CFOs reveal how they are navigating the supply-chain disruptions brought on by crises.
Pramy Moodley, Sappi’s Southern Africa CFO, knows all too well what it’s like to experience a major disruption – from both a supply-chain and personal perspective. She was in KwaZulu-Natal during the July 2021 civil unrest, and as CFO for a global paper and pulp provider, she had to navigate the fallout on multiple fronts.
According to Pramy, the civil unrest brought Sappi’s operations in KwaZulu-Natal to a standstill, and the supply chain was negatively impacted. “Fortunately, we didn’t suffer physical damage to our property or forests, but we lost a substantial amount of money due to our three mills having to shut down for employee safety; from a personal experience, it’s something I don’t want to re-live.”
As Sappi’s Southern Africa CFO, Pramy had to think on her feet – not only from a profitability perspective, but also from a working capital and cash flow aspect. She had to model the impact through collaboration with procurement, supply chain, manufacturing, and forestry teams. “The fact that we had various teams managing the process meant that we had sufficient stock in the pipeline for our customers, and we sourced raw materials from various suppliers to ensure that our manufacturing plants continued to operate,” says Pramy.
To throw a spanner in the proverbial works, the Durban Port was subsequently hit by a cyber-attack, and only refrigerated stock was allowed through – not paper or dissolving pulp – as it wasn’t considered critical stock.
According to Sappi’s FY22 Q2 results for the period ended March 2022, the flooding in KwaZulu-Natal caused another temporary halt in production. The results caution that although Durban’s port officially resumed operations, export deliveries could be negatively impacted for some time due to damaged access roads, congestion, and limited availability of vessel space. “We anticipate that there will be no material impact on EBITDA for the year. However, after external insurance proceeds, the estimated net loss of approximately US$28 million will be reflected as a special item expense in the third quarter,” reads the Q2 results.
After the floods, Pramy notes that Sappi reviewed the supply-chain process and optimised the existing shipping options to ensure the continuous supply of product to its customers.
According to the FY22 Q2 results, demand for a Sappi product, Sappi Verve, remained robust, and along with improved conditions at the Durban port and the use of the regular breakbulk vessel, resulted in a nine percent quarter-on-quarter increase in sales volumes.
This special feature was originally published in the second edition of the 2022 CFO South Africa magazine.
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