UPM Financial Review 2006


UPM-Kymmene Corporation    Stock Exchange Release   February 1, 2007  at 12:00

UPM Financial Review 2006

Earnings per share for 2006 were € 0.65 (€ 0.50 for 2005), excluding 
non-recurring items € 0.80 (€ 0.54). Operating profit for the year was 
€ 536 million (€ 318 million), excluding non-recurring items € 725 million 
(€ 558 million). Operating profit for the fourth quarter was € 247 million 
(€ -58 million), excluding non-recurring items € 252 million (€ 202 million).
The profitability programme improved prerequisites for sustainable profitability. 
Customer deliveries from closed production lines were successfully retained.

Key figures
                        Q4/    Q4/ Q1-Q4/ Q1-Q4/ Q1-Q4/
                       2006   2005   2006   2005   2004
                                                       
Sales, €m             2,583  2,574 10,022  9,348  9,820
EBITDA, €m 1)           467    423  1,678  1,428  1,435
% of sales             18.1   16.4   16.7   15.3   14.6
Operating profit, €m    247    -58    536    318    685
excluding               252    202    725    558    470
non-recurring items, €m
Profit before tax, €m   203    -91    367    257    556
excluding               202    160    550    399    341
non-recurring items, €m
Net profit for the      195    -77    338    261    920
period, €m
Earnings per share, €  0.37  -0.15   0.65   0.50   1.76
excluding              0.30   0.22   0.80   0.54   0.49
non-recurring items, €
Diluted earnings       0.38  -0.15   0.65   0.50   1.75
per share, €
Return on equity, %    10.8   neg.    4.6    3.5   12.6
excluding               8.7    5.9    5.7    3.8    3.4
non-recurring items, %
Return on capital       8.8   neg.    4.7    3.4    6.0
employed, %
excluding               8.7    6.5    6.2    4.5    4.3
non-recurring items, %
Equity to assets       50.4   47.3   50.4   47.3   48.2
ratio at end of period, %
Gearing ratio at         56     66     56     66     61
end of period, %
Shareholders'         13.90  14.01  13.90  14.01  14.46
equity per share 
at end of period, €
Net interest-bearing  4,048  4,836  4,048  4,836  4,617
liabilities at end
of period, €m
Capital employed at  11,634 12,650 11,634 12,650 12,953
end of period, €m
Capital                 197    220    699    749    686
expenditure, €m
Personnel at end of  28,704 31,522 28,704 31,522 33,433
period

1) EBITDA is operating profit before depreciation, amortization and impairment 
charges, and excluding the change in value of biological assets, the share of 
results of associated companies and joint ventures and non-recurring items.


The market in 2006

Demand for printing and writing papers in Europe remained good, showing an 
increase of 2% from the previous year, while in North America, demand for 
printing and writing papers decreased by 1%. In other markets - most notably in 
Asia - demand for printing and writing papers continued to grow rapidly.

Spending on advertising globally increased from the previous year. While spending 
on printed advertising increased, it decreased as a proportion of total 
advertising. Of the various types of printed advertising, direct-mail advertising 
showed the strongest growth.

Average market prices for magazine papers in Europe and North America were about 
the same as last year. Standard newsprint market prices in Europe were on average 
5% higher, but prices for coated and uncoated fine papers decreased by about 2%. 
In Asia, fine paper prices increased from last year.

Demand for self-adhesive labelstock grew in the main markets: North America, 
Europe and Asia. Average prices for self-adhesive labelstock were slightly higher 
than in the previous year. Demand for industrial wrappings remained at the 
previous year's level. Prices were unchanged.

In wood products, birch plywood demand continued to be strong in all markets. 
Spruce plywood markets maintained a good balance. Plywood prices increased slightly 
in comparison to last year. Also, the markets for veneer and further processed goods 
were solid. Redwood and whitewood sawn timber markets improved and prices 
increased. The supply of logs tightened, exerting upward pressure on costs.


Changes in reporting classifications

From the beginning of 2006, the share of results of associated companies and 
joint ventures related to business operations is reported in operating profit. In 
previous years, the results were reported after operating profit. Also from the 
beginning of 2006, part of the results of derivative instruments relating to cash 
flow hedges are allocated to the respective division. Comparative years have been 
revised accordingly.


Earnings

Q4 of 2006 compared with Q4 of 2005

Sales for the fourth quarter of 2006 were € 2,583 million, slightly higher than 
the € 2,574 million for the fourth quarter of 2005. Paper deliveries were 
2,892,000 tonnes (2,907,000 tonnes).

Operating profit was € 247 million (loss of € 58 million), 9.6% of sales (-2.3%). 
Operating profit excluding non-recurring items was € 252 million, 9.8% of sales 
(€ 202 million, 7.8% of sales). Operating profit for the fourth quarter includes 
non-recurring charges net of € 5 million (€ 260 million). The main non-recurring 
items were a provision of € 13 million mainly for personnel expenses for the 
profitability programme and of a gain of € 10 million from the sale of the Rauma 
power plant to Pohjola Voima Oy.

Profitability of all divisions improved from last year. Transfer of production 
from the closed production lines to UPM's other paper machines improved capacity 
utilization. Profitability benefited from higher newsprint and fine paper prices 
and lower fixed costs. On the other hand, energy prices especially in Central 
Europe and the UK were higher than a year ago.

The share of results of associated companies and joint ventures was € 9 million 
(€ 14 million).

Profit before tax was € 203 million (loss of € 91 million) and excluding 
non-recurring items € 202 million (€ 160 million). A gain of € 6 million from the 
sale of shares was reported after operating profit as a non-recurring gain. 
Interest and other finance costs net were € 46 million (€ 33 million). The 
average interest rate on borrowings increased; on the other hand, net 
interest-bearing liabilities decreased. Exchange rate and fair value gains and 
losses resulted in a gain of € 4 million (€ 0 million).

Income taxes were € 8 million (€ 14 million positive). Fourth-quarter income 
taxes include income of € 35 million primarily from a receivable arising from the 
change in German tax legislation.

Profit for the fourth quarter was € 195 million (loss of € 77 million) and 
earnings per share were € 0.37 (€ -0.15). Earnings per share excluding 
non-recurring items were € 0.30 (€ 0.22).

Return on equity was 10.8% (neg.) and return on capital employed 8.8% (neg.). 
Excluding non-recurring items, the respective figures were 8.7% (5.9%) and 8.7% 
(6.5%).

2006 compared with 2005

Deliveries and results in 2005 were affected by the labour dispute in Finland 
during the second quarter of 2005.

Sales for 2006 were € 10,022 million (€ 9,348 million) showing an increase of 7% 
from the previous year's figure. Paper deliveries were 10,988,000 tonnes 
(10,172,000 tonnes).

Operating profit was € 536 million (€ 318 million), 5.3% of sales (3.4%). 
Operating profit excluding non-recurring items was € 725 million, 7.2% of sales 
(€ 558 million, 6.0% of sales). Operating profit for 2006 includes non-recurring 
gains of € 144 million and charges of € 333 million, for a net figure of € 189 
million in charges (net figure of € 240 million in charges).

Due to the profitability programme announced in March 2006, an impairment of € 
135 million mostly attributable to the closure of Voikkaa paper mill, and a 
provision of € 61 million from personnel expenses and other restructuring 
charges, in total to € 196 million were reported as non-recurring charges. An 
impairment of € 115 million was made from the production facilities at the 
Miramichi magazine paper mill in Canada, mainly due to the negative currency 
impact on the profitability. In addition, a loss of € 10 million from the sale of 
the UPM-Kymmene Loulay S.A. plywood mill in France, a charge for a donation of € 
5 million to UPM-Kymmene Cultural Foundation and other charges of € 7 million 
were reported as non-recurring charges.

Reported as non-recurring gains were a capital gain of € 41 million on the sale 
of Group Head Office real estate, a € 93 million tax-exempt capital gain on the 
sale of the Finnish building materials merchant Puukeskus Oy and a gain of € 10 
million on the sale of the Rauma power plant to Pohjolan Voima Oy.

The profitability of all divisions improved from last year. Transfer of 
production from the closed production lines to UPM's other paper machines 
improved capacity utilization. Energy prices, especially in Central Europe and 
the UK, were higher. Limited availability of wood raw material in Finland due to 
unusual weather conditions in the autumn put upward pressure on wood procurement 
costs. The increase in UPM's net costs was, however, moderate partly due to the 
high self sufficiency in chemical pulp and electricity.

The fair value of biological assets decreased by € 126 million (increase of € 34 
million) mainly due to an increase of half a percentage point in the discount 
rate, 7.5% applied in forest valuation, and higher fellings from own forests.

Deliveries of magazine papers were higher, and average prices increased slightly. 
Newsprint deliveries increased and average prices were higher than a year ago. 
Also fine paper deliveries increased. Average prices of fine papers were slightly 
down from last year. In the Converting division, profitability of UPM Raflatac's 
self-adhesive labelstock improved, and was good. Also Walki Wisa's profitability 
improved. The profitability of plywood was good. Sawmilling improved its 
profitability, and operating profit turned positive due to higher prices and 
increased deliveries. The operating profit of Other Operations was lower than a 
year ago the main reason being decrease in the fair value of biological assets 
and lower availability of hydropower.

The share of the results of associated companies and joint ventures was € 61 
million (€ 41 million).

Profit before tax was € 367 million (€ 257 million) and excluding non-recurring 
items € 550 million (€ 399 million). A gain of € 6 million on the sale of shares 
was reported after operating profit as a non-recurring gain. Interest and other 
finance costs were € 185 million (€ 147 million) net. The average interest rate 
on borrowings increased; on the other hand, net interest-bearing liabilities 
decreased. Exchange rate and fair value gains and losses resulted in a gain of € 
18 million (loss of € 4 million).

Income taxes were € 29 million (€ 4 million positive). Taxes include, as a 
negative item, a reduction of € 22 million in the deferred tax assets of 
Miramichi due to a decrease in the income tax rate in Canada, and as positive 
items € 20 million from the increase in deferred tax assets related to the change 
in the Group's structure in Canada, and € 28 million from a receivable arising 
from the change in German tax legislation.

The effective tax rate was 7.8% (positive 1.6%). Excluding the effect of 
non-recurring items, the effective tax rate was 24.4% (29.0%).

Profit for the year was € 338 million (€ 261 million) and earnings per share were 
€ 0.65 (€ 0.50). Earnings per share excluding non-recurring items were € 0.80 (€ 
0.54). Operating cash flow per share was € 2.32 (€ 1.63).

Return on equity was 4.6% (3.5%) and return on capital employed 4.7% (3.4%). 
Excluding non-recurring items, the respective figures were 5.7% (3.8%) and 6.2% 
(4.5%).


Deliveries

Paper deliveries for the year were 10,988,000 tonnes (10,172,000 tonnes). 
Magazine paper deliveries were 4,761,000 tonnes (4,486,000 tonnes), newsprint 
2,677,000 tonnes (2,592,000 tonnes) and fine and speciality papers 3,550,000 
tonnes (3,060,000 tonnes).

Plywood production was 955,000 cubic metres (916,000 cubic metres) and sawn 
timber production 2,357,000 cubic metres (2,147,000 cubic metres).


Financing

Cash flow from operating activities, before capital expenditure and financing, 
was € 1,215 million (€ 853 million). The decrease in net working capital amounted 
to € 21 million (increase of € 234 million).

The gearing ratio as of 31 December was 56% (66% on 31 December 2005). Net 
interest-bearing liabilities at the end of the year came to € 4,048 million (€ 
4,836 million). In December 2006, UPM bought back three leased hydropower plants 
located on the Kymijoki river in Finland from the mutual pension insurance 
company Varma for a total of € 126 million with no impact on UPM's balance sheet. 
The average maturity of borrowings at year end was 7.1 years (7.5 years).

In 2006, UPM's credit ratings were unchanged. At the end of the year, the ratings 
for UPM's public bonds were BBB from S&P and Baa2 from Moody's.


Personnel

In 2006, UPM had an average of 31,039 employees (32,949 employees). At the 
beginning of the year the number of employees was 31,522 and at the end of the 
year 28,704, a decrease of 2,818 persons. Of this, a decrease of 2,371 was due to 
the closures of production lines and rationalisation of operations and 608 due to 
the sale of Puukeskus. In UPM Raflatac, the number of employees increased by 161.


Capital expenditure

In 2006, capital expenditure, excluding acquisitions and share purchases, was € 
631 million, 6.3% of sales (€ 705 million, 7.5% of sales). Including acquisitions 
and share purchases, capital expenditure was € 699 million, 7.0% of sales (749 
million, 8.0%).

In 2006, acquisitions and share purchases consisted mainly of an investment in 
shares of the Metsä-Botnia pulp mill in Uruguay for € 56 million (€ 21 million).

In 2006, a decision was made to rebuild the recovery plant at the Kymi pulp mill. 
The total investment cost is € 325 million and it is planned for completion in 
the summer of 2008. At the Jämsänkoski mill, € 45 million will be invested to 
convert coated magazine paper machine 4 to produce label papers. The conversion 
is scheduled for completion in the second quarter of 2007. The investment plan 
announced in August 2005 to build an uncoated magazine paper machine in 
Continental Europe was postponed. At the plywood mills in Savonlinna and 
Jyväskylä, € 8 million will be invested to improve production efficiency and 
product quality. The investments are scheduled for completion by the end of the 
first quarter of 2007.

A € 25 million investment will be made in bleached pulp production at the 
Tervasaari mill, where a new bleaching line is scheduled to start up in autumn 
2007. An investment of € 6 million will be made in plywood manufacturing at the 
Chudovo and Heinola mills.

A new self-adhesive labelstock factory will be built in Dixon, Illinois, in the 
United States. The value of this investment is approximately USD 109 million, and 
the new factory is slated for completion in the first quarter of 2008. At the 
Jämsänkoski mill, € 38 million will be invested in the quality of uncoated 
magazine paper. The investment will be completed in the second quarter of 2008.

A new power plant using biofuels will be built at the Caledonian mill in Irvine, 
Scotland - the investment cost, net, is approximately € 72 million and start-up 
is projected for the third quarter of 2009.

The modernization of Tervasaari release paper machine 8 was completed at the end 
of February 2006. This investment increased annual production capacity by 45,000 
tonnes to 175,000 tonnes and further improved the quality of the paper. Walki 
Wisa's converting factory in China started its operations in March 2006. In 
September, at the Nordland and Docelles paper mills, the rebuilds of two paper 
machines were completed. These investments substantially improved product quality 
and efficiency of the production lines. Completed in September, the modernisation 
investment for the film lamination line at the Tampere labelstock factory doubled 
the filmic self-adhesive labelstock capacity of the factory and further 
strengthened UPM Raflatac's position in the growing filmic labelstock market. At 
the Shotton paper mill in Wales, the new sludge boiler entered production use at 
the end of the year. The investment further improved the mills´ energy 
self-sufficiency and increased the use of biofuels. UPM Raflatac's new production 
plant in China started commercial production, ahead of the original schedule, in 
December.

The biofuel-fired power plant investment for the Chapelle Darblay mill in France 
is proceeding according to plan, with completion scheduled for the first quarter 
of 2007. In Uruguay, UPM's associated company, Metsä-Botnia, is constructing a 
pulp mill with an annual capacity of 1 million tonnes. The construction project 
began in 2005 and is on schedule for a Q3/2007 start-up. The governments of 
Uruguay and Argentina are engaged in a dispute over the environmental impact of 
the mill.


Changes in the Group's structure

In March 2006, in connection with the Uruguayan pulp mill project, UPM sold its 
shares in the Uruguayan forestry company Compañia Forestal Oriental S.A. to 
Metsä-Botnia for € 36 million. Control over Wisapower Oy was transferred from UPM 
to PVO in April. The transaction decreased the Group's assets net by € 152 
million from those held on 31 December, 2005. The Group Head Office real estate 
was sold for € 77 million in June, which generated a € 41 million capital gain. 
UPM will continue to occupy the premises under a lease contract. In August, UPM 
sold its Finnish building materials merchant Puukeskus Oy to the private equity 
investor Triton and Puukeskus's management. The sale resulted in a € 93 million 
capital gain. Puukeskus had annual sales of approximately € 400 million and 
employed 600 people. Also, UPM sold the Rauma power plant to Pohjolan Voima Oy in 
December. The sale had no material impact on the Group's assets and liabilities.


Profitability programme

In March 2006, UPM announced an extensive programme for 2006-2008 to restore its 
profitability. The profitability programme includes a reduction of approximately 
3,600 employees over the three year period and closures of uncompetitive paper 
production capacity. When finalized, the programme is estimated to result in 
annual cost savings of approximately € 200 million. The annual cost savings in 
2007 are estimated to amount to € 110 million.

As part of the programme, in June UPM closed the Voikkaa paper mill, which had an 
annual capacity of 410,000 tonnes of coated magazine paper, and Kymi paper 
machine 7, with an annual capacity of 150,000 tonnes of coated fine paper. In the 
first quarter of 2007, UPM will stop the production of coated magazine paper on 
Jämsänkoski paper machine 4, which has an annual capacity of 120,000 tonnes of 
coated magazine paper. The paper machine will be converted to produce label 
papers in the third quarter of 2007. UPM will close Tervasaari paper machine 6, 
with an annual capacity of 115,000 tonnes of brown sack paper and semi-alkaline 
pulp (SAP) line, with an annual capacity of 60,000 tonnes during the first half 
of 2007.

Most employee negotiations relating to the profitability programme were completed 
in July 2006.


Shares

In 2006, UPM shares worth, in total, € 16,021 million were traded on the Helsinki 
Stock Exchange (€ 11,358 million). The highest per-share quotation was € 20.91 in 
March and the lowest € 15.36 in June. On the New York Stock Exchange, the 
company's shares were traded to a total value of USD 310 million (USD 338 
million).

The Annual General Meeting held on 22 March 2006 approved a proposal by the Board 
of Directors to buy back a minimum of 100 and a maximum of 49,825,000 own shares. 
The meeting authorised the Board to decide on the disposal of shares so 
purchased. No shares were purchased based on this authorisation in 2006. The 
meeting also authorised the Board of Directors to donate 162,000 own shares held 
by the company to a cultural foundation to be established. Subsequently, the 
company does not hold any own shares.

Additionally the meeting authorised the Board of Directors to decide on an 
increase in the share capital, disapplying the pre-emptive rights of 
shareholders, by issuing new shares and/or convertible bond loans in one or more 
issues. On the basis of such issues of new shares or convertible bonds, the share 
capital can be increased by a maximum of € 169,405,000, representing no more than 
99,650,000 new shares having a book value of € 1.70 per share.

In 2006, 4,300 shares were subscribed for through exercising of outstanding share 
options. The number of shares entered in the Trade Register on December 31, 2006 
was 523,259,430. Through the issuance authorisation and share options, the number 
of shares may increase to a maximum of 647,101,130.

Apart from the above, the Board of Directors has no current authorization to 
issue shares, convertible bonds or share options.

The company has received following notifications from shareholders: On December 
15 2006, the Capital Group Companies Inc. held 51,660,753 shares representing 
9.78 per cent of share capital, of which shares it held voting rights 
representing 7.86 per cent of the share capital of UPM-Kymmene Corporation. On 
March 7 2005, the Franklin Templeton Group and its affiliated investment advisers 
of Franklin Resources held 10.11% of the voting rights of UPM-Kymmene 
Corporation.

The listing of UPM 2005F share options commenced on October 2 2006.


Company directors

The Annual General Meeting of 22 March 2006 elected Ms Ursula Ranin, LLM, B.Sc. 
(Econ.), a former General Counsel of Nokia Corporation as a new member to the 
Board of Directors. In addition, Mr Martti Ahtisaari, former President of the 
Republic of Finland; Mr Michael C. Bottenheim, LLM, MBA; Mr Berndt Brunow, 
President and CEO of Oy Karl Fazer Ab; Mr Karl Grotenfelt, LLM, Chairman of the 
Board of Directors of Famigro Oy; Dr. Georg Holzhey, former Executive Vice 
President of UPM and Director of Haindl'sche Papierfabriken KGaA; Ms Wendy E. 
Lane, Chairman of American Investment firm Lane Holdings, Inc; Mr Jorma Ollila, 
Chairman and CEO of Nokia Corporation; Ms Françoise Sampermans, BA Psych, 
Publishing Consultant and Mr Vesa Vainio, LLM were re-elected to the Board of 
Directors.

At the Board of Directors' assembly meeting, Mr Vesa Vainio was re-elected as 
chairman. Mr Jorma Ollila and Mr Berndt Brunow were elected as vice chairmen. In 
addition, the Board of Directors elected from its independent members an Audit 
Committee, with Mr Michael C. Bottenheim as chairman and Ms Wendy E. Lane and Ms 
Ursula Ranin as members. A Human Resources Committee was elected with Mr Berndt 
Brunow as chairman, and Mr Georg Holzhey and Ms Françoise Sampermans as members. 
Furthermore, a Nomination and Corporate Governance Committee was elected with Mr 
Jorma Ollila as Chairman and Mr Karl Grotenfelt and Mr Georg Holzhey as members.


Litigation

The competition authorities are continuing investigations into alleged antitrust 
activities with respect to various products of the company. The US Department of 
Justice, the EU authorities and the authorities in several of its Member States, 
Canada and certain other countries have granted UPM conditional full immunities 
with respect to certain conducts disclosed to the authorities. During 2006, the 
investigations of the U.S. labelstock industry and European fine paper, 
newsprint, magazine paper, label paper and self-adhesive labelstock markets were 
closed by the U.S. Department of Justice and the European Commission competition 
authority. In December 2006, the Finnish Competition Authority decided not to 
propose a fine for UPM in its investigation of raw wood procurement in Finland.

UPM has been named as a defendant in multiple class-action lawsuits against 
labelstock and magazine paper manufacturers in the United States. The remaining 
litigation matters may last several years. No provisions have been made in 
relation to these investigations.

In March 2006, UPM paid a fine of € 56.55 million imposed by the European 
Commission concerning antitrust activities in the market for plastic sacks but 
has appealed the decision.


Events after the balance sheet date

On 30 January 2007, M-real announced to sell 9% of Metsä-Botnia's shares to its 
parent company Metsäliitto for € 240 million. Consequently, M-real rejected UPM's 
offer made in November 2006 to buy 15% of Metsä-Botnia's shares from M-real for € 
500 million.

The Group's management is not aware of any other significant events occurring 
after 31 December 2006 which would have had an impact on the financial 
statements.


Outlook for 2007

Demand for printing papers is forecast to grow somewhat from last year. In North 
America weak demand is expected to continue. The strongest growth in demand will 
be in emerging markets. UPM expects its paper deliveries to increase from last 
year. UPM's average paper price for the first quarter of 2007 is slightly higher 
than that of the fourth quarter of 2006.

Demand for self-adhesive labelstock is forecast to grow in all markets. 
Labelstock prices are forecast to be stable. Demand for industrial wrappings is 
expected to grow somewhat.

In wood products, demand for plywood and sawn timber will remain good.

Wood, raw material and energy prices continue to rise. As a result of expected 
cost savings from the ongoing profitability programme, the increase in the 
company's overall costs is expected to remain at the level of 1-2%.

Capital expenditure is forecast to be about the same as 2006.

The Group expects its profits to increase from last year.


Dividend for 2006

The Board of Directors will propose to the Annual General Meeting to be held on 
27 March 2007 that dividend of € 0.75 per share be paid in respect of the 2006 
financial year (€ 0.75 for 2005). It is proposed that the dividend be paid on 
10 April 2007.


Financial information in 2007

The Annual Report for 2006 will be published on the company's website, (main page 
address: www.upm-kymmene.com) on 12 March 2007. The printed Annual Report will 
be published in the week beginning 19 March 2007.

Publication schedule of interim reports:

Interim Report January-March 2007: 25 April 2007
Interim Report January-June 2007: 26 July 2007
Interim Report January-September 2007: 30 October 2007

Divisional reviews


Magazine Papers
                       Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05    05
                                                                                
Sales, €m              905   861   817   771   928   726   697   743
EBITDA, €m 1)          157   155   145   113   163   155    59   130
% of sales            17.3  18.0  17.7  14.7  17.6  21.3   8.5  17.5
Depreciation,          -88  -209  -210   -97  -262  -103  -102   -99
amortization and impairment charges,€m
Operating profit, €m    75   -62   -85    16   -99    35   -43    31
% of sales             8.3  -7.2 -10.4   2.1 -10.7   4.8  -6.2   4.2
Non-recurring            6  -126  -133     -  -156   -17     -     -  
items, €m 2)
Operating profit excl.  69    64    48    16    57    52   -43    31
non-recurring items
and amortization of goodwill, €m
% of sales             7.6   7.4   5.9   2.1   6.1   7.2  -6.2   4.2 
Deliveries, 1,000 t  1,288 1,227 1,148 1,098 1,308 1,048 1,020 1,110


                     Q1-Q4/ Q1-Q4/ Q1-Q4/
                         06     05     04

Sales, €m             3,354  3,094  3,308
EBITDA, €m 1)           570    507    497
% of sales             17.0   16.4   15.0
Depreciation,          -604   -566   -535
amortization and 
impairment charges,€m
Operating profit, €m    -56    -76    -67
% of sales             -1.7   -2.5   -2.0
Non-recurring          -253   -173   -104
items, €m 2)
Operating profit excl.  197     97     95
non-recurring items
and amortization of goodwill, €m
% of sales              5.9    3.1    2.9
Deliveries, 1,000 t   4,761  4,486  4,940
Capital employed      4,010  4,397  4,749
(average), €m
ROCE (excl.             4.9    2.2    2.0
non-recurring items and
amortization of goodwill), %


1) EBITDA is operating profit before depreciation, amortization and impairment 
charges and excluding non-recurring items.
2) Non-recurring items in the second quarter 2006 include personnel charges of € 
20 million related to the profitability programme, and impairment charges of € 
113 million related to the closure of the Voikkaa paper mill. In the third 
quarter 2006, non-recurring items include personnel charges of € 8 million and 
impairment charges of € 3 million at Voikkaa, and impairment charges of € 115 
million for Miramichi. In the fourth quarter, non-recurring items relate 
primarily to the capital gain on the sale of Rauma power plant. Non-recurring 
items in 2005: impairment charge of € 151 million for Miramichi and € 5 million 
in non-recurring depreciation at Augsburg (4th quarter), and € 17 million 
provision for pension costs at Miramichi (3rd quarter).

Q4 of 2006 compared with Q4 of 2005

Operating profit, excluding non-recurring items, for Magazine Papers increased by 
€ 12 million to € 69 million. Sales for the fourth quarter decreased to € 905 
million from € 928 million. Paper deliveries had a volume of 1,288,000 
(1,308,000) tonnes.

The fourth-quarter profitability of Magazine Papers improved on account of fixed 
costs being lower. Average prices for magazine papers when translated into euros 
were 2% lower than in the previous year. The decrease was mainly due to the 
weaker US dollar and decreased prices in North America.

2006 compared with 2005

Operating profit, excluding non-recurring items, for Magazine Papers increased 
from € 97 million to € 197 million. Sales increased from € 3,094 million to € 
3,354 million. The paper delivery volume was 4,761,000 tonnes (4,486,000 tonnes).

Profitability of magazine papers improved from the previous year. Higher 
deliveries and average prices improved profitability, while the lower US dollar 
exchange rate had a negative effect. The Voikkaa magazine paper mill was closed 
at the end of June, and its production was transferred to UPM's other mills, 
improving their utilisation of capacity. The Miramichi magazine paper mill 
experienced a three-month shutdown in the first half of the year.

Translated into euros, average prices for magazine papers were slightly higher 
than those for 2005.

Markets

In Europe, coated magazine paper demand was flat. Uncoated magazine paper demand 
increased by 7% from the previous year. In North America, demand for coated 
magazine paper increased slightly while the uncoated magazine paper figure 
decreased by 3%. In other markets, especially in Asia, demand for magazine papers 
continued its rapid growth. Average market prices for magazine papers in Europe 
and North America were about the same as last year.


Newsprint
                      Q4/  Q3/  Q2/  Q1/  Q4/  Q3/  Q2/  Q1/
                       06   06   06   06   05   05   05   05

Sales, €m             380  360  351  345  379  296  320  313
EBITDA, €m 1)          89   98   86   72   75   75   60   65
% of sales           23.4 27.2 24.5 20.9 19.8 25.3 18.8 20.8
Depreciation,         -48  -48  -47  -47  -55  -48  -48  -47
amortization and impairment charges,€m
Operating profit, €m   39   50   34   25   20   27   12   18
% of sales           10.3 13.9  9.7  7.2  5.3  9.1  3.8  5.8
Non-recurring          -2    -   -5    -   -5    -    -    -
items, €m 2)
Operating profit       41   50   39   25   25   27   12   18
excl. non-recurring items 
and amortization of goodwill, €m
% of sales           10.8 13.9 11.1  7.2  6.6  9.1  3.8  5.8
Deliveries, 1,000 t   697  666  660  654  736  593  631  632


                     Q1-Q4/ Q1-Q4/ Q1-Q4/
                         06     05     04

Sales, €m             1,436  1,308  1,304
EBITDA, €m 1)           345    275    229
% of sales             24.0   21.0   17.6
Depreciation,          -190   -198   -224
amortization and 
impairment charges,€m
Operating profit, €m    148     77      7
% of sales             10.3    5.9    0.5
Non-recurring            -7     -5      2
items, €m 2)
Operating profit excl.  155     82     33
non-recurring items
and amortization of goodwill, €m
% of sales             10.8    6.3    2.5
Deliveries, 1,000 t   2,677  2,592  2,719
Capital employed      1,921  1,900  2,002
(average), €m
ROCE (excl.             8.1    4.3    1.6
non-recurring items and
amortization of goodwill), %

1) EBITDA is operating profit before depreciation, amortization and impairment 
charges and excluding non-recurring items.
2) The non-recurring cost booked for 2006 relates mainly to the profitability 
programme, and for 2005 is due to one-time depreciation at Augsburg.

Q4 of 2006 compared with Q4 of 2005

Operating profit, excluding non-recurring items, for Newsprint increased to € 41 
million from € 25 million. Sales for the fourth quarter totalled € 380 million 
(€ 379 million). The total volume of paper deliveries was 697,000 tonnes 
(736,000 tonnes).

The profitability of the Newsprint division benefited from higher paper prices. 
This period's average prices for both standard and improved newsprint when 
translated into euros were up about 6% on the figures for the equivalent period 
of 2005. Higher recycled paper and wood prices had a negative effect on 
profitability.

2006 compared with 2005

Operating profit, excluding non-recurring items, for Newsprint increased from 
€ 82 million in 2005 to € 155 million. Sales amounted to € 1,436 million, 10% 
higher than in 2005. Paper deliveries were 2,677,000 tonnes (2,592,000 tonnes).

The main contributor to the improved profitability was the higher price of 
newsprint. Average prices for standard and improved newsprint were about 6% 
higher than in 2005, when translated into euros. Capacity was in good use. Higher 
energy prices in Central Europe and the UK negatively affected results. The 
average price of the most important raw material, recycled paper, was about the 
same as in 2005.

Markets

In Europe, demand for standard and improved newsprint showed a 2% increase 
compared with the year before. In Europe, standard newsprint market prices were, 
on average, 5% higher. Also in the other markets, with the exception of North 
America, growth in demand increased.


Fine and Speciality Papers

                       Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05    05

Sales, €m              667   626   627   640   626   574   495   539
EBITDA, €m 1)          104   106    76    82    88    92    34    95
% of sales            15.6  16.9  12.1  12.8  14.1  16.0   6.9  17.6
Depreciation,          -56   -55   -71   -55   -68   -56   -51   -49
amortization and impairment charges, €m
Operating profit, €m    44    50   -13    27    20    36   -17    46
% of sales             6.6   8.0  -2.1   4.2   3.2   6.3  -3.4   8.5
Non-recurring           -3    -2   -36     -    -8     -     -     -
items, €m 2)
Operating profit excl.  47    52    23    27    28    36   -17    46
non-recurring items
and amortization of goodwill, €m 
% of sales             7.0   8.3   3.7   4.2   4.5   6.3  -3.4   8.5 
Deliveries, 1,000 t.   907   878   884   881   863   793   684   720


                     Q1-Q4/ Q1-Q4/ Q1-Q4/
                         06     05     04

Sales, €m             2,560  2,234  2,286
EBITDA, €m 1)           368    309    367
% of sales             14.4   13.8   16.1
Depreciation,          -237   -224   -199
amortization and 
impairment charges,€m
Operating profit, €m    108     85    171
% of sales              4.2    3.8    7.5
Non-recurring           -41     -8      3
items, €m 2)
Operating profit excl.  149     93    173
non-recurring items
and amortization of goodwill, €m
% of sales              5.8    4.2    7.6
Deliveries, 1,000 t   3,550  3,060  3,074
Capital employed      2,760  2,843  2,640
(average), €m
ROCE (excl.             5.4    3.3    6.6
non-recurring items and
amortization of goodwill), %


1) EBITDA is operating profit before depreciation, amortization and impairment 
charges and excluding non-recurring items.
2) In 2006, non-recurring items include personnel and impairment charges related 
to the profitability programme. In 2005, one-time depreciation was booked for the 
rebuild of Nordland's paper machine.

Q4 of 2006 compared with Q4 of 2005

Operating profit, excluding non-recurring items, for Fine and Speciality Papers 
increased to € 47 million (€ 28 million). Sales were € 667 million (€ 626 
million). Paper deliveries were 907,000 tonnes (863,000 tonnes).

Operating efficiency improved in the fourth quarter and deliveries increased. 
Increasing raw material prices had a negative effect on profitability. Average 
prices for fine and speciality papers translated into euros were up 1%.

2006 compared with 2005

Operating profit, excluding non-recurring items, for Fine and Speciality Papers 
was € 149 million (€ 93 million). Sales were € 2,560 million (2,234 million). 
Paper deliveries increased from 3,060,000 tonnes to 3,550,000 tonnes.

Energy and raw material costs increased from the last year but the negative 
impact of these was partially offset by improved operating efficiency. Kymi paper 
machine 7 was closed at the end of June. Its production was transferred to other 
machines at the Kymi and Nordland Papier mills due to which their capacity 
utilisation improved. Speciality paper capacity was in good use. The new paper 
machine, started up in May 2005 in China, contributed to the volume increase. 
Average prices for fine and speciality papers translated into euros were slightly 
down from last year.

Markets

In Europe, demand for coated fine papers increased by 2% and for uncoated fine 
papers by 1% compared with the previous year. For label and packaging papers, the 
good demand continued. In Asia, demand for coated and uncoated fine papers 
increased. Market prices for coated and uncoated fine papers in Europe decreased 
by about 2%. In Asia, fine paper prices were higher than a year ago.


Converting
                       Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05    05

Sales, €m              323   312   316   323   297   343   346   361
EBITDA, €m 1)           25    23    26    28    18    22    17    32
% of sales             7.7   7.4   8.2   8.7   6.1   6.4   4.9   8.9
Depreciation,           -9   -11    -9    -9   -11   -11   -11   -12
amortization and 
impairment charges,€m
Operating profit, €m    16    12    17    19     8    36     6    20
% of sales             5.0   3.8   5.4   5.9   2.7  10.5   1.7   5.5
Non-recurring            -     -     -     -     1    25     -     -
items, €m 2)
Operating profit excl.  16    12    17    19     7    11     6    20
non-recurring items
and amortization of goodwill, €m
% of sales             5.0   3.8   5.4   5.9   2.4   3.2   1.7   5.5


                     Q1-Q4/ Q1-Q4/ Q1-Q4/
                         06     05     04

Sales, €m             1,274  1,347  1,414
EBITDA, €m 1)           102     89    122
% of sales              8.0    6.6    8.6
Depreciation,           -38    -45    -53
amortization and 
impairment charges,€m
Operating profit, €m     64     70     71
% of sales              5.0    5.2    5.0
Non-recurring             -     26      2
items, €m 2)
Operating profit excl.   64     44     74
non-recurring items
and amortization of goodwill, €m
% of sales              5.0    3.3    5.2
Capital employed        489    603    654
(average), €m
ROCE (excl.            13.1    7.3   11.3
non-recurring items and
amortization of goodwill), %

1) EBITDA is operating profit before depreciation, amortization and impairment 
charges and excluding non-recurring items.
2) Non-recurring items in 2005 include a gain of € 26 million from the sale of 
Loparex.

Q4 of 2006 compared with Q4 of 2005

Operating profit, excluding non-recurring items, for Converting was € 16 million 
(€ 7 million). Fourth-quarter sales for the division came to € 323 million (€ 297 
million).

UPM Raflatac's self-adhesive labelstock profitability was good. Prices were 
slightly higher than a year earlier. UPM Raflatac's sales increased in all 
markets. The internal efficiency of Walki Wisa improved, but price increases for 
oil-based raw materials had a negative effect on the result. Sales of Walki Wisa 
increased.

2006 compared with 2005

For 2006, Converting's operating profit, excluding non-recurring items, increased 
to € 64 million from € 44 million. The division's sales came to € 1,274 million 
(€ 1,347 million). The Loparex Group, with approximately € 340 million in annual 
sales, was sold in August 2005.

The profitability of UPM Raflatac's self-adhesive labelstock improved and was 
good. Volumes were higher, and sales increased by 15% to € 987 million. Notable 
growth took place in North America and Europe but also in Asia. Sales growth in 
Asia Pacific accelerated towards the end of the year, led by good development in 
China. The new factory in Changshu made its first commercial deliveries at the 
end of December. Prices of raw materials remained largely unchanged. The growth 
in sales volume for RFID tags accelerated towards the end of the year.

The profitability of Walki Wisa's industrial wrappings improved, mainly as a 
result of internal measures. Sales amounted to € 287 million, 7% higher than for 
2005.

Markets

Demand for self-adhesive labelstock grew in North America, Europe, and Asia. 
Average prices for self-adhesive labelstock were slightly higher. The demand for 
industrial wrappings continued to be strong, at the previous year's level; 
however, competition remained fiery as well. Prices were unchanged.


Wood Products
                       Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05   05  

Sales, €m              287   310   378   346   331   302   343   314
EBITDA, €m 1)           24    22    33    25    22     9    26    29
% of sales             8.4   7.1   8.7   7.2   6.6   3.0   7.6   9.2
Depreciation,          -10   -11   -11   -11   -40   -11   -12   -12
amortization and impairment charges,€m
Operating profit, €m    14   104    22     4   -23    -2    14    17 
% of sales             4.9  33.5   5.8   1.2  -6.9  -0.7   4.1   5.4
Non-recurring            -    93     -   -10   -32     -     -     - 
items, €m 2)
Operating profit        14    11    22    14     9    -2    14    17 
excl. non-recurring items, €m
% of sales             4.9   3.5   5.8   4.0   2.7  -0.7   4.1   5.4 
Production, plywood    259   209   239   248   245   189   245   237 
1,000 m3
Production, sawn       591   486   581   556   592   475   455   495
timber 1,000 m3

                     Q1-Q4/ Q1-Q4/ Q1-Q4/
                         06     05     04

Sales, €m             1,321  1,290  1,492
EBITDA, €m 1)           104     86     80
% of sales              7.9    6.7    5.4
Depreciation,           -43    -75    -73
amortization and 
impairment charges,€m
Operating profit, €m    144      6    111
% of sales             10.9    0.5    7.4
Non-recurring            83    -32     83
items, €m 2)
Operating profit excl.   61     38     28
non-recurring items
and amortization of goodwill, €m
% of sales              4.6    2.9    1.9
Production, plywood     955    916    969
1,000 m3
Production, sawn      2,214  2,017  2,276
timber 1,000 m3
Capital employed        616    660    748
(average), €m
ROCE (excl.             9.9    5.8    3.7
non-recurring items), %

1) EBITDA is operating profit before depreciation, amortization and impairment 
charges and excluding non-recurring items.
2) Non-recurring items in the first quarter 2006 include a loss of € 10 million 
from the sale of the Loulay plywood mill, and in the third quarter, a capital 
gain of € 93 million on the sale of Puukeskus. Non-recurring items in 2005 
include impairment charges of € 25 million relating to the Group's Finnish 
sawmills and a provision of € 7 million relating mainly to restructuring of the 
sales network.

Q4 of 2006 compared with Q4 of 2005

Operating profit, excluding non-recurring items, for Wood Products increased to 
€ 14 million (€ 9 million). Sales for the division came to € 287 million (€ 331 
million). The plywood production was 259,000 (245,000) cubic metres and sawn 
timber production 591,000 (592,000) cubic metres.

The profitability of plywood was good. The profitability of sawmilling improved, 
and its operating profit was positive. Due to the exceptionally warm autumn, 
availability of wood weakened and capacity could not be utilized in an optimal 
manner.

2006 compared with 2005

The division's operating profit, excluding non-recurring items, increased to € 61 
million (€ 38 million). Sales came to € 1,321 million (€ 1,290 million). Plywood 
production was 955,000 cubic metres (916,000 cubic metres) and sawn timber 
production 2,214,000 cubic metres (2,017,000 cubic metres).

Plywood enjoyed good profitability. Sawmilling improved its profitability, and 
operating profit turned positive due to higher prices and increased deliveries. 
Sawn timber production was higher than in 2005, mainly as a result of the 
increased volumes from the Pestovo sawmill in Russia.

Sale of the building materials merchant Puukeskus Oy took place at the end of 
August. The annual sales of Puukeskus were approximately € 400 million.

Markets

Birch and spruce plywood demand continued to be strong in all markets. Plywood 
prices increased slightly from their 2005 levels. Markets for veneers and further 
processed goods were solid. Redwood and whitewood sawn timber markets improved, 
and prices increased. The supply of logs tightened, causing upward pressure on 
prices.


Other Operations

€m                     Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05    05

Sales 1)               162   143   126   140   133   111   136   137
EBITDA 2)               69    23    32    66    55    32    37    36
Depreciation,           -8    -6    -8    -4    -5    -4    -7    -6
amortization and impairment charges
Operating profit                                                                
Forestry 3)             23    20   -82    20    20    17     5    22
Energy Department,      36     -    18    40    42    23    41    29
Finland
Other and               -9   -19    27    -7   -60    -7    -6   -11
eliminations
Operating profit, total 50     1   -37    53     2    33    40    40
Non-recurring items 4)  -6    -1    41    -5   -57     -     -     -
Operating profit,       56     2   -78    58    59    33    40    40
excluding non-recurring items


€m                  Q1-Q4/  Q1-Q4/  Q1-Q4/
                        06      05      04

Sales 1)               571     517     538  
EBITDA 2)              190     160     138
Depreciation,          -26     -22     -38
amortization and impairment charges
Operating profit                                                                
Forestry 3)            -19      64      66   
Energy Department,      94     135     118 
Finland
Other and               -8     -84     150
eliminations
Operating profit, total 67     115     334     
Non-recurring items 4)  29     -57     219    
Operating profit,       38     172     115  
excluding non-recurring items
Capital employed     3,343   3,501   3,355
at the end of period (including associated companies)                                     

1) Includes sales outside the Group.
2) EBITDA is operating profit before depreciation, amortization and impairment 
charges and excluding the change in value of biological assets and non-recurring 
items.
3) The second quarter of 2006 includes a decrease of € 102 million in the fair 
value of biological assets and wood harvested.
4) Non-recurring items in 2006 include in the second quarter the capital gain of 
€ 41 million of the Group head office real estate, and in the first quarter, the 
donation of € 5 million to a UPM-Kymmene Cultural Foundation, and in 2005 they 
include a fine of € 57 million imposed by the European Commission.

Q4 of 2006 compared with Q4 of 2005

Excluding non-recurring items, operating profit for Other Operations was € 56 
million (€ 59 million). Sales were € 162 million (€ 133 million). The cost of 
wood raw material harvested from the Group's forests was € 27 million (€ 12 
million). The increase in the fair value of biological assets (growing trees) was 
€ 22 million (€ 21 million).

Operating profit of the Energy Department in Finland was € 36 million (€ 42 
million). Hydropower availability was significantly lower than the previous year 
even if the water reservoirs in the Nordic countries returned to their normal 
levels for the season, or even higher, by the end of the year.

2006 compared with 2005

Excluding non-recurring items, the operating profit for Other Operations in 2006 
was € 38 million (€ 172 million). Sales totalled € 571 million (€ 517 million). 
The cost of wood raw material harvested from the Group's own forests was € 107 
million (€ 34 million). The decrease in the fair value of biological assets 
(growing trees) was € 19 million (increase of € 68 million).

Fellings from the Group's own forests increased as planned to compensate 
transient shortage in wood supply stemming from the change in Finnish forest 
taxation. Additionally, during the fourth quarter there were difficulties in 
reaching the felling sites in Finland and Russia, due to unusually warm and rainy 
weather. The decrease in the fair value of biological assets was mainly due to an 
increase of half a percentage point, to 7.5%, in the discount rate applied in 
forest valuation.

The operating profit of the Energy Department in Finland was € 94 million 
(€ 135 million). Availability of hydropower was significantly lower than in the 
comparison period and costs of energy increased. Average energy prices in Nord 
Pool were substantially higher.

Associated companies and joint ventures

€m                     Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05    05

Share of result after tax
Oy Metsä-Botnia Ab      18    24    13    14    19    13   -10    14
Pohjolan Voima Oy       -9    -7    -5     7     -    -1   -11    12
Other                    -     1     -     5    -5     3     2     5
Total                    9    18     8    26    14    15   -19    31

€m                    Q1-Q4/  Q1-Q4/ Q1-Q4/  
                         06      05      04   

Share of result after tax
Oy Metsä-Botnia Ab       69      36      56   
Pohjolan Voima Oy       -14       -      -5    
Other                     6       5       7     
Total                    61      41      58   

The first quarter of 2005 includes non-recurring income of € 12 million, and the 
fourth quarter charges of € 3 million, both relating to valuation of the assets 
of Pohjolan Voima Oy.

The average price of long-fibre (NBSK) pulp was USD 675/tonne, up by 10% on last 
year. The price for short-fibre (BHKP) pulp was USD 638/tonne, up 10%. The 
corresponding prices in euros were 535/tonne for NBSK (up 10%) and 508/tonne for 
BHKP (up 11%).


Deliveries and production

                       Q4/   Q3/   Q2/   Q1/   Q4/   Q3/   Q2/   Q1/
                        06    06    06    06    05    05    05   05                                                                 
Deliveries                                                          
Magazine papers,     1,288 1,227 1,148 1,098 1,308 1,048 1,020 1,110
1,000 t
Newsprint, 1,000 t     697   666   660   654   736   593   631   632
Fine and speciality    907   878   884   881   863   793   684   720
papers, 1,000 t
Converting papers,       -     -     -     -     -    10     8    16
1,000 t
Deliveries total     2,892 2,771 2,692 2,633 2,907 2,444 2,343 2,478

Production                                                          
Paper, 1,000 t       2,858 2,858 2,744 2,691 2,801 2,840 1,929 2,653
Plywood, 1,000 m3      259   209   239   248   245   189   245   237
Sawn timber, 1,000 m3  614   526   623   594   618   508   493   528
Chemical pulp, 1,000 t 547   506   498   544   539   516   237   548

                     Q1-Q4/ Q1-Q4/ Q1-Q4/
                         06     05     04
Deliveries                               
Magazine papers,      4,761  4,486  4,940
1,000 t
Newsprint, 1,000 t    2,677  2,592  2,719
Fine and speciality   3,550  3,060  3,074
papers, 1,000 t
Converting papers,        -     34     59
1,000 t
Deliveries total     10,988 10,172 10,792

Production                               
Paper, 1,000 t       11,151 10,223 10,886
Plywood, 1,000 m3       955    916    969
Sawn timber, 1,000 m3 2,357  2,147  2,409
Chemical pulp, 1,000t 2,095  1,840  2,243

Helsinki, 1 February 2007

UPM-Kymmene Corporation

Board of Directors


Financial information

This financial review is unaudited

Consolidated income statement

€m                       Q4/     Q4/  Q1-Q4/  Q1-Q4/  Q1-Q4/
                        2006    2005    2006    2005    2004
                                (As              (As     (As
                            revised)        revised)revised)
 
Sales                  2,583   2,574  10,022   9,348   9,820
Other operating           20      27     231     117     168
income
Costs and expenses    -2,141  -2,241  -8,514  -8,092  -8,254
Change in fair value      -5       9    -126      34      15
of biological assets and wood harvested
Share of results of        9      14      61      41      58
associated companies and 
joint ventures
Depreciation,           -219    -441  -1,138  -1,130  -1,122
amortization and 
impairment charges
Operating profit         247     -58     536     318     685

Gains on                  -2       -      -2      90       1
available-for-sale investments, net
Exchange rate and          4       -      18      -4      48
fair value gains and losses
Interest and other       -46     -33    -185    -147    -178
finance costs, net
Profit before tax        203     -91     367     257     556

Income taxes              -8      14     -29       4     364
Profit for the period    195     -77     338     261     920

Attributable to:                                            
Equity holders of        196     -76     340     263     919
the parent company
Minority interest         -1      -1      -2      -2       1
                         195     -77     338     261     920
                                                            
Earnings per share for profit attributable to 
the equity holders of the parent company
Basic earnings per      0.37   -0.15    0.65    0.50    1.76
share, €
Diluted earnings        0.38   -0.15    0.65    0.50    1.75
per share, €


Consolidated balance sheet
€m                            31.12.  31.12.
                                2006    2005
ASSETS                                      
Non-current assets                          
Goodwill                       1,514   1,514
Other intangible assets          461     535
Property, plant and equipment  6,500   7,316
Investment property               30      35
Biological assets              1,037   1,174
Investments in associated      1,177   1,034
companies and joint ventures
Available-for-sale investments   127     153
Non-current financial assets      74     170
Deferred tax assets              362     352
Other non-current assets          73      38
                              11,355  12,321

Current assets
Inventories                    1,255   1,256
Trade and other receivables    1,657   1,653
Income tax receivables             3      28
Cash and cash equivalents        199     251
                               3,114   3,188

Assets held for sale               -      32
Total assets                  14,469  15,541                                    

EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital                    890     890
Share premium reserve            826     826
Treasury shares                    -      -3
Translation differences          -89     -34
Fair value and other reserves    278     233
Retained earnings              5,366   5,415
                               7,271   7,327
Minority interest                 18      21
Total equity                   7,289   7,348
                                            
Non-current liabilities
Deferred tax liabilities         790     887
Retirement benefit obligations   427     429
Provisions                       187     190
Interest-bearing liabilities   3,353   4,326
Other liabilities                 13      13
                               4,770   5,845

Current liabilities
Current interest-bearing         992     976
liabilities
Trade and other payables       1,399   1,364
Income tax payables               19       8
                               2,410   2,348

Total liabilities              7,180   8,193
Total equity and liabilities  14,469  15,541

Consolidated statement of changes in equity

                     Attributable to equity holders of the parent                                                

€m                     Share   Share   Share   Trea-  Trans-    Fair    Re-
                     capital   issue premium    sury  lation   value tained
                                     reserve  shares  diffe-     and   ear-
                                                      rences   other  nings
                                                              reser-     1)
                                                                ves 1)

Balance at 1 January     890       -     737       -     -42     263   5,149
2004 (as revised)
Transactions with equity holders
Share options exercised    1       1       8       -       -       -       -
Share-based compensation   -       -       -       -       -      12       -
Dividend paid              -       -       -       -       -       -    -393
Business combinations      -       -       -       -       -       -       -

Income and expenses recognised directly in equity
Translation differences    -       -       -       -     -13       -       -
Other items                -       -       -       -       -       1       1
Cash flow hedges                                                            
recorded in equity,        -       -       -       -       -      31       -
net of tax 
transferred to income      -       -       -       -       -     -19       -
statement, net of tax
Available-for-sale investments
gains/losses arising       -       -       -       -       -      13       -
from fair valuation, net of tax
transferred to income      -       -       -       -       -       -       -
statement, net of tax
Revision of profit                                 -              27        
on valuation of available-for-sale investments
Profit for the period      -       -       -       -       -       -     919
(as revised)
Balance at 31            891       1     745       -     -55     328   5,676
December 2004 (as revised)
                                                                            
Transactions with equity holders
Share options exercised   12      -1      68       -       -       -       -
Acquisition of             -       -       -    -151       -       -       -
treasury shares
Reissuance of              -       -       -      11       -       -       -
treasury shares
Cancellation of          -13       -      13     137       -       -    -137
treasury shares
Share-based                -       -       -       -       -       8       -
compensation
Dividend paid              -       -       -       -       -       -    -387
Business combinations      -       -       -       -       -       -       -

Income and expenses recognised directly in equity
Translation differences    -       -       -       -      25       -       -
Net investment hedge,      -       -       -       -      -4       -       -
net of tax
Cash flow hedges                                                            
recorded in equity,        -       -       -       -       -     -63       -
net of tax
transferred to             -       -       -       -       -      -2       -
income statement, net of tax
Available-for-sale investments
gains/losses arising       -       -       -       -       -      51       -
from fair valuation, net of tax
transferred to             -       -       -       -       -     -89       -
income statement, net of tax
Profit for the period      -       -       -       -       -       -     263
Balance at 31            890       -     826      -3     -34     233   5,415
December 2005

Transactions with equity holders
Reissuance of              -       -       -       3       -       -       1
treasury shares
Share-based compensation   -       -       -       -       -       7       -
Dividend paid              -       -       -       -       -       -    -392
Business combinations      -       -       -       -       -       -       -

Income and expenses recognised directly in equity
Translation differences    -       -       -       -     -63       -       -
Other items                -       -       -       -       -      -2       2
Net investment hedge,      -       -       -       -       8       -       -
net of tax
Cash flow hedges                                                            
recorded in equity,        -       -       -       -       -      45       -
net of tax
transferred to             -       -       -       -       -      -5       -
income statement, net of tax
Available-for-sale investments
gains/losses arising       -       -       -       -       -       -       -
from fair valuation, net of tax
transferred to             -       -       -       -       -       -       -
income statement, net of tax
Profit for the period      -       -       -       -       -       -     340
Balance at 31            890       -     826       -     -89     278   5,366
December 2006

                                            
€m                     Total   Mino-   Total
                                rity  equity
                            interest

Balance at 1           6,997      32   7,029
January 2004 (as revised)
Transactions with equity holders
Share options exercised   10       -      10
Share-based compensation  12       -      12
Dividend paid           -393       -    -393
Business combinations      -      -7      -7

Income and expenses recognised directly in equity
Translation differences  -13       -     -13
Other items                2       -       2
Cash flow hedges                            
recorded in equity,       31       -      31
net of tax
transferred to           -19       -     -19
income statement, net of tax
Available-for-sale investments
gains/losses              13       -      13
arising from fair valuation, net of tax
transferred to             -       -       -
income statement, net of tax
Revision of profit        27       -      27
on valuation of available-for-sale investments
Profit for the period    919       1     920
(as revised)
Balance at 31          7,586      26   7,612
December 2004 (as revised)
                                            
Transactions with equity holders
Share options exercised   79       -      79
Acquisition of          -151       -    -151
treasury shares
Reissuance of             11       -      11
treasury shares
Cancellation of            -       -       -
treasury shares
Share-based compensation   8       -       8
Dividend paid           -387       -    -387
Business combinations      -      -3      -3

Income and expenses recognised directly in equity
Translation differences   25       -      25
Net investment            -4       -      -4
hedge, net of tax
Cash flow hedges                            
recorded in equity,      -63       -     -63
net of tax
transferred to            -2       -      -2
income statement, net of tax
Available-for-sale investments
gains/losses              51       -      51
arising from fair 
valuation, net of tax
transferred to           -89       -     -89
income statement, net of tax
Profit for the period    263      -2     261
Balance at 31          7,327      21   7,348
December 2005
                                            
Transactions with equity holders
Reissuance of              4       -       4
treasury shares
Share-based compensation   7       -       7
Dividend paid           -392       -    -392
Business combinations      -      -1      -1

Income and expenses recognised directly in equity
Translation differences  -63       -     -63
Other items                -       -       -
Net investment             8       -       8
hedge, net of tax
Cash flow hedges                            
recorded in equity,       45       -      45
net of tax
transferred to            -5       -      -5
income statement, net of tax
Available-for-sale investments
gains/losses               -       -       -
arising from fair valuation, net of tax
transferred to             -       -       -
income statement, net of tax
Profit for the period    340      -2     338
Balance at 31          7,271      18   7,289
December 2006

1) Reflects the retrospective application of new and revised International 
Financial Reporting Standards.


Cash flow statement
                                       1.1.- 
                                      31.12.
€m                              2006    2005    2004
                                                 (As
                                               revi-
                                               sed*)
Cash flow from operating activities
Profit for the period            338     261     920
Adjustments to                 1,195   1,125     419
profit for the period 1)
Interest received                  9      15      39
Interest paid                   -187    -156    -189
Dividends received                16      21      39
Other financial                  -18     -86     -45
items, net
Income taxes paid               -159     -93     -72
Change in working                 21    -234    -114
capital 2)
Net cash provided              1,215     853     997
by operating activities
                                                    
Cash flow from investing activities
Acquisition of                     -      -6      -1
subsidiary shares, net of cash
Acquisition of                   -68      -5     -40
shares in associated companies
Acquisition of                     -     -22      -1
available-for-sale investments
Capital expenditure             -635    -690    -630
Proceeds from                    203     200     185
disposal of subsidiary shares,net of cash
Proceeds from                     52      16      25
disposal of shares in associated companies
Proceeds from                      3     284     -41
disposal of available-for-sale investments
Proceeds from sale               108      47      29
of fixed assets
Proceeds from                     23      25      20
long-term receivables
Increase in long-term              -      -7     -12
receivables
Other investing                    -       -       -
cash flow
Net cash used in                -314    -158    -466
investing activities
                                                    
Cash flow from financing activities
Proceeds from                    415     178       -
long-term liabilities
Payments of                     -574    -641    -224
long-term liabilities
Proceeds from                   -398     262    -102
(payment of) short-term borrowings, net
Share options                      -      78      10
exercised
Dividends paid                  -392    -388    -393
Purchase of own shares             -    -151       -
Other financing cash flow         -2      74      -1
Net cash used in                -951    -588    -710
financing activities
                                                    
Change in cash and               -50     107    -179
cash equivalents
                                                    
Cash and cash                    251     142     338
equivalents at the beginning of year
Foreign exchange                  -2       2     -17
effect on cash
Change in cash and               -50     107    -179
cash equivalents
Cash and cash                    199     251     142
equivalents at year-end
                                                    
Notes to the consolidated cash flow statement
1) Adjustments to net profit
Taxes                             29      -4    -364
Depreciation,                  1,138   1,130   1,122
amortization and impairment charges
Share of results in              -61     -41     -58
associated companies and joint ventures
Profits and losses              -157     -48    -138
on sale of fixed assets and investments
Gains on                           2     -90      -1
available-for-sale investments, net
Finance costs, net               167     151     130
Rosenlew cartel fine             -57       -       -
Change in the                      -       -    -269
Finnish pension system
Other adjustments                134      27      -3
                               1,195   1,125     419
2) Change in working capital
Inventories                      -60    -124     -26
Current receivables              -69    -130    -203
Current non-interest             150      20     115
bearing liabilities
                                  21    -234    -114

*) Reflects the retrospective application of new and revised International 
Financial Reporting Standards.


Quarterly information
€m                       Q4/     Q3/     Q2/     Q1/     Q4/     Q3/     Q2/
                          06      06      06      06      05      05      05
Sales by segment                                                            
Magazine Papers          905     861     817     771     928     726     697
Newsprint                380     360     351     345     379     296     320
Fine and Speciality      667     626     627     640     626     574     495
Papers
Converting               323     312     316     323     297     343     346
Wood Products            287     310     378     346     331     302     343
Other Operations         162     143     126     140     133     111     136
Internal sales          -141    -117    -131    -105    -120    -109     -84
Sales, total           2,583   2,495   2,484   2,460   2,574   2,243   2,253
                                                                            
Operating profit by segment
Magazine Papers           75     -62     -85      16     -99      35     -43
Newsprint                 39      50      34      25      20      27      12
Fine and Speciality       44      50     -13      27      20      36     -17
Papers
Converting                16      12      17      19       8      36       6
Wood Products             14     104      22       4     -23      -2      14
Other Operations          50       1     -37      53       2      33      40
Share of results of        9      18       8      26      14      15     -19
associated companies and joint ventures
Operating profit         247     173     -54     170     -58     180      -7
(loss), total
% of sales               9.6     6.9    -2.2     6.9    -2.3     8.0    -0.3
Gains on                  -2       -       -       -       -       -       1
available-for-sale investments, net
Exchange rate and          4      -3       5      12       -      14     -15
fair value gains 
and losses
Interest and other       -46     -41     -52     -46     -33     -45     -29
finance costs, net
Profit (loss)            203     129    -101     136     -91     149     -50
before tax
Income taxes              -8      18      -2     -37      14     -38      72
Profit (loss) for        195     147    -103      99     -77     111      22
the period
                                                                            
Basic earnings per      0.37    0.29   -0.20    0.19   -0.15    0.21    0.05
share, €
Diluted earnings        0.38    0.28   -0.20    0.19   -0.15    0.21    0.05
per share, €
Average number of    523,258 523,256 523,256 523,108 523,105 523,115 521,617
shares basic (1,000)
Average number of    526,416 525,938 525,874 525,936 524,703 524,710 522,131
shares diluted (1,000)
                                                                            
Non-recurring items in operating profit.
Non-recurring items in operating profit
are specified in the divisional reviews on pages 6-9.

Magazine Papers            6    -126    -133       -    -156     -17       -
Newsprint                 -2       -      -5       -      -5       -       -
Fine and Speciality       -3      -2     -36       -      -8       -       -
papers
Converting                 -       -       -       -       1      25       -
Wood Products              -      93       -     -10     -32       -       -
Other Operations          -6      -1      41      -5     -57       -       -
Share of results of        -       -       -       -      -3       -       -
associated companies and joint ventures
Non-recurring items       -5     -36    -133     -15    -260       8       -
in operating profit, total
Non-recurring items        6       -       -       -       9       -       -
reported after operating profit 1)
Non-recurring items       35      20     -29       -     -16       -      58
reported in taxes 2)
Non-recurring             36     -16    -162     -15    -267       8      58
items, total
                                                                            
Operating profit,        252     209      79     185     202     172      -7
excl. non-recurring items
% of sales               9.8     8.4     3.2     7.5     7.8     7.7    -0.3
Profit before tax,       202     165      32     151     160     141     -50
excl. non-recurring items
% of sales               7.8     6.6     1.3     6.1     6.2     6.3    -2.2
Earnings per share,     0.30    0.25    0.04    0.21    0.22    0.19   -0.07
excl. non-recurring items, €
Return on equity,        8.7     7.2     1.1     6.1     5.9     5.3    neg.
excl. non-recurring items, %
Return on capital        8.7     7.1     2.7     6.4     6.5     6.0    neg.
employed, excl. non-recurring items, %

€m                       Q1/  Q1-Q4/  Q1-Q4/  Q1-Q4/
                          05      06      05      04
Sales by segment                                    
Magazine Papers          743   3,354   3,094   3,308
Newsprint                313   1,436   1,308   1,304
Fine and Speciality      539   2,560   2,234   2,286
Papers
Converting               361   1,274   1,347   1,414
Wood Products            314   1,321   1,290   1,492
Other Operations         137     571     517     538
Internal sales          -129    -494    -442    -522
Sales, total           2,278  10,022   9,348   9,820
                                                    
Operating profit by segment
Magazine Papers           31     -56     -76     -67
Newsprint                 18     148      77       7
Fine and Speciality       46     108      85     171
Papers
Converting                20      64      70      71
Wood Products             17     144       6     111
Other Operations          40      67     115     334
Share of results of       31      61      41      58
associated companies and joint ventures
Operating profit         203     536     318     685
(loss), total
% of sales               8.9     5.3     3.4     7.0
Gains on                  89      -2      90       1
available-for-sale investments, net
Exchange rate and         -3      18      -4      48
fair value gains and losses
Interest and other       -40    -185    -147    -178
finance costs, net
Profit (loss)            249     367     257     556
before tax
Income taxes             -44     -29       4     364
Profit (loss) for        205     338     261     920
the period
                                                    
Basic earnings per      0.39    0.65    0.50    1.76
share, €
Diluted earnings        0.39    0.65    0.50    1.75
per share, €
Average number of    520,281 523,220 522,029 523,641
shares basic (1,000)
Average number of    523,065 526,041 523,652 526,247
shares diluted (1,000)
                                                    
Non-recurring items in operating profit.
Non-recurring items in operating profit
are specified in the divisional reviews on pages 6-9.

Magazine Papers            -    -253    -173    -104
Newsprint                  -      -7      -5       2
Fine and Speciality        -     -41      -8       3
papers
Converting                 -       -      26       2
Wood Products              -      83     -32      83
Other Operations           -      29     -57     219
Share of results of       12       -       9      10
associated companies and joint ventures
Non-recurring items       12    -189    -240     215
in operating profit, total
Non-recurring items       89       6      98       -
reported after operating profit 1)
Non-recurring items        -      26      42     519
reported in taxes 2)
Non-recurring            101    -157    -100     734
items, total
                                                    
Operating profit,        191     725     558     470
excl. non-recurring items
% of sales               8.4     7.2     6.0     4.8
Profit before tax,       148     550     399     341
excl. non-recurring items
% of sales               6.5     5.5     4.3     3.5
Earnings per share,     0.20    0.80    0.54    0.49
excl. non-recurring items, €
Return on equity,        5.6     5.7     3.8     3.4
excl. non-recurring items, %
Return on capital        6.1     6.2     4.5     4.3
employed, excl. non-recurring items, %

1) Non-recurring items in the first quarter of 2005 include net gains of € 89 
million on sales of listed shares, and in the fourth quarter gains of € 9 million 
from the sale of associated companies.
2) Non-recurring items in the second quarter 2006 comprise € 29 million relating 
to the decrease of deferred tax assets due to the reduction of income tax rate in 
Canada, in the third quarter € 20 million income due to an increase in deferred 
tax assets, and in the fourth quarter € 35 million income primarily due to the 
change in German tax legislation. Non-recurring items in the first quarter of 
2005 comprise € 58 million in deferred tax assets booked on the losses made by 
UPM's Canadian operations and for the fourth quarter € 16 million relating to the 
tax status of an associated company.


Changes in property, plant and equipment

€m                   Q1-Q4/ Q1-Q4/
                       2006   2005
                                  
Book value at         7,316  7,621
beginning of period
Acquired companies        -      6
Capital                 604    671
expenditure
Decreases              -325   -118
Depreciation and     -1,039 -1,049
impairment charges
Translation             -56    185
difference and other changes
Book value at end     6,500  7,316
of period


Commitments and contingencies

€m                    31.12.  31.12. 
                        2006    2005
Own commitments
Mortgages                 92      94

On behalf of associated companies and joint ventures
Guarantees for loans      12      18

On behalf of others
Guarantees for loans       1       2
Other guarantees           5       6

Other own commitments
Leasing commitments       23      25
for the next 12 months
Leasing commitments       94      70
for subsequent periods
Other commitments         69      61

Capital commitments

€m                    Comple-   Total By 31.12.  Q1-Q4/  After 
                         tion    cost      2005   2006  31.12.
                                                          2006

Pulp mill rebuild,  June 2008     325        -      25     300
Kymi
New mill, UPM      March 2008      88        -       8      80
Raflatac, Dixon
New bioboiler, September 2009      72        -       -      72
Caledonia
PM5 quality         June 2008      38        -       -      38
upgrade, Jämsänkoski
PM4 rebuild,         May 2007      45        -      11      34
Jämsänkoski


Notional amounts of derivative financial instruments

€m                   31.12.  31.12. 
                       2006    2005
Currency derivatives
Forward contracts      4,293   4,552
Options, bought           20       -
Options, written          10       -
Swaps                    570     588
                                    
Interest rate derivatives
Forward contracts      2,500   2,609
Swaps                  2,566   2,856
                                    
Other derivatives                   
Forward contracts         13      16
Swaps                     16      38


Related party (associated companies and joint ventures) transactions and balances

€m                  Q1-Q4/Q1-Q4/
                      2006  2005

Sales to associated     61    43
companies
Purchases from         448   438
associated companies
Non-current              -     4
receivables at end of period
Trade and other         20    21
receivables at end of period
Trade and other         23    19
payables at end of period


Key exchange rates for the euro at end of period

                      31.12.   30.9.   30.6.   31.3.  31.12.   30.9.   30.6.
                        2006    2006    2006    2006    2005    2005    2005

USD                   1.3170  1.2660  1.2713  1.2104  1.1797  1.2042  1.2092
CAD                   1.5281  1.4136  1.4132  1.4084  1.3725  1.4063  1.4900
JPY                   156.93  149.34  145.75  142.42  138.90  136.25  133.95
GBP                   0.6715  0.6777  0.6921  0.6964  0.6853  0.6820  0.6742
SEK                   9.0404  9.2797  9.2385  9.4315  9.3885  9.3267  9.4259

                       31.3.
                        2005

USD                   1.2964
CAD                   1.5737
JPY                   138.44
GBP                   0.6885
SEK                   9.1430


Basis of preparation

The Group has adopted the following interpretation to existing standards to its 
financial statements from 1 January 2006 that have affected the amounts reported 
for the current period:

IFRS 2 applies to share-based payment transactions in which the entity receives 
or acquires goods or services. IFRIC 8 includes into the scope of IFRS 2 
the transactions where the entity, when granting its own shares, cannot identify 
the goods or services received. The interpretation is effective for annual 
periods beginning on or after 1 May 2006. The Group early adopted IFRIC 8 as of 
the beginning of 2006 resulting in a charge of € 3 million in the first quarter.

Revised 2005 and 2004

Operating profits for 2005 and 2004 have been revised to correspond with the 
current reporting format. The share of results of associated companies and joint 
ventures, related to business operations, previously reported after operating 
profit, is now reported in operating profit, with an effect of income of € 41 
million and € 58 million in Q1-Q4/2005 and Q1-Q4/2004, respectively. Also from 
the beginning of 2006, part of the results of derivative instruments relating to 
cash flow hedges are allocated to the respective division. Comparative years have 
been revised accordingly.

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, 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 4-8 of the company's annual report on 
form 20-F for the year-ended 31 December, 2005 under "Item 3. Risk Factors".

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications

DISTRIBUTION
Helsinki Exchanges
New York Stock Exchange
Main media
www.upm-kymmene.com