Business News

Sappi: Results for the first quarter ended 2007

Thursday 31. January 2008 - Results for the first quarter ended December 2007 · Operating profit (excl. special items) improved on last year · Basic EPS 18 US cents for the quarter · Prices improved except in Europe · Saiccor expansion progresses well · High input costs

The quarter under review

Commenting on the results, Sappi chief executive Ralph Boëttger said:

“Our operating performance improved further in the quarter. Forest Products benefited from good demand for its products and increasing prices to report a strong performance. Our fine paper business continued to improve its profitability despite continued cost pressures and difficult market conditions in Europe. We continued to improve our margins in North America through improved coated fine paper prices and cost reduction. Our sales increased by 8.7% compared to a year ago to US$1.38 billion. Operating profit excluding special items increased 46% to US$92 million from US$63 million a year ago.

We have announced coated fine paper sheet price increases in Europe for February 2008 which are essential to offset high raw material and energy prices.”

Looking forward, Boëttger commented:
“Global macroeconomic conditions are less favourable than expected, with commentators concerned about a possible slowdown in the US economy and the strong Euro dampening European growth. Input costs are increasing at the same time. Our South African businesses are also affected by the national power shortage and we are working to minimise the impact.

In the coated fine paper sector the global supply/demand balance is generally favourable. Advertising forecasts remain positive. The pulp industry continues to experience strong demand and prices continue to increase.

Given that cost pressure is unlikely to abate, we will continue to emphasise cost reduction. We will also continue our efforts to improve prices for our products, in particular coated fine paper sheets in Europe.

As reported last quarter we expect our net debt to increase further in the second quarter before reducing towards the end of the year, as we complete the Saiccor expansion.

We expect strong operating performance from our Forest Products business and continued improvement in North America. Margins in Europe will remain under pressure. Operating profit excluding special items is expected to improve in the next quarter compared to a year ago.”