Sappi has reported a net profit of $58m for this financial year’s third quarter, compared to $32m for the same period last year.
For Q3, its earnings per share stood at $0.11, excluding special items. Sappi had also reduced its debt by a further 17% or $265m, in a year-on-year basis.
Presently, its net debt is $1.3bn. It also repaid $400m in bonds with its cash reserves, which can generate savings of up to $21m per annum in its net interest charge.
The company’s packaging business in its native market South Africa turned out to be a positive quarter with high sales volume. However, planned annual maintenance shut at Ngodwana Mill and replacement of economiser tubes at Saiccor Mill had an impact on its costs.
The company’s specialised cellulose business saw higher sales volumes and higher average dollar selling prices, compared to last year. The sales are being attributed to the increased demand of viscose fibre stable from the Chinese market.
In the European market, its speciality packaging business showed strong sales growth and high profit margins, while its graphics paper business saw a partial increase in price. But most importantly, increase in the price of raw material, reduced its profitability in the region for the period.
In the US, the advantages of higher volumes of dissolving wood pulp (DWP) and pricing were negated by the ongoing weakness of coating paper prices. Thanks, to cost containment programmes, the company maintained a constant year-on-year result.
Sappi CEO Steve Binnie said: “Sappi’s third quarter is seasonally and historically its weakest quarter due 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.
“The past quarter’s earnings (EBITDA ex special items) at US$155 million where almost flat on a year ago. Higher volumes were offset by higher raw material prices and a stronger Rand/Dollar exchange rate.
“Based on current market conditions, including higher paper pulp prices and the current Rand/Dollar exchange rate, we expect the group’s fourth quarter operating performance to be slightly below that of last year. The full year result is likely to be above that of the prior year.”