2008 Annual report - Sappi

sappi
Demand and prices in the international pulp markets was
strong but prices started to soften in the final quarter and have
softened further since then. In the Southern African market
demand for packaging paper and newsprint was firm.
The weaker Rand relative to the US Dollar and Euro had a
positive effect on margins.
The Saiccor Mill expansion was commissioned towards the end
of the fourth quarter, increasing the mill’s chemical cellulose
capacity by 225,000 tons to 800,000 tons. Although we have
experienced a softening in demand since year end and pulp
prices have weakened, the prospects for this business, which
sells mainly to the textile industry, are excellent. The impact of
weaker prices is currently largely offset by the weaker Rand
against the US Dollar.
In addition to re-establishing the plantations damaged by fire,
we have a strategy to develop a substantial additional low-cost
wood resource in Southern Africa. Fibre has become more
scarce and valuable over the last few years as pressure to find
renewable energy sources grows. We initiated a project to plant
150,000 hectares of additional plantations in Southern Africa
over the next five to 10 years to create a low-cost fibre resource
for future expansion.
In the year ahead we expect demand to be weaker and
international pulp prices to be lower on average than last year.
Input costs are, however, expected to decline significantly in
response to the reduction in oil and commodity prices. We also
expect that the weakening of the Rand against the US Dollar
will have a favourable impact on margins.
We had a second season of severe fires during the year resulting
in damage to 26,000 hectares of our plantations. We are
reviewing our fire protection methods to ensure we are better
placed to deal with the threat of fires in future dry seasons.
// 2008 Annual report
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