SAPPI Plans to Invest in Eastern Cape Community Forestry

JOHANNESBURG, SOUTH AFRICA, May 23, 2011- Sappi Southern Africa today announced that it had initiated a consultation process with staff and relevant Union representatives to cease operations at Adamas Mill in Port Elizabeth in response to difficult market conditions and sustained input costs increases.

This supports Sappi Southern Africa's strategy to improve the competitiveness of its fine paper business by aligning its production capacity to market demand. Removal of production capacity at Adamas would address the high manufacturing overheads associated with a small mill (Adamas produces about 40,000 tpa, of a total regional capacity in excess of 1 million tpa). Variable costs will be improved by shifting production closer to Sappi's main South African markets and raw material sources.

Sappi Southern Africa acquired the Adamas Mill in 1964. It originally produced board for the motor industry and subsequently uncoated writing and printing papers with a significant percentage of recycled fibre.

Commenting on the decision, Alex Thiel, CEO of Sappi Southern Africa said, "We fully recognise and commend the enormous past and ongoing efforts that employees and mill management have undertaken to reduce costs and improve profitability. However the Mill's size, technical age and high costs of energy and fibre have made it necessary to initiate a review. A final decision will only be made once the consultation process is completed towards the end of July."

The potential closure of Adamas Mill would have no impact on customers as production will be moved to Sappi's Enstra and Tugela Mills.

Sappi will maintain its presence in the Eastern Cape as regards marketing and sales as well as the collection and purchase of collected fibre (used for recycled paper) through Sappi ReFibre.

Forestry investment

Furthermore Sappi, in partnership with AsgiSA-EC have developed a joint proposal with a strategic goal of accelerating the establishment and management of 30,000ha of commercial tree plantations by 2020 in the Eastern Cape. This development is expected to create a number of permanent skilled and unskilled jobs. Sappi and AsgiSA-EC have already developed close to 150ha in conjunction with the Mkambathi and Sinawo communities.