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SAP
SAVVI
SAP - Sappi limited - Results for the third quarter and nine months ended
June 2007
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN Code: ZAE000006284
3rd
quarter results and nine months
ended June 2007
financial highlights
- EPS 23 US cents
- Strong Forest Products performance
- European price realisation disappointing
- Input cost pressure
- Underlying operating profit improvement continues
summary
Quarter Nine months
ended ended
June March June June June
2007 2007 2006 2007 2006
Sales (US$ million) 1,297 1,318 1,214 3,882 3,645
Operating profit
(US$ million) 87 117 (34) 296 74
Operating profit to
sales (%) 6.7 8.9 (2.8) 7.6 2.0
EBITDA**
(US$ million) * 182 211 62 580 366
EBITDA** to
sales (%) * 14.0 16.0 5.1 14.9 10.0
Operating profit to
average net assets (%) 8.6 11.7 (3.4) 9.9 2.4
EPS (US cents) 23 25 (23) 62 (19)
Return on average
equity (ROE) (%) * 13.6 15.7 (14.6) 12.4 (4.0)
Net debt
(US$ million) * 2,313 2,236 2,222 2,313 2,222
Net debt to total
capitalisation (%) * 46.1 46.2 47.4 46.1 47.4
*Refer to Supplemental Information, for the definition of the term.
**Refer to additional information in Supplemental Information for the
reconciliation of EBITDA to profit.
comment
The performance of the business improved significantly in the quarter
compared to a year earlier in a quarter which is usually slower than our
second and fourth fiscal quarters. Pulp prices strengthened further,
supporting the strong performance of our Forest Products business. We did
not realise the full benefit of the higher coated fine paper prices in
Europe partly as a result of an increase in the volume we exported from
Europe. The North American business had a further recovery in margin for
the quarter.
Group sales for the quarter were US$1.3 billion, a 7% increase compared to
a year earlier with improvements from each of the regions.
As a result of storm damage, wood prices in Europe were lower than the
previous quarter. Other raw material input costs and energy costs remained
high during the quarter. Our efforts to offset these high input costs
through process and product innovation has helped reduce the impact on our
unit costs.
Operating profit for the quarter was US$87 million, compared to a loss of
US$34 million a year ago. Our operating profit margin was 6.7% in the
quarter compared to a loss last year and improved on the previous quarter
(excluding the Nash sale in the previous quarter). Tight control of fixed
manufacturing costs and Selling, General and Administration costs and
better pricing contributed to this improvement.
We reported a plantation fair value gain of US$15 million before tax in the
quarter (last year a loss of US$23 million) as a result of an increase in
wood prices, which was partly offset by increased costs to delivery of the
wood to market following fuel price increases.
During the quarter plantation fires exacerbated by severe weather
conditions destroyed large tracts of timber land in South Africa and
approximately 5,000 hectares of timber in our Southern African plantations.
We recorded an after insurance charge of US$7 million before tax for this
damage during the quarter.
A charge of US$2 million before tax was taken for damage caused by flooding
at Westbrook Mill, USA.
Net finance costs were US$37 million, up US$2 million from a year ago. Net
interest paid increased as a result of higher interest rates and debt
levels and an unfavourable change in the value of financial instruments,
partly offset by the capitalisation of interest in respect of the Saiccor
expansion project and favourable foreign exchange gains.
The effective tax rate has reduced as a result of the reduction of deferred
tax liabilities by US$14 million following the German tax rate reduction
from 38% to 30%.
Earnings per share for the quarter was 23 US cents compared to a loss of 23
US cents a year ago.
cash flow and debt
Cash generated by operations improved to US$177 million for the quarter, an
increase of US$110 million compared to a year ago. Working capital
increased US$36 million during the quarter compared to a reduction in
working capital of US$16 million during the equivalent quarter last year.
We expect a reduction in working capital during the fourth quarter. Other
items impacting cash flow in the quarter were the US Dollar bonds bi-annual
interest payment of US$26 million, pension fund payments of US$34 million
and a German tax settlement payment of US$15 million.
Capital expenditure of US$116 million was US$40 million higher than the
previous quarter, as a result of increased capital expenditure on the
Saiccor expansion project. We remain confident we will be able to finance
the Saiccor project from internal cash flow and therefore expect to end the
year with a similar level of debt as at September 2006, excluding the
impact of currency movements.
Net debt at the end of June 2007 was US$2.3 billion and net debt to total
capitalisation was 46.1% compared to 46.2% in March.
operating review for the quarter
Sappi Fine Paper
Quarter Quarter
ended ended
June 2007 June 2006 % March 2007
US$ million US$ million change US$ million
Sales 1,037 968 7.1 1,057
Operating profit (loss) 25 (18) - 49
Operating profit
(loss) to sales (%) 2.4 (1.9) - 4.6
EBITDA 100 62 61.3 122
EBITDA to sales (%) 9.6 6.4 - 11.5
RONOA pa (%) 3.2 (2.3) - 6.3
Sales volumes increased by 4% compared to a year ago. In Dollar terms
prices increased significantly as a result of the relatively weak US
Dollar. In local currency terms average prices realised in the quarter were
slightly down compared to last year`s level in Europe and North America.
Margins continued to improve compared to both a year ago and the previous
quarter (excluding the Nash sale in the previous quarter).
Europe
Quarter Quarter
ended ended % %
June 2007 June 2006 change change March 2007
US$ million US$ million (US$) (Euro) US$ million
Sales 584 536 9.0 1.5 597
Operating profit 14 1 - - 44
Operating profit
to sales (%) 2.4 0.2 - - 7.4
EBITDA 57 47 21.3 12.9 88
EBITDA to
sales (%) 9.8 8.8 - - 14.7
RONOA pa (%) 2.9 0.2 - - 9.4
Sales volumes improved 4% year on year. Our geographic sales mix changed
with a greater proportion of sales to overseas markets and reflected a loss
of market share in the European markets.
Average prices realised were affected by the change in geographic mix.
Within Western Europe we achieved higher coated fine paper prices during
the quarter, but towards the end of the quarter prices started to erode.
The European cost reduction programme is progressing well with the
reductions helping to offset the high wood and pulp prices.
North America
Quarter Quarter
ended ended
June 2007 June 2006 % March 2007
US$ million US$ million change US$ million
Sales 362 354 2.3 371
Operating profit (loss) 8 (14) - 3
Operating profit (loss)
to sales (%) 2.2 (4.0) - 0.8
EBITDA 36 16 125.0 29
EBITDA to sales (%) 9.9 4.5 - 7.8
RONOA pa (%) 3.0 (4.9) - 1.1
Apparent consumption in North America for the quarter shows a decline of
13% compared to a year ago largely as a result of reduced imports.
Shipments from local suppliers were about 2% lower.
Our sales volume increased 3% including strong pulp sales in the quarter
compared to a year ago. Average paper prices realised were marginally lower
than a year ago mainly as a result of product mix and slower demand, but
pulp prices were substantially higher.
The operating profit margin has continued to recover as a result of
improved operating efficiency, but is still far from an acceptable level.
Further plans to improve margins through process and product innovation are
being implemented.
Some price increases were realised on certain grades of coated fine paper
and pulp during the quarter. Further general coated fine paper price
increases have been announced for July.
South Africa
Quarter Quarter
ended ended % %
June 2007 June 2006 change change March 2007
US$ million US$ million (US$) (Rand) US$ million
Sales 91 78 16.7 28.3 89
Operating profit
(loss) 3 (5) - - 2
Operating profit
(loss) to
sales (%) 3.3 (6.4) - - 2.2
EBITDA 7 (1) - - 5
EBITDA to
sales (%) 7.7 (1.3) - - 5.6
RONOA pa (%) 7.8 (11.9) - - 4.9
The business had a strong sales performance in the quarter. Margins
improved slightly but remain under pressure from the high cost of pulp
purchases.
Forest Products
Quarter Quarter
ended ended % %
June 2007 June 2006 change change March 2007
US$ million US$ million (US$) (Rand) US$ million
Sales 260 246 5.7 16.2 261
Operating profit
(loss) 65 (16) - - 69
Operating profit
(loss) to
sales (%) 25.0 (6.5) - - 26.4
EBITDA 84 - - - 90
EBITDA to
sales (%) 32.3 - - - 34.5
RONOA pa (%) 17.3 (4.7) - - 18.9
Plantation
fair value
gain (loss) 15 (23) - -
12
The sales volume of pulp and paper was 3% below a year ago mainly as a
result of a major maintenance shut at Usutu. Prices were strong and sales
increased 5% in Dollar terms.
Global demand for pulp, including chemical cellulose and unbleached pulp,
was strong. Demand in the South African economy remains strong for our
containerboard and newsprint.
The result for the quarter included the plantation fair value gain of US$15
million. In the equivalent quarter last year a loss of US$23 million was
recorded.
The Saiccor expansion project is progressing well. The expected start-up
date for the expansion is May 2008.
directors
Ralph Boettger was appointed to the board as Chief Executive Officer of
Sappi Limited from July 2007. He has completed a brief hand over period and
will take executive responsibility for the group after this results
announcement.
Wolfgang Pfarl retired as a non-executive director in June 2007 following
his retirement as Chief Executive Officer of Sappi Fine Paper Europe at the
end of March 2007.
post balance sheet event
During the weekend of 27 July to 29 July 2007 fires destroyed further large
tracts of timber land in South Africa and Swaziland. The extent of the fire
damage to our plantations is being determined and could be of a similar
magnitude to the previous quarter`s fire, which destroyed approximately 2%
our plantations.
outlook
We see good demand for our products on a global basis and an improving
supply demand balance in our major markets.
The preliminary introduction of countervailing and anti-dumping duties in
the USA against certain Asian importers last quarter is likely to alter the
trade flows and to provide some support for improved price levels in the
USA.
The extent of our price increases in Europe has not met our initial
expectation and still does not compensate for the increases in input costs;
however, the end of the downward pricing trend and the continued growth of
demand provide the opportunity for further coated fine paper increases.
Most of the industry has announced coated fine paper price increases for
September.
We expect the trend of improving underlying earnings to continue next
quarter.
On behalf of the Board
E van As M R Thompson
Director Director 06 August 2007
forward-looking statements
Certain statements in this release that are neither reported financial
results nor other historical information, are forward-looking statements,
including but not limited to statements that are predictions of or indicate
future earnings, savings, synergies, events, trends, plans or objectives.
Undue reliance should not be placed on such statements because, by their
nature, they are subject to known and unknown risks and uncertainties and
can be affected by other factors, that could cause actual results and
company plans and objectives to differ materially from those expressed or
implied in the forward-looking statements (or from past results). Such
risks, uncertainties and factors include, but are not limited to the highly
cyclical nature of the pulp and paper industry (and the factors that
contribute to such cyclicality, such as levels of demand, production
capacity, production, input costs including raw material, energy and
employee costs, and pricing), adverse changes in the markets for the
group`s products, consequences of substantial leverage, changing regulatory
requirements, unanticipated production disruptions, economic and political
conditions in international markets, the impact of investments,
acquisitions and dispositions (including related financing), any delays,
unexpected costs or other problems experienced with integrating
acquisitions and achieving expected savings and synergies and currency
fluctuations. The company undertakes no obligation to publicly update or
revise any of these forward-looking statements, whether to reflect new
information or future events or circumstances or otherwise.
financial results
for the quarter and nine months ended June 2007
group income statement
Quarter Quarter
ended ended
June 2007 June 2006 %
US$ million US$ million change
Sales 1,297 1,214 6.8
Cost of sales 1,116 1,142
Gross profit 181 72 151.4
Selling, general and
administrative expenses 87 98
Share of (profit) loss from
associates and joint ventures (2) -
Other operating
expenses (income) 9 8
Operating profit (loss) 87 (34) -
Net finance costs 37 35
Net paid 39 35
Capitalised (4) -
Net foreign exchange gains (3) (1)
Change in fair value
of financial instruments 5 1
Profit (loss) before tax 50 (69) -
Taxation - current 17 1
- deferred (20) (17)
Profit (loss) for the period 53 (53) -
Basic earnings (loss)
per share (US cents) 23 (23)
Weighted average
number of shares
in issue (millions) 227.9 226.3
Diluted earnings (loss)
per share (US cents) 23 (23)
Weighted average
number of shares
on fully diluted
basis (millions) 231.4 228.4
Nine months Nine months
ended ended
June 2007 June 2006 %
US$ million US$ million change
Sales 3,882 3,645 6.5
Cost of sales 3,349 3,282
Gross profit 533 363 46.8
Selling, general and
administrative expenses 268 268
Share of (profit) loss from
associates and joint ventures (6) 1
Other operating
expenses (income) (25) 20
Operating profit (loss) 296 74 300.0
Net finance costs 107 93
Net paid 112 100
Capitalised (8) (1)
Net foreign exchange gains (9) (5)
Change in fair value
of financial instruments 12 (1)
Profit (loss) before tax 189 (19) -
Taxation - current 32 16
- deferred 16 9
Profit (loss) for the period 141 (44) -
Basic earnings (loss)
per share (US cents) 62 (19)
Weighted average
number of shares
in issue (millions) 227.5 226.1
Diluted earnings (loss)
per share (US cents) 61 (19)
Weighted average
number of shares
on fully diluted
basis (millions) 230.4 227.9
group balance sheet
June 2007 Sept 2006
US$ million US$ million
ASSETS
Non-current assets 4,424 3,997
Property, plant and equipment 3,352 3,129
Plantations 628 520
Deferred taxation 57 74
Other non-current assets 387 274
Current assets 1,559 1,500
Inventories 772 699
Trade and other receivables 600 577
Cash and cash equivalents 187 224
Assets held for sale - 20
Total assets 5,983 5,517
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 1,635 1,386
Non-current liabilities 2,505 2,465
Interest-bearing borrowings 1,623 1,634
Deferred taxation 370 336
Other non-current liabilities 512 495
Current liabilities 1,843 1,666
Interest-bearing borrowings 854 694
Bank overdraft 23 9
Other current liabilities 842 862
Taxation payable 124 101
Total equity and liabilities 5,983 5,517
Number of shares in issue at balance sheet date
(millions) 228.5 227.0
group cash flow statement
Quarter Quarter
ended ended
June 2007 June 2006
US$ million US$ million
Operating profit (loss) 87 (34)
Depreciation, fellings and other amortisation 113 116
Other non-cash items (including impairment
charges) (23) (15)
Cash generated by operations 177 67
Movement in working capital (36) 16
Net finance costs (42) (48)
Taxation paid (15) -
Dividends paid * - -
Cash retained from operating activities 84 35
Cash effects of investing activities (154) (94)
(70) (59)
Cash effects of financing activities 19 31
Net movement in cash and cash equivalents (51) (28)
* Dividend number 83: 30 US cents per share
(2006: 30 US cents per share)
Nine months Nine months
ended ended
June 2007 June 2006
US$ million US$ million
Operating profit (loss) 296 74
Depreciation, fellings and other amortisation 336 347
Other non-cash items (including impairment
charges) (128) (115)
Cash generated by operations 504 306
Movement in working capital (80) (97)
Net finance costs (110) (116)
Taxation paid (18) (12)
Dividends paid * (68) (68)
Cash retained from operating activities 228 13
Cash effects of investing activities (345) (246)
(117) (233)
Cash effects of financing activities 74 34
Net movement in cash and cash equivalents (43) (199)
* Dividend number 83: 30 US cents per share
(2006: 30 US cents per share)
group statement of recognised income and expense
Quarter Quarter
ended ended
June 2007 June 2006
US$ million US$ million
Pension fund asset recognised
(not recognised) 48 (2)
Actuarial losses on pension and
other post employment benefit liabilities - (5)
Deferred taxation on above items (13) -
Valuation allowance against deferred
tax asset and actuarial losses recognised - -
Exchange differences on translation of
foreign operations 45 (142)
Net income (expense) recorded directly
in equity 80 (149)
Profit (loss) for the period 53 (53)
Total recognised income (expense) for
the period 133 (202)
Nine months Nine months
ended ended
June 2007 June 2006
US$ million US$ million
Pension fund asset recognised
(not recognised) 44 (6)
Actuarial losses on pension and
other post employment benefit liabilities - (5)
Deferred taxation on above items (14) 1
Valuation allowance against deferred
tax asset and actuarial losses recognised 5 -
Exchange differences on translation of
foreign operations 123 (122)
Net income (expense) recorded directly
in equity 158 (132)
Profit (loss) for the period 141 (44)
Total recognised income (expense) for
the period 299 (176)
notes to the group results
1. Basis of preparation
The condensed financial statements have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting. The
accounting policies and methods of computation used in the preparation of
the results are consistent, in all material respects, with those used in
the annual financial statements for September 2006 which are compliant with
the English language version of International Financial Reporting Standards
(IFRS) as published by the International Accounting Standards Board.
These results are unaudited.
2. Reconciliation of movement in shareholders` equity
Nine months Nine months
ended ended
June 2007 June 2006
US$ million US$ million
Balance - beginning of year 1,386 1,589
Total recognised income (expense) for the period 299 (176)
Dividends paid (68) (68)
Transfers to participants of the share purchase
trust 14 2
Share Based Payment Reserve 4 7
Balance - end of period 1,635 1,354
Quarter Quarter
ended ended
June 2007 June 2006
US$ million US$ million
3. Operating profit
Included in operating profit are
the following non-cash items:
Depreciation and amortisation
Depreciation of property,
plant and equipment 95 96
Other amortisation - -
95 96
Fair value adjustment on plantations
(included in cost of sales)
Changes in volume
Fellings 18 20
Growth (22) (21)
(4) (1)
Changes in fair value (15) 23
(19) 22
Included in other operating expenses
(income) are the following:
Asset impairments - 2
Restructuring provision (released) raised (1) -
Profit on sale of assets - -
Written off assets 1 7
Flood and fire damage 9 -
Nine months Nine months
ended ended
June 2007 June 2006
US$ million US$ million
3. Operating profit
Included in operating profit are
the following non-cash items:
Depreciation and amortisation
Depreciation of property,
plant and equipment 283 291
Other amortisation 1 1
284 292
Fair value adjustment on plantations
(included in cost of sales)
Changes in volume
Fellings 52 55
Growth (57) (56)
(5) (1)
Changes in fair value (56) (44)
(61) (45)
Included in other operating expenses
(income) are the following:
Asset impairments 1 8
Restructuring provision (released) raised (11) 3
Profit on sale of assets (25) (2)
Written off assets 1 7
Flood and fire damage 9 -
Quarter Quarter
ended ended
June 2007 June 2006
US$ million US$ million
4.Headline earnings (loss) per share
Headline earnings (loss) per share
(US cents) * 24 (20)
Weighted average number of shares
in issue (millions) 227.9 226.3
Diluted headline earnings (loss) per
share (US cents) * 23 (20)
Weighted average number of shares
on fully diluted basis (millions) 231.4 228.4
Calculation of Headline earnings
(loss) *
Profit (loss) for the period 53 (53)
Profit on disposal of business
and property,
plant and equipment (1) -
Write-off of assets 1 5
Impairment of property, plant and
equipment 1 3
Headline earnings (loss) 54 (45)
* Headline earnings disclosure is
required by the JSE Limited.
5. Capital expenditure
Property, plant and equipment 116 74
Nine months Nine months
ended ended
June 2007 June 2006
US$ million US$ million
4.Headline earnings (loss) per share
Headline earnings (loss) per share
(US cents) * 54 (14)
Weighted average number of shares
in issue (millions) 227.5 226.1
Diluted headline earnings (loss) per
share (US cents) * 53 (14)
Weighted average number of shares
on fully diluted basis (millions) 230.4 227.9
Calculation of Headline earnings
(loss) *
Profit (loss) for the period 141 (44)
Profit on disposal of business
and property,
plant and equipment (20) (2)
Write-off of assets 1 7
Impairment of property, plant and
equipment 1 8
Headline earnings (loss) 123 (31)
* Headline earnings disclosure is
required by the JSE Limited.
5. Capital expenditure
Property, plant and equipment 330 213
June 2007 Sept 2006
US$ million US$ million
6. Capital commitments
Contracted but not provided 241 294
Approved but not contracted 171 255
412 549
7. Contingent liabilities
Guarantees and suretyships 53 52
Other contingent liabilities 16 11
supplemental information
definitions
Average - averages are calculated as the sum of the opening and closing
balances for the relevant period divided by two
EBITDA - earnings before interest (net finance costs), tax, depreciation
and amortisation
EBITDA to sales - EBITDA divided by sales
Fellings - the amount charged against the income statement representing the
standing value of the plantations harvested
Headline earnings - as defined in circular 7/2002 issued by the South
African Institute of Chartered Accountants, separates from earnings all
items of a capital nature. It is not necessarily a measure of sustainable
earnings. It is a listing requirement of the JSE Limited to disclose
headline earnings per share
NBSK - Northern Bleached Softwood Kraft pulp. One of the main varieties of
market pulp, mainly produced from spruce trees in Scandinavia, Canada and
north eastern USA. The NBSK is a benchmark widely used in pulp and paper
industry for comparative purposes
Net assets - total assets less current liabilities
Net asset value - shareholders` equity plus net deferred tax
Net asset value per share - net asset value divided by the number of shares
in
issue at balance sheet date
Net debt - current and non-current interest-bearing borrowings, and bank
overdrafts (net of cash, cash equivalents and short-term deposits)
Net debt to total capitalisation - Net debt divided by shareholders` equity
plus minority interest, non-current liabilities, current interest-bearing
borrowings and overdraft
Net operating assets - Net operating assets are total assets (excluding
deferred taxation and cash) less current liabilities (excluding interest-
bearing borrowings and bank overdraft)
ROE - return on average equity. Profit for the period divided by average
shareholders` equity
RONA - operating profit divided by average net assets
RONOA - operating profit divided by average net operating assets
SG&A - selling, general and administrative expenses
The above financial measures are presented to assist our shareholders and
the investment community in interpreting our financial results. These
financial measures are regularly used and compared between companies in our
industry.
supplemental information
additional information
Quarter Quarter
ended ended
June 2007 June 2006
US$ million US$ million
Profit (loss) for the period to
EBITDA (1) reconciliation
Profit (loss) for the period 53 (53)
Net finance costs 37 35
Taxation - current 17 1
- deferred (20)
(17)
Depreciation 95 96
Amortisation - -
EBITDA (1) (2) 182 62
Nine months Nine months
ended ended
June 2007 June 2006
US$ million US$ million
Profit (loss) for the period to
EBITDA (1) reconciliation
Profit (loss) for the period 141 (44)
Net finance costs 107 93
Taxation - current 32 16
- deferred 16 9
Depreciation 283 291
Amortisation 1 1
EBITDA (1) (2) 580 366
June 2007 Sept 2006
US$ million US$ million
Net debt (US$ million) (3) 2,313 2,113
Net debt to total capitalisation (%) (3) 46.1 46.4
Net asset value per share (US$) (3) 8.53 7.26
(1) In connection with the U.S. Securities Exchange Commission ("SEC")
rules relating to "Conditions for Use of Non-GAAP Financial Measures", we
have reconciled EBITDA to net profit rather than operating profit. As a
result our definition retains non-trading profit/loss and minority interest
as part of EBITDA. EBITDA represents earnings before interest (net finance
costs), taxation, depreciation and amortisation. Net finance costs
includes: gross interest paid; interest received; interest capitalised; net
foreign exchange gains; and net fair value adjustments on interest rate
financial instruments. See the Group income statement for an explanation of
the computation of net finance costs. We use EBITDA as an internal measure
of performance to benchmark and compare performance, both between our own
operations and as against other companies. EBITDA is a measure used by the
group, together with measures of performance under IFRS and US GAAP, to
compare the relative performance of operations in planning, budgeting and
reviewing the performances of various businesses. We believe EBITDA is a
useful and commonly used measure of financial performance in addition to
net profit, operating profit and other profitability measures under IFRS or
US GAAP because it facilitates operating performance comparisons from
period to period and company to company. By eliminating potential
differences in results of operations between periods or companies caused by
factors such as depreciation and amortisation methods, historic cost and
age of assets, financing and capital structures and taxation positions or
regimes, we believe EBITDA can provide a useful additional basis for
comparing the current performance of the underlying operations being
evaluated. For these reasons, we believe EBITDA and similar measures are
regularly used by the investment community as a means of comparison of
companies in our industry. Different companies and analysts may calculate
EBITDA differently, so making comparisons among companies on this basis
should be done very carefully. EBITDA is not a measure of performance under
IFRS or US GAAP and should not be considered in isolation or construed as a
substitute for operating profit or net profit as an indicator of the
company`s operations in accordance with IFRS or US GAAP.
(2) The EBITDA calculation was amended at the beginning of the financial
year to eliminate the adjustment for fellings which previously resulted in
fellings being added back in the calculation as part of amortisation. Given
the current accounting treatment of plantations, management has concluded
that eliminating such an adjustment would be more appropriate in
determining the EBITDA performance measure in future both for internal and
reporting purposes. Prior year figures have been recalculated for
comparison purposes as follows: June 2006 quarter: decreased by US$20
million; June 2006 year to date: decreased by US$55 million.
(3) Refer to Supplemental Information for the definition of the term.
supplemental information
regional information
Quarter Quarter
ended ended
June 2007 June 2006
Metric tons Metric tons %
(000`s) (000`s) change
Sales volumes
Fine Paper - North America 360 349 3.2
Europe 599 576 4.0
Southern Africa 86 79 8.9
Total 1,045 1,004 4.1
Forest Products - Pulp and paper
operations 358 368 (2.7)
Forestry operations 259 394 (34.3)
Total 1,662 1,766 (5.9)
Nine months Nine months
ended ended
June 2007 June 2006
Metric tons Metric tons %
(000`s) (000`s) change
Sales volumes
Fine Paper - North America 1,108 1,058 4.7
Europe 1,860 1,824 2.0
Southern Africa 260 237 9.7
Total 3,228 3,119 3.5
Forest Products - Pulp and paper
operations 1,067 1,070 (0.3)
Forestry operations 788 1,142 (31.0)
Total 5,083 5,331 (4.7)
Quarter Quarter
ended ended
June 2007 June 2006 %
US$ million US$ million change
Sales
Fine Paper - North America 362 354 2.3
Europe 584 536 9.0
Southern Africa 91 78 16.7
Total 1,037 968 7.1
Forest Products - Pulp and paper
operations 242 224 8.0
Forestry operations 18 22 (18.2)
Total 1,297 1,214 6.8
Nine months Nine months
ended ended
June 2007 June 2006 %
US$ million US$ million change
Sales
Fine Paper - North America 1,107 1,066 3.8
Europe 1,768 1,625 8.8
Southern Africa 263 238 10.5
Total 3,138 2,929 7.1
Forest Products - Pulp and paper
operations 694 651 6.6
Forestry operations 50 65 (23.1)
Total 3,882 3,645 6.5
supplemental information
Quarter Quarter
ended ended
June 2007 June 2006 %
US$ million US$ million change
Operating profit
Fine Paper - North America 8 (14) -
Europe 14 1 -
Southern Africa 3 (5) -
Total 25 (18) -
Forest Products 65 (16) -
Corporate (3) - -
Total 87 (34) -
Earnings before interest, tax,
depreciation and amortisation
charges
Fine Paper - North America 36 16 125.0
Europe 57 47 21.3
Southern Africa 7 (1) -
Total 100 62 61.3
Forest Products 84 - -
Corporate (2) - -
Total 182 62 193.5
Net operating assets
Fine Paper - North America 1,061 1,134 (6.4)
Europe 1,947 1,900 2.5
Southern Africa 153 158 (3.2)
Total 3,161 3,192 (1.0)
Forest Products 1,572 1,246 26.2
Corporate and other 40 9 344.4
Total 4,773 4,447 7.3
Nine months Nine months
ended ended
June 2007 June 2006 %
US$ million US$ million change
Operating profit
Fine Paper - North America 13 (23) -
Europe 71 21 238.1
Southern Africa 6 (7) -
Total 90 (9) -
Forest Products 212 90 135.6
Corporate (6) (7) -
Total 296 74 300.0
Earnings before interest, tax,
depreciation and amortisation
charges
Fine Paper - North America 93 66 40.9
Europe 206 161 28.0
Southern Africa 17 5 240.0
Total 316 232 36.2
Forest Products 269 140 92.1
Corporate (5) (6) -
Total 580 366 58.5
Net operating assets
Fine Paper - North America 1,061 1,134 (6.4)
Europe 1,947 1,900 2.5
Southern Africa 153 158 (3.2)
Total 3,161 3,192 (1.0)
Forest Products 1,572 1,246 26.2
Corporate and other 40 9 344.4
Total 4,773 4,447 7.3
supplemental information
summary rand convenience translation
Quarter Quarter
ended ended
June June %
2007 2006 change
Sales (ZAR million) 9,221 7,849 17.5
Operating profit (loss) (ZAR million) 619 (220) -
Profit (loss) for the period (ZAR
million) 377 (343) -
EBITDA (ZAR million) * 1,294 401 222.7
Operating profit (loss) to sales (%) 6.7 (2.8)
EBITDA to sales (%) * 14.0 5.1
Operating profit (loss) to average
net assets (%) 8.5 (3.3)
EPS (SA cents) 164 (149) -
Net debt (ZAR million) * 16,282 15,932 2.2
Net debt to total capitalisation (%) * 46.1 47.4
Cash generated by operations
(ZAR million) 1,258 433 190.5
Cash retained from operating activities
(ZAR million) 597 226 164.2
Net movement in cash and
cash equivalents (ZAR million) (363) (181) -
Nine months Nine months
ended ended
June June %
2007 2006 change
Sales (ZAR million) 27,997 23,339 20.0
Operating profit (loss) (ZAR million) 2,135 474 350.4
Profit (loss) for the period (ZAR
million) 1,017 (282) -
EBITDA (ZAR million) * 4,183 2,344 78.5
Operating profit (loss) to sales (%) 7.6 2.0
EBITDA to sales (%) * 14.9 10.0
Operating profit (loss) to average
net assets (%) 9.6 2.3
EPS (SA cents) 447 (122) -
Net debt (ZAR million) * 16,282 15,932 2.2
Net debt to total capitalisation (%) * 46.1 47.4
Cash generated by operations
(ZAR million) 3,635 1,959 85.6
Cash retained from operating activities
(ZAR million) 1,644 83 1,880.7
Net movement in cash and
cash equivalents (ZAR million) (310) (1,274) -
* Refer to Supplemental Information for the definition of the term.
exchange rates
June March Dec
2007 2007 2006
Exchange rates:
Period end rate: US$1 = ZAR 7.0393 7.2650 7.0076
Average rate for the Quarter: US$1 = ZAR 7.1095 7.1532 7.3358
Average rate for the YTD: US$1 = ZAR 7.2121 7.2783 7.3358
Period end rate: EUR 1 = US$ 1.3542 1.3358 1.3199
Average rate for the Quarter: EUR 1 = US$ 1.3498 1.3160 1.2926
Average rate for the YTD: EUR 1 = US$ 1.3178 1.3021 1.2926
Sept June
2006 2006
Exchange rates:
Period end rate: US$1 = ZAR 7.7738 7.1700
Average rate for the Quarter: US$1 = ZAR 7.2475 6.4658
Average rate for the YTD: US$1 = ZAR 6.6039 6.4031
Period end rate: EUR 1 = US$ 1.2672 1.2789
Average rate for the Quarter: EUR 1 = US$ 1.2744 1.2570
Average rate for the YTD: EUR 1 = US$ 1.2315 1.2191
The financial results of entities with reporting currencies other than the
US
Dollar are translated into US Dollars as follows:
- Assets and liabilities at rates of exchange ruling at period end; and
- Income, expenditure and cash flow items at average exchange rates.
this report is available on the Sappi website www.sappi.com
Other interested parties can obtain printed copies of this report from:
South Africa: United States United Kingdom:
Computershare Investor ADR Depository: Capita Registrars
Services 2004 Limited The Bank of New York The Registry
70 Marshall Street Investor Relations 34 Beckenham Road
Johannesburg 2001 PO Box 11258 Beckenham, Kent
PO Box 61051 Church Street Station BR3 4TU, DX 91750
Marshalltown 2107 New York, NY 10286-1258 Beckenham West
Tel +27 (0)11 370 5000 Tel +1 610 382 7836 Tel +44 (0)208 639 2157
Date: 06/08/2007 09:00:37 Produced by the JSE SENS Department.
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