(HELSINKI) - Stora Enso, Europe's leading paper and cardboard maker, reported a 68.0-percent profit slump on Thursday reflecting higher wood costs and strength of the euro, and said economic turmoil made the outlook uncertain.

The Finnish company had warned on March 20 that its first-quarter profits excluding non-recurring items were likely to fall sharply from the figure in the first quarter of 2007, blaming the price of logs and a weakening of the European market for wood products.

Stora Enso's January-March net profit shrank by 68 percent from the figure 12 months earlier to 71.2 million euros (112.8 million dollars).

Operating profit in the quarter was 125 million euros, 58 percent lower than in the first quarter of 2007.

Net profit from continuing operations fell to 66.5 million euros from 197.2 million euros. Sales fell by 5.6 percent to 2.8 billion euros.

"The results are clearly unsatisfactory, but they also show that the restructuring plans announced in the third quarter of 2007 that we are rapidly completing were absolutely necessary to reverse the downward trend as fast as we ever can," chief executive Jouko Karvinen said in a statement.

He said Stora Enso had continued to face the same challenges as in the fourth quarter of 2007: more expensive wood and strength of the euro.

Karvinen added, however, that the company expected its wood costs to level off towards the end of the second quarter, partly because it has reduced the amount of imported wood and reduced its production capacity.

Russia is trying to get forestry companies to invest in Russia instead of exporting wood to Finland and Sweden. Russia increased hardwood timber duties to 15 euros per cubic meter in early April.

Stora Enso said it planned to continue curtailments of its pulp production at two mills in Finland and was also preparing for further production halts at sawmills.

"Our short-term market outlook has not changed essentially since February. However, the uncertainty beyond the present quarter has further increased due to macroeconomic concerns," Karvinen said.

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