Sappi Limited Reports FY2026 Results: Fourth-Quarter Performance Improves as Market Conditions Begin to Recover

Sappi Limited (JSE: SAP) today announced its financial results for the fourth quarter and financial year ended September 2026, reporting improved fourth-quarter performance amid a challenging global operating environment characterised by geopolitical uncertainty, persistent cost inflation, currency volatility and subdued demand across several paper markets.

The Group delivered Adjusted EBITDA of US$294 million for FY2026, compared with US$501 million in FY2025. Revenue decreased by 3% to US$5.277 billion, while the Group recorded a net loss of US$747 million, compared with a net loss of US$177 million in the previous financial year.

Despite the difficult trading environment, Sappi made progress in its operational improvement initiatives, cost reduction programmes and liquidity management, while strengthening its commercial performance in North American packaging and dissolving wood pulp (DWP) markets.

FINANCIAL PERFORMANCE

For the year ended September 2026, Sappi reported:

• Revenue of US$5.277 billion, down 3% from US$5.420 billion in FY2025.

• Adjusted EBITDA of US$294 million, compared with US$501 million in the previous year.

• Net loss of US$747 million, compared with US$177 million in FY2025.

• Headline earnings per share of negative 69 US cents, compared with negative 15 US cents.

• Net debt increased to US$2.050 billion from US$1.920 billion.

• Net asset value decreased to 280 US cents per share from 382 US cents.

The full-year results were impacted by lower selling prices in the early part of the year, significant input cost inflation, adverse currency movements, asset impairments and a negative forestry fair value price adjustment of US$269 million.

Special items reduced annual earnings by US$405 million, primarily reflecting asset impairments of US$319 million and strategic project costs.

FOURTH-QUARTER PERFORMANCE SHOWS SEQUENTIAL IMPROVEMENT

Sappi delivered Adjusted EBITDA of US$99 million in the fourth quarter of FY2026, compared with US$111 million in the corresponding quarter of the previous year.

Revenue was US$1.322 billion, while the net loss for the quarter narrowed to US$116 million from US$194 million in Q4 FY2025.

The sequential improvement was supported by targeted cost savings, improved operational performance, increased profitability in North American packaging and speciality papers, and reduced scheduled maintenance compared with the third quarter.

The commercial ramp-up of Somerset Mill PM2 continued to gain momentum, with improved production stability, product quality and sales volumes contributing positively to earnings.

However, elevated fuel prices, logistics expenses, chemical costs and congestion at the Port of Durban continued to weigh on profitability.

BUSINESS SEGMENT HIGHLIGHTS

Pulp

The pulp segment faced lower profitability during FY2026, primarily due to lower selling prices earlier in the year, adverse foreign exchange movements and higher production costs.

Dissolving wood pulp market conditions strengthened during the second half, supported by healthy viscose staple fibre demand and favourable substitution trends from synthetic to cellulosic fibres.

During the fourth quarter, DWP market prices increased by US$22 per ton to US$920 per ton.

Packaging and Speciality Papers

The segment continued to experience challenging market conditions, although performance improved during the second half of the year.

North American operations benefited from the improving commercial performance of Somerset Mill PM2, stronger demand and industry capacity reductions.

Segment sales volumes increased by 9% year-on-year, primarily driven by higher paperboard volumes from Somerset Mill.

In South Africa, containerboard demand remained healthy, supported by robust agricultural activity.

Graphic Papers

The graphic papers segment continued to face structural demand decline driven by digital substitution.

Sales volumes decreased by 7% during FY2026. However, disciplined fixed-cost management and operational efficiency improvements helped maintain overall margins in line with the previous year.

CASH FLOW AND BALANCE SHEET MANAGEMENT

Sappi maintained a disciplined approach to capital allocation, liquidity preservation and balance sheet management throughout FY2026.

Net cash utilised during the year amounted to US$146 million, while capital expenditure was controlled at US$210 million, below the previously indicated guidance of US$240 million.

At year-end, net debt stood at US$2.050 billion.

Liquidity remained satisfactory at US$707 million, comprising US$165 million in cash and US$542 million in committed, undrawn revolving credit facilities.

The Group also engaged proactively with its lending group, securing an extension of the suspension of covenant testing to June 2027 and revised leverage covenant thresholds through December 2027.

STRATEGIC PRIORITIES AND OUTLOOK

Looking ahead, Sappi expects the global operating environment to remain uncertain, with geopolitical tensions, elevated energy prices, supply chain disruptions and foreign exchange volatility continuing to influence operating costs and market conditions.

Nevertheless, the Group sees encouraging signs of improvement in dissolving wood pulp and North American packaging markets.

Its priorities remain focused on:

• Delivering targeted cost reduction programmes.

• Improving operational efficiencies and asset utilisation.

• Strengthening cash generation and liquidity.

• Maintaining disciplined capital allocation.

• Improving the competitive cost position.

• Maximising the benefits of the Somerset Mill PM2 commercial ramp-up.

Capital expenditure for FY2027 is estimated at approximately US$240 million.

Sappi expects first-quarter FY2027 Adjusted EBITDA to be below the fourth quarter of FY2026, reflecting planned maintenance shutdowns, seasonal demand patterns and continued cost inflation.

BOARD AND GOVERNANCE DEVELOPMENTS

Sappi also announced changes to its board committees.

Ms Busisiwe Silwanyana and Mr Charles Brand have been appointed to the relevant board committees, effective 4 November 2026.

Mr Brian Beamish has been appointed Lead Independent Director, succeeding Mr Michael (Mike) Fallon following his retirement at the Annual General Meeting on 10 February 2027.