Sappi says demand is returning

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Sappi says demand is returning

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Published Date: 2020-11-06 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sappi says demand is returning

The paper and pulp group has reported a fourth-quarter loss but says demand for some of its products remains strong.

Sappi has reported a soggy end to its financial year due to big declines in sales of dissolving pulp and graphic paper. However, the group says industry demand for DP has recovered faster than expected as global clothing retail sales rebound.

The fourth quarter of its financial year followed the trend set the previous quarter when Covid-19 and global lockdowns, changes in consumer behaviour and logistical challenges had a severe impact on its business. DP, which is used to create viscose fibre, was impacted as retail stores were closed. The economic slowdown also affected demand for graphic paper.

Sales of DP declined by 29% over the quarter while graphic paper fell 32%. In response to lower demand, it temporarily shut the calcium line at its Saiccor production facility south of Durban and switched some capacity at its Cloquet mill in the US from dissolving pulp to paper pulp. Graphic paper demand in Europe and North America was most affected by Covid-19 between May and June. Since then, it experienced a slow recovery through to September. The decline in DP and graphic papers sales were offset by an increase in volumes of packaging and speciality products as strong sales growth at its US business made up for a slightly weaker performance in Europe. Its SA container board business also achieved a strong end to the year.

Total sales for the three months to end-September fell 25% to $1.09 billion, taking annual sales 20% lower to $4.61 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 56% to $82 million over the quarter, with full-year EBITDA down by 20% to $687 million. It reported a quarterly loss of 4c per share, excluding special items, while its annual loss amounted to 5c per share, down from earnings of 44c last year.

Sappi said the underlying performance of its business continued to improve in the first quarter of the new financial year, driven by the current recovery in DP and graphic paper markets. However, it said sales volumes would be impacted in both Europe and South Africa by usual seasonal weakness and maintenance shutdowns at its Ndogwana Mill in Mpumalanga and Somerset in the US.

The company's shares rose 3% to R25.53 yesterday.





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