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Sappi delivers strong first quarter
Sappi has published its first quarter report. Financial summary for the quarter includes:
- EBITDA excluding special items US$197 million (Q1 2018 US$172 million)
- Profit for the period US$81 million (Q1 2018 US$63 million)
- EPS excluding special items 16 US cents (Q1 2018 14 US cents)
- Net debt US$1,557 million (Q1 2018 US$1,349 million)
Commenting on the result, Sappi Chief Executive Officer Steve Binnie said: “In a difficult operating climate, the resilience of the business and the benefits from the diversification of the product portfolio in recent years were emphasised during the quarter. Profitability was in line with our guidance at the end of the 2018 financial year. EBITDA excluding special items increased by 15% and profit increased by 29% from a year ago. We continue to work hard to mitigate increased input costs and weaker global graphic paper markets. The dissolving wood pulp business continued to enjoy stable pricing and healthy customer demand.”
Binnie added that “Our strategy to invest in higher margin growth segments continues to bear fruit. Overall sales volumes for packaging and specialities increased by 27% year-on-year. In Europe the volumes increased by 50% year-on-year following the completion of the Maastricht Mill conversion and the inclusion of the Cham Paper volumes and in North America sales volumes of existing packaging grades and new paperboard grades helped drive packaging and specialities volumes 68% higher than those of last year. In South Africa packaging volumes also increased year-on-year, supporting a strong improvement in operating performance for the business.”
Input cost pressures on non- or partially integrated mills persisted due to elevated paper pulp prices, which impacted margins. These cost pressures and sluggish demand in some market segments were offset by higher sales, higher selling prices and market share gains in other segments along with good fixed cost control.
Looking towards the rest of the year, Binnie indicated that “Sappi expects EBITDA in the second quarter of financial year 2019, given current exchange rates, to be slightly below that of 2018 due to current weak graphic paper markets and paper pulp prices which remain high in Europe and North America. However, the full year result is expected to be above that of the prior year.”