Feb 06, 2013. /Lesprom Network/. Sappi's 1Q operating profit excluding special items of $73 million was in line with our expectations given generally lower selling prices for pulp and paper. This compares to an operating profit excluding special items of $100 million in the equivalent quarter last year and $118 million in the quarter ended September 2012, as the company said in a press release received by Lesprom Network. Earnings per share for the 1Q was 3 US cents (including a charge of 1 US cent in respect of special items) compared with 9 US cents (including a gain of 2 US cents in respect of special items) in the equivalent quarter last year. Net cash utilised for the 1Q was $102 million, an improvement from the same quarter last year. Capital expenditure in the quarter increased to $97 million compared to $75 million a year ago, reflecting the continued expenditure on the dissolving wood pulp projects. Net debt of $2,095 million is down from $2,175 million in December 2011, but up from $1,979 million in the quarter ended September 2012 as a result of the seasonal increase in cash utilisation. Liquidity remains strong with cash on hand of $504 million and the Euro 350 million ($463 million) available from the undrawn committed revolving credit facility at quarter end. Commenting on the result, Sappi CEO Ralph Boettger said: "2013 is an important transitional year as specialised cellulose capacity is expanded. The group performance for the quarter was impacted by generally lower selling prices for pulp and paper. The North American business performed well as a result of higher coated paper sales volumes despite lower average sales prices. Conversely, we experienced a slightly weaker than expected performance in our Southern African and European businesses. “While Europe remains challenging and conditions worsened during the quarter, Sappi's operating and sales achievements were ahead of the market. Lower pricing across all graphic paper grades led to lower profitability for the European paper business. In South Africa, the impact of lower dissolving wood pulp prices compared to the equivalent quarter in the prior year combined with the three-week road transport strike negatively affected the result, however volume and pricing momentum picked up towards the end of the quarter. "This financial year is an important transitional year for the group as we consolidate the three pillars of our strategy, more specifically as we expand our Specialised Cellulose business, continue to optimise our paper businesses and deleverage our balance sheet. The conversion projects at the Ngodwana and the Cloquet Mills are on schedule for start-up in the 3Q of the year. "Given prevailing market conditions, we expect the second quarter operating profit excluding special items to be below that of the first quarter. This is due in large part to the extended planned maintenance shut at our Ngodwana Mill for the Specialised Cellulose conversion project as well as continued challenging market conditions in particular in the European paper business. We expect the operating profit in the second half of the financial year to be stronger than in the first half." Sappi is a global company focused on providing chemical cellulose, paper-pulp and paper based solutions to its direct and indirect customer base across more than 100 countries.