The world's largest paper makers yesterday warned that higher raw material costs would continue to hurt profitability even though demand is rising and will lead, in Europe, to higher newsprint and magazine paper prices this year.

Stora Enso, the world's largest producer of paper and paper board, said a weak US dollar and higher raw material costs had contributed to a 80 per cent drop in fourth-quarter pre-tax profits to €24.7m ($32m) from €114.8m and that these factors, plus shutdowns as it sought to rebuild three paper mills, would continue to hurt profits in the first part of 2005.