Business News

UPM Interim Report 1 January-31 March 2009

Wednesday 29. April 2009 - Earnings per share for the first quarter were EUR -0.30 (0.20), and excluding special items EUR -0.27 (0.19). Operating loss was EUR 95 million (profit of EUR 193 million), and excluding special items operating loss was EUR 78 million (profit of EUR 188 million). Operating cash flow was EUR 274 million (50 million). Cash preservation and cost-savings were emphasised.

Key figures
Q1/ Q1/ Q1-Q4/
2009 2008 2008

Sales, EUR million 1,857 2,410 9,461
EBITDA, EUR million 1) 128 337 1,206
% of sales 6.9 14.0 12.7
Operating profit (loss), EUR -95 193 24
million
excluding special items, EUR -78 188 513
million
% of sales -4.2 7.8 5.4
Profit (loss) before tax, EUR -162 134 -201
million
excluding special items, EUR -145 129 282
million
Net profit (loss) for the -158 103 -180
period, EUR million
Earnings per share, EUR -0.30 0.20 -0.35
excluding special items, EUR -0.27 0.19 0.42
Diluted earnings per share, EUR -0.30 0.20 -0.35
Return on equity, % neg. 6.2 neg.
excluding special items, % neg. 5.9 3.4
Return on capital employed, % neg. 6.7 0.2
excluding special items, % neg. 6.5 4.6
Operating cash flow per 0.53 0.10 1.21
share, EUR
Shareholders’ equity per 11.05 12.48 11.74
share at end of period, EUR
Gearing ratio at end of 72 64 71
period, %
Net interest-bearing 4,139 4,107 4,321
liabilities at end of
period, EUR million
Capital employed at end of 10,501 10,772 11,193
period, EUR million
Capital expenditure, EUR 67 137 551
million
Personnel at end of period 24,039 25,841 24,983

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 2009 compared with Q1 of 2008

Sales for the first quarter of 2009 were EUR 1,857 million, 23% lower than the
EUR 2,410 million in the first quarter of 2008. Sales decreased due to lower
deliveries across most of UPM’s business areas.

The operating loss was EUR 95 million, -5.1% of sales (profit of EUR 193
million, 8.0% of sales). The operating loss excluding special items was EUR 78
million, -4.2% of sales (profit of EUR 188 million, 7.8% of sales). Operating
loss includes charges net of EUR 17 million as special items. UPM sold assets
related to the former Miramichi paper mill in Canada, and recorded an income of
EUR 21 million. The share of the results of associated companies includes
special charges of EUR 29 million. Other special charges of EUR 9 million
relate to restructuring measures.

Profitability declined clearly from the same period last year. The main reason
for the weaker profitability was significantly lower deliveries in most of
UPM’s business areas.

UPM responded to the decline in demand and deliveries with a flexible way of
operating in all of its business areas. Through permanent cost saving measures
and temporary layoffs, the company lowered its fixed costs by EUR 70 million
from the same period last year. Furthermore, the Label business area is
restructuring its European operations.

Wood costs remained at the same high level as in the comparison period. In
addition, EBITDA and operating profit excluding special items include a write
down of EUR 43 million in wood inventories and reserves. Energy costs increased
by approximately EUR 44 million.

The average paper price in euro increased by approximately 4% from the same
period last year. The average price for label materials was clearly higher.
Timber and plywood prices declined materially.

The change in the fair value of biological assets net of wood harvested was
EUR 11 million compared with EUR 28 million a year before.

The share of results of associated companies and joint ventures was EUR 53
million negative (22 million positive). The result includes special charges of
EUR 29 million from Metsä-Botnia’s Kaskinen pulp mill closure.

The loss before tax was EUR 162 million (profit of EUR 134 million) and
excluding special items the loss was EUR 145 million (profit of EUR 129
million). Interest and other finance costs, net, of EUR 58 million (49 million)
include the arrangement fee of the new syndicated revolving credit facility.
Exchange rate and fair value gains and losses resulted in a loss of EUR 9
million (10 million).

Income taxes were EUR 4 million positive (31 million negative). The impact on
taxes from special items was EUR 3 million negative (0 million).

The loss for the first quarter was EUR 158 million (profit of EUR 103 million)
and earnings per share were EUR -0.30 (0.20). Earnings per share excluding
special items were EUR -0.27 (0.19). Operating cash flow per share was EUR 0.53
(0.10).


Financing

Cash flow from operating activities, before capital expenditure and financing,
was EUR 274 million (50 million). Net working capital decreased by EUR 216
million during the period (increased by EUR 106 million).

The gearing ratio as of 31 March 2009, was 72% (64% on 31 March 2008). Net
interest-bearing liabilities at the end of the period came to EUR 4,139 million
(4,107 million).

UPM signed a new EUR 825 million revolving credit facility on 12 March 2009.
The facility matures in 2012 and replaces the EUR 1.5 billion facility that was
to mature in 2010. On 31 March 2009, UPM’s cash funds and unused committed
credit facilities totalled EUR 1.7 billion.


Personnel

In the first quarter of 2009, UPM had an average of 24,199 employees (25,971).
At the beginning of the year the number of employees was 24,983, and at the end
of the first quarter it was 24,039. The reduction of 944 persons is mostly
attributable to ongoing restructuring.


Capital expenditure

During the first three months of 2009, capital expenditure was EUR 67 million,
3.6% of sales (EUR 137 million, 5.7% of sales).

The largest ongoing project is a new renewable energy power plant at the
Caledonian mill in Irvine, Scotland. The total investment cost is estimated to
be EUR 75 million. The new power plant is scheduled to start in the second
quarter of 2009.


Shares

In the first quarter of 2009, UPM shares worth EUR 1,503 million (2,840
million) in total were traded on the NASDAQ OMX Helsinki stock exchange. The
highest quotation was EUR 9.78 in January and the lowest EUR 4.35 in March.

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 25 March 2009 approved a proposal of the
Board of Directors to authorise the Board of Directors to decide on the
buy-back of not more than 51,000,000 own shares. The authorisation is valid for
18 months from the date of the decision.

The Annual General Meeting of 27 March 2007 decided to authorise the Board to
decide on a free issue of shares to the company itself so that the total number
of shares to be issued to the company combined with the number of own shares
bought back under the buy-back authorisation may not exceed 1/10 of the total
number of shares of the company.

In addition, the Board has the authority to decide to issue shares and special
rights entitling the holder to shares of the company. The number of new shares
to be issued, including shares to be obtained under special rights, shall be no
more than 250,000,000. Of that, the maximum number that can be issued to the
company’s shareholders based on their pre-emptive rights is 250,000,000 shares
and the maximum amount that can be issued deviating from the shareholders’
pre-emptive rights in a directed share issue is 100,000,000 shares. The maximum
number of new shares to be issued as part of the company’s incentive programmes
is 5,000,000. Furthermore, the Board is authorised to decide on the disposal of
own shares. To date, this authorisation has not been used. These authorisations
of the Annual General Meeting 2007 will remain valid for no more than three
years from the date of the decision.

The Meeting of 27 March 2007 also decided on granting share options in
connection with the company’s share-based incentive plans. In option programmes
2007A, 2007B and 2007C, the total number of share options is no more than
15,000,000, and they will entitle to subscribe for a total of no more than
15,000,000 new shares of the company.

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 2009 was
519,970,088. Through the issuance authorisation and share options, the number
of shares may increase to a maximum of 790,970,088.

At the end of the period, the company held 15,944 of its own shares, or 0.003%
of the total number of shares, which have been granted under the Group’s share
reward scheme. These shares have been returned to the company in connection
with termination of employment contracts.


Dividend

The Annual General Meeting of 25 March 2009 approved the Board’s proposal to
pay a dividend of EUR 0.40 per share for the 2008 financial year. The dividend
of EUR 208 million was approved to be paid on 8 April 2009 and is included in
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, Board member of Oy Karl Fazer Ab, Mr Karl Grotenfelt, Chairman of the
Board of Directors of Famigro Oy, Dr. Georg Holzhey, former Executive Vice
President of UPM and Director of G. Haindl’sche Papierfabriken KGaA, 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.

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

At the assembly meeting of the Board of Directors, Mr Björn Wahlroos was
re-elected as Chairman, and Mr Berndt Brunow and Dr. Georg Holzhey were
re-elected as Vice Chairmen.

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 Dr. Georg Holzhey and Ms Ursula Ranin 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

Certain competition authorities are continuing investigations into alleged
antitrust activities with respect to various products of UPM. The authorities
have granted UPM conditional full immunity with respect to certain conduct
disclosed to them. UPM has settled or agreed to settle the class-action
lawsuits in the US except for those filed by indirect purchasers of labelstock.
The remaining litigation matters may last several years. No provisions have
been made in relation to these investigations.


Events after the balance sheet date

The Group’s management is not aware of any significant events occurring after
31 March 2009.


Outlook for 2009

Economic activity in UPM’s main markets continues to contract and this will
have an impact on consumer demand, construction activity, and advertising
expenditure in media and thus on demand for all of UPM’s products.

UPM curtails production to respond to the changes in demand. Pressure on
product prices exists, however, due to excess market supply.

UPM’s paper deliveries for 2009 are forecast to be markedly lower than last
year. Deliveries for the second quarter of the year are estimated to be
somewhat higher than for the first quarter of 2009.

Demand for self-adhesive labelstock in the main markets is estimated not to
improve during the rest of the year.

Demand for birch and spruce plywood is forecast to continue at current low
level for the rest of the year. Cost of wood raw material will gradually be
lower.

For the Group wood and other raw material costs are expected to be lower than
2008, however, main impact would be during the latter part of the year. Also
fixed costs are expected to be lower.

Capital expenditure for 2009 is forecast to be about EUR 300 million.


Business area reviews

Energy
Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 136 141 129 103 105 478
EBITDA, EUR million 1) 57 76 58 34 39 207
% of sales 41.9 53.9 45.0 33.0 37.1 43.3
Share of results of -4 -11 -8 -2 -5 -26
associated companies and
joint ventures, EUR million
Depreciation, amortisation -2 -3 -1 -1 -1 -6
and impairment charges, EUR million
Operating profit, EUR million 51 62 49 31 33 175
% of sales 37.5 44.0 38.0 30.1 31.4 36.6
Special items, EUR million – – – – – –
Operating profit excl. 51 62 49 31 33 175
special items, EUR million
% of sales 37.5 44.0 38.0 30.1 31.4 36.6
Electricity deliveries, 1,000 2,486 2,731 2,653 2,344 2,439 10,167
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.


Q1 of 2009 compared with Q1 of 2008

The operating profit excluding special items for Energy was EUR 51 million,
EUR 18 million higher than last year (33 million). Sales increased by 30% to
EUR 136 million (105 million), whereof EUR 49 million was external sales (15
million). The electricity sales volume was 2.5 TWh in the quarter (2.4 TWh).

Profitability improved compared with the same period last year, mainly due to
the higher average electricity sales price. The average electricity sales price
increased by 40% to EUR 45.2/MWh (32.3/MWh). Hydropower volume was 9% lower
than last year, which increased the average cost of procuring electricity.


Market review

The average electricity price in the Nordic electricity exchange in the first
quarter was EUR 38.2/MWh, unchanged from the same period last year (38.0/MWh).

Oil and coal prices decreased significantly in the global energy markets from
the comparison period. CO2 emission allowance prices decreased as well.

The one year forward electricity price in the Nordic electricity exchange
averaged EUR 33.8/MWh in the first quarter, 34% lower than in the same period
last year (51.4/MWh).


Pulp
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 139 200 228 247 269 944
EBITDA, EUR million 1) -55 9 38 35 57 139
% of sales -39.6 4.5 16.7 14.2 21.2 14.7
Share of results of -47 -4 44 20 26 86
associated companies and
joint ventures, EUR million
Depreciation, amortisation -20 -73 -22 -17 -16 -128
and impairment charges, EUR million
Operating profit, EUR million -122 -76 60 38 67 89
% of sales -87.8 -38.0 26.3 15.4 24.9 9.4
Special items, EUR million 2) -29 -59 – – – -59
Operating profit excl. -93 -17 60 38 67 148
special items, EUR million
% of sales -66.9 -8.5 26.3 15.4 24.9 15.7
Pulp deliveries, 1,000 t 372 421 480 527 554 1,982

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. In 2008, special items of EUR 59
million relate to the closure of the Tervasaari pulp mill.


Q1 of 2009 compared with Q1 of 2008

The operating loss excluding special items for Pulp was EUR 93 million (profit
of EUR 67 million). The sales of UPM’s own pulp mills decreased by 48% to
EUR 139 million (269 million) and deliveries by 33% to 372,000 tonnes
(554,000).

Profitability weakened substantially from the previous year. The main reasons
for the fall in profitability were the approximately 23% lower average pulp
price and lower deliveries at the same time as wood costs remained high. The
company chose to reduce wood inventories and reserves during the quarter. This
resulted in higher pulp inventories for later internal use.

EBITDA and operating profit excluding special items in the quarter include a
wood inventory write down of EUR 28 million and a pulp inventory write down of
EUR 10 million.

The share of results of the associated company Metsä-Botnia was EUR 47 million
negative (26 million positive). The result includes special charges of EUR 29
million from Metsä-Botnia’s Kaskinen pulp mill closure.


Market review

In the first quarter of 2009, chemical market pulp shipments declined from the
comparison period by about 9%. Despite production curtailments, pulp producer
inventories remained at a high level. Global chemical pulp prices continued to
decline. The average softwood pulp (NBSK) market price in euro terms, at
EUR 455/tonne, was 23% lower than in the same period last year (EUR 588/tonne).
The average hardwood pulp (BHKP) market price in euro terms also decreased by
23% from last year, to EUR 409/tonne (EUR 529/tonne).


Forest and timber
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 385 419 475 518 508 1,920
EBITDA, EUR million 1) -15 -52 -4 4 4 -48
% of sales -3.9 -12.4 -0.8 0.8 0.8 -2.5
Change in fair value of 11 -2 4 20 28 50
biological assets and wood
harvested, EUR million
Share of results of 1 -1 – – 1 –
associated companies and
joint ventures, EUR million
Depreciation, amortisation -5 -6 -36 -7 -7 -56
and impairment charges, EUR million
Operating profit, EUR million -18 -63 -38 17 25 -59
% of sales -4.7 -15.0 -8.0 3.3 4.9 -3.1
Special items, EUR million 2) -10 -2 -33 – -1 -36
Operating profit excl. -8 -61 -5 17 26 -23
special items, EUR million
% of sales -2.1 -14.6 -1.1 3.3 5.1 -1.2
Sawn timber deliveries, 1,000 363 421 510 628 573 2,132
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) In 2009, special items of EUR 10 million relate to the sales loss of
Miramichi’s forestry and sawmilling operations’ assets. Special items in 2008
include an impairment charge of EUR 31 million related to fixed assets of the
Finnish sawmills.


Q1 of 2009 compared with Q1 of 2008

The operating loss excluding special items for Forest and timber was EUR 8
million (profit of EUR 26 million). Sales declined by 24% to EUR 385 million
(508 million). Sawn timber deliveries decreased by 37% to 363,000 cubic metres
(573,000 cubic metres).



Profitability weakened from the same period last year, mainly due to the
approximately 21% lower average price of delivered timber goods and lower
deliveries. Wood costs remained at a high level.

The increase in the fair value of biological assets (growing trees) was EUR 21
million (41 million). The cost of wood raw material harvested from the Group’s
own forests was EUR 10 million (13 million). The net effect was EUR 11 million
positive (28 million positive).


Market review

Demand for both redwood and whitewood sawn timber in Europe declined materially
from last year, due to low construction activity. Weaker market balance
resulted in significantly lower prices.

Wood purchases in the Finnish wood market were some 50% lower than in the first
quarter of 2008. In 2008 the industry prepared for prohibitive wood export
duties from Russia with high wood inventories. This combined with low wood
consumption slowed down market activity during the quarter.

In Finland fibre wood market prices decreased as wood demand slowed down. Log
market prices decreased from the previous year as well.


Paper
Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 1,367 1,750 1,761 1,727 1,773 7,011
EBITDA, EUR million 1) 187 189 271 216 209 885
% of sales 13.7 10.8 15.4 12.5 11.8 12.6
Share of results of -1 1 – – – 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -149 -264 -388 -156 -159 -967
and impairment charges, EUR million
Operating profit, EUR million 60 -126 -114 60 51 -129
% of sales 4.4 -7.2 -6.5 3.5 2.9 -1.8
Special items, EUR million 2) 23 -153 -227 – 1 -379
Operating profit excl. 37 27 113 60 50 250
special items, EUR million
% of sales 2.7 1.5 6.4 3.5 2.8 3.6
Deliveries, publication 1,304 1,809 1,760 1,749 1,772 7,090
papers, 1,000 t
Deliveries, fine and 724 784 863 923 981 3,551
speciality papers, 1,000 t
Paper deliveries total, 1,000 t 2,028 2,593 2,623 2,672 2,753 10,641

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 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. In 2008, special items include the goodwill
impairment charge of EUR 230 million impairment charges of EUR 101 million and
other restructuring costs of EUR 42 million related to the closure of the
Kajaani paper mill, and other restructuring costs, net of EUR 6 million.


Q1 of 2009 compared with Q1 of 2008

The operating profit excluding special items for Paper was EUR 37 million,
EUR 13 million lower than a year ago (50 million). Sales were EUR 1,367 million
(1,773 million). Paper deliveries decreased by 26% to 2,028,000 tonnes
(2,753,000). Paper deliveries for publication papers (magazine papers and
newsprint) decreased by 26% and for fine and speciality papers by 27% from the
previous year. The deliveries in Europe declined less than exports from Europe
as company concentrated to improve market and customer mix.

The profitability weakened from the corresponding period last year due to lower
deliveries. The average price for all paper deliveries when translated into
euros was 4% higher. The stronger euro against the GBP impacted profitability
negatively.

Pulp costs were significantly lower than last year. Also, logistic costs and
fixed costs decreased. In response to the weak market situation, extensive
production downtime was taken during the quarter.


Market review

Demand for publication papers in Europe was 19% and for fine papers 20% lower
than a year ago. In North America the demand for publication papers continued
to decline and demand was 26% down from last year. In Asia demand for fine
papers decreased likewise.

The average market prices in euro area increased but decreased in GBP area when
translated into euros due to 20% devaluation of GBP. In Europe the average
market prices in euros increased by about 2% for magazine papers and decreased
by some 3% for standard newsprint when compared with the first quarter of 2008.
The average market price increased by 4% for coated fine papers and declined by
7% for uncoated fine papers from the previous year.

In North America the average US dollar prices for magazine papers were 1%
higher for the quarter compared to the corresponding period a year ago. In Asia
market prices for fine papers decreased.


Label
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 223 233 239 245 242 959
EBITDA, EUR million 1) 6 -1 9 15 11 34
% of sales 2.7 -0.4 3.8 6.1 4.5 3.5
Depreciation, amortisation -9 -16 -8 -7 -8 -39
and impairment charges, EUR million
Operating profit, EUR million -3 -38 1 8 3 -26
% of sales -1.3 -16.3 0.4 3.3 1.2 -2.7
Special items, EUR million 2) – -28 – – – -28
Operating profit excl. -3 -10 1 8 3 2
special items, EUR million
% of sales -1.3 -4.3 0.4 3.3 1.2 0.2

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 2008, special items of EUR 28 million relate to measures to reduce
coating capacity and close two slitting terminals in Europe.


Q1 of 2009 compared with Q1 of 2008

The operating loss excluding special items for Label was EUR 3 million (profit
of EUR 3 million). Sales were EUR 223 million (242 million). Profitability
weakened due to lower sales volumes.

Delivery volumes of self-adhesive label materials declined by 10-20% depending
on the region driven by lower economic activity. Average prices converted to
euros increased by about 9% which fully compensated for the higher raw material
costs. Fixed costs were lower.

In 2008, UPM Raflatac opened two new labelstock factories; one in Dixon, USA in
January, and another in Wroclaw, Poland in November. The start-up of both
factories has proceeded according to the plan.

Restructuring of European operations, which was announced in the fourth quarter
of 2008, has proceeded as planned. The first capacity closures have already
taken place and the programme will be completed by end of the year 2009.


Market review

Demand for self-adhesive label materials has declined in all markets as demand
for consumer products has slowed down. In Europe and North America demand has
stabilised at the current low level during the first three months of the year,
and in Asia, it has shown some first signs of partial recovery.


Plywood
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 75 102 121 150 157 530
EBITDA, EUR million 1) -23 -5 3 22 26 46
% of sales -30.7 -4.9 2.5 14.7 16.6 8.7
Depreciation, amortisation -5 -5 -5 -6 -5 -21
and impairment charges, EUR million
Operating profit, EUR million -29 -10 -2 19 21 28
% of sales -38.7 -9.8 -1.7 12.7 13.4 5.3
Special items, EUR million 2) -1 – – 3 – 3
Operating profit excl. -28 -10 -2 16 21 25
special items, EUR million
% of sales -37.3 -9.8 -1.7 10.7 13.4 4.7
Deliveries, plywood, 1,000 m3 133 160 188 227 231 806

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 2008 include reversals of provisions related to the
disposed Kuopio plywood mill.


Q1 of 2009 compared with Q1 of 2008

The operating loss excluding special items for Plywood was EUR 28 million
(profit of EUR 21 million). Sales decreased by EUR 82 million to EUR 75 million
as plywood deliveries declined by 42% to 133,000 m3.

Profitability for Plywood declined from last year due to significantly lower
delivery volumes and lower prices. The cost of logs remained at a record high
level.

EBITDA and operating profit excluding special items in the quarter include a
wood inventory write down of EUR 15 million.

Weak market demand led to extensive production downtime at all mills. The
Heinola mill was temporarily shut down from 19  January 2009 onwards. Decisions
to move the Lahti operations to other mills and temporarily shut down the
Kaukas mill were announced after the period on 14 April 2009.


Market review

In Europe, plywood demand declined substantially from the first quarter of 2008
due to record low construction activity and demand for engineered end products
in transportation and other industrial end uses. Declining demand in Europe has
left much idle capacity and increased need to reduce inventories in all parts
of the supply chain. The market price levels have been under pressure.


Other operations
Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/
2009 2008 2008 2008 2008 2008

Sales, EUR million 34 34 52 66 48 200
EBITDA, EUR million 1) -29 -38 3 -13 -9 -57
% of sales -85.3 -111.8 5.8 -19.7 -18.8 -28.5
Share of results of -2 -1 -1 3 – 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -3 2 -2 -5 -3 -8
and impairment charges, EUR million
Operating profit, EUR million -34 -35 4 -16 -7 -54
% of sales -100.0 -102.9 7.7 -24.2 -14.6 -27.0
Special items, EUR million 2) – 2 4 -1 5 10
Operating profit excl. -34 -37 0 -15 -12 -64
special items, EUR million
% of sales -100.0 -108.8 0.0 -22.7 -25.0 -32.0

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 2008, special items include an adjustment of EUR 5 million to sales of
disposals of 2007 and other restructuring income net of EUR 5 million.

Other operations include development units (the wood plastic composite unit UPM
ProFi, RFID tags and biofuels), logistic services and corporate administration.


Q1 of 2009 compared with Q1 of 2008

Excluding special items, the operating loss for Other operations was EUR 34
million (loss of EUR 12 million). Sales amounted to EUR 34 million (48
million). The development units incurred an operating loss.