Commenting on the group’s results, Sappi Chief Executive Officer Steve Binnie said: “Despite continued challenging global macroeconomic conditions and weak paper markets I am pleased that the group delivered Adjusted EBITDA of US$203 million, which was ahead of expectations and substantially above last year.”
Year-on-year profitability improved across all segments, supported by cost savings, operational efficiency gains, higher dissolving pulp (DP) selling prices and sales volumes combined with improved packaging and speciality papers sales volumes.
Against the backdrop of global macroeconomic headwinds, weak consumer spending and overcapacity in paper markets, our Thrive strategy – in particular our strategic capacity rationalisation and cost-saving initiatives – continued to deliver positive outcomes.
The pulp segment delivered another strong performance with profitability significantly above that of last year. Demand for DP continued to be robust despite the Chinese viscose staple fibre (VSF) market entering the seasonally slow period ahead of the Chinese Lunar New Year. VSF industry operating rates remained high and inventories in the value chain continued to trend below historical levels.
Profitability of the packaging and speciality papers segment improved compared to the prior year, albeit off a low base. Sales volumes increased by 14% due to a significant recovery in North American paperboard sales volumes. Recovery in Europe continued to lag, driven by weak consumer sentiment and overcapacity. In South Africa, underlying demand was satisfactory within the context of the typical low seasonal activity in fruit export markets in the first quarter.
Profitability of the graphic papers segment improved year-on-year driven primarily by cost savings related to operational efficiency improvements. Sales volumes declined by 3% compared to the prior year as market demand resumed its historical decline following the volatility observed over the last two years. Selling prices were resilient despite significant supply overcapacity and low industry operating rates, which supported healthy EBITDA margins for the segment.
Looking forward, Binnie stated: “Notwithstanding relatively stable underlying market conditions and after taking into account the US$44 million negative impact of the annual maintenance shuts at Ngodwana and Saiccor Mills in South Africa, along with a 70-day shut to complete the Somerset Mill PM2 project, we anticipate that Adjusted EBITDA for the second quarter of FY2025 will be below that of the first quarter of FY2025.”
Source: Sappi
