Sappi profit rises over pulp sales increase

Johannesburg - Sappi, the largest producer of dissolving wood pulp, said second-quarter profit rose 79% after sales and prices of the cotton substitute rose and the company reiterated a forecast for strong earnings growth in 2016.

Net income for the three months through March increased to $100m, compared with $56m a year earlier, the Johannesburg-based company said in a statement on Monday. Net debt was $1.65bn, compared with the $1.73bn the company reported three months ago.

Sappi is diversifying its production as a global shift to digital publishing and advertising damps the demand outlook for its traditional glossy paper business. The company’s dissolving wood pulp business has benefited for rising US dollar sales prices over the past year.

"Demand remains positive and we remain confident that, at current pricing levels and exchange rates, the outlook for this business is positive," Sappi said in the statement. "As a result of improved operating profits and lower expected finance costs, offset somewhat by increased tax charges, we expect a strong increase in our earnings” in the second half of the year, the company said.

Sappi shares gained 7.3%, the most since December 10 on a closing basis, to R66.30 as in Johannesburg. The stock has gained 35% in the past 12 months, valuing the company at R35bn.

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