Sappi Saiccor mill near Umkomaas, KwaZulu-Natal. The group's South Africa sales volumes in the quarter to June 30, 2025 were restricted by low inventory levels stemming from the extended maintenance shutdown at Ngodwana Mill in the previous quarter. The office paper and newsprint categories continued to face significant challenges.
Image: File Photo
Sappi reported a $33 million loss for the third quarter to June 2025, versus a $51m profit at the same time last year, but a better result is anticipated in the fourth quarter, CEO Steve Binnie said Thursday.
The paper, packaging and pulp group struggled against muted demand and prices for many of its products because of the weak and uncertain global macroeconomy, and trade and tariff tensions, and a later than expected start of the $500 million Somerset Mill project in the US, Binnie said in an interview with Business Report.
The adjusted earnings per share (EPS) came to a loss of 4 US cents, compared with a 9 US cents profit last year. The share price slipped 1.52% to R26.55 Thursday morning on the JSE.
He said however the Somerset Mill was now ramping up production after completing its expansion in May, 2025, its capital expenditure that had ratcheted up group debt was now over, group annual capital expenditure was expected to fall to around $300m a year and be focused mainly on maintenance, there were no mill maintenance shuts planned for the fourth quarter.
In addition, dissolving wood pulp (DWP) prices had begun to rise, and should continue to do so, Binnie said in an interview. DWP is Sappi’s key product which it produces for global textile, pharmaceutical and consumer goods markets. DWP demand had remained stable, he said.
Debt ended the quarter end stood at $1.95 billion, up from $1.34bn at the same time last year, and the focus from now on was to reduce debt in line with their target of bringing the figure to below $1bn, Binnie said.
Demand across global packaging and speciality papers markets remained muted in the third quarter, he said. Competitive pressures in Europe intensified, largely due to oversupply across all product categories.
The graphic paper segment continued to navigate long-term structural decline., with global oversupply amplifying pricing and competitive pressures. Sappi sales volumes however outperformed the broader market contraction in the quarter.
No third quarter dividend was declared due to the focus on preserving liquidity and strengthening cash flow due to the debt, and ongoing macroeconomic uncertainty. Cost-saving initiatives had been implemented and disciplined capital allocation was being applied.
The deferral of non-essential capital expenditure resulted in a reduction of the full year capex forecast from $550m to $510m.
The textile and apparel sector, a key driver of DWP demand, remained highly sensitive to ongoing trade tensions and inflationary pressures. The outlook for global DWP demand remains positive and the group was cautiously optimistic that prices would recover in the year ahead.
Demand for containerboard in South Africa remained healthy. In Europe the focus was on strengthening the competitive cost position and completing the Alfeld Mill consultation process. Efforts to grow market share were delivering positive results.
Trade tensions and overcapacity in global paper pulp markets were exerting downward pressure on prices, which was expected to benefit the group paper businesses in Europe and North America, where the group was not fully integrated.
In South Africa profitability improved compared to the previous quarter but remained below the prior year’s level, mainly due to lower regional sales volumes, increased variable costs, and a sharp decline in DWP selling prices.
The forestry fair value price adjustment for the quarter was a loss of R179 million, but this figure was expected to improve in the fourth quarter.
Sales volumes in South Africa were restricted by low inventory levels stemming from the extended maintenance shutdown at Ngodwana Mill in the previous quarter. The office paper and newsprint categories continued to face significant challenges.
BUSINESS REPORT