Sappi released its financial results for the first quarter of fiscal year 2026, ending 31 December 2025, reflecting challenging market conditions across its major segments.
The group reported adjusted EBITDA of US$90 million for the quarter, down year on year, as pricing pressure, currency movements and operational disruptions weighed on performance.
Management cited ongoing macroeconomic uncertainty, subdued consumer confidence and industry overcapacity as key factors driving weaker pricing across product categories. Results were further impacted by a stronger South African rand against the US dollar, a combination of scheduled and unscheduled maintenance, and lower prices for dissolving wood pulp (DWP). These effects were partly offset by group-wide cost-saving initiatives and annual energy refunds in Europe.
Cost discipline and balance sheet focus
In response to the softer environment, Sappi continued to tighten capital discipline. The company reduced its capital expenditure outlook for FY2026 to approximately US$260 million, aiming to preserve cash and proactively manage its balance sheet. Liquidity improved after quarter-end following the renewal of the international revolving credit facility and the addition of a new term loan.
Sappi remains focused on executing the “Back to Basics” phase of its Thrive strategy, prioritising cost control and targeted operational efficiency measures to maintain flexibility during the downturn.
Segment performance
The pulp segment saw a mixed performance. While demand for DWP remained supported by healthy downstream viscose staple fibre operating rates, pricing pressure persisted. Net selling prices were below prior-year levels, particularly in China, offsetting higher sales volumes and negatively impacting profitability.
In packaging and speciality papers, sales volumes increased year on year across all regions. However, profitability declined due to lower pricing and higher costs, notably from maintenance-related downtime and ramp-up inefficiencies at the Somerset Mill PM2 in North America. Paperboard markets in North America and Europe remained affected by weak demand and oversupply, despite resilient containerboard demand in South Africa.
The graphic papers segment continued to face structural headwinds. Sales volumes declined following capacity reductions in North America, and pricing pressure remained pronounced, particularly in Europe. While margins stayed above historical averages, overall profitability fell compared with the prior year.
Joint venture discussions and outlook
Sappi also confirmed progress on a proposed 50/50 joint venture with UPM in graphic papers. The transaction would combine Sappi’s European graphic paper operations with UPM’s Communications Paper business across Europe, the UK and the US. Definitive agreements are expected in the first half of 2026, with completion targeted by year-end, subject to regulatory approvals.
Looking ahead, management adopted a cautious stance. Exchange rate headwinds, continued pressure on DWP pricing and geopolitical and trade-related uncertainty are expected to weigh on performance. As a result, Sappi anticipates adjusted EBITDA in the second quarter of FY2026 to be lower than in the first quarter.
Sappi is a global producer of woodfibre-based products, supplying pulp, packaging and speciality papers, graphic papers and biomaterials. The company operates manufacturing facilities across Europe, North America and Southern Africa, using fibre sourced from sustainably managed forests. Sappi’s shares are listed on the Johannesburg Stock Exchange.
Source: Sappi
