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Investing.com -- Shares of UPM Kymmene (HEX:UPM) climbed 2% following the release of its first-quarter earnings, which surpassed market expectations. The Finnish forestry company reported a first-quarter EBIT (earnings before interest and taxes) of €287 million, a 9% beat against the consensus of €262 million. This performance was primarily driven by strong results in the pulp and specialty paper segments.
Despite a decline from the €418 million EBIT reported in the same quarter of the previous year, the company’s earnings still managed to exceed analyst forecasts. UPM has maintained its first-half 2025 EBIT guidance of €400-625 million, suggesting a second-quarter EBIT ranging between €113-338 million, with a €226 million midpoint. This projection stands despite anticipated higher quarter-over-quarter mill maintenance costs, which Jefferies estimates to be over €70 million.
The company is poised to benefit from increased volumes across most divisions, with the exception of paper, through 2025. The full operation of its Uruguay pulp mill is expected to contribute an additional 0.3 million tons of pulp in 2025. While the biofuels segment has been challenging, it is forecasted to show improvement in the first half of 2025 compared to the first half of 2024.
UPM has also completed an initial share buyback program worth €160 million, representing over 1% of its market capitalization, signaling the potential for further capital returns if pulp prices and macro conditions improve.
Investor sentiment had been tempered by factors such as foreign exchange headwinds, particularly a weaker USD, along with uncertainties in trade and consumer sentiment. These concerns, coupled with mixed views on pulp prices, have led to buy-side expectations that are already below those of sell-side analysts.
Jefferies commented on the company’s prospects, stating, "We see 5-10% downside to 2025 cons EBIT of €1.24bn (JEFe:-5% at €1.18bn), Into 2026 our €1.53bn EBIT is -9% below €1.68bn cons. However, with 1Q beat and low-end of guidance less likely in our view, we see UPM higher today."
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