The company, which acquired M-real’s graphic papers business late last year, cited a drop in global demand for paper and said demand for coated graphic paper was weak in the first half of January 2009 resulting in a 25% cut in output.

Operating profit excluding special items in the quarter came in at $US25m ($A39m), down from $US89m ($A138m) the previous quarter.

Sappi generated $US95m ($A148m) in cash, which was down from $US155m ($A241m) a year ago, giving the company a lower operating profit. Its net debt stood at $US1.96bn ($A3.05bn).

Ralph Boëttger, chief executive of Sappi, said: “Prices for coated paper increased relative to the prior quarter and a year earlier in Europe, but were under pressure in the USA and many other markets.

He added that demand fell off sharply throughout the quarter resulting in lower sales across all of its businesses.

Boëttger said the previously-announced €750m acquisition of the M-real business, which provides an annual coated paper capacity of around 1.9m tonnes, was proceeding well.

“Although current market conditions, and particularly a slow-down in demand, will make it more difficult to realise the synergies in the short term, we remain confident that we should deliver the targeted €120m ($A240m) per annum of synergies within three years,” he said.

Into the next quarter, Sappi said it expected operating profit to remain weak but prioritised cash flow and minimising capital expenditure.

Boëttger added: “We have implemented a number of actions which position the group well going forward, and we will continue to act decisively to manage our business through the current turmoil.”

Read the original article at www.printweek.com.

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