Eastern European Markets
February, 2. 2006

UPM's Russian wood suppliers operating at a good level

(UPM, Helsinki, February 2, 2006) – In 2005, UPM carried out 112 supplier audits covering 235 different logging sites. These suppliers accounted for 80% of the wood procured in Russia.

The field audits check that the suppliers work in accordance with UPM's requirements. 80% of the logging sites checked were classed as good. The audits found 20 % of the sites had minor non-conformities related to health and safety, logging site management and logging practices. Corrective actions have been agreed with the suppliers. There were two serious breaches of contract and the supply agreement with those suppliers has been terminated.

UPM started building the origin of wood tracing system in Russia in 1996. The system is based on a statement of origin, database and mapping system and supplier audits including logging site checks. A statement of origin is required for all wood deliveries. These tools allow UPM to regularly monitor supplier performance

"Knowing the origin of wood is important for UPM. The origin of wood tracing system is a practical tool which is used ensure that the wood purchased in Russia is sustainable, legal and not from protected forest areas," says Juhani Hongisto, UPM's Chief Forester responsible for wood sourcing in Russia.

UPM began logging site checks in Russia in 1998 and 133 logging sites were checked that year. The volume of wood procured in Russia has increased since then and the number of supplier audits has risen correspondingly. Audit information from previous years can be found on UPM's internet site.

Supplier audits are carried out according to an agreed format by UPM staff responsible for wood procurement. The logging site visit is most often carried out together with the supplier and the local forest authorities.

"We openly discuss UPM's requirements when we make the supply agreement and also when we carry out the audit. The supplier audits are a good method for giving feedback and strengthening cooperation", confirms Mr Hongisto.

About UPM

UPM is one of the world’s leading producers of printing papers and the clear market leader in magazine papers. The Group's turnover in 2005 was EUR 9.3 billion, and it has 31,500 employees. UPM's main products include printing papers, converting materials and wood products. The company has production plants in 15 countries and its main market areas are Europe and North America. UPM's shares are listed on the Helsinki and New York stock exchanges.

UPM buys about 5 million m©¯ wood annually from Russia. About 4 million m©¯of the wood is used at the mills in Finland. The rest is processed at UPM's Pestovo saw mill and Chudovo plywood and veneer mills in Russia and at Otepää plywood mill in Estonia. UPM supplies wood in Russia also to Svir Timber owned by Botnia, UPM's associated company.

UPM's own forestry and wood sourcing organisation in Russia is responsiblefor wood sourcing. Wood is purchased from UPM's own logging company in Tikhvin and from about 200 independent logging companies and specialised trading companies. Most of the wood comes from Karelia, Leningrad, Vologda and Novgorod areas

For further information:
Juhani Hongisto, Chief Forester, Forestry and Wood Sourcing in Russia,
telephone +358 40 847 6730 or +7 921 920 8470

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