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2010-08-03 08:55:00 CEST 2010-08-03 08:55:04 CEST REGULATED INFORMATION UPM-Kymmene - Interim report (Q1 and Q3)UPM Interim Report 1 January-30 June 2010UPM-Kymmene Corporation Interim Report 3 August 2010 at 09:55 UPM Interim Report 1 January-30 June 2010 Q2/2010: Earnings per share were EUR 0.33 (-0.02), excluding special items EUR 0.29 (0.03). EBITDA was EUR 353 million, 15.9% of sales (238 million, 12.9% of sales). Delivery volumes increased in all businesses - sales grew by 20%. Sales prices started to increase during the quarter following increasing demand. Q1-Q2/2010: Earnings per share were EUR 0.46 (-0.32), excluding special items EUR 0.44 (-0.24). EBITDA was EUR 641 million, 15.1% of sales (366 million, 9.9% of sales). Operating cash flow was EUR 311 million (580 million). Sales increased as economic activity improved. Key figures Q2/ Q2/ Q1-Q2/ Q1-Q2/ Q1-Q4/ 2010 2009 2010 2009 2009 Sales, EURm 2,216 1,841 4,255 3,698 7,719 EBITDA, EURm 1) 353 238 641 366 1,062 % of sales 15.9 12.9 15.1 9.9 13.8 Operating profit (loss), EURm 203 8 310 -87 135excluding special items, EURm 199 31 315 -47 270 % of sales 9.0 1.7 7.4 -1.3 3.5 Profit (loss) before tax, EURm 181 -26 263 -188 187 excluding special items, EURm 177 -3 268 -148 107 Net profit (loss) for the 169 -8 239 -166 169 period, EURm Earnings per share, EUR 0.33 -0.02 0.46 -0.32 0.33 excluding special items, EUR 0.29 0.03 0.44 -0.24 0.11 Diluted earnings per share, EUR 0.33 -0.02 0.46 -0.32 0.33 Return on equity, % 10.0 neg. 7.1 neg. 2.8 excluding special items, % 8.9 0.8 6.7 neg. 1.0 Return on capital employed, % 7.4 0.4 5.6 neg. 3.2 excluding special items, % 7.3 1.3 5.7 neg. 2.5 Operating cash flow per 0.20 0.59 0.60 1.12 2.42 share, EUR Shareholders' equity per 13.33 11.08 13.33 11.08 12.67 share at end of period, EUR Gearing ratio at end of 55 70 55 70 56 period, % Net interest-bearing 3,837 4,036 3,837 4,036 3,730 liabilities at end of period, EURm Capital employed at end of 11,551 10,294 11,551 10,294 11,066 period, EURm Capital expenditure, EURm 55 66 85 133 913 Capital expenditure excluding 52 66 82 133 229 acquisitions and shares, EURm Personnel at end of period 23,458 23,792 23,458 23,792 23,213 1) EBITDA is operating profit before depreciation, amortisation 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. Results Q2 of 2010 compared with Q2 of 2009 Sales for the second quarter of 2010 were EUR 2,216 million, 20% higher than the EUR 1,841 million in the second quarter of 2009. Sales increased due to higher deliveries across all of UPM's business areas. EBITDA was EUR 353 million, 15.9% of sales (238 million, 12.9% of sales). EBITDA improved noticeably from the same period last year. Higher delivery volumes in all of UPM's businesses and the inclusion of the acquired Uruguayan operations were the main contributors to the improvement. Variable costs were higher than last year, even though energy and wood costs decreased slightly from last year. Fixed costs (comparable) were EUR 36 million higher than last year. Changes in sales prices in euro terms reduced EBITDA by about EUR 30 million. The average paper price in euros decreased by approximately 3% from the same period last year. Plywood sales prices were slightly lower than last year. Average sales prices increased for sawn timber and label materials, as well as for electricity and pulp. In most business areas sales prices increased from the first quarter of 2010. Operating profit was EUR 203 million, 9.2% of sales (8 million, 0.4% of sales). The operating profit excluding special items was EUR 199 million, 9.0% of sales (31 million, 1.7% of sales). The increase in the fair value of biological assets net of wood harvested was EUR 31 million compared with EUR 10 million a year before. The share of results of associated companies and joint ventures was EUR 8 million (22 million negative). As of December 2009, Metsä-Botnia is no longer an associated company of UPM. Profit before tax was EUR 181 million (loss of EUR 26 million) and excluding special items EUR 177 million (loss of EUR 3 million). Interest and other finance costs net were EUR 27 million (37 million). Exchange rate and fair value gains and losses resulted in a gain of EUR 4 million (3 million). Income taxes were EUR 12 million (18 million positive). The impact on taxes from special items was EUR 14 million positive (3 million positive), including an income of EUR 15 million from estimated utilisation of tax credits in Poland. Profit for the second quarter was EUR 169 million (loss of EUR 8 million) and earnings per share were EUR 0.33 (-0.02). Earnings per share excluding special items were EUR 0.29 (0.03). January-June of 2010 compared with January-June 2009 Sales for January-June were EUR 4,255 million, 15% higher than the EUR 3,698 million in the same period in 2009. Sales increased due to higher deliveries across all of UPM's business areas. EBITDA was EUR 641 million, 15.1% of sales (366 million, 9.9% of sales). EBITDA improved clearly from the same period last year. Higher delivery volumes in all of UPM's businesses and the inclusion of the Uruguayan operations, acquired in December 2009, were the main contributors to the improvement. Variable costs were higher than last year, even though wood and energy costs were lower. Wood costs increased from the latter part of 2009, but were still approximately EUR 70 million lower than the peak levels of the comparison period. Energy costs decreased by about EUR 45 million. Fixed costs (comparable) increased by about EUR 37 million from last year, mainly due to higher operating rates at UPM's production units, which reduced the need for temporary shutdowns. Changes in sales prices in euro terms reduced EBITDA by about EUR 130 million. The average paper price in euros decreased by approximately 7% from the same period last year. Plywood sales prices were lower than last year. Average sales prices increased for sawn timber and label materials, as well as for external electricity and pulp sales. Operating profit was EUR 310 million, 7.3% of sales (loss of EUR 87 million, -2.4% of sales). The operating profit excluding special items was EUR 315 million, 7.4% of sales (loss of EUR 47 million, 1.3% of sales). Operating profit includes net restructuring charges of EUR 5 million (40 million) as special items. The increase in the fair value of biological assets net of wood harvested was EUR 50 million compared with EUR 21 million a year before. The share of results of associated companies and joint ventures was EUR 11 million (75 million negative). As of December 2009, Metsä-Botnia is no longer an associated company of UPM. Profit before tax was EUR 263 million (loss of EUR 188 million) and excluding special items EUR 268 million (loss of EUR 148 million). Interest and other finance costs net were EUR 53 million (95 million). Exchange rate and fair value gains and losses resulted in a gain of EUR 5 million (loss of EUR 6 million). Income taxes were EUR 24 million (22 million positive). The impact on taxes from special items was EUR 17 million positive (0 million), including an income of EUR 15 million from estimated utilisation of tax credits in Poland. Profit for the period was EUR 239 million (loss of EUR 166 million) and earnings per share were EUR 0.46 (-0.32). Earnings per share excluding special items were EUR 0.44 (-0.24). Operating cash flow per share was EUR 0.60 (1.12). Financing In January-June cash flow from operating activities, before capital expenditure and financing, was EUR 311 million (580 million). Net working capital increased by EUR 242 million during the period (decreased by EUR 355 million), driven by the increase in business activity. The gearing ratio as of 30 June 2010 was 55% (70% on 30 June 2009). Net interest-bearing liabilities at the end of the period came to EUR 3,837 million (4,036 million) On 30 June 2010, UPM's cash funds and unused committed credit facilities totalled EUR 2.1 billion. Personnel In January-June, UPM had an average of 23,035 employees (24,043). At the beginning of the year, the number of employees was 23,213 and at the end of June it was 23,458. The number of employees decreased by around 800 from the beginning of the year, taking into account the around 1,000 seasonal workers in June. Capital expenditure During January-June, capital expenditure was EUR 85 million, 2.0% of sales (EUR 133 million, 3.6% of sales). The largest ongoing project is the rebuild of the debarking plant at the Pietarsaari mill in Finland. The total investment cost is estimated to be EUR 25 million. Shares UPM shares worth EUR 4,499 million (3,086 million) in total were traded on the NASDAQ OMX Helsinki stock exchange during January-June of 2010. The highest quotation was EUR 12.00 in June and the lowest EUR 7.37 in February. The company's ADRs are traded on the US over-the-counter (OTC) market under a Level 1 sponsored American Depositary Receipt programme. The Annual General Meeting, held on 22 March 2010, authorised the Board of Directors to acquire no more than 51,000,000 of the company's own shares. The authorisation is valid for 18 months from the date of the decision. The Board was authorised to decide on the issuance of shares and/or transfer the Company's own shares held by the Company and/or issue special rights entitling holders to shares in the Company as follows: (i) The maximum number of new shares that may be issued and the Company's own shares held by the Company that may be transferred is, in total, 25,000,000 shares. This figure also includes the number of shares that can be received on the basis of the special rights. (ii) The new shares and special rights entitling holders to shares in the Company may be issued and the Company's own shares held by the Company may be transferred to the Company's shareholders in proportion to their existing shareholdings in the Company, or in a directed share issue, deviating from the shareholder's pre-emptive subscription right. This authorisation is valid until 22 March 2013. To date these authorisations have not been used. The company has four option series that would entitle the holders to subscribe for a total of 18,000,000 shares. Share options 2005H may be subscribed for 3,000,000 shares, and share options 2007A, 2007B and 2007C may be subscribed for a total of 15,000,000 shares. The 2007C options have not been distributed yet. Apart from the above, the Board of Directors has no current authorisation to issue shares, convertible bonds or share options. The number of shares entered in the Trade Register on 30 June 2010 was 519,970,088. Through the issuance authorisation and share options, the number of shares may increase to a maximum of 562,970,088. At the end of the period, the company did not hold any of its own shares. On 23 June 2010, BlackRock Inc. announced its ownership in UPM had declined below 5% of the company's shares and voting rights. Litigation and other legal actions In Finland, UPM is participating in the building project of a new nuclear power plant, Olkiluoto 3, through its associated company Pohjolan Voima Oy. Pohjolan Voima Oy is a majority shareholder of Teollisuuden Voima Oy ("TVO") with 58.28% of shares. UPM's indirect share of the capacity of the Olkiluoto 3 is approximately 29%. The original agreed timetable for the start-up of the power plant was summer 2009 but the construction of the unit has been delayed. In June 2010 the AREVA-Siemens Consortium announced that the majority of the work is expected to be completed in 2012 and electricity production at Olkiluoto 3 is scheduled to start in 2013. TVO has informed that the arbitration filed in December 2008 by AREVA-Siemens, concerning the delay at Olkiluoto 3 and related costs, amounted to EUR 1.0 billion. In response, TVO filed a counterclaim in April 2009 for costs and losses that TVO is incurring due to the delay and other defaults on the part of the supplier. The value of TVO's counterclaim was approximately EUR 1.4 billion. The International Court of Justice published its final decision on a litigation against the government of Uruguay on 20 April 2010 in a dispute between the governments of Uruguay and Argentina. In Uruguay there are still two litigations against the government of Uruguay and in Argentina one such litigation against the company operating the pulp mill. Events after the balance sheet date At the beginning of July, the Finnish Parliament voted on decisions-in-principle to build two new nuclear power plants in Finland. The voting was favourable for the fourth reactor of Teollisuuden Voima Oy ("OL4"). Through its associate company Pohjolan Voima Oy, UPM has an indirect share of the OL4 project about 30 %. On 8 July 2010 UPM sold a conservation easement on 76,000 hectares of UPM-owned forest land in Northern Minnesota to the State of Minnesota Department of Natural Resources. UPM received USD 44 million for the easement and will record a pre-tax capital gain of USD 42 million in the Company's third quarter result. Under the conservation easement, UPM retains ownership of the land and will continue to use it as a working forest. Risk factors Expected decisions on the proposed EU Energy Package have increased uncertainties on how the proposed policies and measures will impact the availability and cost of wood fibre for wood processing industries in Europe. At the same time, global competition for fibres has already created disruptions in fibre availability resulting in volatile price developments. Outlook for the second half of 2010 Comparisons against the first half of the year Economic recovery in Europe and Asia is expected to continue, while the US shows signs of a slower pace of recovery. Demand for consumer goods continues positive development particularly in emerging markets. In Europe, recovery of advertising expenditure in print media is expected to improve demand for graphic papers. Improved investment activity, including construction, is expected to have a slightly positive impact on demand for construction materials such as timber and plywood. The electricity generation volume is estimated to be higher than during the first half of the year. Based on current forward sale agreements and Nordpool forward prices, the average sales price for electricity is estimated to be somewhat lower. Chemical pulp price on average is expected to be higher while a moderate correction in market prices for both hardwood and softwood pulp is expected towards the end of the year. Deliveries are expected to be slightly higher. The cost of procured wood will be clearly higher; both log and fibre wood prices have risen from the beginning of the year. Sawn timber deliveries are estimated to be higher but no material improvement in prices is expected. Paper prices for the agreed deliveries during the second half are higher; UPM has increased prices practically in all new contracts. Based on the current good order book, paper deliveries are expected to be higher. Demand growth for self-adhesive labelstock in the main markets is expected to continue, albeit at a more moderate pace. Prices are expected to be higher but intense cost pressure will challenge current sales margins. Plywood deliveries are expected to be slightly higher. Limited improvement in the business environment and prices is foreseen. For the Group average sales prices in euro are expected to be higher. Volume development is positive across all businesses. A material increase in variable costs is expected; in addition to the cost of fibre, costs of various other raw materials are expected to increase. Operating profit excluding special items is estimated to be higher than in the first half of the year. Business area reviews Energy Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 116 174 128 108 100 136 290 236 EBITDA, EURm 1) 39 79 57 35 41 57 118 98 % of sales 33.6 45.4 44.5 32.4 41.0 41.9 40.7 41.5 Share of results of 6 4 -8 -24 -4 -4 10 -8 associated companies and joint ventures, EURm Depreciation, amortisation -1 -2 -2 -1 -1 -2 -3 -3 and impairment charges, EURm Operating profit, EURm 44 81 47 10 36 51 125 87 % of sales 37.9 46.6 36.7 9.3 36.0 37.5 43.1 36.9 Special items, EURm 2) - - -1 -17 - - - - Operating profit excl. 44 81 48 27 36 51 125 87 special items, EURm % of sales 37.9 46.6 37.5 25.0 36.0 37.5 43.1 36.9 Electricity deliveries, 1,000 2,303 2,411 2,277 2,103 1,999 2,486 4,714 4,485 MWh Q1-Q4/ 2009 Sales, EURm 472 EBITDA, EURm 1) 190 % of sales 40.3 Share of results of -40 associated companies and joint ventures, EURm Depreciation, amortisation -6 and impairment charges, EURm Operating profit, EURm 144 % of sales 30.5 Special items, EURm 2) -18 Operating profit excl. 162 special items, EURm % of sales 34.3 Electricity deliveries, 1,000 8,865 MWh 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2009, special items relate to impairments of associated company Pohjolan Voima's two power plants. Q2 of 2010 compared with Q2 of 2009 Operating profit excluding special items was EUR 44 million, EUR 8 million higher than last year (36 million). Sales increased by 16% to EUR 116 million (100 million), of which EUR 35 million was external sales (24 million). The electricity sales volume was 2.3 TWh in the quarter (2.0 TWh). Profitability improved compared with the same period last year, due to the higher electricity sales volume and average electricity sales price. The average electricity sales price increased by 3% to EUR 42.8/MWh (41.7/MWh). Hydropower volume was 27% higher in comparison with last year. January-June 2010 compared with January-June 2009 Operating profit excluding special items was EUR 125 million, EUR 38 million higher than last year (87 million). Sales increased by 23% to EUR 290 million (236 million), of which EUR 129 million was external sales (73 million). The electricity sales volume was 4.7 TWh (4.5 TWh). Profitability improved compared with the same period last year, due to the higher average electricity sales price and volume. The average electricity sales price increased by 20% to EUR 52.4/MWh (43.6/MWh). Hydropower volume was 2% lower in comparison with last year. Market review The average electricity spot price on the Nordic electricity exchange in the first half of the year was EUR 52.1/MWh, 44% higher than in the same period last year (36.1/MWh) due to a poor hydrological situation and increased consumption. Oil and coal market prices increased compared with the same period last year. The CO2 emission allowance price was EUR 15.3/t on 30 June, 11% higher than on the same date last year (13.8/t). In the first half of the year Nordic water reservoirs were 24% below their long-term average. The electricity system forward price for the rest of the year on the Nordic electricity exchange was EUR 48.2/MWh on 30 June, 20% higher than on the same date last year (40.3/MWh). Pulp Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 455 341 226 156 132 139 796 271 EBITDA, EURm 1) 199 120 53 8 -24 -55 319 -79 % of sales 43.7 35.2 23.5 5.1 -18.2 -39.6 40.1 -29.2 Change in fair value of - - -1 - - - - - biological assets and wood harvested, EURm Share of results of - - 7 4 -16 -47 - -63 associated companies and joint ventures, EURm 3) Depreciation, amortisation -37 -36 -24 -21 -20 -20 -73 -40 and impairment charges, EURm Operating profit, EURm 163 83 35 -9 -60 -122 246 -182 % of sales 35.8 24.3 15.5 -5.8 -45.5 -87.8 30.9 -67.2 Special items, EURm 2) 1 -1 - - - -29 - -29 Operating profit excl. 162 84 35 -9 -60 -93 246 -153 special items, EURm % of sales 35.6 24.6 15.5 -5.8 -45.5 -66.9 30.9 -56.5 Pulp deliveries, 1,000 t 768 700 550 446 391 372 1,468 763 Q1-Q4/ 2009 Sales, EURm 653 EBITDA, EURm 1) -18 % of sales -2.8 Change in fair value of -1 biological assets and wood harvested, EURm Share of results of -52 associated companies and joint ventures, EURm 3) Depreciation, amortisation -85 and impairment charges, EURm Operating profit, EURm -156 % of sales -23.9 Special items, EURm 2) -29 Operating profit excl. -127 special items, EURm % of sales -19.4 Pulp deliveries, 1,000 t 1,759 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2009, special items of EUR 29 million relate to the associated company Metsä-Botnia's Kaskinen pulp mill closure. 3) In the balance sheet in the interim report for January-June, on 30 June 2009, UPM has regrouped the 30% transferable share of Botnia's book value as assets held for sale. Consequently, from July 2009, UPM has not included the share of the transferable Botnia operations in the share of results of associated companies. Q2 of 2010 compared with Q2 of 2009 As of December 2009, the Fray Bentos pulp mill and Forestal Oriental eucalyptus plantation forestry company in Uruguay have been included in the Pulp business area and Metsä-Botnia is no longer an associated company of UPM. Operating profit excluding special items was EUR 162 million (loss of EUR 60 million). Sales increased to EUR 455 million (132 million) and deliveries to 768,000 tonnes (391,000). Profitability improved in comparison with last year due to higher average pulp sales prices and volumes. January-June 2010 compared with January-June 2009 Operating profit excluding special items was EUR 246 million (loss of EUR 153 million). Sales increased to EUR 796 million (271 million) and deliveries to 1,468,000 tonnes (763,000). Profitability improved noticeably from last year due to significantly higher pulp sales prices and volumes. Wood costs were lower. Market review In the first half of 2010, global chemical pulp market prices increased substantially due to tight market balance. The global chemical market pulp supply was reduced temporarily due to the earthquake in Chile, along with other occasional supply constrains. By the end of the first half of 2010, most of the Chilean capacity was back in operation. Global chemical pulp shipments increased from last year. The average softwood pulp (NBSK) market price in euro terms, at EUR 678/tonne, was 52% higher than in the same period last year (EUR 446/tonne). At the end of the period the NBSK market price was EUR 794/ tonne. The average hardwood pulp (BHKP) market price in euro terms increased by 57% from last year, to EUR 614/tonne (EUR 390/tonne). At the end of the period the BHKP market price was EUR 747/tonne. Forest and timber Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 393 339 348 295 309 385 732 694 EBITDA, EURm 1) 26 3 30 24 -15 -15 29 -30 % of sales 6.6 0.9 8.6 8.1 -4.9 -3.9 4.0 -4.3 Change in fair value of 31 19 10 -13 10 11 50 21 biological assets and wood harvested, EURm Share of results of 1 1 1 -1 1 1 2 2 associated companies and joint ventures, EURm Depreciation, amortisation -6 -4 -11 -4 -14 -5 -10 -19 and impairment charges, EURm Operating profit, EURm 52 19 21 6 -18 -18 71 -36 % of sales 13.2 5.6 6.0 2.0 -5.8 -4.7 9.7 -5.2 Special items, EURm 2) - - -14 1 -8 -10 - -18 Operating profit excl. 52 19 35 5 -10 -8 71 -18 special items, EURm % of sales 13.2 5.6 10.1 1.7 -3.2 -2.1 9.7 -2.6 Sawn timber deliveries, 1,000 504 371 413 355 366 363 875 729 m3 Q1-Q4/ 2009 Sales, EURm 1,337 EBITDA, EURm 1) 24 % of sales 1.8 Change in fair value of 18 biological assets and wood harvested, EURm Share of results of 2 associated companies and joint ventures, EURm Depreciation, amortisation -34 and impairment charges, EURm Operating profit, EURm -9 % of sales -0.7 Special items, EURm 2) -31 Operating profit excl. 22 special items, EURm % of sales 1.6 Sawn timber deliveries, 1,000 1,497 m3 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) Special items of EUR 14 million including impairment charges of EUR 5 million, in the fourth quarter of 2009 relate to restructuring of Timber operations in Finland. Special items for the second quarter of 2009 include impairment charges of EUR 8 million related to wood procurement operations. In the first quarter of 2009, special items of EUR 10 million relate to the sales loss of Miramichi's forestry and sawmilling operations' assets. Q2 of 2010 compared with Q2 of 2009 Operating profit excluding special items was EUR 52 million (loss of EUR 10 million). Sales increased by 27% to EUR 393 million (309 million). Sawn timber deliveries increased by 38% to 504,000 cubic metres (366,000). The increase in the fair value of biological assets net of wood harvested was EUR 31 million (10 million). The increase in the fair value of biological assets (growing trees) was EUR 60 million (14 million). The cost of wood raw material harvested from the Group's own forests was EUR 29 million (4 million). January-June 2010 compared with January-June 2009 Operating profit excluding special items was EUR 71 million (loss of EUR 18 million). Sales increased by 5% to EUR 732 million (694 million). Sawn timber deliveries increased by 20% to 875,000 cubic metres (729,000). Profitability improved from the same period last year, mainly due to higher average sawn timber prices and higher delivery volumes of timber goods. The increase in the fair value of biological assets net of wood harvested was EUR 50 million (21 million). The increase in the fair value of biological assets (growing trees) was EUR 93 million (35 million). The cost of wood raw material harvested from the Group's own forests was EUR 43 million (14 million). Market review During the first half of the year, wood purchases in the Finnish wood market increased significantly from the very low level in the same period last year. However, wood purchases still remained 14% below long term average purchasing volumes. Wood market prices increased towards the end of the first half of 2010 being above the long-term average prices. In particular, log market prices for pine and spruce increased compared with the same period last year. The European supply-demand balance of sawn softwood timber is still challenging although, in comparison with last year, slight improvement has been seen. Paper Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 1,540 1,401 1,558 1,454 1,388 1,367 2,941 2,755 EBITDA, EURm 1) 72 75 221 274 247 187 147 434 % of sales 4.7 5.4 14.2 18.8 17.8 13.7 5.0 15.8 Share of results of - - 1 - -1 -1 - -2 associated companies and joint ventures, EURm Depreciation, amortisation -130 -136 -140 -142 -147 -149 -266 -296 and impairment charges, EURm Operating profit, EURm -57 -69 74 126 85 60 -126 145 % of sales -3.7 -4.9 4.7 8.7 6.1 4.4 -4.3 5.3 Special items, EURm 2) 4 -8 -8 -6 -10 23 -4 13 Operating profit excl. -61 -61 82 132 95 37 -122 132 special items, EURm % of sales -4.0 -4.4 5.3 9.1 6.8 2.7 -4.1 4.8 Deliveries, publication 1,446 1,364 1,576 1,464 1,323 1,304 2,810 2,627 papers, 1,000 t Deliveries, fine and 994 937 945 872 813 724 1,931 1,537 speciality papers, 1,000 t Paper deliveries total, 1,000 2,440 2,301 2,521 2,336 2,136 2,028 4,741 4,164 t Q1-Q4/ 2009 Sales, EURm 5,767 EBITDA, EURm 1) 929 % of sales 16.1 Share of results of -1 associated companies and joint ventures, EURm Depreciation, amortisation -578 and impairment charges, EURm Operating profit, EURm 345 % of sales 6.0 Special items, EURm 2) -1 Operating profit excl. 346 special items, EURm % of sales 6.0 Deliveries, publication 5,667 papers, 1,000 t Deliveries, fine and 3,354 speciality papers, 1,000 t Paper deliveries total, 1,000 9,021 t 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2010, special items in the second quarter include impairment reversals of EUR 3 million. Other special items in the first and second quarter of 2010, include mainly employee-related restructuring charges. In the fourth and third quarter of 2009, special items of EUR 8 million and EUR 6 million relate to restructuring charges. Special items for the second quarter of 2009 include charges of EUR 9 million related to personnel reduction in Nordland mill, impairment reversals of EUR 4 million and other restructuring charges of EUR 5 million. In the first quarter of 2009, special items include an income of EUR 31 million related to the sale of the assets of the former Miramichi paper mill and charges of EUR 8 million related to restructuring measures. Q2 of 2010 compared with Q2 of 2009 Operating loss excluding special items was EUR 61 million (profit of EUR 95 million). Sales were EUR 1,540 million (1,388 million). Paper deliveries increased by 14% to 2,440,000 tonnes (2,136,000). Paper deliveries for publication papers (magazine papers and newsprint) increased by 9% and for fine and speciality papers by 22% from last year. Deliveries grew in all main markets, with higher growth rates outside Europe. The Paper business area incurred an operating loss, as the cost of fibre increased significantly from last year and paper prices decreased. The average paper price for all paper deliveries when translated into euros was 3% lower than last year. Compared with the first quarter of 2010, however, the average paper price increased by around 4%, with more weight on fine and speciality papers. Higher paper deliveries had a positive impact on operating profit. January-June 2010 compared with January-June 2009 Operating loss excluding special items was EUR 122 million (profit of EUR 132 million). Sales were EUR 2,941 million (2,755 million). Paper deliveries increased by 14% to 4,741,000 tonnes (4,164,000). Paper deliveries for publication papers (magazine papers and newsprint) increased by 7% and for fine and speciality papers by 26% from last year. Deliveries grew in all main markets, with highest growth rates in Asia and North America. The Paper business area incurred an operating loss, as the cost of fibre increased from last year and paper prices decreased significantly. The average paper price for all paper deliveries when translated into euros was 7% lower than last year. Higher paper deliveries had a positive impact on operating profit. Market review In January-June, demand for publication papers in Europe was 4% higher, and for fine papers, 8% higher, than a year ago. In North America, the demand for magazine papers increased by 8% from last year. In Asia, demand for fine papers grew. In Europe, magazine paper prices decreased in the beginning of the year and on average were 10% lower than in the comparison period last year. Newsprint prices also decreased in the beginning of the year and on average were 17% lower than last year. Fine paper prices increased during the first half of the year, but still remained 1% lower than a year ago. In North America, the average US dollar price for magazine papers was 13% lower than last year. In Asia, market prices for fine papers increased during the first half of the year and on average were noticeably higher than a year ago. Label Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 280 260 252 242 226 223 540 449 EBITDA, EURm 1) 34 31 25 29 18 6 65 24 % of sales 12.1 11.9 9.9 12.0 8.0 2.7 12.0 5.3 Depreciation, amortisation -10 -7 -8 -9 -11 -9 -17 -20 and impairment charges, EURm Operating profit, EURm 24 24 16 18 4 -3 48 1 % of sales 8.6 9.2 6.3 7.4 1.8 -1.3 8.9 0.2 Special items, EURm 2) - 1 -1 -2 -5 - 1 -5 Operating profit excl. 24 23 17 20 9 -3 47 6 special items, EURm % of sales 8.6 8.8 6.7 8.3 4.0 -1.3 8.7 1.3 Q1-Q4/ 2009 Sales, EURm 943 EBITDA, EURm 1) 78 % of sales 8.3 Depreciation, amortisation -37 and impairment charges, EURm Operating profit, EURm 35 % of sales 3.7 Special items, EURm 2) -8 Operating profit excl. 43 special items, EURm % of sales 4.6 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2010, special items relate to impairment reversals. In the fourth and third quarter of 2009, special items relate to restructuring charges. In the second quarter of 2009, special items include impairment charges of EUR 2 million and other restructuring charges of EUR 3 million. Q2 of 2010 compared with Q2 of 2009 Operating profit excluding special items was EUR 24 million (9 million). Sales increased by 24% to EUR 280 million (226 million). Profitability improved noticeably from last year, mainly due to higher sales volumes. Delivery volumes of self-adhesive label materials increased in all regions from last year. Volume growth was highest in Asia and Eastern Europe. Raw material costs increased markedly in the second quarter from the first quarter of 2010, but this was offset by higher sales prices. January-June 2010 compared with January-June 2009 Operating profit excluding special items was EUR 47 million (6 million). Sales increased by 20% to EUR 540 million (449 million). Profitability improved noticeably from last year, mainly due to higher sales volumes. Delivery volumes of self-adhesive label materials increased in all regions from last year. Raw material costs were still slightly lower in comparison with the high level last year. Market review Demand for self-adhesive label materials grew noticeably in the first six months from the depressed levels seen in the same period last year. Demand growth was strongest in Asia Pacific, Eastern Europe and Latin America, where demand is estimated to have exceeded pre-recession levels. In mature markets in Western Europe and North America demand recovered, but not to pre-recession levels. Plywood Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 97 76 81 73 77 75 173 152 EBITDA, EURm 1) 2 -2 3 -5 -5 -23 0 -28 % of sales 2.1 -2.6 3.7 -6.8 -6.5 -30.7 0.0 -18.4 Depreciation, amortisation -5 -5 -12 -5 -5 -5 -10 -10 and impairment charges, EURm Operating profit, EURm -1 -7 -33 -10 -10 -29 -8 -39 % of sales -1.0 -9.2 -40.7 -13.7 -13.0 -38.7 -4.6 -25.7 Special items, EURm 2) 2 - -30 - - -1 2 -1 Operating profit excl. -3 -7 -3 -10 -10 -28 -10 -38 special items, EURm % of sales -3.1 -9.2 -3.7 -13.7 -13.0 -37.3 -5.8 -25.0 Deliveries, plywood, 1,000 m3 182 140 150 143 141 133 322 274 Q1-Q4/ 2009 Sales, EURm 306 EBITDA, EURm 1) -30 % of sales -9.8 Depreciation, amortisation -27 and impairment charges, EURm Operating profit, EURm -82 % of sales -26.8 Special items, EURm 2) -31 Operating profit excl. -51 special items, EURm % of sales -16.7 Deliveries, plywood, 1,000 m3 567 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) Special items in the second quarter of 2010, include mainly capital gain from asset sale in Finland. Special items in the fourth quarter of 2009, include impairment charges of EUR 6 million and other restructuring charges of EUR 24 million. Q2 of 2010 compared with Q2 of 2009 Operating loss excluding special items was EUR 3 million (loss of EUR 10 million). Sales grew by 26% to EUR 97 million (77 million), as plywood deliveries grew by 29% to 182,000 cubic metres (141,000). Operating loss for Plywood decreased from last year mainly due to higher delivery volumes. The average plywood sales price was slightly lower than last year, mainly due to changes in product mix. January-June 2010 compared with January-June 2009 Operating loss excluding special items was EUR 10 million (loss of EUR 38 million). Sales increased by 14% to EUR 173 million (152 million), as plywood deliveries increased by 18% to 322,000 cubic metres (274,000). Operating loss for Plywood decreased from last year mainly due to higher delivery volumes and lower raw material costs. The average plywood sales price was lower than last year, mainly due to higher share of spruce products. Market review In Europe, in January-June, plywood demand increased from last year. Market activity increased in the second quarter after a slow winter season. In spruce plywood supply to Europe was temporarily restricted by the earthquake in Chile. Construction activity continued at a low level. The overall plywood market prices remained low during the first half of the year but price development turned positive in the second quarter. Other operations Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q2/Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 2009 Sales, EURm 51 40 35 21 21 34 91 55 EBITDA, EURm 1) -19 -18 -27 -31 -24 -29 -37 -53 Share of results of 1 -2 - - -2 -2 -1 -4 associated companies and joint ventures, EURm Depreciation, amortisation -3 -3 -3 -3 -3 -3 -6 -6 and impairment charges, EURm Operating profit, EURm -22 -24 -34 -45 -29 -34 -46 -63 Special items, EURm 2) -3 -1 -6 -11 - - -4 - Operating profit excl. -19 -23 -28 -34 -29 -34 -42 -63 special items, EURm Q1-Q4/ 2009 Sales, EURm 111 EBITDA, EURm 1) -111 Share of results of -4 associated companies and joint ventures, EURm Depreciation, amortisation -12 and impairment charges, EURm Operating profit, EURm -142 Special items, EURm 2) -17 Operating profit excl. -125 special items, EURm 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and wood harvested, the share of results of associated companies and joint ventures, and special items. 2) In 2010, special items relate to net restructuring charges. In 2009, special items in the fourth quarter include impairment charges of EUR 2 million and other charges of EUR 4 million both relating to terminated activities. Special items of EUR 11 million in the third quarter of 2009 relate mainly to estates of closed industrial sites in Finland. Other operations include development units (RFID tags, the wood plastic composite unit UPM ProFi and biofuels), logistic services and corporate administration. Q2 of 2010 compared with Q2 of 2009 Excluding special items, operating loss was EUR 19 million (loss of EUR 29 million). Sales amounted to EUR 51 million (21 million). The development units incurred a smaller operating loss than last year. January-June 2010 compared with January-June 2009 Excluding special items, operating loss was EUR 42 million (loss of EUR 63 million). Sales amounted to EUR 91 million (55 million). The development units incurred a smaller operating loss than last year. Helsinki, 3 August 2010 UPM-Kymmene Corporation Board of Directors FINANCIAL INFORMATION This Interim Report is unaudited Consolidated income statement EURm Q2/ Q2/ Q1-Q2/ Q1-Q2/ Q1-Q4/ 2010 2009 2010 2009 2009 Sales 2,216 1,841 4,255 3,698 7,719 Other operating income 17 7 26 24 47 Costs and expenses -1,877 -1,627 -3,647 -3,361 -6,774 Change in fair value of 31 10 50 21 17 biological assets and wood harvested Share of results of 8 -22 11 -75 -95 associated companies and joint ventures Depreciation, amortisation -192 -201 -385 -394 -779 and impairment charges Operating profit (loss) 203 8 310 -87 135 Gains on available-for-sale 1 - 1 - -1 investments, net Exchange rate and fair value 4 3 5 -6 -9 gains and losses Interest and other finance -27 -37 -53 -95 62 costs, net Profit (loss) before tax 181 -26 263 -188 187 Income taxes -12 18 -24 22 -18 Profit (loss) for the period 169 -8 239 -166 169 Attributable to: Owners of the parent company 169 -8 239 -166 169 Non-controlling interests - - - - - 169 -8 239 -166 169 Earnings per share for profit (loss) attributable to owners of the parent company Basic earnings per share, EUR 0.33 -0.02 0.46 -0.32 0.33 Diluted earnings per share, EUR 0.33 -0.02 0.46 -0.32 0.33 Consolidated statement of comprehensive income EURm Q2/ Q2/Q1-Q2/Q1-Q2/Q1-Q4/ 2010 2009 2010 2009 2009 Profit (loss) for the period 169 -8 239 -166 169 Other comprehensive income for the period, net of tax: Translation differences 282 37 499 66 165 Net investment hedge -35 -12 -88 -20 -56 Cash flow hedges -56 9 -79 -9 -4 Available-for-sale investments - - 5 - 21 Share of other comprehensive 3 -12 2 -8 30 income of associated companies Other comprehensive income 194 22 339 29 156 for the period, net of tax Total comprehensive income 363 14 578 -137 325 for the period Total comprehensive income attributable to: Owners of the parent company 363 14 578 -137 325 Non-controlling interests - - - - - 363 14 578 -137 325 Condensed consolidated balance sheet EURm 30.06.2010 30.06.2009 31.12.2009 Assets Non-current assets Goodwill 1,034 933 1,017 Other intangible assets 448 394 423 Property, plant and equipment 6,230 5,439 6,192 Biological assets 1,355 1,152 1,293 Investments in associated 568 829 553 companies and joint ventures Deferred tax assets 358 247 287 Other non-current assets 987 622 816 10,980 9,616 10,581 Current assets Inventories 1,285 1,062 1,112 Trade and other receivables 1,702 1,422 1,474 Cash and cash equivalents 263 192 438 3,250 2,676 3,024 Assets classified as held for sale - 327 - Total assets 14,230 12,619 13,605 Equity and liabilities Equity attributable to owners of the parent company Share capital 890 890 890 Fair value and other reserves 319 -132 -23 Reserve for invested 1,145 1,145 1,145 non-restricted equity Retained earnings 4,579 3,860 4,574 6,933 5,763 6,586 Non-controlling interests 16 14 16 Total equity 6,949 5,777 6,602 Non-current liabilities Deferred tax liabilities 596 592 608 Non-current interest-bearing 4,218 4,003 4,164 liabilities Other non-current liabilities 637 591 660 5,451 5,186 5,432 Current liabilities Current interest-bearing liabilities 384 514 365 Trade and other payables 1,446 1,142 1,206 1,830 1,656 1,571 Total liabilities 7,281 6,842 7,003 Total equity and liabilities 14,230 12,619 13,605 Consolidated statement of changes in equity Attributable to owners of the parent company EURm Share Translation Fair value capital differences and other reserves Balance at 1 January 2009 890 -295 130 Profit (loss) for the period - - - Translation differences - 66 - Net investment hedge, net of tax - -20 - Cash flow hedges, net of tax - - -9 Available-for-sale investments - - - Share of other comprehensive - -5 - income of associated companies Total comprehensive income - 41 -9 for the period Share-based compensation, net of tax - - 1 Dividend paid - - - Other items - - - Total transactions with - - 1 owners for the period Balance at 30 June 2009 890 -254 122 Balance at 1 January 2010 890 -164 141 Profit (loss) for the period - - - Translation differences - 499 - Net investment hedge, net of tax - -88 - Cash flow hedges, net of tax - - -79 Available-for-sale investments - - 5 Share of other comprehensive - - - income of associated companies Total comprehensive income - 411 -74 for the period Share-based compensation, net of tax - - 5 Dividend paid - - - Other items - - - Total transactions with - - 5 owners for the period Balance at 30 June 2010 890 247 72 EURm Reserve Retained Total for invested earnings non-restricted equity Balance at 1 January 2009 1,145 4,236 6,106 Profit (loss) for the period - -166 -166 Translation differences - - 66 Net investment hedge, net of tax - - -20 Cash flow hedges, net of tax - - -9 Available-for-sale investments - - - Share of other comprehensive - -3 -8 income of associated companies Total comprehensive income - -169 -137 for the period Share-based compensation, net of tax - - 1 Dividend paid - -208 -208 Other items - 1 1 Total transactions with - -207 -206 owners for the period Balance at 30 June 2009 1,145 3,860 5,763 Balance at 1 January 2010 1,145 4,574 6,586 Profit (loss) for the period - 239 239 Translation differences - - 499 Net investment hedge, net of tax - - -88 Cash flow hedges, net of tax - - -79 Available-for-sale investments - - 5 Share of other comprehensive - 2 2 income of associated companies Total comprehensive income - 241 578 for the period Share-based compensation, net of tax - - 5 Dividend paid - -234 -234 Other items - -2 -2 Total transactions with - -236 -231 owners for the period Balance at 30 June 2010 1,145 4,579 6,933 EURm Non- Total controlling equity interests Balance at 1 January 2009 14 6,120 Profit (loss) for the period - -166 Translation differences - 66 Net investment hedge, net of tax - -20 Cash flow hedges, net of tax - -9 Available-for-sale investments - - Share of other comprehensive - -8 income of associated companies Total comprehensive income - -137 for the period Share-based compensation, net of tax - 1 Dividend paid - -208 Other items - 1 Total transactions with - -206 owners for the period Balance at 30 June 2009 14 5,777 Balance at 1 January 2010 16 6,602 Profit (loss) for the period - 239 Translation differences - 499 Net investment hedge, net of tax - -88 Cash flow hedges, net of tax - -79 Available-for-sale investments - 5 Share of other comprehensive - 2 income of associated companies Total comprehensive income - 578 for the period Share-based compensation, net of tax - 5 Dividend paid - -234 Other items - -2 Total transactions with - -231 owners for the period Balance at 30 June 2010 16 6,949 Condensed consolidated cash flow statement EURm Q1-Q2/ Q1-Q2/ Q1-Q4/ 2010 2009 2009 Cash flow from operating activities Profit (loss) for the period 239 -166 169 Adjustments 371 493 772 Change in working capital -242 355 532 Cash generated from operations 368 682 1,473 Finance costs, net -49 -85 -183 Income taxes paid -8 -17 -31 Net cash generated from 311 580 1,259 operating activities Cash flow from investing activities Acquisitions and share purchases -3 - -586 Capital expenditure -97 -143 -236 Asset sales and other 14 20 608 investing cash flow Net cash used in investing -86 -123 -214 activities Cash flow from financing activities Change in loans and other -183 -387 -732 financial items Dividends paid -234 -208 -208 Net cash used in financing -417 -595 -940 activities Change in cash and cash -192 -138 105 equivalents Cash and cash equivalents at 438 330 330 the beginning of period Foreign exchange effect on cash 17 - 3 Change in cash and cash -192 -138 105 equivalents Cash and cash equivalents at 263 192 438 end of period Quarterly information EURm Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ 2010 2010 2009 2009 2009 2009 Sales 2,216 2,039 2,108 1,913 1,841 1,857 Other operating income 17 9 18 5 7 17 Costs and expenses -1,877 -1,770 -1,810 -1,603 -1,627 -1,734 Change in fair value of 31 19 9 -13 10 11 biological assets and wood harvested Share of results of associated 8 3 1 -21 -22 -53 companies and joint ventures Depreciation, amortisation -192 -193 -200 -185 -201 -193 and impairment charges Operating profit (loss) 203 107 126 96 8 -95 Gains on available-for-sale 1 - - -1 - - investments, net Exchange rate and fair value 4 1 - -3 3 -9 gains and losses Interest and other finance -27 -26 185 -28 -37 -58 costs, net Profit (loss) before tax 181 82 311 64 -26 -162 Income taxes -12 -12 -16 -24 18 4 Profit (loss) for the period 169 70 295 40 -8 -158 Attributable to: Owners of the parent company 169 70 295 40 -8 -158 Non-controlling interests - - - - - - 169 70 295 40 -8 -158 Basic earnings per share, EUR 0.33 0.13 0.57 0.08 -0.02 -0.30 Diluted earnings per share, EUR 0.33 0.13 0.57 0.08 -0.02 -0.30 Earnings per share, excluding 0.29 0.15 0.21 0.14 0.03 -0.27 special items, EUR Average number of shares 519,970 519,970 519,958 519,954 519,954 519,954 basic (1,000) Average number of shares 521,333 520,018 518,876 521,036 519,954 519,954 diluted (1,000) Special items in operating 4 -9 -60 -35 -23 -17 profit (loss) Operating profit (loss), 199 116 186 131 31 -78 excl. special items % of sales 9.0 5.7 8.8 6.8 1.7 -4.2 Special items before tax 4 -9 155 -35 -23 -17 Profit (loss) before tax, 177 91 156 99 -3 -145 excl. special items % of sales 8.0 4.5 7.4 5.2 -0.2 -7.8 Return on equity, excl. 8.9 4.6 7.4 5.0 0.8 neg. special items, % Return on capital employed, 7.3 4.3 7.2 4.9 1.3 neg. excl. special items, % EBITDA 353 288 362 334 238 128 % of sales 15.9 14.1 17.2 17.5 12.9 6.9 Share of results of associated companies and joint ventures Energy 6 4 -8 -24 -4 -4 Pulp - - 7 4 -16 -47 Forest and timber 1 1 1 -1 1 1 Paper - - 1 - -1 -1 Other operations 1 -2 - - -2 -2 Total 8 3 1 -21 -22 -53 EURm Q1-Q2/ Q1-Q2/ Q1-Q4/ 2010 2009 2009 Sales 4,255 3,698 7,719 Other operating income 26 24 47 Costs and expenses -3,647 -3,361 -6,774 Change in fair value of 50 21 17 biological assets and wood harvested Share of results of associated 11 -75 -95 companies and joint ventures Depreciation, amortisation -385 -394 -779 and impairment charges Operating profit (loss) 310 -87 135 Gains on available-for-sale 1 - -1 investments, net Exchange rate and fair value 5 -6 -9 gains and losses Interest and other finance -53 -95 62 costs, net Profit (loss) before tax 263 -188 187 Income taxes -24 22 -18 Profit (loss) for the period 239 -166 169 Attributable to: Owners of the parent company 239 -166 169 Non-controlling interests - - - 239 -166 169 Basic earnings per share, EUR 0.46 -0.32 0.33 Diluted earnings per share, EUR 0.46 -0.32 0.33 Earnings per share, excluding 0.44 -0.24 0.11 special items, EUR Average number of shares 519,970 519,954 519,955 basic (1,000) Average number of shares 520,676 519,954 519,955 diluted (1,000) Special items in operating -5 -40 -135 profit (loss) Operating profit (loss), 315 -47 270 excl. special items % of sales 7.4 -1.3 3.5 Special items before tax -5 -40 80 Profit (loss) before tax, 268 -148 107 excl. special items % of sales 6.3 -4.0 1.4 Return on equity, excl. 6.7 neg. 1.0 special items, % Return on capital employed, 5.7 neg. 2.5 excl. special items, % EBITDA 641 366 1,062 % of sales 15.1 9.9 13.8 Share of results of associated companies and joint ventures Energy 10 -8 -40 Pulp - -63 -52 Forest and timber 2 2 2 Paper - -2 -1 Other operations -1 -4 -4 Total 11 -75 -95 Deliveries Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q2/ 2010 2010 2009 2009 2009 2009 2010 Electricity, 1,000 MWh 2,303 2,411 2,277 2,103 1,999 2,486 4,714 Pulp, 1,000 t 768 700 550 446 391 372 1,468 Sawn timber, 1,000 m3 504 371 413 355 366 363 875 Publication papers, 1,000 t 1,446 1,364 1,576 1,464 1,323 1,304 2,810 Fine and speciality papers, 994 937 945 872 813 724 1,931 1,000 t Paper deliveries total, 1,000 t 2,440 2,301 2,521 2,336 2,136 2,028 4,741 Plywood, 1,000 m3 182 140 150 143 141 133 322 Q1-Q2/ Q1-Q4/ 2009 2009 Electricity, 1,000 MWh 4,485 8,865 Pulp, 1,000 t 763 1,759 Sawn timber, 1,000 m3 729 1,497 Publication papers, 1,000 t 2,627 5,667 Fine and speciality papers, 1,537 3,354 1,000 t Paper deliveries total, 1,000 t 4,164 9,021 Plywood, 1,000 m3 274 567 Quarterly segment information EURm Q2/ Q1/ Q4/ Q3/ 2010 2010 2009 2009 Sales Energy 116 174 128 108 Pulp 455 341 226 156 Forest and timber 393 339 348 295 Paper 1,540 1,401 1,558 1,454 Label 280 260 252 242 Plywood 97 76 81 73 Other operations 51 40 35 21 Internal sales -716 -592 -520 -436 Sales, total 2,216 2,039 2,108 1,913 EBITDA Energy 39 79 57 35 Pulp 199 120 53 8 Forest and timber 26 3 30 24 Paper 72 75 221 274 Label 34 31 25 29 Plywood 2 -2 3 -5 Other operations -19 -18 -27 -31 EBITDA, total 353 288 362 334 Operating profit (loss) Energy 44 81 47 10 Pulp 163 83 35 -9 Forest and timber 52 19 21 6 Paper -57 -69 74 126 Label 24 24 16 18 Plywood -1 -7 -33 -10 Other operations -22 -24 -34 -45 Operating profit (loss), 203 107 126 96 total % of sales 9.2 5.2 6.0 5.0 Special items in operating profit Energy - - -1 -17 Pulp 1 -1 - - Forest and timber - - -14 1 Paper 4 -8 -8 -6 Label - 1 -1 -2 Plywood 2 - -30 - Other operations -3 -1 -6 -11 Special items in operating 4 -9 -60 -35 profit, total Operating profit (loss) excl.special items Energy 44 81 48 27 Pulp 162 84 35 -9 Forest and timber 52 19 35 5 Paper -61 -61 82 132 Label 24 23 17 20 Plywood -3 -7 -3 -10 Other operations -19 -23 -28 -34 Operating profit (loss) excl. 199 116 186 131 special items, total % of sales 9.0 5.7 8.8 6.8 EURm Q2/ Q1/ Q4/ Q3/ 2010 2010 2009 2009 External sales Energy 35 94 38 24 Pulp 106 86 34 9 Forest and timber 193 154 171 145 Paper 1,499 1,353 1,500 1,409 Label 280 259 252 243 Plywood 93 73 77 69 Other operations 10 20 36 14 External sales, total 2,216 2,039 2,108 1,913 Internal sales Energy 81 80 90 84 Pulp 349 255 192 147 Forest and timber 200 185 177 150 Paper 41 48 58 45 Label - 1 - -1 Plywood 4 3 4 4 Other operations 41 20 -1 7 Internal sales, total 716 592 520 436 EURm Q2/ Q1/ Q1-Q2/ Q1-Q2/ 2009 2009 2010 2009 Sales Energy 100 136 290 236 Pulp 132 139 796 271 Forest and timber 309 385 732 694 Paper 1,388 1,367 2,941 2,755 Label 226 223 540 449 Plywood 77 75 173 152 Other operations 21 34 91 55 Internal sales -412 -502 -1,308 -914 Sales, total 1,841 1,857 4,255 3,698 EBITDA Energy 41 57 118 98 Pulp -24 -55 319 -79 Forest and timber -15 -15 29 -30 Paper 247 187 147 434 Label 18 6 65 24 Plywood -5 -23 - -28 Other operations -24 -29 -37 -53 EBITDA, total 238 128 641 366 Operating profit (loss) Energy 36 51 125 87 Pulp -60 -122 246 -182 Forest and timber -18 -18 71 -36 Paper 85 60 -126 145 Label 4 -3 48 1 Plywood -10 -29 -8 -39 Other operations -29 -34 -46 -63 Operating profit (loss), 8 -95 310 -87 total % of sales 0.4 -5.1 7.3 -2.4 Special items in operating profit Energy - - - - Pulp - -29 - -29 Forest and timber -8 -10 - -18 Paper -10 23 -4 13 Label -5 - 1 -5 Plywood - -1 2 -1 Other operations - - -4 - Special items in operating -23 -17 -5 -40 profit, total Operating profit (loss) excl.special items Energy 36 51 125 87 Pulp -60 -93 246 -153 Forest and timber -10 -8 71 -18 Paper 95 37 -122 132 Label 9 -3 47 6 Plywood -10 -28 -10 -38 Other operations -29 -34 -42 -63 Operating profit (loss) excl. 31 -78 315 -47 special items, total % of sales 1.7 -4.2 7.4 -1.3 EURm Q2/ Q1/ Q1-Q2/ Q1-Q2/ 2009 2009 2010 2009 External sales Energy 24 49 129 73 Pulp 10 10 192 20 Forest and timber 150 152 347 302 Paper 1,355 1,327 2,852 2,682 Label 225 222 539 447 Plywood 73 72 166 145 Other operations 4 25 30 29 External sales, total 1,841 1,857 4,255 3,698 Internal sales Energy 76 87 161 163 Pulp 122 129 604 251 Forest and timber 159 233 385 392 Paper 33 40 89 73 Label 1 1 1 2 Plywood 4 3 7 7 Other operations 17 9 61 26 Internal sales, total 412 502 1,308 914 EURm Q1-Q4/ 2009 Sales Energy 472 Pulp 653 Forest and timber 1,337 Paper 5,767 Label 943 Plywood 306 Other operations 111 Internal sales -1,870 Sales, total 7,719 EBITDA Energy 190 Pulp -18 Forest and timber 24 Paper 929 Label 78 Plywood -30 Other operations -111 EBITDA, total 1,062 Operating profit (loss) Energy 144 Pulp -156 Forest and timber -9 Paper 345 Label 35 Plywood -82 Other operations -142 Operating profit (loss), 135 total % of sales 1.7 Special items in operating profit Energy -18 Pulp -29 Forest and timber -31 Paper -1 Label -8 Plywood -31 Other operations -17 Special items in operating -135 profit, total Operating profit (loss) excl.special items Energy 162 Pulp -127 Forest and timber 22 Paper 346 Label 43 Plywood -51 Other operations -125 Operating profit (loss) excl. 270 special items, total % of sales 3.5 EURm Q1-Q4/ 2009 External sales Energy 135 Pulp 63 Forest and timber 618 Paper 5,591 Label 942 Plywood 291 Other operations 79 External sales, total 7,719 Internal sales Energy 337 Pulp 590 Forest and timber 719 Paper 176 Label 1 Plywood 15 Other operations 32 Internal sales, total 1,870 Changes in property, plant and equipment EURm Q1-Q2/Q1-Q2/Q1-Q4/ 2010 2009 2009 Book value at beginning of 6,192 5,688 5,688 period Capital expenditure 60 109 181 Companies acquired - - 1,013 Decreases -6 -11 -20 Depreciation -358 -358 -696 Impairment charges - -7 -14 Impairment reversal 3 4 5 Translation difference and 339 14 35 other changes Book value at end of period 6,230 5,439 6,192 Commitments and contingencies EURm 30.06.2010 30.06.2009 31.12.2009 Own commitments Mortgages 1) 1,067 765 1,043 On behalf of associated companies and joint ventures Guarantees for loans 8 9 8 On behalf of others Other guarantees - 1 1 Other own commitments Leasing commitments for the 23 20 24 next 12 months Leasing commitments for 83 58 60 subsequent periods Other commitments 89 65 69 1) Mortgages and pledges relate mainly to Uruguayan operations, and to giving mandatory security for borrowing from Finnish pension insurance companies. Capital commitments EURm Completion Total cost By 31.12.2009 Materials recovery facility January 2011 19 - (MRF), Shotton Plywood development December 2011 18 - Energy saving TMP plant, January 2011 16 - Steyrermühl Power plant rebuild, January 2011 12 - Schongau Rebuild of debarking plant, October 2010 25 15 Pietarsaari EURm Q1-Q2/ After 2010 30.06. 2010 Materials recovery facility 1 18 (MRF), Shotton Plywood development 1 17 Energy saving TMP plant, 1 15 Steyrermühl Power plant rebuild, 2 10 Schongau Rebuild of debarking plant, 1 9 Pietarsaari Notional amounts of derivative financial instruments EURm 30.06.2010 30.06.2009 31.12.2009 Currency derivatives Forward contracts 4,044 4,049 3,791 Options, bought 4 20 20 Options, written 4 25 20 Swaps 754 522 514 Interest rate derivatives Forward contracts 2,692 2,206 3,259 Swaps 2,590 2,996 2,701 Other derivatives Forward contracts 136 164 25 Options, bought 41 78 73 Options, written 41 78 73 Swaps 2 6 4 Related party (associated companies and joint ventures) transactions and balances EURm Q1-Q2/ Q1-Q2/ Q1-Q4/ 2010 2009 2009 Sales to associated companies 77 54 114 Purchases from associated 170 229 560 companies Non-current receivables at 4 2 2 end of period Trade and other receivables 13 22 23 at end of period Trade and other payables at 31 28 32 end of period Basis of preparation This unaudited interim 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 Consolidated Financial Statements for 2009. 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: Amendment to IAS 27 Consolidated and Separate Financial Statements requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The adoption of the amended standard has changed the name of previous minority interests to non-controlling interests, and in addition the adoption has amended the presentation of consolidated statement of changes in equity. Calculation of key indicators Return on equity, %: (Profit before tax - income taxes) / Total equity (average) x 100 Return on capital employed, %: (Profit before tax + interest expenses and other financial expenses) / (Total equity + interest-bearing liabilities (average)) x 100 Earnings per share: Profit for the period attributable to equity holders of the parent company / Adjusted average number of shares during the period excluding treasury shares Key exchange rates for the euro at end of period 30.06.2010 31.03.2010 31.12.2009 30.09.2009 USD 1.2271 1.3479 1.4406 1.4643 CAD 1.2890 1.3687 1.5128 1.5709 JPY 108.79 125.93 133.16 131.07 GBP 0.8175 0.8898 0.8881 0.9093 SEK 9.5259 9.7135 10.2520 10.2320 30.06.2009 31.03.2009 USD 1.4134 1.3308 CAD 1.6275 1.6685 JPY 135.51 131.17 GBP 0.8521 0.9308 SEK 10.8125 10.9400 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 including the availability and cost of production inputs, 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 87-88 of the company's annual report 2009 UPM-Kymmene Corporation Pirkko Harrela Executive Vice President, Corporate Communications UPM, Corporate Communications Media Desk, tel. +358 40 588 3284 media@upm.com DISTRIBUTION NASDAQ OMX Helsinki Ltd Main media www.upm.com |
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