Sappi shuts paper machines to cut costs 

By | 2020-07-14T12:24:42+00:00 July 14th, 2020|

The timber industry and downstream sectors have not been spared by the impact of the Covid-19 pandemic. Johannesburg-based paper and pulp company Sappi has announced the closure of paper machine 2 (PM2) at its Stockstadt Mill in Germany as well as paper machine 9 (PM9) and the energy complex at its Westbrook Mill in the US.

Johannesburg-based paper and pulp company Sappi has announced the closure of paper machine 2 (PM2) at its Stockstadt Mill in Germany (in picture). Iamge credit: Sappi

Johannesburg-based paper and pulp company Sappi has announced the closure of paper machine 2 (PM2) at its Stockstadt Mill in Germany (in picture). Iamge credit: Sappi

Sappi recently informed its employees and stakeholders of the decision which, the company says, will remove capacity, reduce costs, improve machine utilisation and increase competitiveness.

In early February 2020, Sappi Europe announced that it will initiate a process to determine the future of PM2 at its Stockstadt Mill in Germany, in view of the continuing decline of the coated woodfree paper market. Following an exhaustive consultation process an agreement was reached with mill employee representatives to permanently close PM2, which has a coated woodfree paper production capacity of 240 000 tons per annum. Stockstadt will now focus on its strong and growing uncoated woodfree offering. About 170 employees will leave the company with production expected to cease on 30 September 2020. The once-off restructuring charges amount to approximately EUR27-million (EUR15-million cash; EUR12-million non-cash). The estimated annual saving will be more than EUR15- million.

After a period of review, Sappi North America has decided to permanently shut PM9 and most of the energy complex at its Westbrook Mill in the State of Maine. Sappi will shift PM9’s base paper production to its state-of-the-art mills in Cloquet, Minnesota and Skowhegan, Maine. Approximately 75 employees will be impacted. The impacted assets are expected to close by end of calendar year 2020. As a result of these actions, a restructuring charge of approximately USD14-million (USD11-million cash; USD3-million non-cash) is expected during Sappi’s fourth quarter, in addition to approximately USD8-million of accelerated depreciation to be recorded during the second half of calendar 2020. The estimated annual saving will be approximately USD10-million.

According to Sappi CEO Steve Binnie these steps demonstrate the company’s commitment to taking decisive action to reduce costs and respond to market dynamics. “These mills will now be better placed to compete in the marketplace and deliver increased returns,” says Binnie.