Costs and record-strong euro impacted UPM's results, Magazine paper markets now tight

(UPM, Helsinki, October 30, 2007 at 12:00) – Interim report January–September 2007:
• Earnings per share, excluding special items, for the third quarter were EUR 0.23 (EUR 0.25 for the third quarter of 2006).
• EBITDA was EUR 366 million, 14.8% of sales (EUR 427 million, 17.1%).
• Operating profit excluding special items was EUR 195 million (EUR 209 million).
• The increase in costs, particularly wood costs, and the strengthened euro reduced profitability.

Jussi Pesonen, President and CEO, comments on the result of the third quarter of 2007:

"UPM's deliveries increased during the third quarter by 4% and the efficiency of operations improved. However, the rapidly increasing costs and the strengthening of euro were challenging for the whole industry and they impacted on our results. In particular, wood and recycled paper prices were markedly higher than earlier and our stringent cost control was no longer sufficient to offset the cost increase. At the same time, the average price for all paper deliveries was approximately 2% lower than last year."

"This situation calls for strong action in order to move on with our profit improvement."

"Firstly, price increases are necessary in this situation. We have already notified our paper customers of upcoming price increases. We see that the market continues to be tight in magazine papers, and our target is to close the deals by the end of the year. We have also challenged our fairly long contract validity times due to the rapidly rising costs."

"Secondly, we will revisit the cost competitiveness of our asset portfolio and check it against the current business environment. The review may result in permanent or temporary capacity closures."

"Thirdly, we are introducing stricter guidelines for our capital expenditure in 2008, and we will reallocate them towards growth markets and new businesses. Next year, we expect our capital expenditure to be approximately 500 million euros. That is substantially below the current level."

"We estimate that the cost pressure will continue. Our overall cost inflation for 2007 is estimated to be at the level of approx. 2.5% including the expected cost savings from the ongoing profitability programme."

For more information please contact:
Mr Jussi Pesonen, President and CEO, UPM, tel. +358 204 15 0001
Mr Jyrki Salo, Executive Vice President and CFO, UPM, tel. +358 204 15 0011

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News conference and conference call information

A news conference on the Interim Report January–September 2007 will be held today, October 30, 2007, at UPM's Head Office in Helsinki, Eteläesplanadi 2, at 14:00 Finnish time (12:00 GMT, 07:00 EST). The briefing can be followed live on the Internet at www.upm-kymmene.com. The on-demand version of the audio cast will be available online for three months.

To participate in the UPM conference call, please dial +44 (0)1452 555 566 today at 17:00 Finnish time (15:00 GMT, 10:00 EST). The conference call title is: "UPM Q3 2007 Financial Results", access code: 16638655. A recording of the discussion can be heard until November 6, 2007 by calling +44 (0)1452 550 000, access code 16638655#.

In the United States and Canada, the Conference Call toll free number is +1 866 966 9439. The recording can be heard at the toll free dial at the number +1 866 247 4222, access code: 16638655#.

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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 15-17 of the company's annual report 2006.