Sappi focuses on cost cutting initiatives - CNBC Africa

Sappi focuses on cost cutting initiatives


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Sappi's Alfeld mill is located in Hanover, Germany. PHOTO: Wikipedia

For the third quarter (Q3) ended June 2014, the company reported total earnings before interest, taxes, depreciation and amortisation (EBITDA) of 140 million US dollars excluding special items with an operating profit of 67 million US dollars and total profit of 17 million US dollars.

Earnings per share were three US cents compared to a loss of 9 US cents for the prior comparable quarter.

(READ MORE: Sappi posts Q1 profit of $18 mln)

Sappi’s European businesses posted the strongest performance despite undergoing a seasonally slow period.

“The stronger than expected coated woodfree paper market, coupled with excellent ongoing cost control and focus, has led to steady progress in the European business, an important cash contributor to the group. Two important capital projects at Gratkorn and Kirkniemi are underway, allowing us to make further headway in improving the financial performance of this business,” said [DATA SAP:Sappi Limited] in a statement.

Sappi’s Southern African business also reported an improved performance for Q3 2014 due to growth in demand during the region’s fruit export season.

(READ MORE: Sappi's sees Q2 progress in Southern Africa)

However, the company continues to experience price pressure as a result of the competitiveness of the dissolving wood pulp market and weak viscose staple fibre pricing. But Sappi demand remains strong and all its mills are sold out for the rest of 2014.  

Sappi’s North American business, on the other hand, was impacted by several planned and unplanned outages at its pulp mills as well as the declining price in the coated paper markets.

The company said however that price increases for coated woodfree web paper announced during Q3 will bring some relief to the market during Q4 2014.

(READ MORE: Sappi says CEO to step down due to ill-health)

“The North American business has experienced an extremely difficult year with cost and price pressures in graphic paper, inclement weather and some operational challenges. There are early signs that the graphic paper business will see improved returns with good volumes and higher pricing going forward,” continued the statement.

“The fourth quarter is a seasonally stronger quarter and we believe that the results for the quarter will continue the trend of improved year-on-year quarterly performance which we have experienced throughout 2014.”