UPM Annual Report 2023

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2023

DRIVING THE VALUE OF PAPER UPM COMMUNICATION PAPERS

We believe in paper and the future of the paper.

OUR DIRECTION • Secure the future relevance of the paper business, focusing on sustainability • Maintain a profitable leading market position while managing capacity • Increase operational efficiency and ensure the quality of our products • Operational and supply chain optimisation and digital solutions at the customer interface

OUR STRENGTHS • Long-term commitment to graphic papers and the reliability of our supply • The high quality of our products and services • Extensive, thoroughly optimised production • Responsible operations and traceable supply chain

PLANNED ACTIONS FOR 2024 • Drive customer value and develop product portfolio and partnerships • Continue to drive sustainability of our offering and operations • Continue to improve performance and productivity

IN ACTION

KEY FIGURES 2023

SALES

COMPARABLE EBIT

COMPARABLE ROCE

PERSONNEL

REPLACING FOSSIL FUELS WITH ELECTRIC BOILERS

EURm 3,598

% 32.4

EURm 462

on 31 Dec. 6,005

We are electrifying heat and steam production at our paper mills in Fin land and Germany. Eight electric boil ers will replace the use of fossil fuels, primarily natural gas, peat and oil. In Finland, the new electric boilers can reduce CO 2 emissions from the use of fossil fuels by about 50,000 tonnes every year. In Germany, in addition to reducing emissions, electric boilers will also improve the security of supply for heat and steam generation. The electric boilers will also secure the steam supply for paper and pulp mills in other fuel shortage situations, such as in the event of gas shortag es. Electric boilers will significantly increase the mills’ ability to provide demand-side flexibility to balance the electricity system and market. Taking advantage of periods when electricity prices are low will also result in signifi cant cost savings for us.

transition towards renewable energy by installing new electric boilers across our paper mills in Finland and Germany. By improving the efficiency of on-site heat generation systems, the new electric boil ers can simultaneously lower energy costs, secure heat supply and increase the mills’ ability to provide demand-side flexibility to the electricity system and markets. This makes the electric boilers a valuable tool not only for the mills at a hyperlocal level but also for the grid at a national level, by balancing supply and contributing to grid security (on the left). We are a reliable, quality focused and sustainable long-term partner.

their business performance continued to remain high on our agenda. We believe that paper has an essential and enduring role in creating prosperity, opportunities and wellbeing for people, businesses and societies. The recent Two Sides Trend Tracker survey (polling 10,000 consumers in 16 countries), carried out every two years, found that European consumer preference for printed materials has recovered since the pandemic. According to Two Sides, a majority of European consumers prefer to read printed books (65%) and printed mag azines (51%). The preference for printed magazines represents a significant change, up from 35% two years earlier. Solution for reducing emissions Our focus is to bring UPM closer to the 2030 target of reducing CO 2 emissions from fuels and purchased electricity by 65%. We have taken actions to reduce emissions whilst contributing to the wider

-26%

-25%

-9pp

More key figures on page 131

As one of the world’s leading producers of graphic papers, we offer an extensive prod uct range of papers for advertising and pub lishing, as well as for home and office use. We are committed to driving the value of paper as a unique and sustainable medium of trust, impact, learning and inspiration. Safeguarding competitiveness In 2023, we achieved solid results in a low-demand market environment. Demand for graphic papers in Europe was 24% lower compared to 2022. Margins were suc cessfully protected by implementing cost containment measures and adjusting capac ity to demand through permanent capacity closures and temporary layoffs. Market prices for all paper grades declined from

ures. Earlier in 2022, we signed an agree ment to sell the UPM Steyrermühl site to the HEINZEL GROUP. The new owner took over the responsibility for the site and the employees after the transaction was closed at the beginning of 2024. Paper. Because it’s real The role of paper as a tangible medium and a record of civilisation is in rapid transfor mation. This is due to end user sustainabil ity perceptions, digitalisation and changing customer behaviour, leading to a constantly evolving operating environment. We need to meet the changing needs of all our customers and actively drive the value of paper as a tangible media platform. Reliable partnerships with our customers to support

record highs in the previous year, especially in Europe. Mature graphic paper markets require continuous efforts to ensure cost-competi tive operations that also meet the profitable customer demand and provide good cash flow. We continued to align our production in line with the long-term market outlook. We reduced our capacity by 18% with annual fixed cost savings of approximately EUR 100 million. We permanently closed the UPM Plattling mill and PM6 at UPM Schongau, in Germany, as well as PM4 at UPM Steyrermühl, Austria. Together with employee representatives, we focused on mitigating the impact of the closures for our employees, primarily through follow-up employment or partial retirement meas

www.upmpaper.com

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023