Cost cutting is starting to pay off, says Sappi
January 14, 2004
By Margie Inggs
Durban - Sappi Saiccor operated at its full 600 000 ton capacity in 2003 for the first time in three years following the closure of International Paper's Natchez mill in Europe, Andre Oberholzer, the group's corporate affairs manager, said yesterday.
Natchez, which dissolves pulp and is the third-largest mill of its kind in the world, was forced to close because International Paper could not find a buyer for the unprofitable operation.
"Unlike many of the other more diversified companies, Sappi is quite ruthless about not keeping unprofitable businesses going," he said.
Sappi recently announced it was shutting down one of the paper machines at the Westbrook mill in the US, which would now focus on speciality products. The global pulp and paper group last year announced the closure of its London office and the sale of its Clan Sawmill in South Africa.
In his year-end message to staff, chief executive Jonathan Leslie said cost cutting "must remain a continuous and relentless objective. We must improve the competitiveness of our assets by thinking smarter, not just be demanding more capital."
One way in which Sappi is cutting costs is through its cost-of-quality programme, which implements and rolls out ideas for improvement from the shop floor level upwards through appointed teams. The programme, which financially rewards staff for successful ideas, has saved the group E100.8 million (R894 million) in Europe over the past three years, beating the E100 million target.
Leslie said Europe was finally experiencing some increase in demand, and Sappi and some of its competitors had announced increased prices for the new year.
"In North America, the macroeconomic data look promising for a rebound in the economy, but we have yet to see any of this filter through to our segment of the paper industry," he said.
"It appears that any pick-up in the markets will be delayed beyond our first quarter and we expect earnings in the first quarter to be weaker than in the prior quarter. Both quarters will suffer from one-off charges arising from the restructuring and cost-saving initiatives we have announced," Leslie said.
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