SappiÆs æworst year in recent historyÆ as market d
SappiÆs æworst year in recent historyÆ as market dives
Carli Lourens
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Trade and Industry Editor
PAPER maker Sappi is expected to report its worst annual financial performance in recent history tomorrow due to weak paper prices and rising input costs among other factors.
The I-Net Bridge consensus forecast is for a headline loss of 45c a share for the year to September. One analystÆs forecast yesterday was for a loss of as much as 58c a share.
Analysts expected the third-quarter loss of 4c to have widened. One analyst expected the loss for the last quarter to be 23c a share.
ôThis will be the worst annual result in SappiÆs recent history,ö said one analyst.
The brunt of the yearÆs misfortune would have been felt in the fourth quarter, he said.
Paper makers globally have been suffering from a protracted downturn in the paper market and have largely failed to implement price increases.
In fact, prices in Europe and SA are expected to have declined slightly in SappiÆs 2005 financial year. The group is estimated to have achieved an average rise of close to 9% in the US.
But steep increases in input costs such as energy and transport spoilt the rewards of higher paper prices in the US.
Sappi was closing some of its North American operations that were not viable, giving rise to a $180m impairment charge.
Analysts are expecting SappiÆs results to improve next year.
The I-Net Bridge consensus forecast for next yearÆs headline earnings is 343c a share. Warrick Lucas of Imara SP Reid did not expect input costs to rise as much next year as in the 2005 year.
Lucas said one of the best signals was the rate of change in Organisation for Economic Co-operation and Development lead indicators, and they were turning up. An analyst who did not want to be named expected paper prices to be 2,5% higher, on average, next year compared with this year.
He said a fairly small average paper price increase had a substantial effect on SappiÆs earnings, which he estimated at 327c next year.
In July, Merrill 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.
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