Eralier this month, the South African group Sappi published its quarterly results and reported Adjusted EBITDA of US$53 million for the third quarter ended 30 June 2026, in line with the improved outlook given to shareholders in July. Global market conditions remained challenging, but the quarter reflected progress on key strategic initiatives, particularly the continued ramp-up of the Somerset Mill PM2 paperboard machine in North America, ongoing cost reduction across the group and disciplined capital allocation.
"Improved operational performance in North America, together with continued cost discipline across the group, helped to offset some of the impact from weaker selling prices and inflationary pressures," said Sappi CEO Steve Binnie. The group continued to face pressure from lower selling prices in several categories, higher logistics and chemical costs linked to Middle East geopolitical tensions, and an unfavourable US$/ZAR exchange rate affecting profitability in South Africa.
Despite lower profitability, Sappi maintained liquidity of approximately US$783 million at quarter end, with net debt only marginally higher than the prior year. Capital expenditure was tightly controlled at US$62 million, focused mainly on maintenance and operational reliability.
Regional performance
North America was the highlight of the quarter, with paperboard sales volumes from Somerset Mill PM2 up 63% year-on-year, supported by improved operational stability and cost efficiencies. Recent industry paperboard price increases are expected to further support profitability. Demand for dissolving wood pulp (DWP) remained healthy, with pricing strengthening on favourable viscose staple fibre fundamentals, while graphic paper markets continued to face structural demand pressures globally.
South African profitability declined compared with the prior year, hit by lower sales volumes and prices, particularly in pulp, alongside a scheduled maintenance shut at Ngodwana Mill. Containerboard demand stayed resilient, supported by strong citrus export activity, while rising low-cost imports continued to pressure local paper markets.
In Europe, cost reduction and rationalisation initiatives drove improved performance despite weak volumes and the structural decline in graphic papers demand. The proposed graphic papers joint venture with UPM continues to progress through regulatory approval.
Sappi expects fourth-quarter FY2026 Adjusted EBITDA to be materially above the third quarter, supported by stronger DWP pricing, continued progress at Somerset Mill PM2, lower maintenance costs and recent North American paperboard price increases.