Due to deteriorating market conditions of the graphic paper business, particularly in Europe, as well as the decline in demand from all markets, the Sappi Group posted a significant dip in revenue.
The global paper and pulp group released its full year results for the fourth quarter and year ended September 2013.
Operating profit excluding special items for the year amounted to 191 million US dollars, compared to 403 million rand in 2012.
“The operating profit for the year was negatively affected by the once off impact of the dissolving wood pulp conversions at both the Cloquet and Ngodwana pulp mills and the speciality packaging conversion of paper machine two at Alfeld Mill,” said Ralph Boettger, chief executive officer of Sappi said in a statement.
Net cash generated for the quarter decreased from 203 million US dollars in 2012 to 111 million US dollars. Capital expenditure of 103 million US dollars for the quarter reflects the culmination of the capital expenditure related to the dissolving wood pulp conversion projects at Ngodwana and Cloquet.
The group’s net debt also increased from 1,9 million US dollars to 2,2 million US dollars as of the end of September 2013 due to capital investments.
“[This year] was an important transitional year for Sappi with the commissioning of major capital projects and further repositioning of the business. Our strategy to reposition Sappi for growth, higher margins and improved profitability is on track,” added Boettger.
The company believe that market conditions will remain challenging, particularly for the paper industry where demand for graphic paper in the United States and Europe are expected to decline at three per cent and six per cent per annum respectively.
However, with projects such as their major Specialised Cellulose conversion projects in South Africa and the United Stated successfully completed this year, they expect improved revenues and profitability for the year ahead.
“Our profitability in the 2014 financial year is expected to be better than that of 2013 as a result of a larger Specialised Cellulose business, the gradual improvement in performance of our European paper business, an improvement in the profitability of our Southern African paper business and the consistent performance of our North American paper businesses.” explained Boettger.
“The expected gradual improvement in the group’s underlying operational performance and reduced capital expenditure will also enable us to generate positive cash flow. This will enable us to lower our net debt levels towards achieving our short term target of 2 billion US dollars.”