Johannesburg - Sappi [JSE:SAP], the world's largest maker of
fine paper used in glossy magazines, will only invest in more growth in its
lucrative chemical cellulose business after trimming its net debt to below
$2bn, its chief executive said on Wednesday.
The company said in May that it had reduced its net debt to
$2.133bn in the second quarter to end-March 2012, down slightly from the first
quarter.
The South African paper maker has said chemical cellulose,
which it produces from its own woods for conversion into raw materials for
clothing, plastics, food and pharmaceutical products, is one of the
higher-margin businesses it plans to expand on as the paper industry struggles
to recover from a slump caused by anaemic demand and overcapacity.
The company, the world's largest producer of chemical
cellulose, is currently investing a total of about $500m to boost its total
producton capacity to more than 1.3 million tonnes a year by 2013.
"We will only consider further investment in growth
once we are happy with our gearing and the debt levels," chief executive
Ralph Boettger told Reuters.
"We feel confident that we will reduce our net debt to
below $2bn at the latest by the end of the 2013 financial year."
The conversion projects at Cloquet mill in North America and
Ngodwana mill in South Africa were on track for startup in the third financial
quarter of 2013, the company said last month.
"A large proportion of the additional capacity has
already been taken care of in terms of long-term supply agreements with
customers, so it's a low risk investment that we are making," Boettger
said.
Sappi posted healthy second-quarter earnings in May,
benefiting from aggressive cost cuts and a solid chemical cellulose business.