| Thu 28 Jan 2010, 8:55 | | SAP - Sappi Limited - 1st Quarter results for the period ended December 2009 |
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SAP
SAVVI
SAP - Sappi Limited - 1st Quarter results for the period ended December 2009
Sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
1st Quarter
results for the period ended December 2009
Financial summary for the quarter
- Operating profit excluding special items increased to US$81 million (Q1 2009:
US$25 million)
- General improvement in demand for fine paper and pulp
- Increased pulp prices; favourable for Southern African and North American
businesses, but unfavourable for European business
- Basic loss per share 10 US cents (unfavourably impacted by 11 US cents
special items)
- Cash generated from operations US$245 million (Q1 2009:US$95 million);
net cash outflow US$30 million (Q1 2009: outflow US$121 million)
Quarter ended
Dec 2009 Dec 2008 Sept 2009
Key figures: (US$ million)
Sales 1,620 1,187 1,553
Operating profit (loss) 1 57 (129)
Special items - losses (gains) * 80 (32) 167
Operating profit excluding special items 81 25 38
EBITDA excluding special items ** 193 106 150
Basic (loss) earnings per share (US cents) (10) 6 (20)
Net debt *** 2,581 2,497 2,576
Key ratios: (%)
Operating profit (loss) to sales 0.1 4.8 (8.3)
Operating profit excluding special
items to sales 5.0 2.1 2.4
Operating profit excluding special
items to Capital Employed (ROCE) *** 7.5 2.6 3.3
EBITDA excluding special items to sales 11.9 8.9 9.7
Return on average equity (ROE) *** (11.6) 5.3 (21.4)
Net debt to total capitalisation *** 60.0 57.3 58.9
* Refer to details on special items.
** Refer to note 10 to the group results for the reconciliation of
EBITDA excluding special items to (loss) profit before taxation.
*** Refer to Supplemental Information for the definition of the
term.
The table above has not been audited or reviewed.
Commentary on the quarter
The operating result (excluding special items) for the group improved
substantially compared both to the equivalent quarter last year and to the
prior quarter. The Southern African business returned to profitability
(excluding special items) for the quarter largely as a result of the improving
performance of the expanded Saiccor Mill. Demand conditions in the South
African domestic market, however, remained challenging.
The Fine Paper business result (excluding special items) improved compared to
a year earlier but fell short of the prior quarter primarily as a result of
seasonal factors.
Demand continued to improve for our major products with a steady improvement in
demand for coated woodfree paper. Demand for coated mechanical paper has,
however, not recovered. Paper pulp prices and prices for chemical cellulose
have continued to rise, driven by improved demand in general and good demand
from China.
Sales for the group increased to US$1.6 billion for the quarter, an increase of
36% compared to the equivalent quarter last year largely as a result of the
European Acquisition completed in December 2008 (the "Acquisition") and the
Saiccor expansion. Sales increased 4% compared to the September 2009 quarter.
Raw material and energy input prices increased during the quarter compared to
the prior quarter and managing usage and eliminating waste remained a priority.
Action taken in the prior quarters helped us to reduce fixed costs throughout
the business. During the quarter we announced the closures of the Kangas Mill
in Finland and Usutu Pulp Mill in Swaziland, which will help us further reduce
future fixed costs, manage capacity and improve our profitability.
Additional synergies relating to the Acquisition were achieved during the
quarter. The cumulative amount of synergies achieved for the 12 months to
December 2009 was EUR102 million, which is ahead of our target for that period.
We expect to achieve our announced target of EUR120 million of synergies earlier
than the original three-year time-frame.
Special items for the quarter amounted to US$80 million, mainly comprising the
non-cash plantation fair value price adjustment charge of US$95 million for the
quarter. Other special items included charges for the closure costs of Kangas
Mill and Usutu Mill, offset by alternative fuel tax credits in North America of
US$49 million.
Operating profit excluding special items increased substantially to US$81
million for the quarter, compared to US$25 million a year ago and US$38 million
in the quarter ended September 2009.
After the largely non-cash special items, operating profit was US$1 million for
the quarter compared to a profit of US$57 million a year ago, which included
favourable special items of US$32 million.
Net finance costs increased to US$73 million, mainly as a result of the higher
interest rates on the debt refinanced in September 2009 and our decision to
maintain high cash balances.
Taxation for the quarter comprised a current taxation charge of US$4 million
and a deferred tax credit of US$25 million, which reduced the loss for the
period.
EPS was a loss of 10 US cents (including a loss of 11 US cents in respect of
special items) compared to EPS of 6 US cents for the equivalent quarter last
year (including a gain of 7 US cents in respect of special items).
Cash flow and debt
Cash generated from operations increased to US$245 million for the quarter;
however, as a result of increased activity levels, working capital increased by
US$170 million during the quarter.
Net cash utilised for the quarter was US$30 million, which was a significant
improvement on cash outflow in the three quarters ended December 2008, 2007 and
2006. Capital expenditure, which is included in this amount, was US$37 million
for the quarter. We aim to limit capital expenditure to approximately US$200
million for the full year.
Net debt increased by US$5 million in the quarter to US$2,581 million as a
result of the cash outflow, largely offset by the effect of currency movements
on the value of debt. We are committed to reducing our gearing and expect to
reduce net debt by financial year-end.
Operating Review - Quarter ended December 2009
compared with quarter ended December 2008
Sappi Fine Paper
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
Sales 1,256 924
Operating profit 79 6
Operating profit to sales (%) 6.3 0.6
Special items (gains) losses* (35) -
Operating profit excluding
special items 44 6
Operating profit excluding
special items to sales (%) 3.5 0.6
EBITDA excluding special items 130 69
EBITDA excluding special items
to sales (%) 10.4 7.5
RONOA pa (%) 5.3 0.9
Quarter
ended
% Sept 2009
change US$ million
Sales 35.9 1,208
Operating profit 1,217 1
Operating profit to sales (%) - 0.1
Special items (gains) losses* - 49
Operating profit excluding
special items 633.3 50
Operating profit excluding
special items to sales (%) - 4.1
EBITDA excluding special items 88.4 138
EBITDA excluding special items
to sales (%) - 11.4
RONOA pa (%) - 6.5
* See note 10 to the financial statements.
The Fine Paper business achieved an operating profit excluding special items of
US$44 million for the quarter, which is a significant improvement compared to
the equivalent quarter last year, but about 10% below the prior quarter,
primarily as a result of seasonal factors. The European and North American
businesses improved their performances and were profitable. With effect from
this quarter, the Southern African Fine Paper business, which is a relatively
small operation, is included in the Southern African segment to reflect the
geographic management of the business and comparative numbers have been revised
accordingly.
Europe
Quarter Quarter
ended ended %
Dec 2009 Dec 2008 change
US$ million US$ million (US$)
Sales 936 561 66.8
Operating profit (loss) 12 13 (7.7)
Operating profit (loss)
to sales (%) 1.3 2.3 -
Special items * 13 - -
Operating profit excluding
special items 25 13 92.3
Operating profit excluding
special items to sales (%) 2.7 2.3 -
EBITDA excluding special items 88 50 76.0
EBITDA excluding special items
to sales (%) 9.4 8.9 -
RONOA pa (%) 4.3 3.1 -
Quarter
% ended
change Sept 2009
(Euro) US$ million
Sales 52.5 868
Operating profit (loss) (17.1) (59)
Operating profit (loss)
to sales (%) - (6.8)
Special items * - 75
Operating profit excluding
special items 76.2 16
Operating profit excluding
special items to sales (%) - 1.8
EBITDA excluding special items 61.6 80
EBITDA excluding special items
to sales (%) - 9.2
RONOA pa (%) - 2.7
* See note 10 to the financial statements.
European industry shipments of coated woodfree paper continued to improve
during the quarter compared to the prior quarter but remained 7% below the
equivalent quarter last year. Shipments of coated mechanical paper, however,
were down 13% for the quarter compared to a year earlier, but showed a small
improvement compared to the prior quarter. Average prices realised for the
quarter were 10% below the equivalent quarter last year.
Variable costs per unit were 11% below the equivalent quarter last year. Input
costs are expected to increase gradually, primarily as a result of pulp price
rises and increases in certain chemical prices.
Fixed costs were well managed. During the quarter there were short strikes at
Kirkniemi, Maastricht and Nijmegen Mills.
The Kangas Mill ceased operations on 12 January 2010 following the transition
of the mill`s product range to other Sappi mills.
An electrical fire at Stockstadt Mill in late December resulted in the
interruption of coated paper production at the mill. Arrangements have been
made to supply our customers from other mills and we expect production to
resume in late March 2010. The cost of restoration and business interruption is
expected to be approximately EUR30 million, most of which is self-insured.
North America
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
Sales 320 363
Operating profit (loss) 67 (7)
Operating profit (loss)
to sales (%) 20.9 (1.9)
Special items * (48) -
Operating profit (loss) excluding
special items 19 (7)
Operating profit (loss) excluding
special items to sales (%) 5.9 (1.9)
EBITDA excluding special items 42 19
EBITDA excluding special items
to sales (%) 13.1 5.2
RONOA pa (%) 7.8 (2.6)
Quarter
ended
% Sept 2009
change US$ million
Sales (11.8) 340
Operating profit (loss) - 60
Operating profit (loss)
to sales (%) - 17.6
Special items * - (26)
Operating profit (loss) excluding
special items - 34
Operating profit (loss) excluding
special items to sales (%) - 10.0
EBITDA excluding special items 121.1 58
EBITDA excluding special items
to sales (%) - 17.1
RONOA pa (%) - 13.5
* See note 10 to the financial statements.
The North American business improved its operating performance (excluding
special items) compared to a year ago. Operating profit (excluding special
items) declined compared to the prior quarter as a result of the adverse impact
of the scheduled major pulp mill shut at Somerset Mill.
US coated paper demand has shown an upward trend since May 2009 and coated
woodfree shipments for the quarter recorded the first year-on-year increase
since the quarter ended December 2007 (up 2.4%).
Prices realised for coated paper were 11% below the equivalent quarter last
year. Pulp prices realised showed a strongly improving trend but remained well
below prices a year ago.
Margins have been restored as a result of improved volumes and effective
management of costs, which remains a priority. Fixed costs and supply chain and
variable costs per ton were each significantly lower than the equivalent
quarter last year.
The alternative fuel tax credit for the quarter was US$49 million, which is
included in special items. The law under which this credit was paid expired on
31 December 2009 and we do not expect to receive any further credits subsequent
to that date.
Southern Africa - Forest and Paper Products
Quarter Quarter
ended ended %
Dec 2009 Dec 2008 change
US$ million US$ million (US$)
Sales 364 263 38.4
Operating (loss) profit (86) 51 (268.6)
Operating profit (loss)
to sales (%) (23.6) 19.4 -
Special items * 115 (32) -
Operating profit (loss) excluding
special items 29 19 52.6
Operating profit (loss) excluding
special items to sales (%) 8.0 7.2 -
EBITDA excluding special items 55 37 48.6
EBITDA excluding special items
to sales (%) 15.1 14.1 -
RONOA pa (%) 6.3 4.4 -
Quarter
% ended
change Sept 2009
(Rand) US$ million
Sales 5.3 345
Operating (loss) profit (228.2) (125)
Operating profit (loss)
to sales (%) - (36.2)
Special items * - 115
Operating profit (loss) excluding
special items 16.4 (10)
Operating profit (loss) excluding
special items to sales (%) - (2.9)
EBITDA excluding special items 13.2 15
EBITDA excluding special items
to sales (%) - 4.3
RONOA pa (%) - (2.3)
* See note 10 to the financial statements.
The results of the Southern African Fine Paper division are included in
Southern Africa - Forest and Paper Products from this quarter in accordance
with the geographic management of the division.
Forest Products returned to profitability (excluding special items) for the
quarter after two quarters of operating losses (excluding special items).
The Southern African domestic markets remained weak, adversely impacting demand
and pricing for our domestic sales. Export revenues continued to be impacted by
the relatively stronger Rand to US Dollar exchange rate, which averaged R7.50
compared to R9.86 per US Dollar in the equivalent quarter last year.
The Saiccor Mill output continued at close to capacity levels for the quarter
and operating efficiencies at the mill improved as we gained experience running
the expanded mill.
Prices for chemical cellulose increased steadily through the quarter, helping
to offset the effect of the stronger exchange rate.
Prices of our major raw materials were lower than a year earlier, in particular
wood and chemicals.
Electricity costs, however, increased as a result of major rate increases.
There is a risk of further major increases. We continue to prioritise reduced
energy consumption to help offset the rate increases, and we aim to improve our
self-sufficiency through investment in power generation.
The Usutu Pulp Mill will cease operations at the end of January 2010. We are
addressing the future of the site and plantations with a potential investor and
the government of Swaziland.
Outlook
Conditions in our major markets are expected to improve gradually in 2010,
resulting in rising demand for our products. Although we expect demand and our
capacity utilisation rates to improve compared to financial 2009, we do not
expect demand to return to 2008 levels. We will therefore continue to manage
our output to meet customer demand. Current indications are that recovery of
coated mechanical paper is lagging coated woodfree paper, which will impact our
European business.
As markets improve, it is likely that input prices for our raw materials and
energy will also rise. The strong demand for pulp and chemical cellulose,
accompanied by rising prices, is expected to have a favourable effect on the
Southern African and North American businesses, which are net pulp sellers.
Increased pulp prices are, however, expected to result in rising costs for our
European business which purchases more than half of its pulp requirements.
The achievement of Acquisition synergies and the effect of our cost reduction
initiatives and mill closures over the past year are expected to help us offset
rising input costs.
Against this background, we expect the operating profit excluding special items
to remain positive in the second financial quarter but to be below the level
achieved this quarter.
On behalf of the board
R J Boettger M R Thompson
Director Director 28 January 2010
Sappi Limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
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. The words `believe`,
`anticipate`, `expect`, `intend`, `estimate`, `plan`, `assume`, `positioned`,
`will`, `may`, `should`, `risk` and other similar expressions, which are
predictions of or indicate future events and future trends, which do not relate
to historical matters, identify forward-looking statements. 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 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. We undertake 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 and the integration of the acquired business into our existing
business. The estimate of synergies 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
Quarter Quarter
ended ended
Dec 2009 Dec 2008
Notes US$ million US$ million
Sales 1,620 1,187
Cost of sales 1,531 1,042
Gross profit 89 145
Selling, general and administrative
expenses 107 86
Other operating (income) expense (16) 3
Share of profit from associates and
joint ventures (3) (1)
Operating profit 3 1 57
Net finance costs 73 21
Net interest 79 31
Net foreign exchange gains (3) (7)
Net fair value gain on financial
instruments (3) (3)
(Loss) profit before taxation (72) 36
Taxation (21) 13
Current 4 10
Deferred (25) 3
(Loss) profit for the period (51) 23
Basic (loss) earnings per share
(US cents) 4 (10) 6
Weighted average number of shares in
issue (millions) 4 515.6 383.0
Diluted basic (loss) earnings per
share (US cents) 4 (10) 6
Weighted average number of shares on
fully diluted basis (millions) 4 515.6 385.5
Group statement of comprehensive income
Reviewed
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
(Loss) profit for the period (51) 23
Other comprehensive loss, net of tax (24) (270)
Exchange differences on translation of foreign
operations (25) (293)
Movements on cash flow hedge 1 32
Total comprehensive loss for the period (75) (247)
Group balance sheet
Reviewed
Dec 2009 Sept 2009
US$ million US$ million
ASSETS
Non-current assets 4,563 4,867
Property, plant and equipment 3,798 3,934
Plantations 445 611
Deferred taxation 56 56
Other non-current assets 264 266
Current assets 2,582 2,430
Inventories 813 792
Trade and other receivables 906 868
Cash and cash equivalents 786 770
Assets classified as held for sale 77 -
Total assets 7,145 7,297
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 1,721 1,794
Non-current liabilities 3,574 3,662
Interest-bearing borrowings 2,691 2,726
Deferred taxation 325 355
Other non-current liabilities 558 581
Current liabilities 1,850 1,841
Interest-bearing borrowings 642 601
Bank overdraft 34 19
Other current liabilities 1,092 1,165
Taxation payable 54 56
Liabilities associated with assets held for sale 28 -
Total equity and liabilities 7,145 7,297
Number of shares in issue at balance sheet date
(millions) 515.6 515.7
Group cash flow statement
Reviewed
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
(Loss) profit for the period (51) 23
Adjustment for:
Depreciation, fellings and amortisation 132 97
Taxation (21) 13
Net finance costs 73 21
Post-employment benefits (13) (8)
Plantation fair value adjustment 95 (34)
Other non-cash items 30 (17)
Cash generated from operations 245 95
Movement in working capital (170) (96)
Net finance costs (64) (44)
Taxation paid (4) 1
Dividends paid - (37)
Cash retained from (utilised in) operating
activities 7 (81)
Cash utilised in investing activities (37) (40)
(30) (121)
Cash effects of financing activities 57 793
Net movement in cash and cash equivalents 27 672
Statement of changes in equity
Reviewed
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
Balance - beginning of period 1,794 1,605
Total comprehensive loss for the period (75) (247)
Dividends paid - (37)
Rights offer - 536
Transfers to participants of the share purchase
trust - 3
Share-based payment reserve 2 3
Balance - end of period 1,721 1,863
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 adoption of IFRS 8 "Operating Segments", 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 2009 which are compliant with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
The results are unaudited.
2. Adoption of IFRS 8 "Operating Segments"
The adoption of IFRS 8 "Operating Segments" did not have an impact on the
group`s reported results or financial position.
IFRS 8 requires an entity to report financial and descriptive information about
its reportable segments. Reportable segments are components of an entity for
which separate financial information is available that is evaluated regularly
by the chief operating decision-maker in deciding how to allocate resources and
assessing performance. Prior year segment disclosure has been restated as
reflected in note 10.
Reviewed
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
3. Operating profit
Included in operating profit are the following
non-cash items:
Depreciation and amortisation 112 81
Fair value adjustment on plantations (included
in cost of sales)
Changes in volume
Fellings 20 16
Growth (19) (16)
1 -
Plantation price fair value adjustment 95 (34)
96 (34)
Included in other operating (income) expense
are the following:
Asset (impairment reversals) impairments (8) 3
Loss (profit) on disposal of property, plant
and equipment 2 (1)
Restructuring provisions raised 38 -
Fuel tax credit (49) -
4. Headline (loss) earnings per share *
Headline (loss) earnings per share (US cents) (11) 7
Weighted average number of shares in issue
(millions) 515.6 383.0
Diluted headline (loss) earnings per share (US cents) (11) 6
Weighted average number of shares on fully
diluted basis (millions) 515.6 385.5
Calculation of headline (loss) earnings *
(Loss) profit for the period (51) 23
Asset (impairment reversals) impairments (8) 3
Loss (profit) on disposal of property, plant
and equipment 2 (1)
Tax effect of above items - -
Headline (loss) earnings (57) 25
*Headline earnings disclosure is required by the JSE Limited.
Reviewed
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
5. Capital expenditure
Property, plant and equipment 37 47
Dec 2009 Sept 2009
US$ million US$ million
6. Capital commitments
Contracted 66 62
Approved but not contracted 169 126
235 188
7. Contingent liabilities
Guarantees and suretyships 53 44
Other contingent liabilities 8 8
61 52
8. Interest-bearing borrowings
Secured borrowings 1,884 1,878
Unsecured borrowings 1,449 1,449
Total 3,333 3,327
Less: Current portion included in current
liabilities (642) (601)
2,691 2,726
Our September 2009 disclosure has been amended to correctly reflect the split
between secured and unsecured interest-bearing borrowings and to reflect the
classification set out in the detailed list of borrowings in note 20 to the
2009 group annual financial statements.
As previously Correctly
reported Reclassification classified
Secured borrowings 1,350 528 1,878
Unsecured borrowings 1,977 (528) 1,449
Total 3,327 - 3,327
9. Material balance sheet movements year on year
During the quarter, Sappi announced its intention to close Usutu Pulp Mill. The
disposal group, consisting mainly of plantations, have been classified as held
for sale.
10. Segment information
Restatement of prior year disclosures
Sappi Fine Paper South Africa is reported as part of the Forest and Paper
Products segment in accordance with the geographical management of our
business. The table below shows the effect of this change for the quarter ended
December 2008:
As previously US$ million
reported Adjustment Restated
Fine Paper
Sales 998 (74) 924
Operating profit 8 (2) 6
Net operating assets 2,869 (170) 2,699
Forest and Paper Products - Pulp
and paper operations
Sales 174 74 248
Operating profit 49 2 51
Net operating assets 1,456 170 1,626
The information below is presented in the way that it is reviewed by the chief
operating decision-maker as required by IFRS 8 "Operating Segments".
Restated
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
Metric tons Metric tons
(000`s) (000`s)
Sales volume
Fine Paper -
North America 322 330
Europe 944 556
Total 1,266 886
Forest and Paper Products -
Pulp and paper operations 450 356
Forestry operations 168 242
Total 1,884 1,484
US$ million US$ million
Sales
Fine Paper -
North America 320 363
Europe 936 561
Total 1,256 924
Forest and Paper Products -
Pulp and paper operations 350 248
Forestry operations 14 15
Total 1,620 1,187
Operating profit excluding special items
Fine Paper -
North America 19 (7)
Europe 25 13
Total 44 6
Forest and Paper Products 29 19
Corporate and other 8 -
Total 81 25
Restated
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
Special items - losses (gains)
Fine Paper -
North America (48) -
Europe 13 -
Total (35) -
Forest and Paper Products 115 (32)
Total 80 (32)
Operating profit
Fine Paper -
North America 67 (7)
Europe 12 13
Total 79 6
Forest and Paper Products (86) 51
Corporate and other 8 -
Total 1 57
EBITDA excluding special items
Fine Paper -
North America 42 19
Europe 88 50
Total 130 69
Forest and Paper Products 55 37
Corporate and other 8 -
Total 193 106
Net operating assets
Fine Paper -
North America 980 1,100
Europe 2,364 1,599
Total 3,344 2,699
Forest and Paper Products 1,770 1,626
Corporate and other 15 139
Total 5,129 4,464
Reconciliation of operating profit excluding special items to operating profit
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.
Operating profit excluding special items 81 25
Special items (80) 32
Plantation price fair value adjustment (95) 34
Restructuring provisions raised (38) -
(Loss) profit on disposal of property,
plant and equipment (2) 1
Asset impairment reversals (impairments) 8 (3)
Fuel tax credit 49 -
Fire, flood, storm and related events (2) -
Operating profit 1 57
Reconciliation of EBITDA excluding special items and operating profit excluding
special items to (loss) profit before taxation
Restated
Quarter Quarter
ended ended
Dec 2009 Dec 2008
US$ million US$ million
EBITDA excluding special items 193 106
Depreciation and amortisation (112) (81)
Operating profit excluding special items 81 25
Special items - (losses) gains (80) 32
Net finance costs (73) (21)
(Loss) profit before taxation (72) 36
Reconciliation of net operating assets to total
assets
Net operating assets 5,129 4,464
Deferred tax 56 48
Cash 786 941
Other current liabilities 1,092 801
Taxation payable 54 70
Liabilities classified as held for sale 28 -
Total assets 7,145 6,324
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, produced from coniferous trees (i.e. spruce, pine) in Scandinavia,
Canada and northern USA. The price of 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
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 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
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)
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.
Summary rand convenience translation
Quarter Quarter
ended ended
Dec 2009 Dec 2008
Key figures: (ZAR million)
Sales 12,151 11,702
Operating profit 8 562
Special items - losses (gains) * 600 (315)
Operating profit excluding special items 608 246
EBITDA excluding special items * 1,448 1,045
Basic (loss) earnings per share (SA cents) (75) (197)
Net debt * 19,439 24,258
Key ratios: (%)
Operating profit to sales 0.1 4.8
Operating profit excluding special items to sales 5.0 2.1
Operating profit excluding special items to Capital
Employed (ROCE) * 7.5 2.8
EBITDA excluding special items to sales 11.9 8.9
Return on average equity (ROE) (11.7) 5.8
Net debt to total capitalisation * 60.0 57.3
* 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
Dec Sept June
2009 2009 2009
Exchange rates:
Period end rate: US$1 = ZAR 7.5315 7.4112 7.8990
Average rate for the Quarter: US$1 = ZAR 7.5009 7.7174 8.6197
Average rate for the YTD: US$1 = ZAR 7.5009 9.0135 9.4205
Period end rate: EUR 1 = US$ 1.4397 1.4688 1.4054
Average rate for the Quarter: EUR 1 = US$ 1.4737 1.4317 1.3651
Average rate for the YTD: EUR 1 = US$ 1.4737 1.3657 1.3432
Mar Dec
2009 2008
Exchange rates:
Period end rate: US$1 = ZAR 9.5849 9.7148
Average rate for the Quarter: US$1 = ZAR 9.8979 9.8584
Average rate for the YTD: US$1 = ZAR 9.9015 9.8584
Period end rate: EUR 1 = US$ 1.3301 1.4064
Average rate for the Quarter: EUR 1 = US$ 1.3300 1.3471
Average rate for the YTD: EUR 1 = US$ 1.3288 1.3471
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
this report is available on the Sappi website
www.sappi.com
Date: 28/01/2010 08:55:01 Produced by the JSE SENS Department.
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