| Fri 29 Apr 2005, 10:43 | | Quarter and half-year ended March 2005 |
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Sappi Limited - Results for the quarter and half-year ended March 2005
Sappi Limited
(Registration number 1936/008963/06)
Issuer Code: SVVI
JSE Code: SAP
ISIN Code: ZAE000006284
Results for the quarter and half-year ended March 2005
- Headline EPS 12 US cents; EPS 10 US cents
- Stable market demand
- Continued currency pressure
- Raw material cost increases slowing
- Price increases in April
Summary
Quarter ended Half-year ended
March Dec March March March
2005 2004 2004 2005 2004
Sales (US$ million) 1,225 1,253 1,185 2,478 2,305
Operating profit (US$
million) ** 47 4 56 51 56
EBITDA * (US$ million) ** 172 129 173 301 287
Operating profit to sales (%) 3.8 0.3 4.7 2.1 2.4
EBITDA to sales (%) * 14.0 10.3 14.6 12.1 12.5
Operating profit to average
net assets (%) * 4.0 0.3 4.9 2.2 2.5
Headline EPS (US cents) * 12 6 10 18 0
EPS (US cents) 10 (13) 10 (3) 0
Return on average equity
(%) * 4.2 (5.3) 4.6 (0.6) (0.1)
Net debt (US$ million) * 1,934 1,898 1,753 1,934 1,753
Net debt to total
capitalisation (%) * 37.8 35.6 35.6 37.8 35.6
* Refer to Supplemental Information for the definition of the term.
** Operating profit and EBITDA for the half-year ended March 2005 reduced by
US$42 million (Quarter ended December 2004: US$41 million) in respect of asset
impairments.
Comment
During the quarter we remained firm on pricing of coated paper in North America
and Europe to recover the significant cost increases of recent months and to
begin to re-establish more acceptable margins. The move caused an initial
sharp drop in our sales volumes in North America and towards the end of the
quarter also in Europe. Some of this decline did persist in April, but we are
confident that higher prices will be successfully implemented and that we will
see improved margins and normal volumes in following quarters.
Market conditions were stable in our key businesses this quarter. In our
largest market, Europe, demand for coated fine paper remained firm and taking
account of the reduced shipping days resulting from the earlier Easter
holidays, was slightly up compared to the same quarter last year. In North
America, coated fine paper demand growth remained positive, but a sharp influx
of imports dampened domestic shipments. Demand levels experienced by our South
African businesses were generally good, driven by a buoyant domestic economy
and continued strong export demand for chemical cellulose.
Price movements were mixed. In Europe price increases were effective in April;
our average sales price from our European business measured in US Dollars
increased 2% on the prior quarter but was flat in Euro terms. Improved paper
prices were realised by our North American business in comparison to the prior
quarter; however, overall average sales prices were flat due to a higher
proportion of pulp sales included in the mix. Prices realised by our South
African fine paper business (measured in US Dollars) fell 2% in comparison to
the prior quarter due to import pressure driven by the relative strength of the
Rand. Price increases that averaged 4% (measured in US Dollars) in comparison
to the prior quarter were realised on pulp, chemical cellulose and packaging
paper produced by our Forest Products division.
Cost savings initiatives announced last quarter proceeded well with run-rates
at the level necessary to reach our year-end targets. However, these savings
were to a large extent offset by raw material input cost escalation especially
in our Fine Paper business, and the impact of the sustained strength of the
Rand, which averaged R5.96 per US Dollar in the quarter, on our South African
businesses. The price impact for the group as a whole of higher wood, chemicals
and energy costs reduced our earnings by US$30 million in comparison to the
same quarter last year.
There was a small gain of US$3 million at the operating profit level from the
fair value adjustment on plantations, net after fellings, largely as a result
of higher than expected recovery of snow damaged wood. This compares to a gain
of US$17 million in the same quarter last year.
Net finance costs of US$23 million for the quarter were US$3 million lower than
the same quarter last year. The decrease stems primarily from gains on
financial instruments.
Tax for the quarter was at an effective rate of 4%. There was a tax credit of
US$6 million recorded in the quarter due to the recent reduction of the South
African corporate tax rate from 30% to 29%.
Headline earnings per share were 12 US cents, compared to 10 US cents in the
equivalent quarter last year and 6 US cents in the prior quarter. Earnings per
share were 10 US cents for the quarter, the same as the equivalent quarter last
year.
Cash flow and debt
Cash generated by operations was US$168 million, 9% lower than a year earlier
due to lower operating income. The annual dividend payment of US$68 million was
paid in January 2005 and a further pension funding payment of US$ 22 million
was also paid in the quarter.
Net debt was US$1.934 billion at the end of the quarter, an increase of US$36
million compared to the prior quarter. Net debt to total capitalisation at the
end of the period was 37.8%, which is well within our stated target range of
25% to 50%. At the end of December 2004, net debt to total capitalisation was
35.6 %.
Working capital increased by US$117 million in the quarter mainly as a result
of higher inventories in North America and reduced payables related to annual
rebate payments.
In North America we built inventory as a short-term fix of our service levels
which had deteriorated last year as a result of scheduling and inventory
management problems. We are now achieving our target service levels and will
reduce inventory during the current quarter including taking downtime.
Operating Review for the Quarter
Sappi Fine Paper
Quarter ended
March 2005 March 2004 % December 2004
US$ million US$ million change US$ million
Sales 977 967 1.0 1,011
Operating profit 18 10 80.0 16
Operating profit
to sales (%) 1.8 1.0 - 1.6
EBITDA 109 98 11.2 105
EBITDA to sales (%) 11.2 10.1 - 10.4
RONOA pa (%) 2.1 1.2 - 1.9
Margins for our fine paper business were slightly improved in comparison to the
prior quarter but are still much lower than acceptable levels. Margins were
somewhat better than the same quarter last year as higher prices in US Dollar
terms more than offset volume declines in all three components of this business
and higher costs per ton. The key issues facing our fine paper business this
quarter were our stance on coated paper prices, a sharp increase in imports
into the US dampening domestic shipments in that region and continued raw
material cost pressure in all regions.
Europe
Quarter ended Quarter ended
March 2005 March 2004 % change % change December 2004
US$ million US$ million (US$) (Euro) US$ million
Sales 566 556 1.8 (3.0) 571
Operating profit 21 27 (22.2) (25.9) 28
Operating profit
to sales (%) 3.7 4.9 - - 4.9
EBITDA 71 77 (7.8) (12.1) 78
EBITDA to sales (%) 12.5 13.8 - - 13.7
RONOA pa (%) 4.5 6.2 - - 6.2
Our determination to increase our price levels for coated paper resulted in a
short-term loss of revenue in the quarter and current low order book. We remain
confident that higher prices will be achieved in our third financial quarter.
Cost reduction efforts are proceeding well. Due to our cost of quality and
recipe optimisation work, variable costs were nearly flat in comparison to the
previous quarter despite general raw material cost inflation and in particular
higher purchased pulp costs. Headcount reduction plans related to the
rationalisation of departments between two mills are on schedule. Raw material
cost inflation slowed this quarter, but the impact of wood, energy and
chemicals costs inflation was US$ 10 million in comparison to the same quarter
last year.
North America
Quarter ended Quarter ended
March 2005 March 2004 % December 2004
US$ million US$ million change US$ million
Sales 339 339 - 357
Operating loss (2) (20) 90.0 (15)
Operating loss to
sales (%) (0.6) (5.9) - (4.2)
EBITDA 34 15 126.7 21
EBITDA to sales (%) 10.0 4.4 - 5.9
RONOA pa (%) (0. 6) (5.8) - (4.4)
Shipments of paper from our North American mills fell 6% in comparison to the
same quarter last year largely as a result of remaining firm on prices early in
the quarter. Industry coated fine paper demand growth was healthy, up 3% in
comparison to the same quarter last year; however, imports surged 24% which had
a major negative impact on domestic shipments. Consequently, shipments from US
manufacturers fell 1% in comparison to the same quarter last year.
Price increases were gaining traction by March; but, the real impact of these
will only be seen in the third fiscal quarter.
Raw material cost inflation remained a major issue. The price impact of higher
wood, chemicals and energy costs was US$ 19 million in comparison to the same
quarter last year and US$ 7 million in comparison to the December quarter.
We made progress reducing logistics and distribution costs this quarter.
Delivery costs were down despite fuel surcharges and increases in carrier
rates. We have also increased usage of rail transport. Notwithstanding these
cost improvements, our operating performance next quarter will be adversely
affected by commercial downtime and maintenance charges.
Fine Paper South Africa
Quarter ended Quarter ended
March 2005 March 2004 % change % change December 2004
US$ million US$ million (US$) (Rands) US$ million
Sales 72 72 - (12.5) 83
Operating
profit (loss) (1) 3 - (129.2) 3
Operating
profit (loss)
to sales (%) (1.4) 4.2 - - 3.6
EBITDA 4 6 (33.3) (41.6) 6
EBITDA to
sales (%) 5.6 8.3 - - 7.2
RONOA pa (%) (2.0) 7.4 - - 6.8
Our South African fine paper business incurred a small operating loss compared
to a profit of US$3 million in the same quarter last year. The relative
strength of the Rand continues to attract imports and therefore puts pressure
on prices. This had an adverse impact on both sales volumes which were down 7%
compared to last year and on local prices. Export price realisations in Rand
terms were also negatively affected. Average prices in Rand terms fell 4% in
comparison to the prior quarter.
Forest Products
Quarter ended Quarter ended
March 2005 March 2004 % change % change December 2004
US$ million US$ million (US$) (Rands) US$ million
Sales 248 218 13.8 (0.4) 242
Operating
profit (loss) * 30 48 (37.5) (45.3) (11)
Operating profit
(loss) to sales (%) 12.1 22.0 - - (4.5)
EBITDA * 64 77 (16.9) (27.2) 25
EBITDA to sales (%) 25.8 35.3 - - 10.3
RONOA pa (%) 8.5 16.0 - - (3.2)
*Operating profit and EBITDA for the quarter ended December 2004 reduced by
US$41 million in respect of asset impairment.
Demand across all of Forest Products` businesses remained fairly strong. Pulp
and paper sales volumes increased 4% compared to the same quarter last year.
Domestic prices continued to be under pressure from imports, driven by the
continued strength of the Rand in comparison to the US Dollar. Export margins
also decreased due to currency. Demand for chemical cellulose remained high
and prices increased in US Dollar terms, largely in line with market paper
pulp. Average Rand prices for both domestic sales and exports of pulp and
paper rose 2% in comparison to the prior quarter.
Management actions to improve efficiency and productivity at our Usutu Mill are
ongoing and have started to show results.
Forest Products` operating income for the quarter was US$ 30 million, compared
to US$48 million in the same quarter last year. US$14 million of the decline
was due to a lower forestry fair value adjustment.
Cost reduction efforts are progressing well. Transport costs have been reduced
through logistics optimisation actions including an earlier redesign of our
trucks to increase loads. Headcount reduction is being achieved through
careful evaluation of all job vacancies and personnel restructuring where
possible. Purchasing programs to gain leverage from the strong Rand are
ongoing.
Outlook
Despite forecasts of lower GDP growth in our major markets, we expect the
global supply-demand balance for coated fine paper will continue to improve.
Ad-spend growth, while forecast to slow somewhat in 2005 before picking up
again in 2006, is still much higher than the levels that we saw in the period
2001-2003. Coated fine paper demand is closely correlated with ad-spend growth,
suggesting that coated fine paper demand growth will strengthen, and capacity
additions are at a historically low level, which is expected to result in
improved operating rates.
While the longer-term outlook is positive, current levels of profitability
remain a concern. Our key objective is to improve our returns to a level higher
than our cost of capital and to provide shareholder returns in excess of our
peer group. We continue to focus on costs across the Sappi group and in
particular on improving our North American business. However, raw material
cost increases continue to severely impact our margins and next quarter we
will have a large seasonal maintenance charge of approximately US$22 million
of direct costs. We remain confident about our prices given underlying market
conditions and the cost pressure the industry is experiencing.
We plan to take downtime to readjust our inventory levels in North America and
to match our output in Europe to customer demand during the quarter. This
downtime will have a further detrimental impact on performance.
Price increases have already been realised in North America and are now being
realised in Europe. Despite this positive development and savings from our
on-going cost reduction actions, the combination of high raw material costs and
substantial downtime now makes it unlikely that earnings for the full year
will match last year`s earnings.
On behalf of the Board
J C A Leslie D G Wilson
Director Director 29 April 2005
Forward-looking statements
Certain statements in this release that are neither reported financial results
nor other historical information, are forward-looking statements, including but
not limited to statements that are predictions of or indicate future earnings,
savings, synergies, events, trends, plans or objectives. Undue reliance should
not be placed on such statements because, by their nature, they are subject to
known and unknown risks and uncertainties and can be affected by other factors,
that could cause actual results and company plans and objectives to differ
materially fro m 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 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 and pricing), adverse changes in the markets
for the group`s products, consequences of substantial leverage, changing
regulatory requirements, unanticipated production disruptions, economic and
political conditions in international markets, the impact of investments,
acquisitions and dispositions (including related financing), any delays,
unexpected costs or other problems experienced with integrating acquisitions
and achieving expected savings and synergies and currency fluctuations. The
company undertakes no obligation to publicly update or revise any of these
forward-looking statements, whether to reflect new information or future
events or circumstances or otherwise.
Sappi Limited
group income statement
Reviewed Reviewed
Quarter ended Quarter ended
March 2005 March 2004
US$ million US$ million % change
Sales 1,225 1,185 3.4
Cost of sales 1,076 1,030
Gross profit 149 155 (3.9)
Selling, general &
administrative expenses 97 99
52 56
Other expenses 5 -
Operating profit 47 56 (16.1)
Net finance costs 23 26
Net paid 27 26
Capitalised (1) -
Net foreign exchange gains (1) (4)
Change in fair value of
financial instruments (2) 4
Profit (loss) before tax 24 30 (20.0)
Taxation - current 12 13
- deferred (11) (6)
Net profit (loss) 23 23 -
Earnings (loss) per share (US
cents) 10 10
Headline earnings per
share (US cents) * 12 10
Weighted average number of
shares in issue (millions) 225.6 226.1
Diluted earnings (loss) per
share (US cents) 10 10
Diluted headline earnings
per share (US cents) * 12 10
Weighted average number of
shares on fully
diluted basis (millions) 226.8 228.3
Calculation of Headline
earnings (loss) *
Net profit (loss) 23 23
Write-off of assets 3 -
Impairment of assets 1 -
Headline earnings (loss) 27 23
Reviewed Reviewed
Half-year ended Half-year ended
March 2005 March 2004
US$ million US$ million % change
Sales 2,478 2,305 7.5
Cost of sales 2,189 2,025
Gross profit 289 280 3.2
Selling, general &
administrative expenses 190 224
99 56
Other expenses 48 -
Operating profit 51 56 (8.9)
Net finance costs 52 54
Net paid 55 52
Capitalised (1) (1)
Net foreign exchange gains (3) (6)
Change in fair value of
financial instruments 1 9
Profit (loss) before tax (1) 2 -
Taxation - current 20 24
- deferred (15) (21)
Net profit (loss) (6) (1) -
Earnings (loss) per share
(US cents) (3) 0
Headline earnings
per share (US cents) * 18 0
Weighted average number of
shares in issue (millions) 225.8 226.3
Diluted earnings (loss)
per share (US cents) (3) 0
Diluted headline earnings
per share (US ) * 18 0
Weighted average number of
shares on fully
diluted basis (millions) 227.1 228.4
Calculation of Headline
earnings (loss) *
Net profit (loss) (6) (1)
Write-off of assets 4 -
Impairment of assets 42 -
Headline earnings (loss) 40 (1)
* Headline earnings (loss) disclosure is required by the JSE Securities
Exchange South Africa.
Sappi Limited
group balance sheet
Reviewed Reviewed
March 2005 Sept 2004
US$ million US$ million
ASSETS
Non-current assets 4,655 4,564
Property, plant and equipment 3,660 3,670
Plantations 583 548
Deferred taxation 66 84
Other non-current assets 346 262
Current assets 1,517 1,580
Cash and cash equivalents 247 484
Trade and other receivables 370 331
Inventories 900 765
Total assets 6,172 6,144
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 2,151 2,157
Non-current liabilities 2,409 2,463
Interest-bearing borrowings 1,621 1,693
Deferred taxation 446 453
Other non-current liabilities 342 317
Current liabilities 1,612 1,524
Interest-bearing borrowings 451 364
Bank overdraft 109 11
Taxation payable 116 137
Other current liabilities 936 1,012
Total equity and liabilities 6,172 6,144
Number of shares in issue at balance sheet date
(millions) 225.7 226.5
Sappi Limited
group cash flow statement
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2005 March 2004 March 2005 March 2004
US$ million US$ million US$ million US$ million
Cash generated
by operations 168 184 305 290
Movement in
working capital (117) (31) (266) (144)
Net finance costs (24) (26) (58) (52)
Taxation paid (12) (4) (39) (19)
Dividends paid (68) (66) (68) (66)
Cash retained
(utilised) from
operating
activities (53) 57 (126) 9
Cash effects of
investing activities (79) (96) (206) (185)
(132) (39) (332) (176)
Cash effects of
financing activities 10 (25) 80 (99)
Net movement in
cash and cash
equivalents (122) (64) (252) (275)
Sappi Limited
group statement of changes in shareholders` equity
Reviewed Reviewed
Half-year ended Half-year ended
March 2005 March 2004
US$ million US$ million
Balance - beginning of year as reported 2,119 1,945
Change in accounting policy - refer to
note 1 38 38
Balance - beginning of year restated 2,157 1,983
Net loss (6) (1)
Foreign currency translation reserve 70 130
Revaluation of derivative instruments 12 (7)
Dividends paid - US$0.30 (2004:
US$0.29) per share (68) (66)
Share buybacks net of transfers to
participants of the share
purchase trust (14) (11)
Balance - end of period 2,151 2,028
Sappi Limited
notes to the group results
1. Basis of preparation
The annual financial statements are prepared in conformity with South African
Statements of Generally Accepted Accounting Practice (SA GAAP). These quarterly
results have been prepared in compliance with AC 127 (Interim financial
reporting) and are based on accounting policies which are consistent with those
used in the annual financial statements. The same accounting policies have been
followed as in the annual financial statements for September 2004, except for
the new accounting standard AC 501 - Accounting for `Secondary Tax on Companies
(STC)` - which became effective from the beginning of the current financial
year. This has resulted in the recognition of a deferred tax asset for unused
tax credits to the extent that they will be utilised in the future.
The adoption of the new accounting policy resulted in an increase in
shareholders` equity of US$38 million at September 2004 (September 2003:
increase of US$38 million). The effect on net profit for the current quarter is
nil (December 2004 quarter: decrease of US$8 million; March 2004 quarter: nil).
Where appropriate, comparative figures have been restated.
The preliminary results for the quarter have been reviewed in terms of South
African Auditing Standards by the group`s auditors, Deloitte & Touche. Their
unqualified review report is available for inspection at the company`s
registered offices.
2. Comparative figures
Certain comparative amounts have been reclassified between deferred tax and
current tax. This had no effect on reported net income or shareholders` equity.
Sappi Limited
notes to the group results (continued)
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2005 March 2004 March 2005 March 2004
US$ million US$ million US$ million US$ million
3. Operating profit
Included in operating
profit are the following
non-cash items:
Depreciation
and amortisation
Depreciation of
property, plant
and equipment 108 103 216 203
Other
amortisation - 1 1 1
108 104 217 204
Asset impairment 1 - 42 -
109 104 259 204
Fair value adjustment
(gains) on plantations
(included in cost
of sales)
Changes in volume
Fellings 17 13 33 27
Growth (19) (13) (33) (28)
(2) - - (1)
Changes in fair value (1) (17) (17) (24)
(3) (17) (17) (25)
The above fair value
adjustment gains have
been partially
offset by
silviculture costs 11 9 22 18
4. Capital expenditure
Property, plant
and equipment 60 84 138 167
Reviewed Reviewed
March 2005 Sept 2004
US$ million US$ million
5. Capital commitments
Contracted but not provided 66 76
Approved but not contracted 259 198
325 274
6. Contingent liabilities
Guarantees and suretyships 78 68
Other
contingent
liabilities 11 15
Sappi Limited
Supplemental Information
Definitions
Average - averages are calculated as the sum of the opening and closing
balances for the relevant period divided by two
* EBITDA - earnings before interest (net finance costs), tax, depreciation and
amortisation
* EBITDA to sales - EBITDA divided by sales
Fellings - the amount charged against the income statement representing the
standing value of the plantations harvested
Headline earnings - as defined in circular 7/2002 issued by the South African
Institute of Chartered Accountants, separates from earnings all items of a
capital nature. It is not necessarily a measure of sustainable earnings. It is
a listing requirement of the JSE Securities Exchange South Africa to disclose
headline earnings per share
NBSK - Northern Bleached Softwood Kraft pulp. One of the main varieties of
market pulp, mainly produced from spruce trees in Scandinavia, Canada and north
eastern USA. The NBSK is a benchmark widely used in pulp and paper industry for
comparative purposes
* Net assets - total assets less current liabilities
* Net asset value - shareholders` equity plus net deferred tax
* Net asset value per share - net asset value divided by the number of shares
in issue at balance sheet date
* Net debt - current and non-current interest-bearing borrowings, and bank
overdrafts (net of cash, cash equivalents and short-term deposits)
* Net debt to total capitalisation - Net debt divided by shareholders` equity
plus minority interest, non-current liabilities, current interest-bearing
borrowings and overdraft
* ROE - return on average equity. Net profit divided by average shareholders`
equity
* RONA - operating profit divided by average net assets
* RONOA - operating profit divided by average net operating assets. Net
operating assets are total assets (excluding deferred taxation and cash) less
current liabilities (excluding interest-bearing borrowings and bank overdraft)
* The above financial measures, other than headline earnings per share, 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.
Sappi Limited
Supplemental Information
additional information
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2005 March 2004 March 2005 March 2004
US$ million US$ million US$ million US$ million
Net profit (loss)
to EBITDA(1)
reconciliation
Net profit (loss) 23 23 (6) (1)
Net finance costs 23 26 52 54
Taxation - current 12 13 20 24
- deferred (11) (6) (15) (21)
Depreciation 108 103 216 203
Amortisation
(including
fellings) 17 14 34 28
EBITDA(1) (3) 172 173 301 287
Reviewed Reviewed
March 2005 Sept 2004
US$ million US$ million
Net debt (US$ million)(2) 1,934 1,584
Net debt to total capitalisation (%)(2) 37.8 31.7
Net asset value per share (US$)(2) 11.21 11.15
(1) In connection with the U.S. Securities Exchange Commission (`SEC`) rules
relating to `Conditions for Use of Non-GAAP Financial Measures`, we have
reconciled EBITDA to net profit rather than operating profit. As a result our
definition retains other income / expenses as part of EBITDA.
We use EBITDA as an internal measure of performance and believe it is a useful
and commonly used measure of financial performance in addition to operating
profit and other profitability measures under SA GAAP. EBITDA is not a measure
of performance under SA GAAP. EBITDA should not be construed as an alternative
to operating profit as an indicator of the company`s operations in accordance
with SA GAAP. EBITDA is also presented to assist our shareholders and the
investment community in interpreting our financial results. This financial
measure is regularly used as a means of comparison of companies in our industry
by removing certain differences between companies such as depreciation methods,
financing structures and taxation regimes. Different companies and analysts may
calculate EBITDA differently, so making comparisons among companies on this
basis should be done very carefully.
(2) Refer to Supplemental Information for the definition of the term.
(3) EBITDA for the half-year ended March 2005 reduced by US$42 million (Quarter
ended December 2004: US$41 million) in respect of asset impairments.
Sappi Limited
Supplemental Information
regional information
Quarter ended Quarter ended
March 2005 March 2004
Metric tons Metric tons
(000`s) (000`s) % change
Sales
Fine Paper - North America 331 362 (8.6)
Europe 595 611 (2.6)
Southern Africa 69 74 (6.8)
Total 995 1,047 (5.0)
Forest Products - Pulp and
paper operations 389 373 4.3
Forestry operations 369 341 8.2
Total 1,753 1,761 (0.5)
Reviewed Reviewed
Quarter ended Quarter ended
March 2005 March 2004
US$ million US$ million % change
Sales
Fine Paper - North America 339 339 -
Europe 566 556 1.8
Southern Africa 72 72 -
Total 977 967 1.0
Forest Products - Pulp and
paper operations 230 203 13.3
Forestry operations 18 15 20.0
Total 1,225 1,185 3.4
Operating profit
Fine Paper - North America (2) (20) 90.0
Europe 21 27 (22.2)
Southern Africa (1) 3 -
Total 18 10 80.0
Forest Products * 30 48 (37.5)
Corporate (1) (2) 50.0
Total * 47 56 (16.1)
Earnings before interest, tax,
depreciation
and amortisation charges
Fine Paper - North America 34 15 126.7
Europe 71 77 (7.8)
Southern Africa 4 6 (33.3)
Total 109 98 11.2
Forest Products * 64 77 (16.9)
Corporate (1) (2) 50.0
Total * 172 173 (0.6)
Net operating assets
Fine Paper - North America 1,421 1,396 1.8
Europe 1,811 1,729 4.7
Southern Africa 194 166 16.9
Total 3,426 3,291 4.1
Forest Products 1,343 1,233 8.9
Corporate and other ** 38 (16) -
Total 4,807 4,508 6.6
Half-year ended Half-year ended
March 2005 March 2004
Metric tons Metric tons
(000`s) (000`s) % change
Sales
Fine Paper - North America 681 699 (2.6)
Europe 1,206 1,199 0.6
Southern Africa 147 146 0.7
Total 2,034 2,044 (0.5)
Forest Products - Pulp and
paper operations 780 757 3.0
Forestry operations 750 658 14.0
Total 3,564 3,459 3.0
Reviewed Reviewed
Half-year ended Half-year ended
March 2005 March 2004
US$ million US$ million % change
Sales
Fine Paper - North America 696 655 6.3
Europe 1,137 1,074 5.9
Southern Africa 155 143 8.4
Total 1,988 1,872 6.2
Forest Products - Pulp and
paper operations 452 404 11.9
Forestry operations 38 29 31.0
Total 2,478 2,305 7.5
Operating profit
Fine Paper - North America (17) (74) 77.0
Europe 49 42 16.7
Southern Africa 2 8 (75.0)
Total 34 (24) -
Forest Products * 19 83 (77.1)
Corporate (2) (3) 33.3
Total * 51 56 (8.9)
Earnings before interest,
tax, depreciation
and amortisation charges
Fine Paper - North America 55 (5) -
Europe 149 140 6.4
Southern Africa 10 14 (28.6)
Total 214 149 43.6
Forest Products * 89 141 (36.9)
Corporate (2) (3) 33.3
Total * 301 287 4.9
Net operating assets
Fine Paper - North America 1,421 1,396 1.8
Europe 1,811 1,729 4.7
Southern Africa 194 166 16.9
Total 3,426 3,291 4.1
Forest Products 1,343 1,233 8.9
Corporate and other ** 38 (16) -
Total 4,807 4,508 6.6
* Operating profit and EBITDA for the half-year ended March 2005 reduced by
US$42 million (Quarter ended December 2004: US$41 million) in respect of
asset impairments.
** Includes investment in joint venture in China. This investment was
included in the net operating assets of Sappi Fine Paper Europe
at December 2004
Sappi Limited
Supplemental Information
summary rand convenience translation
Reviewed Reviewed
Quarter ended Quarter ended
March March %
2005 2004 change
Sales (ZAR million) 7,298 8,064 (9.5)
Operating profit (ZAR million) ** 280 381 (26.5)
Net profit (loss) (ZAR million) 137 157 (12.7)
EBITDA * (ZAR million) ** 1,025 1,177 (12.9)
Operating profit to sales (%) 3.8 4.7
EBITDA * to sales (%) 14.0 14.6
Operating profit to average net
assets (%) 4.0 5.0
EPS (SA cents) 60 68 (11.8)
Headline EPS (SA cents) * 71 68 4.4
Net debt (ZAR million) *
Net debt to total capitalisation
(%) *
Cash generated by operations
(ZAR million) 1,001 1,252 (20.0)
Cash retained (utilised) from
operating activities (ZAR million) (316) 388 -
Net movement in cash and cash
equivalents (ZAR million) (727) (436) (66.7)
Reviewed Reviewed
Half-year ended Half-year ended
March March %
2005 2004 change
Sales (ZAR million) 15,025 15,758 (4.7)
Operating profit (ZAR
million) ** 309 383 (19.3)
Net loss (ZAR million) (36) (7) -
EBITDA * (ZAR million) ** 1,825 1,962 (7.0)
Operating profit to sales (%) 2.1 2.4
EBITDA * to sales (%) 12.1 12.5
Operating profit to average
net assets (%) 2.1 2.5
EPS (SA cents) (18) 0 -
Headline EPS (SA cents) * 109 0 -
Net debt (ZAR million) * 12,002 11,524 4.1
Net debt to total
capitalisation (%) * 37.8 35.6
Cash generated by operations
(ZAR million) 1,849 1,983 (6.8)
Cash from operating
activities (ZAR million) (764) 62 -
Net movement in cash and
cash equivalents (ZAR
million) (1,528) (1,880) 18.7
* Refer to Supplemental Information for the definition of the term.
* * Operating profit and EBITDA for the half-year ended March 2005 reduced by
ZAR257 million (Quarter ended December 2004: ZAR247 million) in respect of
asset impairments.
Sappi Limited
Supplemental Information
exchange rates
March Dec Sept June March
2005 2004 2004 2004 2004
Exchange rates:
Period end rate:
US $1 = ZAR 6.2059 5.6480 6.4290 6.3224 6.5738
Average rate for the
Quarter: US $1 = ZAR 5.9577 6.0649 6.3830 6.5953 6.8054
Average rate for the
YTD: US $1 = ZAR 6.0632 6.0649 6.6824 6.7661 6.8363
Period end rate:
EUR 1 = US$ 1.2982 1.3456 1.2309 1.2138 1.2150
Average rate for the
Quarter: EUR 1 = US$ 1.3110 1.2848 1.2233 1.2051 1.2497
Average rate for the
YTD: EUR 1 = US$ 1.2911 1.2848 1.2152 1.2118 1.2161
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.
This report is available on the Sappi website
http://www.sappi.com
Other interested parties can obtain printed copies of this report from:
South Africa:
Computershare Investor Services 2004 Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel +27 (0) 11 370 5000
United States ADR Depository:
The Bank of New York Investor Relations, PO Box 11258
Church Street Station New York, NY 10286-1258
Tel +1 610 382 7836
United Kingdom:
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham
Kent, BR3 4TU, DX 91750, Beckenham West
Tel +44 (0) 208 639 2157
