Sappi Limited

Q3 EBITDA was $53 million, which management said was in line with revised guidance. The quarter was pressured by lower year-on-year selling prices, a stronger rand versus the U.S. dollar, and a $22 million impact from the Ngodwana annual maintenance shut. Management also highlighted major cost inflation, including a $350 million year-over-year impact from sulphur for FY26 and an estimated $106 million of direct delivery cost inflation in South Africa this year. For Q4, management guided that EBITDA will be materially above Q3, citing higher dissolving pulp prices, improved North American packaging volumes, and no Ngodwana shut.

Steve Binnie framed the quarter as difficult but showed confidence that the business is starting to see “green shoots,” especially in North American packaging and dissolving pulp. He emphasized a back-to-basics focus on operational excellence, cost reduction, and debt reduction, saying the company’s number one priority is to lower debt. He also pointed to strategic progress in the U.S. SBS business and said the proposed UPM joint venture in Europe should create substantial synergies and preserve flexibility.

Glen Pearce focused on balance sheet discipline and liquidity. He said leverage has increased because profitability was lower, but debt stayed relatively flat, and the covenant suspension on the leverage covenant runs until March 2027, covering the RCF and the OeKB loan. He reiterated CapEx of about $240 million this year, concentrated on maintenance and essential spend, and said the company has substantial liquidity and reserves, with the next major refinancing being the 2028 Eurobonds.

Analysts pressed on what “materially above” Q4 EBITDA means, and management declined to give a number, but said Q4 should benefit from no Ngodwana shut, higher average DP pricing, and better North American volumes. Questions also focused on debt and covenants; management said it is proactively working with banks and aims to refinance the 2028 bonds with bonds, likely starting to look in early 2027. On North American SBS, management said customer qualification is broadly done for base products, the market remains supported by 1% to 2% demand growth plus competitor capacity removals, and the first $60/tonne price increase should flow mainly into Q4 and Q1.