Sappi Second-Quarter Earnings Gain on Cost Cutting, Pulp Sales

Sappi Ltd. (SAP), the world’s biggest producer of dissolving wood pulp, said second-quarter earnings surged 16-fold from a year ago as cost-cuts and a move away from lower-margin paper boosted performance.

Net income for the three months through March advanced to $32 million compared with a restated $2 million a year ago, the Johannesburg-based company said in a statement today. Sales for the period increased 4.7 percent, while net debt declined to $2.25 billion from $2.38 billion in the first quarter, it said.

Sappi is targeting production of 1.3 million tons of dissolving wood pulp for the year ending September, supplying 20 percent of world demand, according to the company. The product, which carries a higher profit margin than paper, is used to make luxury clothing, sportswear and pharmaceuticals.

“Continued emphasis on lowering cost and optimizing sales in both the coated and dissolving wood pulp markets have enabled us to compete effectively,” the company said. “We will continue to take actions in North America, Europe and Southern Africa to improve our competitiveness and enable us to reduce debt.”

Sappi shares advanced as much as 4.9 percent to 37.22 rand, the highest on an intraday basis since March 31, and traded 3.9 percent higher at 9:47 a.m. in Johannesburg. The stock is up for a third day and has gained 13 percent this year.

To contact the reporter on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net John Bowker, Tom Lavell

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