UPM Interim Report 1 January-30 September 2010

UPM-Kymmene Corporation - Interim report
UPM Interim Report 1 January-30 September 2010
UPM-Kymmene Corporation   Interim Report   28 October 2010   at 09:35

UPM Interim Report 1 January-30 September 2010

Q3/2010: Earnings per share were EUR 0.34 (0.08), excluding special items 
EUR 0.28 (0.14). EBITDA was EUR 384 million, 16.6% of sales (334 million, 
17.5% of sales). Best EBITDA in three years. Sales prices and delivery 
volumes increased in all businesses - sales grew by 21%.

Q1-Q3/2010: Earnings per share were EUR 0.80 (-0.24), excluding special items 
EUR 0.72 (-0.10). EBITDA was EUR 1,025 million, 15.6% of sales (EUR 700
million, 12.5% of sales). Demand and delivery volumes increased in 
all businesses - sales grew by 17%. Solid cash flow - net debt now lower 
than before the Uruguay acquisition in Q4 2009.

Key figures
                                  Q3/    Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
                                 2010   2009   2010   2009   2009
                                                                 
Sales, EURm                     2,312  1,913  6,567  5,611  7,719
EBITDA, EURm 1)                   384    334  1,025    700  1,062
% of sales                       16.6   17.5   15.6   12.5   13.8
Operating profit (loss), EURm     238     96    548      9    135
excluding special items, EURm     204    131    519     84    270
% of sales                        8.8    6.8    7.9    1.5    3.5
Profit (loss) before tax, EURm    199     64    462   -124    187
excluding special items, EURm     165     99    433    -49    107
Net profit (loss) for the         178     40    417   -126    169
period, EURm
Earnings per share, EUR          0.34   0.08   0.80  -0.24   0.33
excluding special items, EUR     0.28   0.14   0.72  -0.10   0.11
Diluted earnings per share, EUR  0.34   0.08   0.80  -0.24   0.33
Return on equity, %              10.3    2.8    8.2   neg.    2.8
excluding special items, %        8.6    5.0    7.4   neg.    1.0
Return on capital employed, %     8.0    3.5    6.5    0.0    3.2
excluding special items, %        6.8    4.9    6.1    0.9    2.5
Operating cash flow per          0.63   0.59   1.23   1.71   2.42
share, EUR
Shareholders' equity per        13.28  11.13  13.28  11.13  12.67
share at end of period, EUR
Gearing ratio at end of period, %  51     64     51     64     56
Net interest-bearing            3,553  3,688  3,553  3,688  3,730
liabilities at end of period, EURm
Capital employed at end of     11,377 10,172 11,377 10,172 11,066
period, EURm
Capital expenditure, EURm          68     39    153    172    913
Capital expenditure excluding      66     38    148    171    229
acquisitions and shares, EURm 
Personnel at end of period     22,293 23,180 22,293 23,180 23,213

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets, excluding the 
share of results of associated companies and joint ventures, and special items.


Results

Q3 of 2010 compared with Q3 of 2009

Sales for the third quarter of 2010 were EUR 2,312 million, 21% higher than the 
EUR 1,913 million in the third quarter of 2009. Sales increased due to higher 
delivery volumes and sales prices across all of UPM's business areas.

EBITDA was EUR 384 million, 16.6% of sales (334 million, 17.5% of sales).

EBITDA increased from the same period last year. Higher sales prices and 
delivery volumes in all of UPM's business areas, and the inclusion of the 
acquired Uruguayan operation were the main contributors to the improvement.

Contribution of higher sales prices in euro terms to EBITDA improvement was 
about EUR 108 million. Sales prices increased in all business areas, both 
compared with the same period last year and with the second quarter of 2010. 
The average paper price in euros increased by approximately 4% from the same 
period last year, or by about 3% from the second quarter of 2010.

Variable costs increased clearly from last year. The biggest cost increase was 
seen in fibre, with purchased pulp, recovered paper and round wood all showing 
cost increases.

Operating profit was EUR 238 million, 10.3% of sales (96 million, 5.0% of 
sales). The operating profit excluding special items was EUR 204 million, 8.8% 
of sales (131 million, 6.8% of sales).

Operating profit includes net income of EUR 34 million as special items. This 
includes a EUR 33 million capital gain from selling a conservation easement on 
187,876 acres (76,000 hectares) of UPM-owned forest land in northern Minnesota.

The increase in the fair value of biological assets net of wood harvested was 
EUR 14 million compared to a decrease of EUR 13 million a year before.

The share of results of associated companies and joint ventures was EUR 2 
million negative (21 million negative). As of December 2009, Metsä-Botnia is no 
longer an associated company of UPM.

Profit before tax was EUR 199 million (64 million) and excluding special items 
EUR 165 million (99 million). Interest and other finance costs, net, were EUR 
28 million (28 million). Exchange rate and fair value gains and losses resulted 
in a loss of EUR 11 million (loss of EUR 3 million).

Income taxes were EUR 21 million (24 million). The impact on taxes from special 
items was EUR 5 million negative (3 million positive).

Profit for the third quarter was EUR 178 million (40 million) and earnings per 
share were EUR 0.34 (0.08). Earnings per share excluding special items were EUR 
0.28 (0.14).


January-September of 2010 compared with January-September 2009

Sales for January-September were EUR 6,567 million, 17% higher than the EUR 
5,611 million in the same period in 2009. Sales increased due to higher 
delivery volumes across all of UPM's business areas.

EBITDA was EUR 1,025 million, 15.6% of sales (700 million, 12.5% of sales).

EBITDA improved clearly from last year. Higher delivery volumes in all of UPM's 
business areas and the inclusion of the Uruguayan operation acquired in 
December 2009 were the main contributors to the improvement.

Variable costs were higher than last year, even though wood and energy costs 
were lower. Wood costs increased from the latter part of 2009, but were still 
approximately EUR 65 million lower than the peak levels of the comparison 
period. Energy costs decreased by about EUR 54 million. However, costs 
increased for purchased pulp, recovered paper and other raw materials.

Changes in sales prices in euro terms had a negative net impact (EUR 22 
million) on EBITDA. The average paper price in euros decreased by about 3% from 
the same period last year. Plywood prices were at approximately the same level 
as last year. Average sales prices increased for label materials and sawn 
timber, as well as for external pulp and electricity sales.

Fixed costs (comparable) were approximately EUR 60 million higher than last 
year mainly due to higher operating rates at production units.

Operating profit was EUR 548 million, 8.3% of sales (9 million, 0.2% of sales). 
The operating profit excluding special items was EUR 519 million, 7.9% of sales 
(84 million, 1.5% of sales). Operating profit includes net income of EUR 29 
million as special items. This includes a EUR 33 million capital gain from 
selling a conservation easement.

The increase in the fair value of biological assets net of wood harvested was 
EUR 64 million compared to EUR 8 million a year before.

The share of results of associated companies and joint ventures was EUR 9 
million (96 million negative). As of December 2009, Metsä-Botnia is no longer 
an associated company of UPM.

Profit before tax was EUR 462 million (loss of EUR 124 million) and excluding 
special items EUR 433 million (loss of EUR 49 million). Interest and other 
finance costs, net, were EUR 81 million (123 million). Exchange rate and fair 
value gains and losses resulted in a loss of EUR 6 million (9 million).

Income taxes were EUR 45 million (2 million). The impact on taxes from special 
items was EUR 12 million positive (3 million positive).

Profit for the period was EUR 417 million (loss of EUR 126 million) and 
earnings per share were EUR 0.80 (-0.24). Earnings per share excluding special 
items were EUR 0.72 (-0.10). Operating cash flow per share was EUR 1.23 (1.71).


Financing

In January-September, cash flow from operating activities, before investing and 
financing activities, was EUR 639 million (889 million). Working capital 
increased by EUR 237 million during the period (decreased by EUR 437 million), 
driven by the increase in business activity.

The gearing ratio as of 30 September 2010 was 51% (64%). Net interest-bearing 
liabilities at the end of the period came to EUR 3,553 million (3,688 million).

On 30 September 2010, UPM's cash funds and unused committed credit facilities 
totalled EUR 1.5 billion. In September 2010, UPM cancelled the EUR 825 million 
credit facility that was to mature in 2012. Given its cash flow generation, the 
company saw the current liquidity as adequate.


Personnel

In January-September, UPM had an average of 22,916 employees (23,826). At the 
beginning of the year, the number of employees was 23,213 and at the end of 
September it was 22,293. The reduction of 920 employees is mostly attributable 
to restructuring in the Plywood and Forest and timber business areas.


Capital expenditure

During January-September, capital expenditure was EUR 153 million, 2.3% of 
sales (172 million, 3.1% of sales).

The largest ongoing project is the rebuild of the debarking plant at the 
Pietarsaari mill in Finland. The total investment cost is estimated to be EUR 
25 million.


Negotiations with Myllykoski Group

On 28 September 2010 UPM confirmed, following an article in a Finnish business 
newspaper, that it is engaged in discussions with the Finnish publication paper 
producer Myllykoski Group concerning a potential transaction of Myllykoski's 
operations in Finland, Germany and the United States.

The discussions continue and a number of significant issues remain unresolved. 
Therefore, there can be no certainty that the discussions between UPM, 
Myllykoski and its lenders will result in a transaction.


Shares

UPM shares worth EUR 6,405 million (4,382 million) in total were traded on the 
NASDAQ OMX Helsinki stock exchange during January-September of 2010. The 
highest quotation was EUR 12.73 in September and the lowest EUR 7.37 in 
February.

The company's ADSs are traded on the US over-the-counter (OTC) market under a 
Level 1 sponsored American Depositary Receipt programme.

The Annual General Meeting, held on 22 March 2010, authorised the Board of 
Directors to acquire no more than 51,000,000 of the company's own shares. The 
authorisation is valid for 18 months from the date of the decision.

The Board was authorised to decide on the issuance of shares and/or transfer 
the company's own shares held by the company and/or issue special rights 
entitling holders to shares in the company as follows: (i) The maximum number 
of new shares that may be issued and the company's own shares held by the 
company that may be transferred is, in total, 25,000,000 shares. This figure 
also includes the number of shares that can be received on the basis of the 
special rights. (ii) The new shares and special rights entitling holders to 
shares in the company may be issued and the company's own shares held by the 
company may be transferred to the company's shareholders in proportion to their 
existing shareholdings in the company, or in a directed share issue, deviating 
from the shareholder's pre-emptive subscription right. This authorisation is 
valid until 22 March 2013.

To date these authorisations have not been used.

The company has four option series that would entitle the holders to subscribe 
for a total of 18,000,000 shares. Share options 2005H may be subscribed for 
3,000,000 shares, and share options 2007A, 2007B and 2007C may be subscribed 
for a total of 15,000,000 shares.

Apart from the above, the Board of Directors has no current authorisation to 
issue shares, convertible bonds or share options.

The number of shares entered in the Trade Register on 30 September 2010 was 
519,970,088. Through the issuance authorisation and share options, the number 
of shares may increase to a maximum of 562,970,088.

At the end of the period, the company did not hold any of its own shares.

The listing of UPM 2007A stock options on the NASDAQ OMX Helsinki stock 
exchange commenced on 1 October 2010.


Litigation and other legal actions

In Finland, UPM is participating in the project for construction of a new 
nuclear power plant, Olkiluoto 3, through its associated company Pohjolan Voima 
Oy. Pohjolan Voima Oy is a majority shareholder of Teollisuuden Voima Oy 
("TVO") with 58.28% of shares. UPM's indirect share of the capacity of the 
Olkiluoto 3 is approximately 29%. The original agreed timetable for the 
start-up of the power plant was summer 2009 but the construction of the unit 
has been delayed. In June 2010, the AREVA-Siemens Consortium announced that the 
majority of the work is expected to be completed in 2012 and, consequently, 
electricity production at Olkiluoto 3 is estimated to start in 2013.

TVO has informed that the arbitration filed in December 2008 by AREVA-Siemens, 
concerning the delay at Olkiluoto 3 and related costs, amounted to EUR 1.0 
billion. In response, TVO filed a counterclaim in April 2009 for costs and 
losses that TVO is incurring due to the delay and other defaults on the part of 
the supplier. The value of TVO's counterclaim was approximately EUR 1.4 
billion.

The International Court of Justice published its final decision on a litigation 
against the government of Uruguay on 20 April 2010 in a dispute between the 
governments of Uruguay and Argentina. In Uruguay, there are two pending 
litigations against the government of Uruguay related to Fray Bentos pulp mill, 
and in Argentina, one such litigation against the company operating the pulp 
mill.


Risk factors

Expected decisions on the proposed EU Energy Package have increased uncertainty 
on how the proposed policies and measures will impact the availability and cost 
of wood fibre for wood processing industries in Europe. At the same time, 
global competition for fibres has already created disruptions in fibre 
availability resulting in volatile price developments.


Events after the balance sheet date

The Group's management is not aware of any significant events occurring after 
30 September 2010.


Outlook for the fourth quarter of 2010
Comparisons with the third quarter of the year

Economic indicators point to a slower momentum of recovery in Europe and a 
subdued economic growth in the US. These are expected to limit continuation of 
demand rebound and recovery in investment activities. A robust economic growth 
in emerging market is expected to continue but, on the other hand, this has 
resulted in strong demand and higher prices for important commodities.

The electricity generation volume is estimated to be higher. Based on current 
forward sale agreements and Nordpool forward prices, the average sales price 
for electricity is estimated to be somewhat higher.

Chemical pulp price on average is expected to be lower. Current pulp prices in 
USD are not expected to change materially. Pulp prices in euro are lower due to 
weaker USD. Deliveries are expected to be about the same.

The cost of wood raw material will be higher; both log and fibre wood prices 
have remained at a high level despite a short spell in increase of supply due
to 
storms in Finland during August. Sawn timber deliveries are estimated to be 
about the same but average price is expected be slightly lower.

Both the average paper price in euro and paper deliveries are expected be about 
the same. Paper prices in invoicing currencies are expected to be higher but 
weaker USD will lower average price in euro. Market balance has improved from 
last year. The company aims to increase prices in all new contracts to 
compensate already materialised increases in main material costs.

Demand growth for self-adhesive labelstock in the main markets is expected to 
continue, albeit at a more moderate pace. Prices are expected to be higher. An 
intense cost pressure continues and will at least temporarily challenge current 
sales margins.

Plywood deliveries and prices are expected to be about the same. In industrial 
end uses business prospects have improved.

For the Group both sales prices in euro and deliveries are estimated to be in 
line with the third quarter. Increases in variable costs continue. Outlook for 
the operating profit, excluding special items, for the year remains unchanged.


Business Area Reviews

Energy
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010

Sales, EURm                      124   116   174   128   108   100   136   414
EBITDA, EURm 1)                   48    39    79    57    35    41    57   166
% of sales                      38.7  33.6  45.4  44.5  32.4  41.0  41.9  40.1
Share of results of               -3     6     4    -8   -24    -4    -4     7
associated companies and 
joint ventures, EURm
Depreciation, amortisation        -1    -1    -2    -2    -1    -1    -2    -4
and impairment charges, EURm
Operating profit, EURm            44    44    81    47    10    36    51   169
% of sales                      35.5  37.9  46.6  36.7   9.3  36.0  37.5  40.8
Special items, EURm 2)             -     -     -    -1   -17     -     -     -
Operating profit excl.            44    44    81    48    27    36    51   169
special items, EURm
% of sales                      35.5  37.9  46.6  37.5  25.0  36.0  37.5  40.8
Electricity deliveries, 1,000  2,276 2,303 2,411 2,277 2,103 1,999 2,486 6,990
MWh

                              Q1-Q3/ Q1-Q4/
                                2009   2009

Sales, EURm                      344   472
EBITDA, EURm 1)                  133   190
% of sales                      38.7  40.3
Share of results of              -32   -40
associated companies and 
joint ventures, EURm
Depreciation, amortisation        -4    -6
and impairment charges, EURm
Operating profit, EURm            97   144
% of sales                      28.2  30.5
Special items, EURm 2)           -17   -18
Operating profit excl.           114   162
special items, EURm
% of sales                      33.1  34.3
Electricity deliveries, 1,000  6,588 8,865
MWh

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) In 2009, special items relate to impairments of associated company Pohjolan 
Voima's two power plants.


Q3 of 2010 compared with Q3 of 2009

Operating profit excluding special items was EUR 44 million, EUR 17 million 
higher than last year (27 million). Sales increased by 15% to EUR 124 million 
(108 million), of which EUR 31 million was external sales (24 million). The 
electricity sales volume was 2.3 TWh in the quarter (2.1 TWh). Hydropower 
volume was 24% higher in comparison with last year.


January-September 2010 compared with January-September 2009

Operating profit excluding special items was EUR 169 million (114 million). 
Sales increased by 20% to EUR 414 million (344 million), of which EUR 160 
million was external sales (97 million). The electricity sales volume was 7.0 
TWh (6.6 TWh).

Profitability improved in comparison with the previous year, due to the higher 
sales price and higher electricity sales volume. The average electricity sales 
price increased almost by 16% to EUR 49.9/MWh (43.1/MWh). Both condensing and 
hydropower volumes were higher in comparison with last year.


Market review

The average electricity system price in the Nordic electricity exchange in the 
first nine months of the year was EUR 50.0/MWh, 45% higher than in the same 
period last year (34.5/ MWh) due to the weak hydropower situation and increased 
industrial consumption.

Oil and coal market prices increased compared to the same period last year. The 
CO2 emissions allowance price was EUR 15.4/t on 30 September, 14% higher than 
on the same date last year. At the end of September Nordic water reservoirs 
were about 19% (-22.3 TWh) below their long-term average at the same time of 
year.

The electricity system forward price for the rest of the year on the Nordic 
electricity exchange was EUR 50.5/MWh on 30 September, 61% higher than on the 
same date last year (31.4/MWh).


Pulp
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010
                                                                              
Sales, EURm                      489   455   341   226   156   132   139 1,285
EBITDA, EURm 1)                  239   199   120    53     8   -24   -55   558
% of sales                      48.9  43.7  35.2  23.5   5.1 -18.2 -39.6  43.4
Change in fair value of           -2     -     -    -1     -     -     -    -2
biological assets and wood 
harvested, EURm
Share of results of                -     -     -     7     4   -16   -47     -
associated companies and 
joint ventures, EURm 3)
Depreciation, amortisation       -38   -37   -36   -24   -21   -20   -20  -111
and impairment charges, EURm
Operating profit, EURm           199   163    83    35    -9   -60  -122   445
% of sales                      40.7  35.8  24.3  15.5  -5.8 -45.5 -87.8  34.6
Special items, EURm 2)             -     1    -1     -     -     -   -29     -
Operating profit excl.           199   162    84    35    -9   -60   -93   445
special items, EURm
% of sales                      40.7  35.6  24.6  15.5  -5.8 -45.5 -66.9  34.6
Pulp deliveries, 1,000 t         752   768   700   550   446   391   372 2,220

                              Q1-Q3/ Q1-Q4/
                                2009   2009

Sales, EURm                      427   653
EBITDA, EURm 1)                  -71   -18
% of sales                     -16.6  -2.8
Change in fair value of            -    -1
biological assets and wood 
harvested, EURm
Share of results of              -59   -52
associated companies and 
joint ventures, EURm 3)
Depreciation, amortisation       -61   -85
and impairment charges, EURm
Operating profit, EURm          -191  -156
% of sales                     -44.7 -23.9
Special items, EURm 2)           -29   -29
Operating profit excl.          -162  -127
special items, EURm
% of sales                     -37.9 -19.4
Pulp deliveries, 1,000 t       1,209 1,759

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) In 2009, special items of EUR 29 million relate to the associated company 
Metsä-Botnia's Kaskinen pulp mill closure.
3) In the balance sheet in the interim report for January-June, on 30 June 
2009, UPM has regrouped the 30% transferable share of Botnia's book value as 
assets held for sale. Consequently, from July 2009, UPM has not included the 
share of the transferable Botnia operations in the share of results of 
associated companies.


Q3 of 2010 compared with Q3 of 2009

As of December 2009, the Fray Bentos pulp mill and Forestal Oriental eucalyptus 
plantation forestry company in Uruguay have been included in the Pulp business 
area and Metsä-Botnia is no longer an associated company of UPM.

Operating profit excluding special items was EUR 199 million (loss of EUR 9 
million). Sales increased to EUR 489 million (156 million) and deliveries to 
752,000 tonnes (446,000).

Profitability improved in comparison with last year due to higher pulp sales 
prices and volumes.


January-September 2010 compared with January-September 2009

Operating profit excluding special items was EUR 445 million (loss of EUR 162 
million). Sales increased to EUR 1,285 million (427 million) and deliveries to 
2,220,000 tonnes (1,209,000).

Profitability improved significantly from last year due to higher pulp sales 
prices and volumes. External sales represented about 23% of total sales. Wood 
costs were lower.


Market review

Due to a tight market balance, global chemical market prices increased until 
August 2010 but then levelled off and started to decline slightly towards end 
the of the period as Chinese buyers significantly reduced their pulp purchases 
in the third quarter of 2010.

During the first half of the year the global chemical market pulp supply was 
reduced temporarily due to the earthquake in Chile, along with other occasional 
supply constrains. During the summer the chemical pulp supply returned back to 
normal.

Global chemical pulp shipments were slightly below last year. The shipments to 
China were significantly lower compared to previous year, especially during the 
third quarter, but the shipments grew to other regions. The pulp producer 
inventories returned to normal during the third quarter of 2010.

The average softwood pulp (NBSK) market price in euro terms, at EUR 705/tonne, 
was 55% higher than in the same period last year (EUR 454/tonne). At the end of 
the period the NBSK market price was EUR 725/tonne.

The average hardwood pulp (BHKP) market price in euro terms increased by 66% 
from last year, to EUR 640/tonne (EUR 385/tonne). At the end of the period the 
BHKP market price was EUR 649/tonne.


Forest and timber
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010

Sales, EURm                      387   393   339   348   295   309   385 1,119
EBITDA, EURm 1)                   18    26     3    30    24   -15   -15    47
% of sales                       4.7   6.6   0.9   8.6   8.1  -4.9  -3.9   4.2
Change in fair value of           16    31    19    10   -13    10    11    66
biological assets and wood 
harvested, EURm
Share of results of                2     1     1     1    -1     1     1     4
associated companies and 
joint ventures, EURm
Depreciation, amortisation        -5    -6    -4   -11    -4   -14    -5   -15
and impairment charges, EURm
Operating profit, EURm            68    52    19    21     6   -18   -18   139
% of sales                      17.6  13.2   5.6   6.0   2.0  -5.8  -4.7  12.4
Special items, EURm 2)            37     -     -   -14     1    -8   -10    37
Operating profit excl.            31    52    19    35     5   -10    -8   102
special items, EURm
% of sales                       8.0  13.2   5.6  10.1   1.7  -3.2  -2.1   9.1
Sawn timber deliveries, 1,000 m3 428   504   371   413   355   366   363 1,303

                              Q1-Q3/ Q1-Q4/
                                2009   2009
                                          
Sales, EURm                      989 1,337
EBITDA, EURm 1)                   -6    24
% of sales                      -0.6   1.8
Change in fair value of            8    18
biological assets and wood 
harvested, EURm
Share of results of                1     2
associated companies and 
joint ventures, EURm
Depreciation, amortisation       -23   -34
and impairment charges, EURm
Operating profit, EURm           -30    -9
% of sales                      -3.0  -0.7
Special items, EURm 2)           -17   -31
Operating profit excl.           -13    22
special items, EURm
% of sales                      -1.3   1.6
Sawn timber deliveries, 1,000  1,084 1,497
m3

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) Special items of EUR 33 million in the third quarter of 2010, relate to a 
capital gain from selling a conservation easement in Minnesota. Other special 
items of EUR 4 million relate to a capital gain and reversals of restructuring 
provisions of Timber operations in Finland. Special items of EUR 14 million 
including impairment charges of EUR 5 million, in the fourth quarter of 2009 
relate to restructuring of Timber operations in Finland. Special items for the 
second quarter of 2009 include impairment charges of EUR 8 million related to 
wood procurement operations. In the first quarter of 2009, special items of 
EUR 10 million relate to the sales loss of Miramichi's forestry and sawmilling 
operations' assets.


Q3 of 2010 compared with Q3 of 2009

Operating profit excluding special items was EUR 31 million (5 million). Sales 
increased by 31% to EUR 387 million (295 million). Sawn timber deliveries 
increased by 21% to 428,000 cubic metres (355,000).

The increase in the fair value of biological assets net of wood harvested was 
EUR 16 million (13 million negative). The increase in the fair value of 
biological assets (growing trees) was EUR 35 million (11 million). The cost of 
wood raw material harvested from the Group's own forests was EUR 19 million (24 
million).

UPM's own forests in Finland were damaged due to storms during the third 
quarter of 2010. The estimated amount of felled wood is approximately 700,000 
cubic metres. Most of the felled wood will be harvested by the end of the year 
2010.


January-September 2010 compared with January-September 2009

Operating profit excluding special items was EUR 102 million (loss of EUR 13 
million). Sales increased by 13% to EUR 1,119 million (989 million). Sawn 
timber deliveries increased by 20% to 1,303,000 cubic metres (1,084,000).

Profitability improved from the same period last year mainly due to higher 
delivery volumes of timber products and higher average sawn timber prices.

The increase in the fair value of biological assets net of wood harvested was 
EUR 66 million (8 million). The increase in the fair value of biological assets 
(growing trees) was EUR 128 million (46 million). The cost of wood raw material 
harvested from the Group's own forests was EUR 62 million (38 million).


Market review

Wood purchase volumes returned to long-term average levels towards the end of 
the period. During the first nine months of the year, wood purchases in the 
Finnish wood market were 22.1 million cubic metres, which was four times higher 
than in the same period last year. The increased market activity in Finland was 
also partly stimulated by storm impact and temporary tax relief that is valid 
until the end of the year.

Both pulpwood and log market prices in Finland increased in comparison with the 
prices of the last year being above the long-term average prices. During the 
third quarter of 2010, wood prices declined temporarily due to storm impact but 
returned to the pre-storm levels towards the end of the period.

The European demand for sawn softwood timber continued to be weak due to low 
building activity. Market activity slowed down during the third quarter of 2010 
after seasonal upturn in the summer. Demand in the export markets weakened 
towards the end of the period due to seasonal variation.


Paper
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010

Sales, EURm                    1,672 1,540 1,401 1,558 1,454 1,388 1,367 4,613
EBITDA, EURm 1)                   67    72    75   221   274   247   187   214
% of sales                       4.0   4.7   5.4  14.2  18.8  17.8  13.7   4.6
Share of results of                -     -     -     1     -    -1    -1     -
associated companies and 
joint ventures, EURm
Depreciation, amortisation      -131  -130  -136  -140  -142  -147  -149  -397
and impairment charges, EURm
Operating profit, EURm           -71   -57   -69    74   126    85    60  -197
% of sales                      -4.2  -3.7  -4.9   4.7   8.7   6.1   4.4  -4.3
Special items, EURm 2)            -7     4    -8    -8    -6   -10    23   -11
Operating profit excl.           -64   -61   -61    82   132    95    37  -186
special items, EURm
% of sales                      -3.8  -4.0  -4.4   5.3   9.1   6.8   2.7  -4.0
Deliveries, publication        1,633 1,446 1,364 1,576 1,464 1,323 1,304 4,443
papers, 1,000 t
Deliveries, fine and             947   994   937   945   872   813   724 2,878
speciality papers, 1,000 t
Paper deliveries total, 1,000t 2,580 2,440 2,301 2,521 2,336 2,136 2,028 7,321

                              Q1-Q3/ Q1-Q4/
                                2009   2009

Sales, EURm                    4,209 5,767
EBITDA, EURm 1)                  708   929
% of sales                      16.8  16.1
Share of results of               -2    -1
associated companies and 
joint ventures, EURm
Depreciation, amortisation      -438  -578
and impairment charges, EURm
Operating profit, EURm           271   345
% of sales                       6.4   6.0
Special items, EURm 2)             7    -1
Operating profit excl.           264   346
special items, EURm
% of sales                       6.3   6.0
Deliveries, publication        4,091 5,667
papers, 1,000 t
Deliveries, fine and           2,409 3,354
speciality papers, 1,000 t
Paper deliveries total, 1,000t 6,500 9,021

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) Special items in the third quarter of 2010, relate to restructuring charges. 
In 2010, special items in the second quarter include impairment reversals of 
EUR 3 million. Other special items in the first and second quarter of 2010, 
include mainly employee-related restructuring charges. In the fourth and third 
quarter of 2009, special items of EUR 8 million and EUR 6 million relate to 
restructuring charges. Special items for the second quarter of 2009 include 
charges of EUR 9 million related to personnel reduction in Nordland mill, 
impairment reversals of EUR 4 million and other restructuring charges of EUR 5 
million. In the first quarter of 2009, special items include an income of 
EUR 31 million related to the sale of the assets of the former Miramichi paper 
mill and charges of EUR 8 million related to restructuring measures.


Q3 of 2010 compared with Q3 of 2009

Operating loss excluding special items was EUR 64 million (profit of EUR 132 
million). Sales were EUR 1,672 million (1,454 million). Paper deliveries 
increased by 10% to 2,580,000 tonnes (2,336,000). Publication paper deliveries 
(magazine papers and newsprint) increased by 12% from last year. Fine and 
speciality paper deliveries increased by 9%. Deliveries grew especially in 
North America. In Europe, deliveries grew broadly in line with the market.

The Paper business area incurred an operating loss, as the cost of fibre 
increased significantly from last year.

Higher paper prices and delivery volumes had a positive impact on operating 
profit. The average paper price for all paper deliveries when translated into 
euros was 4% higher than last year. Compared with the second quarter of 2010, 
the average paper price increased by around 3%. Prices increased across all 
paper grades.


January-September 2010 compared with January-September 2009

Operating loss excluding special items was EUR 186 million (profit of EUR 264 
million). Sales were EUR 4,613 million (4,209 million). Paper deliveries 
increased by 13% to 7,321,000 tonnes (6,500,000). Publication paper deliveries 
(magazine papers and newsprint) increased by 9% and fine and speciality paper 
deliveries by 19% from last year. Deliveries grew in all main markets.

The Paper business area incurred an operating loss, as the cost of fibre 
increased significantly from last year and paper prices decreased. The average 
paper price for all paper deliveries when translated into euros was 3% lower 
than last year.

Higher paper deliveries had a positive impact on operating profit.


Market review

Demand for publication papers in Europe increased by 4% and for fine papers by 
7% from last year. In North America, demand for magazine papers was 6% higher 
than a year ago. In Asia, demand for fine papers grew. Demand for speciality 
papers grew in all main markets.

In Europe, magazine paper prices decreased at the start of the year, but 
increased in the third quarter. On average, magazine paper prices in euros in 
the first nine months were 7% lower than last year. Newsprint prices also 
decreased at the start of the year and were on average 17% lower than last 
year. Fine paper prices increased throughout the period and were on average 4% 
higher than last year. Prices for speciality papers increased from last year.

In North America, the average US dollar price for magazine papers was 7% lower 
than last year. In Asia, market prices for fine papers increased in the first 
half of the year and decreased slightly in the third quarter.


Label
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010

Sales, EURm                      284   280   260   252   242   226   223   824
EBITDA, EURm 1)                   33    34    31    25    29    18     6    98
% of sales                      11.6  12.1  11.9   9.9  12.0   8.0   2.7  11.9
Depreciation, amortisation        -8   -10    -7    -8    -9   -11    -9   -25
and impairment charges, 
EURm
Operating profit, EURm            25    24    24    16    18     4    -3    73
% of sales                       8.8   8.6   9.2   6.3   7.4   1.8  -1.3   8.9
Special items, EURm 2)             1     -     1    -1    -2    -5     -     2
Operating profit excl.            24    24    23    17    20     9    -3    71
special items, EURm
% of sales                       8.5   8.6   8.8   6.7   8.3   4.0  -1.3   8.6

                              Q1-Q3/ Q1-Q4/
                                2009   2009

Sales, EURm                      691   943
EBITDA, EURm 1)                   53    78
% of sales                       7.7   8.3
Depreciation, amortisation       -29   -37
and impairment charges, 
EURm
Operating profit, EURm            19    35
% of sales                       2.7   3.7
Special items, EURm 2)            -7    -8
Operating profit excl.            26    43
special items, EURm
% of sales                       3.8   4.6

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) In 2010, special items relate to impairment reversals. In the fourth and 
third quarter of 2009, special items relate to restructuring charges. In the 
second quarter of 2009, special items include impairment charges of EUR 2 
million and other restructuring charges of EUR 3 million.


Q3 of 2010 compared with Q3 of 2009

Operating profit excluding special items was EUR 24 million (20 million). Sales 
grew by 17% to EUR 284 million (242 million).

Profitability improved slightly from the same period last year. Delivery 
volumes and sales prices of self-adhesive label materials increased from last 
year. Raw material costs were higher.

Sales prices increased in the third quarter from the second quarter of 2010, 
but in most regions not enough to fully compensate for the rise in raw material 
costs.


January-September 2010 compared with January-September 2009

Operating profit excluding special items was EUR 71 million (26 million). Sales 
grew by 19% to EUR 824 million (691 million).

Profitability improved noticeably from last year, mainly due to higher sales 
volumes. Delivery volumes of self-adhesive label materials increased in all 
regions from last year. Volume growth was highest in Eastern Europe and Asia. 
Average sales prices increased from last year.


Market review

Demand for self-adhesive label materials grew noticeably in the first six 
months from the depressed level seen in the same period last year. Demand also 
continued to grow in the third quarter, although at a slower pace.

Demand growth has continued strongly in Eastern Europe, Asia Pacific and Latin 
America. In mature markets in Western Europe and North America, demand 
recovered to close to pre-recession levels.


Plywood
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010

Sales, EURm                       83    97    76    81    73    77    75   256
EBITDA, EURm 1)                    2     2    -2     3    -5    -5   -23     2
% of sales                       2.4   2.1  -2.6   3.7  -6.8  -6.5 -30.7   0.8
Depreciation, amortisation        -5    -5    -5   -12    -5    -5    -5   -15
and impairment charges, EURm
Operating profit, EURm            -4    -1    -7   -33   -10   -10   -29   -12
% of sales                      -4.8  -1.0  -9.2 -40.7 -13.7 -13.0 -38.7  -4.7
Special items, EURm 2)            -1     2     -   -30     -     -    -1     1
Operating profit excl.            -3    -3    -7    -3   -10   -10   -28   -13
special items, EURm
% of sales                      -3.6  -3.1  -9.2  -3.7 -13.7 -13.0 -37.3  -5.1
Deliveries, plywood, 1,000 m3    156   182   140   150   143   141   133   478

                              Q1-Q3/ Q1-Q4/
                                2009   2009

Sales, EURm                      225   306
EBITDA, EURm 1)                  -33   -30
% of sales                     -14.7  -9.8
Depreciation, amortisation       -15   -27
and impairment charges, EURm
Operating profit, EURm           -49   -82
% of sales                     -21.8 -26.8
Special items, EURm 2)            -1   -31
Operating profit excl.           -48   -51
special items, EURm
% of sales                     -21.3 -16.7
Deliveries, plywood, 1,000 m3    417   567

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) Special items in 2010, include mainly a capital gain from asset sale in 
Finland. Special items in the fourth quarter of 2009, include impairment 
charges of EUR 6 million and other restructuring charges of EUR 24 million.


Q3 of 2010 compared with Q3 of 2009

Operating loss excluding special items was EUR 3 million (loss of EUR 10 
million). Sales grew by 14% to EUR 83 million (73 million), as plywood 
deliveries grew by 9% to 156,000 cubic metres (143,000) and sales prices 
increased.

Operating loss for Plywood decreased from last year, mainly due to higher sales 
prices and delivery volumes.


January-September 2010 compared with January-September 2009

Operating loss excluding special items was EUR 13 million (loss of EUR 48 
million). Sales grew by 14% to EUR 256 million (225 million), as plywood 
deliveries grew by 15% to 478,000 cubic metres (417,000).

Operating loss for Plywood decreased from last year, mainly due to higher 
delivery volumes. UPM's delivery volumes benefited from supply constraints of 
some Chilean and Russian competitors. Variable costs were lower than last year.

Sales prices for plywood have increased from the early part of the year. On 
average, plywood sales prices were at the same level as last year.


Market review

In Europe, in January-September, plywood demand increased from last year. 
Demand started to improve in various industrial end-use areas, but the recovery 
remained weak in construction end-uses.

The overall plywood market prices remained low during the first nine months of 
the year, even though they increased during the third quarter.


Other operations
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/ Q1-Q3/
                                2010  2010  2010  2009  2009  2009  2009   2010

Sales, EURm                       45    51    40    35    21    21    34   136
EBITDA, EURm 1)                  -23   -19   -18   -27   -31   -24   -29   -60
Share of results of               -1     1    -2     -     -    -2    -2    -2
associated companies and
joint ventures, EURm
Depreciation, amortisation        -2    -3    -3    -3    -3    -3    -3    -8
and impairment charges, EURm
Operating profit, EURm           -23   -22   -24   -34   -45   -29   -34   -69
Special items, EURm 2)             4    -3    -1    -6   -11     -     -     -
Operating profit excl.           -27   -19   -23   -28   -34   -29   -34   -69
special items, EURm
                              Q1-Q3/ Q1-Q4/
                                2009   2009

Sales, EURm                       76   111
EBITDA, EURm 1)                  -84  -111
Share of results of               -4    -4
associated companies and 
joint ventures, EURm
Depreciation, amortisation        -9   -12
and impairment charges, EURm
Operating profit, EURm          -108  -142
Special items, EURm 2)           -11   -17
Operating profit excl.           -97  -125
special items, EURm

1) EBITDA is operating profit before depreciation, amortisation and impairment 
charges, excluding the change in value of biological assets and wood harvested, 
the share of results of associated companies and joint ventures, and special 
items.
2) Special items in the third quarter of 2010, include mainly a capital gain 
from asset sale in Finland. Other special items in 2010, relate to net 
restructuring charges. In 2009, special items in the fourth quarter include 
impairment charges of EUR 2 million and other charges of EUR 4 million both 
relating to terminated activities. Special items of EUR 11 million in the third 
quarter of 2009 relate mainly to estates of closed industrial sites in Finland.

Other operations include development units (RFID tags, the wood plastic 
composite unit UPM ProFi and biofuels), logistic services and corporate 
administration.


Q3 of 2010 compared with Q3 of 2009

Operating loss excluding special items was EUR 27 million (loss of EUR 34 
million). Sales amounted to EUR 45 million (21 million).

The development units incurred a smaller operating loss than last year.


January-September 2010 compared with January-September 2009

Operating loss excluding special items was EUR 69 million (loss of EUR 97 
million). Sales amounted to EUR 136 million (76 million).

The development units incurred a smaller operating loss than last year.

Helsinki, 28 October 2010

UPM-Kymmene Corporation

Board of Directors


Financial Information
This Iterim Report is unaudited

Consolidated income statement

EURm                              Q3/    Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
                                 2010   2009   2010   2009   2009

Sales                           2,312  1,913  6,567  5,611  7,719
Other operating income             42      5     68     29     47
Costs and expenses             -1,938 -1,603 -5,585 -4,964 -6,774
Change in fair value of            14    -13     64      8     17
biological assets and wood harvested
Share of results of associated     -2    -21      9    -96    -95
companies and joint ventures
Depreciation, amortisation       -190   -185   -575   -579   -779
and impairment charges
Operating profit (loss)           238     96    548      9    135

Gains on available-for-sale         -     -1      1     -1     -1
investments, net
Exchange rate and fair value      -11     -3     -6     -9     -9
gains and losses
Interest and other finance        -28    -28    -81   -123     62
costs, net
Profit (loss) before tax          199     64    462   -124    187
                                                                 
Income taxes                      -21    -24    -45     -2    -18
Profit (loss) for the period      178     40    417   -126    169

Attributable to:
Owners of the parent company      178     40    417   -126    169
Non-controlling interests           -      -      -      -      -
                                  178     40    417   -126    169
Earnings per share for profit (loss) 
attributable to owners of the parent company
                                                                 
Basic earnings per share, EUR    0.34   0.08   0.80  -0.24   0.33
Diluted earnings per share, EUR  0.34   0.08   0.80  -0.24   0.33


Consolidated statement of comprehensive income

EURm                             Q3/  Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
                                2010 2009   2010   2009   2009

Profit (loss) for the period     178    40   417  -126   169
Other comprehensive income 
for the period, net of tax:
Translation differences         -317   -16   182    50   165
Net investment hedge              50   -17   -38   -37   -56
Cash flow hedges                  55    18   -24     9    -4
Available-for-sale investments     2     -     7     -    21
Share of other comprehensive       1    -2     3   -10    30
income of associated companies
Other comprehensive income      -209   -17   130    12   156
for the period, net of tax
Total comprehensive income       -31    23   547  -114   325
for the period
Total comprehensive income attributable to:
Owners of the parent company     -31    23   547  -114   325
Non-controlling interests          -     -     -     -     -
                                 -31    23   547  -114   325


Condensed consolidated balance sheet

EURm                           30.09.2010 30.09.2009 31.12.2009
ASSETS                                                         
Non-current assets
Goodwill                            1,024        933      1,017
Other intangible assets               436        390        423
Property, plant and equipment       5,894      5,253      6,192
Biological assets                   1,347      1,126      1,293
Investments in associated             567        801        553
companies and joint ventures
Deferred tax assets                   340        244        287
Other non-current assets              973        644        816
                                   10,581      9,391     10,581
Current assets
Inventories                         1,320      1,011      1,112
Trade and other receivables         1,636      1,460      1,474
Cash and cash equivalents             484        367        438
                                    3,440      2,838      3,024
Assets classified as held for sale      -        327          -
Total assets                       14,021     12,556     13,605

EQUITY AND LIABILITIES
Equity attributable to owners of the parent company
Share capital                         890        890        890
Fair value and other reserves         111       -155        -23
Reserve for invested                1,145      1,145      1,145
non-restricted equity
Retained earnings                   4,758      3,908      4,574
                                    6,904      5,788      6,586
Non-controlling interests              16         14         16
Total equity                        6,920      5,802      6,602

Non-current liabilities                                        
Deferred tax liabilities              631        590        608
Non-current interest-bearing        4,034      3,941      4,164
liabilities
Other non-current liabilities         636        595        660

                                    5,301      5,126      5,432
Current liabilities
Current interest-bearing              423        429        300
liabilities
Trade and other payables            1,377      1,199      1,271
                                    1,800      1,628      1,571
Total liabilities                   7,101      6,754      7,003
Total equity and liabilities       14,021     12,556     13,605


Consolidated statement of changes in equity

			     Attributable to owners of the parent company	
                                                                      
EURm                                  Share  Translation   Fair value  
                                    capital  differences    and other
							     reserves

Balance at 1 January 2009               890         -295          130
Profit (loss) for the period              -            -            -
Translation differences                   -           50            -
Net investment hedge, net of tax          -          -37            -
Cash flow hedges, net of tax              -            -            9
Available-for-sale investments            -            -            -
Share of other comprehensive              -          -15            -
income of associated companies
Total comprehensive income                -           -2            9
for the period
Share-based compensation, net of tax      -            -            3
Dividend paid                             -            -            -
Other items                               -            -            -
Total transactions with                   -            -            3
owners for the period
Balance at 30 September 2009            890         -297          142
                                                                     
Balance at 1 January 2010               890         -164          141
Profit (loss) for the period              -            -            -
Translation differences                   -          182            -
Net investment hedge, net of tax          -          -38            -
Cash flow hedges, net of tax              -            -          -24
Available-for-sale investments            -            -            7
Share of other comprehensive              -            -            -
income of associated companies
Total comprehensive income                -          144          -17
for the period
Share-based compensation, net of tax      -            -            7
Dividend paid                             -            -            -
Other items                               -            -            -
Total transactions with                   -            -            7
owners for the period
Balance at 30 September 2010            890          -20          131
                                                                     
EURm                                Reserve     Retained        Total
                               for invested     earnings
		   	     non-restricted
				     equity

Balance at 1 January 2009             1,145        4,236        6,106
Profit (loss) for the period              -         -126         -126
Translation differences                   -            -           50
Net investment hedge, net of tax          -            -          -37
Cash flow hedges, net of tax              -            -            9
Available-for-sale investments            -            -            -
Share of other comprehensive              -            5          -10
income of associated companies
Total comprehensive income                -         -121         -114
for the period
Share-based compensation, net of tax      -            -            3
Dividend paid                             -         -208         -208
Other items                               -            1            1
Total transactions with                   -         -207         -204
owners for the period
Balance at 30 September 2009          1,145        3,908        5,788
                                                                     
Balance at 1 January 2010             1,145        4,574        6,586
Profit (loss) for the period              -          417          417
Translation differences                   -            -          182
Net investment hedge, net of tax          -            -          -38
Cash flow hedges, net of tax              -            -          -24
Available-for-sale investments            -            -            7
Share of other comprehensive              -            3            3
income of associated companies
Total comprehensive income                -          420          547
for the period
Share-based compensation, net of tax      -            -            7
Dividend paid                             -         -234         -234
Other items                               -           -2           -2
Total transactions with                   -         -236         -229
owners for the period
Balance at 30 September 2010          1,145        4,758        6,904
                                                     
EURm                                   Non-        Total
				controlling	  equity
				  interests

Balance at 1 January 2009                14        6,120
Profit (loss) for the period              -         -126
Translation differences                   -           50
Net investment hedge, net of tax          -          -37
Cash flow hedges, net of tax              -            9
Available-for-sale investments            -            -
Share of other comprehensive              -          -10
income of associated companies
Total comprehensive income                -         -114
for the period
Share-based compensation, net of tax      -            3
Dividend paid                             -         -208
Other items                               -            1
Total transactions with                   -         -204
owners for the period
Balance at 30 September 2009             14        5,802

Balance at 1 January 2010                16        6,602
Profit (loss) for the period              -          417
Translation differences                   -          182
Net investment hedge, net of tax          -          -38
Cash flow hedges, net of tax              -          -24
Available-for-sale investments            -            7
Share of other comprehensive              -            3
income of associated companies
Total comprehensive income                -          547
for the period
Share-based compensation, net of tax      -            7
Dividend paid                             -         -234
Other items                               -           -2
Total transactions with                   -         -229
owners for the period
Balance at 30 September 2010             16        6,920


Condensed consolidated cash flow statement

EURm                           Q1-Q3/ Q1-Q3/ Q1-Q4/
                                 2010   2009   2009
Cash flow from operating activities
Profit (loss) for the period      417   -126    169
Adjustments                       552    735    772
Change in working capital        -237    437    532
Cash generated from operations    732  1,046  1,473
Finance costs, net                -67   -135   -183
Income taxes paid                 -26    -22    -31
Net cash generated from           639    889  1,259
operating activities

Cash flow from investing activities
Acquisitions and share purchases   -4      -   -586
Capital expenditure              -150   -191   -236
Asset sales and other              49     36    608
investing cash flow
Net cash used in investing       -105   -155   -214
activities

Cash flow from financing activities
Change in loans and other        -261   -489   -732
financial items
Dividends paid                   -234   -208   -208
Net cash used in financing       -495   -697   -940
activities

Change in cash and cash            39     37    105
equivalents
Cash and cash equivalents at      438    330    330
the beginning of period
Foreign exchange effect on cash     7      -      3
Change in cash and cash            39     37    105
equivalents
Cash and cash equivalents at      484    367    438
end of period


Quarterly information

EURm                               Q3/     Q2/     Q1/     Q4/     Q3/     Q2/
                                  2010    2010    2010    2009    2009    2009

Sales                            2,312   2,216   2,039   2,108   1,913   1,841
Other operating income              42      17       9      18       5       7
Costs and expenses              -1,938  -1,877  -1,770  -1,810  -1,603  -1,627
Change in fair value of             14      31      19       9     -13      10
biological assets and wood harvested
Share of results of associated      -2       8       3       1     -21     -22
companies and joint ventures
Depreciation, amortisation        -190    -192    -193    -200    -185    -201
and impairment charges
Operating profit (loss)            238     203     107     126      96       8
Gains on available-for-sale          -       1       -       -      -1       -
investments, net
Exchange rate and fair value       -11       4       1       -      -3       3
gains and losses
Interest and other finance         -28     -27     -26     185     -28     -37
costs, net
Profit (loss) before tax           199     181      82     311      64     -26
Income taxes                       -21     -12     -12     -16     -24      18
Profit (loss) for the period       178     169      70     295      40      -8
Attributable to:
Owners of the parent company       178     169      70     295      40      -8
Non-controlling interests            -       -       -       -       -       -
                                   178     169      70     295      40      -8
Basic earnings per share, EUR     0.34    0.33    0.13    0.57    0.08   -0.02
Diluted earnings per share, EUR   0.34    0.33    0.13    0.57    0.08   -0.02
Earnings per share, excluding     0.28    0.29    0.15    0.21    0.14    0.03
special items, EUR
Average number of shares       519,970 519,970 519,970 519,958 519,954 519,954
basic (1,000)
Average number of shares       521,742 521,333 520,018 518,876 521,036 519,954
diluted (1,000)
Special items in operating          34       4      -9     -60     -35     -23
profit (loss)
Operating profit (loss),           204     199     116     186     131      31
excl. special items
% of sales                         8.8     9.0     5.7     8.8     6.8     1.7
Special items before tax            34       4      -9     155     -35     -23
Profit (loss) before tax,          165     177      91     156      99      -3
excl. special items
% of sales                         7.1     8.0     4.5     7.4     5.2    -0.2
Return on equity, excl.            8.6     8.9     4.6     7.4     5.0     0.8
special items, %
Return on capital employed,        6.8     7.3     4.3     7.2     4.9     1.3
excl. special items, %
EBITDA                             384     353     288     362     334     238
% of sales                        16.6    15.9    14.1    17.2    17.5    12.9

Share of results of associated 
companies and joint ventures
Energy                              -3       6       4      -8     -24      -4
Pulp                                 -       -       -       7       4     -16
Forest and timber                    2       1       1       1      -1       1
Paper                                -       -       -       1       -      -1
Other operations                    -1       1      -2       -       -      -2
Total                               -2       8       3       1     -21     -22

EURm                               Q1/  Q1-Q3/  Q1-Q3/  Q1-Q4/
                                  2009    2010    2009    2009
                                                              
Sales                            1,857   6,567   5,611   7,719
Other operating income              17      68      29      47
Costs and expenses              -1,734  -5,585  -4,964  -6,774
Change in fair value of             11      64       8      17
biological assets and wood harvested
Share of results of associated     -53       9     -96     -95
companies and joint ventures
Depreciation, amortisation        -193    -575    -579    -779
and impairment charges
Operating profit (loss)            -95     548       9     135
Gains on available-for-sale          -       1      -1      -1
investments, net
Exchange rate and fair value        -9      -6      -9      -9
gains and losses
Interest and other finance         -58     -81    -123      62
costs, net
Profit (loss) before tax          -162     462    -124     187
Income taxes                         4     -45      -2     -18
Profit (loss) for the period      -158     417    -126     169
Attributable to:                                              
Owners of the parent company      -158     417    -126     169
Non-controlling interests            -       -       -       -
                                  -158     417    -126     169
Basic earnings per share, EUR    -0.30    0.80   -0.24    0.33
Diluted earnings per share, EUR  -0.30    0.80   -0.24    0.33
Earnings per share, excluding    -0.27    0.72   -0.10    0.11
special items, EUR
Average number of shares       519,954 519,970 519,954 519,955
basic (1,000)
Average number of shares       519,954 521,031 520,315 519,955
diluted (1,000)
Special items in operating         -17      29     -75    -135
profit (loss)
Operating profit (loss),           -78     519      84     270
excl. special items
% of sales                        -4.2     7.9     1.5     3.5
Special items before tax           -17      29     -75      80
Profit (loss) before tax,         -145     433     -49     107
excl. special items
% of sales                        -7.8     6.6    -0.9     1.4
Return on equity, excl.           neg.     7.4    neg.     1.0
special items, %
Return on capital employed,       neg.     6.1     0.9     2.5
excl. special items, %
EBITDA                             128   1,025     700   1,062
% of sales                         6.9    15.6    12.5    13.8
                                                              
Share of results of associated 
companies and joint ventures
Energy                              -4       7     -32     -40
Pulp                               -47       -     -59     -52
Forest and timber                    1       4       1       2
Paper                               -1       -      -2      -1
Other operations                    -2      -2      -4      -4
Total                              -53       9     -96     -95


Deliveries
                                 Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                                2010  2010  2010  2009  2009  2009  2009

Electricity, 1,000 MWh         2,276 2,303 2,411 2,277 2,103 1,999 2,486
Pulp, 1,000 t                    752   768   700   550   446   391   372
Sawn timber, 1,000 m3            428   504   371   413   355   366   363
Publication papers, 1,000 t    1,633 1,446 1,364 1,576 1,464 1,323 1,304
Fine and speciality papers,      947   994   937   945   872   813   724
1,000 t
Paper deliveries total, 1,000t 2,580 2,440 2,301 2,521 2,336 2,136 2,028
Plywood, 1,000 m3                156   182   140   150   143   141   133

                               Q1-Q3/  Q1-Q3/ Q1-Q4/
                                 2010    2009   2009

Electricity, 1,000 MWh          6,990  6,588  8,865
Pulp, 1,000 t                   2,220  1,209  1,759
Sawn timber, 1,000 m3           1,303  1,084  1,497
Publication papers, 1,000 t     4,443  4,091  5,667
Fine and speciality papers,     2,878  2,409  3,354
1,000 t
Paper deliveries total, 1,000t  7,321  6,500  9,021
Plywood, 1,000 m3                 478    417    567


Quarterly segment information

EURm                             Q3/   Q2/   Q1/   Q4/
                                2010  2010  2010  2009
Sales
Energy                           124   116   174   128
Pulp                             489   455   341   226
Forest and timber                387   393   339   348
Paper                          1,672 1,540 1,401 1,558
Label                            284   280   260   252
Plywood                           83    97    76    81
Other operations                  45    51    40    35
Internal sales                  -772  -716  -592  -520
Sales, total                   2,312 2,216 2,039 2,108

EBITDA
Energy                            48    39    79    57
Pulp                             239   199   120    53
Forest and timber                 18    26     3    30
Paper                             67    72    75   221
Label                             33    34    31    25
Plywood                            2     2    -2     3
Other operations                 -23   -19   -18   -27
EBITDA, total                    384   353   288   362

Operating profit (loss)
Energy                            44    44    81    47
Pulp                             199   163    83    35
Forest and timber                 68    52    19    21
Paper                            -71   -57   -69    74
Label                             25    24    24    16
Plywood                           -4    -1    -7   -33
Other operations                 -23   -22   -24   -34
Operating profit (loss), total   238   203   107   126
% of sales                      10.3   9.2   5.2   6.0
                                                      
Special items in operating profit
Energy                             -     -     -    -1
Pulp                               -     1    -1     -
Forest and timber                 37     -     -   -14
Paper                             -7     4    -8    -8
Label                              1     -     1    -1
Plywood                           -1     2     -   -30
Other operations                   4    -3    -1    -6
Special items in operating        34     4    -9   -60
profit, total

Operating profit (loss) 
excl.special items
Energy                            44    44    81    48
Pulp                             199   162    84    35
Forest and timber                 31    52    19    35
Paper                            -64   -61   -61    82
Label                             24    24    23    17
Plywood                           -3    -3    -7    -3
Other operations                 -27   -19   -23   -28
Operating profit (loss) excl.    204   199   116   186
special items, total
% of sales                       8.8   9.0   5.7   8.8

EURm                             Q3/   Q2/   Q1/   Q4/
                                2010  2010  2010  2009
External sales
Energy                            31    35    94    38
Pulp                             102   106    86    34
Forest and timber                181   193   154   171
Paper                          1,636 1,499 1,353 1,500
Label                            283   280   259   252
Plywood                           79    93    73    77
Other operations                   -    10    20    36
External sales, total          2,312 2,216 2,039 2,108

Internal sales                                        
Energy                            93    81    80    90
Pulp                             387   349   255   192
Forest and timber                206   200   185   177
Paper                             36    41    48    58
Label                              1     -     1     -
Plywood                            4     4     3     4
Other operations                  45    41    20    -1
Internal sales, total            772   716   592   520

EURm                                 Q3/       Q2/       Q1/    Q1-Q3/
                                    2009      2009      2009      2010
Sales
Energy                               108       100       136       414
Pulp                                 156       132       139     1,285
Forest and timber                    295       309       385     1,119
Paper                              1,454     1,388     1,367     4,613
Label                                242       226       223       824
Plywood                               73        77        75       256
Other operations                      21        21        34       136
Internal sales                      -436      -412      -502    -2,080
Sales, total                       1,913     1,841     1,857     6,567

EBITDA                                                                
Energy                                35        41        57       166
Pulp                                   8       -24       -55       558
Forest and timber                     24       -15       -15        47
Paper                                274       247       187       214
Label                                 29        18         6        98
Plywood                               -5        -5       -23         2
Other operations                     -31       -24       -29       -60
EBITDA, total                        334       238       128     1,025

Operating profit (loss)
Energy                                10        36        51       169
Pulp                                  -9       -60      -122       445
Forest and timber                      6       -18       -18       139
Paper                                126        85        60      -197
Label                                 18         4        -3        73
Plywood                              -10       -10       -29       -12
Other operations                     -45       -29       -34       -69
Operating profit (loss), total        96         8       -95       548
% of sales                           5.0       0.4      -5.1       8.3

Special items in operating profit
Energy                               -17         -         -         -
Pulp                                   -         -       -29         -
Forest and timber                      1        -8       -10        37
Paper                                 -6       -10        23       -11
Label                                 -2        -5         -         2
Plywood                                -         -        -1         1
Other operations                     -11         -         -         -
Special items in operating           -35       -23       -17        29
profit, total

Operating profit (loss) excl.special items
Energy                                27        36        51       169
Pulp                                  -9       -60       -93       445
Forest and timber                      5       -10        -8       102
Paper                                132        95        37      -186
Label                                 20         9        -3        71
Plywood                              -10       -10       -28       -13
Other operations                     -34       -29       -34       -69
Operating profit (loss) excl.        131        31       -78       519
special items, total
% of sales                           6.8       1.7      -4.2       7.9

EURm                                 Q3/       Q2/       Q1/    Q1-Q3/
                                    2009      2009      2009      2010
External sales
Energy                                24        24        49       160
Pulp                                   9        10        10       294
Forest and timber                    145       150       152       528
Paper                              1,409     1,355     1,327     4,488
Label                                243       225       222       822
Plywood                               69        73        72       245
Other operations                      14         4        25        30
External sales, total              1,913     1,841     1,857     6,567

Internal sales
Energy                                84        76        87       254
Pulp                                 147       122       129       991
Forest and timber                    150       159       233       591
Paper                                 45        33        40       125
Label                                 -1         1         1         2
Plywood                                4         4         3        11
Other operations                       7        17         9       106
Internal sales, total                436       412       502     2,080

EURm                              Q1-Q3/    Q1-Q4/
				    2009      2009
Sales                                             
Energy                               344       472
Pulp                                 427       653
Forest and timber                    989     1,337
Paper                              4,209     5,767
Label                                691       943
Plywood                              225       306
Other operations                      76       111
Internal sales                    -1,350    -1,870
Sales, total                       5,611     7,719

EBITDA
Energy                               133       190
Pulp                                 -71       -18
Forest and timber                     -6        24
Paper                                708       929
Label                                 53        78
Plywood                              -33       -30
Other operations                     -84      -111
EBITDA, total                        700     1,062

Operating profit (loss)
Energy                                97       144
Pulp                                -191      -156
Forest and timber                    -30        -9
Paper                                271       345
Label                                 19        35
Plywood                              -49       -82
Other operations                    -108      -142
Operating profit (loss), total         9       135
% of sales                           0.2       1.7
                                                  
Special items in operating profit
Energy                               -17       -18
Pulp                                 -29       -29
Forest and timber                    -17       -31
Paper                                  7        -1
Label                                 -7        -8
Plywood                               -1       -31
Other operations                     -11       -17
Special items in operating           -75      -135
profit, total

Operating profit (loss) excl.special items
Energy                               114       162
Pulp                                -162      -127
Forest and timber                    -13        22
Paper                                264       346
Label                                 26        43
Plywood                              -48       -51
Other operations                     -97      -125
Operating profit (loss) excl.         84       270
special items, total
% of sales                           1.5       3.5

EURm                              Q1-Q3/    Q1-Q4/
                                    2009      2009
External sales
Energy                                97       135
Pulp                                  29        63
Forest and timber                    447       618
Paper                              4,091     5,591
Label                                690       942
Plywood                              214       291
Other operations                      43        79
External sales, total              5,611     7,719

Internal sales
Energy                               247       337
Pulp                                 398       590
Forest and timber                    542       719
Paper                                118       176
Label                                  1         1
Plywood                               11        15
Other operations                      33        32
Internal sales, total              1,350     1,870


Changes in property, plant and equipment

EURm                          Q1-Q3/ Q1-Q3/ Q1-Q4/
                                2010   2009   2009

Book value at beginning of     6,192  5,688  5,688
period
Capital expenditure              119    139    181
Companies acquired                 -      -  1,013
Decreases                        -14    -14    -20
Depreciation                    -534   -530   -696
Impairment charges                 -     -6    -14
Impairment reversal                4      4      5
Translation difference and       127    -28     35
other changes
Book value at end of period    5,894  5,253  6,192


Commitments and contingencies

EURm                           30.09.2010 30.09.2009 31.12.2009
                                                               
Own commitments                                                
Mortgages 1)                        1,031        760      1,043

On behalf of associated companies 
and joint ventures
Guarantees for loans                    7          8          8
On behalf of others
Other guarantees                        -          1          1
Other own commitments                                          
Leasing commitments for the            22         18         24
next 12 months
Leasing commitments for                88         57         60
subsequent periods
Other commitments                      86         63         69

1) Mortgages and pledges relate mainly to Uruguayan operations, and to giving 
mandatory security for borrowing from Finnish pension insurance companies.


Capital commitments

EURm                             Completion   Total cost By 31.12.2009
Materials recovery facility    January 2011           19             -
(MRF), Shotton
Plywood development           December 2011           18             -
Energy saving TMP plant,       January 2011           16             -
Steyrermühl
Power plant rebuild, Schongau  January 2011           12             -
Rebuild of debarking plant,    October 2010           25            15
Pietarsaari

EURm                          Q1-Q3/ After
                                2010 30.09.2010

Materials recovery facility        7    12
(MRF), Shotton
Plywood development                6    12
Energy saving TMP plant,           4    12
Steyrermühl
Power plant rebuild, Schongau      3     9
Rebuild of debarking plant,        2     8
Pietarsaari


Notional amounts of derivative financial instruments

EURm                           30.09.2010 30.09.2009 31.12.2009
Currency derivatives                                           
Forward contracts                   3,950      3,696      3,791
Options, bought                         -         35         20
Options, written                        -         48         20
Swaps                                 710        511        514
Interest rate derivatives                                      
Forward contracts                   1,924      2,487      3,259
Swaps                               2,475      2,947      2,701
Other derivatives                                              
Forward contracts                     157        164         25
Options, bought                        41         78         73
Options, written                       41         78         73
Swaps                                   1          5          4


Related party (associated companies and joint ventures) 
transactions and balances

EURm                          Q1-Q3/ Q1-Q3/ Q1-Q4/
                                2010   2009   2009

Sales to associated companies    110     81    114
Purchases from associated        254    384    560
companies
Non-current receivables at         5      2      2
end of period
Trade and other receivables       18     23     23
at end of period 
Trade and other payables at       29     30     32
end of period


Basis of preparation

This unaudited interim report has been prepared in accordance with the 
accounting policies set out in International Accounting Standard 34 on Interim 
Financial Reporting and in the Group's Consolidated Financial Statements for 
2009. Income tax expense is recognised based on the best estimate of the 
weighted average annual income tax rate expected for the full financial year.

The Group has adopted the following standard:

Amendment to IAS 27 Consolidated and Separate Financial Statements requires the 
effects of all transactions with non-controlling interests to be recorded in 
equity if there is no change in control and these transactions will no longer 
result in goodwill or gains and losses. The standard also specifies the 
accounting when control is lost. Any remaining interest in the entity is 
re-measured to fair value, and a gain or loss is recognised in profit or loss. 
The adoption of the amended standard has changed the name of previous minority 
interests to non-controlling interests, and in addition the adoption has 
amended the presentation of consolidated statement of changes in equity.


Calculation of key indicators

Return on equity, %:
((Profit before tax - income taxes) / Total equity (average)) x 100

Return on capital employed, %:
(Profit before tax + interest expenses and other financial expenses) /
(Total equity + interest-bearing liabilities (average)) x 100

Earnings per share:
Profit for the period attributable to equity holders of the parent company /
Adjusted average number of shares during the period excluding treasury shares


Key exchange rates for the euro at end of period

                               30.09.2010 30.06.2010 31.03.2010 31.12.2009
USD                                1.3648     1.2271     1.3479     1.4406
CAD                                1.4073     1.2890     1.3687     1.5128
JPY                                113.68     108.79     125.93     133.16
GBP                                0.8600     0.8175     0.8898     0.8881
SEK                                9.1421     9.5259     9.7135    10.2520

                               30.09.2009 30.06.2009 31.03.2009
USD                                1.4643     1.4134     1.3308
CAD                                1.5709     1.6275     1.6685
JPY                                131.07     135.51     131.17
GBP                                0.9093     0.8521     0.9308
SEK                               10.2320    10.8125    10.9400

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 87-88 of the company's annual report 2009.

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications

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

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