UPM-Kymmene Corporation Interim Report 29 October 2009 at 09:30
UPM Interim Report 1 January-30 September 2009
Earnings per share for the third quarter were EUR 0.08 (-0.17), and excluding
special items EUR 0.14 (0.25). Operating profit excluding special items was
EUR 131 million (216 million) and reported operating profit was EUR 96
million (loss of EUR 40 million). Strong cash flow due to continued actions
to preserve cash: EUR 721 million reduction in net debt from last year.
Savings in fixed costs total EUR 70 million in the third quarter from last
year, EUR 240 million year to date.
Key figures
Q3/ Q3/ Q1-Q3/ Q1-Q3/ Q1-Q4/
2009 2008 2009 2008 2008
Sales, EUR million 1,913 2,358 5,611 7,146 9,461
EBITDA,EUR million 1) 334 378 700 1,028 1,206
% of sales 17.5 16.0 12.5 14.4 12.7
Operating profit (loss), EUR 96 -40 9 310 24
million
excluding special items, EUR 131 216 84 559 513
million
% of sales 6.8 9.2 1.5 7.8 5.4
Profit (loss) before tax, EUR 64 -90 -124 159 -201
million
excluding special items, EUR 99 160 -49 402 282
million
Net profit (loss) for the 40 -87 -126 106 -180
period, EUR million
Earnings per share, EUR 0.08 -0.17 -0.24 0.21 -0.35
excluding special items, EUR 0.14 0.25 -0.10 0.61 0.42
Diluted earnings per share, EUR 0.08 -0.17 -0.24 0.21 -0.35
Return on equity, % 2.8 neg. neg. 2.1 neg.
excluding special items, % 5.0 7.8 neg. 6.3 3.4
Return on capital employed, % 3.5 neg. 0.0 3.7 0.2
excluding special items, % 4.9 7.7 0.9 6.6 4.6
Operating cash flow per 0.59 0.33 1.71 0.52 1.21
share, EUR
Shareholders' equity per 11.13 12.54 11.13 12.54 11.74
share at end of period, EUR
Gearing ratio at end of 64 67 64 67 71
period, %
Net interest-bearing 3,688 4,409 3,688 4,409 4,321
liabilities at end of
period, EUR million
Capital employed at end of 10,172 11,310 10,172 11,310 11,193
period, EUR million
Capital expenditure, EUR 39 164 172 438 551
million
Personnel at end of period 23,180 25,616 23,180 25,616 24,983
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets, excluding the
share of results of associated companies and joint ventures, and special items.
Results
Q3 of 2009 compared with Q3 of 2008
Sales for the third quarter of 2009 were EUR 1,913 million, 19% lower than the
EUR 2,358 million in the third quarter of 2008. Sales decreased due to lower
deliveries and sales prices in most of UPM's business areas.
Operating profit was EUR 96 million, 5.0% of sales (loss of EUR 40 million,
-1.7% of sales). The operating profit excluding special items was EUR 131
million, 6.8% of sales (216 million, 9.2% of sales). Operating profit includes
net charges of EUR 35 million as special items. Restructuring charges total EUR
18 million. The share of the results of associated companies includes special
charges of EUR 17 million.
Operating profit excluding special items declined from the same period last
year. The main reasons for weaker profitability were lower sales prices and
significantly lower deliveries in most of UPM's business areas.
The average paper price in euro decreased by approximately 6% from the same
period last year. The average price for label materials was slightly higher.
Timber and plywood prices fell substantially. Changes in sales prices in euro
terms reduced operating profit by about EUR 140 million.
UPM continued its flexible operating mode in all of its business areas,
adjusting production to the low demand. Due to cost saving measures and
temporary layoffs, the company's fixed costs decreased by EUR 70 million in
comparison to the same period last year.
Wood costs decreased from the earlier peak levels. Compared with the same
quarter last year, wood costs decreased by EUR 80 million. Other variable costs
also decreased. Energy costs decreased slightly.
The decrease in the fair value of biological assets net of wood harvested was
EUR 13 million compared to an increase of EUR 4 million a year before.
The share of results of associated companies and joint ventures was EUR 21
million negative (35 million positive). The accounting treatment of the
associated company Metsä-Botnia has changed from 30 June 2009 (see Pulp
business area footnote 3). The result includes special charges of
EUR 17 million related to Pohjolan Voima's two power plants.
Profit before tax was EUR 64 million (loss of EUR 90 million) and excluding
special items EUR 99 million (profit of EUR 160 million). Interest and other
finance costs, net, were EUR 28 million (50 million). Exchange rate and fair
value gains and losses resulted in a loss of EUR 3 million (0 million).
Income taxes were EUR 24 million (3 million positive). The impact on taxes from
special items was EUR 3 million positive (36 million positive).
Profit for the third quarter was EUR 40 million (loss of EUR 87 million) and
earnings per share were EUR 0.08 (-0.17). Earnings per share excluding special
items were EUR 0.14 (0.25).
January-September of 2009 compared with January-September of 2008
Sales for January-September were EUR 5,611 million, 21% lower than the EUR
7,146 million in the same period in 2008. Sales decreased due to lower
deliveries across all of UPM's business areas.
Operating profit was EUR 9 million, 0.2% of sales (310 million, 4.3% of sales).
The operating profit excluding special items was EUR 84 million, 1.5% of sales
(559 million, 7.8% of sales). Operating profit includes net charges of EUR 75
million as special items. UPM sold assets related to the former Miramichi paper
mill in Canada and recorded an income of EUR 21 million. Restructuring measures
resulted in net special charges of EUR 50 million. The share of the results of
associated companies includes special charges of EUR 46 million.
Operating profit declined clearly from the same period last year. The main
reason for weaker profitability was significantly lower deliveries in all of
UPM's business areas.
UPM responded to lower demand with a flexible way of operating in all of its
business areas, using temporary capacity shutdowns to adjust production to the
low demand. Due to cost saving measures and temporary layoffs, the company's
fixed costs decreased by EUR 240 million in comparison to the same period last
year.
Wood costs started to decrease during the period from the earlier peak levels.
Compared with last year, wood costs decreased by EUR 110 million. Energy costs
increased by EUR 50 million. Other variable costs decreased.
The average paper price in euro decreased by approximately 1% from the same
period last year. The average price for label materials was about 6% higher.
Timber and plywood prices fell substantially. Changes in sales prices in euro
terms reduced operating profit by about EUR 100 million.
The increase in the fair value of biological assets net of wood harvested was
EUR 8 million compared to EUR 52 million a year before.
The share of results of associated companies and joint ventures was EUR 96
million negative (78 million positive). The result includes special charges of
EUR 29 million from Metsä-Botnia's Kaskinen pulp mill closure, and of EUR 17
million related to Pohjolan Voima's two power plants.
Loss before tax was EUR 124 million (profit of EUR 159 million) and excluding
special items the loss was EUR 49 million (profit of EUR 402 million). Interest
and other finance costs, net, were EUR 123 million (142 million). Exchange rate
and fair value gains and losses resulted in a loss of EUR 9 million (11
million).
Income taxes were EUR 2 million (53 million). The impact on taxes from special
items was EUR 3 million positive (35 million positive).
Loss for the period was EUR 126 million (profit of EUR 106 million) and
earnings per share were EUR -0.24 (0.21). Earnings per share excluding special
items were EUR -0.10 (0.61). Operating cash flow per share was EUR 1.71 (0.52).
Financing
In January-September, cash flow from operating activities, before capital
expenditure and financing, was EUR 889 million (271 million). Net working
capital decreased by EUR 437 million during the period (increased by EUR 329
million).
The gearing ratio as of 30 September 2009 was 64% (67% on 30 September 2008).
Net interest-bearing liabilities at the end of the period came to EUR 3,688
million (4,409 million).
In March 2009, UPM replaced the EUR 1.5 billion credit facility that was to
mature in 2010 with a new EUR 825 million credit facility, maturing in 2012.
On 30 September 2009, UPM's cash funds and unused committed credit facilities
totalled EUR 2.2 billion.
Personnel
In January-September, UPM had an average of 23,826 employees (26,283). At the
beginning of the year, the number of employees was 24,983 and at the end of
September it was 23,180. The reduction of 1,803 employees is mostly
attributable to ongoing restructuring.
Capital expenditure
During January-September, capital expenditure was EUR 172 million, 3.1% of
sales (438 million, 6.1% of sales). The new renewable energy power plant at the
Caledonian mill in Irvine, Scotland was started in June. The total investment
cost was GBP 68 million.
UPM continued its tight investment discipline during the first nine months of
2009. Few new investment decisions were made. The largest ongoing project is
now the rebuild of the debarking plant at the Pietarsaari mill in Finland. The
total investment cost is estimated to be EUR 30 million.
Restructuring Botnia's ownership
On 15 July 2009, UPM, Metsäliitto Cooperative and M-real Corporation signed a
letter of intent to restructure the ownership of the assets of Oy Metsä-Botnia
Ab (Botnia).
According to the letter of intent, UPM would receive Metsäliitto's and Botnia's
shares of the Fray Bentos pulp mill and the eucalyptus plantation forestry
company Forestal Oriental in Uruguay, and UPM would dispose of part of its
current 47% ownership in Botnia.
In the transaction, the enterprise value of the pulp mill and Forestal Oriental
totals approximately EUR 1.6 billion and the enterprise value of Botnia without
the Uruguayan operations and shareholding in Pohjolan Voima Oy is approximately
EUR 1.9 billion.
Following the restructuring, Metsäliitto's holding in Botnia would be 53%,
M-real's 30%, and UPM's 17%. UPM would have 91% ownership in the Fray Bentos
pulp mill and 100% in Forestal Oriental. On the basis of the 17% holding in
Botnia, UPM would have a 400,000-tonne share of the pulp production capacity of
Botnia's Finnish mills. UPM's own annual production capacity would increase
from 2.1 million tonnes to 3.2 million tonnes a year.
In addition, UPM would acquire 1.2% of the energy company Pohjolan Voima Oy
from Botnia for EUR 66 million.
The agreement was signed after the balance sheet date, on 22 October 2009.
Shares
UPM shares worth EUR 4,382 million (7,963 million) in total were traded on the
NASDAQ OMX Helsinki stock exchange during January-September of 2009. The
highest quotation was EUR 9.78 in January and the lowest EUR 4.33 in April.
The company's ADSs are traded on the US over-the-counter (OTC) market under a
Level 1 sponsored American Depositary Receipt programme.
The Annual General Meeting held on 25 March 2009 approved a proposal by the
Board of Directors to authorise the Board of Directors to decide on the
buy-back of not more than 51,000,000 own shares. The authorisation is valid for
18 months from the date of the decision.
The Annual General Meeting of 27 March 2007 decided to authorise the Board 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 buy-back authorisation may not exceed 1/10 of the total
number of shares in 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 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. Furthermore, the Board is authorised to decide on the disposal of
own shares. To date, this authorisation has not been used. These authorisations
of the Annual General Meeting 2007 will remain valid for no more than three
years from the date of the decision.
The AGM of 27 March 2007 also decided on granting share options in connection
with the company's share-based incentive plans. In option programmes 2007A,
2007B and 2007C, the total number of share options is no more than 15,000,000
and they will entitle the holders to subscribe for a total of no more than
15,000,000 new shares in the company. Apart from the above, the Board of
Directors has no current authorisation to issue shares, convertible bonds or
share options.
The number of shares entered in the Trade Register on 30 September 2009 was
519,970,088. Through the issuance authorisation and share options, the number
of shares may increase to a maximum of 790,970,088.
At the end of the period, the company held 15,944 of its own shares, or 0.003%
of the total number of shares, which have been granted under the Group's share
reward scheme. These shares have been returned to the company in connection
with the termination of employment contracts.
Litigation and other legal actions
Certain competition authorities are continuing investigations into alleged
antitrust activities with respect to various UPM products. The authorities have
granted UPM conditional full immunity with respect to certain conduct disclosed
to them. UPM has settled or agreed to settle the class-action lawsuits in the
US except for those filed by indirect purchasers of labelstock. The remaining
litigation matters may last several years. No provisions have been made in
relation to these investigations.
In Finland, UPM is participating in the country's fifth nuclear power plant
unit, Olkiluoto 3, through its associated company Pohjolan Voima Oy. Pohjolan
Voima Oy is with 58.12% a majority shareholder of Teollisuuden Voima Oy
("TVO"). In January 2009, the constructor TVO disclosed information, confirmed
by the plant supplier, consortium AREVA-Siemens, that the construction of the
unit is delayed and the unit is estimated to start up in summer 2012.
In October 2009 TVO disclosed that the start-up of the unit may be delayed even
beyond June 2012 and that TVO has requested the plant supplier to provide a
re-analysis of the anicipated start-up time.
In June 2009, TVO informed that the arbitration filed in December by
AREVA-Siemens, concerning Olkiluoto 3 delay and related costs amounted to EUR
1.0 billion. In response, TVO has filed in April 2009 a counter-claim for costs
and losses that TVO is incurring due to the delay and other defaults on the
part of the supplier. The value of TVO's counterclaim is currently
approximately EUR 1.4 billion.
Events after the balance sheet date
On 22 October 2009, UPM, Metsäliitto Cooperative, M-real Corporation, and Oy
Metsä-Botnia Ab signed the agreement to restructure the ownership of the assets
of Metsä-Botnia. The agreement is subject to required regulatory approvals and
agreements with lenders. These are expected to be finalised, at the latest,
during the first quarter of 2010.
Outlook for the fourth quarter of 2009
Economic activity in UPM's main markets has shown signs of improvement. Leading
economic indicators such as consumer confidence have clearly improved since
March this year. However, recession continues to have an impact on consumer
demand, construction activity, and advertising expenditure in print media and
thus on demand for all of UPM's products.
UPM will continue to curtail production in most of its businesses to respond to
the changes in market demand.
Chemical pulp deliveries from UPM's own pulp mills are expected be about the
same as during the third quarter but with higher average price.
UPM's paper deliveries for the fourth quarter are forecast to be about the same
as during the third quarter. Pressure on paper prices is expected to continue
and average price for paper deliveries in euro is expected to be lower than
during the third quarter.
Recovery of demand for self-adhesive labelstock in the main markets is expected
to continue. Prices are estimated to be stable but anticipated increases in raw
material costs will put pressure on profitability.
Demand for birch and spruce plywood is forecast to show slight improvement from
the third quarter. Average price is estimated to be about the same as during
the third quarter.
Compared to the third quarter, variable costs are estimated to remain at the
same level. Fixed costs for the full year are estimated to be close to EUR 300
million lower than last year.
Business area reviews
Energy
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2009 2008 2008 2008 2008
Sales, EUR million 108 100 136 141 129 103 105
EBITDA,EUR million 1) 35 41 57 76 58 34 39
% of sales 32.4 41.0 41.9 53.9 45.0 33.0 37.1
Share of results of -24 -4 -4 -11 -8 -2 -5
associated companies and
joint ventures, EUR million
Depreciation, amortisation -1 -1 -2 -3 -1 -1 -1
and impairment charges, EUR million
Operating profit, EUR million 10 36 51 62 49 31 33
% of sales 9.3 36.0 37.5 44.0 38.0 30.1 31.4
Special items,EUR million 2) -17 - - - - - -
Operating profit excl. 27 36 51 62 49 31 33
special items, EUR million
% of sales 25.0 36.0 37.5 44.0 38.0 30.1 31.4
Electricity deliveries, 1,000 2,103 1,999 2,486 2,731 2,653 2,344 2,439
MWh
Q1-Q3/ Q1-Q3/ Q1-Q4/
2009 2008 2008
Sales, EUR million 344 337 478
EBITDA,EUR million 1) 133 131 207
% of sales 38.7 38.9 43.3
Share of results of -32 -15 -26
associated companies and
joint ventures, EUR million
Depreciation, amortisation -4 -3 -6
and impairment charges, EUR million
Operating profit, EUR million 97 113 175
% of sales 28.2 33.5 36.6
Special items,EUR million 2) -17 - -
Operating profit excl. 114 113 175
special items, EUR million
% of sales 33.1 33.5 36.6
Electricity deliveries, 1,000 6,588 7,436 10,167
MWh
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2009, special items of EUR 17 million relate to impairments of associated
company Pohjolan Voima's two power plants.
Q3 of 2009 compared with Q3 of 2008
Operating profit excluding special items was EUR 27 million, EUR 22 million
lower than last year (49 million). Sales decreased by 16% to EUR 108 million
(129 million), of which EUR 24 million was external sales (45 million). The
electricity sales volume was 2.1 TWh in the quarter (2.7 TWh).
The share of results of associated companies includes asset write-downs of EUR
17 million related to Pohjolan Voima's two power plants.
January-September 2009 compared with January-September 2008
Operating profit excluding special items was EUR 114 million (113 million).
Sales increased by 2% to EUR 344 million (337 million), of which EUR 97 million
was external sales (80 million). Internal sales decreased by 4% due to lower
energy consumption in the company's own mills. The electricity sales volume was
6.6 TWh (7.4 TWh) as the hydropower volume was almost 22% lower than last year.
Profitability improved slightly in comparison with the previous year, due to
the higher average electricity sales price. The average electricity sales price
increased by 21% to EUR 43.1/MWh (35.7/MWh). The average cost of procured
electricity increased due to lower share of hydro power volumes.
The share of results of associated companies includes asset write-downs of EUR
17 million related to Pohjolan Voima's two power plants.
Market review
The average electricity price in the Nordic electricity exchange in the first
nine months of the year decreased to EUR 34.5/MWh (42.7/ MWh). The consumption
of electricity in the Nordic area decreased due to low industrial activity.
Oil and coal market prices were lower compared to the same period last year.
CO2 emission allowance prices decreased.
The one-year forward electricity price in the Nordic electricity exchange
averaged EUR 35.9/MWh in the first nine months of the year, 37% lower than in
the same period last year (57.1/MWh).
In the first half of the year the Nordic water reservoirs were below the
long-term average but returned to the normal level towards the end of the
period.
Pulp
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q3/
2009 2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 156 132 139 200 228 247 269 427
EBITDA,EUR million 1) 8 -24 -55 9 38 35 57 -71
% of sales 5.1 -18.2 -39.6 4.5 16.7 14.2 21.2 -16.6
Share of results of 4 -16 -47 -4 44 20 26 -59
associated companies and
joint ventures,EUR million 3)
Depreciation, amortisation -21 -20 -20 -73 -22 -17 -16 -61
and impairment charges, EUR million
Operating profit, EUR million -9 -60 -122 -76 60 38 67 -191
% of sales -5.8 -45.5 -87.8 -38.0 26.3 15.4 24.9 -44.7
Special items,EUR million 2) - - -29 -59 - - - -29
Operating profit excl. -9 -60 -93 -17 60 38 67 -162
special items, EUR million
% of sales -5.8 -45.5 -66.9 -8.5 26.3 15.4 24.9 -37.9
Pulp deliveries, 1,000 t 446 391 372 421 480 527 554 1,209
Q1-Q3/Q1-Q4/
2008 2008
Sales, EUR million 744 944
EBITDA,EUR million 1) 130 139
% of sales 17.5 14.7
Share of results of 90 86
associated companies and
joint ventures,EUR million 3)
Depreciation, amortisation -55 -128
and impairment charges, EUR million
Operating profit, EUR million 165 89
% of sales 22.2 9.4
Special items,EUR million 2) - -59
Operating profit excl. 165 148
special items, EUR million
% of sales 22.2 15.7
Pulp deliveries, 1,000 t 1,561 1,982
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2009, special items of EUR 29 million relate to the associated company
Metsä-Botnia's Kaskinen pulp mill closure. In 2008, special items of EUR 59
million relate to the closure of the Tervasaari pulp mill.
3) In the balance sheet in the interim report for January-June, on 30 June
2009, UPM has regrouped the 30% transferable share of Botnia's book value as
assets held for sale. Consequently, from July 2009, UPM will not include the
share of the transferable Botnia operations in the share of results of
associated companies. Post transaction, UPM will record its 17% ownership in
Botnia among its financial assets.
Q3 of 2009 compared with Q3 of 2008
Operating loss excluding special items was EUR 9 million (profit of EUR 60
million). The sales of UPM's own pulp mills decreased by 32% to EUR 156 million
(228 million) and deliveries by 7% to 446,000 tonnes (480,000).
The share of results of the associated company Metsä-Botnia was profit of EUR 4
million (profit of EUR 44 million).
January-September 2009 compared with January-September 2008
Operating loss excluding special items was EUR 162 million (profit of EUR 165
million). The sales of UPM's own pulp mills decreased by 43% to EUR 427 million
(744 million) and deliveries by 23% to 1,209,000 tonnes (1,561,000).
Due to reduced internal consumption, the Tervasaari pulp mill closure at the
end of 2008 did not have a notable impact on deliveries.
Profitability weakened from the same period last year, mainly due to the lower
deliveries and approximately 26% lower average pulp price. Wood costs remained
at a high level. Chemical pulp inventories decreased from the beginning of the
year due to extended shutdowns.
The share of results of the associated company Metsä-Botnia was loss of EUR 59
million (profit of EUR 90 million). The result includes special charges of EUR
29 million from Metsä-Botnia's Kaskinen mill closure.
Market review
In the first half of 2009, shipments declined from the comparison period, but
in the third quarter the shipments increased due to strong demand in China. In
the first nine months of 2009, global chemical market pulp shipments were
slightly below last year's level.
Chemical pulp producer inventories declined from the high level of the
beginning of the year due to extensive production curtailments and strong
demand in China.
Chemical pulp market prices declined in the first half of the year but started
to increase during the third quarter. The average softwood pulp (NBSK) market
price in euro terms, at EUR 454/tonne, was 22% lower than in the same period
last year (EUR 584/tonne). The bottom market price during the period was EUR
421/tonne. At the end of the period the NBSK market price was EUR 491/ tonne.
The average hardwood pulp (BHKP) market price in euro terms also decreased by
29% from last year to EUR 385/tonne (EUR 539/tonne). The bottom market price
during the period was EUR 352/tonne. At the end of the period the BHKP market
price was EUR 408/ tonne.
Forest and timber
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q3/
2009 2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 295 309 385 419 475 518 508 989
EBITDA,EUR million 1) 24 -15 -15 -52 -4 4 4 -6
% of sales 8.1 -4.9 -3.9 -12.4 -0.8 0.8 0.8 -0.6
Change in fair value of -13 10 11 -2 4 20 28 8
biological assets and wood
harvested, EUR million
Share of results of -1 1 1 -1 - - 1 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -4 -14 -5 -6 -36 -7 -7 -23
and impairment charges, EUR
million
Operating profit, EUR 6 -18 -18 -63 -38 17 25 -30
million
% of sales 2.0 -5.8 -4.7 -15.0 -8.0 3.3 4.9 -3.0
Special items,EUR million 2) 1 -8 -10 -2 -33 - -1 -17
Operating profit excl. 5 -10 -8 -61 -5 17 26 -13
special items, EUR million
% of sales 1.7 -3.2 -2.1 -14.6 -1.1 3.3 5.1 -1.3
Sawn timber deliveries, 1,000 355 366 363 421 510 628 573 1,084
m3
Q1-Q3/Q1-Q4/
2008 2008
Sales, EUR million 1,501 1,920
EBITDA,EUR million 1) 4 -48
% of sales 0.3 -2.5
Change in fair value of 52 50
biological assets and wood
harvested, EUR million
Share of results of 1 -
associated companies and
joint ventures, EUR million
Depreciation, amortisation -50 -56
and impairment charges, EUR million
Operating profit, EUR million 4 -59
% of sales 0.3 -3.1
Special items,EUR million 2) -34 -36
Operating profit excl. 38 -23
special items, EUR million
% of sales 2.5 -1.2
Sawn timber deliveries, 1,000 1,711 2,132
m3
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items for the second quarter of 2009 include impairment charges of
EUR 8 million related to wood procurement operations. In the first quarter of
2009, special items of EUR 10 million relate to the sales loss of Miramichi's
forestry and sawmilling operations' assets. Special items in 2008 include an
impairment charge of EUR 31 million related to fixed assets of the Finnish
sawmills.
Q3 of 2009 compared with Q3 of 2008
Operating profit excluding special items was EUR 5 million (loss of EUR 5
million). Sales declined by 38% to EUR 295 million (475 million). Sawn timber
deliveries decreased by 30% to 355,000 cubic metres (510,000).
The increase in the fair value of biological assets (growing trees) was EUR 11
million (34 million). The cost of wood raw material harvested from the Group's
own forests was EUR 24 million (30 million). The net effect was EUR 13 million
negative (4 million positive).
January-September 2009 compared with January-September 2008
Operating loss excluding special items was EUR 13 million (profit of EUR 38
million). Sales declined by 34% to EUR 989 million (1,501 million). Sawn timber
deliveries decreased by 37% to 1,084,000 cubic metres (1,711,000).
Profitability weakened from the same period last year mainly due to lower
increase in the fair value of biological assets. Timber deliveries were lower
and average price of delivered timber goods decreased approximately by 11%.
Wood inventories decreased.
The increase in the fair value of biological assets (growing trees) was EUR 46
million (126 million). The cost of wood raw material harvested from the Group's
own forests was EUR 38 million (74 million). The net effect was EUR 8 million
positive (52 million positive).
Market review
Forest
Wood purchases in the Finnish wood market were 74% lower compared to the same
period last year. However, the market activity started to recover slightly
towards the end of the period, even though they still remained at a low level.
Industry's lower production and high wood inventories at the beginning of the
year were the main reasons for lower purchases. Wood market prices declined by
an average of about 15% compared to the same period in the previous year.
Timber
During the first nine months of the year, demand for both redwood and whitewood
sawn timber in Europe declined substantially in comparison with the previous
year. The weak market balance resulted in significantly lower prices.
Paper
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2009 2008 2008 2008 2008
Sales, EUR million 1,454 1,388 1,367 1,750 1,761 1,727 1,773
EBITDA,EUR million 1) 274 247 187 189 271 216 209
% of sales 18.8 17.8 13.7 10.8 15.4 12.5 11.8
Share of results of - -1 -1 1 - - -
associated companies and
joint ventures, EUR million
Depreciation, amortisation -142 -147 -149 -264 -388 -156 -159
and impairment charges, EUR million
Operating profit, EUR million 126 85 60 -126 -114 60 51
% of sales 8.7 6.1 4.4 -7.2 -6.5 3.5 2.9
Special items,EUR million 2) -6 -10 23 -153 -227 - 1
Operating profit excl. 132 95 37 27 113 60 50
special items, EUR million
% of sales 9.1 6.8 2.7 1.5 6.4 3.5 2.8
Deliveries, publication 1,464 1,323 1,304 1,809 1,760 1,749 1,772
papers, 1,000 t
Deliveries, fine and 872 813 724 784 863 923 981
speciality papers, 1,000 t
Paper deliveries total, 1,000 2,336 2,136 2,028 2,593 2,623 2,672 2,753
t
Q1-Q3/ Q1-Q3/ Q1-Q4/
2009 2008 2008
Sales, EUR million 4,209 5,261 7,011
EBITDA,EUR million 1) 708 696 885
% of sales 16.8 13.2 12.6
Share of results of -2 - 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -438 -703 -967
and impairment charges, EUR million
Operating profit, EUR million 271 -3 -129
% of sales 6.4 -0.1 -1.8
Special items,EUR million 2) 7 -226 -379
Operating profit excl. 264 223 250
special items, EUR million
% of sales 6.3 4.2 3.6
Deliveries, publication 4,091 5,281 7,090
papers, 1,000 t
Deliveries, fine and 2,409 2,767 3,551
speciality papers, 1,000 t
Paper deliveries total, 1,000 6,500 8,048 10,641
t
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In the third quarter of 2009, special items of EUR 6 million relate to
restructuring charges. Special items for the second quarter of 2009 include
charges of EUR 9 million related to personnel reduction in Nordland mill,
impairment reversals of EUR 4 million and other restructuring charges of EUR 5
million. In the first quarter of 2009, special items include an income of EUR
31 million related to the sale of the assets of the former Miramichi paper mill
and charges of EUR 8 million related to restructuring measures. In 2008,
special items include the goodwill impairment charge of EUR 230 million,
impairment charges of EUR 101 million and other restructuring costs of EUR 42
million related to the closure of the Kajaani paper mill, and other
restructuring costs, net of EUR 6 million.
Q3 of 2009 compared with Q3 of 2008
Operating profit excluding special items was EUR 132 million, EUR 19 million
higher than a year ago (113 million). Sales were EUR 1,454 million (1,761
million). Paper deliveries decreased by 11% to 2,336,000 tonnes (2,623,000).
Publication paper deliveries (magazine papers and newsprint) decreased by 17%.
Fine and speciality paper deliveries increased by 1% from the previous year,
especially driven by demand recovery in China.
Profitability improved from the comparison period due to decreased costs. Lower
paper prices and paper deliveries had a significant negative impact on
profitability, but this was offset by lower fibre costs, mainly for chemical
pulp, and decreased fixed costs.
The average price for all paper deliveries when translated into euros was 6%
lower than in the third quarter of 2008.
January-September 2009 compared with January-September 2008
Operating profit excluding special items was EUR 264 million, EUR 41 million
higher than a year ago (223 million). Sales were EUR 4,209 million (5,261
million). Paper deliveries decreased by 19% to 6,500,000 tonnes (8,048,000).
Publication paper deliveries (magazine papers and newsprint) decreased by 23%
and fine and speciality paper deliveries by 13% from the previous year.
The Kajaani paper mill was closed at the end of 2008. Due to the reduced
demand, the closure had only minor impact on UPM's paper deliveries.
Profitability improved from the corresponding period last year due to decreased
costs. Lower deliveries had a significant negative impact on profitability, but
this was offset by lower costs for fibre, mainly for chemical pulp. Fixed costs
decreased significantly.
The average price for all paper deliveries when translated into euros was 1%
lower than last year.
Market review
In Europe, during the first nine months of the year, demand for publication
papers was 16% lower and for fine papers 18% lower than a year ago. In North
America, demand for publication papers continued to decline and was 25% down
from last year. In Asia, however, demand for fine papers grew from last year.
In Europe, paper prices decreased in the third quarter of 2009 from the
previous quarter. For magazine papers, prices decreased by about 3% from the
second quarter and for newsprint by about 1%. Coated fine paper prices
decreased by about 3% and uncoated fine paper prices by about 2%. In the first
nine months of the year, average prices increased by 1% for magazine papers, 2%
for newsprint and 2% for coated fine papers, but decreased by 7% for uncoated
fine papers from last year.
In North America, the average US dollar prices for magazine papers were 11%
lower compared to the first nine months of 2008. In Asia, market prices for
fine papers decreased from last year, but increased in the third quarter of
2009 from the second quarter of 2009.
Label
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q3/
2009 2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 242 226 223 233 239 245 242 691
EBITDA,EUR million 1) 29 18 6 -1 9 15 11 53
% of sales 12.0 8.0 2.7 -0.4 3.8 6.1 4.5 7.7
Depreciation, amortisation -9 -11 -9 -16 -8 -7 -8 -29
and impairment charges, EUR million
Operating profit, EUR million 18 4 -3 -38 1 8 3 19
% of sales 7.4 1.8 -1.3 -16.3 0.4 3.3 1.2 2.7
Special items,EUR million 2) -2 -5 - -28 - - - -7
Operating profit excl. 20 9 -3 -10 1 8 3 26
special items, EUR million
% of sales 8.3 4.0 -1.3 -4.3 0.4 3.3 1.2 3.8
Q1-Q3/Q1-Q4/
2008 2008
Sales, EUR million 726 959
EBITDA,EUR million 1) 35 34
% of sales 4.8 3.5
Depreciation, amortisation -23 -39
and impairment charges, EUR
million
Operating profit, EUR 12 -26
million
% of sales 1.7 -2.7
Special items,EUR million 2) - -28
Operating profit excl. 12 2
special items, EUR million
% of sales 1.7 0.2
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In the third quarter of 2009, special items of EUR 2 million relate to
restructuring charges. In the second quarter of 2009, special items include
impairment charges of EUR 2 million and other restructuring charges of EUR 3
million. In 2008, special items of EUR 28 million relate to measures to reduce
coating capacity and close two slitting terminals in Europe.
Q3 of 2009 compared with Q3 of 2008
Operating profit excluding special items was EUR 20 million (1 million). Sales
were EUR 242 million (239 million).
Profitability improved clearly from the same period last year. The main reasons
were lower raw material costs and fixed costs. Average sales prices converted
to euros increased slightly from last year and remained stable from the
previous quarter. The delivery volumes of self-adhesive label materials were at
the same level as last year.
January-September 2009 compared with January-September 2008
Operating profit excluding special items was EUR 26 million (12 million). Sales
were EUR 691 million (726 million).
Profitability improved from the same period last year due to decreased costs
and increased prices. Delivery volumes of self-adhesive label materials
declined by some 10% from last year, driven by lower economic activity. While
lower delivery volumes had a significant negative impact on operating profit,
this was offset by reductions in fixed costs. Average sales prices converted to
euros increased by about 6% from last year. Raw material costs remained roughly
on last year's level.
In 2008, UPM Raflatac opened two new labelstock factories; one in Dixon, USA in
January and another in Wroclaw, Poland in November.
The restructuring of European operations, announced in the fourth quarter of
2008, was completed as planned by the end of the third quarter. The
restructuring, combined with the new plant in Wroclaw, has significantly
improved the competitiveness of UPM's European operations.
Market review
During the first half of the year, demand for self-adhesive label materials
declined in all markets from last year as demand for consumer products and
shipments of goods slowed down. In the third quarter, however, demand in Asia
is estimated to have grown and in Europe and North America to have recovered
close to the level of the same quarter last year.
The market prices in euro terms were higher than in the comparison period. In
the third quarter of 2009, prices remained stable compared with the previous
quarter.
Plywood
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q3/
2009 2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 73 77 75 102 121 150 157 225
EBITDA,EUR million 1) -5 -5 -23 -5 3 22 26 -33
% of sales -6.8 -6.5 -30.7 -4.9 2.5 14.7 16.6 -14.7
Depreciation, amortisation -5 -5 -5 -5 -5 -6 -5 -15
and impairment charges, EUR
million
Operating profit, EUR -10 -10 -29 -10 -2 19 21 -49
million
% of sales -13.7 -13.0 -38.7 -9.8 -1.7 12.7 13.4 -21.8
Special items,EUR million 2) - - -1 - - 3 - -1
Operating profit excl. -10 -10 -28 -10 -2 16 21 -48
special items, EUR million
% of sales -13.7 -13.0 -37.3 -9.8 -1.7 10.7 13.4 -21.3
Deliveries, plywood, 1,000 m3 143 141 133 160 188 227 231 417
Q1-Q3/Q1-Q4/
2008 2008
Sales, EUR million 428 530
EBITDA,EUR million 1) 51 46
% of sales 11.9 8.7
Depreciation, amortisation -16 -21
and impairment charges, EUR
million
Operating profit, EUR 38 28
million
% of sales 8.9 5.3
Special items,EUR million 2) 3 3
Operating profit excl. 35 25
special items, EUR million
% of sales 8.2 4.7
Deliveries, plywood, 1,000 m3 646 806
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) Special items in 2008 include reversals of provisions related to the
disposed Kuopio plywood mill.
Q3 of 2009 compared with Q3 of 2008
Operating loss excluding special items was EUR 10 million (loss of EUR 2
million). Sales decreased to EUR 73 million (121 million), as plywood
deliveries declined by 24% to 143,000 cubic metres (188,000).
Plywood reported an operating loss due to significantly lower delivery volumes
and sales prices than in the comparison period.
January-September 2009 compared with January-September 2008
Operating loss excluding special items was EUR 48 million (profit of EUR 35
million). Sales nearly halved to EUR 225 million (428 million), as plywood
deliveries declined by 35% to 417,000 cubic metres (646,000).
Plywood reported an operating loss due to significantly lower delivery volumes
and sales prices than in the comparison period. Material fixed cost reductions
were implemented throughout the organisation, but these could not compensate
for the adverse impact of deliveries and prices.
Weak market demand led to extensive production downtime at all mills. The
Heinola mill was temporarily shut down from January 2009 onwards. The Kaukas
plywood mill was temporarily shut down from May onwards. In April it was
announced that operations at the Lahti mill will be moved to other mills by the
end of the year.
At the Kalso veneer mill, a production automation project was completed in May
2009.
Market review
In Europe, plywood demand declined substantially from last year due to record
low construction activity and demand for engineered end products in
transportation and other industrial end uses. Declining demand in Europe has
left much idle capacity.
Inventories were reduced in all parts of the supply chain in the first half of
the year. This inventory reduction came to an end in the third quarter. The
market prices of plywood declined from the previous year.
Other operations
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/Q1-Q3/
2009 2009 2009 2008 2008 2008 2008 2009
Sales, EUR million 21 21 34 34 52 66 48 76
EBITDA,EUR million 1) -31 -24 -29 -38 3 -13 -9 -84
Share of results of - -2 -2 -1 -1 3 - -4
associated companies and
joint ventures, EUR million
Depreciation, amortisation -3 -3 -3 2 -2 -5 -3 -9
and impairment charges, EUR million
Operating profit, EUR million -45 -29 -34 -35 4 -16 -7 -108
Special items,EUR million 2) -11 - - 2 4 -1 5 -11
Operating profit excl. -34 -29 -34 -37 0 -15 -12 -97
special items, EUR million
Q1-Q3/Q1-Q4/
2008 2008
Sales, EUR million 166 200
EBITDA,EUR million 1) -19 -57
Share of results of 2 1
associated companies and
joint ventures, EUR million
Depreciation, amortisation -10 -8
and impairment charges, EUR million
Operating profit, EUR million -19 -54
Special items,EUR million 2) 8 10
Operating profit excl. -27 -64
special items, EUR million
1) EBITDA is operating profit before depreciation, amortisation and impairment
charges, excluding the change in value of biological assets and wood harvested,
the share of results of associated companies and joint ventures, and special
items.
2) In 2009, special items of EUR 11 million relate mainly to estates of closed
industrial sites in Finland. In 2008, special items include an adjustment of
EUR 5 million to sales of disposals of 2007 and other restructuring income net
of EUR 5 million.
Other operations include development units (RFID tags, the wood plastic
composite unit UPM ProFi and biofuels), logistic services and corporate
administration.
Q3 of 2009 compared with Q3 of 2008
Operating loss excluding special items was EUR 34 million (0 million). Sales
amounted to EUR 21 million (52 million).
The operating loss was greater than in the comparison period, mainly due to
hedging losses of EUR 16 million (profit of EUR 5 million). The development
units continued to incur an operating loss.
January-September 2009 compared with January-September 2008
Operating loss excluding special items was EUR 97 million (loss of EUR 27
million). Sales amounted to EUR 76 million (166 million).
The operating loss was greater than in the comparison period, mainly due to
hedging losses of EUR 25 million (profit of EUR 22 million) and losses of the
development units.
Helsinki, 29 October 2009
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/
2009 2008 2009 2008 2008
Sales 1,913 2,358 5,611 7,146 9,461
Other operating income 5 23 29 74 83
Costs and expenses -1,603 -1,998 -4,964 -6,180 -8,407
Change in fair value of -13 4 8 52 50
biological assets and wood
harvested
Share of results of -21 35 -96 78 62
associated companies and
joint ventures
Depreciation, amortisation -185 -462 -579 -860 -1,225
and impairment charges
Operating profit (loss) 96 -40 9 310 24
Gains on available-for-sale -1 - -1 2 2
investments, net
Exchange rate and fair value -3 - -9 -11 -25
gains and losses
Interest and other finance -28 -50 -123 -142 -202
costs, net
Profit (loss) before tax 64 -90 -124 159 -201
Income taxes -24 3 -2 -53 21
Profit (loss) for the period 40 -87 -126 106 -180
Attributable to:
Equity holders of the parent 40 -86 -126 108 -179
company
Minority interest - -1 - -2 -1
40 -87 -126 106 -180
Earnings per share for profit
(loss) attributable to the
equity holders of the parent
company
Basic earnings per share, 0.08 -0.17 -0.24 0.21 -0.35
EUR
Diluted earnings per share, 0.08 -0.17 -0.24 0.21 -0.35
EUR
Statement of comprehensive income
EUR million Q3/ Q3/Q1-Q3/Q1-Q3/Q1-Q4/
2009 2008 2009 2008 2008
Profit (loss) for the period 40 -87 -126 106 -180
Other comprehensive income
for the period, after tax:
Translation differences -16 93 50 -11 -206
Net investment hedge -17 -31 -37 -5 56
Cash flow hedges 18 -51 9 -51 -33
Share of other comprehensive -2 20 -10 12 1
income of associated companies
Other comprehensive income -17 31 12 -55 -182
for the period, net of tax
Total comprehensive income 23 -56 -114 51 -362
for the period
Total comprehensive income
attributable to:
Equity holders of the parent 23 -55 -114 53 -361
company
Minority interest - -1 - -2 -1
23 -56 -114 51 -362
Condensed consolidated balance sheet
EUR million 30.09.2009 30.09.2008 31.12.2008
ASSETS
Non-current assets
Goodwill 933 933 933
Other intangible assets 390 431 403
Property, plant and 5,253 6,012 5,688
equipment
Biological assets 1,126 1,140 1,133
Investments in associated 801 1,278 1,263
companies and joint
ventures
Deferred tax assets 244 272 258
Other non-current assets 644 452 697
9,391 10,518 10,375
Current assets
Inventories 1,011 1,527 1,354
Trade and other receivables 1,460 1,838 1,710
Cash and cash equivalents 367 136 330
2,838 3,501 3,394
Assets classified as held for 327 - 12
sale
Total assets 12,556 14,019 13,781
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
company
Share capital 890 890 890
Fair value and other -155 -42 -165
reserves
Reserve for invested 1,145 1,145 1,145
non-restricted equity
Retained earnings 3,908 4,527 4,236
5,788 6,520 6,106
Minority interest 14 14 14
Total equity 5,802 6,534 6,120
Non-current liabilities
Deferred tax liabilities 590 717 658
Non-current interest-bearing 3,941 4,399 4,534
liabilities
Other non-current 595 588 624
liabilities
5,126 5,704 5,816
Current liabilities
Current interest-bearing 429 378 537
liabilities
Trade and other payables 1,199 1,403 1,291
1,628 1,781 1,828
Liabilities related to assets - - 17
classified as held for sale
Total liabilities 6,754 7,485 7,661
Total equity and liabilities 12,556 14,019 13,781
Condensed consolidated cash flow statement
EUR Q1-Q3/ Q1-Q3/ Q1-Q4/
million 2009 2008 2008
Cash flow from operating
activities
Profit (loss) for the period -126 106 -180
Adjustments 735 786 1,232
Change in working capital 437 -329 -132
Cash generated from 1,046 563 920
operations
Finance costs, net -135 -223 -216
Income taxes paid -22 -69 -76
Net cash generated from 889 271 628
operating activities
Cash flow from investing
activities
Acquisitions and share - -7 -19
purchases
Purchases of intangible and -191 -453 -558
tangible assets
Asset sales and other 36 41 45
investing cash flow
Net cash used in investing -155 -419 -532
activities
Cash flow from financing
activities
Change in loans and other -489 352 305
financial items
Share options exercised - 78 78
Dividends paid -208 -384 -384
Net cash used in financing -697 46 -1
activities
Change in cash and cash 37 -102 95
equivalents
Cash and cash equivalents at 330 237 237
the beginning of period
Foreign exchange effect on - 1 -2
cash
Change in cash and cash 37 -102 95
equivalents
Cash and cash equivalents at 367 136 330
end of period
Operating cash flow per 1.71 0.52 1.21
share, EUR
Consolidated statement of changes in equity
Attributable to equity holders of the parent company
EUR million Share Translation Fair value
capital differences and other
reserves
Balance at 1 January 2008 890 -158 193
Changes in equity for 2008
Share options exercised - - -
Share-based compensation, net - - -18
of tax
Dividend paid - - -
Business combinations - - -
Total comprehensive income - -7 -52
for the period
Balance at 30 September 2008 890 -165 123
Balance at 1 January 2009 890 -295 130
Changes in equity for 2009
Share-based compensation, net - - 3
of tax
Dividend paid - - -
Business combinations - - -
Other items - - -
Total comprehensive income - -2 9
for the period
Balance at 30 September 2009 890 -297 142
EUR million Reserve for Retained Total
invested earnings
non-restricted
equity
Balance at 1 January 2008 1,067 4,778 6,770
Changes in equity for 2008
Share options exercised 78 - 78
Share-based compensation, net - 21 3
of tax
Dividend paid - -384 -384
Business combinations - - -
Total comprehensive income - 112 53
for the period
Balance at 30 September 2008 1,145 4,527 6,520
Balance at 1 January 2009 1,145 4,236 6,106
Changes in equity for 2009
Share-based compensation, net - - 3
of tax
Dividend paid - -208 -208
Business combinations - - -
Other items - 1 1
Total comprehensive income - -121 -114
for the period
Balance at 30 September 2009 1,145 3,908 5,788
EUR million Minority Total
interest equity
Balance at 1 January 2008 13 6,783
Changes in equity for 2008
Share options exercised - 78
Share-based compensation, net - 3
of tax
Dividend paid - -384
Business combinations 3 3
Total comprehensive income -2 51
for the period
Balance at 30 September 2008 14 6,534
Balance at 1 January 2009 14 6,120
Changes in equity for 2009
Share-based compensation, net - 3
of tax
Dividend paid - -208
Business combinations - -
Other items - 1
Total comprehensive income - -114
for the period
Balance at 30 September 2009 14 5,802
Quarterly information
EUR million Q3/ Q2/ Q1/ Q4/ Q3/ Q2/
2009 2009 2009 2008 2008 2008
Sales 1,913 1,841 1,857 2,315 2,358 2,378
Other operating income 5 7 17 9 23 11
Costs and expenses -1,603 -1,627 -1,734 -2,227 -1,998 -2,074
Change in fair value of -13 10 11 -2 4 20
biological assets and wood
harvested
Share of results of -21 -22 -53 -16 35 21
associated companies and
joint ventures
Depreciation, amortisation -185 -201 -193 -365 -462 -199
and impairment charges
Operating profit (loss) 96 8 -95 -286 -40 157
Gains on available-for-sale -1 - - - - 2
investments, net
Exchange rate and fair value -3 3 -9 -14 - -1
gains and losses
Interest and other finance -28 -37 -58 -60 -50 -43
costs, net
Profit (loss) before tax 64 -26 -162 -360 -90 115
Income taxes -24 18 4 74 3 -25
Profit (loss) for the period 40 -8 -158 -286 -87 90
Attributable to:
Equity holders of the parent 40 -8 -158 -287 -86 92
company
Minority interest - - - 1 -1 -2
40 -8 -158 -286 -87 90
Basic earnings per share, 0.08 -0.02 -0.30 -0.56 -0.17 0.18
EUR
Diluted earnings per share, 0.08 -0.02 -0.30 -0.56 -0.17 0.18
EUR
Earnings per share, excluding 0.14 0.03 -0.27 -0.19 0.25 0.17
special items, EUR
Average number of shares 519,954 519,954 519,954 519,979 519,999 517,622
basic (1,000)
Average number of shares 521,036 519,954 519,954 519,979 519,999 516,791
diluted (1,000)
Special items in operating -35 -23 -17 -240 -256 2
profit (loss)
Operating profit (loss), 131 31 -78 -46 216 155
excl. special items
% of sales 6.8 1.7 -4.2 -2.0 9.2 6.5
Special items before tax -35 -23 -17 -240 -250 2
Profit (loss) before tax, 99 -3 -145 -120 160 113
excl. special items
% of sales 5.2 -0.2 -7.8 -5.2 6.8 4.8
Return on equity, excl. 5.0 0.8 neg. neg. 7.8 5.4
special items, %
Return on capital employed, 4.9 1.3 neg. neg. 7.7 5.7
excl. special items, %
EBITDA 334 238 128 178 378 313
% of sales 17.5 12.9 6.9 7.7 16.0 13.2
Share of results of
associated companies and
joint ventures
Energy -24 -4 -4 -11 -8 -2
Pulp 4 -16 -47 -4 44 20
Forest and timber -1 1 1 -1 - -
Paper - -1 -1 1 - -
Other operations - -2 -2 -1 -1 3
Total -21 -22 -53 -16 35 21
EUR million Q1/ Q1-Q3/ Q1-Q3/ Q1-Q4 /
2008 2009 2008 2008
Sales 2,410 5,611 7,146 9,461
Other operating income 40 29 74 83
Costs and expenses -2,108 -4,964 -6,180 -8,407
Change in fair value of 28 8 52 50
biological assets and wood
harvested
Share of results of 22 -96 78 62
associated companies and
joint ventures
Depreciation, amortisation -199 -579 -860 -1,225
and impairment charges
Operating profit (loss) 193 9 310 24
Gains on available-for-sale - -1 2 2
investments, net
Exchange rate and fair value -10 -9 -11 -25
gains and losses
Interest and other finance -49 -123 -142 -202
costs, net
Profit (loss) before tax 134 -124 159 -201
Income taxes -31 -2 -53 21
Profit (loss) for the period 103 -126 106 -180
Attributable to:
Equity holders of the parent 102 -126 108 -179
company
Minority interest 1 - -2 -1
103 -126 106 -180
Basic earnings per share, 0.20 -0.24 0.21 -0.35
EUR
Diluted earnings per share, 0.20 -0.24 0.21 -0.35
EUR
Earnings per share, excluding 0.19 -0.10 0.61 0.42
special items, EUR
Average number of shares 512,581 519,954 516,734 517,545
basic (1,000)
Average number of shares 513,412 520,315 516,734 517,545
diluted (1,000)
Special items in operating 5 -75 -249 -489
profit (loss)
Operating profit (loss), 188 84 559 513
excl. special items
% of sales 7.8 1.5 7.8 5.4
Special items before tax 5 -75 -243 -483
Profit (loss) before tax, 129 -49 402 282
excl. special items
% of sales 5.4 -0.9 5.6 3.0
Return on equity, excl. 5.9 neg. 6.3 3.4
special items, %
Return on capital employed, 6.5 0.9 6.6 4.6
excl. special items, %
EBITDA 337 700 1,028 1,206
% of sales 14.0 12.5 14.4 12.7
Share of results of
associated companies and
joint ventures
Energy -5 -32 -15 -26
Pulp 26 -59 90 86
Forest and timber 1 1 1 -
Paper - -2 - 1
Other operations - -4 2 1
Total 22 -96 78 62
Deliveries
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2009 2008 2008 2008 2008
Electricity, 1,000 MWh 2,103 1,999 2,486 2,731 2,653 2,344 2,439
Pulp, 1,000 t 446 391 372 421 480 527 554
Sawn timber, 1,000 m3 355 366 363 421 510 628 573
Publication papers, 1,000 t 1,464 1,323 1,304 1,809 1,760 1,749 1,772
Fine and speciality papers, 872 813 724 784 863 923 981
1,000 t
Paper deliveries total, 2,336 2,136 2,028 2,593 2,623 2,672 2,753
1,000 t
Plywood, 1,000 m3 143 141 133 160 188 227 231
Q1-Q3/ Q1-Q3/ Q1-Q4/
2009 2008 2008
Electricity, 1,000 MWh 6,588 7,436 10,167
Pulp, 1,000 t 1,209 1,561 1,982
Sawn timber, 1,000 m3 1,084 1,711 2,132
Publication papers, 1,000 t 4,091 5,281 7,090
Fine and speciality papers, 2,409 2,767 3,551
1,000 t
Paper deliveries total, 6,500 8,048 10,641
1,000 t
Plywood, 1,000 m3 417 646 806
Quarterly segment information
EUR Q3/ Q2/ Q1/ Q4/
million 2009 2009 2009 2008
Sales
Energy 108 100 136 141
Pulp 156 132 139 200
Forest and timber 295 309 385 419
Paper 1,454 1,388 1,367 1,750
Label 242 226 223 233
Plywood 73 77 75 102
Other operations 21 21 34 34
Internal sales -436 -412 -502 -564
Sales, total 1,913 1,841 1,857 2,315
EBITDA
Energy 35 41 57 76
Pulp 8 -24 -55 9
Forest and timber 24 -15 -15 -52
Paper 274 247 187 189
Label 29 18 6 -1
Plywood -5 -5 -23 -5
Other operations -31 -24 -29 -38
EBITDA, total 334 238 128 178
Operating profit (loss)
Energy 10 36 51 62
Pulp -9 -60 -122 -76
Forest and timber 6 -18 -18 -63
Paper 126 85 60 -126
Label 18 4 -3 -38
Plywood -10 -10 -29 -10
Other operations -45 -29 -34 -35
Operating profit (loss), 96 8 -95 -286
total
% of sales 5.0 0.4 -5.1 -12.4
Special items
Energy -17 - - -
Pulp - - -29 -59
Forest and timber 1 -8 -10 -2
Paper -6 -10 23 -153
Label -2 -5 - -28
Plywood - - -1 -
Other operations -11 - - 2
Special items, total -35 -23 -17 -240
Operating profit (loss)
excl.special items
Energy 27 36 51 62
Pulp -9 -60 -93 -17
Forest and timber 5 -10 -8 -61
Paper 132 95 37 27
Label 20 9 -3 -10
Plywood -10 -10 -28 -10
Other operations -34 -29 -34 -37
Operating profit (loss) excl. 131 31 -78 -46
special items, total
% of sales 6.8 1.7 -4.2 -2.0
EUR million Q3/09 Q2/09 Q1/09 Q4/08
External sales
Energy 24 24 49 57
Pulp 9 10 10 6
Forest and timber 145 150 152 199
Paper 1,409 1,355 1,327 1,701
Label 243 225 222 233
Plywood 69 73 72 94
Other operations 14 4 25 25
External sales, total 1,913 1,841 1,857 2,315
Internal sales
Energy 84 76 87 84
Pulp 147 122 129 194
Forest and timber 150 159 233 220
Paper 45 33 40 49
Label -1 1 1 -
Plywood 4 4 3 8
Other operations 7 17 9 9
Internal sales, total 436 412 502 564
EUR million Q3/ Q2/ Q1/ Q1-Q3/
2008 2008 2008 2009
Sales
Energy 129 103 105 344
Pulp 228 247 269 427
Forest and timber 475 518 508 989
Paper 1,761 1,727 1,773 4,209
Label 239 245 242 691
Plywood 121 150 157 225
Other operations 52 66 48 76
Internal sales -647 -678 -692 -1,350
Sales, total 2,358 2,378 2,410 5,611
EBITDA
Energy 58 34 39 133
Pulp 38 35 57 -71
Forest and timber -4 4 4 -6
Paper 271 216 209 708
Label 9 15 11 53
Plywood 3 22 26 -33
Other operations 3 -13 -9 -84
EBITDA, total 378 313 337 700
Operating profit (loss)
Energy 49 31 33 97
Pulp 60 38 67 -191
Forest and timber -38 17 25 -30
Paper -114 60 51 271
Label 1 8 3 19
Plywood -2 19 21 -49
Other operations 4 -16 -7 -108
Operating profit (loss), -40 157 193 9
total
% of sales -1.7 6.6 8.0 0.2
Special items
Energy - - - -17
Pulp - - - -29
Forest and timber -33 - -1 -17
Paper -227 - 1 7
Label - - - -7
Plywood - 3 - -1
Other operations 4 -1 5 -11
Special items, total -256 2 5 -75
Operating profit (loss)
excl.special items
Energy 49 31 33 114
Pulp 60 38 67 -162
Forest and timber -5 17 26 -13
Paper 113 60 50 264
Label 1 8 3 26
Plywood -2 16 21 -48
Other operations - -15 -12 -97
Operating profit (loss) excl. 216 155 188 84
special items, total
% of sales 9.2 6.5 7.8 1.5
EUR million Q3/08 Q2/08 Q1/08 Q1-Q3/09
External sales
Energy 45 20 15 97
Pulp 17 18 22 29
Forest and timber 197 240 233 447
Paper 1,699 1,657 1,704 4,091
Label 238 244 241 690
Plywood 111 139 147 214
Other operations 51 60 48 43
External sales, total 2,358 2,378 2,410 5,611
Internal sales
Energy 84 83 90 247
Pulp 211 229 247 398
Forest and timber 278 278 275 542
Paper 62 70 69 118
Label 1 1 1 1
Plywood 10 11 10 11
Other operations 1 6 - 33
Internal sales, total 647 678 692 1,350
EUR million Q1-Q3/ Q1-Q4 /
2008 2008
Sales
Energy 337 478
Pulp 744 944
Forest and timber 1,501 1,920
Paper 5,261 7,011
Label 726 959
Plywood 428 530
Other operations 166 200
Internal sales -2,017 -2,581
Sales, total 7,146 9,461
EBITDA
Energy 131 207
Pulp 130 139
Forest and timber 4 -48
Paper 696 885
Label 35 34
Plywood 51 46
Other operations -19 -57
EBITDA, total 1,028 1,206
Operating profit (loss)
Energy 113 175
Pulp 165 89
Forest and timber 4 -59
Paper -3 -129
Label 12 -26
Plywood 38 28
Other operations -19 -54
Operating profit (loss), 310 24
total
% of sales 4.3 0.3
Special items
Energy - -
Pulp - -59
Forest and timber -34 -36
Paper -226 -379
Label - -28
Plywood 3 3
Other operations 8 10
Special items, total -249 -489
Operating profit (loss)
excl.special items
Energy 113 175
Pulp 165 148
Forest and timber 38 -23
Paper 223 250
Label 12 2
Plywood 35 25
Other operations -27 -64
Operating profit (loss) excl. 559 513
special items, total
% of sales 7.8 5.4
EUR million Q1-Q3/08 Q1-Q4/08
External sales
Energy 80 137
Pulp 57 63
Forest and timber 670 869
Paper 5,060 6,761
Label 723 956
Plywood 397 491
Other operations 159 184
External sales, total 7,146 9,461
Internal sales
Energy 257 341
Pulp 687 881
Forest and timber 831 1,051
Paper 201 250
Label 3 3
Plywood 31 39
Other operations 7 16
Internal sales, total 2,017 2,581
Changes in property, plant and equipment
EUR Q1-Q3/ Q1-Q3/ Q1-Q4/
million 2009 2008 2008
Book value at beginning of 5,688 6,179 6,179
period
Capital expenditure 139 421 471
Decreases -14 -10 -24
Depreciation -530 -550 -748
Impairment charges -6 -31 -182
Impairment reversals 4 - -
Translation difference and -28 3 -8
other changes
Book value at end of period 5,253 6,012 5,688
Commitments and contingencies
EUR million 30.09.2009 30.09.2008 31.12.2008
Own commitments
Mortgages1) 760 89 787
On behalf of associated
companies and joint ventures
Guarantees for loans 8 10 10
On behalf of others
Other guarantees 1 2 2
Other own commitments
Leasing commitments for the 18 11 17
next 12 months
Leasing commitments for 57 66 56
subsequent periods
Other commitments 63 65 62
1) Mortgages relate mainly to giving mandatory security for borrowing
from Finnish pension insurance companies.
Capital commitments
EUR million Completion Total cost By 31.12.2008
Rebuild of debarking plant, October 2010 30 1
Pietarsaari
Waste water treatment plant, September 2010 19 -
Blandin
Energy saving TMP plant, January 2011 16 -
Steyremühl
Power plant rebuild, January 2011 12 -
Schongau
Fibre line improvement, December 2011 10 3
Blandin
EUR Q1-Q3/ After
million 2009 30.09.2009
Rebuild of debarking plant, 5 24
Pietarsaari
Waste water treatment plant, - 19
Blandin
Energy saving TMP plant, - 16
Steyremühl
Power plant rebuild, - 12
Schongau
Fibre line improvement, 2 5
Blandin
Notional amounts of derivative financial instruments
EUR million 30.09.2009 30.09.2008 31.12.2008
Currency derivatives
Forward contracts 3,696 5,763 4,598
Options, bought 35 113 -
Options, written 48 164 -
Swaps 511 522 508
Interest rate derivatives
Forward contracts 2,487 3,767 2,668
Swaps 2,947 2,205 2,833
Other derivatives
Forward contracts 164 34 172
Options, bought 78 - -
Options, written 78 - 78
Swaps 5 9 8
Related party (associated companies and joint ventures) transactions
and balances
EUR Q1-Q3/ Q1-Q3/ Q1-Q4/
million 2009 2008 2008
Sales to associated 81 100 138
companies
Purchases from associated 384 427 592
companies
Non-current receivables at 2 - -
end of period
Trade and other receivables 23 18 37
at end of period
Trade and other payables at 30 31 27
end of period
Basis of preparation
This unaudited financial report has been prepared in accordance with the
accounting policies set out in International Accounting Standard 34 on Interim
Financial Reporting and in the Group's Consolidated Financial Statements for
2008. 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:
IAS 1 (Revised) Presentation of Financial Statements became effective 1 January
2009. The revised standard prohibits the presentation of items of income and
expenses (that is, 'non-owner changes in equity') in the statement of changes
in equity, requiring 'non-owner changes in equity' to be presented separately
from owner changes in equity. Entities can choose whether to present one
performance statement (the statement of comprehensive income) or two statements
(the income statement and statement of comprehensive income). Where entities
restate or reclassify comparative information, they will be required to present
a restated balance sheet as at the beginning comparative period in addition to
the current requirement to present balance sheets at the end of the current
period and comparative period. Following the adoption of the revised standard
the Group will present two separate statements (a separate income statement
followed by a statement of comprehensive income).
Calculation of key indicators
Return on equity, %:
(Profit before tax - income taxes)/Total equity (average)x 100
Return on capital employed, %:
(Profit before tax + interest expenses and other financial expenses)/
(Total equity + interest-bearing liabilities (average))x 100
Earnings per share:
Profit for the period attributable to equity holders of the parent company/
Adjusted average number of shares during the period excluding treasury shares
Key exchange rates for the euro at end of period
30.09.2009 30.06.2009 31.03.2009 31.12.2008
USD 1.4643 1.4134 1.3308 1.3917
CAD 1.5709 1.6275 1.6685 1.6998
JPY 131.07 135.51 131.17 126.14
GBP 0.9093 0.8521 0.9308 0.9525
SEK 10.2320 10.8125 10.9400 10.8700
30.09.2008 30.06.2008 31.03.2008
USD 1.4303 1.5764 1.5812
CAD 1.4961 1.5942 1.6226
JPY 150.47 166.44 157.37
GBP 0.7903 0.7923 0.7958
SEK 9.7943 9.4703 9.3970
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 71-73 of the company's annual report 2008.
UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications
UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
communications@upm-kymmene.com
DISTRIBUTION
NASDAQ OMX Helsinki Ltd
Main media
www.upm-kymmene.com
