Morgan Stanley paper research analyst Charles Spencer said the continued lack of demand for products coupled with pressure on pricing levels, especially in fine paper, was adding to paper manufacturers woes.

Stora Enso said it expected to report fourth-quarter operating profits for 2003 at half the level of its third-quarter figures, which would see levels plunge to just under 50m.

Its share price fell 6.4% to 7.50 on the news.

The Finnish-Swedish manufacturer said the decrease was due to a multitude of items, including a rise in lower margin overseas sales, the decline in the value of the dollar, seasonal shutdowns at some of its Nordic mills and the paper workers strike in Finland at the end of 2003. Redundancy costs have also hit the bottom line.

Spencer said the weak dollar had led to price levels in the US being some $100 per tonne less for some grades than in Europe.

As a result, we feel the US is poised for price increases, while Europe will continue to lag behind in terms of performance, he said.

The levels of operating profits that will be announced by Stora Enso would lead to an unacceptable level of return, according to Spencer, with fourth-quarter non-recurring items totalling 47.2m.

Stora Enso will issue its fourth quarter results for 2003 on 4 February.

Story by Andy Scott