UPM Annual Report 2022

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

CO-CREATING A SUSTAINABLE FUTURE UPM SPECIALTY PAPERS

We innovate renewable and recyclable products that help minimise our dependency on fossil-based materials.

OUR DIRECTION • A global leader in labelling materials • The preferred partner for fine paper in the Asia-Pacific region • Growth in selected flexible packaging applications

OUR STRENGTHS • Sustainable alternatives to fossil-based materials • Extensive expertise in technically demanding papers • Recognised by customers as a reliable partner • The ability to serve customers globally • The ability to develop and co-create industrial scale innovation

PLANNED ACTIONS FOR 2023 • Continue commercialisation of new barrier papers

• Scaling up co-creation projects • Preparation for future growth

CASE

CO-CREATING SUSTAINABLE PACKAGING FOR THE FUTURE

KEY FIGURES 2022

UPM Specialty Papers, BOBST, a Swiss leader in packaging and label machinery, and Michelman, a high-barrier coat ings manufacturer, have collaboratively developed a ground-breaking packaging solution for foods with a long shelf life. The longer the shelf life, the higher the demands on the packaging to protect the food from moisture and oxygen. The end result of a BOBST-led project was a new high-barrier packaging innovation that can be recycled in established fibre recycling streams. The new solution provides an alternative to the multi-layered plastic food packaging that is difficult to recycle. UPM's paper provided a strong foundation for the development work. The paper is suit able for further processing as it is very smooth, dense and strong, while its structure enabled a lightweight and uniform coating. The collaboration is a great example of the kind of packaging innovation the world needs right now. This new innovation enables brand owners to reduce the amount of fossil-based or non-recyclable materials and increase the use of renewable materials in their packaging.

SALES

COMPARABLE EBIT

COMPARABLE ROCE

PERSONNEL on 31 Dec. 1,959

In addition, regulatory developments, particularly in Europe, and consumer demand are increasingly pushing for sustainable and easy-to-recycle packaging. In response to this, brand owners and the packaging value chain have set ambitious targets for recyclable pack aging made of renewable materials, for which fibre-based packaging is an excellent choice. In line with our strategy, we have been working to commercialise and co-create packaging papers that help brand owners achieve these targets. We have launched new products such as a new high-barrier pack aging solution for food products with a long shelf-life (right) and heat-sealable barrier papers (page 96). We bring new, sustainable fibre-based packaging solutions to the market.

Continuous improvement in sustainability We have been working intensively and innovatively to improve our energy efficien cy globally and to reduce our emissions. A new combined heat and power (CHP) plant at UPM Nordland Papier in Germany and investments in electrical boilers at UPM Tervasaari and UPM Jämsänkoski in Finland are good examples of how we have improved efficiency, whilst also securing energy availability. (page 87) In China, our consistent track record for being a leader in sustainability was further strengthened. We were recognised as a 2022 Green Development Leading Company in Ji angsu Province for being a leader in producer responsibility and preventing pollution. The UPM Changshu mill was awarded the 2022 Suzhou Quality Award for its excellent quality management model and high-quality product performance management.

EURm 1,677

EURm 153

% 17.2

+13%

+13%

+2pp

More key figures on page 129

We respond to the world’s need for sustain able products with high-performance fos sil-free materials for labelling and packag ing. We also produce sustainable office and graphic papers available in the Asia-Pacific region. Our global team and mills in China, Finland and Germany serve customers reliably worldwide. Delivering profitable growth In 2022, we achieved a good performance despite historically high raw materials prices, the Finnish Paper Union's strike at the beginning of the year and a volatile

market environment. Delivery volume was below the previous year, mainly due to the strike. Demand for label papers, release base papers and packaging papers was good in all markets and sales prices increased com pared to the previous year. Market demand became softer towards the end of the year. For fine paper, demand was impacted by the COVID-19 lockdowns and containment measures in China. Fine paper sales prices increased compared to the previous year. Our global mill network and good prepa ration allowed us to maintain some deliv eries despite the strike in Finland between

January and April. In China, we managed the COVID-19 situation very well with spe cial arrangements and were able to run our operations with minimal interruption. New business and co-creation Megatrends support our business and healthy market demand is expected to continue. We actively assess alternatives for future growth in specialty grades. Our recent investment in UPM Nordland Papier in Germany has already advanced our growth strategy.

www.upmspecialtypapers.com

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022