July 1 (Bloomberg) -- Sappi Ltd., the world’s largest maker of glossy paper, will sell 67,000 hectares (165,561 acres) of forest in Swaziland to finance debt and expand in dissolving pulp production.
The sale of Usutu Forest Products Co. to Swaziland-based Montigny Investments Ltd. has been agreed at 1 billion rand ($101.4 million), the Johannesburg-based company said in a statement today. Usutu owns softwood plantations, a decommissioned pulp mill and two villages.
“The proceeds will be used for general corporate purposes and will reduce Sappi’s net debt on a pro forma basis” as of March 31 to $2.045 billion, the company said. “Sappi’s conversion and expansion of its Ngodwana plant to produce dissolving pulp, rather than bleached softwood pulp, has reduced its softwood requirements.”
Sappi is converting paper mills in South Africa and the U.S. for an additional 500,000 metric tons of dissolving wood pulp as the company shifts to high-end products. Sappi is working to offset weaker sales in Europe, its biggest market.
“The sale is in line with the company’s strategy of reducing net debt below $2 billion,” Sean Ungerer, an analyst at Avior Research (Pty) Ltd., said in a phone interview from Johannesburg. “This is positive news for the counter with a net debt reduction of approximately 5 percent.”
The stock gained 0.9 percent to 24.62 rand at the close of trading in Johannesburg, valuing the company at 13.3 billion rand. Sappi has declined 20 percent this year, compared with a 1.7 percent gain for the FTSE/JSE Africa All Share Index.
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