UPDATE 1-UPM profit falls, says industry must cut capacity

Thu Apr 25, 2013 3:57am EDT

* Q1 adjusted EBIT falls 7.7 pct to 144 mln euros

* CEO sees more "structural changes" in industry (Adds comments on paper capacity cuts)

HELSINKI, April 25 (Reuters) - UPM-Kymmene, the world's largest graphic paper maker, reported a fall in quarterly profit and said the entire paper industry must cut more capacity to cope with a shift from traditional print media to digital devices.

UPM and its main rival Stora Enso have been closing paper mills and machines for years, both announcing new cuts earlier this year, aiming to bolster prices.

Smaller paper manufacturers have benefited from such moves, but many have held back from making cuts of their own.

"Economic pressure has led - and we believe will continue to lead - to structural changes that will be important for the whole industry," UPM chief executive Jussi Pesonen said in a statement.

UPM's paper unit, the biggest in the group by sales, earned only 3 million euros in quarterly operating profit excluding special items, on sales of 1.6 billion euros ($2.1 billion).

Cheuvreux Nordic analyst Mikael Jafs also said more capacity cuts were inevitable.

"If the overall demand picture continues to be weak, we should probably expect more closure announcements when the companies report their Q2 numbers," he said.

The group's overall adjusted operating profit fell 7.7 percent from a year ago to 144 million euros, in line with market expectations.

The results would have been weaker if not for solid profits from its energy and pulp businesses.

Shares in the company, which have fallen over 15 percent in the past three months, rose 1.6 percent in early trade. ($1 = 0.7695 euros) (Reporting By Jussi Rosendahl; Editing by Ritsuko Ando)

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