UPM-Kymmene Oyj - UPM Interim Report 1 January-31 March 2010

UPM-Kymmene Corporation Interim Report 28 April 2010 at 09:40

UPM Interim Report 1 January-31 March 2010

Earnings per share for the first quarter were EUR 0.13 (-0.30), and excluding
special items EUR 0.15 (-0.27). Operating profit excluding special items was
EUR 116 million (loss of EUR 78 million). Operating cash flow was
EUR 209 million (274 million). Positive development in delivery volumes
in all businesses - sales grew by 10%.


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

Sales, EURm                                         2,039     1,857     7,719
EBITDA, EURm 1)                                     288       128      1,062
% of sales                                                  14.1        6.9        13.8
Operating profit (loss), EURm                107        -95         135
excluding special items, EURm             116        -78         270
% of sales                                                    5.7       -4.2          3.5
Profit (loss) before tax, EURm                  82      -162         187
excluding special items, EURm               91      -145         107
Net profit (loss) for the                                70      -158         169
period, EURm
Earnings per share, EUR                       0.13      -0.30       0.33
excluding special items, EUR               0.15       -0.27      0.11
Diluted earnings per share, EUR         0.13       -0.30      0.33
Return on equity, %                                   4.2          neg.       2.8
excluding special items, %                      4.6          neg.       1.0
Return on capital employed, %               4.0          neg.       3.2
excluding special items, %                      4.3          neg.       2.5
Operating cash flow per                         0.40          0.53      2.42
share, EUR
Shareholders' equity per                      12.62       11.05    12.67
share at end of period, EUR
Gearing ratio at end of                                54             72         56
period, %
Net interest-bearing                               3,569       4,139   3,730
liabilities at end of period, EURm
Capital employed at end of                 10,953     10,501 11,066
period, EURm
Capital expenditure, EURm                         30            67      913
Capital expenditure excluding                     30            58      229
acquisitions and shares, EURm
Personnel at end of period                   22,840    24,039 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

Q1 of 2010 compared with Q1 of 2009

Sales for the first quarter of 2010 were EUR 2,039 million, 10% higher than the
EUR 1,857 million in the first quarter of 2009. Sales increased due to higher
deliveries across all of UPM's business areas.

Operating profit was EUR 107 million, 5.2% of sales (loss of EUR 95 million,
-5.1% of sales). The operating profit excluding special items was EUR 116
million, 5.7% of sales (loss of EUR 78 million, -4.2% of sales). Operating
profit includes net charges of EUR 9 million (17 million) as special items,
which mainly consist of employee-related restructuring charges in the Paper
business area.

Profitability improved noticeably from the same period last year. The main
reasons for the better profitability were higher delivery volumes in UPM's
businesses and lower costs for wood and energy. The operations in Uruguay,
acquired in December 2009, contributed positively to the operating profit.

Due to the stevedores' strike in Finland from 4 March to 19 March, the
company's production volumes have been lower in Paper, Pulp, Timber and
Plywood. The estimated loss due to strike is approximately EUR 20 million with
an impact on first and second quarter results.

Wood costs increased from the latter part of 2009, but decreased by about EUR
40 million from the first quarter of last year. Energy costs were about EUR 30
million lower than last year. In addition, the comparison period included wood
and pulp inventory write-downs of EUR 53 million.

Changes in sales prices in euro terms reduced operating profit by about EUR 100
million. The average paper price in euros decreased by approximately 10% from
the same period last year. The average price for label materials in euros was
slightly lower than last year and plywood prices decreased somewhat. Sawn
timber sales prices increased by approximately 14%. The price for external
electricity sales was noticeably higher, improving operating profit.

The increase in the fair value of biological assets net of wood harvested was
EUR 19 million compared with EUR 11 million a year before.

The share of results of associated companies and joint ventures was EUR 3
million (53 million negative).

Profit before tax was EUR 82 million (loss of EUR 162 million) and excluding
special items EUR 91 million (loss of EUR 145 million). Interest and other
financing costs net were EUR 26 million (58 million). Exchange rate and fair
value gains and losses were EUR 1 million (loss of EUR 9 million).

Income taxes were EUR 12 million (4 million positive). The impact on taxes from
special items was EUR 3 million positive (3 million negative).

Profit for the first quarter was EUR 70 million (loss of EUR 158 million) and
earnings per share were EUR 0.13 (-0.30). Earnings per share excluding special
items were EUR 0.15 (-0.27). Operating cash flow per share was EUR 0.40 (0.53).


Financing

Cash flow from operating activities, before capital expenditure and financing,
was EUR 209 million (274 million). Net working capital increased by EUR 18
million during the period (decrease of EUR 216 million).

The gearing ratio as of 31 March 2010, was 54% (72%). Net interest-bearing
liabilities at the end of the period came to EUR 3,569 million (4,139 million).

On 31 March 2010, UPM's cash funds and unused committed credit facilities
totalled EUR 2.2 billion.


Personnel

In the first quarter of 2010, UPM had an average of 22,889 employees (24,199).
At the beginning of the year the number of employees was 23,213, and at the end
of the first quarter it was 22,840.


Capital expenditure

During the first three months of 2010, capital expenditure was EUR 30 million,
1.5% of sales (EUR 67 million, 3.6% of sales).

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


Shares

In the first quarter of 2010, UPM shares worth EUR 2,118 million (1,503
million) in total were traded on the NASDAQ OMX Helsinki stock exchange. The
highest quotation was EUR 10.03 in March and the lowest EUR 7.37 in February.

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

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

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

To date these authorisations have not been used.

The company has four option series that would entitle the holders to subscribe
for a total of 18,000,000 shares. Share options 2005H may be subscribed for
3,000,000 shares, and share options 2007A, 2007B and 2007C may be subscribed
for a total of 15,000,000 shares. 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 31 March 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.


Dividend

The Annual General Meeting of 22 March 2010 approved the Board's proposal to
pay a dividend of EUR 0.45 per share for the 2009 financial year. The dividend
of EUR 234 million was approved to be paid on 7 April 2010 and is included in
the short-term non-interest bearing liabilities at the end of March.


Company directors

At the Annual General Meeting, nine members were elected to the Board of
Directors. Mr Matti Alahuhta, President and CEO of KONE Corporation, Mr Berndt
Brunow, Chairman of the Board of Oy Karl Fazer Ab, Mr Karl Grotenfelt, Chairman
of the Board of Directors of Famigro Oy, Ms Wendy E. Lane, Chairman of the
American investment firm Lane Holdings, Inc., Mr Jussi Pesonen, President and
CEO of UPM, Ms Ursula Ranin, Board member of Finnair plc, Mr Veli-Matti
Reinikkala, President of ABB Process Automation Division and Mr Björn Wahlroos,
Chairman of the Board of Sampo plc were re-elected as members of the Board of
Directors. Mr. Robert J. Routs, Vice Chairman of the supervisory board of Aegon
N.V. was elected to the Board of Directors as a new member.

The term of office of the members of the Board of Directors will last until the
end of the next Annual General Meeting.

At the organisation meeting of the Board of Directors, Mr Björn Wahlroos was
re-elected as Chairman, and Mr Berndt Brunow was re-elected as Deputy Chairman.

In addition, the Board of Directors appointed from among its members an Audit
Committee with Mr Karl Grotenfelt as Chairman, and Ms Wendy E. Lane and Mr
Veli-Matti Reinikkala as members. A Human Resources Committee was appointed
with Mr Berndt Brunow as Chairman, and Ms Ursula Ranin and Mr Robert J. Routs
as members. Furthermore, a Nomination and Corporate Governance Committee was
appointed with Mr Björn Wahlroos as Chairman, and Mr Matti Alahuhta and Mr Karl
Grotenfelt as members.


Litigation

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 was summer
2009 but the construction of the unit has been delayed. The latest anticipated
start-up time is after June 2012. TVO has requested that the plant supplier,
the AREVA-Siemens consortium, provide a re-analysis of the anticipated start-up
time.

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 counter-claim 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.


Events after the balance sheet date

On 20 April 2010, the International Court of Justice published its decision on
the litigation action against the government of Uruguay related to the Fray
Bentos pulp mill in Uruguay. The decision reduces the political risk related to
the Fray Bentos pulp mill.


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 2010

Gradual recovery in UPM's main markets is expected to continue and demand for
consumer goods is forecast to improve. Recovery of advertising expenditure in
print media is slow, and this will impede growth in demand for graphic papers.
Investment activity, including construction, has shown signs of recovery, and
demand for construction materials such as timber and plywood is expected to
pick up. Growth is expected to continue in Asia, especially in China.
Disruptions in supply of fibre and plywood from Chile continue to affect
markets during the second quarter.

Low capacity utilisation rates at some of the company's timber, plywood and
European paper mills will continue periodically. Necessary production
curtailments will require continuing the flexible way of working in these
operations.

For the rest of the year, the electricity generation volume will be about the
same as last year, assuming that a lower than average hydrological balance
continues in Finland. Based on current forward sale agreements and Nordpool
forward prices, the average sales price for electricity is estimated to be
about the same as last year.

Chemical pulp deliveries, on a comparable basis, are expected to be higher than
last year. Current prices for both hardwood and softwood pulp are significantly
higher than last year.

Paper demand in Europe is forecast to recover from 2009, and UPM's paper
deliveries for 2010 are expected to be higher than last year. Deliveries for
fine and speciality papers are expected to increase the most. The average price
in euro for all paper deliveries for the second quarter is expected to improve
slightly from the first quarter of this year. UPM's target is to increase
prices in all new sales agreements.

Demand for self-adhesive labelstock is estimated to improve from last year in
all the main markets. Raw material costs, especially in paper and oil-based raw
materials, have increased. This puts pressure on sales margins.

The operating profit (excluding special items) for the year 2010 is expected to
clearly improve from last year. Variable costs are expected to increase by
about 2% from last year.

BUSINESS AREA REVIEWS

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

Sales, EURm                                                  174      128     108     100      136     472
EBITDA, EURm 1)                                            79         57       35       41         57     190
% of sales                                                      45.4      44.5    32.4    41.0    41.9     40.3
Share of results of                                              4          -8      -24        -4         -4      -40
associated companies and
joint ventures, EURm
Depreciation, amortisation                              -2          -2        -1        -1          -2       -6
and impairment charges, EURm
Operating profit, EURm                                    81        47       10       36         51    144
% of sales                                                        46.6    36.7      9.3    36.0      37.5   30.5
Special items, EURm 2)                                    -          -1       -17         -             -     -18
Operating profit excl.                                          81       48        27       36         51   162
special items, EURm
% of sales                                                        46.6    37.5    25.0    36.0      37.5  34.3
Electricity deliveries,                                     2,411 2,277  2,103 1,999   2,486 8,865
1,000 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.


Q1 of 2010 compared with Q1 of 2009

The operating profit excluding special items for Energy was EUR 81 million, EUR
30 million higher than last year (51 million). Sales increased by 28% to EUR
174 million (136 million), of which EUR 94 million was external sales (49
million). The electricity sales volume was 2.4 TWh in the quarter (2.5 TWh).

Profitability improved compared with the same period last year, due to the
higher average electricity sales price and temporarily higher external sales as
less electricity was consumed internally in the Finnish paper mills during the
stevedores' strike in March.

The average electricity sales price increased by 36% to EUR 61.3/MWh
(45.2/MWh). Hydropower volume was 29% lower in comparison with the previous
year but it was partly compensated with higher condensing power generation.


Market review

The average electricity spot price on the Nordic electricity exchange in the
first quarter was EUR 59.5/MWh, 56% higher than in the same period last year
(38.2/MWh) due to a cold and dry winter.

Oil and coal prices increased compared with the same period last year. CO2
emission allowance prices were higher.

The rest of the year electricity system forward price on the Nordic electricity
exchange was EUR 42.2/MWh on 31 March, 26% higher than on the same date last
year (33.4/MWh).

In the first quarter of the year, the Nordic water reservoirs were below their
long-term average at this time of the year.


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

Sales, EURm                                                341     226      156     132      139     653
EBITDA, EURm 1)                                        120       53           8      -24       -55      -18
% of sales                                                    35.2     23.5        5.1   -18.2   -39.6     -2.8
Change in fair value of                                     -          -1            -          -           -         -1
biological assets and wood
harvested, EURm
Share of results of                                             -           7            4      -16      -47     -52
associated companies and
joint ventures, EURm 3)
Depreciation, amortisation                           -36      -24         -21     -20      -20     -85
and impairment charges, EURm
Operating profit, EURm                                   83       35           -9     -60    -122   -156
% of sales                                                       24.3   15.5        -5.8  -45.5   -87.8  -23.9
Special items, EURm 2)                                  -1          -             -          -       -29     -29
Operating profit excl.                                         84       35          -9      -60      -93   -127
special items, EURm
% of sales                                                       24.6    15.5       -5.8   -45.5  -66.9  -19.4
Pulp deliveries, 1,000 t                                  700     550       446     391     372 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.


Q1 of 2010 compared with Q1 of 2009

The Fray Bentos pulp mill and Forestal Oriental eucalyptus plantation forestry
company in Uruguay were included in the Pulp business area as of December 2009.

The operating profit excluding special items for Pulp was EUR 84 million (loss
of EUR 93 million). Sales increased by 145% to EUR 341 million (139 million)
and deliveries by 88% to 700,000 tonnes (372,000).

Profitability improved substantially from the previous year. The main reasons
for the improvement were significantly higher pulp prices and higher sales
volumes than last year. Wood costs were lower.

Comparison period also included a wood inventory write-down of EUR 28 million
and a pulp inventory write-down of EUR 10 million.


Market review

In the first quarter of 2010, global chemical pulp prices increased
substantially due to the tight market balance. The earthquake in Chile has
reduced the global chemical market pulp supply temporarily, whilst strong
market demand, driven by China, continued.

The average softwood pulp (NBSK) market price in euro terms, at EUR 613/tonne,
was almost 35% higher than in the same period last year (EUR 455/tonne). At the
end of the first quarter, the NBSK market price was EUR 666/tonne. The average
hardwood pulp (BHKP) market price in euro terms increased by almost 33% from
last year, to EUR 543/tonne (EUR 409/tonne). At the end of the first quarter
the BHKP market price was EUR 591/tonne.


Forest and timber

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

Sales, EURm                                         339      348     295      309     385 1,337
EBITDA, EURm 1)                                      3        30        24      -15      -15      24
% of sales                                                0.9       8.6       8.1     -4.9      -3.9     1.8
Change in fair value of                            19        10       -13       10        11      18
biological assets and wood
harvested, EURm
Share of results of                                      1           1         -1          1          1       2
associated companies and
joint ventures, EURm
Depreciation, amortisation                      -4        -11        -4       -14         -5   -34
and impairment charges, EURm
Operating profit, EURm                           19          21         6       -18       -18    -9
% of sales                                                 5.6         6.0      2.0      -5.8      -4.7 -0.7
Special items, EURm 2)                            -         -14         1          -8       -10  -31
Operating profit excl.                                 19         35         5        -10         -8   22
special items, EURm
% of sales                                                  5.6     10.1      1.7       -3.2      -2.1  1.6
Sawn timber deliveries,                         371       413    355       366      363 1,497
1,000 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.


Q1 of 2010 compared with Q1 of 2009

The operating profit excluding special items for Forest and timber was EUR 19
million (loss of EUR 8 million). Sales decreased by 12% to EUR 339 million (385
million). Sawn timber deliveries increased by 2% to 371,000 cubic metres
(363,000 cubic metres).

Profitability improved from the same period last year, mainly due to the
average sawn timber price being approximately 14% higher than last year. Wood
costs were lower.

The increase in the fair value of biological assets net of wood harvested was
EUR 19 million (11 million). The increase in the fair value of biological
assets (growing trees) was EUR 33 million (21 million). The cost of wood raw
material harvested from the Group's own forests was EUR 14 million
(10 million).


Market review

In the first quarter of 2010, Finnish wood market activity remained at a low
level, representing about half of the long term average purchasing volumes.
However, wood purchases in the Finnish wood market increased almost by 59% from
the very low level in the same period last year.

Wood market prices declined by an average of about 2% compared with the same
period last year but increased slightly from the fourth quarter of 2009.

Log market prices for pine and spruce increased from last year, mainly
due to weakened supply of wood. Log market prices for birch declined.

In the first quarter of 2010, demand for both redwood and whitewood sawn timber
in Europe improved slightly in comparison with last year even though
the construction activity remained still very low.


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

Sales, EURm                                         1,401  1,558  1,454  1,388   1,367  5,767
EBITDA, EURm 1)                                       75     221     274      247      187     929
% of sales                                                    5.4    14.2    18.8    17.8      13.7    16.1
Share of results of                                         -           1          -         -1         -1        -1
associated companies and
joint ventures, EURm
Depreciation, amortisation                     -136    -140   -142    -147    -149    -578
and impairment charges, EURm
Operating profit, EURm                              -69       74     126       85        60     345
% of sales                                                    -4.9      4.7      8.7       6.1       4.4     6.0
Special items, EURm 2)                               -8        -8       -6       -10        23       -1
Operating profit excl.                                    -61       82    132        95        37    346
special items, EURm
% of sales                                                     -4.4      5.3     9.1       6.8       2.7     6.0
Deliveries, publication                             1,364 1,576 1,464  1,323  1,304 5,667
papers, 1,000 t
Deliveries, fine and                                      937    945     872     813     724 3,354
speciality papers, 1,000 t
Paper deliveries total,                              2,301 2,521  2,336 2,136  2,028 9,021
1,000 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 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.


Q1 of 2010 compared with Q1 of 2009

Operating loss excluding special items for Paper was EUR 61 million (profit of
EUR 37 million). Sales were EUR 1,401 million (1,367 million). Paper deliveries
increased by 13% to 2,301,000 tonnes (2,028,000). Paper deliveries for
publication papers (magazine papers and newsprint) increased by 5%, and for
fine and speciality papers by 29%, from last year. Delivery growth was
highest in Asia and in North America.

The Paper business area incurred an operating loss, as the average paper price
decreased significantly from the same period last year and the cost of fibre
increased. Higher paper deliveries had a positive impact on operating profit,
even though delivery volumes were negatively affected by the stevedores' strike
in Finland. The average price for all paper deliveries when translated into
euros was 10% lower than last year. Compared with the fourth quarter of 2009,
prices decreased for all publication paper grades, but increased for fine
papers and speciality papers.


Market review

Demand for publication papers in Europe was 3% higher, and for fine papers 4%
higher, than a year ago. In North America, the demand for magazine papers
increased by 10% from last year. In Asia, demand for fine papers grew.

In Europe, magazine paper prices decreased in the first quarter by about 4%
from the previous quarter, or about 10% from the first quarter of 2009.
Newsprint prices decreased by about 14% both compared with the previous quarter
and with the same period last year. Fine paper prices were about the same as in
the last quarter of 2009, but were about 5% lower than in the same period last
year.

In North America, the average US dollar price for magazine papers was 2% lower
than in the previous quarter, or 17% lower than a year ago. In Asia, market
prices for fine papers increased both from last year and from the previous
quarter.


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

Sales, EURm                                            260      252     242      226     223     943
EBITDA, EURm 1)                                      31         25       29        18          6       78
% of sales                                                 11.9       9.9    12.0       8.0       2.7      8.3
Depreciation, amortisation                        -7         -8        -9       -11         -9      -37
and impairment charges, EURm
Operating profit, EURm                             24         16      18          4          -3       35
% of sales                                                   9.2        6.3     7.4       1.8       -1.3      3.7
Special items, EURm 2)                             1           -1       -2         -5           -        -8
Operating profit excl.                                   23         17      20          9          -3       43
special items, EURm
% of sales                                                    8.8        6.7     8.3       4.0       -1.3     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.


Q1 of 2010 compared with Q1 of 2009

Operating profit excluding special items for Label was EUR 23 million (loss of
EUR 3 million). Sales increased by 17% to EUR 260 million (223 million).

Profitability improved mainly due to lower raw material costs and higher sales
volumes. Delivery volumes of self-adhesive label materials increased in all
regions. Volume increase was highest in growth markets of Asia and Eastern
Europe.

The average price for label materials in local currencies decreased marginally
from the same period last year. Prices in local currencies increased during the
first quarter of 2010 and on average were higher than in the fourth quarter of
2009.


Market review

Demand for self-adhesive label materials grew noticeably in the first quarter
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 yet to pre-recession levels.


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

Sales, EURm                                                    76        81        73       77        75     306
EBITDA, EURm 1)                                             -2          3         -5        -5        -23     -30
% of sales                                                       -2.6        3.7      -6.8    -6.5    -30.7    -9.8
Depreciation, amortisation                             -5        -12         -5        -5         -5      -27
and impairment charges, EURm
Operating profit, EURm                                    -7        -33       -10     -10      -29      -82
% of sales                                                        -9.2     -40.7    -13.7 -13.0   -38.7  -26.8
Special items, EURm 2)                                    -         -30           -         -         -1      -31
Operating profit excl.                                         -7           -3       -10     -10      -28     -51
special items, EURm
% of sales                                                       -9.2        -3.7    -13.7  -13.0  -37.3  -16.7
Deliveries, plywood, 1,000 m3                    140        150      143    141     133    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 fourth quarter of 2009 include impairment charges of
EUR 6 million and other restructuring charges of EUR 24 million.


Q1 of 2010 compared with Q1 of 2009

Operating loss excluding special items for Plywood was EUR 7 million (loss of
EUR 28 million). Sales were EUR 76 million (75 million). Plywood deliveries
increased by 5% to 140,000 m3.

Operating loss for Plywood decreased from last year due to lower raw material
costs. Plywood sales prices were lower than last year. Delivery volumes were
negatively affected by the stevedores' strike in Finland. The comparison period
also included a wood inventory write-down of EUR 15 million.


Market review

In Europe, plywood demand increased slightly from the first quarter of 2009.
Construction activity continued at a very low level and was further limited by
the cold winter in Europe. Demand for engineered end products in transportation
and other industrial end-uses showed only weak signs of improvement. The market
prices of plywood were lower than in the same quarter last year, but increased
slightly from the fourth quarter of 2009.


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

Sales, EURm                                            40       35        21        21        34     111
EBITDA, EURm 1)                                   -18      -27      -31       -24       -29   -111
Share of results of                                     -2         -           -           -2         -2       -4
associated companies and
joint ventures, EURm
Depreciation, amortisation                      -3        -3         -3          -3         -3    -12
and impairment charges, EURm
Operating profit, EURm                          -24      -34      -45        -29      -34  -142
Special items, EURm 2)                           -1        -6      -11            -           -     -17
Operating profit excl.                                -23      -28      -34        -29      -34 -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 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.


Q1 of 2010 compared with Q1 of 2009

Excluding special items, the operating loss for Other operations was EUR 23
million (loss of EUR 34 million). Sales amounted to EUR 40 million (34
million). The development units incurred a smaller operating loss than
last year.


Helsinki, 28 April 2010
UPM-Kymmene Corporation
Board of Directors


FINANCIAL INFORMATION

This Interim Report is unaudited

Consolidated income statement

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

Sales                                                                 2,039      1,857    7,719
Other operating income                                         9           17          47
Costs and expenses                                     -1,770    -1,734   -6,774
Change in fair value of                                         19           11          17
biological assets and wood harvested
Share of results of associated                             3          -53         -95
companies and joint ventures
Depreciation, amortisation                              -193       -193       -779
and impairment charges
Operating profit (loss)                                        107         -95         135

Gains on available-for-sale                                   -              -             -1
investments, net
Exchange rate and fair value                                 1           -9             -9
gains and losses
Interest and other finance                                   -26        -58            62
costs, net
Profit (loss) before tax                                           82      -162          187
Income taxes                                                         -12            4           -18
Profit (loss) for the period                                     70      -158          169
Attributable to:
Owners of the parent company                           70       -158         169
Non-controlling interests                                         -             -               -
                                                                                   70       -158         169

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

Basic earnings per share, EUR                         0.13     -0.30       0.33
Diluted earnings per share, EUR                       0.13     -0.30       0.33


Consolidated statement of comprehensive income

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

Profit (loss) for the period                                        70       -158        169
Other comprehensive income for
the period, net of tax:
Translation differences                                          217           29        165
Net investment hedge                                             -53            -8         -56
Cash flow hedges                                                    -23          -18          -4
Available-for-sale investments                                  5              -          21
Share of other comprehensive                                 -1             4          30
income of associated companies
Other comprehensive income                               145             7        156
for the period, net of tax
Total comprehensive income                                 215       -151       325
for the period

Total comprehensive income attributable to:
Owners of the parent company                               215       -151       325
Non-controlling interests                                               -              -            -
                                                                                       215       -151       325


Condensed consolidated balance sheet

EURm                                                            31.03.2010      31.03.2009       31.12.2009
ASSETS
Non-current assets
Goodwill                                                                   1,025                    934                1,017
Other intangible assets                                            452                    409                   423
Property, plant and equipment                             6,166                5,584                6,192
Biological assets                                                    1,324                1,144                1,293
Investments in associated                                       555                1,219                   553
companies and joint ventures
Deferred tax assets                                                    314                   260                   287
Other non-current assets                                          865                   726                   816
                                                                                  10,701             10,276              10,581
Current assets
Inventories                                                                 1,204               1,198                1,112
Trade and other receivables                                  1,557               1,447                1,474
Cash and cash equivalents                                      365                  197                    438
                                                                                     3,126               2,842                3,024
Total assets                                                            13,827             13,118              13,605

EQUITY AND LIABILITIES
Equity attributable to owners of the parent company
Share capital                                                                 890                  890                    890
Fair value and other reserves                                    125                 -151                    -23
Reserve for invested                                                1,145               1,145                1,145
non-restricted equity
Retained earnings                                                   4,403                3,864                4,574
                                                                                     6,563                5,748                6,586
Non-controlling interests                                              16                     14                      16
Total equity                                                                 6,579                5,762               6,602

Non-current liabilities
Deferred tax liabilities                                                  589                   612                   608
Non-current interest-bearing                                   4,005               4,189                4,164
liabilities
Other non-current liabilities                                         661                  605                    660
                                                                                       5,255               5,406                 5,432
Current liabilities
Current interest-bearing                                               369                  550                    365
liabilities
Trade and other payables                                         1,624               1,400                1,206
                                                                                        1,993               1,950                1,571
Total liabilities                                                              7,248               7,356                7,003
Total equity and liabilities                                        13,827             13,118              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                                               -                           29                       -
Net investment hedge, net of tax                               -                            -8                       -
Cash flow hedges, net of tax                                      -                             -                    -18
Available-for-sale investments                                   -                             -                       -
Share of other comprehensive                                   -                           10                      -
income of associated companies
Total comprehensive income                                     -                           31                   -18
for the period
Share-based compensation, net of tax                     -                              -                      1
Dividend paid                                                                  -                              -                      -
Other items                                                                      -                              -                      -
Total transactions with                                                  -                              -                      1
owners for the period
Balance at 31 March 2009                                        890                      -264                 113

Balance at 1 January 2010                                       890                      -164                 141
Profit (loss) for the period                                              -                              -                      -
Translation differences                                                  -                         217                     -
Net investment hedge, net of tax                                  -                          -53                     -
Cash flow hedges, net of tax                                         -                             -                  -23
Available-for-sale investments                                      -                             -                     5
Share of other comprehensive                                      -                             -                      -
income of associated companies
Total comprehensive income                                        -                        164                 -18
for the period
Share-based compensation, net of tax                        -                            -                      2
Dividend paid                                                                     -                           -                       -
Other items                                                                         -                           -                       -
Total transactions with                                                     -                           -                       2
owners for the period
Balance at 31 March 2010                                          890                           -                  125


EURm                                                                      Reserve 
                                                                                for invested          Retained 
                                                                              non-restricted        earnings             Total
                                                                                    equity

Balance at 1 January 2009                                    1,145                    4,236               6,106
Profit (loss) for the period                                             -                        -158                 -158
Translation differences                                                 -                              -                      29
Net investment hedge, net of tax                                 -                              -                       -8
Cash flow hedges, net of tax                                        -                              -                    -18
Available-for-sale investments                                     -                             -                        -
Share of other comprehensive                                     -                            -6                       4
income of associated companies
Total comprehensive income                                        -                       -164                -151
for the period
Share-based compensation, net of tax                        -                             -                       1
Dividend paid                                                                     -                       -208                -208
Other items                                                                         -                            -                       -
Total transactions with                                                     -                       -208                -207
owners for the period
Balance at 31 March 2009                                       1,145                    3,864              5,748

Balance at 1 January 2010                                      1,145                    4,574              6,586
Profit (loss) for the period                                                -                           70                   70
Translation differences                                                    -                              -                  217
Net investment hedge, net of tax                                    -                              -                  -53
Cash flow hedges, net of tax                                           -                              -                  -23
Available-for-sale investments                                       -                              -                      5
Share of other comprehensive                                       -                            -1                    -1
income of associated companies
Total comprehensive income                                         -                           69                 215
for the period
Share-based compensation, net of tax                         -                              -                     2
Dividend paid                                                                     -                         -234              -234
Other items                                                                         -                             -6                   -6
Total transactions with                                                     -                         -240              -238
owners for the period
Balance at 31 March 2010                                       1,145                      4,403            6,563


EURm                                                                    Non-controlling                      Total
                                                                                      interests                            equity

Balance at 1 January 2009                                           14                                  6,120
Profit (loss) for the period                                                -                                    -158
Translation differences                                                    -                                        29
Net investment hedge, net of tax                                    -                                        -8
Cash flow hedges, net of tax                                           -                                      -18
Available-for-sale investments                                        -                                         -
Share of other comprehensive                                        -                                         4
income of associated companies
Total comprehensive income                                           -                                   -151
for the period
Share-based compensation, ne of tax                            -                                        1
Dividend paid                                                                        -                                  -208
Other items                                                                            -                                        -
Total transactions with                                                        -                                   -207
owners for the period
Balance at 31 March 2009                                               14                                5,762

Balance at 1 January 2010                                              16                                6,602
Profit (loss) for the period                                                   -                                      70
Translation differences                                                       -                                    217
Net investment hedge, net of tax                                       -                                     -53
Cash flow hedges, net of tax                                              -                                     -23
Available-for-sale investments                                          -                                         5
Share of other comprehensive                                          -                                       -1
income of associated companies
Total comprehensive income                                            -                                    215
for the period
Share-based compensation, net of tax                            -                                        2
Dividend paid                                                                        -                                    -234
Other items                                                                             -                                      -6
Total transactions with                                                         -                                  -238
owners for the period
Balance at 31 March 2010                                                 16                               6,579


Condensed consolidated cash flow statement

EURm                                                                    Q1/      Q/   Q1-Q4 /
                                                                            2010    2009    2009

Cash flow from operating activities
Profit (loss) for the period                                   70     -158      169
Adjustments                                                        180      289      772
Change in working capital                                -18       216      532
Cash generated from operations                   232       347  1,473
Finance costs, net                                              -13       -59     -183
Income taxes paid                                              -10       -14        -31
Net cash generated from                                 209      274   1,259
operating activities

Cash flow from investing activities
Acquisitions and share purchases                     -            -     -586
Capital expenditure                                             -49       -78    -236
Asset sales and other                                            9        14      608
investing cash flow
Net cash used in investing                                -40       -64     -214
activities

Cash flow from financing activities
Change in loans and other                              -250    -342     -732
financial items
Dividends paid                                                         -           -       -208
Net cash used in financing                              -250    -342      -940
activities

Change in cash and cash                                   -81   -132       105
equivalents
Cash and cash equivalents at                           438    330       330
the beginning of period
Foreign exchange effect on cash                           8       -1            3
Change in cash and cash                                   -81   -132       105
equivalents
Cash and cash equivalents at                           365    197       438
end of period


Quarterly information

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

Sales                                                               2,039   2,108  1,913  1,841 1,857  7,719
Other operating income                                       9        18          5          7       17        47
Costs and expenses                                   -1,770 -1,810 -1,603 -1,627 -1,734 -6,774
Change in fair value of                                       19          9        -13       10       11       17
biological assets and wood harvested
Share of results of associated                           3          1         -21      -22     -53      -95
companies and joint ventures
Depreciation, amortisation                            -193    -200      -185    -201   -193   -779
and impairment charges
Operating profit (loss)                                      107     126          96          8      -95    135
Gains on available-for-sale                                 -           -            -1           -          -       -1
investments, net
Exchange rate and fair value                               1           -            -3          3        -9      -9
gains and losses
Interest and other finance                                 -26      185         -28      -37      -58     62
costs, net
Profit (loss) before tax                                         82       311         64      -26    -162    187
Income taxes                                                       -12        -16        -24       18          4    -18
Profit (loss) for the period                                   70      295          40        -8    -158   169
Attributable to:
Owners of the parent company                          70     295          40         -8    -158   169
Non-controlling interests                                       -           -              -           -           -        -
                                                                                  70     295          40         -8    -158   169
Basic earnings per share, EUR                      0.13    0.57      0.08    -0.02   -0.30  0.33
Diluted earnings per share, EUR                   0.13    0.57       0.08    -0.02   -0.30 0.33
Earnings per share, excluding                        0.15    0.21       0.14     0.03   -0.27  0.11
special items, EUR
Average number of shares                    519,970 519,958 519,954 519,954 519,954 519,955
basic (1,000)
Average number of shares                    520,018 518,876 521,036 519,954 519,954 519,955
diluted (1,000)
Special items in operating                                     -9    -60         -35         -23     -17 -135
profit (loss)
Operating profit (loss),                                         116   186        131         31      -78  270
excl. special items
% of sales                                                               5.7     8.8         6.8        1.7      -4.2   3.5
Special items before tax                                        -9    155         -35        -23       -17    80
Profit (loss) before tax,                                          91    156          99          -3     -145  107
excl. special items
% of sales                                                               4.5    7.4          5.2       -0.2      -7.8   1.4
Return on equity, excl.                                           4.6    7.4          5.0        0.8       neg. 1.0
special items, %
Return on capital employed,                                4.3    7.2          4.9        1.3       neg. 2.5
excl. special items, %
EBITDA                                                                    288  362         334       238      128 1,062
% of sales                                                              14.1 17.2        17.5      12.9       6.9 13.8

Share of results of associated companies and joint ventures
Energy                                                                           4     -8         -24           -4         -4   -40
Pulp                                                                                -       7            4         -16       -47   -52
Forest and timber                                                       1       1           -1            1           1      2
Paper                                                                              -       1            -           -1          -1     -1
Other operations                                                        -2        -            -           -2          -2     -4
Total                                                                               3       1         -21        -22       -53   -95


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

Electricity, 1,000 MWh                           2,411 2,277   2,103  1,999  2,486  8,865
Pulp, 1,000 t                                               700    550       446     391     372  1,759
Sawn timber, 1,000 m3                           371    413       355      366     363 1,497
Publication papers, 1,000 t                  1,364 1,576   1,464   1,323  1,304 5,667
Fine and speciality papers,                     937    945      872       813     724 3,354
1,000 t
Paper deliveries total,                            2,301 2,521  2,336    2,136 2,028 9,021
1,000 t
Plywood, 1,000 m3                                    140     150     143       141     133    567


Quarterly segment information

EURm                                                                Q1/      Q4/      Q3/      Q2/
                                                                         2010   2009   2009   2009
Sales
Energy                                                              174      128     108      100
Pulp                                                                  341      226     156      132
Forest and timber                                          339      348     295      309
Paper                                                            1,401   1,558  1,454  1,388
Label                                                                260      252      242     226
Plywood                                                             76         81        73       77
Other operations                                              40         35        21       21
Internal sales                                                -592      -520    -436   -412
Sales, total                                                   2,039    2,108  1,913 1,841

EBITDA
Energy                                                                79          57        35      41
Pulp                                                                  120          53          8     -24
Forest and timber                                              3           30        24    -15
Paper                                                                 75         221      274   247
Label                                                                  31           25        29     18
Plywood                                                             -2              3         -5      -5
Other operations                                           -18            -27      -31    -24
EBITDA, total                                                 288           362     334   238

Operating profit (loss)
Energy                                                               81             47       10      36
Pulp                                                                   83             35        -9     -60
Forest and timber                                           19             21         6      -18
Paper                                                               -69             74     126      85
Label                                                                 24             16       18        4
Plywood                                                             -7            -33      -10    -10
Other operations                                           -24            -34      -45    -29
Operating profit (loss), total                       107           126        96       8
% of sales                                                       5.2            6.0       5.0    0.4

Special items in operating profit
Energy                                                                -            -1           -17        -
Pulp                                                                  -1               -               -        -
Forest and timber                                             -          -14              1       -8
Paper                                                                -8            -8             -6     -10
Label                                                                  1            -1             -2       -5
Plywood                                                              -           -30             -          -
Other operations                                            -1             -6          -11         -
Special items in operating                           -9           -60          -35     -23
profit, total

Operating profit (loss) excl.special items
Energy                                                              81           48         27      36
Pulp                                                                  84           35          -9     -60
Forest and timber                                          19           35           5     -10
Paper                                                               -61          82       132      95
Label                                                                 23          17         20        9
Plywood                                                            -7            -3       -10      -10
Other operations                                          -23          -28       -34      -29
Operating profit (loss) excl.                       116         186      131       31
special items, total
% of sales                                                      5.7          8.8        6.8      1.7

EURm                                                      Q1/2010    Q4/2009    Q3/2009    Q2/2009
External sales
Energy                                                                 94               38               24              24
Pulp                                                                     86               34                  9              10
Forest and timber                                           154             171             145           150
Paper                                                             1,353          1,500          1,409       1,355
Label                                                                 259             252              243          225
Plywood                                                              73                77                69            73
Other operations                                               20               36                 14              4
External sales, total                                    2,039          2,108           1,913      1,841

Internal sales
Energy                                                                 80                90                84            76
Pulp                                                                   255              192             147          122
Forest and timber                                           185              177             150          159
Paper                                                                   48                58               45             33
Label                                                                      1                   -                 -1               1
Plywood                                                                 3                  4                  4               4
Other operations                                                20                -1                  7             17
Internal sales, total                                          592             520             436           412

EURm                                                      Q1/         Q1-Q4/
                                                                 2009         2009
Sales
Energy                                                       136           472
Pulp                                                           139           653
Forest and timber                                   385        1,337
Paper                                                      1,367       5,767
Label                                                         223           943
Plywood                                                      75           306
Other operations                                       34           111
Internal sales                                         -502       -1,870
Sales, total                                            1,857        7,719

EBITDA
Energy                                                          57          190
Pulp                                                             -55           -18
Forest and timber                                     -15            24
Paper                                                          187         929
Label                                                               6            78
Plywood                                                       -23          -30
Other operations                                        -29        -111
EBITDA, total                                              128      1,062

Operating profit (loss)
Energy                                                            51         144
Pulp                                                             -122       -156
Forest and timber                                        -18           -9
Paper                                                               60        345
Label                                                                 -3          35
Plywood                                                          -29        -82
Other operations                                          -34       -142
Operating profit (loss), total                       -95        135
% of sales                                                    -5.1         1.7

Special items in operating profit
Energy                                                                -          -18
Pulp                                                                 -29         -29
Forest and timber                                         -10         -31
Paper                                                                23           -1
Label                                                                   -            -8
Plywood                                                            -1          -31
Other operations                                               -          -17
Special items in operating                          -17       -135
profit, total

Operating profit (loss) excl.special items
Energy                                                               51        162
Pulp                                                                  -93       -127
Forest and timber                                            -8           22
Paper                                                                 37        346
Label                                                                   -3          43
Plywood                                                            -28         -51
Other operations                                            -34       -125
Operating profit (loss) excl.                          -78        270
special items, total
% of sales                                                      -4.2         3.5

EURm                                                               Q1/     Q1-Q4/
External sales                                              2009       2009
Energy                                                                49         135
Pulp                                                                    10            63
Forest and timber                                          152         618
Paper                                                            1,327      5,591
Label                                                                222         942
Plywood                                                             72          291
Other operations                                              25           79
External sales, total                                    1,857     7,719

Internal sales
Energy                                                                 87        337
Pulp                                                                   129        590
Forest and timber                                           233        719
Paper                                                                   40       176
Label                                                                      1           1
Plywood                                                                 3         15
Other operations                                                  9         32
Internal sales, total                                         502    1,870


Changes in property, plant and equipment

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

Book value at beginning of                 6,192      5,688    5,688
period
Capital expenditure                                   25            65       181
Companies acquired                                  -               -     1,013
Decreases                                                   -3          -11         -20
Depreciation                                           -178        -178       -696
Impairment charges                                    -               -         -14
Impairment reversal                                    1              -             5
Translation difference and                     129            20         35
other changes
Book value at end of period                6,166      5,584    6,192


Commitments and contingencies
EURm                                                   31.03.2010      31.03.2009      31.12.2009

Own commitments
Mortgages 1)                                                  1,056                   760                1,043

On behalf of associated
companies and joint ventures
Guarantees for loans                                            8                        9                      8
On behalf of others
Other guarantees                                                   1                        2                      1

Other own commitments
Leasing commitments for the                           26                      20                   24
next 12 months
Leasing commitments for                                  84                      51                   60
subsequent periods
Other commitments                                             68                      68                   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
Waste water treatment plant,             July 2011                  19                              -
Blandin
Power plant rebuild, Schongau  January 2011                  12                              -
´

EURm                                                       Q1/                    After
                                                                 2010             31.03.2010

Materials recovery facility                         -                        19
(MRF), Shotton
Plywood development                              -                        18
Energy saving TMP plant,                        -                        16
Steyrermühl
Waste water treatment plant,                 6                       13
Blandin
Power plant rebuild, Schongau             1                       11


Notional amounts of derivative financial instruments

EURm                                             31.03.2010      31.03.2009      31.12.2009
Currency derivatives
Forward contracts                                   3,654                3,824                3,791
Options, bought                                            19                        -                      20
Options, written                                             27                        -                      20
Swaps                                                          527                   505                   514

Interest rate derivatives
Forward contracts                                   2,110                2,718                3,259
Swaps                                                       2,511                2,809                2,701

Other derivatives
Forward contracts                                       119                   161                      25
Options, bought                                             41                     78                      73
Options, written                                              41                     78                      73
Swaps                                                                3                       8                        4


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

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

Sales to associated companies                     34           27        114
Purchases from associated                            63         103        560
companies
Non-current receivables at                                 2             2             2
end of period
Trade and other receivables                            11           22          23
at end of period
Trade and other payables at                            31           30          32
end of period


Basis of preparation

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

The Group has adopted the following standard:

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


Calculation of key indicators

Return on equity, %:

(Profit before tax - income taxes) / Total equity (average) x 100

Return on capital employed, %:

(Profit before tax + interest expenses and other financial expenses) /
(Total equity + interest-bearing liabilities (average)) x 100

Earnings per share:

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


Key exchange rates for the euro at end of period

                                   31.03.2010       31.12.2009       30.09.2009       30.06.2009

USD                                  1.3479               1.4406                1.4643              1.4134
CAD                                  1.3687               1.5128                1.5709              1.6275
JPY                                    125.93               133.16               131.07               135.51
GBP                                  0.8898                0.8881               0.9093               0.8521
SEK                                  9.7135              10.2520             10.2320             10.8125

                                     31.03.2009

USD                                    1.3308
CAD                                    1.6685
JPY                                      131.17
GBP                                    0.9308
SEK                                  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
communications@upm-kymmene.com

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