TIDMSAZ
RNS Number : 6466R
Sappi Ld
05 May 2009
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
quarter results for the period ended March 2009
Financial summary
- Global economic downturn/weak demand impacted operating profitability
-
Continued production curtailment
- Basic loss per share of 7 US cents
-
Positive cash generation
- Acquisition synergies on track
+--------------------------------+--------+-----------+----------+---------+-----------+
| | Quarter ended | Half-year ended |
+--------------------------------+-------------------------------+---------------------+
| | Mar | Mar 2008 | Dec 2008 | Mar | Mar 2008 |
| | 2009 | | | 2009 | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Key figures: (US$ million) | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Sales | 1,313 | 1,473 | 1,187 | 2,500 | 2,850 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Operating profit | 6 | 221 | 57 | 63 | 312 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Special items - gains * | (23) | (124) | (32) | (55) | (123) |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Operating (loss) profit | | | | | |
| excluding | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| special items | (17) | 97 | 25 | 8 | 189 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| EBITDA excluding special items | 82 | 190 | 106 | 188 | 378 |
| ** | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Basic EPS (US cents) *** | (7) | 43 | 6 | (3) | 54 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Net debt **** (excluding | | | | | |
| rights offer | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| cash in Dec 08) | 2,735 | 2,661 | 2,497 | 2,735 | 2,661 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Key ratios: (%) | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Operating profit to sales | 0.5 | 15.0 | 4.8 | 2.5 | 11.0 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Operating (loss) profit | | | | | |
| excluding | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| special items to sales | (1.3) | 6.6 | 2.1 | 0.3 | 6.6 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Operating (loss) profit | | | | | |
| excluding | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| special items to | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Capital Employed (ROCE) ** | (1.6) | 9.0 | 2.6 | 0.4 | 9.0 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| EBITDA excluding special | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| items to sales | 6.2 | 12.9 | 8.9 | 7.5 | 13.3 |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Return on average equity (ROE) | (7.5) | 35.9 | 5.3 | (1.4) | 22.6 |
| **** | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| Net debt to total | | | | | |
| capitalisation **** | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| (excluding rights offer cash | | | | | |
+--------------------------------+--------+-----------+----------+---------+-----------+
| in Dec 08) | 59.4 | 61.3 | 57.3 | 59.4 | 61.3 |
+--------------------------------+--------+-----------+----------+---------+-----------+
* Refer to details on special items.
** Refer to Supplemental Information for the reconciliation of EBITDA excluding
special items to (loss) profit for the period.
* Comparative figures have been revised in accordance with IAS 33 to reflect the
impact of the rights offer.
**** Refer to Supplemental Information for the definition of the term.
The table above has not been audited or reviewed.
Commentary
The quarter was characterised by a sharp decline in our sales volumes, which was
driven by declines in demand for coated paper and pulp in our major markets. Our
sales volumes declined approximately 24% compared to the corresponding quarter
last year, including the mills acquired from M-real on 31 December 2008 (the
Acquisition) in both periods. Actual sales volumes including the new business
were approximately 95% of volumes reported a year ago.
Average prices realised by the group in the quarter were 6% lower in US dollar
terms than a year ago mainly as a result of the sharp fall in pulp prices, which
fell 32% relative to a year earlier. Prices realised for coated paper were
higher than in the corresponding quarter a year ago.
We curtailed production extensively in each of our regions during the quarter to
match supply with demand and reduce inventories. Our finished goods inventories
were reduced by 13% in volume terms compared to December 2008, excluding the
Acquisition.
Raw material, in particular pulp, and energy prices were lower in the quarter
compared to the prior quarter and corresponding quarter last year. This had some
effect on costs in the quarter; however, we expect that a greater effect will be
apparent in our third quarter now that higher cost inventories have been
depleted.
We announced the suspension of operations at Muskegon Mill for at least six
months and a further restructuring affecting 70 people in the North American
business in response to weak demand, as part of our actions to manage costs and
inventories. A restructuring provision of US$8 million was therefore recorded in
the quarter.
The acquired mills were also impacted by low operating rates as a result of
global economic conditions. The operating result for the Acquisition was a loss
of US$2.6 million for the period since 31 December 2008. The integration of the
Acquisition has progressed well and the achievement of our previously announced
synergies of Euro 120 million per annum within 3 years is on track.
Operating profit for the quarter was US$6 million compared to US$221 million in
the corresponding period last year. Special items comprising mainly a favourable
adjustment to plantation price fair value offset by the North American
restructuring provision amounted to US$23 million in the quarter compared to a
favourable adjustment last year of US$124 million. We therefore report an
operating loss excluding special items of US$17 million for the quarter compared
to a profit of US$97 million a year ago.
Net finance costs for the quarter increased to US$40 million compared to US$27
million last year as a result of increased debt and the effect of interest
capitalised a year ago.
The group did not benefit from tax relief on reported losses as a result of tax
losses in certain regions that could not be raised.
The basic loss per share was 7 US cents for the quarter compared to EPS of 43 US
cents a year earlier, which was favourably impacted by special items of 30 US
cents per share.
Cash flow and debt
During the quarter we completed the Acquisition, resulting in a net cash
investment of US$586 million, essentially from the proceeds of the rights offer
completed in December 2008. In addition, the Acquisition resulted in increased
debt of US$359 million (Euro 220 million of Vendor Loan Notes and Euro 50
million of interest bearing assumed debt). Details of the preliminary accounting
for the Acquisition are included in note 9.
Cash generated from operations for the quarter was US$99 million, down from
US$176 million a year ago as a result of lower operating profit, but much
improved on the previous quarter. In addition US$28 million was released from
working capital in the quarter.
Capital expenditure during the quarter was US$39 million, a major reduction from
US$164 million last year which included part of the Saiccor expansion project.
Net cash generated (excluding cash invested in the Acquisition) was US$75
million for the quarter compared to an outflow of US$108 million a year ago. Net
debt increased from approximately US$2.0 billion in December to US$2.7 billion
as a result of the Acquisition, offset by the cash generated in the business and
currency effect of approximately US$100 million.
Liquidity
Our liquidity situation is soundly managed. At March Sappi had cash and cash
equivalents of US$711 million and undrawn commitments under the revolving credit
facility of US$266 million (Euro 200 million). Sappi's short term borrowings of
US$1,292 million include drawings under our Euro 600 million long term revolving
credit facility which runs until May 2010 (US$543 million), financing under the
securitised receivables programme which runs until 2012 (US$279 million) and a
number of smaller short term facilities, commercial paper programmes and
overdrafts (US$470 million).
We do not have any major borrowings maturing in the next 12 months.
Operating review for the quarter ended March 2009 compared to the quarter ended
March 2008
+------------------------------+-----------+----------+--------+------------+
| Sappi Fine Paper | | | | |
+------------------------------+-----------+----------+--------+------------+
| | Quarter | Quarter | | Quarter |
+------------------------------+-----------+----------+--------+------------+
| | ended | ended | | ended |
+------------------------------+-----------+----------+--------+------------+
| | March | March | % | Dec 2008 |
| | 2009 | 2008 | | |
+------------------------------+-----------+----------+--------+------------+
| | US$ | US$ | change | US$ |
| | million | million | | million |
+------------------------------+-----------+----------+--------+------------+
| Sales | 1,112 | 1,209 | (8.0) | 998 |
+------------------------------+-----------+----------+--------+------------+
| Operating (loss) profit | (43) | 47 | - | 8 |
+------------------------------+-----------+----------+--------+------------+
| Operating (loss) profit to | (3.9) | 3.9 | - | 0.8 |
| sales (%) | | | | |
+------------------------------+-----------+----------+--------+------------+
| Special items (gains) losses | 8 | (2) | - | - |
+------------------------------+-----------+----------+--------+------------+
| Operating (loss) profit | | | | |
| excluding | | | | |
+------------------------------+-----------+----------+--------+------------+
| special items | (35) | 45 | - | 8 |
+------------------------------+-----------+----------+--------+------------+
| Operating (loss) profit | | | | |
| excluding special | | | | |
+------------------------------+-----------+----------+--------+------------+
| items to sales (%) | (3.1) | 3.7 | - | 0.8 |
+------------------------------+-----------+----------+--------+------------+
| EBITDA excluding special | 48 | 120 | (60.0) | 74 |
| items | | | | |
+------------------------------+-----------+----------+--------+------------+
| EBITDA excluding special | | | | |
| items | | | | |
+------------------------------+-----------+----------+--------+------------+
| to sales (%) | 4.3 | 9.9 | - | 7.4 |
+------------------------------+-----------+----------+--------+------------+
| RONOA pa (%) | (4.3) | 5.5 | - | 1.1 |
+------------------------------+-----------+----------+--------+------------+
+------------------------------+--------------+----------+--------+--------+----------+
| Europe | | | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| | Quarter | Quarter | | | Quarter |
+------------------------------+--------------+----------+--------+--------+----------+
| | ended | ended | % | % | ended |
+------------------------------+--------------+----------+--------+--------+----------+
| | March 2009 | March | change | change | Dec 2008 |
| | | 2008 | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| | US$ million | US$ | (US$) | (Euro) | US$ |
| | | million | | | million |
+------------------------------+--------------+----------+--------+--------+----------+
| Sales | 737 | 697 | 5.7 | 19.3 | 561 |
+------------------------------+--------------+----------+--------+--------+----------+
| Operating (loss) profit | (21) | 18 | - | - | 13 |
+------------------------------+--------------+----------+--------+--------+----------+
| Operating (loss) profit to | (2.8) | 2.6 | - | - | 2.3 |
| sales (%) | | | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| Special items (gains) | - | (2) | - | - | - |
+------------------------------+--------------+----------+--------+--------+----------+
| Operating (loss) profit | | | | | |
| excluding | | | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| special items | (21) | 16 | - | - | 13 |
+------------------------------+--------------+----------+--------+--------+----------+
| Operating (loss) profit | | | | | |
| excluding | | | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| special items to sales (%) | (2.8) | 2.3 | - | - | 2.3 |
+------------------------------+--------------+----------+--------+--------+----------+
| EBITDA excluding special | 34 | 61 | (44.3) | (36.0) | 50 |
| items | | | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| EBITDA excluding special | | | | | |
+------------------------------+--------------+----------+--------+--------+----------+
| items to sales (%) | 4.6 | 8.8 | - | - | 8.9 |
+------------------------------+--------------+----------+--------+--------+----------+
| RONOA pa (%) | (4.2) | 3.1 | - | - | 3.1 |
+------------------------------+--------------+----------+--------+--------+----------+
Volumes for the quarter were impacted by the exceptionally weak market
conditions. Apparent consumption in Europe declined by 23% for coated woodfree
paper and 27% for lightweight coated paper compared to the corresponding quarter
last year. Total shipments including exports declined approximately 28% and 30%
respectively.
We curtailed production by approximately 30% during the quarter across all our
European mills, including the mills acquired from M-real, on 1 January 2009, to
match our production to the reduced demand level and to reduce inventories.
Average prices realised in the quarter in Euros were 3% above the corresponding
quarter last year. Further price increases for coated fine paper were
implemented in Europe in the quarter.
The integration of the Acquisition has progressed well. The achievement of the
synergy target of Euro 120 million per annum within three years is on track as
is the target for 2009, despite current difficult market conditions.
+----------------------------------+-----------+-----------+--------+-----------+
| North America | | | | |
+----------------------------------+-----------+-----------+--------+-----------+
| | Quarter | Quarter | | Quarter |
+----------------------------------+-----------+-----------+--------+-----------+
| | ended | ended | | ended |
+----------------------------------+-----------+-----------+--------+-----------+
| | March | March | % | Dec 2008 |
| | 2009 | 2008 | | |
+----------------------------------+-----------+-----------+--------+-----------+
| | US$ | US$ | change | US$ |
| | million | million | | million |
+----------------------------------+-----------+-----------+--------+-----------+
| Sales | 301 | 423 | (28.8) | 363 |
+----------------------------------+-----------+-----------+--------+-----------+
| Operating (loss) profit | (24) | 26 | - | (7) |
+----------------------------------+-----------+-----------+--------+-----------+
| Operating (loss) profit to sales | (8.0) | 6.1 | - | (1.9) |
| (%) | | | | |
+----------------------------------+-----------+-----------+--------+-----------+
| Special items - losses | 8 | - | - | - |
+----------------------------------+-----------+-----------+--------+-----------+
| Operating (loss) profit | | | | |
| excluding | | | | |
+----------------------------------+-----------+-----------+--------+-----------+
| special items | (16) | 26 | - | (7) |
+----------------------------------+-----------+-----------+--------+-----------+
| Operating (loss) profit | | | | |
| excluding | | | | |
+----------------------------------+-----------+-----------+--------+-----------+
| special items to sales (%) | (5.3) | 6.1 | - | (1.9) |
+----------------------------------+-----------+-----------+--------+-----------+
| EBITDA excluding special items | 8 | 51 | (84.3) | 19 |
+----------------------------------+-----------+-----------+--------+-----------+
| EBITDA excluding special | | | | |
+----------------------------------+-----------+-----------+--------+-----------+
| items to sales (%) | 2.7 | 12.1 | - | 5.2 |
+----------------------------------+-----------+-----------+--------+-----------+
| RONOA pa (%) | (5.9) | 9.7 | - | (2.6) |
+----------------------------------+-----------+-----------+--------+-----------+
Total sales volumes declined about 30% compared to the corresponding quarter
last year, with pulp sales volumes declining 40%. Average prices realised were
at the same level as a year ago. Paper prices realised, although lower than the
peak achieved in mid-2008, were 2% higher than a year ago. Pulp prices, however,
were more than 30% lower than the corresponding quarter last year.
We curtailed coated paper production by approximately 100,000 tons during the
quarter and reduced our paper inventories by 13% in volume terms. In addition we
suspended operations at Muskegon Mill, which has a capacity of 170,000 tons per
annum, for at least six months. During this period 190 people have been
temporarily laid off. We have reduced a further 70 positions across the North
American business to help manage our costs. Costs of raw materials and energy
declined in the quarter but were partly offset by inefficiencies of stopping and
starting operations.
+--------------------------+--------------+------------+----------+--------+-----------+
| Southern Africa | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| | Quarter | Quarter | | | Quarter |
+--------------------------+--------------+------------+----------+--------+-----------+
| | ended | ended | % | % | ended |
+--------------------------+--------------+------------+----------+--------+-----------+
| | March 2009 | March 2008 | change | change | Dec 2008 |
+--------------------------+--------------+------------+----------+--------+-----------+
| | US$ million | US$ | (US$) | (Rand) | US$ |
| | | million | | | million |
+--------------------------+--------------+------------+----------+--------+-----------+
| Sales | 74 | 89 | (16.9) | 10.2 | 74 |
+--------------------------+--------------+------------+----------+--------+-----------+
| Operating profit | 2 | 3 | (33.3) | (9.1) | 2 |
+--------------------------+--------------+------------+----------+--------+-----------+
| Operating profit to | 2.7 | 3.4 | - | - | 2.7 |
| sales (%) | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| Special items | - | - | - | - | - |
+--------------------------+--------------+------------+----------+--------+-----------+
| Operating profit | | | | | |
| excluding | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| special items | 2 | 3 | (33.3) | (9.1) | 2 |
+--------------------------+--------------+------------+----------+--------+-----------+
| Operating profit | | | | | |
| excluding | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| special items to sales | 2.7 | 3.4 | - | - | 2.7 |
| (%) | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| EBITDA excluding special | 6 | 8 | (25.0) | (1.7) | 5 |
| items | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| EBITDA excluding special | | | | | |
+--------------------------+--------------+------------+----------+--------+-----------+
| items to sales (%) | 8.1 | 9.0 | - | - | 6.8 |
+--------------------------+--------------+------------+----------+--------+-----------+
| RONOA pa (%) | 4.6 | 8.6 | - | - | 5.7 |
+--------------------------+--------------+------------+----------+--------+-----------+
The business generated a small operating profit; however, margins declined as a
result of a 10% decline in sales volumes and continued cost pressure.
+------------------------+-----------+----------+-----------+-----------+------------+
| Forest Products | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| | Quarter | Quarter | | | Quarter |
+------------------------+-----------+----------+-----------+-----------+------------+
| | ended | ended | % | % | ended |
+------------------------+-----------+----------+-----------+-----------+------------+
| | March | March | change | change | Dec 2008 |
| | 2009 | 2008 | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| | US$ | US$ | (US$) | (Rand) | US$ |
| | million | million | | | million |
+------------------------+-----------+----------+-----------+-----------+------------+
| Sales | 201 | 264 | (23.9) | 1.0 | 189 |
+------------------------+-----------+----------+-----------+-----------+------------+
| Operating profit | 48 | 172 | (72.1) | (63.0) | 49 |
+------------------------+-----------+----------+-----------+-----------+------------+
| Operating profit to | 23.9 | 65.2 | - | - | 25.9 |
| sales (%) | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| Special items - | (31) | (122) | - | - | (32) |
| (gains) | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| Operating profit | | | | | |
| excluding | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| special items | 17 | 50 | (66.0) | (55.0) | 17 |
+------------------------+-----------+----------+-----------+-----------+------------+
| Operating profit | | | | | |
| excluding | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| special items to sales | 8.5 | 18.9 | - | - | 9.0 |
| (%) | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| EBITDA excluding | 32 | 67 | (52.2) | (36.6) | 32 |
| special items | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| EBITDA excluding | | | | | |
| special | | | | | |
+------------------------+-----------+----------+-----------+-----------+------------+
| items to sales (%) | 15.9 | 25.4 | - | - | 16.9 |
+------------------------+-----------+----------+-----------+-----------+------------+
| RONOA pa (%) | 4.6 | 11.3 | - | - | 4.3 |
+------------------------+-----------+----------+-----------+-----------+------------+
The forest products' business was affected by weakening demand in the Southern
African and export markets for its packaging paper. Sales volumes of chemical
cellulose, although well below Saiccor Mill's expanded capacity, were higher
than volumes in the equivalent quarter last year.
Pulp prices continued to fall in US Dollar terms and were more than 30% lower
than a year ago impacting paper pulp and chemical cellulose sales.
Wood, other raw material and energy input costs in Rand terms increased
significantly compared to a year ago, partly as a result of the weakening of the
Rand against the US Dollar.
Outlook
The general economic outlook and market conditions remain depressed. In these
circumstances we expect demand for our products to remain weak and we will
therefore continue to curtail production to match supply with demand.
It has been difficult to identify the extent to which the fall in apparent
demand for our products is an inventory effect, but it appears that the decline
of inventories in the downstream supply chain has been significant. We are of
the opinion that downstream inventories are stabilising and therefore expect
apparent demand to start improving slightly in many of our markets.
Demand for chemical cellulose, particularly in Asia, has started to improve and
we are continuing to ramp up production at Saiccor Mill. We expect the operating
rate to be close to the total expanded capacity by our financial year end.
Pricing, however, is expected to remain weak for the rest of the year. The other
Southern African businesses will continue to manage production to match demand.
The Rand has recently strengthened relative to the US Dollar, which, if
sustained, will put pressure on margins.
In Europe stabilisation of downstream inventories is expected to help improve
the supply/demand balance. M-real ceased coated fine paper production at Hallein
and Gohrsmühle at the end of April 2009. We were selling the output of these
mills for M-real on an agency basis and therefore expect the operating rates of
our own mills to improve following this cessation as we transfer this production
to our mills. This, together with the continued achievement of Acquisition
synergies, is expected to improve the region's profitability.
In North America we do not expect a significant market improvement this year.
The actions taken to restructure the business including suspending operations at
Muskegon Mill are expected to help improve profitability.
Although market conditions remain difficult and there is still little
visibility, we expect our profitability to improve in the next quarter as a
result of the actions we have taken to manage costs, continued declines in input
costs and the gradual achievement of Acquisition synergies.
Prioritising cash generation and liquidity remains our critical objective as we
stated in our trading update at the group's Annual General Meeting in March.
Each of our operating businesses is implementing production curtailment and
variable and fixed cost reduction plans to minimise the cash impact of the
current weak market conditions, including the suspension of operations at
Muskegon Mill. We are also tightly managing working capital down to minimum
levels without compromising on service excellence. We are targeting a further
reduction in working capital by our financial year end. In addition, we are
reducing capital expenditure to a minimum. In the current financial year we
expect capital expenditure in our operations to be below US$200 million compared
to US$505 million last year. As a result of these actions we expect positive
cash generation for the full financial year.
Given the weak global market conditions, we are expecting the rest of 2009 to
remain challenging. Our actions and plans are focused on dealing with these
tough market conditions and importantly to ensure that Sappi develops even
closer relationships with our customers through the quality of our service and
continued improvements in efficiencies and remains well positioned to take full
advantage of our leading positions in coated graphic paper and chemical
cellulose when markets start to recover.
+------------------------------+----------------------------------+---------------------+
| On behalf of the board | | |
+------------------------------+----------------------------------+---------------------+
| R J Boëttger | M R Thompson | |
+------------------------------+----------------------------------+---------------------+
| Director | Director | 05 May 2009 |
+------------------------------+----------------------------------+---------------------+
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
Other information (this information has not been reviewed)
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, financial impacts of
natural disasters and non-cash gains or losses on the price fair value
adjustment of plantations.
Special items, excluding interest and tax effects, for the relevant periods are:
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | Quarter | Quarter | Half-year | Half-year |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | ended | ended | ended | ended |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | US$ | US$ | US$ | US$ |
| | | million | million | million | million |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Plantation price fair | | (35) | (118) | (69) | (117) |
| value adjustment | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Restructuring provisions | | 8 | (2) | 8 | (3) |
| raised (released) | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Profit on disposal of | | | | | |
| property, plant and | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| equipment | | - | (3) | (1) | (4) |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Asset impairments | | 2 | - | 5 | 2 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Fire, flood, storm and | | 2 | (1) | 2 | (1) |
| related events | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | (23) | (124) | (55) | (123) |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| key regional figures | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | Quarter | Quarter | Half-year | Half-year |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | ended | ended | ended | ended |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | Metric | Metric | Metric | Metric |
| | | tons | tons | tons | tons |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | (000's) | (000's) | (000's) | (000's) |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Sales volume | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Fine Paper - | North America | 289 | 402 | 619 | 775 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Europe | 759 | 657 | 1,315 | 1,281 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Southern Africa | 75 | 83 | 152 | 159 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Total | 1,123 | 1,142 | 2,086 | 2,215 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Forest Products - | Pulp and paper | 334 | 347 | 613 | 692 |
| | operations | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Forestry | 189 | 247 | 431 | 447 |
| | operations | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Total | | 1,646 | 1,736 | 3,130 | 3,354 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | | US$ | US$ | US$ | US$ |
| | | million | million | million | million |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Sales | | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Fine Paper - | North America | 301 | 423 | 664 | 807 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Europe | 737 | 697 | 1,298 | 1,335 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Southern Africa | 74 | 89 | 148 | 176 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Total | 1,112 | 1,209 | 2,110 | 2,318 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Forest Products - | Pulp and paper | 189 | 246 | 363 | 498 |
| | operations | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| | Forestry | 12 | 18 | 27 | 34 |
| | operations | | | | |
+----------------------------+-------------------+------------+----------+-----------+-----------+
| Total | | 1,313 | 1,473 | 2,500 | 2,850 |
+----------------------------+-------------------+------------+----------+-----------+-----------+
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Other information (this information has not been reviewed) |
+------------------------------------------------------------------------------------------------+
| | | Quarter | Quarter | Half-year | Half-year |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | | ended | ended | ended | ended |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | | US$ million | US$ | US$ | US$ |
| | | | million | million | million |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Operating profit (loss) | | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Fine Paper - | North | (24) | 26 | (31) | 37 |
| | America | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Europe | (21) | 18 | (8) | 37 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Southern | 2 | 3 | 4 | 4 |
| | Africa | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Total | (43) | 47 | (35) | 78 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Forest Products | | 48 | 172 | 97 | 227 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Corporate and other | | 1 | 2 | 1 | 7 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Total | | 6 | 221 | 63 | 312 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Special items - (gains) losses | | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Fine Paper - | North | 8 | - | 8 | 2 |
| | America | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Europe | - | (2) | - | (4) |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Southern | - | - | - | - |
| | Africa | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Total | 8 | (2) | 8 | (2) |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Forest Products | | (31) | (122) | (63) | (121) |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Total | | (23) | (124) | (55) | (123) |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Operating (loss) profit | | | | | |
| excluding special items | | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Fine Paper - | North | (16) | 26 | (23) | 39 |
| | America | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Europe | (21) | 16 | (8) | 33 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Southern | 2 | 3 | 4 | 4 |
| | Africa | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Total | (35) | 45 | (27) | 76 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Forest Products | | 17 | 50 | 34 | 106 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Corporate and other | | 1 | 2 | 1 | 7 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Total | | (17) | 97 | 8 | 189 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| EBITDA excluding special items | | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Fine Paper - | North | 8 | 51 | 27 | 91 |
| | America | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Europe | 34 | 61 | 84 | 123 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Southern | 6 | 8 | 11 | 12 |
| | Africa | | | | |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| | Total | 48 | 120 | 122 | 226 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Forest Products | | 32 | 67 | 64 | 144 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Corporate and other | | 2 | 3 | 2 | 8 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
| Total | | 82 | 190 | 188 | 378 |
+--------------------------------+-------------+--------------+----------+-----------+-----------+
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 from 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 impact of the global economic downturn, the risk that the
Acquisition will not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected, expected revenue synergies
and cost savings from the acquisition may not be fully realized or realized
within the expected time frame, revenues following the acquisition may be lower
than expected, any anticipated benefits from the consolidation of the European
paper business may not be achieved, 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), adverse changes in the
markets for the group's products, consequences of substantial leverage,
including as a result of adverse changes in credit markets that affect our
ability to raise capital when needed, changing regulatory requirements,
unanticipated production disruptions (including as a result of planned or
unexpected power outages), 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.
We have included in this announcement an estimate of total synergies from the
acquisition of M-real's coated graphic paper business and the integration of the
acquired business into our existing business. The estimate of synergies that we
expect to achieve following the completion of the acquisition is based on
assumptions which in the view of our management were prepared on a reasonable
basis, reflect the best currently available estimates and judgments, and
present, to the best of our management's knowledge and belief, the expected
course of action and the expected future financial impact on our performance due
to the acquisition. However, the assumptions about these expected synergies are
inherently uncertain and, though considered reasonable by management as of the
date of preparation, are subject to a wide variety of significant business,
economic and competitive risks and uncertainties that could cause actual results
to differ materially from those contained in this estimate of synergies. There
can be no assurance that we will be able to successfully implement the strategic
or operational initiatives that are intended, or realise the estimated
synergies. This synergy estimate is not a profit forecast or a profit estimate
and should not be treated as such or relied on by shareholders or prospective
investors to calculate the likely level of profits or losses for Sappi for
fiscal 2009 or beyond.
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Group income statement | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| | | Reviewed | Reviewed | | Reviewed | Reviewed | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| | | Quarter | Quarter | | Half-year | Half-year | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| | | ended | ended | | ended | ended | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| | | Mar 2009 | Mar 2008 | % | Mar 2009 | Mar 2008 | % |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| | Notes | US$ | US$ | change | US$ | US$ | change |
| | | million | million | | million | million | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Sales | | 1,313 | 1,473 | (11) | 2,500 | 2,850 | (12) |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Cost of sales | | 1,196 | 1,162 | | 2,238 | 2,354 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Gross profit | | 117 | 311 | (62) | 262 | 496 | (47) |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Selling, general and | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| administrative expenses | | 97 | 102 | | 183 | 199 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Other operating expenses | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| (income) | | 11 | (7) | | 14 | (6) | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Share of loss (profit) | | | | | | | |
| from | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| associates and joint | | 3 | (5) | | 2 | (9) | |
| ventures | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Operating profit | 3 | 6 | 221 | (97) | 63 | 312 | (80) |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Net finance costs | | 40 | 27 | | 61 | 55 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Net interest | | 41 | 26 | | 72 | 63 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Finance cost capitalised | | - | (6) | | - | (15) | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Net foreign exchange gains | | (4) | (4) | | (11) | (5) | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Net fair value loss on | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| financial instruments | | 3 | 11 | | - | 12 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| (Loss) profit before | | (34) | 194 | - | 2 | 257 | (99) |
| taxation | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Taxation | | 1 | 39 | | 14 | 60 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Current | | (6) | 1 | | 4 | 4 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Deferred | | 7 | 38 | | 10 | 56 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| (Loss) profit for the | | (35) | 155 | - | (12) | 197 | - |
| period | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Basic (loss) earnings per | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| share (US cents) | 1 | (7) | 43 | | (3) | 54 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Weighted average number of | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| shares in issue (millions) | 1 | 515.8 | 362.3 | | 449.4 | 361.9 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Diluted basic (loss) | | | | | | | |
| earnings | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| per share (US cents) | 1 | (7) | 42 | | (3) | 54 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| Weighted average number | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| of shares on fully diluted | | | | | | | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
| basis (millions) | 1 | 517.8 | 365.0 | | 451.5 | 364.9 | |
+----------------------------+----------+-----------+------------+--------+-----------+-----------+--------+
+---------------------------------------+--------------+-------------+
| Group balance sheet | | |
+---------------------------------------+--------------+-------------+
| | Reviewed | Reviewed |
+---------------------------------------+--------------+-------------+
| | Mar 2009 | Sept 2008 |
+---------------------------------------+--------------+-------------+
| | US$ million | US$ million |
+---------------------------------------+--------------+-------------+
| ASSETS | | |
+---------------------------------------+--------------+-------------+
| Non-current assets | 4,669 | 4,408 |
+---------------------------------------+--------------+-------------+
| Property, plant and equipment | 3,626 | 3,361 |
+---------------------------------------+--------------+-------------+
| Plantations | 605 | 631 |
+---------------------------------------+--------------+-------------+
| Deferred taxation | 36 | 41 |
+---------------------------------------+--------------+-------------+
| Other non-current assets | 402 | 375 |
+---------------------------------------+--------------+-------------+
| Current assets | 2,373 | 1,701 |
+---------------------------------------+--------------+-------------+
| Inventories | 821 | 725 |
+---------------------------------------+--------------+-------------+
| Trade and other receivables | 841 | 702 |
+---------------------------------------+--------------+-------------+
| Cash and cash equivalents | 711 | 274 |
+---------------------------------------+--------------+-------------+
| Total assets | 7,042 | 6,109 |
+---------------------------------------+--------------+-------------+
| EQUITY AND LIABILITIES | | |
+---------------------------------------+--------------+-------------+
| Shareholders' equity | | |
+---------------------------------------+--------------+-------------+
| Ordinary shareholders' interest | 1,866 | 1,605 |
+---------------------------------------+--------------+-------------+
| Non-current liabilities | 2,873 | 2,578 |
+---------------------------------------+--------------+-------------+
| Interest-bearing borrowings | 2,154 | 1,832 |
+---------------------------------------+--------------+-------------+
| Deferred taxation | 334 | 399 |
+---------------------------------------+--------------+-------------+
| Other non-current liabilities | 385 | 347 |
+---------------------------------------+--------------+-------------+
| Current liabilities | 2,303 | 1,926 |
+---------------------------------------+--------------+-------------+
| Interest-bearing borrowings | 1,259 | 821 |
+---------------------------------------+--------------+-------------+
| Bank overdraft | 33 | 26 |
+---------------------------------------+--------------+-------------+
| Other current liabilities | 959 | 1,025 |
+---------------------------------------+--------------+-------------+
| Taxation payable | 52 | 54 |
+---------------------------------------+--------------+-------------+
| Total equity and liabilities | 7,042 | 6,109 |
+---------------------------------------+--------------+-------------+
| Number of shares in issue at balance | 515.8 | 229.2 |
| sheet date (millions) | | |
+---------------------------------------+--------------+-------------+
+--------------------------------+--------------+-------------+-----------+-----------+
| Group cash flow statement | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| | Reviewed | Reviewed | Reviewed | Reviewed |
+--------------------------------+--------------+-------------+-----------+-----------+
| | Quarter | Quarter | Half-year | Half-year |
+--------------------------------+--------------+-------------+-----------+-----------+
| | ended | ended | ended | ended |
+--------------------------------+--------------+-------------+-----------+-----------+
| | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+--------------------------------+--------------+-------------+-----------+-----------+
| | US$ million | US$ million | US$ | US$ |
| | | | million | million |
+--------------------------------+--------------+-------------+-----------+-----------+
| (Loss) profit for the period | (35) | 155 | (12) | 197 |
+--------------------------------+--------------+-------------+-----------+-----------+
| Adjustment for: | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| Depreciation, fellings and | 114 | 112 | 211 | 229 |
| amortisation | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| Taxation | 1 | 39 | 14 | 60 |
+--------------------------------+--------------+-------------+-----------+-----------+
| Net finance costs | 40 | 27 | 61 | 55 |
+--------------------------------+--------------+-------------+-----------+-----------+
| Post employment benefits | (11) | (39) | (19) | (53) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Other non-cash items | (10) | (118) | (61) | (157) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Cash generated from operations | 99 | 176 | 194 | 331 |
+--------------------------------+--------------+-------------+-----------+-----------+
| Movement in working capital | 28 | (30) | (68) | (163) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Net finance costs | (10) | (8) | (54) | (67) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Taxation paid | (3) | (9) | (2) | (16) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Dividends paid * | - | (73) | (37) | (73) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Cash retained from operating | 114 | 56 | 33 | 12 |
| activities | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| Cash utilised in investing | (625) | (164) | (665) | (253) |
| activities | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| Capital expenditure | (39) | (164) | (79) | (253) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Acquisition of M-real | (586) | - | (586) | - |
+--------------------------------+--------------+-------------+-----------+-----------+
| | (511) | (108) | (632) | (241) |
+--------------------------------+--------------+-------------+-----------+-----------+
| Cash effects of financing | 243 | (118) | 1,036 | 105 |
| activities | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| Net movement in cash and | | | | |
+--------------------------------+--------------+-------------+-----------+-----------+
| cash equivalents | (268) | (226) | 404 | (136) |
+--------------------------------+--------------+-------------+-----------+-----------+
* Dividend no 85: 16 US cents per share paid on 28 November 2008.
Group statement of recognised income and expense
+--------------------------------+-------------------+-----------+------------+-----------+
| | Reviewed | Reviewed | Reviewed | Reviewed |
+--------------------------------+-------------------+-----------+------------+-----------+
| | Quarter | Quarter | Half-year | Half-year |
+--------------------------------+-------------------+-----------+------------+-----------+
| | ended | ended | ended | ended |
+--------------------------------+-------------------+-----------+------------+-----------+
| | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+--------------------------------+-------------------+-----------+------------+-----------+
| | US$ million | US$ | US$ | US$ |
| | | million | million | million |
+--------------------------------+-------------------+-----------+------------+-----------+
| Exchange differences on | | | | |
| translation of | | | | |
+--------------------------------+-------------------+-----------+------------+-----------+
| foreign operations | 6 | (262) | (287) | (272) |
+--------------------------------+-------------------+-----------+------------+-----------+
| Realised gain on cash flow | (32) | - | - | - |
| hedge | | | | |
+--------------------------------+-------------------+-----------+------------+-----------+
| Sundry other movements in | 9 | - | - | 2 |
| equity | | | | |
+--------------------------------+-------------------+-----------+------------+-----------+
| Net expense recorded directly | | | | |
+--------------------------------+-------------------+-----------+------------+-----------+
| in equity | (17) | (262) | (287) | (270) |
+--------------------------------+-------------------+-----------+------------+-----------+
| (Loss) profit for the period | (35) | 155 | (12) | 197 |
+--------------------------------+-------------------+-----------+------------+-----------+
| Total recognised expense for | (52) | (107) | (299) | (73) |
| the period | | | | |
+--------------------------------+-------------------+-----------+------------+-----------+
Notes to the group results
1. Basis of preparation
The condensed financial statements have been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting. The
accounting policies and methods of computation used in the preparation of the
results are consistent, in all material respects, with those used in the annual
financial statements for September 2008 which are compliant with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
The preliminary results for the six month period and quarter ended March 2009
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 offices.
In November and December 2008, Sappi conducted a renounceable rights offer of
286,886,270 new ordinary shares of ZAR1.00 each to qualifying Sappi shareholders
recorded in the shareholders register at the close of business on Friday 21
November 2008, at a subscription price of ZAR20.27 per rights offer share in the
ratio of 6 rights offer shares for every 5 Sappi shares held. The rights offer
was fully subscribed and the shareholders received their shares on 15 December
2008. The rights offer raised ZAR5,8 billion which was used to partly finance
the acquisition of the coated graphic paper business of M-Real and the related
costs.
In accordance with IAS 33, prior period basic, headline and diluted earnings per
share have been restated to take into account the bonus element of the rights
offer. The prior period weighted average number of shares has been adjusted by a
factor of 1.58 (the adjustment factor). Please refer to Supplemental Information
for a summary of this calculation.
2. Reconciliation of movement in shareholders' equity
+---------------------------------------------------+----------------+-------------------+
| | Reviewed | Reviewed |
+---------------------------------------------------+----------------+-------------------+
| | Half-year | Half-year |
+---------------------------------------------------+----------------+-------------------+
| | ended | ended |
+---------------------------------------------------+----------------+-------------------+
| | Mar 2009 | Mar 2008 |
+---------------------------------------------------+----------------+-------------------+
| | US$ million | US$ million |
+---------------------------------------------------+----------------+-------------------+
| Balance - beginning of period | 1,605 | 1,816 |
+---------------------------------------------------+----------------+-------------------+
| Total recognised expense for the period | (299) | (73) |
+---------------------------------------------------+----------------+-------------------+
| Dividends paid | (37) | (73) |
+---------------------------------------------------+----------------+-------------------+
| Rights offer | 575 | - |
+---------------------------------------------------+----------------+-------------------+
| Costs directly attributable to the rights offer | (31) | - |
+---------------------------------------------------+----------------+-------------------+
| Issue of new shares to M-real | 45 | - |
+---------------------------------------------------+----------------+-------------------+
| Transfer to participants of the share purchase | 3 | 3 |
| trust | | |
+---------------------------------------------------+----------------+-------------------+
| Share based payment reserve | 5 | 4 |
+---------------------------------------------------+----------------+-------------------+
| Balance - end of period | 1,866 | 1,677 |
+---------------------------------------------------+----------------+-------------------+
+----+-------------------------------+-------------------+------------+-----------+------------+
| 3. | Operating profit | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | Reviewed | Reviewed | Reviewed | Reviewed |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | Quarter | Quarter | Half-year | Half-year |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | ended | ended | ended | ended |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | US$ million | US$ | US$ | US$ |
| | | | million | million | million |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Included in operating profit | | | | |
| | are the | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | following non-cash items: | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Depreciation and amortisation | 99 | 93 | 180 | 189 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Fair value adjustment on | | | | |
| | plantations | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | (included in cost of sales) | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Changes in volume | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Fellings | 15 | 19 | 31 | 40 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Growth | (16) | (17) | (32) | (35) |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | (1) | 2 | (1) | 5 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Plantation price fair value | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | adjustment | (35) | (118) | (69) | (117) |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | (36) | (116) | (70) | (112) |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Included in other operating | | | | |
| | expenses | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | are the following: | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Asset impairments | 2 | - | 5 | 2 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Profit on disposal of | | | | |
| | property, | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | plant and equipment | - | (3) | (1) | (4) |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Restructuring provisions | 8 | (2) | 8 | (3) |
| | raised (released) | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| 4. | Headline earnings per share * | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Headline earnings per share | (6) | 42 | (2) | 54 |
| | (US cents) ** | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Weighted average number of | | | | |
| | shares in | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | issue (millions) ** | 515.8 | 362.3 | 449.4 | 361.9 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Diluted headline earnings per | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | share (US cents) ** | (6) | 41 | (2) | 53 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Weighted average number of | | | | |
| | shares on | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | fully diluted basis | 517.8 | 365.0 | 451.5 | 364.9 |
| | (millions) ** | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Calculation of headline | | | | |
| | earnings * | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | (Loss) profit for the period | (35) | 155 | (12) | 197 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Asset impairments | 2 | - | 5 | 2 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Profit on disposal of | | | | |
| | property, plant | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | and equipment | - | (3) | (1) | (4) |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Tax effect of above items | - | (1) | - | - |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Headline (loss) earnings | (33) | 151 | (8) | 195 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | ** Headline earnings disclosure is required by the JSE Limited |
| | ** Prior period headline earnings per share has been restated for the bonus element of |
| | the rights offer on accordance with IAS 33. |
| | Please refer to Supplemental information for a summary of this calculation |
+----+-----------------------------------------------------------------------------------------+
| | | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| 5. | Capital expenditure | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Property, plant and equipment | 46 | 165 | 93 | 274 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | | | Mar 2009 | Sept 2008 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | | | US$ | US$ |
| | | | | million | million |
+----+-------------------------------+-------------------+------------+-----------+------------+
| 6. | Capital commitments | | | | |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Contracted | | | 96 | 76 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | Approved but not contracted | | | 160 | 130 |
+----+-------------------------------+-------------------+------------+-----------+------------+
| | | | | 256 | 206 |
+----+-------------------------------+-------------------+------------+-----------+------------+
+--------------------------------------------------------------+--------------+-------------------+
| Notes to the group results | | |
+--------------------------------------------------------------+--------------+-------------------+
| | Mar 2009 | Sept 2008 |
+--------------------------------------------------------------+--------------+-------------------+
| | US$ million | US$ million |
+--------------------------------------------------------------+--------------+-------------------+
| 7. Contingent liabilities | | |
+--------------------------------------------------------------+--------------+-------------------+
| Guarantees and suretyships | 36 | 38 |
+--------------------------------------------------------------+--------------+-------------------+
| Other contingent liabilities | 7 | 7 |
+--------------------------------------------------------------+--------------+-------------------+
| | 43 | 45 |
+--------------------------------------------------------------+--------------+-------------------+
8. Material balance sheet movements
* Acquisition of M-real's coated graphic paper business
* See note 9 for details of how the acquisition is recorded in the balance sheet.
* Interest-bearing borrowings and cash and cash equivalents
* Included in long term borrowings is the EUR220 million (US$293 million) vendor
loan note and the assumed interest bearing debt both used to partly finance the
acquisition of M-real's coated graphic paper business.
* During the six months ended March 2009, the group also drew down EUR200 million
(US$266 million) of its committed facilities and raised a further US$52 million
in long term bank loans. All of this is currently held in cash.
9. Acquisition
* On 31 December 2008, Sappi acquired M-real's coated graphic paper business for
EUR750 million (US$1.1 billion). The transaction includes M-real's coated
graphic paper business (excluding M-real's South African business), including
brands and company knowledge, as well as four coated graphic mills.
* The acquisition was financed through a combination of equity, assumed debt, the
cash proceeds from a rights offering and a vendor loan note.
* The acquired business contributed revenues of US$280 million, a net operating
loss of US$3 million and a net loss of US$7 million to the group for the period
from acquisition to 29 March 2009.
* Details of net assets acquired and goodwill are as follows:
+------------------------------------------------------------+----------+---------+
| | EURO | US$ |
+------------------------------------------------------------+----------+---------+
| Purchase consideration: | | |
+------------------------------------------------------------+----------+---------+
| Cash consideration | 400 | 563 |
+------------------------------------------------------------+----------+---------+
| Shares issued * | 32 | 45 |
+------------------------------------------------------------+----------+---------+
| Vendor loan note | 220 | 308 |
+------------------------------------------------------------+----------+---------+
| Adjustments to working capital | 6 | 8 |
+------------------------------------------------------------+----------+---------+
| Gain on forward exchange contract covering purchase | (24) | (32) |
| consideration | | |
+------------------------------------------------------------+----------+---------+
| Direct costs relating to the acquisition | 21 | 30 |
+------------------------------------------------------------+----------+---------+
| Total purchase consideration | 655 | 922 |
+------------------------------------------------------------+----------+---------+
| Provisional fair value of net identifiable assets acquired | 628 | 884 |
| (see below) | | |
+------------------------------------------------------------+----------+---------+
| Provisional goodwill ** | 27 | 38 |
+------------------------------------------------------------+----------+---------+
* 11,159,702 Sappi shares were issued to M-real as partial payment of the
acquisition price. The fair value of USD$45 million (EUR32 million) was
determined using Sappi's published market price at the date of exchange.
** The initial accounting for the business combination has been determined
provisionally as at the end of the second quarter ended March 2009 because the
group is still in the process of finalising the fair values of the identifiable
assets and liabilities of the acquired business of M-real.
+------------------------------------------+------------+-------------+------------+-------------+
| The assets and liabilities arising from the acquisition are as follows: |
+------------------------------------------------------------------------------------------------+
| | EURO | EURO | US$ | US$ |
+------------------------------------------+------------+-------------+------------+-------------+
| | Acquiree's | Provisional | Acquiree's | Provisional |
+------------------------------------------+------------+-------------+------------+-------------+
| | carrying | fair | carrying | fair |
+------------------------------------------+------------+-------------+------------+-------------+
| | amount | value | amount | value |
+------------------------------------------+------------+-------------+------------+-------------+
| Property, plant and equipment | 640 | 494 | 901 | 695 |
+------------------------------------------+------------+-------------+------------+-------------+
| Information technology related | 2 | 2 | 3 | 3 |
| intangibles | | | | |
+------------------------------------------+------------+-------------+------------+-------------+
| Brand names | - | 18 | - | 25 |
+------------------------------------------+------------+-------------+------------+-------------+
| Inventories | 118 | 116 | 166 | 163 |
+------------------------------------------+------------+-------------+------------+-------------+
| Trade receivables | 200 | 200 | 281 | 281 |
+------------------------------------------+------------+-------------+------------+-------------+
| Prepayments and other debit balances | 15 | 21 | 21 | 30 |
+------------------------------------------+------------+-------------+------------+-------------+
| Cash and cash equivalents | 5 | 5 | 7 | 7 |
+------------------------------------------+------------+-------------+------------+-------------+
| Trade payables | (86) | (86) | (121) | (121) |
+------------------------------------------+------------+-------------+------------+-------------+
| Pension liabilities | (37) | (40) | (52) | (56) |
+------------------------------------------+------------+-------------+------------+-------------+
| Borrowings | (46) | (47) | (65) | (66) |
+------------------------------------------+------------+-------------+------------+-------------+
| Provisions | (4) | (4) | (6) | (6) |
+------------------------------------------+------------+-------------+------------+-------------+
| Other payables and accruals | (66) | (64) | (93) | (89) |
+------------------------------------------+------------+-------------+------------+-------------+
| Net deferred tax (liabilities) assets | (10) | 13 | (14) | 18 |
+------------------------------------------+------------+-------------+------------+-------------+
| Net identifiable assets acquired | 731 | 628 | 1,028 | 884 |
+------------------------------------------+------------+-------------+------------+-------------+
| Outflow of cash to acquire business, net | | | | |
| of cash acquired: | | | | |
+------------------------------------------+------------+-------------+------------+-------------+
| |
+------------------------------------------------------------------------------------------------+
| | | | EURO | US$ |
+------------------------------------------+------------+-------------+------------+-------------+
| Cash consideration | | | 400 | 563 |
+------------------------------------------+------------+-------------+------------+-------------+
| Direct costs relating to acquisition | | | 21 | 30 |
+------------------------------------------+------------+-------------+------------+-------------+
| Cash and cash equivalents in subsidiary | | | (5) | (7) |
| acquired | | | | |
+------------------------------------------+------------+-------------+------------+-------------+
| Cash outflow on acquisition | | | 416 | 586 |
+------------------------------------------+------------+-------------+------------+-------------+
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Notes to the group | | | | | | | |
| results | | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | | Reviewed | Reviewed | | Reviewed | Reviewed | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | | Quarter | Quarter | | Half-year | Half-year | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | | ended | ended | | ended | ended | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | | Mar 2009 | Mar 2008 | % | Mar 2009 | Mar 2008 | % |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | | US$ | US$ | change | US$ | US$ | change |
| | | million | million | | million | million | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| 10. Regional | | | | | | | |
| information | | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Sales | | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Fine Paper - | North America | 301 | 423 | (29) | 664 | 807 | (18) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Europe | 737 | 697 | 6 | 1,298 | 1,335 | (3) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Southern | 74 | 89 | (17) | 148 | 176 | (16) |
| | Africa | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Total | 1,112 | 1,209 | (8) | 2,110 | 2,318 | (9) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Forest | | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Products - | Pulp and | | | | | | |
| | paper | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | operations | 189 | 246 | (23) | 363 | 498 | (27) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Forestry | 12 | 18 | (33) | 27 | 34 | (21) |
| | operations | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Total | | 1,313 | 1,473 | (11) | 2,500 | 2,850 | (12) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Operating profit | | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Fine Paper - | North America | (24) | 26 | - | (31) | 37 | - |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Europe | (21) | 18 | - | (8) | 37 | - |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Southern | 2 | 3 | (33) | 4 | 4 | - |
| | Africa | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Total | 43 | 47 | - | (35) | 78 | - |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Forest Products | | 48 | 172 | (72) | 97 | 227 | (57) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Corporate and other | | 1 | 2 | (50) | 1 | 7 | 100 |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Total | | 6 | 221 | (97) | 63 | 312 | (80) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Net operating | | | | | | | |
| assets | | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Fine Paper - | North America | 1,070 | 1,116 | (4) | 1,070 | 1,116 | (4) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Europe | 2,376 | 2,085 | 14 | 2,376 | 2,085 | 14 |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Southern | 181 | 127 | 43 | 181 | 127 | 43 |
| | Africa | | | | | | |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| | Total | 3,627 | 3,328 | 9 | 3,627 | 3,328 | 9 |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Forest Products | | 1,531 | 1,695 | (10) | 1,531 | 1,695 | (10) |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Corporate and other | | 126 | 8 | - | 126 | 8 | - |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
| Total | | 5,284 | 5,031 | 5 | 5,284 | 5,031 | 5 |
+---------------------+---------------+-----------+----------+--------+-----------+-----------+--------+
Supplemental Information (this information has not been reviewed)
general definitions
Average - averages are calculated as the sum of the opening and closing balances
for the relevant period divided by two
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, mainly produced from spruce trees in Scandinavia, Canada and north
eastern USA. The 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
Acquisition - the acquisition of M-real's coated graphic paper business on 31
December 2008
Adjustment factor - This is calculated using the pre-announcement share price
divided by the theoretical ex-rights price (TERP). TERP is the [(Number of new
shares multiplied by the Subscription price) plus the (Number of shares held
multiplied by the Ex-dividend share price)] all divided by the (Number of new
shares plus the number of shares held prior to the rights offer).
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 8/2007 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 listing requirement of the JSE Limited to disclose headline
earnings per share
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 and
cash equivalents) less current liabilities (excluding interest-bearing
borrowings and bank overdraft)
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
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 net operating 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,
financial impacts of natural disasters and non-cash gains or losses on the price
fair value adjustment of plantations
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.
Supplemental Information (this information has not been reviewed)
+-----------------------------------------+------------+----------+-----------+-----------+
| EBITDA excluding special items | | | | |
+-----------------------------------------+------------+----------+-----------+-----------+
| | Quarter | Quarter | Half-year | Half-year |
+-----------------------------------------+------------+----------+-----------+-----------+
| | ended | ended | ended | ended |
+-----------------------------------------+------------+----------+-----------+-----------+
| | Mar 2009 | Mar 2008 | Mar 2009 | Mar 2008 |
+-----------------------------------------+------------+----------+-----------+-----------+
| | US$ | US$ | US$ | US$ |
| | million | million | million | million |
+-----------------------------------------+------------+----------+-----------+-----------+
| Reconciliation of (loss) profit for the | | | | |
| period to | | | | |
+-----------------------------------------+------------+----------+-----------+-----------+
| EBITDA excluding special items (1) | | | | |
+-----------------------------------------+------------+----------+-----------+-----------+
| (Loss) profit for the period | (35) | 155 | (12) | 197 |
+-----------------------------------------+------------+----------+-----------+-----------+
| Net finance costs | 40 | 27 | 61 | 55 |
+-----------------------------------------+------------+----------+-----------+-----------+
| Taxation | 1 | 39 | 14 | 60 |
+-----------------------------------------+------------+----------+-----------+-----------+
| Special items - gains | (23) | (124) | (55) | (123) |
+-----------------------------------------+------------+----------+-----------+-----------+
| Operating (loss) profit excluding | (17) | 97 | 8 | 189 |
| special items | | | | |
+-----------------------------------------+------------+----------+-----------+-----------+
| Depreciation and amortisation | 99 | 93 | 180 | 189 |
+-----------------------------------------+------------+----------+-----------+-----------+
| EBITDA excluding special items (1) | 82 | 190 | 188 | 378 |
+-----------------------------------------+------------+----------+-----------+-----------+
| | | | Mar 2009 | Sept 2008 |
+-----------------------------------------+------------+----------+-----------+-----------+
| | | | US$ | US$ |
| | | | million | million |
+-----------------------------------------+------------+----------+-----------+-----------+
| Net debt (US$ million) (2) | | | 2,735 | 2,405 |
+-----------------------------------------+------------+----------+-----------+-----------+
| Net debt to total capitalisation (%) | | | 59.4 | 60.0 |
| (2) | | | | |
+-----------------------------------------+------------+----------+-----------+-----------+
| Net asset value per share (US$) (2) | | | 3.62 | 7.00 |
+-----------------------------------------+------------+----------+-----------+-----------+
(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 excluding special items to net profit rather than operating
profit. As a result our definition retains minority interest as part of EBITDA
excluding special items.
Operating profit excluding special items represents earnings before interest
(net finance costs), taxation and special items. Net finance costs includes:
gross interest paid; interest received; interest capitalised; net foreign
exchange gains; and net fair value adjustments on interest rate financial
instruments. See the group income statement for an explanation of the
computation of net finance costs. 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 and loss
on disposal of property, investments and businesses, asset impairments,
restructuring charges, financial impacts of natural disasters and non-cash gains
or losses on the price fair value adjustment of plantations.
EBITDA excluding special items represents operating profit before depreciation,
amortisation and special items.
We use both operating profit excluding special items and EBITDA excluding
special items as internal measures of performance to benchmark and compare
performance, both between our own operations and as against other companies.
Operating profit excluding special items and EBITDA excluding special items are
measures used by the group, together with measures of performance under IFRS, to
compare the relative performance of operations in planning, budgeting and
reviewing the performances of various businesses. We believe they are useful and
commonly used measures of financial performance in addition to net profit,
operating profit and other profitability measures under IFRS because they
facilitate operating performance comparisons from period to period and company
to company. By eliminating potential differences in results of operations
between periods or companies caused by factors such as depreciation and
amortisation methods, historic cost and age of assets, financing and capital
structures and taxation positions or regimes, we believe both operating profit
excluding special items and EBITDA excluding special items can provide a useful
additional basis for comparing the current performance of the operations being
evaluated. For these reasons, we believe operating profit excluding special
items and EBITDA excluding special items and similar measures are regularly used
by the investment community as a means of comparison of companies in our
industry. Different companies and analysts may calculate operating profit
excluding special items and EBITDA excluding special items differently, so
making comparisons among companies on this basis should be done very carefully.
Operating profit excluding special items and EBITDA excluding special items are
not measures of performance under IFRS and should not be considered in isolation
or construed as a substitute for operating profit or net profit as indicators of
the company's operations in accordance with IFRS.
(2) Refer to Supplemental Information for the definition of the term.
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Supplemental Information (this information has not been reviewed) |
| summary rand convenience translation |
+---------------------------------------------------------------------------------------------+
| | Quarter ended | Half-year ended |
+---------------------------+------------------------------------+----------------------------+
| | Mar 2009 | Mar 2008 | % | Mar | Mar | % change |
| | | | change | 2009 | 2008 | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Key figures: (ZAR | | | | | | |
| million) | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Sales | 12,996 | 10,988 | 18 | 24,754 | 20,368 | 22 |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Operating profit | 59 | 1,649 | (96) | 624 | 2,230 | (72) |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Special items - gains * | (228) | (925) | - | (545) | (879) | - |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Operating (loss) profit | | | | | | |
| excluding | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| special items | (168) | 724 | - | 79 | 1,351 | (94) |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| EBITDA excluding special | 812 | 1,417 | (43) | 1,861 | 2,701 | (31) |
| items * | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Basic EPS (SA cents) | (69) | 321 | - | (30) | 386 | - |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Net debt * | 26,215 | 21,669 | 21 | 26,215 | 21,669 | 21 |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Key ratios: (%) | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Operating profit to sales | 0.5 | 15.0 | | 2.5 | 10.9 | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Operating (loss) profit | | | | | | |
| excluding | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| special items to sales | (1.3) | 6.6 | | 0.3 | 6.6 | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Operating (loss) profit | | | | | | |
| excluding | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| special items to Capital | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Employed (ROCE) | (1.7) | 9.0 | | 0.4 | 8.6 | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| EBITDA excluding special | | | | | | |
| items | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| to sales | 6.2 | 12.9 | | 7.5 | 13.3 | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
| Net debt to total | 59.4 | 61.3 | | 59.4 | 61.3 | |
| capitalisation * | | | | | | |
+---------------------------+-------------+-------------+--------+--------+--------+----------+
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| * Refer to Supplemental Information for the definition of the term. |
| The above financial results have been translated into ZAR 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. |
| exchange rates |
+-----------------------------------------------------------------------------------------------------+
| | Mar | Dec | Sept | June | Mar |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| | 2009 | 2008 | 2008 | 2008 | 2008 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Exchange rates: | | | | | |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Period end rate: US$1 = ZAR | 9.5849 | 9.7148 | 8.0751 | 7.9145 | 8.1432 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Average rate for the Quarter: US$1 = ZAR | 9.8979 | 9.8584 | 7.8150 | 7.8385 | 7.4593 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Average rate for the YTD: US$1 = ZAR | 9.9015 | 9.8584 | 7.4294 | 7.3236 | 7.1465 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Period end rate: EUR 1 = US$ | 1.3301 | 1.4064 | 1.4615 | 1.5795 | 1.5802 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Average rate for the Quarter: EUR 1 = US$ | 1.3300 | 1.3471 | 1.5228 | 1.5747 | 1.5006 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
| Average rate for the YTD: EUR 1 = US$ | 1.3288 | 1.3471 | 1.5064 | 1.5071 | 1.4790 |
+-----------------------------------------------------+-----------+--------+--------+--------+--------+
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.
Notes
Other interested parties can obtain printed copies of this report from:
+----------------------------+---------------------------------+---------------------+
| South Africa: | United States: | Channel Islands: |
+----------------------------+---------------------------------+---------------------+
| Computershare Investor | ADR Depositary: | Capita Registrars |
+----------------------------+---------------------------------+---------------------+
| Services (Proprietary) | The Bank of New York Mellon | (Jersey) Limited |
| Limited | | |
+----------------------------+---------------------------------+---------------------+
| 70 Marshall Street | Investor Relations | 12 Castle Street |
+----------------------------+---------------------------------+---------------------+
| Johannesburg 2001 | PO Box 11258 | St Helier, |
+----------------------------+---------------------------------+---------------------+
| PO Box 61051 | Church Street Station | Jersey |
+----------------------------+---------------------------------+---------------------+
| Marshalltown 2107 | New York, NY 10286-1258 | JE2 3 RT |
+----------------------------+---------------------------------+---------------------+
| Tel +27 (0)11 370 5000 | Tel +1 610 382 7836 | Tel + 44 (0)208 639 |
| | | 3399 |
+----------------------------+---------------------------------+---------------------+
this report is available on the Sappi website
www.sappi.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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