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Sappi Quarterly Profit Surges 50% on Cellulose Product Boost

Sappi Ltd., the world’s biggest maker of glossy paper, said first-quarter profit gained 50 percent as it began to see the benefit of boosting production of high-margin cellulose products.

Net income increased to $18 million in the three months through December, compared with $12 million in the same period in 2012, the Johannesburg-based company said in a statement today. Sales advanced to $1.5 billion from $1.48 billion the previous year.

Sappi’s debt will probably decline over the next 12 months as the company reduces costs and capacity at European operations and invests in the production and export of dissolving wood pulp, used to make sportswear and luxury clothing, Chief Executive Officer Ralph Boettger said Jan. 24.

“We expect our business to continue to improve,” Boettger said on a conference call with reporters today, citing a return to operating profit at its European business as evidence. He is leaving Sappi in June because of ill health after almost seven years as CEO. The company has yet to announce a replacement.

Sappi shares fell 0.8 percent to 34.79 rand as of 9:31 a.m. in Johannesburg, valuing the company at 18.14 billion rand ($1.66 billion). The stock has gained 6.3 percent this year, compared with a 4.3 percent decline on the FTSE/JSE Africa All Share Index.

Sappi’s focus on exports mean it’s a beneficiary of the weakening South African currency. The rand has declined 5.2 percent against the dollar this year, the worst performer of 16 major currencies tracked by Bloomberg.

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