The year 2009 was a landmark year in pulp and paper group Sappi’s transformation journey. In that year, a turning point for the company, Sappi’s debt peaked at $2.6bn, up by $171m compared with 2008. It reported an 8% drop in sales to $5.4bn, while its operating profit fell significantly to $33m from $366m in 2008. To complete the nightmare, the net loss was $177m.
Facing a sharp decline in demand for its products, Sappi had no choice but to take steps to immediately return to profitability, improve cash flow and reduce the debt pile. Fast-forward to the 2018 year end results. Sappi reported a profit of $323m, while net debt has nearly halved from $2.6bn in 2009 to $1.6bn. This is in line with the company’s target of two times net debt to earnings before interest, tax, depreciation and amortisation (ebitda). The net debt to ebitda ratio shows how many years it would take for a company to pay back its debt if net debt and ebitda were held constant. This validates the company’s...
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