Sappi CEO Steve Binnie. As Sappi enters its 90th year of being listed on the JSE, the company points to its sustainability credentials as key to its ability to weather rapidly evolving market conditions.
Image: Supplied
Sappi’s share price slumped over 11% on the JSE Thursday morning after it posted a $413 million (around R6.7 billion) loss for the quarter to March 31 compared with a $20m profit the year before, and its management expects the third quarter may be worse.
The share price slid 13.1% to R14.15 on the JSE Thursday morning. Sappi, which operates in over 150 countries but is pivoting toward its US operations, said adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) fell by 51% to $52m from $107m.
“While headline earnings were impacted by an unprecedented ‘risk-off’ global environment and a volatile rand per dollar exchange rate, the group has significantly accelerated its focus on innovative business enhancements to ensure global competitiveness,” CEO of the dual-listed woodfibre and bioeconomy resource group, Steve Binnie, said.
Profitability of the North American region improved in the three months, but it remained substantially below last year. Performance was hurt by the materially lower paperboard pricing and slower-than-anticipated ramp-up of paperboard sales volumes.
Nevertheless, the Somerset Mill PM2 investment was gaining momentum after a slow start, and the group expected to benefit from its long-term investment, said Binnie. Sappi recently invested heavily to double the mill’s paperboard capacity.
Binnie said in an interview that they were slowly pivoting to the US because management saw the potential for the group to grow in that market; it had made substantial investments in the US, while domestic US trade policies could put the group in a good position in the market.
The liquidity remained well managed through the quarter, with cash on hand of $192m and access to a further $632m of undrawn revolving credit facilities in Europe and South Africa.
Group sales volumes had increased year-on-year, but selling prices declined across all regions. North American paperboard volumes increased 27% year-on-year, reflecting continued progress in the ramp-up of Somerset Mill PM2.
Binnie said they were very close to the ramp-up of full volumes at the Somerset Mill, but it was unfortunate that volumes were accelerating; selling prices had come under “tremendous pressure” because of the geopolitical pressures.
In Europe, profitability benefited from solid sales volumes and fixed-cost savings initiatives. Sales volumes were up 2%. Market conditions in the European region remained challenging, reflecting macroeconomic weakness and a significant oversupply in paper markets.
“Consolidation remains a key theme in Europe, and a key focus for the Sappi leadership team will be to finalise the proposed joint venture with European counterpart UPM,” he said.
“Work is progressing in line with the targeted timeline for the signing of definitive agreements in the first half of 2026. Completion of the transaction remains subject to the signing of definitive agreements, receipt of all required regulatory approvals…with closing anticipated by the end of 2026,” said Binnie.
In South Africa, profitability was affected by adverse exchange rate movements, and other rising costs such as power, logistics and supply chain costs, and now also fuel, said Binnie.
The business in South Africa was also affected by significantly lower US dollar-denominated dissolving wood pulp prices, but these prices were beginning to turn around, he said.
Containerboard sales volumes were in line with the prior year, supported by strong agricultural demand and positive market forecasts for the 2026 citrus season. However, net selling prices were 3% lower than last year, reflecting weak global containerboard market conditions and increased competition from low-priced imports into South Africa.
Binnie said they were adopting a cautious outlook for the third quarter, and adjusted EBITDA is likely to be below that of the second quarter of the financial year.
The cautious stance was against a backdrop of continued market uncertainty arising from ongoing trade tensions, escalating geopolitical conflicts, and their broader indirect effects on global macroeconomic conditions, input costs, and currency movements.
"While the current reporting period reflects the inescapable pressures of a cyclical global market, our focus remains fixed on the structural shift toward the global bioeconomy,” he said.
"By aligning our operational DNA with the evolving sustainability landscapes of the US, Europe, and South Africa, we are doing more than just navigating a downturn; we are securing our 'license to operate' for the next decade.”
BUSINESS REPORT
Sappi CEO Steve Binnie. As Sappi enters its 90th year of being listed on the JSE, the company points to its sustainability credentials as key to its ability to weather rapidly evolving market conditions.
Image: Supplied