Sappi second quarter beats expectations on the back of higher selling prices and sales volumes

Commenting on the results, Sappi Chief Executive Officer Steve Binnie said: “I am very satisfied with our performance for this quarter as reflected by increased sales, EBITDA and net profit. I’m particularly pleased that all regions were able to deliver higher sales volumes despite the short-term impact of the expansion and conversion projects. We faced higher raw material costs, in particular pulp, for our paper businesses but were able to increase selling prices to offset most of this impact. The acquisition of the Cham speciality paper business was completed during the quarter and the integration into Sappi is moving ahead smoothly.”

Turning to the next quarter, Binnie stated: “Our operating performance for the third quarter is expected to be in line with that of the prior year as the impact of the stronger Rand and the various capital projects underway will offset the improved paper markets.”

Financial summary for the quarter
EBITDA excluding special items US$211 million (Q2 2017 US$208 million).
Profit for the period US$102 million (Q2 2017 US$88 million).
EPS excluding special items 17 US cents (Q2 2017 17 US cents).
Acquisition of Cham speciality paper business completed.
Net debt US$1,632 million (Q2 2017 US$1,329 million).

The major factors which influenced the second quarter’s results include:
Dissolving wood pulp (DWP) demand remained strong with pricing improving steadily during the quarter
Demand for specialities and packaging papers continued to grow across all regions and all major product segments, only constrained by our current production capacity. EBITDA margins improved to 15%
European and export printing and writing papers markets were stable, allowing for the implementation of coated paper price increases that have offset much of the rise in paper pulp costs. In the US, sales volumes increased in all product categories and higher graphic paper prices were achieved
Paper pulp costs continued to rise throughout the quarter, and
A stronger Rand/US Dollar exchange rate lowered the profitability of the South African businesses.

Update on investments for growth
Acquisition of the Cham speciality paper business has been concluded. Positive earnings impact achieved.
Rockwell Solutions barrier coating technology is enabling new paper-based packaging solutions for key FMCG customers.
Projects in North America and Europe at Somerset, Maastricht, Alfeld, Ehingen and Lanaken Mills will boost higher margin, high growth specialities and packaging volumes.
Debottlenecking projects in Southern Africa and North America at Ngodwana, Saiccor and Cloquet Mills to maintain market share in DWP.
Regulatory approval process underway for the 110,000tpa expansion of Saiccor Mill in response to satisfy strong demand and positive DWP markets.
Investigations continue to identify further DWP capacity increase opportunities.

Commenting on investments to enhance the competitive advantage and increase speciality packaging and DWP capacity, Binnie said: “Our acquisitions, conversions and expansion projects are positioning us to take advantage of the move from plastics to natural fibre, biobased products and paper-based packaging alternatives. Sappi’s strategy of securing its leadership position in high quality printing and writing papers while expanding its footprint in higher growth and higher margins market segments has begun to deliver real value and this will only increase into the future.”
more detail at: https://www.sappi.com/sappi-second-quarter-beats-expectations-back-higher-selling-prices-and-sales-volumes

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