Earnings per share excluding special items for the first quarter were EUR 0.25
(EUR 0.21 for the first quarter of 2006). EBITDA was EUR 418 million 16.6%
of sales (EUR 386 million, 15.7%). Operating profit excluding special items
was EUR 221 million (EUR 185 million). New Label Division was formed for
self-adhesive label and RFID businesses.
Key figures
Q1/ Q1/ Q1-Q4/
2007 2006 2006
Sales, EUR million 2,519 2,460 10,022
EBITDA, EUR million 1) 418 386 1,678
% of sales 16.6 15.7 16.7
Operating profit, 221 170 536
EUR million
excluding special 221 185 725
items, EUR million
Profit before tax, 177 136 367
EUR million
excluding special 177 151 550
items, EUR million
Net profit for the 131 99 338
period, EUR million
Earnings per share, 0.25 0.19 0.65
EUR
excluding special 0.25 0.21 0.80
items, EUR
Diluted earnings 0.25 0.19 0.65
per share, EUR
Return on equity, % 7.3 5.5 4.6
excluding special 7.3 6.1 5.7
items, %
Return on capital 7.9 5.9 4.7
employed, %
excluding special 7.9 6.4 6.2
items, %
Gearing ratio at 57 67 56
end of period, %
Shareholders' equity 13.38 13.48 13.90
per share at end of
period, EUR
Net interest-bearing 4,023 4,768 4,048
liabilities at end of
period, EUR million
Capital employed at 11,330 12,516 11,634
end of period, EUR million
Capital expenditure, 193 177 699
EUR million
Personnel at end of 28,578 31,305 28,704
period
1) EBITDA is operating profit before depreciation, amortization 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.
Changes in reporting classifications
As of the beginning of 2007, the Converting Division consists only of UPM
Raflatac and the division has been renamed as the Label Division. The sale of
Walki Wisa is expected to be completed in the second quarter, and the unit is
reported in Other Operations. Comparative periods have been regrouped
accordingly.
Results
Q1 of 2007 compared with Q1 of 2006
Sales for the first quarter of 2007 were EUR 2,519 million, 2% higher than EUR
2,460 million in the first quarter of 2006.
Operating profit was EUR 221 million (EUR 170 million), 8.8% (6.9%) of sales.
In the first quarter of 2007 there were no special items. In 2006 operating
profit excluding special items was EUR 185 million, 7.5% of sales.
Operating profit increased as a result of improved utilisation of capacity and
internal efficiency. Paper prices on average remained about the same; prices
for
newsprint and uncoated fine paper increased, while prices for magazine paper
decreased. The good profitability of the label business continued. The
improvement of profitability in wood products came mainly from sawmilling. Raw
material costs, especially for wood and recycled fibre, increased. The impact
of the increase was partly compensated by lower fixed costs.
The share of results of associated companies and joint ventures was EUR 21
million (EUR 26 million).
Profit before tax was EUR 177 million (EUR 136 million) and excluding special
items EUR 177 million (EUR 151 million). Interest and other finance costs net
were EUR 49 million (EUR 46 million). The average interest rate on borrowings
increased; on the other hand, net interest-bearing liabilities were lower than
a year ago. Exchange rate and fair value gains and losses and gains on
available-for-sale investments resulted in a gain of EUR 5 million (EUR 12
million).
Income taxes were EUR 46 million (EUR 37 million). The effective tax rate was
26% (27%).
Profit for the first quarter was EUR 131 million (EUR 99 million) and earnings
per share were EUR 0.25 (EUR 0.19). Earnings per share excluding special items
were EUR 0.25 (EUR 0.21). Operating cash flow per share was EUR 0.36 (EUR
0.34).
Paper deliveries
Paper deliveries for the first three months were 2,753,000 tonnes, 5% higher
than in 2006 (2,633,000 tonnes). Magazine paper deliveries were 1,155,000
tonnes (1,098,000 tonnes), newsprint 630,000 tonnes (654,000 tonnes) and fine
and speciality papers 968,000 tonnes (881,000 tonnes).
Financing
Cash flow from operating activities, before capital expenditure and financing,
was EUR 187 million (EUR 180 million). The increase in net working capital
amounted to EUR 145 million (EUR 72 million).
The gearing ratio at 31 March was 57% (67% at 31 March 2006). Equity to assets
ratio at 31 March was 48.4% (44.8%). Net interest-bearing liabilities at the
end of the period were EUR 4,023 million (EUR 4,768 million).
Personnel
In the first quarter, UPM had an average of 28,558 employees (31,323
employees). At the beginning of the year the number of employees was 28,704
and at the end of the period 28,578.
Capital expenditure
During the first three months, gross capital expenditure was EUR 193 million,
7.7% of sales (EUR 177 million, 7.2% of sales).
The power plant investment at the Chapelle Darblay mill in France was completed
during the first quarter. The biofuel-powered boiler improves biomass
utilisation at the mill. The total investment cost was EUR 75 million.
At the Jämsänkoski mill, the coated magazine paper machine 4 was shut down for
conversion to label papers. The project is scheduled for completion in the
second quarter of 2007. The largest ongoing investment, the rebuild of the
recovery plant at the Kymi pulp mill, is proceeding according to plan.
In Uruguay, UPM's associated company, Oy Metsä-Botnia Ab, is constructing a
pulp mill with an annual capacity of 1 million tonnes. The construction is on
schedule for a Q3/2007 start-up.
Changes in the Group's structure
In February 2007, UPM announced the sale of Walki Wisa to funds managed by
CapMan. UPM estimates the sale to result in a capital gain of EUR 25 million.
The transaction is expected to be completed in the second quarter of 2007. In
2006 Walki Wisa had sales of EUR 287 million and it employed about 950 people.
After the balance sheet date in April, UPM signed an agreement on the sale of
UPM-Asunnot Oy to Waterhouse Real Estate Investment Oy. A capital gain of
around EUR 35 million is estimated on the sale. The transaction is estimated to
be concluded in the second quarter of 2007. UPM-Asunnot Oy owns around 2,000
rental apartments and employs 15 people.
Shares
In the first quarter of 2007, UPM shares worth, in total, EUR 4,267 million
were traded on the Helsinki Stock Exchange (EUR 5,168 million). The highest
quotation was EUR 20.59 in February and the lowest EUR 18.73 in March. On the
New York Stock Exchange, the company's shares were traded to a total value of
USD 57 million (90 million).
The Annual General Meeting held on 27 March 2007 approved a proposal by the
Board of Directors to authorise the Board to buy back not more than
52,000,000 own shares. The authorisation is valid for 18 months. The meeting
authorized the board to decide on the disposal of shares so acquired as well
as on an issue of shares free of payment 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 authorization may not exceed
1/10 of the total number of shares of the company. These authorisations will
remain valid for three years from the date of the decision of the Annual
General Meeting.
Additionally, the 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 the shares to be obtained under special rights,
will 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. This authorisation is valid for no
more than three years from the date of the decision.
The meeting also decided on granting share options in connection with the
company's share-based incentive plans. In the option programmes 2007 A, B and
C, the total number of share options is no more than 15,000,000, and they will
entitle to subscribe in total for no more than 15,000,000 new shares of the
company.
In the first quarter of 2007, 2,600 shares were subscribed for through
exercising of outstanding share options. The number of shares entered in the
Trade Register at 31 March 2007 was 523,262,030. Through the issuance
authorisation and share options, the number of shares may increase to a maximum
of 812,451,130.
At the end of the period, the company did not hold any of its own shares.
Apart from the above, the Board of Directors has no current authorisation to
issue shares, convertible bonds or share options.
Dividend
The Annual General Meeting of 27 March 2007 approved the Board's proposal to
pay a dividend of EUR 0.75 per share for the 2006 financial year. The total
dividend of EUR 392 million was debited from shareholders' equity and credited
to short-term non-interest-bearing liabilities at the end of March. The
dividend was paid on 10 April 2007.
Company directors
The Annual General Meeting of 27 March 2007 confirmed that the number of
members on the Board of directors is 11. Mr Veli-Matti Reinikkala, Head of
Process Automation Division of ABB, and Mr Jussi Pesonen, President and CEO of
UPM, were elected to the Board of Directors as new members. In addition, Mr
Michael C. Bottenheim, LL.M., MBA; Mr Berndt Brunow, President and CEO of Oy
Karl Fazer Ab; Mr Karl Grotenfelt, LL.M., Chairman of the Board of Directors of
Famigro Oy; Dr. Georg Holzhey, former Executive Vice President of UPM and
Director of G. Haindl'sche Papierfabriken KGaA; Ms Wendy E. Lane, Chairman of
American investment firm Lane Holdings, Inc; Mr Jorma Ollila, Chairman of Nokia
Corporation and Royal Dutch Shell plc; Ms Ursula Ranin, LL.M., B.Sc. (Econ.),
Ms Françoise Sampermans, B.A., Psych., Publishing Consultant and Mr Vesa
Vainio, LL.M., were re-elected members of the Board of Directors. The term of
office of the members of the Board of Directors lasts until the end of the next
Annual General Meeting.
At the assembly meeting of the Board of Directors, Mr Vesa Vainio was
re-elected as Chairman, and Mr Jorma Ollila and Mr Berndt Brunow were
re-elected as Vice Chairmen. In addition, the Board of Directors elected from
its members an Audit Committee with Mr Michael C. Bottenheim as Chairman, and
Ms Wendy E. Lane and Mr Veli-Matti Reinikkala as members. A Human Resources
Committee was elected with Mr Berndt Brunow as Chairman, and Mr Georg Holzhey,
Ms Ursula Ranin and Ms Françoise Sampermans as members. Furthermore, a
Nominating 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
investigations started in 2003. The U.S. Department of Justice, the EU
authorities and the authorities in several EU Member States, Canada and certain
other countries have granted UPM conditional full immunities with respect to
certain conduct disclosed to the authorities. The investigations of the U.S.
labelstock industry and European fine paper, newsprint, magazine paper, label
paper and self-adhesive labelstock markets have been closed by the U.S.
Department of Justice and the European Commission competition authority.
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.
Events after the balance sheet date
With the exception of the sale of UPM-Asunnot Oy, the Group's management is not
aware of any other significant events occuring after 31 March 2007 which would
have had an impact on the financial statements.
Outlook for the second quarter
In Europe, demand for printing papers is forecast to grow from the
corresponding quarter of last year, while in North America demand is expected
to decrease. Strong growth in demand is expected to continue in the emerging
markets. UPM estimates its paper deliveries to increase from last year and
average price for all paper deliveries to be about the same as in the first
quarter of 2007.
Demand for self-adhesive label materials is forecast to continue to grow in all
markets, and prices are expected to remain stable.
In wood products, strong demand for plywood and sawn timber will continue
during the second quarter.
Increase in wood cost and possible lack of sufficient supply of wood raw
material may result in less optimal use of capacity.
The company's overall cost inflation is estimated to remain at the level of
1-2%, including expected cost savings from the ongoing profitability programme.
Divisional reviews
Magazine Papers
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales, EUR million 793 905 861 817 771 3,354
EBITDA, EUR million 1) 113 157 155 145 113 570
% of sales 14.2 17.3 18.0 17.7 14.7 17.0
Depreciation, -86 -88 -209 -210 -97 -604
amortization and impairment
charges, EUR million
Operating profit, 27 75 -62 -85 16 -56
EUR million
% of sales 3.4 8.3 -7.2 -10.4 2.1 -1.7
Special items, EUR - 6 -126 -133 - -253
million 2)
Operating profit 27 69 64 48 16 197
excl. special items, EUR million
% of sales 3.4 7.6 7.4 5.9 2.1 5.9
Deliveries, 1,000 t 1,155 1,288 1,227 1,148 1,098 4,761
1) EBITDA is operating profit before depreciation, amortization and impairment
charges and excluding special items.
2) Special items in the second quarter 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 Rauma power plant.
Q1 of 2007 compared with Q1 of 2006
Operating profit, excluding special items, for Magazine Papers was EUR 27
million (EUR 16 million). Sales increased from EUR 771 million to EUR 793
million. Paper deliveries had a volume of 1,155,000 (1,098,000) tonnes.
Fixed costs were lower, internal efficiency improved and delivery volumes
increased but profitability of the division remained unchanged due to a decline
in paper prices. Average price for all magazine paper deliveries translated
into euros was over 4% lower than a year ago. In Europe, the price for
magazine paper decreased by about 2%.
Market review
During the first three months of the year, magazine paper demand in Europe
continued to be good, driven by a strong increase in demand in Eastern Europe.
Coated magazine paper demand increased by about 3% and that for uncoated
magazine paper by about 5% compared with the same period in 2006. Export of
magazine paper from Europe decreased compared with the previous year. In North
America, demand for coated magazine paper decreased slightly, while the figure
for uncoated magazine paper increased by about 5%. Average market price for
magazine papers in Europe was down from last year. In North America, prices
decreased by about 9%.
Newsprint
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales, EUR million 348 380 360 351 345 1,436
EBITDA, EUR million 1) 92 89 98 86 72 345
% of sales 26.4 23.4 27.2 24.5 20.9 24.0
Depreciation, -48 -48 -48 -47 -47 -190
amortization and impairment charges,
EUR million
Operating profit, 44 39 50 34 25 148
EUR million
% of sales 12.6 10.3 13.9 9.7 7.2 10.3
Special items, EUR - -2 - -5 - -7
million 2)
Operating profit 44 41 50 39 25 155
excl. special items, EUR million
% of sales 12.6 10.8 13.9 11.1 7.2 10.8
Deliveries, 1,000 t 630 697 666 660 654 2,677
1) EBITDA is operating profit before depreciation, amortization and impairment
charges and excluding special items.
2) The special items booked for 2006 relate mainly to the profitability
programme.
Q1 of 2007 compared with Q1 of 2006
Operating profit, excluding special items, for Newsprint increased from EUR 25
million to EUR 44 million. Sales were EUR 348 million (EUR 345 million). Paper
deliveries were 630,000 tonnes (654,000 tonnes).
The main contributor to the improved profitability was the higher price of
newsprint. The start-up of the new biofuel power plants at the Shotton and
Chapelle Darblay mills lowered energy costs. On the other hand, the price of
recycled paper was higher than a year ago. Average price for all newsprint
deliveries translated into euros was almost 5% up from the corresponding period
in 2006.
Market review
In Europe, demand for standard and improved newsprint was almost the same as in
the first quarter of last year. Net exports from Western Europe decreased. In
Europe, average market price for standard newsprint was about 4% up. In the
other markets, with the exception of North America, demand increased but prices
were lower than in the same period last year.
Fine and Speciality Papers
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales, EUR million 699 667 626 627 640 2,560
EBITDA, EUR million 1) 85 104 106 76 82 368
% of sales 12.2 15.6 16.9 12.1 12.8 14.4
Depreciation, -53 -56 -55 -71 -55 -237
amortization and impairment charges,
EUR million
Operating profit, 32 44 50 -13 27 108
EUR million
% of sales 4.6 6.6 8.0 -2.1 4.2 4.2
Special items, EUR - -3 -2 -36 - -41
million 2)
Operating profit 32 47 52 23 27 149
excl. special
items, EUR million
% of sales 4.6 7.0 8.3 3.7 4.2 5.8
Deliveries, 1,000 t 968 907 878 884 881 3,550
1) EBITDA is operating profit before depreciation, amortization and impairment
charges and excluding special items.
2) In 2006, special items include personnel and impairment charges related to
the profitability programme.
Q1 of 2007 compared with Q1 of 2006
Operating profit, excluding special items, for Fine and Speciality Papers was
EUR 32 million (EUR 27 million). Sales increased from EUR 640 million to EUR
699 million. Paper deliveries were 968,000 (881,000) tonnes.
Increased operating efficiency and higher uncoated fine paper prices had a
positive effect on the profitability of the division. However, prices for
certain raw materials, especially for chemical pulp, rose compared with the
first quarter of 2006. Average price for all fine and speciality paper
deliveries translated into euros remained about the same.
Market review
In Europe, demand for coated fine paper increased by about 2% compared with
the same period last year. Demand for uncoated fine paper increased slightly.
Good demand for label and packaging papers continued. In Europe, average
market price for coated fine paper was about the same as in the first quarter
of 2006. Average market price for uncoated fine paper increased by about 4%.
In Asia, demand and prices for fine paper increased from last year.
Label Materials
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales, EUR million 261 251 240 245 251 987
EBITDA, EUR million 1) 26 25 20 24 24 93
% of sales 10.0 10.0 8.3 9.8 9.6 9.4
Depreciation, -8 -8 -9 -8 -7 -32
amortization and impairment charges,
EUR million
Operating profit, 18 17 11 16 17 61
EUR million
% of sales 6.9 6.8 4.6 6.5 6.8 6.2
Special items, EUR - - - - - -
million
Operating profit 18 17 11 16 17 61
excl. special items, EUR million
% of sales 6.9 6.8 4.6 6.5 6.8 6.2
1) EBITDA is operating profit before depreciation, amortization and impairment
charges and excluding special items.
Q1 of 2007 compared with Q1 of 2006
Operating profit, excluding special items, for the Label Division was EUR 18
million (EUR 17 million). Sales increased by 4% from EUR 251 million to EUR 261
million.
The profitability of the division continued to be good. Delivery volumes grew
in the European and North American markets. In Asia, volumes increased after
the
start-up of the new factory in China at the end of 2006. The average price of
label materials in local currencies remained stable. There were no marked
changes in raw material prices.
Market review
During the first months of the year in Europe and North America, good demand
for label materials continued. At the beginning of the year the growth rate of
demand was somewhat lower compared with last year, but the markets picked-up
towards the end of the quarter. A strong increase in demand continued in Asia.
Wood Products
Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales, EUR million 314 287 310 378 346 1,321
EBITDA, EUR million 1) 42 24 22 33 25 104
% of sales 13.4 8.4 7.1 8.7 7.2 7.9
Depreciation, -10 -10 -11 -11 -11 -43
amortization and impairment charges,
EUR million
Operating profit, 32 14 104 22 4 144
EUR million
% of sales 10.2 4.9 33.5 5.8 1.2 10.9
Special items, EUR - - 93 - -10 83
million 2)
Operating profit 32 14 11 22 14 61
excl. special
items, EUR million
% of sales 10.2 4.9 3.5 5.8 4.0 4.6
Deliveries, plywood 255 243 205 232 251 931
1,000 m3
Deliveries, sawn 587 598 517 622 580 2,317
timber 1,000 m3
1) EBITDA is operating profit before depreciation, amortization and impairment
charges and excluding special items.
2) Special items in the first quarter 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.
Q1 of 2007 compared with Q1 of 2006
Operating profit, excluding special items, for Wood Products increased from EUR
14 million to EUR 32 million. Sales came to EUR 314 million (EUR 346 million).
Excluding Puukeskus Oy, which was sold in August 2006, sales increased from
the first quarter of 2006. Plywood deliveries were 255,000 (251,000) cubic
metres and sawn timber deliveries 587,000 (580,000) cubic metres.
The profitability of the division improved despite increased raw material costs
and weakened availability of logs. The profitability of plywood continued to be
good, and sawmilling clearly improved its profitability from last year.
Market review
During the first quarter, birch and spruce plywood demand continued strong in
all markets. Plywood prices were slightly higher than a year ago. The markets
for veneers and further processed goods were solid. Redwood and whitewood sawn
timber demand continued to strengthen and prices increased. The supply of logs
tightened due to higher demand that caused an increase in the cost of wood raw
material.
Other Operations
EUR million Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales 1) 234 224 206 189 204 823
EBITDA 2) 60 69 27 33 70 199
Depreciation, -10 -9 -9 -9 -5 -32
amortization and impairment charges
Operating profit
Forestry 3) 28 23 20 -82 20 -19
Energy Department, 28 36 - 18 40 94
Finland
Other and -9 -10 -18 28 -5 -5
eliminations
Operating profit, 47 49 2 -36 55 70
total
Special items, EUR - -6 -1 41 -5 29
million 4)
Operating profit 47 55 3 -77 60 41
excl. special items, MEUR
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 special
items.
3) The second quarter of 2006 includes a decrease of EUR 102 million in the
fair value of biological assets and wood harvested.
4) Special items in 2006 include in the first quarter the donation of EUR 5
million to a 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.
Q1 of 2007 compared with Q1 of 2006
Excluding special items, operating profit for Other Operations was EUR 47
million (EUR 60 million). Sales were EUR 234 million (EUR 204 million).
The operating profit of Forestry was EUR 28 million (EUR 20 million). The
increase in the fair value of biological assets (growing trees) was EUR 23
million (EUR 16 million). The cost of wood raw material harvested from the
Group's forests was EUR 26 million (EUR 21 million). Fellings from the Group's
own forests increased as planned to compensate shortage in wood supply.
The operating profit of the Energy Department in Finland was EUR 28 million
(EUR 40 million). Hydropower availability was good as the water reservoirs in
the Nordic countries returned to their normal levels for the season. The price
of electricity at Nord Pool was significantly lower than in the corresponding
period a year ago.
Associated companies and joint ventures
EUR million Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q4/
2007 2006 2006 2006 2006 2006
Share of result after tax
Oy Metsä-Botnia Ab 21 18 24 13 14 69
Pohjolan Voima Oy - -9 -7 -5 7 -14
Other - - 1 - 5 6
Total 21 9 18 8 26 61
Deliveries
Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/
2007 2006 2006 2006 2006 2006
Paper deliveries
Magazine papers, 1,155 1,288 1,227 1,148 1,098 4,761
1,000 t
Newsprint, 1,000 t 630 697 666 660 654 2,677
Fine and speciality 968 907 878 884 881 3,550
papers, 1,000 t
Paper deliveries 2,753 2,892 2,771 2,692 2,633 10,988
total
Wood products deliveries
Plywood 1,000 m3 255 243 205 232 251 931
Sawn timber 1,000 m3 587 598 517 622 580 2,317
Helsinki, 24 April 2007
UPM-Kymmene Corporation
Board of Directors
This Interim Report is unaudited
Financial information
Consolidated income statement
EUR million Q1/ Q1/ Q1-Q4/
2007 2006 2006
Sales 2,519 2,460 10,022
Other operating 18 41 231
income
Costs and expenses -2,119 -2,130 -8,514
Change in fair -3 -4 -126
value of biological assets
and wood harvested
Share of results of 21 26 61
associated companies and joint ventures
Depreciation, -215 -223 -1,138
amortization and impairment charges
Operating profit 221 170 536
Gains/losses on 2 - -2
available-for-sale investments, net
Exchange rate and 3 12 18
fair value gains and losses
Interest and other -49 -46 -185
finance costs
Profit before tax 177 136 367
Income taxes -46 -37 -29
Profit for the 131 99 338
period
Attributable to:
Equity holders of 131 99 340
the parent company
Minority interest - - -2
131 99 338
Basic earnings per 0.25 0.19 0.65
share, EUR
Diluted earnings 0.25 0.19 0.65
per share, EUR
Condensed consolidated balance sheet
EUR million 31.03. 31.03. 31.12.
2007 2006 2006
ASSETS
Non-current assets
Goodwill 1,514 1,514 1,514
Other intangible 435 576 461
assets
Property, plant and 6,435 7,224 6,500
equipment
Biological assets 1,027 1,168 1,037
Investments in 1,175 1,044 1,177
associated companies and joint ventures
Deferred tax assets 360 345 362
Other non-current assets 281 375 304
11,227 12,246 11,355
Current assets
Inventories 1,273 1,312 1,255
Trade and other 1,699 1,741 1,660
receivables
Cash and cash 200 531 199
equivalents
3,172 3,584 3,114
Assets held for sale 157 7 -
Total assets 14,556 15,837 14,469
EQUITY AND LIABILITIES
Equity attributable to the equity
holders of the parent company
Share capital 890 890 890
Share premium reserve 826 826 826
Fair value and 178 212 189
other reserves
Retained earnings 5,106 5,123 5,366
7,000 7,051 7,271
Minority interest 18 21 18
Total equity 7,018 7,072 7,289
Non-current liabilities
Deferred tax 781 900 790
liabilities
Non-current 3,238 4,380 3,353
interest-bearing liabilities
Other non-current 600 641 627
liabilities
4,619 5,921 4,770
Current liabilities
Current 1,068 1,063 992
interest-bearing liabilities
Trade and other 1,809 1,769 1,418
payables
2,877 2,832 2,410
Liabilities related 42 12 -
to assets held for sale
Total liabilities 7,538 8,765 7,180
Total equity and 14,556 15,837 14,469
liabilities
Consolidated statement of changes in equity
Attributable to equity holders of the parent
EUR million Share Treasury Transla- Share Fair Retained
capital shares tion premium value earnings
diffe- reserve and
rences other
reserves
Balance at 890 -3 -34 826 233 5,415
1 January 2006
Transactions with
equity holders
Reissuance of - 3 - - - 1
treasury shares
Share-based - - - - 2 -
compensation
Dividend paid - - - - - -392
Income and expenses recognised directly in equity
Translation differences - - -22 - - -
Net investment - - 7 - - -
hedge, net of tax
Cash flow hedges
recorded in equity, - - - - 17 -
net of tax
transferred to - - - - 9 -
income statement, net of tax
Available-for-sale investments
transferred to - - - - - -
income statement, net of tax
Profit for the period - - - - - 99
Balance at 31 March 890 - -49 826 261 5,123
2006
Balance at 890 - -89 826 278 5,366
1 January 2007
Transactions with equity holders
Share-based - - - - 1 -
compensation
Dividend paid - - - - - -392
Income and expenses recognised directly in equity
Translation differences - - -11 - - -
Other Items - - - - - 1
Cash flow hedges
recorded in equity, - - - - 9 -
net of tax
transferred to - - - - -8 -
income statement, net of tax
Available-for-sale investments
transferred to - - - - -2 -
income statement, net of tax
Profit for the period - - - - - 131
Balance at 31 March 890 - -100 826 278 5,106
2007
EUR million Total Minority Equity
interest total
Balance at 1 7,327 21 7,348
January 2006
Transactions with equity holders
Reissuance of 4 - 4
treasury shares
Share-based 2 - 2
compensation
Dividend paid -392 - -392
Income and expenses recognised directly in equity
Translation differences -22 - -22
Net investment 7 - 7
hedge, net of tax
Cash flow hedges
recorded in equity, 17 - 17
net of tax
transferred to 9 - 9
income statement, net of tax
Available-for-sale investments
transferred to - - -
income statement, net of tax
Profit for the period 99 - 99
Balance at 31 March 7,051 21 7,072
2006
Balance at 7,271 18 7,289
1 January 2007
Transactions with equity holders
Share-based 1 - 1
compensation
Dividend paid -392 - -392
Income and expenses recognised directly in equity
Translation differences -11 - -11
Other Items 1 - 1
Cash flow hedges
recorded in equity, 9 - 9
net of tax
transferred to -8 - -8
income statement, net of tax
Available-for-sale investments
transferred to -2 - -2
income statement, net of tax
Profit for the period 131 - 131
Balance at 31 March 7,000 18 7,018
2007
Condensed consolidated cash flow statement
EUR million Q1/ Q1/ Q1-Q4/
2007 2006 2006
Cash flow from operating activities
Profit for the period 131 99 338
Adjustments, total 273 220 1,195
Change in working -145 -72 21
capital
Cash generated from 259 247 1,554
operations
Finance costs, net -24 -33 -180
Income taxes paid -48 -34 -159
Net cash from 187 180 1,215
operating activities
Cash flow from investing activities
Acquisitions and -2 -33 -68
share purchases
Purchases of -201 -151 -635
intangible and tangible assets
Asset sales and 21 69 389
other investing cash flow
Net cash used in -182 -115 -314
investing activities
Cash flow from financing activities
Change in loans and -3 215 -559
other financial items
Dividends paid - - -392
Net cash used in -3 215 -951
financing activities
Change in cash and 2 280 -50
cash equivalents
Cash and cash 199 251 251
equivalents at beginning of period
Foreign exchange - - -2
effect on cash
Change in cash and 2 280 -50
cash equivalents
Cash and cash 201 531 199
equivalents at end of period
Operating cash flow 0.36 0.34 2.32
per share, EUR
Quarterly information
EUR million Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q4/
2007 2006 2006 2006 2006 2006
Sales by segment
Magazine Papers 793 905 861 817 771 3,354
Newsprint 348 380 360 351 345 1,436
Fine and Speciality 699 667 626 627 640 2,560
Papers
Label Materials 261 251 240 245 251 987
Wood Products 314 287 310 378 346 1,321
Other Operations 234 224 206 189 204 823
Internal sales -130 -131 -108 -123 -97 -459
Sales, total 2,519 2,583 2,495 2,484 2,460 10,022
Operating profit by segment
Magazine Papers 27 75 -62 -85 16 -56
Newsprint 44 39 50 34 25 148
Fine and Speciality 32 44 50 -13 27 108
Papers
Label Materials 18 17 11 16 17 61
Wood Products 32 14 104 22 4 144
Other Operations 47 49 2 -36 55 70
Share of results of 21 9 18 8 26 61
associated companies and joint ventures
Operating profit 221 247 173 -54 170 536
(loss), total
% of sales 8.8 9.6 6.9 -2.2 6.9 5.3
Gains on 2 -2 - - - -2
available-for-sale investments, net
Exchange rate and 3 4 -3 5 12 18
fair value gains and losses
Interest and other -49 -46 -41 -52 -46 -185
finance costs, net
Profit (loss) 177 203 129 -101 136 367
before tax
Income taxes -46 -8 18 -2 -37 -29
Profit (loss) for 131 195 147 -103 99 338
the period
Basic earnings per 0.25 0.37 0.29 -0.20 0.19 0.65
share, EUR
Diluted earnings 0.25 0.38 0.28 -0.20 0.19 0.65
per share, EUR
Average number of 523,261 523,258 523,256 523,256 523,108 523,220
shares basic (1,000)
Average number of 527,086 526,416 525,938 525,874 525,936 526,041
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 - 6 -126 -133 - -253
Newsprint - -2 - -5 - -7
Fine and Speciality - -3 -2 -36 - -41
papers
Label Materials - - - - - -
Wood Products - - 93 - -10 83
Other Operations - -6 -1 41 -5 29
Share of results of - - - - - -
associated companies and joint ventures
Special items in - -5 -36 -133 -15 -189
operating profit, total
Special items after - 6 - - - 6
operating profit
Special items - 35 20 -29 - 26
reported in taxes
Special items, total - 36 -16 -162 -15 -157
Operating profit, 221 252 209 79 185 725
excluding special items
% of sales 8.8 9.8 8.4 3.2 7.5 7.2
Profit before tax, 177 202 165 32 151 550
excluding special items
% of sales 7.0 7.8 6.6 1.3 6.1 5.5
Earnings per share, 0.25 0.30 0.25 0.04 0.21 0.80
excluding special items, EUR
Return on equity 7.3 8.7 7.2 1.1 6.1 5.7
excl. special. items, %
Return of capital 7.9 8.7 7.1 2.7 6.4 6.2
empl. excl. special items, %
Changes in property, plant and equipment
EUR million Q1/ Q1/ Q1-Q4/
2007 2006 2006
Book value at 6,500 7,316 7,316
beginning of period
Acquired companies - - -
Capital 181 144 604
expenditure
Decreases -12 -19 -325
Depreciation and -195 -206 -1,039
impairment charges
Translation -39 -11 -56
difference and other changes
Book value at end 6,435 7,224 6,500
of period
Commitments and contingencies
EUR million 31.03. 31.03. 31.12.
2007 2006 2006
Own commitments
Mortgages 94 94 92
On behalf of associated companies and joint ventures
Guarantees for loans 11 19 12
On behalf of others
Guarantees for loans 1 2 1
Other guarantees 5 6 5
Other own commitments
Leasing commitments 26 23 23
for the next 12 months
Leasing commitments 94 72 94
for subsequent periods
Other commitments 80 69 69
Capital commitments
EUR million Completion Total By 31.12. Q1/ After
cost 2006 2007 31.3.
2007
Pulp mill rebuild, June 2008 325 25 77 223
Kymi
New USA mill, March 2008 88 8 9 71
UPM Raflatac, Dixon
New Bioboiler, September 2009 72 - - 72
Caledonian
PM5 quality June 2008 38 - - 38
upgrade, Jämsänkoski
PM4, rebuild, May 2007 45 11 13 21
Jämsänkoski
Notional amounts of derivative financial instruments
EUR million 31.03. 31.03. 31.12.
2007 2006 2006
Currency derivatives
Forward contracts 3,968 4,440 4,293
Options, bought 3 10 20
Options, written 3 10 10
Swaps 565 577 570
Interest rate derivatives
Forward contracts 2,851 3,193 2,500
Swaps 2,542 2,743 2,566
Other derivatives
Forward contracts 12 20 13
Swaps 12 31 16
Related party (associated companies and joint ventures) transactions and
balances
EUR million Q1/ Q1/Q1-Q4/
2007 2006 2006
Sales to associated 15 14 61
companies
Purchases from 103 86 448
associated companies
Non-current - 4 -
receivables at end of period
Trade and other 14 11 20
receivables at end of period
Trade and other 28 32 23
payables at end of period
Key exchange rates for the euro at end of period
31.3. 31.12. 30.9. 30.6. 31.3.
2007 2006 2006 2006 2006
USD 1.3318 1.3170 1.2660 1.2713 1.2104
CAD 1.5366 1.5281 1.4136 1.4132 1.4084
JPY 157.32 156.93 149.34 145.75 142.42
GBP 0.6798 0.6715 0.6777 0.6921 0.6964
SEK 9.3462 9.0404 9.2797 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 Annual Report 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) / Shareholders' equity (average) x 100
Return on capital employed, %:
(Profit before tax + interest expenses and other financial expenses) /
(Balance sheet total - non-interest-bearing liabilities (average)) x 100
Earnings per share:
Profit for the period attributable to equity holders of parent company /
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, 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
Helsinki Exchanges
New York Stock Exchange
Main media
www.upm-kymmene.com