Sappi Announces Financial Results for Fourth Quarter and Full Year

Sappi Limited (JSE: SAP, OTC: SPPJY) released its Q4 FY19 and full-year financial results for the period ended September 2019.

• EBITDA excluding special items
  • For the quarter US$185 million (Q4 FY18 US$224 million)
  • For the year US$687 million (FY18 US$762 million)
• Profit for the period
  • For the quarter US$50 million (Q4 FY18 US$107 million)
  • For the year US$211 million (FY18 US$323 million)
• EPS excluding special items
  • For the quarter 10 US cents (Q4 FY18 19 US cents)
  • For the year 44 US cents (FY18 60 US cents)
• Strong cash generation for the quarter of US$173 million (Q4 FY18 US$26 million)
• Net debt US$1,501 million (FY18 US$1,568 million)

Commenting on the results, Sappi Chief Executive Officer Steve Binnie said: “An initially strong start to the year was unfortunately offset by weak graphic paper markets and lower dissolving wood pulp (DWP) prices driven by the ongoing trade wars and slower economic growth in various geographies. Our EBITDA declined by 10% year-on-year due to lower dissolving wood pulp prices and weak graphic paper demand. Our strategy to diversify our product portfolio into higher margin segments continues to deliver positive results.”

“The trend towards paper-based packaging in consumer segments continues, and we experienced stable demand for containerboard in the South African market. The recent projects to increase capacity at each of the DWP mills and convert capacity at Somerset and Maastricht Mills towards packaging boosted sales volumes in each of these segments during the year, and for the quarter delivered improved margins, thereby lessening the impact of weak graphic paper markets.”

Reflecting on the fourth quarter, Binnie indicated: “I am pleased that we were able to generate cash of US$173 million in the quarter thereby ending the year with net debt at US$1,501 million. This was done by tightly managing working capital and postponing discretionary capital expenditure.”

Looking forward, Binnie stated: “Due to the current very weak pricing in the DWP market and with paper markets yet to show signs of a sustained recovery in demand, we expect EBITDA in the first quarter of financial year 2020 to be below that of 2019. Management have taken a number of steps to mitigate the effect that the current uncertain market conditions and low DWP prices are having on the profitability and leverage of the group. These steps include tighter working capital management, the postponement and reduction in capital expenditure. The directors have furthermore concurred with management that it would be prudent to temporarily halt dividends until such time as market conditions improve.”

You can download and view all of the latest financial results at https://www.sappi.com/latest-financial-results

TAPPI
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