Sappi, a global producer of dissolving pulp (DP), speciality papers, and packaging materials, has reported positive financial results for the second quarter of financial year 2024 (Q2 FY24).
Earnings before interest, taxes, depreciation, and amortisation, excluding special items, reached $183m, a 10% increase year-over-year (YoY).
This growth stemmed primarily from strong DP demand and significant cost savings across the company.
Specifically, DP sales volumes rose 2% compared to the prior year, with high viscose staple fibre operating rates boosting demand.
Profitability in the segment further benefitted from cost reductions for wood and chemicals.
Packaging and speciality paper demand rebounded in Q2 FY24, with sales volumes up 9% YoY.
However, selling prices remained under pressure due to declines in the second half of FY23.
The company's graphic paper segment also saw a gradual demand recovery, with sales volumes increasing 7% YoY.
Cost savings helped improve profitability in this segment despite a structural decline in demand compared to 2022.
Sappi's European business profitability continued its slow recovery, driven by higher sales volumes, cost savings, and successful capacity utilisation following mill closures.
North American operations delivered a good performance with strong paperboard sales volumes offsetting lower graphic paper demand.
Sappi's packaging and speciality paper markets are expected to see continued improvement, particularly in North America and South Africa.
However, rising pulp market prices could negatively impact paper business profitability, especially in Europe.
Planned maintenance shutdowns at the Saiccor and Somerset Mills are also expected to affect group profitability in Q3.
Sappi said it remains committed to its strategic shift away from graphic paper markets.
Capital expenditure for FY24 is expected to be approximately $500m, with a significant portion allocated to the ongoing Somerset Mill conversion project focused on renewable packaging and biomaterials growth.
