The pre-tax loss compares with a profit of €115m at the same time last year. It follows sales of €1.8bn for the second quarter of 2009 – down 23% from €2.3bn at the same period a year earlier.

UPM chief executive and president Jussi Pesonen said the recession was continuing to have an impact on product demand and, as a result, temporary production curtailments would continue.

"Weak demand from poor economic activity has led to significantly lower deliveries across all of UPM's businesses," he said. "Our market outlook remains cautious."

Operating profit "declined clearly" in the first half of 2009 to a loss of €87m from a profit of €350m for the same period a year earlier.

However, Pesonen said contraction of economic activity seemed to have slowed and demand for the company's products was stabilising. For paper, there was also some improvement in order intake.

The average paper price in euros increased by around 1% from the same time a year earlier.

In June, UPM started operating its £68m renewable energy power plant at its Caledonian mill in Scotland.

It has also signed a letter of intent to gain sole ownership of Botnia's Fray Bentos mill and forest plantations in Uruguay.