Sappi reports record quarterly performance as paper prices climb

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The Sappi paper and pulp factory in Mbombela.
The Sappi paper and pulp factory in Mbombela.
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Wood fibre products maker Sappi's share price climbed on Thursday morning after it released its third-quarter results. 

For the three months to end-June, Sappi's headline earnings per share increased by 1 067% to 35 US cents from 3 cents in the previous year. 

The JSE-listed company said it was a record quarterly performance, thanks to strong global paper demand and pricing momentum. This offset the negative impact of maintenance-related production shuts and sharp cost increases.

In South Africa, the group also had to contend with the KwaZulu-Natal floods in April, which resulted in the closure three of its mills in the province. Sappi lost 24 000 tons of production and 32 000 tons of damaged inventory at its Durban port warehouse due to the floods.

The company has lodged a business interruption insurance claim for almost R230 million.

The strong quarter has helped to cut its debt burden further,  from $1.5 billion a year ago, to $525 million (about R8.8 billion).

In addition to packaging and speciality papers, Sappi produces dissolving pulp, which is used in a wide range of products including fashion, food, personal beauty and hygiene. Its casting and release papers are used in apparel production, as well as decorative laminates for automotive interiors and exterior. 

Sappi also manufactures biomaterials, graphic paper and Timber. 

"The hardwood dissolving pulp market price rallied to US$1 200 per ton on the back of buoyant viscose staple fibre (VSF) prices, which reached their highest level since 2017," said Sappi.

A fire at competitor, which constrained supplies in the market, also contributed to higher prices. 

Looking ahead, Sappi said it expects demand and favourable price levels to continue in the fourth quarter, despite macroeconomic uncertainties.

 By midday, Sappi's share price was up 1.4% to R56.12, from R38.32 a year ago.

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