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 strong Q4 2025 operating cash flow of €720 million and a return to profitability in biofuels. The company's decisive strategic actions, including a shift toward higher-value, fossil-free products, have bolstered investor confidence. Additionally, the proposed unchanged €1.50 per-share dividend for 2025, paid in two €0.75 instalments later in 2026, and the issuance of first-half 2026 EBIT guidance of €325 million to €525 million, have provided clarity on the company's financial outlook.

1.c. Company Highlights

Last Price	26.35
Change Percentage	-2.34%
Open	26.57
Previous Close	26.98
Market Cap ( Millions)	13895
Volume	566367
Year High	28.85
Year Low	21.72
M A 50	25.15
M A 200	23.98

FCF Yield	7.03%
Dividend Yield	5.69%
ROE	4.77%
Debt / Equity	37.94%
Net Debt / EBIDTA	221.99%
Price To Book	1.39
Price Earnings Ratio	28.95
Price To FCF	14.22
Price To sales	1.44
EV / EBITDA	12.24

2. UPM's Q4 Results: Navigating Geopolitical Tensions

UPM reported a quarter 4 EBIT of EUR 355 million, down 15% from the previous year, with an EBIT margin of 15.3%. The company's operating cash flow was strong at EUR 720 million, and the net debt to EBITDA ratio stood at 2.29x. Earnings per share (EPS) came in at EUR 0.4874, beating analyst estimates of EUR 0.43. The company's P/E Ratio is 30.28, indicating that the stock may be trading at a premium, while the Dividend Yield is 5.44%, suggesting an attractive income stream for investors.

Publication Date: Feb -15

                                    📋 Highlights
                                    Q4 EBIT Decline Amidst Strong Cash Flow:
                                                Q4 EBIT fell to EUR 355 million (-15% YoY) but operating cash flow remained strong at EUR 720 million with a net debt/EBITDA of 2.29x.
Decarbonization Solutions Outperform:
                                                Energy business hit EUR 54 million EBIT (best 2025 quarter), while Biofuels regained profitability in 2H2025.
Advanced Materials Restructuring:
                                                Adhesive Materials streamlined operations and prioritized growth investments to enhance competitiveness.
Joint Venture Expansion:
                                                UPM plans a graphic paper joint venture with Sappi to boost efficiency and sustainability in the sector.
2026 Cost & EBIT Outlook:
                                                Fibers South aims for EUR 25-30/tonne cost savings over 2 years, with H1 2026 EBIT guidance at EUR 325-525 million.

                                

Segment Performance

In Decarbonization Solutions, the Energy business achieved a comparable EBIT of EUR 54 million, its best quarter in 2025. Biofuels improved performance each quarter and returned to profitability in the second part of the year. The Specialty Materials business delivered robust results, with a good quarter 4 EBIT improvement. Fibers experienced a volatile 2025, but Fibers South strengthened its position as a world-class low-cost business platform, with cost decreases and optimizations.

Strategic Developments

UPM announced a plan to establish a graphic paper joint venture with Sappi, which would create a more efficient, adaptable, and sustainable graphic paper business. The company aims to change its profile by increasing focus on growth and improved margins and leverage, with a future portfolio made of Decarbonization Solutions, Advanced Materials, and Renewable Fibers. The Versowood deal is expected to unlock efficiencies by securing a stable and competitive wood supply, making the cost of pulpwood needed cheaper compared to spot prices.

Outlook and Guidance

UPM's comparable EBIT for the first half of 2026 is expected to be approximately EUR 325-525 million. The company's performance is expected to benefit from moderately higher sales prices and delivery volumes and lower fixed costs. However, performance will be held back by weak Communication Papers markets and increased costs during the production ramp-up at the UPM Leuna refinery. The CapEx estimate for 2026 is EUR 300 million, and the Board of Directors has proposed an unchanged dividend of EUR 1.50 per share for 2025.

Valuation and Returns

The company's EV/EBITDA ratio is 12.7, indicating a moderate valuation. The ROIC is 1.99%, and the ROE is 4.77%, suggesting that the company is generating returns, albeit modest. The Net Debt / EBITDA ratio is 2.22, indicating a manageable debt burden. With a P/B Ratio of 1.45, the stock appears to be reasonably valued relative to its book value.

3. NewsRoom

UPM-Kymmene Corporation: Managers' Transactions (Kekki)

Feb -06

Source:

Why UPM-Kymmene (HLSE:UPM) Is Up 6.4% After Biofuels Turnaround And Cash-Flow-Backed Dividend

Feb -05

Source:

UPM-Kymmene Oyj (UPMKF) Q4 2025 Earnings Call Highlights: Navigating Challenges with Strategic ...

Feb -04

Source:

Notice of the Annual General Meeting of UPM-Kymmene Corporation

Feb -04

Source:

The new plans commencing in 2026 within UPM share incentive arrangements

Feb -04

Source:

UPM financial statements release 2025: Positive finish to the year - strong cash flow and decisive strategic actions

Feb -04

Source:

UPM's financial reports and Annual General Meeting in 2026

Dec -11

Source:

Assessing UPM-Kymmene (HLSE:UPM)'s Valuation After Recent Share Price Rebound

Dec -05

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

Iberpapel

A-Score: 6.8/10

Value: 6.7

Growth: 5.0

Quality: 5.8

Yield: 7.5

Momentum: 6.5

Volatility: 9.7

1-Year Total Return ->

Semapa

A-Score: 6.8/10

Value: 8.7

Growth: 5.4

Quality: 5.0

Yield: 7.5

Momentum: 8.0

Volatility: 6.0

1-Year Total Return ->

Exacompta Clairefontaine

A-Score: 6.4/10

Value: 9.3

Growth: 5.1

Quality: 4.0

Yield: 7.5

Momentum: 7.0

Volatility: 5.3

1-Year Total Return ->

Nordic Paper Holding

A-Score: 5.7/10

Value: 7.7

Growth: 4.7

Quality: 5.3

Yield: 9.4

Momentum: 3.5

Volatility: 3.7

1-Year Total Return ->

UPM-Kymmene

A-Score: 4.7/10

Value: 4.7

Growth: 2.6

Quality: 3.3

Yield: 8.1

Momentum: 2.0

Volatility: 7.7

1-Year Total Return ->

Arctic Paper

A-Score: 4.0/10

Value: 8.9

Growth: 3.0

Quality: 2.3

Yield: 4.4

Momentum: 0.0

Volatility: 5.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-3.50%

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 Q4 Results: Navigating Geopolitical Tensions

Segment Performance

Strategic Developments

Outlook and Guidance

Valuation and Returns

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