UPM-Kymmene Oyj (UPM.HE) | Investment Case

1. Company Snapshot

1.a. Company Description

UPM-Kymmene Oyj engages in the forest-based bio industry.It operates through UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers, UPM Plywood, and Other operations segments.The company provides softwood, birch, and eucalyptus pulp for tissue, specialty, and graphic papers and packaging; sawn timber for joinery, packaging, furniture, planning, and construction industries; and wood-based renewable diesel and renewable naphtha for the petrochemical industry.

It is also involved in the generation of electricity through hydro and nuclear power plants.In addition, the company offers self-adhesive label materials for branding and promotion, information, and functional labelling in the food, beverage, personal care, pharmaceutical, and logistics segments; and label papers, release base papers, office papers, and flexible packaging for labelling, packing, commercial siliconizing, and printing, as well as graphic papers for advertising, publishing, and home and office use.Further, it provides plywood and veneer products for construction, vehicle flooring, liquefied natural gas shipbuilding, and parquet manufacturing, as well as for other industrial applications; wood and wood-based biomass, and forestry services for forest investors and owners; wood-based lignin products for industrial use and cell hydrogels for 3D cell culturing; UPM ProFi decking products and UPM formi granules; and biomedical products.

The company primarily operates in Europe, North America, Asia, and internationally.UPM-Kymmene Oyj was founded in 1871 and is headquartered in Helsinki, Finland.

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1.b. Last Insights on UPM

UPM-Kymmene Oyj's recent performance was driven by its ability to secure performance in a turbulent global trade environment, as highlighted in its Q2 2025 report. The company's UPM Raflatac segment showcased impactful sustainability achievements in its 2024 Climate Review, demonstrating progress in climate action. Additionally, the appointment of Sami Pauni as Executive Vice President, General Counsel, is expected to strengthen the company's leadership. UPM Adhesive Materials' participation in Labelexpo Europe 2025 also underscores its commitment to showcasing leading label material performance.

1.c. Company Highlights

Last Price	24.24
Change Percentage	-0.98%
Open	24.24
Previous Close	24.48
Market Cap ( Millions)	12782
Volume	1124743
Year High	30.07
Year Low	21.72
M A 50	23.09
M A 200	24.05

FCF Yield	6.17%
Dividend Yield	6.19%
ROE	3.28%
Debt / Equity	40.67%
Net Debt / EBIDTA	216.15%
Price To Book	1.28
Price Earnings Ratio	37.05
Price To FCF	16.2
Price To sales	1.25
EV / EBITDA	10.2

2. UPM's Q3 2025 Earnings: A Mixed Bag

UPM reported a comparable EBIT of EUR 153 million, up 21% from the previous quarter but down 47% from the last year's corresponding period, with an EBIT margin of 6.7%. The company's EPS came in at EUR 0.19, missing estimates of EUR 0.4491. Revenue growth was not explicitly stated, but the company's operating cash flow was EUR 218 million in the third quarter, and net debt decreased by EUR 92 million from the second quarter to EUR 3.218 billion.

Publication Date: Nov -02

                                    📋 Highlights
                                    Comparable EBIT::
                                                EUR 153 million (+21% QoQ, -47% YoY) with a 6.7% margin.
Net Debt-to-EBITDA::
                                                2.36x, above the 2x policy limit, with EUR 3.218 billion net debt.
Fibres South EBIT::
                                                EUR 80 million, 22% margin, highlighting improved performance in Decarbonization Solutions.
CapEx Outlook::
                                                Maintenance CapEx at EUR 250 million/year, with efficiency projects adding tens of millions.
Forest Revaluation Impact::
                                                EUR 150+ million gross gain in 2025, but 2026 gains may shrink due to lower wood prices.

                                

Segment Performance

The Advanced Materials and Decarbonization Solutions segments improved their performance, while Renewable Fibres and Communication Paper businesses were impacted by volatility in their operating environment. Fibres and Communication Papers reported lower EBIT compared to last year, while Adhesive Materials, Specialty Papers, Plywood, Energy, and Biofuels improved their EBIT year-on-year. As Massimo Reynaudo stated, "the negative EBIT in the third quarter was due to a combination of factors, including the Kaukas maintenance shut, high wood prices, and low pulp prices."

Valuation Metrics

Using the available valuation metrics, we can assess what's priced into UPM's stock. The P/E Ratio is 35.59, indicating a relatively high valuation. The Net Debt / EBITDA ratio is 2.16, above the company's policy limit of 2x. The EV/EBITDA ratio is 9.88, suggesting a moderate valuation. The Dividend Yield is 6.44%, which is relatively attractive.

Outlook and Guidance

The company's outlook remains unchanged, with a comparable EBIT range of EUR 425 million to EUR 650 million in the second half of 2025. The company is taking decisive actions to improve competitiveness and performance, including closing down paper production at certain mills and introducing the notion of Fibres South and Fibres North. The company's CapEx is expected to be lower in 2026 and 2027 due to the completion of major investment cycles.

Strategic Developments

The company is proceeding with the qualification of sustainable aviation fuels and the start-up of its biochemical refinery in Leuna, Germany. The strategic partnership with Versowood will provide access to more wood chips and pulpwood, addressing the critical issue of wood availability in Finland. The revaluation of the Finnish forest assets is expected to have a significant impact on the company's results.

3. NewsRoom

UPM and Sappi have signed a non-binding letter of intent to form a graphic paper Joint Venture

Dec -04

Source:

Plywood Market Competitive Landscape Report 2025: Recent Developments, Strategies, Sustainability Benchmarking, Product Analysis, Key Persons and Revenue

Nov -26

Source:

UPM Adhesive Materials unveils a global showcase of premium performance label materials for wine and spirits

Oct -30

Source:

UPM Interim Report Q3 2025: UPM business portfolio delivered resilient performance in weak markets

Oct -29

Source:

Is This the Right Moment to Reassess UPM After a 16.6% Drop This Year?

Oct -07

Source:

Smurfit Westrock stock falls after Mondi profit warning rattles sector

Oct -06

Source:

A Fresh Look at UPM (HLSE:UPM) Valuation: Is There Upside After Recent Share Price Weakness?

Oct -06

Source:

Inside information: UPM initiates a strategic review of UPM Plywood business area

Sep -23

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.61%)

6. Segments

UPM Communication Papers

Expected Growth: 2.5%

UPM Communication Papers' 2.5% growth is driven by increasing demand for sustainable packaging, growing e-commerce, and rising need for specialty papers. Additionally, UPM-Kymmene Oyj's strategic investments in production capacity, cost savings initiatives, and focus on high-margin products contribute to the segment's growth.

UPM Fibers

Expected Growth: 2.8%

UPM Fibers' 2.8% growth is driven by increasing demand for sustainable packaging, pulp, and paper products. Strong biofuels market and growing use of biocomposites in construction and automotive industries also contribute to growth. Additionally, UPM-Kymmene's strategic investments in production capacity and cost savings initiatives support the segment's expansion.

UPM Raflatac

Expected Growth: 3.2%

UPM Raflatac's 3.2% growth driven by increasing demand for sustainable labeling solutions, expansion in emerging markets, and strategic investments in digitalization and product development, enabling the company to capitalize on trends such as e-commerce growth and brand owners' focus on sustainability.

UPM Specialty Papers

Expected Growth: 2.2%

UPM Specialty Papers' 2.2% growth is driven by increasing demand for sustainable and specialty paper products, particularly in the packaging and labeling segments. Additionally, the company's focus on innovation, cost savings, and operational efficiency have contributed to its growth. Furthermore, the rising trend of e-commerce and online shopping has led to higher demand for specialty papers used in packaging materials.

Other

Expected Growth: 1.8%

UPM-Kymmene Oyj's 1.8% growth is driven by increasing demand for sustainable packaging, growing e-commerce, and rising need for specialty papers. Additionally, the company's strategic focus on innovation, cost savings, and expansion into emerging markets contribute to its growth momentum.

UPM Energy

Expected Growth: 3.5%

UPM Energy's 3.5% growth is driven by increasing demand for renewable energy, favorable regulatory environment, and strategic investments in bioenergy and wind power. Additionally, growing electricity demand from industrial customers and expanding presence in emerging markets contribute to the segment's growth.

UPM Plywood

Expected Growth: 2.0%

UPM Plywood's 2.0% growth is driven by increasing demand for sustainable building materials, growth in the construction industry, and rising popularity of eco-friendly furniture. Additionally, UPM-Kymmene's strategic investments in production capacity and product development, as well as its strong market position, contribute to the segment's growth.

Eliminations and Reconciliations

Expected Growth: 0.5%

UPM-Kymmene Oyj's 0.5% growth is driven by steady demand for sustainable paper products, efficient cost management, and strategic investments in emerging markets. Additionally, the company's focus on innovation and digitalization has improved operational efficiency, contributing to the modest growth.

7. Detailed Products

Graphic Papers

UPM-Kymmene Oyj produces a wide range of graphic papers for printing, writing, and packaging applications.

Specialty Papers

UPM-Kymmene Oyj offers specialty papers for labelling, packaging, and technical applications.

Pulp

UPM-Kymmene Oyj produces pulp for paper, board, and tissue products.

Timber

UPM-Kymmene Oyj produces sawn timber for construction, furniture, and packaging industries.

Bioenergy

UPM-Kymmene Oyj produces bioenergy from wood residues and other biomass.

Biorefinery Products

UPM-Kymmene Oyj produces biorefinery products such as biofuels, biochemicals, and bioplastics.

8. UPM-Kymmene Oyj's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for UPM-Kymmene Oyj is moderate due to the availability of alternative products such as recycled paper and digital media.

Bargaining Power Of Customers

The bargaining power of customers is low due to the company's strong brand reputation and diversified customer base.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate due to the company's dependence on wood pulp and other raw materials.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the paper and forest products industry.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the industry and the presence of several large players.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	19.89%
Debt Cost	3.95%
Equity Weight	80.11%
Equity Cost	6.27%
WACC	5.81%
Leverage	24.83%

11. Quality Control: UPM-Kymmene Oyj passed 6 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Semapa

A-Score: 7.2/10

Value: 8.4

Growth: 5.6

Quality: 4.8

Yield: 7.5

Momentum: 7.5

Volatility: 9.7

1-Year Total Return ->

Iberpapel

A-Score: 7.0/10

Value: 8.2

Growth: 5.0

Quality: 6.1

Yield: 7.5

Momentum: 6.0

Volatility: 9.3

1-Year Total Return ->

Exacompta Clairefontaine

A-Score: 6.4/10

Value: 9.2

Growth: 5.2

Quality: 3.9

Yield: 7.5

Momentum: 7.0

Volatility: 5.3

1-Year Total Return ->

Nordic Paper Holding

A-Score: 5.6/10

Value: 7.7

Growth: 4.9

Quality: 5.1

Yield: 9.4

Momentum: 4.0

Volatility: 2.7

1-Year Total Return ->

UPM-Kymmene

A-Score: 4.7/10

Value: 5.0

Growth: 2.6

Quality: 3.3

Yield: 8.8

Momentum: 1.0

Volatility: 7.7

1-Year Total Return ->

Arctic Paper

A-Score: 4.0/10

Value: 9.6

Growth: 3.1

Quality: 2.5

Yield: 4.4

Momentum: 0.0

Volatility: 4.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-3.46%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.81%

UPM-Kymmene Oyj - FI0009005987

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on UPM

1.c. Company Highlights

Expensive

Medium Volatility

Average Yield

Earnings Beats

Revenues Miss

Earnings Miss

Less Volatile

Average Growth

Higher Yield

Weak Momentum

Fairly Valued

Stable Momentum

Revenues Beats

2. UPM's Q3 2025 Earnings: A Mixed Bag

Segment Performance

Valuation Metrics

Outlook and Guidance

Strategic Developments

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.61%)

6. Segments

UPM Communication Papers

Expected Growth: 2.5%

UPM Fibers

Expected Growth: 2.8%

UPM Raflatac

Expected Growth: 3.2%

UPM Specialty Papers

Expected Growth: 2.2%

Other

Expected Growth: 1.8%

UPM Energy

Expected Growth: 3.5%

UPM Plywood

Expected Growth: 2.0%

Eliminations and Reconciliations

Expected Growth: 0.5%

7. Detailed Products

Graphic Papers

Specialty Papers

Pulp

Timber

Bioenergy

Biorefinery Products

8. UPM-Kymmene Oyj's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: UPM-Kymmene Oyj passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

12.e Scoring ^Insights

12.f DCF ^BETA