UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

5.2 Net debt Net debt is defined as the total of current and non-current debt less cash and cash equivalents and interest-bearing current and non-current financial assets. In 2023, net debt increased by EUR 58 million. Net debt totalled EUR 2,432 million (2,374 million) at the end of 2023. In 2020, UPM established a EUR 3 billion Euro Medium Term Note (EMTN) programme and launched a Green Finance Framework that aligns with the International Capital Markets Association (ICMA) Green Bond Principles. UPM has since issued three Green Bonds, totalling EUR 1,750 million. The independent second party opinion concerning the framework was provided by CICERO Shades of Green, and UPM’s framework was rated with the highest-grade, CICERO Dark Green. In November 2023, UPM published an updated Green Finance Framework, which was reviewed by S&P Global Ratings. The new framework also received the highest “Dark Green” overall shading. The proceeds from the Green Bonds have been allocated in accordance with the Green Finance Framework to eligible green projects and assets in the following categories: sustainable forest management, climate-positive products and solutions, and hydropower. The bonds do not have any financial covenants and all issued euro bonds are listed on the Irish Stock Exchange plc, trading as Euronext Dublin.

Net debt EURm

Change in net debt 2023

2023 2022

Reported in financing activities in cash flow statement

Bonds

2,002

1,974 1,604

Loans from financial institutions

188 612

NON CURRENT

DEBT HELD FOR SALE

CASH AND CASH EQUIVA LENTS

FINANCIAL ASSETS HELD FOR SALE

Lease liabilities

583 137 179

LEASE LIABI LITIES

NET

INVEST

OTHER FINANCIAL ASSETS

LOANS INCL. REPAYMENTS

CURRENT LOANS

DERIVA

MENT FUNDS

NET DEBT

Derivatives Other loans

94

EURm

TIVES

160

Carrying value, at 1 January

Non-current debt

3,056

4,476

3,766

668

441

90

-1

—

-523

-2,067

—

2,374

Repayments of non-current debt Repayments of lease liabilities

20 94 33

9

Change in net debt, cash Proceeds from non-current debt Payments of non-current debt

84 24

Derivatives

100

— —

— — —

— — — —

— — — —

— — — —

— — — —

— — — —

— — — —

100

Other liabilities Current debt Debt held for sale

180 327

441 558

-1,506

-1,506

— —

-99

-99

Lease repayments

2

0

—

-260

-260

Change in current liabilities

Total debt

3,385

5,034

Net cash flows from derivatives

—

—

—

6

—

—

—

—

—

6

Loan receivables

4

4

Derivatives

51 17 71

61 19 84

Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow Change in investment funds Change in cash and cash equivalents

—

—

—

—

—

—

311

—

—

311

Other receivables

Non-current interest-bearing assets

—

—

—

—

— — — —

— — — —

-5

—

— — — —

-5

Loan receivables

1

0

—

Derivatives

14

9

Net debt

Other receivables Investment funds

187

500

—

—

—

—

—

1,379 1,379

1,379

1

1

-1,406

-99

-260

6

306

-74

Cash and cash equivalents

632 835

2,067 2,576

2,500

25

Change in net debt, non-cash Companies acquired

Current interest-bearing assets Interest-bearing assets held for sale Total interest-bearing assets

2

—

— —

— —

— —

— —

— —

— —

— —

2

2,000

20

47

0

—

-2

-2

Companies disposed New contracts and subsequent additions

Gearing ratio, %

953

2,660 2,374

1,500

15

Net debt

2,432

— —

149

— — — —

— —

— — — —

— — — —

— — — —

— — —

— — — —

149

1,000

10

2

2

Lease liability reassessments Fair value gains and losses Exchange gains and losses

EURm

33 -27

—

-34

-1

500

5

Accounting policies

-11

—

16

-22

0

0

Effective interest rate adjustment

4

—

—

—

—

—

—

—

—

4

Debt Debt comprising of bonds, bank and pension loans, lease liabilities and other loans is recognised initially at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest method. Any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the estimated life of the borrowing. UPM classifies debt as non-current unless due for settlement within a year. Most of the debt is hedged in a fair value hedge relationship as described in » Note 6.1 Financial risk management.

-500

-5

Reclassifications to assets and liabilities held for sale

19 20 21 22 23

-1

-1

— —

—

— —

2 2

9 8

39 55

-47 -47

—

11

137

-34

131

Carrying value, at 31 December

2,371

706

180

63

-1

2

-208

-632

-47

2,432

200

201

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

200

UPM FINANCIAL REPORT 2023

201