UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Performance improvement and transformation continued in 2015

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performance

growth

PORTFOLIO

innovation

Business area

Strategic targets

Actions in 2015

Actions planned for 2016 *)

events IN 2015

16 June: UPM announces a EUR 50 million investment to further improve the efficiency and competitiveness of its Kaukas pulp mill 22 June: UPM permanently closes paper machine 3 at UPM Chapelle Darblay in France as part of the profit improvement programme launched in Nov 2014 24 June: Teollisuuden Voima Oyj decides not to apply for a building permit for the Olki- luoto 4 nuclear power plant project 1 Sept: UPM marks one hun- dred years of listing on the stock exchange 2 Sept: UPM sells Tilhill Forest- ry Limited to the BSW Timber Group 10 Sept: UPM is listed as industry leader on the global Dow Jones Sustainability Index 16 Sept: UPM announces that its FSC® group certification scheme for private forest own- ers in Finland has exceeded 100,000 hectares of certified forest 2 Oct: UPM joins China Sustainable Paper Alliance to promote responsibly sourced pulp and paper

7 Oct: UPM Plywood announc- es a competitiveness improve- ment programme at its Finnish birch plywood mills 12 Oct: UPM announces an increase in the IFRS fair value of its forests in Finland 27 Oct: UPM announces the successful ramp-up of the ex- pansion in the UPM Kymi pulp mill in Finland 4 Nov: UPM is listed on the CDP Nordic Disclosure Leader- ship Index (CDLI) for the 7th time 17 Nov: UPM and LEIPA an- nounce discussions on the potential sale and conversion of the UPM Schwedt mill into liner production in Germany 3 Dec: Finnish Market Court makes decision on biofuels- related patent dispute between UPM and Neste for UPM’s benefit 10 Dec: UPM announces its plan to change its corporate structure in Finland to better match its current business structure 22 Dec: UPM announces the sale of its 10.6% SMARTRAC share to OEP Technologie Holding B.V.

UPM BIOREFINING

Grow as a cost competitive pulp producer providing the most versatile pulp product offering Commercialise the biorefinery investment Benefit from integrated full-production

Capacity expansion completed at UPM Kymi pulp mill Commercial production started at UPM Lappeenranta Biorefinery 2 4 UPM Kaukas pulp mill investment decision 2 Debottlenecking investments at sawmills 1 Reduction in variable costs 1 2

Capture benefits of pulp capacity expansions 2 Complete UPM Kaukas pulp mill investment 2

12 Jan: UPM announces that its Lappeenranta Biorefinery is in commercial production producing wood-based renew- able diesel 19 Jan: UPM is listed as indus- try leader with Gold Class Distinction in RobecoSAM’s sustainability assessment 20 Jan: UPM announces the permanent closure of three paper machines in Finland and in the UK as part of the profit improvement programme launched in Nov 2014 3 Feb: UPM introduces a new cash flow-based dividend policy 23 Apr: UPM announces an EUR 40 million investment to expand its Otepää plywood mill in Estonia 6 May: Renewable and locally produced UPM BioVerno diesel fuel becomes available at cer- tain Finnish service stations 11 June: UPM’s ValChem project receives EUR 13.1 mil- lion in funding from the EU to demonstrate an integrated bio- chemicals process from wood to chemicals value chain

Continue production ramp-up in UPM Lappeenranta biorefinery Participate in variable cost savings

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UPM ENERGY

Create value in power generation and physical and financial trading Profitable growth on the Nordic CO 2 emission-free electricity market

Continue OL3 construction and refurbishment of hydropower plants Grow energy management services

Optimal use of hydropower assets and hedging

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Continued OL3 construction

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Continued the refurbishment of hydropower plants

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Continue optimal use of hydropower assets

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UPM RAFLATAC

Started up expanded production in China, Malaysia and Poland Strengthened product portfolio in films and special products

Profitable growth through organic growth, product portfolio development and synergistic acquisitions Growth in high value added films and special products Expand presence in developing markets Profitable growth in labelling materials globally and in high quality office papers in Asia-Pacific Exceptional customer experience and leading sustainability performance Improve profitability and maximise cash flow through a customer-focused sales strategy Make use of optimisation opportunities in the extensive low-cost operations

Continuous product portfolio development Ramp up production in new units Plan new slitting and distribution terminals in growth markets Participate in variable cost savings Ramp up of the third production unit at UPM Changshu, China Participate in variable cost savings

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Reduction in variable costs

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UPM PAPER ASIA

Completed construction of the third production unit at UPM Changshu, China

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Reduction in variable costs

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UPM PAPER ENA

Leverage on simplified, customer segment-based organisation

Strengthen customer relationships Participate in variable cost savings, fixed cost savings

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Closure of four paper machines Reduction in variable and fixed costs

Study the possible sale of UPM Schwedt in Germany

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Improved market position

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UPM PLYWOOD

Increased deliveries to demanding end-use segments Otepää plywood mill investment decision in Estonia

Profitable growth through customer-oriented service and operational excellence Strengthen market position in selected businesses by increasing value and service offering

Complete Otepää mill investment in Estonia Participate in variable costs savings

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Improved production flexibility

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Competitiveness improvement programme at the Finnish birch plywood mills

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Reduction in variable costs

WOOD SOURCING AND FORESTRY

Secure competitive wood

Reduction in wood costs

Continue forest land sales

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Sold 63,670 hectares of forest land in Finland

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Participate in variable costs savings

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Sale of Tilhill Forestry Limited

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BUSINESS Portfolio development and VALUE creation

Grow with synergistic acquisitions Simplify with best value realisation for UPM

Studied M&A opportunities, no significant transactions materialised

Continue to look for value enhancing M&A opportunities

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Sold the SMARTRAC share

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NEW BUSINESS DEVELOPMENT

UPM Biocomposites: business creation and continued growth UPM Biochemicals: further application development and piloting Commercialise technology and IPR innovations for core-related activities Comply with laws and regulation Mitigate risks and capture opportunities

Continue to expand UPM ProFi product port- folio. Continue to commercialise UPM Formi 4 Continue to develop biochemicals 4 Continue technology and IPR commerciali- sation, search collaboration opportunities

Industrial concept development proceeded in biochemicals 4 Significant EU funding for biochemicals concept demonstration 4

Active management of patent portfolio, attractive partnerships with start-up companies enhanced

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in bioeconomy/circular economy

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Code of Conduct renewed

Code of Conduct launch and training Efficiency and safety further improved Diversity initiative to be launched UPM’s sponsorship and donations programme

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Responsibility

New 2030 responsibility targets established

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Efficiency and safety improved

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Enhance competitiveness Continuous improvement

Responsible sourcing management strengthened

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contents

*) not a complete list

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UPM Annual Report 2015

UPM Annual Report 2015