UPM Annual Report 2022

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

CREATING LASTING VALUE UPM COMMUNICATION PAPERS

We believe in the future of print and its effective coexistence with digital media.

OUR DIRECTION • Maintain a profitable leading market position while managing capacity • Increase operational efficiency and ensure the quality of our products • Operational and supply chain optimisation and digital solutions at the customer interface • Secure the future relevance of the paper business, focusing on sustainability

OUR STRENGTHS • Long-term commitment to graphic papers and the reliability of our supply • The high quality of our products and services • Extensive, thoroughly optimised production • Responsible operations and traceable supply chain

PLANNED ACTIONS FOR 2023 • Capture growth opportunities and develop product portfolio and service offering • Continue developing new concepts in sustainability and the circular bioeconomy • Continue to improve productivity

CASE

KEY FIGURES 2022

SALES

COMPARABLE EBIT

COMPARABLE ROCE

PERSONNEL on 31 Dec. 6,289

NEW PAPER GRADES FOR DIGITAL PRINTING

EURm 4,866

EURm 619

% 41.1

We are collaborating with printing machine manufacturer Hewlett Packard to pilot a new generation of digital printing papers. The new coated paper grades are well suit ed for books, catalogues, direct marketing and magazines. The digital printing market is growing rapidly, although its share of the global graphic paper market is still only 4%. The strengths of digital printing methods are cost-effective print runs at lower volumes, on-demand printing and the potential for personalised content. The new papers benefit customers through increased production efficiency, outstanding print quality, time and cost savings, and ease of use. Lower ink con sumption and waste reduction also support our customers’ sustainability goals. UPM and HP formed a partnership in 2019 to bring these products to market. After intense R&D work and test runs, pro duction has now started at the UPM Kaukas paper mill in Finland.

+36%

(2021: EURm -79)

+47pp

and our focus is on reducing our emissions across the entire value chain. Our defined three focus areas for the climate change mitigation are: climate-positive forestry, green energy production and supporting energy transition systems. We support sustainable forestry practic es through forest certification, biodiversity programmes and control over the supply chain. (pages 82-85) Our significant investments in a combined heat and power plant and a biomass-fired boiler at two of our German mill sites are significant steps to reduce UPM’s CO 2 emissions (page 87). Our long term wind power purchase agreement will also lead to further reduction from 2023 onwards. By tapping into a wide range of en ergy sources, we’re helping society to move towards an energy system that reduces carbon emissions, while increasing grid stability and our business viability.

We are a long-term committed paper partner – reliable and sustainable.

More key figures on page 130

As the world’s leading producer of graphic papers, we offer an extensive product range of papers for advertising and publishing, as well as for home and office use. We work constantly to deliver sustainable solutions for our customers, whether by optimising our production processes, using renewable energy in our mills or ensuring the protection of biodiversity in our forests. High profitability and improved agility In 2022, we achieved strong earnings in a highly uncertain market environment. Input costs increased significantly, partic ularly in energy and fibres, but they were successfully offset by higher sales prices and active margin management. Market prices for all paper grades were at a record high both in Europe and in the US. Demand for graphic papers in Europe

was 12% lower than in 2021. Still, the demand and supply balance in Europe re mained tight and we were able to strength en our position with strategic customers. We continued to focus on efficien cy and cost competitiveness. Between January and April, our operations were affected by the negotiations on collective labour agreements and the related strike in Finland. The first-ever business-spe cific collective labour agreement with the Paperworkers' Union was signed in April, enabling improvements both in productiv ity and competitiveness. We also adopted a more agile operating model and were active in energy optimi sation and consumption. We focused on adjusting supply and demand to achieve a balance that benefited paper production and UPM’s climate commitment (page 86).

Competitiveness and collaboration Our strategic focus is on safeguarding long term competitiveness and good cash flow. In Q2, we signed an agreement to sell the UPM Steyrermühl site to the HEINZEL GROUP. The mill has approximately 400 employees, an annual newsprint capacity of 320,000 tonnes and an annual timber capacity of 370,000 cubic metres. News print production at the mill will stop at the end of 2023. To further improve our competitiveness, we plan to optimise resource efficiency and reduce waste even more by making the best possible use of materials during production and after use. For example, residues from the papermaking process will be used for energy generation in our mills. In 2023, we will con tinue developing new concepts to increase energy flexibility and the use of byproducts.

Collaboration with our customers on sustainability remained high on our agenda as print publications are at the core of the circular economy and fit well into custom ers’ strategy. We also continued to strength en our customer focus by monitoring how printing methods are evolving. In 2022, we piloted a new generation of digital printing papers as digital printing technologies are increasingly being adopted in conventional printing (on the right). Commitment across the value chain We contribute significantly to UPM’s long term targets to mitigate climate change

www.upmpaper.com

www.hp.com

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022