UPM THE BIOFORE COMPANY

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1 UPM THE BIOFORE COMPANY Nordea Forest Products & Paper Seminar 2013 President and CEO Jussi Pesonen

2 Strategic direction of UPM s businesses Advancing in growth markets Label Paper in China, label papers Pulp Growth in lowemission energy Biofuels Energy Securing cash flow in mature markets Graphic papers in Europe and North America Plywood Timber 2 UPM

3 Current actions Advancing in growth markets Label expansion New speciality paper machine in China Growth in lowemission energy Biofuel refinery Schongau CHP OL3 Securing cash flow in mature markets Plan to reduce 850kt of paper capacity in 2013 Plan to reduce fixed costs by EUR 90m Timber restructuring 3 UPM

4 FINANCIALS

5 Profitability over two economic slowdowns Europe continues to underperform the other major economic zones Real GDP y-o-y growth % % 12,5 Operating profit excluding special items % of sales 12 10,0 10 7,5 5,0 2,5 BRIC US 8 6 8,3 5,4 8,2 6,8 5,3 5,8 0, E -2,5 Euro zone -5, ,5-7,5 0 Sources: Global Insight Q1/13 5 UPM

6 UPM s business portfolio EBITDA and capital employed Paper 33% Cumulative EBITDA Plywood 1% Forest and Timber 2% Energy 16% Paper 29% Capital employed 31 March 2013 Other 2% Plywood 2% Forest and Timber 15% Label 8% Pulp 41% Label 5% Energy 25% Pulp 22% 6 UPM

7 Consistently strong cash flow EUR million Cash flow Cash flow after investing activities Operating cash flow 0 7 UPM Q1/13 LTM

8 Cash flow-based dividend Cash flow, EUR million Operational capex Cash flow after operational capex EUR per share 0,90 0,80 0,70 0,60 0,50 0,40 0,30 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 0.50 per share Actual / proposed dividend Minimum dividend by the dividend policy 0,20 Dividend for 2012 EUR 0.60 (0.60) per share 8 UPM

9 Strong balance sheet Net debt, EUR million Net debt / EBITDA (trailing 12 months) 4,5 Net debt, EUR million Gearing % Net debt / EBITDA 4, , Gearing , , , Net debt 1, Net debt , UPM Liquidity was EUR 1.8bn at the end of Q Repayments total EUR 228m in next 12 months 2012 figures restated

10 SECURING CASH FLOW IN MATURE MARKETS

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12 Myllykoski cost synergies achieved, new cost reduction plan proceeding as planned EURm UPM Paper EBITDA % of sales In 2012, Myllykoski synergy benefits reduced Paper business costs by EUR 170m Full cost synergies of EUR 200m were realised from Q New plan to reduce annual fixed costs by a further EUR 90m announced in January 690kt of magazine paper capacity closed during January- April 2013, Docelles mill sales process continues 12 UPM

13 ADVANCING IN GROWTH MARKETS

14 Biofore in action Consistent growth in label materials EURm UPM Label sales UPM

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17 Biofore in action UPM grows in China and in the fast developing label materials segment UPM will build a new speciality paper machine at the Changshu mill in China Government and environmental permits clear Site preparation works on-going Infrastructure works under preparation Equipment tendering process on-going New sheeting line started up Total investment CNY 3,000m (approx. EUR 390m), start-up by the end of 2014 Investment supports the good profitability of UPM s growth businesses 17 UPM

18 Biofore in action UPM s pulp platform for growth Fray Bentos started 2007 Pietarsaari major investment in 2004 Kymi major investment in 2008 Kaukas modernisation in 1996 Fray Bentos Pietarsaari Kymi Kaukas BHKP tonnes BSKP tonnes Total capacity Fray 1,100,000 1,100,000 Bentos Kaukas 310, , ,000 Kymi 370, , ,000 Pietarsaari 320, , ,000 Total 2,100,000 1,100,000 3,200, UPM

19 GROWTH IN LOW-EMISSION ENERGY

20 Biofore in action Consistent growth in low-emission electricity generation During the past decade: 83% growth in biomass-based electricity generation 16% growth in hydropower 81% of UPM s power generation is CO 2 neutral MW CO 2 emission neutral electricity capacity Biomass Biggest on-going projects are the Schongau CHP plant in Germany and the OL3 nuclear power plant in Finland Hydro Nuclear +OL e 20 UPM

21 Biofore in action UPM creates new business in wood-based renewable diesel UPM invests in wood-based renewable diesel production Total investment EUR 150m Production capacity 100,000 tonnes/a Technology is based on UPM s innovation and long-term development work Raw material is sustainably produced crude tall oil Residue from pulp production Outside food value chain, no indirect land use change Main product is unique renewable diesel No blend wall issues - compatible with fossil diesel EN590 quality 80% reduction in greenhouse gas emissions High energy content 21 UPM

22 Biofore in action UPM creates new business in wood-based renewable diesel Lappeenranta biorefinery status: Construction and commissioning works on-going, on schedule and budget Main equipment installations will start in June Fleet tests of the product started in April Recruitment of operative staff on-going Start-up in mid-2014 Investment supports the good profitability of UPM s growth businesses Potential to grow into a significant new business with good profitability 22 UPM

23 SUMMARY

24 Mature businesses Growth businesses Expanding well performing growth businesses maintaining cash flow from mature businesses Sales, EURm Sales, EURm UPM 3.1bn +43% 4.4bn "5+ years" 7.6bn Energy Biofuels Pulp -11% 6.8bn Paper China, label papers Label "5+ years" Paper other Timber Plywood Average EBITDA margin 21% ROCE 13% Average EBITDA margin 5%, generating free cash flow ( * Steps in well performing growth businesses Labelstock expansion Paper machine in China Biofuel refinery Fair valuation of Energy assets * ) This is not a forecast, but one scenario from some of UPM s existing growth opportunities Securing cash flow in mature businesses Closed 690kt of magazine paper capacity Docelles (160kt of fine papers) sales process continues Planned annual fixed cost savings EUR 90m Timber restructuring

25 What are we targeting? More than 50% of sales from well performing growth businesses in 5+ years Drive strong cash flow through improved margin, release capital from mature businesses Maintain solid balance sheet and strong cash flow Increase UPM s earnings and valuation 25 UPM

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