UPM's earnings fall 31% as trade tensions hit demand for fibres and paper

Finnish forestry group UPM-Kymmene UPM reported a 31% drop in its second-quarter operating profit on Thursday, as uncertainty related to President Donald Trump's trade policies weakened demand and the U.S. dollar.

The group has five U.S. sites for producing paper and labelling materials and it also exports products into the country, though the tariff effects were felt globally.

"UPM Fibres was indirectly impacted by the escalating trade tensions. In China, orders halted during the height of the trade tensions between the U.S. and China," CEO Massimo Reynaudo said in the statement.

UPM Communication Papers division, which J.P.Morgan analysts called a "cash cow" in a note to clients, also suffered from the tensions that negatively affected both deliveries and selling prices.

The unit, which supplies graphic paper for advertising and publishing, plans to end paper production in the Kaukas mill in Lappeenranta, Finland, and move it to Rauma, UPM said. The change would cut annual production capacity of coated mechanical paper by 300,000 tonnes.

The plan is part of a broader structural shift as paper producers adjust to two decades of falling paper demand, analyst Antti Viljakainen from research firm Inderes said.

"(UPM) will survive through the structural change but (from) the stock's perspective it would be better if the change progressed rather slowly than quickly," he added.

The company's shares were down 1.3% by 0930 GMT, after its comparable operating profit fell to 126 million euros ($148 million) in the second quarter, well below analysts' consensus.

It also forecast a comparable operating profit of 425-650 million euros for the second half of 2025, up from the 413 million it had recorded in the first six months of the year.

On Wednesday, its Finnish peer Stora Enso STEAV reported a consensus-beating operating profit, but said it expected subdued and volatile demand to persist through the rest of 2025.

($1 = 0.8503 euros)