Sappi (SAP) Q3 2024 earnings summary

Executive summary

• EBITDA excluding special items rose 40–42% year-over-year to $151 million, reflecting strong recovery in pulp and improved profitability in graphic papers, despite seasonal and maintenance impacts.

• Net cash generated for the quarter was $32 million, supported by the $49 million sale of Stockstadt Mill land.

• Profit for the period increased to $51 million, with EPS excluding special items at 9 US cents.

• Exposure to graphics paper reduced below 50% of product mix, with a target to drop below 30% by 2027 through ongoing conversions and closures.

• Packaging and speciality papers showed volume growth but faced pricing pressure.

Financial highlights

• EBITDA for the quarter reached $151 million, up from $106 million in Q3 FY23, with margin improving to 11.0%.

• Sales for the quarter were $1,370 million, up from $1,326 million in Q3 FY23.

• Variable costs increased 2% quarter-on-quarter, mainly due to higher pulp prices.

• Free cash flow remains healthy, though bottom line is negative due to CapEx and mill closures.

• CapEx for the year reduced to $480 million, with $154 million for Somerset Mill PM2 project.

Outlook and guidance

• Q4 EBITDA is expected to exceed the same quarter last year, excluding a negative plantation fair value adjustment.

• Pulp prices are anticipated to decline, benefiting the paper business in the new financial year.

• Packaging volumes and margins are expected to improve, especially in North America and South Africa, while Europe remains challenging.

• Global macroeconomic conditions and consumer sentiment are gradually improving, but logistical challenges persist.

• FY2024 capital expenditure forecast is slightly below previous guidance, at around $480 million.