UPM-Kymmene Oyj

Jussi Pesonen - President and CEO Tapio Korpeinen - CFO

Antti Koskivuori - Danske Bank Fabio Lopes - Bank of America/Merrill Lynch Mohit Khanna - Value Investments Principals Mikael Jåfs - Kepler Cheuvreux Lars Kjellberg - Credit Suisse Mikael Doepel - Handelsbanken Linus Larsson - SEB Enskilda Rebecca Clements - BlueMountain Capital

Ladies and gentlemen, welcome to UPM’s Fourth Quarter and Full-Year 2014 result webcast. My name is Jussi Pesonen, I am the CEO of UPM.

And I’m here with my colleague, Tapio Korpeinen, our CFO.

Good afternoon, everyone.

2014 was a year of progress for UPM. Our operating profit improved by 24%, thanks to the success of the EUR 200 million profit improvement program.

As you remember, this program reached its targets already in Q3. And in Q4, we launched a new EUR 150 million profit improvement program to keep up the positive momentum for this year also.

I’m especially pleased with our strong cash flow. Our operating cash flow was EUR 1.2 billion in 2014 or EUR 2.33 per share.

As a result of the consistently strong cash flow, UPM’s net debt decreased to ERU 2.4 billion level. Our gearing is 32% and net debt to EBITDA is at 1.9x level.

Our balance sheet has never been this strong. At the same time, as we reduced our net debt by more than EUR 600 million, we made progress in our growth projects.

We reached an important milestone in January this year when we started up commercial production of the renewable diesel in our Lappeenranta Biorefinery. Also the other growth projects are proceeding well, and we will be completing them during this year.

Finally, we have today, renewed our dividend policy and the Board proposes 17% increase in our dividend to EUR 0.70 per share. The Q4 results, shows the same strong earnings momentum as the full-year results.

Both EBITDA and operating profit increased from the same quarter a year-ago. The main reason for the improvement was the decrease in variable costs, again, partly thanks to this EUR 200 million profit improvement program.

Cash flow was particularly strong in Q4, partly due to seasonal release of working capital at the end of the year. But now ladies and gentlemen, I will hand over to Tapio, to analyze our results some in more detail.

Tapio, please.

Thank you, Jussi. Here, on this following page, we have UPM’s EBITDA development for the full-year of 2014, as compared to the previous year 2013.

On the left hand side, you can see that we were able to reduce both, variable and fixed costs significantly from the previous year. Our fixed costs were EUR 60 million lower than in the previous years.

In Biorefining, our fixed costs increased compared to last year, due to higher maintenance costs in pulp, as well as the costs of building the new biofuels organization. If we exclude Biorefining, then the other businesses were able to reduce their fixed costs by EUR 90 million for the year.

Sales prices had a significant negative impact on UPM’s earnings in 2014, but we were able to reduce variable costs by more than the impact was from sales prices. Currencies were broadly neutral for the full-year of 2014 as compared to 2013.

They had a negative impact in the early part of the year, and a small positive impact in the later part of the year. In the fourth quarter of 2014, as compared to the fourth quarter in ’13 one year previously, the improvement in EBITDA came mainly from lower variable costs.

Our fixed costs were on the same level. You may recall that majority of the fixed cost savings actions in our earlier EUR 200 million profit improvement program were already benefiting the Q4 ’13 results.

On business area level, all businesses improved in 2014, except for Biorefining. In the fourth quarter of 2014, Biorefining and Paper ENA, reported about the same level of earnings as in the fourth quarter of 2013, and the other four businesses improved.

This page shows the operating profit development of our six business areas. As you can see, we have a strong end to the year in all businesses.

This is especially visible in Energy and Plywood, which both, improved seasonally from the third quarter. Energy also benefited from favorable production mix and low costs in the quarter.

While the currency movements had only a minor positive impact on the group earnings in Q4, they did increase pulp pricing in euros as compared to the third quarter. In Biorefining, this helped to offset the earnings impact of the maintenance stop in Fray Bentos.

On the other hand, in Paper Asia and Paper ENA, this increased variable costs, as compared to the third quarter. Paper ENA was also impacted by the seasonally higher fixed costs in the last quarter, as compared to the third quarter.

Raflatac benefited from solid sales growth in the last quarter of 2014. You probably remember that in our Capital Markets Day, last spring, we announced long-term return targets for each of our business areas.

We have three different types of businesses and also targets for each that are set accordingly. First of all, Raflatac is a less capital-intensive converting type of business, and there the return on capital employed target is 18%.

On the other hand, Energy is a capital-intensive utility business, where we value most of the assets at fair value. Energy, our ROCE target is 6%.

Finally, Biorefining, Paper Asia, Paper ENA and Plywood are process industry businesses, targeting returns of 10% to 12%. In the case of Paper ENA, this is defined as a cash return on capital employed after capital expenditure, restructuring payments and changes in working capital.

As you can see, four of the six businesses achieved or exceeded their targets in terms of returns for 2014. Even in Biorefining, we would be close to the target, if we did exclude the biofuels business, which tied capital and incurred fixed costs, but only now this year it’s starting to generate sales.

In addition to the long-term return targets shown here, each of the businesses, is targeting top performance on their respective markets compared with relevant peers. On this metric Energy, Paper Asia, Paper ENA and Plywood improved their relative performance.

Jussi already mentioned our strong cash flow. In 2014 as compared to 2013, our cash flow benefited naturally from the improved EBITDA, but also improved working capital efficiency and lower finance costs and income taxes.

In Q4, 2014, we released EUR 144 million from working capital, but obviously we enjoyed the improved EBITDA and lower finance costs and taxes as well. At the end of 2014, UPM balance sheet was stronger than ever before, whether we measure it by absolute net debt, gearing ratio or net debt to EBITDA.

Our net debt decreased by EUR 639 million during 2014, and our net debt to EBITDA decreased to 1.9x. A few slides ago, I showed you the business area performance compared with their long-term return targets.

With current business portfolio, if all of our businesses achieve their targets simultaneously, UPM’s operating profit margin would be about 10%. In 2014, we were not quite there yet.

We achieved an EBIT margin of 8.6%, up 1.8 percentage points from 2013. Our return on equity reached 8.3%, up 1.9 percentage points.

This exceeded our minimum target. The target is defined as 5 percentage points over 10-year risk-free interest rates of just the Finnish states’ 10-year bond yield.

So you can see interest rates have continued to come down. I think that UPM’s share price development, whether in relation to earnings or book value, is well supported by these group level results.

This page shows our new simplified dividend policy and the Board’s dividend proposal for 2014. UPM aims to pay an attractive dividend.

The level of dividend is to be around 30% to 40% of the company’s operating cash flow per share. The new policy is clear and transparent to the investors.

It is based on the reported operating cash flow per share, the same key performance indicator that UPM has been reporting for more than 10 years, no adjustments are required. Strong cash flow is one of UPM’s strengths, and is key for the company’s ability to pay dividends, invest on growth and act on strategic opportunities.

In line with this new policy, the Board proposes a dividend of EUR 0.70 per share for 2014. This represents 30% of 2014 operating cash flow per share, and is about 17% higher than the dividend for 2013.

This page summarizes the outlook for 2015. In the first quarter, our earnings will be affected by lower paper prices - publication paper prices.

The paper contract negotiations are still partly going on, so I will not go into the details on this. At this point, I can only say we can expect a low-single-digit reduction in the average paper price in Paper ENA in the first quarter of 2015.

Also the electricity hedging position in UPM Energy for 2015 is priced at lower level than it was for 2014, resulting in a lower average electricity sales price from Q1 ’15 onwards. There are several positive drivers impacting our earnings as well.

First, the new EUR 150 million profit improvement program will start to improve our cost position as the year progresses, reaching its full impact by the end of the year. Second, we expect the first positive impacts from our growth projects to materialize during 2015.

The investments at Pietarsaari and Fray Bentos pulp mills, as well as the Lappeenranta Biorefinery have been completed, and now it is up to the units to ramp-up and optimize production and start to contribute to the earnings. Third, the recent weakening of the euro is supporting to our earnings.

UPM’s net U.S. dollar flow is about EUR 110 million and the net U.K.

pound sterling flow is about EUR 500 million. On average, we hedge some 50% of the estimated 12-month currency flow.

Finally, the fall in oil price impacts many of our cost items directly and indirectly, for instance, logistics costs, chemical costs and energy costs. All in all, we expect the good level of profitability, we achieved in 2014, to continue during 2015.

Depending on the exact timing and magnitude of the positives, such as the indirect impact of the oil price, there are also opportunities to improve profitability further. And now back to Jussi.

Thank you, Tapio. And now I will briefly go through some of the actions that Tapio mentioned in his comments about the outlook.

First in November, we announced a new profit improvement program targeting on EUR 150 million of fixed and variable cost savings by the end of this year. And this is - the comparison is on the cost level of Q3 2014.

This program also includes plan to close down four paper machines, i.e., 800,000 tonnes of publication paper capacity in total. Decisions have been made regarding three paper machines.

These machines totaling 675 million tonnes of publication paper capacity will be closed by the end of the first quarter this year. Employee consultation process is currently proceeding regarding the fourth machine.

In these planned paper machine closures, we are closing down our own excess capacity. We are fully capable of delivering the same customer demand as before, even after closures.

Thus this means that our capacity utilization rates and cost efficiency will improve for this year. The main part of fixed cost savings related to the paper machine closures will start to impact our earnings from Q2 this year.

The other savings under the program will cumulate gradually as the year proceeds. Ladies and gentlemen, let's go to the growth projects.

On January 12, we were announcing that Lappeenranta Biorefinery has started commercial production. The production process works as planned, and is producing high-quality renewable diesel that fulfills the customer specification.

And obviously this is a great success. Now it works as we were expecting the whole process to work.

Now it is time for the new biofuels’ team to show what this refinery and this technology can do. First, ramp-up the production to the high-capacity utilization and then optimize the process in order to meet our business case financial targets.

This is an very exciting moment for us, eight years of R&D work, piloting construction is now behind and we are ramping up the first commercial scale refinery. This is the first of its kind in the world.

Page 14 summarizes our pulp expansion projects. The picture is from the new pulp drying machine hall in our Kymi mill.

The Kymi expansion is proceeding well, and is expected to start by the end of this year. Like Tapio said, Fray Bentos and Pietersaari investments are completed during 2014, and it is now up for the engineers to optimize the production process and gradually increase the production towards the new nominal capacity.

Page 15 shows our growth project in Paper Asia and Raflatac. The picture that you see here shows the construction site of the new labeling materials production unit at our Changshu mill in China.

Also this project is proceeding well, and is expected to start up by the end of this year. At the same time, the self-adhesive labelstock expansion project in China, Malaysia and Poland are proceeding, and are expected to be completed by the end of the first quarter.

This enables continued sales growth for Raflatac in APAC and higher value-added products in our European business. Page 16 shows our CapEx.

And in 2014, our CapEx was EUR 375 million, or EUR 411 million including this year’s installment of PVO shares issue. You remember that we were investing a total of EUR 680 million over three years on the focused growth projects in biofuels, pulp, labeling materials and self-adhesive labelstock.

We target an additional EBITDA of EUR 200 million when all these projects are in full operation. At the end of 2014, we had already invested EUR 350 million out of this EUR 680 million and another EUR 365 million was yet to be invested.

Most of that will happen this year. Although total CapEx guidance for 2015 is EUR 500 million, with the current known projects, our CapEx will again be clearly lower in 2016.

Ladies and gentlemen, I would like to summarize our presentations. In 2014, we achieved a clear improvement in our profitability.

Four of our businesses achieved their long-term return targets and four businesses improved their relative performance compared with their peers. We are starting 2015 with the good prospects to maintain a good performance, and even improve that in the future.

Good business performance supports our excellent cash flow. Consistently strong cash flow has enabled us to strengthen our balance sheet to a record strong level.

I believe UPM is in a unique position. We can simultaneously distribute an attractive dividend to our shareholders, implement the growth projects and act on strategic opportunities.

And with these two pages, you can see our short, medium to long-term strategy of UPM, really pushing performance up in all fronts and all businesses. The six business - independent business model works very well for us and generates good cash flow.

And finally, I will then end my presentation by putting this model up to the screen to talk about the cash flow that we are generating out of this six businesses is able to really give us an opportunity for focused investments, strengthening our balance sheet and for paying an attractive dividend. Ladies and gentlemen, this was our prepared part of the presentation.

And now we are ready to answer your all questions. Dear operator, I hand over to you for a Q&A session.

Question-and-Answer Session

Yes, thank you. I would have three questions.

Firstly, on the new dividend policy. It’s more simpler.

Yes, that’s true [ph]. Do you expect also it to be more volatile than the old - or do you expect dividend to be more volatile that would have been according to the old policy, which was on a rolling three-year cash flow basis?

That’s my first question. Secondly on the Energy division.

The cost level was extremely low in Q4, around 20% below historical levels. What are the drivers behind that, and do you expect that to be a steady state also in 2015 in Energy division?

And thirdly, still on the Energy. Finnish area electricity prices, of which you have a good chart on Slide 32, I believe Russian imports have increased quite a lot in past months, assumably a reaction to weaker Russian ruble.

Do you expect these higher imports to have a negative impact on Finnish area price premium in 2016? Thank you.

All right. If I start with the dividend policy.

It is not aimed to be more volatile. Obviously, we are aiming to pay an attractive dividend.

And the formula itself doesn’t actually cause a more volatility for the dividend. Obviously our target is to strengthen our cash flow in the future as well, and take actions that will strengthen our cash flow.

And therefore we are very comfortable with the new dividend policy. It is much more simpler than the old one, but the formula itself doesn’t actually cause any more volatility.

Maybe I’ll answer to the energy questions. Well, first of all, of course the cost level in energy depends on the mix of energy that we have at any given time.

So when hydro and nuclear are running well, then the costs and the average are low. Also let's say in addition to the generation costs as such, we have been taken action to improve our cost effectiveness across the energy business, and that is bearing fruit and showing in the last year’s performance.

So I would say going forward, again there will be some variance depending on the mix of generation that we have in any given quarter. On the question on the area electricity price, it is true that Russia is now in a sense more active of course.

Usually in the very beginning of the year, there is more imports from Russia when the Northeastern Russians are, let's say, in their sort of vacation or holiday period, then therefore it’s sort of slower point in time in terms of local consumption there. But also like you say probably because of the ruble and perhaps, let's say, economic situation in general on the other side of the border here, it seems that there has been some more activity, which may have an impact on the Finnish side of the border as well.

But at the same time I would say that this is something that kind of tends to add to the volatility as we have seen during some recent days here already. So that on the other hand, let's say, for us given our hydro capability, gives us potential to sort of capture some of those high priced hours and days when they happen.

All right. Very good.

Thank you very much.

Hi, good morning. Thanks for taking the questions.

I have two questions. Given the strong cash flow, even with the dividend policy and spending a little bit more of CapEx, you’re going to probably still have some spare cash, and especially to 2016, when your CapEx should be coming down again.

So I would like to ask, what are the priorities for capital allocation going forward? Would you consider return some to shareholder and things like that, or it’s going to be more for the growth.

Could you give us some clarity on that? And then the second question would be, I know, you already said that the price negotiations are ongoing for paper.

I would just like to ask, given all this capacity being shutdown and utilization rates going up, would it be reasonable to expect that beyond Q2, which is when your machines will be shutdown, we should be expecting higher prices? And I would like to ask one more question.

Could you give a little bit more clarity on the timing, on the roll-out of the hedges in the energy business? Thank you.

All right. If I start, once again if you turn to Page 19 which is on the screen, that is actually the very clear guidance from the management and from the Board that where we allocate our money to pay an attractive dividend, to strengthen further our balance sheet for the strategic opportunities and then having a focused good return on investments.

And that is where we are allocating our capital when we are producing a strong cash flow. So that was the question one.

And then capacity closure and prices, and what is the relation. Obviously, first of all, why we are closing capacity?

We are improving our own efficiencies. First of all, the operating rates and utilization rates, first we are getting better efficiency and cost efficiency.

Then it remains to be seen how the kind of market balance will actually move on. The price is a separate issue but that is - our priority is to improve our efficiencies first.

And Tapio might actually then comment the last one.

Well, let's say on the hedges, you will see an impact starting in the first quarter from the beginning of this year, because again as we do make hedging decisions sort of three years forward, then the forward contracts that are made, they are annual contracts in the, let's say, beginning of that three-year period when you go sort of further out in the future. So therefore then actually we’ll start seeing the difference right away from the beginning of the year.

But of course we are, let's say active in the market - have been active in the market continuously. So that will impact the curve as well.

Let me just follow-up on the question one. As you continue to deleverage, what levels of net debt to EBITDA would you feel comfortable operating in terms of optimum capital structure?

We are already feeling quite comfortable, and further it costs then we have all the opportunities to really consider the kind of help get this company further and for the future. So basically already we are comfortable with 1.9x EBITDA.

But hard we work for getting more out of the machine that we have in hand at this point is the six businesses that we have. So more we do, it’s the clear focus of being better in the future and that doesn’t worry me at all actually at this point that we are getting I think even better and even further down leveraging.

It’s a good progress and we will continue. Obviously when it comes to focused investments, we need to see a good return for the investment as we see for this EUR 680 million that we decided to have a fast, good return for the investment and then actually using the money for attractive dividend and taking the debt down.

Okay. But how far down would you like to bring debt?

That is the call [ph].

That we do not have a target for that. We do not have a figure for that.

Fair enough. Thanks.

The more important is to run these six businesses as best we can actually and to generate as much as cash flow as we can.

Fair enough. Thank you.

Hello guys. Congratulations, a good set of numbers here.

Yes, I wanted to have a bit more clarity on the dividend front, about the volatility in the dividends. And also do you think buying back stock over here might be a good option to use the excess cash flows that you’ve got?

Thank you.

Well, maybe to start with the dividends. So again this range that we have in the dividend policy now, 30% to 40%, that gives you, in a sense, the aim that we have for the dividend from year to year.

So as Jussi already mentioned earlier, the intention is not to kind of increase the volatility or annual change in the dividend from what the approach so far has been. And of course our target is to have a steady improvement in profitability and steady improvement in cash flow over time in the company, which hopefully then results also in a steady development in terms of dividend growth as well.

And as far as buying back of shares is concerned. At the moment, UPM does not have a share buyback program.

Our main means of distributing cash to the shareholders is and has been through dividends. So I would say that for the time being that is the case.

In the future, of course then that can be sort of revisited if need be. But at the moment dividends is the way that we return cash to the shareholders.

Okay. So then how do you guys plan to use the excess cash?

I mean - and free cash flow has been going up. So do you think any organic or inorganic expansion is a possibility in the near-term?

First of all, actually the focus is now in these projects that we’re presenting that totaling EUR 680 million. So to get them up and running is our first priority, but obviously then we do have options, but once again I would like to emphasize that we actually always consider investments to have a very fast and good and real payback actually as soon as possible.

And then when it comes to non-organic growth, that remains to be seen later.

Very good. Thank you.

And if I can have one follow-up question more, I’m sorry.

Yes go ahead.

Yes please.

Thank you so much for taking this. Can you please give us the sensitivity to the euro/dollar exchange rate and for the oil prices?

Thank you.

Well, again as was mentioned earlier, our sort of net cash flow position going forward in U.S. dollars is about EUR 800 million long.

So obviously from that directly, sort of then present difference is EUR 80 million, but then also as we do hedge about 50% of that sort of currency position going forward, then kind of half of the change is then expected to be kind of balanced out by the hedges that we have in place.

Okay. And for the oil?

Oil obviously, again it has both direct and indirect impacts on our costs. Directly obviously it impacts our logistics costs, both inbound/outbound logistic costs.

And I would say that there alone a 10% change in oil price over time will mean a change in our logistics costs that is in the tens of millions of euros. In addition to that, we have, let's say, indirect impact to several areas like chemicals, various materials that are based on oil based polymers and so on, like for instance in our labelstock business and so on.

So in that sense, not a sort of a number directly to give to you, but in any case, it is clearly in the tens of millions of euros for every 10% that the oil price has come down.

Okay. Very good.

Thank you.

Yes, thank you, and good afternoon, everybody, and congratulations to very good Q4 numbers. I have a couple of questions.

The first one would be around the market for graphic papers in Europe. I mean, here you clearly state that you expect some low-single-digit price declines.

At the same time, there is exports going out of Europe and we have weak euro. So I’m wondering net-net in your opinion, which force would be the biggest; the price decline or the euro decline?

That’s the first question. And then the second one would be around this new biodiesel product and project that is now up and running.

Could you elaborate a little bit on how we should think about that as external observers going forward? Thank you.

First of all the - you’re overwritten [ph], when talking about the graphic papers, obviously the dollar/euro ratio is important and obviously UPM has had always a kind of steady policy of exports from Europe, and especially in the magazine grades. So it is still today and therefore we believe that we will benefit out of that obviously when the euro/dollar rates will change.

When it comes to graphic paper prices, it is still too early to state exactly where the prices goes in what market, in what product. And therefore it is more difficult to define what is more important.

These both things are important, and that’s one of the reasons why we again started this EUR 150 million cost saving program to be efficiently taking care of the changes in the commercial front. And then the biodiesel, obviously it’s early stage, but obviously for us, it has been a positive surprise how well we have been able to actually start-up the mill.

Obviously we had technical challenges during the autumn time, but when the process itself works as planned, the production has to be in positively moving forward, and the end product quality is exactly what we were aiming or even some more better than what we aimed when the project was under construction. So basically it’s positively moving on.

Obviously for the external kind of looking outside in - we are not going to report the profitability separate to our Biorefining BA. Therefore it’s a bit more difficult to adjust and justify what is the profitability.

First of all, now it is well proceeding ramp-up when it comes to production.

Okay. Many thanks.

Hi, good afternoon. Thank you.

Just a couple of clarifications on what you talked about earlier. When you look at energy, of course there are hedges in the energy business, but I would assume that you’ve got a similar hedge on the paper side.

Can you sort of say the net impact of electricity external sales surface what you buy to the paper division would be? And also if you can clarify what - as far as I interpreted, you said that the closures per se will not have any impact on your delivery capacity, which I would then assume is saying it doesn’t really have an revenue impact, so the full impact would be seen from the cost savings on the bottom line.

Is that the way to look at it?

If I lead with later part, the closures. Obviously, we do have the capacity to deliver all of the accounts that - we want actually to deliver.

Obviously there might be some accounts that we are not actually willing to move on, but all of the accounts that we want actually to deliver obviously there might be some. So basically yes, that is correct that we are trying to serve our customers with a good quality paper and service for the future.

As we speak, we do not have a capacity problem not to deliver our customers, absolutely we will. And Tapio will take care of the…

Yes, on the energy. Well, first of all, I would just kind of again point out that when you think about the Energy BA as such, of course one factor that will impact our performance and our average sales price this year vis-à-vis last year is the energy hedges that we have been discussing today, but also the other factor which has impacted and will impact our performance going forward is our ability to make money on the volatility that we have in the Finnish energy market.

And that volatility seems to be there to stay if not to increase. So we are able to actually increase our average sales price going forward as well, because of the volatility and now are able to capture the better hours and days.

And third point of course again, when it comes to our energy business area, which only sells in the Finnish market here, we benefit from the Finnish area price, which has been higher than, let's say, in the North pole area as a whole. Then when it comes to the consumption side, Finland, but we consume electricity also outside of Finland, and we do not generate or sell electricity outside of Finland.

And then let’s say for the consumption that we have in Finland, the hedging decisions have been done independently from the hedging decisions what is there for the amounts sold to the Finnish area market. Overall last year, lower energy prices, because of these reasons, we are a major consumer of energy and electricity outside of Finland was a positive and I would expect it to be so this year as well.

Okay. Just a couple of follow-ups.

Lappeenranta, it started up of course right and then we have an oil price that absolutely collapsed. How does that impact the economics of that project?

And then obviously you are very strongly generating cash. You discussed your capital allocation.

I’m curious about given your product mix and the various growth components, where can you continue to grow your business? You have the EUR 680 million program, of course right, but if you look beyond 2016, where could you see growth opportunities within your current group constellation?

The Lappeenranta obviously…

’16, where could you see growth opportunities within your current group constellation.

If I comment that, typically people are making a direct connection to the oil price development, but this is a totally different market. The biodiesel is different market.

It’s in the kind of additive to the fossil fuel and its own cost structure is different because of deals that it is connected to diesel price or oil price in general. And that is maybe the kind of easy answer to you that obviously the raw material market is totally different than the market itself where we sell the product.

It’s having its own dynamics. So less than many times people believe it is having a relation to oil price.

Okay. And on future growth projects work, could you consider to put more money?

Obviously we will always tell them when we decide something, but if you are looking kind of - and what we have been guiding on our Capital Markets Day, we have growth divisions. Obviously the only area where we are not per se, allocating more capital is Paper Europe and North America, but when and if there are good growth projects, whether they are in Europe or outside of Europe, we will then consider about returns for those allocations.

Basically that is the only area where we have said that we are not going to allocate more capital.

Final question. When you’re looking on the outlook for 2015, what sort of demand contractions are you thinking about in Paper ENA?

The last year was - when you’re looking Europe, it was around 3% decline as well as for the magazine or publication - magazine grades in North America, it was roughly 3% down. If you would have asked me year ago that whether it’s a 3%?

I would have said that it’s more, but the whole year of 2014 ended on a level of 3% down, which was good to see that it doesn’t always run fast down actually. It was 3%.

At 4/15, it remains to be seen. We do not have a guidance for that.

Okay, thank you.

Yes, thank you. Just a clarification on your comment on the Q1 publication paper pricing.

You said that you - would that be net of currency effects or in local currencies?

Well, let's say at the current exchange rates.

Okay. And then secondly, on the guidance.

It is a bit vague I would say. You are highlighting some positives and some negatives, but do I interpret correctly that what you’re saying here is that for the full-year it will be either flat or somewhat better?

And for the first half of the year, it might even be down and then you will improve in the second half. Is that the correct way to think about it?

We don’t sort of give six month guidance here, but as said, we would expect that we will have the same level of profitability for this year as a whole as compared to last year, and we believe there is upside, we can improve further because of the actions that we have ongoing and because we do feel a tailwind at the moment in the market as we have discussed already during this call. And we do, let's say, have this negatives in the beginning of the year, those will be more felt now in the first quarter.

And obviously we do expect, let's say, the impact from the cost measures that are ongoing to be, let's say, accumulating during the year. So those are the trends.

What’s the reason, why you changed your guidance policy? You used to guide for the half year.

Well, let's say, no particular reason on that, but we want to give, let's say, a picture of how we see now the year developing, again given, let's say, things that we have ongoing within the company. And so, let's say, what we expect from the external environment.

Okay, got it. Thank you very much.

Yes. Thank you very much, and a good afternoon.

A couple of questions on the biofuel to when maybe would you expect an EBIT breakeven result. Is that already in the current quarter or some time later during this year, or even later than that?

This is unfortunately kind of thing that we do not actually guide you at this point.

Okay. On that project, nevertheless you’ve talked about further investments in other biofuel production lines.

At what stage would you be prepared to announce or make a further decision on further investments within biofuel?

Linus, actually today majority of the people of the biofuels organization is really focusing on this current mill to get the performance out, but obviously we have some people considering all the time what next and how next. That remains to be seen.

But obviously we have a strong that we are going to proceed with the biofuels in the future as well.

So it’s a possibility that you might announce a next step investment in this current year for instance?

It is something that we do not guide unfortunately.

And then maybe also for housekeeping sake, on the pulp exposure, on a group level, what’s your guided net tonnage for 2015 would you say?

Well, actually I don’t even know. We don’t follow.

We are just trying to push the performance of the pulp mills. But Tapio, if you have a figure?

It maybe - let's say, obviously it’s a bit higher figure now than previously. It may end up being somewhere around 400,000 tonnes or so.

Again given the fact that now we have more production out of Pietarsaari and Fray Bentos, so in that sense, sort of a net figure is slightly on the increase.

Good. Thank you very much.

Hi, just a follow-up to the previous question. Your actual net pulp exposure.

Is that all hardwood or is that a mixed part in softwood?

It is primarily hardwood.

And along those lines, do you have a view on pricing for hardwood pulps this year? It seems that some are more optimistic than others.

I won't sort of venture to predict pulp prices as such at the moment, let's say, the hardwood price is pretty stable even during the fall it was slightly on the increase. And let's say for us, exchange rates have been also kind of moving in the right direction.

So at the moment, it’s a pretty stable situation.

Okay. Do you expect to change with new capacity coming on this year, or do you expect it will still remain stable or upped [ph] by currency I guess?

Yes, that remains to be seen.

Okay. And then on the cost savings, the new program that you’ve announced.

I would guess that the majority of that is related to the Paper ENA division?

Let's say EUR 55 million fixed cost savings is coming from the Paper ENA business and from the capacity actions that we announced last November. Then the remainder, which is variable cost savings to a large extent is across all businesses, of course given the size of Paper ENA that has, let's say, a significant part from that, but certainly let's say, other large businesses are contributing their fair share to that.

Okay. And then last question, looking at your EBIT and EBITDA for the fourth quarter in Paper ENA this year.

It was actually the first quarter of this year that you haven't had an improvement. Is that because of the tailing off of the cost savings programs and they’ve completely rolled in, and should we expect to see improvements next year as these new cost savings go through from, I guess, financial impacts from second quarter of ’15?

Well, let's say that of course in the fourth quarter as we discussed earlier, there are sort of several moving parts, one being again at the end of the year we have shuts and maintenance costs, which add to the costs, and every year it’s a little bit different than that. But then the other point that we mentioned also is that, in 2013 in a sense, kind of the comparison quarter, the fourth quarter of 2013, there we had already let's say, clear impact or significant impact from our earlier cost program that we implemented in the Paper ENA business.

So in a sense the comp is tougher there for the fourth quarter, but that’s why we have now more actions under implementation in the Paper ENA at the moment which are kicking in now.

Okay. So, well those new actions, will that be coming from second quarter in terms of hitting the financing statements, or will we be seeing first quarter impact?

Well, let's say of course now the paper machines are as we discussed earlier, paper machines are shutting down towards the end of this quarter and starting - well, starting now. So the full impact you will start seeing in the second quarter.

Okay. Thank you.

Thank you ladies and gentlemen. It was nice to have you in our quarterly reporting.

Have a very nice afternoon. Thank you.

Bye.