UPM Annual Report 2023

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2023

TRUSTED SUPPLIER UPM PLYWOOD

We deliver responsibility to our customers through our products and services.

As a trusted supplier of high-quality plywood products made of sustainably grown and sourced wood, we have set our responsibility standards high.

OUR DIRECTION • Create value for our customers by providing a superior customer experience and supporting their decarbonisation targets

OUR STRENGTHS • End use, market, and customer insight • Leader in supply reliability with consistent fit to purpose quality • Trusted supplier in demanding end-use segments • Carbon-storing products and the strongest brand on the market: WISA ®

PLANNED ACTIONS FOR 2024 • Enhance customer and employee experience via new digital services • Support authorities to fight against unfair competition • Execute further steps on our CO 2 reduction roadmap • Maintain efficient margin management

IN ACTION

• Maintain cost competitiveness and prerequisites for long-term business performance • Evaluate future growth and renewal opportunities

UPM PLYWOOD TAKES ACTION TO PREVENT UNFAIR TRADE

Imports of birch plywood from Türkiye and Kazakhstan have surged since anti-dumping duties and EU sanctions against Russian products came into force. The European Com mission is investigating the suspected evasion of EU anti-dumping regu lations regarding imports of Russian birch plywood. The Commission aims to determine whether imports to the EU truly originate from these countries, neither of which has been recognised as a significant producer of birch plywood. Illegal imports distort the market by damaging ethical European plywood manufacturers, retailers and end users. UPM Plywood is collaborating with the Woodstock Consortium, a platform of leading European birch plywood pro ducers, to support the EU authorities in their investigation. Despite the sanctions, Russian and possibly Belarusian birch plywood is still being imported into the EU using various techniques. The EU takes a strong stance on breaches of sanc tions orders and all imports of birch plywood must now be registered upon entering EU borders. The best way to fight illegal imports and unfair competition is to stay vigilant and react strongly to illegal use.

KEY FIGURES 2023

low-carbon and lifecycle characteristics of buildings. As buildings’ energy use shifts to low-carbon forms of energy, there will be an emphasis on the importance of materi als. WISA plywood meets these tightening requirements brilliantly. In 2023, we finalised our EUR 10 million investment in the overlaying line at our plywood mill in Joensuu, Finland. The investment strengthens the mill’s compet itiveness and ability to serve customers as well as ensure the highest plywood quality for vehicle flooring. Our updated vehicle flooring panel WISA-Trans Mk2 with a new surface pattern is a great example of a prod uct from this new overlaying line. Growing market demand continues to represent a growth potential far into the future in other demanding industrial appli cations, such as the insulation elements of LNG tankers carrying liquefied natural gas, which plays an increasingly important role in the global energy mix. As a global market leader, more than 50% of all LNG ships around the world today are already insulat ed with WISA plywood. Drewry forecasts that the LNG fleet will expand at a CAGR of 8.5% between 2023 and 2028, driven by a buoyant trade outlook, increasing invest ments and boosting demand for modern

tonnage. Tight shipbuilding capacity will strengthen the price of newbuilds, which will restrain fleet growth. Tangible decarbonisation The environmental impact of products is an increasingly important selection criterion in construction and industry. The Envi ronmental Product Declarations (EPD) for WISA birch plywood products provide researched information on the environ mental impact of product manufacture and estimates of the environmental impact of the entire lifecycle of the product in the construction industry. EPDs are currently voluntary for product manufacturers, but their importance is growing as construc tion requirements become stricter. UPM Plywood has published product-specific EPDs for WISA plywood since 2019. This information can be used to calculate the carbon footprint of buildings. We have continuously taken active steps to reduce CO 2 emissions in our plywood production. In purchased electricity, our aim is to achieve zero CO 2 emissions in our plywood mills by 2024.

SALES

COMPARABLE EBIT

COMPARABLE ROCE

PERSONNEL

EURm 422

% 22.2

EURm 56

on 31 Dec. 1,634

-22%

-48%

-22pp

More key figures on page 131

We manufacture high-quality WISA ® ply wood and veneer products from sustainable sources for construction, vehicle flooring, LNG shipbuilding, parquet manufacturing and other industrial applications. Plywood can replace many substances that are made from non-renewable raw materials, such as aluminium, concrete and steel. Managing margins In 2023, our earnings decreased from the record levels in the previous year. We were able to manage our margins well in the low-volume environment. Our sales prices increased and offset the impact of higher variable costs. Demand for spruce plywood and veneer declined due to lower activity in the renovation and construction industry.

Demand for birch plywood in panel trading and industrial applications was good in the first half of the year but moderated towards the end of the year. The European birch plywood balance was impacted by the leakage of illegal Russian plywood to Europe. The EU has imposed sanctions on the import of Rus sian-origin wood and wood products due to the ongoing war in Ukraine. Together with other European market operators, we have actively supported authorities for stopping illegal imports and preventing unfair com petition throughout the entire value chain (on the right). In 2023, we completed the withdrawal of our businesses from Russia by selling the Chudovo plywood mill. In 2023, we renewed our organisation

in Finland as well as our sales offices, and adjusted our operations to meet reduced production capacity and the deteriorating market situation. In connection with this, we developed our operating model to better sup port the company’s current strategic focus ar eas, create value to our customers and utilise the opportunities brought by digitalisation. Building future with plywood Our products store carbon and can replace fossil-based materials in construction, vehicles and other applications. The popu larity of plywood has grown even more with the growing attention paid to the climate impact of materials. In many European countries, construction laws are changing, and new laws set requirements for the

www.wisaplywood.com

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023