President and chief executive Juha Niemal cited low paper prices and the strength of the euro for a decline in the groups turnover and pressure on profits in the second quarter.
He could not see any sign of a turnaround this year. There is no sign of a cyclical improvement, not even if the normal seasonal upturn takes place, he said.
Profits before extraordinary items fell 31% to 93m (E132m), on sales of 1.7bn, down 6.6% on the same period last year.
Niemal said the economic outlook for Europe was unclear, but paper demand had begun to pick up slowly.
The firm has started to implement the 138m annual cost-cutting scheme it announced in April. It is focusing on raw material costs, logistics and the optimisation of paper production.
Despite the challenging market, Niemal said UPM had a strong balance sheet and good cash flow to enable it to develop its operations.
The project to build a new fine paper machine at Changshu mill in China, which was halted due to the SARS outbreak, will now continue. Niemal said this should be only a few months later than had originally been anticipated, with the completion date now set for summer 2005.
Story by Andy Scott
