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Sappi Limited (SPPJY)
OTHER OTC:SPPJY

Sappi (SPPJY) AI Stock Analysis

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Sappi

(OTC:SPPJY)

Rating:56Neutral
Price Target:
$1.50
▼(-10.71%Downside)
Sappi's overall stock score reflects a company undergoing transition with significant challenges. Financial performance is hindered by high debt and liquidity concerns. Technical analysis indicates bearish momentum. Despite an attractive valuation, the mixed earnings call and cautious guidance highlight ongoing difficulties in the market environment.

Sappi (SPPJY) vs. SPDR S&P 500 ETF (SPY)

Sappi Business Overview & Revenue Model

Company DescriptionSappi Limited provides materials made from woodfiber-based renewable resources in Europe, North America, and South Africa. The company offers dissolving pulp; graphic papers; packaging and specialty papers, including flexible packaging papers, label papers, functional paper packaging products, containerboards, paperboards, silicone base papers, dye sublimation papers, and inkjet papers; and casting and release papers. It also provides specialty chemicals and food ingredients; generates biomass energy, biogas, and hot water; offers fuel rods; and owns and manages forests. The company was formerly known as South African Pulp and Paper Industries Limited and changed its name to Sappi Limited in 1973. Sappi Limited was founded in 1936 and is headquartered in Johannesburg, South Africa.
How the Company Makes MoneySappi generates revenue through the production and sale of its wide range of products. The company's key revenue streams include the sale of dissolving pulp, which is used in the production of textiles, packaging and specialty papers for consumer and industrial markets, and graphic papers for printing and publishing industries. Sappi also invests in the development of biomaterials and biochemicals, tapping into the growing demand for sustainable alternatives in various sectors. Strategic partnerships and investments in research and development further bolster Sappi's ability to innovate and meet market demands, thereby enhancing its revenue potential.

Sappi Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q2-2025)
|
% Change Since: -6.67%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed outlook with both positive strides in project completion and strategic debt management, but significant challenges with market conditions, maintenance disruptions, and price pressures. Despite strategic achievements, the cautionary guidance for the next quarter indicates a challenging environment.
Q2-2025 Updates
Positive Updates
Successful Bond Refinancing
Successfully completed a refinancing of 2026 bonds, replaced with 2032 bonds with good demand and pricing.
Packaging Segment Growth
Volumes in the Packaging segment were higher than previously, indicating growth despite broader market challenges.
Somerset Project Completion
The Somerset project is now complete, doubling capacity to 470,000 tonnes of SBS, aligning with strategy to reduce exposure to graphic paper.
Positive Liquidity Position
Refinanced 2026 bonds with next major debt due in 2028, providing a favorable liquidity outlook.
Commitment to Debt Reduction
A strong commitment to reducing debt, with plans to keep CapEx levels below $350 million for the next two years.
Negative Updates
Market Deterioration and Price Pressure
Market conditions deteriorated across all segments with selling prices under pressure, particularly due to anticipated U.S. tariffs.
Impact of Maintenance Shuts
Extended maintenance shuts at South African mills resulted in lower production and higher fixed costs, impacting financial performance.
Negative Fair Value Adjustment
There was a negative fair value adjustment on plantations in South Africa, which impacted financial results.
Energy Cost Increases
Higher energy costs in Europe and South Africa due to inefficient use of resources during maintenance shuts.
Dissolving Pulp Price Decline
Dissolving Pulp prices decreased significantly by quarter-end, with further declines anticipated.
Company Guidance
In the recent call, Stephen Binnie outlined several key metrics and developments impacting the company's financial performance and strategic direction. The company experienced a deterioration in market conditions, leading to a decline in earnings, which was anticipated due to significant maintenance shuts at the Somerset project and two South African mills, resulting in a $20 million impact and an additional 13 million tonnes of production loss. Sales volumes remained stable, with the Packaging segment showing growth, but reduced production led to higher fixed cost absorption and lower inventories. On a 12-month basis, cash generated from operations remained strong, with net debt to EBITDA rising to 2.4 due to increased CapEx. The company successfully refinanced its 2026 bonds, replacing them with 2032 bonds. Year-on-year, the main shortfall was attributed to higher fixed costs linked to production shutdowns and negative fair value adjustments on South African plantations. Energy costs rose in Europe and South Africa due to operational inefficiencies, while pulp and wood costs declined. The company's CapEx for the year is estimated at $550 million, primarily due to the Somerset project, with plans to reduce it to below $350 million in the coming years to focus on debt reduction. Despite challenges, the company remains committed to its long-term debt reduction strategy, aiming for substantial debt reduction from Q4 onwards.

Sappi Financial Statement Overview

Summary
Sappi's financial performance is marked by improved operational efficiencies with better EBIT and EBITDA margins, but inconsistent revenue growth and high debt levels pose risks. Cash flow management is strained due to high capital expenditures, affecting liquidity.
Income Statement
65
Positive
Sappi's income statement shows a mixed performance with a TTM gross profit margin of approximately 12.9% and a net profit margin of 3.2%. The company experienced a decline in revenue from 2023 to 2024, but showed a slight recovery in the TTM period. EBIT and EBITDA margins improved significantly in the TTM period, indicating better operational efficiency. However, overall revenue growth has been inconsistent, reflecting challenges in the industry.
Balance Sheet
60
Neutral
Sappi's balance sheet reflects moderate stability with a debt-to-equity ratio of 0.74, showing manageable leverage. The equity ratio stands at about 41.7%, indicating a solid proportion of equity in the company's capital structure. Return on equity for the TTM was 7.3%, suggesting decent profitability relative to shareholders' equity. However, the debt levels remain relatively high compared to historical figures, posing a potential risk.
Cash Flow
55
Neutral
The cash flow analysis reveals some concerns, with a negative free cash flow in the TTM period. This is largely due to substantial capital expenditures exceeding operating cash flow. The operating cash flow to net income ratio of 1.36 indicates that operating cash flow covers net income adequately, but the free cash flow to net income ratio is negative, signaling potential liquidity challenges if capital spending continues at the current rate.
BreakdownTTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income Statement
Total Revenue5.54B5.46B5.81B7.30B5.26B4.61B
Gross Profit715.00M776.00M907.00M1.37B549.00M399.00M
EBITDA707.00M497.00M731.00M1.08B444.00M283.00M
Net Income180.00M33.00M259.00M536.00M13.00M-135.00M
Balance Sheet
Total Assets5.90B6.21B5.80B6.23B6.19B5.46B
Cash, Cash Equivalents and Short-Term Investments156.00M317.00M601.00M780.00M366.00M279.00M
Total Debt1.83B1.74B1.69B1.94B2.31B2.24B
Total Liabilities3.44B3.63B3.35B3.87B4.22B3.82B
Stockholders Equity2.46B2.58B2.44B2.36B1.97B1.63B
Cash Flow
Free Cash Flow-357.00M-349.00M223.00M514.00M33.00M-91.00M
Operating Cash Flow244.00M124.00M605.00M882.00M407.00M260.00M
Investing Cash Flow-516.00M-430.00M-395.00M-376.00M-378.00M-517.00M
Financing Cash Flow31.00M-80.00M-501.00M-43.00M33.00M138.00M

Sappi Technical Analysis

Technical Analysis Sentiment
Negative
Last Price1.68
Price Trends
50DMA
1.81
Negative
100DMA
1.99
Negative
200DMA
2.31
Negative
Market Momentum
MACD
-0.04
Positive
RSI
39.40
Neutral
STOCH
4.17
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SPPJY, the sentiment is Negative. The current price of 1.68 is below the 20-day moving average (MA) of 1.77, below the 50-day MA of 1.81, and below the 200-day MA of 2.31, indicating a bearish trend. The MACD of -0.04 indicates Positive momentum. The RSI at 39.40 is Neutral, neither overbought nor oversold. The STOCH value of 4.17 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SPPJY.

Sappi Peers Comparison

Overall Rating
UnderperformOutperform
Sector (44)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
70
Neutral
$1.07B25.804.51%3.24%-4.91%-46.51%
KRKRO
67
Neutral
$739.68M7.6911.87%3.11%10.42%
56
Neutral
$1.01B5.587.53%6.14%4.00%
55
Neutral
$1.62B-88.14%-17.68%-214.32%
49
Neutral
$835.34M-17.65%2.53%4.13%62.89%
44
Neutral
C$967.22M-6.71-13.35%2.72%17.20%-32.62%
43
Neutral
$855.70M-8.44%9.26%4.15%57.25%
* Basic Materials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
SPPJY
Sappi
1.70
-1.02
-37.50%
KRO
Kronos Worldwide
6.58
-5.73
-46.55%
RDUS
Schnitzer Steel Industries
29.63
15.12
104.20%
TROX
TRONOX
5.53
-9.72
-63.74%
NGVT
Ingevity
46.79
5.50
13.32%
WTTR
Select Energy Services
9.04
-1.01
-10.05%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jun 14, 2025