Sappi (SAP) Q4 2021 earnings summary

Executive summary

• Returned to FY21 profitability: profit $13m vs. FY20 loss $135m; adjusted EBITDA $532m vs. $378m. Q4 profit was $35m and adjusted EBITDA $177m.

• Recovery in dissolving pulp and record North American performance supported results; packaging and specialities reached record profitability, while European earnings faced cost inflation.

Financial highlights

• FY21 sales $5,265m vs. $4,609m; operating profit excluding special items $203m vs. $57m; reported operating profit $146m vs. loss of $38m.

• Q4 sales $1,425m vs. $1,092m; operating profit excluding special items $92m vs. loss of $5m; reported operating profit $58m vs. loss of $44m.

• FY21 basic EPS 2¢ vs. loss of 25¢; EPS excluding special items 15¢ vs. loss of 5¢. Q4 adjusted EPS was 11¢ vs. loss of 4¢.

• Special items were a $57m loss for FY21, including $19m of impairments and costs associated with asset damage, floods and restructuring.

Outlook and guidance

• Q1 FY22 EBITDA expected to improve further from Q4 FY21, despite cost inflation, supply-chain constraints and the Somerset maintenance outage.

• Somerset’s scheduled maintenance and extended cold outage expected to reduce Q1 profitability by $22m; the 14-week Q1 will lift sales versus comparable quarters.

• FY22 capex estimated at $395m, including $30m for Saiccor expansion, $80m for cost optimisation and quality projects, and $75m for sustainability projects.

• Paper price increases and European energy surcharges were implemented to mitigate rising costs; global logistics challenges and vessel shortages expected to persist through FY22.