UPM Kymmene Oyj : Presentation (upm graphic paper joint venture presentation final)

‌UPM and Sappi to form a graphic paper Joint Venture

Massimo Reynaudo President and CEO

‌UPM and Sappi to form a graphic paper Joint Venture

50%

50%

• New, independent graphic paper company, owned 50/50 by UPM and Sappi

• Would include the UPM Communication Papers business and

  Sappi's graphic paper business in Europe

• Enterprise value of € 1.42 billion, excluding the value of synergies

• The financial benefit for UPM at closing would include €613 million cash payment, €406 million transfer of pension liabilities and a 50% share of the Joint Venture

• The transaction is expected to have a positive impact on UPM's

  profitability margins (EBIT % of sales), balance sheet and leverage

• The transaction is subject to definitive agreements and

merger control in the EU and other jurisdictions

2 | © UPM

‌Planned Joint Venture overview

• 12 paper mills(*, including

  
  
  

  • 8 UPM Communication Papers mills in Finland, Germany,

    the UK and USA

  • 4 Sappi graphic paper mills in Finland, Germany, Austria and the Netherlands

• Mixed customer base of direct end-users and distributors

  • Newsprint, SC, CM, WFC and WFU

  • Primary sales regions Europe (~75%) and North America (~11%)

• Additional value creation through synergies:

  annual synergies of approx. €100 million

  • Synergies achieved through asset optimization, product portfolio rationalization, logistics optimization, sourcing efficiency improvements and operational efficiencies

    
    
    

    UPM Communication Papers mill site

    Sappi graphic paper mill site

    
    
    
    
    ‌A structural solution creating long-term value

    Long-term supply security for customers

    • Reliable and committed supply, with competitive cost base

      Efficient, adaptable and sustainable graphic paper business

      • Production optimization for efficiencies

      • Improved ability to advance sustainability and reduce carbon emissions

        Long-term viability and competitiveness of the European graphic paper industry

    • Improved utilization rates, more balanced and resilient industry

      
      
      ‌Based on the letter of intent

      Enterprise values

• UPM Communication Papers valued at €1,100 million

• Sappi Europe valued at €320 million

  Cash proceeds

• UPM would receive cash proceeds of €613 million from the JV(*

• Sappi would receive €139 million(*

  Shares in the

  Joint Venture

• UPM would receive 50% of the shares

• Sappi would receive 50% of the shares

  Financing

• The JV would raise debt to fund the purchase prices payable

• The JV would be independently financed, without recourse to the shareholders

  
  
  ‌Based on the letter of intent

  Dividends

• The JV would distribute dividends to its shareholders according to its financial performance and standing

  Potential exit

• • Three years after closing, with the JV expected to have completed the integration and realized the synergies, either shareholder may initiate a divestment of their shareholding

    
    
    ‌Financial impact of the transaction on UPM

• The financial benefit for UPM at closing would include

  → €613 million cash payment to UPM

  → €406 million transfer of pension liabilities

  → 50% share of the Joint Venture

  Expected impact based on the valuation of the transaction at the time of the LoI, subject to customary adjustments

• UPM Communication Papers business valued at €1.1 billion equals an EV / EBITDA multiple

  of 4.6x for LTM (Q4/2024-Q3/2025)

• The UPM Communication Papers assets to be transferred to the Joint Venture are estimated

  to represent less than 10% of UPM's total assets.

• UPM's ownership in the Joint Venture would be accounted for using the equity method.

‌UPM key figures(1

€ million	UPM Group Q4 2024-Q3 2025	UPM Communication Papers Q4 2024-Q3 2025	UPM excl. UPM Communication Papers Q4 2024-Q3 2025
Sales	9,976	2,602	7,843
Comparable EBITDA	1,365	241	1 124
% of sales	13.7	9.3	14.3
Operating profit	255	30	225
% of sales	2.6	1.1	2.9
Comparable EBIT	984	180	804
% of sales	9.9	6.9	10.3
Capital employed	14,292	986	13,306 2)
Comparable ROCE, %	6.9	16.9	6.1

1. The tables show UPM key figures as reported and excluding UPM Communication Papers. The figures do not include the impact of forming the joint venture, any transaction costs, synergies, dis-synergies or project costs.

2. Excluding UPM Communication Paper operating capital employed

‌Indicative timeline*

Definitive JV agreement

Financing agreements

Joint Venture operational*

Closing*

Definitive agreements

Letter of

Intent

Q4/2025 H1/2026 H2/2026

Merger

controls

*) The transaction is subject to review by the European Commission and the relevant merger controls and approvals by the authorities in other jurisdictions. The Joint Venture would become operational only with all the closing conditions fulfilled.

‌Assuming the Joint Venture is formed, UPM would increase its growth focus through streamlined business portfolio

• UPM is a material solutions company with world-class businesses on growth markets

• UPM would achieve

→stronger growth profile

→improved margins

→strengthened balance sheet

→no direct sales exposure to the declining European and North American graphic paper markets

‌A material solutions company with world-class businesses on growth markets

(*UPM Plywood is under a strategic review,

Decarbonization solutions

Decarbonization

solutions

Advanced

materials

Renewable

fibres

UPM Energy: CO2-free base load nuclear and flexible

value-adding hydropower

UPM Biorefining: innovative solutions to decarbonize traffic, aviation and chemicals

Advanced materials(*

UPM Adhesive Materials: self-adhesive materials

globally, solid offering of graphic solutions

UPM Specialty Papers: labelling and industrial release liners globally, promising presence in specialty packaging

Renewable fibres

UPM Fibres: hardwood and softwood pulp globally, sawn timber products

‌Strong growth track record and global presence: opportunities in faster growing markets, served from competitive platforms

€ million

9 000

UPM sales (*, excl.

Communication Papers and Plywood

Sales by market 2024, excl.

Communication Papers and Plywood

8 000

7 000

6 000

5 000

Rest of the World 6%

Asia 35%

Europe 47%

4 000

3 000

10-year sales CAGR +4.4%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

North America

12%

‌Improve competitiveness and focused growth

UPM actions

Decarbonization solutions: Large long-term growth potential with unique solutions

• Energy: maximize value on the volatile and growing electricity markets

• Biorefining: entry in biochemicals, debottlenecking and development of feedstock technologies in biofuels

  
  
  

  Market growth

  +++

++

Advanced materials:

Focused capital-efficient growth

• Adhesive materials: focused growth, cost efficiency, production to low-cost units

• Specialty Papers: cost efficiency, capacity to grow

  with low investments

  +

Renewable fibres:

Maximizing value creation from the

existing assets

• Improve costs in both Fibres South sand North

• Increase capital efficiency, generate strong cash flow

• Low-capex debottlenecking

‌We act on three fronts 1 2 3 Improve competitiveness Focused growth World-class businesses

Competitiveness Capital efficiency Balance sheet

Strong asset base Focused growth in a capital-efficient way

Strong market positions on growing markets, aim for world-class performance

‌Summary

• UPM and Sappi have signed a letter of intent to form a graphic paper Joint Venture

• Would lead to an efficient, adaptable and sustainable graphic paper business to provide long-

  term commitment and supply security to graphic paper customers

• The planned Joint Venture will position the UPM Communication Papers business for continued value creation for its customers in a way that benefits UPM shareholders

• The transaction is expected to have a positive impact on UPM's profitability margins (EBIT % of

  sales), balance sheet and leverage.

• The future UPM would have no direct sales exposure to the declining European and North American graphic paper markets

• UPM would increase its growth focus through streamlined business portfolio

• UPM is a material solutions company with world-class businesses on growth markets

‌