UPM Annual Report 2022

BEYOND FOSSILS

UPM

BUSINESSES

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

ACCELERATING GROWTH

NEARLY 50% GROWTH IN CARBON-FREE ELECTRICITY GENERATION

Climate change mitigation requires the further electrification of society and the rapid reduction of the use of fossil-based fuels. Russia’s war in Ukraine and the current energy crisis in Europe have made fossil energy even less appealing and emphasised the importance of supply securi ty and energy competitiveness. UPM is a shareholder in the new OL3 nucle ar power plant unit in Finland and is scheduled to start commercial production in April 2023. Once the new unit is fully up and running, it will increase UPM Energy’s carbon-free Demand for sustainable alternatives for fossil-based chemicals in consumer products and decarbonis ing traffic with renewable fuels create significant new business opportunities. Access to sustainable feedstocks, proprietary technology concepts and high-quality products are expected to provide a lasting competitive advantage for UPM. UPM Biochemicals is preparing for a commer cial-scale market entry. Our next generation bio chemicals refinery in Leuna, Germany is sched uled to start production by the end of 2023. The biorefinery will have an annual capacity of 220,000 tonnes of wood-based biochemicals. The EUR 750m investment is expected to meet our ROCE target of 14% once fully ramped up. UPM Biochemicals is also proceeding in commercialising its products. Application areas Global consumer megatrends are driving demand for sustainable and safe labelling and packaging solutions. We continue to expand in the specialty paper and self-adhesive label materials segments. Our focus is on expanding customer reach and continuously developing our product portfolio. Our strong position and innovations in these technically demanding and fast-growing niche segments of the packaging value chain provide attractive growth opportunities. In 2022, UPM Raflatac acquired AMC AG, a German self-adhesive label materials company

electricity generation by nearly 50%. It will also significantly improve the self-sufficiency, supply security and climate performance of Finland’s electricity system.

UPM Energy on page 42

Our transformation is in an intensive phase, with growth investments totalling EUR 3.8 billion are estimated to be completed in 2023.

IMPACT • We create a future beyond fossils • We enable our customers and consumers to make more sustainable choices

TRANSFORMATIVE NEW BUSINESSES BEYOND FOSSILS

include wood-based recyclable PET bottles, coolants for electrical vehicles, raw materials for textiles and renewable functional fillers to significantly reduce the CO 2 footprint and weight of rubber and plastic applications. UPM Biofuels already supplies the markets with UPM BioVerno renewable diesel and naph tha. The Lappeenranta Biorefinery has proven its proprietary technology, product quality and sustainability, and has achieved commercial success. We are currently in the basic engineer ing phase of a potential larger next generation biorefinery in Rotterdam, in the Netherlands, to scale up the business.

TARGETS • Earnings growth • Attractive returns • Successful commercialisation OUR WAY • Sustainable and safe solutions • Strong long-term fundamentals for demand growth • High barriers to entry and a competitive advantage • Strict return requirements • Talent attraction

UPM Biochemicals on page 54 UPM Biofuels on page 52

OVER 50% GROWTH IN THE PULP BUSINESS

GROWTH AND PRODUCT INNOVATION IN SPECIALTY PACKAGING MATERIALS

Global consumer megatrends and the need to find more sustainable alternatives for fos sil-based materials support demand growth for market pulp. The requirements for competitive greenfield pulp operations are difficult to meet and provide a lasting competitive advantage. The production in our world-class pulp mill in Paso de los Toros in Uruguay and deliveries from a highly efficient pulp terminal at the port of Montevideo are scheduled to start up by the end of Q1 in 2023. The project and related planta tion operations and logistics solutions have been carefully designed and prepared over the past

decade to ensure that the operation is highly competitive and sustainable. The mill will have an annual capacity of 2.1 million tonnes of eucalyptus market pulp. The USD 3.47 billion investment will raise our pulp production capacity by more than 50%. Given the expected highly competitive cash costs and the large scale of the mill, the investment is expected to significantly contribute to our future earnings.

to speed up its growth strategy. The acquisition opens new attractive product segments and further strengthens UPM Raflatac's position in the filmic products in Central Europe. UPM Specialty Papers has also made further progress with its barrier paper products that provide a sustainable and recyclable alternative for flexible packaging applications, for example.

UPM Raflatac on page 44 UPM Specialty Papers on page 46

UPM Pulp on page 36 UPM Paso de los Toros on page 40

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022