Sappi's share price fell more than 11% on the JSE on Thursday morning after it reported a loss of $413 million (about R6.7 billion) in the quarter to March 31, compared with a profit of $20 million last year, and its management expects the third quarter to be worse.
The share price fell 13.1% to R14.15 on the JSE on Thursday morning. Sappi, Which operates in more than 150 countries but is turning its attention to its US operations, said adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) fell 51% to $52 million from $107 million.
Steve Binney, CEO of the dual-listed woodfibre and bioeconomy resources group, said, “While headline earnings were impacted by an unprecedented 'risk-off' global environment and a volatile rand to dollar exchange rate, the group has continued its focus on innovative business enhancements to ensure global competitiveness.
profitability of North American region There was improvement in three months, but it remained well below last year. Performance was actually impacted by lower paperboard prices and slower than anticipated growth in paperboard sales volumes.
Still, after a slow start the Somerset Mill PM2 investment was gaining momentum, and the group expected to profit from its long-term investment, Binney said. Sappi has recently invested heavily in doubling the paperboard capacity of the mill.
Binny said in an interview that they were gradually turning to the US because management saw the group's growth potential in that market; It had made substantial investments in the US, while domestic US trade policies could position the group well in the market.
Liquidity remained well managed during the quarter, with $192 million of cash on hand and access to an additional $632 million of undrawn revolving credit facilities in Europe and South Africa.
The group's sales volume has increased year-on-year, but sales prices have declined in all regions. North American paperboard volumes increased 27% year-over-year, reflecting continued progress in the ramp-up of Somerset Mill PM2.
Binney said they were very close to full volume growth at the Somerset mill, but it was unfortunate that volumes were accelerating; Sales prices had come under “tremendous pressure” due to geopolitical pressures.
In EuropeProfitability benefited from solid sales volumes and certain cost savings initiatives. Sales volume increased by 2%. Market conditions in the European region remain challenging, reflecting macroeconomic weakness and oversupply in paper markets.
“Integration into Europe remains a key topic and a key focus of the Sappi leadership team will be to finalize the proposed joint venture with European counterpart UPM,” he said.
“Work is underway in line with the targeted timeline for signing of definitive agreements in the first half of 2026. Completion of the transaction is subject to the signing of definitive agreements, receipt of all necessary regulatory approvals… closing is expected to occur by the end of 2026,” Binny said.
In South Africa, Profitability has been impacted by adverse exchange rate fluctuations and other rising costs such as power, logistics and supply chain costs and now fuel, Binny said.
He said that South Africa's business has also been affected by the significant decline in wood pulp prices denominated in US dollars, but these prices have started to change.
Containerboard sales volumes were in line with last year, supported by strong agricultural demand and positive market forecasts for the 2026 citrus season. However, net selling value was 3% lower than last year, reflecting weak global containerboard market conditions and increasing competition from low-priced imports into South Africa.
Binny said they are taking a cautious approach for the third quarter, and adjusted EBITDA is likely to be below the second quarter of the fiscal year.
The cautious stance was against the backdrop of continued market uncertainty arising from ongoing trade tensions, escalating geopolitical conflicts and their broader indirect effects on global macroeconomic conditions, input costs and currency movements.
“While the current reporting period reflects the inevitable pressures of a cyclical global market, our focus remains on the structural shift towards a global bioeconomy,” he said.
“By aligning our operational DNA with the emerging sustainability scenarios of the US, Europe and South Africa, we are doing more than just tackling recession; we are securing our 'license to operate' for the next decade.”
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