Sappi Group: The power of wood fibre

In the past decade sustainability has entered the industrial psyche with growing importance, but within the paper and pulp industry, it has been an integral fact of life for far longer. At the forefront of this sector, Sappi continues to embrace sustainability and its role as part of the future low carbon economy.

Saapi01Established in South Africa 75 years ago, we are today a global company, listed on the New York Stock Exchange in addition to our primary listing on the Johannesburg Securities Exchange. With sales of US$6.3 billion in 2012, we are focussed on providing graphic, packaging and speciality papers, as well as dissolving wood pulp solutions to our customers in more than 100 countries worldwide.

Concern for the environment has led some people to wrongly believe that using paper or forest products is bad for the environment. Sappi makes a strong case that no-one should feel guilty about using paper from a supplier that is committed to responsible forestry and manufacturing practices.

In South Africa, where we own tree farms or commercial plantations and use no indigenous timber, Sappi plants 67 trees a minute. We actually plant more trees than we harvest, each year planting some 37 million trees while harvesting some 35 million. Through focused research and development, our tree improvement and breeding programmes have increased yields for eucalyptus by 60 per cent, while reducing water consumption and increasing disease resistance. This means that Sappi obtains more and better quality fibre from the same amount of land, a critical competitive advantage. Our rural forestry operations contribute significantly to rural development and beyond creating jobs, we allow harvesting in our plantations by local communities of honey, mushrooms and traditional medicines.

Globally, the focus on climate change and a low carbon economy, as well as increasing preferences for products made from natural and renewable sources, perfectly supports the forestry industry. While other economic sectors have destroyed forests, responsible forestry management has enabled the global forest cover to be expanded and has increased the areas with importance to conservation that are being effectively protected. In South Africa, Sappi manages a third of our property, some 130,000 hectares, for conservation and biodiversity purposes. In addition, our commercial plantations absorb 13 million metric tons of carbon and release more than eight million tons of oxygen every year and from plantation to production, Sappi absorbs more carbon than it emits, according to the Forestry Industry Carbon Assessment Tool (FICAT).

Saapi02While Sappi’s European and North American operations, which constitute 80 per cent of the group, have always focused on graphic paper used for commercial printing such as brochures, catalogues, magazines, direct mail and books and reports, our South African operations operate across a wider range of products including newsprint, graphic paper (both coated and uncoated), packaging papers, containerboard, security paper as well as office or copy paper. Recently Sappi’s European operation announced that we were investing in specialised one-sided coated paper used for high quality packaging; a rapidly growing market segment, and our North American business is also a world leader in specialised release paper, which is used to impart patterns and textures to fabrics including artificial leather for the fashion and motor car industries and to surfaces such as laminated floors for the housing and commercial building industry.

Our corporate strategy is clear; that paper will remain a key component of Sappi, delivering solid results as a low cost market leader despite the projected slowdown in paper consumption in developed markets. The corporate strategy has, however, evolved to also include investment in exciting new market segments which are delivering high growth and high margins. Beyond the speciality paper applications, the major component of this strategic driver is our Specialised Cellulose business, making dissolving wood pulp (DWP). A non-paper application of wood fibre, DWP is used to make textiles and is a key component of household goods, foodstuffs, cosmetics and pharmaceutical products. Sappi is the world’s leading producer of DWP with our products being mainly used for viscose staple fibre used in clothing and textiles.

Our production capacity of 800,000 tons from the Saiccor Mill in South Africa is currently being expanded to 1.3 million tons through two projects. The first is the partial conversion of the Sappi Cloquet Mill in the USA and the second is the partial conversion of the Ngodwana Mill in Mpumalanga, South Africa. Sappi’s reputation for quality product and the growth in the market has enabled us to conclude supply agreements for most of these new volumes.

Saapi03The investment further underlines our commitment to the environment: unlike many synthetic raw materials, the product supplied by Sappi Specialised Cellulose is produced from a natural and renewable resource. In South Africa this is Eucalyptus hardwood. These fast growing trees are grown in relatively close proximity to both mills, which contributes to the business’ position as a low cost producer of dissolving wood pulp.

Our Technology Centre in Pretoria carries out significant research from the production process including water consumption and effluent treatment, to efficiencies, as well as fibre utilisation and creating value from by-products. The Shaw Research Centre, near Howick in KwaZulu-Natal, focuses on tree breeding and optimal efficiencies in Sappi’s forestry sector. The Technology Centre also undertakes research for the industry as a whole, including strength tests on boxes and paper strength testing.

Another key element to Sappi’s continued success is its quality control systems, which include processes allowing the traceability of all products, back to the forest. In South Africa, our plantations are FSC™ (Forest Stewardship Council™) certified, while globally we do not promote one certification scheme above another and subscribe to all credible certification systems including the PEFC and SFI®. Our mills are ISO 9001 and 14001 as well as OHSAS 18001 certified with a particular focus on safety.

To ensure that Sappi is positioned for sustained growth and profitability, we have worked extremely hard over the past few years to ensure that we are a low cost producer with excellent customer service and relevant products. We have closed down excess or high cost capacity and restructured our product offering to ensure that we respond to changing markets. The latest results from Sappi confirm that we are on the right track and once the major capital projects related to the Specialised Cellulose business in South Africa and North America and the speciality packaging paper business in Europe come online in 2013, good growth is expected from 2014 onwards.

In closing just a reminder why paper remains so relevant in our lives –

paper offers us a sensory experience no other communication medium can replicate. We do not merely use paper, we engage with it. Paper stimulates our senses and emotions. A world without paper would also offer no sustainable, renewable and biodegradable solutions for everyday necessities such as packaging. That’s the power of paper.