UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

4. Capital employed UPM’s capital employed primarily relates to its production facilities and both forest and energy assets. UPM aims to capture growth opportunities in its existing business portfolio and invest in projects with attractive and

changing market and economic conditions, or changes in service period of plan participants. Significant differences in actual experience or significant changes in assumptions may affect the future amounts of the defined benefit obligation and future expense.

Key estimates and judgements Several actuarial assumptions are used in calculating the expense and liability related to the defined benefit plans. Statistical information used may differ materially from actual results due to, among others,

Accounting policies

Defined benefit pension plans Plan benefits depend on salary and length of service. The defined benefit obligations are calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the term of the related pension liability. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The cost of providing pensions is charged to the income statement as employee costs so as to spread the cost over the service lives of employees. Changes in actuarial assumptions and actuarial gains and losses arising from experience adjustments are charged or credited in other comprehensive income in the period in which they arise. Past service costs and gains or losses on settlement are recognised immediately in income when they occur. Defined contribution plans For defined contribution plans, contributions are paid to pension insurance companies. Once the contributions have been paid, there are no further payment obligations. Contributions to defined contribution plans are charged to the income statement in the period to which the contributions relate. Other post-employment obligations Some group companies provide post-employment medical and other benefits to their retirees. The entitlement to healthcare benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment, using an accounting methodology similar to that for defined benefit pension plans. Valuations of these obligations are carried out by independent qualified actuaries.

sustainable returns. Capital employed

Actuarial assumptions The weighted average principal assumptions used in the valuations of the defined benefit obligations are detailed below:

FINLAND

UK

GERMANY

OTHER COUNTRIES

EURm

2023 2022

2023 3.11 2.13 1.89 1.44

2022 3.25 2.53 2.23 1.77

2023 4.55 3.10

2022 4.80 3.25

2023 3.26 2.00 2.50 2.00

2022 3.32 2.00 2.50 2.00

2023 4.16 2.28 2.50

2022 3.67 2.51 2.87 1.13

Property, plant and equipment

7,053

6,733

Discount rate % Inflation rate %

Leased assets Forest assets

683

713

2,355 2,283

2,442 3,652

Rate of salary increase % Rate of pension increase %

—

—

Energy shareholdings

3.00

3.15

—

Goodwill and other intangible assets

998

834

Expected average remaining working years of participants

Operating working capital

1,883

2,026

1.0

1.9

8.8

9.5

8.1

8.0

11.5

9.0

Provisions

-266 -501 632

-134 -526

Net retirement benefit assets and liabilities

Cash and cash equivalents Other assets and liabilities

2,067

Sensitivity analysis of defined benefit obligations The sensitivity analysis shows the effect of the change in assumption. The analysis assume that all other assumptions remain unchanged. The projected unit credit method has been applied when calculating the obligation as well as these sensitivities.

EURm

0.5% INCREASE 0.5% DECREASE 2023 2022 2023 2022

-69

257 -151

Net deferred tax assets and liabilities Assets classified as held for sale, net

-185

Discount rate %

-50

-52

54

57

50

—

Rate of salary increase % Rate of pension increase % Life expectancy +1 year

6

7

-6

-7

Total

14,916

17,913

40 29

39 29

-37

-38

—

—

Plan assets by categories 2023

A negative change indicates a decrease in the defined benefit obligation. A positive change indicates an increase in the defined benefit obligation.

Assets held by insurance companies 9%

Other assets 5%

Money market 16%

Plan assets by categories at 31 December

Property 6%

EURm

2023 2022 Quoted Unquoted Quoted Unquoted

Equity instruments 15%

Money market Debt instruments Equity instruments

49

2

97

36 77 15 59

129

32 45 21

— — —

Debt instruments 49%

3

Property

—

Assets held by insurance companies

— —

30 15

— —

39 16

Plan assets by categories 2022

Other assets

Total

182

145

97

243

Other assets 5%

Assets held by insurance companies 12%

In 2023 plan assets include the company's ordinary shares with a fair value of EUR 0 million (0 million). In 2024 contributions of EUR 22 million are expected to be paid to group’s defined benefit plans. In 2023 contributions of EUR 25 million were paid to group’s defined benefit plans.

Money market 39%

Property 17%

Equity instruments 4%

Debt instruments 23%

186

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

186

UPM FINANCIAL REPORT 2023

187