UPM Annual Report 2021








1.5 Changes in accounting policies The group has reviewed IFRS standard amendments effective on periods starting 1 January 2021. The amendments effective as of 1 January 2021 did not have any impact on the group's financial statements.

from the translation of net investment in foreign operations and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign entity is partially disposed of, sold or liquidated, translation differences accrued in equity are recognised in the income statement as part of the gain or loss on sale/liquidation.

obligations for the liabilities, relating to the arrangement. Joint control is a contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. UPM’s share in joint operations is recognised in the consolidated balance sheet through recognition of the group’s own assets and liabilities and revenues and expenses in the arrangement together with UPM’s proportionate share in the joint assets, liabilities and joint income and expenses. The proportionate share of realised and unrealised gains and losses arising from intragroup transactions between UPM and its joint operations is eliminated. Associates and joint ventures Associates are entities over which the group has significant influence but no control. Significant influence is the power to participate in the financial and operating policy decisions without the power to control or jointly control those policies. Joint ventures are joint arrangements where the group has joint control with other parties and the parties have rights to the arrangement’s net assets. Interests in associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. Associates and joint ventures follow the group accounting policies for consolidation purpose. Non-controlling interests The profit or loss attributable to owners of the parent company and non controlling interests is presented on the face of the income statement. Non-controlling interests are presented in the consolidated balance sheet within equity, separately from equity attributable to owners of the parent company. Transactions with non-controlling interests are treated as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between consideration paid and the acquired share of the carrying value of the subsidiary’s net assets is recorded in equity. Gains or losses of disposals to non-controlling interests are also recorded in equity, net of transaction costs. 1.4 Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of transaction. Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date are translated into the functional currency using the balance sheet date exchange rate. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when recognised in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. UPM records foreign exchange differences relating to ordinary business operations within the appropriate line items above operating profit and those relating to financial items are presented separately as a net amount in finance costs. Income and expenses of subsidiaries that have a functional currency different from euro are translated into euros at quarterly average exchange rates. Assets and liabilities of subsidiaries are translated at the closing rate at the balance sheet date. All resulting translation differences are recognised as a separate component in other comprehensive income. On consolidation, exchange differences arising

Financial risks UPM is exposed to a variety of financial risks as a result of its business activities including currency risk, interest rate risk, commodity price risk, credit risk, capital risk and liquidity risk. Risk management related to financial activities is carried out by UPM’s central treasury department, Treasury and Risk Management, under policies approved by the Board of Directors. Financial risks are described in the relevant notes as described below.

2. Business performance



Credit risk

4.6 Working capital


Comparable EBIT

Comparable ROE 11.7 %

Liquidity and refinancing risk

5.1 Capital management

EUR 9,814 m

EUR 1,471 m

Interest rate risk

6.1 Financial risk management 6.1 Financial risk management 6.1 Financial risk management

Foreign exchange risk Electricity price risk Financial counterparty risk


(EUR 8,580m)

(EUR 948m)

6.2 Derivatives and hedge accounting

2.1 Business areas UPM business portfolio consist of six competitive businesses with strong market positions. UPM reports financial information for the following business areas (segments): UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers, UPM Plywood and Other operations. UPM has production plants in 12 countries. The group’s most important markets are Europe, North America and Asia. Accounting policies 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. Internal reporting is prepared under the same basis as the consolidated accounts. Costs, revenues, assets and liabilities are allocated to business areas on a consistent basis. The sales transactions between business areas are based on market prices, and they are eliminated on consolidation.

Impact of COVID-19 on the financial statements The impact of COVID-19 on UPM financial statements has so far been relatively limited. The group uses estimates and makes significant judgements when valuating certain assets and liabilities, including energy shareholdings, forest assets, retirement benefit obligations and provisions. The group has assessed the impact of COVID-19 to balance sheet items by considering indicators of impairment of goodwill and other intangible assets, recoverable amount of property, plant and equipment, recoverability of deferred tax assets, valuation of inventories, and collectability of trade receivables. The expectations of future cash flows, discount rates and other significant valuation inputs were revised to reflect changed economic environment. Based on these assessments, no significant adjustments to the carrying amounts of said assets were made due to COVID-19. However, the increased uncertainty in the economic environment can lead to significant adjustments to the carrying amount of assets. The group expects that it will continue to operate and meet its liabilities as they fall due. UPM has a strong financial position. Net debt in the balance sheet amounted to EUR 647 million on 31 December 2021. Cash, investment funds, and unused committed credit facilities amounted to EUR 2.5 billion. The facilities and UPM's outstanding debt have no financial covenants. 1.3 Consolidation principles Subsidiaries UPM’s consolidated financial statements include the financial statements of the parent company, UPM-Kymmene Corporation, and subsidiaries controlled by UPM. All group entities apply consistently UPM’s accounting policies. All intercompany transactions, receivables, liabilities and unrealised profits, as well as intragroup profit distributions, are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and

Comparable EBIT, EURm

0 200 400 600 800

UPM Energy

UPM Raflatac

UPM Plywood

UPM Biorefining

Other Operations

UPM Specialty Papers UPM Communication Papers

2020 2021

Capital employed 31 Dec 2021 EUR 13,759 million

Comparable ROCE, %

Other operations 15%

UPM Plywood 2%

-10 0 10 20 30 40

UPM Biorefining 37%

UPM Communication Papers 8%

UPM Specialty Papers 7%

UPM Raflatac 4%

UPM Energy

UPM Raflatac

UPM Plywood

UPM Biorefining

UPM Energy 20%

UPM Specialty Papers UPM Communication Papers







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