Sappi suffers profit slump, its debt burden grows to R28 billion

The paper and packaging producer Sappi reported a grim set of results for the three months to end-December, with sales down 8% to $1.3 billion. Its profit slumped, with headline earnings down 73%.

Its net debt rose by 23% to $1.9 billion (R28 billion), in part due to the acquisition of a Canadian pulp mill.

Sappi’s share price was up almost 2% at the start of trading on Wednesday, but continues to trade around its lowest level in six years.

“A good performance from the European and North American packaging and specialities segment and satisfactory results from the graphic paper businesses were not enough to offset the significant impact from the unprecedented and markedly lower dissolving wood pulp prices,” Sappi said.

Profitability in the packaging and specialities segment improved despite a particularly sluggish containerboard market in South Africa, it added.

The substantial market share gains in coated woodfree paper in both North America and Europe countered the ongoing deterioration in graphic paper demand.