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Introduction & Market Context
UPM-Kymmene Oyj (HEL:UPM) presented its first quarter 2025 results on April 24, showing stable revenue figures but declining profitability amid challenging market conditions. The Finnish forest industry company reported sales of €2,646 million, slightly above the €2,640 million recorded in the same period last year, while comparable EBIT decreased by 14% to €287 million.
CEO Massimo Reynaudo described Q1 as "a good start to the year" despite increasing global trade tensions creating uncertainty in the business environment. The company highlighted gradually improving markets in pulp and advanced materials, with self-adhesive label materials recovering above pre-COVID levels.
The presentation comes as UPM’s stock has been trading near the lower end of its 52-week range, with the share price at €23.77 as of the most recent trading session, well below its 52-week high of €34.71.
Quarterly Performance Highlights
UPM maintained stable revenue in Q1 2025, but profitability metrics showed pressure compared to both the previous year and quarter. Comparable EBIT decreased to €287 million (10.8% of sales) from €333 million (12.6%) in Q1 2024, representing a 14% year-over-year decline.
The company’s performance was affected by several factors, as illustrated in the following breakdown of comparable EBIT changes:
The presentation highlighted that UPM’s actions to sharpen competitiveness "started to bear fruit," though the earnings report revealed that the company’s EPS of $0.41 slightly missed analyst expectations of $0.4274.
UPM maintained a solid financial position with net debt of €2,954 million and a net debt to EBITDA ratio of 1.77, remaining below the company’s policy target of 2.0x. Cash funds and committed credit facilities totaled €3.0 billion at the end of Q1.
Detailed Financial Analysis
The performance across UPM’s business segments showed varied results, with some areas demonstrating resilience while others faced more significant challenges. The company provided a detailed breakdown of comparable EBIT by business area:
In the renewable fibres segment, UPM highlighted its position as the third-largest producer globally and the leader in multi-fibre production. The company operates significant pulp production facilities in Uruguay (3.4 million tonnes of eucalyptus pulp) and Finland (2.4 million tonnes, mainly softwood pulp).
The advanced materials business showed signs of recovery, with labeling markets exceeding pre-COVID levels. UPM Raflatac maintains its position as the strong global number two in this segment, while UPM Specialty Papers holds the leading global position in its market.
The company’s exposure to potential tariffs was also addressed, with 14% of UPM’s 2024 sales directed to the US market. Of these sales, 40% were locally produced while 60% were imported, suggesting a relatively limited direct impact from potential tariff changes.
Strategic Initiatives
UPM outlined three strategic priorities during the presentation: improving competitiveness, accelerating growth, and developing world-class businesses. These priorities are being implemented across the company’s diversified portfolio of operations.
A significant strategic move announced was the planned closure of the Ettringen paper mill in Germany (270,000 tonnes capacity) in July 2025, which is expected to generate annual fixed cost savings of €39 million. This decision reflects UPM’s response to the ongoing structural challenges in the Communication Papers segment.
The company also completed the acquisition of Metamark, strengthening its position in the advanced materials sector, and repurchased 6 million of its own shares for approximately €160 million by April 8, 2025. The first dividend installment for 2024 (€397 million) was paid on April 8, with a second installment planned for November.
UPM’s major investment cycle appears to be coming to an end, with capital expenditure excluding acquisitions for 2025 estimated at €400 million, significantly lower than in recent years.
Forward-Looking Statements
For the first half of 2025, UPM expects comparable EBIT to be approximately in the range of €400-625 million, compared to €515 million in H1 2024. The company anticipates benefits from higher delivery volumes and lower fixed costs, but expects these to be partially offset by lower sales margins.
The outlook acknowledges significant uncertainties in geopolitics and global trade relations. During the earnings call, management addressed concerns about US tariff impacts, pulp production strategies, and currency hedging approaches, emphasizing efforts to protect margins and optimize operations.
UPM’s planned maintenance shutdowns in 2025, particularly in Q2, are expected to impact production volumes and operational efficiency. The company provided a detailed schedule of these shutdowns, which include work at the Olkiluoto nuclear power plant and several pulp mills.
In conclusion, while UPM maintains a solid financial position and diverse business portfolio, the company faces challenges from declining profitability and uncertain global trade conditions. Management’s focus on competitiveness and cost optimization will be crucial as UPM navigates these headwinds while positioning its various business segments for future growth.
Full presentation:
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