Fit for the future Sappi

FIT FOR THE FUTURE

With rationalisation in Europe and expansion in South Africa as well as continuing product innovation, Sappi is boosting its performance despite rising input costs

Global paper and pulp group Sappi employs 15,600 people worldwide, and their manufacturing operations on four continents have an annual capacity of 6.6 million tons of paper, 3.3 million tons of paper pulp and 800,000 tons of chemical cellulose.

Sappi works in over 100 countries to provide customers with sustainable paper, paper-pulp and chemical cellulose products and related services and innovations. The market-leading range of paper-products includes coated fine papers used by printers, publishers and corporate end-users and casting release papers used by suppliers to the fashion, textiles, automobile and household industries. In the Southern African region the portfolio includes newsprint, uncoated graphic and business papers, premium quality packaging papers, paper grade pulp and chemical cellulose. The chemical cellulose products are used worldwide by converters to create viscose fibre, acetate tow, pharmaceutical products and other consumer products.

In March 2011 Sappi released a positive statement with the publication of their second quarter results: “Operating profit for the quarter more than doubled compared to a year earlier (US$54 million) and on a per week basis was at the same level as our first financial quarter ended December 2010. The operating performance of each of our regional businesses improved when compared to a year earlier, and in particular the fine paper business continued its improving trend, with operating profit increasing 65 per cent compared to the equivalent quarter last year and 25 per cent compared to the quarter ended December 2010. Sales for the quarter increased to US$1.8 billion, up 16 per cent compared to the equivalent quarter last year.”

Cost savings across Europe

Raw material increases affected Sappi’s performance in Europe, which represents 55 per cent of group sales, and where more than half of the pulp is being bought in. The

high prices for pulp, wood, latex and energy contributed to the decision to cease production of coated graphic paper at the Biberist paper mill in Switzerland, where production will have ceased by the end of July. Sappi is investigating possibilities for the sale of the site, and promising leads are being pursued – with a clear emphasis on those which generate the maximum employment opportunities. Volumes produced at the mill will be transferred to other Sappi sites and there will be no supply interruption of coated paper to customers during the transfer of production. Sappi estimates that the benefits of the closure will exceed US$50 million per annum. In addition, the group has identified further actions across their European business which will eventually result in fixed and variable cost savings of over US$50 million per annum.

The next generation of coated inkjet papers

In February, Sappi Fine Paper Europe announced that it has joined forces with HP to develop coated papers for the high-speed inkjet market. JazTM silk is a coated paper for high-quality graphic applications such as direct mail or commercial print. This new paper grade has drawn on the experience of HP to combine the flexibility of inkjet with the high quality associated with Sappi paper. This combination of the best in paper combined with the best in inkjet technology is enabling businesses everywhere to produce high speed, full-colour, printed communications with a real offset look and feel.

Expansion for South African mill

The Sappi board has recently approved the expansion and modernisation of the Ngodwana mill in South Africa. The mill will produce kraft linerboard, newsprint and an additional 210,000 tons of chemical cellulose production, scheduled to commence in early 2013.

With this decision Sappi’s output of chemical cellulose will increase to over a million tons per year, entrenching its position as the global leader in chemical cellulose production. The project is expected to bring a major

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boost for the local Lowveld economy, and improve the mill’s environmental footprint: efficiencies from new equipment will mean burning 61,000 tons less coal per year which equates to 120,000 tons fewer CO2 emissions. In addition, total mill effluent will significantly reduce and the revised project will require 200,000 tons less timber per year and 18,400 fewer trucks on the road.

Leading on sustainable grocery packaging

Through a partnership with South African grocery retailer Pick n Pay, Sappi has launched an eco-friendly alternative to plastic shopping bags. The new paper-based packaging, which has been custom-developed to meet Pick n Pay’s stringent quality standards, was developed by the R&D team at the Sappi Technology Centre, situated at the Innovation Hub in Tshwane.

The new bags offer shoppers a fully recyclable and fully-biodegradable option. In addition, they hold up to 10 kg in weight, and have reinforced handles and a square bottom to ensure excellent carrying capacity and convenience. The paper for the new shopping bags is manufactured at the Sappi Tugela Mill in KwaZulu Natal. In addition to using timber from local tree plantations the bags themselves are fully recyclable, and the fibre can be reused up to six times before decomposing without releasing any toxic materials into the soil or water.

The year ahead

Sappi is forecasting that major markets will remain favourable; however, input costs are expected to increase in line with the global economic recovery. Helped by the effect of the European profit improvement measures in the coming months the improved trend in the group’s underlying operating performance is set to continue through the remainder of the financial year. n