UPM Annual Report 2025

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Hedging reserve

In addition to commercial foreign currency flow, the Group has hedged risk currency flow related to investments. Cash flow hedge accounting is applied. At the end of 2025, the hedged net risk currency flow was €8 million (€2 million).

6. Risk management 6.1 Financial risk management

Electricity purchase and sales hedges

Currency cash flow hedges

Cost of hedging

€ million

Tax

Total

2025 Hedging reserve, at January 1

The objective of financial risk management is to protect the Group from unfavorable changes in financial markets and thus help to secure profitability. The objectives and limits for financing activities are defined in the Group Treasury Policy approved by the Board of Directors. In financial risk management various financial instruments are used within the limits specified in the Group Treasury Policy. Only such instruments which market value and risk profile can be continuously and reliably monitored are used for this purpose. Financing services are provided to the Group entities and financial risk management carried out by the central treasury department, Treasury and Risk Management. As a consequence of the global nature of its business, UPM is exposed to risks associated with changes in exchange rates, primarily with respect to USD, UYU, GBP and CNY. Foreign exchange risk arises from contracted and expected commercial future payment flows (transaction exposure), changes in value of recognized assets and liabilities denominated in foreign currency and changes in the value of assets and liabilities in foreign subsidiaries (translation exposure). The objective of foreign exchange risk management is to limit the uncertainty created by changes in foreign exchange rates on the future value of cash flows earnings and in the Group’s balance sheet. Changing exchange rates can also have indirect effects, such as change in relative competitiveness between currency regions. Transaction exposure The Group hedges transaction exposure related to highly probable future commercial foreign currency cash flows on a rolling basis over the next 12-month period based on forecasts by the respective business areas. Transaction risk arises from the changes in currency rates of highly probable transactions, which are expected to take place in currencies other than the functional currency of the entity. The Group’s policy is to hedge an average of 50% of its estimated net risk currency cash flow. Some highly probable cash flows have been hedged for longer than 12 months ahead while deviating from the risk neutral hedging level at the same time. At December 31, 2025, 52% (52%) of the forecast 12-month currency flow was hedged. The Group enters into external forward contracts, which are designated at Group level as hedges of foreign exchange risk of specific future foreign currency flows. Cash flow hedge accounting is applied when possible. If hedge accounting is not possible, fair value changes of the hedging instrument are recognized through profit and loss immediately. At the end of 2025, UPM’s estimated net risk currency flow for the next 12 months was €1,456 million (1,815 million). The weighted hedging rate by currency against EUR were USD 1.16, UYU 49.01 and GBP 0.87. Foreign exchange risk

12 months net risk currency flow and hedges 2025

-40

29

0

2

-10

Amounts reclassified to profit and loss

-37

-51

3

17

-68

-300 0 300 600 900 1200 1500 1800

Change in fair value of hedging instruments recognized in OCI

99

39

-6

-26

106

Hedging reserve, at December 31

22

16

-2

-8

28

Electricity purchase and sales hedges

€ million

Currency cash flow hedges

Cost of hedging

€ million

Tax

Total

2024 Hedging reserve, at January 1

USD

UYU

GBP

Other

13

-120

-3

21

-88

Amounts reclassified to profit and loss

2

2

3

-1

6

Hedges

Currency flow

Change in fair value of hedging instruments recognized in OCI

-55

146

-1

-18

72

Hedging reserve, at December 31

-40

29

0

2

-10

12 months net risk currency flow and hedges 2024

-300 0 300 600 900 1200 1500 1800

€ million

USD

UYU

GBP

Others

Hedges

Currency flow

Translation exposure The Group has several currency denominated assets and liabilities on its balance sheet such as foreign currency bonds, loans and deposits, Group internal loans and cash in other currencies than functional currencies. UPM aims to fully hedge this balance sheet translation exposure, however, UPM might have unhedged balance sheet exposures within the limits set in Group Treasury Policy. At December 31, 2025, the unhedged balance sheet exposures in net of interest-bearing assets and liabilities amounted to €10 million (7 million). Hedge accounting is not applied and all fair value changes of hedging instruments are recognized through profit and loss immediately. The Group has also accounts receivable and payable balances denominated in foreign currencies and UPM aims to fully hedge the net exposure in main currencies. The nominal values of the hedging instruments in net of accounts payable and receivable hedging were €242 million (333 million). Hedge accounting is not applied and all fair value changes of hedging instruments are recognized through profit and loss immediately.

UPM Financial Report 2025

312

UPM Financial Report 2025

313

312

313

UPM Annual Report 2025

UPM Annual Report 2025