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
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
Main media
www.upm.com
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