UPM-Kymmene - Company Announcement

UPM plans restructuring and permanent closures to ensure competitiveness of its Plywood and Timber operations in Finland; Savonlinna plywood mill to turn into a world-class birch plywood unit

UPM-Kymmene Corporation   Stock exchange release 3 November 2009  at 09:30      

UPM plans restructuring and permanent closures to ensure competitiveness of its 
Plywood and Timber operations in Finland;                                       
Savonlinna plywood mill to turn into a world-class birch plywood unit           

UPM plans significant restructuring to ensure the competitiveness of its Plywood
and Timber operations in Finland. The target is to remarkably improve the       
businesses' long-term cost competitiveness and increase value added of the      
production in Finland. Co-operation negotiations with employees concerning the  
plans will start immediately                                                    

UPM plans to permanently close the plywood mill and sawmill in Heinola, the     
Kaukas plywood mill in Lappeenranta, and the further processing mill in Parkano 
during the first half of 2010. Furthermore in the Plywood business area, the    
company plans to discontinue weekend shifts in most of the Finnish mills as well
as to streamline the organisation of office employees. In addition, the         
production of the Kaukas further processing mill in Lappeenranta will be        
restructured. If the restructuring is realised according to these plans, the    
amount of UPM employees will decrease by approximately 870 persons, of which    
approx. 650 work in units planned to be permanently closed.                     

The restructuring costs are estimated to be approximately EUR 44 million        
including impairment charges of approximately EUR 11 million.                   

In addition, UPM plans to invest approximately EUR 25 million in the expansion  
of the Savonlinna plywood mill and the development of the production in the     
Kaukas sawmill and the Aureskoski further processing mill. If the plans         
materialise, the Savonlinna plywood mill will become the world's most efficient 
birch plywood unit with an annual production capacity of                        
120, 000 cubic metres of high quality birch plywood. With the investment UPM    
strives to ensure its position as the leading plywood supplier in Europe. The   
planned investments in the Kaukas sawmill and Aureskoski further processing mill
would strengthen the cost competitiveness of the Timber business and position in
the European markets.                                                      "Centralisation and efficiency improvement create opportunities for profitable  
operations in Finland in the long term. The employee impacts of these plans are 
regrettable but the current situation is unsustainable. Cost competitiveness and
an efficient production structure are necessary for both our Plywood and Timber 
businesses," says Mr Jussi Vanhanen, Member of UPM's Group Executive Board and  
President of the Engineered materials Business Group.                           "With the proposed actions UPM will adjust its Finnish production to a level    
which facilitates profitable production and competitive wood sourcing," says Mr 
Tuomo Visanko, Senior Vice President of UPM's Forest and Timber Business Area.  

The challenging market situation of plywood and timber products has continued   
since last autumn and UPM has been forced to implement large production         
curtailments and temporary lay-offs in all of its mills.                        

The Heinola plywood mill has been at a standstill since January and the Kaukas  
plywood mill since May this year. The employees of both of the mills have been  
temporarily laid off during the standstills. The Kaukas plywood mill employs 298
persons and the Heinola plywood mill 212 persons.                               

The Heinola sawmill and the Parkano and Kaukas further processing mills have had
production curtailments during the whole year. The Heinola sawmill employs 77,  
the Parkano further processing mill 64 and the Kaukas further processing mill 25
persons.                                                                        "In the future, UPM would operate four modern plywood mills and two veneer      
mills, five sawmills and three further processing mills in Finland. We have here
very good know-how and a stabile operating environment. The planned actions     
improve our ability to respond to our customers' needs as the market picks up   
again. UPM will be the leading European plywood supplier also in the future",   
says Vanhanen.                                                                  

UPM's Plywood business employs currently 2,450 persons in Finland whereas Timber
employs around 900 persons. If the measures materialise as planned, the number  
of employees in the Plywood business will decrease by around 710 persons and by 
160 in the Timber business. The Timber business will also start co-operation    
negotiations with employees in all the other Finnish units on continuing        
temporary production curtailments in 2010.                                      

UPM estimates the restructuring costs for the fourth quarter of 2009 to be in   
the Plywood business approximately EUR 30 million, including approximately EUR  
24 million cash impact. In Timber business the cost is estimated to be          
approximately EUR 14 million, including approximately EUR 9 million cash impact.

The first results of the co-operation negotiations can be expected at the       
beginning of 2010.Also opportunities for retirement, relocation within UPM and
retraining will be discussed in the negotiations. 

If the planned closures will be completed, UPM will start a From-job-to-job     
programme based on its earlier experiences. The programme would include, in     
cooperation with various parties, active measures to support finding a new job  
and retraining.                                                                 

Press conferences                                                               

UPM will arrange following news conferences concerning the plans in Finnish     
language today on 3 November 2009 at 11:00 Finnish time:                        
- in Heinola at the Opetusalan koulutuskeskus (Opeko), address Lampikatu 5,     
hosted by UPM directors Jussi Vanhanen, Tuomo Visanko, Pauli Hänninen and Kari  
Hyvönen.                                                                        
Local contact person: Markku Herrala, Communications Manager, UPM, Plywood,     
tel. +358 40 586 2597.      
- in Lappeenranta at the Kaukas Club, address Kaukaankatu 26, hosted by UPM     
directors Hans Sohlström, Arto Juvonen, Raimo Särkelä and Matti Lehmuskorpi.    
Local contact person: Mariitta Stenbäck, Communications Manager, UPM, Kaukas,   
tel. +358 40 595 8904.                                                          
- in Parkano at the further processing mill, Teollisuustie 11, hosted by UPM    
directors Arto Halonen and Matti Nordberg. Local contact person: Antti Ratia,   
Head of Communications, UPM, Timber, tel. +358 40 487 2173.                     

Press material in Finnish and English will we available on UPM website as of    
11:00 o'clock Finnish time at www.upm-kymmene.com > Media > Competitiveness of  
Plywood and Timber businesses                                                   

For further information, please contact:                                        
Mr Tapio Korpeinen, President, Energy and Pulp Business Group and Member of     
UPM's Group Executive Board, tel. +358 204 15 0567                              

Plywood business - after 11.45 Finnish time:                                    
Mr Jussi Vanhanen, President, UPM, Engineered materials Business Group, tel.    
+358 40 567 2458                                                                
Mr Arto Juvonen, Senior Vice President, UPM, Plywood Business Area, tel. +358 20
415 0469                                                                        

Timber business - after 11.45 Finnish time:                                     
Mr Tuomo Visanko, Senior Vice President, UPM, Forest and Timber Business Area,  
tel. +358 20  415 6300                                                          
Mr Arto Halonen, Senior Vice President, UPM, Timber, tel. +358 40 823 2877      

UPM, Corporate Communications                                                   
Media Desk, tel. +358 40 588 3284                                               
communications@upm-kymmene.com      

Notes to the editor                                                             

The Heinola plywood mill employs 212 persons and the annual capacity is
approximately 50,000 m³ of birch plywood. 

The Heinola sawmill employs 77 persons and the annual capacity is 120,000 m³ of 
sawn timber.                                                                    

The Kaukas plywood mill employs 298 persons and the annual capacity is
approximately 80,000 m³ of birch plywood. 

The Kaukas sawmill employs around 160 persons and the annual capacity is 500,000
m³ of redwood sawn timber.                                                      

The Kaukas further processing mill employs 25 persons and the annual capacity is
approximately 40,000 m³ of further processed products.                          

Parkano further processing mill employs 64 persons and the annual capacity is   
20,000 m³ of further processed products.                                        

Aureskoski further processing mill employs around 60 persons and the annual     
capacity is 120,000 m³ of further processed products.                           

Savonlinna plywood mill employs around 330 persons. The mills annual capacity is
80,000 m³ of birch plywood. After the planned investment the capacity would be  
120,000 m³.                                                                     

UPM leads the integration of bio and forest industries into a new, sustainable  
and innovation-driven future. Our competitiveness is based on cost leadership   
and change readiness. Our products are made of renewable raw materials and are  
recyclable. UPM consists of three Business Groups: Energy and pulp, Paper, and  
Engineered materials. The Group employs around 24,000 people and it has         
production facilities in 14 countries. In 2008, UPM's sales amounted to EUR 9.5 
billion. UPM's shares are listed on the Helsinki stock exchange.                
www.upm-kymmene.com                                   

UPM offers high-quality WISA plywoods and veneers mainly for construction,      
transport and furniture industries. The sales of UPM Plywood in 2008 were EUR   
530 million and it has about 3,400 employees, of which 2,450 in Finland. UPM has
6 plywood mills and 2 veneer mills in Finland, a plywood and a veneer mill in   
Russia and a plywood mill in Estonia. www.wisa.com                              

UPM Timber produces sawn timber and further processed timber products to        
building and construction industry and joinery. The annual production capacity  
is 2,4 million cubic metres of WISA timber products. UPM Timber has 15          
production units in Austria, Finland, France and Russia. In Finland, UPM        
operates 6 sawmills which are located in Lappeenranta, Kajaani, Pietarsaari,    
Korkeakoski, Heinola and Pori. UPM Timber employs 1,300 people, of which 900 in 
Finland.                                                                        

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

UPM, Corporate Communications                                                   
Media Desk, tel. +358 40 588 3284                                               
communications@upm-kymmene.com                                                  

DISTRIBUTION                                                                    
NASDAQ OMX Helsinki Ltd                                                         
Main media                                                                      
www.upm-kymmene.com