The European region experienced a challenging quarter with weak economic conditions and overcapacity in graphic papers markets creating significant headwinds for the business. However, the closure of the Stockstadt and Lanaken Mills substantially reduced fixed costs and enabled the region to generate Adjusted EBITDA⁽¹⁾ of €36 million, which was significantly better than the prior year. The recovery of paper markets was slow and although sales volumes were slightly higher than a year ago, selling prices were under pressure.

The combination of higher sales volumes and higher selling prices boosted profitability of the packaging and speciality papers segment compared to last year. However, market conditions remained subdued with paperboard markets particularly struggling. Sales volumes were 6% above last year but still well below the highs of 2022 as the uncertain macroeconomic environment in the region dampened consumer sentiment.

Graphic papers sales volumes were consistent with recent quarters. The 4% increase in sales volumes compared to last year can be attributed to normalisation of downstream inventories following the destocking cycle of 2023 and underlying demand in the region remains muted. Selling prices came under pressure with coated mechanical papers experiencing a larger decline compared to coated woodfree papers. Capacity utilisation of the graphic papers assets was supported by the transfer of sale volumes from the two mill closures as we retained or improved market share across all coated woodfree categories.

Variable costs for the fourth quarter increased 4% year-on-year driven by increases in purchased pulp and chemicals partially offset by lower wood costs. Fixed costs were 15% below last year due to the strategic restructuring of the business.

⁽¹⁾ Adjusted EBITDA is EBITDA excluding special items and plantation fair value price adjustment.

The North American region delivered Adjusted EBITDA of US$71 million for the quarter, which was a solid performance within the context of a slower than anticipated recovery in paper markets following the destocking cycle of 2023. Higher paper sales volumes and improved pulp selling prices were partially offset by increased variable costs. The conversion and expansion of Somerset PM2 to paperboard progressed well during the quarter and is on schedule for start-up in April 2025. This strategic investment is integral to the Thrive strategy to reduce exposure to declining graphic papers markets and increased capacity in growing packaging markets.

Demand for Verve⁽⁷⁾ remained strong, supported by strong seasonal demand in the VSF sector. Sales volumes in the pulp segment were 20% below last year. This was primarily driven by reduced high yield⁽⁵⁾ pulp sales due to higher integration into our own packaging paper assets in North America and Europe as packaging market conditions improved. Higher selling prices offset the lower volumes and boosted profitability for the segment compared to last year.

Sales volumes for packaging and speciality papers recovered substantially compared to the previous year and were once again aligned with production. Volumes were 44% above last year but lower selling prices, particularly in the food services category, negatively impacted profitability of the segment.

Demand for graphic papers improved during the quarter, aligning with typical seasonal trends. Sales volumes were 14% above last year but this was largely due to normalisation of downstream stock levels rather than a significant improvement in underlying demand. Lower selling prices and higher costs compared to the previous year reduced margins, but profitability of the segment remained healthy.

Variable costs for the fourth quarter increased by 6% year-on-year driven by higher purchased pulp, partly offset by lower energy, wood and chemicals costs. Fixed costs were 10% above the prior year due to higher personnel and maintenance costs.

⁽⁵⁾ High yield pulp = bleached chemi-thermomechanical pulp (BCTMP).
⁽⁷⁾ Verve is the brand name for Sappi dissolving pulp.

The South African region delivered an excellent quarter with Adjusted EBITDA⁽¹⁾ of ZAR2,033 million enabling the region to achieve its third consecutive record annual performance. The success was largely driven by variable cost savings and favourable selling prices for DP. Positive plantation fair value price gains in the first half of the year were offset by a significant ZAR581 million reversal in the fourth quarter due to lower hardwood timber market prices. The net adjustment for the fiscal year was ZAR17 million.

Demand for Verve⁽⁸⁾ was robust supported by strong seasonal demand in the VSF sector. Margins for the pulp segment improved substantially with slightly lower year-on-year sales volumes more than offset by variable cost savings and higher selling prices, which were 8% above last year. The Saiccor Mill recovered well after the mill temporarily halted production following an oxygen tanker explosion on site in July 2024. However, the lost production of approximately 15,000 tons contributed to the lower sales volumes for the quarter.

Containerboard demand was stable as the citrus season concluded during the quarter. Sales volumes were 3% higher than the prior year but margins came under pressure due to an increase in sales into export markets. Office paper and tissue markets remained subdued, and a combination of lower sales volumes, higher variable costs and lower selling prices reduced profitability of the graphic papers segment.

Variable costs for the fourth quarter were 2% below the prior year driven by lower wood, energy and chemicals costs, partly offset by higher ocean freight delivery costs. Fixed costs were 9% higher than last year due to higher personnel and insurance costs.

⁽¹⁾ Adjusted EBITDA is EBITDA excluding special items and plantation fair value price adjustment.
⁽⁸⁾ Verve is the brand name for Sappi dissolving pulp.