Second quarter hit by high raw material costs, pressure continues, UPM committed to improve profitability

(UPM, Helsinki, 24 July 2008 at 09:30) – Interim report January–June 2008:
- Earnings per share for the second quarter were EUR 0.18 (EUR -0.38 for the second quarter of 2007), excluding special items EUR 0.17 (0.28)
- Operating profit was EUR 157 million (a loss of 75 million) excluding special items EUR 155 million (225 million)
- Increase of overall costs for the full year is still expected to be about 2%

Jussi Pesonen, UPM's President and CEO, comments on the result of the second quarter of 2008:

"Regrettably UPM's result for the second quarter was weak. While our internal cost efficiency improved, our result was hit by the high wood and recovered paper costs as well as significantly lower market prices for sawn timber. Neither did the exchange rates work in our favour. On the positive side, we were able to increase magazine paper prices and the average price of paper was slightly higher than last year. Also the turnaround measures of the Label Division got off to a good start."

"The demand outlook of our businesses has weakened since the beginning of the year, and our operative profitability for the full year 2008 is expected to be lower than that of last year."

"With this in mind, we are currently assessing the market potential of different businesses, price and availability of raw materials as well as the cost competitiveness of our various units. This review may result in permanent or temporary closures."

"In Finland, it is clear that we can only develop our Finnish units in the long term providing that low cost Finnish wood is available. This is something we will take into consideration in our assessment. We will make our plans based on the assumption that the Russian export duty on wood will be implemented in the beginning of 2009."

"Due to cost savings from the ongoing profitability actions, the increase in the company’s overall costs for the full year is still expected to be about 2%," says Pesonen.

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

UPM's President and CEO Jussi Pesonen will present the financial results for the period January–June 2008 in a press conference to be held at UPM Head Office in Helsinki (main entrance, Eteläesplanadi 2) today, 24 July 2008, at 13:30 Finnish time (11:30 BST, 06:30 EST).
The joint press conference for media and financial analysts can be listened online at www.upm-kymmene.com. The on-demand version of the audio cast will be available online for three months.

A conference call, hosted by Jussi Pesonen, will take place on 24 July 2008, at 17:00 Finnish time (15:00 BST, 10:00 EST, please see dial-in details below). Participants are registered by the operator before the start of the conference call. In order to ensure a timely conference start, please dial in 10 minutes before the conference start time.

Dial-in numbers for conference call:
Call title: UPM-Kymmene, Interim Review Q2 2008
Access code: 49554834
International dial-in: +44 (0) 1452 555 566
UK Free call: 0800 6940 257
UK Local call: 0844 493 3800
USA Free Call: 1866 966 9439

Dial-in numbers for replay, available until 30 July 2008:
Access code: 49554834#
International Dial In: +44 (0) 1452 550 000
UK Free Dial In: 0800 953 1533
UK Local Dial In: 0845 245 5205
USA Free Dial In: 1866 247 4222

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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 68–69 of the company's Annual Report 2007.