Nordic paper giants Stora Enso Oyj (SEO) and UPM-Kymmene Corp (UPM) Thursday posted weak fourth-quarter earnings that fell short of expectations and said the 2003 outlook looks worse, causing their shares to plunge. With its larger exposure to the weak European magazine paper and fine paper market, Finland's UPM-Kymmene was worse hit than rival Stora Enso, the world's biggest paper producer, which got some help from North America, where advertising-driven demand picked up. In the three months ended Dec. 31, UPM-Kymmene said its closely watched pretax profit fell 60% to EUR102 million from EUR255 million, excluding non-recurring items, and far below the EUR217 million expected by analysts. "The magazine paper and fine paper earnings were especially bad," said a Swedish paper sector analyst. Coupled with a gloomy outlook for its key products, the weak numbers - dubbed as "disappointing" by UPM-Kymmene's Chief Executive Juha Niemela - sent the paper maker's shares tumbling and at 1320 GMT the stock was down 8.5% at EUR26.85 in Helsinki. Stora Enso shares were 4.3% lower at EUR9.12. Lower prices for magazine paper and fine paper in Europe, negative currency effects, and higher costs for production cutbacks due to weak demand all dragged down fourth-quarter earnings for both UPM-Kymmene and Stora Enso. Stora Enso's fourth-quarter pretax profit fell to EUR242.8 million from EUR249.1 million, well short of expectations of around EUR275 million. Looking ahead, UPM-Kymmene said 2003 profits will be below 2002. At a Helsinki news conference, UPM-Kymmene's Chief Executive Juha Niemela said "it's easy to see that this year will most probably be a low growth year." "It's very negative that they're already hinting that this whole year will be weaker," a Helsinki-based analyst said. Niemela said profitability within the group's U.S. paper mills isn't satisfactory with magazine prices still at low levels, and newsprint prices globallyare also a concern. "The most worrying is the newsprint situation where the annual contracts have held well during the year but further price deterioration has now happened in the year end price discussions which are partly still ongoing," he said. Both companies blamed the uncertain global economic and political situation for the pessimistic forecasts. Stora Enso's CEO Jukka Harmala said that European paper prices are still under pressure and stressed that "the further continuation of the positive trend in North America and indeed the outlook for global paper markets depend largely on the outcome of the current geopolitical situation." Separately Thursday, Swedish hygiene products and packaging group Svenska Cellulosa AB (S.SCA) posted a 2.8% drop in fourth quarter pretax profit to SEK2.053 billion, slightly below expectations of SEK2.079 billion. The company gets only around 14% of total sales from the traditional forest products supplied by Stora Enso and UPM-Kymmene. SCA said higher sales volumes and acquisitions boosted results, but that the effect was offset in part by lower product prices and negative currency effects. Shares fell however, on the disappointing outlooks from Stora Enso and UPM-Kymmene, and were down 2.0% to SEK266.5 in Stockholm.