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Johannesburg - Paper maker Sappi [JSE:SAP] fell to a fourth-quarter loss on Thursday hurt by continued weak demand from the slowdown in the global economy, and said market conditions remained uncertain.
As the paper industry struggles to recover from a slump caused by anaemic demand and overcapacity, Sappi is closing mills and targeting higher-margin businesses.
Sappi, the world’s largest maker of fine paper used in glossy magazines, reported a loss per share of 24 US cents for the quarter to end-September, compared with earnings of 16 US cents a year earlier.
It said operating profit, excluding special items, fell to $80m for the quarter, against $129m last year.
Rivals Mondi [JSE:MND], UPM-Kymmene's and Stora Enso have also warned of continued weak demand.
Sappi is closing mills in Switzerland and South Africa to focus on more lucrative products such as as pulp-derived chemical cellulose, which is used to make viscose fibre, cellophane and other products.
Sappi, which has operations in Europe and North America, said it would invest about $170m to convert its Kraft pulp mill in North America to produce 330 000 tonnes of quality chemical cellulose annually. The conversion is planned to come on line in 2013.
The company also said it would spend $13m to upgrade coated paper capability at Somerset Mill.
Sappi’s shares were down 1.23% at R21.46 as of 07:25 GMT, compared with a 0.54% fall in the Johannesburg's All Share [JSE:J203] Index.
