Interim Report 1 January 30 September 2013

Interim Report 1 January 30 September 2013 Board of Directors 31 October 2013

1 VAPO OY INTERIM REPORT 1 JANUARY 30 SEPTEMBER 2013 July-September Group turnover in the July-September period was EUR 107.9 million (EUR 106.1 million in the same period in 2012). Operating margin (EBITDA) was EUR 4.6 million, or 4.3% of turnover (EUR -11.8 million, - 11.1%). The operating result was EUR -8.4 million, or -7.8% of turnover (EUR -23.3 million, - 22.0%). The operating result includes one-off items of EUR 0.8 million (EUR 1.0 million). Free cash flow before taxes was EUR -27.4 million (EUR 1.8 million). Gross investments were EUR 11.9 million (EUR 10.5 million). Net investments were EUR 11.4 million (EUR 1.6 million). 1.6 TWh of energy peat was delivered (1.4 TWh). January- September Group turnover in the January-September period was EUR 452.7 million (EUR 497.4 million in the same period in 2012). Operating margin (EBITDA) was EUR 53.8 million, or 11.9% of turnover (EUR 40.9 million, 8.2%). The operating result was EUR 20.4 million, or 4.5% of turnover (EUR 9.0 million, 1.8%). The operating result includes one-off items of EUR 2.8 million (EUR 11.2 million). The pre-tax return on invested capital (ROIC, previous 12 months) was 2.6% (-3.2%). Free cash flow before taxes was EUR 2.3 million (EUR 75.1 million). Gross investments were EUR 36.5 million, ratio to depreciation 1.1 (EUR 35.1 million, 1.1). Net investments were EUR 34.5 million, ratio to depreciation 1.0 (EUR 15.5 million, 0.5). The equity ratio on 30 September 2013 was 36.4% (36.9%). The equity ratio at the end of 2012 was 37.1%. Interest-bearing net debt on 30 September 2013 was EUR 368.4 million (EUR 345.1 million). Interest-bearing net debt at the end of 2012 was EUR 355.9 million. The ratio of interest-bearing net debt to operating margin on 30 September 2013 was 6.0 (11.3). 8.0 TWh of energy peat was delivered (10.1 TWh). Peat production volumes were approximately 80% (47%) of target. CEO Tomi Yli-Kyyny on the result for the January-September period: In a tough market situation operating profit developed in a positive direction In the January-September period, turnover decreased 9.0 per cent compared to the reference period. The turnover of the Peat Products business area was almost EUR 30 million below the reference period owing to a shortage of peat. Turnover was also reduced by the disposal of the forest fuels business in Sweden and adjustment of pellet deliveries to demand in the domestic markets of Finland and Sweden. The turnover of Vapo Timber grew by over EUR 11 million. The operating profit of the Vapo Group was EUR 20.4 million, double that of the reference period in 2012. Peat production succeeded well and the profitability of the Heat and Power busi-

2 ness area improved. Losses decreased at the Pellets and Forest Fuels businesses and at Vapo Timber. The operational profitability of the Kekkilä Group was lower than the reference period. This year s peat production season was much better than the previous year both quantitively and qualitatively. 80 per cent of the production target was met (2012: 47 per cent). We are able to offer our customers a sufficient range of grades of peat in almost all market areas. However, this production success does not automatically mean increased sales and improved profitability for Vapo everywhere. Coal has become cheaper and has taken market share from domestic-origin fuels, i.e. peat and wood. This has been evident in our customer base. At its meeting on 19 September 2013, the company s Board of Directors decided to pay a dividend of EUR 10 million (EUR 333.33 per share). The dividend payment date was 24 September 2013. The background to this was the decision taken by the Annual General Meeting of Vapo Oy (19 March 2013) to pay a conditional dividend such that a dividend not exceeding EUR 10 million may be paid for the 2012 financial period on a date to be decided by the Board of Directors. In making its decision, the Board took into account the company s financial position, future financing requirements and capital structure corresponding to the financial targets. Vapo Oy did not pay a dividend on the result for 2011. We changed our reporting schedule to correspond to the natural annual cycle of our core businesses. Around two thirds of our turnover consists of sales of energy i.e. fuels and heat and power, which we have defined as our core businesses. We have decided to concentrate on the Finnish, Swedish and Estonian markets, which all have clear seasonal variations. In a financial year based on the calendar year, production costs and the revenues from production and processing partly fall in different financial years. In October 2013, the extraordinary Annual General Meeting of Vapo Oy decided to alter the financial year and reporting schedule. The new financial year will start on 1 May and end on 30 April. At the same time we will move from quarterly reporting to tertial reporting. The first tertial will start on 1 May and end on 31 August. This period includes peat production and preparations for the heating season. The second tertial (1 September 31 December) and the third tertial (1 January 30 April) cover the heating season. The second tertial ends at the year-end (31 December), thus maintaining the continuity and comparability of key figures with previous annual accounts. The change will take effect by extending the current financial year that began on 1 January 2013 by four months to 30 April 2014. We have resolutely strengthened our balance sheet. This has been done by disposing of noncore holdings, enhancing the recycling of capital and improving operational profitability. We have cut all investments apart from environmental investments, which we have continued according to plan. The strengthening of the balance sheet is reflected in the equity ratio and the net debt / EBITDA ratio. Despite there being much more capital tied up in peat stocks than last year and despite having just paid a dividend of EUR 10 million, our equity ratio is 36.4 per cent (36.9%) and the net debt / EBITDA ratio is 6.0 (11.3). There is still room for improvement in both, but it is a significant improvement compared to the end of 2011, for example, when the equity ratio was 33.8 per cent and net debt/ebitda was 9.9. Our target continues to be an operating profit of EUR 30 million for this year (1 January 31 December 2013).

3 Consolidated key figures MEUR 7-9/2013 7-9/2012 1-9/2013 1-9/2012 1-12/2012 Turnover 107.9 106.1 452.7 497.4 652.9 Operating profit (EBITA) -8.4-23.3 20.4 9.0 5.8 % of turnover -7.8-22.0 4.5 1.8 0.9 Result for the period -8.9-17.8 9.1 3.9 2.8 Operating margin (EBITDA) 4.6-11.8 53.8 40.9 48.9 +/- Change in working capital -20.6 15.1-17.0 49.7 42.2 - Net investments -11.4-1.6-34.5-15.5-26.9 Free cash flow before taxes -27.4 1.8 2.3 75.1 64.2 Gross investments 11.9 10.5 36.5 35.1 48.0 Return on invested capital % *) 2.6-3.2 0.9 Return on invested capital % before impairments * 2.7-1.8 1.0 Return on equity % * 2.7-5.4 0.9 Balance sheet total 828.5 810.6 804.8 Shareholders equity 288.6 294.2 291.6 Interest-bearing net debt 368.4 345.1 355.9 Equity ratio % **) 36.4 36.9 37.1 Interest-bearing net debt / operating margin (EBITDA) *) 6.0 11.3 7.3 Gearing % 127.6 117.5 122.0 Employees, average 1123 1172 1154 *) Previous 12 months **) In calculating the equity ratio, the convertible bond on the balance sheet was calculated was calculated as shareholders equity in accordance with the recommendations of the Committee for Corporate Analysis Developments by business segment Turnover by segment MEUR 7-9/2013 7-9/2012 Change % 1-9/2013 1-9/2012 Change % 1-12/2012 Peat Products 28.3 31.2-9.5 139.4 168.2-17.1 220.5 Energy peat 22.1 21.4 3.2 119.1 140.0-14.9 183.2 Environmental peat 6.2 9.8-36.8 20.3 28.2-28.0 37.2 Wood Fuels 20.2 22.0-8.4 96.0 121.1-20.7 165.4 Forest fuels 7.5 7.0 6.2 35.7 48.5-26.3 65.2 Pellets 12.7 15.0-15.2 60.3 72.6-16.9 100.2 Heat and Power 13.7 14.2-3.5 72.1 74.0-2.5 105.5 Kekkilä Group 16.0 16.9-5.5 75.3 76.6-1.7 92.1 Vapo Timber 30.3 27.2 11.2 98.3 87.1 12.8 112.5 Others 2.9 2.8 5.7 7.8 7.3 7.3 9.8 Forest BtL 0.0 0.0 0.0 0.0 0.0 Mustankorkea 2.9 2.8 5.7 7.8 7.3 7.3 9.8 Group administration & shared by businesses 0.0 0.0 0.0 0.0 0.0 Inter-segment turnover -3.5-8.3 58.1-36.3-36.9 1.7-52.9 Total 107.9 106.1 1.7 452.7 497.4-9.0 652.9

4 Operating profit/loss by segment MEUR 7-9/2013 7-9/2012 Change % 1-9/2013 1-9/2012 Change % 1-12/2012 Peat Products 2.6-6.8 138.2 26.8 26.3 2.1 29.0 Energy peat 1.9-7.4 125.4 24.4 23.0 6.1 25.4 Environmental peat 0.7 0.8-17.7 2.4 3.2-26.4 3.7 Wood Fuels -1.8-3.9 53.3-1.3-8.6 84.9-8.1 Forest fuels -0.2-1.5 88.2 0.1-3.2 104.1-2.7 Pellets -1.7-2.5 32.2-1.4-5.4 73.7-5.4 Heat and Power -4.0-7.6 47.0 1.4-2.4 156.9-1.2 Kekkilä Group -1.9-1.0-82.7 2.3 6.9-66.8 3.8 Vapo Timber -1.2-3.6 67.5-5.0-7.9 36.6-10.9 Others -1.6-1.0-53.1-5.7-4.9-15.7-6.7 Forest BtL -0.2 0.0-680.2-0.9-0.3-211.9-0.6 Mustankorkea 0.7 0.6 22.2 1.6 1.5 7.2 2.1 Group admin. & shared by businesses -2.1-1.7-24.7-6.4-6.1-4.6-8.2 Disposals -0.9 0.6-239.1 1.9-0.3 739.4-0.2 Total -8.4-23.3 64.1 20.4 9.0 126.7 5.8 Peat Products The turnover of the business area in the July-September period was EUR 28.3 million (EUR 31.2 million). The operating result for the period was EUR 2.6 million (EUR -6.8 million). The operating result includes one-off items of EUR 0.6 million. Gross investments totalled EUR 5.3 million (EUR 4.8 million). Turnover from energy peat in the third quarter was EUR 22.1 million (EUR 21.4 million) and the operating result was EUR 1.9 million (EUR -7.4 million). Energy peat deliveries totalled 1.6 TWh (1.8 TWh): in Finland 1.4 TWh (1.7 TWh), in Sweden 0.1 TWh (0.1 TWh) and in the Baltic countries 0.1 TWh (0.04 TWh). Turnover from environmental peat in the third quarter was EUR 6.2 million (EUR 9.8 million) and the operating result was EUR 0.7 million (EUR 0.8 million). In the January-September period the turnover of the business area was EUR 139.4 million (EUR 168.2 million) and the operating result was EUR 26.8 million (EUR 26.3 million). Energy peat deliveries totalled 8.0 TWh (11.6 TWh). Of this, deliveries in Finland were 7.0 TWh, 0.8 TWh in Sweden and 0.2 TWh in the Baltic region. The mild weather and low electricity prices have been the main factors impacting earnings for the year to date. Both reduced demand for peat. In Finland the peat production season started a couple of weeks later than usual, but with favourable conditions in the late summer 80 per cent of the target was reached. Following a difficult season last year, there is now sufficient higher-quality peat for our contract customers. Investments have focused on improving water treatment systems and on upgrading production areas and machinery.

5 Wood Fuels The turnover of the business area in the July-September period was EUR 20.2 million (EUR 22.0 million). The operating result for the period was EUR -1.8 million (EUR -3.9 million). The operating result includes one-off items of EUR 0.2 million. Gross investments were EUR 0.3 million (EUR 0.4 million). Turnover from forest fuels and sawmill industry by-products in the third quarter was EUR 7.5 million (EUR 7.0 million) and the operating result was EUR -0.2 million (EUR -1.5 million). 400 GWh of forest fuels were sold (354 GWh). In the third quarter 329 GWh of forest fuels were sold in Finland (305 GWh), and in the Baltic region and Sweden a total of 70 GWh (49 GWh). Turnover from pellets in the third quarter was EUR 12.7 million (EUR 15.0 million) and the operating result was EUR -1.7 million (EUR -2.5 million). Pellet deliveries totalled 76,400 tonnes (83,300 tonnes). In Poland, changes in subsidy schemes have brought sales to an almost complete halt. In Finland 31,400 tonnes of pellets were sold in the third quarter (22,700 tonnes) including exports and sales to the Group. In Sweden pellet sales in the period were 38,700 tonnes (33,500 tonnes). In Poland, pellet sales were 1,200 tonnes (18,500 tonnes) and in Denmark 5,100 tonnes (8,600 tonnes). In the January-September period the turnover of the business area was EUR 96.0 million (EUR 121.1 million). The operating result for the period was EUR -1.3 million (EUR -8.6 million). Sales of forest fuels in Finland totalled 1,574 GWh (1,500 GWh). In the Baltic region and Sweden the total was 235 GWh (908 GWh). 685 GWh of pellets were delivered in Finland (660 GWh) and 860 GWh in Sweden (790 GWh). Heat and Power The turnover of the business area in the July-September period was EUR 13.7 million (EUR 14.2 million). The operating result for the period was EUR -4.0 million (EUR -7.6 million). Gross investments totalled EUR 2.8 million (EUR 1.6 million). The warm weather in September reduced heat sales in the third quarter compared to 2012. The result for the reference period in 2012 is weakened by the shutdown of the Forssa power plant for repair work and the resultant increase in generation costs. Deliveries of heat and steam to customers totalled 186 GWh (216 GWh). Electricity sales were 3 GWh (4 GWh). In Finland a total of 134 GWh of heat and steam were supplied (152 GWh) and 3 GWh of electricity was sold (4 GWh). In Sweden a total of 49 GWh of heat and steam were supplied (63 GWh) and in the Baltic region 1 GWh (1 GWh). The turnover of the business area in the January-September period was EUR 72.1 million (EUR 74.0 million). The operating result for the period was EUR 1.4 million (EUR -2.4 million). Deliveries of heat and steam to customers totalled 1,135 GWh (1,251 GWh) and electricity sales were 73 GWh (77 GWh).

6 Kekkilä Group The turnover of the Kekkilä Group in the July-September period was EUR 16.0 million (EUR 16.9 million). The operating result for the period was EUR -1.9 million (EUR -1.0 million). Gross investments totalled EUR 0.4 million (EUR 2.7 million). The turnover of the consumer business in the third quarter was EUR 4.9 million (EUR 4.8 million). Turnover in the professional growing business in the third quarter was EUR 5.3 million (EUR 5.4 million). Turnover in the landscaping business in the third quarter was EUR 4.4 million (EUR 4.3 million). Turnover in the environmental management business in the third quarter was EUR 1.3 million (EUR 2.0 million), turnover being reduced by the expiry of old contracts. The turnover of the Kekkilä Group in the January-September period was EUR 75.3 million (EUR 76.6 million). The operating result for the period was EUR 2.3 million (EUR 6.9 million). The result for the reference period in 2012 includes an insurance indemnity for the fire at the Eurajoki garden peat plant and an increase of EUR 0.4 million in the peatland after-use reserve. The comparable operating result for 2012 was EUR 4.7 million. Turnover was impacted by the exceptionally short horticultural season in consumer markets. The price of peat raw material has increased significantly due to the poor peat production situation the previous summer. In the Norwegian consumer market profitability is being eroded imports of finished products and raw peat from Sweden. Vapo Timber The turnover of Vapo Timber in the July-September period was EUR 30.3 million (EUR 27.2 million). The operating result for the period was EUR -1.2 million (EUR -3.6 million). Gross investments were EUR 0.1 million (EUR 0.7 million). Deliveries of sawn timber in the July-September period were 142,000 cubic metres, which was 25 per cent more than a year earlier. Sales prices also strengthened. Investments were concentrated on repair and maintenance measures. The turnover of Vapo Timber in the January-September period was EUR 98.3 million (EUR 87.1 million) and the operating result was EUR -5.0 million (EUR -7.9 million). Demand for sawn timber has picked up markedly from last year, which has lifted market prices. The ongoing efficiency-enhancement programme has meant that the cost-efficiency of sawmills has been improved from last year. Other activities The impact of other business activities on the operating result in the July-September period was EUR -1.6 million (EUR -1.0 million). Gross investments totalled EUR 3.3 million (EUR 0.2 million). The impact of group administration and shared by businesses on the operating result in the July-September period was EUR -2.1 million (EUR -1.7 million). The impact of Forest BtL Oy on the result was EUR -0.2 million. The planning and development expenses for the Ajos biodiesel plant will mostly be activated as investments from 1 Jan-

7 uary 2013. As of the beginning of 2013 investments total EUR 5.1 million. Forest BtL Oy is responsible for planning the Ajos biodiesel plant project, raw material procurement, sales of the final product, and arranging contracts and financing. The turnover of Mustankorkea Oy in the third quarter was EUR 2.9 million (EUR 2.8 million) and the operating result was EUR 0.7 million (EUR 0.6 million). In the January-September period the impact of other business activities on the operating result was EUR -5.7 million (EUR -4.9 million). Gross investments totalled EUR 6.3 million (EUR 0.7 million). Cash flow, investments and financing Free cash flow before taxes in the third quarter was EUR -27.4 million (EUR 1.8 million). Operating margin (EBITDA) was EUR 4.6 million (EUR -11.7 million), working capital increased by EUR 20.6 million (in 2012 working capital decreased by EUR 15.1 million). Net investments were EUR 11.4 million (EUR 1.6 million). Gross investments in the July-September period were EUR11.9 million or 92 per cent of the amount of depreciation (EUR 10.5 million, 90%), broken down into the Peat Products business area EUR 5.3 million, the Wood Fuels business area EUR 0.3 million, the Heat and Power business area EUR 2.8 million, Vapo Timber EUR 0.1 million and the Kekkilä Group EUR 0.4 million. Other investments by the Group were EUR 3.3 million. The principal investments related to improvements to water treatment systems in peat production. In the January-September period free cash flow before taxes was EUR 2.3 million (EUR 75.1 million). Operating margin (EBITDA) was EUR 53.8 million (EUR 40.9 million), working capital increased by EUR 17.0 million (in 2012 working capital decreased by EUR 49.7 million). Net investments were EUR 34.5 million (EUR 15.5 million). Interest-bearing net debt at the end of September was EUR 368.4 million (EUR 345.1 million). Interest-bearing net debt at the end of 2012 was EUR 355.9 million. Interest-bearing net debt includes a EUR 5 million convertible bond issued by Vapo s subsidiary. The ratio of net debt to operating margin (net debt/ebitda) on 30 September 2013 was 6.0 x (11.3 x). Short-term interest-bearing debt was EUR 110.5 million (EUR 99.6 million). Short-term interest-bearing debt was at the end of 2012 was EUR 124.2 million. The equity ratio at the end of September was 36.4 per cent (36.9%) and the gearing ratio was 127.6 per cent (117.5%). The consolidated balance sheet total was EUR 828.5 million (EUR 810.6 million). Group net financial expenses were EUR -7.8 million (EUR -3.3 million). Net financing expenses were 1.7 per cent of turnover (0.7%). Changes in Group structure Vapo Oy agreed the sale of Mustankorkea Oy to the City of Jyväskylä on 7 May 2012. In the consolidated balance sheet, the external assets and debts of Mustankorkea Oy have been separated out as assets and available-for-sale assets and debts in line with IFRS5.

8 Dividend On 19 March 2013 the Annual General Meeting decided to distribute dividend for the 2012 financial year not exceeding EUR 10 million or EUR 333.33 per share at a time to be decided by the Board of Directors. The dividend was paid on 24 September 2013. Change in the financial year The Board of Directors of Vapo Oy has proposed to Annual General Meeting to change the financial year from the current calendar year to the period 1 May 30 April. The Annual General Meeting approved the proposal in October. The current financial year will be continued to form a 16-month period ending on 30 April 2014. In addition it was proposed to move from quarterly reporting to tertial reporting. The first tertial will begin on 1 May and end on 31 August. This period includes peat production and preparations for the heating season. The second tertial (1 September 31 December) and the third tertial (1 January 30 April) cover the heating season. This change in the financial year and the tertial reporting support the seasonal fluctuations in the businesses. Natural seasonal fluctuation in activities The sales volumes of the Peat Products and Heat and Power business areas are heavily dependent on seasonal temperatures. This results in seasonal fluctuations in sales. The favourable weather in the early and late summer satisfactory volumes of peat were produced. Heavy rainfall in July brought production to a halt at older, low-lying peatlands. There were substantial regional variations. 80 per cent of the production target was achieved. Human resources The Group employed an average of 1,123 persons in the January-September period (1,172). Employees by segment, average 1-9/2013 1-9/2012 Peat Products 318 342 Wood Fuels 155 166 Heat and Power 109 118 Kekkilä Group 219 218 Vapo Timber 190 182 Others 132 146 Total 1123 1172 Employees in Finland and other countries, average 1-9/2013 1-9/2012 Finland 784 771 Other countries 339 401 Total 1123 1172

9 Vapo Oy sold its equipment manufacturing unit in Haukineva, Seinäjoki to Peatmax Oy of Tampere in October 2013. Of the unit s 15 employees, 13 transferred to Peatmax Oy as existing employees. Risks to businesses Regulatory risks The regulatory risk together with the market risk caused by increased usage of coal will have a significant impact on investments and activity in the energy sector. Increased peat taxation in Finland is a significant risk and threatens to further reduce energy usage of peat. From the point of view of the future of Vapo s peat business, a long-term risk is the increasing difficulty of obtaining environmental permits for new peat production areas. The shortfall compared to requirements is around 2,000 hectares annually. The pending amendment to the Environmental Protection Act includes a so-called natural value clause, which if it becomes law will make it difficult to begin peat production in peatlands. The sustainability criteria of solid renewable fuels are being evaluated in the EU and Finland. Depending on the content of future regulations, they will represent a threat to the usage of wood-based fuels. Market risks Vapo's sawmill, pellet, wood fuel and electricity generation businesses are subject to significant market risks both in terms of the prices and volumes of the end product and the price and availability of raw materials. The poor economic situation has put construction investments in Europe on ice and we have tried to compensate this decline by increasing sawn timber exports to countries outside Europe. The risk of availability of peat production contractors was managed and sufficient contracting agreements were made for the current production period. Lower coal prices together with higher peat taxation are a significant risk to demand for domesticorigin fuels. For some customers, coal has already significantly replaced peat and other domestic-origin fuels. Weather risks A common risk affecting Vapo's businesses generally is the weather conditions. In winter, the temperature affects fuel purchases by external and internal customers as well as the utilization rate of our own energy generation plants. In 2013 the weather risk was partially realized in Finland. The short spring season led to below-forecast sales of Kekkilä s horticultural products, which cannot be made up in the remainder of the year. There are significant regional variations in the success of peat production, although peat production as a whole performed reasonably well in 2013. Damage risks The most significant damage risks for Vapo include risks of harm to property and interruption, environmental risks and occupational safety risks. Vapo aims to prevent damage risks from being realized through proactive risk management. Risks that we cannot manage by our own actions are insured where possible. The aim is that damage risks related to e.g. property, interruption of activities and operational and product liability are covered with appropriate insurance policies. The poor damage ratio of previous years has improved, and no major damage has occurred in 2013.

10 Financing and commodity risks The main financing risks are currency, interest rate and refinancing risks. The most significant commodity risks include electricity and emissions rights price risks. The main objective of the management of financing risks is to minimize harmful effects from changes in currency and interest rate markets on the consolidated result and cash flow and to ensure the Group s liquidity. We updated our risk policies for electricity trading relating to both procurement and generation in 2013. The most significant risks and uncertainty factors are described in more detail in the 2012 Annual Report. Outlook for the remainder of the year to 30 April 2014 Demand for peat has weakened due to the low price of competing fuels, especially coal, and increased peat taxation. Factors affecting turnover and earnings for the 2013-2014 heating season include how well Vapo succeeds in reconciling demand and supply regionally, electricity prices, the utilization rate in industry, external temperatures and the effect of taxation decisions affecting peat and other fuels. Turnover in forest fuels is expected to decrease from the previous year, because Vapo is targeting better profitability and is cutting sales to less profitable customers. Demand is expected to increase in the domestic pellet market, but Vapo is further restricting pellet exports and sales in Poland. The efficiency-enhancing measures taken in the Heat and Power business area are beginning to show and the earnings forecast for the year-end is better than the reference period in 2012. Programmes have been launched to improve the profitability of the Kekkilä Group. The benefits of centralized production facilities and increased in-house peat production will improve profitability in 2014 and 2015. At Vapo Timber, the remainder of the year is expected to be better than last year due to a revival in export markets. The availability of reasonably priced raw timber is still a challenge in ensuring that the sawmills run at full capacity. Vapo will continue to invest in water treatment and sustainable peat production to ensure continuity of peat production. The target is for continued improvements in cash flow and profitability.

11 Kerava, 31 October 2013 Vapo Oy Board of Directors For further information please contact Tomi Yli-Kyyny, CEO tel. +358 20 790 5605 Jyrki Vainionpää, CFO tel. +358 20 790 5609 Ahti Martikainen, Director, Communications and Public Affairs tel. +358 20 790 5608

12 Interim Report Tables The Interim Report of Vapo Oy was drawn up in accordance with IAS 34 Interim Financial Reporting standards. Complying with IFRS standards in the preparation of an Interim Report requires Group management to make estimates and assumptions. These estimates and assumptions have a bearing on the value of balance sheet items, the disclosure of contingent assets and liabilities, and the amounts of reported revenues and expenses. Although the estimates are accurate to the best of management's knowledge, actual results may differ from the estimates. The estimates used in this Interim Report are the same as those used in the 2012 Financial Statements. The information presented in this Interim Report is unaudited.

13 Consolidated statement of comprehensive income MEUR 7-9/2013 7-9/2012 Change % 1-9/2013 1-9/2012 Change % 1-12/2012 TURNOVER 107.9 106.1 1.7% 452.7 497.4-9.0% 652.9 Other operating income 0.8 3.9-78.0% 6.2 16.6-62.9% 25.2 Share of associated company results -0.2-0.4 52.9% -0.5-0.4-48.8% -0.5 Operating expenses -103.7-121.0 14.3% -404.1-472.4 14.5% -629.3 Depreciation -13.0-11.6-11.5% -33.7-32.0-5.4% -42.0 Impairments -0.2-0.2 0.0% -0.2-0.2 9.1% -0.5 OPERATING PROFIT -8.4-23.3 64.1% 20.4 9.0 126.7% 5.8 Financial income -1.2 8.5-114.2% 2.2 13.3-83.1% 12.8 Financial expenses -0.5-8.0 94.0% -10.1-16.6 39.2% -19.2 PROFIT/LOSS BEFORE TAXES -10.0-22.7 55.8% 12.5 5.7 120.9% -0.5 Income taxes 1.1 5.0-84.4% -3.4-1.8-108.9% 3.3 PROFIT/LOSS FOR THE PERIOD -8.9-17.8 47.8% 9.1 3.9 126.5% 2.8 OTHER COMPREHENSIVE INCOME ITEMS: Translation differences from foreign units 0.3 0.7-0.5 1.0 0.8 Other comprehensive income items for the period after taxes 0.3 0.7-0.5 1.0 0.8 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD -8.6-17.1 8.6 4.9 3.6 Distribution of profit for the period: To parent company shareholders -9.2-17.9 8.0 3.4 2.0 To non-controlling shareholders 0.3 0.2 1.1 0.5 0.8-8.9-17.8 9.1 3.9 2.8 Distribution of comprehensive income for the period: To parent company shareholders -8.9-17.2 7.6 4.4 2.8 To non-controlling shareholders 0.3 0.2 1.0 0.5 0.8-8.6-17.1 8.6 4.9 3.6 Earnings per share calculated from profits due to parent company shareholders Earnings/share, EUR -308-598 268 112 65 Average number of shares 30,000 30,000 30,000 30,000 30,000

14 Consolidated balance sheet CONDENSED CONSOLIDATED BALANCE SHEET MEUR 30.9.2013 30.9.2012 31.12.2012 ASSETS LONG-TERM ASSETS Intangible assets 15.8 11.4 11.7 Goodwill 11.7 12.0 11.9 Land and water areas 46.0 46.5 45.6 Buildings and structures 71.1 74.4 76.0 Machinery and equipment 146.5 153.5 156.6 Other tangible assets 183.1 186.9 190.8 Investments in progress 57.1 50.4 40.5 Investments 7.4 11.7 8.4 Long-term receivables 3.8 4.4 3.6 Deferred tax asset 3.0 3.9 0.9 LONG-TERM ASSETS 545.5 555.2 546.1 CURRENT ASSETS Inventories 183.2 164.4 141.0 Sales and other receivables 88.0 75.2 99.8 Cash on hand and bank balances 2.0 6.0 8.7 CURRENT ASSETS 273.3 245.6 249.5 AVAILABLE-FOR-SALE ASSETS 9.8 9.8 9.3 ASSETS 828.5 810.6 804.8 SHAREHOLDERS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY Parent company shareholders share of shareholders equity 284.5 290.1 287.7 Non-controlling shareholders 4.1 4.1 4.0 SHAREHOLDERS EQUITY 288.6 294.2 291.6 LONG-TERM LIABILITIES Deferred tax liability 21.0 24.8 20.3 Long-term interest-bearing liabilities 263.5 255.0 244.1 Long-term non-interest-bearing liabilities 4.2 4.8 4.6 Long-term provisions 18.6 18.8 18.5

15 LONG-TERM LIABILITIES 307.3 303.3 287.4 CURRENT LIABILITIES Current interest-bearing liabilities 110.5 99.6 124.2 Current non-interest-bearing liabilities 118.5 109.3 97.3 CURRENT LIABILITIES 229.0 208.9 221.5 AVAILABLE-FOR-SALE INTEREST-BEARING AND NON- INTEREST-BEARING DEBT 3.6 4.2 4.3 SHAREHOLDERS EQUITY AND LIABILITIES 828.5 810.6 804.8 Statement of change in Group shareholders equity Changes in shareholders equity, IFRS MEUR MEUR Equity capital Fair value fund Other funds Total TOTAL SHAREHOLDERS EQUITY 1.1.2013 50.5 0.0 29.9-0.1 207.4 287.7 4.0 291.7 Changes in shareholders equity Distribution of dividend -10.0-10.0-0.9-10.9 Comprehensive income for the period, total -0.4 8.0 7.6 1.0 8.6 Other changes -0.8-0.8-0.8 SHAREHOLDERS EQUITY TOTAL 30.9.2013 50.5 0.0 29.9-0.5 204.6 284.6 4.1 288.6 MEUR Equity capital Fair value fund Other funds Total Translation differences Retained earnings Noncontrolling shareholders Translation differences Retained earnings Noncontrolling shareholders TOTAL SHAREHOLDERS EQUITY 1.1.2012 50.5 0.0 29.7-0.9 202.1 281.4 4.3 285.7 Changes in shareholders equity Distribution of dividend 0.0-0.8-0.8 Transfers between items Comprehensive income for the period, total 1.0 3.4 4.4 0.5 4.9 Other changes 0.2 4.0 4.3 4.3 SHAREHOLDERS EQUITY TOTAL 30.9.2012 50.5 0.0 29.9 0.1 209.5 290.1 4.0 294.1

16 Condensed consolidated cash flow statement MEUR 7-9/2013 7-9/2012 1-9/2013 1-9/2012 31.12.2012 Cash flow from operating activities Profit/loss for the period -8.9-17.8 9.1 3.9 2.8 Adjustments to the result for the period 13.7 4.6 43.2 29.9 32.8 Change in working capital -20.6 16.9-16.9 56.2 47.5 Cash flow from operating activities before financial items and taxes -15.8 3.6 35.4 89.9 83.0 Net financial expenses -1.5-3.1-5.9-10.4-14.0 Taxes paid on operating activities -0.5 2.0-1.3 3.2 3.6 Cash flow from operating activities -17.8 2.5 28.2 82.7 72.6 Cash flow from investing activities Investments in tangible and intangible assets -12.0-10.2-36.5-34.8-45.6 Proceeds from disposal of tangible and intangible assets 0.8 8.9 5.1 20.4 27.9 Proceeds from disposal of other investments 0.0 0.8 0.4 7.4 8.8 Changes in loans receivable 0.0 0.1 0.2 0.0-0.2 Dividends received 0.0 0.0 0.0 0.9 0.9 Cash flow from investing activities -11.1-0.4-30.8-6.1-8.2 Cash flow before financing -28.9 2.1-2.6 76.6 64.4 Cash flow from financing activities Change in long-term loans and other financing items 38.3-9.8 6.2-71.2-56.3 Dividends paid -10.4 0.0-11.3-0.8-0.8 Cash flow from financing activities 27.9-9.8-5.0-72.0-57.1 Change in cash and cash equivalents -1.0-7.7-7.6 4.7 7.3 Cash and cash equivalents opening balance 2.5 14.6 8.7 2.6 2.6 Change in cash and cash equivalents -1.0-7.7-7.6 4.7 7.3 Effect of changes in exchange rates 0.6-0.9 1.0-1.2-1.2 Cash and cash equivalents at end of period 2.0 6.0 2.0 6.0 8.7 Notes to the interim report SEGMENT DATA 7-9/2013 MEUR Peat Products Wood Fuels Heat and Power Kekkilä Group Vapo Timber Others Disposals External turnover 25.7 18.1 13.3 15.8 32 3 0 107.9 Internal turnover 2.6 2.1 0.4 0.2-1.8 0-3.5 0 Turnover 28.3 20.2 13.7 16 30.3 2.9-3.5 107.9 Segment operating profit 2.6-1.8-4 -1.9-1.2-1.6-0.5-8.4 / loss Financial income and expenses -1.7 Income taxes 0.8 Group total Result for the period -9.3 Investments 5.3 0.3 2.8 0.4 0.1 3.3-0.2 11.9 Depreciation 6.4 1.0 2.7 1.9 1.0 1.0-1.0 13.0

17 SEGMENT DATA 1-9/2013 MEUR Peat Products Wood Fuels Heat and Power Kekkilä Group Vapo Timber Others Disposals External turnover 124.2 81 70.7 74 95 7.8 0 452.7 Internal turnover 15.2 15 1.5 1.3 3.3 0-36.3 0 Turnover 139.4 96 72.1 75.3 98.3 7.8-36.3 452.7 Segment operating profit 26.8-1.3 1.4 2.3-5 -5.7 1.9 20.4 / loss Financial income and expenses -7.8 Income taxes -3.8 Result for the period 8.8 Group total Segment assets 389.4 89.2 136.7 79.0 70.0 39.8 14.9 818.9 Shares in associated companies 0.0 2.7 0.0 0.7 2.7 0.0 0.0 6.2 Unallocated assets 3.5 Assets total 30.9.2013 828.5 Segment debt 57.4 17.8 15.2 12.5 32.9 7.3-4.5 138.5 Unallocated debt 397.8 Debt total 30.9.2013 536.3 Investments 21.3 0.4 4.9 3.6 3.2 6.3-3.3 36.5 Depreciation 12.5 3.1 8.3 4.9 3.1 3.5-1.7 33.7 SEGMENT DATA 1-12/2012 MEUR Peat Products Wood Fuels Heat and Power Kekkilä Group Vapo Timber Other Disposals External turnover 200.7 143.9 102.2 89.9 106.6 9.7 652,9 Internal turnover 19.8 21.5 3.3 2.2 5.9 0.1-52.9 0 Turnover 220.5 165.4 105.5 92.1 112.5 9.8-52.9 652,9 Segment operating profit 29-8.1-1.2 3.8-10.9-6.7 5,8 / loss Financial income and expenses -6,4 Income taxes 3,3 Result for the period 2,8 Segment assets 352 96.2 157 104 55.7 185.8-164.6 786 Shares in associated companies 2.9 0.1 0.7 2.9 6.7 Unallocated assets 12.1 Assets total 31.12.2012 804.8 Segment debt 47.8 16.4 16.3 12.4 20.5 12.8-3.1 123.2 Unallocated debt 375.6 Debt total 31.12.2012 498.9 Investments 25.4 0.9 7 28.9 2.9 0.7-17.6 48.1 Depreciation 14.7 4.4 11.4 6.1 4 3.9-2.6 42 Group total Impairments 0.6 0.6

18 COLLATERAL, CONTINGENT COMMITMENTS AND OTHER LIABILITIES MEUR 30.9.2013 30.9.2012 31.12.2012 Collateral As collateral for own debt Mortgages 2.0 2.1 2.1 Liabilities for own commitments Mortgages Guarantees 11.0 14.3 18.6 Total 13.0 16.4 20.7 Financial leasing and other rental liabilities Financial leasing liabilities Due in present financial period 0.5 0.6 0.5 Due in future financial periods 8,7 9.5 9.1 Other rental liabilities Due in present financial period 4.2 4.9 4.9 Due in future financial periods 9,3 13.3 10.8 Total 22.7 28.3 25.3 The Group has rented machinery and equipment, vehicles and IT equipment. Most of the agreements concern leased production machinery and equipment, with a capital value of EUR 18.6 million on the closing date. There are no agreements in the acquisition period. The duration of the rental agreements is ten years. The agreements include an option, but not an obligation, to continue the agreement after the original ending date. Guarantees given on behalf of others Guarantees Contingent commitments on behalf of associated companies Guarantees 2.5 2.5 2.5 DERIVATIVE CONTRACTS 30.9.2013 30.9.2012 31.12.2012 MEUR Nominal value Nominal value Nominal value Fair value Fair value Fair value Interest rate derivatives 300.2 329.4 329 3.9 5.3 4,9 Currency derivatives 68.8 59.2 59.8 0.0-0.5 0,0 Electricity derivatives 15.5 1.6 0.0 0.3-0.8 0,0 Nominal value, total 384.5 390.2 388.8 Fair value, total 4.2 4.0 4.9