UPM's profitability improved, macro economic outlook uncertain; UPM continues actions to improve its profitability in slowing economy

(UPM, Helsinki, 28 October 2008 at 09:30) – Interim report January–September 2008:
- Operating profit excluding special items was EUR 216 million (195 million)
- Earnings per share for the third quarter were EUR -0.17 (0.23 for the third quarter of 2007), excluding special items EUR 0.25 (0.23)
- Higher paper prices together with stringent cost control improved profitability

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

"During the third quarter, higher paper prices together with stringent cost control improved profitability. Our competitive energy and pulp assets also contributed to the better result. The recent weakening of the euro improves our profitability in all export markets."

"Proactive and timely capacity closures in magazine papers, newsprint, and fine papers improved the market and customer mix of our paper business. However, the permanent and temporary closures decreased our deliveries. We also gave up some market share by refusing low-priced contracts."

"While the operating profit improved in paper business, the profitability in Label Materials and Wood Products was weak. Label Materials suffers from poor demand development and increasing costs. In Wood Products, the cost of wood has remained high while prices and demand for sawn timber and plywood have declined. We plan significant efficiency improvements in Label Materials and will today announce plans to curtail production in Wood Products."

"With these plans we are ready to face the business environment of slow growth and high costs."

"The demand for our products is not immune to the economic slowdown. We are confident, however, that the internal restructuring and savings programmes that we have successfully implemented, will give us competitive advantage in this extremely challenging financial environment."

"Our new business structure, announced in September, will help us to leverage our competitive advantages. Preparations for the new structure have proceeded well, and we believe that it will have a far-reaching impact on our operations."

"We estimate that our operating profit for the fourth quarter, excluding special items and change in the fair value of biological assets, will be about the same as last year. Due to cost savings from the ongoing profitability actions, an 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–September 2008 in a press conference to be held at UPM Head Office in Helsinki (main entrance, Eteläesplanadi 2) today, 28 October 2008, at 14:00 Finnish time (12:00 GMT, 07:00 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 for analysts and investors, hosted by UPM's President and CEO Jussi Pesonen, will take place today on 28 October 2008, at 17:00 Finnish time (15:00 GMT, 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 Q3 2008
Access code: 68849755
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 3 November 2008:
Access code: 68849755#
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.