Sappi Delivers Solid Profit During Third Quarter

Financial summary for the quarter to end June 2017

  • Profit for the period US$58 million (Q3 FY16: US$32 million)
  • Net debt US$1,318 million, down US$265 million year-on-year
  • EPS excluding special items 11 US cents (Q3 FY16: 11 US cents)

Sappi Chief Executive Officer Steve Binnie, commenting on the group’s performance, said:

“I am pleased to report that during the past quarter Sappi delivered profits up 81% from a year ago, reduced debt by a further 17% (US$265 million) year-on-year. We also repaid US$400 million in bonds from cash reserves which will generate savings of approximately US$21 million per annum on our net interest charge.

“Sappi’s third quarter is seasonally and historically its weakest quarter due to the slow-down in business activity during the Northern Hemisphere summer holiday period and Sappi’s choice to use this quarter to undertake major annual maintenance shuts. The past quarter’s earnings (EBITDA ex special items) at US$155 million where almost flat on a year ago. Higher volumes were offset by higher raw material prices and a stronger Rand/Dollar exchange rate.

Based on current market conditions, including higher paper pulp prices and the current Rand/Dollar exchange rate, we expect the group’s fourth quarter operating performance to be slightly below that of last year. The full year result is likely to be above that of the prior year.”

The period under review:

The specialised cellulose business delivered higher sales volumes and higher average Dollar selling prices compared to the previous year driven by healthy demand and higher viscose staple fibre prices in the Chinese market.

In Europe, the speciality packaging business continued to achieve strong sales growth and profit margins while the graphics paper business partially achieved price increases announced in April. However, higher raw material prices contributed to a reduction in profitability compared to the prior year.

In the US, the benefits of higher dissolving wood pulp (DWP) volumes and pricing compared to last year in addition to increased packaging and coated paper sales volumes were offset by the ongoing weakness of coated paper prices. The success of cost containment programmes and efficiency gains led to a constant year-on-year result.

The packaging paper business in South Africa had another positive quarter with higher sales volumes. Costs in the quarter were impacted by the planned annual maintenance shut at Ngodwana Mill and replacement of economiser tubes at Saiccor Mill.

Our projects to increase capacity of speciality packaging in Europe and North America are progressing as planned. During the quarter capital expenditure of US$78 million was related mainly to these projects along with the next phase of the DWP debottlenecking projects at Ngodwana and Saiccor Mills. These projects will contribute increased volumes in our high growth business segments.

read more/source: https://www.sappi.com/sappi-pays-down-debt-further-and-delivers-solid-profit-during-third-quarter

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