Massimo Reynaudo: Hello, everyone. Welcome to UPM Q3 2026 Results Webcast. I'm Massimo Reynaudo, CEO of UPM. Here with me is Tapio Korpeinen, our CFO. After a strong H1, Q3 turned out to be softer. High energy and fuel cost led and contributed to increased variable cost. Combined with that, persistent global uncertainty pushed customers to be more cautious, and that determined a visible destocking in a number of market segments. On the other hand, a clear highlight for the quarter has been the strong cash flow supported by improved working capital efficiency. Meanwhile, we continued our transformative projects aimed to shape the new UPM, built around businesses with strong positions in structurally growing markets. Our Q3 sales totaled about EUR 2.2 billion, EUR 2.202 billion to be precise, or 1% below last year. The comparable EBIT decreased by 8% to EUR 131 million, or 5.9% of sales.
Massimo Reynaudo: The actions implemented to improve the working capital efficiency resulted in a strong operating cash flow of EUR 420 million in the quarter. As a consequence, the net debt decreased. When we enlarge the view to the first nine months of the year, the comparable EBIT grew by 10% to EUR 601 million, or 8.9% of sales. I'll turn now to Tapio for some further analysis on the results.
Tapio Korpeinen: Thank you, Massimo. Once again, here on the left-hand side, you can see our Q3 EBIT development from last year. There, first you can see that over the past year, prices at the group level have increased more than variable costs. Also, you can see that despite low volumes in Q3, both deliveries and fixed costs were minor positive earnings drivers in this comparison. Last year, fair value increase in forest assets supported our result, whereas this year the forest asset values decreased. That explains in round figures about EUR 40 million of that difference. On the right-hand side, you can see the same chart, but Q3 compared to Q2 sequentially this year. There you can see two significant headwinds. First, variable costs increased significantly. Then also delivery volumes were clearly lower.
Tapio Korpeinen: Sales prices increased in most businesses, but decreased in Fibres and Energy. At the group level, sales price increases covered only part of the variable cost increase. This was particularly true for Communication Papers. Fixed cost decreased partly for seasonal reasons, but also partly due to lower maintenance activity. Here you can see that operating cash flow was strong in Q3 at EUR 420 million. The chart shows the nine months cash flow, and their EBITDA is EUR 119 million higher than last year for the same period of time. Operating cash flow was impacted by payments for last year's restructurings and also costs related to the transformative projects. Working capital for the first three quarters tied EUR 63 million.
Tapio Korpeinen: In Q3, we had a significant release from working capital in terms of cash, and we aim to release further cash in Q4. This is the typical seasonal pattern, but this year includes underlying actions to improve working capital efficiency. As you can see on the right-hand side in the chart, typically towards the end of the year, we release cash from working capital. Net debt decreased by EUR 320 million in Q3 compared to the end of Q2. Net debt to EBITDA was 2.09 times at the end of the quarter. Strengthening cash flow and maintaining a strong balance sheet remain clear priorities for us. Our aim is to get down to below our 2 times net debt to EBITDA policy target. We have maintained our H2 EBIT guidance unchanged.
Tapio Korpeinen: While there continues to be uncertainty in the operating environment, it is also important to note that there are also positive factors that underpin our performance. Demand continues to be strong in the decarbonization solutions businesses, and we are seasonally entering a stronger period in the Energy business, and in Fibres as well. In Advanced Materials businesses, unit margins are healthy. Destocking is still going on in some of the markets, but in nature is temporary. Finally, following the increase in variable costs, we will continue with actions to manage our margins across our businesses. Nevertheless, due to the realized low volumes and increased variable costs during Q3, the upper end of the guidance range at the moment looks less likely. In the interim report now, we have also outlined the timing of maintenance shutdowns for 2027 already for your modeling purposes.
Tapio Korpeinen: You will note that there will be no shutdowns next year at the 2 biggest units, which are now on an 18-month cycle. That means, Paso de los Toros Pulp Mill and Olkiluoto 3 nuclear power plant. So no shutdowns next year in 2027. On the other hand, there will be a turnaround shutdown at the Leuna refinery. By this, we mean a shutdown that is done every 4 years. Now back to Massimo.
Massimo Reynaudo: Thank you, Tapio. Let me give you some more detail, business area by business area. If we start with decarbonization solutions, markets, Tapio said it before, continued to be strong in the quarter. In energy specifically, the performance was in line with the low seasonality of Q3. Meanwhile, the electricity consumption in Finland continues to grow. I am going to be talking a bit more and specifically about energy and the situation in Finland soon. On the other hand, on biofuels, our refinery in Lappeenranta underwent the planned maintenance shutdown during the summer, moderating our Q3 performance. The demand for renewable fuels was good, and the bio premiums are at a healthy level. In biochemicals, the interest for our products stays strong, and the Leuna ramp-up continued.
Massimo Reynaudo: Here, let me spend a couple of minutes to tell you some more about our operational ramp-up in Leuna. In this slide here, it is a bit busy, but in this slide here, we are providing a visual description of the various processes happening in the refinery. Basically, or simplistically, two of the three core processes are producing commercial volumes already. When it comes to the first process, specifically, the one you see in the middle, that is where wood is transformed either in lignin or sugars. That process was started up in Q4 of last year, in 2025. It has been ramped up during this year, and commercial deliveries of industrial sugars have reached substantial volumes already. This represents a major milestone, as nobody until now has achieved success in this process and definitely in this scale before.
Massimo Reynaudo: The production of lignin-derived specialty chemicals has also reached stable operations, and we are ramping up sales into attractive growth segments, such as batteries and construction materials. This is for the first process. When it comes to the second process, you see here on the slide in the bottom part of the slide, we have reached technical readiness to produce Renewable Functional Fillers. The production is ramping up now during this quarter. We will immediately start qualifying the final products at the customers and subsequently start sales, and these sales will go in areas like tires, mechanical rubber goods, or plastics. Then it comes the third process. It is in this slide, the upper part of the slide. That is the so-called sugar to glycols process. This process was expected to start production by the end of this year.
Massimo Reynaudo: During the commissioning of this last process, we have identified small technological challenges that require some modifications. We expect these modifications to be completed by Q1 2027. The refinery to start integrated production in Q2 2027. This means approximately 6 months later than we earlier anticipated. As already discussed, the final process, the conversion. This has been covered. We expect the production will reach the nominal capacity as a consequence of this in the early part of 2028. This is the prerequisite for EBIT-positive operations. The EBIT impact for the full year 2027 is expected, therefore, to be broadly on a similar level as it was, or as it is in 2026. The commercial interest, on the other hand, in the main products and the side stream is strong.
Massimo Reynaudo: The confirmed customer contracts and the sales and customer qualification pipeline exceed multiple times the annual capacity of the refinery. During the project, we are also able to widen the portfolio of high-value products and materials, opening up additional market opportunities. This includes, for example, lignin derived specialty chemicals and additional grades in the Renewable Functional Fillers category. We have also continued strengthening our IPR portfolio, which is going to be a critical element for the future. In other terms, the biochemical business case is intact. Let me turn now to energy. As we have discussed in earlier earning calls, Finland is a very attractive location for data centers. During Q3, several new data center projects have been announced, and this has a significant impact on the electricity market outlook.
Massimo Reynaudo: We are an active player in this market, and we are having discussions with various counterparties now because we have three things which are in high demand. We have electricity. As the second largest provider in Finland, we have annually about 12 terawatt hours of reliable CO2-free electricity production. We are able and willing to offer long-term PPAs. In addition, we can offer trading and balancing services for large electricity consumers such as data centers. This is the first point. We have powered land. This is the second thing. This means the reduced time to market to hyperscalers or developers that want to build data centers capacity quickly. We are also the second largest land owner in Finland, with extensive industrial presence and expertise in permitting in the country. Here, we can offer about 1 gigawatt worth of powered land in a relatively short period, less than 2 years.
Massimo Reynaudo: We have the possibility to add another 3 gigawatts in the next 3 years. Then comes the third element. We can add the generation. Data centers often want or are required to bring additional energy generation. We can help with this as well. We have a wind, solar, and battery development portfolio in the scale of about 1 gigawatt, ready to build in a relatively short time. In summary, we are well positioned to take the advantages of the data center development in Finland. Let's turn now to advanced materials. In this segment, we have observed a heavy destocking in Q3, and particularly in Europe. In the adhesive materials business, to give you a scale, the shipment of label materials in Europe has decreased 20% compared to Q2, or 5% year-on-year. This is typically a segment where demand grows at GDP level.
Massimo Reynaudo: A significant and evident destocking has taken place during the quarter. Despite the sharp decline in demand, our business delivered a performance about in line with the same period last year. Our specialty materials business has seen a similar dynamics. Despite the destocking and despite the increasing variable costs, both businesses have kept their market positions and healthy unit margins. This is important because this will ensure that when volumes will normalize, performance will directly benefit from it. Also, and specifically talking about adhesive materials, today we have announced the decision to open up a new factory in India. This investment continues our expansion in the region following the announcement we made in March of the opening of a new terminal in New Delhi. Just for the memory, we have already a terminal operating in Mumbai.
Massimo Reynaudo: This investment is in line with the strategic objective of the adhesive materials area to accelerate growth by expanding in high margin areas or, like in this case, high growing regions such India is. Let's go next to our Fibres business. In Fibres, the performance improved both in Q2 and from Q4 last year. When it comes to Fibres South, the platform continued to deliver strong profitability and margins, and this is despite low prices touched during the quarter. Cost inflation in logistics and chemicals has been mostly offset by continued cost improvements. This all proves the competitiveness of the platform. Fibres North returned to positive EBIT during Q3 after the performance in Q2 was impacted by maintenance activities. In both platforms, our delivery volumes were relatively low during Q3.
Massimo Reynaudo: In the case of Fibres North, we have implemented an 8 weeks of production curtailment in the Kaukas mill, to optimize wood sourcing and to protect the profitability. We will have another 5 weeks in Pietarsaari in Q4. In Fibres South, our eucalyptus pulp inventories were low, and they required some replenishment ahead of the Paso de los Toros maintenance shutdown, which is ongoing right now. Next, to Communication Papers. Communication Papers had a really challenging quarter and reported an EBIT loss of EUR 8 million in Q3. The market demand in Europe weakened further compared to the previous quarters and declining 7% year-on-year, so compared to Q3 last year. Energy-related input costs increased sharply during the quarter.
Massimo Reynaudo: Average paper prices increased as well, but the speed and the scale of the cost increases, combined with the overcapacity in the industry, limited the ability to pass through the full cost increase during the quarter. It has to be considered also that talking about the overcapacity, we estimate it being roughly 30%. Further, and to make the situation more challenging, there have been no meaningful capacity closures in Europe in 2026. Basically, these market realities reaffirm if there was still a need, the need to strengthen the competitiveness. We see the planned joint venture with Sappi as an effective way to achieve this objective, while on the other hand, ensuring reliable, high quality supplies to the customers now and in the long term. As we have commented in the previous calls, the transaction is subject to merger control approvals in a number of jurisdictions.
Massimo Reynaudo: Most jurisdictions have given their approvals already. In early October, the European Commission restated its serious concerns about the joint venture. We believe in the strength of our arguments, and we have been addressing the concerns raised. At the same time, we have opened discussions on potential remedies. The European Commission's final decision is expected by the end of the year or shortly thereafter. Next is still another ongoing strategic portfolio initiative is relative to the UPM Plywood business. Its separation is in fact a few days away from completion, and it will result in the establishment of WISA Group as an independent listed company. WISA Group had its first capital market day in September, and there they had the possibility to highlight own strengths.
Massimo Reynaudo: And just some of them are the fact of being a leader or a leading plywood player in premium categories, to have an experienced leadership team, a resilient track record across all business cycles, and the ability to pursue strategic growth opportunities. The trading of WISA Group will start on the Nasdaq Helsinki on 2 November, and the UPM shareholders will receive one WISA share for each UPM share they own. No action is therefore required by them. Now, and concluding. Going into Q4, we remain focused on protecting margins, improving cash flow, and maintaining disciplined capital allocation. We continue to execute our transformation toward a new UPM focused on a reduced portfolio of businesses with a stronger growth potential and higher value creation opportunities. And with this, I conclude, or this concludes the prepared part of our presentation and we are ready for questions.
Operator: If you wish to ask a question, please dial #5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #6 on your telephone keypad. The next question comes from Linus Larsson from SEB. Please go ahead.
Linus Larsson: Hello, everyone, and thanks for taking my question. Starting off with your implicit Q4 guidance, you are expecting quite an improvement. So I wonder if you could just elaborate a bit on what kind of visibility you have. You talk about, if I read you right, a volume setback in Q3. So what is the visibility on volume improvement across your businesses? And also, maybe specifically in communication papers your visibility on variable costs there and pricing, and also the energy refunds that you have guided for being clearly lower than last year. And maybe also the visibility on fair value of forests at this point.
Massimo Reynaudo: Okay. Look, I will start with the question and let then Tapio to complement it potentially, because this is a wide question which touches a number of different business areas. But basically going between Q3 to Q4, there are typically a number of, let us say, elements that did differ also historically. One of them, you mentioned it, is this energy refunds about communication paper, that they get mature during the whole year, but they come on December, or they are booked only when they come in December. So this is one difference between Q4 and Q3. Then another element of difference is energy, but it is our energy business. And that is because it is a business with a seasonality and typically going into Q4, energy consumption increases during winter months.
Massimo Reynaudo: Historically, the profitability of that business has been higher in Q4 than it has been in Q3. When it comes to those, the volume dynamics, well, actually, the situation is very volatile and speculating too much is not the right thing to do. It is, however, important to acknowledge the fact that as we said earlier, in Q3, we have seen a significant destocking. In a part, this was a reversal of some inventory buildup in Q2 due to the uncertainty that the war in Middle East brought into the number of supply chains. So Q3 has seen a part of an element of destocking or rebalancing after that inventory built in Q2. Destocking, and Tapio said it before, by nature is of temporary nature.
Massimo Reynaudo: There may still be some tail going into Q4, also because it is difficult to separate destocking from underlying demand in times of uncertainty. Demand should be normalizing. Then here I'll hand it over to Tapio to complement what I said and if there is anything relevant that I have not covered.
Tapio Korpeinen: Yes, maybe Linus, to your list of questions. I think Massimo mentioned the bigger moving parts. Again, we have the energy refunds like always booked at the end of the Q4. Scale in a sense has been coming down somewhat. One can say it in round figures around EUR 60 million order of magnitude kind of addition to the profitability of the underlying business as such for communication papers. Then we have these forest valuations like we have indicated earlier, less than what we had last year in the H2. As I mentioned earlier in the Q3 now, actually we had a small decrease in forest asset valuations. Again, in round figures, in the Q3 we'll have a current estimate in the scale of EUR 50 million impact from that. Then we do have more maintenance as has been mentioned.
Tapio Korpeinen: If we had
Tapio Korpeinen: Maybe about EUR 25 million impact or similar level to last year's Q3 in current year's Q3. Q4 with the Paso de los Toros shutdown and, in a sense, the remaining impact of Olkiluoto 3 can be in the scale of EUR 65 million, so about EUR 40 million more than in Q3. That is obviously to the other direction. On the positive direction, these refunds and the forest valuation. As Massimo said, you can look at the previous years, we have seasonally higher prices, obviously when winter comes in the Helsinki price area, so that should boost the result of energy business seasonally from Q3. As I was pointing out in discussing the outlook, we do have healthy, resilient unit margins in advanced materials businesses. I would say that also is true for our biofuels business. Maybe that is some additional color.
Linus Larsson: Thanks a lot. That is super helpful. Could I just double-check one thing you said, Tapio? Did you say that you will have a EUR 550 million positive impact in Q4 from forest revaluation? Did I get that right?
Tapio Korpeinen: Yes. That is the, I would say, scale that we would expect at this time.
Linus Larsson: Perfect. Thanks for clarifying that. Then maybe just finally, on variable costs, you showed them one graph how you saw variable costs escalate by more than EUR 100 million in Q3 compared to Q2. What is your sense now if you bridge Q4 versus Q3? Are variable costs still rising? I can imagine, for instance, energy would be rising, but then I do not know if there are offsets in fiber or anything else or your own actions. What do you think? What is the delta Q4 and Q3 on variable costs for the group?
Tapio Korpeinen: Well, I would say without quantifying more that we are seeing some stabilization on the kind of market prices for inputs. In a sense, the real energy-driven impacts are there. No respite there, but I would say stabilizing into the current quarter, so impact should be obviously less than what we saw between Q2 and Q3.
Linus Larsson: Excellent. Thanks a lot.
Massimo Reynaudo: Thank you.
Operator: The next question comes from Gabriel Simões from Goldman Sachs. Please go ahead.
Gabriel Simões: Hi. Thank you very much for taking my questions. The first question would be on the communication paper side. As you were saying, you usually have the energy refunds in Q4. You mentioned at an earlier point in the year, and now again in the call, that you expect that to be lower at around EUR 60 million this year. I just wanted to understand how the mechanism works exactly for the refunds. What I am trying to understand mainly is that if we are in a high energy cost environment still, if we could actually see higher than expected refunds in Q4, if they are related to that specifically. My second question is on the energy division. You usually hedge around 60% of your volumes ahead of time.
Gabriel Simões: I just wanted to understand and have a little bit more color on how exactly the policy for the hedging works. In the end of the year and beginning of the year, do you usually hedge at a similar amount, even though we usually expect higher prices? How much energy is already hedged for 2027, and when will you start hedging for 2028 as well? Thank you.
Massimo Reynaudo: Okay. I will take maybe the first part of the question, and then I leave the one about energy to Tapio Korpeinen, which has handed over the business at the beginning of October, but I am sure maintains good memories about it. When it comes to communication paper, the way refunds work, or basically the refunds we are getting this year are the ones that have been matured last year. Any impact from the situation this year will be visible potentially in 2027. The specific energy situation this year will not have any impact on the scale of the refunds in December. Tapio, you want to comment about our hedging strategy?
Tapio Korpeinen: Yes. On hedging, we have not disclosed numbers for any quarter or years separately. What we have said, obviously, is that we do build our hedge position over several years.
Tapio Korpeinen: We do start also when liquidity is there, and obviously depending on the price level hedging on the third year. We have started to hedge also 2028.
Tapio Korpeinen: We build up the portfolio, let's say, typically, or the position typically over 3 years. Then we do take a view in how soon we build up that sort of hedge position. We do take a view of the forward prices vis-à-vis our fundamental view looking forward. What obviously tends to impact that is that there has been a fairly common pattern that the liquidity, the sort of demand for the years further out has been less. So there has been a backwardation on the sort of forward prices, and that's usually then leading to, let's say, our building the hedge position later rather than sooner on the further out years.
Gabriel Simões: Thank you. Very clear. If I may just add a follow-up on the communication paper side. Given, Massimo, what you mentioned for the impact in 2027, is there any guidance you could give in terms of how much those refunds should increase actually in 2027 versus 2026?
Massimo Reynaudo: No, I believe that we're not in a position or willing to give a guidance right now. Also, let me recall another aspect here. A part of these refunds are both proportional to the energy price, but also to the production levels in the country, where we do receive those subsidies, and so production curtailment or stopping assets play a role as well.
Gabriel Simões: Perfect. Thank you.
Massimo Reynaudo: Okay. Thank you, Gabriel.
Operator: The next question comes from Cole Hathorn from Jefferies. Please go ahead.
Cole Hathorn: Good afternoon. Thanks for taking my question. First of all, Tapio, you have been here ever since I have covered UPM, so I just wanted to thank you for all the calls that you have done in the past. I would like to focus on the pulp markets for the question, and I would like your thoughts on how you see the pulp market developing into 2027. We are starting to see FX slightly move from a headwind to a tailwind. I am just wondering what you can call out from a demand perspective as well as a kind of an outlook into 2027. Anything that you can provide there on the pulp side?
Massimo Reynaudo: Well, getting into forecasting 2027, I believe we do not have much more, let us say, visibility or intelligence here than anybody else in this call. What we can comment about when it comes now to Q4 at least, is that we have seen a different and improving dynamic compared to Q3. Basically, when it comes to the price dynamic, what we have seen is already in September, first, I am talking general information, not necessarily talking UPM numbers, to be clear. We have seen a first round of price increases being announced, and I believe mostly implemented in the market. A second round announced in October. It still required time to see the realization on that element. That has been supported by an improved demand, some seasonally improving demand combined with rather low inventories during the summertime.
Massimo Reynaudo: Going much farther from that and into 2027, I do not think I will be adding valuable information here.
Cole Hathorn: Maybe then I just ask you on the FX side. Is there anything that FX is impacting your business or turning slightly more positive? The reason I ask this is it is moving from a headwind to a tailwind into 2027, particularly with the Brazilian real. I am just wondering if there is any competitive dynamics there that maybe mean that the Brazilian players are less likely to push for price, considering they have just got a lower production base with the Brazilian real. I am just wondering if the lower Brazilian real is a concern and if improvements in FX will support numbers for 2027. Just your thoughts on the FX side. I know it is a difficult one.
Massimo Reynaudo: Well, I do not think we are in a position or even willing to build a scenario on a lower real in Brazil on a base of a couple of days of trading there. So that I would leave it apart. When it comes to the broader question around what is the impact that FX has on our business, I will hand it over to Tapio.
Tapio Korpeinen: Well, yes. Like you say, Cole, it is obviously relevant for the pulp business. So a stronger dollar, generally speaking, is impacting the most the pulp business through the top line. To some extent can impact also the biofuels business because the fossil diesel, ultra-low sulfur diesel prices are quoted in US dollars. So generally speaking, stronger dollar is good for UPM.
Cole Hathorn: Thank you. Just to follow up is maybe just technical guidance for the Leuna business. You talk about a similar level of EBIT year on year into 2027, just with the push-out in the ramp-up. Is there any kind of rough quantification you are giving for 2026 so that we just have an idea what we should expect for 2027? I mean, is the kind of roughly EUR -140 million negative the right ballpark for Leuna and that kind of stays similar in 2027?
Tapio Korpeinen: Well, we have shown a EUR -65 million EBIT for the H1 of the year. If you read the outlook statement carefully, we have there increased costs moderately in a sense in that comparison. So, a slightly higher than negative impact than the EUR -65 million for the H2 of the year.
Cole Hathorn: Thank you.
Operator: As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad.
Massimo Reynaudo: Two calls. Questions? Okay, good. Just checking, but apparently we have answered the call we had in the line. Oh, no, new call coming? Okay, let's pick it up. We are still within the time allocated.
Operator: The next question comes from Priya Ribiawala from Barclays. Please go ahead.
Priya Ribiawala: Hi, good morning. This is Priya Ribiawala from Barclays on behalf of Pallav Mittal. My question would be on destocking and Q4 demand. You highlighted significant customer destocking, particularly in adhesive and specialty materials, which you expect to be temporary. Are you seeing any signs of normalization in October, or should we expect this destocking to continue into Q4? What gives you the confidence that this is inventory correction rather than an underlying demand weakness?
Massimo Reynaudo: Okay. Yes. I'm probably partly repeating what I said before. But we have seen destocking for specialty materials and for adhesive materials. There may still be some tail during Q4, and then we believe that demand will kind of normalize. So any inventory play effect will be exhausted. Then it comes a point of what is the normalized demand, which depends by a number of other factors. Answering your question, this is what we see. I also add here, compared to what I said before, that for both businesses, we believe that not only we have kind of protected our margins during the quarters, but we have also protected our positions, our market shares. So, by this standpoint, any market recovery, we are well set to capture it and make it visible in our performance.
Priya Ribiawala: Okay, thank you.
Operator: The next question comes from Cole Hathorn from Jefferies. Please go ahead.
Cole Hathorn: Thanks for taking the follow-up. I would just like to ask on the energy business. Massimo, you gave a lot of helpful color on expectations of timing of when you could do data centers. But Tapio, you have run the energy business for a long period of time, and you have brought it up a lot to where it is today. So I am just wondering, as you move on from UPM, what do you see as the most exciting opportunities for the energy division as you hand it across?
Tapio Korpeinen: Well, thanks, Cole, for a good question. I would say, of course, the kind of fundamental change that we have been talking about for a while, but you can now see happening in very concrete terms and live as we speak, is that there is a fundamental change in electricity consumption in the Nordic countries and also specifically in Finland. We have been basically in an environment where energy consumption has been pretty flat, but now there is a clear trajectory upwards. Also what we know is that when this growth happens, and we can see the construction with our kind of bare eyes happening at the moment, then what will become scarce is electricity supply that is not weather-dependent. We can add renewables. UPM also has, like Massimo has pointed out, wind and solar capacity ready to build soon, so we can add that.
Tapio Korpeinen: What is very difficult for anyone to add in the short term is capacity that is not weather-dependent. Thinking about these kind of new consumers who are investing billions here, and obviously are not fair weather consumers of electricity, but are here for the long term. We have a lot to offer to them in terms of the portfolio of power consumption that we have, which is, I would say, world-class. Additional new electricity, whether it is through lifetime extension in Olkiluoto, so more nuclear or then renewables and the sites, so we can package basically solutions that nobody else can in Finland.
Cole Hathorn: Tapio, may I just follow up? If you are thinking about that, is it right to reduce your out to year hedges if you believe that power prices are going to be higher and you want to be able to offer those PPAs? Is the business going to be less hedged as we move forward from here to look at some of those positives?
Tapio Korpeinen: Well, I would say that is, again, a portfolio question, so to speak, in a sense that the reality is that even if and when these sort of longer-term contracts for electricity then become more a kind of a market standard, so to speak, over time, eventually, then the Nordic power market is still also dependent on the weather. Whether we have lots of hydro and wind or then a dry year and a cold winter, then that will still, in this sort of a spot market, obviously affect electricity price. Therefore, then how to manage that depends, in a sense, on the kind of portfolio of contracts that you have going forward, whether they are longer-term PPAs or whether they are then shorter kind of tenure or term bilaterals or then perhaps some hedges in the futures contract market as well.
Tapio Korpeinen: You have to obviously look at it as a totality, so to speak.
Cole Hathorn: Thank you very much for the color.
Operator: The next question comes from Tomi Railo of DNB Carnegie. Please go ahead.
Tomi Railo: Hello, this is Tomi from DNB Carnegie. Just a question on the maintenance. You provided some timing and commentary for next year, but just to make sure, do I read it correctly that the costs should be lower next year compared to 2026? And maybe still that, if I understand correctly, the cost for 2026 is maybe roughly EUR 140 million, EUR 150 million.
Tapio Korpeinen: Well, let's say if I just comment on that, like I said, we would expect the impact for Q4 to be around EUR 65 million, EUR 25 million in Q3. That impact includes both the costs and the lost margin. I point that out, therefore, that it is early to talk about the total impact of maintenance next year, because obviously then we will comment that more when we have also a better view on what the margin loss might be. Maybe just having said that on the cost basis, of course, the fact that we have two big maintenance shutdowns less next year should mean that we have less maintenance cost overall, even if we have the Kaukas mill turnaround shutdown. Then again, the total impact we will know more when we have also better visibility on the margins.
Tomi Railo: Yes. Thank you. Very clear. Thanks.
Operator: The next question comes from Joni Sandvall from Nordea. Please go ahead.
Joni Sandvall: Yeah, thanks for the presentation. One question related to adhesive materials. Following your label material investment into India, are you actually considering any consolidation possibilities within the, especially adhesive materials market?
Massimo Reynaudo: That is not the strategy we are pursuing right now. At this point, what we have done very actively over, I would say, the last 18, 24 months, has been acting on our competitiveness, and we have done significant, let's say, internal consolidation, closing some assets, moving production toward more, let's say, cost-efficient options. Then we have invested a lot on, let's say, on the commercial side. This is one of the thing we have done. The second one has been to reinforce our presence in area with high margin growth opportunities. Like we've invested in a coater in the US, or we have invested in new terminals in Vietnam, in Taiwan, earlier on mentioned India already. Now we are reinforcing our position in India. So call this kind of organic development of the business.
Massimo Reynaudo: Then beside that, as we have also stated publicly, we stay open to consider acquisitions in this space, but only if and when they create value in the sense of, let's say, either opening up to or reinforcing our position in geographies where we are already or enabling additional value creation.
Joni Sandvall: Okay, thanks. That is clear.
Massimo Reynaudo: Okay, thank you. Thank you, Joni. Okay. I believe we have received or taken all the calls in the line. Thank you all for your participation to the call today. Have a nice rest of the day. Thank you.
