UPM-Kymmene Financial Review 2002: Decreased profitability, strong cash flow and balance sheet

Archive 30.1.2003 0:00 EET

Key figures:

- Profit before extraordinary and non-recurring items EUR 835 million (1,113)
- Earnings per share excluding non-recurring items EUR 2.25 (3.22) and including non-recurring items EUR 2.12 (3.85)
- Turnover EUR 10,475 million (9,918)
- Return on equity excluding non-recurring items 8.4% (12.9)
- Return on capital employed excluding non-recurring items 8.8% (13.5)
- Board of Directors' dividend proposal EUR 1.50 (1.50)

President and CEO Juha Niemelä comments on the Group's Financial Review 2002:

"The soft market situation that began the previous year and continued throughout 2002 allowed UPM-Kymmene to achieve only a moderate result. Although we had efficient operations, profitability was strongly impacted by weak demand and decreasing market prices."

"During the last quarter, apparently due to the long holiday period demand diminished sharply and led to extensive downtime from mid-December onwards resulting in additional costs. The market related production curtailments were well in excess of 300,000 tonnes. Also the contribution of the company resource units like forestry and energy was clearly lower than usual. The profitability for the last quarter was therefore disappointing."

"The key indicators for UPM-Kymmene's financial performance, return on capital employed and return on equity, did not meet the company's set targets. That said, reduction in working capital during the last quarter by EUR 100 million, including 129,000 tonnes reduction in inventories and controlled capital expenditure resulted in a continued strong cash flow. Also the balance sheet remained strong with gearing at 76% at year end."

"The integration of Haindl has proceeded beyond expectations. The synergy targets of last year of EUR 25 million were exceeded by EUR 10 million. The initial total synergy target of EUR 70 million appears to have been a conservative estimate. Haindl is the most extensive acquisition in our company history and we can be very proud with how the integration has progressed," continues Niemelä.

"The outlook for this year is characterized by political and economic uncertainty. The demand for publication papers and fine papers continues to be weak and the overcapacity and tight price competition prevail on the market. Production curtailments continue to be a reality. Cost efficiency across all operations will be emphasized. On a positive note, in the US there are signs of recovery in advertising and the inventory levels are low throughout the supply chain. That lays a foundation for rapid recovery when paper demand eventually picks up," concludes Niemelä.

For more information, please contact:
Mr Juha Niemelä, President and CEO, UPM-Kymmene Corporation, tel. +358 203 15 0001
Mr Kari Toikka, Executive Vice President and CFO, tel. +358 204 15 0014


UPM-Kymmene Corporation
Corporate Communications
January 30, 2003



Conference Call Information

To participate in the UPM-Kymmene Conference Call, please dial +44 (0)20 8781 0562 at 16:00 (Finnish time) (14:00 GMT, 09:00 EST) on January 30, 2003. The access code: UPM-Kymmene. Conference Call can be listened to until 3 February, 2003 at the following phone number: +44 (0)20 8288 4459, access code: 338 132.

In the United States and Canada the Conference Call number is +1 334 323 6203, password: UPM-Kymmene. The reply will be heard at the following number +1 703 736 7336, access code: 338 132.