The paper manufacturer recorded a third quarter operating profit excluding special items of €136m (£118m).

Turnover increased year on year from €2.6bn to €3.3bn for the quarter, while overall turnover for the first three quarters of 2011 was €7.4bn (€6.5bn 2010).

It said that demand for publication papers was stable but, despite increasing prices between 1-2%, it had not offset the rise in variable costs.

However, in its outlook statement the company said that economic outlook turned weaker in the second half of the year.

It stated: "As a result, demand for UPM’s products for the rest of the year is lower than earlier anticipated. UPM’s full-year 2011 operating profit excluding special items is expected to be somewhat lower than last year. Previously, the full year 2011 operating profit excluding special items was expected to improve from last year."

Chief executive Jussi Pesonen said that the company's strong performance in terms of operating cash flow continued, while integration of Myllykoski, which it acquired in August, has proceeded well.

It also acquired a Frey Bentos Mill, but overall debt increased by €205m and Pesonen said the company would look at "further strategic investments".

But, he added: "During the third quarter UPM’s delivery volumes fell while variable costs reached a peak level. These coinciding events impacted on our operating profit.  Particularly the lower pulp and fine paper deliveries in Europe had an adverse impact on the operating profit.

"We are prepared for a heavy winter. There is already a clear decline in demand in Europe for our timber and plywood businesses. However, UPM is in a much better position to respond to the rough economic climate compared to 2008."