Diversified industrial business Sappi delivered adjusted earnings before interest, taxes, depreciation and amortisation, special items and plantation fair value price adjustment (Ebitda) of $501-million for the financial year ended September 30, and a loss of $177-million.

Sappi uses renewable resources to produce woodfibre-based products for global markets. It has manufacturing operations on three continents and sells its products in over 150 countries.

The global group is turning its attention to extracting operational benefits from bedding down a key North American investment while reducing debt.

Net debt was $1.92-billion.

Sappi in March successfully completed a €300-million bond issuance of 4.5% sustainability-linked senior notes due in 2032.

At year-end, liquidity was said to have remained healthy with cash on hand of $219-million and $602-million from unused committed revolving credit facilities (RCF) in South Africa and Europe.

The group highlights strong institutional investor support from long-term anchor shareholders and positive analyst consensus outlook.

“Sappi’s immediate focus remains on internal levers within the company’s control. Our ‘Back to Basics’ focus is to reduce debt and strengthen the balance sheet through targeted cost savings initiatives and operational efficiency improvements,” CEO Steve Binnie explains.

He highlights that the group, which will celebrate its ninetieth birthday next year, is one of the few businesses that has managed to transition from a South African business to a global company.

REGIONS
The South African region delivered a satisfactory performance within the context of challenging global paper market conditions, weaker dissolving wood pulp (DWP) pricing, and adverse rand:dollar exchange rate movements affecting the pulp segment, Sappi points out.

Domestic containerboard demand was boosted as the citrus season concluded with citrus production significantly higher than last year.

The South African operations delivered R26.18-billion in revenue with adjusted Ebitda of R5.2-billion for the year.

Revenue for the North American operations was $1.73-billion, with adjusted Ebitda of $133-million for the year.

Sappi says a key highlight was the completion of the Somerset Mill PM2 conversion and expansion project in North America.

While the startup was delayed, the technical ramp-up is indicated to be exceeding expectations with good initial market feedback of product quality.

Sales volumes for packaging and speciality papers increased 22% compared with the previous year as production at the Somerset Mill stabilised and the PM2 ramp-up progressed through the quarter.

Despite the higher sales, segment profitability remained below last year’s levels, primarily owing to lower pricing in weak market conditions and higher costs. The cost increase was in line with expectations and reflected operational inefficiencies and limited fixed cost absorption during the transitional PM2 ramp-up phase.

Market conditions in Europe remained challenging with a continuing high level of competition against the backdrop of an oversupplied and weak demand environment.

Sales volumes in the packaging and speciality papers segment improved by 8% compared to last year driven primarily by increased sales of label paper while paperboard demand remained stable and flexible packaging showed gradual signs of recovery.

The region delivered revenue of €2.03-billion and adjusted Ebitda of €58-million.

OUTLOOK
Despite an anticipated complex operating environment, Sappi says it remains confident in the underlying strength of its business and the resilience of its operations.

In support of the leadership team’s commitment to reducing debt, capital expenditure (capex) has been adjusted downward to below $300-million a year for the next two years, with no expansionary capex anticipated during this period.

“Taking into account the confluence of market factors and the scheduled maintenance shut at the Somerset Mill, we anticipate that the Adjusted Ebitda for the first quarter of full-year 2026 will be below that of the fourth quarter of full-year 2025,” Binnie informs.

“Sappi is a well-capitalised business with a proven ability to adapt and respond to market cycles. Our recent strategic growth investments in packaging and speciality papers and DWP have strengthened our portfolio and position us well to benefit from a market recovery.

“We remain committed to navigating the current operating environment with discipline and transparency, prioritising cash generation to re-enforce our balance sheet and further enhance our financial resilience,” he avers.