Sappi downgraded after price setback
Larry Claasen
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INVESTMENT house Merrill Lynch has downgraded paper and pulp company Sappi’s earnings forecast for this year after it revised its outlook for the group last month.
Merrill Lynch said the downgrade was prompted by customer resistance in Europe to higher prices for Sappi’s wood-free coated paper.
The reduction of the price rise to à10 a ton from an earlier increase of à40 a ton in September saw the investment house downgrading its earnings forecast for Sappi’s full-year results from $0,70 in earnings a share to $0,78.
Merrill Lynch’s expectation for second-quarter earnings a share has been revised from $0,18 to $0,14.
A source close to Sappi said while the end users for coated paper in Europe were prepared to accept increases, paper merchants were reluctant to accept any kind of increase after years of depressed markets.
Meanwhile, Sappi chairman Eugene van As said yesterday the company was experiencing rising costs, especially energy costs.
Speaking at Sappi’s annual general meeting, Van As said the strength of the rand continued to put pressure on margins at Sappi’s local units.
The Chemical, Energy, Paper, Printing and Allied Workers’ Union used the meeting to level charges of slow transformation and lack of skills development for workers at Sappi.
“We decided to make use of this meeting because we think that some of these things are hidden from the shareholders,” said union president Pasco Dyani. With Siseko Njobeni
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