Metsä Group’s profitability in the second quarter improved on last year, with comparable EBITDA being EUR 129 million

Metsä Group’s Jan–Jun 2026 sales fell to EUR 2,741m from EUR 3,069m, while EBITDA declined to EUR 231m from EUR 250m (comparable EBITDA: EUR 257m vs EUR 265m). The operating result deteriorated to EUR -33m from EUR 6m (comparable operating result: EUR -7m vs EUR 44m), and result before taxes swung to EUR -74m from -24m. Net cash flow from operations turned negative at EUR -37m (vs EUR 10m), with comparable ROCE at -0.1% (vs 1.3%).

Analysis

This reads less like a one-off earnings miss and more like a sector utilization problem: when a large Nordic forest-products operator is running below breakeven, the industry is likely still in a pricing-down/volume-down loop. That matters because it reduces the odds of near-term price discipline across pulp, board, and paper, and it usually bleeds through to peers with more leverage to spot pricing and less self-supplied fiber or energy.

The immediate losers are the more rate-sensitive packaging and paper names in Europe where buyers can still push back on contract resets; suppliers into mill capex, trucking, and maintenance can also feel the second-order hit as spending gets deferred. Relative winners are the better-capitalized, more diversified operators with energy or bio-products exposure and lower reliance on spot pricing, because they can ride out weak spreads without forced cuts.

Over the next 1-3 months, the key catalyst is not earnings season alone but whether pulp/board inventories and contract negotiations stabilize. If spot pricing keeps slipping or working capital remains trapped, equity downside can persist even if volumes stop worsening. Over 6-18 months, the trade reverses only if capacity rationalization and restocking reassert pricing power; otherwise margins stay structurally capped.

Contrarian view: the market may already assume ‘cheap forest stocks = limited downside,’ but that misses cash-conversion risk. When operating cash flow stays negative, low multiples deserve to stay low; the thesis breaks if EUR weakness, a pulp price inflection, or European restocking restores spread expansion for two straight months.

Key Decisions for Investors

• Pair trade: long UPM.HE / short METSB.HE for 1-3 months. Rationale: UPM’s diversification and balance-sheet flexibility should hold up better if Nordic fiber-product pricing stays soft. Exit if METSB outperforms UPM by ~10% or if pulp/board benchmarks inflect for 4-6 weeks.
• Short STERV.HE on strength over the next 1-3 months. Stora Enso’s packaging exposure makes it vulnerable if buyers keep using weak industry prints to negotiate lower contract prices. Cover if European containerboard spreads widen meaningfully or management guides to faster volume recovery.
• Use HOLM-B.ST as a higher-quality hedge against a broader sector short, not as the outright short. If you want to be bearish on the complex, pair short STERV.HE vs long HOLM-B.ST to isolate balance-sheet and cash-conversion risk rather than beta to the whole forestry basket.
• Set an alert rather than a trade: if NBSK/pulp prices rise for two consecutive months and EUR weakens, reassess the whole bearish sector view. That would be the cleanest falsifier for the downside thesis.