UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Notes to the parent company financial statements

Cash flow statement

EURm

2023

2022

Cash flows from operating activities Profit before closing entries and tax Financial income and expenses Adjustments to operating profit 1) Change in working capital 2)

Accounting policies

Leases Lease payments of lease contracts are recognised in other operating expenses over the lease term. Lease payments due in future years under lease contracts are presented as off-balance sheet items. Provisions Provisions include foreseeable future expenses and losses to which the company is committed, the realization of which is probable and the amount can be reliably estimated, e.g. pension and environmental liabilities and termination and restructuring costs. Changes in provisions are recognised in income statement within particular cost items. Sales Sales include sales revenue from actual operations less indirect taxes, discounts, claims and exchange rate differences on trade receivables. Research and development costs Research and development costs are expensed in the year in which they are incurred. Pensions In Finland employers are obliged to insure their employees for statutory benefits, as determined in Employee’s Pension Act (TyEL). The mandatory pensions are arranged mainly through pension insurance companies. Contributions to pension insurance companies are charged to the income statement in the period to which the contributions relate. Share-based payments Share based compensation is recognized as an expense in the income statement over the earnings period and the related liability is booked to the balance sheet. Closing entries Parent company closing entries consists of the change in the depreciation difference and group contributions granted to group companies. The accumulated depreciation difference in the parent company has not been divided into equity and deferred tax liability. Income taxes Income taxes presented in the income statement consist of accrued taxes for the financial year and tax adjustments for prior years. The parent company has not recognised deferred tax assets and liabilities in the balance sheet, but presents the information in the notes. Derivatives Realised results of derivative contracts and negative fair value of open derivative contracts are recognised in the income statement. Negative fair value of open derivative contracts that are not settled in cash is recognised as a provision in the balance sheet. Hedge accounting is not applied. Income and expenses of balance sheet hedging and forward foreign exchange contracts hedging commercial foreign currency flow of all group companies are recognised in financial items . Income and expenses of commodity derivatives are recognised in operating profit. Income and expenses of commodity derivative contracts of group companies are recognized in financial items. Majority of financial derivative contracts of the group are made by the parent company. All contracts are made with external counterparties

1,642 -1,632

-101 547 231

The financial statements of the parent company are prepared in accordance with Finnish Accounting Standards, FAS. The main differences in accounting policies of the group and the parent company relate to the measurement of financial derivatives and forest assets and recognition of defined benefit obligations, share-based payments, lease agreements and deferred income taxes. The financial statements are presented in millions of euros and rounded and therefore the sum of individual figures might deviate from the presented total figure. Foreign currency translation Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date and other commitments are translated into euro currency using the balance sheet date exchange rate. Exchange rate differences arising from the valuation of trade receivables are recognised in sales and exchange rate differences on trade payables in purchases. Exchange differences arising from the measurement of other receivables and liabilities are recognised in financial items. Tangible and intangible assets Tangible and intangible assets are stated at cost less accumulated depreciation and amortisation according to plan and impairments. Emission rights are recognised using net approach. Depreciation and amortization according to plan is recorded on a straight-line basis over the expected useful lives of the assets as follows:

48

983 185 -228 738 861

-1,156

Interest received

87 -69

Interest paid

Dividends received Other financial items Income taxes paid 3) Operating cash flow

293 -758

8

-84

2,605

-1,010

Cash flows from investing activities Investments in tangible and intangible assets

-69

-79

Investments in shares and holdings

-812

-1,285

Proceeds from sale of intangible and tangible assets Proceeds from disposal of shares and holdings

12 68 -63

17

1

Change in other non-current receivables

-143

Investing cash flow

-865

-1,490

Cash flows from financing activities Proceeds from non-current liabilities Payments of non-current liabilities

325

4,493 -2,627 1,794

-1,578 -1,004

Change in current liabilities

Dividends paid

-800

-693

Group contributions, net

-24

-19 97

Land and water areas, no depreciation Intangible assets

Other items

-1

5–10 years 20–50 years 5–10 years 15–20 years 20–30 years 5–20 years

Financing cash flow

-3,081

3,044

Buildings

Light machinery and equipment

Cash and cash equivalents at beginning of period

1,840 -1,340

1,296

Heavy machinery

Change in cash and cash equivalents

545

Cash and cash equivalents at end of period

Power plants

500

1,840

Other tangible assets

Notes to cash flow statement 1) Adjustments to operating profit EURm

Forest assets are recognised as tangible assets within land and water areas at historical cost and revaluation. No systematic depreciation or changes in value due to felling is recognised. Investments Investments are stated at cost less impairments. Inventories Inventories are stated at cost or the lower of replacement cost and probable selling price. Costs are measured using FIFO-method. In addition to variable costs, the cost of inventories includes a portion of the fixed costs of acquisition and manufacturing. Revaluations The balance sheet value of land includes revaluations. No new revaluations are made and the balance sheet value of land is considered to be below their fair value.

2023

2022

Depreciation, amortisation and impairment charges Capital gains and losses on sale of non-current assets

113

181

-14 -51 48

-13 63

Change in provisions

Total

231

2) Change in working capital

EURm

2023

2022

Inventories

34

-121

Current receivables

1,133

-1,143

Current non-interest-bearing liabilities

-184 983

108

Total

-1,156

3) Income taxes related to sale of assets are presented in investing cash flow.

226

227

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

226

UPM FINANCIAL REPORT 2023

227