UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Information on shares Shares UPM has one class of shares. Each share entitles the holder to one vote at the General Meeting of UPM. On 31 December 2023, the total number of UPM shares was 533,735,699. Through the issuance authorisation described below, the number of shares may increase to a maximum of 558,735,699. On 31 December 2023, UPM held 411,653 treasury shares, representing approximately 0.08% of the total number of UPM shares and voting rights. There are no specific terms related to the shares. In 2023, UPM shares worth a total of EUR 8,752 million (9,680 million) were traded on the Nasdaq Helsinki stock exchange. This is estimated to represent approximately 70% of the total trading volume in UPM shares. The highest listing was EUR 35.99 in January and the lowest was EUR 26.62 in June.

R&D’s role in different businesses

BUSINESS AREA DESCRIPTION UPM Fibres

Authorisations held by the Board of Directors The Annual General Meeting held on 12 April 2023 authorised the Board of Directors to decide on the repurchase of a maximum of 50,000,000 of the Company’s own shares. The authorisation will be valid for 18 months from the date of the AGM resolution. The Annual General Meeting held on 12 April 2023 authorised the Board of Directors to decide on the issuance of new shares, the transfer of treasury shares and the issuance of special rights entitling to shares in proportion to the shareholders’ existing holdings in the Company, or in a directed share issue, deviating from the shareholder’s pre-emptive subscription right. The Board of Directors may also decide on a share issue without payment to the Company itself. The aggregate maximum number of new shares that may be issued and treasury shares that may be transferred is 25,000,000, including the number of shares that can be received on the basis of special rights. The authorisation will be valid for 18 months from the date of the AGM resolution. Aside from the above, the Board of Directors has no current authorisation to issue shares, convertible bonds or share options.

In 2023 our global R&D presence in Asia, Europe and the Americas continued to enable us to work faster and better with our customers and partners to find and implement required solutions. By having a local presence at a global scale we were able to implement fit for purpose solutions. Several developments were made to improve operational reliability, safety and environmental performance at our pulp mills. Our commitment to developing sustainable and high-quality eucalyptus plantations for pulp production remains at the core of our operations in Uruguay. In 2023, it has taken a new dimension with the fully operational Forestry R&D Center in Paysandú and the inauguration of a new tree nursery in Sarandí del Yí, turning our long term R&D into high quality seedlings for new plantations, and supporting the new era in our operations after the start-up of the UPM Paso de los Toros pulp mill. In Uruguay, we have also been able to capitalize on long-term R&D by starting to deliver continuously a dried mix of biosludge and lime sludge to a local cement factory, reducing landfill waste at the UPM Fray Bentos pulp mill and substituting high CO 2 energy sources at the cement factory with a renewable biofuel. After a period of solution development stage for our second state-of-the-art eucalyptus pulp mill that started operating in Uruguay in April, more emphasis was placed on developing and piloting the first stages of our next fibre based and bio-streams growth concepts for our pulp mills in cooperation with research institutes at UPM’s pilot plant in Lappeenranta. In doing so, we see clear synergies and advantages in having in-house businesses that focus on replacing fossil materials with renewable solutions. It allows us to make our customers more successful faster by designing and implementing solutions based on our bio-steams in a range of industries and applications. UPM is researching options in the further use of its biogenic CO 2 sidestream. Options researched include creating negative emissions by storing biogenic CO 2 emitted by pulp mills as well as utilisation into, for example, carbon neutral synthetic fuels and chemicals. UPM published a white paper on its views on how to scale up the negative emissions value chain. The focus was on improving the cost-competitiveness and environmental performance of hydropower production assets and on developing competencies and business operations related to the optimisation of industrial energy consumption and demand-side flexibility. UPM Energy participated in several research programmes and undertook development work with the aim of improving UPM’s power generation and consumption operations in a changing electricity market, as well as developing means to mitigate the impact of hydro power operations on rivers and migratory fish as a part of UPM’s Stream water programme. UPM Raflatac product development in Strategic Business Units and in Global R&D continues to support UPM’s sustainable development goals and commitments in self-adhesive label materials. Packaging recyclability, reduction of raw materials and new renewable raw materials are core elements in all UPM Raflatac’s R&D projects supporting UPM’s beyond fossils strategy. Continuous improvements in quality and cost efficiency remain essential to product and process development. The AMC acquisition brings new technologies and products which will further strengthen UPM Raflatac’s technical competencies in self-adhesive materials. This will enable new opportunities for future product development. R&D and product development initiatives aim to enable high performance and efficiency in the value chain and to develop fibre-based alternatives for non-renewable materials. These initiatives also support growth targets by driving the innovation of products for new applications. We continue to focus on co-creating sustainable paper-based packaging solutions for various end-uses; together with the packaging value network; we currently have several ongoing co-creation initiatives supported by our excellent R&D infrastructure including Northern European and Asian R&D centres. UPM Specialty Papers continues to develop release liner base papers to further improve efficiency and minimise the environmental impact of the value chain. For example, our downgauging initiatives support our customers’ material efficiency targets. We are also driving an industry wide design-for-recycling approach across the label and tape value chains. In the area of energy, we have electrified our heat and steam generation and invested considerably in power-to-heat boilers at our paper locations in order to enable reliable heat supply in case of gas or other fuel supply disruptions, improve our cost competitiveness and reduced CO 2 emissions in an increasingly volatile electricity system. Furthermore, the focus was on technological innovations that help minimise energy needs at the production sites. Paper mills also developed further intelligent operations to enable increasing demand-side management towards the electricity markets and networks to support system stability and decrease emissions at peak times. The Research & Development Centre in Lappeenranta, Finland and the Central European Support Team in Augsburg, Germany continued to focus on investigating fibre concepts for various paper grades. The teams have been further optimising recovered paper (RCP) supply by various quality studies. UPM Communication Papers continued to participate in projects and association activities to keep RCP recyclable, e. g. in the cycle4green initiative. Furthermore, our R&D teams provided support to optimise the deinking process with the aim of minimising material losses and reducing energy and the water consumption. Product portfolio development focused on the needs of key customer groups. In terms of operations efficiency, our R&D efforts concentrated on improving the efficiency of several mills for pinpointed efficiency supporting actions as well as safety-improving areas. Contributions from the R&D teams contributed to meeting the 2030 targets in the areas of energy, water consumption, effluent treatment and resource efficiency. UPM Plywood product management and development provides competitive products within selected end-use areas in collaboration with our customers, superior technical expertise and support for customers, and support for the commercialisation of newly developed products and applications. An example would be further expanding the use of lignin-based WISA BioBond gluing solution to new product lines. Collaboration for the development of new applications for renewable plastics based on UPM BioVerno naphtha continued. Piloting, research and process development continued to take place at the UPM Biorefinery Development Centre (BrDC) and with external partners. UPM also studied and tested the use of several new innovative feedstocks that meet sustainability criteria, such as wood residues and feedstocks from carbon farming for our possible growth plans.

UPM Energy

UPM Raflatac

Changes in number of shares

2023

2022

2021

2020

2019

Number of shares 1 January

533,735,699 533,735,699 533,735,699 533,735,699 533,735,699 533,735,699 533,735,699 533,735,699 533,735,699 533,735,699

UPM Specialty Papers

Number of shares at 31 December

Major shareholders at 31 December 2023

UPM Communication Papers

NUMBER OF SHARES

HOLDING %

Ilmarinen Mutual Pension Insurance Company Varma Mutual Pension Insurance Company ELO Mutual Pension Insurance Company

8,958,528 8,599,564 4,892,000 2,900,000 2,621,521 2,500,000 1,860,000 1,696,360 1,478,991 1,454,890

1.68 1.61 0.92 0.54 0.49 0.47 0.35 0.32 0.28 0.27

The State Pension Fund

The Society of Swedish Literature in Finland

Holding Manutas Oy Security Trading Oy

Kymin Osakeyhtiön 100-vuotissäätiö

Nordea Pro Finland Fund

UPM Plywood

Samfundet Folkhälsan i Svenska Finland

Nominee registered

360,763,557 136,010,288 533,735,699

67.59 25.48

Others

Other operations UPM Biofuels

Total

100.00

158

159

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

158

UPM FINANCIAL REPORT 2023

159