UPM-Kymmene Oyj

Jussi Pesonen - CEO Tapio Korpeinen - CFO

Fabio Lopes - Bank of America Mikael Jafs - Kepler Cheuvreux Lars Kjellberg - Credit Suisse Antti Koskivuori - Danske Bank Cecil Boex - Brigade Capital Linus Larsson - SEB

Ladies and gentlemen, welcome to UPM's second quarter result webcast. My name is Jussi Pesonen, I am the CEO of UPM, and I’m here with Tapio Korpeinen, our CFO.

Hello.

Ladies and gentlemen, our performance in first half of 2014 was significantly stronger than that of last year. The €200 million profit improvement program that we launched 12 months ago has proceeded fast, and is now clearly evident in our results.

UPM’s operating profit increased 35% from last year, both in Q2 and in first half. Looking our businesses, Paper ENA, Plywood, and Paper Asia, all succeeded in their profit improvement efforts.

On the other hand, Biorefining and Raflatac had some temporary operational issues in Q2 and did not reach their full potential in this quarter. With improved Group level profitability, also our cash flow was strong.

In the first half of the year, our operating cash flow was €292 million higher than last year. Strong cash flow always enables us to pay healthy dividends to our shareholders, investing in organic growth projects, and strengthening our balance sheet in the future.

As a result of the strong cash flow, our net debt was almost €600 million lower than at the end of same period last year. 12 months ago, we also set ourselves clear targets in our growth projects over a three-year time period.

As you most probably remember, we are targeting additional €200 million EBITDA when all these projects are fully operational and in full run. Now, one year later, I’m happy to report solid progress in all of our projects.

We will come back, and we are coming back in this presentation to those projects. Moving to the page 3, page 3 shows the progress of our €200 million profit improvement program, and as you can see, we have been able to implement the cost reduction measures clearly ahead of schedule.

In Q2, about 94% of the targeted savings are in improving our results. On quarterly level, the program reduces our cost base by €47 million in Q2, compared to run rate we had in Q2 last year.

The remaining part of the program is related to variable costs. It is clear we will reach the target of €200 million during the second half of the year, but like always we still see some further potential in variable costs.

The work does not end when we reach €200 million impact. Ladies and gentlemen, now I will hand over to Tapio for some analysis of our results.

Tapio, please.

Thank you, Jussi. On the page 4, we see our EBITDA development during the first six months of 2014 as compared to last year.

On the left hand side, you can see that both our variable and fixed costs have decreased significantly from last year. Approximately half of our variable cost decrease shown here was due to our own profit improvement program results.

Our fixed costs decreased by €34 million, even though we had two pulp mill maintenance stops during the first six months of this year that we did not had last year. This increased our maintenance cost in the Biorefining business area.

In fact, the combined fixed cost reduction in the other businesses and functions, excluding Biorefining, was €60 million during this period. Our average paper price was 2% lower than last year.

Hardwood pulp prices were also clearly lower than last year. On top of these, we had headwinds from currencies in Biorefining, Paper Asia, and Raflatac.

Deliveries in Paper ENA were 2% lower than last year, but this was more than offset by positive volume development in the other businesses. On the right hand side, you can see that the biggest improvement came from Paper ENA followed by Plywood and Paper Asia.

Most of the improvement comes from lower reduced variable and fixed costs. On top of this, Paper Asia and Plywood achieved higher deliveries, and Plywood also increased sales prices.

Moving on to page 5, here we summarized the operating profit development in our six business areas. On the bottom row, the good profit improvement achievement in Paper ENA, Plywood, and Paper Asia is clearly visible.

In UPM Energy, operating profits decreased seasonally from the first quarter, but remained on the same level as we had in the second quarter of last year, partly due to successful hedging, but also due to good value creation with our hydropower asset. Q2 results for Raflatac suffered from several unfortunate, but temporary operational issues, partly related to the ongoing reorganizing.

The impact was a few million euros negative. This is not a big factor in UPM Group earnings, but still resulted in a lower operating profit in the second quarter than last year or sequentially in the previous quarter.

Biorefining operating profits decreased in the second quarter due to three factors. First, we had the scheduled maintenance stop at our Pietarsaari pulp mill in Q2.

This impacted our Q2 results by about €10 million. Second, we had a prolonged somewhat difficult start-up in our Kaukas pulp mill after the maintenance shut that we had in March.

This reduced production and efficiencies in the mill and impacted our Q2 results by another €10 million. Finally, hardwood pulp prices have decreased significantly during the past quarters, and as a result, the average pulp price in euros during the second quarter was about 12% lower than last year.

Here I would point out that the price indices that are available on the pulp market, the people in Europe don’t fully show perhaps the change in prices in terms of where pulp transactions take place. So in that sense, again, if you compare, for instance, the situation in China where the indices perhaps also are a little bit more illustrative of the actual situation in the market, pulp price in the second quarter was about $100 lower than one year ago.

So in that sense, again, this change in hardwood pulp price, the impact is there already in the Q2 results. Then moving on to the next page on our cash flow, again the improved profitability is also visible in our cash flow, and calculated over the past 12 months, our operating cash flow totals €1,027 million.

In other words, we’re back in the annual level of over €1 billion of operating cash flow. In the second quarter, our operating cash flow was €215 million, which is €131 million higher than last year.

In the first six months, our operating cash flow was €479 million, which is €292 million more than last year. And as Jussi mentioned, strong cash flow obviously is very important for us because it is key to help the dividends, in addition to realizing organic growth projects and for strengthening our balance sheet.

And in fact, we have been strengthening our balance sheet. As a result of the strong cash, our net debt was nearly €600 million lower than one year ago in the second quarter, and our gearing at 40% now is 8 percentage points lower than last year.

Our net debt to EBITDA is 2.4 times, which is 0.6 multiples lower than it was 12 months ago. Of course, it’s also good to remember that in the second quarter we paid our dividend €319 million, so therefore from the first quarter to the end of second quarter, our net debt went up €148 million, which in the sense is in line with what typically happened in the second quarter, but as our operating cash flow is strong, also then during the coming quarters or for the year as a whole we would expect a similar pattern of net debt coming down again during the second half of the year.

Our liquidity continues to be strong at €1.8 billion. Page 8 summarizes our outlook for the second half of this year, and it can be characterized as broadly stable.

In the second half of 2014, as compared with the second half of 2013, we expect similar or slightly better performance from Paper ENA, Paper Asia, Raflatac, Plywood, and Energy. In Biorefining, as the result of the hardwood pulp price decreases seen in the first half of the year, we expect lower performance for the second half of this year in comparison to the second half of last year.

Finally, the commercial production at the Lappeenranta renewable diesel refinery is expected to start up in terms of commercial production during the autumn. It will be ramping up its production during the latter part of the year, and it’s not yet expected to contribute meaningfully to Biorefining earnings during the second half of the year.

And now, I’d like to hand back over to Jussi for some comments on our growth projects.

Thank you, Tapio. As Tapio already mentioned the Lappeenranta refinery, so let’s start with that.

On page 9, you can see the picture of the refinery taken a week ago, so basically this, as you can see, quite complete, and big scale factory. I’m happy to tell you that the construction of the refinery was completed in July quite well according to the schedule, so as we said that by the end of the second quarter we are ready to start.

We are currently going through the testing and the commissioning process, which in this kind of refinery, typically takes some months. We expect to start commercial production of the renewable wood-based diesel in the refinery during the autumn.

We have also taken all of the necessary actions when it comes to commercial things. One commercial milestone was reached in June when we signed a sales agreement with NEOT in Finland to settle our renewable diesel, and this is a kind of a long-awaited moment, seven years of lot of work and innovation patents, production, designing and all the process designing, and now we are really first time ever starting up this kind of refinery in the world that is based on wood raw material.

It offers a new exciting business opportunity for UPM. When it reaches its full production, we expect this new business to contribute nicely towards our €200 million EBITDA growth target.

Then, we can leverage on the learnings that we have gained and decide the future growth steps in our biodiesel business, so this is really a exciting moment and exciting period to come in the next few months to really look at how the seven year tough work is then yielding to a biodiesel refinery within UPM portfolio. Let’s move on to the page 10, we said 12 months ago that we will increase our pulping capacity by 10% i.e.

330,000 tons comparing that to our 2013 capacity. Also, in the area, we made solid - in this area, we had made very solid progress in Q2.

We completed the fiber line modernization in Pietarsaari pulp mill in June, enabling the mill to increase its annual production by 70,000 tons. In June, we also received an increased production permit for our Fray Bentos mill in Uruguay.

Now we are allowed to increase production in the mill by another 100,000 tons to 1.3 million tons. To enable this increase in production, we plan some minor investments to be carried out during the annual maintenance stoppage later this year.

The project to increase capacity in our Kymi mill by 170,000 tons has got a good start, and it’s expected to be completed by the end of next year, so basically all of these three items that I mentioned are already giving us that 10% expansion on our pulping capacity. Summing these together, we end up with 200,000 -- 340,000 tons of additional pulp production, but on top of that there we still have some debottlenecking potential at our Kaukas mill, so basically this is well proceeding as we announced 12 months ago.

Moving to the page 11, we have made a good start also in the labeling materials. Machine project there in our Changshu paper mill in China, the 360,000 ton specialty paper machine is expected to start by the end of next year as well.

We are also expanding our self-adhesive labelstock production capacity in Asia at the same time by almost 50% by investing in our labelstock factories in Changshu China and in Malaysia. These investments are expected to be completed by the end of this year.

Raflatac is also expanding its filmic labelstock production in Poland. This expansion is expected to start up in Q1 next year.

So, all in all, 12 months ago we set ourselves a €200 million EBITDA target for organic growth investments in three years. In H2 2014, we are seeing the first signs of these investments and start-ups like the biorefining plant.

Page 12, the beauty of UPM asset portfolio is that our assets are well invested and in excellent shape. This means that our maintenance investment needs on the current assets are low, about €200 million per annum.

This means that we can realize our organic growth investments and still keep our total CapEx fairly low. Our estimate for 2014 total CapEx is €450 million.

This means we continue to strengthen our balance sheet. We do not need to leverage our balance sheet on organic projects, rather we can utilize it when there are value enhancing M&A opportunities.

Ladies and gentlemen, summarizing - and to summarize, we achieved a strong improvement in profits, 35% increase in our EBIT. To a large part driven by the successful profit improvement program, our operating profit increased really clearly, and we had some temporary issues in Biorefining and Raflatac during the second quarter, but those are now over.

Our cash flow generation is strong. UPM generated over €1 billion of operating cash flow in the past 12 months, and as a result, our net debt is about €600 million lower than 12 months ago.

And finally, we have made a good progress in our growth projects, the first of them are now coming to their start-up phase. And the last page is all about promise that we made 12 months ago, profit improvement program of €200 million, then the organic growth projects, adding another €200 million, business portfolio although we have not seen these developments there yet, it’s still valid, and then finally, biodiesel is in the concrete start-up phase at this point.

Ladies and gentlemen, with these words, this is the end of the prepared part of the presentation, and now we are ready to answer all of your questions. Dear operator, I hand over to you for the Q&A session.

Thank you.

I have three quick questions. One, on the dividend, I would like to clarify how you are thinking about the dividend in terms of the dividend policy for the full year.

And the second one, regarding Raflatac, the labels, what would you expect for the second half, these little operational problems, is it sorted already? And the third question would be, what are your expectations for pulp for the second half of this year?

Thank you very much.

I guess that these were spot-on questions. First of all, UPM has been and will be always a - or wanting to be a good dividend payer, and therefore we are very delighted that’s in our cash flow.

Cash flow is back on track, more than a €1 billion in trailing 12 months period, so basically maybe it is too early to talk about dividend at this point, but our aim is to really generate good cash flow, and as you all know that our dividend policy is based on cash flow, so we are very pleased with that, and we want to be kind of good in that respect as well. Raflatac, yes, the challenges are over.

So far, we are, in third quarter, we are running back on track in that respect, and in pulp, of course you know, as we say, the comparing -- what will be the comparison time, of course, if you compare second half of last year to second half of this year, lower pulp prices that we have already experienced will have an effect on the pulp profitability, but on the other hand, as already mentioned in Pietarsaari, we have been able to now complete the project and there is a new permit for Uruguay. So basically obviously the kind of result will be dictated by the pulp markets and the prices where we saw already decline in the second quarter comparing that of a year ago.

I would like to - since we discussed pulp, in your opinion, with the current pulp prices that you are experiencing, how far are we from the high cost producers, cash costs that will be -- I don’t need a number, but a general discussion would be nice. That’s the first question.

And then, the second question would be on Q3 maintenance, will we have the Fray Bentos rebuild/maintenance in Q2 and - in Q3 sorry, and are there any other maintenance-related stoppages that you would like to highlight to us? Thank you.

Well, perhaps, Mikael, on your second question first, we will have the maintenance stop in Uruguay and in that sense, actually I would expect that to be more or less the same impact, the same kind of stop as we had last year, and I would say that is in a sense the only major one in Q3 worth mentioning. Then, in a sense, back to the pulp discussion, again as discussed or mentioned earlier, of course, where we have seen the biggest change in terms of where pulp is being transacted is in hardwood, and there the drop has been significant.

So I won’t sort of speculate in terms of how far it can go or where the kind of the floor might be, but I think as far as hardwood pulp, for the higher-cost producers, this is a significant change already, and of course always it’s not the only the price as such, but also currencies for the producers, whether they are moving in a sense, in a direction that mitigates or worsens that development. This is always something to be seen.

In our case, if we compare second quarter this year and second quarter last year, also stronger euro was a negative factor. Then, softwood prices have held up better and there the situation has been quite stable or good and - but then the price difference between the two is quite high in historical comparison.

There also typically the cost curve is steeper, so we will see what happens during the coming months in that.

Just a couple of questions, continue on the pulp side. Tapio, you mentioned a meaningful difference between the index prices that we can see from various sources and what is actually realized.

Can you give us any sense on the how the discount has increased versus, let's say, a year ago on hardwoods? The second question from me is hardwood.

How does that really impact the Group level? Of course, the Paper division, of course, benefits.

And the final thing is on hedging on the Energy. How much is the benefit from the hedges for the Group, and when do they roll over, and assuming current spot prices, what would that mean for Group earnings?

Well, first of all, on your first question regarding the pulp price, I won’t go into the discount as such, but again what I - the point that I was making earlier was that if you look at the sort of indices that are publicly available for China on one hand and then on the other hand for Europe, there is a difference in the curve especially now for hardwood in terms of what the change has been, and again I would say that in a sense, the Chinese index is closer to what is actually happening in the marketplace in terms of transaction prices and it gives a better illustration of that change than what the index shows for the European price. There you can see, in a sense, that those two curves departing reflect also the discount situation.

Then, when it comes to the impact on our Paper business, of course, we are a large user of hardwood pulp as well in our fine paper business, also in our label paper business, obviously in our Chinese fine paper business as well, so it impacts negatively our Biorefining or Pulp business. There is a tailwind or a positive effect on our Paper business.

There it’s good to know that there is a certain time lag there between when we are purchasing pulp between when the actual purchase is transacted and when the pulp is actually consumed and therefore affects the bottom line of the Paper business. Then, the last question on hedges in the Energy business, so there, of course, we don’t sort of disclose the numbers as such, but of course what is happening as we speak or as we report our results in each quarter, the hedges come to maturity that we have put in place earlier and the kind of the results is realized from that, and as the price curve has been downward during the last years and of course those volumes of earlier hedges are being consumed.

But again at the same time, for instance, in the second quarter of this year, while this in a sense was the development, there as well at the same time we were able to also create value with our hydro assets in the spot market or volatility of the difficult spot markets, so we have been able to, on one hand, also add to our results through that. So, that’s why in spite of the fact that the hedges have been in a sense coming to maturity, still we have been able to maintain the profitability level in the Energy business.

Just a follow up on the hardwood pulp question, can you give us any sense of the volume issue, long or short hardwoods, maybe I can calculate that, but can you give us any sense of that?

So we are long about 300 in hardwood.

In hardwood, yes, exactly yes.

And the final question from me. When you're talking about your guidance, we can interpret that in many ways, I suppose.

But you also mentioned uncertainty on paper pricing. What do you see in prices at this moment?

I mean the indices that you referred to early on paper have shown some downward trajectory for newsprint and magazine in certain markets. Do you want to comment on what you're seeing in the market and literally in all your geographic areas, including U.S., China, and Europe?

I guess, Lars, I can answer that. I guess that overall what we see that there is a serious attempt to increase paper prices in fine papers starting from September, and I’m pretty confident that that will realize in other products like magazine rates and newsprint, there has been slight price pressure, but overall if you look in our guidance, no, we are guiding that kind of performance will be pretty stable.

And that goes for China and the U.S. as well?

China, yes. China, there has been some very little pressure in prices.

There has not been that significant change at this point, and in China, we are running flat out with our Changshu mill, so we don’t expect that to be realizing us to really see any change on that. And in the U.S., maybe Tapio, you have better, but no major changes at this point.

And just a clarification, as you mentioned Fray Bentos downtime, is that a Q3 event, and would that be similar to the cost incurred at Pietarsaari or Kaukas?

It’s impacting Q4 and it will be similar or the same as what we had last year, round figures, it is around the same €10 million when a large pulp mill is down for annual maintenance shut.

Firstly, on your outlook for variable costs for H2, how do you see the development there if we look beyond your own actions, what do you expect to get from the market in H2?

Well, obviously that remains to be seen, but as I mentioned, there is certain time lag in any case before sort of the market prices actually realize in our bottom line, so therefore, for instance, as far as pulp cost is concerned, from our Paper business’ point of view, there is still some benefits to come, and I would say, generally speaking, there is some tailwind still rather than the sort of the general market/development turning to the other direction to be expected, and of course, as Jussi mentioned, we continue our own internal work obviously on top of that, so not only relying on the market prices, but taking action of our own [indiscernible].

Secondly, on biodiesel in Lappeenranta, you say here that in H2 you don't expect much of a contribution from that unit. What is your expectations for early 2015 and when should we expect to see contribution from Lappeenranta?

And also maybe you probably have some kind of an indication about the volumes at the moment. How is that developing?

Are you expecting it to be fully utilized once the technical ramp up is done? Could you talk a little bit about that?

I guess for your last question, yes, we do not have any limitations to ramp it up as technically, we are able to do and like Tapio already almost mentioned some other facts that we do not guide for the 2015, but obviously when it is in full run, it will start to contribute nicely to our €200 million EBITDA. This autumn will be ramp up time and that will then be done by the end of this year and hopefully from the next year we are in the kind of utilization rates that gives us a good return.

Could you just give us an indication on, I know you talked about it earlier on, but in terms of the discussions that you've had for paper prices in Q3 in Europe, would those be down small single digit or where did those discussions end?

That would be something that we are not guiding, I guess but then after the third quarter we will report the actuals but like I said that in fine papers we are having a serious attempt to increase and then there are some pressures in some of the other rates, especially in Europe.

And just on the, I guess, the biodiesel facility. Could you just run me through a little bit the economics?

What was sort of total investment? And I think you were guiding probably for something like a five-year payback, if I'm not mistaken.

But could you just remind me of the rough economics of that facility?

Yes, so it’s 120 million liters of diesel or 100,000 tons. The investment now €175 million and the payback figures as such are as we have earlier indicated, so again now we have the commercial start up and then during next year, also the technical start-up going and next year, we’ll both commercially and technically ramp up the business, so then after that we believe that the payback figures are in the range that we’ve indicated earlier as well, no big changes.

Just to remind me, that was five years roughly you indicated, if I’m not mistaken, is it correct?

In that order of magnitude.

And just on the dividend policy, I know we had the previous question and I just wanted to confirm. Is there, I guess, a threshold at which you would look to, if I understood correctly, increase dividend based on the level of cash flow?

Is that what you were commenting?

These actually as you see and have read our dividend policy which is done on kind of the year average cash flow and then you know it’s based on that, and therefore we are just guiding that our cash flow is back on track, that we had kind of lower cash flow last year and now we are back on track, and therefore we wanted to guide that, also in the connection to the dividend policy as well, but like I said, it’s too early to talk about dividend at this stage, but as a kind of management of UPM, obviously we are always proposing a healthy good dividend.

And let me just -- I know you already commented on sort of your long position in the hardwood. I had it down as 300,000 tons, is that right?

I just couldn't hear acoustically.

Yes, 300,000 is kind of a rough number for --.

That's an annual figure, is it?

Annualized figure, yes.

And I presume that is pre your expansion projects, which would add another 340,000. Is that right?

But that is not only hardwood, that is softwood.

Could you let me know how much of that is hardwood?

Of course, Fray Bentos, what we are having there, that is eucalyptus, and then the expansions here in Finland, they are a mix of both but more softwood here in Finland.

So you sort of think it's a 50/50 split?

Maybe something like that.

A couple of questions on paper in Europe to start with. It's been a while -- if you compare to last year, it was very active in the industry on capacity closure and rationalization projects and now, looking at the industry overall and what you're doing, it's been relatively quiet yet there is still overcapacity.

So, that's my first question, how you look upon that. And also, partly related to that is looking at your cost savings program, you've done extremely well, but that also means that you're very near completion on that cost savings target.

So maybe those two questions can be answered together, how you look upon that right now.

First of all, when it comes to kind of the capacity closures, yes, the industry is still having additional capacity and obviously we are looking everyday that what can we do to optimize our costs, and our kind of returns, and obviously every day we need to earn a kind of profits for every mill, and therefore it is kind of continuous process, it has not stopped last year or this year. We have taken serious actions and if that is needed we will take that again.

So that is pretty clear that there is no change. When it comes to cost savings, yes, the €200 million program that we put together last autumn is nearly to be completed, but ever since last autumn we have not sit stable and we have been putting a lot of effort to further take our variable costs down by our own actions and also fixed costs wherever it’s possible, so basically there is a plentiful of actions all the time going to reduce our costs and be more profitable [indiscernible].

And is this the format that we should expect also going forward that you will then announce a new program or a new cost savings target or will it be differently communicated going forward?

That is -- we have not decided, but we have a concept of doing it, but like we -- maybe that of what we did last year was a perfect fit for when we changed the organization and then had the kind of guidance for the new direction. Obviously, then we need to decide how do we communicate, but like I said, this is more or less work that we are doing everyday now and these programs are also internally very good.

When you are getting a program done, you have at the same time, learn to do further actions and take further actions, so basically we will see then how we go forward obviously, we will try to guide you as best we can of the programs that we are having inside of UPM.

And when it comes to capacity closures, you've said, at least at some stage, that your guide internally as to when and how to close capacity, your guide is your own order book for paper, and how is that looking right now?

That is something that we are not disclosing unfortunately.

May I also ask on the portfolio development that you commented upon and you said that it's still valid, and for how long will it remain valid? When will you say that you've turned every stone and you're happy with the structure?

Or will it always be like this that the portfolio is under review? Could you explain if there's any certain types of assets or criteria that is important in this process?

I guess that this is very interesting, I understand that very well, but like now when we reorganized ourselves to six different business units, that was obviously a kind of step change of putting all of these six businesses to be available for M&A or to grow or to be then directed. So basically what we said in our Capital Markets Day, we clearly said that we want to be a top performer in each business area, and obviously there is a plentiful of work going on to be the top performer on that business, and obviously then if we are, we will have kind of ideas to grow the business, and if we are not capable or it doesn’t fit our portfolio, we are also then looking for other alternatives, so basically kind of big step change for the future.

It is not only this quarter or next quarter, it was when we were coming out with more independent six business areas, so that was a kind of big change and the statement is related to that.

It's a follow-up question on the paper business and the impact of lower pulp prices. Okay, lower pulp prices will have a negative impact on Biorefining and, in theory, it creates a tailwind for the Paper business like you said, but correct me if I'm wrong, about half of the paper that you make use pulp.

And how is the price negotiation with the clients when they see the pulp price going down? Don't they come and ask for discounts?

How does that dynamic work? Thanks.

It depends obviously very much on the dynamics or the balance of the market in the paper business, so hardwood pulp prices have been, as discussed earlier, sloping down, but fine paper market actually, here in Europe, has been in pretty good balance now recently, so the price movement there has been rather to the other direction, so in that sense there is no fixed rule there, it depends very much on the balance and situation specifically in each market. And of course in a sense, as you say, this varies by paper grade as well, but it’s not an issue in newsprint.

It is a bigger cost component in fine paper and then magazine papers are there in between.

Sorry, just to follow up, can you just give us what your current utilization rates are in magazine and then in newsprint?

Unfortunately, this is something that we do not disclose.

And then, maybe just one other question on the outlook. Just so I understand correctly, the outlook you've given us obviously for broadly stable or slightly positive, if we look at the cost savings that came through in the Q3 of last year, those were only on a run rate €50 million whereas we're now on a run rate close to €200 million.

Is that comment of broadly stable to slightly positive, is that on the operating line or is that on the top line?

That is on the bottom line, in a sense on the operating profit.

So that is already inclusive of the cost savings, the €200 million, so €50 million quarterly or €47 million quarterly.

That is the second half this year as compared to the performance during the second half of last year.

And you expect it to be -- you expect H2 to be then, obviously, on par or slightly better for all the businesses except pulp with 2013 second half?

Yes.

Okay. Thanks.

I just wanted to clarify the cost savings on that point. Thanks very much.

Just a follow up on the energy hedging, if you could tell us what the hedging profile looks like. What's the percentage of volumes hedged for the second half of this year and same question for 2015 and 2016, please?

Well, as earlier, we don’t disclose hedging profile as such, so again typically we are, let’s say, for the next 12 months sort of 80% hedged, and at the moment, we are not too far from that.

So have you continued --.

Obviously, the hedging rates get lower.

So how do you hedge the, so far this -- have you continued to hedge so far this year or have you not hedged during this year?

Well, of course, we are hedging three years out, so in that sense, we make hedging decisions over time, how much and or which year that we don’t disclose, but of course that is a continuous process.

Thank you. Dear participants thank you for your interest in UPM and have a very nice afternoon.

Thank you. Bye now.