UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Our strategy

Our businesses

Sustainability

Ensuring performance

We aim for continuous improvement in financial performance through our agile operating model, performance culture and effective capital allocation. In 2024, our comparable EBIT increased by 21% from the previous year in a challenging market.

Capturing corporate synergies We build on corporate synergies, adding val ue to our businesses and stakeholders with: • Competitive and sustainable wood sourc ing, forestry and plantation operations • Efficient and responsible global functions • Technology development and intellectual property rights • Global business platform • Disciplined and effective capital allocation • Compliance, UPM Code of Conduct and strong UPM brand Effective capital allocation Capital allocation is key to attractive long-term returns, as well as developing the business portfolio in areas with the best long-term value creation potential. At UPM, capital allocation decisions take place at the corporate level.

The sequential start-up of the Leuna biorefinery commenced at the end of 2024, and the ramp-up of production is expected to proceed throughout 2025. The biorefinery is expected to reach full production and positive EBIT in 2027. Agile operating model Our businesses in various parts of the bio and forest industry value chain operate as separate market-facing entities, both in terms of customers and suppliers. This enables agility in a fast-changing business environment, higher efficiency, differentiat ed commercial strategies, optimal sourcing, the right incentives, wider product devel opment opportunities and effective capital allocation. At the business area level, we are tar geting top performance in their respective markets. We have also set long-term return targets (ROCE %, below) for the six business areas. The return targets apply over business and investment cycles. In 2024, three out of six business areas achieved or exceeded the targeted returns.

UPM plans to allocate capital in order to: • Invest to grow the company and its earn ings. UPM invests in sustainable business es with strong long-term fundamentals for demand growth and a clear competitive advantage or high barrier to entry for superior returns. UPM targets growth in comparable EBIT and comparable return on equity exceeding 10%. • Pay attractive dividends. UPM aims to pay attractive dividends, targeting at least half of the comparable earnings per share over time. The targeted earnings growth drives dividend growth over time. • Maintain a strong balance sheet. Accord ing to UPM’s leverage policy, net debt to EBITDA ratio is to be less than 2. An invest ment grade rating is an important element in the financing strategy. • Share buybacks. They are a complemen tary tool that may be used relative to investment opportunities and company valuation. Executing our growth strategy on page 20 2030 sustainability targets and progress on page 30 Generating shareholder value on page 36 Financial Statements on page 254

In 2024, the recovery of our product markets from the exceptional cycle of 2023 proved uneven and gradual. This affected UPM’s overall performance. We took meas ures in several of our businesses to safe guard profitability and improve competi tiveness in this slow recovery scenario. We continue to take decisive action to ensure the competitiveness of our businesses and to support our growth ambitions.

At UPM, a major investment cycle is com ing to an end. We ramped up our strategic growth projects and continued to lay the foundations for future growth. The highly competitive business platform in Uruguay performed well. The third quarter was the first quarter of full production at both pulp mills in Uruguay, paving the way for further optimisation to reach the targeted perfor mance levels.

Priority to improve profitability and competitiveness • Cost-effectiveness • Efficient use of assets and capital • Commercial excellence • Capitalise on corporate benefits and synergies • Agile operating model Setting up to capture the recovery and future growth in our product markets • Top performance in each business • Growth in comparable EBIT • Attractive returns • Strong balance sheet • Sustainability • Innovation and technology • Engaging employees • Global reach

Our performance improved, supported by a good contribution from the new pulp mill in Uruguay and modestly improved volumes in the advanced materials businesses.

8.3% Comparable ROE 11.8% Comparable EBIT of sales

BUSINESS AREA RETURNS AND LONG-TERM TARGETS

UPM Communication Papers

UPM Specialty Papers

Comparable ROE

Net debt and leverage

Comparable EBIT

UPM Plywood

ROCE %* ) UPM Fibres

ROCE %* ) UPM Raflatac

UPM Energy*** )

ROCE %* )

FCF/CE %**)

ROCE %* )

ROCE %*)

%

EURm

Net debt/EBITDA (x)

EURm

22

12

50

20

48

20

50

50

10 12

4,000

4

2,500

12

11

18

44

Target

17

17

16

40 40

40

40

40

2,000

Target

15

15

3,000

3

Target

9

32

0 2 4 6 8

7

7

11

30

30

30

11

1,500

Target

10

25

10

10

2,000

2

6

22

22

Target

18

6

19

Target

20

20

20

17

1,000

7

Target

14

5

11

11

5

5

10

3

1,000

1

10

10

10

500

12

2

0

0

0

0

0

0

0

0

0

20 21 22 23 24

20 21 22 23 24

20 21 22 23 24

20 21 22 23 24

20 21 22 23 24

20 21 22 23 24

15 16 17 18 19 20 21 22 23 24

15 16 17 18 19 20 21 22 23 24

15 16 17

20 21 22 23 24

18 19

* ) ROCE % = Return of capital employed excluding items affecting comparability ** ) Free cash flow after investing activities and restructuring costs *** ) Shareholdings in UPM Energy valued at fair value

Net debt Net debt/EBITDA

-1

22

23

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024