Sappi has achieved record earnings for the third quarter of its financial year ending in June. Its Ebitda figure reached $371 million compared to $145 million in the same quarter a year earlier and compared to the $337 million earned in Q2 this year.
This was achieved on revenues of $1,818 million in Q3 this year ($1,393 million in 2021) and to $1,858 million in sales in Q2. In the first nine months revenues have reached $5,373 million ($3,840 million).
Despite the steep rise in prices, there remains a strong global demand for paper says Sappi which allows an equally strong pricing momentum for paper. This is allowing Sappi to maintain and grow margins even with input price increases and to cope with the planned shutdowns in pulp production.
As a consequence sales in graphic papers increased 4% and capacity was at full utilisation. “We are expecting strong demand to continue,” says Sappi, “and at favourable rates. We are expecting strong demand for our products to continue into the fourth quarter.
“There is early indicators of the graphic paper market softening in some sales regions, but order books remain healthy.”
The company notes that one cloud is the ongoing threat to energy supplies in Europe with a potential impact on business in Europe. It also points to ongoing war in Ukraine as creating inflationary pressures and Covid lockdowns in China as threats to business success. Climate change may have contributed to flooding which struck in South Africa, damaging or destroying 56,000 tonnes of paper and briefly closing local mills.
Europe is the biggest market for Sappi’s mix of coated and uncoated printing papers, packaging and speciality grades and for its dissolving hardwood pulp. And coated papers is the biggest sector within Europe at 51% of Sappi’s sales in Europe. The market for graphic papers remained tight despite the ending of the UPM strike which released more volume for sale. Increased prices in the quarter more than matched cost increases so helped achieve margin expansion, says Sappi. It has had to cope with an increase of variable costs, mostly energy, of 47% and of fixed costs, personally and maintenance of 14%.
Packaging, which remained resilient during Covid has shown a revenue growth of 16%.
In Q2 sales in Europe reached 780 tonnes, below the 801 tonnes sold in Q2 but above the 733 tonnes sold in 2021. It recorded an Ebitda of €200 million, much greater than the €14 million from 2021’s equivalent period.
