JSE-listed Sappi delivered solid profits of 81% and reduced debt by a further 17% for the year ended June 30, 2017.
The company reported earnings before interest, taxes, depreciation and amortisation of $155-million for the period and earnings per share of 11c.
“Sappi’s third quarter is seasonally and historically its weakest quarter owing to the slow-down in business activity during the northern hemisphere summer holiday period and Sappi’s choice to use this quarter to undertake major annual maintenance shuts,” CEO Steve Binnie said on Thursday.
He highlighted that the packaging paper business in South Africa had another positive quarter with higher sales volumes.
Costs in the quarter were impacted by the planned yearly maintenance shutdown at Ngodwana Mill and replacement of economiser tubes at Saiccor Mill.
“Based on current market conditions, including higher paper pulp prices and the current rand/dollar exchange rate, the group’s fourth quarter operating performance will probably be slightly below that of last year,” he said.
Binnie added that Sappi’s projects to increase capacity of specialty packaging in Europe and the US were progressing as planned.
During the quarter, capital expenditure of $78-million was related mainly to these projects, along with the next phase of the dissolving wood pulp (DWP) debottlenecking projects at Ngodwana and Saiccor Mills.
These projects will contribute increased volumes in our high growth business segments.
The specialised cellulose business delivered higher sales volumes and higher average dollar selling prices compared with the previous year, driven by healthy demand and higher viscose staple fibre prices in the Chinese market.
In Europe, the specialty packaging business continued to achieve strong sales growth and profit margins, while the graphics paper business partially achieved price increases.
“However, higher raw material prices contributed to a reduction in profitability compared to the prior year,” he said.
In the US, the benefits of higher DWP volumes and pricing compared to last year, in addition to increased packaging and coated paper sales volumes, were offset by the ongoing weakness of coated paper prices.
“The success of cost containment programmes and efficiency gains led to a constant year-on-year result,” Binnie said.