Nompumelelo Magwaza

SAPPI was selling 30 000 hectares of its pine forest land in Mpumalanga as a result of the conversion of its Ngodwana mill from a fibre line to a dissolving pulp mill, the group chief executive Steve Binnie said yesterday.

The land, which is believed to be worth about $60 million (R638m), will continue to be used as a forest by the unidentified buyer.

Binnie said the 30 000ha plantation was a small part of the 500 000ha of land owned by the paper maker locally.

“It is a lot of land but bear in mind that we have 500 000ha of land in South Africa, and this makes the percentage of this land sale very small.”

Binnie said the sale of the land was necessitated by the conversion of the Ngodwana mill. “Our need for [pine wood] became less and we had a need for more hard wood which goes into the dissolving pulp.”

In June, Sappi converted a fibre line at the mill to produce 210 000 tons a year of specialised cellulose. This product is a sought-after natural, renewable fibre with a wide range of uses in the textile, consumer goods, foodstuff and pharmaceutical industries.

However, Binnie said this did not mean that Sappi was cutting back on its paper business, which used pine wood.

“It’s just that we had an excess of land, which we could sell and we thought it would be best,” he said.

Sappi delivered net income of $17m in its third quarter to June, compared with a loss of $47m a year ago. Sales rose to $1.48 billion from $1.42bn in the previous comparable period.

“Sappi has done a lot of good work to turn around the loss experienced last year to [a] profit. This was achieved mainly through internal initiatives, which included reduction of costs across the business, especially in Europe,” Binnie said.

Through these initiatives, Sappi has been able to raise about $60m. Sappi also plans to reduce its debt to $1.6bn within two years from $2.29bn at the end of June.

Sappi declined 5.37 percent to close at R40.69 yesterday.