UPM Weak guidance for H2’26 and bearish thesis on pulp hasn’t even begun to play out. Remains a core Underweight in the sector

Research evidence excerpt

UPM Weak guidance for H2’26 and bearish thesis on pulp hasn’t even begun to play out. Remains a core Underweight in the sector

- 27E (€ mn) 1,661 1,544 -7.0%

H2’26 EBIT guidance disappoints Quarterly Forecasts (FYE Dec)

Adj. EBITDA (€ mn)

• Key drivers. UPM guided for H2’26 EBIT to be between €375-575m versus 2025A 2026E 2027E Q1 421 395A 441

pre-results consensus of €631m and pre-results JPMe of €626m. In making this Q2 257 356A 334

guidance, UPM called out three key drivers - (1) maintenance costs in H2’26 Q3 251 323 366

to be ~€40m higher than H2’25 and H1’26, (2) Forestry fair valuation gains to Q4 382 403 402

be significantly lower than the H2’25 figure of €131m (on the conference call, FY 1,324 1,459 1,544

management indicated that it could be up to €100m lower y/y) and (3) potential Style Exposure

for the energy refund to be ~€40m lower y/y. Bullish incomings throughout the

day defended these items as “non-operational/one-off”, but we disagree with

this.

• Our take on the key drivers. When it comes to lower forestry fair valuation

gains, our stance is that H2’25 was elevated rather than H2’26 being unusually

low. In fact, our forecasts ahead of these results had already assumed a ~€110m

headwind y/y in H2’26. When it comes to energy refunds being lower y/y, this

again was partly expected. Prior to these results, we had forecast steadily

declining energy refunds as the graphic paper volumes that these energy

refunds are linked to, continually decline. We had already forecast energy

refunds to decline by €20m y/y, so the guided €40m decline y/y is only a €20m

negative surprise. Maintenance costs being higher by €40m is something that

we had not initially modeled and we would be surprised if consensus had

modeled this either.