UPM Annual Report 2022

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

PROFITABLE GROWTH UPM RAFLATAC We deliver long-term value in the attractive packaging materials value chain with our high-value added and sustainable label solutions.

OUR DIRECTION • Profitable organic growth, potentially complemented by acquisitions • Expanding customer reach through commercial excellence • Widening product portfolio with high-value added and sustainable products • Improving productivity in everything we do

OUR STRENGTHS • Safe and sustainable products for various end-uses • Global customer reach, delivery network and efficient supply chain • Global-scale R&D and technical expertise • Modern, strategically well located production assets

PLANNED ACTIONS FOR 2023 • Continue with the Germany-based AMC integration • Capture growth opportunities and expand product portfolio to new applications • Continue new concepts in sustainability and the circular bioeconomy • Continue to improve productivity

CASE

TURNING OCEAN BOUND PLASTIC INTO LABELS

KEY FIGURES 2022

We expand our product portfolio to new end uses.

SALES

COMPARABLE EBIT

COMPARABLE ROCE

PERSONNEL on 31 Dec. 3,319

The first label materials company beyond fossils We continued our efforts to be the world’s first label materials company beyond fossils. In practice, this means increasing the use of certified fibres and traceability of biobased materials, fostering reduction of greenhouse gas emissions, and developing innovative products and services that help brand owners to take a positive climate ac tion. Our ambition is to design better solu tions for the packaging industry through the smart use of materials and enhanced recyclability and reuse. The recognitions received during 2022 proved that we are moving forward to reach this target. The regulatory landscape around packaging and packaging waste continues to develop globally and will impact future product and service design and the demand for sustainable label solutions. In addition to developing our product portfolio, we continue to develop our service offering like RafCycle™ recycling service and Label Life lifecycle assessment. RafCycle now has over 400 partners globally.

UPM Raflatac is the first label manufactur er to adopt ocean bound plastics as raw materials for labels. The new Ocean Action label material is made from chemically recycled ocean bound plastic waste on a mass balance basis. This waste has been mainly collected from the coastal regions of South-East Asia. Today, only about 10% of plastic waste is recycled, and it is estimated that 80% of plastic marine litter comes from ocean bound plastic waste from areas up to 50 km inland from shores and at risk of ending up in the ocean. Through its development work, UPM has collaborated with multiple partners in the product’s value chain. Ocean Bound Plastic and ISCC PLUS certifications have been used to ensure credibility. The label material is intended for cosmet ics, home and personal care, beverages and food packaging. It has proved very interesting to brand owners who are com mitted to using recycled materials in their packaging. For example, the houseware producer Orthex has started using this label material in their product line, which makes use of old fishing nets and ropes.

EURm 1,982

EURm 214

% 31.5

+19%

-4%

-9pp

More key figures on page 129

first half of 2022, our business was im pacted by a labour market strike and other supply chain disruptions which limited the supply of raw materials. Russia's war in Ukraine and our decision to suspend deliveries to Russia reduced our overall customer base. In addition, variable cost inflation continued throughout the year and variable costs rose to historically high levels. We protected our profitability by taking firm actions to mitigate these cost increases and supply tightness. Towards the end of 2022 the labelling value chain experienced significant destock ing especially in Europe, which decreased deliveries and impacted our result in Q4 2022. However, the demand for UPM Raf latac’s end-use portfolio is relatively resil ient and the long-term outlook for self-ad hesive label materials remains positive.

We create value to customers and brand owners with innovative and sustainable self-adhesive paper and film products for a wide variety of end uses. Our product and service offering, reliable supply chain and our wide distribution network enable print ers and converters to serve their customers effectively. Significant progress in our strategy We have made significant progress in exe cuting our growth strategy with a widening product portfolio and better customer reach. In May 2022, we announced the acquisition of Germany-based AMC AG (Advanced Methods of Coating). The ac quisition was completed in September and UPM Raflatac now has two new production

sites in Kaltenkirchen and Hagenow in Northern Germany. The acquisition pro vides synergies, strengthens our position in Central Europe and expands our offering to new self-adhesive product lines such as graphics solutions and removable self-adhe sive products. To meet the growing customer needs in North America, we announced the opening of a new state-of-the-art terminal in Van couver, Washington, due to open in early 2023. The new facility strengthens our ter minal network and expands our slitting and distribution capacity in the western USA. We launched the world’s first certified la bel material under the Zero Plastic Oceans certifications program to fight ocean-bound plastic pollution: the Ocean Action label.

These labels are made from chemically recycled ocean bound plastic using a mass balance approach. This new innovative la bel material is made possible through close collaboration with multiple partners in the product’s value chain. (right) We extended our CarbonNeutral® prod uct portfolio and our whole Linerless prod uct range is now certified as a CarbonNeu tral® product. The certification is issued by Natural Capital Partners in accordance with The CarbonNeutral Protocol. Solid long-term growth Customer demand for labels was solid in Q1-Q3 2022. Despite the high short-term volatility that challenged the industry in 2022, our business performed well. In the

www.upmraflatac.com

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022