Financial summary for the quarter and full year
EBITDA excluding special items:
◦For the quarter US$221 million (2016 US$209 million)
◦For the year US$785 million (2016 US$739 million)
EPS excluding special items:
◦For the quarter 19 US cents (2016 18 US cents)
◦For the year 64 US cents (2016 57 US cents)
Profit for the period:
◦For the quarter US$102 million (2016 US$112 million)
◦For the year US$338 million (2016 US$319 million)
Net debt US$1,322 million, down US$86 million year-on-year
Dividend of 15 US cents declared (2016 11 US cents)
Sappi Chief Executive Officer Steve Binnie, commenting on the group’s performance, said: “Sappi has delivered another strong set of results with profits up 6% year-on-year. I am very pleased with the growth of the dissolving wood pulp (DWP) and speciality packaging businesses. Furthermore our initiatives to reduce variable costs and the benefits of lower interest charges were able to help mitigate higher paper pulp prices and a stronger Rand/Dollar exchange rate during the reporting period.
“Capital expenditure in 2018 is expected to increase to US$450 million as we continue the conversions in both Europe and North America, complete the Saiccor and Ngodwana debottlenecking and start the upgrade of the Saiccor wood-yard. The increase in expansionary capital spending during 2018 is focused on higher margin growth segments including dissolving wood pulp and speciality packaging. This will position us for stronger profitability from 2019 onwards.”
The periods under review:
Demand for DWP was robust, growing at double-digits throughout the year. We shifted more production capacity to speciality packaging during the year. The European business experienced a good final quarter, with expanded sales volumes and price increases helping to counteract the impact of rising paper pulp prices. In North America improved packaging and release paper sales volumes, coupled with lower fixed and variable costs outweighed lower coated paper sales prices and volumes. The packaging paper business in South Africa continued to show lower variable costs and higher sales volumes and prices compared to previous quarters.
Our success in bringing our debt levels to below our targeted leverage ratio of less than two times net debt to EBITDA in the prior year has meant that we could turn our attention to increased investments in growth projects, with the main focus being on conversions of paper machines in Europe and the United States to speciality packaging grades and DWP debottlenecking projects in South Africa. We remain well on track to achieve our Vision2020 targets.
Net cash for the year (US$108 million) and for the quarter (US$41 million) was lower than both prior periods (US$359 million and US$168 million) due to the aforementioned capital expenditure in growth projects, increased cash taxes, the dividend payment and higher working capital.
The Board has approved an increased dividend per share of 15 US cents, a 36% increase over the prior year. The 2017 dividend is covered four times by basic earnings per share, excluding non-cash special items. The group aims to declare ongoing annual dividends, and over time achieve a long-term average earnings to dividend ratio of three to one.