UPM's operating profit 2007 impacted by high cost of wood and fibre, Prospects for magazine paper business are improving

Financial Review 2007
- Earnings per share for 2007 were EUR 0.16 (EUR 0.65 for 2006), excluding special items EUR 1.00 (EUR 0.80)
- Operating profit for the year was EUR 483 million (EUR 536 million), excluding special items EUR 835 million (EUR 725 million)
- Operating profit for the fourth quarter was EUR 142 million (EUR 247 million), excluding special items EUR 194 million (EUR 252 million)
- Full year results were impacted by significantly higher than forecast cost of wood and fibre
- As a result of the Profitability Programme 2006, UPM has reduced its paper capacity by over 1.1 million tonnes and its headcount by 3,200 persons

UPM's President and CEO comments on the Financial Review 2007:

"We were hit by the unexpectedly sharp increase in wood and fibre costs, particularly in Finland. However, we were able to decrease our other variable costs year-on-year and the efficiency of our operations increased. While we cannot be satisfied with the performance of all of our businesses, newsprint and wood products, particularly plywood, did have a good year."

"As a result of our profitability programme 2006 we have closed more than 1.1 million tonnes of our paper capacity, corresponding to almost 10% of our total capacity. The headcount has decreased by 3,200 persons and productivity and cost competitiveness have improved in all divisions. We have proceeded in line with our plans and improved business prospects especially in magazine papers."

"During 2008, the availability and cost of wood and fibre as well as the development of the paper prices are critical for our profitability development. The strong euro continues to pose a challenge for the European paper industry."

"Currently our order books in printing papers are good. In magazine papers, we have agreed on price increases in all markets and shortened contract validities in Europe. In newsprint, the contract negotiations for 2008 in Europe are still ongoing."

"Although the sharpest price rise in wood raw material seems to have levelled off, the full year cost for wood in 2008 is forecast to be higher than that of the full year 2007. The increase in the company's overall costs is expected to be about 2%. "

"For the full year 2008, we expect our operative profitability to be about the same as in 2007. However, the first quarter is expected to be below the same period last year and we continue to seek new ways to improve our profitability," 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

***

News conference and conference call information

A news conference on the Financial Review 2007 will be held today, February 5, 2008, 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-Kymmene Financial review 2007", access code: 31003111. A recording of the discussion can be heard until February 12, 2008 by calling +44 (0)1452 550 000, access code 31003111#.

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 9669439, access code: 31003111#.

***

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.