UPM Annual Report 2020

2.2 Sales UPM generates revenue mainly from the sale of goods, i.e. several types of products. The majority of UPM’s revenue comes from sales of graphic and specialty papers to publishers, retailers, printing houses, merchants and distributors, converters and label stock manufacturers; sales of self adhesive label materials to label printers and brand owners and sales of pulp products to tissue, board, specialty and graphic paper producers. The revenue comprises also sales of energy, biofuels, sawn timber and plywood products and a very limited amount of services not related to sale of goods. UPM sells a proportion of its products to several major customers. The largest customer in terms of sales represented approximately 2% (3%) of UPM’s sales and the ten largest customers represented approximately 14% (15%) of such sales. The group disaggregates its external sales by business area, because this depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Sales by UPM business areas are reported consistently with the internal reporting provided to UPM’s President and CEO who is responsible for allocating resources and assessing performance of the business areas. The goods and services included in sales revenue of each business area are presented in below tables.

Items affecting comparability

Total assets and capital expenditure by country

Sales by business area

Assets

Capital expenditure

EURm

2020 2019

EURm Finland

2020 2019 2020 2019

In operating profit Impairment charges Restructuring charges

EURm

2020 2,183

2019 CHANGE

-70

-13 -52

9,050 1,218 2,575

9,217 1,144 2,099

131 136 604

135

2,712

-20 %

UPM Biorefining

-137

Germany Uruguay

94 70 35

Change in fair value of unrealised cash flow and commodity hedges Capital gains and losses on sale of non-current assets

379

417

-9 % 0 % -6 %

UPM Energy UPM Raflatac

-3

5

1,560 1,324 3,333

1,555 1,412 4,552

China

683 328 151 103 123 125

782 385 155 101 158 138

5 6 2 5 5 4 3 1

23

—

UPM Specialty Papers

United States

6 5 4 3 1 1

-27 % -10 % -15 %

UPM Communication Papers

Total

-187 -187

-60 -60

United Kingdom

405 225 -828

450 264

UPM Plywood

Total in profit before tax

Austria Russia Poland Estonia France

Other operations

In income taxes Taxes related to items affecting comparability

24

-1,125 10,238

—

Eliminations

21

14

Total

8,580

-16 %

Changes in tax rates

-3

—

53 43 48

54 67 49

Total

18

14 -46

Total in profit for the period

-169

Other EU countries Other European countries

—

—

29

27

1 1

—

Certain non-operational or non-cash valuation transactions with significant income statement impact are considered as items affecting comparability and reported separately to reflect the underlying business performance and to enhance comparability from period to period. In 2020, items affecting comparability in UPM Communication Papers include EUR 117 million restructuring charges and EUR 58 million impairment charges related to closure of UPM Chapelle paper mill and UPM Kaipola paper mill. In UPM Plywood business area, items affecting comparability include EUR 15 million restructuring charges and EUR 8 million impairment charges related to the closure of Jyväskylä plywood mill. Additionally, restructuring charges reported as items affecting comparability include prior capacity closures in UPM Communication Papers as well as restructuring costs related to the business functions of UPM Communications Papers and UPM Raflatac. Capital gains affecting the comparability comprise of a gain of EUR 12 million relating to sale of group's share in Kainuun Voima Oy as well as earnings of EUR 11 million on the sale of other non-current assets. In 2019, items affecting comparability in operating profit include EUR 15 million restructuring charges and EUR 12 million impairment charges related to closure of paper machine 2 at UPM Rauma mill, Finland, and EUR 24 million restructuring charges and EUR 1 million impairment charges related to closure of paper machine 10 at UPM Plattling mill, Germany. Additionally, restructuring charges reported as items affecting comparability include prior capacity closures in UPM Communication Papers as well as restructuring costs related to establishment of a new Business Services Hub in Wroclaw, Poland.

Rest of world

330

348

1

Total

14,858

14,722

903

378

» Refer Note 2.1 Business areas for information on UPM products.

Sales by destination country

External sales by major products

EURm Finland

2020 2019

865

894

BUSINESS AREA EUR million UPM Biorefining

BUSINESS

2020

2019

Germany

1,304

1,580 1,213

United States

963 520 953 326 277 122 159 25

UPM Pulp, UPM Biofuels, UPM Timber

1,720

2,096

United Kingdom

665

UPM Energy UPM Raflatac

UPM Energy UPM Raflatac

252

180

China France

1,042

1,560 1,148 3,296

1,555 1,203 4,516

387

UPM Specialty Papers

UPM Specialty Papers

Uruguay

25

UPM Communication Papers

UPM Communication Papers

Poland Austria Russia

289 156 172

UPM Plywood

UPM Plywood

385 221

427 258

Other operations

UPM Forest, UPM Biochemicals, UPM Biomedicals, UPM Biocomposites

Eliminations and reconciliations

-1

4

Other EU countries

1,495

1,927

Total

8,580

10,238

Other European countries

298

304

Rest of world

1,272 8,580

1,584

Total

BUSINESS

PRODUCT RANGE

10,238

UPM Pulp

Softwood, birch and eucalyptus pulp

UPM Biofuels UPM Timber UPM Energy UPM Raflatac

Wood-based renewable diesel for transport and renewable naphtha for transport and petrochemicals

Standard and special sawn timber Electricity and related services Self-adhesive paper and film label stock

UPM Specialty Papers

Labelling materials, release base papers, flexible packaging materials, office papers, graphic papers

UPM Communication Papers

Graphic papers for various end uses

UPM Plywood

Plywood and veneer products

UPM Forest

Wood and wood-based biomass (logs, pulpwood, chips, forest residues etc.), full forestry service offering

UPM Biochemicals UPM Biomedicals UPM Biocomposites

Lignin products for industrial use

Wood-based products for biomedical applications UPM ProFi decking products and UPM Formi granules

158

UPM ANNUAL REPORT 2020 UPM FINANCIAL REPORT 2020 43 159

UPM ANNUAL REPORT 2020

UPM FINANCIAL REPORT 2020 42