It recorded sales for the same quarter of €1.07bn, compared with €1.1bn for the first quarter of 2008. Sales for the first six months of the year were €2.16bn compared to €2.25bn the same time a year earlier.

The company said its results were due to rising production costs, pulp production curtailments caused by wood shortages, and a decrease in the sales volume of fine papers.

It also said the stronger euro and a postponement of price increases for coated fine paper also affected the company's figures.

Mikko Helander, M-real Corporation chief executive, said there was a "definite need" to increase the prices for all paper and paperboard products and added that the company will do everything it can to achieve this.

He said: "We will still launch new profit improvement actions later in the year to cover as much of the heavy cost inflation as possible."

Demand for M-real's paperboard and magazine paper products in the main markets is expected to remain strong in the third quarter of 2008, while in fine papers there is "some sign" of demand weakening.

The company said its profit improvements programme, which was launched in November 2007, has proceeded according to its targets.

In May 2008, the total annual profit improvement target was raised from the original €100m to €150m. The full impact on results will be achieved by the end of 2010.

Earlier this month, M-real warned that its full-year 2008 operating profit would be less than 2007. The company had not previously given any profit outlook for 2008.