OTTAWA, May 25 -- Rising costs will cut profits by about $500 million in Canada's paper products industry in 2005, according to the Conference Board's Industrial Outlook: Canada's Paper Products Industry - Spring 2005. "Although the industry's financial performance rebounded in 2004, operators are struggling to fully recover from the grip of a cyclical downturn over recent years, brought on by weak North American demand for newsprint and a stronger Canadian dollar," said Louis Thériault, Associate Director, Industrial Outlook. "Revenue gains will not keep pace with cost growth this year, leading to a significant decline in profit levels and weakened profit margins." "Declining exports are a major reason for rising costs in 2005, since many Canadian plants will operate below capacity. In addition, high energy prices will put downward pressure on profit margins." Industry profits reached $1.2 billion in 2004, but are forecast to fall off to slightly more than $700 million this year. Cost increases are forecast to moderate beginning in 2006, boosting profits to an estimated $1.3 billion - due largely to a recovery in the printing and writing papers segment. Plant conversions and additional consolidation will contribute to profit growth averaging 10 per cent per year between 2007 and 2009.