Sappi full-year profit drops, sees better 2010

Sappi, the world’s largest maker of fine paper used in glossy magazines, reported on Monday a drop in full-year underlying operating profit, but forecast a better 2010.

Sappi’s underlying operating profit for the year to end-September dropped to $33-million, down from $366-million the previous year, mainly on weaker sales and a stronger rand.

Sales for the year were down 8%, hit by a sharp fall in demand and lower prices for pulp, and a stronger rand in its South African business, which eroded gains earned in foreign currencies.

Sappi said it had decided not to declare a dividend.

Sappi, which reported a fourth-quarter basic loss per share of 20 US cents, down from a loss of 12 cents the previous quarter, said it expects demand for its major products in the 2010 financial year to improve in most markets.

“Despite our first quarter historically being a seasonally weaker quarter, given current market conditions we expect to remain profitable at operating level excluding special items,” it said in a statement.

“We expect the full year’s performance to be better than financial 2009 based on a gradual recovery in world economic conditions and the decisive actions we have taken to improve our business.”

The global paper industry has struggled for nearly a decade to climb out of a slump caused by overcapacity, soft demand, low prices and weak earnings.

The drop has been exacerbated by the recession, which has further eroded demand for basic materials, including paper, as print advertising has dropped steeply.

The company said it had managed to improve its liquidity position with $770-million available at the end of September and sees no major debt maturities before 2012. - Reuters