The divestiture of UPM’s Communications Papers business will be good thing all round says president and CEO Massimo Reynaudo in the UPM annual report and accounts.
The deal, announced at the end of the year, to combine UPM assets with Sappi’s European graphic paper interests, “would start a new era in our transformation while continuing to provide the bet possible future for the graphic paper business and its customers”.
UPM would gain some €600 million in cash from the sale of assets to the new joint venture and would reduce pension liabilities by around €420 million. The joint venture UP argues will “create a structurally competitive cost base and supply security for Europe and global customers”. There would be loss of capacity enabling machines and mills that remain to operate with greater efficiency. There would also likely be a reduction in the brand portfolio as well as better chance of controlling prices.
The need is seen in the figures which show a 16% drop in sales for the Communications Paper business and a 34% reduction in Ebit to €181 million. Sales are €2.493 billion. In order to manage capacity UPM has closed its Kaukas and Ettringen mills, reducing its production capacity by 13%. European demand for graphic papers fell 8% in 2025.
Timing is now to have details of the joint venture ready by the end of Q2 this year and be ready to close the deal by the end of the year. That would then trigger further realignment of capacity across the mills and machines in order to achieve “a more sustainable capacity utilisation” and to “rationalise supply in an industry burdened by declining demand, structural over capacity and high energy costs”. Even before such rationalisation the JV would achieve savings of €100 million a year in synergies.
UPM will retain its interests in self adhesive materials, known mostly through the Raflatac brand. Sales rose 2% in Europe, 1% in North America and faced challenging conditions in Asia. Overall sales were up 6% to €1.655 million though Ebit fell 7% to €124 million. Its specialists papers division is earmarked for growth and the company is seeking additional opportunities in the flexible packaging sector as it shifts from oil based to fibre based materials. Sales fell 10% to €1.315 billion with Ebit rising 9% to €147 million.
Overall UPM sales increased to €9.7 billion across all its sectors.
