| Wed 8 Feb 2012, 8:11 | | SAP - Sappi Limited - Results for the first quarter ended December 2011 |
|
SAP
SAVVI
SAP - Sappi Limited - Results for the first quarter ended December 2011
Sappi Limited
(Incorporated in the Republic of South Africa)
Registration number: 1936/008963/06
JSE share code: SAP
ISIN code: ZAE000006284
NYSE code: SPP
Johannesburg, 08 February 2012
Results for the first quarter ended December 2011
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$75 million on seasonal working capital increase
Summary
Quarter ended
Dec 2011 Dec Sept 2011
2010**
Key figures: (US$ million)
Sales 1,585 1,873 1,787
Operating profit (loss) 107 121 (88)
Special items - (gains) losses* (7) 16 168
Operating profit excluding special 100 137 80
items*
EBITDA excluding special items * 194 246 183
Basic earnings (loss) per share (US 9 7 (24)
cents)
Net debt* 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)* 12.0 7.6 (30.2)
Net debt to total capitalisation* 58.9 54.7 58.7
Net asset value per share (US cents) 291 388 284
* Refer to the published results for details on special items, the
definition of the terms, the reconciliation of profit/loss for the period to
EBITDA excluding special items.
** 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.
Commenting on the results, Sappi Chief Executive Officer Ralph Boettger said:
"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.
"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 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.
"The chemical cellulose business continued to perform strongly during the
quarter, generating almost all of the operating profit excluding special items
of the Southern African region for the quarter.
"The Southern African paper business is proceeding with the restructuring
announced last year for which the charges were reported in the fourth financial
quarter of 2011.
"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 on hand was US$401 million at quarter end after debt repayments of
approximately US$140 million during the quarter. Net debt at US$2,175 million is
slightly higher than the previous quarter (US$2,100 million) but substantially
down from US$2,432 million as at December 2010."
Outlook
Looking forward, Boettger commented:
"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."
ENDS
The full results announcement is available at www.sappi.com
There will be a conference call to which investors are invited. Full details are
available on www.sappi.com using the links Investor Info; Investor Calendar;
01Q12 Financial Results
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.
Issued by:
Brunswick South Africa on behalf of Sappi Limited
Tel + 27 (0) 11 502 7300
For further information contact:
Robert Hope
Group Head Strategic Development
Sappi Limited
Tel +27 (0) 11 407 8492
Robert.Hope@sappi.com
Andre F Oberholzer
Group Head Corporate Affairs
Sappi Limited
Tel +27 (0) 11 407 8044
Mobile +27 (0) 83 235 2973
Andre.Oberholzer@sappi.com
Date: 08/02/2012 08:11:26 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
