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2008-10-28 08:30:00 CET 2008-10-28 08:30:41 CET REGULATED INFORMATION UPM-Kymmene - Interim report (Q1 and Q3)UPM Interim Report 1 January-30 September 2008UPM-Kymmene Corporation Interim Report 28 October 2008 at 09:30 Operating profit excluding special items was EUR 216 million (195 million). Earnings per share for the third quarter were EUR -0.17 (0.23 for the third quarter of 2007), excluding special items EUR 0.25 (0.23). Higher paper prices together with stringent cost control led to better profitability. UPM continues actions to improve its profitability. Key figures Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/ 2008 2007 2008 2007 2007 Sales, EUR million 2,358 2,467 7,146 7,523 10,035 EBITDA, EUR million 1) 378 366 1,028 1,195 1,546 % of sales 16.0 14.8 14.4 15.9 15.4 Operating profit, -40 195 310 341 483 EUR million excluding special 216 195 559 641 835 items, EUR million Profit before tax, -90 144 159 200 292 EUR million excluding special 160 144 402 500 644 items, EUR million Net profit for the -87 119 106 52 81 period, EUR million Earnings per share, -0.17 0.23 0.21 0.10 0.16 EUR excluding special 0.25 0.23 0.61 0.76 1.00 items, EUR Diluted earnings -0.17 0.23 0.21 0.10 0.16 per share, EUR Return on equity,% neg. 6.9 2.1 1.0 1.2 excluding special 7.8 6.9 6.3 7.5 7.4 items, % Return on capital neg. 6.8 3.7 4.1 4.3 employed, % excluding special 7.7 6.8 6.6 7.6 7.4 items, % Gearing ratio at 67 60 67 60 59 end of period, % Shareholders' 12.54 13.24 12.54 13.24 13.21 equity per share at end of period,EUR Net interest-bearing 4,409 4,120 4,409 4,120 3,973 liabilities at end of period, EUR million Capital employed at 11,310 11,173 11,310 11,173 11,098 end of period, EUR million Capital expenditure, 164 182 438 535 708 EUR million Personnel at end of 25,616 27,550 25,616 27,550 26,352 period 1) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets, the share of results of associated companies and joint ventures, and special items. Results Q3 of 2008 compared with Q3 of 2007 Sales for the third quarter of 2008 were EUR 2,358 million, 4% lower than last year (2,467 million). Paper deliveries decreased by 9%. Operating loss was EUR 40 million, -1.7% of sales (profit of EUR 195 million, 7.9% of sales). Excluding special items, operating profit improved to EUR 216 million, 9.2% of sales (195 million, 7.9% of sales). Special items in operating profit totalled EUR -256 million net, including a EUR 230 million goodwill impairment charge in the Newsprint Division and a EUR 30 million fixed asset impairment charge in the Wood Products Division. Operating profit excluding special items improved mainly due to higher average paper prices and improved share of results from the associated companies. Translated into euros, the average paper prices were approximately 5% higher than last year. Fixed costs decreased. Paper divisions' combined operating profit improved. Profitability in Label Materials and Wood Products was weak. The increase in the fair value of biological assets, net of wood harvested, was EUR 4 million (21 million). The share of results of associated companies and joint ventures improved to EUR 35 million (14 million). Loss before tax was EUR 90 million (profit of EUR 144 million). Excluding special items, profit before tax was EUR 160 million (144 million). Interest and other finance costs, net, were EUR 50 million (42 million). Exchange rate and fair value gains and losses were zero (loss of EUR 9 million). Income taxes were EUR 3 million positive (charges of EUR 25 million). Taxes include income of EUR 28 million arising from decreased deferred tax liabilities, related to the goodwill impairment in the Newsprint Division. Loss for the third quarter was EUR 87 million (profit of EUR 119 million). Earnings per share were EUR -0.17 (0.23) and excluding special items EUR 0.25 (0.23). January-September of 2008 compared with January-September of 2007 Sales for January-September were EUR 7,146 million, 5% lower than the EUR 7,523 million in the same period in 2007. Operating profit was EUR 310 million, 4.3% of sales (341 million, 4.5% of sales) and excluding special items EUR 559 million, 7.8% of sales (641 million, 8.5% of sales). Sales decreased partly due to lower deliveries and partly due to the divestment of the Walki Wisa industrial wrappings business in June 2007. Furthermore, both GBP and USD depreciated against the euro, affecting sales. The operating profit excluding special items declined mainly due to the increase in wood costs, lower paper deliveries and the decline in sawn timber prices. Recovered paper, purchased electricity and fuel prices were also higher than last year. Fixed costs declined, and the net increase in cost level was below 2%. Paper divisions' combined operating profit excluding special items declined to EUR 296 million (334 million). Average paper prices increased approximately 2% from last year. However, paper deliveries decreased by 5%. Production was stopped in the Miramichi paper mill in Canada in August 2007, and the mill was permanently closed at the end of the year. Label Materials' operating profit excluding special items declined to EUR 5 million from last year's EUR 41 million, mainly due to higher raw material and fixed costs. Further weakening of sawn timber markets led to lower prices which combined with the high wood costs caused the Wood Products Division to report an operating loss excluding special items of EUR 18 million (profit of EUR 71 million). In Other Operations, the Energy Department in Finland improved its operating profit to EUR 127 million (70 million), benefiting from good availability of hydropower and increased electricity price. The increase in the fair value of biological assets net of wood harvested was EUR 52 million (32 million). The share of results of associated companies and joint ventures was EUR 78 million (41 million). The improvement came from Metsä-Botnia's new pulp mill in Uruguay, started up in October 2007, which more than compensated for the weakened profitability in Metsä-Botnia's Finnish operations. Profit before tax was EUR 159 million (200 million) and excluding special items EUR 402 million (500 million). Interest and other finance costs, net, were EUR 142 million (145 million). Exchange rate and fair value gains and losses resulted in a loss of EUR 11 million (gain of EUR 2 million). Income taxes were EUR 53 million (148 million), and the effective tax rate excluding the impact of special items was 22% (24%). Profit for the period was EUR 106 million (52 million). Earnings per share were EUR 0.21 (0.10) and excluding special items EUR 0.61 (0.76). Operating cash flow per share was EUR 0.52 (1.09). Paper deliveries Paper deliveries for the first nine months amounted to 8,048,000 tonnes (8,472,000). Magazine paper deliveries totalled 3,383,000 tonnes (3,610,000), newsprint 1,898,000 tonnes (1,980,000), and fine and speciality papers 2,767,000 tonnes (2,882,000). Financing In January-September, cash flow from operating activities, before capital expenditure and financing, was EUR 271 million (573 million). The increase in working capital amounted to EUR 329 million (271 million), of which about one third is attributable to wood procurement operations. Wood inventories at the end of September 2008 were significantly higher than they were a year ago as UPM pursues to secure the availability of wood raw material in Finland. The cash flow from operations was also negatively affected by a one-time cash contribution for changing the UK pension plans from defined benefit to defined contribution, and settlement of the restructuring provisions related to the closure of the Miramichi paper mill in 2007. As of 30 September, the gearing ratio was 67% (60% as of 30 September 2007). Equity to assets ratio on 30 September was 46.7% (49.1%). Net interest-bearing liabilities at the end of the period were EUR 4,409 million (4,120 million). Personnel In January-September, UPM had an average of 26,283 employees (28,830 employees for the same period last year). The number of employees at the end of September was 25,616 (27,550). Capital expenditure For the first nine months of the year, gross capital expenditure was EUR 438 million, 6.1% of sales (535 million, 7.1% of sales). The largest ongoing investment, worth approximately EUR 90 million, is the building of a new self-adhesive label materials factory in Poland. The project is scheduled for start-up in the fourth quarter of 2008. UPM is building a new power plant at its Caledonian mill in Irvine, Scotland. The total investment cost is EUR 75 million. The new bioboiler is scheduled to start in the third quarter of 2009. Restructuring In September UPM announced plans to close its least competitive paper and pulp capacity in Finland. The company is planning possible closures of the Kajaani paper mill (annual capacity 640,000 tons of newsprint, special newsprint and uncoated SC magazine papers) and the Tervasaari pulp mill (annual capacity 210,000 tons of pulp) by the end of 2008. UPM has started cooperation negotiations with the employee representatives in the Kajaani and Tervasaari mills affecting 535 and 150 employees, respectively. The planned actions to close capacity are estimated to provide a positive EBITDA impact. In case the closures are implemented as planned, UPM will book in the fourth quarter of 2008 approximately EUR 170 million write-off in fixed assets and make a provision of about EUR 30 million for the reduction in the number of employees, and for other closure costs. UPM is also planning measures to improve efficiency in all of the company's business groups and functions. A preliminary estimate on the number of employees affected by these measures is around 950. The streamlining of operations is expected to result in annual savings of about EUR 70 million in fixed costs. If all above mentioned measures are completed as planned, the Group's total number of employees will decline by around 1,600 in 2009-2010. In August, UPM decided to close the Leivonmäki sawmill (annual capacity of 80,000 cubic meters of spruce sawn timber). The operations will cease during 2008. UPM's Label Division plans to undertake restructuring of its European operations in 2009-2010. A detailed plan will be announced later this year. New business structure In September UPM announced that it will adopt a completely new business structure. The company will consist of three Business Groups: Energy and Pulp, Paper, and Engineered Materials. The change will take effect on 1 December, 2008. When the new business structure is in effect, the company will report financial information for the following six segments: Energy, Pulp, Forest and Timber, Paper, Label Materials, and Plywood. The Energy and Pulp segments will include shares of corresponding associated companies. Historical financial figures for the period from the first quarter of 2007 to the third quarter of 2008 according to the new structure will be published in December 2008. Shares UPM shares worth EUR 7,963 million in total were traded on the NASDAQ OMX Helsinki Ltd (12,812 million) during January-September. The highest quotation was EUR 13.87, in January, and the lowest EUR 9.67, in July. The Annual General Meeting held on 26 March 2008 approved a proposal to authorise the Board of Directors to decide to buy back not more than 51,000,000 own shares. The authorisation is valid for 18 months from the date of the decision. As of the end of September, this authorisation had not been exercised. On the basis of the decisions of the Annual General Meeting of 27 March 2007, the Board has the authority to decide on a free issue of shares to the company itself so that the total number of shares to be issued to the company combined with the number of own shares bought back under the buyback authorisation may not exceed 1/10 of the total number of shares of the company. In addition, the Board has the authority to decide to issue shares and special rights entitling the holder to shares of the company. The number of new shares to be issued, including shares to be obtained under special rights, shall be no more than 250,000,000. Of that, the maximum number that may be issued to the company's shareholders based on their pre-emptive rights is 250,000,000 shares and the maximum amount that can be issued deviating from the shareholders' pre-emptive rights in a directed share issue is 100,000,000 shares. The maximum number of new shares to be issued as part of the company's incentive programmes is 5,000,000 shares. Furthermore, the Board is authorised to decide on the disposal of own shares. These authorisations of the 2007 Annual General Meeting will remain valid for no more than three years from the date of the decision. To date this authorisation has not been exercised. In January-September 7,393,296 shares were subscribed for through exercising of outstanding share options. The number of shares entered in the Trade Register as of 30 September 2008 was 519,968,088. Through the issuance authorisation and share options, the number of shares may increase to a maximum of 793,966,088. Apart from the above, the Board of Directors has no current authorisation to issue shares, convertible bonds or share options. On 26 September 2008 UPM applied for listing of 2005H stock options on the NASDAQ OMX Helsinki Ltd to start 1 October. The total number of stock options is 3,000,000, each entitling to subscription of one share. Litigation Certain competition authorities are continuing investigations into alleged antitrust activities with respect to various products of the company. The US Department of Justice, the EU authorities and the authorities in several EU Member States, Canada, and certain other countries have granted UPM conditional full immunity with respect to certain conduct disclosed to them. The US and Canadian investigations are closed, and the European Commission has tentatively closed its investigation of the European fine paper, newsprint, magazine paper, label paper, and self-adhesive labelstock markets. UPM has been named as a defendant in multiple class-action lawsuits against labelstock and magazine paper manufacturers in the United States. UPM has agreed to settle the class-action lawsuits raised by direct purchasers of labelstock and magazine paper. Certain class-action lawsuits filed by indirect purchasers of labelstock and magazine paper continue to be pending. The remaining litigation matters may last several years. No material provisions have been made in relation to these investigations. Events after the balance sheet date The Group's management is not aware of any significant events occurring after 30 September 2008. Risk factors Rapid downgrades in European and global economic growth forecasts have considerably increased uncertainties about 2009 business environment including cost development and demand of UPM's products. If implemented, the third increase in the export duty on Russian wood from the beginning of 2009 will make imports of round wood uneconomical. Finnish industry, including UPM, has announced plans to close wood consuming capacity in Finland. Despite these efforts, there is a high risk that the imports cannot be fully replaced in a financially sound manner in 2009. Outlook Paper demand in Europe is expected to be lower than last year. In North America, continued decline in demand persists. Demand growth in China is slowing down. For the fourth quarter of the year UPM's paper deliveries are expected to be over 200,000 tons less than last year. Group's average paper price in euro is expected to be unchanged from the third quarter of 2008. Market demand for self-adhesive labelstock is forecast to be lower than last year both in Europe and North America. In Asia, growth in demand continues although at a clearly slower pace. Self-adhesive labelstock prices in local currencies are expected to increase in key markets. In Wood Products, market balance is expected to further soften both in birch and spruce plywood. In sawn timber, weak market continues. Combined with high cost of wood raw material, the result is not expected to improve from the loss made in the third quarter. Wood fibre costs are expected to stay at the current high level. However, due to cost savings from the ongoing profitability actions, an increase in the company's overall costs for the full year is still expected to be about 2%. Demand outlook of UPM's businesses for the fourth quarter has weakened from the outlook presented at the end of the second quarter. UPM's operating profit for the fourth quarter of 2008, excluding special items and changes in the fair value of biological assets, is estimated to be about the same as last year. Divisional reviews Magazine Papers Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Sales, EUR million 806 767 781 811 847 798 793 2,354 2,438 EBITDA, EUR million 1) 157 125 120 98 116 114 113 402 343 % of sales 19.5 16.3 15.4 12.1 13.7 14.3 14.2 17.1 14.1 Depreciation, -76 -77 -76 -83 -82 -443 -86 -229 -611 amortisation and impairment charges, EUR million Operating profit, 81 49 44 -62 34 -339 27 174 -278 EUR million % of sales 10.0 6.4 5.6 -7.6 4.0 -42.5 3.4 7.4 -11.4 Special items, EUR - 1 - -77 - -371 - 1 -371 million 2) Operating profit 81 48 44 15 34 32 27 173 93 excl. special items, EUR million % of sales 10.0 6.3 5.6 1.8 4.0 4.0 3.4 7.3 3.8 Deliveries, 1,000t 1,140 1,107 1,136 1,238 1,266 1,189 1,155 3,383 3,610 Q1-Q4/ 07 Sales, EUR million 3,249 EBITDA, EUR million1) 441 % of sales 13.6 Depreciation, -694 amortisation and impairment charges, EUR million Operating profit, -340 EUR million % of sales -10.5 Special items, EUR -448 million 2) Operating profit 108 excl. special items, EUR million % of sales 3.3 Deliveries, 1,000t 4,848 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) Special items for the second quarter of 2007 include a goodwill impairment charge of EUR 350 million, an impairment charge of EUR 22 million and personnel costs of EUR 10 million related to the Miramichi paper mill, and an income of EUR 11 million related to impairment reversals. For the fourth quarter, special items include personnel expenses of EUR 44 million and other costs of EUR 36 million related to the Miramichi paper mill, and an income of EUR 3 million related to other restructuring measures. Q3 of 2008 compared with Q3 of 2007 Operating profit, excluding special items, for Magazine Papers improved to EUR 81 million (34 million). Sales were EUR 806 million (847 million). Paper deliveries decreased by 10% to 1,140,000 tonnes (1,266,000). Profitability improved due to higher paper prices. The average price for all magazine paper deliveries translated into euros increased by about 6%. January-September 2008 compared with January-September 2007 Operating profit, excluding special items, for Magazine Papers was EUR 173 million (93 million). Sales were EUR 2,354 million (2,438 million). Paper deliveries declined by 6% to 3,383,000 tonnes (3,610,000). The production of the Miramichi paper mill in Canada, with annual capacity of 450,000 tonnes and representing 8% of capacity of UPM's Magazine Papers, was stopped in August 2007. Profitability of the division improved. Magazine paper prices in local currencies increased in all the main markets. The average price for all magazine paper deliveries translated into euros, increased by over 2% from last year. Lower fixed costs mitigated the rise in fibre and energy costs. The strengthened euro impacted profitability negatively. Market review Magazine paper demand in Europe increased during the first six months but weakened slightly toward the end of the period. Demand was at last year's level for coated magazine paper, and for uncoated magazine paper increased by about 6%. North American demand for magazine papers was weak. Coated magazine paper demand declined by about 11%, and demand for uncoated magazine paper declined by about 2%. The average market price for magazine papers in Europe increased by about 1% from last year. In North America, US dollar prices increased by about 21%. Market prices in local currencies increased across all markets. Newsprint Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Sales, EUR million 331 332 332 378 365 379 348 995 1,092 EBITDA, EUR million 1) 62 57 60 79 91 100 92 179 283 % of sales 18.7 17.2 18.1 20.9 24.9 26.4 26.4 18.0 25.9 Depreciation, -275 -46 -46 -48 -47 -47 -48 -367 -142 amortisation and impairment charges, EUR million Operating profit, -213 11 15 36 44 53 44 -187 141 EUR million % of sales -64.4 3.3 4.5 9.5 12.1 14.0 12.6 -18.8 12.9 Special items, EUR -230 - 1 5 - - - -229 - million 2) Operating profit 17 11 14 31 44 53 44 42 141 excl. special items, EUR million % of sales 5.1 3.3 4.2 8.2 12.1 14.0 12.6 4.2 12.9 Deliveries, 1,000 t 620 642 636 702 667 683 630 1,898 1,980 Q1-Q4/ 07 Sales, EUR million 1,470 EBITDA, EUR million 1) 362 % of sales 24.6 Depreciation, -190 amortisation and impairment charges, EUR million Operating profit, 177 EUR million % of sales 12.0 Special items, EUR 5 million 2) Operating profit 172 excl. special items, EUR million % of sales 11.7 Deliveries, 1,000 t 2,682 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) Special items for the third quarter of 2008 include a goodwill impairment charge of EUR 230 million. Special items for the fourth quarter of 2007 include an income of EUR 5 million related to restructuring measures. Q3 of 2008 compared with Q3 of 2007 Operating profit, excluding special items, for Newsprint decreased from EUR 44 million to EUR 17 million. Sales were EUR 331 million (365 million). Paper deliveries decreased by 7% to 620,000 tonnes (667,000). The average price for all newsprint deliveries when translated into euros was almost 3% lower than in the corresponding period in 2007. The division recorded a EUR 230 million impairment charge from the division's goodwill. The primary drivers for the impairment are lower-than-forecasted realised newsprint market demand in Europe and continued overcapacity in Europe together with increased costs. January-September 2008 compared with January-September 2007 Operating profit, excluding special items, for Newsprint decreased from EUR 141 million to EUR 42 million. Sales for the first nine months were EUR 995 million (1,092 million). Paper deliveries decreased by 4% to 1,898,000 tonnes (1,980,000). Kajaani PM4 (annual capacity of 250,000 tonnes) has been closed since February. The profitability of the division weakened due to lower paper prices and volume in Europe, the stronger euro against GBP and higher costs. The average price for all newsprint deliveries when translated into euros was about 5% lower than a year ago. Recycled fibre, wood and energy costs were higher, but fixed costs were lower. Market review In Europe, demand for standard and improved newsprint decreased almost 3% from January-September 2007. Demand was hit by the weakening economy and lower advertising. The average market price for standard newsprint in Europe was about 7% lower than last year. In North America, average prices of newsprint increased, but demand continued to decrease. In the overseas markets, the positive demand trend continued and prices increased. Fine and Speciality Papers Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Sales, EUR million 674 686 726 718 694 686 699 2,086 2,079 EBITDA, EUR million 1) 89 71 84 66 82 92 85 244 259 % of sales 13.2 10.3 11.6 9.2 11.8 13.4 12.2 11.7 12.5 Depreciation, -57 -53 -53 -54 -53 -53 -53 -163 -159 amortisation and impairment charges, EUR million Operating profit, 35 18 31 12 29 39 32 84 100 EUR million % of sales 5.2 2.6 4.3 1.7 4.2 5.7 4.6 4.0 4.8 Special items, EUR 3 - - - - - - 3 - million Operating profit 32 18 31 12 29 39 32 81 100 excl. special items, EUR million % of sales 4.7 2.6 4.3 1.7 4.2 5.7 4.6 3.9 4.8 Deliveries, 1,000 t 863 923 981 977 954 960 968 2,767 2,882 Q1-Q4/ 07 Sales, EUR million 2,797 EBITDA, EUR million1) 325 % of sales 11.6 Depreciation, -213 amortisation and impairment charges, EUR million Operating profit, 112 EUR million % of sales 4.0 Special items, EUR - million Operating profit 112 excl. special items, EUR million % of sales 4.0 Deliveries, 1,000 t 3,859 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. Q3 of 2008 compared with Q3 of 2007 Operating profit, excluding special items, for Fine and Speciality Papers was EUR 32 million (29 million). Sales decreased to EUR 674 million (694 million). Paper deliveries totalled 863,000 tonnes (954,000). The average price for all fine and speciality paper deliveries when translated into euros was about 7% higher than a year ago. The division reduced production at the Nordland paper mill by temporary closure of PM2. The Docelles mill was temporarily closed for the whole August month. January-September 2008 compared with January-September 2007 Operating profit, excluding special items, for Fine and Speciality Papers decreased from EUR 100 million to EUR 81 million. Sales increased from EUR 2,079 million to 2,086 million. Paper deliveries came to 2,767,000 tonnes (2,882,000). The profitability of the division weakened from last year's level. Wood and pulp costs were markedly higher than last year. The fixed costs were lower. The average paper prices were about 4% higher. In Asia, the average prices increased significantly and in Europe, the product and market mix improved. Market review In Europe, demand for coated fine paper was at last year's level. Demand for uncoated fine paper decreased by about 3%. In Europe, the average market price for coated fine paper was about 4% lower than last year, and the average price for uncoated fine paper was about 1% lower than last year. In Asia, demand and prices for fine paper increased, but the market stabilised after the strong increase in the earlier part of the year. Demand for label papers continued at a good level but that for packaging was slowing down toward the end of the period. Label Materials Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Sales, EUR million 244 252 249 249 252 260 261 745 773 EBITDA, EUR million 1) 8 14 9 15 18 21 26 31 65 % of sales 3.3 5.6 3.6 6.0 7.1 8.1 10.0 4.2 8.4 Depreciation, -9 -8 -9 -9 -8 -8 -8 -26 -24 amortisation and impairment charges, EUR million Operating profit, -1 6 0 10 10 13 18 5 41 EUR million % of sales -0.4 2.4 0.0 4.0 4.0 5.0 6.9 0.7 5.3 Special items, EUR - - - 4 - - - - - million 2) Operating profit -1 6 0 6 10 13 18 5 41 excl. special items, EUR million % of sales -0.4 2.4 0.0 2.4 4.0 5.0 6.9 0.7 5.3 Q1-Q4/ 07 Sales, EUR million 1,022 EBITDA, EUR million 1) 80 % of sales 7.8 Depreciation, -33 amortisation and impairment charges, EUR million Operating profit, 51 EUR million % of sales 5.0 Special items, EUR 4 million 2) Operating profit 47 excl. special items, EUR million % of sales 4.6 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) Special items in the fourth quarter of 2007 include an income of EUR 4 million related to restructuring measures. Q3 of 2008 compared with Q3 of 2007 Operating profit, excluding special items, for Label Materials decreased from EUR 10 million to a EUR 1 million loss. Sales were EUR 244 million (252 million). Labelstock delivery volumes decreased slightly in Europe and North America but increased in Asia-Pacific from the same period last year. January-September 2008 compared with January-September 2007 Operating profit, excluding special items, for Label Materials was EUR 5 million (41 million). Sales decreased by 4% to EUR 745 million (773 million). Labelstock delivery volumes increased slightly in Europe and the Americas and significantly in Asia-Pacific. RFID delivery volumes were higher than last year but growth in demand slowed toward end of the period. The profitability of the division weakened. The main reasons were significant increases in raw material and distribution costs. Also, fixed costs have increased due to the start-up of the Dixon labelstock and Guangzhou RFID factories, as well as ongoing investment in the Wroclaw labelstock factory, which is scheduled for start-up in the fourth quarter of 2008. In addition, the strengthened euro and lower prices in invoicing currencies during the beginning of the year impacted profitability negatively. The price increases implemented during the second and third quarter of 2008 offset only partly the cost increases. The division launched an internal profitability improvement programme in the second quarter of 2008 and plans to undertake restructuring of its European operations in 2009-2010. Market review Due to the weakening economy and consumer demand, label material demand in North America is estimated to have decreased during the first nine months of the year. In Europe, demand continued to grow in the first half of the year, but it started to decline slightly during the third quarter. In Asia, the solid demand growth continued even though in some areas grew at a slower pace than last year. Wood Products Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Sales, EUR million 237 293 298 297 262 326 314 828 902 EBITDA, EUR million 1) -19 13 19 26 8 51 42 13 101 % of sales -8.0 4.4 6.4 8.8 3.1 15.6 13.4 1.6 11.2 Depreciation, -41 -10 -11 -11 -10 -11 -10 -62 -31 amortisation and impairment charges, EUR million Operating profit, -61 6 8 21 -2 41 32 -47 71 EUR million % of sales -25.7 2.0 2.7 7.1 -0.8 12.6 10.2 -5.7 7.9 Special items, EUR -32 3 - 6 - - - -29 - million 2) Operating profit -29 3 8 15 -2 41 32 -18 71 excl. special items, EUR million % of sales -12.2 1.0 2.7 5.1 -0.8 12.6 10.2 -2.2 7.9 Deliveries, plywood 195 236 241 239 204 247 255 672 706 1,000 m3 Deliveries, sawn 494 601 560 520 480 637 587 1,655 1,704 timber 1,000 m3 Q1-Q4/ 07 Sales, EUR million 1,199 EBITDA, EUR million 1) 127 % of sales 10.6 Depreciation, -42 amortisation and impairment charges, EUR million Operating profit, 92 EUR million % of sales 7.7 Special items, EUR 6 million 2) Operating profit 86 excl. special items, EUR million % of sales 7.2 Deliveries, plywood 945 1,000 m3 Deliveries, sawn 2,224 timber 1,000 m3 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) Special items in the second quarter of 2008 include reversals of provisions related to the Kuopio plywood mill disposed in June. Special items in the third quarter of 2008 include an impairment charge of EUR 30 million related to fixed assets of the Finnish sawmills. In the fourth quarter of 2007, special items include a gain of EUR 6 million on sale of estate assets. Q3 of 2008 compared with Q3 of 2007 Operating loss, excluding special items, for Wood Products was EUR 29 million (loss of EUR 2 million). Sales decreased by 10% to EUR 237 million (262 million). Plywood deliveries totalled 195,000 cubic metres (204,000) and sawn timber deliveries 494,000 cubic metres (480,000). The Wood Products Division recorded a EUR 30 million impairment charge in the fixed assets of the Finnish sawmills. The primary reasons for the impairment are the increased cost of wood raw material, weakened demand for sawn timber in the main markets and lower sawn timber prices. It was decided to close Leivonmäki sawmill (annual capacity of 80,000 cubic meters of spruce sawn timber). The operations will cease during 2008. January-September 2008 compared with January-September 2007 Operating profit, excluding special items, for Wood Products decreased from a profit of EUR 71 million profit to a loss of EUR 18 million. Sales decreased by 8% to EUR 828 million (902 million). Plywood deliveries totalled 672,000 cubic metres (706,000) and sawn timber deliveries 1,655,000 cubic metres (1,704,000). The profitability of the division weakened, as sawn timber prices declined and wood costs remained at a high level. Sawn timber production at Finnish mills was reduced during the period under review. The profitability of plywood remained good in the first half of the year but started weakening in the third quarter. The new Otepää production line (annual capacity of 25,000 cubic meters of birch plywood) was opened in September. Luumäki timber components and planing mills were closed down in June. Market review Plywood demand in Europe started slowing down during the period. Plywood market prices were higher than a year ago. The market balance for sawn timber weakened substantially in Europe and demand for both redwood and whitewood sawn timber decreased. Sawn timber prices continued to decrease. The weakening economy impacted the market situation negatively in all main markets both in plywood and in sawn timber. Other Operations EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Sales 1) 189 194 168 188 173 214 234 551 621 EBITDA 2) 81 33 45 67 51 32 60 159 143 Depreciation, -4 -5 -4 -31 -6 -5 -10 -13 -21 amortisation and impairment charges Operating profit Forestry 22 31 37 61 43 34 28 90 105 Energy Department, 57 32 38 42 23 19 28 127 70 Finland Other and 5 -17 -2 20 - 59 -9 -14 50 eliminations Operating profit, 84 46 73 123 66 112 47 203 225 total Special items 3) 3 -2 4 10 - 71 - 5 71 Operating profit, 81 48 69 113 66 41 47 198 154 excluding special items EUR million Q1-Q4/ 07 Sales 1) 809 EBITDA 2) 210 Depreciation, -52 amortisation and impairment charges Operating profit Forestry 166 Energy Department, 112 Finland Other and 70 eliminations Operating profit, 348 total Special items 3) 81 Operating profit, 267 excluding special items 1) Includes sales outside the Group. 2) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and special items. 3) Special items for the first quarter of 2008 include adjustment to sales of disposals in 2007. Other special items in 2008 relate to restructuring measures. Special items for the second quarter of 2007 include capital gains of EUR 42 million related to the sale of UPM-Asunnot and EUR 29 million related to the sale of Walki Wisa. In the fourth quarter, special items include a capital gain of EUR 58 million on the sale of port operators Rauma Stevedoring and Botnia Shipping, a compensation charge of EUR 12 million related to class-action lawsuits in the US, impairment charges of EUR 31 million related mainly to Miramichi's forestry and sawmilling operations, and other restructuring costs of EUR 5 million. Q3 of 2008 compared with Q3 of 2007 Excluding special items, operating profit for Other Operations was EUR 81 million (66 million). Sales came to EUR 189 million (173 million). The operating profit of Forestry was EUR 22 million (43 million). The increase in the fair value of biological assets (growing trees) was EUR 34 million (49 million). The cost of wood raw material harvested from the Group's forests was EUR 30 million (28 million). The net effect was EUR 4 million (21 million). The operating profit of the Energy Department in Finland was EUR 57 million (23 million). The higher spot prices together with high hydropower volumes have had positive effect. January-September 2008 compared with January-September 2007 Excluding special items, operating profit for Other Operations was EUR 198 million (154 million). Sales were EUR 551 million (621 million). The operating profit of Forestry was EUR 90 million (105 million). The increase in the fair value of biological assets net of wood harvested was EUR 52 million (32 million), including the increase of EUR 126 million (121 million) in the value of growing trees and the cost of EUR 74 million (89 million) for wood raw material harvested from own forests. The operating profit of the Energy Department in Finland was EUR 127 million (70 million). The spot prices were higher and hydropower availability was very good, lowering the average cost of energy generation. Associated companies and joint ventures EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 08 08 08 07 07 07 07 08 07 Oy Metsä-Botnia Ab 44 20 26 6 19 12 21 90 52 Pohjolan Voima Oy -8 -2 -5 -4 -5 -5 - -15 -10 Other -1 3 1 - - -1 - 3 -1 Total 35 21 22 2 14 6 21 78 41 EUR million Q1-Q4/ 07 Share of result after tax Oy Metsä-Botnia Ab 58 Pohjolan Voima Oy -14 Other -1 Total 43 Deliveries Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 08 08 08 07 07 07 07 08 Paper deliveries Magazine papers, 1,140 1,107 1,136 1,238 1,266 1,189 1,155 3,383 1,000 t Newsprint, 1,000 t 620 642 636 702 667 683 630 1,898 Fine and speciality 863 923 981 977 954 960 968 2,767 papers, 1,000 t Paper deliveries 2,623 2,672 2,753 2,917 2,887 2,832 2,753 8,048 total Wood products deliveries Plywood, 1,000 m3 195 236 241 239 204 247 255 672 Sawn timber, 1,000 m3 510 628 573 537 505 666 617 1,711 Q1-Q3/ Q1-Q4/ 07 07 Paper deliveries Magazine papers, 3,610 4,848 1,000 t Newsprint, 1,000 t 1,980 2,682 Fine and speciality 2,882 3,859 papers, 1,000 t Paper deliveries 8,472 11,389 total Wood products deliveries Plywood, 1,000 m3 706 945 Sawn timber, 1,000 m3 1,788 2,325 Helsinki, 28 October 2008 UPM-Kymmene Corporation Board of Directors Financial information This Interim Report is unaudited Consolidated income statement EUR million Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/ 2008 2007 2008 2007 2007 Sales 2,358 2,467 7,146 7,523 10,035 Other operating 23 15 74 113 200 income Costs and expenses -1,998 -2,116 -6,180 -6,380 -8,650 Change in fair 4 21 52 32 79 value of biological assets and wood harvested Share of results of 35 14 78 41 43associated companies and joint ventures Depreciation, -462 -206 -860 -988 -1,224 amortisation and impairment charges Operating profit -40 195 310 341 483 Gains on - - 2 2 2 available-for-sale investments, net Exchange rate and - -9 -11 2 -2 fair value gains and losses Interest and other -50 -42 -142 -145 -191 finance costs, net Profit before tax -90 144 159 200 292 Income taxes 3 -25 -53 -148 -211 Profit for the -87 119 106 52 81 period Attributable to: Equity holders of -86 120 108 53 85 the parent company Minority interest -1 -1 -2 -1 -4 -87 119 106 52 81 Earnings per share for profit attributable to the equity holders of the parent company Basic earnings per -0.17 0.23 0.21 0.10 0.16 share, EUR Diluted earnings -0.17 0.23 0.21 0.10 0.16 per share, EUR Condensed consolidated balance sheet EUR million 30.09.2008 30.09.2007 31.12.2007 ASSETS Non-current assets Goodwill 933 1,163 1,163 Other intangible 431 408 392 assets Property, plant and 6,012 6,276 6,179 equipment Biological assets 1,140 1,051 1,095 Investments in 1,278 1,188 1,193 associated companies and joint ventures Deferred tax assets 272 316 284 Other non-current 452 290 333 assets 10,518 10,692 10,639 Current assets Inventories 1,527 1,325 1,342 Trade and other 1,838 1,824 1,735 receivables Cash and cash 136 121 237 equivalents 3,501 3,270 3,314 Assets held for - 41 - sale Total assets 14,019 14,003 13,953 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital 890 890 890 Treasury shares - -197 - Fair value and -42 77 35 other reserves Reserve for invested 1,145 1,067 1,067 non-restricted equity Retained earnings 4,527 5,010 4,778 6,520 6,847 6,770 Minority interest 14 16 13 Total equity 6,534 6,863 6,783 Non-current liabilities Deferred tax 717 753 745 liabilities Non-current 4,399 3,115 3,384 interest-bearing liabilities Other non-current 588 584 624 liabilities 5,704 4,452 4,753 Current liabilities Current 378 1,195 931 interest-bearing liabilities Trade and other 1,403 1,483 1,486 payables 1,781 2,678 2,417 Liabilities related - 10 - to assets held for sale Total liabilities 7,485 7,140 7,170 Total equity and 14,019 14,003 13,953 liabilities Consolidated statement of changes in equity Attributable to equity holders of the parent EUR million Share Share Treasury Translation Fair capital premium shares differences value reserve and other reserves Balance at 890 826 - -89 278 1 January 2007 Translation differences - - - -16 - Other items - - - - -2 Net investment hedge, - - - - - net of tax Cash flow hedges fair value - - - - 43 gains/losses, net of tax transfers from - - - - -25 equity, net of tax Available-for-sale investments transfers to income - - - - -2 statement, net of tax Profit for the - - - - - period Total recognised - - - -16 14 income and expense for the period Acquisition of - - -197 - - treasury shares Share options - - - - - exercised Share-based - - - - 12 compensation, net of tax Dividend paid - - - - - Transfers and other - -826 - - -122 Business combinations - - - - - Total of other - -826 -197 - -110 changes in equity Balance at 30 September2007 890 - -197 -105 182 Balance at 1 January 2008 890 - - -158 193 Translation differences - - - -2 - Other items - - - - -1 Net investment - - - -5 - hedge, net of tax Cash flow hedges fair value gains/losses, - - - - 6 net of tax transfers from equity, - - - - -57 net of tax Available-for-sale investments transfers to income - - - - - statement, net of tax Profit for the period - - - - - Total recognised income - - - -7 -52 and expense for the period Share options exercised - - - - - Share-based compensation, - - - - -18 net of tax Dividend paid - - - - - Business combinations - - - - - Total of other - - - - -18 changes in equity Balance at 30 September2008 890 - - -165 123 EUR million Reserve for Retained Total Minority Total invested earnings interest equity non-restricted equity Balance at 1 January 2007 - 5,366 7,271 18 7,289 Translation differences - - -16 - -16 Other items - -1 -3 - -3 Net investment - - - - - hedge, net of tax Cash flow hedges fair value gains/losses, - - 43 - 43 net of tax transfers from - - -25 - -25 equity, net of tax Available-for-sale investments transfers to income - - -2 - -2 statement, net of tax Profit for the period - 53 53 -1 52 Total recognised income - 52 50 -1 49 and expense for the period Acquisition of - - -197 - -197 treasury shares Share options exercised 104 - 104 - 104 Share-based compensation, - - 12 - 12 net of tax Dividend paid - -392 -392 - -392 Transfers and other 963 -16 -1 -1 -2 Business combinations - - - - - Total of other 1,067 -408 -474 -1 -475 changes in equity Balance at 30 September 2007 1,067 5,010 6,847 16 6,863 Balance at 1 January 2008 1,067 4,778 6,770 13 6,783 Translation differences - - -2 - -2 Other items - 4 3 - 3 Net investment hedge, - - -5 - -5 net of tax Cash flow hedges fair value - - 6 - 6 gains/losses, net of tax transfers from equity, - - -57 - -57 net of tax Available-for-sale investments transfers to income - - - - - statement, net of tax Profit for the period - 108 108 -2 106 Total recognised income - 112 53 -2 51 and expense for the period Share options exercised 78 - 78 - 78 Share-based compensation, - 21 3 - 3 net of tax Dividend paid - -384 -384 - -384 Business combinations - - - 3 3 Total of other 78 -363 -303 3 -300 changes in equity Balance at 30 September 2008 1,145 4,527 6,520 14 6,534 Condensed consolidated cash flow statement EUR million Q1-Q3/ Q1-Q3/ Q1-Q4 / 2008 2007 2007 Cash flow from operating activities Profit for the period 106 52 81 Adjustments, total 786 1,096 1,390 Change in working -329 -271 -204 capital Cash generated from 563 877 1,267 operations Finance costs, net -223 -162 -236 Income taxes paid -69 -142 -164 Net cash from 271 573 867 operating activities Cash flow from investing activities Acquisitions and -7 -13 -25 share purchases Purchases of -453 -520 -673 intangible and tangible assets Asset sales and other 41 186 273 investing cash flow Net cash used in -419 -347 -425 investing activities Cash flow from financing activities Change in loans and 352 154 152 other financial items Share options exercised 78 104 104 Dividends paid -384 -392 -392 Purchase of own shares - -169 -266 Net cash used in 46 -303 -402 financing activities Change in cash and -102 -77 40 cash equivalents Cash and cash 237 199 199 equivalents at beginning of period Foreign exchange effect 1 -1 -2 on cash Change in cash and -102 -77 40 cash equivalents Cash and cash equivalents 136 121 237 at end of period Operating cash flow 0.52 1.09 1.66 per share, EUR Quarterly information EUR million Q3/ Q2/ Q1/ Q4/ Q3/ 08 08 08 07 07 Sales by segment Magazine Papers 806 767 781 811 847 Newsprint 331 332 332 378 365 Fine and Speciality 674 686 726 718 694 Papers Label Materials 244 252 249 249 252 Wood Products 237 293 298 297 262 Other Operations 189 194 168 188 173 Internal sales -123 -146 -144 -129 -126 Sales, total 2,358 2,378 2,410 2,512 2,467 Operating profit by segment Magazine Papers 81 49 44 -62 34 Newsprint -213 11 15 36 44 Fine and Speciality 35 18 31 12 29 Papers Label Materials -1 6 - 10 10 Wood Products -61 6 8 21 -2 Other Operations 84 46 73 123 66 Share of results of 35 21 22 2 14 associated companies and joint ventures Operating profit -40 157 193 142 195 (loss), total % of sales -1.7 6.6 8.0 5.7 7.9 Gains on - 2 - - - available-for-sale investments, net Exchange rate and fair - -1 -10 -4 -9 value gains and losses Interest and other -50 -43 -49 -46 -42 finance costs, net Profit (loss) before tax -90 115 134 92 144 Income taxes 3 -25 -31 -63 -25 Profit (loss) for the period -87 90 103 29 119 Basic earnings per -0.17 0.18 0.20 0.06 0.23 share, EUR Diluted earnings -0.17 0.18 0.20 0.06 0.23 per share, EUR Average number of 519,999 517,622 512,581 514,085 527,012 shares, basic (1,000) Average number of 519,999 516,791 513,412 515,322 529,530 shares, diluted (1,000) Special items in operating profit Special items in operating profit are specified in the divisional reviews on pages 5-8. Magazine Papers - 1 - -77 - Newsprint -230 - 1 5 - Fine and Speciality 3 - - - - Papers Label Materials - - - 4 - Wood Products -32 3 - 6 - Other Operations 3 -2 4 10 - Share of results of associated companies - - - - - and joint ventures Special items in -256 2 5 -52 - operating profit, total Special items reported in 6 - - - - financial items Operating profit, 216 155 188 194 195 excl. special items % of sales 9.2 6.5 7.8 7.7 7.9 Profit before tax, 160 113 129 144 144 excl. special items % of sales 6.8 4.8 5.4 5.7 5.8 Earnings per share, 0.25 0.17 0.19 0.24 0.23 excl. special items, EUR Return on equity, 7.8 5.4 5.9 7.1 6.9 excl. special items, % Return on capital employed, 7.7 5.7 6.5 6.9 6.8 excl. special items, % EUR million Q2/ Q1/ Q1-Q3/ Q1-Q3/ Q1-Q4/ 07 07 08 07 07 Sales by segment Magazine Papers 798 793 2,354 2,438 3,249 Newsprint 379 348 995 1,092 1,470 Fine and Speciality 686 699 2,086 2,079 2,797 Papers Label Materials 260 261 745 773 1,022 Wood Products 326 314 828 902 1,199 Other Operations 214 234 551 621 809 Internal sales -126 -130 -413 -382 -511 Sales, total 2,537 2,519 7,146 7,523 10,035 Operating profit by segment Magazine Papers -339 27 174 -278 -340 Newsprint 53 44 -187 141 177 Fine and Speciality 39 32 84 100 112 Papers Label Materials 13 18 5 41 51 Wood Products 41 32 -47 71 92 Other Operations 112 47 203 225 348 Share of results of 6 21 78 41 43 associated companies and joint ventures Operating profit -75 221 310 341 483 (loss), total % of sales -3.0 8.8 4.3 4.5 4.8 Gains on - 2 2 2 2 available-for-sale investments, net Exchange rate and fair 8 3 -11 2 -2 value gains and losses Interest and other -54 -49 -142 -145 -191 finance costs, net Profit (loss) before tax -121 177 159 200 292 Income taxes -77 -46 -53 -148 -211 Profit (loss) for the period -198 131 106 52 81 Basic earnings per -0.38 0.25 0.21 0.10 0.16 share, EUR Diluted earnings -0.38 0.25 0.21 0.10 0.16 per share, EUR Average number of 527,111 523,261 516,734 525,794 522,867 shares, basic (1,000) Average number of 530,980 527,086 516,734 529,198 525,729 shares, diluted (1,000) Special items in operating profit Special items in operating profit are specified in the divisional reviews on pages 5-8. Magazine Papers -371 - 1 -371 -448 Newsprint - - -229 - 5 Fine and Speciality Papers - - 3 - - Label Materials - - - - 4 Wood Products - - -29 - 6 Other Operations 71 - 5 71 81 Share of results of - - - - - associated companies and joint ventures Special items in -300 - -249 -300 -352 operating profit, total Special items reported in - - 6 - - financial items Operating profit, 225 221 559 641 835 excl. special items % of sales 8.9 8.8 7.8 8.5 8.3 Profit before tax, 179 177 402 500 644 excl. special items % of sales 7.1 7.0 5.6 6.6 6.4 Earnings per share, 0.28 0.25 0.61 0.76 1.00 excl. special items, EUR Return on equity, 8.5 7.3 6.3 7.5 7.4 excl. special items, % Return on capital 8.3 7.9 6.6 7.6 7.4 employed, excl. special items, % Changes in property, plant and equipment EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/ 2008 2007 2007 Book value at 6,179 6,500 6,500 beginning of period Capital expenditure 421 503 644 Decreases -10 -84 -96 Depreciation -550 -567 -752 Impairment charges -31 -22 -42 Impairment reversal - 11 12 Translation difference 3 -65 -87 and other changes Book value at end 6,012 6,276 6,179 of period Commitments and contingencies EUR million 30.09.2008 30.09.2007 31.12.2007 Own commitments Mortgages 89 91 90 On behalf of associated companies and joint ventures Guarantees for loans 10 10 10 On behalf of others Other guarantees 2 3 3 Other own commitments Leasing commitments 11 18 21 for the next 12 months Leasing commitments 66 89 99 for subsequent periods Other commitments 65 74 70 Capital commitments EUR million Completion Total cost By 31.12. Q1-Q3/ After 30.09. ´ 2007 2008 2008 New bioboiler, Sept 2009 75 11 35 29 Caledonian Rebuild of debarking Oct 2010 30 - 1 29 plant, Wisaforest Waste water treatment Sept 2010 17 - - 17 plant, Blandin New Poland mill, Nov 2008 90 23 55 12 UPM Raflatac Keltti hydropower Dec 2009 13 1 4 8 station rebuild Notional amounts of derivative financial instruments EUR million 30.09.2008 30.09.2007 31.12.2007 Currency derivatives Forward contracts 5,763 4,006 4,369 Options, bought 113 42 50 Options, written 164 47 60 Swaps 522 548 529 Interest rate derivatives Forward contracts 3,767 4,523 3,642 Swaps 2,205 2,504 2,383 Other derivatives Forward contracts 34 13 12 Swaps 9 4 3 Related party (associated companies and joint ventures) transactions and balances EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/ 2008 2007 2007 Sales to associated 100 91 130 companies Purchases from 427 356 500 associated companies Trade and other 18 16 29 receivables at end of period Trade and other 31 27 42 payables at end of period Key exchange rates for the euro at end of period 30.09.2008 30.06.2008 31.03.2008 31.12.2007 30.09.2007 USD 1.4303 1.5764 1.5812 1.4721 1.4179 CAD 1.4961 1.5942 1.6226 1.4449 1.4122 JPY 150.47 166.44 157.37 164.93 163.55 GBP 0.7903 0.7923 0.7958 0.7334 0.6968 SEK 9.7943 9.4703 9.3970 9.4415 9.2147 30.06.2007 31.03.2007 USD 1.3505 1.3318 CAD 1.4245 1.5366 JPY 166.63 157.32 GBP 0.6740 0.6798 SEK 9.2525 9.3462 Basis of preparation This unaudited financial report has been prepared in accordance with the accounting policies set forth in International Accounting Standard 34 on Interim Financial Reporting and in the Group's Consolidated Financial Statements for 2007. Income tax expense is recognised based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Calculation of key indicators Return on equity, %: Profit before tax - income taxes / Shareholders' equity (average) x 100 Return on capital employed, %: (Profit before tax + interest expenses and other financial expenses) / (Equity total + interest-bearing liabilities (average)) x 100 Earnings per share: Profit for the period attributable to equity holders of parent company / Adjusted average number of shares during the period excluding own shares It should be noted that certain statements herein, which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein 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 68-69 of the company's annual report 2007. UPM-Kymmene Corporation Pirkko Harrela, Executive Vice President, Corporate Communications DISTRIBUTION NASDAQ OMX Helsinki Ltd Main media www.upm-kymmene.com UPM, Corporate Communications Media desk, tel. +358 40 588 3284 communications@upm-kymmene.com |
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