South Africa's Sappi buys Canadian paper mill, third-quarter profit falls

JOHANNESBURG (Reuters) - South African paper and pulp maker Sappi SAPJ.J said on Thursday its Canadian division was buying Matane hardwood pulp mill in Canada to increase pulp integration and cut costs after reporting a 84% decline in profit for the third quarter.

The paper company said it would acquire Mantane from Rayonier Advanced Materials for $175 million. The acquisition will be financed through internal resources and be concluded by the end of the year, the company said in a statement.

“The acquisition will increase Sappi’s pulp integration for both its North American and European packaging businesses and lower Sappi’s costs of pulp, reduce its volatility of earnings throughout the pulp cycle and provide certainty of supply,” Sappi said.

Sappi, whose Europe and North American operations contribute 51% and 25% of sales respectively, said profit fell to $8 million in the quarter from $51 million in the same period last year, citing challenging market conditions and lower demand for some paper products.

Third-quarter sales slipped to $1.371 billion from $1.445 billion in the previous year.

Earnings before interest, tax, depreciation and amortization (EBITDA) fell 24% to $118 million from $155 million in the same period last year.

The paper company’s shares were down 5.04% at 0751 GMT.

Reporting by Onke Ngcuka, editing by Deepa Babington and David Evans