Commenting on the group’s results, Sappi Chief Executive Officer Steve Binnie said: “I am pleased with the continued recovery in our results over the past nine months. EBITDA improved progressively from a low of US$26m in our third quarter of 2020 due to the impact of COVID-19 to US$98m for the first quarter of our 2021 financial year. I am confident that our recovery is on track despite the ongoing negative affect from COVID-19.”
He continued: “As a group we outperformed the guidance provided at the end of the last quarter with profitability across all reporting segments exceeding expectations. During the quarter, the global surge of COVID-19 infections and the related employee absenteeism put all of our operations under pressure. In spite of the unprecedented obstacles that have arisen as a result of the pandemic and through the dedication and resilience of our workforce, our mills remained fully operational.”
Looking forward, Binnie stated: “Despite the ongoing impact of COVID-19, we expect profitability in the second quarter to improve relative to the first quarter. Ensuring the safety of our employees and supporting our customers and communities is a priority and our comprehensive COVID-19 action plan remains relevant and in place.”
Financial summary for the quarter
*EBITDA excluding special items US$98 million (Q1 FY20 US$139 million)
*Net debt US$2,056 million (Q1 FY20 US$1,916 million)
*Loss for the period US$17 million (Q1 FY20 Profit of US$24 million)
*EPS excluding special items -1 US cent (Q1 FY20 6 US cents)
For the quarter, the overall improvement was due mainly to dissolving pulp (DP) markets and graphic paper demand in North America recovering at a faster rate than anticipated. These benefits were partially offset by the impact of the Ngodwana Mill maintenance shut, which had been rescheduled from the third quarter of last year, as well as the scheduled Somerset Mill maintenance shut.
The economic effects of the COVID-19 pandemic continued to impact performance with graphic paper sales still well below 2019 levels. The pandemic also severely affected global shipping and container availability which somewhat reduced our DP sales volumes in the quarter.
DP markets tightened considerably, and market prices rallied by US$106/ton through the quarter. Key drivers behind the price increase included DP capacity curtailment, resurgent viscose staple fibre (VSF) demand and prices, higher paper pulp prices and a weaker US$/Renminbi exchange rate. The impact of COVID-19 related shipping challenges combined with the Ngodwana Mill shut and reduced production volumes from the Saiccor Mill due to the temporary halting of the calcium line, reduced DP sales volumes by 16% compared to the same quarter last year.
Packaging and speciality papers sales volumes in all three regions experienced encouraging growth compared to the prior year. While demand for most categories was positive, some non-essential products in Europe were affected by the COVID-19 related lockdowns and other governmental measures. Profitability was partially reduced by lower selling prices linked to depressed pulp prices.
Graphic paper demand continued to slowly recover from the impact of COVID-19 and volumes were down 19% compared to the same quarter last year, an improvement on the 32% reduction experienced in the prior quarter. While North America recorded a strong recovery, soft coated mechanical (CM) demand in Europe, weak export markets in South America and Australasia and low selling prices were a drag on profitability in this segment. The group took production downtime of 125,000 tons in the quarter, entirely in Europe, which was less than the 321,000 tons required by the group in the prior quarter. South African newsprint and uncoated woodfree demand continued to be adversely impacted by the weaker domestic economy.
https://www.sappi.com/sappi-shows-a-recovery-in-results-for-first-financial-quarter-2021