Sappi to reduce KZN harvesting

2009-02-16 00:00

GIANT pulp and paper producer Sappi has confirmed that a wider decision to reduce harvesting because of waning demand has impacted on harvesting in certain parts of KZN.

The news came as rival paper producer Mondi forecasted significantly softer full-year profits (for the year ended December 31, 2008) yesterday.

The paper and pulp industry has been hard hit by slowing demand, particularly in Europe.

In response to rumours that Sappi has significantly cut back on operations at some midlands operations in recent weeks, Sappi regional communications manager Zelda Schwalbach told The Witness that one implication of the curtailment in production is a reduction in the raw materials required. This includes a reduction in the amount of timber required by Sappi’s mills.

Schwalbach said they are working closely with harvesting and transport contractors to minimise the knock-on effect.

“Like companies in the rest of the world, demand for Sappi products has been negatively impacted by the global economic downturn. Our first quarter results clearly reflect the very challenging market conditions in which we are operating as a result of the rapidly slowing world economy. A decrease in demand requires us to make adjustments to our production schedules to prevent an increase in stocks,” Schwalbach said.

She could not detail the specific areas affected by the decision as Sappi is constantly re-evaluating the situation and adjusting its plans.

Earlier this month, Sappi reported a halving in basic earnings per share (to six U.S. cents/share) for the quarter ended December 28, 2008.

At the time, Sappi chief executive Ralph Boëttger said the short-term outlook is for difficult global economic conditions to continue.

Operating profit for the quarter ending March 2009 is expected to remain weak.

Rival Mondi said in a trading statement yesterday that the company also had to deal with high finance costs, particularly as a result of high interest rates and currency weakness in emerging markets.

kavith@witness.co.za

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