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Johannesburg- Pulp and paper maker Sappi's sales into Russia and Ukraine have been affected by the political crisis in the region, its chief executive said on Thursday, as the company posted a return to third-quarter profit.
Sappi [JSE:SAP] sells its products into Russia and Ukraine mainly from its key European operations, CEO Steve Binnie said.
"We are still selling into these countries but it has had an impact on our business. Our average monthly sales were about €10m and it has dropped to about €8m," he told Reuters in an interview.
Sappi, which also has operations in North America, has been facing headwinds due to a fall in demand for glossy paper as tablet computers and e-readers take a bite out of the traditional magazine industry and as retailers rely more on websites than printed catalogues.
It has closed some paper mills to focus on higher-margin businesses such as chemical cellulose, which is made from wood and used in clothing, plastics and pharmaceutical products.
It is now the world's largest manufacturer of chemical cellulose.
The company reported diluted headline earnings of 9 US cents per share for its April-June quarter, from a loss of 9c a year earlier as cost cuts in its key European business offset weak paper prices.
Headline earnings are the main profit gauge in South Africa and exclude certain one-time and non-trading items.
Despite the up tick in profit, Binnie reiterated that the company would only resume dividend payments after reducing its debt. Sappi has not paid out dividends since 2008.
"We have set ourselves a target of 2 times Ebitda for our debt. We are not sure exactly when we will get there but it’s unlikely to be in the 2015 financial year," Binnie said. "So we wouldn’t be resuming dividend this year or next year."
Sappi's net debt stood at about $2.3bn at the end of the June quarter, which translates to about 4.3 times Ebitda, according to Reuter’s calculations.
Its shares were down 4.19% at R41.20 at 15:40.
The shares are up 30% this year, outperforming a 12% rise in Johannesburg's All-Share index.
