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

4.1 Property, plant and equipment

Impairment testing Carrying values of individual items included in property, plant and equipment are reviewed at each closing date to determine whether there is any indication of impairment. The carrying value is written down immediately to the asset’s recoverable amount if the carrying value exceeds the estimated recoverable amount. Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell and its value in use. Value in use is determined by discounting future cash flows expected to be generated by the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but the increased carrying amount will not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. The estimations of useful lives, residual value as well as depreciation and amortisation methods require significant management judgement and are reviewed annually. Management makes estimates on the future cash flows expected to result from the use of the asset and its eventual disposal. While management believes that estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect valuations. The long useful lives of assets, changes in estimated future sales prices of products, changes in product costs and changes in the discount rates used could lead to significant impairment charges. Estimates are also made in an acquisition when determining the fair values and remaining useful lives of acquired intangible and tangible assets. Key estimates and judgements

In 2023, impairment charges mainly relate to the closure of UPM Plattling mill in Germany.

LAND AND WATER

MACHINERY AND EQUIPMENT

OTHER TANGIBLE ASSETS

CONSTRUC TION IN PROGRESS

Accounting policies

EURm

AREAS BUILDINGS

TOTAL

2024 Accumulated costs

954

4,699 -2,601 2,098 2,073

14,693 -11,688

821 -642 178 175

1,224

22,390 -15,305

Property, plant and equipment Property, plant and equipment is stated at historical cost. Costs of assets of acquired in business combinations are determined at fair value at the acquisition date. Depreciation is calculated on a straightline basis and the carrying value is adjusted for impairment charges, if any. The carrying value of property, plant and equipment on the balance sheet represents the cost less accumulated depreciation and any impairment charges. Borrowing costs incurred for the construction of any qualifying assets are capitalised during the period of time required to complete and prepare the asset for its intended use. Other borrowing costs are expensed. Major renovations are capitalised and depreciated over the useful lives of the related asset. Ordinary expenses for repairs and maintenance are expensed as incurred. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in other operating income and other operating expenses, respectively.

Accumulated depreciation and impairments

—

-373 850 925 462

Carrying value, at 31 December Carrying value, at 1 January

954 861

3,005 3,019

7,085 7,053

Additions

—

3 2

—

508

Companies acquired

— — —

Disposals

-2

—

-1

—

-3

Depreciation Impairment

— —

-101

-339

-21

-461 -435 136 272

-32 55 98

-28

-1

-373 -167

Reclassifications 1)

230 119

Translation differences and other changes

Carrying value, at 31 December

954

2,098

3,005

178

850

7,085

2023 Accumulated costs

862

4,766 -2,693 2,073 1,054

14,771 -11,752

891 -716 175 148

925

22,216 -15,163

Accumulated depreciation and impairments

-2

—

Carrying value, at 31 December Carrying value, at 1 January

861 900

3,019 1,638

925

7,053 6,733 1,074

2,993 1,067

ASSESSED USEFUL LIVES Land, not subject to depreciation

NUMBER OF YEARS

Additions

— —

— — —

Companies acquired

— — — — —

— —

— — — —

Buildings

20-50 20-30 15-20 10-15

Disposals

-1

-2

Power plants

Depreciation Impairment

-92

-310

-19

-422

Heavy machinery Light machinery

-3

-15

-3

-20

Reclassifications 1)

1,135

1,723

-3,052

-141

Equipment

Reclassifications to assets held for sale 2) Translation differences an other changes Carrying value, at 31 December

-17 -23

-1

-1 -3

—

-21

-19

-20

-84

-149

861 7,053 1) Reclassifications in 2024 and 2023 relate to final classification of assets in the Uruguay pulp mill investment. » Refer note 4.4 Goodwill and other intangible assets . 2) Reclassification to assets held for sale in 2023 relates to agreement to sell 100% of the shares of the Austrian subsidiary UPM-Kymmene Austria GmbH. 2,073 3,019 175 925

Capital expenditure Capital expenditure, excluding acquisitions and shares, amounted to EUR 527 million (1,094 million) in 2024. In January 2020, UPM announced that it would invest in a 220,000 tonnes next-generation biochemicals biorefinery in Leuna, Germany. The commissioning and start-up was initiated in late 2024, and the total investment estimate is EUR 1,275 million. Capitalised borrowing costs In 2024, the borrowing costs capitalised as part of non-current assets amounted to EUR 29 million (38 million). Amortisation of capitalised borrowing costs was EUR 1 million (2 million) and the average interest rate used 3.04% (3.00%), which represents the average costs to finance the projects. In 2024, capitalised borrowing costs were related to the construction of the biochemicals biorefinery in Germany. In 2023, capitalised borrowing costs were related to the construction of the pulp mill in Uruguay and biochemicals biorefinery in Germany.

Government grants In 2024, government grants recognised as deduction of non-current assets totalled to EUR 3 million (7 million). Major capital commitments at 31 December

EURm

2024 2023

New biorefinery / Germany

177

363

Impairment losses In 2024, impairment charges relate to the closure of UPM Hürth mill, closure of paper machine 3 at Nordland in Germany, planned closure of Kaltenkirchen factory in Germany and property, plant and equipment of Leuna biorefinery. In December 2024, the group conducted the impairment test of UPM Biochemicals CGU resulting to impairment of the entire goodwill of EUR 5 million and impairment of EUR 373 million of property, plant and equipment. Refer Note 4.4 Goodwill and other intangible assets.