Sappi posts 28% increase in profit in Q3, Mpact’s revenue slumps by 1.1% in H1 of FY24

SOUTH AFRICA – Paper and packaging manufacturer Sappi improved its operating performance in the third quarter of the year compared with the same quarter last year, delivering a 28% increase in profit from US$40 million to US$51 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 42% year-on-year from US$106 million in the third quarter of last year to US$151 million in the reporting quarter.

Notably, included in the EBITDA was a positive plantation fair value price adjustment of US$3 million.

However, for the nine months ended June 30, Sappi reported a loss of US$46 million, compared with a profit of US$299 million in the prior comparable period.

Meanwhile, basic earnings per share (EPS) for the third quarter grew 29% year-on-year to US$0.09, while EPS excluding special items grew by 80% year-on-year to US$0.09 apiece.

Sappi generated net cash of US$32 million in the reporting quarter, a positive working capital inflow of US$44 million, and proceeds of US$49 million from the sale of the Stockstadt mill in Germany.

This was offset by a cash outflow of US$61 million for the closure and restructuring of the Lanaken mill in Belgium.

The group also spent US$108 million on conversion and expansion projects, including a new turbine at the Saiccor mill in South Africa.

CEO Steve Binnie said that the group’s spending in South Africa has mostly been on maintenance, but the group is looking to invest more in the future.

These investments will involve decarbonization, possibly renewable energy, and boosting its packaging capabilities.

Meanwhile, the quarter’s positive cash flow allowed Sappi to reduce its net debt by US$26 million to US$1.34 billion.

The group has US$365 million of cash and US$662 million in unused revolving credit facilities.

Looking ahead, Binnie expects a high level of global macroeconomic uncertainty to continue, but he is confident that DP market conditions remain robust. Low downstream VSF inventories and constrained DP supply continue to support prices.

Mpact’s revenue decreased by 1.1% in H1 of FY24

Meanwhile, JSE-listed paper and plastics packaging business and recycler Mpact saw revenue decrease by 1.1% to R6.17 billion (US$336.90m) during the half-year period to June 30, down from R6.24 billion (US$340.72m) in the comparable 2023 interim period, primarily due to a 2.1% decrease in sales volumes.

However, the company increased its net asset value (NAV) a share by 9% to R34.11.

Underlying operating profit decreased to R423 million (US$23.10m), down from R531 million (US$28.99m) for the 2023 half-year period.

This was due to lower selling prices in the paper business, the under-recovery of fixed costs, and higher depreciation from major projects capitalized towards the end of 2023.

“The group generated earnings before interest, taxes, depreciation and amortization of R763 million and cash from operations of R516 million (US$28.18m), and although lower than last year, this demonstrates our resilience through the cycle,” says Mpact CEO Bruce Strong.

The company also declared an interim dividend of 30c a share.

Meanwhile, the company’s net debt increased to R3.2 billion (US$174.73m) after it had invested R490 million (US$26.76m) in capital projects, R73 million (US$3.99m) in acquiring a 30% interest in blow-moulding water tank manufacturer Africa Tanks and paid R111 million (US$6.06m) in dividends to shareholders.

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