Tight cost control was driving UPM's profits, Demand slowly recovering in most businesses

Archive 2.2.2010 0:00 EET

(UPM, Helsinki 2 February 2010 at 09:30) –
October–December 2009:
- Earnings per share were EUR 0.57 (-0.56), excluding special items EUR 0.21 (-0.19)
- Operating profit excluding special items was EUR 186 million (loss of EUR 46 million)
- Stringent cost control contributed to profit improvement, EBITDA margin was 17.2 %
- Demand has started to improve.

January–December 2009:
- Earnings per share were EUR 0.33 (-0.35), excluding special items EUR 0.11 (0.42)
- Operating profit excluding special items was EUR 270 million (513 million)
- Strong operating cash flow of EUR 1,259 million, net debt reduced by EUR 591 million
- Fixed cost savings worth EUR 300 million.

Jussi Pesonen, UPM's President and CEO, comments on the financial review for 2009:

"Tight cost control and flexible operations proved to be a good solution in the challenging business environment of 2009. Given the circumstances, UPM was able to achieve a good full year result in 2009. The Board of Directors' proposal for dividend, EUR 0.45 is in line with the company's dividend policy."

"Demand for all of our products was affected by the global recession, and our sales dropped by 18% during the year, severely impacting the profitability of our operations. Lower sales prices also impacted operating profit negatively."

"In response, timely cost savings and temporary production curtailments were applied in all of our business areas. Due to cost savings measures, the company's fixed costs decreased by EUR 300 million from the previous year. These successful savings were crucial for our financial performance in 2009."

"The operating cash flow was strong, amounting up to EUR 1,259 million for the full year. We were able to reduce our debt by EUR 591 million and clearly improve the gearing."

"All these figures show that our organisation stayed very focused and was prepared and agile to respond to the weakened economy."

"In Paper and Label businesses, the internal improvements were necessary and they were professionally implemented. In Label, a quick and clear turnaround was achieved. In Plywood and Timber, the markets declined substantially in the course of the year which resulted in extensive production downtimes. Eventually, restructuring in Finland was necessary to improve long-term cost competitiveness of these businesses."

"In 2009, the restructuring of Botnia ownership was a major strategic milestone for our company. Now we have not only excellent assets and people in Uruguay, but also a clear structure in our pulp operations, Fray Bentos cash flow in our full control and a solid bridgehead in Latin America."

"The current year will pose challenges, but we see signs of improvement, too. However, in our main markets recovery is expected to be slow and differ from country to country. Low capacity utilisation rates and a flexible way of working in our timber, plywood and European paper mills will continue."

"In 2010 we expect the pulp business to improve, and we can gain the benefits of Uruguayan operations to the full. Also paper deliveries are expected to be higher than last year. However, average price for all paper deliveries will be clearly lower than last year. Demand is estimated to improve in self-adhesive labelstock."

"The operating profit for this year is not expected to change materially from last year. The first quarter is expected to be seasonally the weakest quarter. Capital expenditure for this year is forecast to be approximately EUR 300 million," 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