DURBAN – Sappi shares plunged by more than 15 percent on Thursday after the leading global producer of dissolving wood pulp reported weak earnings as sluggish graphic paper demand and dissolving wood pulp prices weakened significantly in the quarter to end June.
The group's profits tumbled by 84 percent to $8 million (R115.99), down $51m compared to last year, due to the lower operating profit and a $9 million once-off finance costs charge to the income statement for the refinancing of the 2022 bonds.
Its earnings before interest, tax, depreciation and amortisation (Ebitda), excluding special items, declined by 24 percent to $118m while earnings per share (Eps) excluding special items declined by 60 percent to 4 US cents a share compared to last year.
Sappi chief executive Steve Binnie said although their third quarter was traditionally lower due to northern hemisphere summer holidays, the results for the quarter were under pressure.
“We faced challenging market conditions across all our major product categories, but in particular from sluggish graphic paper demand in Europe and North America, which necessitated production downtime and weak dissolving wood pulp (DWP) prices due to soft viscose staple fibre (VSF) markets. In addition, annual maintenance shuts which impact production and sales volumes were completed at Ngodwana, Saiccor and Cloquet mills,” Binnie said.