Earnings per share were however expected to be one-third lower than the 10 euro cents posted in first quarter, owing to cost reductions, it said.

The group attributed the drop to "the combined effects of weak economic conditions in Europe and therefore an increase in lower-profit-margin overseas exports from the company's European mills, direct and indirect effects of the fall in the value of the US dollar and continuing overcapacity in some paper grades."

"The weaker financial performance of the company's North American operations due to higher energy costs, lower production volumes and only limited success in increasing product prices from already low levels" is also expected to contribute to the weaker results, Stora Enso said.

The forest and paper sector has been severely affected by the global economic downturn, as lower activity in the construction and publishing industries has caused demand for its products to drop.

Stora Enso sales totaled 12.8 billion euros (14.5 billion dollars) in 2002, and it has some 42,500 employees in over 40 countries.

Its share price rose 4.44 percent to 10.82 euros on the Helsinki stock exchange following the news, with analysts saying the move had been widely expected given the weak international economic outlook.

TERRA.WIRE