UPM Annual Report 2020

From left: Mika Mikkola, VP, Investor Relations; Jussi Pesonen, President and CEO; Kari Ståhlberg, EVP, Strategy and Tapio Korpeinen, CFO.

DRIVING LONG-TERM VALUE CREATION

Aiming for top performance We aim for continuous improvement in our financial performance. We make good use of commercial strategies, tight cost control, materials and energy efficiency, effective capital allocation and efficient use of assets. We capture opportunities provided by our operating model, while capitalising on corporate synergies. Value-enhancing growth projects Consumer megatrends drive the demand growth for most of our products. This is further supported by the increasing need for sustainable alternatives for fossil-based materials and energy. We invest in businesses with strong long-term fundamentals for profitability and growth, where we have a clear competitive advantage. This underpins attractive returns for invested capital both in the short and longer term. Innovating for a future beyond fossils We enable our customers and consumers make more sustainable choices. We protect our intellectual property. Our innovations create new attractive business opportunities with high added value and a unique competitive advantage in molecular bioproducts or specialty packaging materials, for example. Value from responsibility Sustainability is an important driver for growth and competitiveness for us. We aim to capture the opportunities presented by the increasingly responsible consumer choices and tightening regulation in mitigating climate change and answering the plastics challenge, for example. Responsible operations and value chain help to mitigate risks. Improving business portfolio Increasing our share of sustainability-driven growth businesses with higher margins improves our long-term profitability and boosts the value of our shares. UPM’s growth businesses have three times higher EBIT margins on average than the mature graphic paper business. Industry-leading balance sheet Our industry-leading balance sheet mitigates risks and enables us to implement our growth projects also during uncertain times, such as in 2020. Attractive dividends We aim to pay attractive dividends. A growth in earnings enables us to pay increasing dividends in the long term. Our dividend policy is based on cash flow, targeting a dividend of 30–40% of the company’s annual operating cash flow per share.

In the coming years we will focus on ensuring performance, successfully completing our transformative growth projects and developing our next growth steps. CREATING SHAREHOLDER VALUE

Dividend proposal EUR 1.30 per share -1.4% Share price 2020

Enterprise value and cumulative dividends

Cash flow-based dividend

1.4 EUR per share

EURm

5-YEAR SHARE PERFORMANCE AND VALUATION MULTIPLES 2020

70

2019 30.91

2018 22.15

2017 25.91

2016 23.34

20,000

Share price at 31 Dec, EUR Comparable EPS, EUR Dividend per share, EUR

30.47

1.2

60

1.37

2.07 1.30 3.46

2.24 1.30 2.49

1.88 1.15 2.74

1.65 0.95 3.16

16,000

1.0

50

1.30* )

Operating cash flow per share, EUR

1.89

12,000

0.8

40

Effective dividend yield, %

4.3

4.2

5.9 7.9

4.4

4.1

0.6

30

P/E ratio

29.0 1.74 11.3

15.5 1.64

14.2 1.60

14.1 1.51

8,000

P/BV ratio 1)

1.21

0.4

20

EV/EBITDA ratio 2 )

8.7

6.3

8.6

8.7

4,000

0.2

10

Market capitalisation, EUR million

16,250

16,485

11,813

13,818

12,452

0.0

0

0

*) 2020: Board’s proposal 1) P/BV ratio = Share price at 31 Dec./Equity per share 2) EV/EBITDA ratio = (Market capitalisation + Net debt)/EBITDA

16 17

18

19 20

19 20 15 16 17 18 13 14 11 12

Policy: A dividend of 30–40% of the annual operating cash flow per share

Net debt Market capitalisation Cumulative dividend

% of operating cash flow per share 2020: Board’s proposal

20

21

UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020