Paper producer Sappi reported on Thursday that its net profit for the quarter ended June had dropped to $29-million, about half of the prior quarter and 56,1% below the equivalent quarter last year.
Group operating profit for the quarter decreased by 52,6% to $46-million compared to a year earlier largely as a result of weak demand and price pressure on its coated fine paper business and the pressure on prices in Southern African businesses as a result of the weak dollar relative to the rand.
Headline earnings were $2-million lower than net profit mainly as the result of profit on the sale of fixed assets.
Earnings per share for the quarter were 13 US cents, 52% of the prior quarter and 55,2% below a year earlier.
Headline earnings per share were 12 US cents. Operating costs were generally well managed; however, a concentration of mill maintenance shuts in the quarter and higher inflation in South Africa led to increased costs in the forest products business.
The real cost performance was distorted by translation to dollars. Net interest paid included additional costs of $10,5-million in respect of an investment-linked financing agreement.
The impact on net finance costs, after related credits, was $5,5-million.
These costs result from the cumulative under-performance of the investment component. Net finance costs were $21-million compared to $27-million in the March quarter.
Cash generated by operations was $124-million, 39,5% lower than a year earlier and 36,1% lower than the March quarter.
Capital expenditure for the quarter was $70-million, approximately 80% of depreciation.
In the light of the uncertain outlook capital expenditure for the full year, which was planned at a level of 100% of depreciation, had been cut back to approximately 80% of depreciation.
Net debt increased by $62-million to $1,571-million in the quarter largely as a result of translation of its Euro and rand debt into its reporting currency, the dollar, which had weakened during the period.
Inventories increased by $28-million excluding currency movement in the quarter, which was traditionally a quarter in which Sappi built inventory in North America for a seasonal increase in demand.
Net debt to total capitalisation decreased to 33,9% from 35,4% as the value of the group”s equity was enhanced when translated to dollars at stronger period end rates.
Since its second quarter announcement the group had re-purchased approximately 1,1-million shares at an average price of approximately $12,60 per share.
Sappi’s JSE share price rose by 0,1% to R93,20 by mid-morning on Thursday. – Sapa