Financial summary for the quarter
- EBITDA excluding special items, up over 40% to US$151 million (Q3 FY23 US$106 million)
- Profit for the period is up over 25% to US$51 million (Q3 FY23 US$40 million)
- EPS excluding special items is up by 4c to 9 US cents (Q3 FY23 5 US cents)
- Net debt of US$1,340 million (Q3 FY23 US$1,176 million)
Commenting on the group’s results, Sappi Chief Executive Officer Steve Binnie said: “I am pleased the Group delivered EBITDA (earnings) more than 40% above the prior year at US$151 million. Despite the third quarter being a seasonally slower period for our business, and the sluggish global economy, our results were in line with our guidance. Underlying profitability, excluding a US$30 million impact from scheduled maintenance shuts at Saiccor and Somerset Mills, remained steady quarter-on-quarter. This is a pleasing performance driven by sustained strong market conditions in the pulp segment, offset somewhat by a muted recovery in paper markets.”
Globally consumer sentiment showed signs of improvement as inflation continued to subside, which provided a boost for packaging and textile markets. However, graphic paper demand remained generally subdued, with the post-destocking cycle recovery of 2023 slowing during the quarter.
Market conditions for dissolving pulp (DP) continued to be favourable, supported by tight supply and strong demand, which was enhanced by high downstream viscose staple fibre (VSF) operating rates and low inventory levels. The hardwood DP spot market price was stable during the quarter rising by US$2/ton to end the quarter at US$942/ton. DP sales volumes and USD pricing were roughly in line with the prior year and quarter.
Graphic paper sales volumes increased by 13%, a substantial year-on-year improvement in profitability for the segment compared to the weak performance seen last year. However, the gradual market recovery following the destocking cycle of last year slowed during the quarter as underlying demand continues to be suppressed by global macroeconomic challenges and a likely shift in consumer behaviour following the COVID-19 pandemic. Escalating costs also impacted margins compared to the prior quarter.
The packaging and speciality paper segment experienced a challenging quarter. Paperboard demand in North America rebounded, but selling prices came under pressure, while the region was further negatively impacted by the scheduled Somerset Mill maintenance shut. European demand also improved, albeit off a low base. Market sentiment showed modest signs of recovery, particularly in the label and self-adhesive categories. Containerboard demand in South Africa was negatively impacted by a weaker than forecast citrus fruit season due to adverse weather events. Despite these headwinds, sales volumes were 22% above last year and improved by 10% quarter-on-quarter. The positive sales volumes momentum was, however, offset by rising costs and declining prices which negatively impacted the profitability of the segment.
The sale of the Stockstadt Mill site for US$49 million was concluded during the quarter and ownership transferred to the Progroup. Shortly after the quarter-end Sappi announced the sale of the Lanaken Mill to UTB Waalwijk B.V., a privately owned Dutch company specialising in industrial property conversions. In terms of the agreement UTB will acquire all the shares in Sappi Lanaken N.V. including all its assets, for a value of €50 million, of which €40 million will be paid in cash. The transaction is unconditional and expected to close during October 2024.
Source: Sappi
