However UPM President and CEO Jussi Pesonen reacted positively to the company's first quarter results. Pesonen says, "Our timely and continued cost savings measures were a good response to the heavy challenges posed by the steeply increasing cost of wood and the strengthening euro.

"On the positive side, the demand for most paper grades, particularly magazine paper, and plywood remained good. Our delivery volumes in paper were about the same as last year despite our considerable capacity reductions.

Accorrding to UPM the market balance in magazine papers improved and the company was able to increase prices both in Europe and in the export markets. The announced capacity closures in standard newsprint have materialised slowly in the industry and the market prices declined compared to last year.

The company says its early measures to temporarily shut down newsprint capacity were correct and necessary in this situation.

UPM says its current order books in magazine paper, newsprint and fine papers are seasonally good. However to address the poor profitability of certain businesses, it has decided on temporary shutdowns in our fine paper mills in Central Europe for one to three months."

Pesonen expressed disappointment with the profitability of the Label Division was disappointing. He said, "The label business is clearly cyclical to the weakening economy. UPM has already initiated measures to improve cost efficiency and increased prices to cope with the increased costs. I expect the situation to improve clearly once the ongoing investment programme is completed."

Wood fibre costs for 2008 are forecast to be higher than in the earlier forecast for the full year. However, the increase in the company's overall costs is still expected to be about two per cent. This
includes cost savings from the ongoing profitability programme."

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