Summary:
Conference call: A another slightly subdued conference call with continued demand uncertainty in the outlook, alongside the challenge of weaker prices in pulp in particular, and headwind of a weaker US dollar. In QandA most useful was some clarification of some of the assumptions included in 2H guidance albeit pulp price assumptions were (per usual) not shared. Overall, we are surprised (but relieved!) by the resilience of the stock today (+1% as we type), albeit recognise the buyside was braced for weak numbers (which were at least close to our own expectations). Management also indicated likely lower capex again in 2026+, after a sharp fall already in 2025, given no major project commitments remain. Unlike Nordic peers, UPM was unwilling to acknowledge a fall in wood costs (at least in Finland, which is its only Nordic exposure).
Results: We last heard from UPM at Q1 on 24 April. Today the company reports Q2 results with comparable EBIT EUR126m vs Infront (and Bloomberg) consensus EUR185m, and also below our EUR133m estimate. Most of the miss versus consensus (EUR36m) came from the Communication Paper segment on weak pricing, though there was also a shortfall in Fibres (pulp) (EUR17m). H2 guidance has been given: EUR425-650m op EBIT, the mid point of which is 7% below consensus. There is also a small restructuring to reduce capacity in the structurally declining Communication Paper segment with a decent c.1 year cash on cash payback implied.
Main points from Q2 results call
n.b. outlook comments already provided in the statement in detail. See 2Q25 first take: Q2 EBIT 32% miss; H2 guide implies downgrades. Hence below we just summarise incremental news from the call.
- H2 guidance: of EUR425-650m op EBIT includes EUR60m maintenance impact for Kaukas and Frey Bentos mill maintenance (roughly EUR30m for each pulp mill, in Q3 and Q4 respectively) versus c.EUR90m in Q2 (EUR70m Paso de los Toros and balance in Energy segment power stations)....
