Paper and pulp manufacturing giant Sappi says it has started talks over the possible closure of its Belgium-based Lanaken Mill as it forges ahead with its strategy to reduce its exposure to the graphics market.
The R24.4bn diversified industrial materials firm has been looking to reduce its exposure to the graphics paper market in favour of moving more towards the dissolving pulp and packaging markets.
The group announced the proposed sale of three mills in Europe in 2022 to pan-European multi-asset manager group Aurelius Investment Lux One for €272m (R4.73bn), which later fell through.
On Tuesday, Sappi said it continued to be faced with significant overcapacity in the graphic paper market, forcing the firm to take extended periods of costly commercial downtime.
“The persistent global economic downturn is proving to be much tougher than anticipated, with depressed markets, geopolitical instability and weak economic growth combining to put significant pressure on Sappi, particularly in Europe,” Sappi said.
“As the recent over-stocking by customers reduces, it has become very clear that demand will not return to previous levels. Combined with input cost pressure, we do not see this situation, caused by factors beyond our control improving in the foreseeable future.”
Subsequently, the Johannesburg-based manufacturer said it had informed both the Mill Management and the Works Council that it was starting the consultation process on the potential closure of the Lanaken Mill.
“In parallel, we are reviewing how best to reduce overall fixed and other overhead costs,” Sappi added.
The Lanaken Mill is an integrated pulp mill located in Belgium, currently employing 644 workers, with a production capacity of 165,000 tonnes per annum (tpa) of pulp which is used to produce 530,000 tpa of coated wood-free paper mainly sold into the European market.
In Europe, Sappi has said it wants to focus on the more robust commercial print market and on the markets for flexible packaging, functional papers, self-adhesives and dye-sublimation.
The fresh consultations on the proposed disposal of Lanaken come as it edges closer to concluding the sale of its Stockstadt Mill in Germany, after a stop-and-start process delayed the disinvestment process in that plant and two others including the Maastricht Mill in the Netherlands, and its Kirkniemi Mill in Finland.
On Tuesday, Sappi reported that the process of the closure of Stockstadt Mill was complete with a social plan for the employees in place while an agreement has been signed for the sale of the site.
The group said the closure of the site should be completed during the first calendar quarter of 2024 and the effect is expected to be “cash neutral”.
Group CEO Steve Binnie said the company was continuing to position itself for growth and increased profitability by reducing exposure to the graphic paper segment while expanding Sappi’s presence in packaging, speciality papers, pulp and biomaterials.
“Recent investments across our SA, US and European operating businesses demonstrate this priority,” Binnie said.
“We will therefore continue to review the viability of all our operations and make changes when necessary.”
Operating in Europe, North America and SA, Sappi is a global supplier of dissolving pulp, wood pulp, biomaterials and timber. Its end-use products include packaging and speciality papers, graphic papers, casting and release papers and forestry products manufactured from wood fibre sourced from sustainably managed forests and plantations.
Sappi shares rose 3.07% to R44.72 by the afternoon, having slipped over 11% since the start of the year.
Correction: October 10 2023
A previous version of this story stated that Sappi was exiting the graphics paper market, whereas it is only reducing its exposure.
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