UPDATE 1-UPM-Kymmene shares hurt by weak pulp outlook

Tue Aug 5, 2014 3:49am EDT

Related Topics

* Q2 group op profit excl one-offs 186 million euros

* Analysts had expected 191 million on average

* Pulp division sales 477 mln vs f'cast 500 mln

* Pulp div profit 31 mln vs expected 58 mln

* Shares down more than 3 pct (Adds analyst, shares, details)

HELSINKI, Aug 5 (Reuters) - Finnish paper maker UPM-Kymmene Oyj has posted weaker than expected quarterly results in its pulp operations and warned that the unit's profitability would fall later this year, sending its shares down more than 3 percent.

Pulp division sales in the second quarter reached 477 million euros ($640 million), below the 500 million expected in a Reuters poll. Operating profit was 31 million, just over half of the expected 58 million.

"Profitability of pulp was weak in the second quarter, and it guided that it would fall short of last year's levels in the second half of the year," Evli analyst Markku Jarvinen said.

UPM shares fell 3.8 percent to trade at 11.82 euros by 0720 GMT.

UPM said the pulp unit's performance would be impacted by lower chemical pulp prices, though it added that for the company as a while, the business outlook was broadly stable.

UPM was able to beat expectations for its Europe and North America paper division, posting a 47 million euro comparable operating profit, against expectations of 35 million.

April-June group operating profit excluding non-recurring items rose to 186 million euros ($249.6 million) from 138 million a year earlier, just below the 191 million expected on average by analysts polled by Reuters.

UPM, along with main rival Stora Enso, has been closing paper mills in Europe for years in an attempt to protect profitability amid a decline in graphic paper demand and prices.

The company said its cost-cutting programme was ahead of schedule and it had achieved 94 percent of the targeted 200 million euros in annual savings. (1 US dollar = 0.7453 euro) (Reporting by Sakari Suoninen; Editing by David Holmes)

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