SEASONALLY WEAK
Sappi’s profit plummets 76 percent after planned maintenance shutdowns
SAPPI, the world’s largest producer of dissolving wood pulp, said third-quarter profit declined 76 percent after planned maintenance shutdowns in all three of its operating regions.
Profit was $4 million (R50m) in the three months to end-June, compared with $17m a year earlier, the company said on Friday. Revenue fell 14 percent to $1.27 billion.
Excluding special items, earnings per share were unchanged at 2c.
Basic earnings per share were 1c for the June quarter, down from 3c in the June quarter last year.
Earnings before interest, taxes, depreciation and amortisation (Ebitda), excluding special items, fell 22 percent to $109m in the third quarter from $140m in the 2014 June quarter.
A mill upgrade in Austria and planned annual maintenance shutdowns in North America, Europe and South Africa reduced profit by about $27m compared with a year earlier, Sappi said. A stronger US dollar also hurt profit margins in the Europe and North American business.
“The third quarter is seasonally the weakest for Sappi,” the company said.
“The specialised cellulose business continued to generate solid returns during the quarter, with Ebitda excluding special items of $56m. The planned annual maintenance shuts at Saiccor and Ngodwana reduced margins relative to the prior quarter,” Sappi said.
“The performance of the European business was adversely impacted by the higher cost of raw materials due to the stronger US dollar and additional pulp purchases during the upgrade of the recovery boiler at Gratkorn. The mar- kets for graphic paper continues to decline in Western Europe. But the weaker euro made exports more competitive and profitable,” Sappi said.
“In the South African paper business, the virgin fibre packaging grades continue to show good demand growth. But newsprint and recycled packaging paper demand were flat.”
Sappi is seeking to lower costs and cut debt as it focuses on pulp and packaging products for growth amid softening demand for graphic paper.
Net debt stood at $1.92bn at the end of June, down from $2.29bn the previous year.
Sappi’s shares finished down 6.59 percent at R41.25 on Friday. The stock has fallen 2.3 percent this year, compared with a 4.5 percent increase in the all share index.