UPM-Kymmene Corporation Interim Report 28 October 2008 at 09:30
Operating profit excluding special items was EUR 216 million (195 million).
Earnings per share for the third quarter were EUR -0.17 (0.23 for the third
quarter of 2007), excluding special items EUR 0.25 (0.23). Higher paper
prices together with stringent cost control led to better profitability.
UPM continues actions to improve its profitability.
Key figures
Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2008 2007 2008 2007 2007
Sales, EUR million 2,358 2,467 7,146 7,523 10,035
EBITDA, EUR million 1) 378 366 1,028 1,195 1,546
% of sales 16.0 14.8 14.4 15.9 15.4
Operating profit, -40 195 310 341 483
EUR million
excluding special 216 195 559 641 835
items, EUR million
Profit before tax, -90 144 159 200 292
EUR million
excluding special 160 144 402 500 644
items, EUR million
Net profit for the -87 119 106 52 81
period, EUR million
Earnings per share, -0.17 0.23 0.21 0.10 0.16
EUR
excluding special 0.25 0.23 0.61 0.76 1.00
items, EUR
Diluted earnings -0.17 0.23 0.21 0.10 0.16
per share, EUR
Return on equity,% neg. 6.9 2.1 1.0 1.2
excluding special 7.8 6.9 6.3 7.5 7.4
items, %
Return on capital neg. 6.8 3.7 4.1 4.3
employed, %
excluding special 7.7 6.8 6.6 7.6 7.4
items, %
Gearing ratio at 67 60 67 60 59
end of period, %
Shareholders' 12.54 13.24 12.54 13.24 13.21
equity per share
at end of period,EUR
Net interest-bearing 4,409 4,120 4,409 4,120 3,973
liabilities at end
of period, EUR million
Capital employed at 11,310 11,173 11,310 11,173 11,098
end of period,
EUR million
Capital expenditure, 164 182 438 535 708
EUR million
Personnel at end of 25,616 27,550 25,616 27,550 26,352
period
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets, the share of
results of associated companies and joint ventures, and special items.
Results
Q3 of 2008 compared with Q3 of 2007
Sales for the third quarter of 2008 were EUR 2,358 million, 4% lower than last
year (2,467 million). Paper deliveries decreased by 9%.
Operating loss was EUR 40 million, -1.7% of sales (profit of EUR 195 million,
7.9% of sales). Excluding special items, operating profit improved to EUR 216
million, 9.2% of sales (195 million, 7.9% of sales). Special items in operating
profit totalled EUR -256 million net, including a EUR 230 million goodwill
impairment charge in the Newsprint Division and a EUR 30 million fixed asset
impairment charge in the Wood Products Division.
Operating profit excluding special items improved mainly due to higher average
paper prices and improved share of results from the associated companies.
Translated into euros, the average paper prices were approximately 5% higher
than last year. Fixed costs decreased. Paper divisions' combined operating
profit improved. Profitability in Label Materials and Wood Products was weak.
The increase in the fair value of biological assets, net of wood harvested, was
EUR 4 million (21 million). The share of results of associated companies and
joint ventures improved to EUR 35 million (14 million).
Loss before tax was EUR 90 million (profit of EUR 144 million). Excluding
special items, profit before tax was EUR 160 million (144 million). Interest
and other finance costs, net, were EUR 50 million (42 million). Exchange rate
and fair value gains and losses were zero (loss of EUR 9 million).
Income taxes were EUR 3 million positive (charges of EUR 25 million). Taxes
include income of EUR 28 million arising from decreased deferred tax
liabilities, related to the goodwill impairment in the Newsprint Division.
Loss for the third quarter was EUR 87 million (profit of EUR 119 million).
Earnings per share were EUR -0.17 (0.23) and excluding special items EUR 0.25
(0.23).
January-September of 2008 compared with January-September of 2007
Sales for January-September were EUR 7,146 million, 5% lower than the EUR 7,523
million in the same period in 2007.
Operating profit was EUR 310 million, 4.3% of sales (341 million, 4.5% of
sales) and excluding special items EUR 559 million, 7.8% of sales (641 million,
8.5% of sales).
Sales decreased partly due to lower deliveries and partly due to the divestment
of the Walki Wisa industrial wrappings business in June 2007. Furthermore, both
GBP and USD depreciated against the euro, affecting sales.
The operating profit excluding special items declined mainly due to the
increase in wood costs, lower paper deliveries and the decline in sawn timber
prices. Recovered paper, purchased electricity and fuel prices were also higher
than last year. Fixed costs declined, and the net increase in cost level was
below 2%.
Paper divisions' combined operating profit excluding special items declined to
EUR 296 million (334 million). Average paper prices increased approximately 2%
from last year. However, paper deliveries decreased by 5%. Production was
stopped in the Miramichi paper mill in Canada in August 2007, and the mill was
permanently closed at the end of the year.
Label Materials' operating profit excluding special items declined to EUR 5
million from last year's EUR 41 million, mainly due to higher raw material and
fixed costs.
Further weakening of sawn timber markets led to lower prices which combined
with the high wood costs caused the Wood Products Division to report an
operating loss excluding special items of EUR 18 million (profit of EUR 71
million).
In Other Operations, the Energy Department in Finland improved its operating
profit to EUR 127 million (70 million), benefiting from good availability of
hydropower and increased electricity price. The increase in the fair value of
biological assets net of wood harvested was EUR 52 million (32 million). The
share of results of associated companies and joint ventures was EUR 78 million
(41 million). The improvement came from Metsä-Botnia's new pulp mill in
Uruguay, started up in October 2007, which more than compensated for the
weakened profitability in Metsä-Botnia's Finnish operations.
Profit before tax was EUR 159 million (200 million) and excluding special items
EUR 402 million (500 million). Interest and other finance costs, net, were EUR
142 million (145 million). Exchange rate and fair value gains and losses
resulted in a loss of EUR 11 million (gain of EUR 2 million).
Income taxes were EUR 53 million (148 million), and the effective tax rate
excluding the impact of special items was 22% (24%).
Profit for the period was EUR 106 million (52 million). Earnings per share were
EUR 0.21 (0.10) and excluding special items EUR 0.61 (0.76). Operating cash
flow per share was EUR 0.52 (1.09).
Paper deliveries
Paper deliveries for the first nine months amounted to 8,048,000 tonnes
(8,472,000). Magazine paper deliveries totalled 3,383,000 tonnes (3,610,000),
newsprint 1,898,000 tonnes (1,980,000), and fine and speciality papers
2,767,000 tonnes (2,882,000).
Financing
In January-September, cash flow from operating activities, before capital
expenditure and financing, was EUR 271 million (573 million). The increase in
working capital amounted to EUR 329 million (271 million), of which about one
third is attributable to wood procurement operations. Wood inventories at the
end of September 2008 were significantly higher than they were a year ago as
UPM pursues to secure the availability of wood raw material in Finland. The
cash flow from operations was also negatively affected by a one-time cash
contribution for changing the UK pension plans from defined benefit to defined
contribution, and settlement of the restructuring provisions related to the
closure of the Miramichi paper mill in 2007.
As of 30 September, the gearing ratio was 67% (60% as of 30 September 2007).
Equity to assets ratio on 30 September was 46.7% (49.1%). Net interest-bearing
liabilities at the end of the period were EUR 4,409 million (4,120 million).
Personnel
In January-September, UPM had an average of 26,283 employees (28,830 employees
for the same period last year). The number of employees at the end of September
was 25,616 (27,550).
Capital expenditure
For the first nine months of the year, gross capital expenditure was EUR 438
million, 6.1% of sales (535 million, 7.1% of sales).
The largest ongoing investment, worth approximately EUR 90 million, is the
building of a new self-adhesive label materials factory in Poland. The project
is scheduled for start-up in the fourth quarter of 2008.
UPM is building a new power plant at its Caledonian mill in Irvine, Scotland.
The total investment cost is EUR 75 million. The new bioboiler is scheduled to
start in the third quarter of 2009.
Restructuring
In September UPM announced plans to close its least competitive paper and pulp
capacity in Finland. The company is planning possible closures of the Kajaani
paper mill (annual capacity 640,000 tons of newsprint, special newsprint and
uncoated SC magazine papers) and the Tervasaari pulp mill (annual capacity
210,000 tons of pulp) by the end of 2008. UPM has started cooperation
negotiations with the employee representatives in the Kajaani and Tervasaari
mills affecting 535 and 150 employees, respectively.
The planned actions to close capacity are estimated to provide a positive
EBITDA impact.
In case the closures are implemented as planned, UPM will book in the fourth
quarter of 2008 approximately EUR 170 million write-off in fixed assets and
make a provision of about EUR 30 million for the reduction in the number of
employees, and for other closure costs.
UPM is also planning measures to improve efficiency in all of the company's
business groups and functions. A preliminary estimate on the number of
employees affected by these measures is around 950. The streamlining of
operations is expected to result in annual savings of about EUR 70 million in
fixed costs.
If all above mentioned measures are completed as planned, the Group's total
number of employees will decline by around 1,600 in 2009-2010.
In August, UPM decided to close the Leivonmäki sawmill (annual capacity of
80,000 cubic meters of spruce sawn timber). The operations will cease during
2008.
UPM's Label Division plans to undertake restructuring of its European
operations in 2009-2010. A detailed plan will be announced later this year.
New business structure
In September UPM announced that it will adopt a completely new business
structure. The company will consist of three Business Groups: Energy and Pulp,
Paper, and Engineered Materials. The change will take effect on 1 December,
2008.
When the new business structure is in effect, the company will report financial
information for the following six segments: Energy, Pulp, Forest and Timber,
Paper, Label Materials, and Plywood. The Energy and Pulp segments will include
shares of corresponding associated companies. Historical financial figures for
the period from the first quarter of 2007 to the third quarter of 2008
according to the new structure will be published in December 2008.
Shares
UPM shares worth EUR 7,963 million in total were traded on the NASDAQ OMX
Helsinki Ltd (12,812 million) during January-September. The highest quotation
was EUR 13.87, in January, and the lowest EUR 9.67, in July.
The Annual General Meeting held on 26 March 2008 approved a proposal to
authorise the Board of Directors to decide to buy back not more than 51,000,000
own shares. The authorisation is valid for 18 months from the date of the
decision. As of the end of September, this authorisation had not been
exercised.
On the basis of the decisions of the Annual General Meeting of 27 March 2007,
the Board has the authority to decide on a free issue of shares to the company
itself so that the total number of shares to be issued to the company combined
with the number of own shares bought back under the buyback authorisation may
not exceed 1/10 of the total number of shares of the company. In addition, the
Board has the authority to decide to issue shares and special rights entitling
the holder to shares of the company. The number of new shares to be issued,
including shares to be obtained under special rights, shall be no more than
250,000,000. Of that, the maximum number that may 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. Furthermore, the Board is authorised to decide on the
disposal of own shares. These authorisations of the 2007 Annual General Meeting
will remain valid for no more than three years from the date of the decision.
To date this authorisation has not been exercised.
In January-September 7,393,296 shares were subscribed for through exercising of
outstanding share options. The number of shares entered in the Trade Register
as of 30 September 2008 was 519,968,088. Through the issuance authorisation and
share options, the number of shares may increase to a maximum of 793,966,088.
Apart from the above, the Board of Directors has no current authorisation to
issue shares, convertible bonds or share options.
On 26 September 2008 UPM applied for listing of 2005H stock options on the
NASDAQ OMX Helsinki Ltd to start 1 October. The total number of stock options
is 3,000,000, each entitling to subscription of one share.
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 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. UPM has
agreed to settle the class-action lawsuits raised by direct purchasers of
labelstock and magazine paper. Certain class-action lawsuits filed by indirect
purchasers of labelstock and magazine paper continue to be pending. The
remaining litigation matters may last several years. No material provisions
have been made in relation to these investigations.
Events after the balance sheet date
The Group's management is not aware of any significant events occurring after
30 September 2008.
Risk factors
Rapid downgrades in European and global economic growth forecasts have
considerably increased uncertainties about 2009 business environment including
cost development and demand of UPM's products.
If implemented, the third increase in the export duty on Russian wood from the
beginning of 2009 will make imports of round wood uneconomical. Finnish
industry, including UPM, has announced plans to close wood consuming capacity
in Finland. Despite these efforts, there is a high risk that the imports cannot
be fully replaced in a financially sound manner in 2009.
Outlook
Paper demand in Europe is expected to be lower than last year. In North
America, continued decline in demand persists. Demand growth in China is
slowing down.
For the fourth quarter of the year UPM's paper deliveries are expected to be
over 200,000 tons less than last year. Group's average paper price in euro is
expected to be unchanged from the third quarter of 2008.
Market demand for self-adhesive labelstock is forecast to be lower than last
year both in Europe and North America. In Asia, growth in demand continues
although at a clearly slower pace. Self-adhesive labelstock prices in local
currencies are expected to increase in key markets.
In Wood Products, market balance is expected to further soften both in birch
and spruce plywood. In sawn timber, weak market continues. Combined with high
cost of wood raw material, the result is not expected to improve from the loss
made in the third quarter.
Wood fibre costs are expected to stay at the current high level. However, due
to cost savings from the ongoing profitability actions, an increase in the
company's overall costs for the full year is still expected to be about 2%.
Demand outlook of UPM's businesses for the fourth quarter has weakened from the
outlook presented at the end of the second quarter. UPM's operating profit for
the fourth quarter of 2008, excluding special items and changes in the fair
value of biological assets, is estimated to be about the same as last year.
Divisional reviews
Magazine Papers
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Sales, EUR million 806 767 781 811 847 798 793 2,354 2,438
EBITDA, EUR million 1) 157 125 120 98 116 114 113 402 343
% of sales 19.5 16.3 15.4 12.1 13.7 14.3 14.2 17.1 14.1
Depreciation, -76 -77 -76 -83 -82 -443 -86 -229 -611
amortisation and
impairment charges,
EUR million
Operating profit, 81 49 44 -62 34 -339 27 174 -278
EUR million
% of sales 10.0 6.4 5.6 -7.6 4.0 -42.5 3.4 7.4 -11.4
Special items, EUR - 1 - -77 - -371 - 1 -371
million 2)
Operating profit 81 48 44 15 34 32 27 173 93
excl. special
items, EUR million
% of sales 10.0 6.3 5.6 1.8 4.0 4.0 3.4 7.3 3.8
Deliveries, 1,000t 1,140 1,107 1,136 1,238 1,266 1,189 1,155 3,383 3,610
Q1-Q4/
07
Sales, EUR million 3,249
EBITDA, EUR million1) 441
% of sales 13.6
Depreciation, -694
amortisation and
impairment charges,
EUR million
Operating profit, -340
EUR million
% of sales -10.5
Special items, EUR -448
million 2)
Operating profit 108
excl. special
items, EUR million
% of sales 3.3
Deliveries, 1,000t 4,848
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges and excluding special items.
2) Special items for 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. For the fourth quarter, special
items include personnel expenses of EUR 44 million and other costs of EUR 36
million related to the Miramichi paper mill, and an income of EUR 3 million
related to other restructuring measures.
Q3 of 2008 compared with Q3 of 2007
Operating profit, excluding special items, for Magazine Papers improved to EUR
81 million (34 million). Sales were EUR 806 million (847 million). Paper
deliveries decreased by 10% to 1,140,000 tonnes (1,266,000).
Profitability improved due to higher paper prices. The average price for all
magazine paper deliveries translated into euros increased by about 6%.
January-September 2008 compared with January-September 2007
Operating profit, excluding special items, for Magazine Papers was EUR 173
million (93 million). Sales were EUR 2,354 million (2,438 million). Paper
deliveries declined by 6% to 3,383,000 tonnes (3,610,000). The production of
the Miramichi paper mill in Canada, with annual capacity of 450,000 tonnes and
representing 8% of capacity of UPM's Magazine Papers, was stopped in August
2007.
Profitability of the division improved. Magazine paper prices in local
currencies increased in all the main markets. The average price for all
magazine paper deliveries translated into euros, increased by over 2% from last
year. Lower fixed costs mitigated the rise in fibre and energy costs. The
strengthened euro impacted profitability negatively.
Market review
Magazine paper demand in Europe increased during the first six months but
weakened slightly toward the end of the period. Demand was at last year's level
for coated magazine paper, and for uncoated magazine paper increased by about
6%. North American demand for magazine papers was weak. Coated magazine paper
demand declined by about 11%, and demand for uncoated magazine paper declined
by about 2%. The average market price for magazine papers in Europe increased
by about 1% from last year. In North America, US dollar prices increased by
about 21%. Market prices in local currencies increased across all markets.
Newsprint
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Sales, EUR million 331 332 332 378 365 379 348 995 1,092
EBITDA, EUR million 1) 62 57 60 79 91 100 92 179 283
% of sales 18.7 17.2 18.1 20.9 24.9 26.4 26.4 18.0 25.9
Depreciation, -275 -46 -46 -48 -47 -47 -48 -367 -142
amortisation and
impairment charges,
EUR million
Operating profit, -213 11 15 36 44 53 44 -187 141
EUR million
% of sales -64.4 3.3 4.5 9.5 12.1 14.0 12.6 -18.8 12.9
Special items, EUR -230 - 1 5 - - - -229 -
million 2)
Operating profit 17 11 14 31 44 53 44 42 141
excl. special
items, EUR million
% of sales 5.1 3.3 4.2 8.2 12.1 14.0 12.6 4.2 12.9
Deliveries, 1,000 t 620 642 636 702 667 683 630 1,898 1,980
Q1-Q4/
07
Sales, EUR million 1,470
EBITDA, EUR million 1) 362
% of sales 24.6
Depreciation, -190
amortisation and
impairment charges,
EUR million
Operating profit, 177
EUR million
% of sales 12.0
Special items, EUR 5
million 2)
Operating profit 172
excl. special
items, EUR million
% of sales 11.7
Deliveries, 1,000 t 2,682
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges and excluding special items.
2) Special items for the third quarter of 2008 include a goodwill impairment
charge of EUR 230 million. Special items for the fourth quarter of 2007 include
an income of EUR 5 million related to restructuring measures.
Q3 of 2008 compared with Q3 of 2007
Operating profit, excluding special items, for Newsprint decreased from EUR 44
million to EUR 17 million. Sales were EUR 331 million (365 million). Paper
deliveries decreased by 7% to 620,000 tonnes (667,000).
The average price for all newsprint deliveries when translated into euros was
almost 3% lower than in the corresponding period in 2007.
The division recorded a EUR 230 million impairment charge from the division's
goodwill. The primary drivers for the impairment are lower-than-forecasted
realised newsprint market demand in Europe and continued overcapacity in Europe
together with increased costs.
January-September 2008 compared with January-September 2007
Operating profit, excluding special items, for Newsprint decreased from EUR 141
million to EUR 42 million. Sales for the first nine months were EUR 995 million
(1,092 million). Paper deliveries decreased by 4% to 1,898,000 tonnes
(1,980,000). Kajaani PM4 (annual capacity of 250,000 tonnes) has been closed
since February.
The profitability of the division weakened due to lower paper prices and volume
in Europe, the stronger euro against GBP and higher costs. The average price
for all newsprint deliveries when translated into euros was about 5% lower than
a year ago. Recycled fibre, wood and energy costs were higher, but fixed costs
were lower.
Market review
In Europe, demand for standard and improved newsprint decreased almost 3% from
January-September 2007. Demand was hit by the weakening economy and lower
advertising. The average market price for standard newsprint in Europe was
about 7% lower than last year. In North America, average prices of newsprint
increased, but demand continued to decrease. In the overseas markets, the
positive demand trend continued and prices increased.
Fine and Speciality Papers
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Sales, EUR million 674 686 726 718 694 686 699 2,086 2,079
EBITDA, EUR million 1) 89 71 84 66 82 92 85 244 259
% of sales 13.2 10.3 11.6 9.2 11.8 13.4 12.2 11.7 12.5
Depreciation, -57 -53 -53 -54 -53 -53 -53 -163 -159
amortisation and
impairment charges,
EUR million
Operating profit, 35 18 31 12 29 39 32 84 100
EUR million
% of sales 5.2 2.6 4.3 1.7 4.2 5.7 4.6 4.0 4.8
Special items, EUR 3 - - - - - - 3 -
million
Operating profit 32 18 31 12 29 39 32 81 100
excl. special
items, EUR million
% of sales 4.7 2.6 4.3 1.7 4.2 5.7 4.6 3.9 4.8
Deliveries, 1,000 t 863 923 981 977 954 960 968 2,767 2,882
Q1-Q4/
07
Sales, EUR million 2,797
EBITDA, EUR million1) 325
% of sales 11.6
Depreciation, -213
amortisation and
impairment charges,
EUR million
Operating profit, 112
EUR million
% of sales 4.0
Special items, EUR -
million
Operating profit 112
excl. special
items, EUR million
% of sales 4.0
Deliveries, 1,000 t 3,859
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges and excluding special items.
Q3 of 2008 compared with Q3 of 2007
Operating profit, excluding special items, for Fine and Speciality Papers was
EUR 32 million (29 million). Sales decreased to EUR 674 million (694 million).
Paper deliveries totalled 863,000 tonnes (954,000). The average price for all
fine and speciality paper deliveries when translated into euros was about 7%
higher than a year ago.
The division reduced production at the Nordland paper mill by temporary closure
of PM2. The Docelles mill was temporarily closed for the whole August month.
January-September 2008 compared with January-September 2007
Operating profit, excluding special items, for Fine and Speciality Papers
decreased from EUR 100 million to EUR 81 million. Sales increased from EUR
2,079 million to 2,086 million. Paper deliveries came to 2,767,000 tonnes
(2,882,000).
The profitability of the division weakened from last year's level. Wood and
pulp costs were markedly higher than last year. The fixed costs were lower. The
average paper prices were about 4% higher. In Asia, the average prices
increased significantly and in Europe, the product and market mix improved.
Market review
In Europe, demand for coated fine paper was at last year's level. Demand for
uncoated fine paper decreased by about 3%. In Europe, the average market price
for coated fine paper was about 4% lower than last year, and the average price
for uncoated fine paper was about 1% lower than last year. In Asia, demand and
prices for fine paper increased, but the market stabilised after the strong
increase in the earlier part of the year. Demand for label papers continued at
a good level but that for packaging was slowing down toward the end of the
period.
Label Materials
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Sales, EUR million 244 252 249 249 252 260 261 745 773
EBITDA, EUR million 1) 8 14 9 15 18 21 26 31 65
% of sales 3.3 5.6 3.6 6.0 7.1 8.1 10.0 4.2 8.4
Depreciation, -9 -8 -9 -9 -8 -8 -8 -26 -24
amortisation and
impairment charges,
EUR million
Operating profit, -1 6 0 10 10 13 18 5 41
EUR million
% of sales -0.4 2.4 0.0 4.0 4.0 5.0 6.9 0.7 5.3
Special items, EUR - - - 4 - - - - -
million 2)
Operating profit -1 6 0 6 10 13 18 5 41
excl. special
items, EUR million
% of sales -0.4 2.4 0.0 2.4 4.0 5.0 6.9 0.7 5.3
Q1-Q4/
07
Sales, EUR million 1,022
EBITDA, EUR million 1) 80
% of sales 7.8
Depreciation, -33
amortisation and
impairment charges,
EUR million
Operating profit, 51
EUR million
% of sales 5.0
Special items, EUR 4
million 2)
Operating profit 47
excl. special
items, EUR million
% of sales 4.6
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges and excluding special items.
2) Special items in the fourth quarter of 2007 include an income of EUR 4
million related to restructuring measures.
Q3 of 2008 compared with Q3 of 2007
Operating profit, excluding special items, for Label Materials decreased from
EUR 10 million to a EUR 1 million loss. Sales were EUR 244 million (252
million). Labelstock delivery volumes decreased slightly in Europe and North
America but increased in Asia-Pacific from the same period last year.
January-September 2008 compared with January-September 2007
Operating profit, excluding special items, for Label Materials was EUR 5
million (41 million). Sales decreased by 4% to EUR 745 million (773 million).
Labelstock delivery volumes increased slightly in Europe and the Americas and
significantly in Asia-Pacific. RFID delivery volumes were higher than last year
but growth in demand slowed toward end of the period.
The profitability of the division weakened. The main reasons were significant
increases in raw material and distribution costs. Also, fixed costs have
increased due to the start-up of the Dixon labelstock and Guangzhou RFID
factories, as well as ongoing investment in the Wroclaw labelstock factory,
which is scheduled for start-up in the fourth quarter of 2008. In addition, the
strengthened euro and lower prices in invoicing currencies during the beginning
of the year impacted profitability negatively. The price increases implemented
during the second and third quarter of 2008 offset only partly the cost
increases.
The division launched an internal profitability improvement programme in the
second quarter of 2008 and plans to undertake restructuring of its European
operations in 2009-2010.
Market review
Due to the weakening economy and consumer demand, label material demand in
North America is estimated to have decreased during the first nine months of
the year. In Europe, demand continued to grow in the first half of the year,
but it started to decline slightly during the third quarter. In Asia, the solid
demand growth continued even though in some areas grew at a slower pace than
last year.
Wood Products
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Sales, EUR million 237 293 298 297 262 326 314 828 902
EBITDA, EUR million 1) -19 13 19 26 8 51 42 13 101
% of sales -8.0 4.4 6.4 8.8 3.1 15.6 13.4 1.6 11.2
Depreciation, -41 -10 -11 -11 -10 -11 -10 -62 -31
amortisation and
impairment charges,
EUR million
Operating profit, -61 6 8 21 -2 41 32 -47 71
EUR million
% of sales -25.7 2.0 2.7 7.1 -0.8 12.6 10.2 -5.7 7.9
Special items, EUR -32 3 - 6 - - - -29 -
million 2)
Operating profit -29 3 8 15 -2 41 32 -18 71
excl. special
items, EUR million
% of sales -12.2 1.0 2.7 5.1 -0.8 12.6 10.2 -2.2 7.9
Deliveries, plywood 195 236 241 239 204 247 255 672 706
1,000 m3
Deliveries, sawn 494 601 560 520 480 637 587 1,655 1,704
timber 1,000 m3
Q1-Q4/
07
Sales, EUR million 1,199
EBITDA, EUR million 1) 127
% of sales 10.6
Depreciation, -42
amortisation and
impairment charges,
EUR million
Operating profit, 92
EUR million
% of sales 7.7
Special items, EUR 6
million 2)
Operating profit 86
excl. special
items, EUR million
% of sales 7.2
Deliveries, plywood 945
1,000 m3
Deliveries, sawn 2,224
timber 1,000 m3
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges and excluding special items.
2) Special items in the second quarter of 2008 include reversals of provisions
related to the Kuopio plywood mill disposed in June. Special items in the third
quarter of 2008 include an impairment charge of EUR 30 million related to fixed
assets of the Finnish sawmills. In the fourth quarter of 2007, special items
include a gain of EUR 6 million on sale of estate assets.
Q3 of 2008 compared with Q3 of 2007
Operating loss, excluding special items, for Wood Products was EUR 29 million
(loss of EUR 2 million). Sales decreased by 10% to EUR 237 million (262
million). Plywood deliveries totalled 195,000 cubic metres (204,000) and sawn
timber deliveries 494,000 cubic metres (480,000).
The Wood Products Division recorded a EUR 30 million impairment charge in the
fixed assets of the Finnish sawmills. The primary reasons for the impairment
are the increased cost of wood raw material, weakened demand for sawn timber in
the main markets and lower sawn timber prices.
It was decided to close Leivonmäki sawmill (annual capacity of 80,000 cubic
meters of spruce sawn timber). The operations will cease during 2008.
January-September 2008 compared with January-September 2007
Operating profit, excluding special items, for Wood Products decreased from a
profit of EUR 71 million profit to a loss of EUR 18 million. Sales decreased by
8% to EUR 828 million (902 million). Plywood deliveries totalled 672,000 cubic
metres (706,000) and sawn timber deliveries 1,655,000 cubic metres (1,704,000).
The profitability of the division weakened, as sawn timber prices declined and
wood costs remained at a high level. Sawn timber production at Finnish mills
was reduced during the period under review. The profitability of plywood
remained good in the first half of the year but started weakening in the third
quarter.
The new Otepää production line (annual capacity of 25,000 cubic meters of birch
plywood) was opened in September. Luumäki timber components and planing mills
were closed down in June.
Market review
Plywood demand in Europe started slowing down during the period. Plywood market
prices were higher than a year ago.
The market balance for sawn timber weakened substantially in Europe and demand
for both redwood and whitewood sawn timber decreased. Sawn timber prices
continued to decrease. The weakening economy impacted the market situation
negatively in all main markets both in plywood and in sawn timber.
Other Operations
EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Sales 1) 189 194 168 188 173 214 234 551 621
EBITDA 2) 81 33 45 67 51 32 60 159 143
Depreciation, -4 -5 -4 -31 -6 -5 -10 -13 -21
amortisation and
impairment charges
Operating profit
Forestry 22 31 37 61 43 34 28 90 105
Energy Department, 57 32 38 42 23 19 28 127 70
Finland
Other and 5 -17 -2 20 - 59 -9 -14 50
eliminations
Operating profit, 84 46 73 123 66 112 47 203 225
total
Special items 3) 3 -2 4 10 - 71 - 5 71
Operating profit, 81 48 69 113 66 41 47 198 154
excluding special
items
EUR million Q1-Q4/
07
Sales 1) 809
EBITDA 2) 210
Depreciation, -52
amortisation and
impairment charges
Operating profit
Forestry 166
Energy Department, 112
Finland
Other and 70
eliminations
Operating profit, 348
total
Special items 3) 81
Operating profit, 267
excluding 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) Special items for the first quarter of 2008 include adjustment to sales of
disposals in 2007. Other special items in 2008 relate to restructuring
measures. Special items for 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. In the fourth quarter, special items include a capital
gain of EUR 58 million on the sale of port operators Rauma Stevedoring and
Botnia Shipping, a compensation charge of EUR 12 million related to
class-action lawsuits in the US, impairment charges of EUR 31 million related
mainly to Miramichi's forestry and sawmilling operations, and other
restructuring costs of EUR 5 million.
Q3 of 2008 compared with Q3 of 2007
Excluding special items, operating profit for Other Operations was EUR 81
million (66 million). Sales came to EUR 189 million (173 million).
The operating profit of Forestry was EUR 22 million (43 million). The increase
in the fair value of biological assets (growing trees) was EUR 34 million (49
million). The cost of wood raw material harvested from the Group's forests was
EUR 30 million (28 million). The net effect was EUR 4 million (21 million).
The operating profit of the Energy Department in Finland was EUR 57 million (23
million). The higher spot prices together with high hydropower volumes have had
positive effect.
January-September 2008 compared with January-September 2007
Excluding special items, operating profit for Other Operations was EUR 198
million (154 million). Sales were EUR 551 million (621 million).
The operating profit of Forestry was EUR 90 million (105 million). The increase
in the fair value of biological assets net of wood harvested was EUR 52 million
(32 million), including the increase of EUR 126 million (121 million) in the
value of growing trees and the cost of EUR 74 million (89 million) for wood raw
material harvested from own forests.
The operating profit of the Energy Department in Finland was EUR 127 million
(70 million). The spot prices were higher and hydropower availability was very
good, lowering the average cost of energy generation.
Associated companies and joint ventures
EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/ Q1-Q3/
08 08 08 07 07 07 07 08 07
Oy Metsä-Botnia Ab 44 20 26 6 19 12 21 90 52
Pohjolan Voima Oy -8 -2 -5 -4 -5 -5 - -15 -10
Other -1 3 1 - - -1 - 3 -1
Total 35 21 22 2 14 6 21 78 41
EUR million Q1-Q4/
07
Share of result after tax
Oy Metsä-Botnia Ab 58
Pohjolan Voima Oy -14
Other -1
Total 43
Deliveries
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ Q1-Q3/
08 08 08 07 07 07 07 08
Paper deliveries
Magazine papers, 1,140 1,107 1,136 1,238 1,266 1,189 1,155 3,383
1,000 t
Newsprint, 1,000 t 620 642 636 702 667 683 630 1,898
Fine and speciality 863 923 981 977 954 960 968 2,767
papers, 1,000 t
Paper deliveries 2,623 2,672 2,753 2,917 2,887 2,832 2,753 8,048
total
Wood products deliveries
Plywood, 1,000 m3 195 236 241 239 204 247 255 672
Sawn timber, 1,000 m3 510 628 573 537 505 666 617 1,711
Q1-Q3/ Q1-Q4/
07 07
Paper deliveries
Magazine papers, 3,610 4,848
1,000 t
Newsprint, 1,000 t 1,980 2,682
Fine and speciality 2,882 3,859
papers, 1,000 t
Paper deliveries 8,472 11,389
total
Wood products deliveries
Plywood, 1,000 m3 706 945
Sawn timber, 1,000 m3 1,788 2,325
Helsinki, 28 October 2008
UPM-Kymmene Corporation
Board of Directors
Financial information
This Interim Report is unaudited
Consolidated income statement
EUR million Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2008 2007 2008 2007 2007
Sales 2,358 2,467 7,146 7,523 10,035
Other operating 23 15 74 113 200
income
Costs and expenses -1,998 -2,116 -6,180 -6,380 -8,650
Change in fair 4 21 52 32 79
value of
biological assets
and wood harvested
Share of results of 35 14 78 41 43
associated
companies and joint
ventures
Depreciation, -462 -206 -860 -988 -1,224
amortisation and
impairment charges
Operating profit -40 195 310 341 483
Gains on - - 2 2 2
available-for-sale
investments, net
Exchange rate and - -9 -11 2 -2
fair value gains
and losses
Interest and other -50 -42 -142 -145 -191
finance costs,
net
Profit before tax -90 144 159 200 292
Income taxes 3 -25 -53 -148 -211
Profit for the -87 119 106 52 81
period
Attributable to:
Equity holders of -86 120 108 53 85
the parent
company
Minority interest -1 -1 -2 -1 -4
-87 119 106 52 81
Earnings per share for profit attributable to the
equity holders of the parent company
Basic earnings per -0.17 0.23 0.21 0.10 0.16
share, EUR
Diluted earnings -0.17 0.23 0.21 0.10 0.16
per share, EUR
Condensed consolidated balance sheet
EUR million 30.09.2008 30.09.2007 31.12.2007
ASSETS
Non-current assets
Goodwill 933 1,163 1,163
Other intangible 431 408 392
assets
Property, plant and 6,012 6,276 6,179
equipment
Biological assets 1,140 1,051 1,095
Investments in 1,278 1,188 1,193
associated
companies and joint
ventures
Deferred tax assets 272 316 284
Other non-current 452 290 333
assets
10,518 10,692 10,639
Current assets
Inventories 1,527 1,325 1,342
Trade and other 1,838 1,824 1,735
receivables
Cash and cash 136 121 237
equivalents
3,501 3,270 3,314
Assets held for - 41 -
sale
Total assets 14,019 14,003 13,953
EQUITY AND
LIABILITIES
Equity attributable to equity holders of the parent
Share capital 890 890 890
Treasury shares - -197 -
Fair value and -42 77 35
other reserves
Reserve for invested 1,145 1,067 1,067
non-restricted equity
Retained earnings 4,527 5,010 4,778
6,520 6,847 6,770
Minority interest 14 16 13
Total equity 6,534 6,863 6,783
Non-current liabilities
Deferred tax 717 753 745
liabilities
Non-current 4,399 3,115 3,384
interest-bearing
liabilities
Other non-current 588 584 624
liabilities
5,704 4,452 4,753
Current liabilities
Current 378 1,195 931
interest-bearing
liabilities
Trade and other 1,403 1,483 1,486
payables
1,781 2,678 2,417
Liabilities related - 10 -
to assets held for sale
Total liabilities 7,485 7,140 7,170
Total equity and 14,019 14,003 13,953
liabilities
Consolidated statement of changes in equity
Attributable to equity holders of the parent
EUR million Share Share Treasury Translation Fair
capital premium shares differences value
reserve and other
reserves
Balance at 890 826 - -89 278
1 January 2007
Translation differences - - - -16 -
Other items - - - - -2
Net investment hedge, - - - - -
net of tax
Cash flow hedges
fair value - - - - 43
gains/losses, net of tax
transfers from - - - - -25
equity, net of tax
Available-for-sale
investments
transfers to income - - - - -2
statement, net of tax
Profit for the - - - - -
period
Total recognised - - - -16 14
income and expense
for the period
Acquisition of - - -197 - -
treasury shares
Share options - - - - -
exercised
Share-based - - - - 12
compensation, net of tax
Dividend paid - - - - -
Transfers and other - -826 - - -122
Business combinations - - - - -
Total of other - -826 -197 - -110
changes in equity
Balance at 30 September2007 890 - -197 -105 182
Balance at 1 January 2008 890 - - -158 193
Translation differences - - - -2 -
Other items - - - - -1
Net investment - - - -5 -
hedge, net of tax
Cash flow hedges
fair value gains/losses, - - - - 6
net of tax
transfers from equity, - - - - -57
net of tax
Available-for-sale
investments
transfers to income - - - - -
statement, net of tax
Profit for the period - - - - -
Total recognised income - - - -7 -52
and expense for the period
Share options exercised - - - - -
Share-based compensation, - - - - -18
net of tax
Dividend paid - - - - -
Business combinations - - - - -
Total of other - - - - -18
changes in equity
Balance at 30 September2008 890 - - -165 123
EUR million Reserve for Retained Total Minority Total
invested earnings interest equity
non-restricted
equity
Balance at 1 January 2007 - 5,366 7,271 18 7,289
Translation differences - - -16 - -16
Other items - -1 -3 - -3
Net investment - - - - -
hedge, net of tax
Cash flow hedges
fair value gains/losses, - - 43 - 43
net of tax
transfers from - - -25 - -25
equity, net of tax
Available-for-sale
investments
transfers to income - - -2 - -2
statement, net of tax
Profit for the period - 53 53 -1 52
Total recognised income - 52 50 -1 49
and expense for the period
Acquisition of - - -197 - -197
treasury shares
Share options exercised 104 - 104 - 104
Share-based compensation, - - 12 - 12
net of tax
Dividend paid - -392 -392 - -392
Transfers and other 963 -16 -1 -1 -2
Business combinations - - - - -
Total of other 1,067 -408 -474 -1 -475
changes in equity
Balance at 30 September 2007 1,067 5,010 6,847 16 6,863
Balance at 1 January 2008 1,067 4,778 6,770 13 6,783
Translation differences - - -2 - -2
Other items - 4 3 - 3
Net investment hedge, - - -5 - -5
net of tax
Cash flow hedges
fair value - - 6 - 6
gains/losses, net of tax
transfers from equity, - - -57 - -57
net of tax
Available-for-sale investments
transfers to income - - - - -
statement, net of tax
Profit for the period - 108 108 -2 106
Total recognised income - 112 53 -2 51
and expense for the period
Share options exercised 78 - 78 - 78
Share-based compensation, - 21 3 - 3
net of tax
Dividend paid - -384 -384 - -384
Business combinations - - - 3 3
Total of other 78 -363 -303 3 -300
changes in equity
Balance at 30 September 2008 1,145 4,527 6,520 14 6,534
Condensed consolidated cash flow statement
EUR million Q1-Q3/ Q1-Q3/ Q1-Q4 /
2008 2007 2007
Cash flow from operating activities
Profit for the period 106 52 81
Adjustments, total 786 1,096 1,390
Change in working -329 -271 -204
capital
Cash generated from 563 877 1,267
operations
Finance costs, net -223 -162 -236
Income taxes paid -69 -142 -164
Net cash from 271 573 867
operating activities
Cash flow from investing activities
Acquisitions and -7 -13 -25
share purchases
Purchases of -453 -520 -673
intangible and
tangible assets
Asset sales and other 41 186 273
investing cash flow
Net cash used in -419 -347 -425
investing activities
Cash flow from financing activities
Change in loans and 352 154 152
other financial items
Share options exercised 78 104 104
Dividends paid -384 -392 -392
Purchase of own shares - -169 -266
Net cash used in 46 -303 -402
financing activities
Change in cash and -102 -77 40
cash equivalents
Cash and cash 237 199 199
equivalents at
beginning of period
Foreign exchange effect 1 -1 -2
on cash
Change in cash and -102 -77 40
cash equivalents
Cash and cash equivalents 136 121 237
at end of period
Operating cash flow 0.52 1.09 1.66
per share, EUR
Quarterly information
EUR million Q3/ Q2/ Q1/ Q4/ Q3/
08 08 08 07 07
Sales by segment
Magazine Papers 806 767 781 811 847
Newsprint 331 332 332 378 365
Fine and Speciality 674 686 726 718 694
Papers
Label Materials 244 252 249 249 252
Wood Products 237 293 298 297 262
Other Operations 189 194 168 188 173
Internal sales -123 -146 -144 -129 -126
Sales, total 2,358 2,378 2,410 2,512 2,467
Operating profit by segment
Magazine Papers 81 49 44 -62 34
Newsprint -213 11 15 36 44
Fine and Speciality 35 18 31 12 29
Papers
Label Materials -1 6 - 10 10
Wood Products -61 6 8 21 -2
Other Operations 84 46 73 123 66
Share of results of 35 21 22 2 14
associated companies
and joint ventures
Operating profit -40 157 193 142 195
(loss), total
% of sales -1.7 6.6 8.0 5.7 7.9
Gains on - 2 - - -
available-for-sale
investments, net
Exchange rate and fair - -1 -10 -4 -9
value gains and losses
Interest and other -50 -43 -49 -46 -42
finance costs, net
Profit (loss) before tax -90 115 134 92 144
Income taxes 3 -25 -31 -63 -25
Profit (loss) for the period -87 90 103 29 119
Basic earnings per -0.17 0.18 0.20 0.06 0.23
share, EUR
Diluted earnings -0.17 0.18 0.20 0.06 0.23
per share, EUR
Average number of 519,999 517,622 512,581 514,085 527,012
shares, basic (1,000)
Average number of 519,999 516,791 513,412 515,322 529,530
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 - 1 - -77 -
Newsprint -230 - 1 5 -
Fine and Speciality 3 - - - -
Papers
Label Materials - - - 4 -
Wood Products -32 3 - 6 -
Other Operations 3 -2 4 10 -
Share of results of
associated companies - - - - -
and joint ventures
Special items in -256 2 5 -52 -
operating profit, total
Special items reported in 6 - - - -
financial items
Operating profit, 216 155 188 194 195
excl. special items
% of sales 9.2 6.5 7.8 7.7 7.9
Profit before tax, 160 113 129 144 144
excl. special items
% of sales 6.8 4.8 5.4 5.7 5.8
Earnings per share, 0.25 0.17 0.19 0.24 0.23
excl. special items, EUR
Return on equity, 7.8 5.4 5.9 7.1 6.9
excl. special items, %
Return on capital employed, 7.7 5.7 6.5 6.9 6.8
excl. special items, %
EUR million Q2/ Q1/ Q1-Q3/ Q1-Q3/ Q1-Q4/
07 07 08 07 07
Sales by segment
Magazine Papers 798 793 2,354 2,438 3,249
Newsprint 379 348 995 1,092 1,470
Fine and Speciality 686 699 2,086 2,079 2,797
Papers
Label Materials 260 261 745 773 1,022
Wood Products 326 314 828 902 1,199
Other Operations 214 234 551 621 809
Internal sales -126 -130 -413 -382 -511
Sales, total 2,537 2,519 7,146 7,523 10,035
Operating profit by segment
Magazine Papers -339 27 174 -278 -340
Newsprint 53 44 -187 141 177
Fine and Speciality 39 32 84 100 112
Papers
Label Materials 13 18 5 41 51
Wood Products 41 32 -47 71 92
Other Operations 112 47 203 225 348
Share of results of 6 21 78 41 43
associated companies
and joint ventures
Operating profit -75 221 310 341 483
(loss), total
% of sales -3.0 8.8 4.3 4.5 4.8
Gains on - 2 2 2 2
available-for-sale
investments, net
Exchange rate and fair 8 3 -11 2 -2
value gains and losses
Interest and other -54 -49 -142 -145 -191
finance costs, net
Profit (loss) before tax -121 177 159 200 292
Income taxes -77 -46 -53 -148 -211
Profit (loss)
for the period -198 131 106 52 81
Basic earnings per -0.38 0.25 0.21 0.10 0.16
share, EUR
Diluted earnings -0.38 0.25 0.21 0.10 0.16
per share, EUR
Average number of 527,111 523,261 516,734 525,794 522,867
shares, basic (1,000)
Average number of 530,980 527,086 516,734 529,198 525,729
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 - 1 -371 -448
Newsprint - - -229 - 5
Fine and Speciality Papers - - 3 - -
Label Materials - - - - 4
Wood Products - - -29 - 6
Other Operations 71 - 5 71 81
Share of results of - - - - -
associated companies
and joint ventures
Special items in -300 - -249 -300 -352
operating profit, total
Special items reported in - - 6 - -
financial items
Operating profit, 225 221 559 641 835
excl. special items
% of sales 8.9 8.8 7.8 8.5 8.3
Profit before tax, 179 177 402 500 644
excl. special items
% of sales 7.1 7.0 5.6 6.6 6.4
Earnings per share, 0.28 0.25 0.61 0.76 1.00
excl. special items, EUR
Return on equity, 8.5 7.3 6.3 7.5 7.4
excl. special items, %
Return on capital 8.3 7.9 6.6 7.6 7.4
employed, excl.
special items, %
Changes in property, plant and equipment
EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/
2008 2007 2007
Book value at 6,179 6,500 6,500
beginning of period
Capital expenditure 421 503 644
Decreases -10 -84 -96
Depreciation -550 -567 -752
Impairment charges -31 -22 -42
Impairment reversal - 11 12
Translation difference 3 -65 -87
and other changes
Book value at end 6,012 6,276 6,179
of period
Commitments and contingencies
EUR million 30.09.2008 30.09.2007 31.12.2007
Own commitments
Mortgages 89 91 90
On behalf of associated
companies and joint
ventures
Guarantees for loans 10 10 10
On behalf of others
Other guarantees 2 3 3
Other own commitments
Leasing commitments 11 18 21
for the next 12 months
Leasing commitments 66 89 99
for subsequent periods
Other commitments 65 74 70
Capital commitments
EUR million Completion Total cost By 31.12. Q1-Q3/ After 30.09.
´ 2007 2008 2008
New bioboiler, Sept 2009 75 11 35 29
Caledonian
Rebuild of debarking Oct 2010 30 - 1 29
plant, Wisaforest
Waste water treatment Sept 2010 17 - - 17
plant, Blandin
New Poland mill, Nov 2008 90 23 55 12
UPM Raflatac
Keltti hydropower Dec 2009 13 1 4 8
station rebuild
Notional amounts of derivative financial instruments
EUR million 30.09.2008 30.09.2007 31.12.2007
Currency derivatives
Forward contracts 5,763 4,006 4,369
Options, bought 113 42 50
Options, written 164 47 60
Swaps 522 548 529
Interest rate derivatives
Forward contracts 3,767 4,523 3,642
Swaps 2,205 2,504 2,383
Other derivatives
Forward contracts 34 13 12
Swaps 9 4 3
Related party (associated companies and joint ventures) transactions and
balances
EUR million Q1-Q3/ Q1-Q3/ Q1-Q4/
2008 2007 2007
Sales to associated 100 91 130
companies
Purchases from 427 356 500
associated companies
Trade and other 18 16 29
receivables at end
of period
Trade and other 31 27 42
payables at end of
period
Key exchange rates for the euro at end of period
30.09.2008 30.06.2008 31.03.2008 31.12.2007 30.09.2007 USD
1.4303 1.5764 1.5812 1.4721 1.4179
CAD 1.4961 1.5942 1.6226 1.4449 1.4122
JPY 150.47 166.44 157.37 164.93 163.55
GBP 0.7903 0.7923 0.7958 0.7334 0.6968
SEK 9.7943 9.4703 9.3970 9.4415 9.2147
30.06.2007 31.03.2007
USD 1.3505 1.3318
CAD 1.4245 1.5366
JPY 166.63 157.32
GBP 0.6740 0.6798
SEK 9.2525 9.3462
Basis of preparation
This unaudited financial report has been prepared in accordance with the
accounting policies set forth in International Accounting Standard 34 on
Interim Financial Reporting and in the Group's Consolidated Financial
Statements for 2007. Income tax expense is recognised based on the best
estimate of the weighted average annual income tax rate expected for the full
financial year.
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) / (Equity
total + 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 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
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