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Both companies released figures this week; for the six months to end-June, Mondi reporter €3.2bn in revenue and an operating profit of €263m. This was on the back of a strong performance from the international and European operations and improved performance from its South African operations.
Sappi followed with quarterly results showing an operating profit of US$88m. However, accounting changes saw the company revalue its assets down by US$105m, resulting in less flattering figures.
In a recent note to investors, Delphine Govender, a director at asset manager Allan Gray noted that over the past 25 years, Sappi has had a highly cyclical earnings history, achieving super-profits in one year, only to have earnings fall significantly a few years later.
Govender attributed much of Sappi's poor performance to weak European paper prices, which account for 60% of Sappi's coated paper sales.
She said a consolidation of the European coated-paper market will be vital before Sappi will be able to regain pricing power there.
"While the timing of this earnings recovery might depend on a few material events occurring, when these events eventually do occur, the impact on Sappi will be significant, and the returns will be solid."
However in an interview with Fin24.com last month, Shoaib Vayej, a resource fund manager at Sanlam Investment Managers expressed a preference for Mondi. Vayej cited the company's exposure to emerging markets as a plus.
According to the unit trust quarterly figures for the quarter ended June 2008, funds were net buyers of both Sappi, Mondi Ltd and Mondi PLC.
Mondi Ltd. saw net buying of 533 429 units with the newly established Clade Cash Flow Weighted Equity Fund being the largest buyer.
Mondi PLC saw net buying of 332 862 units with the highly rated Nedgroup Investments Rainmaker fund being the largest buyer.
Sappi however was the fund managers' preference, with a net buying position of 1.14m shares. The Investec Equity Fund was the major buyer, adding over 1 million units to its portfolio.
Since January this year, Sappi shareholders have been on a rollercoaster ride. Starting the year at around R97, the share price climbed steadily to a high of R121 before tumbling to the current R75 level.
- Fin24.com
