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Sappi reports loss on slower demand
Sappi reports loss on slower demand

Sappi reports loss on slower demand


Business Day - Nov 11th 2011, 08:36

SAPPI , the global paper, packaging, pulp and chemical cellulose group, says fourth-quarter operating profit for the year ended September, excluding special items of $80m, was 33% higher than for the third quarter , but lower than the $129m for the same quarter last year. 

It says strategic initiatives saw asset impairment and restructuring charges of $165m, despite its North American operations and Southern African chemical cellulose business performing strongly. It also says its European business generated positive operating profit, excluding special items, but high input costs squeezed margins.

This left Sappi with a loss per share of 24 US cents, from earnings per share of 16c in the same quarter last year. However, earnings per share excluding special items and once-off debt refinancing costs was 2c from 9c in the earlier period.

"(This year) was a year of significant intervention — we took dramatic action to achieve a massive reduction in our cost base across our businesses," CEO Ralph Boettger said yesterday.

He said this would better enable the company to serve its customers, and adapt to changing market needs.

"It was also a year of major investment decisions to position our business for growth."

Mr Boettger said all of this hit the group’s net result, but he did not expect more once-off charges in the shorter term.

Sappi said while demand for chemical cellulose showed signs of softening on lower Chinese growth, it had sold a record 190000 tons of the product in the quarter. "The entire profit of the Southern Africa business in the last year was produced by chemical cellulose," Mr Boettger said.

He said it was a double-digit margin, fast-growing business, and that Sappi was the world’s largest global chemical cellulose supplier, at lowest cost.

But he said the group’s other businesses "had a very tough year", including fine coated paper used in media industries, the packaging business, newsprint operations and the A4 office paper division, and this had led to "drastic actions" by management.

Mr Boettger said he did not foresee any more mill closures for now, and market guidance was that the business would return to net profit next year, barring further global economic ructions.

He also said this financial year had started off well, with good underlying profit and operating profit, only to have slowed in the second half.

The company said it was adding focus to its chemical cellulose business, feeding textile industries in China, Indonesia, India and Europe. 

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