Sappi announces financial results for fourth quarter and full year

Commenting on the group’s results, Sappi Chief Executive Officer Steve Binnie said: “The group’s performance over 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 (DP). The improvement is further evidenced by the quarter-on-quarter improvement in EBITDA from US$26 million to US$82 million.”

Throughout this unprecedented time the health and safety of our employees remained paramount. A comprehensive Covid-19 action plan enabled us to operate in a safe and uninterrupted manner where demand permitted. Working closely with our customers and suppliers we systematically increased activity and output in response to improved market demand and our support for local communities helped mitigate the impact of the pandemic and the ensuing socio-economic consequences on them.

In response to the challenging market conditions we focused on the preservation of liquidity, lowering costs and re-prioritising various strategic actions. 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. Additionally, non-critical capex projects were deferred, and some annual maintenance shuts were postponed 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% complete and we expect completion in the third quarter of FY2021.

Financial summary for the quarter and full year
• EBITDA excluding special items o For the quarter US$82 million (Q4 FY19 US$185 million) o For the year US$378 million (FY19 US$687 million)
• Loss for the period *For the quarter US$88 million (Q4 FY19 profit of US$50 million) *For the year US$135 million (FY19 profit of US$211 million)
• EPS excluding special items *For the quarter -4 US cents (Q4 FY19 10 US cents) *For the year -5 US cents (FY19 44 US cents)
• Cash generation for the quarter of US$88 million (Q4 FY19 US$173 million)
• Net debt US$1,957 million (FY19 US$1,501 million)

For the quarter, packaging and specialities volumes and profitability increased compared to the prior year as the US business in particular experienced encouraging sales growth 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. The South African containerboard business also achieved a strong end to the year.
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