UPM Annual Report 2022

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

BUILDING BETTER UPM PLYWOOD

WISA plywood is a climate smart material that acts as a carbon storage throughout its lifetime with a very low lifecycle contribution to fossil CO 2 emissions.

OUR DIRECTION • Profitable growth by providing a superior customer experience and operational excellence • A strengthened market position by increasing value and service packages • Evaluating future growth opportunities

OUR STRENGTHS • End use, market and customer insight • Leader in supply reliability with consistent fit to purpose quality • Leading supplier in demanding end-use segments • Strongest brand on the market: WISA ®

PLANNED ACTIONS FOR 2023 • EUR 10 million investment to Joensuu mill to be completed and ramped-up • Enhance customer experience via new digital services • Continue the measures to increase the production volume of birch plywood • Manage cost and availability in supply chain

CASE

KEY FIGURES 2022

A RELIABLE CUSTOMER PROMISE FOR GROWTH

SALES

COMPARABLE ROCE

PERSONNEL on 31 Dec. 1,982

COMPARABLE EBIT

UPM Plywood’s outstanding success in the plywood market relies on uncompromisingly meeting customer promises. Russia’s war in Ukraine led to the suspension of operations at the UPM Chudovo plywood mill. The economic sanctions imposed on Russia have closed off the European market to Russian plywood manufacturers. This has led to an unprecedented supply-demand imbalance in the birch plywood market and made meeting customer needs a challenge. We have mitigated for the loss of production at Chudovo by increasing operation rates at our Finnish mills. This has been possible thanks to a new collective labour agreement that came in to force at the beginning of the year. We have also actively collaborated with customers to find industrial applications where spruce plywood could replace birch plywood. Comprehensive and flexible customer management, and production reorganisa tion, have been keys to our success. We are able to deliver on both commercial and sustainability-related customer promises, even in exceptional market conditions, which is reflected in high customer loyalty and satisfaction.

EURm 539

% 44.3

EURm 109

We deliver responsibility to our customers through our products and services.

We are constantly improving effi ciency and reducing emissions from our mills and the supply chain. Our goal is to reduce emission by more than 65% by 2030 including 1% annual energy efficien cy improvement of our production. The heat required in the production process is almost exclusively produced by bioenergy. The by-products of the process, such as bark and fuel chips, are used as biofuel at the mills’ bio-boiler plants that generate heat the mills require. To further improve the carbon footprint for the product range, we started to use the lignin-based WISA® BioBond bonding technology in all our WISA spruce plywood products in 2022. The technology has already been used in UPM’s birch plywood since 2017. WISA BioBond is UPM Ply wood’s proprietary bonding technology in which at least 50% of fossil-based phenol in the glue is replaced with lignin, wood’s own natural bonding agent.

+10%

+19pp

+51%

More key figures on page 130

We manufacture high-quality WISA® ply wood and veneer products for construction, vehicle flooring, LNG shipbuilding, parquet manufacturing and other industrial applica tions. Plywood can replace many substanc es that are made from non-renewable raw materials, such as aluminium, concrete and steel. Our products act as an efficient carbon storage and are made from responsibly sourced wood. UPM Plywood achieved record earnings in 2022. In the first half the year, the market demand for spruce plywood was strong, driven by the building and construction industry. Demand for birch plywood was also strong in panel trading and industrial Strong earnings amid disrupted market conditions

applications. In the second half of the year, demand for spruce plywood softened due to lower activity in the building and construc tion industry. Demand for birch plywood remained strong and the European market was extremely tight due to restricted ply wood supply from Russia. Sales prices reached record highs and increased throughout the year in all end use areas. Costs increased throughout 2022, especially for chemicals, logistics, wood and energy. In response to Russia’s war in Ukraine, we suspended operations at the UPM Chudovo plywood mill, which has an annual production capacity of 155,000 cubic metres. To mitigate the impact of the suspended operations, we were able to increase the production in our Finnish

plywood mills. UPM Plywood's new three year collective labour agreement with the Industrial Union made it possible to run Finnish plywood mills seven days a week as of the beginning of 2022. Meeting future needs Demand for sustainable raw materials is expected to increase in the coming years. In construction, many European markets are turning more to wood-based materials to of fer this choice to customers and consumers. Our products store carbon and can re place fossil-based materials in construction, transport and other applications. At the end of their lifecycle, they also replace fossil fuels when disposed of by burning. Regulation is also driving demand for wood-based materials. For example, the

French government published plans for a sustainability law that will ensure all new public buildings are built from at least 50% timber or other natural materials. Many markets, especially in the Nordic countries, are already keen to make the most of all that structural construction plywood can offer. Built on our customer promise Responsibility is an underlying part of our products and operations and is guided daily by our “Responsibility Made Easy” customer promise. Our low carbon footprint aligns with our continuous efforts to offer our customers clear sustainability benefits, which help them to meet their own sustainability targets.

www.wisaplywood.com

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022