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Durban - Ralph Boëttger, CEO of paper and pulp producer Sappi, conceded that a forecast €1bn in sales from four mills bought in its €750m acquisition of Finland's M-real last year had "disappeared" owing to the global economic crisis.
In an interview with Fin24.com, Boëttger said the global economic downturn "... came faster and deeper than anyone expected". He was hopeful it could be clawed back adding that turnover would "increase dramatically" in 2010.
However, Boëttger questioned whether global paper markets would return to their former levels, despite the measures Sappi has taken to remove capacity from the industry.
When the M-real deal was being finalised last year, before Sappi's €450m rights issue to partly fund the transaction, the struggling Finnish coated graphic paper producer issued a statement saying the deal was "expected to reduce M-real's annual sales by approximately €1bn".
Sappi should therefore have increased turnover by around €1bn. Sales for the last quarter did rise to $1.55bn from the third quarter's $1.32bn, but over the financial year sales were down 8% to $5.37bn.
"You're right, sales should have increased through the transaction. Typically in this type of transaction you should pick up about 80% of the sales, some customers will always go. But turnover did not come through because of the downturn," Boëttger said.
The annual downturn in sales was worse then the reported 8% drop because it was coming from a much larger business after buying M-real, he said. "On a like-for-like basis, sales were down more, probably by about 20% if it were not for the M-real business."
However Sappi was exceeding its synergy cost savings from the deal, banking €73m. "It's crucial for us not to drop the ball as markets come back up," said Boëttger.
"Over the last quarter demand in our order books improved. Demand for chemical cellulose exceeds what we can supply for the next six months. But the recovery of markets in North America and Europe is likely to be slow."
- Fin24.com