SHARES IN Finnish paper mill operator Powerflute dropped by 16 per cent on the Alternative Investment Market (AIM) in London after chairman Dermot Smurfit warned of lower full-year profits due to weaker demand and rising wood and energy costs.
Powerflute operates a single mill in Kuopio, Finland, and makes a niche product called Nordic semi-chemical which is used in the international transportation of fruit and vegetables. The stock, floated last year at 110p (€1.39), lost 8.25p to close at 43.5p as investors brushed off a 42 per cent rise in first-half pre-tax profits to €3.5 million.
"In the absence of a strong recovery in demand and an improvement in the competitive environment, the board believes profit from operating activities for the year ending December 31st, 2008, will be some way below that of the previous year," said Mr Smurfit.
"Demand during the seasonally quieter summer months has been considerably weaker than in the same period of 2007, most noticeably in the important southern European markets. Although the autumn fruit harvest is currently predicted to be good, we expect trading conditions to remain challenging throughout the second half of 2008."
The firm anticipates strong competition due to the weak market conditions, he said. "However, we are confident that we are well positioned for growth in the longer-term due to our strong market position in an attractive and premium paper grade."
Revenues dropped by €300,000 to €55.6 million in the six months to June. Basic earnings per share rose by 45 per cent to 2.9 cent. The firm declared an interim dividend of 1.681 cent.
