UPM Annual Report 2021

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ACCOUNTS FOR 2021

UPM

BEYOND FOSSILS

STRATEGY

BUSINESSES

RESPONSIBILITY

GOVERNANCE

UPM Raflatac

UPM Specialty Papers

UPM Communication Papers UPM Communication Papers

UPM Plywood UPM Plywood

UPM Raflatac offers innovative and sustainable self-adhesive label materials for branding and promotion, information and functional labelling in the food, beverage, personal care, pharmaceutical and logistics segments, for example.

UPM Specialty Papers offers labelling and packaging materials as well as office and graphic papers for labelling, commercial siliconising, packaging, office use and printing.

UPM Communication Papers offers an extensive product range of sustainably produced graphic papers for advertising and publishing as well as home and office uses. UPM Communication Pap rs offers an extensive product range of sustainably produced graphic apers for dvertising and publishing as well as home and office uses.

UPM Plywood offers high quality WISA® plywood and veneer products for construction, vehicle flooring, LNG shipbuilding, parquet manufacturing and other industrial applications. UPM Plywood ffers high quality WISA® plyw od and vene r pr ducts for construct on, vehicle flooring, LNG shipbuilding, pa quet manuf cturing and other industrial applications.

Comparable EBIT EURm

Comparable EBIT EURm Comparable EBIT EURm

100 150 200 250

12 16

0 20 40 60 80 0 20 40 60 80

100 150 200

12 16

-50 0 50 -50 100 150 200 5 10 5 20

12 15 12 15

-3 0 3 6 9 -3 0 3 6 9

% of sales % of sales

% of sales

0 3 6 9 0 3 6 9

0 4 8

0 50

20 21 20 21

20 21

2021 2020 3,577 3,333 2021 2020 3,577 3,333

2021 2020 2021 2020

2021 2020

492 492 99 99 20.0 20.0

405 405 59 59 14.6 14.6

Sales Sales

1,671

1,560

1,482

1,324

Sales

23 23 0.6 0.6

300 300 9.0 9.0 -179 -179 0 0 9 9 0.3 0.3 -170 180 -170 180 5.4 5.4

Comparable EBITDA, EURm Comparable EBITDA, EURm

259 15.5

252 16.2

209 14.1

273 20.6

Comparable EBITDA, EURm

% of sales % of sales

% of sales

Depreciation, amortisation and impairment charges, EURm Depreciation, amortisation and impairment charges, EURm Operating profit, EURm Operating profit, EURm Items affecting comparability in operating profit, EURm 1) Items affecting comparability in operating profit, EURm 1) % of sales % of sales

0 0

Share of results of associates and joint ventures, EURm Depreciation, amortisation and impairment charges, EURm Share of results of associates and joint ventures, EURm Depreciation, amortisation and impairment charges, EURm

-25 80 -25 80

-35 10 2.5 -35 10 2.5 -23 33 8.0 -23 33 8.0

Depreciation, amortisation and impairment charges, EURm

-155 -155 14 14 0.4 0.4 93 -79 93 -79 -2.2 -2.2

-36

-39

-75

-73

Operating profit, EURm Operating profit, EURm

222 13.3

205 13.2

135

206 15.5

Operating profit, EURm

16.2 16.2

% of sales % of sales

9.1

% of sales

Items affecting comparability in operating profit, EURm 1) Items affecting comparability in operating profit, EURm 1)

8 8

Items affecting comparability in operating profit, EURm 1)

-1

-9

—

Comparable EBIT, EURm Comparable EBIT, EURm

72 72

Comparable EBIT, EURm Comparable EBIT, EURm

223 13.3 553 40.2

214 13.7 542 39.5

135

199 15.0 897 22.2

Comparable EBIT, EURm

% of sales % of sales

14.6 286 25.1 738 14.6 286 25.1 738

% of sales % of sales

9.1

% of sales

1,275 1,446 1,275 1,446 -6.2 12.4 -6.2 12.4 5,828 5,466 5,828 5,466

Capital employed (average), EURm Capital employed (average), EURm Comparable ROCE, % Paper deliveries, 1000 t Comparable ROCE, % Paper deliveries, 1000 t

292 11.2 683 292 11.2 683

Capital employed (average), EURm Capital employed (average), EURm Comparable ROCE, % Comparable ROCE, % Plywood deliveries, 1,000 m3 Plywood deliveries, 1,000 m3

864 15.6

Capital employed (average), EURm

Comparable ROCE, %

Comparable ROCE, % Paper deliveries, 1000 t

1,658

1,596

1) Items affecting comparability include restructuring charges.

1) 2021 items affecting comparability include gain on sale of Shotton Mill Ltd EUR 133 million, impairment charges of newsprint fixed assets EUR 50 million, gain on sale of non-current assets EUR 6 million and restructuring charges EUR 4 million. 2020 items affecting comparability include EUR 74 million restructuring charges and EUR 11 million impairment charges related to closure of Chapelle mill in France, EUR 43 million restructuring charges and EUR 47 million impairment charges relating to closure of Kaipola mill in Finland. EUR 6 million charges relate to restructuring of business functions and EUR 11 million income to prior capacity closures. 2021 compared with 2020 Comparable EBIT decreased due to higher variable costs and lower sales prices. Delivery volumes were higher as the comparison period was impacted by the COVID-19 pandemic and related lockdown measures. Fixed costs decreased. The average price in euro for UPM’s paper deliveries decreased by 1%. Market environment • In 2021, demand for graphic papers in Europe was 4% higher than in 2020. Newsprint demand decreased by 1%, magazine papers increased by 1% and fine papers increased by 10% compared to 2020. • In 2021, publication paper prices in Europe remained unchanged and fine paper prices were 1% higher compared to 2020. • In 2021, demand for magazine papers in North America is estimated to have increased by 1% compared to 2020. The average price in US dollars for magazine papers increased by 11% compared to 2020. Sources: PPI/RISI, Euro-Graph, PPPC 1) 2021 items affecting co parability include gain on sale of Shotton Mill Ltd EUR 133 million, impairment charges of newsprint fixed assets EUR 50 million, gain on sale of non-current assets EUR 6 million and restructuring charges EUR 4 million. 2020 items affecting comparability include EUR 74 million restructuring charges and EUR 11 million impairment charges related to closure of Chapelle mill in France, EUR 43 million restructuring charges and EUR 47 million impairment charges relating to closure of Kaipola mill in Finland. EUR 6 million charges relate to restructuring of business functions and EUR 11 million income to prior capacity closures. 2021 compared with 2020 Comparable EBIT decreased due to higher variable costs and lower sales prices. Delivery volumes were higher as the comparison period was impacted by the COVID-19 pandemic and related lockdown measures. Fixed costs decreased. The average price in euro for UPM’s paper deliveries decreased by 1%. Market environment • In 2021, demand for graphic papers in Europe was 4% higher than in 2020. Newsprint demand decreased by 1%, magazine papers increased by 1% and fine papers increased by 10% compared to 2020. • In 2021, publication paper prices in Europe remained unchanged and fine paper prices were 1% higher compared to 2020. • In 2021, demand for magazine papers in North America is estimated to have increased by 1% compared to 2020. The average price in US dollars for magazine papers increased by 11% compared to 2020. Sources: PPI/RISI, Euro-Graph, PPPC

1) In 2021 items affecting comparability include EUR 6 million restructuring charges reversals and EUR 1 million impairment reversals related to Jyväskylä plywood mill closure in 2020. In 2020, items affecting comparability include EUR 15 million restructuring charges and EUR 8 million impairment charges related to closure of Jyväskylä plywood mill in Finland. 1) In 2021 items affecting comparability include EUR 6 million restructuring charges reversals and EUR 1 million impair ent reversals related to Jyväskylä plywood mill closure in 2020. In 2020, items affecting comparability include EUR 15 million restructuring charges and EUR 8 million impairment charges related to closure of Jyväskylä plywood mill in Finland.

1) 2020 items affecting comparability include gains on sale of non-current assets. 2021 compared with 2020 Comparable EBIT decreased due to higher input costs. Sales prices increased and delivery volumes were higher. Market environment • Global demand for label, release and packaging paper was good in 2021. Demand was driven by fast moving consumer goods and e-commerce. Market prices increased. • In H1 2021, fine paper demand in the Asia-Pacific region was good but in H2 2021 demand became weaker. • In H1 2021, fine paper market prices in China increased sharply from the previous year. However, in H2 2021 market prices decreased below long-term average price levels. Sources: UPM, RISI, Pöyry, AWA

2021 compared with 2020 Comparable EBIT increased due to improved mix and margin management. Variable costs were higher. Market environment • Global demand for self-adhesive label materials continued healthy in 2021. However, supply constraints towards end of the year hold back market growth somewhat. • In Asia, demand was particularly strong in H1 2021. In H2, demand was softening. • In Europe and in the Americas, the robust demand growth continued from the previous year. Sources: UPM, FINAT, TLMI

2021 compared with 2020 Comparable EBIT increased due to higher sales prices and delivery volumes. Variable and fixed costs were higher. The comparison period was impacted by a strike in Finland in Q1 2020. Market environment • In 2021, demand for spruce plywood was strong, driven by the building and construction industry. • In 2021, demand for birch plywood was good in panel trading, vehicle flooring and construction-related industrial applications. Source: UPM 2021 compared with 2020 Comparable EBIT increased due to higher sales prices and delivery volumes. Variable and fixed costs were higher. The comparison period was impacted by a strike in Finland in Q1 2020. Market environment • In 2021, demand for spruce plywood was strong, driven by the building and construction industry. • In 2021, demand for birch plywood was good in panel trading, vehicle flooring and construction-related industrial applications. Source: UPM

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UPM FINANCIAL REPORT 2021 129 UPM FINANCIAL REPORT 2021 129 UPM ANNUAL REPORT 2021 129

UPM ANNUAL REPORT 2021

UPM FINANCIAL REPORT 2021 128

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