UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Change in net debt 2022

Free cash flow Free cash flow is primarily a liquidity measure. It is an important indicator of UPM’s overall operational performance as it reflects the cash generated from operations after investing activities.

Free cash flow

Reported in financing activities in cash flow statement

1,500

NON CURRENT

NET

INVEST

OTHER FINANCIAL ASSETS

CASH AND CASH EQUIVALENTS NET DEBT

1,000

LOANS INCL. REPAYMENTS

LEASE LIABILITIES

CURRENT LOANS

DERIVA

MENT FUNDS

EURm

2023 2022

EURm

TIVES

500

2,269 -1,076 1,193

508

Operating cash flow Investing cash flow

Carrying value, at 1 January Change in net debt, cash Proceeds from non-current debt Payments of non-current debt

2,046

574

2

-99

-100

-317

-1,460

647

-1,585 -1,077

0

Free cash flow

EURm

4,402 -2,550

— —

— — —

— — — —

— — — — —

— — — — —

— — — — —

4,402 -2,550

-799

-693

Dividends paid to owners of the parent company Dividends paid to non-controlling interests Contributions paid by non-controlling interests Transaction costs and discounts in operating cash flow Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow Other financing cash flow

-500

-36 35 -14

-27 97

— — —

-91

-91

Lease repayments

-1,000

— —

439

439

Change in current liabilities Net cash flows from derivatives

-9

—

20

20

19 20 21 22 23

Transaction costs and discounts in operating cash flow Change in other financial assets in operating cash flow Change in other financial assets in investing cash flow

0

5

-5

—

—

—

—

—

—

-5

-311

208

—

—

—

—

—

-208

—

-208

5

-2

— — —

— — —

— — —

— — —

—

2

— —

2

Change in net debt, cash Change in net debt, non-cash

-74

1,499

99

— —

99

Change in investment funds

131

229

—

-610 -610

-610

Change in cash and cash equivalents

Change in net debt Opening net debt Closing net debt

58

1,728

1,847

-91

439

20

99

-206

1,499

2,374 2,432

647

Change in net debt, non-cash Companies acquired

2,374

22

—

— — — — — — —

— — —

— — — — — — —

— — — — — — —

— — — —

22

— —

171

171

New contracts and subsequent additions

-5

-5

Lease liability reassessments Fair value gains and losses Exchange gains and losses Effective interest rate adjustment

Bonds

-180

—

169

-11 49

28

18

— —

3

NOMINAL VALUE ISSUED, MILLION

CARRYING VALUE 2023 EURm

CARRYING VALUE 2022 EURm

3

—

—

3

INTEREST RATE, %

FIXED RATE PERIOD

CURRENCY

-127

184 668

169

3

229

Carrying value, at 31 December

1997-2027 2020-2028 2021-2031 2022-2029

7.450 0.125 0.500 2.250

USD EUR EUR EUR

375 750 500 500

361 650 495 496

378 605 494 496

3,766

441

90

-1

-523

-2,067

2,374

Value, at 31 December

2,002

1,974

Current portion

—

—

Non-current portion

2,002

1,974

Leases Leases of property, plant and equipment where UPM, as a lessee, obtains substantially all of the economic benefits from the use of the identified asset and where UPM has the right to direct the use of the identified asset, are classified as leases. Approximately 34% (34%) of leased assets recognised on the balance sheet consists of land areas in Uruguay, which the group uses for eucalyptus plantations. Approximately 11% of leased assets on the balance sheet consists of vessels for sea transportation in Europe. Approximately 9% (24%) of the leased assets on the balance sheet consist of five power plants. UPM uses the energy generated by these plants for its own production. In 2023, the decrease in carrying value is mainly attributable to the EUR 100 million impairment charge of a leased power plant related to the closure of UPM Plattling paper mill in Germany. In addition, the group has leased one waste water treatment plant as well as several warehouses, terminals, offices and railcars. UPM also leases some production machinery and equipment like forklifts and vehicles that are insignificant to the total leased assets portfolio.

In 2023 and 2022, additions to leased assets mainly relate to biochemicals refinery utilities in Leuna and new vessels for sea transportation in Europe. Impairment charges 2023 relate to the closure of the UPM Plattling paper mill and in 2022 to assets impacted by Russia's war in Ukraine. Due to the significant uncertainties related to operations in Russia and Ukraine, UPM recognised a write off of all leased assets locating or relating to operations in these countries. In 2023, the total cash outflow for leased assets was EUR 99 (91) million. The expenses related to short-term leases recognised in the income statement in 2023 amounted to EUR 3 (3) million. The group did not have significant variable lease payments in 2023. The lease commitments for leases not commenced at year-end 31 December 2023 totalled approximately EUR 176 (245) million, which are mostly related to a railway service agreement in Uruguay and a service agreement related waste water treatment in Leuna, Germany.

202

203

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

202

UPM FINANCIAL REPORT 2023

203