International packaging, pulp and paper producer Sappi’s profit in the third quarter of financial 2017 to the end of June rose appreciably to S$58m from $32m in the period in 2016.
This came as the group paid down net debt to $1.3bn from about $1.6bn a year ago.
"I am pleased to report that during the past quarter Sappi delivered profits up 81% from a year ago and reduced debt by a further 17% year on year," Sappi CEO Steve Binnie said on Thursday. "We also repaid $400m in bonds from cash reserves, which will generate savings of about $21m per annum on our net interest charge."
Binnie said the third quarter was Sappi’s weakest due to the slowdown in business activity during northern hemisphere summer holidays. Sappi also used this period for big annual maintenance shutdowns.
"A major focus for Sappi ... was debt reduction. It has done well in this regard," said Mish-al Emeran, an equity analyst at Electus Fund Managers.
The quarter’s earnings before interest, tax, depreciation and amortisation, excluding special items of $155m, were slightly down from $160m a year ago. Higher output was offset by higher raw material prices and a stronger rand to the dollar.
"Based on current market conditions, including higher paper pulp prices and the current … exchange rate, we expect the group’s fourth quarter operating performance to be slightly below that of last year," said Binnie. "The full-year result is likely to be above that of the prior year," he said.
Avior Capital Markets analyst Wade Napier said Sappi was "very comfortable" in terms of its existing balance sheet.
Projects to increase capacity of speciality packaging in Europe and North America were progressing as planned. During the quarter, capital expenditure of $78m related mainly to these projects and also to the next phase of debottlenecking dissolving wood pulp — also known as specialised cellulose — production at its Ngodwana and Saiccor mills in SA.