UPM Deutsche Bank 7th European Paper Seminar

Jussi PesonenPresident and CEO

11 November, 2009

UPM 2

Contents

� Financials

� Platforms for the future

� Summary

UPM 3

5.47.81.59.26.8% of sales

25,616

-148

271

0.61

559

310

14.4

1,028

7,146

Q1-Q32008

9673455277Cash flow after investing activities, €m

23,180

889

-0.10

84

9

12.5

700

5,611

Q1-Q3 2009

23,180

309

0.14

131

96

17.5

334

1,913

Q32009

25,616

175

0.25

216

-40

16.0

378

2,358

Q32008

24,983

628

0.42

513

24

12.7

1,206

9,461

2008

EBITDA, €m

% of sales

Cash flow from operating activities, €m

Personnel at end of period

Operating profit excl. special items, €m

EPS excluding special items, €

Operating profit, €m

Sales, €m

FINANCIALSKey figures

UPM 4

FINANCIALS EBITDA by business area Q3 2009 vs. Q3 2008

-50

0

50

100

150

200

250

300

350

400

3532.4% 8

5.1%24

8.1%

2912.0% -5

-6.8%

-31

33417.5%

€ millionUPMtotal

Energy Pulp Forest and

timber

Paper Label Plywood Other operations

Q3 2009Q3 2008

27418.8%

UPM 5

FINANCIALSEBITDA development in Q3 2009 vs. Q3 2008

0

50

100

150

200

250

300

350

400

450

500

EBITDAQ308

EBITDAQ309

€ million

33417.5%

Prices, currency

DeliveriesWood costs

Energy costs

Otheritems

Fixed costs

37816.0%

UPM 6

-200

-150

-100

-50

0

50

100

150

200

250

300

Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309

FINANCIALS Operating profit by business areaexcluding special items

€ million

Plywood

Label

Paper

Forest and timber

Pulp

Energy

Other operations

UPM total

1316.8%

2169.2%

UPM 7

3 688

4 321

3 000

3 500

4 000

4 500

5 000

04 05 06 07 08 Q309

6471

0

20

40

60

80

100

120

04 05 06 07 08 Q309

Gearing ratio improved by 7pp from the beginning of the year

Net debt decreased by € 633m from the beginning of the year

% € million

Target: maximum 90%

FINANCIALS Gearing ratio and net interest-bearing liabilities

Liquidity increased to €2.2bn at the end of Q309repayments less than €0.9bn in 2009-11

UPM 8

FINANCIALSDividend policy and financial targets

0

200

400

600

800

1000

1200

1400

04 05 06 07 080,0

0,4

0,8

1,2

1,6

2,0

2,4

2,8

Cash flow€ million € per share

Minimum dividend implied by the dividend policy

Cash flow from operating activities less operational capex

Operational capex

Financial targets

� Operating profit margin to exceed 10 percent

� ROE at least five percentage points above the yield of a 10 year risk-free investment

� Gearing ratio below 90 percent

Dividend policy

� at least one third of net cash flow from operating activities less operational capital expenditure

� net cash flow calculated as an average over three years

PLATFORMS FOR THE FUTURE

UPM 10UPM 10

PURPOSE

We 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.

UPM 11

UPM's three business groups

� Label

� Plywood

� Development units, e.g.

RFID tags and inlays

Wood plastic composites

CAPACITIES • Electricity 1.6 GW• Pulp 2.1 million t/a • Forest 1 million hectares• Sawn timber 2.4 million m³/a

CAPACITIESPaper 11.5 million t/a• Publication 7.2 million t/a • Fine 3.4 million t/a• Speciality 0.9 million t/a

Energy and pulp Paper Engineered materials

CAPACITIES• Label 11 factories globally• Plywood 1.1 million m³/a

� Pulp mills

� Hydropower plants

� Shares of associated companies in pulp and energy

� Forests and timber

� Biofuels

� Magazine

� Newsprint

� Fine

� Speciality papers

UPM 12

STRATEGY Portfolio of choices and opportunities

Energy and pulp Paper Engineered materials

� Expand in cost competitive low emission energy, including biofuels

� Increase the share of low cost pulp

� Strengthen position in the forest biomass market

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

� Consolidation in Europe

� Growth in China and other emerging markets

� Industry leadership in self-adhesive label materials

� Growth in Plywood

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

UPM 13

ENERGYStrategy: "expand in cost competitive low emission energy"

� Invest in biomass-based CHP at paper mills– Kaukas (with PVO) 2009– Caledonian 2009– Kymi 2008– Chapelle 2007– Rauma (with PVO) 2006– Shotton 2006

� Acquire 1.2% of PVO in 2009*

� Ongoing project TVO's nuclear reactor (OL3)

� Growth opportunities – biomass-based power, nuclear power (OL4)

– biofuels, including biodiesel in which piloting and environmental assessments ongoing

* transaction subject to final closure

UPM 14

ENERGY Strategic investments in low cost, low emission electricity generation

Hydro NuclearCHP Condensing

CO2

UPM's power generation structure and latest investm ents

Total 14.2 TWh in 2008 (85% of consumption)

€/MWh

Paper

� Cost competitive electricity generation regardless of fuel and CO2 prices– hydro, nuclear,

biofuels-based CHP

� 62% of fuels used by UPM were biofuels in 2008

CHP start-ups 2009CaledonianKaukas (PVO)

OL3 reactor start-up in 2012

UPM 15

PULPStrategy: "increase the share of low cost pulp"

� Increase the share of plantation based pulp. Restructuring Botnia's ownership* 2009

– acquire Fray Bentos 1.1 million t/a pulp mill and plantations in Uruguay

– reduce ownership in Finnish Botniato 17% from 47%

� Invest in existing capacity's competitiveness– Kymi recovery island € 360m 2008

� Close uncompetitive capacity – Tervasaari 210kt 2008

� Growth opportunities in Latin America and Russia

* Botnia transaction subject to final closure

UPM 16

3,580

400

3,180

740

800

540

1,100

1,000 tons

17% of Botnia's capacity

Total own capacity

Rebuild 2008Kymi

Rebuild 2004Pietarsaari

Rebuild 1996

Start-up 2007

Total

Chemical pulp capacity

Kaukas

Fray Bentos

PULP UPM after the Botnia transaction: share of plantation-based pulp increases to one third

Fray Bentos pulp millForestal Oriental plantations

UPM's own pulp capacity increases by 53%

Plantation-based pulp will represent 35% of total capacity

Top quality mills: low investment needs and low maintenance costs

UPM 17

LABELStrategy: "industry leadership in self-adhesive labelstock"

� Major investment programme (M€ 200 in total) completed: – Wroclaw, Poland 2008

– Dixon, U.S. 2008

– Changshu, China 2007

� Profitability turn-around achieved– European restructuring in 2009– cost leadership

� Growth – growing market

– new products and applications

UPM 18

LABELGrowing demand in labelstock end-uses

Growth drivers

� Continuous renewal of product range by using new raw materials – e.g. filmic liners and new adhesive formulas

� New applications in beverage and food segments

� Personal care segment is key growth driver in emerging markets

� About 80% of business driven by consumer demand, 20% by industrial/commercial demand

Sources: AWA, UPM Raflatac estimates

Retail

Logistics & TransportOffice

Products

Personal Care

Beverage

Pharmaceutical

Home Care

Industrial Chemical

Consumer Durables Automotive

Food

Global self-adhesive label materials demand

UPM 19

Sources: AWA. UPM Raflatac estimates

USA & Canada

Latin America

SEA

AfricaOceania

North Asia

South of Asia

Japan & Korea

4-5%

2-3%

7-9%

3-5%

12-15%

1-2%

~2%

10-12%15-20%

Europe (incl. Russia)

2009-2013 annual growth estimations:

* Asia figures include only high & medium quality segment

MiddleEast

~10%

LABELGrowing self-adhesive labelstock marketTotal worldwide demand 14 billion m² in 2008

UPM 20

UPM labelstock factories

Slitting terminals

Dixon, IL

Changshu, China

Wroclaw, Poland

LABELUPM's global platform and strong market positions

UPM RaflatacAvery Dennison

Other competitors

Other main competitor

UPM 21

LABELLabel has shown a turn-around – restructuring in Europe and focus on pricing excellence

-10

-5

0

5

10

15

20

25

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

-5,0

-2,5

0,0

2,5

5,0

7,5

10,0

12,5

Operating profit

Operating profit margin

€ million %Operating profit excluding special items

UPM 22

PLYWOOD

Strategy: "growth in Plywood"

� Plywood hit by cyclical demand drop

� Plan to secure profitability and raise competitiveness in value added products*– plan to close Heinola plywood mill, 50,000 m³

– plan to close Kaukas plywood mill, 80,000 m³

– decrease the number of employees by 710– invest € 25 million, mostly to make Finnish

Savonlinna mill the world's most efficient unit

� Growth potential not sacrificed – can respond to returning demand

� Growth potential in solutions for demanding end uses and through new products

* subject to employee negotiations

UPM 23

PLYWOODPlywood end-uses in Europe

FlooringPackaging

Transport

Other Construction

Furniture

Source: FEIC,FAOSTAT

Plywood demand in Europe in 2008

8,5 million m³ (without Russia)

Main drivers

� Construction activity

� Industrial production

� Growth in new products and applications

UPM 24

-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

PAPEREconomic indicators have improved, but recession continues to affect 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

UPM 25

PAPER

Graphic paper demand scenarios in Europe – recovery when and how much?

2003 2004 2005 2006 2007 2008 LTM

� Scenario assumptions:

- Paper demand will rebound after recession

- Demand is likely to remain below year 2007 peak level

� Value creating is possible with continuous cost and capacity management

Demand scenarios

Slow recovery

Quick recovery

Peak level 2007

UPM 26

PAPER

Strategy: "focus on European profitability"

� Closed 1.8 million t/a of uncompetitive capacity in 2006-08

� Cut fixed costs (UPM by € 300m in 2009e)

� Lean investments (UPM capex € 300m)– enabled by modern well-invested asset base

– focus on cost competitiveness

� New supply chain management implemented

� Ready for consolidation in Europe to gain- cost and investment synergies- optimal capacity through restructuring

UPM 27

PAPERPaper deliveries and prices are low…

70

75

80

85

90

95

100

105

110

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

Q107 = 100

Publication paper deliveries

Fine and speciality paper deliveries

Average paper price

UPM's paper deliveries and average prices, indexed

UPM 28

PAPER…but margins have increased due to cost cuts and improved efficiency

-100

-50

0

50

100

150

200

250

300

350

400

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

-5

0

5

10

15

20

Paper EBITDA

Pulp EBITDA

EBITDA margin (on Paper sales and Pulp external sales)

€ million %Paper and Pulp EBITDA and EBITDA margin

UPM 29

PAPER Strategy: Growth in China and other emerging markets

* Botnia transaction subject to final closure

Fray Bentos* pulp mill• 1,100 ktons BHKP• start-up 2007

Forestal Oriental

• 180,000 ha

Changshu fine paper mill • 900 ktons WFU, WFC• start-up 1999, 2005

Label materials factory• start-up 2007

Asia R&D centre

Modern, competitive mill operations in strategic gr owth markets*

UPM 30

Summary

� Short-term demand and pricing outlook remains weak

� UPM is coming out of the recession with a solid business platform to grow and harvest cash flow

� UPM develops its businesses through all available tools: investments, M&A, closures, cost cuts, new ways of working, R&D

� Growth opportunities in all of the businesses

� Shareholder value creation– low investment needs to maintain competitiveness

– Good cash flow makes possible to invest in growth and simultaneously to distribute part of cash flow to shareholders

UPM 31UPM 31

UPM 32

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