| Wed 8 Feb 2012, 8:00 | | SAP - Sappi Limited - 1st Quarter results for the period ending December 2011 |
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SAP
SAVVI
SAP - Sappi Limited - 1st Quarter results for the period ending December 2011
Sappi Limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
1st Quarter results for the period ending December 2011
Sappi works closely with customers, both direct and indirect, in over 100
countries to provide them with relevant and sustainable paper, paper-pulp and
chemical cellulose products and related services and innovations.
Our market-leading range of paper products includes: coated fine papers used
by printers, publishers and corporate end-users in the production of books,
brochures, magazines, catalogues, direct mail and many other print
applications; casting release papers used by suppliers to the fashion,
textiles, automobile and household industries; and in our Southern African
region, newsprint, uncoated graphic and business papers, premium-quality
packaging papers, paper-grade pulp and chemical cellulose.
Our chemical cellulose products are used worldwide by converters to create
viscose fibre, acetate tow, pharmaceutical products as well as a wide range of
consumer products.
The pulp needed for our products is either produced within Sappi or bought
from accredited suppliers. Across the group, Sappi is close to `pulp neutral`,
meaning that we sell almost as much pulp as we buy.
Financial summary for the quarter
* Profit for the period US$45 million; Q1 2011 US$37 million
* EPS 9 US cents; Q1 2011 7 US cents
* Operating profit excluding special items US$100 million;
Q1 2011 US$137 million
* European business performance benefits from restructuring and cost
reduction actions
* Southern African chemical cellulose business performed strongly
* Net debt US$2,175 million, up US$75 million on seasonal working
capital increase
Quarter ended
Dec 2011 Dec 2010* Sept 2011
Key figures: (US$ million)
Sales 1,585 1,873 1,787
Operating profit (loss) 107 121 (88)
Special items - (gains) losses(1) (7) 16 168
Operating profit excluding special
items(2) 100 137 80
EBITDA excluding special items(3) 194 246 183
Basic earnings (loss) per share (US cents) 9 7 (24)
Net debt(4) 2,175 2,432 2,100
Key ratios: (%)
Operating profit (loss) to sales 6.8 6.5 (4.9)
Operating profit excluding special
items to sales 6.3 7.3 4.5
Operating profit excluding special
items to capital employed (ROCE) 11.0 12.8 8.1
EBITDA excluding special items to
sales 12.2 13.1 10.2
Return on average equity (ROE)(5) 12.0 7.6 (30.2)
Net debt to total capitalisation(5) 58.9 54.7 58.7
Net asset value per share (US cents) 291 388 284
(1) Refer to note 8 for details on special items.
(2) Refer to note 8 to the group results for the reconciliation of operating
profit excluding special items to segment operating profit.
(3) Refer to note 8 to the group results for the reconciliation of EBITDA
excluding special items and operating profit excluding special items to profit
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 quarter ended December 2010 included 14 weeks whereas the quarters ended
September 2011 and December 2011 included 13 weeks.
The table above has not been audited or reviewed.
Commentary on the quarter
Following a year in which various actions and strategies were initiated,
primarily involving extensive restructuring charges and asset impairments, the
group achieved a profit for the period of US$45 million (Q1 2011 US$37
million) and EPS of 9 US cents (Q1 2011 7 US cents) in the first quarter of
the 2012 financial year.
NOTE: The comparative first quarter of the 2011 financial year consisted of 14
weeks, compared to the 13 weeks of both the first quarter of the 2012
financial year and the fourth quarter of the 2011 financial year. This results
in increased levels of sales and profits in Q1 2011 against which Q1 2012 and
Q4 2011 are compared.
Market conditions remained uncertain as a result of the continued negative
sentiment in financial markets. Nevertheless, utilisation levels for our
coated paper mills remained at high levels in North America and reasonable
levels in Europe.
Pulp prices continued to decline during the quarter but stabilised towards the
end of the quarter.
The European business benefited from lower input prices (particularly pulp)
and the implementation of its US$100 million per annum cost reduction actions
resulting in a significant improvement in operating profit for the region
compared to the quarter ended September 2011.
The reduction in pulp prices had an unfavourable impact on our North American
business, which is a net seller of pulp. In addition, pulp production
interruptions at Somerset Mill and weaker markets for casting release paper in
China had an unfavourable impact on operating profit compared to the
equivalent quarter last year, despite a performance of the North American
coated paper business that was in line with expectations.
The Southern African chemical cellulose business performed strongly. The
weaker Rand/US Dollar exchange rate substantially compensated for lower US
Dollar sales prices. The progress made by the paper business` restructuring is
expected to lead to improved profitability in the second half of the financial
year.
Group operating profit (excluding special items) has improved for two
consecutive quarters coming in at US$100 million but was below the US$137
million in the equivalent quarter last year, partly as a result of the
additional week in the comparative period.
There were no major special items for the quarter, which is in line with our
aim to minimise once-off charges or special items during the year ahead other
than possible adjustments in plantation fair value. The special item gain of
US$7 million included a plantation fair value adjustment of US$3 million and
profit on the sale of assets of US$5 million.
Operating profit was therefore US$107 million compared to US$121 million in
the equivalent quarter last year.
Finance costs of US$54 million were significantly lower than the equivalent
quarter last year (US$71 million) following the refinancing we concluded in
the 2011 financial year and the use of cash to repay higher cost debt.
Cash flow and debt
Net cash utilised for the quarter was US$111 million, an improvement compared
to net cash utilised of US$196 million in the equivalent quarter last year.
This cash outflow for the quarter was mainly a result of a seasonal increase
in working capital. Working capital typically increases at the end of the
first financial quarter as a result of the seasonal slowdown in deliveries in
the second half of December. Capital expenditure in the quarter increased to
US$76 million compared to US$45 million a year ago, reflecting the
commencement of the investments in the announced chemical cellulose expansion
projects. We aim to constrain capital expenditure including these transforming
projects, to below US$450 million for the year, which is slightly above the
expected depreciation charge for the year.
Net debt increased to US$2,175 million from US$2,100 million in the quarter
ended September 2011 as a result of seasonal cash utilisation partly offset by
currency movements. Net debt is down from US$2,432 million in December 2010.
Cash on hand was US$401 million at quarter end after debt repayments of
approximately US$140 million during the quarter.
Operating Review - Quarter ended December 2011 compared with quarter ended
December 2010
NOTE: In order to provide greater context to the performance of our regional
businesses, the tables below summarise the regional results in local currency.
Note 8 discloses the results in US Dollars. In addition, we report 5
consecutive quarters.
Sappi Fine Paper
Quarter Quarter Quarter
ended ended ended
Dec 2011 Sept 2011 Jun 2011
US$ million US$ million US$ million
Sales 1,198 1,337 1,350
Operating profit excluding special items 39 39 30
Operating profit excluding special
items to sales (%) 3.3 2.9 2.2
EBITDA excluding special items 110 115 107
EBITDA excluding special items to
sales (%) 9.2 8.6 7.9
RONOA pa (%) 5.6 5.3 3.9
Quarter Quarter
ended ended
Mar 2011 Dec 2010
US$ million US$ million*
Sales 1,389 1,409
Operating profit excluding special items 71 57
Operating profit excluding special items to sales (%) 5.1 4.0
EBITDA excluding special items 144 137
EBITDA excluding special items to sales (%) 10.4 9.7
RONOA pa (%) 9.1 7.3
* The quarter ended December 2010 included 14 weeks whereas all other quarters
included 13 weeks
The coated paper businesses performed in line with expectations in North
America and the improvement in Europe reflected the cost reduction and
restructuring actions we implemented last year.
The performance of the North American segment was unfavourably impacted by
lower pulp output, declining pulp prices and weaker demand for casting release
products particularly in the Chinese markets.
Europe
Quarter Quarter Quarter
ended ended ended
Dec 2011 Sept 2011 Jun 2011
EUR million EUR million EUR million
Sales 628 666 679
Operating profit (loss) excluding
special items 22 3 (2)
Operating profit (loss) excluding
special items
to sales (%) 3.5 0.5 (0.3)
EBITDA excluding special items 60 44 38
EBITDA excluding special items to
sales (%) 9.6 6.6 5.6
RONOA pa (%) 6.1 0.8 (0.3)
Quarter Quarter
ended ended
Mar 2011 Dec 2010
EUR million EUR million*
Sales 738 760
Operating profit (loss) excluding special items 23 25
Operating profit (loss) excluding special items
to sales (%) 3.1 3.3
EBITDA excluding special items 63 70
EBITDA excluding special items to sales (%) 8.5 9.2
RONOA pa (%) 5.8 6.2
* The quarter ended December 2010 included 14 weeks whereas all other quarters
included 13 weeks
The benefits of the restructuring and cost reduction actions undertaken in our
European business exceeded the target of US$25 million per quarter (US$100
million per annum) for the quarter. The transition of coated products from
Biberist Mill to our other mills was successfully concluded. In addition, the
initiatives to reduce variable and fixed costs progressed well.
As a result of our capacity reduction, operating rates remained reasonable
despite the uncertain market conditions.
In addition to the benefits of our cost reduction actions, prices for major
input costs were lower.
Prices realised for coated woodfree paper were 4% lower than the equivalent
quarter last year and for coated mechanical, were 5% higher. The specialities
business, which supplies the growing renewable packaging market, performed
well.
During the quarter, the agreement that Sappi sell the output of Aanekoski Mill
was terminated on the closure of the mill by the owner, resulting in an
improvement in the coated woodfree paper supply/demand balance in Europe. The
transition of part of the production to our mills is progressing well.
North America
Quarter Quarter Quarter
ended ended ended
Dec 2011 Sept 2011 Jun 2011
US$ million US$ million US$ million
Sales 352 395 371
Operating profit excluding special items 10 34 32
Operating profit excluding special
items to sales (%) 2.8 8.6 8.6
EBITDA excluding special items 29 53 50
EBITDA excluding special items to
sales (%) 8.2 13.4 13.5
RONOA pa (%) 4.4 14.9 13.7
Quarter Quarter
ended ended
Mar 2011 Dec 2010
US$ million US$ million*
Sales 372 382
Operating profit excluding special items 40 23
Operating profit excluding special items to sales (%) 10.8 6.0
EBITDA excluding special items 58 42
EBITDA excluding special items to sales (%) 15.6 11.0
RONOA pa (%) 17.0 9.9
* The quarter ended December 2010 included 14 weeks whereas all other quarters
included 13 weeks
The performance of our North American coated paper business was in line with
expectations. Sales volumes were at the same level as a year earlier on a per
week basis. Average prices realised for coated paper were 3% higher than the
equivalent quarter last year.
The pulp business was impacted by lower pulp sales prices and unplanned pulp
production interruptions at Somerset Mill in addition to the planned annual
maintenance shut of the pulp mill during the quarter. The pulp business`
operating profit was US$6 million below the equivalent quarter last year.
The casting release business underperformed mainly as a result of lower demand
in China during the quarter.
Sappi Southern Africa
Quarter Quarter Quarter
ended ended ended
Dec 2011 Sept 2011 Jun 2011
ZAR million ZAR million ZAR million
Sales 3,131 3,217 3,068
Operating profit excluding special items 494 296 172
Operating profit excluding special
items to sales (%) 15.8 9.2 5.6
EBITDA excluding special items 680 482 355
EBITDA excluding special items to
sales (%) 21.7 15.0 11.6
RONOA pa (%) 15.1 8.9 4.9
Quarter Quarter
ended ended
Mar 2011 Dec 2010
ZAR million ZAR million*
Sales 3,023 3,223
Operating profit excluding special items 368 549
Operating profit excluding special items to sales (%) 12.2 17.0
EBITDA excluding special items 563 750
EBITDA excluding special items to sales (%) 18.6 23.3
RONOA pa (%) 10.5 16.1
* The quarter ended December 2010 included 14 weeks whereas all other quarters
included 13 weeks
The chemical cellulose business continued to perform strongly during the
quarter, generating almost all of the operating profit excluding special items
of the region for the quarter. Our prices, which are generally linked to NBSK
prices, declined in US Dollar terms in line with the decline in NBSK prices.
This reduction was offset by a weakening of the Rand/US Dollar exchange rate,
resulting in an increase in average prices realised in Rand terms compared to
a year earlier and the quarter ended September 2011.
The Southern African paper business is proceeding with the restructuring
announced last year. The restructuring includes streamlining sales and
marketing and the other central functions and services. We have progressed the
consultation with our employees about the intended closures of the pulp mill
at Enstra Mill, the kraft pulp mill at Tugela Mill, a 10,000-ton kraft paper
machine at Tugela Mill and further improving operating efficiency at each
Southern African mill. The benefits of the restructuring are expected to be
realised from the second half of the financial year. The restructuring and
impairment charges related to these actions were accounted for in the quarter
ended September 2011.
Directorate
Mr J E Healey (Jim) retired from the board at the end of December 2011 having
reached the company`s mandatory retirement age.
Outlook
Although market conditions remain uncertain, we are experiencing reasonable
demand in our major markets. Our focus is on delivering the benefits of the
restructuring and cost reduction actions announced and implemented in 2011 -
in line with the group`s stated strategy.
The European business has made good progress with its US$100 million per annum
cost reduction plans and has further benefited from the reduction of prices
for some raw materials, including pulp. At current demand levels we expect to
see further improvement in the performance of this business as the year
progresses.
We expect that the North American business` overall performance will improve
as a result of increased pulp production, as well as an improvement in Chinese
demand for casting release paper. There are signs that pulp prices may have
reached a turning point and we could see an increasing trend over the next few
months. The North American coated paper business is expected to continue
performing well.
The restructuring of the Southern African business is proceeding as planned
and we expect the benefits to be realised from the second half of the
financial year.
Demand for our chemical cellulose remains relatively strong. The performance
of our Southern African chemical cellulose business is sensitive to the Rand
price for our sales, based on the US Dollar chemical cellulose price and the
Rand/Dollar exchange rates. To date the exchange rate movement has largely
offset the drop in prices, resulting in relatively stable Rand-denominated
chemical cellulose prices realised and good margins for our business. The
chemical cellulose expansion projects announced last year are on track.
We are committed to managing our debt levels with a view to reducing net debt
below US$2 billion as soon as the current transforming capital expenditure has
been completed and thereafter to reducing gearing (eg Net Debt to EBITDA) to a
substantially lower level. We expect net cash generation to turn positive for
the full year after the increased capital expenditure and for debt levels,
given constant exchange rates, to reduce by the year end.
Provided there is no deterioration in market conditions, we expect the second
quarter operating profit excluding special items to improve compared to the
first quarter.
On behalf of the board
R J Boettger
Director
M R Thompson
Director
08 February 2012
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 restructurings, cost-reduction programmes, 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
Quarter Quarter
ended ended
Dec 2011 Dec 2010
Note US$ million US$ million
Sales 1,585 1,873
Cost of sales 1,377 1,637
Gross profit 208 236
Selling, general and administrative expenses 105 112
Other operating (income) expenses (4) 5
Share of profit from associates and
joint ventures - (2)
Operating profit 2 107 121
Net finance costs 54 71
Net interest 56 78
Net foreign exchange gains (1) (4)
Net fair value gains on financial
instruments (1) (3)
Profit before taxation 53 50
Taxation 8 13
Current (1) 2
Deferred 9 11
Profit for the period 45 37
Basic earnings per share (US cents) 9 7
Weighted average number of shares in issue (millions) 520.5 519.5
Diluted basic earnings per share (US cents) 9 7
Weighted average number of shares on
fully diluted basis (millions) 524.5 524.5
Condensed group statement of comprehensive income
Quarter Quarter
ended ended
Dec 2011 Dec 2010
US$ million US$ million
Profit for the period 45 37
Other comprehensive (loss) income, net of tax (11) 78
Exchange differences on translation of foreign operations 2 82
Movements in hedging reserves (14) (3)
Deferred tax effect of above items 1 (1)
Total comprehensive income for the period 34 115
Condensed group balance sheet
Reviewed
Dec 2011 Sept 2011
US$ million US$ million
ASSETS
Non-current assets 4,026 4,085
Property, plant and equipment 3,171 3,235
Plantations 586 580
Deferred taxation 43 45
Other non-current assets 226 225
Current assets 1,943 2,223
Inventories 771 750
Trade and other receivables 771 834
Cash and cash equivalents 401 639
Total assets 5,969 6,308
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 1,516 1,478
Non-current liabilities 3,134 3,178
Interest-bearing borrowings 2,245 2,289
Deferred taxation 342 336
Other non-current liabilities 547 553
Current liabilities 1,319 1,652
Interest-bearing borrowings 326 449
Bank overdraft 5 1
Other current liabilities 974 1,182
Taxation payable 14 20
Total equity and liabilities 5,969 6,308
Number of shares in issue at balance sheet date
(millions) 520.9 520.5
Condensed group statement of cash flows
Quarter Quarter
ended ended
Dec 2011 Dec 2010
US$ million US$ million
Profit for the period 45 37
Adjustment for:
Depreciation, fellings and amortisation 113 131
Taxation 8 13
Net finance costs 54 71
Defined post-employment benefits (11) (14)
Plantation fair value adjustments (24) (10)
Restructuring provisions - 3
Black Economic Empowerment charge 1 1
Other non-cash items 9 13
Cash generated from operations 195 245
Movement in working capital (166) (335)
Net finance costs paid (64) (63)
Taxation paid (5) (2)
Cash utilised in operating activities (40) (155)
Cash utilised in investing activities (71) (41)
Net cash utilised (111) (196)
Cash effects of financing activities (117) (15)
Net movement in cash and cash equivalents (228) (211)
Condensed group statement of changes in equity
Quarter Quarter
ended ended
Dec 2011 Dec 2010
US$ million US$ million
Balance - beginning of period 1,478 1,896
Total comprehensive income for period 34 115
Transfers from the share purchase trust 2 2
Transfers of vested share options (2) -
Share-based payment reserve 4 3
Balance - end of period 1,516 2,016
Notes to the condensed group results
1. Basis of preparation
The condensed consolidated interim financial results for the three months
ended December 2011 have been prepared in compliance with the Listings
Requirements of the JSE Limited and in accordance with the framework concepts
and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards
Board, AC 500 standards issued by the Accounting Practices Board, the
requirements of the Companies Act of South Africa and the information required
by IAS 34 `Interim Financial Reporting`. The accounting policies applied in
the preparation of these interim financial results are consistent with those
applied for the year ended September 2011.
The quarter ended December 2011 consisted of 13 weeks compared to the fiscal
quarter ended December 2010 which consisted of 14 weeks.
The preparation of this condensed consolidated financial information was
supervised by the Chief Financial Officer, M R Thompson, CA(SA).
These results are unaudited.
Quarter Quarter
ended ended
Dec 2011 Dec 2010
US$ million US$ million
2. Operating profit
Included in operating profit are the following
non-cash items:
Depreciation and amortisation 94 109
Fair value adjustment on plantations (included in
cost of sales)
Changes in volume
Fellings 19 22
Growth (21) (21)
(2) 1
Plantation price fair value adjustment (3) 11
(5) 12
Included in other operating (income) expenses are
the following:
Profit on disposal of property, plant and equipment (5) -
Restructuring provisions - 3
Black Economic Empowerment charge 1 1
3. Headline earnings per share
Headline earnings per share (US cents) 8 7
Weighted average number of shares in issue (millions) 520.5 519.5
Diluted headline earnings per share (US cents) 8 7
Weighted average number of shares on fully diluted
basis (millions) 524.5 524.5
Calculation of headline earnings
Profit for the period 45 37
Profit on disposal of property, plant and equipment (5) -
Tax effect of above items - -
Headline earnings 40 37
4. Capital expenditure
Property, plant and equipment 76 45
Reviewed
Dec 2011 Sept 2011
US$ million US$ million
5. Capital commitments
Contracted 193 61
Approved but not contracted 538 416
731 477
The increase is primarily due to the announced
conversion of the Cloquet Mill in North America
to produce chemical cellulose.
6. Contingent liabilities
Guarantees and suretyships 32 33
Other contingent liabilities 8 15
40 48
7. Material balance sheet movements
Cash and cash equivalents, interest-bearing borrowings and other current
liabilities.
The group repaid US$142 million of debt from cash resources including the ZAR
10.64% fixed rate public bonds in Southern Africa of US$124 million (ZAR1,000
million).
In addition, other current liabilities were reduced by payments of
restructuring and other accruals.
8. Segment information
Quarter Quarter
ended ended
Dec 2011 Dec 2010
Metric tons Metric tons
(000`s) (000`s)
Sales volume
Fine Paper - North America 339 364
Europe 849 1,012
Total 1,188 1,376
Southern Africa - Pulp and paper 400 452
Forestry 241 194
Total 1,829 2,022
US$ million US$ million
Sales
Fine Paper - North America 352 382
Europe 846 1,027
Total 1,198 1,409
Southern Africa - Pulp and paper 368 447
Forestry 19 17
Total 1,585 1,873
Quarter Quarter
ended ended
Dec 2011 Dec 2010
US$ million US$ million
Operating profit excluding
special items
Fine Paper - North America 10 23
Europe 29 34
Total 39 57
Southern Africa 61 79
Unallocated and eliminations (1) - 1
Total 100 137
Special items - (gains) losses
Fine Paper - North America - -
Europe (5) -
Total (5) -
Southern Africa (2) 13
Unallocated and eliminations (1) - 3
Total (7) 16
Segment operating profit (loss)
Fine Paper - North America 10 23
Europe 34 34
Total 44 57
Southern Africa 63 66
Unallocated and eliminations (1) - (2)
Total 107 121
EBITDA excluding special items
Fine Paper - North America 29 42
Europe 81 95
Total 110 137
Southern Africa 84 108
Unallocated and eliminations (1) - 1
Total 194 246
Segment assets
Fine Paper - North America 901 924
Europe 1,908 2,255
Total 2,809 3,179
Southern Africa 1,663 2,121
Unallocated and eliminations (1) 65 65
Total 4,537 5,365
(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 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.
Quarter Quarter
ended ended
Dec 2011 Dec 2010
US$ million US$ million
Operating profit excluding special items 100 137
Special Items 7 (16)
Plantation price fair value adjustment 3 (11)
Restructuring provisions - (3)
Profit on disposal of property, plant and equipment 5 -
Black Economic Empowerment charge (1) (1)
Fire, flood, storm and related events - (1)
Segment operating profit 107 121
Reconciliation of EBITDA excluding special items
and operating profit excluding special items
to profit before taxation
EBITDA excluding special items 194 246
Depreciation and amortisation (94) (109)
Operating profit excluding special items 100 137
Special items - gains (losses) 7 (16)
Net finance costs (54) (71)
Profit before taxation 53 50
Reconciliation of segment assets to total assets
Segment assets 4,537 5,365
Deferred taxation 43 52
Cash and cash equivalents 401 591
Other current liabilities 974 1,030
Taxation payable 14 39
Total assets 5,969 7,077
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 equate to 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
ended ended
Dec 2011 Dec 2010
Key figures: (ZAR million)
Sales 12,825 13,011
Operating profit 866 841
Special items - (gains) losses(1) (57) 111
Operating profit excluding special items(1) 809 952
EBITDA excluding special items(1) 1,570 1,709
Basic earnings per share (SA cents) 73 49
Net debt(1) 17,587 16,097
Key ratios: (%)
Operating profit to sales 6.8 6.5
Operating profit excluding special items to sales 6.3 7.3
Operating profit excluding special items to capital
employed (ROCE)(1) 11.0 13.1
EBITDA excluding special items to sales 12.2 13.1
Return on average equity (ROE) 12.0 7.7
Net debt to total capitalisation(1) 58.9 54.7
(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
Dec 2011 Sept 2011
US$ million US$ million
Interest-bearing borrowings 2,576 2,739
Non-current interest-bearing borrowings 2,245 2,289
Current interest-bearing borrowings 326 449
Bank overdraft 5 1
Cash and cash equivalents (401) (639)
Net debt 2,175 2,100
Exchange rates
Dec Sept Jun Mar Dec
2011 2011 2011 2011 2010
Exchange rates:
Period end rate: US$1 = ZAR 8.0862 8.0963 6.7300 6.6978 6.6190
Average rate for the
Quarter: US$1 = ZAR 8.0915 7.1501 6.7890 6.9963 6.9464
Average rate for the YTD:
US$1 = ZAR 8.0915 6.9578 6.8941 6.9476 6.9464
Period end rate: EUR1 = US$ 1.2948 1.3386 1.4525 1.4231 1.3380
Average rate for the
Quarter: EUR1 = US$ 1.3482 1.4126 1.4398 1.3702 1.3516
Average rate for the
YTD: EUR1 = US$ 1.3482 1.3947 1.3890 1.3645 1.3516
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
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: 08/02/2012 08:00:09 Produced by the JSE SENS Department.
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