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Company forced to curtail production, close mills and lay off workers.

HELSINKI based paper maker Stora Enso Oyj has revealed that its net profit was down nearly 50 per cent to €69.5 million in the second quarter primarily as a result of lower selling prices for paper and pulp.

The Groups net profit in the same quarter last year came in at €136.0 million. The company said the drop profit would have been even higher except for a one-time accounting gain of €56 million.

Stora Enso also reported that revenue had fallen slightly in the period, from €2.82 billion a year ago to €2.72 billion this quarter.

As a result, shares in the Finnish-Swedish company fell 7 percent to €4.82 on the announcement of the results in Helsinki.

CEO Jouko Karvinen is quoted a saying that the company's weaker than expected result was partly due to Europe's debt crisis, which was beginning to show "material impact" on key markets.

"We must and will continue to adjust our manufacturing capacity to the market demand," he said.

As a result the company has already started cutting production at its mills in an effort to reduce inventories of paper, board and sawnwood products.

In line with many other forest products companies, Stora Enso has struggled with overcapacity in the European market due to falling prices and low customer demand. Like other companies faced with this situation it has been forced to curtail production, close mills and lay off workers.

The company forecast that operating profit for the third quarter would be roughly the same as the second quarter with revenue also at the same level.

Stora Enso is one of the world's largest forest product companies making magazine paper, newsprint, fine paper, pulp and packaging boards. It employs some 30,000 worldwide.

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