A cautious outlook and dividend disappointment knocked shares in Finnish pulp and paper maker UPM-Kymmene on Tuesday, despite it notching up record profits for 2016.
UPM has so far protected its profitability with cost cuts as well as its focus on pulp, a product with a brighter outlook than paper. Pulp is also used to make tissue and packaging board, which are seeing growing demand, particularly from China.
For this year, UPM said it expected profitability to "remain on a good level", which investors took as a sign of a halt in earnings growth and hit the company's shares.
The stock had dropped 9.8 percent by 0857 GMT, making it the biggest faller in the STOXX 600 index.
"2016 was an excellent year for them. But it will be a difficult task to improve profitability from here, with the current business portfolio," said Inderes analyst Antti Viljakainen, with a "reduce" rating on the stock.
In a sign of the shift in its business, during the fourth quarter UPM expanded its pulp production capacity in Finland, while announcing plans to close paper capacity in Germany and Austria.
UPM is the world's largest maker of graphic papers such as newsprint and magazine paper, where demand is falling in the West due to a shift from print to digital publishing.
The company said its fourth-quarter adjusted operating profit rose 15 percent from a year ago to 283 million euros ($303 million), slightly ahead of analysts' average forecast of 275 million euros in a Reuters poll.
UPM also proposed an annual dividend of 0.95 euros, up from 0.75 euros a year earlier but below 1.05 euros in the poll. The company had recently said it was considering a special dividend.
The company also lifted its long-term profitability targets for most of its business areas, saying it was looking into opportunities to "develop business and product mix and further improve cost competitiveness", but gave no further details.