UPM-Kymmene - Half Year financial report

UPM's good performance and favourable market demand continued

UPM-Kymmene Corporation      Half year financial report          25 July 2017 at
9:15 EET

UPM's good performance and favourable market demand continued

Q2 2017 highlights
  * Comparable EBIT increased by 2% to EUR 270 million (264 million in Q2 2016).
  * Favourable market demand continued.
  * High maintenance activity and seasonally higher fixed costs impacted
    comparable EBIT by approximately EUR -20 million compared with Q2 2016, EUR
    -45 million compared with Q1 2017.
  * Solid operating cash flow at EUR 269 million (434 million).
  * Net debt decreased to EUR 1,046 million (1,876 million).
  * UPM announced new focused investments at the Kaukas pulp mill and Tampere
    labelstock factory.

H1 2017 highlights
  * Comparable EBIT increased by 5% to EUR 575 million (545 million in H1 2016).
  * Five business areas increased their comparable EBIT.
  * Growth initiatives contributed to the comparable EBIT growth.
  * Successful mitigation of raw material cost pressures.
  * Strong operating cash flow at EUR 665 million (775 million).
  * UPM announced divestments of hydropower assets in Germany, Austria and the
    US.

Key figures             Q2/2017 Q2/2016 Q1/2017 Q1-Q2/2017 Q1-Q2/2016 Q1-Q4/2016

Sales, EURm               2,464   2,445   2,482      4,946      4,891      9,812

Comparable EBITDA, EURm     349     385     405        755        788      1,560

  % of sales               14.2    15.8    16.3       15.3       16.1       15.9

Operating profit, EURm      269     262     312        581        539      1,135

Comparable EBIT, EURm       270     264     305        575        545      1,143

  % of sales               11.0    10.8    12.3       11.6       11.1       11.6

Profit before tax, EURm     258     250     299        557        513      1,080

  Comparable profit
before tax, EURm            258     252     291        550        519      1,089

Profit for the period,
EURm                        205     198     240        444        425        880

Comparable profit for
the period, EURm            205     200     234        440        425        879

Earnings per share
(EPS), EUR                 0.38    0.37    0.45       0.83       0.80       1.65

  Comparable EPS, EUR      0.39    0.37    0.44       0.82       0.79       1.65

Return on equity (ROE),
%                          10.2    10.1    11.8       10.9       10.9       10.9

Comparable ROE, %          10.2    10.2    11.6       10.8       10.9       10.9

Return on capital
employed (ROCE), %         10.8     9.9    12.0       11.2       10.0       10.5

Comparable ROCE, %         10.8    10.0    11.7       11.1       10.1       10.6

Operating cash flow,
EURm                        269     434     396        665        775      1,686

Operating cash flow per
share, EUR                 0.50    0.81    0.74       1.25       1.45       3.16

Equity per share at end
of period, EUR            15.14   14.36   14.92      15.14      14.36      15.43

Capital employed at the
end of period, EURm       9,965  10,403   9,919      9,965     10,403     10,657

Net debt at the end of
period, EURm              1,046   1,876     807      1,046      1,876      1,131

Net debt to EBITDA
(last 12 m.)               0.68    1.25    0.52       0.68       1.25       0.73

Personnel at the end of
period                   20,096  20,711  19,301     20,096     20,711     19,310


Jussi Pesonen, President and CEO, comments on the Q2 result:

"UPM's comparable EBIT continued on an increasing track in Q2 despite clearly
higher maintenance activity during the quarter. Operating cash flow was solid at
EUR 269 million and net debt decreased to EUR 1,046 million.

Market demand was good and delivery growth continued in most businesses during
the quarter. As expected, the higher maintenance activity resulted in
temporarily higher fixed costs and lower operational efficiency. Moderate cost
inflation continued but was mitigated by our own cost reduction measures and
targeted price increases. Overall business conditions were favourable resulting
in good performance.

UPM Biorefining benefitted from higher pulp prices, strong pulp demand and
improved operational performance in UPM Biofuels. Profitability improved despite
the maintenance shutdown at the UPM Pietarsaari pulp mill. UPM Raflatac and UPM
Plywood maintained strong profitability and continued to show solid sales
growth. UPM Specialty Papers achieved an excellent result. Thanks to the new
specialty paper machine at UPM Changshu we have been able to grow the release
liner business and improve our product mix even faster than expected.

UPM Paper ENA achieved a satisfactory result in the quarter most impacted by
seasonal factors. Demand decline in Europe remained moderate. UPM Energy
suffered from poor hydrological availability and prolonged maintenance activity
at Olkiluoto power plant in Finland. As a result, power generation was
exceptionally low during the quarter.

The focused growth projects over the recent years have been highly successful
and have contributed to our profits and returns well. During the second quarter
we introduced two further focused investments: the Kaukas pulp mill efficiency
and competitiveness improvement in Lappeenranta and the UPM Raflatac specialty
labels expansion in Tampere, both of which are in Finland.

When it comes to longer-term growth, the discussions continue with the
Government of Uruguay concerning infrastructure development and other local
prerequisites for a potential pulp mill investment.

2017 has started well for us. Five out of our six businesses improved their
performance during the first half of the year. Our businesses are performing
well, and our cash flow and balance sheet enable us to distribute attractive
dividend and simultaneously invest in profitable growth. We look confidently
into the future and our opportunities for creating value from bioeconomy."

Outlook for 2017

UPM's profitability improved significantly in 2016 and is expected to continue
on a good level in 2017.

Demand growth is expected to continue for most of UPM's businesses, while demand
decline is expected to continue for UPM Paper ENA. The focused growth projects
continue to contribute gradually to UPM's performance.

Following a deflationary environment in recent years, 2017 is expected to show
modest input cost inflation. UPM will continue measures to reduce fixed and
variable costs to mitigate this.

Q3 2017 is expected to include significantly less maintenance activity than Q2
2017 in UPM Biorefining, UPM Paper ENA and UPM Energy.

Webcast and press conference

UPM's President and CEO Jussi Pesonen will present the financial results in a
webcast and a conference call for analysts and investors, held in English
language, today at 13:15 EET.

Later in the afternoon, Jussi Pesonen will present the results in a press
conference held in Finnish language at the UPM Group Head Office (The Biofore
House) in Helsinki, Alvar Aallon katu 1, at 14:30 EET.

Webcast and conference call details:

The conference call can be participated in either by dialling a number in the
list below or following the webcast online at www.upm.com or through this link.

Only participants who wish to ask questions in the conference call need to dial
in. All participants can view the webcast presentation online. We recommend that
participants start dialling in 5-10 minutes prior to the event in order to
ensure a timely start of the webcast.

The presentation is available at www.upm.com for 12 months after the call.

Conference call title: UPM's Half Year Financial Report 2017

Direct telephone numbers:

BE: +3224040635
DK: +45 823 331 78
FI: +358981710495
UK: +442031940552
NO: +4723500211
SE: +46856642702
US: +18557161597

International telephone numbers with a pin code 65321220#

AU: +61 29253 5844
AT: +43 19282 258
CH: +44 44580 0083
CN: +86 400 681 5421
DE: +49 030 221 510 067
ES: +34 911 143 608
FR: +332 9092 0977
HK: +852 3068 9834
IN: 0018038524634
IR: +353 1696 8154
IT: +39 2 3604 6798
JP: +81 3 4455 9554
NL: +31 20 716 8427
SP: +65 6307 7610

**

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. The main earnings sensitivities and the group's
cost structure are presented on page 115 of the 2016 Annual Report. Risks and
opportunities are discussed on pages 22-23 and risks and risk management are
presented on pages 98-99 of the report.

**

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Stakeholder Relations


UPM, Media Relations
Mon-Fri from 9:00 to 16:00 EET
tel. +358 40 588 3284
media@upm.com

UPM
Through the renewing of the bio and forest industries, UPM is building a
sustainable future across six business areas: UPM Biorefining, UPM Energy, UPM
Raflatac, UPM Specialty Papers, UPM Paper ENA and UPM Plywood. Our products are
made of renewable raw materials and are recyclable. We serve our customers
worldwide. The group employs around 19,300 people and its annual sales are
approximately EUR 10 billion. UPM shares are listed on NASDAQ OMX Helsinki. UPM
- The Biofore Company - www.upm.com

Follow UPM on Twitter | LinkedIn | Facebook | YouTube | Instagram |
upmbiofore.com

UPM presents certain performance measures of performance, financial position and
cash flows, which are alternative performance measures in accordance with the
guidance issued by the European Securities and Markets Authority (ESMA). The
definitions of alternative performance measures are presented in notes to the
consolidated financial statements in UPM Annual Report.

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Attachments:

UPM Half Year Financial Report 2017.pdf