Sappi announces record earnings

Commenting on the group’s results, Sappi Chief Executive Officer Steve Binnie said, “I am very pleased with Sappi’s exceptional performance this past year. Once again, the dedication and resilience of the Sappi team shone through, this year delivering EBITDA of US$1,339 million, well above the previous record set in FY2000 (US$1,052 million). The outstanding performance was particularly noteworthy within the context of a challenging macroeconomic environment. Significant headwinds included extreme weather-related events, lingering Covid pandemic effects in China as well as extraordinary global inflation, which was triggered by geopolitical turmoil and ongoing global supply chain disruptions. Amidst this volatility, we demonstrated adaptability and persistence and remained committed to our Thrive25 strategy.”

Highlights for the year included strong demand and the implementation of higher sales prices to offset rising costs, combined with a focus on product and customer mix optimisation, supported margin expansion in all product segments. In addition, Sappi has resumed dividend payments, with a dividend of US 15 cents being declared.

The strategic priority to invest in packaging and speciality papers in recent years reaped rewards. The segment continued to grow and achieved record EBITDA of US$359 million compared to US$214 million in the prior year. Sales volumes increased by 9%, driven by robust global demand and renewed growth in Europe. However, sales were constrained by available capacity and low levels of inventory in South Africa and North America where demand exceeded supply.

Sales volumes for the pulp segment increased by 15% compared to the prior year on the back of strong market demand and improved logistics as we secured regular breakbulk shipping alternatives for our South African exports. Demand for Verve1 during the year was particularly strong and sales were constrained by available production.

The graphic papers segment generated record EBITDA of US$650 million. The remarkable turnaround from the lows of 2020 was driven by a number of factors which led to an unprecedented global shortage of graphic paper. These included a surge in demand as economic activity normalised post-Covid and a very tight market balance due to a combination of chronic global logistical challenges and reduced supply.

Our Thrive25 strategic objective to reset the balance sheet was largely achieved. Net debt at financial year end decreased by 40%, from US$1,946 million to US$1,163 million as a result of the substantial cash generation and a positive translation impact of a weaker EUR/US Dollar exchange rate on the predominantly Euro-denominated debt. This is the lowest net debt level in over twenty years. In addition, during October 2022 Sappi repurchased US$206 million of the aggregate principal amount of its 2026 bonds via a tender offer. The transaction is fully aligned with the Thrive25 strategic objective to strengthen the balance sheet and yielded a capital gain of US$16 million and will reduce gross annual interest payments by approximately US$6 million per annum.

Financial summary for the quarter and full year
*EBITDA excluding special items – For the quarter US$391 million (Q4 FY21 US$177 million); For the year US$1,339 million (FY21 US$532 million)
*Profit for the period – For the quarter US$26 million (Q4 FY21 US$35 million); For the year US$536 million (FY21 US$13 million)
*EPS excluding special items – For the quarter 44 US cents (Q4 FY21 11 US cents); For the year 138 US cents (FY21 15 US cents)
*Net debt US$1,163 million (FY21 US$1,946 million)
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