Costs and record-strong euro impact on UPM's results; Magazine paper markets now tight

Jussi Pesonen, President and CEO, comments on the result of the third quarter of 2007:

"UPM's deliveries increased during the third quarter by 4% and the efficiency of operations improved. However, the rapidly increasing costs and the strengthening of euro were challenging for the whole industry and they impacted on our results. In particular, wood and recycled paper prices were markedly higher than earlier and our stringent cost control was no longer sufficient to offset the cost increase. At the same time, the average price for all paper deliveries was approximately 2% lower than last year."

"This situation calls for strong action in order to move on with our profit improvement."

"Firstly, price increases are necessary in this situation. We have already notified our paper customers of upcoming price increases. We see that the market
continues to be tight in magazine papers, and our target is to close the deals by the end of the year. We have also challenged our fairly long contract
validity times due to the rapidly rising costs."

"Secondly, we will revisit the cost competitiveness of our asset portfolio and check it against the current business environment. The review may result in
permanent or temporary capacity closures."

"Thirdly, we are introducing stricter guidelines for our capital expenditure in 2008, and we will reallocate them towards growth markets and new businesses.
Next year, we expect our capital expenditure to be approximately 500 million euros. That is substantially below the current level."

"We estimate that the cost pressure will continue. Our overall cost inflation for 2007 is estimated to be at the level of approx. 2.5% including the expected
cost savings from the ongoing profitability programme."

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


Source: UPM