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SAP
SAVVI
Sap - Sappi Limited - Chairman`s Statement At AGM
Sappi Limited
(Registration Number 1936/008963/06)
(Incorporated In The Republic Of South Africa)
Share Code: Sap & Isin: Zae000006284)
("Sappi" Or The "Company")
Chairman`s Statement At AGM
We Reported Our Results For The December Quarter On The 1st Of February And
It Was Pleasing To Note The Improved Operating Results For The Business And
The Reported Earnings Per Share Of 13c In The Quarter.
We Indicated Then That We Expected The Underlying Earnings In The Coming
Quarter To Improve Compared To The December Quarter Excluding The
Unpredictable Fair Value Adjustments. We Continue To Believe That We Will
Be Able To Do This.
Our Fine Paper Business Is Experiencing Strong Demand And Industry
Operating Rates For Coated Fine Paper In Europe And The United States Are
At Very High Levels, But Margins Are Still Under Pressure.
In Europe, The Key To Our Profitability Is An Increase In Paper Prices
Which Have Been Declining For Six Years In Defiance Of Substantial Cost
Increases In Chemicals, Energy And Fibre. In December We Announced Price
Increases In Europe, And As Far As We Can Tell, All Our Major Competitors
Have Now Announced Increases As Well, Although Some, Notably One
Competitor, Have Delayed The Increase Until March. We Are Maintaining The
Higher Prices But In The Short-Term It Is Having Some Effect On Volumes.
We Are Confident That By The End Of The First Calendar Quarter, Prices In
Europe Will Have Risen By About Euro40 A Ton, But This Is Not Sufficient To
Fully Offset Cost Inflation. Significant Progress Has Been Made On
Achieving Cost Reductions Which Are Aimed To Reduce Our Cost On The Average
Of The 2005 Cost Base By Euro 175-Million A Year And This Is On Track For
Completion By September. However, Most Of The Cost Reductions Have Been
Offset By Price Rises In Wood, Energy And Fibre; Further Price Increases
Are Therefore Essential To Restore Reasonable Margins.
In North America, We Have Stabilized The Business And We Are Now Back To
The Excellent Customer Service Levels Which We Offered Previously.
There Are Significant Opportunities To Eliminate Costs By Streamlining Our
Logistics Chain And Also By Generating And Producing New Products In The
Market And Sappi North America Can Now Focus On These Issues.
Our South African Business Is Benefiting From Buoyant Containerboard And
Pulp Prices, Improved Operations At Saiccor, A Slow But Steady Improvement
In The Operating Conditions In Sappi Kraft And The Weaker Rand. The
Expansion Of Saiccor Is Well Underway And Is Expected To Come On Stream By
The Middle Of Next Year Which Will Add Significant New Profit Opportunities
And Cost Reductions For That Business. Much Improved Margins Can Be
Expected From This Business.
During The Last Six Months, There Have Been Significant Management Changes
In The Group As Various Senior Executives Have Reached Retirement Age.
The New Management Teams Are Beginning To Settle Down In South Africa And
We Will Benefit From Fresh Eyes On Old Challenges. We Are Confident That
They Will Find New Opportunities To Improve The Business. In Europe, Berry
Wiersum Joined The Group In January And Will Take Over From Wolfgang Pfarl
As CEO Of Europe When Wolfgang Retires At The End Of March. Berry Is
Actively Engaged In The Transition Period And Focused On Improving The
Revenue Line Of Our European Business. In The Us, The Management Team Has
Stabilized And We Are Focusing In The Quarters Ahead On Reducing Costs And
Growing Our Market Share Back Slowly. Finally, The New CEO Of Sappi
Trading, Wayne Rau, Will Take Over That Business At The End Of March When
Hugh Martin Retires.
We Are Positive About The Outlook For The Business And Expect The Changes
We Have Made Will Continue To Show Steady Improvement In Operating
Performance.
Johannesburg
5 March 2007Sponsor : UBS Warburg
Date: 05/03/2007 15:45:11 Produced by the JSE SENS Department.
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