Sappi plans to increase participation in Russia, China and Eastern Europe, says CEO, to offset falling demand in developed markets; rival Mondi pursuing similar strategy to counter sluggish market in Europe

LOS ANGELES , August 25, 2011 () – Fine paper manufacturer Sappi Ltd. is planning to increase sales revenue from emerging markets to offset declines in developed markets, Reuters reported on Aug. 24.

Mondi Group, Sappi's South African rival, has been pursuing a similar strategy to counter the sluggish market in Europe.

Sappi's CEO Ralph Boettger said Sappi is not planning to invest in Russia, China and Eastern Europe in the near term. But he said the company is increasing its participation there and is already selling a large proportion of output in those markets from the company's mills in South Africa and Europe.

Boettger said businesses are finding it difficult to make spending decisions, citing the economic situation, particularly in Europe, and slowing demand.

Europe's paper industry has been battling with overcapacity and slow demand since the 2009 recession. Some segments, including pulp, are seeing a recovery, but others like newsprint and magazine paper continue to struggle.

The difficult market has led Sappi to announce plans to close its Biberist paper mill in Switzerland and its Adamas mill in South Africa, but Boettger said the company would study demand forecasts before considering further capacity cuts. More cost-cutting measures are planned, however, and Boettger said that could mean further job losses in Europe and South Africa.

Sappi recently revealed plans to focus investment on pulp and chemical cellulose production, rather than the more difficult paper segment.

Shares in the company have dropped 28% since the beginning of last year.

The primary source of this article is Reuters, Johannesburg, on Aug. 24, 2011.


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