Sappi share price drops on setbacks in key markets
Sappi share price drops on setbacks in key markets
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Third-quarter earnings follow weaker trend
Trade and Industry Editor
THE share price of SA-based pulp and paper group Sappi fell more than 7% yesterday, after the group issued a profit warning advising investors of setbacks in each of its three major markets Europe, the US and SA.
Sappi warned that earnings a share for the third quarter the April to June period were expected to be about half of the second quarter's.
When Sappi published its secondquarter results, it advised investors that earnings a share in the following quarter would be worse. "Since then, conditions in Sappi's main markets have deteriorated further than expected, with continued pressures on both prices and volumes," Sappi said yesterday.
CE Jonathan Leslie said: "Unusually, there are difficult conditions in all our key markets and regions at the same time."
In the US, the expected pent-up demand for advertising had not materialised. In the European market, lower sales volumes due to the weak economy were to blame.
In SA, the strong rand affected export earnings, while domestic prices had to be curbed to fight off cheap imports.
"The total effect is lower prices than expected," Leslie said.
SCMB securities analyst Dave Brennan said that the Sappi announcement had come as a shock to the markets, hence the fall in the share price.
He said that three months ago, Sappi had said it would be a challenge for the current year's earnings to match those of the previous year, but now a year-onyear fall was anticipated.
"Things seem to have changed for the worse rather quickly," he said.
Sappi's share price closed at R99,50 on the JSE Securities Exchange SA, a 7,1% drop.
Jun 24 2003 07:33:33:000AM John Fraser Business Day 1st Edition
Tuesday
24 June 2003
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