UPM Annual Report 2025

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Sustainability

Strategic milestones in 2025 The startup of our groundbreaking biochemicals refinery is progressing

UPM and Sappi sign non-binding letter of intent on Joint Venture for graphic papers

The proposed Joint Venture represents a decisive response to the structural changes in the European graphic paper industry.

Our products are uniquely positioned to help our customers and major global brands decarbonize their supply of raw materials.

The Joint Venture would include the entire UPM Communication Papers business, includ ing eight paper mills, as well as Sappi’s Euro pean graphic paper business, which includes four paper mills. The proposed Joint Venture would be owned 50/50 by UPM and Sappi, and operate as an independent company. Benefits of the transaction The planned Joint Venture would provide the best future for the UPM Communication Papers business. The transaction would create a structurally competitive cost base, supplying security to European and global customers. Through strategic reallocation of pro duction volumes to the most efficient paper machines, the Joint Venture would achieve more sustainable capacity utilization and stronger operational performance, while continuing to serve customers with a broad portfolio of graphic paper products.

The Joint Venture is expected to create annual synergies estimated at about €100 million through asset and logistics optimiza tion, product portfolio rationalization and sourcing efficiency improvements. The Joint Venture would rationalize supply in an industry burdened by declining demand, structural overcapacity and high energy costs. It would contribute to a more balanced and resilient European market, positioning the industry better to withstand market challeng es and increasing imports to Europe. The transaction is expected to have a posi tive impact on UPM’s profitability margins, bal ance sheet and leverage. UPM would achieve a more focused business portfolio operating in growth markets and would no longer have di rect sales exposure to the declining European and North American graphic paper markets.

Joint Venture are ongoing, and the parties expect the definitive agreements to be signed during the first half of 2026. The definitive agreements require the completion of exter nal financing agreements, Sappi shareholder approval and other conditions. The proposed transaction is subject to review by the European Commission and the relevant merger control, and approval by the authorities in other jurisdictions such as the US, the UK and China. The parties are committed to working with the regulatory authorities throughout the review process. It is currently expected that the closing would take place by the end of 2026, subject to regulatory approvals and other closing conditions. The Joint Venture would become operational upon closing. UPM Communication Papers on page 43 Financial details of the proposed Joint Venture page 120

The biorefinery will produce a range of 100% wood-based biochemicals, enabling a switch from fossil raw materials to sustaina ble alternatives in various applications. The valuation of these products is driven by their superior technical performance and sustainability, which enables consumer brands to differentiate themselves in the market. The investment opens new markets for UPM with large future growth potential. The industrial-scale biorefinery will convert solid wood into next-generation bio chemicals: bio-monoethylene glycol (BioMEG) and renewable functional fillers (RFF). The biorefinery will also produce bio-monopro pylene glycol (BioMPG) and industrial sugars. End-use segments for renewable glycols include textiles, PET bottles, packaging, cool ants, composite materials, pharmaceuticals, cosmetics, and detergents. Lignin-based RFFs

Negotiations ongoing Negotiations regarding the details of the

UPM evaluates strategic alternatives for its plywood business

with confirmed customer contracts and a sales and customer qualification pipeline exceeding the annual capacity by multiple times. Sales allocation of 2026 volumes has started. The combination of a sustainable wood supply, a unique technology concept, inte gration into existing infrastructure at Leuna, and proximity to customers will ensure competitive operations. The value chain’s safety and sustainabil ity will meet UPM’s high standards, and the strong focus on regional sourcing, espe cially of feedstock, will support the market valuation.

are a sustainable alternative to carbon black and precipitated silica in many rubber and plastic applications. Production and sales have started The wood-to-lignin-and-sugar process was successfully ramped up and the first com mercial deliveries of industrial sugars took place in Q4 2025. With the achieved progress in the critical first part of the process and the advanced status of corrective works in the final core processes, production and sales of further products, lignin, renewable func tional fillers and finally glycols is expected to start in 2026. Commercial interest in the main products and sidestreams has continued to be strong,

In brief

UPM has initiated a strategic review of its plywood business area to assess options for maximizing its long-term potential in an evolv ing market environment. The review includes a range of possibilities, including separation from UPM through divest ment, a partial demerger, or an initial public offering. The aim is to determine the best path forward for the plywood business while creating value for UPM’s shareholders. The review is expected to be concluded by the end of 2026. During the process, UPM will

remain fully committed to the plywood business and its customers.

sures efficient distribution and customer service. UPM Plywood offers a unique portfolio of premium materials under the trusted WISA ® brand. This comprehensive offering is backed by strong customer partnerships and a com mitment to high-quality service. The business has demonstrated financial resilience across market cycles, consistently delivering solid performance and generating cash. Its success is driven by commercial and operational excellence, as well as a proven management team and experienced opera tional personnel.

• Annual production capacity of 220,000 tonnes of 100% wood-based biochemicals • Investment estimated at €1,335 million • Biorefinery expected to reach full production and positive EBIT during 2027 • High safety and sustainability standards throughout the value chain • Certified under the ISCC PLUS, PEFC, and FSC™ chains of custody programs. • Extensive partner network in multiple value chains.

Strong, customer-focused business UPM Plywood is a leader in the European market, particularly in the mid-to-high-end segment, and is globally recognized as a leader in LNG-related plywood applications. Its well-invested asset base consists of three spruce plywood mills, one spruce veneer mill and three birch plywood mills, with a combined annual production capacity of 785,000 cubic meters. The warehouse and sales network en

UPM Leuna Biorefinery

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UPM Annual Report 2025

UPM Annual Report 2025