Massimo Reynaudo, President and CEO, comments on the results:
“The third quarter brought some temporary clarity to the terms of international trade, but consumer demand stayed subdued and uncertainty remains. During the quarter, we continued to take decisive actions to further strengthen our competitiveness. Our focus is on improving performance, cash flow and the strength of our balance sheet.
Our businesses in advanced materials and decarbonization solutions improved their third quarter performance compared to the previous year. However, fibres and communication paper businesses were impacted by the unusual volatility in the operating environment, which affected UPM’s results negatively.
In Q3 our sales were €2,298 million, lower than in the comparison quarters. Comparable EBIT was €153 million, up 22% compared to the previous quarter but down 47% compared to last year’s corresponding period. Operating cash flow was €218 million. At the end of the quarter, our financial position was solid, with a net debt to EBITDA ratio of 2.36.
In UPM Fibres, the low pulp prices resulted in significantly lower EBIT compared to last year. Despite the low cycle market prices, our competitive pulp platform in South America performed well and continued to improve its efficiency. In Q3, Fibres South generated comparable EBIT of €80 million, with an EBIT margin of 22%. After this first full year at nominal capacity for UPM Paso de los Toros and the competitive outbound logistics by rail, improvements will continue. By 2027, the expanded plantation areas will increasingly reach harvesting maturity, enabling us to optimize the wood sourcing and inbound logistics further. Simultaneously, we continue to plan for capex-efficient debottlenecking to unlock further potential of the platform.
In Finland, Fibres North reported a comparable EBIT loss of €37 million, of which the impact of the extended shutdown and maintenance at the Kaukas pulp mill accounted for approximately €30 million. Wood costs reached their highest levels, even though wood market prices started to show the first signs of decline. We continue to take decisive measures to adjust the Finnish pulp operations to the market situation. The announced long-term strategic partnership with Versowood, the largest private producer and processor of sawn timber in Finland, will strengthen our supply of pulpwood and improve the cost efficiency of our wood sourcing in the tight Finnish markets.
Given the significance of the UPM Fibres business and the distinct characteristics of its Fibres South and Fibres North parts, we will provide additional financial information for these two parts of the UPM Fibres reporting segment starting in Q1 2026.
In advanced materials, UPM Adhesive Materials and UPM Specialty Papers demonstrated resilience once again, improving their performance from last year despite the visible effects of global trade tariffs on consumer confidence and demand. UPM Adhesive Materials continued to implement its growth strategy by investing in the U.S., Malaysia and Vietnam. In addition, the business announced plans to discontinue production in Nancy, France in order to increase production efficiency further.
UPM Plywood reported solid results. In September, we announced the strategic review of the business to assess options for maximizing the long-term potential in an evolving market environment. The aim is to determine the best path forward for the plywood business, while also benefiting the value creation for UPM’s shareholders.
UPM Communication Papers faced weak demand and was affected by export tariffs. The business decided to permanently cease paper production at the UPM Kaukas mill by the end of the year. The closed Plattling paper mill site was sold in October to a local logistics company, and the sale will positively impact the Q4 cashflow.
In decarbonization solutions, UPM Energy had a good third quarter, with market prices recovering amid solid power consumption in Finland and the Nordics. Optimization of power production in the volatile price environment yielded good results.
UPM Biofuels produced good volumes and the renewable fuel market prices continued recovering. The EU level renewable energy directive (RED III) is expected to support demand and valuation for advanced renewable fuels, pending implementation at the national level legislation.
In Leuna, Germany, the start-up of our groundbreaking biochemicals refinery proceeded. In the first core process, the hydrothermal breakdown of wood into sugar and lignin, we have successfully achieved stability and production levels on an industrial scale. Production and sales of the first commercial products, industrial sugars and lignin-based products are expected to start by the end of the year, and glycol production and sales in the first half of 2026.
Across our businesses, the market environment during the third quarter proved to be challenging. Although uncertainties in trade, currencies and geopolitics continue in the near term, we are determined to stay competitive and pave way for future growth through targeted investments and the pioneering entry in the new biochemicals business. In these efforts, I want to acknowledge the dedication of our teams and the continued trust of our customers.”
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 have started 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 advanced materials businesses.
The U.S. dollar has been weaker in 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 Q3 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.
