Higher prices boost Sappi

Sappi’s third-quarter profit soared eight-fold due to higher sale prices.

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Johannesburg - Sappi, the largest producer of dissolving wood pulp, a cotton substitute, said third-quarter profit soared eight-fold due to higher sale prices and the benefits from exports of the weaker rand against the dollar.

Read also: Sappi benefits from diversification

Net income for the three months through June rose to $32 million from $4 million a year earlier, the Johannesburg-based company said in a statement on Thursday.

Revenue slid 3.9 percent and net debt was reduced to $1.58 billion from the $1.65 billion that the company reported three months ago.

Sappi, which started as a paper and pulp maker in Johannesburg in 1936, is diversifying its production as the demand outlook for glossy paper weakens, and is also seeking to reduce costs and cut debt.

The company expects to report fourth-quarter earnings before interest, taxes, depreciation and amortisation, excluding one-time items, to be in line with the same period last year, although a worsening drought in South Africa and the impact of the UK’s vote to leave the European Union could weigh, Sappi said.

The shares gained as much as 6 percent, the most since May 10, and traded 3 percent higher at 71.46 rand as of 9.16am in Johannesburg. The stock has advanced 9.2 percent this year, outperforming the FTSE/JSE Africa All-Share Index.

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