Industry Press Releases

Sappi results for 2nd quarter and half-year ended March 2015 in line with expectations

Friday, May 15, 2015

Highlights for the quarter

    Profit for the period US$56 million (Q2 2014 US$32 million)
    EPS excluding special items 11 US cents (Q2 2014 5 US cents)
    EBITDA excluding special items US$170 million (Q2 2014 US$171 million)
    Net debt US$1,916 million (Q2 2014 US$2,248 million)
    Successful refinancing of 2018 and 2019 bonds

Commenting on the result, Sappi Chief Executive Officer Steve Binnie said:

Operating performance in the quarter was in line with our expectations and the equivalent quarter last year. The group generated EBITDA, excluding special items, of US$170 million, operating profit excluding special items of US$104 million and profit for the period of US$56 million. Earnings per share for the quarter were 11 US cents, compared with 6 US cents (including a gain of 1 US cent in respect of special items) in the equivalent quarter last year.

During the quarter we repaid our 2018 and 2019 bonds through the issue of a new €450 million seven-year bond, with a coupon of 3.375%, and through a drawing from the European revolving credit facility.  That facility was also renewed and increased to €465 million (previously €350 million).

Net debt of US$1,916 million declined by US$124 million from the prior quarter, as a result of the cash generated from operations, lower working capital and favourable exchange rates on the translation of our debt.

We expect operating performance for the year will be broadly similar to 2014 despite a number of significant once-off impacts from various capital projects. At current exchange rates, the translation of Euro and Rand results to Dollars may have an impact on group results. Nevertheless, earnings per share excluding special items are expected to be substantially better than that of the prior year.


Quarter ended

Mar 2015     Mar 2014     Dec 2014

Half-year ended

Mar 2015     Mar 2014

Key figures: (US$ million)








Operating profit excluding special items*






Special items – (gains) losses*






EBITDA excluding special items*






Profit for the period






Basic earnings per share (US cents)






Net debt * 







Key ratios (%)


Operating profit excluding special items to sales






Operating profit excluding special items to capital employed (ROCE)*






EBITDA excluding special items to sales






Return on average equity (ROE)*






Net debt to total capitalisation*






Net asset value per share (US cents)






*     Refer to the published results for details on special items, the definition of the terms and the reconciliation of EBITDA excluding special items to profit/loss for the period.

The table above has not been audited or reviewed.

The quarter under review

The Specialised Cellulose business continued to generate solid returns during the quarter, with EBITDA, excluding special items, of US$65 million. US Dollar prices for dissolving wood pulp declined compared to the prior quarter due to excess market supply as well as low prices and margins in the viscose staple fibre sector.  However, the weaker Rand/Dollar exchange rate enabled the South African mills to maintain Rand pricing and margins.

The European business increased profitability but its performance was impacted adversely by higher costs of raw materials due to the weaker Euro/US Dollar exchange rate and particularly weak demand in January.  Export paper prices benefited from the weaker Euro.

The North American business was boosted by higher coated paper prices and returned to an operating profit in the quarter.  This improvement was achieved despite severe weather in the Northeast of the United States, which impacted both logistics and production at the Somerset Mill.

The paper business in South Africa improved operating performance further in this quarter, with increased sales volumes and prices offsetting increased variable costs.

Net cash generation for the quarter of US$82 million was lower than the net cash generated of US$132 million in the equivalent quarter last year as a result of lower working capital inflows due to inventory increases during the period.  Capital expenditure in the quarter was US$46 million and mainly related to maintenance and efficiency projects.

Special items for the quarter included a gain of US$57 million resulting from the transfer of the Sappi Dutch pension fund to a general fund and a positive plantation fair value pricing adjustment of US$18 million for the South African plantations.  These benefits were offset by once-off finance charges of US$63 million relating to the refinancing of the 2018 and 2019 bonds.  The finance charges included breakage fees, accelerated amortisation of costs and unwinding of an interest rate swap.  The cash impact of the refinancing was a negative US$53 million.


Graphic paper markets, particularly for coated mechanical, remain difficult and continued cost pressure from higher paper pulp and wood prices are placing margins under pressure. Lower oil and energy costs are providing some relief.  Coated woodfree paper price increases in the US market have widened the gap with European pricing levels; however, no significant increase in imports into the US market has been experienced to date.

Textile prices, particularly for those of cotton and viscose, appear to have stabilised over the past few months, after a long period of decline.  Dissolving pulp prices have followed a similar trend.  We remain well positioned to meet the changing market needs.  The weaker Rand/US Dollar exchange rate will support the profitability of this business.

Capital expenditure in 2015 is expected to be approximately US$280 million and is focussed largely on maintenance projects and efficiency improvement investments at our Kirkniemi and Gratkorn Mills.

We estimate that, post the refinancing of our 2018 and 2019 bonds, reduction in debt and movements in currencies, net finance costs will be approximately US$110 million per annum.  At current exchange rates, we expect to reduce net debt levels further by year-end.

The third quarter is seasonally weaker in both North America and Europe. The pulp mill upgrade at Gratkorn and regular annual maintenance shuts in all three regions will negatively impact the results of the third quarter by approximately US$21 million when compared to the equivalent quarter last year.

The full results announcement is available at

There will be a conference call to which investors are invited. Full details are available at using the links Investor Info; Investor Calendar; 2Q15 Financial Results

Forward-looking statements

Certain statements in this release that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives. The words 'believe', 'anticipate', 'expect', 'intend', 'estimate', 'plan', 'assume', 'positioned', 'will', 'may', 'should', 'risk' and other similar expressions, which are predictions of or indicate future events and future trends and which do not relate to historical matters, and may be used to identify forward-looking statements. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and from past results, performance or achievements). Certain factors that may cause such differences include but are not limited to:

  • •    the highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production, input costs including raw material, energy and employee costs, and pricing);
  • •    the impact on our business of a global economic downturn;
  • •    unanticipated production disruptions (including as a result of planned or unexpected power outages);
  • •    changes in environmental, tax and other laws and regulations;
  • •    adverse changes in the markets for our products;
  • •    the emergence of new technologies and changes in consumer trends including increased preferences for digital media;
  • •    consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital when needed;
  • •    adverse changes in the political situation and economy in the countries in which we operate or the effect of governmental efforts to address present or future economic or social problems;
  • •    the impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including related financing), any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions or implementing restructuring and other strategic initiatives and achieving expected savings and synergies; and
  • •    currency fluctuations.

We undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.

For further information
Andre F Oberholzer
Group Head Corporate Affairs  
Sappi Limited  
Tel +27 (0)11 407 8044
Mobile +27 (0)83 235 2973

Graeme Wild
Group Head Investor Relations and Sustainability
Sappi Limited
Tel +27 (0)11 407 8391
Mobile +27 (0)83 320 8624

Sappi Limited
PO Box 31560
South Africa

Tel +28 (0)11 407 8111

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