UPM-Kymmene - Half Year financial report

Interim report Q2/2016: UPM's comparable EBIT increased by 21%, cash flow reaching new highs

UPM-Kymmene Corporation      Stock Exchange Release         26 July 2016 at
9:15 EET


Interim report Q2/2016:

UPM's comparable EBIT increased by 21%, cash flow reaching new highs

Q2 2016 highlights
  * Comparable EBIT increased by 21% to EUR 264 million (219 million).
  * Growth projects contributed to earnings, driving delivery growth in UPM
    Biorefining, UPM Raflatac and UPM Paper Asia.
  * Cost-efficiency measures continued on a strong track, variable and fixed
    costs decreased significantly.
  * Operating cash flow was strong at EUR 434 million (324 million).

H1 2016 highlights
  * Comparable EBIT increased by 27% to EUR 545 million (429 million).
  * Operating cash flow increased to EUR 775 million (432 million).
  * Net debt decreased to EUR 1,876 million (2,635 million), and gearing to 24%
    (35%).
  * UPM sold the Schwedt newsprint mill in Germany in July and closed the
    Madison SC paper mill in the US in May.
  * In July, UPM announced expansion of the UPM Kymi pulp mill capacity to
    870,000 tonnes, continuing its focused growth investments.

 Key figures           Q2/2016 Q2/2015 Q1/2016 Q1-Q2/2016 Q1-Q2/2015 Q1-Q4/2015

 Sales, EURm             2,445   2,548   2,446      4,891      5,034     10,138

 Comparable EBITDA,
 EURm                      385     317     403        788        642      1,350

   % of sales             15.8    12.4    16.5       16.1       12.8       13.3

 Operating profit,
 EURm                      262     206     277        539        409      1,142

 Comparable EBIT, EURm     264     219     281        545        429        916

   % of sales             10.8     8.6    11.5       11.1        8.5        9.0

 Profit before tax,
 EURm                      250     182     263        513        363      1,075

   Comparable profit
 before tax, EURm          252     195     267        519        383        849

 Profit for the
 period, EURm              198     160     227        425        315        916

 Comparable profit for
 the period, EURm          200     170     225        425        330        734

 Earnings per share
 (EPS), EUR               0.37    0.30    0.43       0.80       0.59       1.72

   Comparable EPS, EUR    0.37    0.32    0.42       0.79       0.62       1.38

 Return on equity
 (ROE), %                 10.1     8.3    11.4       10.9        8.3       11.9

 Comparable ROE, %        10.2     8.8    11.3       10.9        8.7        9.5

 Return on capital
 employed (ROCE), %        9.9     7.3     9.9       10.0        7.2       10.3

 Comparable ROCE, %       10.0     7.8    10.1       10.1        7.6        8.3

 Operating cash flow,
 EURm                      434     324     341        775        432      1,185

 Operating cash flow
 per share, EUR           0.81    0.61    0.64       1.45       0.81       2.22

 Equity per share at
 end of period, EUR      14.36   14.30   14.94      14.36      14.30      14.89

 Capital employed at
 the end of period,
 EURm                   10,403  11,012  11,000     10,403     11,012     11,010

 Net interest-bearing
 liabilities at end of
 period, EURm            1,876   2,635   1,873      1,876      2,635      2,100

 Gearing ratio at end
 of period, %               24      35      23         24         35         26

 Personnel at the end
 of period              20,711  20,900  19,870     20,711     20,900     19,578


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

"The first half of 2016 gives further evidence that we are on the right track.
We have a strong business model with six agile businesses, efficient capital
allocation and an industry-leading balance sheet. For the future, this ensures
good opportunities for focused investments in growth, continued strong cash flow
and an attractive dividend.

In the second quarter, our growth projects and cost-efficiency measures
continued to deliver and our comparable EBIT grew by 21% year-on-year. Cash flow
strengthened even further and cumulatively reached a record of EUR 1.5 billion
over the past 12 months. By the end of the quarter, our net debt was EUR 759
million lower than a year ago.

UPM businesses enjoyed mostly favourable market demand during the quarter. We
are responding to the market demand with timely growth investments in UPM
Biorefining, UPM Paper Asia, UPM Raflatac and UPM Plywood. At the same time, we
are taking good care of our cost efficiency and the cost take-outs continue on
the previous track. This is evident in our improved performance.

UPM Paper ENA was successful in releasing cash by improving profitability,
reducing working capital and selling assets, in line with its role. In UPM
Energy, the advantageous hedges from previous years have now largely rolled over
and the profitability is on a competitive level despite the current market
situation.

Going forward we have several growth projects in the pipeline. We are continuing
to ramp up production at the new UPM Changshu speciality paper machine, as well
as the Lappeenranta biorefinery, following its maintenance shutdown in Q2.
Ongoing projects in the Otepää plywood mill in Estonia and UPM Kaukas pulp mill
in Finland will be finalised by the end of the year. In July, we announced a EUR
98 million expansion investment in the UPM Kymi pulp mill in Finland. After this
project we will have increased our total annual pulp production capacity by more
than 500,000 tonnes since 2013, with low investment cost. We are also
considering prospects for long-term development in Uruguay."

Outlook for 2016

UPM's profitability improved in 2015 and the improvement is expected to continue
in 2016. The business performance is underpinned by the company's growth
projects and continuous cost efficiency measures.

UPM's growth projects are expected to contribute positively to the company's
earnings in 2016, compared with 2015. UPM continues its measures to reduce
variable and fixed costs in 2016. Currencies are expected to contribute
positively as hedges roll over, assuming relevant currencies stay at the same
level as at the end of 2015.

Webcast and press conference

UPM's President and CEO Jussi Pesonen will present the 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 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 Interim Report for January - June 2016

 Direct telephone numbers:



 BE: +3224040635

 DK: +45 823 331 78

 FI: +358981710495

 FR: +33170750712

 UK: +442031940552

 NO: +4723500211

 SE: +46856642702

 US: +18557161597



 International telephone numbers with a pin code 82596777#



 AU: +61 (0) 284058555

 AT: +43 (0) 19287909

 CH: +41 (0) 445831883

 CN: +86 4006815487

 DE: +49 (0) 6922224998

 ES: +34 914146225

 HK: +852 30600228

 IN: 0018038524627

 IR: +353 (0) 12475065

 IT: +39 (0) 236010935
 JP: +81 (0) 344559575
 NL: +31 (0) 207133412
 SP: +65 64298388


**

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 18 of the 2015 Annual Report. Risks and
opportunities are discussed on pages 17-18 and risks and risk management are
presented on pages 84-86 of the report.

**

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

UPM, Media Relations
9.00-16.00 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 Paper Asia, UPM Paper Europe and North America and UPM Plywood.
Our products are made of renewable raw materials and are recyclable. We serve
our customers worldwide. The group employs around 19,600 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


[HUG#2030588]

Attachments:

UPM Interim Report Q2 2016.pdf