All countries suffered from rising raw material costs and currency fluctuations despite improvements in the global forest and paper industries financial figures for 2004.

PwC's global forest, paper and packaging industry practice UK leader, Clive Suckling, said while global earnings were returning to the levels of 2000, overcapacity and production fragmentation were still limiting performance.

International Paper was number one of the top 100 global performers, with net sales up by 14% to 14.6bn ($25.5bn) in 2003. Stora Enso led European companies with net sales of 8.8bn, a rise of 12.1% on the previous year.

While overall global sales figures were up 11.8% in 2004 to 194bn, return on capital employed grew by a modest 1.3% to 5.5% on 2003. While demand also increased in 2004, Suckling said that prices continued to fall, reflecting a profitless growth.

He added that the pulp sector remained more fragmented than the paper and packaging sectors, with the poorest financial performance. This is despite the fact that pulp prices, at around 370 ($650) per tonne, are 18% higher than in 2003.

Suckling expected pulp prices this year to come under greater pressure, with a cluster of new capacity expected to come on stream, some two-thirds of which will be in South America.

Story by Andy Scott