Sappi Reports Challenging Start to FY2026, Maintains Focus on Cost Discipline and Portfolio Actions

Johannesburg – 3 February 2026 – Sappi Limited reported a challenging first quarter for the period ended December 2025, reflecting continued macroeconomic pressure, weaker pricing across key product segments and adverse currency movements.

The group delivered Adjusted EBITDA of US$90 million, compared to US$203 million in the prior year, and recorded a loss for the period of US$37 million. Results were materially impacted by lower dissolving wood pulp (DWP) prices, a stronger South African rand, and operational disruptions in North America related to scheduled maintenance and utilities interruptions.

Despite difficult trading conditions, Sappi continued to execute its “Back to Basics” phase of the Thrive strategy, prioritising cost control, asset integrity and balance sheet resilience. Capital expenditure was reduced to US$56 million, significantly below the prior year, as the group scaled back to essential maintenance and regulatory spend only.

During the quarter, Sappi progressed strategic initiatives including the proposed graphic papers joint venture with UPM, continued ramp-up of the Somerset Mill PM2 paperboard conversion, and disciplined management of liquidity and debt facilities.

Looking ahead, Sappi expects continued market headwinds in the second quarter of FY2026, with further earnings pressure anticipated from a scheduled maintenance shut at the Saiccor Mill and ongoing pricing volatility.

📊 KEY FINANCIAL HIGHLIGHTS (Q1 FY2026)

• Revenue: US$1,287 million (Q1 FY2025: US$1,363 million)

• Adjusted EBITDA: US$90 million (Q1 FY2025: US$203 million)

• Operating profit (excl. special items): US$1 million

• Loss for the period: US$37 million

• Adjusted EPS: 3 US cents loss

• Net debt: US$1,951 million

• Net debt / EBITDA (excl. special items): 5.5x

🏗️ PROJECTS & OPERATIONAL UPDATES

Somerset Mill PM2 – North America

• Converted from graphic paper to paperboard

• Slower-than-expected ramp-up due to:

  • Weak paperboard demand

  • Competitive pricing pressure

  • Scheduled maintenance shut

  • Utilities-related operational disruptions

• Paperboard volumes +15% year-on-year, with customer trials progressing positively

• Maintenance shut reduced Q1 earnings by ~US$17 million

Saiccor Mill – South Africa

• Annual maintenance shut scheduled in Q2 FY2026

• Expected earnings impact: ~US$15 million

🛑 SHUTDOWNS, CURTAILMENTS & DISRUPTIONS

• Scheduled maintenance shut:

  • Somerset Mill (North America) – completed in Q1

• Unplanned operational disruptions:

  • Utilities-related issues at Somerset and Cloquet Mills

• Temporary production curtailments:

  • High-yield pulp sales intentionally reduced due to low external prices

• No permanent mill closures announced during the quarter

🔁 MERGERS, ACQUISITIONS & JOINT VENTURES

Proposed Graphic Papers Joint Venture with UPM

• Announced: 4 December 2025

• Structure: 50/50 joint venture

• Assets included:

  • Sappi: Gratkorn, Ehingen, Maastricht, Kirkniemi mills + European wood supply JVs

  • UPM: Communications Paper business in Europe, UK and USA

• Enterprise value: EUR 1.42 billion

• Sappi to receive:

  • EUR 139 million cash

  • 50% equity stake in JV

• Target:

  • Definitive agreements: H1 2026

  • Completion: by end-2026, subject to approvals

💰 CAPITAL EXPENDITURE

• Q1 FY2026 capex: US$56 million
  (Q1 FY2025: US$101 million)

• Reduction reflects:

  • Completion of major Somerset PM2 spend

  • “Back to Basics” strategy

• FY2026 capex guidance: ~US$260 million
  (reduced from US$290 million)

🔮 OUTLOOK & FUTURE PLANS

Q2 FY2026 Outlook

• Adjusted EBITDA expected to be below Q1 FY2026

• Key headwinds:

  • Saiccor Mill maintenance shut (~US$15m impact)

  • Weak DWP pricing

  • Stronger ZAR and EUR vs USD

  • Continued oversupply in paper markets

Market Expectations

• DWP prices showing early recovery:

  • From ~US$785 to ~US$805 per ton

• Graphic paper demand decline stabilising at 6–8% per annum

• Packaging markets remain competitive in Europe & North America

Strategic Focus

• Cost discipline and cash preservation

• Balance sheet protection

• Execution of UPM joint venture

• Optimisation of asset utilisation