UPM – THE BIOFORE COMPANY

Jussi PesonenPresident and CEO

May 2016

| © UPM

Contents

• UPM in transformation

• UPM strategic focus areas

1. Performance

2. Growth

3. Portfolio

4. Innovation

• Q1 2016 results

• Summary

2

| © UPM

UPM in transformation

3

0 %

20 %

40 %

60 %

80 %

100 %

Paper ENA

Plywood

Energy

Paper Asia

Raflatac

Biorefining

Otheroperations

0 %

20 %

40 %

60 %

80 %

100 %

Sold units

Paper

Plywood

Raflatac

Sawmilling

2003:

integrated

paper company

2008:

towards market-

driven businesses

2015:

six separate

businesses

Sales

EBIT (*

Net debt

Market cap

Personnel

EUR 9.8bn

EUR 429m

EUR 4.9bn

EUR 7.9bn

34,500

EUR 9.5bn

EUR 513m

EUR 4.3bn

EUR 4.7bn

25,000

EUR 10.1bn

EUR 916m

EUR 2.1bn

EUR 9.2bn

19,600

Business

portfolio,

sales

*) comparable EBIT for 2015, operating profit excluding special items for earlier years

0 %

20 %

40 %

60 %

80 %

100 %

Sold units

Paper

Plywood

Raflatac

Sawmilling

| © UPM

UPM business portfolio today(*

4

UPM ENERGY

UPM BIOREFINING

UPM RAFLATAC

UPM PAPER ASIA

UPM PAPER ENA

UPM PLYWOOD

Electricity

Pulp

Biofuels

Timber

#2 in Finland

# 6 globally

#2 globally

Label papers: #1 globally

High-end office papers:

#1 in China

Leading in Europe

#1 in Europe

Graphic papers

Plywood, veneer

Labelling materials,

fine papers

Self-adhesive label materials

Growth drivers:

Private consumption

Sustainability

Population growth

Urbanisation

Retail, e-commerce

Construction and

transportation

*) by EBITDA

UPM STRATEGIC

FOCUS AREAS

| © UPM6

Performance1 Growth2 Portfolio3 Innovation4

UPM strategic focus areas

Continuous

improvement in

performance

“Cost efficiency

measures”

Focused growth

projects

“EBITDA target for

growth projects

EUR 200m”

Business portfolio

development and

value creation

“Net debt reduction

EUR 546m”

New business and

product

development

“Biofuels

commercial

ramp-up”

1. PERFORMANCE

Continuous improvement in financial, social and environmental performance

| © UPM

Group profitability and targets

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3 000

4 000

5 000

Net Debt

Gearing

Min target

EURm %%% of sales EBIT(* ROE(* Gearing

(* comparable figures for 2015 and 2014,

excluding special items for earlier years

| © UPM

Business area returns and long-term targets

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ROCE %ROCE % (* ROCE %ROCE % CF/CE % ROCE %

UPM

Paper Asia

UPM

Paper ENA

UPM

Plywood

UPM

Raflatac

UPM

EnergyUPM

Biorefining

(* shareholdings in UPM Energy

valued at fair value Long-term return target

| © UPM

Growing with Biofore

– engaged high-performing people

0

5

10

15

20

25

EURmillion

10

0,20

0,25

0,30

0,35

0,40

0,45

0,50

0,55

0,60

ProductivitySafety

Lost-time

accident

frequency

Sales per

employee

Per million hours

5-year CAGR:

+5%5-year change:

-77%

30

40

50

60

70

80

90

Employee engagement

Employee

engagement

Manager

effectiveness

5-year change:

+11

Index

More with Biofore– creating more with less

+5%Usage of

Recovered paper

-17%Electricity consumption

per tonne of paper

-16%Process wastewater

per tonne of paper

-65%Solid waste

to landfills

Less wasteWaste and sidestream utilisation

Efficient technologies

Less water usageWater management optimisation

Advanced technologies

Less effluent

Less energySystematic energy management

Energy efficient processes and technologies

Less air emissions

More recyclingEfficient processes

Product lifetime optimisation

End-of-life systems

Achievements in

2005 – 2015

| © UPM11

Focused high-return growth projects

2. GROWTH

| © UPM

Growth projects ramping up and contributing

to earnings in 2016 and beyond

13

Lappeenranta

biorefinery

120m litres of

renewable diesel

UPM Plywood

Otepää mill

expansion

to 90,000m3

Kymi

pulp mill

expansion

170,000t

UPM Raflatac

50% expansion in

APAC, growth in filmic

labelstock in Poland

UPM Paper Asia

Changshu

new speciality

paper machine

360,000t

Pietarsaari

pulp mill

expansion

70,000t

Fray Bentos

pulp mill

expansion

100,000t

Kaukas

pulp mill efficiency

improvement, paper and

pulp decoupling completed

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Capex so far EUR 680m Remaining EUR 90m

| © UPM

| © UPM

Low investment needs in existing assets allow

growth projects with modest total capex

14

0

200

400

600

800

1 000

1 200

2008 2009 2010 2011 2012 2013 2014 2015 2016e

EURm

Operational investments

Capital expenditure

Strategic investments

DepreciationUruguay

acquisition

Myllykoski

acquisition

486

Estimate

350

3. PORTFOLIO

Enhancing value, long-term profitability and growth outlook

| © UPM

Strengths of UPM’s model

16

Top performance

Industry-leading

balance sheet

Attractive dividend

Strong cash flowFocused

investments

Developing new businesses and improving

the competitiveness of current businesses

4. INNOVATION

| © UPM18

Innovations in new and existing businesses

| © UPM| © UPM19

Q1 2016 RESULTS

| © UPM

Q1 2016 – growth projects and cost efficiency

measures deliver improved earnings

EBITDA increased by 24%

+ Cost efficiency measures resulted in

significantly lower variable, fixed costs

+ Growth projects contributed to earnings

+ Realised currency hedges neutral

+ Operational efficiency on a good level

Comparable EBIT increased by 34% to

EUR 281m (210m)

Strong operating cash flow at

EUR 341m (108m)

Net debt decreased to EUR 1,873m

(2,419m)

20

0

50

100

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200

250

300

350

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450

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

EURm Comparable EBITDA

403

325

| © UPM

0

50

100

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400

450

500

EBITDA

Q1/15

EBITDA

Q1/16

Comparable EBITDA in Q1 2016 vs. Q1 2015

Raflatac

Paper

AsiaOther

operations

and

eliminations

Energy

Biorefining

Paper

ENA

Plywood

0

50

100

150

200

250

300

350

400

450

500

EBITDA

Q1/15

EBITDA

Q1/16

EURm

Prices

Variable

costs

Fixed

costs

Deliveries

UPM benefited from cost efficiency

measures in a deflationary

business environment EURm

Cost efficiency improved in all businesses.

Biorefining, Raflatac and Paper Asia

showed growth in deliveries

21

32513.1%

40316.5%

Currency,

net

impact

32513.1%

40316.5%

| © UPM

Comparable EBIT by business area

22

0,0

2,5

5,0

7,5

10,0

12,5

0

10

20

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40

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Q114

Q314

Q115

Q315

Q116

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5

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120

150

Q114

Q314

Q115

Q315

Q116

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Q114

Q314

Q115

Q315

Q116

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Q114

Q314

Q115

Q315

Q116

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-25

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75

Q114

Q314

Q115

Q315

Q116

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8

12

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10

15

20

25

Q114

Q314

Q115

Q315

Q116

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

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

| © UPM

UPM is well positioned for 2016

UPM actions continue:

• Ramp-up at UPM Changshu PM3 and the

Lappeenranta biorefinery

• Full potential of the pulp mills

• UPM Kaukas and UPM Otepää investments

• Cost efficiency measures

• Closure of Madison Paper Industries,

sale of UPM Schwedt paper mill assets

Scheduled maintenance stops:

• Pulp (Q3, Q4) and paper mills (Q2, Q4),

Lappeenranta biorefinery (Q2) and

Olkiluoto nuclear power plant units (Q2)

23

| © UPM| © UPM24

Outlook for 2016 is unchanged

• UPM’s profitability improved in 2015 and the improvement is expected to continue in 2016.

• UPM’s growth projects are expected to contribute positively to the company’s earnings in 2016, compared with 2015.

• UPM continues its measures to reduce variable and fixed costs also in 2016.

• Currencies are expected to contribute positively as hedges roll over, assuming relevant currencies stay at about the same level as at the end of 2015.

| © UPM

SUMMARY

| © UPM

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

2008 2009 2010 2011 2012 2013 2014 2015

Market capitalisation

UPM’s enterprise value and shareholder

value have increased

26

0

2 000

4 000

6 000

8 000

10 000

12 000

2008 2009 2010 2011 2012 2013 2014 2015

Enterprise value Distribution of the enterprise value

Net debt

EUR million

Market capitalisation

Net debt

| © UPM

Strengths of UPM’s model

27

Top performance

Industry-leading

balance sheet

Attractive dividend

Strong cash flowFocused

investments