UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

8.2 Principal subsidiaries and joint operations

EURm

31 JUL 2023

Accounting policies Deferred tax is calculated based on temporary differences between the carrying amounts and the taxable values of assets and liabilities and for tax loss carry-forwards to the extent that it is probable that these can be utilised against future taxable profits. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised net where there is a legal right to set-off and an intention to settle on a net basis. 8. Group structure 8.1 Business acquisitions and disposals In 2023, UPM sold all its business operations in Russia to Gungnir Wooden Products Trading. The group also sold its holding in ASK Altpapier Sortierung Kinsau GmbH and its 20.00 % holding in the associated company Northern SC Paper Corporation. UPM made also several minor investments and sales of equity investments accounted at fair value through OCI. In 2022, acquired AMC AG (Advanced Methods of Coating) and made a minor investment in ASK Altpapier Sortierung Kinsau GmbH by acquiring the full share capital of of the company. UPM also sold its 33.09 % holding in the associated company Encore Ympäristöpalvelut Oy, and made several minor investments and disposals of equity investments accounted at fair value through OCI. Business combinations On 1 August 2023, it was announced that UPM Biochemicals has acquired SunCoal Industries GmbH. The acquisition enables UPM Biochemicals to strengthen the role as a leading supplier of sustainable, renewable functional fillers (RFF) to the rubber and plastic markets. UPM Biochemicals expects to realize significant synergies through the acquisition. If the transaction had occurred on 1 January 2023, UPM’s sales for January–December 2023 would have been EUR 10,461 million and profit for the period EUR 393 million. These amounts have been calculated using the group’s accounting policies and by adjusting the results of the subsidiaries to reflect the amortisation that would have been charged assuming application of fair value adjustments to other intangible assets from 1 January 2023, together with the consequential tax effects. Details of the purchase consideration, the net assets acquired and goodwill are as follows:

Other intangible assets

22

COUNTRY OF INCORPORATION

Property, plant and equipment

1 0 1 1 5 0 0 1 7

SUBSIDIARIES

HOLDING % 2023 HOLDING % 2022

Leased assets

Blandin Paper Company

US UY UY UY DE UA DE DE DE RU RU DE ES AT DE UY UY CN VN CH SG JP ID

100.00

100.00

Trade and other receivables Cash and cash equivalents

Blanvira S.A. Cuecar S.A.

91.00 91.00

91.00 91.00

Total assets

25

Forestal Oriental S.A.

100.00 100.00 100.00 100.00 100.00 100.00

100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 80.00 — 91.00 91.00

Deferred tax liabilities

Gebr. Lang GmbH Papierfabrik

Provisions

LLC UPM Ukraine

Non-current debt

Nordland Papier GmbH

Trade and other payables

NorService GmbH

Total liabilities

Nortrans Speditionsgesellschaft mbH

Net identifiable assets acquired Goodwill arising from acquisition

17

OOO UPM-Kymmene

— —

5

OOO UPM-Kymmene Chudovo Print Inform Japan K.K. PT UPM Raflatac Indonesia

80.00

Acquisition-related costs of EUR 1 million are included in other operating expenses and are reported as items affecting comparability in UPM Biochemicals business in Other Operation s. Information on the amounts of revenue and profit or loss of the acquiree since the acquisition date included in the consolidated income statement for the reporting period is not disclosed because it would be impracticable. The acquired business has been included in the group since 31 July 2023, and the effects of the revenues and profit or loss thereof are not considered material for disclosure purposes. The fair values of net identifiable assets acquired are provisional and dependent on final fair valuations. Transactions with non-controlling interests In 2023, UPM did not have any change in its non-controlling interests. In 2022, UPM acquired a holding with a minor non-controlling interest as a part of the acquisition of AMC AG. Accounting policies UPM consolidates acquired entities at the acquisition date which is when it gains control using the acquisition method. Consideration transferred is determined as the fair value of the assets transferred, the liabilities incurred and equity instruments issued including the fair value of a contingent consideration. Acquisition related transaction costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date. The group measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred, the amount of any non controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets of the subsidiary acquired is recorded as goodwill. The assets, liabilities, income and expenses of subsidiaries with non controlling interests are consolidated line by line into the UPM consolidated financial statements. The proportion of the profit for the period, as well as the accumulated share of total equity belonging to non-controlling interests are presented separately in the consolidated income statement and consolidated balance sheet.

100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 91.00 91.00

Rhein Papier GmbH

SERPRI S.A. Unipersonal

Steyrermühl Sägewerksgesellschaft m.b.H. Nfg KG

SunCoal Industries GmbH 1)

Tebetur S.A.

Tile Forestal S.A.

UPM (China) Co. Ltd UPM (Vietnam) Limited

UPM AG

UPM Asia Pacific Pte. Ltd. UPM Biochemicals GmbH

DE DE UY

UPM Biochemicals Sales GmbH

UPM Biofuels S.A.

UPM Communication Papers Oy

FI FI

UPM Energy Oy UPM France S.A.S. UPM Fray Bentos S.A.

FR

UY DE KO GB DE AT DE US IN

UPM GmbH

UPM-Kymmene (Korea) Ltd UPM-Kymmene (UK) Ltd

UPM-Kymmene Administrations GmbH & Co. KG

UPM-Kymmene Austria GmbH

UPM-Kymmene Grundbesitz GmbH & Co. KG

UPM-Kymmene Inc.

UPM-Kymmene India Private Limited

UPM-Kymmene Japan K.K.

JP

UPM-Kymmene Kagit Urunleri Sanayi ve Ticared Ltd. Sti.

TR EE

UPM-Kymmene Otepää OÜ

UPM-Kymmene S.r.l.

IT FI

UPM-Kymmene Seven Seas Oy

UPM-Kymmene Sp.z o.o.

PL

UPM NV UPM OÜ

BE EE

EURm Cash paid

21

UPM Plywood Oy UPM Pulp Sales Oy

FI FI

Deferred consideration

2

Total purchase consideration

23

UPM Raflatac (China) Co., Ltd.

CN

UPM FINANCIAL REPORT 2023

218

218

219

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

219