JOHANNESBURG - SAPPI expects its recovery to continue into the second quarter after posting a reduced loss of $17 million (about R254.74 million) for the first quarter to end December, mainly due to dissolving pulp markets and graphic paper demand in North America recovering at a faster rate than anticipated.
The world’s largest manufacturer of dissolving pulp (DP) improved from the loss of $88m reported in the quarter to end September.
However, the performance was still below the profit of $24m achieved in the first quarter to end December 2019.
Its earnings before interest, tax, depreciation and amortisation (Ebitda) excluding special items declined by 29.50 percent to $98m during the quarter, down from $139m compared to the same quarter last year, but was up from $82m reported in the prior quarter.
Chief executive Steve Binnie said yesterday the performance showed a continued recovery in their results in the past nine months.
“Ebitda improved progressively from a low of $26m in our third quarter of 2020, due to the impact of Covid-19 to $98m. I am confident that our recovery is on track, despite the ongoing negative effect from Covid-19,” Binnie said.
He said as a group they outperformed the guidance provided at the end of the last quarter, with profitability across all reporting segments exceeding expectations.
However, the improvement in the companies performance was partially offset by the impact of the Ngodwana Mill maintenance shutdown in South Africa, which had been rescheduled from the third quarter of last year, as well as the scheduled Somerset Mill maintenance shutdown.
Sappi has operations in Europe, North America and South Africa.
In Europe, market conditions continued their slow recovery, with a 15 percent improvement in sales volumes and Ebitda double, compared to the previous year, however, profitability was still significantly below the prior year as Covid-19 infections
in Europe led to renewed and stricter lockdowns, which slowed the rate of economic recovery. In South Africa, DP sales volumes were 23 percent lower compared to last year, and were affected by shipping and logistical challenges, which resulted in higher inventory at the end of the quarter.
Looking ahead, Binnie said despite the ongoing impact of Covid-19, the firm expected profitability in the second quarter to improve relative to the first quarter.
“As of January 29, the Chinese market price had improved to $895/ ton, driven by a number of positive factors including low inventory levels, rebounding textile demand, higher
VSF prices and favourable $/Renminbi currency movements. The full benefit of the rising DP prices will be phased through future quarters due to the quarterly lag in contract pricing,” he said.
Sappi’s share price closed 1.47 percent lower at R44.20 on the JSE yesterday.
BUSINESS REPORT