Sappi’s SA operation adds some gloss


Sappi’s SA operation adds some gloss

Published Date: 2019-02-07 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sappi’s SA operation adds some gloss

The pulp and paper producer says it has benefited from the diversification of its portfolio of products.

A strong performance from its SA operations has cushioned Sappi from weaker conditions at its European businesses.

Releasing quarterly results yesterday, the paper and pulp producer said its SA business delivered an "excellent" performance in the three months to end-December, with increased dissolving wood pulp (DWP) and packaging sales volumes combined with higher rand selling prices across the board. That more than offset energy and woodfibre cost pressures, it said. DWP is used to create viscose fibre for clothing and textiles, as well as other consumer products.

In Europe it was a different story as sluggish demand for coated graphic and packaging papers along with high input costs for paper pulp put pressure on its margins. However, it said higher selling prices and the inclusion of Cham Paper, the Swiss specialty paper business it bought a year ago, led to stable year-on-year profitability.

In the US, higher DWP and coated paper prices, combined with a shorter scheduled shutdown at its Somerset Mill, led to an improved operating performance for North America. Although coated paper demand in the US market began to weaken during the quarter average net selling prices were 13% higher than a year earlier.

Overall sales increased by 6.6% to $1.42 billion in the three months to end-December from a year earlier. Earnings before interest, tax, depreciation, and amortisation (EBITDA), excluding special items, rose 14.5% to $197 million. Earnings per share, also excluding special items, improved to 16c from 14c. Apart from improved operating profit, the group said it benefited from a lower tax charge for the quarter.

Given current weak graphic paper markets and paper pulp prices which remain elevated in Europe and North America, Sappi said EBITDA in the current quarter is likely to be below last year. However, it still expects its full-year results to be higher.

Its shares closed 5.1% down at R75.73 yesterday.

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