UPM Interim Report Q3 2026: Strong cash flow in a challenging quarter amid destocking and cost inflation

UPM-Kymmene Corporation Stock Exchange Release (Q3 Interim Report) October 28, 2026 at 9:45 EET

HELSINKI, Oct. 28, 2026 /PRNewswire/ --

Q3 2026 highlights, continuing operations

• Sales totaled €2,202 million (2,226 million in Q3 2025)
• Comparable EBIT decreased by 8% to €131 million, 5.9% of sales (142 million, 6.4%)
• Q3 performance impacted by lower deliveries during customer destocking, and increased variable costs
• Actions to improve working capital efficiency resulted in strong operating cash flow at €420 million (218 million)¹⁾
• The Extraordinary General Meeting in August decided on the demerger plan, WISA Group plc to start trading on Nasdaq Helsinki in November
• Preparations continued for the planned graphic paper Joint Venture. The transaction is subject to merger control approvals

Q1–Q3 2026 highlights, continuing operations

• Sales totaled €6,983 million (7,140 million in Q1–Q3 2025)
• Comparable EBIT increased by 10% to €601 million, 8.6 % of sales (545 million, 7.6 %)
• Strong performance in Decarbonization solutions businesses (UPM Energy and UPM Biofuels)
• Stable performance in Advanced materials businesses (UPM Adhesive Materials and UPM Specialty Materials), and in UPM Fibres
• Operating cash flow was €645 million (685 million)¹⁾
• The first installment of the dividend for the year 2025 was paid in April, totaling €395 million
• Net debt was 2,993€ million at the end of September (3,218 million) and net debt to EBITDA ratio was 2.09 (2.36)¹⁾

¹⁾  Operating cash, net debt and net debt to EBITDA ratio include continuing and discontinued operations.

UPM Plywood is presented as discontinued operations due to the proposed demerger

On April 29, 2026, the Board of Directors of UPM approved a demerger plan for the separation of the Plywood business into an independent listed company. As a result of the proposed demerger, the Plywood business is presented as a discontinued operation in accordance with IFRS 5. Unless otherwise stated, the commentary in this report relates to UPM's continuing operations. More information in Financial statement information Note 10 assets and liabilities classified as held for distribution to owners and discontinued operations.

Key figures, continuing operations

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's  » Annual Report 2025

Key figures, discontinued operations

The financial information presented for the discontinued operations is not representative of the historical or future profitability of the UPM Plywood business area as a standalone business. Information on UPM Plywood's performance is presented in segment information. WISA Group Plc's demerger and listing prospectus is published at www.upm.com/demerger.

Key figures, UPM total

Massimo Reynaudo, President and CEO, comments on the results:

"This was a softer quarter following a strong first half. The broader global uncertainty and persistently high energy costs were visible in more cautious customer activity. In some of our markets, we saw significant destocking among customers, resulting in lower deliveries. Together with higher variable costs, this weighed on performance, although we were able to partly offset the impact through pricing actions. A clear highlight for the quarter was the strong cash flow, supported by improved working capital efficiency.

We continued our work to shape UPM for the future as a more focused company – built around businesses with strong positions in structurally growing markets. The separation of our Plywood business is just days away from completion and will result in the establishment of WISA Group as an independent listed company.

Operational preparations for the planned graphic paper Joint Venture with Sappi have progressed well. In early October, however, the European Commission restated its serious concerns about the transaction. We believe in the strength of our arguments in addressing the concerns raised. At the same time, we have opened discussions on potential remedies.

Since quarter-end, we have also inaugurated our new biorefinery in Leuna, Germany. Leuna brings our biochemical science and technology to industrial scale and will open up new markets and opportunities for us and our customers. We have now reached production readiness of Renewable Functional Fillers, and qualification volumes for customers will be produced in Q4. This means that two of the three core processes have been tested and are in production. Our customer deliveries now range from industrial sugars, through lignin-derived specialty chemicals to RFF.

During commissioning of the third and final process turning sugars to glycols, we have identified specific modifications that are required. We now expect to start integrated production of the refinery in Q2 2027 – approximately six months later than previously anticipated – and to reach nominal capacity in early 2028. 

During the third quarter, sales from our continuing operations were €2,202 million, and comparable EBIT was €131 million, down 8% year on year. At the same time, our year-to-date performance remains clearly ahead of 2025: comparable EBIT increased by 10% to €601 million and the comparable EBIT margin improved to 8.6% from 7.6%.

Cash generation was particularly strong in the quarter. Actions to improve working capital efficiency contributed to operating cash flow of €420 million. Net debt at the end of the quarter was lower, at €2,993 million, and the net debt to EBITDA ratio improved to 2.09. Strengthening cash flow and maintaining a strong balance sheet remain clear priorities for us.

Our decarbonization solutions businesses continued to perform well, supported by good demand and pricing for renewable fuels. UPM Energy reported broadly stable performance during the summer quarter, which included the maintenance shutdown of the OL3 nuclear power unit. Strong demand for electricity continued, and new data center projects were announced during the quarter in Finland.

With our existing 12 TWh CO2-free production capacity and a multi-gigawatt pipeline consisting of suitable data center sites and renewable energy and battery development projects, we are well positioned to serve data centers and other large electricity consumers.

In our advanced materials businesses, UPM Adhesive Materials and UPM Specialty Materials, earnings were impacted by lower delivery volumes. Both businesses saw heavy customer destocking, particularly in Europe. On the positive side, we were able to maintain stable margins in both businesses, despite input cost increases.

UPM Fibres' results improved. Fibres South continued to deliver strong profitability, while Fibres North returned to positive comparable EBIT. After a seasonally slower summer, demand and market prices increased moderately. Production was curtailed at the Kaukas pulp mill in Finland for eight weeks to optimize production and wood sourcing, and to ensure profitability in the challenging softwood pulp markets. In the final quarter, we will curtail production at the Pietarsaari mill for five weeks.

UPM Communication Papers had a challenging quarter, further underlining the structural pressures facing the graphic paper markets. Market demand weakened, and the prevailing overcapacity limited our ability to pass through the sharp increase in energy-related costs during the quarter. These market realities reaffirm the rationale for the planned Joint Venture with Sappi and the need to strengthen the long-term competitiveness of the business.

Looking ahead, while there continues to be uncertainty in the operating environment, there are also positive factors that underpin our performance. Demand continues to be strong in our decarbonization solutions businesses. In addition, we are entering a seasonally stronger period in the Energy and Fibres businesses. In our advanced materials businesses, unit margins are healthy. Destocking is still going on in some markets but is temporary by nature. Finally, following the increase in variable costs we will continue margin management actions across our businesses.

We remain focused on protecting margins, improving cash flow and working capital efficiency, and maintaining disciplined capital allocation. These priorities support our ongoing transformation towards a more focused UPM, centered on businesses with stronger growth characteristics and higher value creation."

Profit guidance, continuing operations

UPM's comparable EBIT in H2 2026 from continuing operations is expected to be approximately in the range of €375-575 million (€479 million in H2 2025, and €471 million in H1 2026). These figures exclude UPM Plywood, which is classified as discontinued operations.

Outlook

There continue to be significant uncertainties in geopolitics and trade.

In H2 2026, compared with H1 2026, UPM's delivery volumes are expected to be lower. UPM's performance is expected to be supported by moderately higher sales prices. Variable costs are expected to increase. Energy refunds are expected to support UPM Communication Papers' result in Q4. Maintenance activity is expected to increase from the comparison period. The production ramp-up at UPM Leuna is expected to increase costs moderately.

In H2 2026, compared with H2 2025, UPM's performance is expected to benefit from higher sales prices. Variable costs are expected to increase. Fair value change of forest assets is expected to have a significantly smaller impact on comparable EBIT in H2 2026 than in H2 2025 (€131 million). The energy refunds to be booked in UPM Communication Papers in Q4 are anticipated to have a somewhat smaller positive impact than in 2025. Maintenance activity is expected to increase from the comparison period. The production ramp-up at UPM Leuna is expected to increase costs.

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 €180 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 2026, a €10/MWh change in average electricity market price in Finland would impact annual comparable EBIT by approximately €40 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 2026, UPM's estimated net currency cash flows for the next 12 months totaled approximately €1.5 billion. USD was the largest exposure at approximately €1.3 billion, followed by UYU, GBP, JPY 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 2025 on pages 313–314.

Invitation to UPM's webcast on Q3 2026 Interim Report

A webcast and a conference call for analysts and investors will start at 13:15 EET. The Interim 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.

Participants wishing to ask questions after the presentation must register for the conference call. To participate in the conference call, please register here. After registering, 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 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 page 276 of the Annual Report 2025. Risks and opportunities are discussed on pages 31–33, and risks and risk management are presented on pages 128–132.

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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 15,100 people worldwide, with annual sales of approximately €9.7 billion. Our shares are listed on Nasdaq Helsinki Ltd.
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