UPM annual report 2014

A year of progress Shifting gear in UPM transformation

UPM’s strategy includes short-term actions to drive performance, mid-term projects to capture high- return growth opportunities and long-term development work to create new high value added growth. The company is developing its business portfolio in order to increase its value and to create growth.

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NEW BUSINESS DEVELOPMENT FOR LONG-TERM GROWTH UPM is developing new businesses based on its extensive know-how and strong position in the forest biomass sourcing and processing value chain. Ecodesign represents business opportunities with large target markets and high added value.

SHORT TERM PROFITABILITY PROGRAMMES UPM is implementing profit improvement actions in all businesses to further improve cost competitiveness and advance towards top performance in the businesses’ respective markets. • The profit improvement programme, launched in August 2013, achieved its target of EUR 200 million of annualised fixed and variable cost savings in Q3 2014. This was reflected in UPM’s 2014 operating profit, up 24% from 2013. • UPM announced a new profit improvement programme in November 2014, targeting EUR 150 million of fixed and variable cost savings by the end of 2015. The plan includes the permanent closure of four publication paper machines in Europe.

MID-TERM FOCUSED GROWTH PROJECTS

BUSINESS PORTFOLIO DEVELOPMENT AND VALUE CREATION

UPM is investing EUR 680 million in 2013– 2016 in the following four growth projects, targeting an EBITDA impact of EUR 200 million when all the projects are fully operational.

UPM aims to develop its business portfolio to increase its value and to create growth.

• Performance: targeting top performance in each business

• Grow: focused high-return growth investments and synergistic mergers and acquisitions

• Pulp: 10% (340,000 t) capacity increase in the existing pulp mills

BIOFUELS Advanced renewable diesel suitable for all diesel engines BIOCOMPOSITES Renewable materials to replace oil-based materials e.g. in injection moulding BIOCHEMICALS Renewable performance chemicals and drop-in alternatives for oil-based chemicals

• Simplify: best value realisation for UPM

• Biofuels: Lappeenranta biorefinery and the start of the UPM Biofuels business

• Consolidation in European paper market without allocating more capital

• New labelling materials and speciality papers production unit in China

• Self-adhesive labels: 50% increase in self- adhesive labelstock production capacity in Asia Pacific and expansion of high-value-added filmic labelstock production capacity in Poland

STRATEGY IN ACTION

PULP: 10% capacity increase

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BIOFUELS: Lappeenranta biorefinery

LABELLING MATERIALS: Changshu expansion

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UPM Paper Asia

UPM Biorefining

SELF-ADHESIVE LABELS: Advancing in growth markets and in higher value added products

UPM Raflatac

UPM Plywood

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UPM Paper ENA

UPM Energy

New labelling materials and speciality paper production unit at UPM Changshu in China is scheduled to be completed by the end of 2015.

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UPM Annual Report 2014

UPM Annual Report 2014