Sappi sees improvement in Southern African business

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“Overall, this has been a good year for the Southern African business, with an expanded specialised cellulose business and the restructured paper business consistently delivering enhanced margins,” the company said.

“The performance of the Southern African business improved compared to the equivalent quarter last year due to increased sales volumes for dissolving wood pulp, as well as higher average prices for paper and paper packaging.”

However, Sappi reported a decline in overall sales to 1.50 billion US dollars in the 2014 quarter from 1.53 billion US dollars for the same quarter in 2013.

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

The group’s operating profit was at 76 million US dollars in 2014, this from a loss of 110 million US dollars in 2013 and it reported a profit for the period of 68 million US dollars from a loss of 149 million US dollars in the September 2013 quarter.

Basic earnings per share increased to 13 US cents in the 2014 quarter from a loss per share of 29 cents in 2013.

[DATA SAP:Sappi] indicated that markets would remain challenging, both for graphic paper, where demand is expected to continue to decline, and for dissolving wood pulp due to current pricing pressures.

“In the dissolving wood pulp market, demand remains robust. US dollar prices have weakened post the financial year due to pressure from lower cotton prices and the continued oversupply of dissolving wood pulp and viscose staple fibre production capacity,” it said.

“We will continue to focus on cost management in order to maintain our current margins for the overall specialised cellulose business.”

(READ MORE: Sappi focuses on cost cutting initiatives)

It also stated that capital expenditure in 2015 is expected to be in line with that of 2014, and focussed largely on the investments at Sappi’s Kirkniemi and Gratkorn mills.

“The expected improvement in the underlying operational performance of the paper businesses will be offset by lower US dollar dissolving wood pulp pricing and the impact of the projects at Gratkorn and Somerset,” Sappi said.

“We are considering utilising our increased cash reserves to repay and refinance a portion of our debt in order to lower future costs. We expect to reduce our net debt further over the course of the year and to reduce our financial leverage towards our target of two times net debt to EBITDA.”