Sappi reports strong Q1 FY25 earnings amid market challenges

SOUTH AFRICA – JSE-listed paper and packaging manufacturer Sappi has posted strong financial results for the first quarter of FY25, achieving a 14.9% adjusted EBITDA margin despite global economic headwinds.

The company reported adjusted EBITDA of US$203 million, a 56% year-on-year increase from US$130 million in Q1 FY24, driven by cost savings, operational efficiencies, and improved sales volumes in key segments. 

“Sappi navigated ongoing macroeconomic headwinds with strategic cost-saving initiatives and capacity rationalization efforts under our Thrive strategy. I am pleased with our ability to maintain profitability across all segments,” said CEO Steve Binnie.

Segment performance 

The pulp segment delivered a robust performance, with dissolving pulp (DP) sales volumes increasing by 10% year-on-year.

The market remained strong, despite a seasonal slowdown in China’s textile sector ahead of the Lunar New Year.

In the packaging and specialty papers segment, sales volumes surged by 14%, led by a significant recovery in North American paperboard sales. However, European demand remained weak due to consumer sentiment and industry overcapacity.

The graphic papers segment saw profitability improve year-on-year, supported by cost reductions and operational efficiencies. However, sales volumes declined by 3%, reflecting the market’s return to its historical downward trend.

Financial highlights

Sappi reported sales revenue of US$1.36 billion for the first quarter of FY25, marking an increase from US$1.27 billion in the same period last year.

This growth was driven by improved sales volumes in dissolving pulp, packaging, and specialty papers, as well as ongoing cost-saving initiatives.

The company’s operating profit rose to US$132 million, a significant improvement from US$86 million recorded in Q1 FY24.

This increase was attributed to operational efficiency gains, higher dissolving pulp selling prices, and the continued execution of Sappi’s Thrive strategy, which focuses on capacity rationalization and cost optimization.

Despite capital expenditures and strategic investments, net debt stood at US$1.41 billion, slightly lower than the US$1.42 billion reported in the previous quarter.

The company’s strong financial position underscores its commitment to maintaining stability while navigating macroeconomic challenges.

Outlook for Q2 FY25

Sappi anticipates lower adjusted EBITDA in Q2 FY25, citing a US$44 million impact from scheduled maintenance shutdowns at Ngodwana and Saiccor Mills in South Africa, and a 70-day shutdown for the Somerset Mill PM2 project in the US.

Despite near-term challenges, the company remains optimistic about its long-term strategy, focusing on sustainability, operational efficiency, and market adaptability.

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