Sappi falls into $126m quarterly loss, dragging down its share price by 2.42%
SAPPI CEO Steve Binnie said yesterday that market prices for the company’s products softened towards the end of its 2024 first quarter period to the end of December, with higher costs dragging it down from a $190 million (R3.6 billion) profit to a loss of $126m.
Shares in the company closed 2.42% lower at R44.27 on the JSE yesterday after it announced the quarterly. However, the Sappi share price is up 13.6% in the past three months.
The company is set to suffer additional cost increases owing to geopolitical uncertainty in the Middle East which will result in higher shipping costs.
Cost inflation is also expected to weigh down on the company during the current second quarter period to the end of March.
“Cost inflation remains a little bit of a risk (while) logistics is a bit of a challenge, because of the impact from geopolitical issues in the Middle East as shipping goes through that route. Instead of going down the Suez Canal we have to go around the Cape, around Africa and this adds to the cost ,because ships have to go a longer way around,” Binnie said during a results presentation yesterday.
Weaker global economic sentiment will likely suppress demand in the company’s products, he added. In the South African market, demand was solid, but Sappi had to contend with challenges from maintenance shutdowns at the Ngodwana and Saiccor mills.
The scheduled maintenance shutdowns at the Ngodwana and Saiccor mills had reduced DP sales volumes by 5% compared to the previous contrasting period.
“Market prices were a little bit subdued as we came towards the end of the quarter. In the packaging and speciality papers demand was sluggish in Europe, but better in North America,” explained Binnie.
This muzzled the company’s earnings, with earnings before interest, taxes, depreciation and amortisation (Ebitda) for the quarterly period falling from $290m a year ago to $156m. Earnings per share resultantly slowed down from $0.30 to $0.08.
Binnie said Sappi was anticipating “Ebitda for the second quarter to be somewhere close to that of the first quarter” period under review.
Despite the challenges experienced during the period, a weaker rand/US dollar exchange rate provided some respite for the company. This benefited the pulp segment, while the inclusion of a positive R484m plantation fair value price adjustment also weighed in.
“The South African business delivered a good performance for the quarter taking into account the negative impact of the planned maintenance shutdowns at the Ngodwana and Saiccor Mills,” Sappi said in its results statement for the period.