UPM Annual Report 2019

ACTIONS FOR FUTURE GROWTH The year 2019 was a

BUSINESS AREA

STRATEGIC TARGETS

ACTIONS 2019

ACTIONS PLANNED FOR 2020 * )

Continuous improvement programmes Disciplined and effective capital allocation Continue diversity and inclusion work Strengthen engaging safety culture and global health concept Renew UPM Report Misconduct Channel Implementation and training of the revised UPM Supplier and Third Party Code Commitment to UN 1.5 degree pledge Study on climate related substitution and storage effects of our products

Continuous improvement programmes Strong cash flow and balance sheet Disciplined and effective capital allocation A dialogue on developing inclusive leadership started Aiming Higher culture developed Enabling performance approach fostered

Continuous improvement of financial, social and environmental performance Maintain strong balance sheet and capability for future opportunities Developing Aiming Higher culture for business success

GROUP AND ALL BUSINESSES

milestone year in UPM’s strategic transformation. At the same time, all our businesses continue developing product innovations beyond fossils.

Compliance with laws and regulation Mitigate risks and capture opportunities

Engaging safety culture and global health concept promoted UPM Code of Conduct updated and employees trained Counterparty risk management enhanced Internal climate change agenda, TCFD pledge signed, climate-related targets strengthened Decision on the new greenfield pulp mill in Uruguay New profitability level at UPM Lappeenranta Biorefinery, growth in bioplastics market Evaluation of future opportunities to scale up the biofuels business with new types of technology and raw materials Wood supply solutions to improve efficiency and reliability enhanced Service offering development to industrial-scale electricity consumers continued Refurbishment of the Kuusankoski hydropower plant started Continued OL3 project, the commissioning tests of OL3 continued Investment in special label capacity in Tampere, Finland completed Opened a new terminal in Chelyabinsk, Russia Launched UPM Raflatac Forest Film™, the industry’s first wood-based film material Launched UPM Raflatac RAFNXT+ range, the world’s first label material verified by the Carbon Trust Introduction of new label materials with recycled content RafCycle ® recycling solution continued its geographic expansion Three-year productivity programme started Launched new innovative release liner products Ramp-up of UPM Nordland PM2 release liner production in Germany Expansion at UPM Changshu in China completed New office paper brand with the markets’ first non-plastic wrapping material New portfolio of packaging papers Closed a total of 620,000 tonnes of graphic paper capacity in Germany and Finland Plan to sell or close UPM Chapelle mill in France Cost management and mill programmes continued Targeted growth in certain end-uses and segments Strengthen customer interface Investment in a CHP plant at UPM Nordland paper mill, Germany New process for producing precipitated calcium carbonate from residue ash at UPM Schongau mill developed Supply chain service model strengthened Growth investment at the UPM Chudovo mill in Russia completed Boiler replacement at UPM Joensuu completed and scarf-jointing line replacement project proceeded Leadership skills development and mapping of commercial competence development needs Development of strategic forest assets Study availability and quality of competitive wood for UPM’s growth projects Development of indicators and monitoring methods of biodiversity Development of forest carbon calculations Completed the engineering study and continued a commercial assessment to verify attractiveness of the potential biochemicals refinery in Germany Testing of industrial biochemicals applications

Construction work on the pulp mill site and in Montevideo port Evaluation of growth opportunities and new sustainable feedstocks in biofuels continues

Grow as trusted and responsible pulp producer Provide sustainable, advanced biofuels and biomaterials Enhance profitability through efficient wood supply, integrated full-production and focused commercial strategy

UPM BIOREFINING

Profitable growth in zero-carbon electricity generation Solutions for industrial energy excellence Embracing the electrification of society Profitable organic growth, potentially complemented by acquisitions Expanding customer reach through commercial excellence Widening product portfolio, especially in high value-added and sustainable products and solutions Innovating in productivity

Continue developing the service offering to industrial-scale electricity consumers Continue refurbishment of the Kuusankoski hydropower plant The commissioning tests of OL3 to continue Expand distribution coverage in attractive markets Capture growth opportunities and develop product portfolio and service offering Continuing to develop new concepts in sustainability and circular economy Continue three-year productivity programme

UPM ENERGY

UPM RAFLATAC

Global growth in selected products Ramp-up of new capacity in China and Germany Continue strengthening our brands Continue to innovate alternatives for fossil-based materials Continuous improvement in environmental performance

Global leader in labelling materials The preferred fine paper supplier in Asia-Pacific Growth in select flexible packaging end-uses

UPM SPECIALTY PAPERS

Continue cost efficiency improvement Continue strengthening our market role Capture opportunities in additional end-uses and segments Further explore digitalisation opportunities, focusing on customer interface Continue to reduce the environmental impact

Maintain a profitable market position while actively managing capacity in line with market developments Increase operational efficiency and quality of our portfolio Drive digitalisation by focusing on optimisation and extending digital solutions to our customer interface Increase focus on sustainability and our footprint

UPM COMMUNICATION PAPERS

Operational excellence Differentiation from competition with “Responsibility made easy” Further enhance effective raw material usage and agile supply chain capabilities

Profitable growth through superior customer experience and operational excellence Strengthen market position by increasing value and service offerings

UPM PLYWOOD

Secure competitive wood supply sustainably Ensure sustainable land use and forestry by increasing biodiversity and carbon sinks

Development of strategic forest assets Ensure availability and quality of competitive wood for UPM’s growth projects Enhance activity in private wood trade by promoting e-trade Investment in a biorefinery to convert solid wood into next generation biochemicals at Leuna, Germany Continue to commercialise products and search collaboration opportunities Continue to commercialise new UPM ProFi products New UPM Formi product range to be launched with 90% renewable fibre content

UPM FOREST

Enter the wood-based biochemicals market

UPM BIOCHEMICALS

Further application development and piloting, product commercialisation

Launched new biomedical products: Growdex T hydrogel and FibDex, a nanofibrillar cellulose wound dressing

UPM BIOMEDICALS

Business creation and continued growth

Launched new UPM ProFi products Continue to commercialise UPM Formi and UPM Formi 3D

UPM BIOCOMPOSITES

* ) Not a complete list

56

57

OUR BUSINESSES

OUR BUSINESSES

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS