UPM Annual Report 2020

UPM SPECIALTY PAPERS

SPECIAL BY NATURE We are co-creating a future beyond fossils with renewable and recyclable label, packaging and fine papers.

OUR DIRECTION • A global leader in labelling materials • The preferred partner for fine paper in the Asia-Pacific region • Growth in selected flexible packaging applications OUR STRENGTHS • Sustainable alternatives to fossil-based materials • A strong expertise in technically demanding papers • Recognised by customers as a reliable partner • The ability to serve customers globally

Our fibre-based release liner base papers offer renewable alternatives to fossil-based liners. With regards to flexible packaging papers, we continue to grow in selected end-uses with our recyclable papers made from renewable materials. For copy and fine papers, we have continued to build our presence in the Asia-Pacific region by lev eraging our strong track record in sustain ability, an example being our unique fully recyclable fibre-based copy paper wrap, which can replace plastic coated wrappers. In 2020, demand for label, release and packaging papers was strong. The COVID 19 pandemic caused an increase in consum able goods and e-commerce. In the Asia-Pa cific region, fine paper demand decreased in the first half of the year but improved in the second half. The “new normal” encouraged

ised our recent supercalendar investment, increasing our capacity of specialty grades for Asian markets. In 2020, we extended our offering of flexible packaging papers and continued co-creation for more demanding end-uses. To guarantee our competitiveness and to enable future growth, we have continued to focus on efficiency and cost-competi tiveness, most notably on the strict control of fixed costs and streamlining of our cost structure. Leader in sustainability We support our customers in their goals for more sustainable packaging and food safety. Today, all our mills have ISO 22000 Food Safety Management system. The paper machine 3 at the UPMChangshu mill is also

us to develop new digital ways of engaging with customers. We managed to successfully run our operations, without interruption, amid the pandemic, while ensuring the health and safety of our employees. As the pandemic spread to other parts of the world, our UPM Changshu mill in China served as an exam ple, offering insights into best practices for other UPMmills and locations. Investments for future growth The conversion of paper machine 2 at the UPMNordland mill in Germany, from fine paper to speciality grades, was finalised in 2019. In 2020, we continued to ramp-up the production and commercialisation of the new capacity. At the UPMChangshu mill in China, we have successfully commercial

KEY FIGURES

2020 1,324

2019 1,412

Sales, EURm

199 897 22.2

Comparable EBIT, EURm

120 904 13.3

Capital employed (average), EURm

Comparable ROCE, % Personnel on 31 Dec.

1,932

1,992

Comparable EBIT increased mainly due to lower input costs. Delivery volumes increased. Sales prices were lower. The demand growth for label, release and packaging papers was strong and driven by consumable goods and e-com merce. Demand for fine paper in the Asia-Pacific region decreased in the first half of the year but improved in the second half.

We innovate products that help minimise dependency on fossil based materials.

CASE

certified according to FSSC 22000 Food Safety Management System. To further promote sustainable and safe packaging, we have joined CEPI’s 4evergreen alliance to boost the contribution of fibre-based pack aging in a circular and sustainable economy. We introduced UPM LinerLoop TM in 2018, which is a unique concept for recycling release liners. Collected release liners are desiliconed and used to produce new high-performance release liner base papers. We continue to grow this offering by utilising our recently updated produc tion platform. In 2020, we also joined CELAB-Europe, to further promote the development of a circular business model in the self-adhesive

label industry. The target is to ensure that 75% of the used liner and matrix materials in Europe are recycled by 2025. In China, our competitive edge contin ued to strengthen thanks to sustainability and our further improved environmental performance. We were recognised for the second time as a “Water Efficiency Front runner”, which is the highest recognition issued by the Chinese government on water resource management. We were also named as a national “Green Factory” by the Minis try of Industry and Information Technology in China. With this recognition, we serve as a benchmark in efficient land-use, produc tion cleanliness, waste utilisation and low carbon energy.

Furthermore, our operations in China were recognised for our HR practices. It motivates us to continuously maintain and improve the wellbeing of our employees.

CO-CREATING PACKAGING SOLUTIONS

do TM and received very encouraging feedback on its barrier properties from converters. Experimenting with potential new end-uses for existing paper solutions is also an important form of co-creation. UPM Solide TM Lucent provides a unique combination of strength and good printability. We are working with the network to test how its barrier properties can be used in demanding end-uses, such as food products that have a shelf-life of several months.

The packaging industry is experiencing an un precedented change: there is a strong push from consumers and regulators for more sustainable solutions. Brand owners also aim to increase the share of recyclable and fibre-based packaging. To achieve these targets, utilisation of the entire packaging value network is a huge opportunity for everyone involved. Co-creation by the packaging industry is a pre requisite for helping brand owners increase their use of renewable packaging materials. The best way to develop new alternatives to fossil-based materials is by combining our unique strengths to pilot new alternatives.

Responsible product lifecycle on page 82 www.upmspecialtypapers.com

We are working on many projects with members of the value chain from converters and packag ing line manufacturers to chemical suppliers. We have tested our new barrier paper UPM Asen

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UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020