Sappi's strategic moves for 2025 in sustainable packaging and speciality papers
|Published
Raw materials stores drop from a conveyor system at the Ngodwana wood mill, operated by Sappi., the world's biggest producer of dissolving wood pulp, in Mpumalanga, South Africa Picture: Dean Hutton/Bloomberg
EDWARD WEST
edward.west@inl.co.za
Sappi’s completion of the Gratkorn PM9 mill conversion in Austria, to label papers, coupled with good progress on the Somerset PM2 conversion to paperboard in the US, set for commissioning in 2025, positioned the group to meet growing demand for sustainable packaging and speciality papers solutions, the group CEO Steve Binnie said.
Its management said the group had exceeded their expectations in the 2024 financial year. Adjusted earnings a share came to 41 US cents versus 53 US cents in 2023, while the dividend was slightly lower at 14 US cents per share versus 15 US cents in 2023.
The executive directors total remuneration increased sharply. Binnie’s increased to $2.02 million in 2024, from $835 819 in 2023, while that of chief financial officer Glen Pearce increased to $1.08m from $476 438 previously, the annual report showed.
Binnie said in the report that the Verve dissolving wood pulp business played a central role in the past year, with an excellent performance and contributing to a record profitability in the South African region. In Europe, rationalisation improved profitability, while the North American business delivered solid results, which all reflected “the strength and adaptability of our diversified operations,” Binnie said.
He said paper markets remained subdued through 2024, with the expected recovery in demand after the prolonged de-stocking phase of 2023 unfolding more slowly than anticipated. Sales volumes improved in the second half however, but remained below the previous year
The closure of two European paper mills and the conversion and expansion of the Somerset Mill paper machine (PM2) from graphic paper to paperboard was expected to yield substantial benefits in coming years, he said,
Deleveraging of the balance sheet remained a top priority and this combined with healthy liquidity, meant the group was well-positioned to navigate any market challenges in the coming year, said Binnie.
The results were despite persistent global macroeconomic challenges and subdued consumer sentiment and spending.
Binnie said they had in the past year also moved to maximise the utilisation of every tree, with “meaningful progress” in commercialising innovative bio-based products such as lignin and fibrillated cellulose.
In 2024, the group was recognised by Forbes and Time magazines as one of the World’s Best Companies and Employers. Additionally, Sappi ranked seventh globally in Forbes’ World’s Best Companies for Women.
All the group’s key environmental indicators were improved upon, and while production curtailments posed challenges for energy and emission intensity targets, the focus on renewable energy saw good progress, with recent investments in de-carbonisation delivering meaningful results.
“In South Africa, we engaged in collaborative initiatives to ensure a Just Energy Transition that balances environmental and social outcomes. We exceeded our wood-fibre certification targets, enhanced biodiversity within our forestry conservation areas, and reduced waste to landfill,” he said.
Decarbonisation was advanced through solutions that included biomass utilisation, electrification initiatives across Sappi Europe, and a Power Purchase Agreement with Enpower Trading in South Africa. Sappi North America achieved 78% renewable energy usage.
A notable example was the Kirkniemi Mill in Finland, which transitioned at the end of 2023 from fossil fuels to renewable biomass energy. This shift, combined with upgrades to its energy systems, ensured it was now powered entirely by clean electricity, eliminating Scope 2 (indirect) emissions. As a result, the mill achieved a 91% reduction in greenhouse gas emissions intensity over a five-year period.
In 2024 the group’s market growth segments, pulp and packaging and speciality papers, constituted 60% of adjusted earnings before interest tax depreciation and amortisation (EBITDA) and represented 56% of sales volumes (excluding forestry).
“The long-term outlook for pulp, packaging, and speciality papers products remains positive, and we are committed to maximising profitability by expanding capacity and optimising our product mix,” the group diretors said.
The packaging and speciality papers portfolio was expanded in the ast year with the development of a number of new products, including recyclable paper substrates with barrier functionality, such as Guard MH, a renewable alternative to non-recyclable packaging that meets the growing demand for eco-friendly disposal options.
Another breakthrough was Silco Star, a glassine paper featuring a new clay-based coating, which reduces silicone usage and offers a sustainable alternative to traditional coatings.