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Sappi Q1 profits triple

Photo: Sappi
Photo: Sappi
Published by
Simon Matthis - 11 Feb 2016

Sappi recently reported the following results of its fiscal first quarter 2016: Profit for the period was US$75 million (Q1 2015 US$24 million)EPS excluding special items was 13 US cents (Q1 2015 5 US cents).

Commenting on the result, Sappi Chief Executive Officer Steve Binnie said: "Operating performance in the quarter was strong and substantially above the equivalent quarter last year. The group increased EBITDA excluding special items by 21% to US$175 million, operating profit excluding special items by 51% to US$112 million and profit for the period by 213% to US$75 million.

"The Specialised Cellulose business continued to generate good returns during the quarter, with EBITDA excluding special items of US$74 million despite the impact of a severe drought in South Africa which had a negative impact of US$6 million on these results. US Dollar spot prices for dissolving wood pulp increased for most of the quarter. However, as the quarter ended, lower textile prices and the weaker Chinese RMB placed pressure on our viscose staple fibre customers. The weaker Rand/Dollar exchange rate led to increased Rand prices.

"The European business delivered a satisfactory performance, close to the targeted EBITDA excluding special items margin. Price increases in the past year, excellent variable and fixed cost control and the transfer of volumes from Metsä's Husum Mill all contributed positively to results. Profitability for the North American business was higher than that of the equivalent quarter last year due to a recovery in our coated paper sales volumes, the stabilisation of selling prices and lower variable costs. In addition, the comparative quarter was negatively impacted by an extended annual maintenance shut at our Somerset Mill. Profitability for the paper business in South Africa progressed further in this quarter, notwithstanding the sales of the Cape Kraft and Enstra Mills. Higher selling prices for packaging grades offset raw material cost pressures from the weaker Rand.

"We expect the second quarter EBITDA to be in line with the first quarter and slightly ahead of the equivalent quarter last year. The quarter will be impacted by an extended annual maintenance shut at our Ngodwana Mill in South Africa and the annual maintenance stoppage at Saiccor which traditionally occurs in the third quarter. The total scheduled maintenance work in the group will negatively impact the quarter by approximately US$12 million when compared to the equivalent quarter last year.

"Based on current market conditions, and assuming current exchange rates, we expect that EBITDA excluding special items in the 2016 financial year will be higher than 2015. As a result of improved operating profits and lower expected finance costs, offset somewhat by increased tax charges, we expect strong growth in our earnings."