Financial summary for Q3 FY21 ended June 2021:
- EBITDA excluding special items US$145 million (Q3 FY20 US$26 million; Q2 FY21 US$112 million)
- Net debt of US$2,055 million (Q3 FY20 US$1,977 million)
- Profit for the period US$18 million (Q3 FY20 loss of US$73 million)
- EPS excluding special items 5 US cents (Q3 FY20 -10 US cents)
Sappi returns to profitability in third financial quarter 2021
Commenting on the group’s results, Sappi Chief Executive Officer Steve Binnie said: “We have seen a significant improvement in market conditions in the majority of our trading regions during the quarter. This contributed to a material increase in quarter-on-quarter EBITDA and an overall return to profit of US$18 million.”
He continued, “I am particularly pleased with the performance of our packaging and specialities segment which delivered a record EBITDA and validates our strategic investments in this sector. Strong demand and good pricing in the dissolving pulp segment also had a beneficial impact on our South African and North American businesses. In contrast, margins in our European business remained under pressure due to escalating raw material costs and logistical challenges, which constrained export sales.
“As COVID-19 lockdown restrictions continue to ease, we are seeing a steady improvement in global economic activity. This had a positive impact on graphic paper demand in the quarter and the outlook for this segment is expected to improve further with the normalisation of activities in the travel and entertainment sectors. Our focus in this segment is to recover margins through stringent cost management and price increase realisation.
“Despite our improved performance, the quarter has not been without challenges. Logistics continued to be a global obstacle; container availability, port congestion and vessel space remained severely constrained in all of our export shipping routes and freight costs escalated significantly. Additionally, the emergence of more transmissible COVID-19 variants, which are resulting in new waves of infection in countries around the globe, represent an ongoing risk to our employees and business performance. The health and safety of employees is our primary focus and we have embedded strict COVID-19 protocols in the workplace. We actively encourage participation in vaccination programmes and are working closely with South African health authorities to facilitate the vaccination of our employees and their families at our occupational health centres at our operating sites.
“A brief period of civil unrest in South Africa during July caused major disruptions to raw material supplies and forced the temporary closure of three of our mills in KwaZulu-Natal. In the aftermath of the unrest, we worked closely with government and business forums to restore disrupted supply chains and provided immediate assistance to employees, local communities and the South African National Defense Force. The lost production will have an estimated negative impact on our fourth quarter EBITDA of approximately US$16million.”
Looking forward, Binnie stated, “Given the favourable conditions for DP and packaging and specialities combined with tighter graphic paper markets, offset partially by the loss of production volumes from the South African civil unrest and higher raw material costs, we expect an improvement in the fourth quarter EBITDA relative to the third quarter.”
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