UPM Annual Report 2024

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WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Report of the Board of Directors

Sustainability Statement

Financial Statements

Auditor's Report

Sustainability Assurance Reports

Government grants In 2024, government grants recognised as deduction of operating expenses totalled to EUR 31 million (16 million) of which EUR 31 million (16 million) relates to Finland. In addition, the group received emission rights from governments amounting to EUR 92 million (154 million) of which EUR 40 million (65 million) relates to Finland, EUR 40 million (79 million) to Germany, EUR 10 million (0 million) to China and EUR 2 million (4 million) to UK. In addition, the company receives electricity price compensation in Germany and Finland. The group considers that the conditions related to subsidies have been met. Accordingly, the subsidies have been recorded as income for the period when the subsidy has been received. The authorities monitor the use of subsidies afterwards. Other operating income

Government grants Government grants are recognised at fair value where there is a reasonable assurance that the grant will be received and the group will comply with the attached conditions. Government grants relating to the purchase of property, plant and equipment are deducted from the acquisition cost of the asset and accordingly directly reduce the annual depreciation of the underlying asset. Other government grants are recognised in the income statement in the period necessary to match them with the costs they are intended to compensate. A government grant can also become receivable by the group as compensation for expenses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable. Other operating income Other operating income mainly includes gains on the disposal of non current assets and rental income. Further, other operating income includes foreign exchange gains and losses in respect of UPM’s normal business activities. Gains and losses on derivatives not qualifying hedge accounting are also recognised in other operating income. Emission rights The group participates in the European Emissions Trading Scheme aimed at reducing greenhouse gas emissions. In addition, the group participates in the Chinese national emissions trading scheme. Emission rights received from governments free of charge to emit a fixed tonnage of carbon dioxide in a fixed period of time give rise to an intangible asset for the emission rights, a government grant and a liability for the obligation to deliver emission rights equal to the emissions that have been made during the compliance period. Emission rights are initially recognised as intangible assets based on market value at the date of initial recognition. Emission rights are not amortised. If the market price of emissions rights at the balance sheet date is less than the recognised costs, any surplus emission rights that are not required to cover actual and estimated emissions during the financial year, are impaired to the market price. Government grants are recognised as deferred income in the balance sheet at the same time as emission rights and are recognised in other operating income in the income statement, systematically, over the compliance period to which the corresponding emission rights relate. The liability to deliver emission rights is recognised based on actual emissions. The emissions realised are expensed under other operating costs and expenses in the income statement and presented as a provision in the balance sheet. The liability is settled using emission rights on hand, measured at the carrying amount of those emission rights. Emission rights and associated provisions are derecognised when disposed. Any profit or loss represents the costs of purchasing additional rights to cover excess emissions, the sale of unused rights in the case realised emission are under emission rights received free of charge or the impairment of unused emission rights. 2.4 Earnings per share and dividend According to UPM dividend policy, the company aims to pay attractive dividends, targeting at least half of the comparable earnings per share over time. The dividend paid in 2024 was EUR 800 million (EUR 1.50 per share) which is 35% of the operating cash flow per share and in 2023 EUR 800 million (EUR 1.50 per share). The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 800 million, EUR 1.50 per share, will be paid in respect of 2024. The proposed dividend

represents 86% of UPM's comparable earnings per share for the year 2024. Earnings per share

Cost structure 2024 EUR 8,806 million

Delivery of own products 11%

EURm

2024 2023

Other fixed costs 12%

Profit attributable to owners of the parent company, EURm Weighted average no. of shares (1,000)

436

388

Employee costs 13%

533,324

Basic earnings per share, EUR Diluted earnings per share, EUR

0.82 0.82

0.73 0.73

Wood and fibre 28%

Fillers, coating and chemicals 10% Other variable costs 17%

Energy 9%

Accounting policies

EURm

2024 2023

Gains on sale of non-current assets

Cost structure 2023 EUR 9,316 million

Rental income

Earnings per share Earnings per share (EPS) is the amount of profit for the period attributable to each share. The basic earnings per share are computed using the weighted average number of shares outstanding during the period. Diluted earnings per share are computed using the weighted average number of shares outstanding during the period plus the dilutive effect of share options. The group did not have share-option schemes at the end of 2024 and 2023. Dividend Dividend distribution to the owners of the parent company is recognised as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the parent company’s shareholders.

Emission rights received

92 -25

154

Derivatives, non-qualifying hedges Exchange rate gains and losses

-9

-35 88

Delivery of own products 10%

Other fixed costs 12%

Other Total

130

228

Employee costs 14%

Emission rights The group has recognised EUR 92 million (154 million) of income in Other operating income and EUR 64 million of expense (18 million) under Other operating costs and expenses relating to CO 2 emissions. The liability to cover the obligation to return emission rights amounted to EUR 66 million (56 million) and is recognised in provisions. The emission rights recognised in intangible assets are specified below:

Wood and fibre 25%

Other variable costs 19%

Energy 10%

Fillers, coating and chemicals 10%

EURm

2024 2023

Carrying value, at 1 January

256

235 159 -134

Auditor’s fees

Emission rights received and purchased

96 -84

Deliveries and disposals

EURm

2024*

2023*

Impairment

-5

-3 -1

Audit fee

4.5 0.6 0.6 0.1 5.8

4.4 0.2 0.3 0.1 5.0

Reclassifications to assets held for sale Carrying value, at 31 December

—

Audit related services

264 272

256 260

Tax services Other services

Accumulated costs

Accumulated impairments

-8

-4

Total

Carrying value, at 31 December

264

256

*) In 2024 auditor's fees were paid to Ernst & Young and in 2023 auditor's fees were paid to PricewaterhouseCoopers. In 2024, auditor's fees include EUR 0.6 million related to audit related services, EUR 0.4 million related to tax services and EUR 0.0 million related to other services paid to Ernst & Young Oy. The assurance fee EUR 0.3 million related to sustainability reporting is presented as a part of audit related services. The respective fees in 2023 were EUR 0.2 million, EUR 0.3 million and EUR 0.1 million paid to PricewaterhouseCoopers Oy. Research and development costs The research and development costs included in operating expenses were EUR 70 million (66 million) in 2024. The focus was on new technologies and developing businesses.

Accounting policies

Research and development costs Research and development costs are expensed as incurred, except for certain development costs, which are capitalised as they generate future economic benefits, and UPM can the measure the cost reliably. Capitalised development costs are amortised on a systematic basis over their expected useful lives, usually not exceeding five years.