VANCOUVER, British Columbia, July 19 (Reuters) - Problematic pulp and paper markets pounded the profits of Norske Skog Canada (Toronto:NSa.TO - news) in the second quarter and pushed its takeover target Pacifica Papers Inc (Toronto:PPP.TO - news) into red ink, the companies reported on Thursday. Norske Canada recorded net earnings of C$5.3 million, or 4 Canadian cents per share, for the quarter ended June 30. That compared with net earnings of C$57.4 million, or 46 Canadian cents per share, for the same quarter a year earlier. The company said its second quarter results included the recognition of C$1.5 million, or 1 Canadian cent a share, in tax-loss benefits, compared with C$21.0 million, or 17 Canadian cents per share, for the year-earlier quarter. Norske Canada, which is 50.8 percent owned by Norwegian forestry giant Norske Skogindustrier A/S , said sales were C$289.6 million in the quarter, down from C$348.1 million for the same quarter last year. Pacifica had a net loss of C$3.3 million, or 12 Canadian cents a share, on sales of C$200.2 million for the quarter. That compares with a net profit of C$1.4 million, or 5 Canadian cents a share, in the corresponding period last year. Both companies said they were hurt by the economic slowdown in the United States, where reduced advertising sales have cut demand for paper from magazines and newspapers and pushed down pulp prices. The slowdown has already caused Pacifica and Norske Canada to cut production at their mills on British Columbia's Pacific coast, and both companies have warned they make additional cutbacks if demand does not improve. ``The market outlook for paper products for the balance of 2001 does not look promising, as the U.S. and overseas economies are expected to continue to struggle throughout the remainder of 2001,'' Pacifica's chairman Trevor Johnstone said in a written statement. Pacifica agreed last month to a buyout offer from Norske, but final court approval has been tied up by objections from Pacifica's largest shareholder, New York investment group Cerberus Management, which believes the C$960 million ($624 million) deal is not good enough. A decision from the British Columbia Supreme Court is expected within the next few days. The pricetag for the cash and stock deal includes C$600 million in debt to be assumed from Pacifica, which was created in 1998 by a spinoff of the MB Paper division of former Canadian forestry firm MacMillan Bloedel. ($1 equals $1.54 Canadian)