Wrap Text
SAP - Sappi Limited - 4th quarter results and year ended September 2007 and
dividend declaration
SAPPI LIMITED
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN Code: ZAE 000006284
4th quarter results and year ended September 2007
financial highlights
- Improved operating performance
- Basic EPS increased to 27 US cents for the quarter
- Strong cash generation
- Input costs continue to rise
- Prices improved except for Fine Paper Europe
- Dividend of 32 US cents per share declared
summary
Quarter ended
Sept June Sept
2007 2007 2006
Key figures: (US$ million)
Sales 1,422 1,297 1,296
Operating profit 87 87 51
Special items * 9 (6) 11
Operating profit excluding special items 96 81 62
EBITDA excluding special items * ** 187 176 162
Basic EPS (US cents) 27 23 18
Net debt * 2,257 2,313 2,113
Key ratios: (%)
Operating profit to sales 6.1 6.7 3.9
Operating profit excluding special items to sales 6.8 6.2 4.8
EBITDA excluding special items * ** to sales 13.2 13.6 12.5
Operating profit excluding special items
to average net assets 9.1 8.0 6.4
Return on average equity (ROE)* 14.1 13.6 11.7
Net debt to total capitalisation * 43.2 46.1 46.4
Reviewed
Year ended
Sept Sept
2007 2006
Key figures: (US$ million)
Sales 5,304 4,941
Operating profit 383 125
Special items * (70) (34)
Operating profit excluding special items 313 91
EBITDA excluding special items * ** 688 483
Basic EPS (US cents) 89 (2)
Net debt * 2,257 2,113
Key ratios: (%)
Operating profit to sales 7.2 2.5
Operating profit excluding special items to sales 5.9 1.8
EBITDA excluding special items * ** to sales 13.0 9.8
Operating profit excluding special items to
average net assets 7.6 2.3
Return on average equity (ROE) 12.6 (0.3)
Net debt to total capitalisation * 43.2 46.4
* Refer to Supplemental Information, for the definition of the term.
** Refer to additional information in Supplemental Information for
the reconciliation of EBITDA excluding special items to profit.
Comment
Quarter ended September 2007 compared with Quarter ended September 2006
Our operating performance improved further in the quarter with all of our fine
paper businesses improving their margins and returns. Forest Products reported
a strong quarter supported by strong pulp prices and good demand in the
southern African markets. Although improved, Fine Paper`s margins and returns
are still well short of acceptable levels. A major factor was high input costs
including wood, chemical and energy costs. As a group we sell slightly more
pulp than we purchase which provides an economic hedge in terms of pulp prices,
but the European and southern African Fine Paper businesses purchase more than
half of their pulp requirements, consequently their margins continue to be
squeezed by high pulp prices and other input costs.
Coated fine paper prices in North America have started improving but margins
remain under pressure from high input costs. In Europe, the price gains made
earlier in the year have largely been surrendered due to very competitive
markets despite high operating rates for us and the industry as a whole.
Demand for coated fine paper grew at about 1% in Europe compared with the
previous year. In North America shipments by local producers declined largely
as a result of capacity closures. Pulp markets remain very strong; NBSK prices
for the quarter averaged US$800 per ton, up about US$100 compared to a year
ago.
Our sales were US$1.42 billion, an increase of 10%, reflecting strong order
books in all our businesses.
Operating profit increased 70% to US$87 million. Operating profit excluding
special items increased to US$96 million (2006:US$62 million).
Special items excluded from operating profit in the quarter include fire damage
to our southern African forests of US$8 million, profit on sale of assets US$1
million and a loss from a change in the fair value of plantations of US$2
million. Details of these are set out in note 4 to the financial statements.
Net finance costs were US$27 million compared to US$37 million a year ago and
included interest capitalised of US$6 million, foreign exchange gains of US$4
million and a favourable change in fair value of financial instruments of US$3
million.
Basic earnings per share for the quarter grew to 27 US cents compared to 18 US
cents last year.
Year ended September 2007 compared to year ended September 2006
There has been a continuing trend of improvement in operating performance
quarter by quarter through the year. Sales for the year increased 7% to US$5.3
billion. Operating profit increased to US$383 million from US$125 million last
year. Operating profit excluding special items increased to US$313 million from
US$91 million last year. Special items amounted to US$70 million which included
US$54 million plantation fair value gain, US$26 million profit on sale of fixed
assets and US$15 million fire damage.
Net finance costs for the year were US$134 million compared to US$130 million
in the prior year and included interest capitalised of US$14 million and an
unfavourable change in fair value of financial investments of US$9 million.
The effective tax rate for the year was 19% and was reduced by rate changes
offset by non-recognition of deferred tax assets.
Basic earnings per share for the year was 89 US cents compared to a loss of 2
US cents last year.
Cash flow and debt
Cash generated by operations increased to US$182 million for the quarter from
US$158 million a year ago. Working capital was reduced by US$140 million
compared to a reduction of US$80 million a year ago as a result of tight
management of working capital in all regions.
During the quarter net finance costs paid increased to US$52 million compared
to US$22 million a year ago as a result of the roll-over of forward exchange
contracts related to long term debt.
The cash effect of investing activities was US$120 million in the quarter
compared to US$109 million a year ago and US$154 million in the prior quarter.
Net debt at year end was US$2,257 million, compared to US$2,113 million at the
start of the year. After taking account of the non-cash currency impact of
US$168 million on the value of debt, net debt was reduced by US$24 million.
This is in line with our commitment to proceed with the Saiccor expansion
project without materially increasing debt levels. Net debt to total
capitalisation was 43.2% compared to 46.4% in September 2006.
A South African subsidiary issued bonds, maturing in four years, to the value
of ZAR1 billion (US$140 million) on 25 September 2007 to replace short term
debt.
Operating review
Sappi Fine Paper
Quarter ended Quarter ended
Sept 2007 Sept 2006 % June 2007
US$ million US$ million change US$ million
Sales 1,118 1,029 8.6 1,037
Operating profit 29 (40) - 25
Operating profit to
sales (%) 2.6 (3.9) - 2.4
Special items * - 40 - -
Operating profit
excluding special items 29 - - 25
Operating profit
excluding special
items to sales (%) 2.6 - - 2.4
EBITDA excluding
special items 102 83 22.9 100
EBITDA excluding
special items to
sales (%) 9.1 8.1 - 9.6
RONOA pa (%) 3.7 - - 3.2
* See note 4 to the financial statements
All the regions improved operating profit excluding special items and margins
compared to a year ago.
Sales volumes increased by 3.3% compared to a year ago and net sales increased
by 8.6% to US$1.1 billion, mainly as a result of the higher volumes, improved
prices in North America and southern Africa, and the currency conversion of
non-dollar sales to a weaker US Dollar. The operating profit excluding special
items improved to US$29 million compared to breaking even a year ago. The
operating margin of 2.6% remains well below target.
Europe
Quarter ended
Sept 2007 Sept 2006 % change
US$ million US$ million (US$)
Sales 619 569 8.8
Operating profit 17 (48) -
Operating profit to sales (%) 2.7 (8.4) -
Special items * - 40 -
Operating profit excluding special items 17 (8) -
Operating profit excluding special
items to sales (%) 2.7 (1.4) -
EBITDA excluding special items 60 41 46.3
EBITDA excluding special items to
sales (%) 9.7 7.2 -
RONOA pa (%) 3.5 (1.7) -
Quarter ended
% change June 2007
(Euro) US$ million
Sales 0.6 584
Operating profit - 14
Operating profit to sales (%) - 2.4
Special items * - -
Operating profit excluding special items - 14
Operating profit excluding special items to sales (%) - 2.4
EBITDA excluding special items 35.3 57
EBITDA excluding special items to sales (%) - 9.8
RONOA pa (%) - 2.9
* See note 4 to the financial statements
Sales volume increased 1% compared to a year ago but 6% compared to the prior
quarter as we regained some market share lost when we held a strong position on
prices earlier in the year. Average prices realised were at similar levels to a
year earlier and 1.5% below the previous quarter due to fiercely competitive
market conditions.
Operating profit excluding special items improved to US$17 million from a loss
of US$8 million a year ago.
The cost reduction programme initiated in 2005 continues to help offset the
impact of high input costs including wood, pulp, chemical and energy costs as
well as employment inflation.
In Europe apparent consumption for coated fine paper grew 1% compared to a year
ago. Despite reported industry operating rates of 93% for coated fine paper,
prices retreated during the quarter, giving up the gains achieved earlier in
the year. There have been some price improvements in specific markets.
North America
Quarter ended Quarter ended
Sept 2007 Sept 2006 % June 2007
US$ million US$ million change US$ million
Sales 404 373 8.3 362
Operating profit 9 7 28.6 8
Operating profit to
sales (%) 2.2 1.9 - 2.2
Operating profit
excluding special items 9 7 28.6 8
Operating profit
excluding special
items to sales (%) 2.2 1.9 - 2.2
EBITDA excluding
special items 35 37 (5.4) 36
EBITDA excluding
special items to
sales (%) 8.7 9.9 - 9.9
RONOA pa (%) 3.4 2.5 - 3.0
The three new products launched in the past two quarters have been well received
in the market. Sales volumes increased by 8% compared to a year ago after we
regained some market share lost in the previous year. Average prices realised
for paper increased compared to a year ago and compared to the previous
quarter. Further increases are being implemented.
Operating profit excluding special items improved in the quarter to US$9
million compared to US$7 million a year ago.
We continue to implement cost reductions throughout our operations to offset
high input costs.
Apparent consumption for coated fine paper declined significantly. It was
impacted by reduced imports of coated fine paper. It appears that inventories
of imported product have declined and that some of these imports are now
recorded as coated mechanical paper, which is free of the anti-dumping and
countervailing duties recently applied to certain Asian exporters. Shipments
from domestic producers declined 4% reflecting a reduction in capacity
following the closure of approximately 800,000 tons of higher cost coated fine
paper capacity over the past two years.
Fine Paper South Africa
Quarter ended
Sept 2007 Sept 2006 % change
US$ million US$ million (US$)
Sales 95 87 9.2
Operating profit 3 1 200.0
Operating profit to sales (%) 3.2 1.1 -
Operating profit excluding
special items 3 1 200.0
Operating profit excluding
special items to sales (%) 3.2 1.1 -
EBITDA excluding special items 7 5 40.0
EBITDA excluding special items
to sales (%) 7.4 5.7 -
RONOA pa (%) 7.9 2.6 -
Quarter ended
% change June 2007
(Rand) US$ million
Sales 6.1 91
Operating profit 191.6 3
Operating profit to sales (%) - 3.3
Operating profit excluding special items 191.6 3
Operating profit excluding special items to sales (%) - 3.3
EBITDA excluding special items 36.1 7
EBITDA excluding special items to sales (%) - 7.7
RONOA pa (%) - 7.8
Demand in the southern African markets was strong. Sales in US Dollars and
operating profit improved as a result of improved prices but margins remain
under pressure from cost increases including wood, pulp, energy and employment
costs.
Forest Products
Quarter ended
Sept 2007 Sept 2006 % change
US$ million US$ million (US$)
Sales 304 267 13.9
Operating profit 52 85 (38.8)
Operating profit to sales (%) 17.1 31.8 -
Special items* 9 (29) -
Operating profit excluding
special items 61 56 8.9
Operating profit excluding
special items to sales (%) 20.1 21.0 -
EBITDA excluding special items 79 73 8.2
EBITDA excluding special items
to sales (%) 26.0 27.3 -
RONOA pa (%) 15.1 18.4 -
Quarter ended
% change June 2007
(Rand) US$ million
Sales 10.7 260
Operating profit (40.5) 65
Operating profit to sales (%) - 25.0
Special items* - (8)
Operating profit excluding special items 5.9 57
Operating profit excluding special items to sales (%) - 21.9
EBITDA excluding special items 5.2 76
EBITDA excluding special items to sales (%) - 29.2
RONOA pa (%) - 15.1
* See note 4 to the financial statements
The business performed strongly reflecting increasing international pulp prices
and good demand for our products, particularly packaging paper in southern
Africa. Demand for chemical cellulose was strong.
Operating efficiency continued to improve, however there is scope for further
improvement. Energy and employment costs have continued to rise at a rate
exceeding the local rate of inflation, which is approximately 6%. A general
shortage of technical skills is exacerbating employment cost pressures.
Managing these costs is a priority going forward.
During the quarter we experienced extensive plantation fires resulting in a
charge of US$8 million (before tax) included in special items. The fires
suffered in the third and fourth quarter were the worst fires ever experienced
in South Africa. The combined pre-tax charge for the two quarters was US$15
million before tax. Good rains have virtually ended the risk of more fires this
season.
Special items also included a plantation fair value price charge of US$2
million compared to a gain of US$10 million a year ago. The reversal of the
Usutu impairment of US$40 million in the fourth quarter 2006 is reported as a
special item.
The Saiccor expansion project is progressing well and is on track for a second
calendar quarter 2008 start up. The estimated capital expenditure for the
project will be approximately US$500 million.
Dividend
The board has approved a dividend, Number 84, of 32 US cents for the year ended
September 2007. A dividend of 30 US cents was paid for the previous year.
Directors
Ralph Boettger, who joined the board as Chief Executive Officer on 01 July 2007,
took executive authority for the company in August following an intensive
introductory tour. At that date, the group`s Chairman, Eugene van As, resumed
his non-executive role.
John (Jock) McKenzie joined the board as non-executive director on 01 September
2007.
Outlook
Management`s priority is the continuing improvement of our margins and
operating efficiencies. We expect the turnaround of our North American
business, which is well under way, to continue. In Europe our focus is on
further improving operational efficiencies, continuous cost reductions and
price recovery, to help restore margins. The southern African business
continues to benefit from strong local demand and the high international pulp
prices.
Supply/demand conditions for coated fine paper in North America remain
favourable for improved pricing; however, there are signs of the economy
cooling, which could have some impact on demand during 2008. Despite the high
operating rates in Europe prices remain low and industry margins continue to
decline. Pulp prices have continued to rise in October 2007 and NBSK prices are
US$30 per ton higher than the average for the September quarter.
Input cost pressures remain high in all our businesses. While we expect to be
able to offset these costs to some extent through cost reduction efforts and
improved efficiency, improving our revenue line through volume and mix
improvements, improved margin management, innovation and improved pricing, is a
priority. We will also continue to focus on working capital management and cash
generation.
The weakness in the US Dollar at the time of writing is expected to have an
unfavourable impact on our European and southern African businesses.
Our first financial quarter is usually weaker than the fourth financial quarter
due to a seasonal slowdown in activity at the end of the calendar year. We do,
however, expect earnings excluding special items to be stronger than the
equivalent quarter last year.
We expect some increase in net debt as the Saiccor expansion nears completion
over the next two quarters, but expect it to return to current levels by the end
of the financial year.
Maintaining momentum of the trend of continuous improvement in the
profitability of Sappi remains the top priority. A key focus is our commitment
to excellence in customer service and innovation in our product offerings.
On behalf of the board
R J Boettger M R Thompson
Director Director 08 November 2007
Dividend Announcement
The directors have declared a dividend (number 84) of 32 US cents per share for
the year ended September 2007.
In compliance with the requirements of STRATE, the JSE electronic settlement
system which is applicable to Sappi, the salient dates in respect of the
dividend will be as follows:
Last day to trade to qualify for dividend Thursday 27 December 2007
Date on which shares commence trading ex-dividend Friday 28 December 2007
Record date Friday 04 January 2008
Payment date Tuesday 08 January 2008
Dividends payable from the Johannesburg transfer office will be paid in South
African Rands except that dividends payable to nominee shareholders in respect
of shares which they hold on behalf of non-residents of the Republic of South
Africa will without exception be paid in United States Dollars.
There will not be any currency election.
Dividends payable from the London transfer office will be paid in British
Pounds Sterling or in the case of shareholders with registered addresses in the
USA, in United States Dollars.
Dividends payable other than in United States Dollars will be calculated at the
respective rates of exchange ruling at 01:30 Central European Time as per
Reuters on Tuesday, 18 December 2007, and announced on Tuesday, 18 December
2007.
There will not be any de-materialisation nor re-materialisation of Sappi
Limited share certificates from Friday 28 December 2007 to Friday 04 January
2008, both days inclusive.
Sappi Management Services (Pty) Limited
Secretaries
Per D J O`Connor
08 November 2007
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 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, changing regulatory
requirements, unanticipated production disruptions, economic and political
conditions in international markets, the impact of investments, acquisitions
and dispositions (including related financing), any delays, unexpected costs or
other problems experienced with integrating acquisitions and achieving expected
savings and synergies and currency fluctuations. The company undertakes no
obligation to publicly update or revise any of these forward-looking
statements, whether to reflect new information or future events or
circumstances or otherwise.
financial results
for the quarter and year ended September 2007
group income statement
Quarter Quarter
ended ended
Sept 2007 Sept 2006 %
US$ million US$ million change
Sales 1,422 1,296 9.7
Cost of sales 1,242 1,137
Gross profit 180 159 13.2
Selling, general and
administrative expenses 94 99
Share of (profit) loss from
associates and joint ventures (4) -
Other operating expenses (income) 3 9
Operating profit 87 51 70.6
Net finance costs 27 37
Net paid 40 36
Capitalised (6) (1)
Net foreign exchange gains (4) (2)
Change in fair value
of financial instruments (3) 4
Profit (loss) before tax 60 14 328.6
Taxation - current 6 (11)
- deferred (7) (15)
Profit (loss) for the period 61 40 52.5
Basic earnings (loss)
per share (US cents) 27 18
Weighted average
number of shares
in issue (millions) 228.4 226.5
Diluted basic
earnings (loss)
per share (US cents) 26 17
Weighted average
number of shares
on fully diluted
basis (millions) 231.2 228.6
Reviewed Reviewed
year year
ended ended
Sept 2007 Sept 2006 %
US$ million US$ million change
Sales 5,304 4,941 7.3
Cost of sales 4,591 4,419
Gross profit 713 522 36.6
Selling, general and
administrative expenses 362 367
Share of (profit) loss from
associates and joint ventures (10) 1
Other operating expenses (income) (22) 29
Operating profit 383 125 206.4
Net finance costs 134 130
Net paid 152 136
Capitalised (14) (2)
Net foreign exchange gains (13) (7)
Change in fair value
of financial instruments 9 3
Profit (loss) before tax 249 (5) -
Taxation - current 38 5
- deferred 9 (6)
Profit (loss) for the period 202 (4) -
Basic earnings (loss)
per share (US cents) 89 (2)
Weighted average
number of shares
in issue (millions) 227.8 226.2
Diluted basic
earnings (loss)
per share (US cents) 88 (2)
Weighted average
number of shares
on fully diluted
basis (millions) 230.5 226.2
group balance sheet
Reviewed Reviewed
Sept 2007 Sept 2006
US$ million US$ million
ASSETS
Non-current assets 4,608 3,997
Property, plant and equipment 3,491 3,129
Plantations 636 520
Deferred taxation 60 74
Other non-current assets 421 274
Current assets 1,736 1,500
Inventories 712 699
Trade and other receivables 660 577
Cash and cash equivalents 364 224
Assets held for sale - 20
Total assets 6,344 5,517
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` interest 1,816 1,386
Non-current liabilities 2,612 2,465
Interest-bearing borrowings 1,828 1,634
Deferred taxation 385 336
Other non-current liabilities 399 495
Current liabilities 1,916 1,666
Interest-bearing borrowings 771 694
Bank overdraft 22 9
Other current liabilities 998 862
Taxation payable 125 101
Total equity and liabilities 6,344 5,517
Number of shares in issue at balance sheet date
(millions) 228.5 227.0
group cash flow statement
Reviewed Reviewed
Quarter Quarter year year
ended ended ended ended
Sept 2007 Sept 2006 Sept 2007 Sept 2006
US$ million US$ million US$ million US$ million
Operating profit 87 51 383 125
Depreciation,
fellings and
other amortisation 109 119 445 466
Other non-cash
items (including
impairment charges) (14) (12) (142) (127)
Cash generated
by operations 182 158 686 464
Movement in
working capital 140 80 60 (17)
Net finance costs (52) (22) (162) (138)
Taxation paid (9) (1) (27) (13)
Dividends paid * - - (68) (68)
Cash retained
from operating
activities 261 215 489 228
Cash utilised
in investing
activities (120) (109) (465) (355)
141 106 24 (127)
Cash effects of
financing activities 24 (55) 98 (21)
Net movement in
cash and cash
equivalents 165 51 122 (148)
* Dividend number 83: 30 US cents per share (2006: 30 US cents per share)
group statement of recognised income and expense
Reviewed Reviewed
Quarter Quarter year year
ended ended ended ended
Sept 2007 Sept 2006 Sept 2007 Sept 2006
US$ million US$ million US$ million US$ million
Pension fund
asset recognised
(not recognised) 1 (37) 45 (43)
Actuarial gains
on pension and
other post employment
benefit liabilities 101 105 101 100
Fair value
adjustment on
available for sale
financial instruments 1 - 1 -
Deferred
taxation on
above items (38) (20) (52) (19)
Valuation allowance
against deferred
tax asset and
actuarial gains
recognised 26 9 31 9
Exchange
differences on
translation
of foreign
operations 28 (67) 151 (189)
Net income
(expense)
recorded directly
in equity 119 (10) 277 (142)
Profit (loss)
for the period 61 40 202 (4)
Total recognised
income (expense)
for the period 180 30 479 (146)
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 2006 which are compliant with the English
language version of International Financial Reporting Standards (IFRS) as
published by the International Accounting Standards Board.
The preliminary results for the year ended 30 September 2007 have been reviewed
in terms of the International Standard on Review Engagements 2400 by the
group`s auditors, Deloitte & Touche. Their unmodified review report is
available for inspection at the company`s registered offices. The results for
the quarters ended September 2007, June 2007, March 2007 and December 2006 have
not been audited or reviewed.
2. Reconciliation of movement in shareholders` equity
Reviewed Reviewed
year year
ended ended
Sept 2007 Sept 2006
US$ million US$ million
Balance - beginning of year 1,386 1,589
Total recognised income (expense) for the period 479 (146)
Dividends paid (68) (68)
Transfers to participants of the share purchase
trust 14 5
Share Based Payment Reserve 5 6
Balance - end of year 1,816 1,386
Reviewed Reviewed
Quarter Quarter year year
ended ended ended ended
Sept 2007 Sept 2006 Sept 2007 Sept 2006
US$ million US$ million US$ million US$ million
3.Operating profit
Included in operating
profit are the
following
non-cash items:
Depreciation
and amortisation
Depreciation of
property, plant and
equipment 91 99 374 390
Other
amortisation - 1 1 2
91 100 375 392
Fair value
adjustment on
plantations
(included in
cost of sales)
Changes in volume
Fellings 18 19 70 74
Growth (19) (14) (76) (70)
(1) 5 (6) 4
Plantation price fair
value adjustment 2 10 (54) (34)
1 15 (60) (30)
Included in other operating expenses (income) for the years ended September
2007 and September 2006 are items (b), (c), (e) and (f) as disclosed in note 4.
4. Special items
Special items cover those items which management believe are material by nature
or amount to the year`s/quarter`s results and require separate disclosure in
accordance with IAS 1 paragraph 86. Such items would generally include profit
and loss on disposal of property, investments and businesses, asset
impairments, restructuring charges, 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:
notes to the group results (continued)
Reviewed Reviewed
Quarter Quarter year year
ended ended ended ended
Sept 2007 Sept 2006 Sept 2007 Sept 2006
US$ million US$ million US$ million US$ million
(a) Plantation
price fair
value adjustment 2 10 (54) (34)
(b) Asset impairments
(reversals) - (39) - (31)
(c) Restructuring
and closure
provisions raised
(released) - 40 (7) 50
(d) Pension
restructuring gain - - - (28)
(e) Profit on
sale of assets (1) - (26) -
(f) Fire, flood,
storm and related
events 8 - 17 9
9 11 (70) (34)
5. Headline earnings
(loss) per share
Headline earnings (loss)
per share (US cents) * 28 2 82 (11)
Weighted
average number
of shares in issue
(millions) 228.4 226.5 227.8 226.2
Diluted headline
earnings (loss)
per share
(US cents) * 27 2 81 (11)
Weighted
average number
of shares
on fully
diluted basis
(millions) 231.2 228.6 230.5 226.2
Calculation of
Headline earnings
(loss)*
Profit (loss)
for the period 61 40 202 (4)
Profit on
disposal of
property, plant
and equipment - - (20) (2)
Write-off of assets 1 4 2 11
Asset impairments
(reversals) 1 (39) 2 (31)
Headline
earnings (loss) 63 5 186 (26)
* Headline earnings disclosure is required by the JSE Limited.
6. Material balance sheet movements
Non-current interest-bearing borrowings
A South African subsidiary issued bonds to the value of ZAR1 billion (US$140
million) on 25 September 2007. The bonds were issued at a fixed rate of 10.64%
and mature on 14 October 2011.
Other non-current assets
The increase in other non-current assets relates largely to the recognition of
the pension fund asset in our South African subsidiary and the recognised
actuarial gain on the pension asset to the value of ZAR599 million (US$83
million).
Reviewed Reviewed
Quarter Quarter Year Year
ended ended ended ended
Sept 2007 Sept 2006 Sept 2007 Sept 2006
US$ million US$ million US$ million US$ million
7. Capital expenditure
Property, plant
and equipment 128 90 458 303
8. Capital commitments
Contracted but
not provided 188 294
Approved but
not contracted 249 255
437 549
9. Contingent liabilities
Guarantees and
suretyships 43 52
Other contingent
liabilities * 20 11
* The increase in other contingent liabilities relates to tax issues upon which
the group is awaiting further clarification.
10. Secondary Tax on Companies (STC)
During the annual South African `budget speech` the Minister of Finance
announced a rate reduction in South Africa`s STC rate from 12.5% to 10% and the
proposed replacement of STC with a tax on dividends. The rate reduction
resulted in a US$2 million charge in the March quarter`s results because of
the write-down of the related STC asset. There is a remaining asset of
US$10 million which may be impacted by the proposed change in legislation in
this area.
supplemental information
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 both useful and necessary to report these
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 contrued as a
substitute for GAAP measures in accordance with IFRS.
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 overdrafts (net of cash, cash equivalents and short-term
deposits)
Net debt to total capitalisation - Net debt divided by shareholders` equity
plus minority interest, non-current liabilities, current interest-bearing
borrowings and overdraft
Net operating assets - total assets (excluding deferred taxation and cash) less
current liabilities (excluding interest-bearing borrowings and bank overdraft)
Net assets - total assets less current liabilities
Net asset value - shareholders` equity plus net deferred tax
Net asset value per share - net asset value divided by the number of shares in
issue at balance sheet date
ROE - return on average equity. Profit for the period divided by average
shareholders` equity
RONOA - 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 year`s/quarter`s results and require
separate disclosure in accordance with IAS 1 paragraph 86. Such items would
generally include profit and loss on disposal of property, investments and
businesses, asset impairments, restructuring charges, natural disasters and
non-cash gains or losses on the price fair value adjustment of plantations
EBITDA excluding special items - earnings before interest (net finance costs),
tax, depreciation, amortisation and special items
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
additional information
Reviewed Reviewed
Quarter Quarter Year Year
ended ended ended ended
Sept 2007 Sept 2006 Sept 2007 Sept 2006
US$ million US$ million US$ million US$ million
Profit (loss)
for the period
to EBITDA excluding
special items (1)
reconciliation
Profit (loss)
for the period 61 40 202 (4)
Net finance costs 27 37 134 130
Taxation - current 6 (11) 38 5
- deferred (7) (15) 9 (6)
Special items 9 11 (70) (34)
Operating profit
excluding special
items 96 62 313 91
Depreciation 91 99 374 390
Amortisation - 1 1 2
EBITDA excluding
special items (1)(2) 187 162 688 483
Reviewed Reviewed
Sept 2007 Sept 2006
US$ million US$ million
Net debt (US$ million) (3) 2,257 2,113
Net debt to total capitalisation (%) (3) 43.2 46.4
Net asset value per share (US$) (3) 9.37 7.26
(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 year`s/quarter`s
results and require separate disclosure in accordance with IAS 1 paragraph 86.
Such items would generally include profit and loss on disposal of property,
investments and businesses, asset impairments, restructuring charges, 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 and
US GAAP, 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 or US
GAAP 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 or US GAAP 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
or US GAAP.
(2) Operating profit excluding special items and EBITDA excluding special items
have been presented for the first time this quarter. Previously normal EBITDA
was presented. The change reflects the current internal management emphasis on
both Operating profit excluding special items and EBITDA excluding special
items.
(3) Refer to Supplemental Information for the definition of the term.
supplemental information
regional information
Quarter Quarter
ended ended
Sept 2007 Sept 2006
Metric tons Metric tons %
(000`s) (000`s) change
Sales volumes
Fine Paper - North America 398 368 8.2
Europe 633 626 1.1
Southern Africa 90 91 (1.1)
Total 1,121 1,085 3.3
Forest Products - Pulp and paper
operations 417 400 4.3
Forestry operations 242 383 (36.8)
Total 1,780 1,868 (4.7)
Year Year
ended ended
Sept 2007 Sept 2006
Metric tons Metric tons %
(000`s) (000`s) change
Sales volumes
Fine Paper - North America 1,506 1,426 5.6
Europe 2,493 2,450 1.8
Southern Africa 350 328 6.7
Total 4,349 4,204 3.4
Forest Products - Pulp and paper
operations 1,484 1,470 1.0
Forestry operations 1,030 1,525 (32.5)
Total 6,863 7,199 (4.7)
Quarter Quarter
ended ended
Sept 2007 Sept 2006 %
US$ million US$ million change
Sales
Fine Paper - North America 404 373 8.3
Europe 619 569 8.8
Southern Africa 95 87 9.2
Total 1,118 1,029 8.6
Forest Products - Pulp and paper
operations 285 245 16.3
Forestry operations 19 22 (13.6)
Total 1,422 1,296 9.7
Operating profit
Fine Paper - North America 9 7 28.6
Europe 17 (48) -
Southern Africa 3 1 200.0
Total 29 (40) -
Forest Products 52 85 (38.8)
Corporate 6 6 -
Total 87 51 70.6
Reviewed Reviewed
year year
ended ended
Sept 2007 Sept 2006 %
US$ million US$ million change
Sales
Fine Paper - North America 1,511 1,439 5.0
Europe 2,387 2,194 8.8
Southern Africa 358 325 10.2
Total 4,256 3,958 7.5
Forest Products - Pulp and paper
operations 979 896 9.3
Forestry operations 69 87 (20.7)
Total 5,304 4,941 7.3
Operating profit
Fine Paper - North America 22 (16) -
Europe 88 (27) -
Southern Africa 9 (6) -
Total 119 (49) -
Forest Products 264 175 50.9
Corporate - (1) -
Total 383 125 206.4
supplemental information
Quarter Quarter
ended ended
Sept 2007 Sept 2006 %
US$ million US$ million change
Special items *
Fine Paper - North America - - -
Europe - 40
Southern Africa - - -
Total - 40
Forest Products 9 (29) -
Corporate - - -
Total 9 11 (18.2)
Operating profit excluding special items
Fine Paper - North America 9 7 28.6
Europe 17 (8) -
Southern Africa 3 1 200.0
Total 29 - -
Forest Products 61 56 8.9
Corporate 6 6 -
Total 96 62 54.8
EBITDA excluding special items *
Fine Paper - North America 35 37 (5.4)
Europe 60 41 46.3
Southern Africa 7 5 40.0
Total 102 83 22.9
Forest Products 79 73 8.2
Corporate 6 6 -
Total ** 187 162 15.4
Net operating assets
Fine Paper - North America 1,031 1,108 (6.9)
Europe 1,941 1,796 8.1
Southern Africa 149 145 2.8
Total 3,121 3,049 2.4
Forest Products 1,655 1,188 39.3
Corporate and other 21 19 10.5
Total 4,797 4,256 12.7
Reviewed Reviewed
year year
ended ended
Sept 2007 Sept 2006 %
US$ million US$ million change
Special items *
Fine Paper - North America - (14)
Europe (32) 40 -
Southern Africa - - -
Total (32) 26 -
Forest Products (40) (60) -
Corporate 2 - -
Total (70) (34) -
Operating profit excluding special items *
Fine Paper - North America 22 (30) -
Europe 56 13 330.8
Southern Africa 9 (6) -
Total 87 (23) -
Forest Products 224 115 94.8
Corporate 2 (1) -
Total 313 91 244.0
EBITDA excluding special items *
Fine Paper - North America 128 89 43.8
Europe 234 202 15.8
Southern Africa 24 10 140.0
Total 386 301 28.2
Forest Products 299 182 64.3
Corporate 3 - -
Total ** 688 483 42.4
Net operating assets
Fine Paper - North America 1,031 1,108 (6.9)
Europe 1,941 1,796 8.1
Southern Africa 149 145 2.8
Total 3,121 3,049 2.4
Forest Products 1,655 1,188 39.3
Corporate and other 21 19 10.5
Total 4,797 4,256 12.7
* Refer to Supplemental Information for the definition of the term.
** Refer to additional information in Supplemental Information for the
reconciliation of EBITDA excluding special items to profit.
supplemental information
summary rand convenience translation
Quarter Quarter
ended ended
Sept Sept %
2007 2006 change
Key figures: (ZAR million)
Sales 10,018 9,393 6.7
Operating profit 613 370 65.7
Special items * 63 81 (22.2)
Operating profit excluding
special items 676 449 50.6
EBITDA excluding special items * 1,317 1,174 12.2
Profit (loss) for the period 430 290 48.3
Basic EPS (SA cents) 190 130 46.2
Net debt *
Cash generated by operations 1,282 1,145 12.0
Cash retained from operating activities 1,839 1,558 18.0
Net movement in cash and
cash equivalents 1,162 370 214.1
Key ratios: (%)
Operating profit to sales 6.1 3.9
Operating profit excluding
special items to sales 6.8 4.8
EBITDA excluding special items * to sales 13.2 12.5
Operating profit excluding
special items to average net assets 9.2 6.2
Net debt to total capitalisation *
Year Year
ended ended
Sept Sept %
2007 2006 change
Key figures: (ZAR million)
Sales 38,051 32,630 16.6
Operating profit 2,748 825 233.1
Special items * (502) (225) -
Operating profit excluding
special items 2,245 601 273.5
EBITDA excluding special items * 4,936 3,190 54.7
Profit (loss) for the period 1,449 (26) -
Basic EPS (SA cents) 638 (13) -
Net debt * 15,509 16,426 (5.6)
Cash generated by operations 4,921 3,064 60.6
Cash retained from operating activities 3,508 1,506 132.9
Net movement in cash and
cash equivalents 875 (977) -
Key ratios: (%)
Operating profit to sales 7.2 2.5
Operating profit excluding special
items to sales 5.9 1.8
EBITDA excluding special items * to sales 13.0 9.8
Operating profit excluding special items
to average net assets 7.5 2.2
Net debt to total capitalisation * 43.2 46.4
* Refer to Supplemental Information for the definition of the term.
exchange rates
Sept June March
2007 2007 2007
Exchange rates:
Period end rate: US$1 = ZAR 6.8713 7.0393 7.2650
Average rate for the Quarter: US$1 = ZAR 7.0453 7.1095 7.1532
Average rate for the YTD: US$1 = ZAR 7.1741 7.2121 7.2783
Period end rate: EUR 1 = US$ 1.4272 1.3542 1.3358
Average rate for the Quarter: EUR 1 = US$ 1.3782 1.3498 1.3160
Average rate for the YTD: EUR 1 = US$ 1.3336 1.3178 1.3021
Dec Sept
2006 2006
Exchange rates:
Period end rate: US$1 = ZAR 7.0076 7.7738
Average rate for the Quarter: US$1 = ZAR 7.3358 7.2475
Average rate for the YTD: US$1 = ZAR 7.3358 6.6039
Period end rate: EUR 1 = US$ 1.3199 1.2672
Average rate for the Quarter: EUR 1 = US$ 1.2926 1.2744
Average rate for the YTD: EUR 1 = US$ 1.2926 1.2315
The financial results of entities with reporting currencies other than the
US Dollar are translated into US Dollars as follows:
- Assets and liabilities at rates of exchange ruling at period end; and
- Income, expenditure and cash flow items at average exchange rates.
this report is available on the Sappi website
www.sappi.com
Other interested parties can obtain printed copies of this report from:
South Africa: United States United Kingdom:
Computershare Investor ADR Depository: Capita Registrars
Services 2004 Limited The Bank of New York The Registry
70 Marshall Street Investor Relations 34 Beckenham Road
Johannesburg 2001 PO Box 11258 Beckenham, Kent
PO Box 61051 Church Street Station BR3 4TU, DX 91750
Marshalltown 2107 New York, NY 10286-1258 Beckenham West
Tel +27 (0)11 370 5000 Tel +1 610 382 7836 Tel +44 (0)208 639 2157
www.sappi.com
Date: 08/11/2007 08:58:52 Supplied by www.sharenet.co.za
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