Sappi outlines R1.6bn capex plan

PULP AND paper company Sappi said yesterday that it was expecting to spend R1.6 billion in South Africa in capital investment projects in its Ngodwana mills and Saiccor plants. The group sees the dissolving wood pulp (DWP) segment as an area to invest in an effort to increase the volumes for this segment.

Chief executive Steve Binnie said South Africa remained important for the company, despite experiencing low economic growth.

“In Ngodwana we are spending about R900 million as we want to increase our dissolving wood pulp division. The project is on track and we are expecting it to be completed in mid-2018,” Binnie said. The group also said it is expecting to spend R700m in Saiccor to increase its capacity.

Sappi’s overall capital expenditure in the last quarter is expected to be $170m (R2.25bn).

“This includes the next phase of the DWP debottlenecking project at Ngodwana mill, the Somerset mill woodyard and the initial phases of the speciality packaging conversions at Maastricht and Somerset mills,” the group said.

Binnie said the third quarter was seasonally and historically its weakest quarter due to the slowdown in business activity during the northern hemisphere summer holiday period and Sappi’s choice to use this quarter to undertake major annual maintenance shuts.

Despite being the weakest quarter in the group’s history, Sappi managed to post improved results where profits were up by 81.25 percent to $58m, up from $32m, impacted negatively by once-off refinance costs of $23m.

Sappi’s share price rose 2.76 percent on the JSE yesterday to close at R89.24.