SA’s Sappi buys stake in Chinese paper firm

JOHANNESBURG – South African paper producer Sappi will acquire a 34 percent stake in Chinese paper maker Jiangxi Chenming for US$60 million (N$378 million) in a joint venture, its first manufacturing investment in Asia, it said yesterday.

Jiangxi’s sole asset is a mill under construction in southeast China that will produce 350 000 tonnes of paper per year when completed, Sappi said in a statement to the JSE Securities Exchange announcing the agreement. “This is a very good deal.They are paying US$1,300 a tonne for fully integrated paper, I think an acquisition like this could easily cost them about US$1,500,” a Johannesburg-based analyst said.The venture also involves Shandong Chenming, which is listed on the Shenzhen Exchange and has 47,2 per cent, and Seoul-listed Shinmoorim Paper Manufacturing Company, which has 7,5 per cent.The International Finance Corporation has 7,5 per cent and Jiangxi Paper Industry Ltd 3,8 per cent.Shandong Chenming is a Chinese paper producer with an annual production capacity of 1,4 million tonnes while Shinmoorim from South Korea produces 500 000 tonnes.Robert Hope, Sappi executive in charge of strategic development, said construction of the Jiangxi mill, to cost an estimated US$487 million, was at an advanced stage and the plant was due to start delivering paper in the first half of 2005.”Sappi will now have coated paper manufacturing capacity on four continents, further reinforcing our position as a leading global coated paper producer,” Chief Executive Jonathan Leslie said in a statement.Sappi will appoint the chief financial officer of Jiangxi.In July, the group announced a 64 per cent increase in headline earnings for the third quarter but analysts said its operating results were disappointing.The group said at the time it had seen increased demand for its paper in all its markets including Asia, the U.S.and Europe.Sappi, which sells more than 80 per cent of its products in North America and Europe, is the world’s largest producer of fine paper of the kind used in glossy magazines.Shares in Sappi gained 1,15 per cent to 89,01 rand by 0913 GMT outperforming the JSE’s blue-chip Top 40 index which was up 0,20 per cent.-Nampa-Reuters”This is a very good deal.They are paying US$1,300 a tonne for fully integrated paper, I think an acquisition like this could easily cost them about US$1,500,” a Johannesburg-based analyst said.The venture also involves Shandong Chenming, which is listed on the Shenzhen Exchange and has 47,2 per cent, and Seoul-listed Shinmoorim Paper Manufacturing Company, which has 7,5 per cent.The International Finance Corporation has 7,5 per cent and Jiangxi Paper Industry Ltd 3,8 per cent.Shandong Chenming is a Chinese paper producer with an annual production capacity of 1,4 million tonnes while Shinmoorim from South Korea produces 500 000 tonnes.Robert Hope, Sappi executive in charge of strategic development, said construction of the Jiangxi mill, to cost an estimated US$487 million, was at an advanced stage and the plant was due to start delivering paper in the first half of 2005.”Sappi will now have coated paper manufacturing capacity on four continents, further reinforcing our position as a leading global coated paper producer,” Chief Executive Jonathan Leslie said in a statement.Sappi will appoint the chief financial officer of Jiangxi.In July, the group announced a 64 per cent increase in headline earnings for the third quarter but analysts said its operating results were disappointing.The group said at the time it had seen increased demand for its paper in all its markets including Asia, the U.S.and Europe.Sappi, which sells more than 80 per cent of its products in North America and Europe, is the world’s largest producer of fine paper of the kind used in glossy magazines.Shares in Sappi gained 1,15 per cent to 89,01 rand by 0913 GMT outperforming the JSE’s blue-chip Top 40 index which was up 0,20 per cent.-Nampa-Reuters