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Chemical cellulose expansions on track - Sappi Chief
Aug '12
Sappi announces results for the third quarter ended June 2012. Results for the third quarter ended June 2012 in line with expectations despite tough market conditions.  Sappi remains focused on debt reduction, chemical cellulose expansion.
Commenting on the results, Sappi Chief Executive Officer Ralph Boëttger said:
“Operating profit excluding special items for the quarter was in line with expectations and guidance provided. Market conditions remain challenging with little visibility which impacted pricing and demand for most products.
“However the southern Africa chemical cellulose business continued to perform strongly with good margins and volumes. The chemical cellulose conversion projects at the Ngodwana and Cloquet mills are progressing well.
“The successful refinancing during the quarter of the expensive bonds due in 2014 will result in a substantial reduction in interest costs going forward and significantly improve Sappi’s debt maturity profile.  Once-off charges related to the refinancing did, however, lead to a net loss per share for the quarter.
“Market conditions are expected to remain generally tough, with greater uncertainty and lack of visibility.  Trading conditions are expected to be weaker than a year ago, with lower volumes for most of our products and pricing, particularly for pulp, to remain under pressure.  We believe input prices should remain generally flat and that fixed costs are well under control. 
“Notwithstanding the current tough trading conditions, we believe that the strategic actions that we are and have been taking are positioning the group well for both improved margins from our paper divisions and for expansion in higher margin growth businesses such as chemical cellulose.  We are confident that the actions we have taken, including the refinancing completed in the last quarter, the disposal of non-essential assets as well as the reduction in our cost base, will allow us to complete the current growth projects whilst reducing our debt and strengthening our financial position.”

 Operating profit excluding special items for the quarter was similar to that achieved in the corresponding quarter in the prior year. Performance was impacted, as anticipated, by planned annual maintenance shuts as well as seasonal factors when compared to the prior quarter.  Market conditions however deteriorated more than expected in the quarter as a result of the uncertainty in Europe and a general slowdown in all major markets. The group achieved an operating profit excluding special items for the period of US$60 million (Q3 2011 US$60 million) and an operating profit excluding special items for the nine months ended June of US$285 million (2011 US$324 million).
The repurchase of the 2014 bonds will result in annual cash interest savings of approximately US$30 million. However, the full US$89 million accounting cost of the refinancing of the bonds was booked in the quarter, resulting in a loss per share for the quarter of 20 US cents (Q3 2011 loss of 13 US cents) and for the nine months of 1 US cent (2011 loss of 20 US cents). 

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