Durban, 12 October 2012
Decision taken to mothball paper machine (PM4) at Sappi Tugela Mill
Sappi Southern Africa today embarked on an official Section 189 engagement process with staff at its Tugela Mill in Mandeni on the KwaZulu-Natal North Coast regarding its decision to mothball the PM4 paper machine from 01 January 2013. In total just over 400 staff have received Section 189 notices, although the eventual number of positions that will be impacted by the mothballing of PM4 will be substantially lower. This will only be known at the conclusion of the consultation period of 60 days. Sappi remains committed to its approach that retrenchments are a last resort, and as such will work with staff to investigate options to minimise retrenchments.
Despite on-going corrective actions and interventions to address increased energy, labour and raw materials costs, the Tugela Mill has not delivered acceptable financial returns over the past number of years. In recent times the competitiveness of the mill has further been challenged by overcapacity in the local paper market, an influx of imported products, weak demand for certain papers and depressed selling prices.
Initial actions taken during 2011 and 2012 to return Tugela Mill to profitability, included closing one paper machine (PM3), closing down the KCD (Kraft Continuous Digester) pulp circuit, right-sizing the mill to service the remaining assets and ceasing the production on PM4 of Sackkraft products, many of which will be moved to Sappi’s Enstra Mill. PM 4 is currently manufacturing lightweight containerboard products which have been very well received by the market, however the current cost structure and market conditions do not allow PM4 to operate profitably.
This decision will enable Tugela Mill to reposition its cost structure and ensure the sustainability of its other paper machine (PM2) which produces a range of fluting and liner products.
Sappi is confident, given current market conditions, that sufficient capacity exists to meet all local containerboard requirements. No disruptions in supply to customers are anticipated as a result of this decision. Sappi believes that when market conditions improve it will be in a position to restart PM4.
About Sappi Southern Africa
Sappi Southern Africa, an integrated forest products company, meets the needs of local and international cus-tomers through a wide range of products from three divisions:
- The Paper and Paper Packaging division provides products including, pulp, newsprint, coated and uncoated fine papers, office and business papers, security and speciality papers, containerboard (used to manufacture cardboard boxes) and packaging papers (for the pet food, agriculture and FMCG industries). Leading local brands includes Typek, Triple Green, Triple Green Embossed, Masuga, Reviva and Enigma print papers; Sentinel security paper; Wicked Wrap and the Strato packaging papers.
- Chemical cellulose, is sold to converters for use in such products as fashion clothing, mobile phone screens, cellophane wrap, pharmaceutical, beauty and household products. Sappi is one of the world’s largest manufacturers of chemical cellulose.
- Sappi Forests supplies 70% of the woodfibre needs of Sappi Southern Africa from 380,000 hectares of both our own and managed commercial plantations; currently with more than 34 million tons of standing timber. All our own-grown wood is Forest Stewardship Council™ (FSC™) and ISO 9000 certified. A further 150,000 hectares of land is managed for biodiversity conservation, including wetlands, riparian zones and indigenous forests. Sappi’s land is available (with certain provisos) to the public for non-motorised recreational use eg mountain biking and trail running.
Sappi Southern Africa is a division of Sappi Limited (JSE: SAP; NYSE:SPP); a global company headquartered in Johannesburg, South Africa with over 14,000 employees, and manufacturing operations on three continents in seven countries and customers in over 100 countries around the world. Learn more about Sappi at www.sappi.com.
on behalf of Sappi
Tel + 27 (0) 11 502 7300
For further information
Regional Communications Manager
Sappi Southern Africa
Tel +27 (0)31 279 6203
Mobile +27 (0)83 652 8528