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Sateri's VSF production volume up by 76% in 2011

02 Apr '12

6 min read

Sateri Holdings Limited, a leading global specialty cellulose company, announced its audited results for the year ended 31 December 2011. In the second half of 2011, the economic slowdown negatively impacted demand and prices for the Group's dissolving wood pulp (DWP) products, particularly in the fourth quarter.

In this weak business environment, the Group sold reduced volumes of rayon-grade pulp, which gave rise to elevated inventory levels at the 2011 year end. The weak exchange rate of the Brazilian Reais against the US Dollar at year-end led to unrealized foreign exchange losses on open currency hedging positions of US$31 million.

In addition, the Bahia Specialty Cellulose (“BSC”) plant in Brazil experienced certain manufacturing process challenges which reduced operational availability and resulted in a lower level of DWP production than expected.

Mr. Will Hoon, CEO and Executive Director of Sateri, said, “Although we experienced several challenges in 2011, particularly in the fourth quarter, we continued to execute our business strategy and succeeded in maintaining the highest EBITDA margin, net margin, operating cash flow yield, and one of the lowest debt levels in the global industry. In addition, we achieved substantial progress in integrating our rayon operations and expanding our specialty-grade pulp business, resulting in more stable margins in the years to come.”

For the 12 months ended 31 December 2011, the Group reported total revenue of US$807 million, compared to US$802 million in 2010 on a like-for-like basis (excluding results from DP Macao which was disposed of by the Group on 30 September 2010).

Gross profit declined 17% to US$323 million and EBITDA by 25% to US$288 million, compared with the same period last year. Profit attributable to shareholders for the year decreased by 41% to US$155 million, and earnings per share was US$0.05 compared to US$0.09 last year on a like-for-like basis. The Board has recommended a final dividend of HK2.5 cents per share for the year ended 31 December 2011.

John Ying, Chairman of Sateri commented, “The Board is pleased to recommend our first dividend payment to shareholders. Considering our earnings for the year, our cash position and our future business prospects, we are delighted that we can take this opportunity to reward our shareholders for their continued support.”

For its Dissolving Wood Pulp (DWP) business, Sateri firmly established itself as a significant global player in specialty grades, which enjoy more stable margins and pricing than rayon grades. Sales volume increased by 60% to 92,231 metric tons in 2011 from 57,590 metric tons in 2010. BSC's current design capacity allows it to produce up to 320,000 metric tons of specialtygrade pulp per annum, and the Group's strategy is to expand further in this market.

In view of the rapidly deteriorating market, the Group sold reduced volumes of rayon-grade pulp in the fourth quarter of 2011, which gave rise to elevated inventory levels at year end.

The volume of rayon-grade pulp sold to third parties decreased by 51% to 164,396 metric tons in 2011. The Group's internal sales of rayon-grade pulp to Sateri Jiangxi doubled to 100,070 metric tons in 2011 as part of its ongoing strategy to further integrate DWP and VSF businesses.

Revenues in 2011 for the DWP segment decreased 27% to US$444 million and segment profit dropped by 54% to US$115 million compared with the same period last year.

In 2011, the Group continued to enhance the quality of its Viscose Staple Fiber (VSF) products and gained market share. The production volume for VSF increased by 76% to 140,576 metric tons in 2011, whilst sales volume increased by 81% to 140,260 metric tons in 2011, of which 60% were sold in the second half of the year.

In 2011, the Group's VSF business recorded 85% increase in segment revenue to US$363 million. Segment profit was US$36 million, a decrease of 27%, due to the significant volatility in VSF prices in 2011, which dropped sharply from US$3,700 per metric ton in the first quarter to below US$2,200 per metric ton by the fourth quarter as a result of the global economic slowdown.

For DWP, Sateri will continue its strategy to produce and sell more specialty-grade pulp, in view of its lower pricing volatility and superior positioning within the value chain.