UPM Half-Year Financial Report 2025: Securing performance in a turbulent global trade environment

UPM-Kymmene Corporation Stock Exchange Release (Half-Year Financial Report) July 24, 2025 at 09:35 EEST

HELSINKI, July 24, 2025 /PRNewswire/ -- 

Q2 2025 highlights

• Sales totaled €2,400 million (2,546 million in Q2 2024)
• Comparable EBIT decreased by 31% to €126 million, 5.2% of sales (182 million, 7.2%)
• Operating cash flow was €179 million (204 million)
• Increased global trade tensions impacted deliveries and sales prices for UPM Fibres and UPM Communication Papers
• Advanced materials businesses' performance was more resilient, measures to improve profitability continued
• UPM Biofuels had record high deliveries and improved its performance
• UPM discontinued the development of the potential refinery in Rotterdam to sharpen the focus in biofuels growth strategy
• The biochemicals refinery in Leuna started up the first of its three core processes

H1 2025 highlights

• Sales totaled €5,046 million (5,186 million in H1 2024)
• Comparable EBIT decreased by 20% to €413 million, 8.2 % of sales (515 million, 9.9 %)
• Operating cash flow was €468 million (539 million)
• Net debt was €3,310 million at the end of June (2,763 million)
• UPM commenced a share buy-back program and repurchased 6 million shares for a total of approximately €160 million
• UPM was listed as the only forest and paper industry company in the Dow Jones Global and European Sustainability Indices (DJSI) for the years 2024-2025
• UPM was recognized among the top sustainability performers by CDP and S&P Global

Key figures

UPM presents certain measures of performance, financial position and cash flows, which are alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of alternative performance measures are presented in » UPM Annual Report 2024

Massimo Reynaudo, President and CEO, comments on the results:

"The promising start to the year took a negative turn during the second quarter. Tariff announcements caused uncertainty in global trade, which weakened demand and the U.S. dollar. These had a negative impact particularly on the pulp and communication paper businesses. Our advanced materials businesses showed more resilience. To secure performance, we took further actions to safeguard the competitiveness of all our businesses. On a high note, we made good progress in the biochemicals refinery in Leuna, successfully starting up first of the refinery's three core processes.

In Q2, our sales were €2,400 million, down from the preceding quarter as well as from Q2 2024. Comparable EBIT was €126 million, down 31% from last year's corresponding quarter. Operating cash flow was €179 million. Our financial position remains solid, with net debt to EBITDA ratio of 2.12 at the end of June.

UPM Fibres was indirectly impacted by the escalating trade tensions. In China, orders halted during the height of the trade tensions between the U.S. and China. Customer deliveries recovered later in the quarter, but at lower price levels. Our delivery volumes were also affected by the maintenance shutdowns at UPM Paso de los Toros and UPM Kymi.

Despite the weakened dollar, we still managed to run our Finnish pulp operations profitably. Due to the continued, unsustainably high wood prices, the scheduled shutdown of the Kaukas pulp mill in Q3 will be extended to approximately two months. We will continue to monitor the situation closely and take further curtailments at our Finnish pulp mills as needed.

In UPM Communication Papers, demand was weak, prices decreased, and currency rates developed unfavorably. Trade uncertainties significantly affected demand from the U.S. customers.

The business continues to align its paper capacity with profitable demand to ensure operational competitiveness and performance. In the first quarter, we announced the planned closure of the UPM Ettringen mill in Germany. Today, we have announced plans to permanently end paper production at UPM Kaukas. Together, these two closures would reduce paper capacity by 570,000 tonnes, representing 13% of our capacity. With these planned measures we aim to ensure the efficient use of our paper assets.

In our advanced materials business, UPM Adhesive Materials showed resilience and continued to grow sales. Actions to sharpen competitiveness and improve margins continued. The business is taking steps towards strengthening its presence in faster growing regions. We are investing in our production unit in Malaysia to strengthen our asset platform in Southeast Asia. In the U.S. we will increase the capacity for high-value advanced label materials. This will enable us to increase our share of this growing market and bring advanced label production closer to the customers in the Americas.

UPM Specialty Papers navigated a market affected by the uncertainty around tariffs. Growth in the label, release base and packaging papers markets softened in the U.S. toward the end of the quarter. Demand for fine papers in China was sluggish, prices were low, and the business took efficiency measures to improve its competitiveness in these markets.

UPM Plywood saw positive development in its markets but was not able to capture the opportunities due to the prolonged strike at the Finnish mills. After the new collective labor agreement was signed, production volumes quickly picked up, supported by a high backlog of orders.

In decarbonization solutions, UPM Biofuels improved its performance after several challenging quarters with higher deliveries and decreasing costs. Despite the low market prices of advanced renewable fuels, the business reached break-even performance. During the quarter we decided to discontinue the development of the potential second biomass-to-fuels refinery in Rotterdam. We focus our growth strategy in biofuels on further development of the Lappeenranta refinery, advancing proprietary feedstock technologies and by qualifying and commercializing Crude Tall Oil -derived biofuels for jet engine fuels.

In Leuna, Germany, we made good progress toward completing the first-of-its-kind refinery and launching our biochemicals business commercially. The first of the refinery's three core processes, the hydrothermal breakdown of solid biomass, has been successfully tested and started up. This is key to enabling the refinery's further conversion processes to renewable chemicals and materials. We expect the entire integrated process of the refinery to start by end of the year.

UPM Energy experienced a quarter of historically low prices. Coming to the seasonally slow quarter, hydrological reservoirs were high in the Nordics. At the same time, the second quarter showed increased power demand in Finland, as an indication of the electrification of the economy starting to gain traction.

In the uncertain markets, we remain focused on executing our strategy and securing performance. We continue to leverage our world-class fibre platform in Uruguay and will take all means necessary to safeguard profitability in the Finnish pulp operations. In advanced materials, we continue to sharpen our competitiveness and capture appropriate growth opportunities. In decarbonization solutions, we are launching an exciting new biochemicals business."

Profit guidance

UPM's comparable EBIT in H2 2025 is expected to be approximately in the range of €425-650 million (€413 million in H1 2025, and €709 million in H2 2024).

Outlook

The continued significant uncertainties in geopolitics and global trade relations may impact the development of UPM's product deliveries, sales prices, various input cost factors and currency exchange rates.

In H2 2025, compared with H1 2025, UPM's performance is expected to benefit from lower variable costs, including the timing of the annual energy refunds in Q4, and potentially from moderate fair value change of forest assets in Q4. Performance is expected to be resilient in the advanced materials businesses. Pulp prices start the second half of the year at a lower level than the realized prices during the first half of the year.

In H2 2025, compared with H2 2024, UPM's performance is expected to be held back by lower sales margins for pulp, lower deliveries of communication papers, and higher maintenance activity. Performance is expected to improve in the advance materials businesses.

The US dollar is weaker at the start of H2 2025 than during the comparison periods.

Sensitivity to pulp and electricity prices

UPM's comparable EBIT is sensitive to pulp and electricity prices. The figures below represent group earnings sensitivities on annual level.

UPM is a large producer and consumer of chemical pulp. A €50/tonne change in average pulp price would impact annual comparable EBIT by approximately €170 million (net impact: assuming no correlation between pulp and paper prices) to approximately €270 million (gross impact: assuming paper pricing would match changes in pulp costs).

UPM is a large producer and consumer of electricity in Finland and separately hedges part of its electricity sales and purchases. Based on UPM's estimated unhedged net electricity sales position in Finland in 2025, a €10/MWh change in average electricity market price in Finland would impact annual comparable EBIT by approximately €30 million.

Foreign exchange exposure

Fluctuations in monetary policies and economic conditions can significantly impact the value of various currencies, which in turn may affect UPM. Additionally, the escalation of global trade tensions could influence currency exchange rates. These currency fluctuations could impact UPM's cash flow, earnings, or balance sheet, and may also affect the relative competitiveness between different currency regions.

The group's policy is to hedge an average of 50% of its estimated net currency cash flows on a rolling basis over the next 12-month period. At the end of Q2 2025, UPM's estimated net currency cash flows for the next 12 months totaled approximately €1.5 billion. USD was the largest exposure at approximately €1.2 billion, followed by UYU, GBP and CNY. In addition, the earnings of UPM's foreign subsidiaries are translated to euros in reporting. UPM has significant foreign subsidiaries in Uruguay, the U.S. and China. Foreign exchange risks are discussed in UPM's Annual Report 2024 on pages 305-306.

Invitation to UPM's webcast on the Half-year Financial Report 2025

A webcast and a conference call for analysts and investors will begin at 13:15 EEST. The Half-year Financial Report will be presented in English by President and CEO Massimo Reynaudo and CFO Tapio Korpeinen. Participants can follow the webcast online via this link.

Participants wishing to ask questions after the presentation must register for the conference call. To participate in the conference call, please register here. After registration, you will be provided with telephone numbers, a user ID and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to join the queue.

The webcast will be available on the company website for 12 months after the call.

It should be noted that certain statements herein, which are not historical facts, including, without limitation, those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by "believes", "expects", "anticipates", "foresees", or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein including the availability and cost of production inputs, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. The main earnings sensitivities and the group's cost structure are presented on pages 271-272 of the Annual Report 2024. Risks and opportunities are discussed on pages 33-35, and risks and risk management are presented on pages 120-124.

UPM, Media relations
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UPM
UPM is a material solutions company, renewing products and entire value chains with an extensive portfolio of renewable fibres, advanced materials, decarbonization solutions, and communication papers. Our performance in sustainability has been recognized by third parties, including EcoVadis and the Dow Jones Sustainability Indices. We operate globally and employ approximately 15,800 people worldwide, with annual sales of approximately €10.3 billion. Our shares are listed on Nasdaq Helsinki Ltd.

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