| Mon 9 Nov 2009, 8:55 | | SAP - Sappi limited - Results for the 4th quarter and year ended September 2009 |
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SAP
SAVVI
SAP - Sappi limited - Results for the 4th quarter and year ended September 2009
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ZAE000006284
Results for the 4th quarter and year ended September 2009
Financial Summary for the quarter
Net cash generated US$225 million
Refinancing completed; improved liquidity and extended maturities
Saiccor Mill ramp up near full capacity at quarter-end
Stronger Rand impacted SA business unfavourably
Return to operating profit excluding special items
Basic loss per share 20 US cents (unfavourably impacted by 18 US cents
special items)
Acquisition synergies exceeded target
Quarter-ended
Sept 2009 June 2009 Sept 2008
Key figures: (US$ million)
Sales 1,553 1,316 1,519
Operating (loss) profit (129) (7) 25
Special items - losses (gains) * 167 (6) 64
Operating profit (loss) excluding
special items 38 (13) 89
EBITDA excluding special items ** 150 93 180
Basic (loss) earnings per share
(US cents) *** (20) (12) (9)
Net debt **** 2,576 2,770 2,405
Key ratios: (%)
Operating (loss) profit to sales (8.3) (0.5) 1.6
Operating profit (loss) excluding
special items to sales 2.4 (1.0) 5.9
Operating profit (loss) excluding
special items to Capital
Employed (ROCE) ** 3.3 (1.1) 8.5
EBITDA excluding special
items to sales 9.7 7.1 11.8
Return on average equity (ROE) **** (21.4) (12.7) (7.8)
Net debt to total
capitalisation **** 58.9 57.5 60.0
Year-ended
Sept 2009 Sept 2008
Key figures: (US$ million)
Sales 5,369 5,863
Operating (loss) profit (73) 314
Special items - losses (gains) * 106 52
Operating profit (loss) excluding special items 33 366
EBITDA excluding special items ** 431 740
Basic (loss) earnings per share (US cents) *** (37) 28
Net debt **** 2,576 2,405
Key ratios: (%)
Operating (loss) profit to sales (1.4) 5.4
Operating profit (loss) excluding special items to
sales 0.6 6.2
Operating profit (loss) excluding special
items to Capital Employed (ROCE) ** 0.8 9.1
EBITDA excluding special items to sales 8.0 12.6
Return on average equity (ROE) **** (10.4) 6.0
Net debt to total capitalisation **** 58.9 60.0
* Refer to details on special items.
** Refer to Supplemental Information for the reconciliation of
EBITDA excluding special items to (loss) profit for the period.
*** Comparative figures have been revised in accordance with IAS 33 to reflect
the impact of the rights offer.
**** Refer to Supplemental Information for the definition of the term.
The table above has not been audited or reviewed.
Cash flow for the group was strong for the quarter with net cash generated of
US$225 million.
As economic conditions remained weak in our major markets we have taken
decisive action in all our businesses, resulting in a return to operating
profit excluding special items in our North American and European businesses in
the quarter and progress towards a return to operating profit excluding special
items in Southern Africa. The group met its expectation of a return to
operating profit excluding special items for the quarter.
Demand levels for coated paper improved compared to the second and third
financial quarters but remained very depressed compared to a year earlier.
Pulp markets continued to strengthen during the quarter and by quarter-end NBSK
prices had increased to approximately US$720 per ton from a low of US$577 in
March 2009.
Sales for the group were only 2% above the equivalent quarter last year despite
our significantly larger business following the European acquisition completed
in December 2008 (the Acquisition). There was, however, an 18% improvement
compared to the June quarter, primarily as a result of seasonality, the ramp up
of chemical cellulose sales following the expansion of Saiccor mill and
improved demand as inventory reduction in the supply chain slowed.
Prices for coated woodfree paper remained under pressure in Europe and North
America but stabilised later in the quarter. Prices in most other regions, to
which we export, improved during the quarter.
We continued to curtail production in all regions during the quarter to match
supply to demand. In addition, we announced the permanent cessation of
operations at Muskegon Mill which had been suspended since March 2009.
Lower prices for wood, chemicals and energy resulted in cost reductions of
US$30 million and US$12 million compared to the equivalent quarter last year
and the quarter-ended June 2009 respectively. In addition, our actions resulted
in
efficiency gains in the usage of raw materials of approximately US$45 million
compared to the equivalent quarter last year.
We took further steps to manage fixed costs including commencing discussions
with labour representatives at three South African mills about a possible
reduction of up to 300 positions. Since quarter end we have announced the
possible cessation of production at Kangas Mill in Finland and the intended
closure of Usutu Pulp Mill in Swaziland. Last month our North American business
took further action, impacting approximately 40 salaried positions, to reduce
operating costs.
The integration of the Acquisition progressed well. Achievement of synergies
to September 2009 was EURO 73 million (annualised rate of EURO 97 million),
which exceeded our nine month target of EURO 60 million, and we remain on
track to achieve the previously announced EURO 120 million of annual synergies
within 3 years.
Special items for the quarter amounted to US$167 million. They include an
unfavourable plantation fair value adjustment of US$111 million (arising from a
reduction in wood prices and an increase in wood delivery costs), charges in
respect of the closure of Muskegon Mill of US$23 million, and a US$74 million
impairment of the mechanical coated paper business unit in Europe to take
account of weak market conditions. These were partly offset by North American
alternative fuel tax credits earned of US$50 million. Although the plantation
fair value adjustment for the quarter was unfavourable, since adoption of fair
value accounting for forests in 2004 as required by IFRS, the net effect of the
plantation fair value price adjustment has been an increase in the value of our
plantations by US$273 million.
Operating profit excluding special items was US$38 million compared to US$89
million in the equivalent quarter last year. This represents a significant
turnaround from the previous quarter`s operating loss excluding special items
of US$13 million. The North American and European businesses, which had
improved volumes and lower costs, were key to the turnaround. The Southern
African businesses recorded a loss as a result of weak domestic demand, a
stronger Rand/US Dollar exchange rate which resulted in both lower export
revenue and downward pressure on domestic prices as a result of increased
competition from imports. In addition, operations were interrupted for two
weeks, particularly at the Saiccor Mill, as a result of an industry-wide strike
over wages.
After the mostly non-cash special items, the operating loss for the quarter was
US$129 million compared to a profit of US$25 million in the equivalent quarter
last year.
Net finance costs for the quarter were US$14 million. This is not reflective of
ongoing finance costs as it includes a US$41 million income resulting from the
discount at which certain debt was redeemed.
Taxation for the quarter was a credit of US$40 million, mainly deferred tax,
representing an effective tax rate of 28%.
EPS for the quarter was a loss of 20 US cents (including a loss of 18 US cents
of special items including financing items) compared to a loss of 9 US cents in
the equivalent quarter last year (including a loss of 23 US cents of special
items).
Year-ended September 2009 compared to year-ended September 2008
Sales for the year were 8% lower than the prior year mainly as a result of the
sharp fall off in demand and lower prices for pulp, partly offset by our
increased market position in Europe subsequent to the Acquisition earlier this
year.
Operating profit excluding special items was US$33 million for the year
compared to US$366 million last year.
Special items of US$106 million mainly comprised restructuring charges in
respect of Muskegon Mill (US$31 million), impairment of the coated mechanical
business unit in Europe (US$74 million) and plantation fair value adjustments
(US$67 million), partly offset by alternative fuel tax credits (US$87 million).
EPS for the year was a loss of 37 US cents (including a loss of 13 US cents of
unfavourable special items including financing items) compared with last year`s
earnings of 28 US cents (including a loss of 23 US cents of special items).
Refinancing update
During the quarter the proceeds of the US$800 million of senior notes due in
2014 were released from escrow and we completed the refinancing of the EURO 400
million OeKB loan with a 5 year amortising maturity and we repaid in full all
amounts outstanding under our previous revolving credit facility (RCF) and
replaced it with a new RCF in an amount of EURO 209 million, all of which
remains undrawn. We repaid all of the EURO 220 million VLNs at a discount of
approximately EURO 30 million (US$41 million) which reduced net finance costs
correspondingly for the quarter.
Following the refinancing the group has good liquidity with cash exceeding the
amount of short term debt and the undrawn RCF and has no major debt maturities
before the US$500 million 2012 bonds.
Cash flow and debt
Net cash generated of US$225 million for the quarter reflected improved cash
generated by operations including US$65 million of alternative fuel tax credits
collected in North America, cash released from working capital reduction of
US$127 million partly offset by finance costs of US$27 million and capital
expenditure of US$35 million.
Net debt was US$2,576 million, a reduction of US$194 million over the quarter
as a result of cash generated and the discount related to the repurchase of the
VLNs partly offset by capitalisation of refinancing fees and unfavourable
currency translation (strengthening of Euro and Rand to the US Dollar).
Over the financial year net debt increased US$171 million. Debt incurred for
the Acquisition was US$317 million which was largely matched by cash generated
by the business of US$289 million for the year. Capital expenditure for the
year was US$175 million compared to US$505 million in the previous year which
included part of the Saiccor mill expansion.
Operating review for the quarter
Sappi Fine Paper
Quarter- Quarter-
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Sales 1,300 1,222
Operating (loss) profit (1) (80)
Operating (loss) profit to sales (%) (0.1) (6.5)
Special items - losses (gains) 50 124
Operating profit (loss) excluding special items 49 44
Operating profit (loss) excluding special items
to sales (%) 3.8 3.6
EBITDA excluding special items 140 118
EBITDA excluding special items to sales (%) 10.8 9.7
RONOA p.a. (%) 5.4 5.6
Quarter-
ended
% change June 2009
(US$) US$ million
Sales 6.4 1,098
Operating (loss) profit - 19
Operating (loss) profit to sales (%) - 1.7
Special items - losses (gains) - (32)
Operating profit (loss) excluding special items 11.4 (13)
Operating profit (loss) excluding special items
to sales (%) - (1.2)
EBITDA excluding special items 18.6 74
EBITDA excluding special items to sales (%) - 6.7
RONOA p.a. (%) - (1.4)
The Fine Paper business achieved an operating profit excluding special items of
US$49 million for the quarter, an 11% improvement on the equivalent quarter
last year with both the North American and European businesses improving their
performance compared to a year earlier. Although the Southern African fine
paper business improved its result compared to the prior quarter, it reported a
loss excluding special items.
Europe
Quarter- Quarter-
ended ended
Sept 2009 Sept 2008 % change
US$ million US$ million (US$)
Sales 868 680 27.6
Operating loss (59) (111) -
Operating loss to sales (%) (6.8) (16.3) -
Special items - losses 75 123 -
Operating profit excluding
special items 16 12 33.3
Operating profit excluding special
items to sales (%) 1.8 1.8 -
EBITDA excluding special items 80 57 40.4
EBITDA excluding special items to
sales (%) 9.2 8.4 -
RONOA p.a. (%) 2.7 2.5 -
Quarter-
ended
% change June 2009
(Euro) US$ million
Sales 35.7 729
Operating loss - 0
Operating loss to sales (%) - 0
Special items - losses - 4
Operating profit excluding special items 39.6 4
Operating profit excluding special items
to sales (%) - 0.5
EBITDA excluding special items 49.6 62
EBITDA excluding special items to sales (%) - 8.5
RONOA p.a. (%) - 0.7
European industry shipments of coated woodfree paper and coated mechanical
paper were 19% and 16% below the equivalent quarter last year respectively.
This is a significant improvement on the first calendar half year, when
shipments of both were 26% below the first half of last year, largely as a
result of stabilisation of end-use demand and a halt to, or at least a slow
down, in the rate of inventory reduction in the customer supply chain. Our
sales volume reflected the lower demand but were enhanced by sales previously
supplied by the M-real mills which ceased coated paper production at the end of
April.
Prices remained under pressure as a result of the poor supply/demand balance
but stabilised in the latter part of the quarter. We continued to curtail
production substantially to match our supply to demand, and subsequent to
quarter end we have announced that we have entered discussions with labour
representatives about the possible closure of the 210,000 ton per annum Kangas
Mill in Finland, which produces coated mechanical paper. If the Kangas Mill is
closed, we estimate potential cash improvements of US$26 million per annum and
a once-off restructuring charge of approximately US$23 million.
We will continue to meet our customers` requirements from our other coated
mechanical paper mills.
The achievement of the Acquisition synergies have progressed well; however,
weak market conditions resulted in a major deterioration in the underlying
businesses of both the acquired and previously owned mills. The major
categories of synergy achievement have been procurement synergies (measured
after taking into account market price reductions), asset optimisation (which
reflects the benefits of the acquired order books), and SG&A reduction. The
business has paid particular attention to strengthening our relationships with
customers.
North America
Quarter- Quarter-
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Sales 340 433
Operating profit 60 30
Operating profit to sales (%) 17.6 6.9
Special items - (gains) losses (26) 1
Operating profit (loss) excluding special items 34 31
Operating profit (loss) excluding special items
to sales (%) 10.0 7.2
EBITDA excluding special items 58 57
EBITDA excluding special items to sales (%) 17.1 13.2
RONOA p.a. (%) 13.5 11.5
Quarter-
ended
% June 2009
change US$ million
Sales (21.5) 291
Operating profit 100 24
Operating profit to sales (%) - 8.2
Special items - (gains) losses - (37)
Operating profit (loss) excluding special items 9.7 (13)
Operating profit (loss) excluding special items
to sales (%) - (4.5)
EBITDA excluding special items 1.8 13
EBITDA excluding special items to sales (%) - 4.5
RONOA p.a. (%) - (4.9)
Market demand for coated paper remained weak but trended up during the six
months to September on a seasonally adjusted basis. Coated woodfree paper
shipments in the United States in the quarter were down 16% compared to a year
earlier. This is a significant improvement on the 29% decline in the calendar
first half compared to a year earlier and reflects an improving US economy and
a slowing of inventory reduction in the customer supply chain. There is no
evidence of restocking yet. Our volumes were 9% lower than the equivalent
quarter last year but 18% up on the June quarter, partly as a result of
seasonality and increased exports but also as a result of adapting our product
line to match changing market needs.
Prices declined slightly during the quarter compared to the prior quarter and
average prices realised for coated woodfree paper were 11% below the equivalent
quarter last year.
The specialities business had a strong quarter as a result of improved market
conditions, particularly in China.
Pulp sales volumes and prices improved during the quarter, supporting the
business` improved operating result for the quarter.
In August we permanently ceased operations at Muskegon Mill which had been
temporarily suspended in March 2009. Its products and brands have been
successfully transferred to our other mills with a high degree of customer
acceptance.
The business succeeded in reducing variable costs through focus on product
design, procurement, elimination of waste and efficient operations. We have
also continued to reduce our fixed costs in both absolute terms and per unit
terms.
Southern Africa - Fine Paper
Quarter- Quarter-
ended ended
Sept 2009 Sept 2008 % change
US$ million US$ million (US$)
Sales 92 109 (15.6)
Operating (loss) profit (2) 1 -
Operating (loss) profit to sales (%) (2.2) 0.9 -
Special items - losses 1 - -
Operating (loss) profit excluding
special item (1) 1 -
Operating (loss) profit excluding
special item to sales (%) (1.1) 0.9 -
EBITDA excluding special items 2 4 (50.0)
EBITDA excluding special items to
sales (%) 2.2 3.7 -
RONOA p.a. (%) (2.0) 3.4 -
Quarter-
ended
% change June 2009
(Rand) US$ million
Sales (16.7) 78
Operating (loss) profit - (5)
Operating (loss) profit to sales (%) - (6.4)
Special items - losses - 1
Operating (loss) profit excluding special item - (4)
Operating (loss) profit excluding special item
to sales (%) - (5.1)
EBITDA excluding special items (51.6) (1)
EBITDA excluding special items to sales (%) - (1.3)
RONOA p.a. (%) - (8.3)
Demand for our South African fine paper business was weak, resulting in
significant production curtailment and results were further impacted by strong
competition from imports as a result of the stronger Rand to US Dollar exchange
rate during the quarter.
Forest Products
Quarter- Quarter-
ended ended
Sept 2009 Sept 2008 % change
US$ million US$ million (US$)
Sales 253 297 (14.8)
Operating (loss) profit (123) 106 -
Operating (loss) profit to sales (%) (48.6) 35.7 -
Special items - losses (gains) 114 (60) -
Operating (loss) profit excluding
special items (9) 46 -
Operating (loss) profit excluding
special items to sales (%) (3.6) 15.5 -
EBITDA excluding special items 13 63 (79.4)
EBITDA excluding special items to
sales (%) 5.1 21.2 -
RONOA p.a. (%) (2.1) 10.7 -
Quarter-
ended
% change June 2009
(Rand) US$ million
Sales (15.9) 218
Operating (loss) profit - (26)
Operating (loss) profit to sales (%) - (11.9)
Special items - losses (gains) - 19
Operating (loss) profit excluding special items - (7)
Operating (loss) profit excluding special items
to sales (%) - (3.2)
EBITDA excluding special items (79.7) 12
EBITDA excluding special items to sales (%) - 5.5
RONOA p.a. (%) - (1.7)
Demand in the Southern African market was weak for most of our products as a
result of weak economic conditions and increased competition from imports
following the strengthening of the Rand to the US Dollar exchange rate. There
was consequently some temporary rebating of prices during the quarter. Demand
for chemical cellulose in the global markets remained strong and the benchmark
NBSK pulp price improved from its low of US$577 per ton in March to US$720 per
ton by the end of September.
The Saiccor Mill produced at near full capacity in the month of September, 5
months after recommencing the ramp up, which had been deferred following the
sharp drop in demand in the first financial quarter.
We curtailed production at our South African paper mills to match output to
demand during the quarter. Production at all our operations was also
interrupted by an industry- wide wage strike in July which led to a loss of
approximately 37,000 tons of mainly chemical cellulose in the quarter as the
other operations coordinated the timing of commercial shuts with the strikes.
Prices of our major raw materials were lower in the quarter than a year
earlier; however, the interruptions resulting from production curtailment, the
strike and the Saiccor ramp up led to inefficiencies in raw material usage
resulting in an overall increase in variable costs per ton compared to a year
earlier.
The business managed its fixed costs tightly resulting in a below inflation
increase in absolute terms. However, fixed costs per unit increased sharply as
a result of production for the year being significantly below last year, or in
the case of the expanded Saiccor Mill, below capacity. During the quarter, we
entered into discussions with labour representatives about a possible reduction
of up to 300 positions at the Ngodwana, Tugela and Enstra mills.
As a result of adverse market conditions and the cumulative severe impact of
fire damage over the past few years, which destroyed 40% of Usutu`s
plantations, the Usutu pulp mill is no longer viable. Sappi has therefore begun
consulting stakeholders regarding the intention to close the pulp mill on 31
January 2010. If closed, we expect annual cash improvements of US$10 million
and a once off restructuring charge of US$18 million.
Dividend
In light of our performance, our priority is to reduce indebtedness and
preserve liquidity. The board has therefore decided not to declare a dividend
for the current financial year-ended September 2009.
Outlook
Although global economic conditions remain unpredictable and growth
expectations vary considerably among commentators, we expect demand to continue
to grow for our major products in most markets compared to our financial year
2009.
For coated woodfree paper, we expect demand in North America and Europe to
continue the gradual improvement seen in recent months. We also expect some
improvement in demand for coated mechanical paper from the current low base.
The supply/demand balance in Europe is, however, expected to remain weak unless
there are further closures of operations. We continue to review our operations
to ensure that we optimise our capacity footprint and provide a high quality
service to our customers.
New coated woodfree paper capacity is expected to start up over the next year
in China, which is likely to unfavourably impact the global supply/demand
balance; however, much of this should be absorbed by the rapid growth of Asian
markets.
We acted decisively to take advantage of improved demand conditions and to
improve the competitiveness of our businesses. We have devoted resources at all
levels of the business to improving our understanding of customer needs and
developing products and services to meet them. In particular, we have expanded
our chemical cellulose business, we have increased our market position in
Europe and enhanced the breadth of our product and service offerings, and in
North America we have adapted our product line to match changing market needs
and economics.
In addition to temporary production curtailment over the past year, we have
closed or announced the possible closure of two mills and one paper machine in
Europe, one paper mill in North America, a pulp mill in Southern Africa, and
further measures to reduce fixed costs in each region. We expect all of these
measures to continue to improve operating performance over the next year.
Following our refinancing we have an improved liquidity position with cash of
US$770 million available at the end of September and we have no major debt
maturities before 2012. We are of the opinion that it is prudent to maintain an
increased cash balance as a cushion in times of economic uncertainty. Our
finance costs have increased significantly and at current interest rates we
expect our net finance costs for 2010 to increase to US$250 million. In order
to continue reducing our net debt we will focus on cash generation and will
manage our capital expenditures tightly but at a level which ensures we
maintain our assets in good condition.
The first financial quarter is typically a seasonally weak quarter as a result
of the holiday period in December. Nevertheless we expect demand to remain firm
until then and price levels for coated paper to stabilise, and for pulp prices
to improve. We have taken major annual maintenance shuts at two of our North
American mills during the current quarter which will impact output and
maintenance expenses. We expect alternative fuel tax credits to remain
available through December 2009 although the credits could expire earlier.
Despite our first quarter historically being a seasonally weaker quarter, given
current market conditions we expect to remain profitable at operating level
excluding special items. We expect the full year`s performance to be better
than financial 2009 based on a gradual recovery in world economic conditions
and the decisive actions we have taken to improve our business.
On behalf of the board
R J Boettger M R Thompson
Director Director 09 November 2009
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
Other information (this information has not been reviewed)
Special items
Special items cover those items which management believe are material by nature
or amount to the operating results and require separate disclosure. Such items
would generally include profit or loss on disposal of property, investments and
businesses, asset impairments, restructuring charges, non-recurring integration
costs related to acquisitions, financial impacts of natural disasters, non-cash
gains or losses on the price fair value adjustment of plantations and
alternative fuel tax credits receivable in cash.
Special items, excluding interest and tax effects, for the relevant periods
are:
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Plantation price fair value adjustment 111 (108)
Restructuring provisions raised 24 44
Profit on disposal of property,
plant and equipment - -
Asset impairments 73 116
Fuel tax credit (50) -
Integration costs - -
Fire, flood, storm and related events 9 12
167 64
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Plantation price fair value adjustment 67 (120)
Restructuring provisions raised 34 41
Profit on disposal of property,
plant and equipment (1) (5)
Asset impairments 79 119
Fuel tax credit (87) -
Integration costs 3 -
Fire, flood, storm and related events 11 17
106 52
Key regional figures
Quarter Quarter
ended ended
Sept 2009 Sept 2008
Metric tons Metric tons
(000`s) (000`s)
Sales volume
Fine Paper - North America 355 389
Europe 895 628
Southern Africa 83 93
Total 1,333 1,110
Forest Products - Pulp and paper operations 387 380
Forestry operations 168 268
Total 1,888 1,758
US$ million US$ million
Sales
Fine Paper - North America 340 433
Europe 868 680
Southern Africa 92 109
Total 1,300 1,222
Forest Products - Pulp and paper operations 239 276
Forestry operations 14 21
Total 1,553 1,519
Year Year
ended ended
Sept 2009 Sept 2008
Metric tons Metric tons
(000`s) (000`s)
Sales volume
Fine Paper - North America 1,274 1,553
Europe 2,956 2,546
Southern Africa 305 339
Total 4,535 4,438
Forest Products - Pulp and paper operations 1,355 1,419
Forestry operations 817 994
Total 6,707 6,851
US$ million US$ million
Sales
Fine Paper - North America 1,295 1,664
Europe 2,895 2,720
Southern Africa 318 380
Total 4,508 4,764
Forest Products - Pulp and paper operations 806 1,023
Forestry operations 55 76
Total 5,369 5,863
Other information (this information has not been reviewed)
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Operating (loss) profit
Fine Paper - North America 60 30
Europe (59) (111)
Southern Africa (2) 1
Total (1) (80)
Forest Products (123) 106
Corporate and other (5) (1)
Total (129) 25
Special items - losses (gains)
Fine Paper - North America (26) 1
Europe 75 123
Southern Africa 1 -
Total 50 124
Forest Products 114 (60)
Corporate and other 3 -
Total 167 64
Operating profit (loss) excluding
special items
Fine Paper - North America 34 31
Europe 16 12
Southern Africa (1) 1
Total 49 44
Forest Products (9) 46
Corporate and other (2) (1)
Total 38 89
EBITDA excluding special items
Fine Paper - North America 58 57
Europe 80 57
Southern Africa 2 4
Total 140 118
Forest Products 13 63
Corporate and other (3) (1)
Total 150 180
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Operating (loss) profit
Fine Paper - North America 53 92
Europe (67) (64)
Southern Africa (3) 6
Total (17) 34
Forest Products (52) 273
Corporate and other (4) 7
Total (73) 314
Special items - losses (gains)
Fine Paper - North America (55) 3
Europe 79 119
Southern Africa 2 -
Total 26 122
Forest Products 70 (70)
Corporate and other 10 -
Total 106 52
Operating profit (loss) excluding
special items
Fine Paper - North America (2) 95
Europe 12 55
Southern Africa (1) 6
Total 9 156
Forest Products 18 203
Corporate and other 6 7
Total 33 366
EBITDA excluding special items
Fine Paper - North America 98 201
Europe 226 235
Southern Africa 12 21
Total 336 457
Forest Products 89 275
Corporate and other 6 8
Total 431 740
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 impact of the global economic downturn, the risk that the
European Acquisition will not be integrated successfully or such integration
may be more difficult, time-consuming or costly than expected, expected revenue
synergies and cost savings from the acquisition may not be fully realized or
realized within the expected time frame, revenues following the acquisition may
be lower than expected, any anticipated benefits from the consolidation of the
European paper business may not be achieved, 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, including as a result of adverse changes in credit markets that
affect our ability to raise capital when needed, changing regulatory
requirements, possible early termination of alternative fuel tax credits,
unanticipated production disruptions (including as a result of planned or
unexpected power outages), 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.
We have included in this announcement an estimate of total synergies from the
acquisition of M-real`s coated graphic paper business and the integration of
the acquired business into our existing business. The estimate of synergies
that we expect to achieve following the completion of the acquisition is based
on assumptions which in the view of our management were prepared on a
reasonable basis, reflect the best currently available estimates and judgments,
and present, to the best of our management`s knowledge and belief, the expected
course of action and the expected future financial impact on our performance
due to the acquisition. However, the assumptions about these expected synergies
are inherently uncertain and, though considered reasonable by management as of
the date of preparation, are subject to a wide variety of significant business,
economic and competitive risks and uncertainties that could cause actual
results to differ materially from those contained in this estimate of
synergies. There can be no assurance that we will be able to successfully
implement the strategic or operational initiatives that are intended, or
realise the estimated synergies. This synergy estimate is not a profit forecast
or a profit estimate and should not be treated as such or relied on by
shareholders or prospective investors to calculate the likely level of profits
or losses for Sappi.
Group income statement
Reviewed Reviewed
Quarter Quarter
ended ended
Sept 2009 Sept 2008
Notes US$ million US$ million
Sales 1,553 1,519
Cost of sales 1,519 1,234
Gross profit 34 285
Selling, general and
administrative expenses 112 91
Other operating expenses 56 171
Share of profit from
associates and joint ventures (5) (2)
Operating (loss) profit 2 (129) 25
Net finance costs 14 26
Net interest 21 37
Finance cost capitalised - -
Net foreign exchange gains (5) (5)
Net fair value (gain) loss on
financial instruments (2) (6)
(Loss) profit before taxation (143) (1)
Taxation (40) 31
Current (3) (5)
Deferred (37) 36
(Loss) profit for the period (103) (32)
Basic (loss) earnings per
share (US cents) 1 (20) (9)
Weighted average number of
shares in issue (millions) 1 515.8 362.2
Diluted basic (loss) earnings
per share (US cents) 1 (20) (9)
Weighted average number of
shares on fully diluted
basis (millions) 1 515.8 365.2
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Sales 5,369 5,863
Cost of sales 5,029 5,016
Gross profit 340 847
Selling, general and
administrative expenses 385 385
Other operating expenses 39 165
Share of profit from
associates and joint ventures (11) (17)
Operating (loss) profit (73) 314
Net finance costs 145 126
Net interest 137 143
Finance cost capitalised - (16)
Net foreign exchange gains (17) (8)
Net fair value (gain) loss on
financial instruments 25 7
(Loss) profit before taxation (218) 188
Taxation (41) 86
Current 4 6
Deferred (45) 80
(Loss) profit for the period (177) 102
Basic (loss) earnings per
share (US cents) (37) 28
Weighted average number of
shares in issue (millions) 482.6 362.2
Diluted basic (loss) earnings
per share (US cents) (37) 28
Weighted average number of
shares on fully diluted
basis (millions) 482.6 365.8
Group statement of comprehensive income
Reviewed Reviewed
Quarter Quarter
ended ended
Sept 2009 Sept 2008
Notes US$ million US$ million
(Loss) profit for the period (103) (32)
Other comprehensive income, net of tax (154) (35)
Exchange differences on
translation of foreign operations 57 (40)
Actuarial (losses) gains on pension funds (229) 8
Movements on cash flow hedge (14) -
Deferred tax effects on above 32 (3)
Total comprehensive income for the period (257) (67)
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
(Loss) profit for the period (177) 102
Other comprehensive income, net of tax (197) (256)
Exchange differences on
translation of foreign operations 14 (262)
Actuarial (losses) gains on pension funds (229) 7
Movements on cash flow hedge (14) -
Deferred tax effects on above 32 (1)
Total comprehensive income for the period (374) (154)
Group balance sheet
Reviewed Reviewed
Sept 2009 Sept 2008
US$ million US$ million
ASSETS
Non-current assets 4,867 4,408
Property, plant and equipment 3,934 3,361
Plantations 611 631
Deferred taxation 56 41
Other non-current assets 266 375
Current assets 2,430 1,701
Inventories 792 725
Trade and other receivables 868 702
Cash and cash equivalents 770 274
Total assets 7,297 6,109
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 1,794 1,605
Non-current liabilities 3,662 2,578
Interest-bearing borrowings 2,726 1,832
Deferred taxation 355 399
Other non-current liabilities 581 347
Current liabilities 1,841 1,926
Interest-bearing borrowings 601 821
Bank overdraft 19 26
Other current liabilities 1,165 1,025
Taxation payable 56 54
Total equity and liabilities 7,297 6,109
Number of shares in issue at balance sheet date
(millions) 515.7 229.2
Group cash flow statement
Reviewed Reviewed
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
(Loss) profit for the period (103) (32)
Adjustment for:
Depreciation, fellings and amortisation 131 110
Taxation (40) 31
Net finance costs 14 26
Post employment benefits (30) (23)
Other non-cash items 189 24
Cash generated from operations 161 136
Movement in working capital 127 135
Net finance costs (27) 24
Taxation paid - (14)
Dividends paid * - -
Cash retained from operating activities 261 281
Cash utilised in investing activities (36) (143)
Capital expenditure and other
non-current assets (34) (143)
Acquisition (2) -
225 138
Cash effects of financing activities (272) (112)
Net movement in cash and cash equivalents (47) 26
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
(Loss) profit for the period (177) 102
Adjustment for:
Depreciation, fellings and amortisation 467 454
Taxation (41) 86
Net finance costs 145 126
Post employment benefits (62) (88)
Other non-cash items 100 (57)
Cash generated from operations 432 623
Movement in working capital 152 1
Net finance costs (81) (126)
Taxation paid (5) (70)
Dividends paid * (37) (73)
Cash retained from operating activities 461 355
Cash utilised in investing activities (762) (494)
Capital expenditure and other
non-current assets (172) (494)
Acquisition (590) -
(301) (139)
Cash effects of financing activities 707 49
Net movement in cash and cash equivalents 406 (90)
*Dividend no 85: 16 US cents per share paid on 28 November 2008.
Statement of changes in equity
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Balance - beginning of period 1,605 1,816
Total comprehensive income for the period (374) (154)
Dividends paid (37) (73)
Rights offer 575 -
Costs directly attributable to the rights offer (31) -
Issue of new shares to M-real 45 -
Transfers to participants of the share purchase trust 2 6
Share-based payment reserve 9 10
Balance - end of period 1,794 1,605
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. Apart from
the early adoption of IAS 1 Presentation of Financial Statements, 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 2008 which are compliant with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board. The adoption of IAS 1 Presentation of Financial Statements
did not have an impact on the group`s reported results or financial
position.
The preliminary results for the year and quarter ended September 2009 have
been reviewed in terms of the International Standard on Review Engagements
2410 by the group`s auditors, Deloitte & Touche. Their unmodified review
report is available for inspection at the company`s registered offices.
In November and December 2008, Sappi conducted a renounceable rights offer of
286,886,270 new ordinary shares of ZAR1.00 each to qualifying Sappi
shareholders recorded in the shareholders register at the close of business on
Friday, 21 November 2008, at a subscription price of ZAR20.27 per rights offer
share in the ratio of 6 rights offer shares for every 5 Sappi shares held. The
rights offer was fully subscribed and the shareholders received their shares on
15 December 2008. The rights offer raised ZAR5,8 billion which was used to
partly finance the acquisition of the coated graphic paper business of M-real
and the related costs. In accordance with IAS 33, prior period basic, headline
and diluted earnings per share have been restated to take into account the
bonus element of the rights offer. The prior period weighted average number of
shares has been adjusted by a factor of 1.58 (the adjustment factor). Please
refer to Supplemental Information for a summary of this calculation.
2. Operating (loss) profit
Reviewed Reviewed
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Included in operating (loss) profit are the
following non-cash items:
Depreciation and amortisation 112 91
Fair value adjustment on plantations
(included in cost of sales)
Changes in volume
Fellings 19 19
Growth (21) (15)
(2) 4
Plantation price fair value adjustment 111 (108)
109 (104)
Included in other operating expenses
are the following:
Asset impairments 73 116
Profit on disposal of property,
plant and equipment - -
Restructuring provisions raised 24 44
Integration costs - -
Fuel tax credit (50) -
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Included in operating (loss) profit are the
following non-cash items:
Depreciation and amortisation 398 374
Fair value adjustment on plantations
(included in cost of sales)
Changes in volume
Fellings 69 80
Growth (73) (70)
(4) 10
Plantation price fair value adjustment 67 (120)
63 (110)
Included in other operating expenses
are the following:
Asset impairments 79 119
Profit on disposal of property,
plant and equipment (1) (5)
Restructuring provisions raised 34 41
Integration costs 3 -
Fuel tax credit (87) -
Notes to the group results
3. Headline (loss) earnings per share *
Reviewed Reviewed
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Headline (loss) earnings per share (US cents) ** (6) 23
Weighted average number of shares
in issue (millions) ** 515.8 362.2
Diluted headline (loss) earnings per
share (US cents) ** (6) 23
Weighted average number of shares
on fully diluted basis (millions) ** 515.8 365.2
Calculation of headline (loss) earnings *
(Loss) profit for the period (103) (32)
Asset impairments 73 116
Profit on disposal of property, plant and equipment - -
Tax effect of above items - (1)
Headline (loss) earnings (30) 83
4. Capital expenditure
Property, plant and equipment 37 133
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Headline (loss) earnings per share
(US cents) ** (21) 60
Weighted average number of shares
in issue (millions) ** 482.6 362.2
Diluted headline (loss) earnings per
share (US cents) ** (21) 59
Weighted average number of shares
on fully diluted basis (millions) ** 482.6 365.8
Calculation of headline (loss) earnings *
(Loss) profit for the period (177) 102
Asset impairments 79 119
Profit on disposal of property,
plant and equipment (1) (5)
Tax effect of above items - -
Headline (loss) earnings (99) 216
* Headline earnings disclosure is required by the JSE Limited.
** Prior period headline earnings per share has been restated for the bonus
element of the rights offer in accordance with IAS 33.
Please refer to Supplemental Information for a summary of this calculation.
4. Capital expenditure
Property, plant and equipment 184 510
Sept 2009 Sept 2008
US$ million US$ million
5. Capital commitments
Contracted 62 76
Approved but not contracted 126 130
188 206
6. Contingent liabilities
Guarantees and suretyships 44 38
Other contingent liabilities 8 7
52 45
7. Material balance sheet movements year on year
Acquisition of M-real`s coated graphic paper business
See note 9 for details of how the acquisition is recorded in the balance sheet.
Interest-bearing borrowings and cash and cash equivalents
Included in long term borrowings movement within the year is the assumed
interest bearing debt used to partly finance the acquisition of M-real`s
coated graphic paper business and the US$41 million discount related to the
vendor loan note repayment. During the year ended September 2009, the group
raised net proceeds of approximately US$908 million via international and South
African bond issues in predominantly Euro, USD and ZAR dominated high yield
bonds, the proceeds of which, were used together with existing cash
resources of US$266 million to repay existing drawings of US$582 million on
committed facilities and other short-term debt of US$185 million and the
vendor loan note at a discount of US$41 million. In addition, Sappi
successfully refinanced the outstanding OeKB loan of US$570 million in full.
Strong cash generation from operations has contributed to an increased cash
balance at year end.
Other non-current assets and liabilities
The decrease in other non-current assets and the increase in other non-current
liabilities relate mainly to actuarial losses recognised on the group`s defined
benefit schemes.
8. Post balance sheet events
Since year-end the group has announced the possible cessation of production at
Kangas mill in Finland and the intention to cease production at the Usutu pulp
mill in Swaziland.
9. Acquisition
On 31 December 2008, Sappi acquired M-real`s coated graphic paper business for
EUR750 million (US$1.1 billion). The transaction included M-real`s coated
graphic paper business, including brands and company knowledge, as well as four
coated graphic mills.
The acquisition was financed through a combination of equity, assumed debt, the
cash proceeds from a rights offering and a vendor loan note.
The acquired business contributed revenues of US$817 million, a net operating
profit of US$33 million and a net profit of US$38 million to the group for the
period from acquisition to 27 September 2009.
Details of net assets acquired and goodwill are as follows:
EURO US$
Purchase consideration:
Cash consideration 401 565
Shares issued * 32 45
Vendor loan note 220 307
Adjustments to working capital (4) (6)
Gain on forward exchange contract covering purchase
consideration (24) (32)
Direct costs relating to the acquisition 23 32
Total purchase consideration 648 911
Provisional fair value of net identifiable assets acquired
(see below) 648 911
Provisional goodwill ** - -
The assets and liabilities arising from the acquisition are as follows:
EURO EURO
Acquiree`s Provisional
carrying fair
amount value
Property, plant and equipment 634 531
Information technology related intangibles 2 2
Brand names - 18
Inventories 118 115
Trade receivables 200 192
Prepayments and other debit balances 15 18
Cash and cash equivalents 5 5
Trade payables (85) (85)
Pension liabilities (37) (37)
Borrowings (46) (42)
Provisions (4) (4)
Other payables and accruals (60) (65)
Net deferred tax (liabilities) assets (11) -
Net identifiable assets acquired 731 648
US$ US$
Acquiree`s Provisional
carrying fair
amount value
Property, plant and equipment 892 747
Information technology related intangibles 3 3
Brand names - 25
Inventories 166 162
Trade receivables 281 270
Prepayments and other debit balances 21 25
Cash and cash equivalents 7 7
Trade payables (120) (120)
Pension liabilities (52) (52)
Borrowings (65) (59)
Provisions (6) (6)
Other payables and accruals (84) (91)
Net deferred tax (liabilities) assets (15) -
Net identifiable assets acquired 1,028 911
Notes to the group results
Outflow of cash to acquire business, net of cash acquired:
EURO US$
Cash consideration 401 565
Direct costs relating to acquisition 23 32
Cash and cash equivalents in subsidiary acquired (5) (7)
Net cash outflow on acquisition 419 590
The provisional values of the net identifiable assets acquired as at September
2009 remains unchanged from the provisional value as at June 2009.
* 11 159 702 Sappi shares were issued to M-real as partial payment of the
acquisition price. The fair value of US$45 million (EURO 32 million) was
determined using Sappi`s published market price at the date of exchange.
** The initial accounting for the business combination has been determined
provisionally as at the end of the fourth quarter ended September 2009 because
the group is still in the process of finalising the fair values of the
identifiable assets and liabilites of the acquired business of M-real.
10. Regional information
Reviewed Reviewed
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Sales
Fine Paper - North America 340 433
Europe 868 680
Southern Africa 92 109
Total 1,300 1,222
Forest Products - Pulp and paper
operations 239 276
Forestry operations 14 21
Total 1,553 1,519
Operating (loss) profit
Fine Paper - North America 60 30
Europe (59) (111)
Southern Africa (2) 1
Total (1) (80)
Forest Products (123) 106
Corporate and other (5) (1)
Total (129) 25
Net operating assets
Fine Paper - North America 981 1,087
Europe 2,340 1,758
Southern Africa 205 110
Total 3,526 2,955
Forest Products 1,686 1,721
Corporate and other 38 39
Total 5,250 4,715
Reviewed Reviewed
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Sales
Fine Paper - North America 1,295 1,664
Europe 2,895 2,720
Southern Africa 318 380
Total 4,508 4,764
Forest Products - Pulp and paper
operations 806 1,023
Forestry operations 55 76
Total 5,369 5,863
Operating (loss) profit
Fine Paper - North America 53 92
Europe (67) (64)
Southern Africa (3) 6
Total (17) 34
Forest Products (52) 273
Corporate and other (4) 7
Total (73) 314
Net operating assets
Fine Paper - North America 981 1,087
Europe 2,340 1,758
Southern Africa 205 110
Total 3,526 2,955
Forest Products 1,686 1,721
Corporate and other 38 39
Total 5,250 4,715
Supplemental Information (this information has not been reviewed)
general definitions
Average - averages are calculated as the sum of the opening and closing
balances for the relevant period divided by two
Fellings - the amount charged against the income statement representing the
standing value of the plantations harvested
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 the pulp and paper industry
for comparative purposes
SG&A - selling, general and administrative expenses
Non-GAAP measures
The group believes that it is useful to report certain non-GAAP measures for
the following reasons:
- these measures are used by the group for internal performance analysis;
- the presentation by the group`s reported business segments of these measures
facilitates comparability with other companies in our industry, although the
group`s measures may not be comparable with similarly titled profit
measurements reported by other companies; and
- it is useful in connection with discussion with the investment analyst
community and debt rating agencies.
These non-GAAP measures should not be considered in isolation or construed as a
substitute for GAAP measures in accordance with IFRS
Acquisition - the acquisition of M-real`s coated graphic paper business on 31
December 2008
Adjustment factor - This is calculated using the pre-announcement share price
divided by the theoretical ex-rights price (TERP). TERP is the ((Number of new
shares multiplied by the Subscription price) plus the (Number of shares held
multiplied by the Ex-dividend share price)) all divided by the (Number of new
shares plus the number of shares held prior to the rights offer).
Capital employed - shareholders` equity plus net debt
EBITDA excluding special items - earnings before interest (net finance costs),
taxation, depreciation, amortisation and special items
Headline earnings - as defined in circular 3/2009 issued by the South African
Institute of Chartered Accountants, separates from earnings all separately
identifiable remeasurements. It is not necessarily a measure of sustainable
earnings. It is a listing requirement of the JSE Limited to disclose headline
earnings per share
Net debt - current and non-current interest-bearing borrowings, and bank
overdraft (net of cash, cash equivalents and short-term deposits)
Net debt to total capitalisation - net debt divided by capital employed
Net operating assets - total assets (excluding deferred taxation and cash and
cash equivalents) less current liabilities (excluding interest-bearing
borrowings and bank overdraft)
Net assets - total assets less total liabilities
Net asset value per share - net assets divided by the number of shares in issue
at balance sheet date
ROCE - return on average capital employed. Operating profit excluding special
items divided by average capital employed
ROE - return on average equity. Profit for the period divided by average
shareholders` equity
RONOA - return on average net operating assets. Operating profit excluding
special items divided by average net operating assets
Special items - special items cover those items which management believe are
material by nature or amount to the operating results and require separate
disclosure. Such items would generally include profit or loss on disposal of
property, investments and businesses, asset impairments, restructuring charges,
non-recurring integration costs related to acquisitions, financial impacts of
natural disasters, non-cash gains or losses on the price fair value adjustment
of plantations and alternative fuel tax credits receivable in cash.
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 (this information has not been reviewed)
EBITDA excluding special items
Quarter Quarter
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Reconciliation of (loss) profit for the period
to EBITDA excluding special items (1)
(Loss) profit for the period (103) (32)
Net finance costs 14 26
Taxation (40) 31
Special items - losses 167 64
Operating profit excluding special items 38 89
Depreciation and amortisation 112 91
EBITDA excluding special items (1) 150 180
Year Year
ended ended
Sept 2009 Sept 2008
US$ million US$ million
Reconciliation of (loss) profit for the period
to EBITDA excluding special items (1)
(Loss) profit for the period (177) 102
Net finance costs 145 126
Taxation (41) 86
Special items - losses 106 52
Operating profit excluding special items 33 366
Depreciation and amortisation 398 374
EBITDA excluding special items (1) 431 740
Sept 2009 Sept 2008
US$ million US$ million
Net debt (US$ million) (2) 2,576 2,405
Net debt to total capitalisation (%) (2) 58.9 60.0
Net asset value per share (US$) (2) 3.48 7.00
(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 excluding special items to net profit rather than operating
profit. As a result our definition retains minority interest as part of EBITDA
excluding special items.
Operating profit excluding special items represents earnings before interest
(net finance costs), taxation and special items. 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. Special items cover those items which
management believe are material by nature or amount to the operating results
and require separate disclosure. Such items would generally include profit and
loss on disposal of property, investments and businesses, asset impairments,
restructuring charges, non-recurring integration costs related to acquisitions,
financial impacts of natural disasters, non-cash gains or losses on the price
fair value adjustment of plantations and alternative fuel tax credits
receivable in cash.
EBITDA excluding special items represents operating profit before depreciation,
amortisation and special items.
We use both operating profit excluding special items and EBITDA excluding
special items as internal measures of performance to benchmark and compare
performance, both between our own operations and as against other companies.
Operating profit excluding special items and EBITDA excluding special items are
measures used by the group, together with measures of performance under IFRS,
to compare the relative performance of operations in planning, budgeting and
reviewing the performances of various businesses. We believe they are useful
and commonly used measures of financial performance in addition to net profit,
operating profit and other profitability measures under IFRS because they
facilitate 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 both operating profit
excluding special items and EBITDA excluding special items can provide a useful
additional basis for comparing the current performance of the operations being
evaluated. For these reasons, we believe operating profit excluding special
items and EBITDA excluding special items 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 operating profit
excluding special items and EBITDA excluding special items differently, so
making comparisons among companies on this basis should be done very carefully.
Operating profit excluding special items and EBITDA excluding special items are
not measures of performance under IFRS and should not be considered in
isolation or construed as a substitute for operating profit or net profit as
indicators of the company`s operations in accordance with IFRS.
(2) Refer to Supplemental Information for the definition of the term.
Supplemental Information (this information has not been reviewed)
summary rand convenience translation
Quarter Quarter
ended ended
Sept 2009 Sept 2008
Key figures: (ZAR million)
Sales 11,985 11,871
Operating (loss) profit (996) 195
Special items - losses 1,289 500
Operating profit excluding special items 293 695
EBITDA excluding special items * 1,158 1,407
Basic (loss) earnings per share (SA cents) (154) (70)
Net debt * 19,091 19,421
Key ratios: (%)
Operating (loss) profit to sales (8.3) 1.6
Operating profit excluding special items to sales 2.4 5.9
Operating profit excluding special items
to Capital Employed (ROCE) * 3.3 8.3
EBITDA excluding special items to sales 9.7 11.8
Return on average equity (ROE) (21.6) (7.6)
Net debt to total capitalisation * 58.9 60.0
Year Year
ended ended
Sept 2009 Sept 2008
Key figures: (ZAR million)
Sales 48,393 43,559
Operating (loss) profit (658) 2,333
Special items - losses 955 386
Operating profit excluding special items 297 2,719
EBITDA excluding special items * 3,885 5,498
Basic (loss) earnings per share (SA cents) (333) 208
Net debt * 19,091 19,421
Key ratios: (%)
Operating (loss) profit to sales (1.4) 5.4
Operating profit excluding special items to sales 0.6 6.2
Operating profit excluding special items
to Capital Employed (ROCE) * 0.9 9.0
EBITDA excluding special items to sales 8.0 12.6
Return on average equity (ROE) (12.1) 6.0
Net debt to total capitalisation * 58.9 60.0
* Refer to Supplemental Information for the definition of the term.
The above financial results have been translated into ZAR from 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.
exchange rates
Sept June Mar
2009 2009 2009
Exchange rates:
Period end rate: US$1 = ZAR 7.4112 7.8990 9.5849
Average rate for the Quarter: US$1 = ZAR 7.7174 8.6197 9.8979
Average rate for the YTD: US$1 = ZAR 9.0135 9.4205 9.9015
Period end rate: EUR 1 = US$ 1.4688 1.4054 1.3301
Average rate for the Quarter: EUR 1 = US$ 1.4317 1.3651 1.3300
Average rate for the YTD: EUR 1 = US$ 1.3657 1.3432 1.3288
Dec Sept
2008 2008
Exchange rates:
Period end rate: US$1 = ZAR 9.7148 8.0751
Average rate for the Quarter: US$1 = ZAR 9.8584 7.8150
Average rate for the YTD: US$1 = ZAR 9.8584 7.4294
Period end rate: EUR 1 = US$ 1.4064 1.4615
Average rate for the Quarter: EUR 1 = US$ 1.3471 1.5228
Average rate for the YTD: EUR 1 = US$ 1.3471 1.5064
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.
Other interested parties can obtain printed copies of this report from:
South Africa:
Computershare Investor
Services (Proprietary) Limited
70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Tel +27 (0)11 370 5000
United States:
ADR Depositary:
The Bank of New York Mellon
Investor Relations
PO Box 11258
Church Street Station
New York, NY 10286-1258
Tel +1 610 382 7836
Channel Islands:
Capita Registrars
(Jersey) Limited
12 Castle Street
St Helier
Jersey
JE2 3RT
Tel +44 (0)208 639 3399
this report is available on the Sappi website
www.sappi.com
Date: 09/11/2009 08:55:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
