Sappi CEO cites volatile macro, strong rand, and cost pressures in Q3. North America packaging volumes rise, but paper markets remain weak. Debt reduction and cost control are priorities.
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Sappi posted a challenging third quarter as volatile macroeconomic conditions, a strengthening rand, and soft paper markets squeezed margins, CEO Stephen Binnie said on the earnings call.
EBITDA fell year on year, Binnie noted, without providing a precise figure on the call. The strong rand against the U.S. dollar continued to hurt export competitiveness and translated earnings. Selling prices for several product lines declined, while input costs remained elevated.
One bright spot came from North America, where packaging volumes – particularly solid bleached sulfate (SBS) – rose. Binnie said he was pleased with the progress in that segment. The company has been shifting capacity toward packaging and away from graphic papers, a strategy that is showing early returns.
Chief Financial Officer Glen Pearce added that Sappi continues to focus on debt reduction and cost control. Capital expenditure remains disciplined, with spending directed toward high-return packaging projects.
Dissolving pulp, a key earnings driver for Sappi, faced mixed conditions. Demand from textile markets was steady, but pricing came under pressure from lower-cost competitors. The company expects the segment to remain volatile.
Paper markets, particularly in Europe, stayed weak. Binnie described the environment as "challenging" with no immediate catalyst for a recovery. The company has idled some paper capacity to match demand.
Pulp and paper markets have faced similar headwinds across the sector, as covered in our commodities analysis.
Sappi did not provide formal guidance for the fourth quarter. Binnie said the company will continue to manage what it can control: costs, debt, and the shift toward packaging. The next catalyst will be the full-year results in November.
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