Sappi shows signs of recovery on packaging, pulp in quarter

Sappi’s share price fell by more than 6% on the JSE yesterday, despite the company recovering somewhat in the second quarter to end of March, boosted by packaging and specialities performance, as well as a solid performance from the dissolving pulp (DP) segment. The share closed at R48.05.

The diversified woodfire company fell into a loss of $23 million (R331m) in the second quarter to the end of March, down from a profit of $2 reported in the second quarter of last year (Ebitda), excluding special items, fell $112m, compared with last year’s $131m, but an improvement from $98m reported in the first quarter.

According to chief executive Steve Binnie, Sappi was pleased with the steady recovery from the ongoing challenges of the Covid-19 pandemic.

“Ebitda continued to improve quarter-on-quarter from a low of $26m in our third quarter of 2020 through $98m in the previous quarter to $112m for the current quarter, with further improvement expected for our third quarter,” said Binnie.

The group attributed its recovery in the quarter to a strong packaging and specialities performance, combined with solid results from DP, but it was offset by the weak demand and margin squeeze in graphic paper.

Binnie added that a positive highlight for the quarter was the continued rapid recovery of DP markets, with Chinese market prices at their highest levels since May 2012.

“The key factors supporting the positive sentiment in the sector in clude continued tight DP supply, low viscose staple fibre inventory levels throughout the textile value chain, improved apparel retail demand in the US and Asia, which favourably impacted all textile fibre prices, higher paper pulp prices and a continued weaker US$/Renminbi exchange rate,” he said.

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