UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Report of the Board of Directors

Sustainability Statement

Financial Statements

Auditor's Report

Sustainability Assurance Reports

In 2024 1) , the numerator consists of the following categories of Taxonomy-aligned OpEx: 3.6 “Manufacture of other low-carbon technologies” includes maintenance and R&D costs related to biochemicals biorefinery. 4.5. “Electricity generation from hydropower” OpEx includes maintenance costs of hydropower plants. 4.13. “Manufacture of biogas and biofuels for use in transport” OpEx includes maintenance costs of biofuels production facility in Lappeenranta and next generation biofuels refinery R&D costs. 4.20. “Co-generation of heat/cool and power from bioenergy” includes maintenance of related power plants. OpEx related to forestry infrastructure maintenance, forest fire fighting, protection and environmental activities (1.3. “Forest management”) and investments on leased vessels (6.10 “Sea and coastal freight water transport, vessels for port operations and auxiliary activities”) is Taxonomy-eligible but not Taxonomy-aligned. Nuclear and gas related activitie s UPM has reported separately its activities related to Nuclear and Gas as defined in the Complementary Climate Delegated Act (2022/1214). Taxonomy-eligible turnover from nuclear-related activities includes UPM's electricity sales to external customers related to nuclear power plants (Olkiluoto 3 under activity 4.27 and Olkiluoto 1and 2 under activity 4.28). Taxonomy-eligible OpEx in activities 4.27 and 4.28 includes, as defined in the Disclosures Delegated Act, UPM's share of day-to-day servicing costs related to property, plant and equipment in the new and existing nuclear power plants. UPM is not reporting any CapEx related to the nuclear activities as due to the nature of its shareholding ownership in PVO, investments related to nuclear are not included in the total UPM's Capital expenditure as presented in the UPM Annual Report, » Refer to Note 4.3 Energy shareholdings in the consolidated financial statements. All the reported nuclear activities and respective KPIs are both Taxonomy-eligible and Taxonomy-aligned. 1) In 2023, economic activities 1.1 "Afforestation” and 1.3. “Forest management were reported as aligned. Apart from that, activities in the numerators of Taxonomy-aligned turnover, CapEx and OpEx in 2023 were equal to 2024.

financial statements. Capital expenditure presented in the UPM Annual Report under Other financial information differs from Taxonomy-CapEx as it excludes additions to forest assets and leased assets and includes goodwill acquired in business acquisitions. In 2024 1) , the numerator consists of the following categories of Taxonomy-aligned CapEx: 3.6 “Manufacture of other low-carbon technologies” CapEx relates to investment in the new-generation biorefinery in Leuna, Germany. The Group is reporting all CapEx related to ongoing investment in new generation biorefinery as Taxonomy-aligned CapEx. In 2024, UPM interpreted the Leuna investment as a Capex plan (1.1.2.2. (b) of Annex I) instead of capital expenditure relating to assets or processes already associated to environmentally sustainable economic activities, as the Leuna biorefinery is not yet fully in operational stage. The commissioning and start-up of the biorefinery was initiated in late 2024. The integrated commercial production of the site is expected to start in H2 2025. Total CapEx for the investment is estimated to be EUR 1,275 million. 4.5. “Electricity generation from hydropower” CapEx includes refurbishment of hydropower plants. 4.13. “Manufacture of biogas and biofuels for use in transport” CapEx includes refurbishment of Lappeenranta biorefinery. 4.20. “Co-generation of heat/cool and power from bioenergy” includes refurbishment of related power plants. CapEx related to investments on purchased and leased land for afforestation (1.1. “Afforestation”), capitalised forest regeneration costs such as planting, growing of seedlings and operation of nurseries, (1.3. “Forest management”) and leased vessels (6.10 “Sea and coastal freight water transport, vessels for port operations and auxiliary activities”) is Taxonomy-eligible but not Taxonomy-aligned. OpEx UPM has included in OpEx, as defined in the Disclosures Delegated Act, research and development costs as accounted for in accordance IAS 38 Intangible assets, short-term lease expenses as accounted for in accordance IFRS 16 Leases, and costs of day-to-day servicing (i.e., repairs and maintenance) of property, plant and equipment as accounted for in accordance IAS 16. Costs of day-to-day servicing of property, plant and equipment include direct salaries of maintenance personnel, maintenance materials and maintenance services outsourced. In addition, as UPM owns a significant amount of forest assets, it considers forest management and support services as day-to-day servicing of assets as defined in the EU Disclosures Delegated Act. OpEx is included in the consolidated income statement line item Costs and expenses, » Refer to Note 2.3. Operating expenses and other operating income in the consolidated financial statements.

ROW

ECONOMIC ACTIVITIES

AMOUNT

%

1.

4.26. Pre-commercial stages of advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle 4.27. Construction and safe operation of new nuclear power plants, for the generation of electricity or heat, including for hydrogen production, using best-available technologies 4.28. Electricity generation from nuclear energy in existing installations 4.29. Electricity generation from fossil gaseous fuels 4.31. Production of heat/cool from fossil gaseous fuels in an efficient district heating and cooling system Amount and proportion of other Taxonomy non-eligible economic activities not referred to in the rows above in the denominator of the OpEx Total amount and proportion of Taxonomy non-eligible economic activities in the denominator of the OpEx 4.30. High-efficiency co-generation of heat/cool and power from fossil gaseous fuels

2.

3.

4.

5.

6.

7.

601

90 %

8.

601

90 %

In 2024 1) , the numerator of the turnover KPI is defined as the turnover derived from products and services associated with Taxonomy aligned economic activities: 4.5. “Electricity generation from hydropower” generates turnover from the sale of electricity generated by UPM's own or co-owned hydropower plants. 4.13. “Manufacture of biogas and biofuels for use in transport” generates turnover on sale of wood-based renewable diesel and naphtha for transport and petrochemicals. 4.20. “Cogeneration of heat/cool and power from bioenergy” generates turnover from the surplus sale of heat and power generated from biomass in combined heat and power plants that is not consumed in own production. Regarding the power plants, the portion of the fossil fuels has been excluded from the turnover. Turnover from sale of wood and wood-based biomass such as logs, pulpwood and forest residues from UPM's own and leased forests to third-party customers (other sources of wood excluded from the eligible turnover), sale of forestry services to private forest owners (1.3. “Forest management”) and sale of logistic services from leased vessels (6.10 “Sea and coastal freight water transport, vessels for port operations and auxiliary activities”) are Taxonomy-eligible but not Taxonomy-aligned. CapEx UPM has included in CapEx, as defined in the Disclosures Delegated Act, additions to tangible and intangible assets, before any depreciation, impairments, amortisation charges and fair valuations during the financial year, as accounted for in accordance with IAS 16 Property, Plant and Equipment, IAS 38 Intangible assets, IAS 41 Agriculture and IFRS 16 Leases. CapEx corresponds to cash payments to acquire fixed and forest assets in the Consolidated cash flow statement adjusted with amounts accrued but not paid at the end of reporting period. CapEx includes also acquisition of businesses and subsidiaries, excluding goodwill, and additions to leased assets. » Refer to line items Capital expenditure, Additions to forest assets and Acquisition of businesses and subsidiaries, net of cash acquired in Consolidated cash flow statement, and Leases in Note 5.2. Net debt in the consolidated

Accounting Policy UPM consolidated financial statements are prepared in accordance with IFRS Accounting Standards as adopted by the EU and IFRIC Interpretations. UPM has calculated the KPIs using the financial information presented in the Group consolidated financial statements 2024. In determining the eligible and aligned turnover, any specific fragments of production inputs, such as the use of sustainable raw material or energy, have not been included in the eligible turnover if the main activity is not included in the Taxonomy. However, for activities that are used both internally and, to some extent, to generate external turnover, the CapEx and OpEx is not split in relation of internal and external use, but fully allocated to economic activity that leads to revenue. The definitions of CapEx and OpEx key performance indicators are based on definitions set out in the Disclosures Delegated Act. A clear reporting structure prevents double counting and ensures that turnover, CapEx and OpEx related to assets or processes that are associated with Taxonomy-aligned economic activities are counted only once. Whenever an individual investment is considered Taxonomy aligned, this proportion of CapEx is not further allocated to a Taxonomy aligned economic activity, to avoid double counting. Similarly, OpEx related to purchased outputs that are already considered under OpEx associated with Taxonomy-aligned activities is not further counted. The Group has no economic activities contributing to multiple climate or environmental objectives. Turnover UPM has calculated turnover, as defined in the Disclosures Delegated Act, based on the same accounting principles that apply for revenue in IFRS Accounting Standards, i.e., covering all amounts derived from the sale of products and services in the course of ordinary activities. Total turnover corresponds to total sales as reported in the Group consolidated financial statements. » Refer to Note 2.2. Sales in the consolidated financial statements, Accounting policy . Taxonomy-eligible and -aligned turnover include only revenue from sales of products and services generated from activities that are included in the Taxonomy.

UPM FINANCIAL REPORT 2024

174

UPM FINANCIAL REPORT 2024

175

174

175

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024