| Mon 9 May 2011, 8:58 | | SAP - Sappi Limited - 2nd Quarter results for the period ended March 2011 |
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SAP
SAVVI
SAP - Sappi Limited - 2nd Quarter results for the period ended March 2011
Sappi Limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
2nd Quarter results for the period ended March 2011
Financial summary for the quarter
- EPS excluding special items 9 US cents; Q2 2010 loss per share 3 US cents
- Operating profit excluding special items US$127 million; Q2 2010 US$54
million
- Special items US$128 million charge including envisaged closure cost of
Biberist Mill
- Good demand for the majority of our products
- Input costs continue to increase
- Net cash generated US$100 million
Quarter ended
Mar 2011 Mar 2010 Dec 2010
Key figures: (US$ million)
Sales 1,824 1,576 1,873
Operating (loss) profit (1) 28 121
Special items - losses (1) 128 26 16
Operating profit excluding special items (2) 127 54 137
EBITDA excluding special items (3) 228 156 246
Basic (loss) earnings per share (US cents) (14) (6) 7
Net debt (4) 2,370 2,429 2,432
Key ratios: (%)
Operating (loss) profit to sales (0.1) 1.8 6.5
Operating profit excluding special items
to sales 7.0 3.4 7.3
Operating profit excluding special items
to capital employed (ROCE) 11.6 5.1 12.8
EBITDA excluding special items to sales 12.5 9.9 13.1
Return on average equity (ROE) (5) (14.9) (7.3) 7.6
Net debt to total capitalisation (5) 54.8 59.1 54.7
Half-year ended
Mar 2011 Mar 2010
Key figures: (US$ million)
Sales 3,697 3,196
Operating (loss) profit 120 29
Special items - losses (1) 144 106
Operating profit excluding special items (2) 264 135
EBITDA excluding special items (3) 474 349
Basic (loss) earnings per share (US cents) (7) (16)
Net debt (4) 2,370 2,429
Key ratios: (%)
Operating (loss) profit to sales 3.3 0.9
Operating profit excluding special items
to sales 7.1 4.2
Operating profit excluding special items
to capital employed (ROCE) 12.5 6.4
EBITDA excluding special items to sales 12.8 10.9
Return on average equity (ROE) (5) (3.8) (9.4)
Net debt to total capitalisation (5) 54.8 59.1
(1) Refer to note 9 for details on special items.
(2) Refer to note 9 to the group results for the reconciliation of operating
profit excluding special items to segment operating (loss) profit.
(3) Refer to note 9 to the group results for the reconciliation of EBITDA
excluding special items and operating profit excluding special items to loss
before taxation.
(4) Refer to Supplemental information for the reconciliation of net debt to
interest-bearing borrowings.
(5) Refer to Supplemental information for the definition of the term.
The table above has not been audited or reviewed.
Commentary on the quarter
Operating profit excluding special items for the quarter more than doubled
compared to a year earlier and on a per week basis was at the same level as
our first financial quarter ended December 2010. The operating performance of
each of our regional businesses improved when compared to a year earlier.
Sales for the quarter increased to US$1.8 billion, up 16% compared to the
equivalent quarter last year. The increase was a result of sales volume
increases in our European and North American businesses and improved prices
in each of the 3 regional businesses, with a further positive effect of
currency translation of the Euro and Rand to the US Dollar.
Input cost increases affected the performance of each of our businesses. In
particular, our European business, which purchases more than half of its pulp
requirements, was affected by high pulp prices together with prices for wood,
latex and energy. The North American and Southern African businesses are net
sellers of pulp and therefore benefitted from high pulp prices.
Special items for the quarter were a charge of US$128 million arising mainly
as a result of costs associated with the envisaged closure of Biberist Mill.
The Biberist charges comprise restructuring costs of US$59 million and non-
cash asset impairment costs of US$59 million. In the event that Biberist Mill
is closed, we will transfer production to, and will service our customers from
our other mills. We estimate the benefits of such a closure to exceed US$50
million per annum.
Operating profit excluding special items was US$127 million in the quarter
compared to US$54 million in the equivalent quarter last year. Including
special items, the result for the quarter was an operating loss of US$1
million compared to an operating profit of US$28 million a year ago.
Net finance costs for the quarter were US$68 million, which includes a net
charge of US$5 million in connection with the repurchase of US$150 million of
bonds.
Earnings per share for the quarter was a loss of 14 US cents (which included a
charge of 23 US cents of special items) compared to a loss of 6 US cents in
the equivalent quarter last year (which included a charge of 3 US cents of
special items).
Cash flow and debt
Cash generated by operations was US$222 million for the quarter and net cash
generated was US$100 million.
Capital expenditure for the quarter was US$47 million.
During the quarter we tendered for and repurchased US$150 million of our 6.75%
bonds maturing in 2012. At quarter end we had cash on hand of US$567 million.
Net debt reduced to US$2.37 billion as a result of cash generation during the
quarter, partly offset by the currency effect of a strong Euro and Rand to the
US Dollar.
After the end of the quarter, we have refinanced a significant portion of our
debt in order to extend the maturities and reduce our finance costs. We have
raised approximately US$705 million of new bonds comprising EUR250 million
(US$350 million) notes due 2018 and US$350 million notes due 2021, each
bearing interest at a rate of 6.625% per annum. The proceeds (plus additional
cash) will be used shortly to redeem the US$350 million remaining outstanding
obligation of our 6.75% notes maturing in 2012 and repay the EUR320 million
(US$450 million) balance of our OeKB term loan. On a pro-forma basis these
transactions would have resulted in cash on hand of US$407 million at the end
of March 2011. In addition, we have increased our EUR209 million (US$300
million) revolving credit facility to EUR350 million (US$500 million) and
extended the maturity to 2016; this facility remains undrawn.
Operating Review for the Quarter
Sappi Fine Paper
Quarter Quarter Quarter
ended ended ended
Mar 2011 Mar 2010 % Dec 2010
US$ million US$ million change US$ million
Sales 1,389 1,208 15 1,409
Operating (loss) profit (42) 50 - 57
Operating (loss)
profit to sales (%) (3.0) 4.1 - 4.0
Special items -
losses (gains) 113 (7) - -
Operating profit
excluding special items 71 43 65 57
Operating profit
excluding special items
to sales (%) 5.1 3.6 - 4.0
EBITDA excluding
special items 144 120 20 137
EBITDA excluding
special items to sales (%) 10.4 9.9 - 9.7
RONOA (1) pa (%) 9.1 5.3 - 7.3
(1) Refer to Supplemental information for the definition of the term.
The fine paper business continued its improving trend, with operating profit
excluding special items increasing 65% compared to the equivalent quarter last
year and 25% compared to the quarter ended December 2010.
Europe
Quarter Quarter
ended ended %
Mar 2011 Mar 2010 change
US$ million US$ million (US$)
Sales 1,017 866 17
Operating (loss) profit (83) 9 -
Operating (loss) profit to sales (%) (8.2) 1.0 -
Special items - losses (gains) 114 (5) -
Operating profit excluding
special items 31 4 675
Operating profit excluding
special items to sales (%) 3.0 0.5 -
EBITDA excluding special items 86 64 34
EBITDA excluding special items
to sales (%) 8.5 7.4 -
RONOA (1) pa (%) 5.7 0.7 -
Quarter
% ended
change Dec 2010
(Euro) US$ million
Sales 19 1,027
Operating (loss) profit - 34
Operating (loss) profit to sales (%) - 3.3
Special items - losses (gains) - -
Operating profit excluding special items 667 34
Operating profit excluding special items to sales (%) - 3.3
EBITDA excluding special items 37 95
EBITDA excluding special items to sales (%) - 9.3
RONOA (1) pa (%) - 6.2
(1) Refer to Supplemental information for the definition of the term.
The European business achieved a 19% increase in sales in Euro terms compared
to the equivalent quarter last year as a result of improved sales volumes and
prices.
During the quarter a price increase was implemented for coated mechanical
paper in the European market. Average prices achieved for coated woodfree
paper in Euro terms were marginally lower during the quarter than in the
quarter ended December 2010, mainly as a result of export prices which,
although higher in US Dollar terms, were lower in Euros as a result of the
stronger Euro/US Dollar exchange rate. Raw material input costs including
wood, chemical and energy costs have increased significantly compared to a
year ago, as have purchased pulp costs. Although our sales prices have
improved compared to a year ago, further increases will be required to fully
offset the effect of input cost increases.
During the quarter we announced that we envisaged closing Biberist Mill in
Switzerland, which could result in annual benefits in excess of US$50 million.
We are currently consulting with the representatives of our employees at
Biberist Mill about the options for the mill. In addition, we have identified
further actions across our business, which will result in fixed and variable
cost savings of over US$50 million per annum once fully implemented.
The European business had continued strong cash generation.
North America
Quarter Quarter Quarter
ended ended ended
Mar 2011 Mar 2010 % Dec 2010
US$ million US$ million change US$ million
Sales 372 342 9 382
Operating profit 41 41 - 23
Operating profit to sales (%) 11.0 12.0 - 6.0
Special items - (gains) (1) (2) - -
Operating profit
excluding special items 40 39 3 23
Operating profit
excluding special items
to sales (%) 10.8 11.4 - 6.0
EBITDA excluding special items 58 56 4 42
EBITDA excluding
special items to sales (%) 15.6 16.4 - 11.0
RONOA (1) pa (%) 17.0 16.0 - 9.9
(1) Refer to Supplemental information for the definition of the term.
The North American business increased sales by 9% compared to a year ago as a
result of increased sales volume and higher prices.
While the coated paper industry experienced seasonally softer demand during
the quarter, our coated paper business remained strong with good operating
rates and improved prices. Our pulp business performed well with good
production and sales volumes. Our speciality business continued its strong
performance with good demand in its major markets. Input costs were
substantially higher than the equivalent quarter last year.
Sappi Southern Africa
Quarter Quarter
ended ended %
Mar 2011 Mar 2010 change
US$ million US$ million (US$)
Sales 435 368 18
Operating profit (loss) 39 (4) -
Operating profit (loss) to sales (%) 9.0 (1.1) -
Special items - losses 14 16 (13)
Operating profit excluding special items 53 12 342
Operating profit excluding special
items to sales (%) 12.2 3.3 -
EBITDA excluding special items 81 37 119
EBITDA excluding special items to sales (%) 18.6 10.1 -
RONOA (1) pa (%) 10.1 2.7 -
Quarter
% ended
change Dec 2010
(Rand) US$ million
Sales 9 464
Operating profit (loss) - 66
Operating profit (loss) to sales (%) - 14.2
Special items - losses (19) 13
Operating profit excluding special items 309 79
Operating profit excluding special items to sales (%) - 17.0
EBITDA excluding special items 103 108
EBITDA excluding special items to sales (%) - 23.3
RONOA (1) pa (%) - 15.8
(1) Refer to Supplemental information for the definition of the term.
The chemical cellulose business achieved improved sales volumes and prices
during the quarter compared to a year ago, but sales volumes were below the
first financial quarter ended December 2010 as a result of the shorter quarter
and the timing of shipments. Demand for chemical cellulose is strong as a
result of demand for viscose fibre, particularly in Asia.
The Sappi Limited board has approved the expansion of the Ngodwana Mill in
South Africa. The expanded mill will produce kraft linerboard, newsprint as
well as 210,000 tons of chemical cellulose. We expect chemical cellulose
production to commence in early 2013.
Our paper and packaging business continued to make a positive contribution to
the region`s results. Market conditions, however, remain tough with the
strength of the Rand relative to the US Dollar contributing to competition
from lower priced imports.
Outlook
We expect business conditions in our major markets to remain favourable;
however, input costs are increasing as the global economic recovery gathers
momentum. We also expect to start realising the benefits of our European
profit improvement measures in the fourth financial quarter. We therefore
expect the improved trend in the group`s underlying operating performance to
continue through the remainder of the financial year.
We expect positive cash generation for the rest of our financial year and good
net cash generation for the full year.
Our third financial quarter, is generally a seasonally weaker quarter. The
quarter will also be impacted by planned annual maintenance shuts at a number
of our major pulp mills, which will result in a substantial increase in
maintenance costs and lost contribution from reduced output. We expect our
results excluding special items for the third financial quarter to be in line
with the equivalent quarter last year.
On behalf of the board
R J Boettger M R Thompson
Director Director 09 May 2011
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. You should not rely on forward-looking statements because they
involve known and unknown risks, uncertainties and other factors which are in
some cases beyond our control and may cause our actual results, performance or
achievements to differ materially from anticipated future results, performance
or achievements expressed or implied by such forward-looking statements (and
from past results, performance or achievements). Certain factors that may
cause such differences include but are not limited to:
- the highly cyclical nature of the pulp and paper industry (and the factors
that contribute to such cyclicality, such as levels of demand, production
capacity, production, input costs including raw material, energy and employee
costs, and pricing);
- the impact on our business of the global economic downturn;
- unanticipated production disruptions (including as a result of planned or
unexpected power outages);
- changes in environmental, tax and other laws and regulations;
- adverse changes in the markets for our products;
- consequences of our leverage, including as a result of adverse changes in
credit markets that affect our ability to raise capital when needed;
- adverse changes in the political situation and economy in the countries in
which we operate or the effect of governmental efforts to address present or
future economic or social problems;
- the impact of investments, acquisitions and dispositions (including related
financing), any delays, unexpected costs or other problems experienced in
connection with dispositions or 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.
Condensed group income statement
Reviewed Reviewed
Quarter Quarter
ended ended
Mar 2011 Mar 2010
Note US$ million US$ million
Sales 1,824 1,576
Cost of sales 1,596 1,443
Gross profit 228 133
Selling, general and administrative expenses 109 114
Other operating expenses (income) 122 (4)
Share of profit from associates and
joint ventures (2) (5)
Operating (loss) profit 2 (1) 28
Net finance costs 68 62
Net interest 77 79
Net foreign exchange gains (3) (6)
Net fair value gains on financial
instruments (6) (11)
Loss before taxation (69) (34)
Taxation 5 (3)
Current 2 (1)
Deferred 3 (2)
Loss for the period (74) (31)
Basic loss per share (US cents) (14) (6)
Weighted average number of shares in issue (millions) 519.7 515.5
Diluted basic loss per share (US cents) (14) (6)
Weighted average number of shares on fully
diluted basis (millions) 519.7 515.5
Reviewed Reviewed
Half-year Half-year
ended ended
Mar 2011 Mar 2010
US$ million US$ million
Sales 3,697 3,196
Cost of sales 3,233 2,974
Gross profit 464 222
Selling, general and administrative expenses 221 221
Other operating expenses (income) 127 (20)
Share of profit from associates and joint ventures (4) (8)
Operating (loss) profit 2 120 29
Net finance costs 139 135
Net interest 155 158
Net foreign exchange gains (7) (9)
Net fair value gains on financial instruments (9) (14)
Loss before taxation (19) (106)
Taxation 18 (24)
Current 4 3
Deferred 14 (27)
Loss for the period (37) (82)
Basic loss per share (US cents) (7) (16)
Weighted average number of shares in issue (millions) 519.6 515.6
Diluted basic loss per share (US cents) (7) (16)
Weighted average number of shares on fully
diluted basis (millions) 519.6 515.6
Group statement of comprehensive income
Reviewed Reviewed Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
US$ million US$ million US$ million US$ million
Loss for the period (74) (31) (37) (82)
Other comprehensive
income (loss),
net of tax 5 - 83 (24)
Exchange differences on
translation of
foreign operations (13) (1) 69 (26)
Movements in
hedging reserves 18 1 15 2
Deferred tax
effects on above - - (1) -
Total comprehensive
(loss) income
for the period (69) (31) 46 (106)
Condensed group balance sheet
Reviewed Reviewed
Mar 2011 Sept 2010
US$ million US$ million
ASSETS
Non-current assets 4,615 4,653
Property, plant and equipment 3,612 3,660
Plantations 701 687
Deferred taxation 57 53
Other non-current assets 245 253
Current assets 2,448 2,531
Inventories 937 836
Trade and other receivables 944 903
Cash and cash equivalents 567 792
Total assets 7,063 7,184
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 1,951 1,896
Non-current liabilities 2,983 3,249
Interest-bearing borrowings 2,009 2,317
Deferred taxation 421 386
Other non-current liabilities 553 546
Current liabilities 2,129 2,039
Interest-bearing borrowings 928 691
Bank overdraft - 5
Other current liabilities 1,166 1,307
Taxation payable 35 36
Total equity and liabilities 7,063 7,184
Number of shares in issue at balance sheet date
(millions) 519.6 519.5
Condensed group statement of cash flows
Reviewed Reviewed Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
US$ million US$ million US$ million US$ million
Loss for the period (74) (31) (37) (82)
Adjustment for:
Depreciation, fellings
and amortisation 122 117 253 249
Taxation 5 (3) 18 (24)
Net finance costs 68 62 139 135
Post-employment benefits (19) (20) (33) (33)
Plantation fair
value adjustment (13) (3) (23) 73
Asset impairments
(impairment reversals) 69 (5) 69 (13)
Restructuring
provisions raised 63 3 66 41
Other non-cash items 1 2 15 21
Cash generated
from operations 222 122 467 367
Movement in
working capital 17 68 (318) (102)
Net finance costs (91) (29) (154) (93)
Taxation paid (12) - (14) (4)
Cash retained from
(utilised in)
operating activities 136 161 (19) 168
Cash utilised in
investing activities (36) (52) (77) (89)
Net cash generated
(utilised) 100 109 (96) 79
Cash effects of
financing activities (159) (122) (174) (65)
Net movement in
cash and cash equivalents (59) (13) (270) 14
Condensed group statement of changes in equity
Reviewed Reviewed
Half-year Half-year
ended ended
Mar 2011 Mar 2010
US$ million US$ million
Balance - beginning of period 1,896 1,794
Total comprehensive income (loss) for the period 46 (106)
Costs directly attributable to the rights offer - (5)
Transfers from (to) the share purchase trust 1 (6)
Share-based payment reserve 8 6
Balance - end of period 1,951 1,683
Notes to the condensed group results
1. Basis of preparation
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board, the AC 500 standards issued by the Accounting
Practices Board and the information required by IAS 34 "Interim Financial
Reporting". They are based on appropriate accounting policies which have been
consistently applied with those applied in the financial statements for the
year ended September 2010 and which are supported by reasonable and prudent
judgements, including those involving estimations.
The condensed interim results for the six-month period ended March 2011 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 office.
Reviewed Reviewed Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
US$ million US$ million US$ million US$ million
2. Operating
(loss) profit
Included in operating
(loss) profit are
the following
non-cash items:
Depreciation and
amortisation 101 102 210 214
Fair value adjustment
on plantations
(included in cost
of sales)
Changes in volume
Fellings 21 15 43 35
Growth (16) (14) (37) (33)
5 1 6 2
Plantation price
fair value adjustment 3 11 14 106
8 12 20 108
Included in other
operating expenses
(income) are the
following:
Asset impairments
(impairment reversals) 69 (5) 69 (13)
(Profit) loss on
disposal of property,
plant and equipment - (1) - 1
Profit on disposal
of investment - (1) - (1)
Restructuring
provisions raised 63 3 66 41
Black Economic
Empowerment charge 1 - 2 -
Fuel tax credit - (2) - (51)
3. Headline (loss)
earnings per share (1)
Headline (loss)
earnings per share
(US cents) (2) (7) 5 (18)
Weighted average
number of shares
in issue (millions) 519.7 515.5 519.6 515.6
Diluted headline
(loss) earnings
per share (US cents) (2) (7) 5 (18)
Weighted average
number of shares
on fully diluted
basis (millions) 519.7 515.5 519.6 515.6
Calculation of
headline (loss)
earnings (1)
Loss for the period (74) (31) (37) (82)
Asset impairments
(impairment reversals) 69 (5) 69 (13)
(Profit) loss on
disposal of property,
plant and equipment - (1) - 1
Profit on disposal
of investment - (1) - (1)
Tax effect of above items (5) - (5) -
Headline (loss) earnings (10) (38) 27 (95)
(1) Headline earnings disclosure is required by the JSE Limited.
Reviewed Reviewed Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
US$ million US$ million US$ million US$ million
4. Capital expenditure
Property, plant
and equipment 47 41 92 78
Reviewed Reviewed
Mar 2011 Sept 2010
US$ million US$ million
5. Capital commitments
Contracted 90 62
Approved but not contracted 187 109
277 171
6. Contingent liabilities
Guarantees and suretyships 48 48
Other contingent liabilities 8 8
56 56
7. Material balance sheet movements compared to September 2010
Cash and cash equivalents and other current liabilities
The decrease in cash and cash equivalents and in other current liabilities is
largely due to the timing of creditor payments as a result of the calendar
month-end falling before the fiscal month-end when creditor payments fell due
and the repayment of US$150 million principal amount of the outstanding US$500
million 6.75% Guaranteed Notes due June 2012.
Interest-bearing borrowings
The decrease in other non-current and increase in current interest-bearing
borrowings is due to the transfer to current interest-bearing borrowings of
loans falling due in the next twelve months.
8. Post balance sheet events
On 05 April 2011, Sappi issued approximately US$705 million Senior Secured
Notes split into a ten-year US$350 million tranche and a 7-year EUR250 million
tranche. Both tranches were issued at par and bear interest at a rate of
6.625% per annum. The net proceeds of the Notes are being used to redeem the
remaining outstanding US$350 million of our 6.75% Guaranteed Notes due June
2012 and to repay EUR200 million of the outstanding borrowings of EUR320
million under our OeKB Term Loan Facility. At the same time, our existing
undrawn revolving credit facility maturing 2012 was increased from a EUR209
million to a EUR350 million facility and extended to 2016. Furthermore, notice
was given to repay the remaining EUR120 million OeKB Term Loan balance on 26
May 2011 from cash resources.
9. Segment information
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
Metric tons Metric tons Metric tons Metric tons
(000`s) (000`s) (000`s) (000`s)
Sales volume
Fine Paper -
North America 349 345 713 667
Europe 982 919 1,994 1,863
Total 1,331 1,264 2,707 2,530
Southern Africa -
Pulp and paper 414 425 866 875
Forestry 242 244 436 412
Total 1,987 1,933 4,009 3,817
Reviewed Reviewed Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
US$ million US$ million US$ million US$ million
Sales
Fine Paper -
North America 372 342 754 662
Europe 1,017 866 2,044 1,802
Total 1,389 1,208 2,798 2,464
Southern Africa -
Pulp and paper 414 351 861 701
Forestry 21 17 38 31
Total 1,824 1,576 3,697 3,196
Operating profit
(loss)excluding special
items
Fine Paper -
North America 40 39 63 58
Europe 31 4 65 29
Total 71 43 128 87
Southern Africa 53 12 132 41
Unallocated and
eliminations (1) 3 (1) 4 7
Total 127 54 264 135
Special items -
losses (gains)
Fine Paper -
North America (1) (2) (1) (50)
Europe 114 (5) 114 8
Total 113 (7) 113 (42)
Southern Africa 14 16 27 131
Unallocated and
eliminations (1) 1 17 4 17
Total 128 26 144 106
Segment operating
(loss) profit
Fine Paper -
North America 41 41 64 108
Europe (83) 9 (49) 21
Total (42) 50 15 129
Southern Africa 39 (4) 105 (90)
Unallocated and
eliminations (1) 2 (18) - (10)
Total (1) 28 120 29
EBITDA excluding
special items
Fine Paper -
North America 58 56 100 98
Europe 86 64 181 152
Total 144 120 281 250
Southern Africa 81 37 189 92
Unallocated and
eliminations (1) 3 (1) 4 7
Total 228 156 474 349
Segment assets
Fine Paper -
North America 956 966 956 966
Europe 2,120 2,126 2,120 2,126
Total 3,076 3,092 3,076 3,092
Southern Africa 2,092 1,777 2,092 1,777
Unallocated and
eliminations (1) 70 32 70 32
Total 5,238 4,901 5,238 4,901
(1) Includes the group`s treasury operations, the self-insurance captive and
the investment in the Jiangxi Chenming joint venture.
Reconciliation of operating profit excluding special items to segment
operating (loss) 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.
Reviewed Reviewed Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
US$ million US$ million US$ million US$ million
Operating profit
excluding special items 127 54 264 135
Special items (128) (26) (144) (106)
Plantation price
fair value adjustment (3) (11) (14) (106)
Restructuring
provisions raised (63) (3) (66) (41)
Profit (loss) on
disposal of property,
plant and equipment - 1 - (1)
Profit on disposal
of investment - 1 - 1
Asset (impairments)
impairment reversals (69) 5 (69) 13
Fuel tax credit - 2 - 51
Black Economic
Empowerment charge (1) - (2) -
Insurance recoveries 11 - 11 -
Fire, flood, storm
and related events (3) (21) (4) (23)
Segment operating
(loss) profit (1) 28 120 29
Reconciliation of
EBITDA excluding
special items and
operating profit
excluding special
items to loss before
taxation
EBITDA excluding
special items 228 156 474 349
Depreciation and
amortisation (101) (102) (210) (214)
Operating profit
excluding special items 127 54 264 135
Special items - losses (128) (26) (144) (106)
Net finance costs (68) (62) (139) (135)
Loss before taxation (69) (34) (19) (106)
Reconciliation of
segment assets to
total assets
Segment assets 5,238 4,901 5,238 4,901
Deferred tax 57 52 57 52
Cash and cash
equivalents 567 724 567 724
Other current
liabilities 1,166 1,057 1,166 1,057
Taxation payable 35 50 35 50
Liabilities associated
with assets held for sale - 18 - 18
Total assets 7,063 6,802 7,063 6,802
Supplemental information (this information has not been audited or reviewed)
General definitions
Average - averages are calculated as the sum of the opening and closing
balances for the relevant period divided by two
Black Economic Empowerment - as envisaged in the Black Economic Empowerment
(BEE) legislation in South Africa
Black Economic Empowerment charge - represents the IFRS 2 non-cash charge
associated with the BEE transaction implemented in fiscal 2010
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 (ie 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 re-measurements. It is not necessarily a measure of sustainable
earnings. It is a Listings 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)
less current liabilities (excluding interest-bearing borrowings and
overdraft). Net operating assets is considered to equal segment assets
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 segment 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 Half-year Half-year
ended ended ended ended
Mar 2011 Mar 2010 Mar 2011 Mar 2010
Key figures: (ZAR million)
Sales 12,761 11,914 25,685 24,067
Operating (loss) profit (7) 212 834 218
Special items - losses (1) 896 197 1,000 798
Operating profit excluding
special items (1) 889 408 1,834 1,017
EBITDA excluding special
items (1) 1,595 1,179 3,293 2,628
Basic loss per share (SA cents) (98) (45) (49) (120)
Net debt (1) 15,874 18,047 15,874 18,047
Key ratios: (%)
Operating (loss) profit to
sales (0.1) 1.8 3.2 0.9
Operating profit excluding
special items to sales 7.0 3.4 7.1 4.2
Operating profit excluding
special items to Capital
Employed (ROCE)(1) 12.2 5.2 12.7 6.5
EBITDA excluding special
items to sales 12.5 9.9 12.8 10.9
Return on average equity (ROE) (15.7) (7.4) (3.9) (9.6)
Net debt to total
capitalisation (1) 54.8 59.1 54.8 59.1
(1) Refer to Supplemental information for the definition of the term.
The above financial results have been translated into Rands 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.
Reconciliation of net debt to interest-bearing borrowings
Mar 2011 Sept 2010
US$ million US$ million
Interest-bearing borrowings 2,937 3,013
Non-current interest-bearing borrowings 2,009 2,317
Current interest-bearing borrowings 928 691
Bank overdraft - 5
Cash and cash equivalents (567) (792)
Net debt 2,370 2,221
Exchange rates
Mar Dec Sept Jun Mar
2011 2010 2010 2010 2010
Exchange rates:
Period end rate:
US$1 = ZAR 6.6978 6.6190 7.0190 7.6250 7.4298
Average rate for the
Quarter:
US$1 = ZAR 6.9963 6.9464 7.3517 7.5821 7.5597
Average rate for the YTD:
US$1 = ZAR 6.9476 6.9464 7.4917 7.5610 7.5302
Period end rate:
EUR1 = US$ 1.4231 1.3380 1.3491 1.2377 1.3413
Average rate for the
Quarter:
EUR1 = US$ 1.3702 1.3516 1.2871 1.2937 1.3891
Average rate for the YTD:
EUR1 = US$ 1.3645 1.3516 1.3658 1.3845 1.4302
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: United States:
Computershare Investor ADR Depositary:
Services (Proprietary) Limited The Bank of New York Mellon
70 Marshall Street Investor Relations
Johannesburg 2001 PO Box 11258
PO Box 61051 Church Street Station
Marshalltown 2107 New York, NY 10286-1258
Tel +27 (0)11 370 5000 Tel +1 610 382 7836
Sappi has a primary listing on the JSE Limited and a secondary listing on the
New York Stock Exchange
this report is available on the Sappi website
www.sappi.com
Date: 09/05/2011 08:58:01 Produced by the JSE SENS Department.
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