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Sappi profit drops on lower selling prices

Feb 06 2013 08:48
Reuters

Johannesburg - Sappi [JSE:SAP] posted a fall in first-quarter profit on Wednesday, hit by lower paper and pulp selling prices, and said it expected market conditions to remain tough.

Sappi, the world's largest maker of fine paper used in glossy magazines, reported diluted headline earnings per share of 3 US cents for the three months to the end of December from 8 US cents a year earlier.

The company said operating profit, excluding special items, fell to $73m from $100m last year.

Sappi said market conditions for its paper business were expected to remain tough, particularly in Europe, and that its second quarter operating profit excluding special items was likely to be below the first quarter.

The global paper industry is struggling to recover from a slump caused by sluggish demand and over capacity and Sappi has turned its focus into higher margin businesses such as specialised cellulose to boost its earnings.

The company, which is also the world's top producer of chemical cellulose, is currently investing $500m in boosting its chemical cellulose capacity to more than 1.3 million tonnes a year.

Sappi produces chemical cellulose from its own woods for conversion into raw materials for clothing, plastics, food and pharmaceutical products.  

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