President and CEO

Jussi Pesonen

UPM – THE BIOFORE COMPANYNordea Forest Products & Paper Seminar 2014

| © UPM

Contents

• UPM in transformation

• UPM strategy

• Performance

• Summary

2

| © UPM3 | © UPM

UPM IN TRANSFORMATION

| © UPM

UPM in transformation – revenues

4

0 %

20 %

40 %

60 %

80 %

100 %

2013

Paper ENA

Plywood

Energy

Paper Asia

Raflatac

Biorefining

0 %

20 %

40 %

60 %

80 %

100 %

2003

Sold units

Paper

Plywood

Raflatac

Sawmilling

2003:

integrated

paper company

2008:

towards market-

driven businesses

2013:

six separate

businesses

Sales

EBIT(*

EBIT margin(*

Personnel

EUR 9.9bn

EUR 429m

4.4%

34,500

EUR 9.5bn

EUR 513m

5.4%

25,000

EUR 10.1bn

EUR 683m

6.8%

21,000

Business

portfolio,

Sales

*) excluding special items

0 %

20 %

40 %

60 %

80 %

100 %

2008

Sold units

Paper

Plywood

Raflatac

Sawmilling

| © UPM

UPM in transformation – capital

5

0 %

20 %

40 %

60 %

80 %

100 %

2013

Paper ENA

Plywood

Energy

Paper Asia

Raflatac

Biorefining

Other

0 %

20 %

40 %

60 %

80 %

100 %

2003

Sold units

Paper

Plywood

Raflatac

Sawmilling

Other

2003:

integrated

paper company

2008:

towards market-

driven businesses

2013:

six separate

businesses

Capital empl.

ROCE (*

Net debt

Market cap

EUR 12.8bn

4.7%

EUR 4.9bn

EUR 7.9bn

EUR 11.2bn

4.6%

EUR 4.3bn

EUR 4.7bn

EUR 11.6bn

6.0%

EUR 3.0bn

EUR 6.5bn

Business

portfolio,

Capital

employed

0 %

20 %

40 %

60 %

80 %

100 %

2008

Sold units

Paper

Plywood

Raflatac

Sawmilling

Other

*) excluding special items

| © UPM

UPM’s businesses

6

• Pulp• Biofuels• Sawmills

• Fine papers in China• Labelling materials

globally

• Label materials for product and information labelling

• Hydro, nuclear and condensing power generation

• Electricity trading in physical and derivatives markets

• Plywood and veneer products

• Magazine papers in Europe and in North America

• Newsprint and Fine papers in Europe

Financials

2013

Sales

EUR

EBITDA

%

ROCE

%

UPM

Biorefining1,988m 22 11

UPM

Energy466m 43 7

UPM

Raflatac1,213m 9 14

UPM

Paper Asia1,108m 15 9

UPM

Paper ENA5,560m 4 0

UPM

Plywood429m 10 7

UPM total 10,054m 11 6

UPM Biorefining

UPM Paper Asia

UPM Raflatac

UPM Energy

UPM Paper ENA

UPM Plywood

| © UPM

Performance • Top performance in each business area

Portfolio• Develop UPM business portfolio in order to

increase its value and create growth

Financials • Strong cash flow, operating profit margin > 10%

Balance sheet • Strong balance sheet

Dividend policy • Cash flow based, good dividend

7

Group targets

| © UPM8 | © UPM

UPM STRATEGY

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

9

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

10

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses1.

| © UPM

Profit improvement programme

progressing fast

0

50

100

150

200

250

Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115

11

EURm

Full impact of the programme is expected by the end

of 2014 as compared with the Q2/13 results

78%

achieved

in Q1/14

EUR 200m

annualised

fixed and

variable

cost

savings

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

12

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses

2.

| © UPM

Progress in the growth projects targeting

EUR 200m of additional EBITDA

Decisions in 2014

• Changshu labelling materials, 360,000t, start-up by the end of 2015

• Kymi pulp mill expansion, 170,000t, start-up by the end of 2015

• 50% increase in self-adhesive labelstock coating capacity in APAC,

increase filmic labelstock capacity in Europe, start-ups by early 2015

Continued implementation

• Lappeenranta renewable diesel, 100,000t start-up summer 2014

• Pietarsaari pulp mill expansion, 70,000t, start-up summer 2014

Further debottlenecking potential at Fray Bentos and Kaukas pulp mills

Targeted additional EBITDA EUR 200m when all projects in full

operation, total capex estimate EUR 680m over three years

13

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

14

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses

3.

| © UPM

Portfolio development and value creation

• Performance: targeting top performance

in each business

• Grow: focused high-return growth

investments and synergistic M&A

• Simplify: best value realisation for UPM

• Consolidation in European paper

market, without increasing capital

15 | © UPM

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

16

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses

4.

| © UPM| © UPM

• Biofuels renewable drop-in

diesel suitable for all diesel

engines

• Biochemicals renewable

drop-in alternatives for oil-

based chemicals

• Biocomposites for injection

moulding to replace oil-based

raw materials

0

50

100

150

200

250

300

350

2009 2010 2011 2012 2013

Annual patent filings 2009–2013

17

New businesses based on UPM’s

development work

PERFORMANCE

18 | © UPM

| © UPM

0

2

4

6

8

10

12

2008 2009 2010 2011 2012 2013 Q1/14

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

2008 2009 2010 2011 2012 2013 2014E

Operating profit excl. special items

Profitability over two economic slowdowns

Europe has underperformed

the other major economic zones

Real GDP y-o-y growth % % of sales

EU

US

Emerging markets

19

Real GDP y-o-y growth %

5.4

3.5

8.2

6.8

5.3

6.8

Source: IHS Global Insight

7.3

LTM

| © UPM

Strong Q1 2014 results show momentum in

the profit improvement programme

Profit improvement programme progressed fast, with 78% of the

targeted annualised EUR 200m cost savings achieved in Q1/14

Q1/14 EBITDA was EUR 313m (284m in Q1/13), 12.6% of sales

Operating profit excl. special items was EUR 196m (144m in Q1/13),

7.9% of sales

Strong operating cash flow of EUR 264m (103m in Q1/13)

Net debt decreased to EUR 2,777m (3,199m in Q1/13) and net debt

to EBITDA to 2.4x (2.6x in Q1/13)

| © UPM20

| © UPM

Operating profit *) by business area

21

0

2

4

6

8

10

0

10

20

30

40

50

Q312

Q412

Q113

Q213

Q313

Q413

Q114

0

4

8

12

16

20

0

20

40

60

80

100

Q312

Q412

Q113

Q213

Q313

Q413

Q114

0

10

20

30

40

50

0

20

40

60

80

100

Q312

Q412

Q113

Q213

Q313

Q413

Q114

0

2

4

6

8

10

0

10

20

30

40

50

Q312

Q412

Q113

Q213

Q313

Q413

Q114

-4

-2

0

2

4

6

-40

-20

0

20

40

60

Q312

Q412

Q113

Q213

Q313

Q413

Q114

-3

0

3

6

9

12

-5

0

5

10

15

20

Q312

Q412

Q113

Q213

Q313

Q413

Q114

EURm % of salesUPM Paper Asia EURm % of salesUPM Paper ENA EURm % of salesUPM Plywood

EURm % of salesUPM RaflatacEURm % of salesUPM EnergyEURm % of salesUPM Biorefining

*) excluding special items

| © UPM

0

200

400

600

800

1 000

1 200

1 400

2008 2009 2010 2011 2012 2013 Q1/14

Strong cash flow

22

Operating cash flow

Cash flow

after investing

activities

Cash flowEUR million

LTM

| © UPM

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

2008 2009 2010 2011 2012 2013

Cash flow based dividend

EUR per

share

0.40

0.45

0.55

23

Dividend policy

• at least 1/3 of net cash flow from

operating activities less

operational capital expenditure

• net cash flow calculated as an

average over three years

Minimum dividend by the

policy

• EUR 0.45 per share

Dividend for 2013

• EUR 0.60 (0.60) per share

0.60 0.60 0.60

Dividend

| © UPM

Low investment needs in existing assets allow

growth projects with modest total capex

24

0

200

400

600

800

1 000

1 200

2008 2009 2010 2011 2012 2013 2014e

EUR million

Operational investments

329

Capital expenditure

Strategic investments

Depreciation

Uruguay

acquisition

Myllykoski

acquisition

450

Estimate

| © UPM

Strengthening balance sheet

25

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

2008

2009

2010

2011

2012

2013

2014

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

Net debt, EUR millionNet debt / EBITDA(trailing 12 months)

Net debt

Net debt / EBITDA

2.4

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

2008

2009

2010

2011

2012

2013

2014

20

30

40

50

60

70

80

90

Net debt, EUR million Gearing %

Net debt

Gearing

37

Liquidity was EUR 2.0bn at the end of Q1 2014

Repayments total EUR 0.5bn in 2014

SUMMARY

26 | © UPM

| © UPM

Profit

improvement

programme

EUR 200m

Shifting gear in UPM transformation

27

UPM

Biorefining

UPM

Paper

Asia

UPM

Raflatac

UPM

Energy

UPM

Paper

ENA

UPM

Plywood

EBITDA target for

growth initiatives

EUR 200m

Biofuels:

Lappeenranta

biorefinery

Pulp: 10%

capacity increase

Labelling materials

Changshu expansion

Self-adhesive labels:

advancing in growth

markets and in higher

value added products

Business portfolio

development and

value creation

BIOCHEMICALS

BIOCOMPOSITES

BIOFUELS

New businesses