Sappi Reports Q4 Results in Continuing Weak Markets
Press release from the issuing company
JOHANNESBURG, South Africa--Nov. 10, 2003-- Sappi, the world's leading producer of coated fine paper, today announced results for the fourth quarter to September 2003.
Markets remained weak
Significant reduction in prices in all major markets
Fourth quarter sales up 6.7% from prior year
Operating costs well controlled
Cash generated by operations up 28% from prior quarter to US$159 million
Headline EPS of 11 US cents for quarter; 71 US cents for year
EPS of 4 US cents for quarter; 65 US cents for year
After tax charge in quarter of 8 US cents in relation to US machine closure
Dividend of 29 US cents
Commenting on the results, Sappi CEO Jonathan Leslie, said:
"Our results were achieved in an environment of continued weak demand for coated fine paper, contrary to the customary seasonal pick up in this quarter, and lower prices in all regions. Our fine paper businesses were unfavourably affected by weak pricing in Europe and North America and in South Africa by more competitive imports and reduced export margins due to the weaker US Dollar.
"Forest Products experienced firm demand in the South African markets for packaging paper and internationally for dissolving pulp. The weaker US Dollar continued to impact prices realised in local currency.
"We have embarked on a number of actions to improve the supply demand balance and to offset rising costs in these tough markets.
"At Westbrook in the US we will close our highest cost paper machine and transfer the production of coated fine paper to other mills. The mill will in future focus on our Ultracast® and casting release paper business.
"We have stopped operations at our Clan sawmill in South Africa. The sawmill was non-core, relied on old technology and had an uncompetitive log supply.
"I have also decided to restructure the Fine Paper division. Wolfgang Pfarl and Kathy Walters, CEOs of Sappi Fine Paper Europe and North America respectively, will report directly to me and as a consequence the Fine Paper office in London will be closed.
"As the position of CEO of Sappi Fine Paper will no longer exist, we have agreed that Bill Sheffield will leave the group on 14 November 2003.
"In addition we plan to reduce our staffing levels by a further 100 people in North America and by 150 people in Europe in 2004."
Looking forward, Leslie continued:
"We will continue to curtail fine paper production in Europe and North America during the current quarter including scheduling major maintenance shuts at all the North American mills.
"It appears as if any pick up in markets will be delayed beyond our first quarter. As a result of poor market conditions and low prices we expect earnings to be weaker than the prior quarter, before the charges related to closures and staff reductions and the impact of the maintenance shuts, in the first quarter.
In conclusion, he said:
"We are, however, seeing early signs of improvement in Europe. The order intake of coated fine paper has improved and announcements of price increases for coated groundwood paper, in Europe and the United States, and coated fine paper reels, in Europe, have been made.
"With this background we expect earnings to improve for the balance of the year, resulting in an overall improvement, before the closure and staff reduction charges, compared to 2003."
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