UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

3. Employee rewards 3.1 Employee costs

Earnings per share

them with the costs they are intended to compensate. A government grant can also become receivable by the group as compensation for expenses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable. Other operating income Other operating income mainly includes gains on the disposal of non current assets and rental income. Further, other operating income includes foreign exchange gains and losses in respect of UPM’s normal business activities. Gains and losses on derivatives not qualifying hedge accounting are also recognised in other operating income. Emission rights The group participates in the European Emissions Trading Scheme aimed at reducing greenhouse gas emissions. Emission rights received from governments free of charge to emit a fixed tonnage of carbon dioxide in a fixed period of time give rise to an intangible asset for the emission rights, a government grant and a liability for the obligation to deliver emission rights equal to the emissions that have been made during the compliance period. Emission rights are initially recognised as intangible assets based on market value at the date of initial recognition. Emission rights are not amortised. If the market price of emissions rights at the balance sheet date is less than the recognised costs, any surplus emission rights that are not required to cover actual and estimated emissions during the financial year, are impaired to the market price. Government grants are recognised as deferred income in the balance sheet at the same time as emission rights and are recognised in other operating income in the income statement, systematically, over the compliance period to which the corresponding emission rights relate. The liability to deliver emission rights is recognised based on actual emissions. The emissions realised are expensed under other operating costs and expenses in the income statement and presented as a provision in the balance sheet. The liability is settled using emission rights on hand, measured at the carrying amount of those emission rights. Emission rights and associated provisions are derecognised when disposed. Any profit or loss represents the costs of purchasing additional rights to cover excess emissions, the sale of unused rights in the case realised emission are under emission rights received free of charge or the impairment of unused emission rights. 2.4 Earnings per share and dividend On 2 February 2023, UPM’s Board of Directors revised the company’s dividend policy to be based on earnings instead of cash flow. According to new dividend policy, the company aims to pay attractive dividends, targeting at least half of the comparable earnings per share over time. The dividend paid in 2023 were EUR 800 million (EUR 1.50 per share) which is 158% of the operating cash flow per share and in 2022 EUR 693 million (EUR 1.30 per share). The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 800 million, EUR 1.50 per share, will be paid in respect of 2023. The proposed dividend represents 107% of UPM's comparable earnings per share for the year 2023.

EURm

2023 2022

Profit attributable to owners of the parent company, EURm Weighted average no. of shares (1,000)

388

1,526

EURm

2023 2022

533,324

533,324

Salaries and fees

1,039

901

Basic earnings per share, EUR Diluted earnings per share, EUR

0.73 0.73

2.86 2.86

Share-based payments

15

16

Pension and other post-employment benefits, defined benefit plans 1) Pension costs, defined contribution plans

21

77

101 111

93 94

Other indirect employee costs 2)

Accounting policies

Total

1,287

1,181

1) 2022 includes EUR 69 million settlement loss related to replacement of a defined benefit pension plan in Finland with defined contribution plan. 2) Other indirect employee expenses primarily include other statutory social expenses, excluding pension expenses. 3.2 Key management personnel The remuneration of the Chair of the Board of Directors was resolved to be raised so that the Chair of the Board was paid an annual base fee of EUR 218,000, the Deputy Chair of the Board EUR 145,000 and the other members of the Board EUR 120,000. The annual base fee was paid in company shares and cash so that approximately 40% of the fee was paid in the company shares purchased on the Board members’ behalf, and the rest in cash. The company paid any costs and transfer tax related to the purchase of the company shares.

Earnings per share Earnings per share (EPS) is the amount of profit for the period attributable to each share. The basic earnings per share are computed using the weighted average number of shares outstanding during the period. Diluted earnings per share are computed using the weighted average number of shares outstanding during the period plus the dilutive effect of share options. The group did not have share-option schemes at the end of 2023 and 2022. Dividend Dividend distribution to the owners of the parent company is recognised as a liability in the group’s consolidated financial statements in the period in which the dividends are approved by the parent company’s shareholders.

The remuneration of annual committee fees remained unchanged, and the Chair of Audit Committee received annual committee fee of EUR 35,000, the Chair of Nomination and Governance Committee EUR 20,000 and the Chair of Remuneration Committee EUR 27,500. The members of Audit Committee received annual committee fee of EUR 15,000 and members of other committees EUR 10,000. The annual committee fees were paid in cash. In 2023, 3,027 (2,489) company shares were purchased to the Chair, 2,013 (1,742) to the Deputy Chair and 1,666 (1,431) to other members of the Board.

Earnings and dividend per share

0.00 0.50 1.00 1.50 2.00 2.50 3.00

Shareholdings (no. of shares) and fees of the Board of Directors

Annual committee fee (EUR 1,000)

Shareholdings 31 December

Annual base fee (EUR 1,000)

EUR

2023

2022

2023

2022

2023

2022

Board members Henrik Ehrnrooth, Chair 1) Kim Wahl, Deputy Chair 2)

17,488 27,962

14,461 25,949

218 145 120 120 120 120 120 120 120

140 115

20 35 15 10 10 10 10 15 28

10 35

2019

2023

2022

2021

2020

Pia Aaltonen-Forsell 3) Emma FitzGerald Jari Gustafsson Piia-Noora Kauppi

1,666 3,097 4,502

—

—

—

Earnings per share Dividend per share (2023: proposal)

4,644 2,836

115 115 115 115 115 115 200

10 15 10 10 15 28 20

25,701

24,035

Topi Manner

3,097

1,431 9,594

Marjan Oudeman

11,260 26,510

Martin à Porta

24,844 273,189 380,983

Björn Wahlroos, Chair 4)

—

—

—

Total

121,283

1,203

1,145

153

153

1) Henrik Ehrnrooth, Chair as of 12 April 2023 2) Kim Wahl, Deputy Chair as of 12 April 2023 3) Pia Aaltonen-Forsell was elected as a new director to the Board in 2023 4) Björn Wahlroos, Chair until 12 April 2023

180

181

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

180

UPM FINANCIAL REPORT 2023

181