Second quarter hit by high raw material costs, pressure continues; UPM committed to improve profitability

UPM-Kymmene Corporation   Stock Exchange Release  24 July 2008  at 09:30

Interim report January-June 2008: Earnings per share for the second quarter
were EUR 0.18 (EUR -0.38 for the second quarter of 2007), excluding special
items EUR 0.17 (0.28). Operating profit was EUR 157 million (a loss of 75
million) excluding special items EUR 155 million (225 million). Increase of
overall costs for the full year is still expected to be about 2%. 

Jussi Pesonen, UPM's President and CEO, comments on the result of the second
quarter of 2008: 

"Regrettably UPM's result for the second quarter was weak. While our internal
cost efficiency improved, our result was hit by the high wood and recovered
paper costs as well as significantly lower market prices for sawn timber.
Neither did the exchange rates work in our favour. On the positive side, we
were able to increase magazine paper prices and the average price of paper was
slightly higher than last year. Also the turnaround measures of the Label
Division got off to a good start." 

"The demand outlook of our businesses has weakened since the beginning of the
year, and our operative profitability for the full year 2008 is expected to be
lower than that of last year." 

"With this in mind, we are currently assessing the market potential of
different businesses, price and availability of raw materials as well as the
cost competitiveness of our various units. This review may result in permanent
or temporary closures." 

"In Finland, it is clear that we can only develop our Finnish units in the long
term providing that low cost Finnish wood is available. This is something we
will take into consideration in our assessment. We will make our plans based on
the assumption that the Russian export duty on wood will be implemented in the
beginning of 2009." 

"Due to cost savings from the ongoing profitability actions, the increase in
the company's overall costs for the full year is still expected to be about
2%," says Pesonen. 

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

***

News conference and conference call information

UPM's President and CEO Jussi Pesonen will present the financial results for
the period January-June 2008 in a press conference to be held at UPM Head
Office in Helsinki (main entrance, Eteläesplanadi 2) today, 24 July 2008, at
13:30 Finnish time (11:30 BST, 06:30 EST). 

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

A conference call, hosted by Jussi Pesonen, will take place on 24 July 2008, at
17:00 Finnish time (15:00 BST, 10:00 EST, please see dial-in details below).
Participants are registered by the operator before the start of the conference
call. In order to ensure a timely conference start, please dial in 10 minutes
before the conference start time. 

Dial-in numbers for conference call:
Call title: UPM-Kymmene, Interim Review Q2 2008
Access code: 49554834
International dial-in: +44 (0) 1452 555 566
UK Free call: 0800 6940 257
UK Local call: 0844 493 3800
USA Free Call: 1866 966 9439

Dial-in numbers for replay, available until 30 July 2008:
Access code: 49554834#
International Dial In:  +44 (0) 1452 550 000
UK Free Dial In:  0800 953 1533
UK Local Dial In:  0845 245 5205
USA Free Dial In:  1866 247 4222

***

It should be noted that certain statements herein which are not historical
facts, including, without limitation, those regarding expectations for market
growth and developments; expectations for growth and profitability; and
statements preceded by "believes", "expects", "anticipates", "foresees", or
similar expressions, are forward-looking statements. Since these statements are
based on current plans, estimates and projections, they involve risks and
uncertainties which may cause actual results to materially differ from those
expressed in such forward-looking statements. Such factors include, but are not
limited to: (1) operating factors such as continued success of manufacturing
activities and the achievement of efficiencies therein including the
availability and cost of production inputs, continued success of product
development, acceptance of new products or services by the Group's targeted
customers, success of the existing and future collaboration arrangements,
changes in business strategy or development plans or targets, changes in the
degree of protection created by the Group's patents and other intellectual
property rights, 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 68-69 of the company's Annual Report 2007. 

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

DISTRIBUTION
OMX Nordic Exchange Helsinki
Main media
www.upm-kymmene.com

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
communications@upm-kymmene.com