UPM-Kymmene posts 2Q profit, may cut output

The company said the market outlook for the second half of the year had weakened. It reiterated its June 18 warning that full-year operating profit was expected to be lower than in 2007 because of increasing costs and lower deliveries.

Net profit in the three months through June 30 was 92.0 million euros ($146 million) compared with a loss of 198 million euros a year earlier.

Revenue fell 6 percent to 2.4 billion euros ($3.8 billion) in the period.

UPM's stock plunged more than 7 percent to close at 10.02 euros ($15.78) in Helsinki.

UPM said it continued to suffer from high wood costs and a strong euro in the quarter. "Efficiency improvements in paper making and the higher average paper prices did not compensate for the cost increases," it said.

The planned hikes in wood export tariffs by Russia--a major supplier for companies in Finland and elsewhere in Europe--could result in production cuts at some Finnish mills during the remainder of the year, UPM said.

"It is clear that we can only develop our Finnish units in the long term providing that low-cost Finnish wood is available," Chief Executive Jussi Pesonen said. "We will make our plans based on the assumption that the Russian export duty on wood will be implemented in the beginning of 2009."

For the second half of the year, the forest products group predicted that demand for paper would be flat or lower in Europe, continue to weaken in North America and grow in China, compared to the previous year.

UPM-Kymmene has production plants in 14 countries with 170 sales and distribution companies worldwide. It employed some 27,000 people at the end of June, down from 29,000 a year ago.