Strong recovery in UPM's operating profit, Operating profit for the second half of the year expected to improve from the first half

(UPM, Helsinki, 3 August 2010 at 09:55) – Interim Report for January–June 2010:

Q2/2010
- Earnings per share were EUR 0.33 (-0.02), excluding special items EUR 0.29 (0.03)
- Operating profit excluding special items was EUR 199 million (EUR 31 million)
- Delivery volumes increased in all businesses – sales grew by 20%
- Sales prices started to increase following increasing demand

Q1–Q2/2010
- Earnings per share were EUR 0.46 (-0.32), excluding special items EUR 0.44 (-0.24)
- Operating profit excluding special items was EUR 315 million (loss of EUR 47 million)
- Operating cash flow was EUR 311 million (EUR 580 million)
- Sales increased as economic activity improved

Jussi Pesonen, UPM President and CEO, comments on the result for the second quarter of 2010:

"UPM's profit recovery in the second quarter was encouraging. Increased economic activity improved all of our business. Demand continued to pick up, and our sales grew by 20% from last year. Our sales prices in most businesses were higher than in the first quarter of the year. We anticipate this positive development to continue in the second half of the year.

The EBITDA for the second quarter was significantly improved from the same period last year due to higher delivery volumes and the inclusion of the Uruguayan operations. When delivery volumes increase, we clearly see the benefits of the cost efficiency achieved in recent years.

However, in the second quarter, cost pressure started to intensify alongside the increased economic activity. Costs of raw materials increased, resulting in higher variable costs. Cost pressure will continue in the second half of the year. Therefore, we must continue with tight cost control in all of our activities.

The Energy and Pulp businesses have developed well. We are satisfied with the current transparent structure of the Pulp business. Our cost competitive pulp mills in Uruguay and Finland have been able to benefit from the strong pulp market. In July, The Finnish parliament's ratification of the favourable decision-in-principle concerning the application by Teollisuuden Voima (TVO) to construct its fourth nuclear power plant unit, Olkiluoto 4, is a positive step for UPM. The decision opens up the possibility to increase the share of low-emission and cost efficient electricity.

For Paper, deliveries increased in all markets, especially in Asia and North America. Despite of the good cost performance, the Paper business made an operating loss due to significantly higher fibre costs and lower prices than last year. To improve the profitability of Paper, we have increased prices practically in all new contracts.

The profitability of Label business improved significantly from last year due to increased deliveries especially in Asia and Eastern Europe. The current structure of the Label business area provides a good competitive edge in the market. In the second quarter, Label business was able to compensate with higher prices for the considerable increase in raw material costs. In the second half of the year, prices are expected to be higher but intense cost pressure will challenge current sales margins.

Despite the expected material increase in variable costs, we estimate the operating profit excluding special items for the second half of 2010 to be higher than in the first half of the year", says Pesonen.

For more information please contact:
Mr Jussi Pesonen, President and CEO, UPM, tel. +358 204 15 0001
Mr Tapio Korpeinen, CFO, UPM, tel. +358 204 15 0004

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
communications@upm.com

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Conference call and press conference

UPM's President and CEO Jussi Pesonen will present the Interim Report for January–June 2010 in a conference call and webcast for analysts and investors, held in English, on 3 August at 13:00 Finnish time (11:00 London time, 06:00 EST).

Jussi Pesonen will also present the Interim Report for January–June 2010 in a press conference held in Finnish at UPM Group Head Office in Helsinki (main entrance, Eteläesplanadi 2) on 3 August 2010, at 14:15 Finnish time (12:15 London time, 07:15 EST).

Conference call and webcast details:

You can participate in the conference call either by dialling a number in the list below or following the webcast online at www.upm.com. 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 beforehand to ensure the conference starts on time.

Conference call title: UPM-Kymmene Corporation Interim Report January-June 2010
Conference ID: 870019

Phone numbers:

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The webcast can be replayed at www.upm.com for 12 months.

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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, and 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.