UPM-Kymmene - Company Announcement

UPM’s new business structure will sharpen operational focus and facilitate portfolio change

Profit improvement target of EUR 400 million from performance improvement and
focused growth initiatives 



UPM-Kymmene Corporation   Stock Exchange Release       6 August 2013 at 10:00
EET 

UPM's new business structure will sharpen operational focus and facilitate
portfolio change 

Profit improvement target of EUR 400 million from performance improvement and
focused growth initiatives 

UPM will implement a new business structure to drive clear change in
profitability. The company will also seek to simplify and further develop its
business portfolio. 

UPM's new structure will consist of the following Business Areas and reporting
segments: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper
Europe and UPM Plywood. Forests and wood procurement will be reported in Other
operations. The new structure will be valid as of 1 November 2013. 

The new Paper Business Areas will be located at the centers of their markets.
UPM Paper Asia will be headquartered in Shanghai, China, and UPM Paper Europe
in Augsburg, Germany. The Group Head Office will remain in Helsinki, Finland. 

 “Changes in management structure will sharpen the targets and required actionsfor each business. We will address the competitive challenge in mature European
businesses and drive profitable growth outside Europe and in biorefining. The
new management structure will also increase transparency of the company
performance,” says Jussi Pesonen, President and CEO of UPM. 

 “We are determined to change UPM. We will also seek to simplify our business
portfolio and uncover the value of our assets. These opportunities will be
explored in parallel with the profitability improvement and growth initiatives
and may involve changes in ownership structures.” 

The current Business Group structure, established at the end of 2008, will be
discontinued. 

“Within the Business Group structure, we have created commercial platforms and
market driven business organisations for Energy and Pulp. We have also achieved
profitability turnaround in Timber and Plywood businesses and restructured our
European label business. Now these are healthy UPM businesses each in their own
right.” 

“Although the Paper Business Group has been able to improve efficiency and
managed change and integration processes professionally, we now need to move
into a more simple and scalable structure to improve performance further,” says
Pesonen. 

Profit improvement through simplified business structure

UPM has identified actions with an overall profit improvement impact of EUR 200
million in its existing businesses. Each business will implement a profit
improvement program with simplified business model and variable and fixed cost
savings. These planned actions do not include additional capacity closures at
this time. 

Profit improvement includes the remaining part of the EUR 90 million savings
announced in January 2013, as well as further actions resulting from the new
business structure and consequent profit improvement programs. 

UPM will follow and update the progress of the program in its quarterly
reporting. The full impact of the program is expected to materialise by the end
of 2014 as compared with the Q2/2013 results. 

Growth initiatives for the next three years

Pesonen highlights that since 2007 UPM's Energy, Pulp, Label and Asian Paper
businesses have grown by 43% in the topline. “These businesses have been not
only growing but also profitable and enjoy positive long term fundamentals.” 

“Biofuels, woodfree specialty papers in China and continued growth in UPM
Raflatac will provide top line growth for UPM in the coming years. In addition,
we have identified opportunities to expand production in our existing pulp
mills. With these development initiatives we are targeting additional EBITDA
contribution of EUR 200 million when in full operation. “ 

The total investment requirement in these projects is EUR 680 million,
including the earlier announced EUR 540 million in Changshu paper machine and
Lappeenranta biorefinery. EUR 60 million has already been invested, and the
total remaining capital expenditure in the coming three years would be EUR 620
million. 

Group Executive Team appointments

To ensure prompt implementation of profitability improvement and growth plans
UPM's Board of Directors has confirmed the following appointments in the UPM
Group Executive Team: 

Heikki Vappula has been appointed Executive Vice President, UPM Biorefining.
UPM Biorefining consists of pulp, timber and biofuels businesses. It has an
annual capacity of 3.2 million tonnes of pulp, produced by four modern pulp
mills in Finland and Uruguay, plantation operations, four efficient sawmills in
Finland and one in Austria, and a biodiesel plant under construction in
Lappeenranta, Finland. In H1 2013, the sales of the business was EUR 1,044
million and EBITDA EUR 234 million. Heikki is currently President for UPM's
Energy and Pulp Business Group. 

Tapio Korpeinen has been appointed Executive Vice President, UPM Energy. UPM
Energy operates in power generation and physical and derivatives trading. The
business assets consist of UPM's hydro power assets in Finland and
shareholdings in energy companies, with total electricity generation capacity
of 1,721 MW. In H1 2013, the sales of the business was EUR 242 million and
EBITDA EUR 106 million. 

Tapio will also continue in his current role as the Chief Financial Officer,
including responsibilities for Finance & Control, Treasury, Investor Relations,
IT, Sourcing and Real Estate. 

Tapio Kolunsarka has been appointed Executive Vice President, UPM Raflatac as
of 1 September 2013. Tapio is a new member in the Group Executive Team. He is
currently Senior Vice President, UPM Raflatac, Emea. His predecessor, Jussi
Vanhanen, is leaving the company of his own initiative to pursue a
long-standing personal project as well as to act as management advisor in one
of the leading consulting companies. UPM Raflatac manufactures self-adhesive
label materials for product and information labelling. In H1 2013, the sales of
the business was EUR 608 million and EBITDA EUR 54 million 

Kim Poulsen has been appointed Executive Vice President, UPM Paper Asia. UPM
Paper Asia consists of UPM Changshu paper mill in China and label paper
operations in Tervasaari and Jämsänkoski mills in Finland. In H1 2013, the
sales of the business was EUR 557 million and EBITDA EUR 84 million. The
production capacity of UPM Paper Asia is 1.5 million tonnes of fine and label
papers. Kim is currently Executive Vice President, Paper Business Asia Pacific
and Corporate Relations. 

Bernd Eikens has been appointed Executive Vice President, UPM Paper Europe.
Bernd is a new member in the Group Executive Team. Bernd is currently Senior
Vice President, Supply Chain, UPM Paper Business Group. UPM Paper Europe
produces magazine paper, newsprint and fine paper in 19 modern paper mills in
Europe and North America. In H1 2013, the sales of the business was EUR 2,730
million and EBITDA EUR 66 million. The production capacity of UPM Paper Europe
is 10.3 million tonnes of magazine, newsprint and fine papers. 

Mika Sillanpää has been appointed Executive Vice President, UPM Plywood. Mika
is a new member in the Group Executive Team. He is currently Senior Vice
President, Plywood. UPM Plywood is capable of producing approximately one
million cubic meters of plywood and veneer products in Finland, Russia and
Estonia. In H1 2013, the sales of the business was EUR 219 million and EBITDA
EUR 21 million. 

Kari Ståhlberg has been appointed Executive Vice President, Strategy. Kari is a
new member in the Group Executive Team. He is currently Senior Vice President,
Corporate Strategy. 

Juha Mäkelä continues as General Counsel.

Jyrki Ovaska has been appointed Executive Vice President, Technology,
responsible for R&D, Investment Management, wood plastic composite unit UPM
Profi and New Business Development. Jyrki is currently President for UPM's
Paper Business Group. 

Hartmut Wurster Executive Vice President, Technology, will retire after 12
years in UPM and 31 years of service in the industry. In addition to his main
responsibilities his active contribution in the German stakeholder relations
has been invaluable. 

Riitta Savonlahti continues as Executive Vice President, Human Resources.

Pirkko Harrela, currently Executive Vice President, Corporate Communications,
has been appointed Executive Vice President, Stakeholder Relations, including
responsibilities for Corporate Communications, Brand Management, Environmental
Affairs Corporate Relations and Responsibility. 

All members of the Group Executive Team report to the President and CEO. Unless
otherwise stated the appointments are valid as of 1 November 2013. 

* * *
All figures in this release are preliminary. Financial reporting according to
the new structure will take place from Q4 2013 onwards. Comparable financial
figures will be published in November 2013. 

* * *

For further information please contact:
Mr. Jussi Pesonen, President and CEO, UPM, Tel. +358 2041 50 001

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications

UPM, Media Desk
Mon-Fri 9:00-16:00 EET
Tel. +358 40 588 3284
media@upm.com
www.twitter.com/UPM_News

***

UPM leads the integration of bio and forest industries into a new, sustainable
and innovation-driven future. Our products are made of renewable raw materials
and are recyclable. UPM consists of three Business Groups: Energy and pulp,
Paper, and Engineered materials (valid until October, 31, 2013). UPM employs
approximately 22,000 people. UPM is present in 67 countries and have production
units in 17 countries. UPM's annual sales exceed € 10 billion. UPM's shares are
listed on the Helsinki Stock Exchange. UPM - The Biofore Company - www.upm.com