DURBAN – Dissolving wood and paper company Sappi yesterday swung into a full-year loss of $135 million (R2.17 billion) for the year to end September, reversing a profit of $211m compared to last year as the global diversified pulp and paper company felt the impact of Covid-19 outbreak in its operations.
The group said its earnings before interest, tax, depreciation and amortisation (Ebitda), excluding special items, tumbled 45 percent to $378m, but its fourth quarter Ebitda improved to $82m compared to $26m reported in the third quarter below the $185m it recorded during the correspondent period last year.
Sappi chief executive Steve Binnie said the group’s performance in the past year was severely impacted by the Covid-19 pandemic, the related government lockdowns and the ensuing economic after-effects. “While the first half of the year was satisfactory given that we started the year with dissolving pulp prices at historic lows, the third quarter saw the full impact of Covid-19 before a gradual recovery began in the fourth quarter, in particular for dissolving pulp. The improvement is further evidenced by the quarter-on-quarter improvement in Ebitda from $26m to $82m,” Binnie said. Its earnings per share, excluding special items, was a loss of 5 US cents (80c) during the year compared to an earnings of 44c (US) compared to last year while the fourth quarter reported a loss of 4c (US) compared to an earning of 10c (US) reported in the fourth quarter of 2019.
The group’s net debt rose to $1.96bn during the year compared to a net debt of $1.5bn reported last year.
The group said the fourth quarter performance was encouraging, particularly in the packaging and specialities segment, as volumes and profitability increased compared to last year.
It said its US business experienced encouraging sales growth in the last quarter across all of the major product categories, offsetting a slightly weaker performance from the European business which was affected by the temporary shut of Alfeld PM3 following the fire at that machine in the previous quarter and softer demand for non-essential consumer products.
Sappi said it responded to the challenging market conditions by focusing on the preservation of liquidity, lowering costs and re-prioritising various strategic actions during the year.
“Commercial downtime of 1.1 million tons was taken across all segments as required, in order to match supply to demand and prevent the build-up of inventory. However, this had major repercussions for operating efficiency, fixed cost absorption and profitability,” Binnie said. The group deferred non-critical capital expenditure projects and postponed some annual maintenance shutdowns for a short period. “The project to expand the Saiccor Mill capacity, which was put on hold through the initial months of the Covid-19 outbreak, is 75 percent complete and we expect completion in the third quarter of financial year 2021,” Binnie said.
Binnie said while they are confident of a continued recovery through 2021, it remained unclear what theimpact of increased Covid-19 infections rates and associated stricter lockdown regulations across Europe would be.
Sappi rose 3.03 percent on the JSE yesterday to close at R25.53.