UPM-Kymmene Oyj - UPM Interim Report 1 January-30 June 2010

UPM-Kymmene Corporation Interim Report 3 August 2010 at 09:55

UPM Interim Report 1 January-30 June 2010

Q2/2010: Earnings per share were EUR 0.33 (-0.02), excluding special items
EUR 0.29 (0.03). EBITDA was EUR 353 million, 15.9% of sales
(238 million, 12.9% of sales). Delivery volumes increased in all businesses
- sales grew by 20%. Sales prices started to increase during the quarter
following increasing demand.

Q1-Q2/2010: Earnings per share were EUR 0.46 (-0.32), excluding special items
EUR 0.44 (-0.24). EBITDA was EUR 641 million, 15.1% of sales
(366 million, 9.9% of sales). Operating cash flow was EUR 311 million
(580 million). Sales increased as economic activity improved.


Key figures
                                                            Q2/       Q2/  Q1-Q2/ Q1-Q2/ Q1-Q4/
                                                         2010    2009    2010    2009    2009

Sales, EURm                               2,216    1,841   4,255  3,698   7,719
EBITDA, EURm 1)                          353       238      641      366   1,062
% of sales                                       15.9      12.9     15.1       9.9     13.8
Operating profit (loss), EURm     203            8      310       -87      135
excluding special items, EURm  199          31      315      -47       270
% of sales                                         9.0         1.7        7.4     -1.3        3.5
Profit (loss) before tax, EURm     181         -26       263    -188      187
excluding special items, EURm  177           -3       268    -148      107
Net profit (loss) for the                   169           -8       239    -166      169
period, EURm
Earnings per share, EUR               0.33     -0.02      0.46    -0.32    0.33
excluding special items, EUR       0.29       0.03      0.44    -0.24    0.11
Diluted earnings per share, EUR 0.33      -0.02      0.46    -0.32    0.33
Return on equity, %                         10.0        neg.        7.1      neg.      2.8
excluding special items, %              8.9          0.8        6.7      neg.      1.0
Return on capital employed, %       7.4          0.4        5.6      neg.      3.2
excluding special items, %              7.3          1.3        5.7      neg.      2.5
Operating cash flow per                 0.20        0.59     0.60     1.12     2.42
share, EUR
Shareholders' equity per              13.33     11.08   13.33   11.08   12.67
share at end of period, EUR
Gearing ratio at end of                        55          70          55        70        56
period, %
Net interest-bearing                       3,837    4,036    3,837   4,036   3,730
liabilities at end of period, EURm
Capital employed at end of         11,551 10,294 11,551 10,294 11,066
period, EURm
Capital expenditure, EURm                55         66         85       133      913
Capital expenditure excluding            52         66         82       133      229
acquisitions and shares, EURm
Personnel at end of period         23,458 23,792 23,458 23,792 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

Q2 of 2010 compared with Q2 of 2009

Sales for the second quarter of 2010 were EUR 2,216 million, 20% higher than
the EUR 1,841 million in the second quarter of 2009. Sales increased due to
higher deliveries across all of UPM's business areas.

EBITDA was EUR 353 million, 15.9% of sales (238 million, 12.9% of sales).

EBITDA improved noticeably from the same period last year. Higher delivery
volumes in all of UPM's businesses and the inclusion of the acquired Uruguayan
operations were the main contributors to the improvement.

Variable costs were higher than last year, even though energy and wood costs
decreased slightly from last year. Fixed costs (comparable) were EUR 36 million
higher than last year.

Changes in sales prices in euro terms reduced EBITDA by about EUR 30 million.
The average paper price in euros decreased by approximately 3% from the same
period last year. Plywood sales prices were slightly lower than last year.
Average sales prices increased for sawn timber and label materials, as well as
for electricity and pulp. In most business areas sales prices increased
from the first quarter of 2010.

Operating profit was EUR 203 million, 9.2% of sales (8 million, 0.4% of sales).
The operating profit excluding special items was EUR 199 million, 9.0% of sales
(31 million, 1.7% of sales).

The increase in the fair value of biological assets net of wood harvested was
EUR 31 million compared with EUR 10 million a year before.

The share of results of associated companies and joint ventures was EUR 8
million (22 million negative). As of December 2009, Metsä-Botnia is no longer
an associated company of UPM.

Profit before tax was EUR 181 million (loss of EUR 26 million) and excluding
special items EUR 177 million (loss of EUR 3 million). Interest and other
finance costs net were EUR 27 million (37 million). Exchange rate and fair
value gains and losses resulted in a gain of EUR 4 million (3 million).

Income taxes were EUR 12 million (18 million positive). The impact on taxes
from special items was EUR 14 million positive (3 million positive), including
an income of EUR 15 million from estimated utilisation of tax credits in
Poland.

Profit for the second quarter was EUR 169 million (loss of EUR 8 million) and
earnings per share were EUR 0.33 (-0.02). Earnings per share excluding special
items were EUR 0.29 (0.03).

January-June of 2010 compared with January-June 2009

Sales for January-June were EUR 4,255 million, 15% higher than the EUR 3,698
million in the same period in 2009. Sales increased due to higher deliveries
across all of UPM's business areas.

EBITDA was EUR 641 million, 15.1% of sales (366 million, 9.9% of sales).

EBITDA improved clearly from the same period last year. Higher delivery volumes
in all of UPM's businesses and the inclusion of the Uruguayan operations,
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 70 million lower than the peak levels of the comparison
period. Energy costs decreased by about EUR 45 million.

Fixed costs (comparable) increased by about EUR 37 million from last year,
mainly due to higher operating rates at UPM's production units, which reduced
the need for temporary shutdowns.

Changes in sales prices in euro terms reduced EBITDA by about EUR 130 million.
The average paper price in euros decreased by approximately 7% from the same
period last year. Plywood sales prices were lower than last year. Average sales
prices increased for sawn timber and label materials, as well as for external
electricity and pulp sales.

Operating profit was EUR 310 million, 7.3% of sales (loss of EUR 87 million,
-2.4% of sales). The operating profit excluding special items was EUR 315
million, 7.4% of sales (loss of EUR 47 million, 1.3% of sales). Operating
profit includes net restructuring charges of EUR 5 million (40 million) as
special items.

The increase in the fair value of biological assets net of wood harvested was
EUR 50 million compared with EUR 21 million a year before.

The share of results of associated companies and joint ventures was EUR 11
million (75 million negative). As of December 2009, Metsä-Botnia is no longer
an associated company of UPM.

Profit before tax was EUR 263 million (loss of EUR 188 million) and excluding
special items EUR 268 million (loss of EUR 148 million). Interest and other
finance costs net were EUR 53 million (95 million). Exchange rate and fair
value gains and losses resulted in a gain of EUR 5 million (loss of EUR 6
million).

Income taxes were EUR 24 million (22 million positive). The impact on taxes
from special items was EUR 17 million positive (0 million), including an income
of EUR 15 million from estimated utilisation of tax credits in Poland.

Profit for the period was EUR 239 million (loss of EUR 166 million) and
earnings per share were EUR 0.46 (-0.32). Earnings per share excluding special
items were EUR 0.44 (-0.24). Operating cash flow per share was EUR 0.60 (1.12).


Financing

In January-June cash flow from operating activities, before capital expenditure
and financing, was EUR 311 million (580 million). Net working capital increased
by EUR 242 million during the period (decreased by EUR 355 million), driven by
the increase in business activity.

The gearing ratio as of 30 June 2010 was 55% (70% on 30 June 2009). Net
interest-bearing liabilities at the end of the period came to EUR 3,837 million
(4,036 million)

On 30 June 2010, UPM's cash funds and unused committed credit facilities
totalled EUR 2.1 billion.


Personnel

In January-June, UPM had an average of 23,035 employees (24,043). At the
beginning of the year, the number of employees was 23,213 and at the end of
June it was 23,458. The number of employees decreased by around 800 from the
beginning of the year, taking into account the around 1,000 seasonal workers in
June.


Capital expenditure

During January-June, capital expenditure was EUR 85 million, 2.0% of sales (EUR
133 million, 3.6% 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.


Shares

UPM shares worth EUR 4,499 million (3,086 million) in total were traded on the
NASDAQ OMX Helsinki stock exchange during January-June of 2010. The highest
quotation was EUR 12.00 in June and the lowest EUR 7.37 in February.

The company's ADRs 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. The 2007C options have not been distributed
yet.

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 June 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.

On 23 June 2010, BlackRock Inc. announced its ownership in UPM had declined
below 5% of the company's shares and voting rights.


Litigation and other legal actions

In Finland, UPM is participating in the building project 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 electricity production at Olkiluoto 3
is scheduled 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 still two
litigations
against the government of Uruguay and in Argentina one such litigation against
the company operating the pulp mill.


Events after the balance sheet date

At the beginning of July, the Finnish Parliament voted on
decisions-in-principle to build two new nuclear power plants in Finland. The
voting was favourable for the fourth reactor of Teollisuuden Voima Oy ("OL4").
Through its associate company Pohjolan Voima Oy, UPM has an indirect share of
the OL4 project about 30 %.

On 8 July 2010 UPM sold a conservation easement on 76,000 hectares of UPM-owned
forest land in Northern Minnesota to the State of Minnesota Department of
Natural Resources. UPM received USD 44 million for the easement and will record
a pre-tax capital gain of USD 42 million in the Company's third quarter result.

Under the conservation easement, UPM retains ownership of the land and will
continue to use it as a working forest.


Risk factors

Expected decisions on the proposed EU Energy Package have increased
uncertainties 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.


Outlook for the second half of 2010
Comparisons against the first half of the year

Economic recovery in Europe and Asia is expected to continue, while the US
shows signs of a slower pace of recovery. Demand for consumer goods continues
positive development particularly in emerging markets. In Europe, recovery of
advertising expenditure in print media is expected to improve demand for
graphic papers. Improved investment activity, including construction, is
expected to have a slightly positive impact on demand for construction
materials such as timber and plywood.

The electricity generation volume is estimated to be higher than during the
first half of the year. Based on current forward sale agreements and Nordpool
forward prices, the average sales price for electricity is estimated to be
somewhat lower.

Chemical pulp price on average is expected to be higher while a moderate
correction in market prices for both hardwood and softwood pulp is expected
towards the end of the year. Deliveries are expected to be slightly higher.

The cost of procured wood will be clearly higher; both log and fibre wood
prices have risen from the beginning of the year. Sawn timber deliveries are
estimated to be higher but no material improvement in prices is expected.

Paper prices for the agreed deliveries during the second half are higher; UPM
has increased prices practically in all new contracts. Based on the current
good order book, paper deliveries are expected to be higher.

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 but
intense cost pressure will challenge current sales margins.

Plywood deliveries are expected to be slightly higher. Limited improvement in
the business environment and prices is foreseen.

For the Group average sales prices in euro are expected to be higher. Volume
development is positive across all businesses. A material increase in variable
costs is expected; in addition to the cost of fibre, costs of various other raw
materials are expected to increase. Operating profit excluding special items is
estimated to be higher than in the first half of the year.


Business area reviews

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

Sales, EURm                                          116     174     128     108     100     136      290     236
EBITDA, EURm 1)                                    39       79       57        35        41       57      118       98
% of sales                                              33.6    45.4    44.5    32.4     41.0    41.9     40.7    41.5
Share of results of                                      6         4        -8       -24         -4        -4        10        -8
associated companies and
joint ventures, EURm
Depreciation, amortisation                      -1       -2        -2          -1         -1        -2         -3        -3
and impairment charges, EURm
Operating profit, EURm                           44      81       47         10        36       51      125       87
% of sales                                               37.9   46.6   36.7        9.3     36.0   37.5     43.1    36.9
Special items, EURm 2)                            -         -         -1        -17          -          -           -           -
Operating profit excl.                                44       81       48         27        36      51      125        87
special items, EURm
% of sales                                              37.9     46.6   37.5     25.0     36.0   37.5     43.1    36.9
Electricity deliveries, 1,000               2,303   2,411 2,277  2,103   1,999 2,486  4,714  4,485
MWh

                                                                        Q1-Q4/
                                                                          2009

Sales, EURm                                                   472
EBITDA, EURm 1)                                           190
% of sales                                                        40.3
Share of results of                                           -40
associated companies and
joint ventures, EURm
Depreciation, amortisation                              -6
and impairment charges, EURm
Operating profit, EURm                                 144
% of sales                                                       30.5
Special items, EURm 2)                                -18
Operating profit excl.                                      162
special items, EURm
% of sales                                                       34.3
Electricity deliveries, 1,000                        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.


Q2 of 2010 compared with Q2 of 2009

Operating profit excluding special items was EUR 44 million, EUR 8 million
higher than last year (36 million). Sales increased by 16% to EUR 116 million
(100 million), of which EUR 35 million was external sales (24 million). The
electricity sales volume was 2.3 TWh in the quarter (2.0 TWh).

Profitability improved compared with the same period last year, due to the
higher electricity sales volume and average electricity sales price. The
average electricity sales price increased by 3% to EUR 42.8/MWh (41.7/MWh).
Hydropower volume was 27% higher in comparison with last year.

January-June 2010 compared with January-June 2009

Operating profit excluding special items was EUR 125 million, EUR 38 million
higher than last year (87 million). Sales increased by 23% to EUR 290 million
(236 million), of which EUR 129 million was external sales (73 million). The
electricity sales volume was 4.7 TWh (4.5 TWh).

Profitability improved compared with the same period last year, due to the
higher average electricity sales price and volume. The average electricity
sales price increased by 20% to EUR 52.4/MWh (43.6/MWh). Hydropower volume was
2% lower in comparison with last year.

Market review

The average electricity spot price on the Nordic electricity exchange in the
first half of the year was EUR 52.1/MWh, 44% higher than in the same period
last year (36.1/MWh) due to a poor hydrological situation and increased
consumption.

Oil and coal market prices increased compared with the same period last year.
The CO2 emission allowance price was EUR 15.3/t on 30 June, 11% higher than on
the same date last year (13.8/t). In the first half of the year Nordic water
reservoirs were 24% below their long-term average.

The electricity system forward price for the rest of the year on the Nordic
electricity exchange was EUR 48.2/MWh on 30 June, 20% higher than on the same
date last year (40.3/MWh).


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

Sales, EURm                                   455     341      226     156     132      139     796     271
EBITDA, EURm 1)                           199     120         53         8      -24       -55     319      -79
% of sales                                        43.7   35.2      23.5      5.1   -18.2    -39.6    40.1   -29.2
Change in fair value of                       -           -            -1         -          -            -           -          -
biological assets and wood
harvested, EURm
Share of results of                               -           -              7        4      -16       -47          -       -63
associated companies and
joint ventures, EURm 3)
Depreciation, amortisation            -37       -36         -24     -21      -20      -20       -73      -40
and impairment charges, EURm
Operating profit, EURm                 163        83           35       -9      -60    -122      246   -182
% of sales                                       35.8     24.3       15.5    -5.8   -45.5   -87.8     30.9  -67.2
Special items, EURm 2)                    1         -1             -          -           -       -29          -       -29
Operating profit excl.                       162        84          35       -9       -60      -93      246   -153
special items, EURm
% of sales                                        35.6     24.6      15.5     -5.8   -45.5  -66.9     30.9  -56.5
Pulp deliveries, 1,000 t                   768      700       550     446     391     372   1,468    763

                                                               Q1-Q4/
                                                                 2009

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

Q2 of 2010 compared with Q2 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 162 million (loss of EUR 60
million). Sales increased to EUR 455 million (132 million) and deliveries to
768,000 tonnes (391,000).

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

January-June 2010 compared with January-June 2009

Operating profit excluding special items was EUR 246 million (loss of EUR 153
million). Sales increased to EUR 796 million (271 million) and deliveries to
1,468,000 tonnes (763,000).

Profitability improved noticeably from last year due to significantly higher
pulp sales prices and volumes. Wood costs were lower.

Market review

In the first half of 2010, global chemical pulp market prices increased
substantially due to tight market balance. The global chemical market pulp
supply was reduced temporarily due to the earthquake in Chile, along with other
occasional supply constrains. By the end of the first half of 2010, most of the
Chilean capacity was back in operation. Global chemical pulp shipments
increased from last year.

The average softwood pulp (NBSK) market price in euro terms, at EUR 678/tonne,
was 52% higher than in the same period last year (EUR 446/tonne). At the end of
the period the NBSK market price was EUR 794/ tonne.

The average hardwood pulp (BHKP) market price in euro terms increased by 57%
from last year, to EUR 614/tonne (EUR 390/tonne). At the end of the period the
BHKP market price was EUR 747/tonne.


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

Sales, EURm                                393     339      348      295     309     385     732     694
EBITDA, EURm 1)                          26          3        30         24      -15      -15       29      -30
% of sales                                       6.6      0.9       8.6        8.1     -4.9     -3.9      4.0     -4.3
Change in fair value of                   31       19       10        -13        10       11       50       21
biological assets and wood
harvested, EURm
Share of results of                             1         1         1           -1          1         1          2         2
associated companies and
joint ventures, EURm
Depreciation, amortisation             -6       -4      -11           -4      -14        -5      -10      -19
and impairment charges, EURm
Operating profit, EURm                  52      19       21             6      -18      -18       71      -36
% of sales                                      13.2     5.6      6.0          2.0    -5.8     -4.7      9.7     -5.2
Special items, EURm 2)                   -         -       -14             1        -8      -10        -        -18
Operating profit excl.                        52     19       35              5      -10       -8       71      -18
special items, EURm
% of sales                                      13.2    5.6    10.1           1.7     -3.2    -2.1      9.7     -2.6
Sawn timber deliveries, 1,000    504    371    413          355     366    363    875     729
m3

                                                                 Q1-Q4/
                                                                  2009

Sales, EURm                                        1,337
EBITDA, EURm 1)                                     24
% of sales                                                  1.8
Change in fair value of                             18
biological assets and wood
harvested, EURm
Share of results of                                      2
associated companies and
joint ventures, EURm
Depreciation, amortisation                    -34
and impairment charges, EURm
Operating profit, EURm                            -9
% of sales                                                -0.7
Special items, EURm 2)                        -31
Operating profit excl.                                22
special items, EURm
% of sales                                                 1.6
Sawn timber deliveries, 1,000          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 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.

Q2 of 2010 compared with Q2 of 2009

Operating profit excluding special items was EUR 52 million (loss of EUR 10
million). Sales increased by 27% to EUR 393 million (309 million). Sawn timber
deliveries increased by 38% to 504,000 cubic metres (366,000).

The increase in the fair value of biological assets net of wood harvested was
EUR 31 million (10 million). The increase in the fair value of biological
assets (growing trees) was EUR 60 million (14 million). The cost of wood raw
material harvested from the Group's own forests was EUR 29 million (4 million).

January-June 2010 compared with January-June 2009

Operating profit excluding special items was EUR 71 million (loss of EUR 18
million). Sales increased by 5% to EUR 732 million (694 million). Sawn timber
deliveries increased by 20% to 875,000 cubic metres (729,000).

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

The increase in the fair value of biological assets net of wood harvested was
EUR 50 million (21 million). The increase in the fair value of biological
assets (growing trees) was EUR 93 million (35 million). The cost of wood raw
material harvested from the Group's own forests was EUR 43 million (14
million).

Market review

During the first half of the year, wood purchases in the Finnish wood market
increased significantly from the very low level in the same period last year.
However, wood purchases still remained 14% below long term average purchasing
volumes.

Wood market prices increased towards the end of the first half of 2010 being
above the long-term average prices. In particular, log market prices for pine
and spruce increased compared with the same period last year.

The European supply-demand balance of sawn softwood timber is still challenging
although, in comparison with last year, slight improvement has been seen.

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

Sales, EURm                                     1,540  1,401  1,558  1,454  1,388  1,367  2,941  2,755
EBITDA, EURm 1)                                   72       75      221     274     247     187      147     434
% of sales                                               4.7       5.4    14.2     18.8   17.8     13.7      5.0     15.8
Share of results of                                    -            -          1           -         -1        -1          -          -2
associated companies and
joint ventures, EURm
Depreciation, amortisation                -130     -136   -140    -142    -147    -149   -266    -296
and impairment charges, EURm
Operating profit, EURm                        -57       -69       74      126       85        60   -126     145
% of sales                                              -3.7      -4.9      4.7       8.7       6.1      4.4     -4.3      5.3
Special items, EURm 2)                          4         -8        -8         -6       -10       23        -4       13
Operating profit excl.                              -61      -61       82     132         95       37    -122    132
special items, EURm
% of sales                                               -4.0     -4.4      5.3      9.1        6.8      2.7      -4.1     4.8
Deliveries, publication                       1,446  1,364  1,576 1,464   1,323 1,304   2,810 2,627
papers, 1,000 t
Deliveries, fine and                                994     937      945    872      813    724   1,931 1,537
speciality papers, 1,000 t
Paper deliveries total, 1,000              2,440 2,301  2,521  2,336  2,136 2,028  4,741 4,164
t

                                                                Q1-Q4/
                                                                  2009

Sales, EURm                                        5,767
EBITDA, EURm 1)                                   929
% of sales                                                16.1
Share of results of                                      -1
associated companies and
joint ventures, EURm
Depreciation, amortisation                  -578
and impairment charges, EURm
Operating profit, EURm                         345
% of sales                                                 6.0
Special items, EURm 2)                          -1
Operating profit excl.                              346
special items, EURm
% of sales                                                 6.0
Deliveries, publication                        5,667
papers, 1,000 t
Deliveries, fine and                             3,354
speciality papers, 1,000 t
Paper deliveries total, 1,000              9,021
t

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 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.

Q2 of 2010 compared with Q2 of 2009

Operating loss excluding special items was EUR 61 million (profit of EUR 95
million). Sales were EUR 1,540 million (1,388 million). Paper deliveries
increased by 14% to 2,440,000 tonnes (2,136,000). Paper deliveries for
publication papers (magazine papers and newsprint) increased by 9% and for fine
and speciality papers by 22% from last year. Deliveries grew in all main
markets, with higher growth rates outside Europe.

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. Compared with the first quarter of 2010, however, the average
paper price increased by around 4%, with more weight on fine and speciality
papers.

Higher paper deliveries had a positive impact on operating profit.

January-June 2010 compared with January-June 2009

Operating loss excluding special items was EUR 122 million (profit of EUR 132
million). Sales were EUR 2,941 million (2,755 million). Paper deliveries
increased by 14% to 4,741,000 tonnes (4,164,000). Paper deliveries for
publication papers (magazine papers and newsprint) increased by 7% and for fine
and speciality papers by 26% from last year. Deliveries grew in all main
markets, with highest growth rates in Asia and North America.

The Paper business area incurred an operating loss, as the cost of fibre
increased from last year and paper prices decreased significantly. The average
paper price for all paper deliveries when translated into euros was 7% lower
than last year.

Higher paper deliveries had a positive impact on operating profit.

Market review

In January-June, demand for publication papers in Europe was 4% higher, and for
fine papers, 8% higher, than a year ago. In North America, the demand for
magazine papers increased by 8% from last year. In Asia, demand for fine papers
grew.

In Europe, magazine paper prices decreased in the beginning of the year and on
average were 10% lower than in the comparison period last year. Newsprint
prices also decreased in the beginning of the year and on average were 17%
lower than last year. Fine paper prices increased during the first half of the
year, but still remained 1% lower than a year ago.

In North America, the average US dollar price for magazine papers was 13% lower
than last year. In Asia, market prices for fine papers increased during the
first half of the year and on average were noticeably higher than a year ago.


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

Sales, EURm                             280     260     252      242      226     223     540     449
EBITDA, EURm 1)                       34       31        25        29        18          6        65      24
% of sales                                  12.1   11.9       9.9     12.0       8.0      2.7     12.0     5.3
Depreciation, amortisation       -10       -7         -8         -9       -11        -9       -17     -20
and impairment charges, EURm
Operating profit, EURm              24       24        16        18          4        -3        48         1
% of sales                                    8.6      9.2       6.3       7.4       1.8     -1.3       8.9      0.2
Special items, EURm 2)               -          1         -1         -2         -5          -          1         -5
Operating profit excl.                    24       23        17       20           9        -3        47         6
special items, EURm
% of sales                                     8.6     8.8        6.7      8.3       4.0     -1.3       8.7      1.3

                                                                Q1-Q4/
                                                                  2009

Sales, EURm                                           943
EBITDA, EURm 1)                                     78
% of sales                                                  8.3
Depreciation, amortisation                    -37
and impairment charges, EURm
Operating profit, EURm                           35
% of sales                                                 3.7
Special items, EURm 2)                          -8
Operating profit excl.                                43
special items, EURm
% of sales                                                 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.

Q2 of 2010 compared with Q2 of 2009

Operating profit excluding special items was EUR 24 million (9 million). Sales
increased by 24% to EUR 280 million (226 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 Asia and Eastern Europe.

Raw material costs increased markedly in the second quarter from the first
quarter of 2010, but this was offset by higher sales prices.

January-June 2010 compared with January-June 2009

Operating profit excluding special items was EUR 47 million (6 million). Sales
increased by 20% to EUR 540 million (449 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. Raw material costs were still slightly lower in
comparison with the high level last year.

Market review

Demand for self-adhesive label materials grew noticeably in the first six
months from the depressed levels seen in the same period last year. Demand
growth was strongest in Asia Pacific, Eastern Europe and Latin America, where
demand is estimated to have exceeded pre-recession levels. In mature markets in
Western Europe and North America demand recovered, but not to pre-recession
levels.


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

Sales, EURm                                           97       76        81        73       77        75     173     152
EBITDA, EURm 1)                                     2        -2           3         -5        -5       -23         0      -28
% of sales                                               2.1     -2.6        3.7     -6.8     -6.5    -30.7      0.0   -18.4
Depreciation, amortisation                    -5        -5        -12        -5         -5         -5      -10     -10
and impairment charges, EURm
Operating profit, EURm                          -1        -7        -33      -10      -10       -29        -8     -39
% of sales                                              -1.0    -9.2     -40.7   -13.7   -13.0    -38.7    -4.6  -25.7
Special items, EURm 2)                          2         -         -30         -           -          -1          2       -1
Operating profit excl.                                -3       -7          -3      -10       -10      -28       -10     -38
special items, EURm
% of sales                                               -3.1   -9.2      -3.7    -13.7   -13.0   -37.3      -5.8 -25.0
Deliveries, plywood, 1,000 m3            182   140      150      143     141      133      322    274

                                                                   Q1-Q4/
                                                                     2009

Sales, EURm                                              306
EBITDA, EURm 1)                                       -30
% of sales                                                    -9.8
Depreciation, amortisation                        -27
and impairment charges, EURm
Operating profit, EURm                              -82
% of sales                                                  -26.8
Special items, EURm 2)                             -31
Operating profit excl.                                    -51
special items, EURm
% of sales                                                  -16.7
Deliveries, plywood, 1,000 m3                 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 the second quarter of 2010, include mainly 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.

Q2 of 2010 compared with Q2 of 2009

Operating loss excluding special items was EUR 3 million (loss of EUR 10
million). Sales grew by 26% to EUR 97 million (77 million), as plywood
deliveries grew by 29% to 182,000 cubic metres (141,000).

Operating loss for Plywood decreased from last year mainly due to higher
delivery volumes. The average plywood sales price was slightly lower than last
year, mainly due to changes in product mix.

January-June 2010 compared with January-June 2009

Operating loss excluding special items was EUR 10 million (loss of EUR 38
million). Sales increased by 14% to EUR 173 million (152 million), as plywood
deliveries increased by 18% to 322,000 cubic metres (274,000).

Operating loss for Plywood decreased from last year mainly due to higher
delivery volumes and lower raw material costs. The average plywood sales price
was lower than last year, mainly due to higher share of spruce products.

Market review

In Europe, in January-June, plywood demand increased from last year. Market
activity increased in the second quarter after a slow winter season. In spruce
plywood supply to Europe was temporarily restricted by the earthquake in Chile.
Construction activity continued at a low level.

The overall plywood market prices remained low during the first half of the
year but price development turned positive in the second quarter.


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

Sales, EURm                                            51        40        35        21       21        34        91      55
EBITDA, EURm 1)                                   -19      -18       -27       -31     -24       -29       -37    -53
Share of results of                                      1         -2           -           -        -2         -2          -1      -4
associated companies and
joint ventures, EURm
Depreciation, amortisation                       -3        -3         -3         -3        -3        -3          -6      -6
and impairment charges, EURm
Operating profit, EURm                           -22      -24      -34       -45     -29      -34       -46     -63
Special items, EURm 2)                           -3         -1        -6       -11         -           -         -4         -
Operating profit excl.                                -19      -23       -28      -34      -29     -34       -42     -63
special items, EURm
                                                              Q1-Q4/
                                                                2009

Sales, EURm                                         111
EBITDA, EURm 1)                                -111
Share of results of                                    -4
associated companies and
joint ventures, EURm
Depreciation, amortisation                  -12
and impairment charges, EURm
Operating profit, EURm                      -142
Special items, EURm 2)                      -17
Operating profit excl.                           -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) In 2010, special items 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.

Q2 of 2010 compared with Q2 of 2009

Excluding special items, operating loss was EUR 19 million (loss of EUR 29
million). Sales amounted to EUR 51 million (21 million).

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

January-June 2010 compared with January-June 2009

Excluding special items, operating loss was EUR 42 million (loss of EUR 63
million). Sales amounted to EUR 91 million (55 million).

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

Helsinki, 3 August 2010

UPM-Kymmene Corporation

Board of Directors


FINANCIAL INFORMATION

This Interim Report is unaudited


Consolidated income statement

EURm                                                                  Q2/       Q2/ Q1-Q2/ Q1-Q2/ Q1-Q4/
                                                                            2010   2009   2010   2009   2009

Sales                                                                2,216   1,841 4,255  3,698  7,719
Other operating income                                     17           7       26       24        47
Costs and expenses                                   -1,877  -1,627 -3,647 -3,361 -6,774
Change in fair value of                                       31         10       50       21        17
biological assets and wood harvested
Share of results of                                                 8        -22      11      -75       -95
associated companies and joint ventures
Depreciation, amortisation                            -192      -201  -385    -394     -779
and impairment charges
Operating profit (loss)                                      203            8   310       -87     135

Gains on available-for-sale                                 1             -        1          -         -1
investments, net
Exchange rate and fair value                               4             3        5        -6        -9
gains and losses
Interest and other finance                                 -27         -37    -53      -95       62
costs, net
Profit (loss) before tax                                      181          -26    263  -188      187

Income taxes                                                      -12            18     -24     22       -18
Profit (loss) for the period                                169             -8    239  -166     169

Attributable to:
Owners of the parent company                       169            -8     239 -166     169
Non-controlling interests                                       -              -           -       -           -
                                                                               169            -8     239 -166     169

Earnings per share for profit (loss)
attributable to owners of the parent company

Basic earnings per share, EUR                     0.33       -0.02   0.46 -0.32    0.33
Diluted earnings per share, EUR                  0.33       -0.02   0.46 -0.32    0.33


Consolidated statement of comprehensive income

EURm                                                                    Q2/      Q2 /Q1-Q2 /Q1-Q2/ Q1-Q4/
                                                                             2010   2009   2010   2009   2009

Profit (loss) for the period                                 169         -8     239    -166     169

Other comprehensive income
for the period, net of tax:

Translation differences                                      282       37     499       66      165
Net investment hedge                                         -35     -12       -88     -20       -56
Cash flow hedges                                                -56        9       -79       -9         -4
Available-for-sale investments                              -          -           5         -         21
Share of other comprehensive                              3     -12          2       -8         30
income of associated companies
Other comprehensive income                           194      22      339     29      156
for the period, net of tax
Total comprehensive income                            363      14      578 -137      325
for the period

Total comprehensive income attributable to:
Owners of the parent company                         363      14      578  -137     325
Non-controlling interests                                        -           -           -        -           -
                                                                                 363      14      578  -137     325


Condensed consolidated balance sheet

EURm                                                30.06.2010      30.06.2009      31.12.2009
Assets
Non-current assets
Goodwill                                                      1,034                    933                1,017
Other intangible assets                               448                    394                   423
Property, plant and equipment                6,230                 5,439               6,192
Biological assets                                       1,355                 1,152               1,293
Investments in associated                          568                     829                  553
companies and joint ventures
Deferred tax assets                                      358                     247                  287
Other non-current assets                            987                     622                  816
                                                                    10,980                  9,616            10,581

Current assets
Inventories                                                  1,285                   1,062              1,112
Trade and other receivables                   1,702                   1,422              1,474
Cash and cash equivalents                       263                       192                 438
                                                                      3,250                   2,676              3,024
Assets classified as held for sale                 -                       327                      -
Total assets                                             14,230                 12,619            13,605


Equity and liabilities
Equity attributable to owners of the parent company
Share capital                                                  890                      890                 890
Fair value and other reserves                     319                     -132                 -23
Reserve for invested                                 1,145                   1,145             1,145
non-restricted equity
Retained earnings                                    4,579                    3,860             4,574
                                                                      6,933                    5,763             6,586
Non-controlling interests                              16                          14                   16
Total equity                                                 6,949                    5,777              6,602

Non-current liabilities
Deferred tax liabilities                                  596                        592                608
Non-current interest-bearing                   4,218                    4,003             4,164
liabilities
Other non-current liabilities                        637                        591                660
                                                                      5,451                     5,186             5,432
Current liabilities
Current interest-bearing liabilities            384                        514                 365
Trade and other payables                       1,446                     1,142              1,206
                                                                      1,830                     1,656              1,571
Total liabilities                                            7,281                     6,842              7,003
Total equity and liabilities                      14,230                   12,619           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                                          -                          66                      -
Net investment hedge, net of tax                          -                         -20                      -
Cash flow hedges, net of tax                                 -                            -                      -9
Available-for-sale investments                              -                           -                        -
Share of other comprehensive                              -                          -5                       -
income of associated companies
Total comprehensive income                                -                         41                     -9
for the period
Share-based compensation, net of tax               -                            -                       1
Dividend paid                                                           -                            -                        -
Other items                                                               -                            -                        -
Total transactions with                                           -                            -                        1
owners for the period
Balance at 30 June 2009                                  890                      -254                  122

Balance at 1 January 2010                               890                      -164                  141
Profit (loss) for the period                                      -                              -                       -
Translation differences                                          -                         499                      -
Net investment hedge, net of tax                          -                          -88                      -
Cash flow hedges, net of tax                                 -                             -                    -79
Available-for-sale investments                             -                             -                        5
Share of other comprehensive                             -                             -                        -
income of associated companies
Total comprehensive income                               -                        411                   -74
for the period
Share-based compensation, net of tax               -                            -                        5
Dividend paid                                                           -                            -                         -
Other items                                                               -                            -                         -
Total transactions with                                           -                            -                         5
owners for the period
Balance at 30 June 2010                                  890                      247                      72

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                                       -                      -166                  -166
Translation differences                                           -                            -                       66
Net investment hedge, net of tax                           -                            -                      -20
Cash flow hedges, net of tax                                  -                            -                       -9
Available-for-sale investments                              -                            -                         -
Share of other comprehensive                              -                          -3                       -8
income of associated companies
Total comprehensive income                                -                      -169                  -137
for the period
Share-based compensation, net of tax                -                           -                          1
Dividend paid                                                            -                      -208                   -208
Other items                                                                -                            1                        1
Total transactions with                                             -                      -207                  -206
owners for the period
Balance at 30 June 2009                                 1,145                   3,860                5,763



Balance at 1 January 2010                              1,145                   4,574                6,586
Profit (loss) for the period                                        -                        239                   239
Translation differences                                            -                             -                    499
Net investment hedge, net of tax                            -                             -                     -88
Cash flow hedges, net of tax                                   -                             -                    -79
Available-for-sale investments                               -                             -                        5
Share of other comprehensive                               -                             2                       2
income of associated companies
Total comprehensive income                                 -                        241                  578
for the period
Share-based compensation, net of tax                 -                            -                        5
Dividend paid                                                              -                     -234                  -234
Other items                                                                 -                          -2                       -2
Total transactions with                                             -                      -236                   -231
owners for the period
Balance at 30 June 2010                                 1,145                   4,579                6,933

EURm                                                                       Non-                  Total
                                                                              controlling                                equity
                                                                               interests

Balance at 1 January 2009                                    14                      6,120
Profit (loss) for the period                                         -                         -166
Translation differences                                             -                            66
Net investment hedge, net of tax                             -                           -20
Cash flow hedges, net of tax                                    -                             -9
Available-for-sale investments                                -                               -
Share of other comprehensive                                -                             -8
income of associated companies
Total comprehensive income                                  -                          -137
for the period
Share-based compensation, net of tax                  -                              1
Dividend paid                                                              -                          -208
Other items                                                                  -                               1
Total transactions with                                              -                          -206
owners for the period
Balance at 30 June 2009                                       14                        5,777

Balance at 1 January 2010                                    16                        6,602
Profit (loss) for the period                                        -                             239
Translation differences                                            -                             499
Net investment hedge, net of tax                            -                              -88
Cash flow hedges, net of tax                                   -                              -79
Available-for-sale investments                                -                                5
Share of other comprehensive                                -                                2
income of associated companies
Total comprehensive income                                  -                            578
for the period
Share-based compensation, net of tax                  -                                5
Dividend paid                                                               -                          -234
Other items                                                                  -                               -2
Total transactions with                                               -                          -231
owners for the period
Balance at 30 June 2010                                        16                        6,949


Condensed consolidated cash flow statement

EURm                                                                     Q1-Q2/  Q1-Q2/  Q1-Q4/
                                                                                   2010      2009      2009

Cash flow from operating activities
Profit (loss) for the period                                       239       -166         169
Adjustments                                                              371        493          772
Change in working capital                                     -242       355          532
Cash generated from operations                          368       682       1,473
Finance costs, net                                                     -49        -85         -183
Income taxes paid                                                       -8        -17            -31
Net cash generated from                                        311       580        1,259
operating activities

Cash flow from investing activities
Acquisitions and share purchases                          -3           -            -586
Capital expenditure                                                   -97     -143           -236
Asset sales and other                                               14          20            608
investing cash flow
Net cash used in investing                                      -86      -123           -214
activities

Cash flow from financing activities
Change in loans and other                                    -183      -387           -732
financial items
Dividends paid                                                          -234      -208           -208
Net cash used in financing                                     -417      -595           -940
activities

Change in cash and cash                                       -192      -138           105
equivalents

Cash and cash equivalents at                                 438        330           330
the beginning of period
Foreign exchange effect on cash                               17            -                 3
Change in cash and cash                                       -192       -138           105
equivalents
Cash and cash equivalents at                                 263         192           438
end of period


Quarterly information

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

Sales                                                      2,216  2,039  2,108  1,913  1,841 1,857
Other operating income                            17          9       18          5          7       17
Costs and expenses                          -1,877 -1,770 -1,810 -1,603 -1,627 -1,734
Change in fair value of                               31       19          9      -13        10      11
biological assets and wood harvested
Share of results of associated                    8         3          1       -21      -22     -53
companies and joint ventures
Depreciation, amortisation                     -192   -193    -200    -185    -201   -193
and impairment charges
Operating profit (loss)                               203     107     126       96          8     -95
Gains on available-for-sale                          1          -           -         -1           -        -
investments, net
Exchange rate and fair value                         4         1           -         -3          3      -9
gains and losses
Interest and other finance                           -27      -26     185      -28       -37   -58
costs, net
Profit (loss) before tax                                 181       82     311        64       -26 -162
Income taxes                                                 -12      -12      -16       -24        18       4
Profit (loss) for the period                          169        70     295        40         -8 -158
Attributable to:
Owners of the parent company                 169       70      295        40         -8 -158
Non-controlling interests                                 -           -           -           -            -       -
                                                                         169        70      295       40         -8 -158
Basic earnings per share, EUR               0.33     0.13     0.57    0.08   -0.02 -0.30
Diluted earnings per share, EUR            0.33      0.13    0.57     0.08   -0.02 -0.30
Earnings per share, excluding                 0.29      0.15    0.21     0.14     0.03 -0.27
special items, EUR
Average number of shares                 519,970 519,970 519,958 519,954 519,954 519,954
basic (1,000)
Average number of shares                 521,333 520,018 518,876 521,036 519,954 519,954
diluted (1,000)
Special items in operating                              4           -9       -60        -35      -23     -17
profit (loss)
Operating profit (loss),                                 199       116      186       131        31     -78
excl. special items
% of sales                                                        9.0        5.7        8.8        6.8       1.7    -4.2
Special items before tax                                   4          -9       155        -35      -23     -17
Profit (loss) before tax,                                  177         91       156         99        -3   -145
excl. special items
% of sales                                                         8.0        4.5        7.4        5.2     -0.2     -7.8
Return on equity, excl.                                     8.9        4.6        7.4        5.0      0.8     neg.
special items, %
Return on capital employed,                          7.3        4.3        7.2        4.9      1.3     neg.
excl. special items, %
EBITDA                                                               353      288      362       334     238    128
% of sales                                                         15.9     14.1     17.2      17.5    12.9     6.9

Share of results of associated
companies and joint ventures
Energy                                                                      6          4          -8        -24        -4      -4
Pulp                                                                           -           -            7           4      -16    -47
Forest and timber                                                  1          1            1          -1          1       1
Paper                                                                        -           -             1           -         -1      -1
Other operations                                                    1         -2             -           -         -2      -2
Total                                                                          8          3            1        -21     -22    -53

EURm                                                                Q1-Q2/  Q1-Q2/  Q1-Q4/
                                                                              2010      2009      2009

Sales                                                                  4,255      3,698     7,719
Other operating income                                        26           24           47
Costs and expenses                                      -3,647    -3,361    -6,774
Change in fair value of                                           50           21          17
biological assets and wood harvested
Share of results of associated                             11          -75         -95
companies and joint ventures
Depreciation, amortisation                                -385        -394      -779
and impairment charges
Operating profit (loss)                                          310           -87       135
Gains on available-for-sale                                     1               -           -1
investments, net
Exchange rate and fair value                                   5              -6          -9
gains and losses
Interest and other finance                                     -53            -95        62
costs, net
Profit (loss) before tax                                           263          -188      187
Income taxes                                                           -24              22       -18
Profit (loss) for the period                                     239          -166      169
Attributable to:
Owners of the parent company                            239          -166      169
Non-controlling interests                                          -                   -           -
                                                                                    239          -166      169
Basic earnings per share, EUR                          0.46         -0.32     0.33
Diluted earnings per share, EUR                        0.46        -0.32     0.33
Earnings per share, excluding                             0.44        -0.24     0.11
special items, EUR  
Average number of shares                             519,970 519,954 519,955
basic (1,000)
Average number of shares                             520,676 519,954 519,955
diluted (1,000)
Special items in operating                                         -5          -40        -135
profit (loss)
Operating profit (loss),                                             315          -47         270
excl. special items
% of sales                                                                    7.4         -1.3          3.5
Special items before tax                                              -5          -40           80
Profit (loss) before tax,                                              268        -148        107
excl. special items
% of sales                                                                     6.3          -4.0        1.4
Return on equity, excl.                                                 6.7          neg.       1.0
special items, %
Return on capital employed,                                      5.7          neg.       2.5
excl. special items, %
EBITDA                                                                          641          366    1,062
% of sales                                                                    15.1           9.9      13.8

Share of results of associated
companies and joint ventures
Energy                                                                              10             -8         -40
Pulp                                                                                    -            -63         -52
Forest and timber                                                            2               2            2
Paper                                                                                  -              -2           -1
Other operations                                                             -1             -4           -4
Total                                                                                  11           -75         -95

Deliveries
                                                               Q2/      Q1/      Q4/      Q3/      Q2/      Q1/ Q1-Q2/
                                                            2010   2010   2009   2009   2009   2009   2010
Electricity, 1,000 MWh                    2,303  2,411  2,277  2,103  1,999  2,486  4,714
Pulp, 1,000 t                                        768      700    550      446     391      372  1,468
Sawn timber, 1,000 m3                    504      371     413     355      366      363     875
Publication papers, 1,000 t           1,446  1,364  1,576  1,464  1,323   1,304  2,810
Fine and speciality papers,              994      937     945     872     813       724 1,931
1,000 t
Paper deliveries total, 1,000 t        2,440  2,301  2,521 2,336  2,136    2,028 4,741
Plywood, 1,000 m3                             182      140     150     143     141       133    322

                                                                Q1-Q2/  Q1-Q4/
                                                                  2009      2009

Electricity, 1,000 MWh                          4,485     8,865
Pulp, 1,000 t                                              763     1,759
Sawn timber, 1,000 m3                          729     1,497
Publication papers, 1,000 t                 2,627    5,667
Fine and speciality papers,                 1,537    3,354
1,000 t
Paper deliveries total, 1,000 t              4,164   9,021
Plywood, 1,000 m3                                    274      567


Quarterly segment information

EURm                                             Q2/       Q1/       Q4/       Q3/
                                                      2010    2010    2009    2009
Sales
Energy                                            116      174      128      108
Pulp                                                455       341     226      156
Forest and timber                        393       339     348      295
Paper                                          1,540    1,401  1,558   1,454
Label                                              280       260      252      242
Plywood                                           97          76        81        73
Other operations                            51          40        35        21
Internal sales                              -716       -592    -520    -436
Sales, total                                 2,216     2,039  2,108  1,913

EBITDA
Energy                                               39         79         57       35
Pulp                                                 199       120         53         8
Forest and timber                            26           3         30       24
Paper                                                 72         75       221    274
Label                                                  34         31         25       29
Plywood                                               2          -2           3        -5
Other operations                            -19        -18        -27     -31
EBITDA, total                                  353       288       362    334

Operating profit (loss)
Energy                                               44          81          47      10
Pulp                                                 163          83          35       -9
Forest and timber                           52          19          21        6
Paper                                               -57         -69          74    126
Label                                                 24          24          16       18
Plywood                                             -1           -7         -33     -10
Other operations                           -22         -24         -34     -45
Operating profit (loss),                203        107        126       96
total
% of sales                                       9.2         5.2          6.0      5.0

Special items in operating profit
Energy                                                 -              -            -1      -17
Pulp                                                     1            -1             -          -
Forest and timber                              -              -         -14         1
Paper                                                   4            -8           -8       -6
Label                                                    -              1          -1        -2
Plywood                                               2              -         -30        -
Other operations                               -3           -1           -6     -11
Special items in operating               4            -9         -60    -35
profit, total

Operating profit (loss) excl.special items
Energy                                                44           81         48       27
Pulp                                                  162           84         35        -9
Forest and timber                            52           19         35          5
Paper                                                -61          -61         82     132
Label                                                  24           23         17        20
Plywood                                              -3            -7          -3       -10
Other operations                            -19          -23        -28       -34
Operating profit (loss) excl.         199         116       186      131
special items, total
% of sales                                        9.0          5.7        8.8        6.8

EURm                                               Q2/      Q1/      Q4/      Q3/
                                                        2010   2010   2009   2009
External sales
Energy                                                35        94       38        24
Pulp                                                  106        86       34          9
Forest and timber                          193      154     171     145
Paper                                            1,499   1,353 1,500  1,409
Label                                                280      259     252     243
Plywood                                             93         73       77       69
Other operations                              10         20       36       14
External sales, total                    2,216   2,039 2,108 1,913

Internal sales
Energy                                                 81         80      90       84
Pulp                                                   349       255   192     147
Forest and timber                           200       185   177     150
Paper                                                   41         48     58       45
Label                                                       -            1       -         -1
Plywood                                                 4             3       4        4
Other operations                                41          20      -1        7
Internal sales, total                          716       592   520    436

EURm                                                 Q2/     Q1/ Q1-Q2/ Q1-Q2/
                                                          2009   2009   2010   2009
Sales
Energy                                                100      136    290     236
Pulp                                                     132      139   796     271
Forest and timber                             309      385    732    694
Paper                                               1,388   1,367 2,941 2,755
Label                                                   226      223    540     449
Plywood                                                77        75     173     152
Other operations                                21         34       91       55
Internal sales                                  -412      -502 -1,308  -914
Sales, total                                     1,841    1,857  4,255 3,698

EBITDA
Energy                                                   41         57      118      98
Pulp                                                      -24       -55       319     -79
Forest and timber                              -15       -15         29     -30
Paper                                                   247      187      147    434
Label                                                      18          6         65      24
Plywood                                                  -5       -23           -      -28
Other operations                                 -24       -29       -37     -53
EBITDA, total                                       238      128       641   366

Operating profit (loss)
Energy                                                     36        51       125      87
Pulp                                                        -60    -122        246  -182
Forest and timber                                -18      -18           71    -36
Paper                                                       85       60        -126   145
Label                                                          4        -3            48       1
Plywood                                                  -10     -29             -8    -39
Other operations                                   -29     -34          -46    -63
Operating profit (loss),                            8      -95         310    -87
total
% of sales                                              0.4     -5.1          7.3   -2.4

Special items in operating profit
Energy                                                         -           -               -       -
Pulp                                                             -        -29              -   -29
Forest and timber                                   -8        -10              -   -18
Paper                                                      -10         23            -4    13
Label                                                         -5           -               1     -5
Plywood                                                      -          -1              2     -1
Other operations                                       -           -              -4      -
Special items in operating                   -23      -17             -5  -40
profit, total

Operating profit (loss)
excl.special items
Energy                                                       36         51         12      5 87
Pulp                                                          -60        -93       246     -153
Forest and timber                                  -10          -8          71       -18
Paper                                                         95         37       -122     132
Label                                                            9          -3          47          6
Plywood                                                    -10        -28        -10       -38
Other operations                                     -29        -34        -42       -63
Operating profit (loss) excl.                    31        -78       315       -47
special items, total
% of sales                                                1.7        -4.2        7.4      -1.3

EURm                                   Q2/      Q1/ Q1-Q2/ Q1-Q2/
                                            2009   2009   2010   2009
External sales
Energy                                    24        49     129        73
Pulp                                        10        10     192        20
Forest and timber              150     152     347      302
Paper                                1,355  1,327 2,852   2,682
Label                                    225     222     539      447
Plywood                                 73        72     166     145
Other operations                    4        25       30        29
External sales, total        1,841  1,857 4,255  3,698

Internal sales
Energy                                     76        87    161     163
Pulp                                       122      129    604    251
Forest and timber               159      233    385    392
Paper                                       33        40      89       73
Label                                          1          1         1         2
Plywood                                     4          3         7         7
Other operations                    17          9       61      26
Internal sales, total              412     502 1,308    914

EURm                                     Q1-Q4/
                                                   2009
Sales
Energy                                        472
Pulp                                            653
Forest and timber                 1,337
Paper                                      5,767
Label                                          943
Plywood                                     306
Other operations                      111
Internal sales                       -1,870
Sales, total                             7,719

EBITDA
Energy                                        190
Pulp                                             -18
Forest and timber                      24
Paper                                         929
Label                                            78
Plywood                                      -30
Other operations                    -111
EBITDA, total                         1,062

Operating profit (loss)
Energy                                       144
Pulp                                          -156
Forest and timber                       -9
Paper                                         345
Label                                            35
Plywood                                      -82
Other operations                    -142
Operating profit (loss),           135
total
% of sales                                  1.7

Special items in operating profit
Energy                                         -18
Pulp                                             -29
Forest and timber                     -31
Paper                                             -1
Label                                             -8
Plywood                                      -31
Other operations                       -17
Special items in operating    -135
profit, total

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

EURm                                       Q1-Q4/
                                                     2009

External sales
Energy                                           135
Pulp                                                 63
Forest and timber                       618
Paper                                         5,591
Label                                             942
Plywood                                        291
Other operations                           79
External sales, total                7,719

Internal sales
Energy                                           337
Pulp                                               590
Forest and timber                       719
Paper                                            176
Label                                                 1
Plywood                                          15
Other operations                           32
Internal sales, total                  1,870


Changes in property, plant and equipment


EURm                                              Q1-Q2/  Q1-Q2/   Q1-Q4/
                                                             2010     2009      2009

Book value at beginning of             6,192    5,688    5,688
period
Capital expenditure                                60       109       181
Companies acquired                               -             -     1,013
Decreases                                                -6         -11       -20
Depreciation                                         -358      -358     -696
Impairment charges                                -             -7       -14
Impairment reversal                                3              4          5
Translation difference and                 339           14        35
other changes
Book value at end of period             6,230     5,439  6,192


Commitments and contingencies

EURm                                                 30.06.2010      30.06.2009       31.12.2009

Own commitments
Mortgages 1)                                                1,067                    765                 1,043

On behalf of associated
companies and joint ventures
Guarantees for loans                                         8                         9                        8

On behalf of others
Other guarantees                                                 -                         1                        1

Other own commitments
Leasing commitments for the                         23                      20                     24
next 12 months
Leasing commitments for                                83                      58                     60
subsequent periods
Other commitments                                           89                      65                     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,                   January 2011               12                               -
Schongau
Rebuild of debarking plant,       October 2010               25                            15
Pietarsaari

EURm                                              Q1-Q2/                     After
                                                             2010                30.06.2010

Materials recovery facility                     1                           18
(MRF), Shotton
Plywood development                          1                           17
Energy saving TMP plant,                     1                          15
Steyrermühl
Power plant rebuild,                              2                           10
Schongau
Rebuild of debarking plant,                  1                             9
Pietarsaari


Notional amounts of derivative financial instruments

EURm                                      30.06.2010      30.06.2009      31.12.2009

Currency derivatives
Forward contracts                            4,044                 4,049                3,791
Options, bought                                        4                       20                     20
Options, written                                         4                       25                     20
Swaps                                                    754                     522                  514

Interest rate derivatives
Forward contracts                             2,692                  2,206              3,259
Swaps                                                 2,590                  2,996              2,701

Other derivatives
Forward contracts                                 136                     164                    25
Options, bought                                       41                       78                    73
Options, written                                        41                       78                    73
Swaps                                                          2                         6                      4

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

EURm                                                         Q1-Q2/  Q1-Q2/  Q1-Q4/
                                                                       2010      2009      2009

Sales to associated companies                  77           54        114
Purchases from associated                       170         229        560
companies
Non-current receivables at                              4              2             2
end of period
Trade and other receivables                         13            22           23
at end of period
Trade and other payables at                          31           28           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

                                             30.06.2010    31.03.2010    31.12.2009    30.09.2009
USD                                            1.2271            1.3479            1.4406            1.4643
CAD                                             1.2890           1.3687            1.5128            1.5709
JPY                                              108.79           125.93             133.16            131.07
GBP                                             0.8175           0.8898             0.8881           0.9093
SEK                                             9.5259            9.7135          10.2520         10.2320

                                              30.06.2009    31.03.2009
USD                                             1.4134            1.3308
CAD                                              1.6275           1.6685
JPY                                               135.51            131.17
GBP                                              0.8521            0.9308
SEK                                            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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