UPM – The Biofore Company Investor Presentation, May 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 99,600 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 Driven by sustainable solutions for a future beyond fossils PLYWOOD GRAPHIC AND ELECTRICITY AND SAWN TIMBER OFFICE PAPERS everywhere for construction and for advertising and industrial applications home and office uses PLYWOOD for vehicle flooring BIOCOMPOSITES for various outdoor and building material uses PULP AND RENEWABLE BIOFUELS SPECIALTY PAPERS for all diesel engines for packing materials LABEL MATERIALS for information and product labelling 5 | © 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, % 6 | © 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 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 8 | © UPM Spearheads for growth 9 | © 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 10 | © UPM UPM current investment portfolio for earnings growth Focused growth projects Transformative prospects • Chudovo plywood mill expansion Possible new 2mt pulp mill, Uruguay +45k m3 in Q3 2019, Russia • Second preparation phase ongoing: the port concession awarded, mill engineering, design, • Nordland PM2 conversion to release tendering and permitting processes proceeding, liner free-trade zone granted. • Pending: Central Railway PPP project, labour +110kt in Q4 2019, Germany protocols and conflict mitigation regulation and • Changshu release liner expansion certain material outstanding items specified in the IA. +40kt in Q1 2020, China Molecular bioproducts, possible biorefineries • Basic engineering completed for a potential 150kt • Kuusankoski hydropower refurbishment biochemicals refinery in Germany. Final site in Q4 2022, Finland assessment and commercial studies ongoing. • Environmental impact study completed for a potential 500kt biofuels refinery in Finland. Ambition to scale-up with a next generation biorefinery, development ongoing into next year. 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 3 750 2,5 Target: 10% 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 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 -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, assuming the Uruguay pulp mill investment Performance focus Attractive dividend Strong cash flow EUR ~3–4bn Industry-leading balance sheet Net debt/ EBITDA High return < 2x investments EUR ~3–4bn 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 Low replacement investments 600 Uruguay Depreciation acquisition ✓ Asset quality in all businesses, e.g. large competitive pulp mills 400 Strategic investments 350*) 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 *) Excluding potential transformative prospects 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 • RobecoSAM’s Sustainability Yearbook • CDP Programs 19 | © UPM Q1 2019: UPM continues to grow sales and earnings Comparable EBIT EURm 450 • Sales grew by 7% to EUR 2,693 million 400 374 (2,512 million in Q1 2018) 355 350 • Comparable EBIT increased by 5% to 300 EUR 374m (355m) 250 • Sales prices were higher, outweighing the 200 impact of increased variable costs 150 • Operating cash flow was EUR 320m (214m) 100 • Net debt decreased to EUR –5m (41m) 50 0 20 | © UPM Comparable EBIT in Q1 2019 Sales prices higher, outweighing the impact of Lower increase in fair value of forests, depreciation higher. increased variable costs. Deliveries increased. Fixed costs lower and variable costs higher, partly due to seasonal factors. 600 600 Deliveries Fixed Currency, 500 500 costs net Fixed Currency, impact net 404 costs 374 14.8% Deliveries 374 impact Variable 400 355 13.9% 400 13.9% 14.1% Prices costs Variable Depreciation, Depreciation, costs Prices forests, forests, 300 plantations, 300 plantations, other other 200 200 100 100 0 0 Q1/18 Q1/19 Q4/18 Q1/19 21 | © UPM Comparable EBIT by business area