UPM's operating profit improved – demand bottoming out

Archive 29.10.2009 0:00 EET

Interim report January–September 2009:
- Earnings per share for the third quarter were EUR 0.08 (-0.17), and excluding special items EUR 0.14 (0.25).
- Operating profit excluding special items was EUR 131 million (216 million) and reported operating profit was EUR 96 million (loss of EUR 40 million).
- Strong cash flow due to continued actions to preserve cash: EUR 721 million reduction in net debt from last year.
- Savings in fixed costs total EUR 70 million in the third quarter from last year, EUR 240 million year to date.

Jussi Pesonen, UPM’s President and CEO, comments on the result of the third quarter of 2009:

"Slow economic activity continued during the third quarter but demand started to bottom out in most of our businesses. Our operating profit improved and the EBITDA margin for the third quarter was 17.5 %. In times like these, this is a good achievement".
"In Paper, we reported a good result considering the extremely tough circumstances. In Europe, we adjusted production to weak demand and saved costs without losing production efficiency. In China, where we are the market leader in uncoated wood-free grades, we have continued to experience strong demand and a good pricing environment. The agreement on the Uruguayan pulp operations is a good strategic fit with the development of our China operations".

"Another positive note was the Label business. There was a strong recovery both in terms of profitability and volumes. We are reaping the benefits of our restructuring in Europe as well as the successful start-up of our Polish factory".

"In Plywood and Timber, the situation remains challenging both in terms of the raw material supplies in Finland and the long-term competitiveness of our Finnish operations. We have confidence in these products, but it seems impossible to ensure profitable operations with the current cost structure ".

"The wood market in Finland has livened up a little, but not sufficiently. The industry is lacking a steady flow of competitively priced raw material. This is most likely to lead to further capacity adjustments in the Finnish forest industry".

"Economic indicators have clearly improved but the recession continues to affect demand for all of our products. Our demand and pricing outlook remains weak and we will continue to curtail production in most of our businesses. Variable costs are estimated to remain at the same level. Fixed costs for the full year are estimated to be close to EUR 300 million lower than last year."

"Even in tough times, we have never stopped thinking about our future opportunities. We were the first company in our industry to start the transformation. We defined a new vision and business strategy and reorganised ourselves accordingly."

"The next step is to reposition ourselves in the minds of our customers and other stakeholders. UPM will redefine itself as a bio and forest industry company: UPM – The Biofore Company. In doing so we will create a new category in which UPM will take the leading position. Bio is a prefix in practically all of our new development initiatives. It stands for sustainable solutions and good environmental performance, whereas fore stands for not only the forest but also being first, in the forefront. Both UPM's current operations and future orientation support this positioning," says Pesonen.

For more information please contact:
Mr Jussi Pesonen, President and CEO, UPM, tel. +358 204 15 0001
Mr Jyrki Salo, Executive Vice President and CFO, UPM, tel. +358 204 15 0011

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284

News conference and conference call information

UPM’s President and CEO Jussi Pesonen will present the Interim Report for January–September 2009 in a press conference to be held at the UPM Head Office in Helsinki (main entrance Eteläesplanadi 2) today at 14:00 Finnish time (12:00 GMT, 07:00 EST).

You can listen online to the joint press conference for media and financial analysts at www.upm-kymmene.com. The on-demand version of the audio cast will be available online for three months.

A conference call for analysts and investors, hosted by UPM’s President and CEO Jussi Pesonen, will also take place today at 17:00 Finnish time (15:00 GMT, 10:00 EST, please see dial-in details below).

Participants are registered by the operator before the start of the conference call. In order to ensure a timely conference start, please dial in 10 minutes before the conference start time.

Dial-in numbers for conference call:
Call title: UPM Interim Report Q3 2009
Conference ID: 35863585
International dial-in: +44(0) 1452 555 566
UK Free call: 0800 694 0257
UK Local call: 0844 493 3800
USA Free Call: 1866 966 9439

Dial-in numbers for replay, available until 4 November 2009:
Access code: 35863585#
International dial-in: +44 (0) 1452 55 00 00
UK Free call: 0800 953 1533
UK Local call: 0845 245 5205
USA Free call: 1866 247 4222

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, and 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.