LISBON, Oct 27 (Reuters) - Portugal's pulp and paper producer Navigator announced a 40.7% drop in third quarter net profit on Tuesday, a slight improvement on its half-year results as a gradual reopening of economies drove demand.

The results were released after the stock market close. During the trading session, Navigator shares fell 3.23% to 1.858 euros, the lowest since mid-2012 and nearly double the fall in Portugal's benchmark index PSI20 of 1.83%.

At 31.2 million euros ($36.88 million), third quarter profits were significantly below last year's 52.6 million euros, but are an improvement on the company's second quarter profits of 13.4 million euros when global lockdowns shrank paper consumption.

Navigator, which sells more than 80% of its products to 130 countries on five continents and the rest to domestic clients, saw total sales fall 17.1% to 348.4 million euros between July and September this year, but says recovery is in evidence.

"All the group's wood-free, uncoated paper machines have been working at full speed since the beginning of the quarter," the company said.

"With the reopening of economies and the gradual recovery in demand for paper, Navigator saw a significant improvement in its activity."

EBITDA - earnings before interest, taxes, depreciation and amortisation - stood at 70.4 million euros in the quarter, a fall of 24.6% from last year but a recovery from the second quarter's 51.7 million euros.

The operating margin - EBITDA/sales - stood at 20.2% in the third quarter versus 17.8% in the previous quarter and 22.2% in the same quarter of 2019.

($1 = 0.8461 euros) (By Sergio Goncalves; Editing by Victoria Waldersee and Barbara Lewis)