Wrap Text
Results for the fourth quarter and year ended September 2025
Sappi Limited
Registration number: 1936/008963/06
JSE code: SAP
ISIN code: ZAE000006284
("Sappi" or "the Group")
Results for the fourth quarter and year ended September 2025
Quarter ended Reviewed Year ended
% %
US$ million Sep 2025 Sep 2024 Change Sep 2025 Sep 2024 Change
Revenue 1 389 1 464 -5% 5 420 5 458 -1%
Adjusted EBITDA 111 226 -51% 501 684 -27%
EBITDA excluding special items 116 195 -41% 479 685 -30%
Profit (loss) for the period (194) 79 N/M (177) 33 N/M
Net debt 1 920 1 422 35% 1 920 1 422 35%
Headline EPS (US Cents) (19) 9 N/M (15) 1 N/M
Basic EPS (US Cents) (32) 13 N/M (29) 6 N/M
Adjusted EPS (US Cents) (3) 15 N/M 8 41 -80%
Net asset value (US Cents) 382 430 -11% 382 430 -11%
Dividend per share (US cents) - - N/M - 14 N/M
N/M - Not meaningful
Our packaging papers, graphic papers, pulp and biomaterials are manufactured from
woodfibre sourced from sustainably managed forests, in production facilities which, in many
cases use internally generated bio-energy. Many of our operations are self-sufficient.
Together with our partners, Sappi works to build a thriving world by acting boldly to support
the planet, people and prosperity.
Year ended September 2025(3)
The group delivered Adjusted EBITDA (1) of US$501 million for FY2025. Following a strong
start to the financial year, market conditions deteriorated substantially from the second
quarter, driven by heightened uncertainty stemming from persistent global trade tensions
which precipitated a broad-based economic slowdown and weakening of consumer
confidence. The deteriorating macroeconomic environment placed downward pressure on
selling prices across all our market segments. In addition, a significant weakening of the US
Dollar negatively impacted earnings in South Africa and translation of our Euro-denominated
debt. Global paper markets remained oversupplied, creating headwinds for our paper
businesses. Despite these challenges, dissolving wood pulp (DWP) and packaging and
speciality papers sales volumes increased year-on-year, and market share gains were
achieved in the graphic papers segment. The forestry fair value price adjustment for the year
was a loss of US$22 million due to stagnant market prices and persistent inflationary cost
pressures.
A key highlight for the year was the completion of the Somerset Mill PM2 conversion and
expansion project in North America. Although the start-up was delayed, the technical ramp-
up is exceeding expectations with excellent initial market feedback of product quality. Our two
state-of-the-art paperboard machines at the Somerset Mill position the business competitively
in the North American paperboard market. In Europe, we made further progress towards our
strategic rationalisation objectives to improve capacity utilisation. From an operations
perspective, scheduled maintenance shuts in South Africa extended beyond planned timelines
in the second quarter, and the Somerset Mill PM2 shut and subsequent start-up disrupted
production and impacted efficiencies in North America. Amid these operational and
macroeconomic headwinds, the group remained committed to optimising asset utilisation
across all regions, advancing cost-efficiency initiatives, and maintaining strict financial
discipline.
Market sentiment in the textile and apparel sector, a key driver of DWP demand, softened
during the year as ongoing US-China trade tensions and tariff announcements heightened
uncertainty and disrupted global supply chains. Furthermore, the price differential between
DWP and bleached hardwood kraft (BHK) pulp prompted Chinese swing mills to increase
output beyond typical levels, while some non-integrated viscose staple fibre (VSF) producers
substituted DWP with BHK pulp. This combination of weaker textile fibre prices and low paper
pulp prices drove a substantial decline in the hardwood DWP market price(4) through the year
from a peak of US$970 per ton in the first quarter to a low of US$798 per ton in July 2025. As
tariff uncertainties subsided and VSF operating rates improved steadily through the second
half of the year, demand for DWP strengthened leading to a modest price recovery to end the
year at US$818 per ton. Despite these difficult market dynamics, demand for Sappi's DWP
remained robust. Annualised sales volumes for the pulp segment were slightly down
compared to last year, largely due to an intentional reduction in North America as we reduced
external sales of high yield pulp(5) and increased internal integration into our Somerset Mill.
DWP sales volumes increased by 2% on the back of improved production in South Africa but
the benefits were offset by increased costs and negative exchange rate impacts which
adversely impacted the profitability of the segment.
Global demand across packaging and speciality papers markets remained subdued
throughout the year, weighed down by persistent macroeconomic challenges and cautious
consumer spending. Intense competition across all product categories, exacerbated by
ongoing market oversupply, placed considerable pressure on pricing. Europe in particular
struggled with weak demand as many product categories have yet to recover to pre-Covid
levels. In North America, results were impacted by deliberate product mix adjustments to lay
the foundation for growth ahead of the Somerset Mill PM2 start-up, as well as by discounted
sales associated with initial start-up volumes. In South Africa, demand for containerboard
strengthened in the second half of the year, supported by a robust citrus season, although
sales were constrained by low inventory levels following the extended maintenance shut at
the Ngodwana Mill in the second quarter. Overall sales volumes for the segment increased by
8% year-on-year, primarily driven by higher volumes from improved containerboard demand
in South Africa and incremental paperboard volumes from Somerset Mill PM2 start-up in North
America. However, lower prices and higher costs led to margin decline for the segment.
The graphic papers segment continued to operate within a structurally declining market, with
global oversupply amplifying competitive pricing pressure. Ongoing uncertainty surrounding
US tariffs added further complexity, disrupting trade flows and intensifying market challenges.
In North America, the delayed start-up of Somerset Mill PM2 caused operational disruptions,
leading to reduced production and higher costs for the site's remaining graphic papers asset.
Paper prices in the region were resilient despite ongoing declines in demand, supported by
tighter regional supply following the PM2 conversion and higher tariffs on imported paper.
Conversely, in Europe, significant market oversupply and an influx of Asian volumes, driven
by shifts in trade patterns following the US tariff measures, resulted in notable pricing
pressure. In South Africa, demand for newsprint and office paper remained weak, with
heightened competition from imports constraining profitability. Despite these conditions,
Sappi's graphic papers sales volumes outperformed the broader market contraction, reflecting
the success of strategic initiatives to defend and expand market share.
Special items for the year reduced earnings by US$170 million related to asset impairments
and restructuring costs, primarily associated with the European business. Net finance costs
for the year increased to US$89 million due to higher debt levels. As a result of these special
items and the increase in finance costs, the group made a loss of US$177 million.
Cash flow and debt
Net cash utilised for FY2025 was US$369 million due to the lower profitability, a working
capital outflow of US$89 million, a dividend payment of US$85 million and capital expenditure
of US$496 million. Capital expenditure for the year was slightly below guidance of US$500
million and included US$228 million associated with the Somerset Mill PM2 conversion and
expansion project.
Net debt at financial year-end increased to US$1,920 million (FY2024: US$1,422 million) as
a result of the increased cash utilised by the operations and the higher capital expenditure
associated with the Somerset Mill PM2 project. In addition, a negative currency translation
effect on our Euro-denominated debt being converted at a higher rate, increased net debt
notionally by a further US$73 million for the year. At year-end, liquidity remained healthy with
cash on hand of US$219 million and US$602 million from unutilised committed revolving credit
facilities (RCF) in South Africa and Europe.
In March 2025, Sappi successfully completed a €300 million bond issuance of 4.500%
sustainability-linked senior notes due in 2032. The net proceeds from the offering were used
to redeem all of Sappi's outstanding senior notes due in 2026, with an aggregate principal
amount of €240 million, with the remaining funds to be used for general corporate purposes.
The increase in net debt and lower earnings over the last three quarters has resulted in an
increase in the leverage ratio close to our debt covenant of 4x. Our banking group has
unanimously supported increasing our leverage covenant levels for the next 12 months to
provide additional headroom during this temporary period of elevated leverage. Our primary
focus in fiscal 2026 will be to reduce net debt and leverage towards our stated targets.
Fourth quarter September 2025 (6)
The group delivered an Adjusted EBITDA of US$111 million for the fourth quarter, an
improvement on the prior quarter and aligned with expectations. Despite the lack of
improvement in underlying market fundamentals, the quarter-on-quarter performance
benefited from the absence of maintenance shuts and the resulting increase in sales volumes
for the pulp and packaging and speciality papers segments.
Demand for DWP strengthened during the quarter in line with the typical seasonal uptick in
the textile value chain. The hardwood DWP market price recovered marginally, but the rally
was tempered by increased market supply and persistently weak textile fibre prices. Sales
volumes for the pulp segment were 2% higher than the prior year. North American volumes
were intentionally reduced due to increased internal integration of high yield pulp into our
Somerset Mill and increased swing from DWP to paper pulp at the Cloquet Mill. Sales volumes
in South Africa were 11% above the prior year, reflective of the much-improved operational
stability in the region. Higher year-on-year sales volumes were insufficient to offset the
materially lower prices which reduced profitability for the segment.
Sales volumes in the packaging and speciality papers segment increased by 11% year-on-
year, driven by a modest recovery of 8% in Europe and a 22% rise in North America,
attributable to incremental paperboard sales following the Somerset Mill PM2 start-up. In
South Africa, strong seasonal demand from the citrus market supported containerboard sales
volumes. Despite the overall volume growth, segment profitability declined compared to last
year due to significant pricing headwinds in all markets.
Graphic papers volumes declined by 11% compared to the prior year. In North America,
volumes decreased by 26% year-on-year, largely due to the conversion of Somerset Mill PM2
to paperboard and low inventory levels. However, after the PM2 conversion and the
introduction of tariffs on imported products, the North American domestic market tightened,
supporting stable prices and healthy graphic papers margins. In stark contrast, Europe
remained substantially oversupplied. Our sales volumes declined by 5% year-on-year,
outperforming the broader market, but a significant drop in prices compared to the previous
year had a negative impact on segment profitability.
Adjusted earnings per share (2) for the quarter was a loss of 3 US cents, which was substantially
below the profit of 15 US cents in the prior year and indicative of the weaker operating
environment. Special items for the quarter reduced earnings by US$140 million due to asset
impairments and restructuring costs of US$107 million.
Outlook
Challenging global macroeconomic conditions and persistent geopolitical tensions continue to
disrupt market stability, creating ongoing supply and demand imbalances across our industry.
In addition, heightened trade tensions and the resulting realignment of supply chains are
introducing additional costs and uncertainty. While these conditions have created a more
complex operating environment, we remain confident in the underlying strength of our
business and the resilience of our operations. Sappi's immediate focus remains on internal
levers within the company's control. Our "Back to Basics" focus is to reduce debt and
strengthening the balance sheet through targeted cost savings initiatives and operational
efficiency improvements.
To support our commitment to reducing debt, we have adjusted our capital expenditure
downward to below US$300 million per annum for the next two years, with no expansionary
capex anticipated during this period and FY2026 capex expected to be in the region of US$290
million. In addition, the board of directors made the decision in FQ3 to suspend the dividend
for fiscal 2025 to preserve cash.
We anticipate that DWP market conditions will remain stable through the first quarter,
supported by high VSF operating rates and relatively low inventory levels across the value
chain. Demand for Sappi's DWP is expected to remain robust but the significant differential
between DWP and paper pulp prices, together with subdued textile fibre pricing, could slow
the recovery of DWP prices. Additionally, the continued weakness of the US Dollar against
the South African Rand could negatively impact profitability in South Africa.
Our long-term outlook for our sustainably produced packaging and speciality papers products
remains positive. Sales volumes in this segment are expected to increase steadily as the
Somerset Mill PM2 ramp-up progresses in North America. However, underlying margins are
likely to remain below historical levels as global markets continue to face subdued demand
driven by macroeconomic challenges and persistent oversupply. We maintain a strong
competitive position in both South Africa and North America and continue to actively manage
capacity utilisation in Europe. In South Africa, containerboard demand typically softens in the
first quarter due to seasonal factors, but strong agricultural forecasts for 2026 are expected to
support demand through the year. Nonetheless, the continued weakness in global packaging
markets present a risk to pricing dynamics in the South African region. In the short term, our
North American strategy focuses on balancing trade-offs between price and volume as PM2
production ramps up. We will leverage the swing capability of the Somerset Mill PM1 machine
and favourable graphic papers pricing to optimise the product mix and maximise profitability
in the region.
We expect global graphic papers demand to continue declining by approximately 6% to 8%
per annum. Our strategic focus in this segment remains to proactively manage capacity
utilisation. Following the successful conversion of Somerset Mill PM2 in North America and
the anticipated capacity reductions at the Kirkniemi and Ehingen Mills in Europe, we are well
positioned to meet our customers' needs while fully utilising our assets to maximise cash
generation. The conclusion of restructuring initiatives in Europe is anticipated to occur in the
second quarter.
Prices for certain of our key raw materials remain relatively low at present, and we will actively
pursue opportunities for further cost savings. However, ongoing trade tensions continue to
pose a risk due to their potential impact on global inflation. A maintenance shut is scheduled
for the Somerset Mill(7) in the first quarter which will reduce earnings by approximately US$20
million. We anticipate that the plantation fair value price adjustment will be marginally positive.
Taking into account the confluence of market factors and the scheduled maintenance shut at
the Somerset Mill, we anticipate that the Adjusted EBITDA(1) for the first quarter of FY2026 will
be below that of the fourth quarter of FY2025.
Sappi is a well-capitalised business with a proven ability to adapt and respond to market
cycles. Our recent strategic growth investments in packaging and speciality papers and DWP
have strengthened our portfolio and position us well to benefit from a market recovery. We
remain committed to navigating the current operating environment with discipline and
transparency, prioritising cash generation to reinforce our balance sheet and further enhance
our financial resilience.
On behalf of the board
SR Binnie
Director
GT Pearce
Director
05 November 2025
(1) Adjusted EBITDA is EBITDA excluding special items and plantation fair value price
adjustment.
(2) Adjusted EPS is EPS excluding special items and plantation fair value price adjustment.
(3) "Year-on-year" or "prior/previous/last year" is a comparison between FY2025 versus
FY2024.
(4) Market price for imported hardwood dissolving wood pulp into China issued daily by the
CCF Group.
(5) High yield pulp = BCTMP bleached chemi-thermomechanical pulp.
(6) "Year-on-year" or "prior/previous/last year" is a comparison between Q4 FY2025 versus Q4
FY2024; "Quarter-on-quarter" or "prior/previous/last quarter" is a comparison between Q4
FY2025 and Q3 FY2025.
(7) The Somerset Pulp Mill has 18-month intervals between shuts and the last shut was in Q3
of FY2024
This results announcement is the responsibility of the directors. It is only a summary of the
information in the full results for the year ended September 2025 and does not contain full or
complete details. Any investment decisions should be based on the full results for the year
ended September 2025 accessible from 06 November 2025 via the JSE cloudlink and also
available on the home page of the Sappi website at www.sappi.com.
The JSE cloudlink is as follows:
https://senspdf.jse.co.za/documents/2025/JSE/ISSE/SAVVI/SAPQ425.pdf
The condensed consolidated financial statements for the year ended September 2025 have
been reviewed in accordance with ISRE 2410 by KPMG Inc. An unmodified review opinion
has been issued.
06 November 2025
JSE Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 06-11-2025 08:00:00
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