Finland's Kemira warned full-year profit could fall as demand for chemicals from its paper industry and municipal water authority customers weakens.

The company said it now expected full-year core operating profit to be at the same level or slightly lower than the €162 million reported in 2010. It had previously forecast an increase.

"The demand for chemicals for the paper industry in Europe and North America is expected to be lower than estimated. Some municipal customers have unexpectedly decreased their consumption of water treatment chemicals due to the challenging economic environment," the company said.

It also said mild weather in Europe had put back its de-icing product deliveries for airport runways, while high raw material prices also squeezed the company's bottom line.

Analysts said lower demand from the paper industry was not a surprise as paper companies had said demand was declining, but decreasing demand from municipalities was unexpected.

"I expected the company to reach its guidance when they did not change it in the quarterly report (in October)," said Pohjola analyst Pekka Spolander.

"Maybe the municipal side is cutting costs at the end of the year, but I still do not think it is becoming cyclical business," he added.

According to Starmine, analysts had expected Kemira's operating profit to increase to €167.6 million this year.

The firm supplies chemical products and systems for water treatment to oil and gas producers, paper and mining firms, as well as municipal water authorities and utilities. It has shifted its main focus to the growing water chemicals markets.