CEO Steve Binnie said he was very pleased with the “excellent performance” achieved by the group in the results, for the three months to 31 December 2021, which were released yesterday (9 February).
“We outperformed the guidance provided at the end of the last quarter with EBITDA at $240m [£177m], a 36% increase over the prior quarter ($177m) and more than double the equivalent quarter last year ($98m).
“Robust market demand in all product segments combined with the implementation of higher sales prices facilitated the growth and offset rising costs. This achievement was despite logistics and transport bottlenecks, as well as significant increases in energy, pulp and other raw materials.
“The recovery has taken place within the context of the Covid-19 pandemic. Throughout this unprecedented time the health and safety of our employees remained paramount. A comprehensive Covid-19 action plan enabled us to operate in a safe and uninterrupted manner across all our regions.”
Sappi reported net debt, however, of $1.917bn, although this was down on the $2.056bn recorded in the equivalent quarter last year.
In the results commentary, the group added that global logistical challenges “continued unabated and posed headwinds for our export sales and raw material procurement in all regions”.
Substantial energy, raw material, and delivery cost inflation in the quarter was offset by selling price increases in the group’s paper business.
Pulp sales volumes increased by 48% compared to the prior quarter as the group secured more shipping capacity, albeit at higher cost, for its South African exports.
Markets for packaging and speciality papers continued to be robust across all regions with sales volumes up 26% on a year ago. The successful implementation of price increases combined with product mix optimisation led to further progress in profitability for the segment.
Sappi said buoyant demand for graphic papers, meanwhile, boosted sales volumes by 20% compared to last year and provided support for price increases, “which were necessary to offset significant cost inflation and restore EBITDA margins for the segment”.
The group continued: “Renewed strong demand in domestic and export markets supported price increases across all paper grades and facilitated the return of the European business to profitability.
“An unprecedented surge in energy prices for gas, power and coal compelled the implementation of an energy surcharge on all European products. This extraordinary measure was a key component of our strategy to offset the escalating energy costs and restore margins in the European business.”
Looking ahead, Binnie said: “Given the favourable demand outlook for all of our product segments we anticipate a further improvement in EBITDA for the second quarter of FY2022 from the excellent results achieved in the first quarter.”
