Sappi’s Paper Gains

Sappi Limited (JSE: SAP) unveiled its 2023 year-end results on a pivotal Thursday, setting off a remarkable 5% surge in its share price at market open. This past year proved to be a true test for the company, marked by the formidable presence of ongoing geopolitical tensions, the shadow of sluggish global economic growth, relentless waves of surging interest rates, and a somewhat sluggish Chinese economy, all casting a shadow over the market for its sought-after products. 

Moreover, the company confronted the additional hurdle of customers gradually depleting their stockpiled inventories from the latter part of the preceding year, further intensifying the already intricate trading landscape. In the face of these formidable challenges, Sappi resolved to maintain its selling prices and initiated a series of cost-saving measures across its operations. These strategic moves paid off, yielding an impressive EBITDA, excluding special items, totalling $731 million for the year. 

In terms of revenue, the company reported $5.81 billion, a dip from the previous year’s $7.29 billion, while the operating profit stood at $432 million, a marked decline from the $1.04 billion recorded the year before. Though these figures might appear subdued at first glance, they belie the true resilience of Sappi’s operations in the face of an exceedingly demanding economic environment. 


On the 1D chart, an ascending channel breakdown found support at a demand zone around R38.78 before pivoting onto its impressive advance in the Thursday session. Now, testing the resistance from the 50-SMA (blue line) at R41.77, there could be a momentum shift in the directional price action for the stock. 

A sustainable break above the 50-SMA and the 25-SMA (green line) at R42.17 could see the stock price soar toward resistance at R42.61. A change in polarity could then see the multiple SMAs acting as support to the bullish cause, with higher resistance at R44.20 and R45.96, then coming into the equation in the longer term. 

However, should the price fail to move above the 50-SMA, the initial rally could fade in the Thursday session, with the first level of support established at R40.57, the 61.8% Fibonacci golden ratio. If this level fails to contain the bearish counterattack, the prior demand zone at R38.78 could be crucial once more in preventing a sustainable bearish run toward R37.32 and R36.29. 


An impressive 5% run in the share price of Sappi Limited followed its earnings report, but the price seems to be losing steam at the 50-SMA resistance at R41.77. If the price fails to clear this hurdle, there could be a retreat toward support at R40.57 in the Thursday session.  

Sources: Sappi Limited, Tradingview 

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst 

Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.