"In Europe we have seen quite a lot of recovery in our markets edging toward 1999 levels," said executive chairman Eugene van As.

The forecast came as the South African papermaker reported a 21% fall in sales to 595m, which van As attributed to weak prices and a strong dollar, for the second quarter of its 2002 financial year.

He said margins remained robust despite the weak market for coated fine paper, but pre-tax profits fell 17% to 58m. Van As also said there were signs of an upturn in pulp prices.

During the second quarter Sappi took 150,000 tonnes of pulp and paper production downtime, a strategy it plans to continue.