Sappi Ltd. shares closed at the highest in more than seven years after the pulp and paper producer reported a 24 percent increase in full-year earnings and said it expects further gains in the new financial period.
The stock rose 6.7 percent to 57.50 rand, the highest since August 2008, in Johannesburg, where the company is based. Sappi has advanced 36 percent this year, valuing the company at 30 billion rand ($2.1 billion).
Net income for the 12 months through September increased to $167 million from $135 million a year earlier, helped by lower costs and a weakening of the rand relative to the dollar. The company is forecasting increased earnings excluding special items in the three months ending Dec. 31, as well as for the year that started on Oct. 1, the company said in a statement on Thursday.
“It was a good set of results," said Sean Ungerer, a Johannesburg-based analyst at Avior Research (Pty) Ltd. The combination of the weaker rand, higher prices for dissolving wood pulp and declining debt levels are helping boost Sappi’s prospects, he said.
Sappi is the world’s biggest producer of dissolving wood pulp, a cotton substitute used in textiles including lingerie and golf shirts. The company is diversifying its production, including into dissolving wood pulp and niche packaging, as a global shift to digital publishing and advertising cuts demand for high-end paper used in luxury magazines and advertising literature.
Sappi’s net debt fell to $1.77 billion from $1.95 billion a year earlier, and is expected to decrease further in the current financial year, the company said.