Sappi Posts US$20M loss amid shutdowns, weak global demand

SOUTH AFRICA – Global paper and packaging company Sappi has reported a US$20 million loss for the second quarter ended March 31, 2025, reversing a US$29 million profit posted in the same period last year.

The decline was primarily attributed to extended maintenance shutdowns at two key South African mills and a sluggish global economy impacting demand across all segments.

Adjusted EBITDA fell sharply to US$107 million, down from US$180 million in Q2 2024, with CEO Steve Binnie citing “heightened uncertainty from global trade tensions and economic slowdown” as key factors that weighed on selling prices and margins.

The quarter was further strained by a R307 million forestry fair value loss adjustment and prolonged maintenance at the Saiccor and Ngodwana Mills, which added US$13 million in unplanned costs beyond the company’s original US$45 million guidance.

In North America, the Somerset Mill PM2 conversion and expansion project contributed an additional US$20 million in shutdown costs, as anticipated.

Despite the operational disruptions, the mills resumed production successfully, and there was some relief in the form of stable year-on-year sales volumes, with a 9% increase in packaging and speciality paper volumes reflecting modest demand recovery in key markets.

Sappi has revised its annual capital expenditure forecast to US$550 million, largely due to delays and labour cost increases related to the Somerset Mill project.

This contributed to a rise in net debt to US1.67 billion, up US$264 million, driven by capital expenditure and adverse currency movements against the Euro.

Liquidity remains manageable with US$156 million in cash and US$612 million in revolving credit facilities.

Binnie said the company was focused on reducing net debt to around US$1 billion following Q3, when project-related spending is expected to peak.

The dissolving wood pulp (DWP) segment, which feeds into textile production in China, remained under pressure amid slower-than-expected post-Chinese New Year demand and US$70 per ton decline in VSF pricing.

Binnie acknowledged the risk posed by ongoing US-China trade tensions, especially the proposed US tariffs on Chinese apparel, which could indirectly affect DWP demand.

Graphic paper volumes held steady despite structural market decline, with Sappi achieving market share gains.

However, the European division remains under strain, impacted by macroeconomic headwinds and paper oversupply, leading to compressed margins.

Looking ahead, Binnie offered a cautious Q3 outlook, projecting EBITDA to remain at Q2 levels, while reiterating the group’s commitment to cost-saving, asset optimisation, and targeted market share expansion strategies.

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