Sappi’s share price rose 4.1% to close at R45.17 on the JSE yesterday after it said it had concluded the consultation process to close its Stockstadt Mill, Germany, and had started the consultation process on the potential closure of the Lanaken Mill in Belgium.
The persistent global economic downturn was proving to be much tougher than anticipated, with depressed markets, geopolitical instability and weak economic growth combining to put significant pressure on Sappi, particularly in Europe, the firm said.
In July it had announced the start of a consultation process on the possible closure of Stockstadt Mill, had agreed on the social plan for the employees and had now completed this process. An agreement had now been signed for the sale of the site, while its closure of the site should be completed during the first calendar quarter of 2024. The impact was expected to be cash neutral.
“We continue to be faced with significant overcapacity in graphic paper, forcing us to take extended periods of costly commercial downtime. As the recent over-stocking by customers reduces, it has become very clear that demand will not return to previous levels. Combined with input cost pressure, we do not see this situation, caused by factors beyond our control improving in the foreseeable future,” it said.
Sappi said its strategic focus included reducing exposure to the graphic paper segment while expanding its presence in packaging, speciality papers, pulp and biomaterials.
Sappi Europe was focused on building a sustainably resilient company. This requires evaluating the future of all facets of the business based on market dynamics and the market segments Sappi believed will be strongest in the future.
“While continuing to serve the graphic paper market through its competitive assets, the overall priority of the European business will be to grow the packaging and specialities segment, specifically within flexible packaging, functional papers, self-adhesives including glassine, labels, as well as dye-sublimation categories. Restructuring measures result in a better utilisation of Sappi’s remaining assets to the benefit of our customers,” it added.