Sappi has warned that profits could suffer in the second half of the year after reporting a fall in operating profits for the second quarter.


Sappi Fine Paper was hit by weaker demand and a decline in paper prices in the major markets.


And the group also suffered from reduced order inflows forcing it to make production cutbacks and take downtime.


If the difficult market and currency conditions persist, the groups earnings for the second half are likely to modestly below the first, said executive chairman Eugene van As (pictured).


But he said the groups fundamentals were strong, and that it remained very well positioned in all its markets.


Net profit for the quarter increased by 7% to 52m ($75m), but operating profit fell 27% to 84m, mainly due to tough market conditions, particularly in North America.


Sales also fell 7% to 770m, which was not helped by the Euro to dollar exchange rate.


Sappi is to close its Mobile mill in North America due to the tough market conditions in North America, which drained resources by 7m, particularly in the uncoated fine paper business.


Story by Andy Scott