UPM-Kymmene's Interim Review: Profitability on par

Press release from the issuing company

July 21, 2003 -- President and CEO Juha Niemelä comments on the second quarter of the year: "UPM-Kymmene's profitability and earnings per share during the second quarter remained on the same level as during the first quarter, but were well below the company's targets. The primary reason for our weak profitability is continuing low paper prices. The strengthening of the euro has intensified competition in Europe, and the profitability of the US dollar and the British pound denominated exports has weakened. On the other hand, we have been able to lower our costs. The demand for paper in the company's main markets continues to grow slowly, and we do not foresee a significant market turnaround this year." "The company's cost savings campaign is proceeding as planned, with the target of saving EUR 200 million by the beginning of 2005. During the year the company has taken steps to streamline operations and improve cost-efficiency, including selling and closing unprofitable businesses. In addition, the company has optimized paper production e.g. by focusing annual summer shutdowns to fewer production sites. The cost savings are also focused on fixed costs, raw materials procurement and logistics." ´ "Even during these challenging economic times the company continues to have a strong balance sheet and a good cash flow and thus has the resources to develop the operations even during the slow growth period." "The economic outlook for the near future, particularly in Europe, is still uncertain. During the third quarter of this year, we do not anticipate any profit improvement. We don't project any major changes in European publication paper prices during the coming months, even if price pressure continues in some paper grades. On a positive note, we have been able to implement more than half of the previously announced North American price increases for LWC." "The Changshu fine paper machine investment in China, which was temporarily halted during the SARS epidemic, now will continue as previously planned. The machine is scheduled to start up in the summer of 2005," concludes Mr Niemelä.