UPM Annual Report 2022

BEYOND FOSSILS

UPM

BUSINESSES

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

READY FOR SIGNIFICANT GROWTH

Strong financial position Increasing shareholder value has been a long-standing goal of ours and we have worked systematically for years to achieve this. This work has produced results that benefit all our stakeholders and the wider society. UPM's Board of Directors proposes a dividend of EUR 1.50 (1.30) per share for 2022, reflecting UPM's strong financial position and the Board's confidence in the company's future success. The Board has also decided on a new earnings-based divi dend policy in line with our transformative growth strategy.

UPM had a record year in 2022. We had success across all our businesses, despite the extraordinary events happening in the world around us.

The foundation of our business is solid and we expect a strong performance in 2023.

Russia's war in Ukraine permanently changed the geopolitical landscape and led to major sanctions. In the wake of the energy crisis, European countries focused on reducing their dependence on Russia. It was also a year that was marked by high inflation. This, combined with rapidly rising interest rates and continued COVID restric tions across China, had a huge impact on the global economy. For UPM, 2022 was a pivotal year. Our annual sales and earnings were at an all-time high. Our sales increased by 19%, while comparable EBIT increased 42% year on year. Our transformative growth projects also progressed as planned to wards the finish line. We responded to the challenges in the operating environment with commercial and operational agility. UPM's successes in 2022 also included the historic business-specific collective labour agreements, which will increase flexibility and create new opportunities for seven businesses across Finland. All in all, the year proved that even in very exceptional circumstances, we are able to perform excellently. I am therefore very proud of the company and of all UPMers. Major investments in the home stretch Our strategy is firmly up to date with cur rent events. Global megatrends are under pinning demand for many of our products, and both our customers and consumers want to make sustainable choices. Our pur pose is to create a future beyond fossils. We offer renewable and recyclable materials, and low-emission energy. We also innovate and actively invest in sustainable growth.

In Uruguay, we are nearing the end of a major investment project. The Montevideo pulp terminal was inaugurated in October 2022, while construction of the Paso de los Toros pulp mill has been completed and production will start soon. The mill's cash cost level per tonne of pulp delivered will be around USD 280, making it one of the most competitive pulp mills in the world. This investment will increase our pulp production capacity by more than 50% to around 5.8 million tonnes per year. The Olkiluoto 3 nuclear power plant unit was in its testing phase in 2022 and is now about to enter commercial production, in creasing UPM Energy's carbon-free power generation by almost 50%. This will also improve Finland's energy self-sufficiency and provide emission-free energy for the society. UPM Biorefining's biochemical refinery project in Leuna, Germany, is progressing well. Interest in the new biorefinery's prod ucts has been very high, as it is the world's first wood-based biochemicals plant. Detailed commercial and basic engineering studies of the potential biofuels refinery in Rotterdam continues in an intensive mode. Sustainability will remain at the heart of our Biofore strategy. We have ambitious, science-based targets and a solid track record of concrete action to both mitigate climate change and safeguard biodiversity. We source our raw materials from sustain ably managed forests and process them into climate-positive products that help our customers achieve their sustainability goals.

Although the operating environment remains uncertain, UPM's performance in 2023 is expected to be strong. In recent years, we have demonstrated our ability to operate and deliver results in a vola tile environment. The foundation of our business is solid and we are completing major investment projects that will bring us significant growth. I warmly thank all of UPM's employees, stakeholders and shareholders. Togeth er, we made 2022 the best year ever for the company! I am proud of our recent achievements and I look to the long-term future with confidence. The world needs responsible solutions and our growth strategy meets this challenge. We are determined to continue creating a future beyond fossils!

Jussi Pesonen President and CEO

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022