A 5% Drop in Wood Shares in 2025: The Industry in Trouble
Wood shares fell by 5% in 2025 after two consecutive years of losses. Between a slowdown in the construction cycle and squeezed margins, valuation remains well below the global average. Yet, certain players stand out through their transformation into high-value-added solutions.
Wood industry shares fell by 5% in 2025, following a drop of 2% in 2024.
A 5% Drop in Wood Shares in 2025
This decline comes after two consecutive years of losses, with a decrease of -2% in 2024 and -5% in 2025. Investors observed a contraction in demand for wood, particularly in the construction and packaging sectors, exacerbated by rising interest rates in 2022, which increased borrowing costs. The combination of squeezed margins, excess inventory, and falling wood prices led to a sharp decline in stock prices.
Context of the Ecological Transition and Construction Cycle
At the heart of the low-carbon transition, wood is considered a renewable resource capable of storing carbon and replacing high-emission materials. However, the global construction recovery has been hampered by rising interest rates, making real estate projects less attractive. "During the COVID-19 pandemic, wood shares experienced a golden age on the stock market. The explosion of e-commerce boosted cardboard demand, while the resumption of construction sites after lockdowns and the catch-up of interrupted real estate projects propelled construction wood demand," recalls Mioratina Rapelanoro, portfolio manager at Galilee AM.
Recent fundamentals reflect this lull: average revenue growth over three years is just 4%, one of the lowest among the 25 identified themes by Galilee AM. This figure reflects weak demand and margin pressure.
Financial leverage remains high, with a net debt to operating profit ratio around 2.2, limiting investment, innovation, and transformation capabilities. On the stock market, this lack of confidence is reflected in undervaluation: the price-to-earnings ratio is approximately 14 times profits, significantly below the MSCI World valuation (around 24 times profits). This gap is corroborated by a three to five-year average of 13-14 times, well below the 2020 peak of nearly 19 times.
Companies most exposed to price volatility and construction slowdowns, such as Mercer, Interfor Corp, or Sappi, saw their shares drop by 60 to 70% over the same period. Conversely, actors like Sumitomo Forestry or Stella-Jones recorded over 100% performance over three years by positioning themselves as technological solutions for ecological transition.
Divergent performance reflects the ability of certain groups to transform wood into high-value-added solutions. For example, Sumitomo Forestry has successfully integrated sustainable construction, energy-efficient renovation, and innovative products, supporting its results. Stella-Jones, specializing in infrastructure, has also benefited from this strategy. Others, dependent on traditional construction, have suffered from market contraction.
These disparities highlight the importance of a company's structure and its ability to evolve beyond simple commoditization. Investors should therefore focus on integrated groups capable of sustaining long-term growth.
Perspectives for Recovery in 2026
Continued rate cuts by the Fed and ECB could facilitate low-cost refinancing and alleviate financial charges. According to Mioratina Rapelanoro, "the gradual restart of construction and the resumption of real estate projects in Europe and North America, driven by easing rates, is giving new momentum to the sector. The low-carbon transition remains a structural support, while attractive valuations and growing appetite for real and sustainable assets reinforce interest in the wood industry."
Actors able to capture this new dynamic, such as integrated groups specializing in sustainable construction like Stora Enso, Smurfit Westrock, or Sumitomo Forestry, are identified as the most promising. Passive managers may consider ETFs covering the theme, such as the MSCI World CW8 ETF, for diversification.
Investment Strategies
For investors seeking direct exposure, selecting shares of integrated groups is recommended. Mioratina Rapelanoro advises selecting "actors able to capture this new dynamic: integrated groups and specialists in sustainable construction and high-value-added products, such as Stora Enso, Smurfit Westrock, or Sumitomo Forestry."
Passive managers can consider specialized funds or ETFs. An example of a relevant link is the MSCI World CW8 ETF, which offers exposure to the strongest global companies, including those in the wood industry. French investors can also consult the CAC 40 page to follow the performance of shares linked to sustainable construction.
Concrete Conclusion
In 2026, the wood industry could mark the beginning of normalization, thanks to the gradual restart of construction, easing interest rates, and the low-carbon transition. Companies able to transform wood into high-value-added solutions will remain the most resilient in this recovery context.
