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2007-04-24 11:00:00 CEST 2007-04-24 11:00:00 CEST REGULATED INFORMATION UPM-Kymmene - Quarterly reportUPM INTERIM REPORT 1 JANUARY-31 MARCH 2007Earnings per share excluding special items for the first quarter were EUR 0.25 (EUR 0.21 for the first quarter of 2006). EBITDA was EUR 418 million 16.6% of sales (EUR 386 million, 15.7%). Operating profit excluding special items was EUR 221 million (EUR 185 million). New Label Division was formed for self-adhesive label and RFID businesses. Key figures Q1/ Q1/ Q1-Q4/ 2007 2006 2006 Sales, EUR million 2,519 2,460 10,022 EBITDA, EUR million 1) 418 386 1,678 % of sales 16.6 15.7 16.7 Operating profit, 221 170 536 EUR million excluding special 221 185 725 items, EUR million Profit before tax, 177 136 367 EUR million excluding special 177 151 550 items, EUR million Net profit for the 131 99 338 period, EUR million Earnings per share, 0.25 0.19 0.65 EUR excluding special 0.25 0.21 0.80 items, EUR Diluted earnings 0.25 0.19 0.65 per share, EUR Return on equity, % 7.3 5.5 4.6 excluding special 7.3 6.1 5.7 items, % Return on capital 7.9 5.9 4.7 employed, % excluding special 7.9 6.4 6.2 items, % Gearing ratio at 57 67 56 end of period, % Shareholders' equity 13.38 13.48 13.90 per share at end of period, EUR Net interest-bearing 4,023 4,768 4,048 liabilities at end of period, EUR million Capital employed at 11,330 12,516 11,634 end of period, EUR million Capital expenditure, 193 177 699 EUR million Personnel at end of 28,578 31,305 28,704 period 1) EBITDA is operating profit before depreciation, amortization and impairment charges, excluding the change in value of biological assets, excluding the share of results of associated companies and joint ventures and special items. Changes in reporting classifications As of the beginning of 2007, the Converting Division consists only of UPM Raflatac and the division has been renamed as the Label Division. The sale of Walki Wisa is expected to be completed in the second quarter, and the unit is reported in Other Operations. Comparative periods have been regrouped accordingly. Results Q1 of 2007 compared with Q1 of 2006 Sales for the first quarter of 2007 were EUR 2,519 million, 2% higher than EUR 2,460 million in the first quarter of 2006. Operating profit was EUR 221 million (EUR 170 million), 8.8% (6.9%) of sales. In the first quarter of 2007 there were no special items. In 2006 operating profit excluding special items was EUR 185 million, 7.5% of sales. Operating profit increased as a result of improved utilisation of capacity and internal efficiency. Paper prices on average remained about the same; prices for newsprint and uncoated fine paper increased, while prices for magazine paper decreased. The good profitability of the label business continued. The improvement of profitability in wood products came mainly from sawmilling. Raw material costs, especially for wood and recycled fibre, increased. The impact of the increase was partly compensated by lower fixed costs. The share of results of associated companies and joint ventures was EUR 21 million (EUR 26 million). Profit before tax was EUR 177 million (EUR 136 million) and excluding special items EUR 177 million (EUR 151 million). Interest and other finance costs net were EUR 49 million (EUR 46 million). The average interest rate on borrowings increased; on the other hand, net interest-bearing liabilities were lower than a year ago. Exchange rate and fair value gains and losses and gains on available-for-sale investments resulted in a gain of EUR 5 million (EUR 12 million). Income taxes were EUR 46 million (EUR 37 million). The effective tax rate was 26% (27%). Profit for the first quarter was EUR 131 million (EUR 99 million) and earnings per share were EUR 0.25 (EUR 0.19). Earnings per share excluding special items were EUR 0.25 (EUR 0.21). Operating cash flow per share was EUR 0.36 (EUR 0.34). Paper deliveries Paper deliveries for the first three months were 2,753,000 tonnes, 5% higher than in 2006 (2,633,000 tonnes). Magazine paper deliveries were 1,155,000 tonnes (1,098,000 tonnes), newsprint 630,000 tonnes (654,000 tonnes) and fine and speciality papers 968,000 tonnes (881,000 tonnes). Financing Cash flow from operating activities, before capital expenditure and financing, was EUR 187 million (EUR 180 million). The increase in net working capital amounted to EUR 145 million (EUR 72 million). The gearing ratio at 31 March was 57% (67% at 31 March 2006). Equity to assets ratio at 31 March was 48.4% (44.8%). Net interest-bearing liabilities at the end of the period were EUR 4,023 million (EUR 4,768 million). Personnel In the first quarter, UPM had an average of 28,558 employees (31,323 employees). At the beginning of the year the number of employees was 28,704 and at the end of the period 28,578. Capital expenditure During the first three months, gross capital expenditure was EUR 193 million, 7.7% of sales (EUR 177 million, 7.2% of sales). The power plant investment at the Chapelle Darblay mill in France was completed during the first quarter. The biofuel-powered boiler improves biomass utilisation at the mill. The total investment cost was EUR 75 million. At the Jämsänkoski mill, the coated magazine paper machine 4 was shut down for conversion to label papers. The project is scheduled for completion in the second quarter of 2007. The largest ongoing investment, the rebuild of the recovery plant at the Kymi pulp mill, is proceeding according to plan. In Uruguay, UPM's associated company, Oy Metsä-Botnia Ab, is constructing a pulp mill with an annual capacity of 1 million tonnes. The construction is on schedule for a Q3/2007 start-up. Changes in the Group's structure In February 2007, UPM announced the sale of Walki Wisa to funds managed by CapMan. UPM estimates the sale to result in a capital gain of EUR 25 million. The transaction is expected to be completed in the second quarter of 2007. In 2006 Walki Wisa had sales of EUR 287 million and it employed about 950 people. After the balance sheet date in April, UPM signed an agreement on the sale of UPM-Asunnot Oy to Waterhouse Real Estate Investment Oy. A capital gain of around EUR 35 million is estimated on the sale. The transaction is estimated to be concluded in the second quarter of 2007. UPM-Asunnot Oy owns around 2,000 rental apartments and employs 15 people. Shares In the first quarter of 2007, UPM shares worth, in total, EUR 4,267 million were traded on the Helsinki Stock Exchange (EUR 5,168 million). The highest quotation was EUR 20.59 in February and the lowest EUR 18.73 in March. On the New York Stock Exchange, the company's shares were traded to a total value of USD 57 million (90 million). The Annual General Meeting held on 27 March 2007 approved a proposal by the Board of Directors to authorise the Board to buy back not more than 52,000,000 own shares. The authorisation is valid for 18 months. The meeting authorized the board to decide on the disposal of shares so acquired as well as on an issue of shares free of payment to the company itself so that the total number of shares to be issued to the company combined with the number of own shares bought back under the buy-back authorization may not exceed 1/10 of the total number of shares of the company. These authorisations will remain valid for three years from the date of the decision of the Annual General Meeting. Additionally, the meeting authorised the Board of Directors to decide to issue shares and special rights entitling to shares of the company. The number of new shares to be issued, including the shares to be obtained under special rights, will be no more than 250,000,000. Of that amount, the maximum number that can be issued to the company's shareholders based on their pre-emptive rights is 250,000,000 shares and the maximum amount that can be issued deviating from the shareholders' pre-emptive rights in a directed share issue is 100,000,000 shares. The maximum number of new shares to be issued as part of the company's incentive programmes is 5,000,000 shares. This authorisation is valid for no more than three years from the date of the decision. The meeting also decided on granting share options in connection with the company's share-based incentive plans. In the option programmes 2007 A, B and C, the total number of share options is no more than 15,000,000, and they will entitle to subscribe in total for no more than 15,000,000 new shares of the company. In the first quarter of 2007, 2,600 shares were subscribed for through exercising of outstanding share options. The number of shares entered in the Trade Register at 31 March 2007 was 523,262,030. Through the issuance authorisation and share options, the number of shares may increase to a maximum of 812,451,130. At the end of the period, the company did not hold any of its own shares. Apart from the above, the Board of Directors has no current authorisation to issue shares, convertible bonds or share options. Dividend The Annual General Meeting of 27 March 2007 approved the Board's proposal to pay a dividend of EUR 0.75 per share for the 2006 financial year. The total dividend of EUR 392 million was debited from shareholders' equity and credited to short-term non-interest-bearing liabilities at the end of March. The dividend was paid on 10 April 2007. Company directors The Annual General Meeting of 27 March 2007 confirmed that the number of members on the Board of directors is 11. Mr Veli-Matti Reinikkala, Head of Process Automation Division of ABB, and Mr Jussi Pesonen, President and CEO of UPM, were elected to the Board of Directors as new members. In addition, Mr Michael C. Bottenheim, LL.M., MBA; Mr Berndt Brunow, President and CEO of Oy Karl Fazer Ab; Mr Karl Grotenfelt, LL.M., Chairman of the Board of Directors of Famigro Oy; Dr. Georg Holzhey, former Executive Vice President of UPM and Director of G. Haindl'sche Papierfabriken KGaA; Ms Wendy E. Lane, Chairman of American investment firm Lane Holdings, Inc; Mr Jorma Ollila, Chairman of Nokia Corporation and Royal Dutch Shell plc; Ms Ursula Ranin, LL.M., B.Sc. (Econ.), Ms Françoise Sampermans, B.A., Psych., Publishing Consultant and Mr Vesa Vainio, LL.M., were re-elected members of the Board of Directors. The term of office of the members of the Board of Directors lasts until the end of the next Annual General Meeting. At the assembly meeting of the Board of Directors, Mr Vesa Vainio was re-elected as Chairman, and Mr Jorma Ollila and Mr Berndt Brunow were re-elected as Vice Chairmen. In addition, the Board of Directors elected from its members an Audit Committee with Mr Michael C. Bottenheim as Chairman, and Ms Wendy E. Lane and Mr Veli-Matti Reinikkala as members. A Human Resources Committee was elected with Mr Berndt Brunow as Chairman, and Mr Georg Holzhey, Ms Ursula Ranin and Ms Françoise Sampermans as members. Furthermore, a Nominating and Corporate Governance Committee was elected with Mr Jorma Ollila as Chairman, and Mr Karl Grotenfelt and Mr Georg Holzhey as members. Litigation The competition authorities are continuing investigations into alleged antitrust activities with respect to various products of the company. The investigations started in 2003. The U.S. Department of Justice, the EU authorities and the authorities in several EU Member States, Canada and certain other countries have granted UPM conditional full immunities with respect to certain conduct disclosed to the authorities. The investigations of the U.S. labelstock industry and European fine paper, newsprint, magazine paper, label paper and self-adhesive labelstock markets have been closed by the U.S. Department of Justice and the European Commission competition authority. UPM has been named as a defendant in multiple class-action lawsuits against labelstock and magazine paper manufacturers in the United States. The remaining litigation matters may last several years. No provisions have been made in relation to these investigations. Events after the balance sheet date With the exception of the sale of UPM-Asunnot Oy, the Group's management is not aware of any other significant events occuring after 31 March 2007 which would have had an impact on the financial statements. Outlook for the second quarter In Europe, demand for printing papers is forecast to grow from the corresponding quarter of last year, while in North America demand is expected to decrease. Strong growth in demand is expected to continue in the emerging markets. UPM estimates its paper deliveries to increase from last year and average price for all paper deliveries to be about the same as in the first quarter of 2007. Demand for self-adhesive label materials is forecast to continue to grow in all markets, and prices are expected to remain stable. In wood products, strong demand for plywood and sawn timber will continue during the second quarter. Increase in wood cost and possible lack of sufficient supply of wood raw material may result in less optimal use of capacity. The company's overall cost inflation is estimated to remain at the level of 1-2%, including expected cost savings from the ongoing profitability programme. Divisional reviews Magazine Papers Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales, EUR million 793 905 861 817 771 3,354 EBITDA, EUR million 1) 113 157 155 145 113 570 % of sales 14.2 17.3 18.0 17.7 14.7 17.0 Depreciation, -86 -88 -209 -210 -97 -604 amortization and impairment charges, EUR million Operating profit, 27 75 -62 -85 16 -56 EUR million % of sales 3.4 8.3 -7.2 -10.4 2.1 -1.7 Special items, EUR - 6 -126 -133 - -253 million 2) Operating profit 27 69 64 48 16 197 excl. special items, EUR million % of sales 3.4 7.6 7.4 5.9 2.1 5.9 Deliveries, 1,000 t 1,155 1,288 1,227 1,148 1,098 4,761 1) EBITDA is operating profit before depreciation, amortization and impairment charges and excluding special items. 2) Special items in the second quarter 2006 include personnel charges of EUR 20 million related to the profitability programme, and impairment charges of EUR 113 million related to the closure of the Voikkaa paper mill. In the third quarter, special items include personnel charges of EUR 8 million and impairment charges of EUR 3 million at Voikkaa, and impairment charges of EUR 115 million for Miramichi. In the fourth quarter, special items relate primarily to the capital gain on the sale of Rauma power plant. Q1 of 2007 compared with Q1 of 2006 Operating profit, excluding special items, for Magazine Papers was EUR 27 million (EUR 16 million). Sales increased from EUR 771 million to EUR 793 million. Paper deliveries had a volume of 1,155,000 (1,098,000) tonnes. Fixed costs were lower, internal efficiency improved and delivery volumes increased but profitability of the division remained unchanged due to a decline in paper prices. Average price for all magazine paper deliveries translated into euros was over 4% lower than a year ago. In Europe, the price for magazine paper decreased by about 2%. Market review During the first three months of the year, magazine paper demand in Europe continued to be good, driven by a strong increase in demand in Eastern Europe. Coated magazine paper demand increased by about 3% and that for uncoated magazine paper by about 5% compared with the same period in 2006. Export of magazine paper from Europe decreased compared with the previous year. In North America, demand for coated magazine paper decreased slightly, while the figure for uncoated magazine paper increased by about 5%. Average market price for magazine papers in Europe was down from last year. In North America, prices decreased by about 9%. Newsprint Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales, EUR million 348 380 360 351 345 1,436 EBITDA, EUR million 1) 92 89 98 86 72 345 % of sales 26.4 23.4 27.2 24.5 20.9 24.0 Depreciation, -48 -48 -48 -47 -47 -190 amortization and impairment charges, EUR million Operating profit, 44 39 50 34 25 148 EUR million % of sales 12.6 10.3 13.9 9.7 7.2 10.3 Special items, EUR - -2 - -5 - -7 million 2) Operating profit 44 41 50 39 25 155 excl. special items, EUR million % of sales 12.6 10.8 13.9 11.1 7.2 10.8 Deliveries, 1,000 t 630 697 666 660 654 2,677 1) EBITDA is operating profit before depreciation, amortization and impairment charges and excluding special items. 2) The special items booked for 2006 relate mainly to the profitability programme. Q1 of 2007 compared with Q1 of 2006 Operating profit, excluding special items, for Newsprint increased from EUR 25 million to EUR 44 million. Sales were EUR 348 million (EUR 345 million). Paper deliveries were 630,000 tonnes (654,000 tonnes). The main contributor to the improved profitability was the higher price of newsprint. The start-up of the new biofuel power plants at the Shotton and Chapelle Darblay mills lowered energy costs. On the other hand, the price of recycled paper was higher than a year ago. Average price for all newsprint deliveries translated into euros was almost 5% up from the corresponding period in 2006. Market review In Europe, demand for standard and improved newsprint was almost the same as in the first quarter of last year. Net exports from Western Europe decreased. In Europe, average market price for standard newsprint was about 4% up. In the other markets, with the exception of North America, demand increased but prices were lower than in the same period last year. Fine and Speciality Papers Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales, EUR million 699 667 626 627 640 2,560 EBITDA, EUR million 1) 85 104 106 76 82 368 % of sales 12.2 15.6 16.9 12.1 12.8 14.4 Depreciation, -53 -56 -55 -71 -55 -237 amortization and impairment charges, EUR million Operating profit, 32 44 50 -13 27 108 EUR million % of sales 4.6 6.6 8.0 -2.1 4.2 4.2 Special items, EUR - -3 -2 -36 - -41 million 2) Operating profit 32 47 52 23 27 149 excl. special items, EUR million % of sales 4.6 7.0 8.3 3.7 4.2 5.8 Deliveries, 1,000 t 968 907 878 884 881 3,550 1) EBITDA is operating profit before depreciation, amortization and impairment charges and excluding special items. 2) In 2006, special items include personnel and impairment charges related to the profitability programme. Q1 of 2007 compared with Q1 of 2006 Operating profit, excluding special items, for Fine and Speciality Papers was EUR 32 million (EUR 27 million). Sales increased from EUR 640 million to EUR 699 million. Paper deliveries were 968,000 (881,000) tonnes. Increased operating efficiency and higher uncoated fine paper prices had a positive effect on the profitability of the division. However, prices for certain raw materials, especially for chemical pulp, rose compared with the first quarter of 2006. Average price for all fine and speciality paper deliveries translated into euros remained about the same. Market review In Europe, demand for coated fine paper increased by about 2% compared with the same period last year. Demand for uncoated fine paper increased slightly. Good demand for label and packaging papers continued. In Europe, average market price for coated fine paper was about the same as in the first quarter of 2006. Average market price for uncoated fine paper increased by about 4%. In Asia, demand and prices for fine paper increased from last year. Label Materials Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales, EUR million 261 251 240 245 251 987 EBITDA, EUR million 1) 26 25 20 24 24 93 % of sales 10.0 10.0 8.3 9.8 9.6 9.4 Depreciation, -8 -8 -9 -8 -7 -32 amortization and impairment charges, EUR million Operating profit, 18 17 11 16 17 61 EUR million % of sales 6.9 6.8 4.6 6.5 6.8 6.2 Special items, EUR - - - - - - million Operating profit 18 17 11 16 17 61 excl. special items, EUR million % of sales 6.9 6.8 4.6 6.5 6.8 6.2 1) EBITDA is operating profit before depreciation, amortization and impairment charges and excluding special items. Q1 of 2007 compared with Q1 of 2006 Operating profit, excluding special items, for the Label Division was EUR 18 million (EUR 17 million). Sales increased by 4% from EUR 251 million to EUR 261 million. The profitability of the division continued to be good. Delivery volumes grew in the European and North American markets. In Asia, volumes increased after the start-up of the new factory in China at the end of 2006. The average price of label materials in local currencies remained stable. There were no marked changes in raw material prices. Market review During the first months of the year in Europe and North America, good demand for label materials continued. At the beginning of the year the growth rate of demand was somewhat lower compared with last year, but the markets picked-up towards the end of the quarter. A strong increase in demand continued in Asia. Wood Products Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales, EUR million 314 287 310 378 346 1,321 EBITDA, EUR million 1) 42 24 22 33 25 104 % of sales 13.4 8.4 7.1 8.7 7.2 7.9 Depreciation, -10 -10 -11 -11 -11 -43 amortization and impairment charges, EUR million Operating profit, 32 14 104 22 4 144 EUR million % of sales 10.2 4.9 33.5 5.8 1.2 10.9 Special items, EUR - - 93 - -10 83 million 2) Operating profit 32 14 11 22 14 61 excl. special items, EUR million % of sales 10.2 4.9 3.5 5.8 4.0 4.6 Deliveries, plywood 255 243 205 232 251 931 1,000 m3 Deliveries, sawn 587 598 517 622 580 2,317 timber 1,000 m3 1) EBITDA is operating profit before depreciation, amortization and impairment charges and excluding special items. 2) Special items in the first quarter 2006 include a loss of EUR 10 million from the sale of the Loulay plywood mill, and in the third quarter, a capital gain of EUR 93 million on the sale of Puukeskus. Q1 of 2007 compared with Q1 of 2006 Operating profit, excluding special items, for Wood Products increased from EUR 14 million to EUR 32 million. Sales came to EUR 314 million (EUR 346 million). Excluding Puukeskus Oy, which was sold in August 2006, sales increased from the first quarter of 2006. Plywood deliveries were 255,000 (251,000) cubic metres and sawn timber deliveries 587,000 (580,000) cubic metres. The profitability of the division improved despite increased raw material costs and weakened availability of logs. The profitability of plywood continued to be good, and sawmilling clearly improved its profitability from last year. Market review During the first quarter, birch and spruce plywood demand continued strong in all markets. Plywood prices were slightly higher than a year ago. The markets for veneers and further processed goods were solid. Redwood and whitewood sawn timber demand continued to strengthen and prices increased. The supply of logs tightened due to higher demand that caused an increase in the cost of wood raw material. Other Operations EUR million Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales 1) 234 224 206 189 204 823 EBITDA 2) 60 69 27 33 70 199 Depreciation, -10 -9 -9 -9 -5 -32 amortization and impairment charges Operating profit Forestry 3) 28 23 20 -82 20 -19 Energy Department, 28 36 - 18 40 94 Finland Other and -9 -10 -18 28 -5 -5 eliminations Operating profit, 47 49 2 -36 55 70 total Special items, EUR - -6 -1 41 -5 29 million 4) Operating profit 47 55 3 -77 60 41 excl. special items, MEUR 1) Includes sales outside the Group. 2) EBITDA is operating profit before depreciation, amortization and impairment charges and excluding the change in value of biological assets and special items. 3) The second quarter of 2006 includes a decrease of EUR 102 million in the fair value of biological assets and wood harvested. 4) Special items in 2006 include in the first quarter the donation of EUR 5 million to a UPM-Kymmene Cultural Foundation, and in the second quarter the capital gain of EUR 41 million for the sale of the Group head office real estate. Q1 of 2007 compared with Q1 of 2006 Excluding special items, operating profit for Other Operations was EUR 47 million (EUR 60 million). Sales were EUR 234 million (EUR 204 million). The operating profit of Forestry was EUR 28 million (EUR 20 million). The increase in the fair value of biological assets (growing trees) was EUR 23 million (EUR 16 million). The cost of wood raw material harvested from the Group's forests was EUR 26 million (EUR 21 million). Fellings from the Group's own forests increased as planned to compensate shortage in wood supply. The operating profit of the Energy Department in Finland was EUR 28 million (EUR 40 million). Hydropower availability was good as the water reservoirs in the Nordic countries returned to their normal levels for the season. The price of electricity at Nord Pool was significantly lower than in the corresponding period a year ago. Associated companies and joint ventures EUR million Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/ 2007 2006 2006 2006 2006 2006 Share of result after tax Oy Metsä-Botnia Ab 21 18 24 13 14 69 Pohjolan Voima Oy - -9 -7 -5 7 -14 Other - - 1 - 5 6 Total 21 9 18 8 26 61 Deliveries Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2007 2006 2006 2006 2006 2006 Paper deliveries Magazine papers, 1,155 1,288 1,227 1,148 1,098 4,761 1,000 t Newsprint, 1,000 t 630 697 666 660 654 2,677 Fine and speciality 968 907 878 884 881 3,550 papers, 1,000 t Paper deliveries 2,753 2,892 2,771 2,692 2,633 10,988 total Wood products deliveries Plywood 1,000 m3 255 243 205 232 251 931 Sawn timber 1,000 m3 587 598 517 622 580 2,317 Helsinki, 24 April 2007 UPM-Kymmene Corporation Board of Directors This Interim Report is unaudited Financial information Consolidated income statement EUR million Q1/ Q1/ Q1-Q4/ 2007 2006 2006 Sales 2,519 2,460 10,022 Other operating 18 41 231 income Costs and expenses -2,119 -2,130 -8,514 Change in fair -3 -4 -126 value of biological assets and wood harvested Share of results of 21 26 61 associated companies and joint ventures Depreciation, -215 -223 -1,138 amortization and impairment charges Operating profit 221 170 536 Gains/losses on 2 - -2 available-for-sale investments, net Exchange rate and 3 12 18 fair value gains and losses Interest and other -49 -46 -185 finance costs Profit before tax 177 136 367 Income taxes -46 -37 -29 Profit for the 131 99 338 period Attributable to: Equity holders of 131 99 340 the parent company Minority interest - - -2 131 99 338 Basic earnings per 0.25 0.19 0.65 share, EUR Diluted earnings 0.25 0.19 0.65 per share, EUR Condensed consolidated balance sheet EUR million 31.03. 31.03. 31.12. 2007 2006 2006 ASSETS Non-current assets Goodwill 1,514 1,514 1,514 Other intangible 435 576 461 assets Property, plant and 6,435 7,224 6,500 equipment Biological assets 1,027 1,168 1,037 Investments in 1,175 1,044 1,177 associated companies and joint ventures Deferred tax assets 360 345 362 Other non-current assets 281 375 304 11,227 12,246 11,355 Current assets Inventories 1,273 1,312 1,255 Trade and other 1,699 1,741 1,660 receivables Cash and cash 200 531 199 equivalents 3,172 3,584 3,114 Assets held for sale 157 7 - Total assets 14,556 15,837 14,469 EQUITY AND LIABILITIES Equity attributable to the equity holders of the parent company Share capital 890 890 890 Share premium reserve 826 826 826 Fair value and 178 212 189 other reserves Retained earnings 5,106 5,123 5,366 7,000 7,051 7,271 Minority interest 18 21 18 Total equity 7,018 7,072 7,289 Non-current liabilities Deferred tax 781 900 790 liabilities Non-current 3,238 4,380 3,353 interest-bearing liabilities Other non-current 600 641 627 liabilities 4,619 5,921 4,770 Current liabilities Current 1,068 1,063 992 interest-bearing liabilities Trade and other 1,809 1,769 1,418 payables 2,877 2,832 2,410 Liabilities related 42 12 - to assets held for sale Total liabilities 7,538 8,765 7,180 Total equity and 14,556 15,837 14,469 liabilities Consolidated statement of changes in equity Attributable to equity holders of the parent EUR million Share Treasury Transla- Share Fair Retained capital shares tion premium value earnings diffe- reserve and rences other reserves Balance at 890 -3 -34 826 233 5,415 1 January 2006 Transactions with equity holders Reissuance of - 3 - - - 1 treasury shares Share-based - - - - 2 - compensation Dividend paid - - - - - -392 Income and expenses recognised directly in equity Translation differences - - -22 - - - Net investment - - 7 - - - hedge, net of tax Cash flow hedges recorded in equity, - - - - 17 - net of tax transferred to - - - - 9 - income statement, net of tax Available-for-sale investments transferred to - - - - - - income statement, net of tax Profit for the period - - - - - 99 Balance at 31 March 890 - -49 826 261 5,123 2006 Balance at 890 - -89 826 278 5,366 1 January 2007 Transactions with equity holders Share-based - - - - 1 - compensation Dividend paid - - - - - -392 Income and expenses recognised directly in equity Translation differences - - -11 - - - Other Items - - - - - 1 Cash flow hedges recorded in equity, - - - - 9 - net of tax transferred to - - - - -8 - income statement, net of tax Available-for-sale investments transferred to - - - - -2 - income statement, net of tax Profit for the period - - - - - 131 Balance at 31 March 890 - -100 826 278 5,106 2007 EUR million Total Minority Equity interest total Balance at 1 7,327 21 7,348 January 2006 Transactions with equity holders Reissuance of 4 - 4 treasury shares Share-based 2 - 2 compensation Dividend paid -392 - -392 Income and expenses recognised directly in equity Translation differences -22 - -22 Net investment 7 - 7 hedge, net of tax Cash flow hedges recorded in equity, 17 - 17 net of tax transferred to 9 - 9 income statement, net of tax Available-for-sale investments transferred to - - - income statement, net of tax Profit for the period 99 - 99 Balance at 31 March 7,051 21 7,072 2006 Balance at 7,271 18 7,289 1 January 2007 Transactions with equity holders Share-based 1 - 1 compensation Dividend paid -392 - -392 Income and expenses recognised directly in equity Translation differences -11 - -11 Other Items 1 - 1 Cash flow hedges recorded in equity, 9 - 9 net of tax transferred to -8 - -8 income statement, net of tax Available-for-sale investments transferred to -2 - -2 income statement, net of tax Profit for the period 131 - 131 Balance at 31 March 7,000 18 7,018 2007 Condensed consolidated cash flow statement EUR million Q1/ Q1/ Q1-Q4/ 2007 2006 2006 Cash flow from operating activities Profit for the period 131 99 338 Adjustments, total 273 220 1,195 Change in working -145 -72 21 capital Cash generated from 259 247 1,554 operations Finance costs, net -24 -33 -180 Income taxes paid -48 -34 -159 Net cash from 187 180 1,215 operating activities Cash flow from investing activities Acquisitions and -2 -33 -68 share purchases Purchases of -201 -151 -635 intangible and tangible assets Asset sales and 21 69 389 other investing cash flow Net cash used in -182 -115 -314 investing activities Cash flow from financing activities Change in loans and -3 215 -559 other financial items Dividends paid - - -392 Net cash used in -3 215 -951 financing activities Change in cash and 2 280 -50 cash equivalents Cash and cash 199 251 251 equivalents at beginning of period Foreign exchange - - -2 effect on cash Change in cash and 2 280 -50 cash equivalents Cash and cash 201 531 199 equivalents at end of period Operating cash flow 0.36 0.34 2.32 per share, EUR Quarterly information EUR million Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/ 2007 2006 2006 2006 2006 2006 Sales by segment Magazine Papers 793 905 861 817 771 3,354 Newsprint 348 380 360 351 345 1,436 Fine and Speciality 699 667 626 627 640 2,560 Papers Label Materials 261 251 240 245 251 987 Wood Products 314 287 310 378 346 1,321 Other Operations 234 224 206 189 204 823 Internal sales -130 -131 -108 -123 -97 -459 Sales, total 2,519 2,583 2,495 2,484 2,460 10,022 Operating profit by segment Magazine Papers 27 75 -62 -85 16 -56 Newsprint 44 39 50 34 25 148 Fine and Speciality 32 44 50 -13 27 108 Papers Label Materials 18 17 11 16 17 61 Wood Products 32 14 104 22 4 144 Other Operations 47 49 2 -36 55 70 Share of results of 21 9 18 8 26 61 associated companies and joint ventures Operating profit 221 247 173 -54 170 536 (loss), total % of sales 8.8 9.6 6.9 -2.2 6.9 5.3 Gains on 2 -2 - - - -2 available-for-sale investments, net Exchange rate and 3 4 -3 5 12 18 fair value gains and losses Interest and other -49 -46 -41 -52 -46 -185 finance costs, net Profit (loss) 177 203 129 -101 136 367 before tax Income taxes -46 -8 18 -2 -37 -29 Profit (loss) for 131 195 147 -103 99 338 the period Basic earnings per 0.25 0.37 0.29 -0.20 0.19 0.65 share, EUR Diluted earnings 0.25 0.38 0.28 -0.20 0.19 0.65 per share, EUR Average number of 523,261 523,258 523,256 523,256 523,108 523,220 shares basic (1,000) Average number of 527,086 526,416 525,938 525,874 525,936 526,041 shares diluted (1,000) Special items in operating profit. Special items in operating profit are specified in the divisional reviews on pages 5-8. Magazine Papers - 6 -126 -133 - -253 Newsprint - -2 - -5 - -7 Fine and Speciality - -3 -2 -36 - -41 papers Label Materials - - - - - - Wood Products - - 93 - -10 83 Other Operations - -6 -1 41 -5 29 Share of results of - - - - - - associated companies and joint ventures Special items in - -5 -36 -133 -15 -189 operating profit, total Special items after - 6 - - - 6 operating profit Special items - 35 20 -29 - 26 reported in taxes Special items, total - 36 -16 -162 -15 -157 Operating profit, 221 252 209 79 185 725 excluding special items % of sales 8.8 9.8 8.4 3.2 7.5 7.2 Profit before tax, 177 202 165 32 151 550 excluding special items % of sales 7.0 7.8 6.6 1.3 6.1 5.5 Earnings per share, 0.25 0.30 0.25 0.04 0.21 0.80 excluding special items, EUR Return on equity 7.3 8.7 7.2 1.1 6.1 5.7 excl. special. items, % Return of capital 7.9 8.7 7.1 2.7 6.4 6.2 empl. excl. special items, % Changes in property, plant and equipment EUR million Q1/ Q1/ Q1-Q4/ 2007 2006 2006 Book value at 6,500 7,316 7,316 beginning of period Acquired companies - - - Capital 181 144 604 expenditure Decreases -12 -19 -325 Depreciation and -195 -206 -1,039 impairment charges Translation -39 -11 -56 difference and other changes Book value at end 6,435 7,224 6,500 of period Commitments and contingencies EUR million 31.03. 31.03. 31.12. 2007 2006 2006 Own commitments Mortgages 94 94 92 On behalf of associated companies and joint ventures Guarantees for loans 11 19 12 On behalf of others Guarantees for loans 1 2 1 Other guarantees 5 6 5 Other own commitments Leasing commitments 26 23 23 for the next 12 months Leasing commitments 94 72 94 for subsequent periods Other commitments 80 69 69 Capital commitments EUR million Completion Total By 31.12. Q1/ After cost 2006 2007 31.3. 2007 Pulp mill rebuild, June 2008 325 25 77 223 Kymi New USA mill, March 2008 88 8 9 71 UPM Raflatac, Dixon New Bioboiler, September 2009 72 - - 72 Caledonian PM5 quality June 2008 38 - - 38 upgrade, Jämsänkoski PM4, rebuild, May 2007 45 11 13 21 Jämsänkoski Notional amounts of derivative financial instruments EUR million 31.03. 31.03. 31.12. 2007 2006 2006 Currency derivatives Forward contracts 3,968 4,440 4,293 Options, bought 3 10 20 Options, written 3 10 10 Swaps 565 577 570 Interest rate derivatives Forward contracts 2,851 3,193 2,500 Swaps 2,542 2,743 2,566 Other derivatives Forward contracts 12 20 13 Swaps 12 31 16 Related party (associated companies and joint ventures) transactions and balances EUR million Q1/ Q1/Q1-Q4/ 2007 2006 2006 Sales to associated 15 14 61 companies Purchases from 103 86 448 associated companies Non-current - 4 - receivables at end of period Trade and other 14 11 20 receivables at end of period Trade and other 28 32 23 payables at end of period Key exchange rates for the euro at end of period 31.3. 31.12. 30.9. 30.6. 31.3. 2007 2006 2006 2006 2006 USD 1.3318 1.3170 1.2660 1.2713 1.2104 CAD 1.5366 1.5281 1.4136 1.4132 1.4084 JPY 157.32 156.93 149.34 145.75 142.42 GBP 0.6798 0.6715 0.6777 0.6921 0.6964 SEK 9.3462 9.0404 9.2797 9.2385 9.4315 Basis of preparation This unaudited financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the Group's Annual Report for 2006. Income tax expense is recognised based on the best estimate of the weighted average annual income tax rate expected for the full financial year. The Group has adopted the following standard: IFRS 7 Financial Instruments: Disclosures, and a complementary amendment to IAS 1 Presentation of Financial Statements - Capital Disclosures, effective for annual periods beginning on or after 1 January 2007. IFRS 7 introduces new disclosures to improve the information about financial instruments. The amendment to IAS 1 introduces disclosures about how an entity manages its capital. Adoption of IFRS 7 and the amendment to IAS 1 will expand disclosures presented in the annual financial statements. Calculation of key indicators Return on equity, %: (Profit before tax - income taxes) / Shareholders' equity (average) x 100 Return on capital employed, %: (Profit before tax + interest expenses and other financial expenses) / (Balance sheet total - non-interest-bearing liabilities (average)) x 100 Earnings per share: Profit for the period attributable to equity holders of parent company / Adjusted average number of shares during the period excluding own shares It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. For more detailed information about risk factors, see pages 15-17 of the company's annual report 2006. UPM-Kymmene Corporation Pirkko Harrela Executive Vice President, Corporate Communications DISTRIBUTION Helsinki Exchanges New York Stock Exchange Main media www.upm-kymmene.com |
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