Business News
Sappi: Results for the second quarter ended March 2008
Tuesday 06. May 2008 - Operating profit excluding special items improved to US$97 million Special items US$124 million (pre-tax) - primarily plantation fair value Basic EPS 68 US cents (inclusive of special items) Prices up but only marginally so in Europe Continued input cost pressure Saiccor expansion on track
The quarter under review
Commenting on the results, Sappi chief executive Ralph Boëttger said:
“Our operating performance this quarter improved further, both compared to a year ago and compared to the prior quarter. The performance of our Southern African businesses was supported by good demand, higher prices and a weaker Rand against the Dollar. Our North American business continued its improving trend, benefiting from higher prices and improved operating efficiencies. However, margins remain under pressure from rising input costs. Our key challenge remains to restore our European business to acceptable profitability. The limited coated fine paper price increases we achieved in parts of Europe were insufficient to recover the increasing input costs. Globally our sales increased by 11.8% compared to a year ago to US$1.47 billion. Operating profit excluding special items increased 33% to US$97 million from US$73 million a year ago.
Looking forward, Boëttger commented:
“Global capacity utilisation remains reasonably high with limited new capacity coming on stream within the next year. Prices for coated fine paper continue to strengthen in most regions in US Dollar terms. Improved price realisation in Europe is, however, essential in order to achieve a much needed improvement in margin.
Pulp prices remain high supported by strong demand, particularly from Asia, and the weaker US Dollar.
While market conditions in terms of demand are generally favourable in our industry, we cannot ignore the potential impact of economic slow-downs in North America and Europe on our business.
Operating performance of our Southern African operations is expected to remain strong and in North America we expect the improving trend to continue on a year on year basis. Europes performance will remain under pressure as a result of the pricing situation and high input costs. Manufacturing and logistics efficiencies and tight control over costs remain essential to manage the effect of high energy, pulp and wood costs and labour cost inflation.
Our net debt is expected to start declining towards the end of the financial year following the completion of the Saiccor expansion project. Improved cash generation, continued attention to working capital and capital expenditure management will remain priorities.
Operating profit excluding special items is expected to improve in the next quarter compared to a year ago.”