The South African manufacturer said European orders excluding overseas exports fell 3% compared to the same period last year.
Although its total sales rose 9% to 660m ($1.06bn) for the quarter, the effect of translating its results into US dollars, its reporting currency, masked the decline in local currencies in South Africa and Europe.
Group operating profit more than halved to 28.5m, while operating profit in Europe slumped by four-fifths to 6.8m, giving an operating margin of just 2.3%.
Sappi said economic growth in Europe remained elusive, while improvement in the US was taking longer than expected.
The group also expects to take further downtime to match production to demand.
It has cut back on capital expenditure too. The uncertain outlook forced it to spend at 80% of depreciation instead of its planned 100%.
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