Wrap Text
Results for the second quarter ended March 2025
Sappi Limited
Registration number: 1936/008963/06
JSE code: SAP
ISIN code: ZAE000006284
Issuer code: SAVVI
("Sappi" or "the Group")
Results for the second quarter ended March 2025
Reviewed
Quarter ended Half-year ended
% %
US$ million Mar 2025 Mar 2024 Change Mar 2025 Mar 2024 Change
Revenue 1 347 1 352 0% 2 710 2 624 3%
Adjusted EBITDA 107 180 -41% 310 310 0%
EBITDA excluding special
items 90 183 -51% 292 339 -14%
Profit (loss) for the period (20) 29 N/M 50 (97) N/M
Net debt 1 670 1 366 22% 1 670 1 366 22%
Headline EPS (US Cents) (3) 5 N/M 9 (16) N/M
Basic EPS (US Cents) (3) 5 N/M 8 (17) N/M
Adjusted EPS (US Cents) 1 12 -92% 15 17 -12%
Net asset value (US Cents) 407 387 5% 407 387 5%
N/M - Not meaningful
Our packaging papers, graphic papers, pulp and biomaterials are manufactured from
woodfibre sourced from sustainably managed forests, in production facilities which, in many
cases use internally generated bioenergy. Many of our operations are self-sufficient.
Together with our partners, Sappi works to build a thriving world by acting boldly to support
the planet, people and prosperity.
Commentary on the quarter1
Operating performance for the second quarter fell short of expectations, with the Group
delivering Adjusted EBITDA of US$107 million. Challenging market conditions prevailed
across all segments, driven by heightened uncertainty from potential global trade tensions and
a broader economic slowdown, which placed downward pressure on selling prices. Despite
these headwinds, year-on-year sales volumes remained stable, with a modest recovery in
packaging and specialty paper volumes, underscoring the long-term potential of these
markets. While market conditions for graphic papers remained soft, targeted efforts to grow
market share delivered positive year-on-year gains. The forestry fair value price adjustment
for the quarter was a loss of US$17 million. Amid these macroeconomic challenges, the Group
remained focused on optimising asset utilisation and advancing cost-saving initiatives to
support future performance.
The quarter was negatively impacted by issues that arose during the scheduled maintenance
shuts in South Africa, which required additional repairs and extended the shutdowns beyond
the planned timeline thereby reducing production for the period. This resulted in an additional
financial impact of US$13 million over and above the US$45 million guidance. These issues
were resolved and both Saiccor and Ngodwana Mills are running well post start-up. The
quarter was also affected by the extended shut for the conversion and expansion of Somerset
Mill PM2 in North America, which was US$20 million as per guidance.
Demand for dissolving wood pulp (DWP) remained steady during the quarter, but the typical
seasonal boost in demand post Chinese New Year was not observed as textile and apparel
markets slowed on the back of increasing geopolitical trade tensions and macroeconomic
uncertainties. Viscose staple fibre (VSF) pricing consequently came under pressure catalysing
a US$70 per ton decline in the hardwood DWP market price2, which ended the quarter at
US$900 per ton. The profitability of the pulp segment was negatively impacted by the lower
production at the Saiccor and Ngodwana mills during the quarter. Although market prices
dropped during the quarter, the net average selling price for the segment was above the
equivalent period last year. However, this positive year-on-year sales price momentum was
offset by lower sales volumes and increased costs resulting from the extended maintenance
shuts.
Graphic paper sales volumes remained relatively stable year-on-year, despite the ongoing
structural decline in market demand, reflecting positive market share gains for Sappi. The
segment continued to operate in an oversupplied environment, with pricing largely influenced
by cost dynamics rather than demand fundamentals. In this context, lower raw material costs
compared to last year, particularly for paper pulp, exerted some downward pressure on selling
prices, which negatively impacted profitability of the segment.
Sales volumes in the packaging and specialty paper segment increased by 9% year-on-year,
reflecting a normalisation of inventory levels and modest recovery in demand in North America
and South Africa. However, overall global demand remained subdued due to persistent
macroeconomic headwinds and weak consumer sentiment. Intense competition across all
product categories, driven in part by ongoing market oversupply, coupled with deliberate
product mix adjustments undertaken in North America to seed the market ahead of the
Somerset Mill PM2 commissioning, contributed to a 4% year-on-year decline in average selling
price. Profitability was impacted by the extended maintenance shut at the Ngodwana mill.
Adjusted earnings per share for the quarter was 1 US cent, which was below the 12 US cents
in the prior year due to the challenging market conditions and the adverse impacts of the once-
off operational challenges experienced during the quarter. Special items reflected a net
expense of US$17 million due primarily to US$12 million related to fire and other extraordinary
events at our sites together with the final closure costs for the Lanaken mill of US$4 million.
Cash flow and debt
Net cash utilised for the quarter of US$207 million was principally due to elevated capital
expenditure of US$182 million associated with the scheduled maintenance shuts and the
Somerset Mill PM2 conversion and expansion project and a dividend payment of US$85
million.
On 19 March 2025, Sappi successfully completed a €300 million bond issuance of 4.500%
sustainability-linked senior notes due in 2032. The net proceeds from the offering were used
to redeem all of Sappi's outstanding senior notes due in 2026, with an aggregate principal
amount of €240 million, with the remaining funds to be used for general corporate purposes.
Net debt of US$1,670 million was US$264 million above last quarter. This was due to the net
cash utilised as discussed above, and a negative currency translation effect of US$52 million
due to a weaker US Dollar on our Euro denominated debt. Liquidity comprised cash on hand
of US$156 million and US$612 million from the committed unutilised revolving credit facilities
(RCF) in South Africa and Europe.
Outlook
The escalating tariff trade tensions initiated by the United States against key trading partners
introduces a high level of uncertainty into the global macroeconomic outlook which poses risks
to our financial performance. We expect the direct impact of the currently proposed United
States trade tariffs on our business to be relatively limited. At present, less than 7% of
the Group's sales volumes involve cross-border trade with the United States, limiting our direct
revenue exposure to tariff-related risks. Importantly, we maintain a strong domestic presence
in the United States, and the paper markets in which we operate are net importers. As a result,
tariffs could present a strategic opportunity as downstream participants in the value chain may
increasingly shift toward domestic supply. However, the disruption of trade flows related to
tariff actions could contribute to global inflationary pressures which may materially weaken
consumer demand across all of our key markets. We continue to monitor these developments
closely and remain focused on maintaining operational flexibility and cost discipline in the face
of these external challenges.
The Somerset Mill PM2 conversion and expansion project was successfully completed in early
May 2025 and machine commissioning is in progress. Our strategic focus for the packaging
and speciality segment is to execute the commercial ramp-up of the PM2 machine, optimise
our product portfolio mix and capture long-term growth opportunities as market conditions
improve.
The textile and apparel market, with its long and complex supply chain, is particularly
vulnerable to ongoing trade tensions and inflationary pressures. Moreover, inflation driven
constraints on consumer spending are likely to dampen demand for discretionary items such
as clothing. Demand for VSF and DWP in China has slowed in recent weeks as the value
chain assesses the implications of these newly imposed tariffs. This has exerted downward
pressure on pricing causing the hardwood DWP market price3 to drop to US$847 per ton in
early May. Despite current headwinds, our DWP business remains well positioned for
sustained long-term growth.
Demand for graphic papers continues to decline. Our strategic focus in this segment is to
proactively manage capacity utilisation and cash generation from our assets. Our efforts to
maximise our market share is yielding positive results, with year-on-year gains reinforcing our
competitive positioning.
Despite current raw material costs being relatively low, potential global inflationary impacts
associated with trade tensions pose a risk for our input costs. Maintenance shuts are
scheduled for the Cloquet4 and Saiccor mills in the third quarter, which will have a negative
impact on earnings of approximately US$20 million. We further anticipate that the forestry fair
value price adjustment will be negative due to lower wood market prices in South Africa.
Our capital expenditure forecast for FY2025 has risen to US$550 million due to the delay in
the start-up and substantially increased labour costs associated with the Somerset Mill PM2
project. We anticipate that net debt will peak in the third quarter as the capital expenditure for
the project is completed. We remain committed to disciplined capital allocation and reducing
net debt is our priority for FY2026 and FY2027.
Given the uncertainty in our markets due to ongoing global trade tensions and their broader
indirect effects on macroeconomic conditions, particularly the tariffs imposed by the US on
textile and apparel manufacturers in China which is impacting demand and pricing for DWP,
we are adopting a cautious outlook and estimate that Adjusted EBITDA for the third quarter of
FY2025 will be at a similar level to that of the second quarter.
On behalf of the board
SR Binnie
Director
GT Pearce
Director
Date of approval:
07 May 2025
Date of release on SENS:
08 May 2025
1 "year-on-year" or "prior/previous year" is a comparison between Q2 FY2025 versus Q2
FY2024; "Quarter-on-quarter" or "prior/previous quarter" is a comparison between Q2 FY2025
and Q1 FY2025.
2 Market price for imported hardwood dissolving wood pulp into China issued daily by the
CCF Group.
3 Market price for imported hardwood dissolving wood pulp into China issued daily by the
CCF Group.
4 The Cloquet mill has 18-month intervals between shuts and the last shut was in FQ1 2024.
This results announcement is the responsibility of the directors. It is only a summary of the
information in the full results for the second quarter ended March 2025 and does not contain
full or complete details. Any investment decisions should be based on the full results for the
second quarter ended March 2025 accessible from 08 May 2025 via the JSE link and also
available on the home page of the Sappi website at www.sappi.com.
The JSE link is as follows:
https://senspdf.jse.co.za/documents/2025/JSE/ISSE/SAVVI/SAPQ225.pdf
JSE Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 08-05-2025 08:00:00
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