| Tue 19 Jul 2005, 10:53 | | Paper-thin margins dim SappiÆs outlook |
|
Paper-thin margins dim SappiÆs outlook
Carli Lourens
--------------------------------------------------------------------------------
E-Mail article Print-Friendly
Trade and Industry Editor
ANALYSTS have taken a dim view of paper maker SappiÆs third-quarter performance, prompting brokerage Merrill Lynch to slash its forecast earnings a share for SappiÆs 2005 financial year by more than a third.
Sappi, the worldÆs largest producer of coated fine paper, releases third-quarter results next week.
Merill Lynch downgraded its earlier forecast of $0,48 a share in full-year earnings to $0,30, mainly as a result of poor price increase realisations in Europe and lower sales volumes in Europe and the US.
Sappi moved lower-than- expected volumes in its largest markets, Europe and North America, in the third quarter ending June, the brokerage said in a report released yesterday.
In addition, paper makers had been unable to implement the price increases on coated wood-free paper that they had hoped for in Europe and the US in that quarter, Merrill Lynch said.
The brokerage expected Sappi to report a loss of $0,03 a share for the third quarter next week.
Its second-quarter earnings were $0,10 a share.
An unnamed analyst at another brokerage said yesterday that he expected earnings of $0,37 a share for the full year.
He said SappiÆs fourth quarter was traditionally better than the third, but he maintained a ôsellö recommendation on the stock.
Another analyst said he was reducing his forecast for full-year earnings. He said volumes in the US were especially weak. The analyst, like Merrill Lynch, maintained a ôneutralö recommendation.
Of the North American market, Merrill Lynch said Sappi Fine PaperÆs volumes were expected to fall 2% in the 2005 financial year compared with the previous year.
It said prices in the US had been strong in the year to date, with producers managing two successful $60-a-ton price increases on coated wood-free paper. A third increase was still being attempted.
European sales were expected to fall 6% in the 2005 financial year.
Merrill Lynch said paper makers had yet to implement any price increases on coated wood-free paper this year.
It said Sappi had not benefited from a strike in the Finnish paper sector, which had been long enough to tighten supply in Europe, as Finnish producersÆ inventories were sufficient to make up the shortfall.
SappiÆs share price hit a low of R58,30 in May this year after a gradual decline over the past few years. The share has recovered since then, closing at R70,80 yesterday.
