UPM Annual Report 2023

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2023

UPM SPECIALTY PAPERS

VALUE FROM CO-CREATION

We innovate renewable and recyclable products that help to minimise society's dependency on fossil-based materials.

OUR DIRECTION • A global leader in labelling materials • The preferred partner for fine papers in the Asia-Pacific region • Growth in selected flexible packaging applications

OUR STRENGTHS • Sustainable alternatives to fossil-based materials • Extensive expertise in technically demanding papers • Recognised by customers as a reliable partner • The ability to serve customers globally • The ability to develop and co-create industrial scale solutions

PLANNED ACTIONS FOR 2024 • Focus on profitable growth • Safeguard cost competitiveness • Commercial success with co-creation partnerships and scaling up barrier papers

TRANSFORMATION STORY

FULLY FIBRE-BASED PACKAGING DEVELOPED WITH FAZER

KEY FIGURES 2023

SALES

COMPARABLE EBIT

COMPARABLE ROCE

PERSONNEL

UPM Specialty Papers and Fazer have co-created fully fibre-based packaging for Fazer’s Oat Rice Pies. The new pack aging reduces the use of fossil-based materials and improves recyclability while preserving the taste and food safe ty of the pies until their best-before date. Previously, a paper-plastic laminate was needed to provide protection against moisture and grease and to heat seal the packaging. The new packaging solution is based on UPM Confidio™ barrier paper, which is heat sealable and can be used to package food. The paper works in Fazer’s existing packag ing processes and can be recycled in awarded the WorldStar 2024 by the World Packaging Organization, and ScanStar 2023. It also came second in the New Wood competition in the spring. Fazer’s Oat Rice Pies are a tra ditional Finnish snack available in shops throughout Finland. existing fibre recycling streams. The packaging innovation was

EURm 1,485

EURm 98

% 11.2

on 31 Dec. 1,963

Advancing a circular bioeconomy UPM has set ambitious responsibility tar gets for 2030 (page 32). All of our products are designed to be recycled, helping brand owners and converters adapt to regulatory changes and meet their targets of prioritis ing sustainable materials. What’s more, a large number of our packaging papers and label papers are now certified as industrial ly and home compostable. 100% of production waste streams are efficiently utilised, either recovered or recycled. UPM's goal is to reach zero waste to landfill or incineration without energy recovery by 2030. Our packaging papers offer fibre-based alternatives for a future beyond fossils.

we have co-created a recyclable paper packaging for fresh foods (on the left). Fresh food products such as these have traditionally been packaged using plastics or paper-plastic laminates. We have worked closely with partners from across the packaging value network to develop new fibre-based solutions. We have collaborated with chemical suppliers as well as packaging and printing machine suppliers, for example, to test and opti mise our materials for existing machinery. Our long-standing relationship with the German company Henkel has resulted in a concept for recyclable, heat-sealable, grease-resistant packaging material. OneBARRIER FibreCycle solution was announced as one of the winners of Packaging Europe’s Sustainability Awards 2023. It is a ground-breaking paper-based high barrier solution for foods for a long shelf-life, providing an alternative to mul ti-layer plastic packaging that is difficult to recycle.

-11%

-36%

-6pp

More key figures on page 130

We provide high-performance materials for labelling and packaging. In the APAC region, we also offer fine papers. Our customer success is built on our customer focus, our well-defined product offering and our strong global presence and reach. Year of unforeseen volatility In 2023, our financial performance was chal lenged by the unstable market environment, as inventory build-up and release combined with changes in private consumption caused unforeseen volatility in the demand for specialty papers. In H1, our results were weak due to low volumes. In H2, our earnings improved from low levels. Despite the chal lenging market environment, we succeeded in margin and stock management.

Global demand for label papers, release base papers and packaging papers was soft, and sales prices decreased compared to the previous year. The recovery of the Chinese economy was slower than expected, impact ing the growth in demand for fine papers. In H2, demand began improving both in China and in the rest of the Asia-Pacific region. The sales prices of fine papers decreased compared to the previous year. In the long term, solid trends in de mand are driving the growth of specialty papers. In 2023, we launched a new or ganisational setup with a strong devel opment focus on commercial and digital competencies and on maximising global synergies across our organisation. We continued to scale up our previous growth

investments and prepared for the possible next steps in our growth strategy, which is driven by long-term growth for label and release liners, increased opportunities for sustainable packaging and Asian economic growth. Co-creating fibre-based materials With the packaging industry preparing for the EU’s Packaging and Packaging Waste Regulation (PPWR), which aims to ensure that all packaging in the EU is reusable or recyclable by 2030, the demand for recyclable fibre-based packaging solutions is growing. We are continuously aiming higher in our commercial success with a broad range of versatile packaging papers and value-adding co-creation. With Fazer,

www.upmspecialtypapers.com

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023