Earnings per share, excluding special items, for the third quarter were EUR 0.23 (EUR 0.25 for the third quarter of 2006). EBITDA was EUR 366 million, 14.8% of sales (EUR 427 million, 17.1%). Operating profit excluding special items was EUR 195 million (EUR 209 million). The increase in costs, particularly wood costs, and the strengthened euro decreased profitability. Key figures Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/ 2007 2006 2007 2006 2006 Sales, EUR million 2,467 2,495 7,523 7,439 10,022 EBITDA, EUR million 1) 366 427 1,195 1,211 1,678 % of sales 14.8 17.1 15.9 16.3 16.7 Operating profit, 195 173 341 289 536 EUR million excluding special 195 209 641 473 725 items, EUR million Profit before tax, 144 129 200 164 367 EUR million excluding special 144 165 500 348 550 items, EUR million Net profit for the 119 147 52 143 338 period, EUR million Earnings per share, 0.23 0.29 0.10 0.28 0.65 EUR excluding special 0.23 0.25 0.76 0.50 0.80 items, EUR Diluted earnings 0.23 0.28 0.10 0.27 0.65 per share, EUR Return on equity, % 6.9 8.3 1.0 2.6 4.6 excluding special 6.9 7.2 7.5 4.8 5.7 items, % Return on capital 6.8 5.9 4.1 3.4 4.7 employed, % excluding special 6.8 7.1 7.6 5.4 6.2 items, % Gearing ratio at 60 62 60 62 56 end of period, % Shareholders' 13.24 13.58 13.24 13.58 13.90 equity per share at end of period, EUR Net interest-bearing 4,120 4,388 4,120 4,388 4,048 liabilities at end of period, EUR million Capital employed at 11,173 11,787 11,173 11,787 11,634 end of period, EUR million Capital 182 171 535 502 699 expenditure, EUR million Personnel at end of 27,550 29,939 27,550 29,939 28,704 period 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 Q3 of 2007 compared with Q3 of 2006 Sales for the third quarter of 2007 were EUR 2,467 million (EUR 2,495 million). Paper deliveries increased 4%. Operating profit was EUR 195 million, 7.9% of sales (EUR 173 million, 6.9% of sales). There were no special items for the third quarter of 2007. In the third quarter of last year, operating profit, excluding special items, was EUR 209 million, 8.4% of sales. Operating profit decreased due to lower paper prices and higher costs. Especially wood and recycled paper costs were markedly higher. The average price for all paper deliveries translated into euros was approximately 2% lower than a year ago. The euro and the Canadian dollar both have strengthened approximately 11% against the US dollar during the past twelve months. Change in the fair value of biological assets net of wood harvested was EUR 21 million (negative EUR 15 million). The share of results of associated companies and joint ventures was EUR 14 million (EUR 18 million). Profit before tax was EUR 144 million (EUR 129 million). Excluding special items, profit before tax was EUR 144 million (EUR 165 million). Interest and other finance costs, net, were EUR 42 million (EUR 41 million). Exchange rate and fair-value gains and losses resulted in a loss of EUR 9 million (loss of EUR 3 million). Income taxes were EUR 25 million (positive EUR 18 million), which include as a positive item an income tax rate change in Germany and the UK. Profit for the third quarter was EUR 119 million (EUR 147 million). Earnings per share were EUR 0.23 (EUR 0.29), and excluding special items EUR 0.23 (EUR 0.25). First nine months of 2007 compared with first nine months of 2006 Sales for January-September were EUR 7,523 million, slightly higher than the EUR 7,439 million in the same period in 2006. Paper deliveries increased by 5%. Operating profit came to EUR 341 million, 4.5% of sales (EUR 289 million, 3.9% of sales). Operating profit excluding special items was EUR 641 million, 8.5% of sales (EUR 473 million, 6.4% of sales). Cost increase was over 2% from last year. Wood and recycled paper saw the highest price increases. Price increases in Finland were triggered by low winter wood storage levels due to the mild winter and the increase in export duties on Russian wood. In Central Europe, alternate uses of wood competed with fibre usage for paper making. Energy costs, on the other hand, were lower than a year ago. Fixed costs decreased as overall operational efficiency improved partly because of closures of the production facilities. Delivery volumes of paper and self-adhesive label materials were higher than last year. The average price for newsprint and uncoated fine paper when translated into euros increased, while the average price for magazine and coated fine papers declined from the corresponding period of last year. Profitability of exports suffered from the strengthening of the euro and the Canadian dollar. The increase in the fair value of biological assets, net of wood harvested, was EUR 32 million (decrease of EUR 121 million). The share of results of associated companies and joint ventures was EUR 41 million (EUR 52 million). Profit before tax was EUR 200 million (EUR 164 million) and excluding special items EUR 500 million (EUR 348 million). Interest and other finance costs, net, were EUR 145 million (EUR 139 million). Exchange rate and fair-value gains and losses resulted in a gain of EUR 2 million (gain of EUR 14 million). Income taxes were EUR 148 million (EUR 21 million), and the effective tax rate, excluding the impact of special items was 24% (26%). Profit for the period was EUR 52 million (EUR 143 million). Earnings per share were EUR 0.10 (EUR 0.28) and excluding special items, EUR 0.76 (EUR 0.50). Operating cash flow per share was EUR 1.09 (EUR 1.53). Paper deliveries Paper deliveries for the first nine months were 8,472,000 (8,096,000) tonnes. Magazine paper deliveries were 3,610,000 (3,473,000) tonnes, newsprint 1,980,000 (1,980,000) tonnes, and fine and speciality papers 2,882,000 (2,643,000) tonnes. Financing Cash flow from operating activities, before capital expenditure and financing, was EUR 573 million (EUR 800 million). The increase in net working capital amounted to EUR 271 million (EUR 71 million). The gearing ratio as of 30 September 2007 was 60% (62% on 30 September 2006). Equity to assets ratio on 30 September was 49.1% (48.8%). Net interest-bearing liabilities at the end of the period were EUR 4,120 million (EUR 4,388 million). Personnel In January-September, UPM had an average of 28,830 employees (31,643 employees for Q1-Q3/2006). The number of employees at the end of September was 27,550 (29,939). Walki Wisa, which was sold in June 2007, employed approximately 950 people in 2006. Capital expenditure and restructuring For the first nine months, gross capital expenditure was EUR 535 million, 7.1% of sales (EUR 502 million, 6.7% of sales). At the Tervasaari mill, the new bleaching line for pulp started up in September, allowing increased use of integrated pulp. As part of the profitability programme, brown sack paper machine PM6 and the special chemical pulp line were closed in August. The largest ongoing investment, a EUR 325 million rebuild of the recovery plant at the Kymi pulp mill, is proceeding according to plan. The start up of UPM associated company Botnia's pulp mill in Uruguay will commence as soon as the permit procedure is finalised and the Uruguayan authorities give their permission. Shares In total, UPM shares worth EUR 12,812 million were traded on the Helsinki Stock Exchange (EUR 12,307 million) in January-September. The highest quotation was EUR 20.59 in February and the lowest EUR 14.87 in August. On the New York Stock Exchange, the company's shares were traded to a total value of USD 213 million (244 million). The Annual General Meeting held on 27 March 2007 approved a proposal by the Board of Directors to buy back not more than 52,000,000 own shares. The authorisation is valid for 18 months. The meeting authorised the board to decide on the disposal of shares so acquired as well as 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. On 20 August 2007, the UPM Board of Directors decided to buy back up to 16,400,000 own shares. The share buy-backs were initiated on 29 August. At the end of the period, UPM had bought back 11,840,000 of its own shares for EUR 196.7 million, for an average price of EUR 16.61. Additionally, the Annual General Meeting authorised the Board of Directors to decide to issue shares and special rights entitling 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 amount, 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 shares. The authorisation is valid for no more than three years from the date of the decision. To date, this authorisation has not been used. The meeting also decided on granting share options in connection with the company's share-based incentive plans. In option programmes 2007 A, 2007 B, and 2007 C, the total number of share options is no more than 15,000,000, and they will entitle to subscribe for, in total, no more than 15,000,000 new shares of the company. To date, this authorisation has not been used. The meeting decided to decrease the share premium reserve by the amount of EUR 776,122,940.18, and the legal reserve by the amount of EUR 187,227,209.68 as shown in the balance sheet of the parent company as per 31 December 2006. The changes were executed on 1 August. The reserves were transferred to the invested non-restricted equity fund. Apart from the above, the Board of Directors has no current authorisation to issue shares, convertible bonds, or share options. On 17 September 2007, UPM applied for listing of 2005G stock options on the OMX Nordic Exchange Helsinki. The total number of stock options is 3,000,000, each entitling for a subscription of one share. In the third quarter of 2007, no shares were subscribed for through exercising of outstanding share options. The number of shares entered in the Trade Register on 30 September 2007 was 528,969,320. Through the issuance authorisation and share options, the number of shares may increase to a maximum of 810,558,420. On 13 September 2007, the Capital Group Companies, Inc. informed that the Finnish Financial Supervision Authority had granted exemption to the Capital Group Companies, Inc. to report its holdings and those of Capital Group International, Inc. separately from those of Capital Research and Management Company. Pursuant to this exemption, the aggregate holdings of Capital Group Companies, Inc.; Capital Group International, Inc.; and its subsidiaries had fallen below 5% of the shares and voting rights of UPM-Kymmene Corporation. The aggregate holdings on 12 September 2007 were 11,388,908 shares, representing 2.15% of the shares and voting rights. The Capital Research and Management Company held, on 12 September 2007, a total of 16,035,800 UPM-Kymmene Corporation shares, representing 3.03% of the shares and voting rights. Litigation Certain 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 EU Member States, Canada and certain other countries have granted UPM conditional full immunity with respect to certain conduct disclosed to them. The US and Canadian investigations are now closed, and the European Commission has tentatively closed its investigation of the European fine paper, newsprint, magazine paper, label paper, and self-adhesive labelstock markets. 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 or litigations. Events after the balance sheet date On 11 October 2007, UPM sold port operators Rauma Stevedoring and Botnia Shipping to Babcock & Brown Infrastructure (BBI) for approximately EUR 90 million. These companies had 665 employees as of 30 September 2007. On 17 October 2007, UPM decided to close the Keuruu Veneer mill. The operations will cease in spring 2008. On 30 October 2007, UPM decided to terminate listing of its American Depositary Shares (ADS) from the New York Stock Exchange (NYSE) and seek deregistration and termination of its reporting obligations under the Securities Exchange Act of 1934. Apart from the above, the Group's management is not aware of any significant events occurring after 30 September that would have an impact on the financial statements. Outlook for the fourth quarter In Europe, demand for printing papers is forecast to grow slightly from the corresponding quarter of last year, while in North America it is expected to decrease. Strong growth in demand is expected to continue in emerging markets. UPM estimates its paper deliveries to be about the same as last year and the average price for all paper deliveries to be about the same as it was in the third quarter of 2007. Demand for self-adhesive label materials will be seasonally high in all main markets, and prices are expected to remain at current level. In wood products, good demand for plywood continues. Sawn-timber demand will be softer than earlier in the year. Availability of birch logs may limit production of birch plywood in the course of the period. The company's overall cost inflation for 2007 is estimated to be approximately 2.5% including the expected cost savings from the ongoing profitability programme. Divisional reviews Magazine Papers Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 07 07 07 06 06 06 06 07 06 Sales, EUR million 847 798 793 905 861 817 771 2,438 2,449 EBITDA, EUR million 1) 116 114 113 157 155 145 113 343 413 % of sales 13.7 14.3 14.2 17.3 18.0 17.7 14.7 14.1 16.9 Depreciation, -82 -443 -86 -88 -209 -210 -97 -611 -516 amortisation and impairment charges, EUR million Operating profit, 34 -339 27 75 -62 -85 16 -278 -131 EUR million % of sales 4.0 -42.5 3.4 8.3 -7.2 -10.4 2.1 -11.4 -5.3 Special items, EUR - -371 - 6 -126 -133 - -371 -259 million 2) Operating profit 34 32 27 69 64 48 16 93 128 excl. special items, EUR million % of sales 4.0 4.0 3.4 7.6 7.4 5.9 2.1 3.8 5.2 Deliveries, 1,000t 1,266 1,189 1,155 1,288 1,227 1,148 1,098 3,610 3,473 Q1-Q4/ 06 Sales, EUR million 3,354 EBITDA, EUR million 1) 570 % of sales 17.0 Depreciation, -604 amortisation and impairment charges, EUR million Operating profit, -56 EUR million % of sales -1.7 Special items, EUR -253 million 2) Operating profit 197 excl. special items, EUR million % of sales 5.9 Deliveries, 1,000t 4,761 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) Special items in the second quarter of 2007 include a goodwill impairment charge of EUR 350 million, an impairment charge of EUR 22 million and personnel costs of EUR 10 million related to the Miramichi paper mill, and an income of EUR 11 million related to impairment reversals. Special items in the second quarter of 2006 include personnel charges of EUR 20 million related to the profitability programme, and impairment charges of EUR 113 million related to the closure of the Voikkaa paper mill. In the third quarter, special items include personnel charges of EUR 8 million and impairment charges of EUR 3 million at Voikkaa, and impairment charges of EUR 115 million for Miramichi. In the fourth quarter, special items relate primarily to the capital gain on the sale of the Rauma power plant. Q3 of 2007 compared with Q3 of 2006 The operating profit, excluding special items, for Magazine Papers was EUR 34 million, EUR 30 million lower than a year ago (EUR 64 million). Sales were EUR 847 million (EUR 861 million). Paper deliveries increased by 3% to 1,266,000 (1,227,000) tonnes. Profitability weakened compared with the same period last year. The main reasons for the decline were lower paper prices and markedly increased fibre costs. The euro and the Canadian dollar strengthened, reducing profitability of exports. In Europe average prices decreased from last year and the average price for all magazine paper deliveries when translated into euros was over 6% lower than a year ago. The Miramichi magazine paper mill in Canada, with a capacity of 450,000 t/a, was shut down for 9-12 months at the end of August. Q1-Q3 of 2007 compared with Q1-Q3 of 2006 The operating profit, excluding special items, for Magazine Papers was EUR 93 million, EUR 35 million lower than in Q1-Q3 of the previous year (EUR 128 million). Sales amounted to EUR 2,438 million, slightly below last year's level (EUR 2,449 million). Paper deliveries increased by 4% to 3,610,000 (3,473,000) tonnes. Profitability decreased from the same period in 2006. Efficiency improved with the closures of uncompetitive capacity, and fixed costs were lower. The positive impact of cost savings was, however, offset by lower paper prices and higher fibre costs. The euro and the Canadian dollar strengthened, reducing profitability of exports. When translated into euros, the average price for all magazine paper deliveries was approximately 5% lower than a year ago. Market review During January-September, magazine paper demand in Europe continued to be good, driven by a strong increase in demand in Eastern Europe. Demand for both coated and uncoated magazine paper increased by about 4% from that seen in the same period in 2006. Export of magazine paper from Europe decreased from the previous year. The average market price for magazine papers in Europe was 3% down from last year's figure. In North America, demand for coated magazine paper increased by about 5% and the figure for uncoated magazine paper increased by about 6%. In North America, USD prices decreased by about 8%. Newsprint Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 07 07 07 06 06 06 06 07 Sales, EUR million 365 379 348 380 360 351 345 1,092 EBITDA, EUR million 1) 91 100 92 89 98 86 72 283 % of sales 24.9 26.4 26.4 23.4 27.2 24.5 20.9 25.9 Depreciation, -47 -47 -48 -48 -48 -47 -47 -142 amortisation and impairment charges, EUR million Operating profit, 44 53 44 39 50 34 25 141 EUR million % of sales 12.1 14.0 12.6 10.3 13.9 9.7 7.2 12.9 Special items, EUR - - - -2 - -5 - - million 2) Operating profit 44 53 44 41 50 39 25 141 excl. special items, EUR million % of sales 12.1 14.0 12.6 10.8 13.9 11.1 7.2 12.9 Deliveries, 1,000 t 667 683 630 697 666 660 654 1,980 Q1-Q3/ Q1-Q4/ 06 06 Sales, EUR million 1,056 1,436 EBITDA, EUR million 1) 256 345 % of sales 24.2 24.0 Depreciation, -142 -190 amortisation and impairment charges, EUR million Operating profit, 109 148 EUR million % of sales 10.3 10.3 Special items, EUR -5 -7 million 2) Operating profit 114 155 excl. special items, EUR million % of sales 10.8 10.8 Deliveries, 1,000 t 1,980 2,677 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) The special items booked for 2006 relate mainly to the profitability programme. Q3 of 2007 compared with Q3 of 2006 For Newsprint, operating profit, excluding special items, decreased to EUR 44 million (EUR 50 million). Sales were EUR 365 million (EUR 360 million). Paper deliveries amounted to 667,000 tonnes (666,000 tonnes). Paper prices were higher but an increase in recycled fibre and wood costs weakened profitability. Lower energy costs mitigated the negative impact of higher fibre costs. The average price for all newsprint deliveries, when translated into euros, was up about 1% on the figure for the corresponding quarter in 2006. The price development was affected by the change in sales mix. Q1-Q3 of 2007 compared with Q1-Q3 of 2006 Operating profit, excluding special items, for Newsprint came to EUR 141 million, EUR 27 million higher than a year ago (EUR 114 million). Sales were EUR 1,092 million (EUR 1,056 million). Paper deliveries were the same as a year ago, at 1,980,000 tonnes. The main contributor to the improved profitability was the higher price of newsprint. The average price for all newsprint deliveries when translated into euros was 3% higher than a year ago, despite a decline of overseas market prices. Costs savings from energy investments mitigated the impact of increased recycled fibre and wood costs. Market review The first nine months of the year saw demand for standard and improved newsprint decrease by about 2% in Europe when compared with the figure for the same period last year. Imports to Europe increased from the previous year. In Europe, the average market price for standard newsprint was about 5% higher than a year ago. In the other markets, with the exception of North America, demand increased but prices were lower than in the same period in 2006. Fine and Speciality Papers Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 07 07 07 06 06 06 06 07 Sales, EUR million 694 686 699 667 626 627 640 2,079 EBITDA, EUR million 1) 82 92 85 104 106 76 82 259 % of sales 11.8 13.4 12.2 15.6 16.9 12.1 12.8 12.5 Depreciation, -53 -53 -53 -56 -55 -71 -55 -159 amortisation and impairment charges, EUR million Operating profit, 29 39 32 44 50 -13 27 100 EUR million % of sales 4.2 5.7 4.6 6.6 8.0 -2.1 4.2 4.8 Special items, EUR - - - -3 -2 -36 - - million 2) Operating profit 29 39 32 47 52 23 27 100 excl. special items, EUR million % of sales 4.2 5.7 4.6 7.0 8.3 3.7 4.2 4.8 Deliveries, 1,000 t 954 960 968 907 878 884 881 2,882 Q1-Q3/Q1-Q4 / 06 06 Sales, EUR million 1,893 2,560 EBITDA, EUR million1) 264 368 % of sales 13.9 14.4 Depreciation, -181 -237 amortisation and impairment charges, EUR million Operating profit, 64 108 EUR million % of sales 3.4 4.2 Special items, EUR -38 -41 million 2) Operating profit 102 149 excl. special items, EUR million % of sales 5.4 5.8 Deliveries, 1,000 t 2,643 3,550 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) In 2006, special items include personnel and impairment charges related to the profitability programme. Q3 of 2007 compared with Q3 of 2006 The operating profit, excluding special items, for Fine and Speciality Papers came to EUR 29 million which is EUR 23 million less than last year (EUR 52 million). Sales increased from EUR 626 million to EUR 694 million. Paper deliveries increased by 9% to 954,000 (878,000) tonnes. The average price for all fine and speciality paper deliveries when translated into euros was about 2% higher than a year ago. Increase in fibre costs, however, more than offset the positive impact of higher average prices and increased delivery volumes. Strengthening of the euro against the US dollar weakened the profitability of exports. Q1-Q3 of 2007 compared with Q1-Q3 of 2006 The operating profit, excluding special items, for Fine and Speciality Papers was EUR 100 million, almost the same as last year (EUR 102 million). Sales increased from EUR 1,893 million to EUR 2,079 million. Paper deliveries amounted to 2,882,000 tonnes, 9% higher than a year ago (2,643,000 tonnes). More efficient utilisation of capacity and investments at the Changshu mill last year were the main contributors to the higher delivery volumes. The profitability of the division was almost the same as last year. When translated into euros, the average price for all fine and speciality paper deliveries was about 1% higher than a year ago. Increased efficiency and higher average paper prices mitigated the impact of increased fibre costs. Strengthening of the euro against the US dollar weakened profitability of exports. Market review In Europe, demand for coated fine paper increased by about 2% while that for uncoated fine paper remained the same when compared with the corresponding period last year. In Europe, the average market price for coated fine paper was about 1% higher and that for uncoated fine paper about 7% higher than in the same period last year. The good demand for packaging papers continued. Growth in demand for label papers slowed down from the previous year. In Asia, demand and prices for fine paper increased from last year. Label Materials Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 07 07 07 06 06 06 06 07 Sales, EUR million 252 260 261 251 240 245 251 773 EBITDA, EUR million 1) 18 21 26 25 20 24 24 65 % of sales 7.1 8.1 10.0 10.0 8.3 9.8 9.6 8.4 Depreciation, -8 -8 -8 -8 -9 -8 -7 -24 amortisation and impairment charges, EUR million Operating profit, 10 13 18 17 11 16 17 41 EUR million % of sales 4.0 5.0 6.9 6.8 4.6 6.5 6.8 5.3 Special items, EUR - - - - - - - - million Operating profit 10 13 18 17 11 16 17 41 excl. special items, EUR million % of sales 4.0 5.0 6.9 6.8 4.6 6.5 6.8 5.3 Q1-Q3/ Q1-Q4/ 06 06 Sales, EUR million 736 987 EBITDA, EUR million 1) 68 93 % of sales 9.2 9.4 Depreciation, -24 -32 amortisation and impairment charges, EUR million Operating profit, 44 61 EUR million % of sales 6.0 6.2 Special items, EUR - - million Operating profit 44 61 excl. special items, EUR million % of sales 6.0 6.2 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. Q3 of 2007 compared with Q3 of 2006 The operating profit, excluding special items, for Label Materials was EUR 10 million (EUR 11 million). Sales increased to EUR 252 million (EUR 240 million). The division's profitability was slightly lower than last year. Delivery volumes of self-adhesive label materials grew in the European and North American markets. In Asia, volumes increased due to the start-up of the new factory in China at the end of 2006 and opening of new distribution terminals in the region. For RFID, third-quarter development of volumes was strong. Q1-Q3 of 2007 compared with Q1-Q3 of 2006 Label Materials' operating profit, excluding special items, was EUR 41 million (EUR 44 million). Sales increased to EUR 773 million (EUR 736 million). The profitability of the division continued to be good despite a strong expansion of operations. Sales growth was affected by the stronger euro and changes in the product mix. In local currencies, the average price of self-adhesive label materials declined in most markets due to the highly competitive market situation. There were no marked changes in raw material prices. In RFID business, strong growth in volume continued. Market review In Europe, the good demand continued in the first half of the year, but there were some signs of it slowing down during the third quarter. In North America, demand for self-adhesive label materials improved somewhat in the third quarter, after the flat first half of the year. In the Asia-Pacific region, demand continued to grow at a healthy rate, which helped to maintain stable prices. For RFID, the retail and logistics markets were the strongest in Europe, while the media management, especially library sector, showed the strongest growth in the USA. Wood Products Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 07 07 07 06 06 06 06 07 Sales, EUR million 262 326 314 287 310 378 346 902 EBITDA, EUR million 1) 8 51 42 24 22 33 25 101 % of sales 3.1 15.6 13.4 8.4 7.1 8.7 7.2 11.2 Depreciation, -10 -11 -10 -10 -11 -11 -11 -31 amortisation and impairment charges, EUR million Operating profit, -2 41 32 14 104 22 4 71 EUR million % of sales -0.8 12.6 10.2 4.9 33.5 5.8 1.2 7.9 Special items, EUR - - - - 93 - -10 - million 2) Operating profit -2 41 32 14 11 22 14 71 excl. special items, EUR million % of sales -0.8 12.6 10.2 4.9 3.5 5.8 4.0 7.9 Deliveries, plywood 204 247 255 243 205 232 251 706 1,000 m3 Deliveries, sawn 480 637 587 598 517 622 580 1,704 timber 1,000 m3 Q1-Q3/ Q1-Q4/ 06 06 Sales, EUR million 1,034 1,321 EBITDA, EUR million 1) 80 104 % of sales 7.7 7.9 Depreciation, -33 -43 amortisation and impairment charges, EUR million Operating profit, 130 144 EUR million % of sales 12.6 10.9 Special items, EUR 83 83 million 2) Operating profit 47 61 excl. special items, EUR million % of sales 4.5 4.6 Deliveries, plywood 688 931 1,000 m3 Deliveries, sawn 1,719 2,317 timber 1,000 m3 1) EBITDA is operating profit before depreciation, amortisation and impairment charges and excluding special items. 2) Special items in the first quarter of 2006 include a loss of EUR 10 million from the sale of the Loulay plywood mill, and in the third quarter, a capital gain of EUR 93 million on the sale of Puukeskus. Q3 of 2007 compared with Q3 of 2006 The operating profit, excluding special items, for Wood Products declined from EUR 11 million, to a EUR 2 million loss. Sales came to EUR 262 million (EUR 310 million, including Puukeskus). Plywood deliveries were 204,000 (205,000) cubic metres in volume and sawn timber deliveries 480,000 (517,000) cubic metres. The profitability of Wood Products suffered as a result of sharply rising wood costs. The profitability of plywood remained slightly behind the previous year's level. Availability of birch logs was tight, causing less optimal use of production capacity. Sawmilling's profitability clearly decreased due to higher log prices and a soft market situation. Q1-Q3 of 2007 compared with Q1-Q3 of 2006 The operating profit, excluding special items, for the Wood Products was EUR 71 million, EUR 24 million higher than last year (EUR 47 million). Sales came to EUR 902 million (EUR 1,034 million). Excluding Puukeskus Oy, which was sold in August 2006, sales increased from last year. Plywood deliveries were 706,000 (688,000) cubic metres and sawn timber deliveries 1,704,000 (1,719,000) cubic metres. Despite the unsatisfactory third-quarter results, the profitability of the division was better than it was last year. Plywood profitability continued to be good, and sawmilling performed clearly better than last year. Market review In the first nine months of the year, birch plywood demand continued to be strong and prices increased. Demand for spruce plywood and veneers remained solid and prices remained stable. In the first half of the year, redwood and whitewood sawn timber demand was strong and prices increased. Following the summer, the markets have slowed down and inventories have increased. In the beginning of the year the supply of logs was tight but the situation has normalised for all species except the birch. Prices of logs were considerably higher than in the corresponding period a year ago. Other Operations EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 07 07 07 06 06 06 06 07 Sales 1) 173 214 234 224 206 189 204 621 EBITDA 2) 51 32 60 69 27 33 70 143 Depreciation, -6 -5 -10 -9 -9 -9 -6 -21 amortisation and impairment charges Operating profit Forestry 3) 43 34 28 23 20 -82 20 105 Energy Department, 23 19 28 36 - 18 40 70 Finland Other and - 59 -9 -10 -18 28 -5 50 eliminations 4) Operating profit, 66 112 47 49 2 -36 55 225 total Special items 4) - 71 - -6 -1 41 -5 71 Operating profit 66 41 47 55 3 -77 60 154 excl. special items EUR million Q1-Q3/ Q1-Q4/ 06 06 Sales 1) 599 823 EBITDA 2) 130 199 Depreciation, -24 -32 amortisation and impairment charges Operating profit Forestry 3) -42 -19 Energy Department, 58 94 Finland Other and 5 -5 eliminations 4) Operating profit, 21 70 total Special items 4) 35 29 Operating profit -14 41 excl. special items 1) Includes sales outside the Group. 2) EBITDA is operating profit before depreciation, amortisation and impairment charges, excluding the change in value of biological assets and special items. 3) The second quarter of 2006 includes a change of EUR 102 million of the decrease in the fair value of biological assets and wood harvested. 4) Special items in the second quarter of 2007 include capital gains of EUR 42 million related to the sale of UPM-Asunnot and EUR 29 million related to the sale of Walki Wisa. Special items in 2006 include in the first quarter the donation of EUR 5 million to UPM-Kymmene Cultural Foundation, and in the second quarter the capital gain of EUR 41 million for the sale of the Group head office real estate. Q3 of 2007 compared with Q3 of 2006 Excluding special items, the operating profit for Other Operations was EUR 66 million (EUR 3 million). Sales amounted to EUR 173 million (EUR 206 million). The operating profit of Forestry was EUR 43 million (EUR 20 million). The increase in the fair value of biological assets (growing trees) was EUR 49 million (EUR 19 million), and the cost of wood raw material harvested from the Group's forests was EUR 28 million (EUR 34 million). For the Energy Department in Finland, operating profit was EUR 23 million (EUR 0 million). Availability of hydropower was good. The Nord Pool price of electricity increased in the period under review but still remained lower than last year. Q1-Q3 of 2007 compared with Q1-Q3 of 2006 Excluding special items, the operating profit of Other Operations was EUR 154 million (loss of EUR 14 million). Sales were EUR 621 million (EUR 599 million). The increase in the fair value of biological assets (growing trees) was EUR 121 million (decrease of EUR 41 million). The cost of wood raw material harvested from the Group's forests was EUR 89 million (EUR 80 million). Associated companies and joint ventures EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/ 07 07 07 06 06 06 06 07 06 Share of result after tax Oy Metsä-Botnia Ab 19 12 21 18 24 13 14 52 51 Pohjolan Voima Oy -5 -5 - -9 -7 -5 7 -10 -5 Other - -1 - - 1 - 5 -1 6 Total 14 6 21 9 18 8 26 41 52 EUR million Q1-Q4/ 06 Share of result after tax Oy Metsä-Botnia Ab 69 Pohjolan Voima Oy -14 Other 6 Total 61 Deliveries Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ 07 07 07 06 06 06 06 07 Paper deliveries Magazine papers, 1,266 1,189 1,155 1,288 1,227 1,148 1,098 3,610 1,000 t Newsprint, 1,000 t 667 683 630 697 666 660 654 1,980 Fine and speciality 954 960 968 907 878 884 881 2,882 papers, 1,000 t Paper deliveries 2,887 2,832 2,753 2,892 2,771 2,692 2,633 8,472 total Wood products deliveries Plywood 1,000 m3 204 247 255 243 205 232 251 706 Sawn timber 1,000 m3 505 666 617 621 557 663 616 1,788 Q1-Q3/ Q1-Q4/ 06 06 Paper deliveries Magazine papers, 3,473 4,761 1,000 t Newsprint, 1,000 t 1,980 2,677 Fine and speciality 2,643 3,550 papers, 1,000 t Paper deliveries 8,096 10,988 total Wood products deliveries Plywood 1,000 m3 688 931 Sawn timber 1,000 m3 1,836 2,457 Helsinki, 30 October 2007 UPM-Kymmene Corporation Board of Directors Financial information This Interim Report is unaudited Condensed consolidated income statement EUR million Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/ 2007 2006 2007 2006 2006 Sales 2,467 2,495 7,523 7,439 10,022 Other operating 15 103 113 211 231 income Costs and expenses -2,116 -2,088 -6,380 -6,373 -8,514 Change in fair 21 -15 32 -121 -126 value of biological assets and wood harvested Share of results of 14 18 41 52 61 associated companies and joint ventures Depreciation, -206 -340 -988 -919 -1,138 amortisation and impairment charges Operating profit 195 173 341 289 536 Gains/losses on - - 2 - -2 available-for-sale investments, net Exchange rate and -9 -3 2 14 18 fair value gains and losses Interest and other -42 -41 -145 -139 -185 finance costs Profit before tax 144 129 200 164 367 Income taxes -25 18 -148 -21 -29 Profit for the period 119 147 52 143 338 Attributable to: Equity holders of 120 148 53 144 340 the parent company Minority interest -1 -1 -1 -1 -2 119 147 52 143 338 Basic earnings per 0.23 0.29 0.10 0.28 0.65 share, EUR Diluted earnings 0.23 0.28 0.10 0.27 0.65 per share, EUR Condensed consolidated balance sheet EUR million 30.09.07 30.09.06 31.12.06 ASSETS Non-current assets Goodwill 1,163 1,514 1,514 Other intangible assets 408 486 461 Property, plant and 6,276 6,595 6,500 equipment Biological assets 1,051 1,044 1,037 Investments in 1,188 1,165 1,177 associated companies and joint ventures Deferred tax assets 316 363 362 Other non-current assets 290 306 304 10,692 11,473 11,355 Current assets Inventories 1,325 1,264 1,255 Trade and other 1,824 1,730 1,660 receivables Cash and cash 121 147 199 equivalents 3,270 3,141 3,114 Assets held for sale 41 - - Total assets 14,003 14,614 14,469 EQUITY AND LIABILITIES Equity attributable to the equity holders of the parent company Share capital 890 890 890 Share premium reserve - 826 826 Fair value and 947 219 189 other reserves Retained earnings 5,010 5,168 5,366 6,847 7,103 7,271 Minority interest 16 19 18 Total equity 6,863 7,122 7,289 Non-current liabilities Deferred tax liabilities 753 820 790 Non-current interest- 3,115 3,904 3,353 bearing liabilities Other non-current 584 652 627 liabilities 4,452 5,376 4,770 Current liabilities Current interest- 1,195 761 992 bearing liabilities Trade and other 1,483 1,355 1,418 payables 2,678 2,116 2,410 Liabilities related 10 - - to assets held for sale Total liabilities 7,140 7,492 7,180 Total equity and 14,003 14,614 14,469 liabilities Condensed consolidated statement of changes in equity Attributable to equity holders of the parent EUR million Share Treasure Translat- Fair capital shares ion Share value differ- premium and other ences reserve reserves Balance at 1 890 -3 -34 826 233 January 2006 Transactions with equity holders Share options exercised - - - - - Reissuance of - 3 - - - treasury shares Share-based compensation - - - - 7 Dividend paid - - - - - Business combination - - - - - Income and expenses recognised directly in equity Translation differences - - -30 - - Other items - - - - -2 Net investment hedge, - - 8 - - net of tax Cash flow hedges recorded in equity, - - - - 34 net of tax transferred to - - - - 3 income statement, net of tax Available-for-sale investments transferred to - - - - - income statement, net of tax Profit for the period - - - - - Balance at 30 890 - -56 826 275 September 2006 Balance at 1 890 - -89 826 278 January 2007 Transactions with equity holders Share options exercised - - - - - Acquisitions of - -197 - - - treasury shares Share-based compensation, - - - - 12 net of tax Dividend paid - - - - - Transfers and other - - - -826 -122 Income and expenses recognised directly in equity Translation differences - - -16 - - Other items - - - - -2 Cash flow hedges recorded in equity, - - - - 43 net of tax transferred to - - - - -25 income statement, net of tax Available-for-sale investments transferred to - - - - -2 income statement, net of tax Profit for the period - - - - - Balance at 30 890 -197 -105 - 182 September 2007 EUR million Attributable to equity holders of the parent Reserve for Retained Total Minority Equity invested earnings interest total non-restricted equity Balance at 1 - 5,415 7,327 21 7,348 January 2006 Transactions with equity holders Share options exercised - - - - - Reissuance of - 1 4 - 4 treasury shares Share-based compensation - - 7 - 7 Dividend paid - -392 -392 - -392 Business combination - - - -1 -1 Income and expenses recognised directly in equity Translation differences - - -30 - -30 Other items - - -2 - -2 Net investment hedge, - - 8 - 8 net of tax Cash flow hedges recorded in equity, - - 34 - 34 net of tax transferred to - - 3 - 3 income statement, net of tax Available-for-sale investments transferred to - - - - - income statement, net of tax Profit for the period - 144 144 -1 143 Balance at 30 - 5,168 7,103 19 7,122 September 2006 Balance at 1 - 5,366 7,271 18 7,289 January 2007 Transactions with equity holders Share options exercised 104 - 104 - 104 Acquisitions of - - -197 - -197 treasury shares Share-based compensation, - - 12 - 12 net of tax Dividend paid - -392 -392 - -392 Transfers and other 963 -16 -1 -1 -2 Income and expenses recognised directly in equity Translation differences - - -16 - -16 Other items - -1 -3 - -3 Cash flow hedges recorded in equity, - - 43 - 43 net of tax transferred to - - -25 - -25 income statement, net of tax Available-for-sale investments transferred to - - -2 - -2 income statement, net of tax Profit for the period - 53 53 -1 52 Balance at 30 1,067 5,010 6,847 16 6,863 September 2007 Condensed consolidated cash flow statement EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/ 2007 2006 2006 Cash flow from operating activities Profit for the period 52 143 338 Adjustments, total 1,096 935 1,195 Change in working -271 -71 21 capital Cash generated from 877 1,007 1,554 operations Finance costs, net -162 -120 -180 Income taxes paid -142 -87 -159 Net cash from 573 800 1,215 operating activities Cash flow from investing activities Acquisitions and -13 -50 -68 share purchases Purchases of -520 -470 -635 intangible and tangible assets Asset sales and 186 329 389 other investing cash flow Net cash used in -347 -191 -314 investing activities Cash flow from financing activities Change in loans and 154 -320 -559 other financial items Share options 104 - - exercised Dividends paid -392 -392 -392 Purchases of own -169 - - shares Net cash used in -303 -712 -951 financing activities Change in cash and -77 -103 -50 cash equivalents Cash and cash 199 251 251 equivalents at beginning of period Foreign exchange -1 -1 -2 effect on cash Change in cash and -77 -103 -50 cash equivalents Cash and cash 121 147 199 equivalents at end of period Operating cash flow 1.09 1.53 2.32 per share, EUR Quarterly information EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ 2007 2007 2007 2006 2006 2006 2006 Sales by segment Magazine Papers 847 798 793 905 861 817 771 Newsprint 365 379 348 380 360 351 345 Fine and Speciality 694 686 699 667 626 627 640 Papers Label Materials 252 260 261 251 240 245 251 Wood Products 262 326 314 287 310 378 346 Other Operations 173 214 234 224 206 189 204 Internal sales -126 -126 -130 -131 -108 -123 -97 Sales, total 2,467 2,537 2,519 2,583 2,495 2,484 2,460 Operating profit by segment Magazine Papers 34 -339 27 75 -62 -85 16 Newsprint 44 53 44 39 50 34 25 Fine and Speciality 29 39 32 44 50 -13 27 Papers Label Materials 10 13 18 17 11 16 17 Wood Products -2 41 32 14 104 22 4 Other Operations 66 112 47 49 2 -36 55 Share of results of 14 6 21 9 18 8 26 associated companies and joint ventures Operating profit 195 -75 221 247 173 -54 170 (loss), total % of sales 7.9 -3.0 8.8 9.6 6.9 -2.2 6.9 Gains on - - 2 -2 - - - available-for-sale investments, net Exchange rate and -9 8 3 4 -3 5 12 fair value gains and losses Interest and other -42 -54 -49 -46 -41 -52 -46 finance costs, net Profit (loss) 144 -121 177 203 129 -101 136 before tax Income taxes -25 -77 -46 -8 18 -2 -37 Profit (loss) for 119 -198 131 195 147 -103 99 the period Basic earnings per 0.23 -0.38 0.25 0.37 0.29 -0.20 0.19 share, EUR Diluted earnings 0.23 -0.38 0.25 0.38 0.28 -0.20 0.19 per share, EUR Average number of 527,012 527,111 523,261 523,258 523,256 523,256 523,108 shares basic (1,000) Average number of 529,530 530,980 527,086 526,416 525,938 525,874 525,936 shares diluted (1,000) Special items in operating profit Special items in operating profit are specified in the divisional reviews on pages 5-8. Magazine Papers - -371 - 6 -126 -133 - Newsprint - - - -2 - -5 - Fine and Speciality - - - -3 -2 -36 - Papers Label Materials - - - - - - - Wood Products - - - - 93 - -10 Other Operations - 71 - -6 -1 41 -5 Share of results of - - - - - - - associated companies and joint ventures Special items in - -300 - -5 -36 -133 -15 operating profit, total Special items after - - - 6 - - - operating profit Special items - -32 - 35 20 -29 - reported in taxes (see page 3) Special items, total - -332 - 36 -16 -162 -15 Operating profit, 195 225 221 252 209 79 185 excluding special items % of sales 7.9 8.9 8.8 9.8 8.4 3.2 7.5 Profit before tax, 144 179 177 202 165 32 151 excluding special items % of sales 5.8 7.1 7.0 7.8 6.6 1.3 6.1 Earnings per share, 0.23 0.28 0.25 0.30 0.25 0.04 0.21 excluding special items, EUR Return on equity 6.9 8.5 7.3 8.7 7.2 1.1 6.1 excl. special items, % Return of capital 6.8 8.3 7.9 8.7 7.1 2.7 6.4 empl. excl. special items, % EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/ 2007 2006 2006 Sales by segment Magazine Papers 2,438 2,449 3,354 Newsprint 1,092 1,056 1,436 Fine and Speciality 2,079 1,893 2,560 Papers Label Materials 773 736 987 Wood Products 902 1,034 1,321 Other Operations 621 599 823 Internal sales -382 -328 -459 Sales, total 7,523 7,439 10,022 Operating profit by segment Magazine Papers -278 -131 -56 Newsprint 141 109 148 Fine and Speciality 100 64 108 Papers Label Materials 41 44 61 Wood Products 71 130 144 Other Operations 225 21 70 Share of results of 41 52 61 associated companies and joint ventures Operating profit 341 289 536 (loss), total % of sales 4.5 3.9 5.3 Gains on 2 - -2 available-for-sale investments, net Exchange rate and 2 14 18 fair value gains and losses Interest and other -145 -139 -185 finance costs, net Profit (loss) 200 164 367 before tax Income taxes -148 -21 -29 Profit (loss) for 52 143 338 the period Basic earnings per 0.10 0.28 0.65 share, EUR Diluted earnings 0.10 0.27 0.65 per share, EUR Average number of 525,794 523,207 523,220 shares basic (1,000) Average number of 529,198 525,916 526,041 shares diluted (1,000) Special items in operating profit Special items in operating profit are specified in the divisional reviews on pages 5-8. Magazine Papers -371 -259 -253 Newsprint - -5 -7 Fine and Speciality - -38 -41 Papers Label Materials - - - Wood Products - 83 83 Other Operations 71 35 29 Share of results of - - - associated companies and joint ventures Special items in -300 -184 -189 operating profit, total Special items after - - 6 operating profit Special items -32 -9 26 reported in taxes (see page 3) Special items, total -332 -193 -157 Operating profit, 641 473 725 excluding special items % of sales 8.5 6.4 7.2 Profit before tax, 500 348 550 excluding special items % of sales 6.6 4.7 5.5 Earnings per share, 0.76 0.50 0.80 excluding special items, EUR Return on equity 7.5 4.8 5.7 excl. special items, % Return of capital 7.6 5.4 6.2 empl. excl. special items, % Changes in property, plant and equipment EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/ 2007 2006 2006 Book value at 6,500 7,316 7,316 beginning of period Capital expenditure 503 442 604 Decreases -84 -254 -325 Depreciation -567 -617 -804 Impairment charges -22 -243 -243 Impairment reversal 11 - - Translation -65 -49 -48 difference and other changes Book value at end 6,276 6,595 6,500 of period Commitments and contingencies EUR million 30.09.07 30.09.06 31.12.06 Own commitments Mortgages 91 91 92 On behalf of associated companies and joint ventures Guarantees for loans 10 12 12 On behalf of others Guarantees for loans - 2 1 Other guarantees 3 6 5 Other own commitments Leasing commitments 18 19 23 for the next 12 months Leasing commitments 89 109 94 for subsequent periods Other commitments 74 70 69 Capital commitments EUR million Completion Total cost By 31.12. Q1-Q3/ After 2006 2007 30.09.07 Pulp mill rebuild, June 2008 325 25 169 131 Kymi New bioboiler, Sept. 2009 84 - 7 77 Caledonian New Poland mill, Nov. 2008 90 - 10 80 UPM Raflatac PM5 quality upgrade, June 2008 38 - 6 32 Jämsänkoski New USA mill, March 2008 75 8 39 28 UPM Raflatac, Dixon Notional amounts of derivative financial instruments EUR million 30.09.07 30.09.06 31.12.06 Currency derivatives Forward contracts 4,006 4,388 4,293 Options, bought 42 30 20 Options, written 47 35 10 Swaps 548 576 570 Interest rate derivatives Forward contracts 4,523 3,066 2,500 Swaps 2,504 2,643 2,566 Other derivatives Forward contracts 13 33 13 Swaps 4 20 16 Related party (associated companies and joint ventures) transactions and balances EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/ 2007 2006 2006 Sales to associated 91 41 61 companies Purchases from 356 334 448 associated companies Non-current receivables - 4 - at end of period Trade and other 16 16 20 receivables at end of period Trade and other 27 35 23 payables at end of period Key exchange rates for the euro at end of period 30.9.2007 30.6.2007 31.3.2007 31.12.2006 30.9.2006 USD 1.4179 1.3505 1.3318 1.3170 1.2660 CAD 1.4122 1.4245 1.5366 1.5281 1.4136 JPY 163.55 166.63 157.32 156.93 149.34 GBP 0.6968 0.6740 0.6798 0.6715 0.6777 SEK 9.2147 9.2525 9.3462 9.0404 9.2797 30.6.2006 31.3.2006 USD 1.2713 1.2104 CAD 1.4132 1.4084 JPY 145.75 142.42 GBP 0.6921 0.6964 SEK 9.2385 9.4315 Basis of preparation This unaudited financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the Group's Consolidated Financial Statements for 2006. Income tax expense is recognised based on the best estimate of the weighted average annual income tax rate expected for the full financial year. The Group has adopted the following standard: IFRS 7 Financial Instruments: Disclosures, and a complementary amendment to IAS 1 Presentation of Financial Statements - Capital Disclosures, effective for annual periods beginning on or after 1 January 2007. IFRS 7 introduces new disclosures to improve the information about financial instruments. The amendment to IAS 1 introduces disclosures about how an entity manages its capital. Adoption of IFRS 7 and the amendment to IAS 1 will expand disclosures presented in the annual financial statements. Calculation of key indicators Return on equity, %: (Profit before tax - income taxes) divided by Shareholders' equity (average) times 100 Return on capital employed, %: (Profit before tax + interest expenses and other financial expenses) divided by (Balance sheet total - non-interest-bearing liabilities (average)) times 100 Earnings per share: Profit for the period attributable to equity holders of parent company divided by Adjusted average number of shares during the period excluding own shares It should be noted that certain statements herein, which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein including the availability and cost of production inputs, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, 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 15-17 of the company's annual report 2006. UPM-Kymmene Corporation Pirkko Harrela Executive Vice President, Corporate Communications DISTRIBUTION OMX Nordic Exchange Helsinki New York Stock Exchange Main media www.upm-kymmene.com