meet the management may 26, 2009 helsinki...biomass value chain offers strategic opportunities •...

UPM

MEET THE MANAGEMENTMay 26, 2009Helsinki

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.

Forward-looking statement

UPM STRATEGY

Jussi PesonenPresident & CEO

May 26, 2009

PURPOSEWe create value from renewable and recyclable materials by combining expertise and technologies within fibre based, energy-related and engineered materials businesses.

In the new forest industry, we reshape markets through cost leadership, change readiness and leading innovation. We develop smart, sustainable products and solutions for customers worldwide.

VISION

The front-runner of the new forest industry.

STRATEGYUPM's three business groups

Energy and pulp Paper Engineered materials

New business structure leverages the company's competitive advantages

sets the basis for market driven operations in all three Business Groups

develop energy related and pulp businesses

strengthen the cost leadership by optimizing resources, production and investments as well as decreasing complexities in Paper

increase the weight of fast growing higher value added businesses in Engineered Materials

new segment reporting to increase transparency of the results and value creation in the company

STRATEGYEnergy & Pulp

Strategy actions

Grow in biomass based energy incl. biofuels

Leverage high self sufficiency in electricity after OL3 nuclear power plant

Increase share of low cost pulp

Sawmilling for wood and biomass sourcing

Pulp mills

Hydro power assets

Shares of associated companies in pulp and energy

Forests & Timber

Biofuels

STRATEGYPaper

Strategy actions

Focus on European profitability: cost leadership, supply chain management and lean investments

Growth in China and other emerging markets

Consolidation in Europe

Magazine

Newsprint

Fine

Speciality papers

STRATEGYEngineered Materials

Strategy actions

Industry leadership in label materials

Grow in Plywood

Develop new businesses like RFID, Wood plastic composite based on proprietary know how

Label

RFID tags and inlays

Plywood

Wood plastic composites

STRATEGYStrategy actions – portfolio of choices and opportunities

Energy & Pulp

Paper

Engineered Materials

Grow in biomass based energy incl. biofuelsLeverage high self sufficiency in electricity after OL3 nuclear power plantIncrease share of low cost pulp Sawmilling for wood and biomass sourcing

Focus on European profitability: cost leadership, supply chain management and lean investmentsGrowth in China and other emerging marketsConsolidation in Europe

Industry leadership in label materialsGrow in PlywoodDevelop new businesses like RFID, Wood plastic composite based on proprietary know how

Biomass value chain offers strategic opportunities

• forestry• harvesting• sorting on site• drying

Pulpwoodfor pulp and paper

Forest residuesSmall woodStumps

PlywoodSawn timber

PulpPaperCardboard

BiodieselHeatElectricity

Forest biomass Logsfor wood products

Recycling

UPM strategy - Key messages

Long termUPM will reshape its portfolio:

new markets, engineered materials and energy related businesses broaden our scope. Fibre based businesses continue to form the

cornerstone of our strategy.

Short to medium termSecure profitability and cash flow through undisputed cost

leadership.

ENERGY AND PULP

Tapio KorpeinenPresident

May 26, 2009

ENERGY AND PULPContents

Energy and Pulp Business GroupEnergyPulpForest and timberBiofuelsConclusions

Energy– Hydropower assets and shares in energy companies

Pulp– Pulp mills and the associated company Metsä-Botnia

Forest and timber – UPM's forests, wood procurement, sawmills

Biofuels

ENERGY AND PULP Energy and Pulp Business Group

UPM's capital employed € 11.2 billion

UPM's operating profit € 513 million

(excl. special items)

UPM's sales € 9,461 million

ENERGY AND PULP Strategy – Energy and pulp

DEVELOPMENT AND GROWTH:

Biomass based, nuclear, and hydropower generation

Growth opportunities for pulp

Biofuel development

IMPROVED ASSET BASE:

Major share of UPM's strategic investments since 2003 on energy

Investments on cost competitive pulp

Close uncompetitive pulp capacity

TARGET:

Grow in low cost, emission free energy

Increase the share of low cost pulp

Energy and pulp are developed as market-driven businesses

Electricity– growing demand in Europe and globally– need to replace old fossil fuel-based capacity– integration of the Nordic and central European markets

Pulp– world pulp demand expected to grow regardless of North

American and European paper demand scenario– low paper demand affects availability of recovered paper– capacity growth where wood is cheap and readily available

Biofuels– demand for renewable energy is growing – EU energy directives – demand for biofuels and biomass

ENERGY AND PULPFavourable long-term market outlook

ENERGYLow-cost, low emission electricity generation

27 %

32 %

30 %

11 %

Hydro Nuclear

CHP (Paper) Thermal

Total electricity generation 14.2 TWh in 2008

Cost competitive electricity generation regardless of fuel and CO2 prices– hydro, nuclear, biofuels-based CHP

Electricity self-sufficiency 85% in 2008– net purchases 2.5TWh– net seller in Finland (2.5TWh)

62% of fuels used by UPM globally were biofuels in 2008– 81% in Finland

Ongoing investment – TVO's new reactor will add 3.5TWh of

nuclear power, starting in 2012

0

200

400

600

800

1 000

DEI

Nuon

RWE

Drax

CEZ

Scott

ish &

South

ern

Union

Feno

saEn

desa Enel

EDP

Vatte

nfall

Dong

E.ON

Electr

abel

Iberdr

ola EDF

Britis

h Ene

rgyVe

rbund

UPM

Fortu

mSta

tkraft

ENERGYLow CO2 emission electricity sources

Source: PWC 2008, UPM

kgCO2/MWh Carbon factor – CO2 emissions per electricity unit

European average carbon factor373 kg of CO2/MWh

107

ENERGYUPM intends to grow further in emission-free electricity

UPM invests in CO2-free electricity generation to grow in electricity business– investments– joint ventures– acquisitions

After the start-up of TVO's OL3 in 2012 UPM's capacity grows by 468 MW (18%)

UPM wants to participate and grow in CO2-free electricity market also in the future – TVO's OL4 application to build a new

nuclear power unit

300

400

500

600

700

800

900

1 000

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09

PIX NBSK PIX BHKP

PULP Chemical pulp market prices

USD/ton

(Northern Bleached Softwood Kraft)

Source: FOEX Indexes Ltd.

(Northern Bleached Hardwood Kraft)

25

200

250

300

350

400

450

500

550

0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000

Cumulative capacity, 1000 t/a

Delivered cash costs to Frankfurt, EUR/t

World softwoodmarket pulp

PULP At current market prices over half of world market pulp capacity operates on negative EBITDA

World hardwoodmarket pulp

UPMMetsä-Botnia

Best European

Best European

Source: Pöyry estimate Q4/2008

Price

Price

80

100

120

140

160

2005 Ap

r Jul

Oct

2006 Ap

r Jul

Oct

2007 Ap

r Jul

Oct

2008 Ap

r Jul

Oct

2009 Ap

r Jul

Oct

NBSK (EUR) Pine pulpwood BHKP (EUR) Birch pulpwood

PULP Operating in the economic downturn: pulp prices have fallen while wood costs are still high in Finland

Jan 2005 = 100

Source: Metla, Board of Customs Wood prices delayed by six months

Operating profit turned into losses due to lower pulp price and deliveriesWood cost remained highWood and pulp inventory write downs of € 38 million in Q1 2009

-100

-80

-60

-40

-20

0

20

40

60

80

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

57-55EBITDA

n.a.-23%Average price, change

-33%

-93

139

Q1 2009

n.a.Deliveries, change

67Operating profit M€excl. special items

269Sales, M€

Q1 2008

Pulp

Associated company Metsä-Botnia

€, millionPulp

Operating profit excluding special items

PULPOperating in the economic downturn

Wood and pulp inventory write down

InvestmentsBotnia's 1 million tonne pulp mill in Uruguay– Started in November 2007

Evaluating new ventures, e.g. Borea J/V in Russia– Shareholders' agreement in 2008– Investment decisions are subject to the results of the final

feasibility study and necessary approvals from relevant authorities

ClosuresIn Q4 2008, UPM closed its least competitive pulp mill– Tervasaari 210,000 tonnes

In March 2009 Botnia closed its least competitive pulp mill– Kaskinen 450,000 tonnes, UPM's share 212,000 tonnes

PULP Increasing the share of low-cost pulp

UPM's wood consumption was 24.8 million m³ in 2008– paper, pulp and plywood mills, sawmills and bioenergy plants– supplied forest biomass equivalent to 3.4 GWh of energy

Forests– UPM owns 1 million hectares of forest land– supplies 10% of UPM's wood consumption– other forests under management 0.7 million hectares

Sawmilling has an important role in biomass sourcing– annual capacity for sawn timber 2.4 million m³

Forest biomass value chain is important in bioenergy

FOREST AND TIMBERForest biomass sourcing and sawmilling

10

12

14

16

18

20

22

24

26

2004 Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009

Spruce Pine Birch

35

40

45

50

55

60

65

70

75

2004 Jul 2005 Jul 2006 Jul 2007 Jul 2008 Jul 2009

Spruce Pine Birch

FOREST AND TIMBERWood prices in Finland returning to 2005 levels

€ / m³ Log prices € / m³ Fibre wood prices

Source: Metla

60

80

100

120

140

160

180

2005 Ap

r Jul

Oct

2006 Ap

r Jul

Oct

2007 Ap

r Jul

Oct

2008 Ap

r Jul

Oct

2009 Ap

r Jul

Oct

Whitewood timber Spruce logs Redwood timber Pine logs

FOREST AND TIMBER Operating in the economic downturn: sawn timber prices have fallen while log costs are still high

Jan 2005 = 100

Source: Metla, Board of Customs Wood prices delayed by six months

-60

-40

-20

0

20

40

60

80

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

4-15EBITDA

-37%

-21%

-8

385

Q12009

n.a.Sawn timber deliveries, change

n.a.Average price of sawn timber, change


508Sales, M€

Q1 2008

Forest and timber

Operating losses mainly due to lower price and deliveries of sawn timberCost of logs remained at a high levelFair value of biological assets increased less than a year ago

Fair value change of biological assets

€, millionForest and timber

Operating profit excluding special items

FOREST AND TIMBEROperating in the economic downturn

Wood inventory write down

UPM's biofuel development utilises synergies within the pulp and paper value chain, instead of competing with food value chain

2nd generation biofuels– high quality and lowering impact on CO2 emissions throughout the

value chain

EU directive– biofuels 10% of all transportation fuels by 2020– 2nd generation biofuels counted with 2x weight

UPM is piloting concepts for biodiesel, bioethanol and bio-oil– Technical requirements for investment decisions in place by the end

of 2009

BIOFUELS UPM's biofuel development

Low-cost, low emission electricity generation

Competitive pulp mill assets

Investment requirements in the current assets are low

Current business environment is challenging– pulp and sawn timber prices have fallen and demand is low– wood costs to decline in 2H09

Favourable long-term market outlook– growth opportunities in electricity, pulp and biofuels

ENERGY AND PULP Conclusions

PAPER

Jyrki OvaskaPresident

May 26, 2009

Operating in the low-demand environmentConclusions

Paper Business GroupStructural advantage and cost leadership

Publication papers (magazine papers and newsprint) and fine and speciality papers

Customers are publishers, printers, merchants and paper converters

19 paper mills in Europe, China and the US, sales representation in 55 countries

Paper includes the mechanical and deinked pulp production and the combined heat and power (CHP) plants operating on paper mill sites (1/3 of UPM’s total power generation)

Combined annual paper production capacity ~11.5 million tonnes

PAPER Paper Business Group

Paper52%


Paper49%



Paper72%

UPM's sales €9,461 million

PAPERStrategy – Paper

DEVELOPMENT AND GROWTH:

Consolidation in Europe

Proactive response to paper end-use

developments

Growth in China and other emerging

markets

IMPROVED COST BASE:

Close uncompetitive capacity

Improve operating efficiency

Effective supply chain management

Lean investments

TARGET:

European profitability

Growth in new markets

Paper is well positioned and ready to benefit from industry consolidation in Europe

Paper Business Group

Operating in the low-demand environmentStructural advantage and cost leadership

Conclusions

100

200

300

400

051015202530

WEAK

STRONG

- Technical age, years -

- Weighted averagePM capacity, 1 000 t/a -

UPM

Stora Enso

Sappi

IP

Norske Skog

Domtar

Nippon

Oji

AbitibiBowater

APP

Including newsprint, MFS, SC, CWC, std. CWF, std. UWF

100

200

300

400

051015202530

WEAK

STRONG

- Technical age, years -

- Weighted averagePM capacity, 1 000 t/a -

Stora Enso

M-real Myllykoski

SappiNorske Skog

Burgo

Mondi

SCAHolmen

NOTE: Currently idled Nordland PM2 is excluded from the analysis

UPM

PAPERUPM has modern well invested assets with limited investment needs

Source: Pöyry

Printing papers - EuropePrinting papers - Global

PAPER Effective supply chain management

Uniform modus operandi

Management by supply chain KPIs (key performance indicators)

Higher efficiency in order-to-deliveryprocess

Cost savings in working capital

Maintaining good level of service

PAPERCost inflation is easing up

Chemical pulp pricing is significantly coming down

RCP prices are declining

Wood cost will remain high through Q2 and then reduce

Electricity prices are declining, but with a long time delay

Oil based chemicals and logistics cost

Temporary layoffs

Fixed costs are expected to be lower

Fibre costs29 %

Other variable

costs12 %

Fixed costs19 %

Energy costs15 %

Capital charges

15 %

Delivery costs10 %

European graphic papers producers

Average cost structure

Source: Pöyry

0

20

40

60

80

100

2000 2002 2004 2006 2008

Recycled fibre (deinked pulp)Mechanical pulpChemical pulp

Optimisation of diversified fibre portfolio

– Hardwood pulp – net buyer incl. Botnia

– Softwood pulp – net seller incl. Botnia

– Mechanical pulp – integrated into paper production

– RCP – procurement to be involved in the value chain

PAPEROptimization of diversified fibre base has improved the cost structure

Fibres used in UPM's paper production, %

Diversified fibre portfolio enables development of different fiber mixes

Paper Business Group

Operating in the economic downturnStructural advantage and cost leadership

Conclusions

-9,0

-7,4

-5,9

-4,3

-2,8

-1,2

0,3

1,9

3,4

5,0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-25

-20

-15

-10

-5

0

5

10

15

20

PAPERWeaker economic growth affects demand for European graphic paper demand

Paper demand growth (%, trailing 3 month)

Sources: Cepiprint, Cepifine, OECD

Euro zone composite leading indicator

Graphic paper demand growth

Euro zone composite leading indicator

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

2001

2002

2003

2004

2005

2006

2007

2008

e

2009

e

2010

e

2011

e

Total advertising expenditure growth, %

Source: Zenith Optimedia March 2009

PAPERGrowth of advertising expenditure – recovery is forecasted from 2010

Print media advertising growth by region (excl. direct mail), %

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

2001

2002

2003

2004

2005

2006

2007

2008

e

2009

e

2010

e

2011

e

North America

AsiaEurope Asia

Europe

North America

Forecast Forecast

PAPERDevelopment of ad-spend last 10 years – change in role of print media vs. the Internet

15 24 24 24

4451 51 46

46

55 58 612

6 921

127

163169

181

0

50

100

150

200

1998 2000 2004 2008

20 22 21 21

35 41 38 41

3138 45

550

1 3

17

97

115123

154

0

50

100

150

200

1998 2000 2004 2008

US$, billion US$, billion US$, billion

NORTH AMERICA EUROPE ASIA PACIFIC

Source: Zenith Optimedia Advertising spend in current dollars – March 2009

5 6 6 720 23 25 26

27 3035 410

13

1262

7081

103

0

50

100

150

200

1998 2000 2004 2008

Total

Other

Internet

TV

News

Maga

PAPERRegional paper demand by end-use 2008

Books & Directories

Magazines Catalogues

Direct marketing

Business forms &

Envelopes

Cut sizeNewspapers

EuropeNorth America

Newspapers

Books & Directories

Magazines

CataloguesDirect marketing

Business forms &

Envelopes

Cut size

Source: CEPI, GAPTRACK, UPM

PAPERCustomers have a choice:different paper grades for the same end-use

WFU

WFC

LWC

SC

MFS

Newsprint

Copy paperBusinessforms +

Envelopes

Direct marketingCataloguesMagazines

Book/DirectoriesNewspaper

Consumer papersAdvertising materialPublishing

Source: UPM5 – 10% 11 – 30% 31 – 50% over 50%3% and below

Paper grade's share of total end-use consumption

End-use

Grade

PAPERUPM is prepared to cope with the lower demand environment in Europe

Improved cost competitiveness – lower fixed costs due to less machines and improved operational

efficiency of large and cost competitive production units– closed 2.1 million tonnes of paper making capacity– restructuring, streamlining and targeted investments– achieved better product and market mix– optimisation of diversified fibre base

Effective supply chain management– reduction of working capital– improved internal efficiency

PAPERPaper – operating in the economic downturn

Sales declined by 22%Higher prices maintainedSignificant reduction in fixed costs through restructuring and flexible way of workingLower pulp costs compensated for the increase in energy costs

EBITDA margin increased to 13.7% (11.8%)

-4%-1%-22%Sales growth, %

10,6412,7532,028Paper deliveries, 1,000 t

885209187EBITDA, M€

0%

50

11.8

1,773

Q1 2008

12,613.7EBITDA, % of sales

-26%

37

1,367

Q1 2009

-7%Paper deliveries, % change

250Operating profit, M€excl. special items

7,011Sales, M€

2008Paper

Paper Business GroupBusiness environmentStructural advantage and cost leadershipConclusions

Conclusions

Focus in market driven operations– flexibility with good customer service and wide range of graphic

papers – customer segmentation for good targeting

Cost competitiveness is # 1 priority– cost leadership by optimising resources and production– tight investment policy– new ways of operating to leverage competitive advantages

UPM is well positioned– focus to grow in the new markets (China, Eastern Europe, Russia)– readiness to benefit from industry restructuring in Europe

ENGINEERED MATERIALS

Jussi VanhanenPresident

May 26, 2009

Contents

Engineered Materials Business GroupLabelPlywoodNew businessesConclusions

Label Self-adhesive label materials for product labelling andvariable information printing

Plywood Technical birch and spruce products for construction andindustrial end-uses

RFID RFID tags and inlays for information or data management

Wood plastic composites for outdoor constructions

ENGINEERED MATERIALS Businesses in the Business Group




UPM's sales €9,461 million

ENGINEERED MATERIALSWhat is common between the businesses?

Higher added value businesses with growth potential– Growing end-uses, UPM's market share

Businesses with opportunity for renewal– New end-use areas

In-house know-how and development plays a significant role

There are some synergy advantages but– each business is operated independently and– the development potential of each business is maximised

Source: FINAT, TLMI and UPM Raflatac estimates.Pie size indicates the current market size in m².

ENGINEERED MATERIALSTwo global companies in the labelstock business

UPM RaflatacAvery Dennison

Other main competitorOther competitors

ENGINEERED MATERIALS UPM clear market leader in the plywood business

0 200 400 600 800 1000 1200

Vänerply

Ilim-Bratsk

Fanerny Komi

Sonae

Fankom

Syktyvkar

Latvijas Finieris

Sveza

Metsäliitto

UPM

1000 m3

STK 9.2.2009 Sources: finnforest.com, latvijas.lv, plysorol.fr, pyrabelisk.com, sveza.com, vanerply.se

ENGINEERED MATERIALS UPM Raflatac market leader in RFID business Indexed inlay turnover in 2008

0

20

40

60

80

100

120

UPM Raflatac Avery DennisonRFID*

Alien* Tagsys* KSW*

UPM Raflatac turnover = 100

Source: UPM Raflatac estimates* Estimated inlay turnover

ENGINEERED MATERIALSLabel – operating in the economic downturn

Sales declined by 10-20% depending on the region

Prices increased by 9%, which fully compensated higher raw material costs

Reduction in fixed costs even before restructuring benefits materializing

The start-up of new factory in Wroclaw successful

3-3Operating profit, M€excl. special items

n.a.+9%Average price, change

n.a.-10-20%Deliveries, change

116EBITDA, M€

4.5

242

Q1 2008

2.7EBITDA, % of sales

223

Q1 2009

Sales, M€

Label

ENGINEERED MATERIALS Labelstock consumption is driven by consumer demand and shipping activity

Foodlabelling

Beveragelabelling

Personal Care labelling

Home Carelabelling

Retail, Logistics & Transport labelling

Current topics– Consumer demand has slowed down due to economic downturn– Pricing discipline– Completed investments and restructuring actions have secured a

competitive asset base

ENGINEERED MATERIALSStrategy – Label

IMPROVED COST BASE:

Restructuring theEuropean operations

IMPROVED ASSET BASE:

Changshu, China2006

Dixon, USA2008

Wroclaw, Poland2008

TARGET:

Cost leadership

Profitable growththrough new productand service launches

Label as a cost competitive growth business

ENGINEERED MATERIALS Plywood – operating in the economic downturn

Operating profit declined due to significantly lower delivery volumes and lower pricesWood costs remained at a high level – write down takenExtensive production downtime was taken at all mills

-30

-20

-10

0

10

20

30

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09

26-23EBITDA

n.a.-11%Average price of plywood, change

-42%

-28

75

Q1 2009

n.a.Plywood deliveries, change


157Sales, M€

Q1 2008

€, million Operating profit excluding special items

Wood inventory write down

ENGINEERED MATERIALS Plywood demand driven by construction and transportation industry activity

Current topics– Strong deceleration in construction and transportation– Capacity management – Cost cutting in general

Construction Transportation Furniture industry

ENGINEERED MATERIALS New businesses: in-house know-how forms the basis for further business development

RFID– Basis of development: joint customer base with

labelstock business and material know-how– UPM has a strong position as a reliable, long-term

supplier of RFID tags and inlays– Current focus: make full use of Chinese factory

and widen product portfolio

UPM ProFi– Wood plastic composite materials made from

waste deriving from UPM Raflatac value chain– Current focus: extension of distribution reach and

ramping up new German factory– Exploring new end-uses for the material

Conclusions

Secure the profitability in an environment of strong but temporary slowdown of demand, without risking future opportunities

Seek ways to utilize the economic slowdown for improving our long-term prospects

Profitable growth through new product and service launches

New, synergetic and significant business opportunities

Favourable long-term market outlook

FINANCIALS

Jyrki SaloCFO

May 26, 2009

FINANCIALSEBITDA development in Q1 2009

0

50

100

150

200

250

300

350

400

450

500

EBITDAQ108

EBITDAQ109

€ million

337

128

Prices, currency

Deliveries

Wood costs Energy

costs Otheritems

Fixed costs

Wood and pulp inventory write-down

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109

Publication papers Fine and speciality papers Sawn timber Plywood

FINANCIALSUPM's production has been curtailed to respond to changes in demand

Delivery change from previous year (%)

-26%-27%

-37%-42%

FINANCIALSCost deflation materialising with a delay

Cost breakdowntotal €8.4bn in 2008

Energy 11%

Fibre 28%

Delivery 10%

Chemicals 13%

Personnel 17%

Other 15%

Fixed costs– permanent savings– temporary lay-offs

Fibre costs– wood– RCP– purchased pulp

Energy costs

Oil-based chemicals and logistics costs

Other raw materials

6%

10

11

12

13

14

15

16

17

18

19

20

2004 2005 2006 2007 2008 2009

FINANCIALSWood prices in Finland returning to 2005 levels – 2009 still burdened by high wood costs

Fibre wood prices in Finland, € / m³

Source: Metla

UPM's wood costs expected to decrease with a

delay

Birch

Pine

6 month averagedelayed by 6 months

210

14

196

-78

274

-73

216

131

128

Q1 2009

-121

4

-125

-175

50

-99

-106

255

337

Q1 2008

70Cash flow after capex

-292Finance costs and income taxes

-558Capital expenditure

26Asset sales and acquisitions

96Cash flow after investing activities

-132Change in working capital

628Net cash from operating activities

1,052Cash flow before change in working capital

1,206EBITDA

2008€, million

FINANCIALSCash flow

FINANCIALS Cash flow and actions to preserve cash

-750

-500

-250

0

250

500

750

1 000

1 250

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

€ million, trailing 12 months

WOC reduction

Dividend cutCapex cut

Net cash flow from operations

Cash flow after investing activities

Cash flow improvement from:

0

200

400

600

800

1000

04 05 06 07 08 09e

FINANCIALS Capital expenditure 2009 estimate € 300 million

€ million

Depreciation excl. amortization of goodwill

Strategic investments

Operational investments

551

300

Estimate

Q1 2009 capital expenditure was € 67 million

0200400600800

1 0001 2001 4001 6001 8002 000

Res

t of

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

-202

6

2027

2028

2029

2030

Committed Facilities Loans

Liquidity on 31 March 2009 was € 1.7bnIn March, the € 1.5bn loan facility maturing in 2010 was replaced by a new three-year € 825m facility

FINANCIALSMaturity profile – moderate repayments for the next three years

€ million

FINANCIALSConclusions

# 1 Priority: cash preservation and profitability

Cost deflation materialising with a delay

Solid balance sheet and good liquidity

Balance demand and supply with temporary lay-offs

meet the management may 26, 2009 helsinki...biomass value chain offers strategic opportunities •...

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