ANNUAL GENERAL MEETING 2018

Jussi Pesonen

President and CEO

| © UPM

UPM redefined

2008 2017

1,292513

1744,321

25.99.0

3.321.2

7149

85%66%

2

10.09.5

1.150.4

Comparable

EBIT

Net debt

Share price

Safety

Engagement

Certified fibre

Dividend (proposal)

Sales

UPM TRANSFORMATION SUCCESS FACTORS

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OPERATING MODELMarket driven businesses

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OPERATING MODELEBIT +152% (vs. 2008)

Growing businesses > 80%

| © UPM6 | © UPM

CAPITAL ALLOCATIONDisciplined and effective

High returns

| © UPM7 | © UPM

CAPITAL ALLOCATIONNet debt reduction EUR 4.1bn

(vs. 2008)

| © UPM8 | © UPM

HIGH PERFORMING PEOPLEValue-based leadership

Actively leading performance

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HIGH PERFORMING PEOPLEEmployee engagement +45% (vs. 2008)

Productivity CAGR +4%

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INNOVATIONBiomass-based innovations

Biomolecules

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INNOVATION~300 patent applications

each year

| © UPM12 | © UPM

RESPONSIBILITYCompetitive advantage

Limitless opportunities of bioeconomy

| © UPM13 | © UPM

SHAREHOLDER VALUETotal shareholder return CAGR

2008–2017 +19%

| © UPM14 | © UPM

UPM TODAY

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Competitive businesses with strong

market positions

UPM

BIOREFINING

Pulp

Biofuels

Timber

UPM

ENERGY

Electricity

generation

and trading

UPM

RAFLATAC

Label materials

for product and

information

labelling

UPM

SPECIALTY

PAPERS

Label papers,

release liners,

office papers

and flexible

packaging

UPM

PAPER ENA

Magazine

papers,

newsprint and

fine papers

UPM

PLYWOOD

Plywood

and veneer

products

UPM Biochemicals

UPM Biocomposites

Wood sourcing and

forestry

OTHER

OPERATIONS

| © UPM17

Operating on healthily growing marketsUPM PLYWOOD

Plywood, veneer ~3%

UPM PAPER ENA

Graphic papers ~ –4%

UPM SPECIALTY PAPERS

Label papers ~4%

High-end office papers ~4%

UPM RAFLATAC

Self-adhesive labels ~4%UPM ENERGY

Electricity ~1%

UPM BIOREFINING

Pulp ~3%

Biofuels strong

Timber ~2%

By comparable EBIT 2017

Demand trend growth, % pa

| © UPM18

Global businesses – local presence

54production plants

in 12 countries

19,100employees

in 46 countries

12,000customers

in 120 countries

90,000shareholders

in 35 countries

25,000b-to-b suppliers

in 75 countries

UPM’s sales by market 2017

EUR 10,010 million

13%North America

62%Europe

5%Rest of the world

20%Asia

RECORD-STRONG YEAR 2017

19 | © UPM

| © UPM20

Improvement continued through

a turn in input costs environment

Sales

EUR 10,010m +2%

EBITDA

EUR 1,631m +71m

Comparable EBIT

EUR 1,292m +149m

2017 vs. 2016:

Comparable EPS

EUR 1.88 +0.23

Net debt

EUR 174m -957m

Operating cash flow

EUR 1,558m -128m

Net debt / EBITDA

0.11x -0.62x

Comparable ROE

11.9% +1.0pp

| © UPM

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Higher delivery volumes contributed to EBIT

growth, prices and variable costs increased

0

200

400

600

800

1 000

1 200

1 400

2016 2017

Variable

costs

Fixed

costs

Deliveries

Paper ENA

Currency,

net impact

Comparable EBIT 2017 vs. 2016

Prices

Depr.,

forests,

plantations

1,14311.6%

EURm1,29212.9%Deliveries

Other BAs

| © UPM

0,0

2,5

5,0

7,5

10,0

12,5

15,0

0

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50

75

100

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150

2013 2014 2015 2016 2017

EURm % of salesUPM Raflatac

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7,5

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15,0

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100

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300

2013 2014 2015 2016 2017

EURm % of salesUPM Paper ENA

Comparable EBIT by business area

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0,0

2,5

5,0

7,5

10,0

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15,0

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50

75

100

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150

2013 2014 2015 2016 2017

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15,0

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125

150

2013 2014 2015 2016 2017

EURm % of salesUPM Specialty Papers EURm % of salesUPM Plywood

EURm % of salesUPM EnergyEURm % of salesUPM Biorefining

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0

2

4

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12

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22

24

26

28

30ROCE %

23

Five of six businesses exceeded their

long-term return targets

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2

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14

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18

20

22

24

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28

30ROCE % *)

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2

4

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28

30ROCE %

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28

30

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30ROCE %

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28

30ROCE %

*) shareholdings in UPM Energy valued at fair value

Long-term return target

UPM

Specialty Papers

UPM

Paper ENA

UPM

PlywoodUPM

RaflatacUPM

Energy

UPM

Biorefining

FCF/CE %

| © UPM24

Consistent improvement in financial

performance

0

200

400

600

800

1 000

1 200

1 400

ComparableEBIT

Comparable figures for 2014 – 2017,

excluding special items for earlier years

EURm

Target: EBIT growth

0

2

4

6

8

10

12

14

%

ComparableROE

Target: 10%

0,0

0,5

1,0

1,5

2,0

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3,0

0

750

1 500

2 250

3 000

3 750

4 500

Net debtEURm

Net debtand leverage

Net debt /EBITDA (x)

Policy: ≤ 2x

| © UPM

Outlook for 2018

• UPM reached record earnings in 2017. Fundamentals for UPM

businesses in 2018 continue to be favourable.

• Healthy demand growth is expected to continue for most of

UPM’s businesses in 2018, while modest demand decline is

expected to continue for UPM Paper ENA. Sales prices are

expected to increase in most of UPM’s businesses, compared

with 2017.

• Input costs are expected to continue increasing in 2018,

compared with 2017. UPM will continue measures to reduce fixed

and variable costs to mitigate this. 2018 starts with less

favourable currencies than 2017.

• Q1 2018 results are expected to be impacted by temporary wood

harvesting limitations in Northern Europe caused by unusually

warm and wet weather in late 2017 and the beginning of 2018.| © UPM25

| © UPM26

Dividend proposal: 21% increase

Dividend policy

• UPM aims to pay an attractive dividend,

30–40% of operating cash flow per share

Dividend proposal for 2017

• EUR 1.15 (0.95) per share, totalling

EUR 613.3m

• 39% of 2017 operating cash flow

EUR

per share

0

10

20

30

40

50

60

70

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

2012 2013 2014 2015 2016 2017

% of operating

cash flow per shareDividend

AIMING HIGHER

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Responsible

operations

and

value chain

Circular economy

Sustainable and safe solutions

for global consumer demand

High

performing

people

Sustainable

forestry

2020

2030

Innovation

Limitless opportunities of

bioeconomy

| © UPM29

Global megatrends drive demand for

sustainable and safe solutions

Population growth, urbanisation

Resource scarcity, role of renewables

Digitalisation, e-commerce

Climate change

Responsibility and compliance

| © UPM30 | © UPM

Sustainable

and safe products

for everyday use

LABEL MATERIALS

for food packaging,

drinks bottles and

for communicating

information

SPECIALTY

PAPERS

for food packaging

WOOD

MATERIALS

for construction

and design

features

TIMBER

for indoor air quality

ELECTRICITY

for lighting and

heating

PULP-BASED

MATERIALS

for packaging,

transport,

storage and

hygiene products

PUBLICATION

PAPERS

for reading and

advertising

OFFICE PAPERS

for printing

WOOD MATERIALS

for furniture and the home

LABELS

for food products

| © UPM

Biomolecules

Fibres

Logs

Trees

Biofuels

Biochemicals

Pulp

Paper

Packaging

Tissue

Labelling materials

Biocomposites

Sawn timber

Plywood

Energy

| © UPM31

Evolution of wood usage

| © UPM32

UPM strategic focus areas

| © UPM

> Continuous

improvement

We create value by seizing… …the limitless potential of bioeconomy

> Earnings growth > Growth and

competitiveness

> Continuous

improvement

Portfolio

> Develop businesses with strong long-term fundamentals and sustainable competitive advantage

Performance Growth Innovation Responsibility

| © UPM

Top performance and

spearheads for growth

High-value fibre

and wood products

Pulp Plywood

Specialty packaging

materials

Raflatac Specialty papers

Graphic papers Energy

Biofuels Biochemicals

Molecular

bioproducts

33 | © UPM

| © UPM34

Focused investments in businesses with strong

fundamentals and sustainable competitive advantage

FOCUSED INVESTMENTS

100

75

50

25

0

Sales 2017

UPM Biorefining

UPM Raflatac

UPM Specialty Papers

UPM Plywood

UPM Paper ENA

13 14 15 16 17 18 19UPM Energy

+70,000 t+100,000 t

+170,000 t

Label stock

expansion

+120m litres +360,000 t

Pulp mill

efficiency

+40,000 m3

+170,000 t

Label stock

expansion

Specialty

labels

expansion

+40,000 t

+30,000 t

+45,000 m3

-420,000 t

-160,000 t

-460,000 t

-345,000 t

-195,000 t

-280,000 t -128,000 t

-305,000 t

Power plants

CAPACITY CLOSURES AND DIVESTMENTS

| © UPM

Focused investments are delivering growth

35

Pulp CAGR +3%

Biofuels New business

Standard paper labels CAGR +5%

Films and specials CAGR +7%

Label materials CAGR +15%

Cut-size CAGR +6%

Plywood CAGR +2%

AVERAGE UPM

DELIVERY GROWTH

2013 –2017

UPM Biorefining

UPM Raflatac

UPM Specialty Papers

UPM Plywood

Sales 2017

100

75

50

25

0

| © UPM36

UPM’s current investment portfolio for

earnings growth

Focused growth projects

• Completed in Q4/17

– Kymi pulp mill expansion, Finland

– Raflatac expansion, Poland

• Construction stage

– Kaukas pulp mill expansion, Finland

– Raflatac expansion, Finland

– Jämsänkoski label papers expansion,

Finland

– Chudovo plywood mill expansion, Russia

• Feasibility study

– Nordland PM2 conversion from fine

papers to label papers, Germany

| © UPM37

UPM’s current investment portfolio for

earnings growth

Transformative prospects

• Possible new pulp mill, Uruguay

– UPM and the Government of Uruguay

signed an agreement on local

prerequisites for a possible new pulp mill.

Infrastructure projects and the pre-

engineering of the mill in progress.

• Biomolecules businesses

– Basic engineering study regarding a

potential industrial-scale biochemicals

refinery, Germany

– Exploring next steps in biofuels

| © UPM

Current operations Uruguay prospect

Establishing a competitive operating platform

in Uruguay – we are now in preparation phase II

• Plantation base

in West Uruguay

• Fray Bentos pulp mill

1.3 million tonnes

• ~100 km of river barging

for outbound logistics

• Sea port in Nueva Palmira

loading half vessels

• Ocean vessels to pulp markets

• Plantation base in Central

and North Eastern Uruguay

• Potential new pulp mill about

2 million tonnes, on-site

investment estimate EUR 2bn

• Railway with high technical

standards

• Deep sea port in Montevideo

loading full vessels

• Ocean vessels to pulp markets

38

| © UPM

Biochemicals products are sustainable and

competitive alternatives to replace fossil materials

| © UPM39

Basic engineering for an industrial-scale biochemicals biorefinery in progress

Mono Ethylene Glycol

bMEG

Textiles

Bottles & packaging

Deicing fluids

Mono Propylene Glycol

bMPG

Composites

Pharma & cosmetics

Detergents

Lignin

Lignin

Wood resins

Plastics

Foams & coatings

40% Cellulose

30%Hemi-

cellulose

25%Lignin

DISCIPLINED CAPITAL ALLOCATION

40 | © UPM

| © UPM41

Disciplined capital allocation –

5-year cumulative cash flow (2013-2017)

Industry-leading

balance sheet

Net debt /EBITDA

0.11x

EUR 6.4bn

Deleveraging

Strong operating cash flow

Attractive dividend

Focused investments

EUR 1.9bn

EUR 2.6bn

EUR 1.9bn

| © UPM42

Illustrative capital allocation(* for next 5 years,

assuming the Uruguay pulp mill investment

Industry-leading

balance sheet

Net debt /EBITDA

< 2x

Attractive dividend

EUR ~3-4bn

Performance focus

Strong cash flow

High return

investments

EUR ~3-4bnMaintain headroom

(* This is not a forecast

SHAREHOLDER VALUE

43 | © UPM

| © UPM

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

Enterprise value and dividendEURm

UPM transformation, performance and

disciplined capital allocation are reflected

in shareholder value

Cumulative dividend

Market capitalisation

Net debt

44

| © UPM45 | © UPM

UPM – The Biofore Company

Purpose

We create value by seizing the

limitless potential of bioeconomy.