UPM Annual Report 2021

BEYOND FOSSILS

UPM

STRATEGY

BUSINESSES

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2021

DRIVING LONG-TERM VALUE CREATION

Top performance enables investments in growth, innovation and responsibility 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 agile operating model, while capitalising on corporate synergies. Value-enhancing growth Consumer megatrends drive the demand growth for most of our products. This is further supported by the rapidly increasing need for sustainable alternatives to fossil-based materials and energy. We grow businesses with strong long-term demand fundamentals, where we have a clear competitive advantage. This underpins attractive returns on invested capital. Responsibility is good business Sustainability is an important driver for growth and competitiveness for us. We capture the opportunities presented by increasingly responsible consumer choices and tightening regulations for mitigating climate change and answering the plastics challenge, for example. Responsible operations and value chains help to mitigate risks. Innovating for a future beyond fossils We innovate new growth businesses with a unique competitive position in biochemicals, biofuels, biomedicals and speciality packaging materials, for example. The successful commercialisation and scale-up of the businesses to a significant size are important. We protect our intellectual property. An improving business portfolio drives profitability and valuation Increasing our share of sustainability-driven higher-margin growth businesses improves our long-term profitability and boosts the value of our shares. On average, UPM’s growth businesses have more than three times higher EBIT margins 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 even during uncertain times, such as during the pandemic in 2020–2022. 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.

CREATING SHAREHOLDER VALUE

Making more sustainable choices increases demand for our products and attracts interest from investors. Our goal is to significantly increase our earnings and valuation in the coming years, while offering an attractive dividend to our shareholders.

+9.8% Share price 2021

Cash flow-based dividend

Enterprise value and cumulative dividends

1.4 EUR per share

EURm

70

5-YEAR SHARE PERFORMANCE AND VALUATION MULTIPLES 2021

25,000

2020 30.47

2019 30.91

2018 22.15

2017 25.91

1.2

60

20,000

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

33.46

1.30 Dividend proposal EUR

1.0

50

2.22

1.37 1.30 1.89 29.0 1.74 11.3 4.3

2.07 1.30 3.46

2.24 1.30 2.49

1.88 1.15 2.74

15,000

1.30* )

0.8

40

Operating cash flow per share, EUR

2.34

0.6

30

10,000

Effective dividend yield, %

3.9

4.2

5.9 7.9

4.4

0.4

20

P/E ratio

13.9 1.65 10.2

15.5 1.64

14.2 1.60

per share

5,000

P/BV ratio 1)

1.21

0.2

10

EV/EBITDA ratio 2 )

8.7

6.3

8.6

Share of ESG-focused investors of all institutional shareholders 47%

0

0

0

Market capitalisation, EUR million

17,845

16,250

16,485

11,813

13,818

17

18

19

20

21

20 21 16 17 18 19 14 15 12 13

*) 2021: Board’s proposal 1) P/BV ratio = Share price at 31 Dec./Equity per share 2) EV/EBITDA ratio = (Market capitalisation + Net debt)/EBITDA

Net debt Market capitalisation Cumulative dividend

% of operating cash flow per share 2021: Board’s proposal

18

19

UPM ANNUAL REPORT 2021

UPM ANNUAL REPORT 2021