Bloomberg News

Sappi Falls After Chief Says Dividends to Resume Once Debt Cut

February 13, 2012

Feb. 8 (Bloomberg) -- Sappi Ltd., the world’s largest producer of fine-coated paper, dropped the most in two months after Chief Executive Officer Ralph Boettger said the company will consider resuming dividends once its debt has been cut.

The company wants to ensure dividends are “reliable and predictable,” he said today in an interview at Sappi’s annual general meeting in Johannesburg. “It’s in shareholders’ interests to reduce debt to more acceptable levels.”

Sappi plans to reduce net debt to less than $2 billion in “at least” the next 18 months, Boettger said in a telephone interview earlier. Debt climbed to $2.18 billion at the end of December compared with $2.1 billion at the end of September.

The company halted dividend payouts in fiscal 2009 to lower debt that stood at $2.58 billion and in March 2010 pledged to resume payouts to shareholders as soon as possible. Over the past year, Sappi announced plans to shut mills in South Africa and Switzerland and cut about 800 jobs in the nine months through June as part of its reorganization. Rising costs and weaker paper sales have also led Helsinki-based competitors Stora Enso Oyj and UPM Kymmene Oyj to close mills.

“Sappi’s debt targeting plans may mean that it won’t resume paying dividends next year,” Sean Ungerer, an analyst at Avior Research (Pty) Ltd., said by phone from Johannesburg.

The stock fell 4 percent to 25.50 rand at the close in Johannesburg, the biggest drop since Dec. 1.

Second-quarter operating profit excluding one-time items will improve from the $100 million posted in the three months through December, Sappi said in a statement.

“Although market conditions remain uncertain, we are experiencing reasonable demand in our major markets,” the company said in a statement. “Our focus is on delivering the benefits of the restructuring and cost reduction actions announced and implemented in 2011.”

--Editors: Vernon Wessels, Alastair Reed, Tom Lavell

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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