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

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

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

Q2 2025 highlights

  · Sales totaled €2,400 million (2,546 million in Q22024)
  · Comparable EBIT decreased by 31% to €126 million, 5.2% of sales (182million,
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

              Q2/2025  Q2/2024  Q1/2025  Q1-Q2/2  Q1-Q2/2  Q1-Q4/2024
                                         025      024
Sales, €      2,400    2,546    2,646    5,046    5,186    10,339
million
Comparable    257      359      421      678      848      1,734
EBITDA, €
million
% of sales    10.7     14.1     15.9     13.4     16.3     16.8
Operating     107      50       198      305      404      604
profit
(loss),
€ million
Comparable    126      182      287      413      515      1,224
EBIT, €
million
% of sales    5.2      7.2      10.8     8.2      9.9      11.8
Profit        85       28       173      258      360      500
(loss)
before
tax, €
million
Comparable    105      163      262      367      474      1,123
profit
before
tax, €
million
Profit        71       33       143      215      312      463
(loss) for
the
period, €
million
Comparable    89       131      223      312      389      953
profit for
the period,
€ million
Earnings per  0.13     0.05     0.26     0.39     0.56     0.82
share
(EPS), €
Comparable    0.17     0.23     0.41     0.57     0.70     1.74
EPS, €
Return on     2.7      1.1      5.2      3.9      5.5      4.0
equity
(ROE),
%
Comparable    3.4      4.6      8.1      5.7      6.9      8.3
ROE, %
Return on     3.2      1.6      5.5      4.3      5.7      4.1
capital
employed
(ROCE), %
Comparable    3.7      5.2      7.9      5.8      7.2      8.2
ROCE, %
Operating     179      204      289      468      539      1,352
cash flow, €
million
Operating     0.34     0.38     0.54     0.88     1.01     2.54
cash flow
per
share, €
Equity per    18.96    20.10    19.29    18.96    20.10    20.89
share at the
end of
period, €
Capital       14,394   14,590   14,449   14,394   14,590   15,452
employed at
the
end of
period, €
million
Net debt at   3,310    2,763    2,954    3,310    2,763    2,869
the end of
period, €
million
Net debt to   2.12     1.64     1.77     2.12     1.64     1.66
EBITDA (last
12 months)
Personnel at  16,307   16,776   15,890   16,307   16,776   15,827
the end of
period

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 (https://www.upm.com/siteassets/asset/investors/2024/upm-annual-report
-2024.pdf)

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 (https://upm.events.inderes.com/q2-2025).

Participants wishing to ask questions after the presentation must register for
the conference call. To participate in the conference call, please register
here (https://events.inderes.com/upm/q2-2025/dial-in). 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 (https://www.upm.com/) 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
Mon-Fri 9:00-16:00 EEST
tel. +358 40 588 3284
media@upm.com

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.

UPM - we renew the everyday
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