Sappi in talks with potential buyers for closed Usutu business

28th January 2010 By: Terence Creamer - Creamer Media Editor

Paper and pulp producer Sappi, which is in the final stages of closing its Usutu operations, in Swaziland, has received approaches from several interested buyers, but it could not disclose the nature of the bids at this stage.

Sappi CEO Ralph Boëttger said that the decision to close Usutu by the end of January, had been a "tough and unfortunate" one for the group, but he also stressed that it was the "right business decision".

"We are open to selling the forests and the mill," he said, adding that most of the offers, which numbered "more than ten", had been for the plantations.

Further, about half of those bids could be described and "serious", with, some of the bidders perceiving future sawmill or power generation potential.

Boëttger stressed Sappi was dealing with the closure, which was being heavily contested by labour unions, in a "professional and appropriate" manner. One union was seeking to have the mill liquidated, which would affect Sappi's ability to find an investor for other operations.

Negotiations were continuing on the terms of the retrenchment process, which would affect some 600 workers, as well as with potential buyers of the assets.

Speaking following the release of the group's first quarter results, for the three-months ended December 31, 2009, Boëttger also stressed that the JSE-listed group had no firm plans for any further plant closures.

However, he could not discount the possibility entirely, noting that the executive was committed to taking all necessary steps to return the business to full financial health.

A far-reaching restructuring exercise had already taken shape, affecting some 2 000 of the group's some 16 000 Southern African employees. But Boëttger insisted that, besides the Usutu process, no other retrenchments were being planned for during 2010.

Sappi reported materially improve operational results for the period, which were insufficient, however, to deliver a profit. The company reported a basic loss of 10 US cents a share.

The company also said that, although demand and prices for most of its products were expected to improve during 2010, the operating profit would be lower in the second quarter relative to the first, albeit still positive.

Operating profit during the first quarter, excluding special items, rose to $81-million from $25-million in the corresponding period last year. The result was also an improvement on the $31-million operating profit reported for the fourth quarter of 2009.