UPM's exit from graphic paper is not simply a matter of industrial refocusing. In fact, the recently announced joint venture with Sappi marks the culmination of a strategic transition that has been underway for over a decade. The Finnish group now intends to accelerate its transformation by reducing its activities in declining markets, to position itself as a global supplier of material solutions derived from the bioeconomy.
Massimo Reynaudo, President and CEO of UPM, assures us that the creation of the joint venture is "a new era in its transformation, which it believes began long before the joint venture project. Once the joint venture is formed, UPM will no longer have a direct presence in graphic paper sales in Europe and North America, two areas where demand continues to weaken.
This move would enable the Group to reduce its exposure to a segment that is still significant (sales of close to three billion euros in 2024), but whose profitability and outlook remain limited.
UPM's portfolio refocused on three pillars
UPM's strategic refocusing now revolves around three axes.
UPM relies on renewable fibers, with pulp production from sustainably managed plantations and integrated logistics between Europe and South America.
The Finnish company is also focusing on advanced materials, which include technical labels, flexible packaging papers and industrial liners.
Finally, UPM relies on decarbonization solutions, which include low-carbon power generation, renewable fuels and green chemistry.
The Leuna biorefinery in Germany is one of the most emblematic of these projects. This pioneering site for the production of biosourced molecules for industrial use is due to deliver its first customers by the end of 2025. It illustrates UPM's ambition to position itself in high value-added segments, less exposed to traditional industrial cycles.
11.6% EBITDA margin for UPM Communication Papers
The financial data provided by UPM confirm the logic of this repositioning. Over the past decade, these three divisions have achieved average annual growth of 4.4%.
Excluding graphic papers, UPM expects annual sales of ?7.9 billion in 2024, with an EBITDA margin of 17.6%, compared with 11.6% for UPM Communication Papers activities.
UPM plans to support this transformation with a targeted capital allocation. The Group, which employs some 16,000 people, says it wants to strengthen its competitiveness, optimize the use of its assets and maintain a strong balance sheet, while ensuring a regular payout to shareholders.
At the same time, a strategic review is underway for the plywood business (UPM Plywood), the outcome of which is expected by the end of 2026, at the same time as the finalization of the graphics joint venture.
In a sector where graphic paper remains central for many players, UPM has opted for an assertive repositioning. Without making a sharp break, the Finnish group is pursuing its trajectory towards more technical and, above all, more profitable markets.
