Sappi's paper division still underperforming but ongoing restructuring on track and expected to show benefits in Q3, which is typically weak and maintenance outages are planned, says company's CEO; about 800 jobs could be affected

LOS ANGELES , May 11, 2012 () –

Sappi Ltd.’s paper division is still underperforming, but a restructuring of the South Africa-based company’s paper and packaging division is on schedule and should accrue benefits in the third quarter, according to the company’s chief, reported Engineering News on May 10.

During second-quarter 2012, Sappi’s paper division did not do well due to a competitive environment in terms of prices, costs and volumes, said CEO Ralph Boëttger.

The company’s restructuring, which has a “relentless” focus on cost reduction, includes the closing of a pulp mill in Enstra, South Africa, and a kraft pulp mill and 10,000 tonnes-per-year kraft paper machine at its mill in Tugela, South Africa. Approximately 800 jobs could also be affected, though some losses could be a result of voluntary retrenchments or retirements.

This is aimed at improving profits, streamlining sales and marketing, and dealing with difficult market conditions, with coated paper weaker in the second-quarter than a year earlier, Engineering News reported.

Meanwhile, Sappi is on track with expansions in its lucrative cellulosic pulp operations, including the US$240-million expansion of its Ngodwana mill in Mpumalanga, South Africa, and the $170-million conversion of its U.S. mill in Cloquet, Minnesota.

Both are slated for a third-quarter 2012 startup that will boost Sappi’s cellulose capacity to more than 1.3 million tonnes/year, reported Engineering News.

The company’s operating performance was improving in the second quarter and that improvement continues in the current quarter, especially in Europe and North America, said Boëttger.

While Sappi is “confident” that its actions will result in ongoing improvement in the future, the third quarter is typically the weakest of the year and will be further affected by scheduled yearly maintenance downtime, Boëttger said, Engineering News reported.

The primary source of this article is Engineering News, Johannesburg, South Africa, on May 10, 2012.


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