Sappi flags civil unrest to hit fourth-quarter results
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Paper firm Sappi said yesterday that there was no material damage to any of its plants after civil unrest in South Africa last week, but flagged a knock to its fourth quarter financials.
However, the company said its immediate focus was on reinstating logistical supply chains for raw materials and product delivery.
Operations at its three affected mills, Saiccor, Tugela and Stanger, commenced slowly from July 19. However, it said these were complex plants and the restarting of production must be conducted in a prudent and structured manner.
Sappi said the financial impact of the temporary closures and associated ramp-up of production at the three mills was a permanent loss of sales volumes of approximately 28 000 tons of dissolving pulp and 7 000 tons of paper with an expected negative impact on earnings before interest, taxes, depreciation, and amortisation of approximately R220 million on the Sappi fourth quarter results.
“The civil unrest referenced in our market update of 14th July appears to be under control. Intensive work by government agencies and business is focused on ensuring that supply chain disruptions are resolved, and people can move safely to and from work. Sappi’s employees at the affected mills were able to return to work on Monday 19th July,” Sappi said.
It said the three dissolving pulp lines at Saiccor would be restarted in a phased approach and production output would take a few days to ramp-up to full capacity. Work on the Saiccor expansion project also resumed on Monday, but the commissioning timeline had been negatively impacted and the start-up was now expected to begin in September or early October.
Although the Port of Durban had resumed operations, it was anticipated that export deliveries could be negatively impacted for an extended period due to congestion and limited availability of vessel space. This would likely result in protracted delays for dissolving pulp exports.