Global paper mill company Sappi yesterday reported that it has more than doubled its fourth quarter dividend following a stand-out financial performance in South Africa.
And despite the paper and packaging market continuing to be affected by global economic and geopolitical tensions, supply chain instability and fluctuating input costs, adjusted earnings before interest tax depreciation and amortisation (EBITDA) for the first quarter of 2025 was expected to be “significantly above that of the prior year,” CEO Steve Binnie said in a telephone interview yesterday.
EBITDA for 2024 came to $684 million (R11.99 billion), exceeding management expectations, against the backdrop of a subdued global economic environment, low consumer confidence, and geopolitical uncertainty.
Quarterly profit turned around to $79m from a $40m loss at the same time last year.
The final quarter dividend more than doubled to 15 US cents from six US cents. The dividend for 2024 was 41 US cents versus 52 US cents in 2023.
The pulp segment’s strong performance was a highlight, with record profitability for the South African region, Binnie said.
The South African region’s adjusted EBITDA of R2.03bn represented a third consecutive record performance. Binnie said this was largely due to cost savings, and favourable selling prices and demand for dissolving pulp (DP).
South Africa paper markets were “softer” but improved later in year as the consumer environment started to look up, particularly for container-board, he said.
The Saiccor Mill recovered well after temporarily halting production following an oxygen tanker explosion on site in July. About 15 000 tons of lost production contributed to lower sales volumes.
Globally, paper markets were subdued, with a slower than expected recovery in demand from the prolonged destocking phase of 2023.
Binnie said although European markets were likely to remain tough, globally markets were starting to improve following, for instance, lower interest rates in many countries. There were significant fixed costs savings in the past year, he said.
Growing in the packaging and speciality papers segment, with the expansion of Somerset PM2 mill, in Maine, US, remained vital to the strategy and to offset graphic paper market decline, he said
The project was on schedule for commissioning in the third quarter. A large part of the increase in debt to $1.42bn from $1.09bn related to the more than $400m capital cost of the expansion, and debt would fall once the project was underway, he said.
Demand for DP was strong, with selling prices rallying. Demand was buoyed by high viscose staple fibre (VSF) operating rates and low inventory levels.
Supply was tight following closures at competitors and little additional capacity added in the past two years.
Graphic papers sales volumes were up 2% but the pace of recovery slowed as the year progressed. Lower selling prices were partially mitigated by cost savings.
Closing the Stockstadt and Lanaken Mills in Europe reduced the cost base and contributed to better profitability of the segment.
Demand for packaging and speciality papers products improved as the destocking cycle of 2023 reversed, leading to an 8% increase in sales volumes.
Binnie said the North American region quarterly adjusted EBITDA of $71m was a solid performance. Higher paper sales volumes and better pulp selling prices were partially offset by increased variable costs.
The European region experienced a challenging quarter with weak economic conditions and overcapacity in graphic papers markets. The Stockstadt and Lanaken Mill closures reduced costs and helped the region’s adjusted EBITDA of €36m to be “significantly better” than the prior year.
BUSINESS REPORT