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

5.4 Financial income and expenses

Fair value measurement hierarchy for financial assets and liabilities

EURm

2024

2023

EURm

2024

2023

Level 1 Level 2 Level 3

Total

Level 1 Level 2 Level 3

Total

Exchange rate gains and losses Derivatives

Financial assets Investment funds

-31 -11 37

4

— —

1

— — —

1

— —

1

— — —

1

Exchange gains and losses on financial liabilities measured at amortised costs Exchange gains and losses on financial assets measured at amortised costs

29 -32 -73 -72

Derivatives, non-qualifying hedges Derivatives under hedge accounting

10 85

10 85

19 91

19 95

1

4

Other exchange rate gains and losses 1)

0

Energy shareholdings

—

—

2,247 2,247

2,247 2,343

—

—

2,283 2,283

2,283 2,398

-6

Total

1

96

4

111

Fair value changes Fair value gains and losses on derivatives designated as fair value hedges

16 -17

32 -33

Financial liabilities Derivatives, non-qualifying hedges Derivatives under hedge accounting

Fair value adjustment of debt attributable to interest rate risk

— — —

17

— — —

17

—

46

— — —

46

-1 -7

-2

195 211

195 211

6 6

128 174

134 180

Total

-74

Total

Interest and other finance income and costs, net Interest expense on lease liabilities

-24 -47 -40 31

-21 -38 -28 37

There have been no transfers between levels in 2024 and 2023.

Interest expense on other financial liabilities measured at amortised cost

Interest income (expense) on derivatives Interest income on loans, receivables and cash Dividend income from energy shareholdings Impairment charges of associates and joint ventures

Fair values under level 1 Quoted prices (unadjusted) traded in active markets for identical assets or liabilities. Derivatives include futures and commodity forwards traded in exchange. Fair values under level 2 Observable inputs are used as basis for fair value calculations either directly (prices) or indirectly (derived from prices). If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. For investment funds, the valuation is based on quoted prices (unadjusted) for identical assets in markets that are not active. For derivatives, level 2 include OTC derivatives like forward foreign exchange contracts, foreign currency options, interest and currency swaps and commodity swaps. Specific valuation techniques used to value financial instruments at level 2 include the following methods: Interest forward rate agreements (FRA) are fair valued based on quoted market rates on the balance sheet date. Forward foreign exchange contracts are fair valued based on the contract forward rates at the balance sheet date. Foreign currency options are fair valued based on quoted market rates and market volatility rates on the balance sheet date by using the Black&Scholes option valuation model. Interest and currency swap instruments are fair valued as present value of the estimated future cash flows based on observable yield curves. Commodity swaps are fair valued based on quoted forward prices on the balance sheet date. An embedded derivative that is by nature a foreign currency forward contract is valuated at market forward exchange rates and is included in level 2. Embedded derivatives are monitored by the group and the fair value changes are reported in other operating income in the income statement. Fair values under level 3 Financial assets or liabilities of which fair values are not based on observable market data (that is, unobservable inputs) are classified under level 3. This category include UPM’s energy shareholdings and forest assets. Fair valuations are performed at least quarterly by respective business areas or functions. Fair valuations are reviewed by the group finance management and overseen by the Audit Committee. » Refer Note 4.3 Energy shareholdings and » Note 4.2 Forest assets .

Accounting policies

2

0 0

Fair value through profit or loss This category includes derivatives that do not qualify for hedge accounting and investments funds. They are measured at fair value and any gains or losses from subsequent measurement are recognised in the income statement. Equity instruments at fair value through OCI This category includes mainly UPM’s energy shareholdings. These assets are measured at fair value through other comprehensive income. » Refer Note 4.3 Energy shareholdings. Financial assets at amortised cost This category comprises loan receivables with fixed or determinable payments that are not quoted in an active market, as well as trade and other receivables, and cash and cash equivalents. They are included in non-current assets unless they mature within 12 months of the balance sheet date. Cash and cash equivalents are always classified as current assets. Loan receivables that have a fixed maturity are measured at amortised cost using the effective interest method. Loan receivables without fixed maturity date are measured at amortised cost. As soon as a loan receivables or cash and cash equivalents are originated or purchased, a loss allowance for 12-month expected credit losses are recognised in profit or loss. If credit risk increases significantly, full lifetime expected credit losses are recognised in profit or loss. The credit loss model applied to trade receivables is described in » Note 4.6 Working capital . Derivatives under hedge accounting All derivatives are initially and continuously recognised at fair value in the balance sheet. Gains and losses on remeasurement of derivatives used for hedging purposes are recognised in accordance with the accounting principles described in » Note 6.2 Derivatives and hedge accounting. Financial liabilities measured at amortised cost This category includes debt, trade payables and other financial liabilities. » Refer Note 5.2 Net debt, for further information. The different levels of fair value hierarchy used in fair value estimation are defined as follows:

-2

Other financial income and expenses, net

-17 -97

-20 -70

Total

-104

-144

1) Other exchange rate gains and losses include EUR 71 million exchange rate losses relating to the sale of Russian subsidiaries in 2023.

Net gains and losses on derivatives included in the operating profit

EURm

2024

2023

Cash flow hedges reclassified from hedging reserve

-7

-117

Non-qualifying hedges

-25 -33

4

Total

-113

Foreign exchange gains and losses in the operating profit excluding non-qualifying hedges

EURm

2024 2023

Sales

-5 -9

61 -35 26

Other operating income

Total

-14

5.5 Share capital and reserves The company has one series of shares and each share carries one vote. There are no specific terms related to the shares. At 31 December 2024, the number of the company’s shares was 533,735,699. The shares do not have any nominal counter value. The shares are included within the book entry system for securities.

Share capital

2024

2023

Number of shares (1,000)

533,736

533,736

Share capital, EURm

890

890

UPM FINANCIAL REPORT 2024 302

302

UPM FINANCIAL REPORT 2024

303

303

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024