UPM Annual Report 2021









customer and consumer behaviour. More and more people want to make responsible purchasing decisions. Our purpose is to create a future beyond fossils. We offer our customers and consum ers sustainable choices: renewable and recy clable materials and low-emission energy. Our strategy remains unchanged. We seek sustainable growth in businesses with strong long-termmarket fundamentals. We have defined our spearheads for growth loud and clear: fibre products, specialty packag ing materials and biorefining. Performance, innovation and responsibility continue to be the cornerstones we build on. Responsibility is an integral part of our Biofore strategy. We source our rawmateri als from sustainably managed forests and we foster biodiversity. We develop climate-pos itive products that replace fossil-based products. We also have ambitious and science-based emission reduction targets. Strong financial position Increasing shareholder value continues to be our long-term goal. We believe that this also benefits other stakeholders and society in the long term. UPM’s Board of Directors is proposing an unchanged dividend of EUR 1.30 per share for 2021. The proposal reflects UPM’s strong financial position and confidence in UPM’s future success. I believe that 2022 will be another good year for UPM. Good demand is expected to continue for most products and sales prices for many products are expected to develop favourably. There are uncertainties in the operating environment also in 2022. How ever, we have demonstrated our ability to perform in a volatile environment and our long-term strategy is solid. I warmly thank all UPM employees, stakeholders and shareholders for an excel lent year 2021! I also look to the future with confidence. The world needs responsible solutions. Together, we will create a future beyond fossils.

2021 was a strong year for UPM. We successfully managed to navigate an exceptionally fast changing operating environment, delivering performance that exceeded UPM’s financial targets.

The world economy recovered quickly from the previous year’s deep slowdown. Demand for our products was strong in all business areas. Our earnings returned to strong pre-pandemic levels, and five out of our six business areas surpassed their long-term financial targets. We improved ourmargins, despite significant rawmaterial and energy cost increases. The year endedwith a solidQ4. Overall, the year was excellent. Our sales increased by 14% and our comparable EBIT by 55% from the previous year. Delivery volumes increased in all business areas. Sales prices also increased in all of our business areas except for graphic papers. Operating cash flow strengthened further. In February 2021, we joined the Climate Pledge, which aims for climate-neutrality by 2040 and to reach the targets of the Paris Agreement 10 years in advance. In 2021, our energy-related CO 2 emissions decreased by 8%. As part of our journey towards carbon neutrality, our goal is stop using coal energy by 2030. In 2021, we again received several recog nitions for our sustainability work. Our am bitious responsibility targets will continue to steer us in the right direction. Progress in strategic growth projects The year 2021 was significant in our strate gic growth projects, which was reflected in investments of nearly EUR 1.5 billion. Our investment projects have taken place in an exceptional period when the pandemic and disturbances in the global supply chains have caused unpredictable challenges. Given the circumstances, the projects have

progressed well. The construction of the Paso de los Toros pulp mill is now at a point where the most material uncertainties have been resolved and we can fine-tune the proj ect’s completion plan. The mill will start production by the end of Q1 2023, with a 10% increase in the updated investment estimate. Most importantly, the investment case remains strong because of the cash cost level of approximately USD 280 per delivered tonne of pulp. Business preparation at UPMBiochem icals is proceeding at good pace and the long-term business opportunities for the project are excellent. There is keen interest in wood-based biochemicals. However, the pandemic and disruptions to global supply chains have affected the progress of the proj ect. We estimate that the start-up will take place by the end of 2023. At the beginning of 2021, we started the basic engineering phase of a next gener ation biofuels biorefinery. The potential investment would take place in Rotterdam. The current investment environment is very challenging for newmajor projects so we are not planning to make further deci sions before the end of 2022. These strategic investments remain our focus area also this year. We will do our best to ensure that they proceed successfully and safely. Biofore strategy unchanged Global megatrends are increasing demand for many of our products. The drive for more sustainable consumption affects

Jussi Pesonen President and CEO





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