UPM Q3 2026 Results: Comparable EBIT Falls 8% to €131 Million as Customer Destocking Weighs on Sales

UPM-Kymmene Corporation reported third-quarter 2026 sales of €2.202 billion from continuing operations, down 1% from €2.226 billion in the corresponding period last year, as customer destocking and higher variable costs weighed on performance.

Comparable operating profit (EBIT) declined 8% to €131 million from €142 million, while the comparable EBIT margin fell to 5.9% from 6.4%. Despite the weaker quarterly result, UPM generated operating cash flow of €420 million, almost double the €218 million recorded a year earlier, supported by improved working capital efficiency.

For the first nine months of 2026, UPM's sales from continuing operations totalled €6.983 billion, down 2% from €7.140 billion. Comparable EBIT, however, increased 10% to €601 million from €545 million, lifting the comparable EBIT margin to 8.6% from 7.6%.

The results reflect a mixed operating environment across UPM's businesses. Energy and biofuels continued to benefit from favourable market conditions, while customer destocking affected deliveries in advanced materials and graphic papers. Higher variable costs also limited the company's ability to convert price increases into stronger quarterly earnings.

Key financial results

UPM's third-quarter financial performance weakened year on year, although reported profit and operating cash flow improved.

Operating cash flow includes continuing and discontinued operations.

The difference between comparable EBIT and reported operating profit reflects items affecting comparability. In the third quarter, these items amounted to a negative €19 million, compared with a negative €94 million in the prior-year quarter.

Although comparable EBIT declined, reported operating profit increased to €112 million from €47 million. Profit for the period rose to €78 million from €12 million, while comparable profit edged down to €91 million from €93 million.

The results underline the importance of distinguishing underlying operating performance from reported earnings when evaluating UPM's quarterly financial position.

Customer destocking and higher costs pressure quarterly earnings

UPM said the third quarter was softer following a strong first half, as global uncertainty and persistently high energy costs made customers more cautious.

Destocking in several markets, particularly Europe, reduced deliveries and weighed on sales. Higher variable costs also affected profitability, although price increases across most businesses partly offset the pressure.

Compared with the second quarter of 2026, comparable EBIT fell 38% from €212 million to €131 million. Sales declined from €2.355 billion to €2.202 billion as delivery volumes decreased across most businesses.

Variable costs increased significantly across several input categories. While selling prices rose, the increases were insufficient to offset the full impact of higher costs.

UPM reduced fixed costs by €39 million compared with the previous quarter, partly reflecting seasonal changes and lower maintenance activity.

For the first nine months, the picture was more positive. Lower variable costs, moderately higher delivery volumes and a €73 million reduction in fixed costs supported the 10% increase in comparable EBIT.

UPM Energy and Biofuels support performance

UPM's decarbonisation solutions businesses continued to provide support, particularly through renewable fuels and electricity generation.

UPM Energy

UPM Energy reported third-quarter sales of €129 million, down from €149 million a year earlier. Comparable EBIT declined to €22 million from €37 million, primarily because of lower nuclear generation volumes and lower electricity selling prices.

UPM's average electricity sales price fell 10% to €44.0 per megawatt-hour from €48.8/MWh in the third quarter of 2025.

The quarter included the maintenance shutdown of the Olkiluoto 3 nuclear power unit, which began in September and was expected to continue into early November.

For January–September 2026, UPM Energy's sales increased to €522 million from €439 million, while comparable EBIT rose to €146 million from €97 million. Higher electricity deliveries and stronger average selling prices supported the year-to-date improvement.

UPM Biofuels and Next Generation Renewables

UPM reported strong demand and pricing for renewable fuels, with biofuels volumes and selling prices clearly higher than a year earlier. Lower variable costs also supported performance.

However, the ramp-up of the company's biochemicals refinery in Leuna, Germany, continued to generate costs.

The refinery has reached stable operation in lignin-derived specialty chemicals, and UPM has achieved technical readiness to produce Renewable Functional Fillers (RFF). Customer qualification volumes for RFF were planned for the fourth quarter.

UPM identified further modifications required in the final process converting sugars into glycols. Integrated production is now expected to begin in the second quarter of 2027, approximately six months later than previously anticipated. The company expects to reach nominal capacity in early 2028.

The delay means additional ramp-up costs will continue to affect the business, although UPM said customer interest in the refinery's products remains strong.

Advanced materials face lower deliveries

UPM's advanced materials businesses, UPM Adhesive Materials and UPM Specialty Materials, experienced lower deliveries as customers continued to reduce inventories.

Both businesses maintained stable margins despite input cost increases, but lower sales volumes affected their earnings.

UPM Adhesive Materials recorded third-quarter sales of €413 million, compared with €405 million a year earlier. For the first nine months, sales increased slightly to €1.274 billion from €1.264 billion.

UPM Specialty Materials reported sales of €303 million, compared with €304 million in the prior-year quarter. Nine-month sales declined to €976 million from €1.006 billion.

The results show differing sales trends between the two businesses, while customer destocking remained a common challenge. UPM said margins remained healthy in its advanced materials businesses.

The company is also expanding UPM Adhesive Materials' production and distribution footprint, including capacity investments in the United States and Malaysia and new distribution terminals in Vietnam and near New Delhi, India.

UPM Fibres reports improved earnings

UPM Fibres recorded improved earnings in the third quarter. The business includes pulp operations and forest resources, following the company's reporting-segment changes implemented in January 2026.

UPM Fibres South continued to deliver strong profitability, while Fibres North returned to positive comparable EBIT.

Following a seasonally slower summer, pulp demand and market prices increased moderately. However, UPM curtailed production at its Kaukas pulp mill in Finland for approximately eight weeks to optimise production and wood sourcing amid challenging softwood pulp market conditions.

The company also planned a five-week production curtailment at the Pietarsaari pulp mill in the fourth quarter.

For the first nine months, UPM Fibres sales declined to €2.554 billion from €2.706 billion, reflecting lower sales compared with the prior-year period. The improvement in quarterly earnings nevertheless provided a positive contribution to the group's overall performance.

Communication Papers remains under structural pressure

UPM Communication Papers continued to face weak demand in graphic paper markets, with lower delivery volumes and higher variable costs weighing on quarterly profitability.

Sales for the segment totalled €608 million, down from €619 million in the third quarter of 2025. Paper deliveries declined to 708,000 tonnes from 733,000 tonnes.

UPM said European graphic paper demand was 7% lower year on year in the third quarter. Demand declined 3% for newsprint, 9% for magazine papers and almost 9% for fine papers.

Average European publication paper prices were 2% higher than a year earlier, but price increases were not sufficient to offset the impact of lower sales volumes and increased variable costs.

UPM's comparable EBIT in Communication Papers declined year on year. Higher selling prices and lower fixed costs provided some support, but market overcapacity and higher energy-related costs continued to limit profitability.

The business remains central to UPM's proposed graphic paper joint venture with Sappi, which aims to strengthen the long-term competitiveness of the European and North American graphic paper operations.

However, the transaction remains subject to regulatory approval. UPM reported that the European Commission continued to have serious concerns about the proposed joint venture and that discussions on potential remedies had begun.

Strong operating cash flow improves financial position

Cash generation was a key positive in the third quarter. UPM's operating cash flow increased to €420 million from €218 million in the prior-year period, supported by improved working capital efficiency.

For the first nine months, operating cash flow was €645 million, compared with €685 million a year earlier.

Net debt declined to €2.993 billion at the end of September from €3.218 billion a year earlier. The net debt-to-EBITDA ratio improved to 2.09 from 2.36, while the gearing ratio stood at 29%, compared with 31%.

Cash funds and unused committed credit facilities totalled €2.6 billion at the end of the third quarter.

UPM's improved debt position and strong quarterly cash flow provide flexibility as the company continues its investment programme and business transformation. Capital expenditure from continuing operations, excluding investments in shares, is expected to total approximately €300 million in 2026.

Plywood demerger advances as WISA Group prepares to list

UPM continued preparations to separate its Plywood business into an independent company, WISA Group Plc.

The demerger was approved by shareholders at an Extraordinary General Meeting on August 31, 2026. UPM's report presents Plywood as a discontinued operation, meaning the principal financial figures discussed in this article relate to continuing operations unless otherwise stated.

The planned completion date for the demerger was October 31, 2026, with trading in WISA Group shares on Nasdaq Helsinki expected to begin around November 2, subject to completion of the required procedures.

The separation is intended to give the plywood business a more focused operating structure and allow UPM to concentrate on businesses with stronger growth characteristics.

Outlook: UPM expects lower deliveries but moderately higher prices

UPM expects comparable EBIT from continuing operations in the second half of 2026 to be approximately €375 million to €575 million. The company reported €471 million in the first half of 2026 and €479 million in the second half of 2025.

For the second half of 2026, compared with the first half, UPM expects lower delivery volumes but moderately higher selling prices. Variable costs are expected to increase, while maintenance activity is expected to be higher than in the comparison period.

Energy refunds are expected to support UPM Communication Papers' fourth-quarter result. Meanwhile, the production ramp-up at the Leuna biorefinery is expected to increase costs moderately.

UPM said significant geopolitical and trade uncertainties remain. Its priorities are to protect margins, improve cash flow and working capital efficiency, and maintain disciplined capital allocation.

The final quarter will therefore depend on the balance between higher prices, variable cost inflation, seasonal demand, maintenance activity and the ongoing ramp-up of new biochemicals capacity.

Conclusion: Stronger year-to-date earnings offset a softer quarter

UPM's third-quarter results show the effects of customer destocking and higher costs, with comparable EBIT down 8% year on year. However, stronger cash flow, lower net debt and a 10% increase in comparable EBIT for the first nine months provide a more resilient picture of the company's overall financial position.

Energy, biofuels and improved Fibres performance helped offset pressure in graphic papers and advanced materials. The company is also continuing strategic changes through the planned Plywood demerger and the proposed graphic paper joint venture with Sappi.

For the pulp, paper and forest products industry, UPM's results highlight the importance of cost control, working capital discipline and portfolio adjustments as demand remains uneven across markets.