Nov 02, 2005. /Lesprom Network/. Paper companies UPM-Kymmene Oyj and Norske Skogindustrier ASA yesterday both reported declines in their third-quarter net profit, with Helsinki-based UPM citing lower sales and higher raw-material and energy prices, and Norske Skog citing higher energy costs and negative currency effects. Both companies were upbeat in their forecasts, however. UPM said it expects improvements in the fourth quarter, and Norske Skog said it sees price increases and a tight newsprint market in most regions in 2006. UPM, the world's leading magazine-paper producer, said net profit decreased by about one-third to 111 million euros ($133 million) from 165 million euros in the year-earlier period. It said the seven-week Finnish labor dispute, which ended in early July, hit pretax profit by around 20 million euros in the third quarter and hurt paper deliveries. The strike had particularly hurt rival Finnish paper and packaging manufacturer Stora Enso Oyj, which last week reported a 51% drop in third-quarter net profit to 66.4 million euros. Sales at UPM declined 8.4% to 2.24 billion euros from 2.45 billion euros. This was lower than the 2.40 billion euro average forecast in an SME Direkt poll of 18 analysts. The volume of paper deliveries fell 8%. Norway's Norske Skog, the world's second-largest producer of publication paper, reported a 14% decline in net profit to 193 million kroner ($29.6 million), from 224 million kroner, though last year's number includes a tax gain of 67 million kroner. Sales increased slightly to 6.43 billion kroner from 6.38 billion kroner, the company said. With the paper industry plagued by overcapacity and low profitability, analysts keep a constant watch for news on capacity reductions. UPM didn't give any such news in conjunction with the report. "We are continuously looking at our costs, and we believe that there is still some leverage for additional cost cuts," UPM Chief Executive Jussi Pesonen said in an interview. He said, however, that the company doesn't feel any need to be part of a restructuring of the pressured fine-paper market. Instead, UPM points at the magazine-paper and newsprint businesses as the areas most in need of improved cost competitiveness and higher prices. "In the fourth quarter, we've managed to increase the spot prices and quarterly contract prices for magazine papers," Mr. Pesonen said, while emphasizing that the increase doesn't involve longer contracts. As for the biggest challenges facing Norske Skog, Chief Executive Jan Oksum said the strengthened Norwegian krone and a European price level for newsprint that is significantly below that in most markets are both grounds for concern.