Share

Sappi hits 7-year high on profits, debt plan

Johannesburg - Paper maker Sappi posted a 14% rise in quarterly profits on Thursday and announced plans to cut debt costs, sending shares soaring 10% to a seven-year high.

Sappi's shares jumped to R59.84, trading at levels last seen in 2008 as fourth quarter profits rose due to lower debt costs and higher sales in all regions.

The company said it was considering paying down and refinancing its debt to lower interest costs next year, targeting two times net debt-to-EBITDA.

Net debt reached $1.77bn by end-September down from $1.95bn in the same period last year. As a result of expected lower debt costs, Sappi sees profits rising in 2016 compared with 2015.

Chief executive Steve Binnie said Sappi will use cash flow generated from operations to pay down some debt and associated costs.

The world's largest maker of the fine paper used in glossy magazines said in the three months to September headline earnings per share - the main profit gauge in South Africa which excludes certain one-time items - totalled 16 US cents from 14 cents last year.

Sappi 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.

The worst drought in South African province of KwaZulu Natal in over a century could cost the company between $5m and $10m in the first quarter of 2016, Binnie told Reuters.

The company operates three mills in the drought-hit province but Binnie said profits in the first quarter would still show an improvement compared with the first three months of this year.

Sales in Sappi's biggest market Europe rose 7 percent to €609m in the seasonally strong quarter, boosted by higher sales in the wood-free coated segment but profits were capped by a weaker euro.

The sale of its Enstra mill and Cape Kraft mill in South Africa is expected to be concluded by November 2015 for about R600m, Binnie said.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.89
+0.2%
Rand - Pound
23.87
+0.1%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.12
+0.1%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders