Sappi says drop in paper demand will make for ‘challenging’ 2009

At its Annual General Meeting held earlier this week, non-executive chairman Danie Cronjé said the manufacturer had experienced weaker pricing in some markets and that, in Europe, demand for coated paper had fallen, particularly for coated fine paper sheets.

“Prices have held up and we are implementing a further increase in the February and March timeframe,” he said.

Demand levels are expected to remain “substantially below” for the remainder of the year, and the group said it expected to continue to curtail production during a “challenging” 2009.

Cronjé said: “Visibility of future market demand remains poor, but we now expect an operating loss before special items for the quarter to March 2009.”

In February, Sappi shares dipped from US$3.1 to around US$2.9 after the South African-headquartered paper manufacturer recorded an 8% drop in sale volumes in its first quarter, ending 28 December, to US$1.187bn (A$1.846bn).

The company acquired M-real’s graphic papers business for €750m (A$1.35bn) late last year and Sappi said integration of the mills was proceeding well.

It is set to start integrating the acquired order books and brands of the Gohrsmühle and Hallein mill when M-real ceases coated fine paper production at the mills in April.

Cronjé said the company has generally had good support from its existing customers and new customers following the acquisition.

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