UPM-Kymmene Oyj

Jussi Pesonen - President and CEO, Chairman of GET Tapio Korpeinen - CFO, EVP, UPM Energy

Mikael Jåfs - Kepler Cheuvreux Antti Koskivuori - Danske Bank Alexander Berglund - Bank of America Merrill Lynch Justin Jordan - Jefferies Lars Kjellberg - Credit Suisse Mikael Doepel - Handelsbanken Robin Santavirta - Carnegie Linus Larsson - SEB Harri Taittonen - Nordea Kevin Hellegard - Goldman Sachs

Ladies and gentlemen, welcome to UPM's Quarter Three 2017 Result Webcast. My name is Jussi Pesonen.

I am the CEO of UPM. I'm here with our CFO, Tapio Korpeinen.

Hello, everyone.

Q3 was an excellent quarter for UPM. Favorable market demand continued, and we achieved good growth in our delivery volumes.

Moderate variable cost inflation continued in Q3, but we have been able to mitigate it with our own cost reduction measures as well as targeted price increases in several businesses. In Q3, we had now significant maintenance activity which resulted the strong operational efficiency.

Our comparable EBIT increased by 12% to EUR 351 million from last year and this represents 18th consecutive quarter of growing EBIT. Our operating cash flow was strong at EUR 486 million and our net debt decreased by EUR 856 million compared to Q3 last year.

Today we have also announced two new growth initiatives. First, we are investing to grow our well performing plywood business in highly competitive way.

And secondly, we have announced a future progress and further progress in our biochemicals where we are now evaluating the potential of building our first industrial scale by a refinery. It would be the first of its kind solid wood to a biochemicals refinery in the world.

And that would brand owners with sustainable and competitive alternatives to fossil-based chemicals. We'll come back to this matter later in this presentation.

Next page, our growth project continued to have a positive impact on our EBIT. They enabled us to respond to a good market demand in Q3.

In biorefining our pulp deliveries grew 5% also biofuels deliveries grew. As production at Lappeenranta biorefinery now reached its designed capacity.

In specialty papers, our total deliveries grew by 3% and product mix improved a lot with the higher release liner volumes. In Raflatac, our self-adhesive label stock deliveries grew by 9% from last year driven in particular by strong development in our fast-growing markets.

In plywood our deliveries grew by 4%. In energy, hydropower volumes recovered to a normal level and in our Paper ENA, our deliveries were only 1% lower than that of last year.

Ladies and gentlemen, at this point I hand over to Tapio for some further analysis of our Q3 result. Tapio, please.

Thanks, Jussi. This Page 4, you can see the comparable EBIT development by business area.

First starting with biorefining; biorefining reported a clear increase in EBIT from last year due to increased pulp pricing also due to higher deliveries. Pulp price in EUR so was some 12% higher than last year.

EBIT increased also sequentially from the second quarter mainly due to a higher operational efficiency with no maintenance such in the third quarter and also due to 1% higher average pulp price in EURO terms. The increased pulp prices represented increased cost for both speciality papers and Paper ENA.

In Paper ENA, higher recovered paper prices added to fiber costs increase is compared to the third quarter last year. Speciality papers reported the same Q3 EBIT this last year, so far, the business area has succeeded in offsetting the higher pulp cost with sales price increases improved product mix and higher delivery volumes.

Paper ENA could not fully offset the headwind from fiber cost but nevertheless reported its best quarter of this year. This shows the results of consistent and continuous work for cost efficiency and competitiveness as well as stringent execution of commercial strategies.

You can also see the seasonal pattern of fixed costs here; the third quarter and the first quarter are seasonally low-cost quarters partly due to low maintenance activity and the second and fourth quarters are quarters with seasonally higher fixed costs. In energy like Jussi already mentioned the hydropower volumes recovered to the long-term average level in the third quarter.

As production also resumed at the Olkiluoto nuclear reactor after its prolonged maintenance shutdown. The EBIT in energy EBIT margin recovered back to 30%.

Raflatac has enjoyed strong market demand and good growth in deliveries. However, raw material cost increases have had a negative impact on its sales margins not fully covered by price increases, so far.

For plywood, third quarter is the low season of the year, so it was also this year. Plywood demand continued in a good level with building and construction related end uses improving further.

Here you can see, our EBIT development by earnings driver as you can see growth in deliveries had a positive impact on our EBIT. At the same time our fixed costs were slightly lower than last year.

You can see a significant headwind from variable costs compared with the third quarter last year which was the low operating [ph] of our variable costs. Costs have increased for example for pulp, recovered paper, chemicals, films and adhesives.

The positive news is that, we have also been able to increase our own sales prices for example for pulp, specialty papers, fine papers in Paper ENA, plywood and energy. The net impact of prices and variable costs on our aggregated sales margins, in this year-on-year comparison was slightly positive i.e.

increased our EBIT. The same applies if we compare the third quarter to the previous second quarter.

The strengthening of the EUR o had a negative impact on our EBIT which is shown in this graph as well. This slide shows our cash flow and development of net debt.

Over the latest 12 months, our operating cash flow has totaled EUR 1,556 million or EUR 2.92 per share. Over the latest 12 months our working capital decreased by EUR 111 million.

In the third quarter the operating cash flow was EUR 486 million including a release in working capital of about EUR 54 million. Net debt continued on its declining trend and ended the quarter at EUR 623 million or 0.41 times EBITDA.

Here you have our outlook for 2017 as we expected in the beginning of the year input costs have increased in 2017 after the deflationary cost environment we have experienced during the recent years. We have been to continue our solid profit performance through this turn in the input cost environment, 2017 is expected to be another year of growing comparable EBIT for UPM.

In the fourth quarter, we will have the normal seasonal increase in maintenance and other fixed costs particularly in Paper ENA. In Biorefining, we have the maintenance shutdown at the Kymi mill.

During this shutdown also, the latest capacity expansion investment is completed. The seasonal factors are estimated to impact our fourth quarter result by approximately EUR 35 million to EUR 40 million as compared to the maintenance free third quarter.

At the Fray Bentos mill in Uruguay, we are planning to adopt a similar 18-month maintenance cycle that we have already earlier taken into use at our three pulp mills in Finland. This means that the maintenance shutdown of Fray Bentos mill will not take place this year in the fourth quarter as has been the case in the earlier years.

At this point I will hand back over to Jussi for some comments on our latest growth initiatives.

Thank you, Tapio. Ladies and gentlemen, today we have announced a new focused growth investment in our well performing plywood business.

The latest growth project in Otepää plywood mill in Estonia has been a success and now we will follow that by expanding the Chudovo plywood mill in Russia. This investment will enable us to continue growing in the most attractive plywood segments with very competitive cost structure and attractive returns.

The total investment is about EUR 50 million and it will increase the Chudovo mill's capacity by 40%. UPM's strong position in the wood processing value chain gives us a unique position to provide sustainable solutions to global consuming and consumption growth.

Now and in the future, it will be one of the main focuses of UPM. We believe in long-term outlook of most of our businesses.

We're growing in fiber based businesses such as pulp, specialty papers and self-adhesive labels as discussed, we have just announced a new growth project in plywood business. When we invest we look for attractive returns protected by the clear competitive and advantage.

We are even going beyond these well-established growth businesses and we want to further increase the added value in our value chain in a very sustainable manner. UPM aims to grow in biomolecule businesses.

In this business, we are disintegrating wood all the way into a molecular level and to produce sustainable biofuels and biochemicals once again to replace fossil-based alternative. In Lappeenranta biorefinery was the first significant investment in such a new innovative wood-based product, the renewable diesel called BioVerno.

Now after more than five years of extensive development work and piloting we are moving forward to the next phase with the development of our biochemicals business. As said today, we have announced that we are now evaluating the potential of building an industrial scale biochemicals, biorefinery in Germany.

This biorefinery would use sustainable solid wood as its feedstock. It would combine novel technologies in an innovative way to produce bio-monoethylene glycol and bio-monopropylene glycol and lignin.

We have started detailed, commercial and basic engineering study to verify the attractiveness of the business case. This phase is expected to take about 12 months from now.

If this phase is successful, we would start our standard procedure of analysing and preparing the investment decision. This slide shows the simplified of our plant biorefinery process.

It would be the first of its kind, solid wood to biomolecules refinery in the world. Starting from the raw material would consistent mainly cellulose, hemi-cellulose and lignin.

In the first process step, the cellulose and hemi-cellulose would be separated from lignin and disintegrated into a monomer sugars. Due to the similarities with existing pulping process, we call this sugar pulping.

In the second step the sugars would be converted into a targeted biochemicals. In this case, bio-monoethylene glycol and bio-monopropylene glycol.

The next slide, the Slide 12 shows the products and markets we are targeting with our biochemicals, biorefinery initiative. Mono ethylene glycol is one the major chemical intermediates today having a market demand above 26 million tons per year.

It is a component of various products like textiles, bottles, packaging or deicing fluids. Mono propylene glycol has a market demand above two million tons per year.

It is used in products like composites, cosmetics, pharma and all kind of other things. Both markets are growing markets.

Today supplied by fossil, oil gas or coal-based products. We are aiming to provide the brand owners with the sustainable drop-in alternative enabling them to reduce their CO2 footprint significantly.

And our aim is to do this with a very competitive cost. The market pull for such sustainable alternatives is strong and increasing.

Ladies and gentlemen, for lignin we have developed our own applications since more than 10 years. Recently UPM plywood introduced a WISA BioBond gluing technology that replaces fossil-based phenol with the lignin in plywood products.

Other applications examples were plastics, foams and coatings. All in all, this is a very exciting new business opportunity for UPM.

Our aim is now in a basic engineering phase to verify the expected profitability and returns of the business. Focused growth initiatives and projects over the past couple of years have been highly successful and contributed well into UPM's profits and returns.

Currently we have five such a focus growth projects ongoing strengthening our position into a growing market into 2018 and beyond. The Kymi pulp mill expansion will be completed during this quarter.

Raflatac expansion in Poland will be completed in early next year. Raflatac specialty label expansion in Finland and Kaukas pulp mill expansion will be completed by the mid of 2018.

The latest addition to this list is our Chudovo plywood mill expansion which will be then completed by the end of 2019. Our established growth project and businesses will provide us further similar growth opportunities in the future as well.

When it comes to large long-term growth opportunities in pulp the discussions continue with the Government of Uruguay concerning infrastructure development and other local prerequisites for the pulp mill investment. In addition to the established growth businesses, the new biomolecular businesses provide us with totally new opportunities to grow profitably.

By providing sustainable alternative for fossil-based materials and innovations is important on that business. Ladies and gentlemen, I would now like to summarize our presentation before the Q&A session.

We have now been able to so four and half years of growing EBIT also during turn into a cost environment in this year. We expect our EBIT to increase also 2017 compared with 2016.

Today, we have announced new attractive focused growth investments in our plywood business and progress development in totally new biochemicals business for UPM. UPM's transformation continues with new initiatives for the future growth and we need to of course actively manage our cost to successful also next year.

With these words, dear operator we're ready for the Q&A session. Thank you.

So, I've two questions, first on the biochemicals investments. It sounds very interesting but how should we think about this in the context of UPM.

Will it be just a minor thing or is it something that overtime could become rather important? That's sort of the first question.

The second question is around Paper ENA and you together with some of your colleagues have been closing capacity in especially the uncoated magazine segments. Do you see any particular market dynamics there going into 2018 regarding supply and demand situation?

Those were my questions. Thank you.

Mikael, this is Jussi. First of all, the biochemicals is very interesting part of the growth.

If you look at the kind of the growth. If you look at the kind of the page that we are representing the kind of how to use wood for various businesses, the biomolecules fibers logs and trees for energy.

I think that this is a very logical step for the company like UPM. We by the way use more than worth of billions of chemicals ourselves so chemical is part of our life every day.

We buy a lot of wood which is kind of well-known fact, but similar amount of all kind of chemicals, we use in our facilities and production as well. So basically, our aim to become a significant player on this arena as well and wood raw material where there is a lot of energy and lot of molecules inside of the wood say a kind of natural step forward, with this kind of processes by disintegrating wood [indiscernible] sugar and then moving on, it's pretty much like I said sugar pulping, it is similar to our knowledge base in pulp making.

So basically, that's kind of natural expansion of the kind of innovation arena and moving forward, it's a very interesting, we have lot of IPR on that and knowledge as well. So that's the number one, issue.

And then the second one, yes there has been a lot of initiative to have a good supply, demand balance is all of the papers of course. We have been in uncoated magazine race as well obviously.

It remains to be seen what does it mean for the next year. Asset supply, demand balance but that looks healthy at this point of time.

Okay, thank you very much.

I would have three questions, if I may. Firstly, on the pulp market I was just wondering what kind of thoughts and Jussi you had on that market for the rest of this year and maybe also early 2018 when it comes to market balance and pricing.

And the second question would be, a follow-up on the biochemical refinery investment. What kind of CapEx should we expect on this particular refinery?

Is it in the same pulp back then in Lappeenranta on CapEx per capacity for example and also, I assume that you're going to go ahead with the investment decision. When should we expect this line to be operational?

And then thirdly, I would like to hear your thoughts on comments about yesterday's announcement from EU's Environmental Committee to leave Tullow Oil from the list of approved feedstocks to meet EU's biodiesel mandates post 2021. I know it's quite early days and this is not a final decision yet, but what kind of potential impact this decision could have on your strategy in the biodiesel segment and current operations in Lappeenranta.

Thank you.

Let's start with the pulp. I think that you know we are not forecasting very short-term changes in the pulp that until - during the second half the pulp market has been pretty tight and as consequently prices have been increasing.

But when it comes to long-term I guess that there are fundamentals that are for the long-term quite solid, demand is growing quite nicely it's almost 1.5 tons a year, there is a kind of all kind of shutdowns coming on long-term and also there are not that many protest coming onstream, but when it comes to short-term, you were talking about the end of the year and the early part of next year, there we do not forecast, of course we do have our own view on it. But let's see, how it evolves.

Our aim to have the most competitive assets on that field that we are always making good returns. The biochemicals business however, the capital intensity point of view, this is broadly similar to the biofuels refinery we have in Lappeenranta.

So that's a kind of similar, but that still when the time comes of course the size of mill is decisive and then taking next steps after that you know even the capacity will be increased, so I - but like the first step is pretty much the same on that. Start-up we do not speculate at this time we are making the basic engineering study and then thereafter taking the final decision understanding all the commercial plans and so forth, but once again similar to what has been in the Lappeenranta as well.

We're talking about one and half years, two years after the decision. That is very typical, this is adding value products both our highly adding value products and therefore I believe, this is the kind of magnitude not having absolutely concrete figures in my hand at this point of time.

And then the EU, we need to now treat this as an opinion of one single committee and there are absolutely several more votes to come and of course there are many opinions. Therefore, I wouldn't draw any conclusions at this stage at all on that, but of course we believe on long-term regular stability and that we expect as well in this case.

So, let's see there will be several votes and several opinions coming on stream. There are also as I know there are proposals that are very much favoring our approach, so it remains to be seen.

All right, thank you very much.

I've two questions on the topic of cost and cost inflation. The first one is regarding wood and wood sourcing costs.

What are you seeing there are on the prices of wood in the markets that you operate and then also if you could please remind us, how much of your wood needs are sourced externally. And on the second question is regarding labor, labor costs.

I believe there's been articles out there talking about Finnish paper workers threatening to go on strike. And [indiscernible] basically saying that although the paper industry is improving they haven't seen a reward or increase in their wages.

So, if you can comment on that and what is the risk that you've seen or wage inflation from here going forward. Thank you.

If I start actually on the labor side and Tapio I think, would speak on wood cost. So first of all, that is now as we speak continuing discussions with the labor unions to move on.

Of course, we're trying to find a solution where there are the contractor wording would actually give us an opportunity to improve our cost efficiency and if that's the case, then obviously the kind of possible salary increases would be then compensated, but that is still very much spending, and I have not more to comment at this stage on that topic.

Yes, and maybe on the wood cost. Well first of all to kind of remind us all, what sort of consuming regions for us in terms of volume.

Are Uruguay and Finland obviously, we have some operations in other parts of Europe and Russia as well. But the volume point of view Finland and Uruguay are the biggest fans and obviously in Uruguay we have our own fast-growing eucalyptus plantations where overtime we're - for the current operation more than self-sufficient in terms of wood supply in there.

We're able to manage the cost of wood through increasing the productivity of the eucalyptus plantation. So, there I think the wood cost picture is quite stable.

Then looking at Finland, we do own forest land as well, but still normally it's only about perhaps 10% or so, if our needs in terms of wood raw material in Finland, so vast majority comes from mostly private forest owners and other suppliers. And I would say that in Finland the big picture is that wood market has been quite stable, during the recent years and continues to be so as well even if let's say now there has been increase in terms of wood consumption or wood harvests.

There's been additional pulping capacity added to Finland, but I think the big picture for us is fairly stable. Some impact on the new capacity coming to the market, but overall stable outlook there.

Okay, thank you very much. Very clear.

I've got three quick questions, if I could please. Firstly, I just want to follow-up on just the theme of cost inflation.

Can you give us some idea Tapio on the variable costs? Just what the price increases you're seeing on areas like chemical [indiscernible] which you called out.

Secondly, is there any update that you can give us on discussions with the Government of Uruguay. I believe the government has invited tenders for modernizing the Revlink [ph].

I believe you've also signed labor [indiscernible] agreement, is there anything you can comment on both of those? And thirdly just on I guess Slide 13 of your presentation, you now described Lappeenranta having reached a, it's design capacity and generate a good financial return.

Are we going to infer that it's now making the 14% return on capital employed hurdle that you have further finding divisions? Thank you.

If you Tapio, start with the costs. I'll then follow-up.

Yes, well it's a like the slide in our presentation shows sort of year-on-year comparison we had more than EUR 50 million net impact variable cost, of that figure of course the vast majority are clearly the biggest part comes from fiber cost comparing to the last year's third quarter. RCP price obviously for Paper ENA, but then also in this kind of analysis higher pulp cost for the paper business is - shows up in this cost variation as well, even if it's also let's say positive for our pulp business as such.

So those are the kind of clearly the major contributors to the net increase in variable cost. Then on the other areas in terms of chemical adhesives.

I feel, there is some obviously increase in inflation as well at the UPM level. The other of magnitude though is clearly smaller than for fibers, for obviously individual businesses like let's say for instance the label materials business is still significant.

There I think the kind of relatively speaking perhaps the biggest increases we saw during the first half of the year somewhat more moderate now when we come to the second quarter, but again on a year-on-year comparison there is an increase there as well. But again, let's say in terms of the impact on the UPM level by far the fiber cost is the main component there.

And I would follow now with the Uruguay as we speak there has been a lot of discussions now and the negotiations and they're continuing at the stage as we speak intensive discussions and in a good spirit so that is moving on. I have relatively little that, on anything that has been in the publicity like you mentioned the Revlink [ph].

Yes, there are some proceedings on that, so basically nothing to add what has been in the publicity you know as well, as much as I do actually on those proceedings at this stage. Time will tell when that agreement will be then finalized.

So that's the Uruguay proceedings lot of discussion as we speak. Then the biofuels business, it is actually now meeting the kind of requirements that we set for the business in our decision-making phase when it comes to quality, when it comes to production, when it comes to finalized result.

So that is where we are today.

Thank you both.

Just a couple of questions. First, if we can think a bit about Uruguay, when do you think there is a reasonable timeline.

You could potentially spend the first money on that facility. Second question relates to, last year at the investor day your Chairman made it quite clear that you were done with debt deleveraging and since then of course the debt has fallen quite dramatically.

How should we think about your capital allocation considering in regards to your 0.41 of net debt to EBITDA which of course is exceptionally low and not a bad place to be maybe, but in similarly somewhat overcapitalized. And the third question I have is, you mentioned cost recovery to a degree to pricing.

In terms of your sort of near term outlook, do you see any incremental such cost recovery possibilities in the fourth quarter and heading into the first of 2018.

Lars, what was your first one actually.

The first question, if you can talk us through, you call it a Blue Sky scenario when you first get start to spend money in Uruguay to build the pulp mill.

Sorry, yes. Absolutely.

Now we are actually finalizing the Phase I and that's what we have said that you know, the Phase II is preparing the kind of paper meeting Phase II is all about making the infrastructure available by the Government of Uruguay and then Phase II is to make the kind of construction designing and so forth and so forth. And then, that takes some 12 to 18 months and thereafter the kind of large amount of CapEx we start to be in, if then FID will be then decided, that's the time horizon in a way, that is actually presented in our capital markets day material, these three phases.

So, there it is in more details. And then the capital allocation I would ask here that, get to Page 19 for your information.

This is now what has happened in five years cumulative cash flow and how it has been distributed, the various activities and as you can see, that it has been almost EUR 6 billion of operating cash flow, we have actually paid almost EUR 2 billion of dividend deleveraging has been around EUR 2 billion, EUR 2.1 billion and then focused investments have been more or less EUR 2 billion as well and now we all know that you know the in between deleveraging doesn't need that much more money, so basically we do have opportunity to grow the company and then pay attractive dividend and that will be the kind of in our focus that how do we proceed with that.

So, you're not considering any sort of incremental sort of one-off payouts or obviously you have a significant mandate to buy back stock for example which haven't used but that's.

I guess not all the tools are in our toolbox now and then when we're ready for everything that what we want to do then we tell. But like I said, this company is now in a very good position to pay attractive dividend and then grow the company as well.

Sure.

And then Tapio, if you take the cost.

Well that's an obviously a question I think what's more around the topline whether there is cost recovery opportunities there. And of course, again let's say particularly in the businesses where we have a growing market where we have been increasing also sales prices to our customers there we do what we need to do in terms of the let's say maintaining or recovering the margins that we have there, so I would say that's certainly in the growing businesses, that is the target and there is opportunity to do so.

Can you call specifics on China, where of course you've seen explosive fiber costs inflation for the past couple of months, if there is anything particular that would enable you to call back those high costs or/and what you've done?

Well I would just actually kind of refer it to the track record in a sense there, if you look what has been happening with paper prices in China, which are public also recorded. As the cost structure for suppliers there is similar most of the supply is dependent on purchase pulp then the paper price is actually reacting quite readily to changes in the pulp price and that has been the case in this cycle as well.

And how has your experience been just to get access to pulp and I just wanted to get some sort of color and because you [indiscernible] in China of course?

Well we of course in terms of our pulp sourcing, we source pulps globally. We have long-term relationships with suppliers there, so for us that has been well covered.

Thank you very much.

Couple of questions. First of all, in terms of what you're seeing in the reports which have got your paper operations and one thing to defend your earnings also next year mentioning capacity adjustments as one and we expect to hear more about this at some point in time.

This is Jussi. Absolutely, we need to earn our earnings every day and therefore we consider all the time, all the options that how to move on to adjust our capacity to, to be more cost efficient elsewhere.

So that's a continuous process and if I remember correctly last 10 years we have been taking action every year. So that's how we have been operating to keep our assets efficiently run and that what we do in the future as well.

Okay and then in terms of the speciality papers. Do you still expect to see some mixed improvements in that business, with more label sales going forward?

That is our continuous process, we do have the three big continents of high demand on specialty papers and of course we do have a great asset park that gives us an opportunity to grow the kind of speciality paper mix as well. absolutely that is our aim, but of course you know it has been quite significant in especially in China where we have had quite a change for what the speciality grades in the new machine, so that's well performing business now because of that the mix change has been quite nicely moving on.

Do you see de-bottlenecking potential for the new machine there in China?

No, that machine is now still one, it has been operating now one area of course there is potential to increase capacity. And also, de-bottlenecking as well by installing some of the equipment for the future.

I guess that this has been very positive surprise how quickly we have been able to ramp up the machine especially on that grade that we wanted to produce which is the release liner. So therefore yes there is opportunity to further de-bottleneck that business.

Okay and then just the final question. Maybe just Tapio [indiscernible] discussion about and the cost inflation but I think you mentioned at some point, during the presentation that the Q3 last year was the low point in terms of variable costs?

Does that - are you trying to suggest with that you see a less kind of year-over-year of cost inflation going forward?

Well we've already in the second quarter reports sort of indicated that we expect let's say the rate of cost increases to moderate during the second half of the year and that is still the case.

Okay, good. Those were my questions.

Thank you very much.

Couple of questions, If I may, please. First in terms of specialty paper and Raflatac.

And especially your business or your sales in Asia and in China, what is the current demand environment and how has that developed now over this year?

Both are having a very positive business outlook and that has been even more sold this year, specialty papers have had a very nice growth in terms of volumes as well as Raflatac as you saw that 9% of delivery increase over the year and then the new Polish factory is coming onstream early next year, so therefore when you see a quite a positive trend for both businesses at this stage.

Is it only you or would you say that the market is quite tight in China for about those segments?

It is actually very good, actually for both segments for all. Of course e-commerce is one of the main drivers for increased demand consumer goods labeling is another one where there is a lot of positive developments, so there are plentiful this mega trends in China that are supporting both of the business is one being urbanization is, that people are moving to the cities more than 10 million people a year and therefore there will be a lot of consumer goods that are sold to the customers and they both are important part of the packages and the value chain.

Exactly thanks. And then final on maintained as related costs, you said - I think Tapio said that EUR 35 million to EUR 40 million up quarter-on-quarter.

Now would that compare to last year Q4, is this roughly in line, is it bit more?

This year it might be because again this year we won't have the Fray Bentos shutdown, but we do have the Kymi, I would say that overall this year it might be slightly less than last year, but similar perhaps slightly less.

Very good. Thank you very much.

Wanted to follow-up on the biochemicals investment or the potential investment and this product not very familiar to me. And I guess many of us and maybe if you could in anyway help us to understand topline that you are targeting in this kind of business?

Unfortunately, this is the area where we won't, not call [ph] at this stage. There are plentiful still material that we want to keep inside of UPM family and therefore this is kind of first stage of what we tell to the publicity and therefore for the topline - even the topline is on that radar at this point of time, sorry for that.

Yes. Because I'm sure there is a spectrum of products within these markets as well.

But you wouldn't like to comment upon whether this is like a EUR 100 million or a EUR 1 billion business that you're looking at for this particular plant.

I guess that you know you can dig into the details to find out that there is a variation in between EUR 1000 per ton to EUR 1,400, EUR 1,500 per ton products. But that's the kind of topline that you need to actually consider based on that fact, there is kind of variation on the product price of roughly EUR 1,000 to EUR 1,500 in between.

That's very helpful, thank you. And then also now it appears the stock of much awaited Olkiluoto 3 approaching if I understand things correctly in the spring of 2019 according to I believe the most recent updates.

Will you at some point or would you even today comment upon the impact that Olkiluoto 3 would have on your energy segment, if you started in the current price environment?

Let's say all that we have said earlier as well I think is what we can say now is that of course let's say if you look where the forward curves are, for the Helsinki area price and kind of on the other hand then look at what the full cost based on which then energy or electricity would be coming to UPM from Olkiluoto 3, that forecast at the moment is higher than the forward curve for the Helsinki area, but then as time goes by, we will see how the electricity pricing actually move, so early to say more than that.

But based on what we see in the markets today it would be a negative EBIT contributor, I assume.

Well yes, that's what we have indicated already earlier as well.

And are there any, when it comes to your I mean any potential balance sheet implications. Are you done with your equity investments or must there be more equity injections to be made before or in conjunction with the start-up of Olkiluoto 3?

We just made the last payment EUR 26 million of the existing equity commitment that there is from UPM to PVO. Who then has had commitments to TVO and there's nothing further in a sense to comment at this point.

Okay, many thanks.

Just one sort of technical I guess question on the cash flow. I mean, which was strong, and it just looks like the sort of adjustment line in the cash flow was higher than usual, so not only the kind of profitability but also the adjustments and obviously with the interim report we don't really see the what's behind that.

could you give some color on that - on what happened in the cash flow and what drove the result apart from the working capital which was sort of visible, but what was within those adjustments driving cash flow or sowing [ph] in the cash flow?

Well of course we had EBITDA some release from working capital, but on the adjustments as such there is let's say no detail, but I have to give on that.

Sure. Yes, I mean there just seems to be a higher than they have been in the past quarters, but I know that there quite a lot of lines within that.

Okay, so no particular comment on that, then. On the cost inflation, you did mention that the inflation was steeper in the early part of this year and then it has been more moderate, but now we're looking at economy of real quiet, sort of strong and thinking about what sort of cost inflation should we be looking at for 2018, as oppose a lot of purchasing contracts are also made with sort of pricing changing at the year end.

So is there anything you can see at this moment, on that issue.

Well perhaps early to say obviously too much about it yet, but as you say with let's say higher economic activity then you would expect to also see some let's say cost escalation taking place like for instance we have seen some movement on the oil price during this year, so those kinds of factors will with the sort of economic activity staying up have impact for next year, so in that sense you have to be prepared to continue on working on the let's say more inflationary environment during next year as well, but early to say much more than that.

Yes, sure that ties up with one more question, if I may on the Page 27 where you showed the paper price versus cash cost of marginal cost producer. It's quite intriguing that now you're showing that the cash cost is at the higher level, then the price level which it has normally led to price increases, but is there something related to that, it really is so that you're seeing that the part of the supply is now running at cash loss or is that what you're seeing and what part of that sort of marry up with upcoming price negotiation in the paper.

Harri, I guess that this is the curve that Mika and the guys have been doing for many years and has been correlating quite nicely on that - remains to be seen, what happens, but this is absolutely has been quite nice correlation on that as well and therefore it remains to be seen, how it moves on. Of course, there is kind of cost escalation now coming in many respect, but time will tell that this is the discussion between the companies and the customers.

Fair enough. Many thanks.

Most of my questions have already been answered, but just one quick follow-up. On the higher maintenance cost quarter-on-quarter could you give a rough split on how much is the Paper ENA and how much is the biorefining division?

Roughly you can say about 50-50 because again there is one sort of bigger pulp mill shutdown, the Kymi and then you have the kind of yearend downtime in maintenance in the Paper ENA.

Okay, thank you very much.

Yes, ladies and gentlemen. Behalf of Tapio and myself, thank you for joining us.

This is end of the call. We stop here and see you in the markets.

Thank you. Bye now.