UPM – the Biofore Company Investor Presentation, October 2019

UPM – The Biofore Company Investor Presentation, October 2019

1 | © UPM UPM UPM UPM UPM UPM UPM UPM BIOREFINING ENERGY RAFLATAC SPECIALTY COMMUNICA- PLYWOOD BIOCOMPOSITES PAPERS TION PAPERS UPM ProFi ® UPM Formi ® Pulp Hydro-, nuclear- Label materials Fine and specialty Extensive product WISA® Plywood UPM Formi 3D® Plantations and condensing power for product and papers in China range of graphic and veneer products (incl. shares in energy information labelling and APAC papers for advertising ® Biofuels UPM Grada UPM companies) Labelling material and publishing wood material BIOCHEMICALS Sawmills Electricity production globally as well as home Wood-based biochemicals Wood Sourcing and trading and office uses Packaging papers for variety of industrial uses

and Forestry Optimisation services mainly in Europe UPM BUSINESSES UPM UPM BIOMEDICALS GrowDex®

2 | © UPM Global businesses – local presence

UPM’s sales by market EUR 10,483 million production 54 plants in 12 countries

62% 19,000 employees in 46 countries 12% Europe North America 20% Asia 12,600 customers in 110 countries

100,400 shareholders in 32 countries 6% b-to-b- Rest of the world 24,000 suppliers in 75 countries

3 | © UPM Sustainable and safe products for everyday use PULP AND BIOFUEL BASED MATERIALS TIMBER ELECTRICITY for packaging, transport, PUBLICATION PAPERS for construction everywhere storage and hygiene for reading and products advertising

LABEL MATERIALS for food packaging, LABELS drink bottles and for for food products communicating information

SPECIALTY PAPERS for food packaging

WOOD MATERIALS for construction and design features OFFICE PAPERS WOOD for printing MATERIALS for furniture and the home

4 | © UPM Operating on healthily growing markets

UPM PLYWOOD Comparable EBIT by Plywood, veneer ~3% business area 2018 EUR 1,513m UPM COMMUNICATION PAPERS Graphic papers ~ –5%

UPM SPECIALTY PAPERS UPM BIOREFINING Label papers, high-end Pulp ~3% office papers ~4% Biofuels strong Timber ~2% UPM RAFLATAC Self-adhesive labels ~4%

UPM ENERGY Electricity ~1% Market demand trend growth, %

5 | © UPM Biofore strategy

WE CREATE VALUE BY SEIZING THE LIMITLESS POTENTIAL OF BIOECONOMY

PERFORMANCE GROWTH INNOVATION RESPONSIBILITY

STRONG LONG-TERM FUNDAMENTALS FOR DEMAND GROWTH AND HIGH BARRIERS TO ENTRY

6 | © UPM Spearheads for growth

7 | © UPM UPM in transformation

2008 2018 Operating model vertically integrated six separate Promotes value creation paper company businesses

100 % 100 % Sales Communication Business portfolio Papers 80 % 80 % Plywood Increasing share of businesses with Paper Energy strong long-term fundamentals for 60 % 60 % profitability and growth Plywood Specialty Papers 40 % 40 % Raflatac Raflatac 20 % 20 % Sawmilling Biorefining Others 0 % 0 %

Sales EUR 9.5bn EUR 10.5bn Business performance EBIT *) EUR 513m EUR 1,513m Continuous improvement in financial, ROE *) 3.5% 12.9% social and environmental performance

Net debt EUR 4.3bn EUR -0.3bn Disciplined capital allocation Market cap EUR 4.7bn EUR 11.8bn Driving value creation *) excluding special items for 2008, comparable figures for 2018

8 | © UPM 2030 Limitless opportunities Sustainable and safe solutions of bioeconomy for global consumer demand

2020

Innovation

Responsible operations and Circular economy A FUTURE BEYOND FOSSILS value chain

High performing people

Sustainable forestry | © UPM UPM current investment portfolio for earnings growth

Focused investments Transformative prospects • Chudovo plywood mill expansion New 2.1mt eucalyptus pulp mill 3 +45k m in Q3 2019, Russia • Mill investment of USD 2.7 billion, Uruguay • Nordland PM2 conversion to release liner • Investments in port operations in Montevideo, local +110kt in Q4 2019, Germany facilities in Paso de los Toros of USD 350 million • Scheduled start-up in H2 2022 • Changshu release liner expansion Molecular bioproducts, possible biorefineries +40kt in Q1 2020, China • Basic engineering completed for a potential 150kt • New power plant in Nordland biochemicals refinery in Germany. Final site in Q3 2022, Germany assessment and commercial studies ongoing. • Environmental impact study completed for a • Kuusankoski hydropower refurbishment potential 500kt biofuels refinery in Finland. Ambition in Q4 2022, Finland to scale-up with a next generation biorefinery, development ongoing into next year.

10 | © UPM Continuously taking action to ensure competitiveness

UPM Communication Papers All business areas and functions • UPM Plattling PM 10 (LWC) • Continuous improvement programmes -155kt closed down in Q3 2019 Variable costs, working capital, commercial strategies, maintenance and site costs, safety, • UPM Rauma PM 2 (SC) environmental performance -265kt, plan to close down by the end of 2019 • Efficient use of assets • UPM Chapelle (newsprint) • Fixed cost reduction -240kt, plan to sell by the end of Q2 2020 New Business Services Hub in Wroclaw, Poland • UPM Nordland PM2 (fine) • Product and mix development -200kt, conversion to release liner in Q4 2019 • Digitalisation • New power plant in UPM Nordland Customer interface, planning, data analytics in Q3 2022

11 | © UPM Business area returns and long-term targets

UPM UPM UPM UPM Communication UPM Energy Biorefining Specialty Papers Papers Plywood UPM Raflatac 30 30 30 30 30 30 ROCE % *) ROCE % ROCE% FCF/CE % ROCE % ROCE % 28 28 28 28 28 28 26 26 26 26 26 26 24 24 24 24 24 24 22 22 22 22 22 22 20 20 20 20 20 20 18 18 18 18 18 18 16 16 16 16 16 16 14 14 14 14 14 14 12 12 12 12 12 12 10 10 10 10 10 10 8 8 8 8 8 8 6 6 6 6 6 6 4 4 4 4 4 4 2 2 2 2 2 2 0 0 0 0 0 0

) * shareholdings in UPM Energy Long-term return target valued at fair value

12 | © UPM Group financial performance

EURm Comparable EBIT % Comparable ROE Net debt Net debt Net debt/ EURm and leverage EBITDA (x) 1 600 14 4 500 3,0

1 400 12 Target: EBIT growth Target: 10% 3 750 2,5 1 200 10 3 000 2,0 1 000 Policy: ≤ 2x 8 800 2 250 1,5 6 600 1 500 1,0 4 400 750 0,5 200 2

0 0 0 0,0 2014 2015 2016 2017 2018 LTM 2014 2015 2016 2017 2018 LTM 2014 2015 2016 2017 2018 Q3/19 LTM -750 -0,5

13 | © UPM 5-year cumulative cash flow (2014–2018) – efficient capital allocation in action

Attractive dividend Strong operating cash flow EUR 2.2bn EUR 6.9bn Industry-leading Deleveraging balance sheet EUR 2.8bn Net debt/ EBITDA ~ 0x

Focused investments EUR 1.9bn

14 | © UPM Illustrative capital allocation *) for the next 5 years

Performance focus Attractive dividend Strong cash flow EUR ~3–4bn Industry-leading balance sheet

Net debt/ EBITDA High return < 2x investments EUR ~4bn Maintain headroom

*) This is not a forecast

15 | © UPM Dividend for 2018: 13% increase

EUR % of operating per share cash flow per share 1,60 80 Long term dividend policy 1,40 70 • UPM aims to pay an attractive dividend, 1,20 60 30–40% of operating cash flow per share

1,00 50 Dividend for 2018 0,80 40 • EUR 1.30 (1.15) per share,

0,60 30 totalling EUR 693m • 50% of 2018 operating cash flow 0,40 20

0,20 10

0,00 0 2013 2014 2015 2016 2017 2018

16 | © UPM Low investment needs in existing assets allow growth projects with modest total capex

Capital expenditure EURm Estimate Focused growth investments 1 200 ✓ High returns and fast payback

1 000 Myllykoski ✓ Low implementation risk acquisition ✓ Financed from operating cash flow 800 Uruguay Low replacement investments 600 acquisition Depreciation 450 ✓ Asset quality in all businesses, Strategic investments 400 e.g. large competitive pulp mills 303 ✓ UPM Communication Papers 200 Operational investments Modest total capex 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E and attractive returns

17 | © UPM Value from responsibility

Compliance Renewable, recyclable and safe products • Responsible business practises • Renewable and biodegradable raw • Decision making, management and materials and recyclable products operations guided by our values and UPM Code of Conduct • Product stewardship • Reliable, credible and • Open and transparent product transparent reporting communications

Responsible operations Value based leadership and value chain • Safe and healthy working environment • Material efficiency and and wellbeing of employees circular economy thinking • Value-based and inspiring leadership • Climate solutions and working • Diversity and inclusion towards carbon neutrality • High performance and continuous • Diversity and inclusion professional development of employees • Responsible water use • Local commitment • Sustainable land use • Respecting human rights

18 | © UPM Our consistent efforts on responsibility have received recognition globally

• UN Global Compact LEAD

• Dow Jones Sustainability Index

• CDP Programs

• MSCI ESG Ratings

https://www.msci.com/documents/1296102/1523388 6/How-to-Reference-an-MSCI-ESG-Rating-Final.pdf 19 | © UPM Q3 2019: Good performance and strong financial position – Uruguay decision drives significant future earnings growth

Comparable EBIT • Sales decreased by 6% to EUR 2,493 million EURm 450 (2,650 million in Q3 2018) 420 400 • Comparable EBIT decreased by 19% to 342 350 EUR 342m (420m) 300 • Sales prices decreased, outweighing the 250 impact of lower variable costs in all businesses 200

• Operating cash flow was strong at EUR 500m 150 (405m) 100

• Net debt decreased to EUR -2m (4m) 50

20 | © UPM Comparable EBIT in Q3 2019

Sales prices decreased, outweighing the impact of Sales prices decreased more than variable costs. lower variable costs across all business areas. Fixed costs lower, mainly due to seasonal factors. Fixed costs decreased. Deliveries increased.

EURm 600 EURm 600

500 500 420 Currency, 15.9% Fixed net Variable Currency, 400 costs impact 342 400 345 342 net costs 13.7% 13.2% Prices 13.7% impact Volumes Depreciation, 300 300 Volumes Depreciation, forests, forests, Prices plantations, Fixed plantations, other costs other 200 200 Variable costs

100 100

0 0 Q3/18 Q3/19 Q2/19 Q3/19

21 | © UPM Comparable EBIT by business area

EURm UPM Biorefining % of sales EURm UPM Communication Papers % of sales EURm UPM Specialty Papers % of sales 280 35 60 15 120 15 240 30 50 12,5 100 12,5 200 25 40 10 80 10 160 20 30 7,5 120 15 60 7,5 20 5 80 10 40 5 10 2,5 40 5 20 2,5 0 0 0 0 0 0

-20 -2,5

EURm UPM Plywood % of sales EURm UPM Energy % of sales EURm UPM Raflatac % of sales 60 18 60 60 60 15

50 15 50 50 50 12,5

40 12 40 40 40 10

30 9 30 30 30 7,5

20 6 20 20 20 5

10 3 10 10 10 2,5

0 0 0 0 0 0

22 | © UPM Consistently strong cash flow

Operating cash flow EURm 1 800

1 600 • Q3/19 operating cash flow was EUR 500m (405m in Q3/18) 1 400 Free cash flow 1 200 • Working capital decreased by EUR 112m

1 000 (increased by 75m)

800 600 • Q1-Q3/19 operating cash flow was 400 EUR 1,256m (947m) 200 Operating cash flow

0 2014 2015 2016 2017 2018 LTM

23 | © UPM Outlook for 2019

The global economic growth is estimated to continue in 2019, albeit at a slower pace than in 2018. There are significant uncertainties related to global economic growth, including global trade tensions. Growth has slowed down in Europe, particularly in Germany. These issues may have an impact on the global economic growth and on UPM’s product and raw material markets. UPM reached record earnings in 2018. UPM’s business performance is expected to be at a good level in 2019. In 2019, demand growth has continued for most UPM businesses, albeit at a modest pace. Demand decline has continued for UPM Communication Papers. Fair value increases of forest assets are not expected to contribute materially to comparable EBIT in 2019. In Q4 2019, the average pulp price for UPM businesses is expected to be lower than in Q3 2019. UPM Biorefining is affected by the scheduled maintenance shutdown at the UPM Fray Bentos pulp mill. UPM Communication Papers is positively impacted by the annual energy related refunds.

24 | © UPM UPM Biorefining Market pulp consumed in growing end-uses – supply of alternative white fibres declines

Growing end-uses of white fibre

Based on Tissue & fluff white fibre Graphic papers 10 % 29 % Based on Specialty Other 11 % 60% white fibre 40% brown fibre Based on Containerboard brown fibre 38 % Cartonboard 12 %

Total fibre consumption (2016): 423 million tonnes

25 | © UPM UPM Biorefining Pulp demand outlook

Global consumption of end-uses Global consumption of fibres in million tonnes in million tonnes

500 500 Growing white Graphic Decline in graphic White papers papers virgin fibre end-uses 400 400 virgin overcome decline fibre Tissue & in graphic paper fluff Growth in tissue, 300 300 White Dwindling white RCP Specialty hygiene, specialties RCP availability Brown Carton- and packaging virgin 200 board 200

Brown Strong demand for 100 Container Strong growth 100 -board in containerboards RCP brown fibre

0 0 2005 2015 2025 2005 2015 2025

26 | © UPM UPM Biorefining Few decided projects coming on stream in the short-term

Entry of market bleached pulp capacity ’000 t/a Completed projects Decided projects 7 000 Min. construction 6 000 time span 5 000 4 000 UPM Below-average rate 3 000 Paso de los Toros 2 000 of expansion 1 000 0 -1 000 ? ? ? -2 000 Exits take place 5-year-average exit rate -3 000 -4 000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Exits New mill/line Other expansion Decided projects

Note: Year 2022 including BHKP, BSKP, excluding fluff and dissolving Sources: Pöyry, UPM

27 | © UPM UPM Biorefining UPM invests in a world class pulp mill in Uruguay

• UPM will construct a competitive new pulp mill with Brazil annual production capacity of 2.1 million tonnes of eucalyptus pulp Argentina Uruguay • Mill investment of USD 2.7 billion • Investments in port operations in Montevideo, local facilities in Paso de los Toros of USD 350 million • Scheduled start-up in H2 2022 • Located in the department of Durazno, close to the town of Paso de los Toros • The main part of the total capital expenditure of USD 3 billion will take place in 2020–2022

28 | © UPM UPM Biorefining Transformative step in UPM’s pulp business and in UPM’s future earnings

• Significant step for UPM’s future earnings UPM Pulp capacity – Expected cash cost level of USD 280 per delivered tonne 5.8mt/a of pulp(* – one of the most competitive mills in the world – Attractive returns in various market scenarios – Carefully prepared to ensure long-term competitiveness 3.7mt/a and to minimise risks both in the project phase and during continuous operations Eucalyptus

• Step change in UPM’s pulp business Northern – +57% in pulp business size in a sustainable and highly hardwood competitive way Northern – UPM becomes one of the most competitive suppliers of softwood premium pulp in the world 2019 2023

*) including variable and fixed costs of plantation operations, wood sourcing, mill operations and logistics delivered to the main markets 29 | © UPM UPM Biorefining State of the art mill design

• Initial production capacity of 2.1 million tonnes of eucalyptus pulp, with further potential • Mill investment USD 2.7 billion, efficient investment level compared with corresponding projects • World-class single line pulp mill and Best Available Techniques (BAT) – Excellent safety – Proven high environmental performance – High availability and maintainability – High energy output, surplus renewable electricity 110 MW – Low costs

30 | © UPM UPM Biorefining Competitive wood supply

• Eucalyptus availability secured through UPM’s own and leased plantations and wood sourcing agreements with private partners • UPM’s own and leased plantations in Uruguay cover 382,000 hectares, supplying both UPM Fray Bentos and the new mill near Paso de los Toros • 30 years experience of sustainably managed and productive plantations

31 | © UPM UPM Biorefining Efficient logistics set-up

• UPM will invest USD 280 million to construct a deep sea pulp terminal in Montevideo port – Direct rail access from the mill to a modern port terminal creates an efficient supply chain to world markets – Synergies with the UPM Fray Bentos mill • Agreed railway modernisation – Public-private-partnership agreement between the government and the construction company has been signed, financing is finalised • Agreed road improvements

32 | © UPM UPM Biorefining Project schedule and capital outflow

• The necessary permits have been granted and the material agreements with the Government of Uruguay have been concluded to the satisfaction of both parties. • The Public-Private-Partnership agreement between the government and the construction company for the construction of the central railway was signed in May 2019 and the financing of the construction company is finalised. • Among other project preparations, the site works for the mill and dredging of the port have been started. The tendering for the main equipment and manning of the project is ongoing. Commitments on major capital outlays will be made in line with the railway financing and execution. • The mill is expected to start up in H2 2022. • The main part of the total capital expenditure of USD 3 billion will take place in 2020–2022. UPM will have 91% ownership in the project and a local long-time partner which has been involved also in UPM Fray Bentos is owning 9%.

33 | © UPM UPM Biorefining Chemical pulp market prices

Pulp market prices, EUR Pulp market prices, USD EUR/tonne USD/tonne 1200 1300

1100 1200

1000 1100 1000 900 900 800 800 700 700 600 600 500 500

400 400

300 300

BHKP, Europe NBSK, Europe BHKP, Europe, EUR NBSK, Europe, EUR BHKP, China NBSK, China BHKP, China, EUR NBSK, China, EUR Source: FOEX Indexes Ltd

34 | © UPM UPM Biorefining Demand-supply drivers of pulp market

Short term Long term Sustainable, renewable and recyclable Food product safety End use Population growth demand Replacing plastics Urbanisation Middle class expansion Regulation Aging demography Demand and product Re- and E-commerce standards destocking of Decline of e.g. RCP inventories graphic paper production and scarcity of recycled fibre Capacity Availability of Supply closures competitive Maintenance Conversions mill locations stoppages Consolidation Plantations, sustainable Production wood raw material issues Water availability New mill Infrastructure starts Debottleneck investments

35 | © UPM Developing our forest assets

• Investing in strategic forest assets, e.g. in Uruguay • Releasing capital from forests far from our mills • Productivity with active management and nurseries • Strong commitment to sustainability

UPM forests and plantations 2008 2018 Area distribution Forest and plantation land (own and rented) (1,000 ha) 1,012 971 8% 8% US

Forest growth (million m3) 4.3 8.8 90% 53% Finland Wood sourced from UPM forests and plantations (million m3) 2.2 4.6 39% Uruguay Value of forests and plantations, including land (EURm) 1,270 2,514

2008 2018

36 | © UPM UPM Energy UPM’s power generation – competitive in all market conditions

UPM’s power generation assets UPM in Finland UPM in Nordics UPM Condensing UPM # 2

Hydro

Nuclear Others Others

37 | © UPM UPM Energy UPM Energy

UPM Energy’s power generation MW EURm Cost of sourced electricity from Hydropower holdings 551 740 Illustration shareholdings Nuclear power OL1 and OL2 588 1,185 Nuclear power OL3 under construction (494) 226 Condensing power 95 1 UPM Energy’s shareholdings in total, 1,234 2,152 valued at fair value UPM own hydropower assets 160 UPM Energy’s in total (excl. OL3) 1,394 UPM Energy capital employed 2,419

UPM Energy sources electricity from part owned energy companies at full cost (cost-price principle, mankala principle)

38 | © UPM UPM Energy Cost efficient generation enables robust profitability in changing market environment

Market electricity prices vs UPM sales price EUR/MWh 60

0 2014 2015 2016 2017 2018 2019

Helsinki Front Year System Front Year UPM average sales price

UPM Energy profitability 2014 2015 2016 2017 2018 9M/19

Comparable EBIT, EURm 202 181 116 91 123 132

% of sales 43.5 43.6 32.7 28.8 31.5 43.2

39 | © UPM UPM Energy UPM Energy ROCE

• In UPM balance sheet, UPM Energy shareholdings are valued at fair value • Energy market transformation is ongoing • UPM Energy assets are competitive

% UPM Energy ROCE vs. Nordic peers 20 UPM Energy comparable ROCE: shareholdings at fair value 16% 15 11% UPM Energy ROCE if calculated based on acquisition cost 10 5% 4% Fortum Vattenfall Statkraft 5

Source: Companies’ financial reports, UPM 0 2017 2018 40 | © UPM UPM Raflatac Self-adhesive labels in end-use

PHARMACEUTICALS WINE, SPIRITS & CRAFT FOOD HOME & PERSONAL CARE DURABLES BEVERAGE

TRANSPORT & LOGISTICS RETAIL, OIL & INDUSTRIAL A4 & CUT-SIZE SECURITY & BRAND TYRE PROTECTION

41 | © UPM UPM Raflatac The self-adhesive labelstock market

>EUR 8bn global market Strategy for profitable growth ~4% p.a. growth Increased customer reach Private consumption driven Wider product portfolio Largest of the labelling technologies Winning operations

~1/5 of total self adhesive materials markets Enabled by strong common capabilities and global operating model Potentially accelerated with M&A if feasible

Self-adhesive labelstock market All labelling technologies All self adhesive materials

UPM Raflatac UPM Raflatac UPM Raflatac Self adhesive Self adhesive labelstock labelstock Other producers Other Other self Other labelling Other producers adhesive producers technologies materials

LABELLING MATERIAL PACKAGING OFFICE PAPER APAC

LEADERSHIP POSITION IN NICHE PLAYER IN CONSUMER MAJOR SUPPLIER OF OFFICE LABELLING MATERIALS PACKAGING PAPER IN ASIA

CASE: Siliconized release CAGR Paper flexpack, CAGR Asian cutsize market, CAGR 2 liner market, 51 Bn m 5% million tonnes 2% million tonnes 2–3%

6.1 63.5 2,1 5.3 1,9 51.0 7% 2% 1–2% Other Asia

1–3% 2–3% 5% China

2017 2022E 2017E 2022E 2017 2022E

Asia North America Europe South America MEA Source: AWA; Pira, UPM

Others Medical Envelope 2 % Product functions 3 % 3 %

Release liner carries the adhesive and face Graphic film material: 5 % • Prevents the adhesive from sticking permanently Food & bakery 5 % • Important and often critical feature of a layered construction Hygiene 8 % Globally Labelstock 48.7 Bn m2 50 %

Industrial 11 %

Tapes 13 % Source: AWA

• Cost competitiveness • Growth • Growth • Capacity investment • Responsible Fibre & Nordic Origin Face paper Office papers

LABELLING FINE PAPERS • Growth in high quality label papers Release liner base paper • Innovations in other Publication papers applications

• Capacity investments PACKAGING Packaging papers

• Growth • Innovations

Uncompromising Targeted Commercial 1 performance 2 innovation 3 excellence

Continued focus on stringent Targeted investments in innovation Optimize and evolve commercial capacity management and to drive performance, increase interface and supporting processes performance improvement. efficiencies and extend our position to ensure supply security and in the market. customer value add.

Zero accidents Leadership Focused on sustainability

EUR/t

Price

Cash cost of a marginal producer

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Sources: PPI, RISI, Pöyry

Europe North America China EUR/t USD/t USD/t 1100 1300 1300

1000 1200 1200

1100 1100 900 1000 1000 800 900 900 700 800 800 600 700 700

500 600 600

400 500 500

WFC r (100% chemical pulp) News SC LWC News SC LWC Uncoated Woodfree Reels (100% chemical WFC WFU WFC WFU pulp) Sources: PPI, RISI

Construction Vehicle flooring LNG shipbuilding

UPM’s position and direction UPM’s position and direction UPM’s position and direction • Leading position in high and medium • Leading position in Europe • Global leader in LNG plywood range standard products in Europe • Competitive edge built on smoothly • Competitive edge based on right quality through well established distribution running operations and needs-based and accurate on-time deliveries network providing easy access to product design creating value to both ® • Long term commitment and benchmark WISA plywood vehicle manufacturers and operators service level • Uncompromised sustainability, certified • Growth sought by expanding to new • Focus to secure leading position in LNG products and operations markets and related end use segments carriers and to extend offering into • New growth sought by strengthening related applications using the same position in selected emerging markets technologies (e.g. land storage tanks)

Strategic choices Sales Relevant market Low-end EMEA market Non-footprint by category ~5.1Mm3 market ~12Mm3 market 1. Demanding industrial applications Industrial 2. High and medium range applications standard products 0.8 12 90 3. Selected customers Construction / 4. EMEA region and Panel Trading LNG business globally UPM Plywood EMEA plywood Global plywood sales ~811tm3 market ~12Mm3 market ~90Mm3

Biomass use is not increasing Use of fossil resources Use of fossils has increased increases CO amount CO2 to carbon cycle 2 global CO2 -emissions

40 Fossil fuels, cement and 35 flaring Forestry and other land Biofuels and 30 use biochemicals 25

Wood for /year energy 2 20

Wood fiber for GtCO 15 pulp and paper production 10

Timber and 5 plywood

1917 1953 1989 1845 1854 1863 1872 1881 1890 1899 1908 1926 1935 1944 1962 1971 1980 1998 2007 Energy from Source: IPCC AR5 fossil resources 52 | © UPM UPM Biofuels The possible Kotka Biorefinery: an innovative and robust concept to scale up the business

✓ Competitive and ✓ Low-carbon fuels for sustainable feedstocks road, aviation, shipping Lappeenranta Biorefinery and petrochemicals 100kt

Residual oils

Residues, Carbon farming saw dust, bark (Carinata oil)

UPM feedstocks Potential Kotka Biorefinery UPM renewable fuels 500kt ✓ World-scale biorefinery leveraging UPM ecosystem ✓ Significant efficiency gains enabled by economy of scale and synergies with Lappeenranta

53 | © UPM UPM Biochemicals Biochemicals products are sustainable and competitive alternatives to replace fossil materials

BIOREFINERY PROCESS

FIXED TECHNOLOGY PLATFORM VARIABLE FOR EACH BIOREFINERY

STEP 1: SUGAR PULPING STEP 2: CHEMICAL CONVERSION 40% Disintegrating wood into sugars, Conversion of sugars into targeted Cellulose lignin and green energy biochemicals Biochemical A . . . 30% Biochemical N Hemi- BIOMASS SUGARS cellulose

2 %

25% Lignin Lignin

GREEN ENERGY 54 | © UPM UPM Biochemicals Biochemicals biorefinery targeting to produce bio-MEG, bio-MPG and lignin from hardwood

bMEG bMPG Lignin Monoethylene glycol Monopropylene glycol Biorefinery lignin

Existing fossil-based market Existing fossil-based market Performance chemical Market demand > 26 m tonnes Market demand > 2 m tonnes Application driven CAGR > 3% MonopropyleneCAGR > 5% glycol Strong IP position Application examples: Application examples: Application examples:

Textiles Composites Wood resins

Bottles & packaging Pharma & cosmetics Plastics

Deicing fluids Detergents Foams & coatings