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

4.4 Goodwill and other intangible assets The group’s goodwill in 2024 mainly relates to pulp operations in Uruguay belonging to the UPM Fibres business area. In 2024, the group impaired the entire goodwill of Pulp operations in Finland CGU, amounting to EUR 113 million and entire goodwill of UPM Biochemicals CGU, amounting to EUR 5 million. Companies acquired in 2024, relate to the acquisition of Grafityp in UPM Raflatac business area. Refer note 8.1. Business acquisitions and disposals for further information. In 2023, the group's goodwill and other intangible assets increased mainly as a result of the company acquisition of SunCoal Industries GmbH in UPM Biochemicals under Other Operations.

Goodwill by business area

Impairment testing Impairment tests for goodwill and water rights with indefinite life were carried out in the fourth quarter 2024. Water rights of hydropower plants belonging to UPM Energy and reported in intangible rights amounted EUR 189 million at the end of 2024 and 2023. The values of water rights were tested based on expected future cash flows of each separate hydro power plant. The impairment test of water rights did not result in a recognition of any impairment in 2024 and 2023. Goodwill impairment tests were carried out for pulp operations in Finland and Uruguay, belonging to the UPM Fibres business area, UPM Raflatac business area, UPM Plywood business area and UPM Biochemicals business in Other operations. In 2024, the weakened pulp market and high wood costs have negatively affected the performance outlook of Pulp operations in

Finland compared to previous estimates. As a result of the impairment test calculation, UPM impaired the entire goodwill of EUR 113 million. No other assets than goodwill was impaired. UPM Biochemicals CGU includes assets of Leuna biorefinery, which is the first of its kind new technology-based plant. The increased costs from the initial investment estimate and the construction delays indicated that the carrying amount of CGU may no longer be fully recoverable. As a result of the impairment test calculation conducted in December 2024, UPM impaired the entire goodwill of EUR 5 million and EUR 373 million of other assets. The remaining book value of the refinery closely aligns with the estimated cost of constructing a comparable plant in the current economic environment. Refer Note 4.1 Property, Plant and Equipment . The recoverable amount of CGUs was estimated based on value in use calculations.

EURm

2024 2023

Pulp operations Uruguay Pulp operations Finland

111

105 113

—

UPM Raflatac UPM Plywood

48 13

46 13

Other operations

Total

174

283

Goodwill

EURm

2024 2023

Carrying value, at 1 January

283

282

The basis for valuation and key assumptions used in goodwill impairment testing are summarised in the below table:

Companies acquired Translation differences Impairment charges

3 7

-4

BASIS OF VALUATION Value in use Value in use Value in use Value in use Value in use

-118 174

—

CASH GENERATING UNIT

PERIOD OF FORECAST PRE-TAX DISCOUNT RATE

KEY ASSUMPTIONS Pulp price, wood costs Pulp price, wood costs

Carrying value, at 31 December

283

Pulp operations Finland Pulp operations Uruguay

10 years + terminal value 10 years + terminal value 10 years + terminal value 10 years + terminal value 5 years + terminal value

10.55 % (2023: 10.68%) 9.12% (2023: 9.61%) 10.59% (2023: 10.05%) 11.12% (2023: 12.06%) 9.69% (2023: 10.20%)

UPM Raflatac UPM Plywood

Product prices, cost development Product prices, cost development Product prices, cost development

Other intangible assets

SOFTWARE AND OTHER INTANGIBLE ASSETS

UPM Biochemicals

EURm

INTANGIBLE RIGHTS

TOTAL

2024 Accumulated costs

decisions made by the group as well as the profitability programmes that the group has implemented and the views of knowledgeable industry experts on the long-term development of demand and prices. In the projection of cash flows UPM uses EBITDA adjusted with cash flows not captured within EBITDA, including working capital movements and capital expenditures. An assumed terminal value is based on a EBITDA multiples six times, except for UPM Biochemicals for which perpetuity value is determined using inflation based 2% growth rate. Discount rate The discount rate is estimated using the weighted average cost of capital (WACC) on the calculation date adjusted for risks specific to the business in question. The adjusted after-tax discount rate is translated to a pre-tax rate for each cash generating unit (CGU) based on the specific tax rate applicable to where the CGU operates. Goodwill Goodwill arises in connection with business combinations where the consideration transferred exceeds the fair value of the acquired net assets. Goodwill is recognised at cost less accumulated impairment and is an intangible asset with an indefinite useful life. Goodwill is allocated to the cash generating units that are expected to benefit from the synergies from the business combination. Intangible rights Intangible rights include water rights of hydropower plants, patents, licences, intellectual property and similar rights. Water rights are deemed to have an indefinite useful life as the company has a contractual right to exploit water resources in the energy production of power plants. Accounting policies

434 -222 212 214

587 -482 104 245

1,021

Sensitivity analyses The sensitivity analyses of goodwill impairment tests indicate that no reasonable change in key assumptions would result in recognition of impairment loss against goodwill. In pulp operations Uruguay, the recoverable amount is most sensitive to pulp sales prices.

Accumulated amortisation and impairments

-705 316 459

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

Additions

Companies acquired

—

Amortisation Impairment

-5

-26

-30

— — —

-5

Key estimates and judgements

Reclassifications 2)

-136

-135

Translation differences

The group’s assessment of the carrying value of goodwill and indefinite life assets requires significant judgement. While management believes that estimates of future cash flows are reasonable, different assumptions are subject to change as a result of changing economic and operational conditions. Actual cash flows could therefore vary from estimated discounted future cash flows and could result in changes in the recognition of impairment charges in future periods. Future cash flows The review of recoverable amount for goodwill and indefinite life assets is based on a calculation of value in use, using management projections of future cash flows. The most important assessments and assumptions needed in calculations are forecasts for future growth rates for the business in question, product prices, cost development and the discount rates applied. The group is using mainly ten-year forecasts in calculations as the nature of the group’s business is long term, due to its capital intensity, and is exposed to cyclical changes. For UPM Biochemicals, the group used five-year forecasts in calculations due to different maturity level of the business. In estimates of product prices and cost development, forecasts prepared by management for the next three years and estimates made for the following two to seven years are taken into consideration. In addition, consideration is given to the investment

Carrying value, at 31 December Emission rights, carrying value 1)

212

104

316 264 580

Carrying value including emission rights, at 31 December

2023 Accumulated costs

463 -249 214 198

765 -520 245 120

1,228

Accumulated amortisation and impairments

-769 459 317

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

Additions

6 4

Companies acquired

22 -29

Amortisation

-4

-25

Reclassifications 2)

—

140 245

140 459 256 715

Carrying value, at 31 December Emission rights, carrying value 1)

214

Carrying value including emission rights, at 31 December

1) » Refer Note 2.3 Operating expenses and other operating income , for further information on emission rights. 2) Reclassifications in 2024 and 2023 relate to final classification of assets in the Uruguay pulp mill investment. » Refer note 4.1 Property, plant and equipment.