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SAPPI LIMITED
REGISTRATION NO. 05/08963/06
THE WORD FOR FINE PAPER
99 PRELIMINARY RESULTS
FOR THE QUARTER AND YEAR ENDED 30 SEPTEMBER 1999
HIGHLIGHTS
* HEADLINE EPS UP:
* 180% FOR THE QUARTER
* 80% FOR THE YEAR
* R3.1 BILLION DEBT REDUCTION FOR THE YEAR
* FAVOURABLE MARKET OUTLOOK
* SUCCESSFUL GLOBAL SHARE OFFERING
* BROADER OWNERSHIP
* IMPROVED LIQUIDITY
SUMMARY STATISTICS
QUARTER ENDED YEAR ENDED
30 SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT.
1999 1999 1998 1999 1998
SALES
- (R BILLION) 7.7 6.4 7.2 26.6 22.7
- (US$ BILLION) 1.3 1.0 1.2 4.4 4.3
OPERATING INCOME
- (R MILLION) 793 604 713 2,451 2,208
- (US$ MILLION) 131 99 118 408 419
EBITDA
- (R MILLION) 1,384 1,144 1,260 4,739 4,088
- (US$ MILLION) 228 186 208 788 776
OPERATING INCOME TO SALES
(%) 10.3 9.4 9.9 9.2 9.7
EBITDA TO SALES (%) 18.0 17.9 17.5 17.8 18.0
OPERATING INCOME TO AVERAGE
NET ASSETS (%) 13.6 10.0 10.0 9.5 9.2
EPS BEFORE EXCEPTIONAL ITEMS
(HEADLINE)
- (SA CENTS) 162 118 58 456 253
- (US CENTS) 27 19 10 76 48
EPS
- (SA CENTS) 168 27 109 329 296
- (US CENTS) 28 4 18 55 56
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
COMMENT
MARKETS
THE FUNDAMENTALS IN THE COATED WOODFREE PAPER AND PULP SECTORS STRENGTHENED IN
THE QUARTER. DEMAND HAS REMAINED STRONG AND THE DEMAND - SUPPLY BALANCE HAS
TIGHTENED. PRICES FOR COATED WOODFREE PAPER HAVE RISEN IN EUROPE AND NORTH
AMERICA.
WE ARE MONITORING CLOSELY THE IMPACT OF STRONG ORDERS FOR COATED WOODFREE PAPER
ON CUSTOMER INVENTORIES AND CAN FIND NO EVIDENCE OF AN ABNORMAL INCREASE - IN
FACT THE STATISTICS AVAILABLE CONTINUE TO INDICATE A FLAT OR DECLINING TREND IN
DAYS OF SUPPLY AT VARIOUS LEVELS IN THE SUPPLY CHAIN.
PULP PRODUCER INVENTORIES ARE DECLINING AND NORTH AMERICAN AND SCANDINAVIAN
INVENTORIES DROPPED TO 1.14 MILLION TONS IN OCTOBER, DOWN FROM 1.34 MILLION
TONS IN JUNE. CONSUMER INVENTORIES IN DAYS OF SUPPLY ARE AT THE SAME LEVEL FOR
THIS TIME OF YEAR AS THE THREE PREVIOUS YEARS.
PULP PRICES HAVE INCREASED AND ARE CURRENTLY $600 PER TON FOR THE BENCHMARK
NBSK. FURTHER PRICE INCREASES HAVE BEEN ANNOUNCED FOR JANUARY 2000 WHEN PRICES
ARE LIKELY TO BE AT LEAST $630 PER TON.
OPERATING REVIEW FOR THE THREE MONTHS TO 30 SEPTEMBER 1999
THE GROUP DID WELL IN THE QUARTER TO IMPROVE EARNINGS COMPARED TO THE PREVIOUS
QUARTER AND THE SAME QUARTER LAST YEAR IN SPITE OF THE FACT THAT THE BENEFITS
OF THE FINE PAPER PRICE INCREASES DID NOT FLOW THROUGH UNTIL AFTER THE QUARTER
END. STRONG COST CONTROL AND HIGHER VOLUMES CAUSED MOST OF THE EARNINGS
INCREASES.
THE BENEFIT OF VIRTUAL PULP INTEGRATION IS REFLECTED IN THE IMPROVED EARNINGS
OF THE FOREST PRODUCTS' BUSINESS WHICH LARGELY OFFSET THE PULP COST INCREASES
IN FINE PAPERS.
A BRIEF REVIEW OF SAPPI'S BUSINESSES AND REGIONAL PERFORMANCE FOLLOWS:
FINE PAPER BUSINESS
EUROPE
QUARTER ENDED
30 SEPT. 30 SEPT. %
US$ MILLION 1999 1998 CHANGE
SALES 528.5 492.9 7.2
OPERATING INCOME* 39.7 30.0 32.3
- ONCE OFF CHARGES (9.9) 4.8
NET OPERATING INCOME 29.7 34.8 (14.7)
OPERATING MARGIN (%)* 7.5 6.1
EBITDA* 94.4 79.6 18.6
EBITDA MARGIN (%)* 17.9 16.1
RONOA P.A. (%)* 9.5 5.8
* ADJUSTMENT FOR ONCE OFF CHARGES
ORDER INFLOW FOR COATED WOODFREE PAPER REMAINED STRONG AND PRICES INCREASED
COMPARED TO THE PREVIOUS QUARTER AND WERE SIMILAR TO THE FOURTH QUARTER LAST
YEAR. VOLUMES SOLD WERE ALSO STRONG INCREASING BY 14.7% ON THE PRIOR QUARTER
AND 6.3% OVER THE FOURTH QUARTER LAST YEAR.
OPERATING INCOME WAS HIGHER THAN THE FOURTH QUARTER LAST YEAR BECAUSE OF COST
SAVINGS BUT ONCE OFF RESTRUCTURING EXPENSES RELATING TO THE DOWNSIZING OF THE
LABOUR FORCE OF APPROXIMATELY $10 MILLION AND FAVOURABLE ADJUSTMENTS LAST YEAR,
RESULTED IN REDUCED NET OPERATING INCOME.
FURTHER PRICE INCREASES WERE ACHIEVED FOLLOWING THE PERIOD AND PUBLISHED PRICES
FOR COATED WOODFREE PAPER ARE NOW APPROXIMATELY $50 PER TON HIGHER THAN THE
AVERAGE PRICE FOR THE FOURTH QUARTER OF 1999.
NORTH AMERICA
QUARTER ENDED
30 SEPT. 30 SEPT. %
US$ MILLION 1999 1998 CHANGE
SALES 451.6 427.0 5.8
OPERATING INCOME 45.8 53.1 (13.7)
OPERATING MARGIN (%) 10.1 12.4
EBITDA 76.7 85.3 (10.1)
EBITDA MARGIN (%) 17.0 20.0
RONOA P.A. (%) 15.5 15.7
THE NORTH AMERICAN MARKET FOR FINE PAPER WAS STRONG DURING THE QUARTER. VOLUMES
SOLD WERE ALSO STRONG AND INCREASED SIGNIFICANTLY COMPARED TO THE PREVIOUS
QUARTER AND COMPARED TO THE FOURTH QUARTER LAST YEAR IN PART DUE TO THE IMPACT
OF SAPPI EUROPE PRODUCT WHICH FLOWS THROUGH THE NORTH AMERICAN BUSINESS. PRICE
EROSION OF APPROXIMATELY 6% WAS PARTLY OFFSET BY INCREASES IN VOLUME AND
CONTINUED CONTROL OF COSTS.
ALTHOUGH LOWER THAN THE COMPARATIVE QUARTER LAST YEAR OPERATING INCOME
INCREASED BY ALMOST 60% COMPARED TO THE PRIOR QUARTER.
SUBSEQUENT TO THE PERIOD END A FIRE AT MUSKEGON MILL AFFECTED PRODUCTION ON
PAPER MACHINE #5 WHICH PRODUCES HIGH QUALITY COATED WOODFREE PAPER. THE PAPER
MACHINE RESTARTED ON 29 NOVEMBER 1999 AFTER BEING OFFLINE FOR APPROXIMATELY
FOUR WEEKS. THE IMPACT ON CUSTOMERS HAS BEEN MINIMISED BY TAKING ADVANTAGE OF
OUR GLOBAL MANUFACTURING STRENGTHS WHICH HAVE ENABLED US TO SUPPLY THE PRODUCT
FROM OTHER FACILITIES. THE COST OF REPAIRS AND LOSS OF PROFIT ARE INSURED.
SUBSEQUENT TO THE END OF THE QUARTER, PRICES FOR COATED WOODFREE PAPER HAVE
INCREASED FURTHER AND THE PUBLISHED PRICE FOR THE MAJOR PUBLICATION GRADE (#3
WEB 60LBS) IS NOW ABOUT $50 PER TON ABOVE THE AVERAGE FOR THE FOURTH QUARTER OF
1999.
SOUTH AFRICA
QUARTER ENDED
30 SEPT. 30 SEPT. %
US$ MILLION 1999 1998 CHANGE
SALES 78.4 65.1 20.4
OPERATING INCOME 12.3 10.3 19.4
OPERATING MARGIN (%) 15.7 15.8
EBITDA 14.5 12.7 14.2
EBITDA MARGIN (%) 18.5 19.5
RONOA P.A. (%) 25.7 21.6
THE SOUTH AFRICAN MARKET SHOWED FURTHER SIGNS OF IMPROVEMENT DURING THE QUARTER
SALES VOLUME INCREASED BY 22.8% COMPARED TO THE PRIOR QUARTER BUT WAS 2.6%
BELOW THE SAME PERIOD LAST YEAR. PRICES INCREASED RELATIVE TO THE PRIOR QUARTER
AND ARE CURRENTLY APPROXIMATELY 3.6% HIGHER THAN THE AVERAGE FOR 1999.
FOREST PRODUCTS BUSINESS
QUARTER ENDED
30 SEPT. 30 SEPT. %
US$ MILLION 1999 1998 CHANGE
SALES 209.4 194.0 7.9
OPERATING INCOME 36.2 22.3 62.3
OPERATING MARGIN (%) 17.3 11.5
EBITDA 51.4 30.4 69.1
EBITDA MARGIN (%) 24.5 15.7
RONOA P.A. (%) 11.6 7.1
SALES VOLUMES INCREASED COMPARED TO THE PREVIOUS QUARTER AND WERE UP
SIGNIFICANTLY ON THE SAME QUARTER LAST YEAR. THE DOMESTIC MARKET CONTINUED TO
IMPROVE. INTEREST RATES IN SOUTH AFRICA HAVE DECLINED FROM A PEAK OF 25% A YEAR
AGO TO 15.5% WHICH IS EXPECTED TO LEAD TO IMPROVED ECONOMIC GROWTH.
OPERATING INCOME MARGINS WERE BOOSTED BY IMPROVED PRICES AND TIGHT CONTROL OF
COSTS.
THE EXPORT MARKETS WERE STRONG AND NBSK PRICES INCREASED FROM $520 PER TON AT
THE START OF THE QUARTER TO $560 AT THE END OF THE QUARTER. EXPORTS TO ASIA
CONTINUED TO STRENGTHEN AS THE ECONOMIES IN THAT REGION ARE REJUVENATED.
GROUP RESULTS FOR THE YEAR TO 30 SEPTEMBER 1999
CONSOLIDATED SALES FOR THE YEAR WERE R26.6 BILLION (US$4.4 BILLION) (1998:
R22.7 BILLION) (US$4.3 BILLION). R1.8 BILLION OF THIS INCREASE RELATES TO THE
INCLUSION OF KNP LEYKAM FOR THE FULL PERIOD OF 1999.
PRICES STARTED INCREASING TOWARDS THE END OF THE YEAR BUT HAD A NEGLIGIBLE
IMPACT ON THE YEAR'S RESULTS. FURTHER INCREASES HAVE BEEN ACHIEVED SUBSEQUENTLY
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) COSTS INCREASED BY 34.3% FOR THE
YEAR AS A RESULT OF THE INCLUSION OF KNP LEYKAM FOR THE FULL PERIOD, COSTS
INCURRED IN ACHIEVING YEAR 2000 COMPLIANCE AND THE REALLOCATION OF EXPENSES
FROM COST OF GOODS SOLD.
NET FINANCE COSTS WERE SIGNIFICANTLY LOWER IN RAND AND DOLLAR TERMS AS A RESULT
OF REDUCED DEBT AND LOWER INTEREST RATES COMPARED TO LAST YEAR. CASH INTEREST
COVER INCREASED TO 4.3 TIMES COMPARED TO 3.2 TIMES LAST YEAR.
THE INTRODUCTION OF COMPREHENSIVE DEFERRED TAX IN THE CURRENT FINANCIAL YEAR
RESULTED IN AN EFFECTIVE TAX RATE OF 26.6% FOR THE GROUP (1998 RESTATED 39.5%).
IN THE FUTURE WE EXPECT THE AVERAGE TAX RATE TO BE IN THE MID-30% RANGE.
EARNINGS BEFORE EXCEPTIONAL ITEMS (HEADLINE) AMOUNTED TO R1,020 MILLION (US$170
MILLION) AN INCREASE OF R512 MILLION COMPARED TO 1998. EARNINGS BEFORE
EXCEPTIONAL ITEMS PER SHARE WERE 456 SA CENTS (76 US CENTS) OF WHICH 162 SA
CENTS (27 US CENTS) WERE EARNED IN THE FOURTH QUARTER REFLECTING SAPPI'S
IMPROVING EFFICIENCIES AND IMPROVED INDUSTRY CONDITIONS. EARNINGS PER SHARE
WERE 329 SA CENTS (55 US CENTS). THE ADJUSTMENTS TO NET INCOME TO ARRIVE AT
EARNINGS BEFORE EXCEPTIONAL ITEMS (HEADLINE) INCLUDE THE SALE OF THE US
TIMBERLANDS, AND THE PROVISIONS FOR RESTRUCTURING AT WESTBROOK AND IN EUROPE.
CAPITAL STRUCTURE
THE GROUP'S NET DEBT AS AT SEPTEMBER 1999 WAS R12.2 BILLION (US$2.0 BILLION)
REFLECTING A 20% DECREASE IN RANDS AND 22.6% DECREASE IN US DOLLARS COMPARED TO
SEPTEMBER 1998 LEVELS. THIS HAS BEEN ACHIEVED PRIMARILY AS A RESULT OF STRONG
INTERNAL CASH GENERATION, DISCIPLINED CAPITAL EXPENDITURE AND THE SALE OF THE
US TIMBERLANDS FOR $180 MILLION.
NET DEBT TO TOTAL CAPITALISATION WAS 44.3%, DOWN FROM 47.4% IN SEPTEMBER 1998.
THE GROUP HAS AGREED TO THE REFINANCING OF THE ZERO COUPON NOTES OF R2.1
BILLION (NLG 755.5 MILLION) ISSUED IN CONNECTION WITH THE ACQUISITION OF KNP
LEYKAM AND WHICH MATURE ON 31 DECEMBER 1999.
THE REFINANCING WILL BE ACHIEVED THROUGH A EURO 350 MILLION SYNDICATED TERM
LOAN FACILITY FOR A PERIOD OF UP TO TWO YEARS AND AT RATES FAVOURABLE TO THE
GROUP. THE REFINANCING OF THE ZERO COUPON NOTES WILL RESULT IN AN IMPROVED
PROFILE OF THE DEBT FROM THE FIRST QUARTER OF THE NEW FINANCIAL YEAR.
YEAR 2000
THE GROUP'S COMPLIANCE PLAN TO ADDRESS THE ISSUES RELATED TO YEAR 2000 WAS
SUCCESSFULLY ACHIEVED BY 30 SEPTEMBER 1999.
THE GROUP IS NOW FOCUSING ON CONTINGENCY PLANS AND ENSURING THE COMPLIANCE OF
KEY SUPPLIERS AND CUSTOMERS. TO DATE NO MAJOR RISK AREAS HAVE BEEN IDENTIFIED.
THE SAPPI GROUP YEAR 2000 COMPLIANCE STATEMENT IS PUBLISHED ON THE SAPPI WEB
SITE - WWW.SAPPI.COM
EQUITY OFFERING AND ACQUISITION OF MINORITIES IN SUBSIDIARIES
ON 5 NOVEMBER 1999 THE SHAREHOLDERS APPROVED A SPECIFIC ISSUE OF SHARES FOR
CASH. ON 16 NOVEMBER 1999 WE ANNOUNCED THAT SAPPI HAD ISSUED 14.5 MILLION NEW
SHARES FOR CASH AND THAT BUHRMANN NV WHICH HAD HELD APPROXIMATELY 44.6 MILLION
SHARES HAS SOLD 31.5 MILLION SECONDARY SHARES FOR ITS BENEFIT IN A GLOBAL
OFFERING WHICH RAISED APPROXIMATELY US$385 MILLION. SUBSEQUENT TO THE OFFERING
BUHRMANN NV HOLDS 13.1 MILLION SHARES REPRESENTING 5.5% OF THE ISSUED SHARES OF
THE COMPANY. IN THE PAST TWO YEARS THE SAPPI SHAREHOLDER BASE HAS ALTERED FROM
A HIGH CONCENTRATION, WHERE TWO SHAREHOLDERS HELD APPROXIMATELY 46% TO A
DISTRIBUTED SHAREHOLDING WHERE NO SHAREHOLDER HOLDS MORE THAN 10% OF THE
COMPANY. CONSEQUENTLY THE LIQUIDITY OF THE COMPANY'S SHARES HAS IMPROVED
CONSIDERABLY.
SAPPI INTENDS TO USE THE NET PROCEEDS OF THE PRIMARY OFFERING (APPROXIMATELY
US$115 MILLION) TO ACQUIRE THE MINORITY SHAREHOLDERS IN LEYKAM MURZTALER FOR
APPROXIMATELY US$92 MILLION AND USUTU PULP COMPANY FOR APPROXIMATELY US$10
MILLION AND TO REPAY CERTAIN USUTU DEBT. THESE ACQUISITIONS WILL FACILITATE THE
ACCESS TO CASHFLOW GENERATED WITHIN THE GROUP.
SAPPI IS CONCURRENTLY REORGANISING THE HOLDING STRUCTURE OF ITS FINE PAPER
BUSINESS TO CREATE A SIMPLER CAPITAL STRUCTURE, TO IMPROVE OPERATING
EFFICIENCIES, REMOVE RESTRICTIONS ON THE MOVEMENT OF FUNDS IN THE GROUP AND TO
IMPROVE WITHHOLDING TAX EFFICIENCY.
DIVIDENDS
THE DIRECTORS HAVE DECLARED A DIVIDEND OF 115 SA CENTS (APPROXIMATELY 18.7 US
CENTS) FOR THE YEAR ENDED 30 SEPTEMBER 1999. A DIVIDEND OF 100 SA CENTS (16.6
US CENTS) WAS PAID THE PREVIOUS YEAR.
OUTLOOK
ALL THE SIGNS ARE THAT OUR INDUSTRY IS ENTERING A PERIOD OF RECOVERY.
ECONOMIC GROWTH IN THE MAJOR MARKETS OF USA AND EUROPE REMAIN ON TRACK AND MANY
OF THE ASIAN ECONOMIES ARE NOW ALSO GROWING.
SUPPLY AND DEMAND IS IN BETTER BALANCE THAN IT HAS BEEN FOR MANY YEARS AND NEW
CAPACITY PARTICULARLY OF OUR MAIN PRODUCT - COATED WOODFREE PAPER - IS LIMITED
WITH LITTLE SCOPE FOR MAJOR NEW CAPACITY FOR 2 YEARS OR MORE FROM NOW. IN
RESPECT OF PULP THE MANY CLOSURES OF PULPING CAPACITY IN NORTH AMERICA FOR
ENVIRONMENTAL REASONS - WITH MORE TO COME - HAS LEAD TO A SIGNIFICANT
TIGHTENING OF SUPPLY AND THE BENCHMARK NORTH AMERICAN AND SCANDINAVIAN PULP
INVENTORY FIGURE HAS DROPPED TO 1.14 MILLION TONS, ITS LOWEST LEVEL SINCE EARLY
1995 AND IN DAYS OF SUPPLY SINCE 1989.
THE GROUP CAN EXPECT FAVOURABLE MARKET CONDITIONS NEXT YEAR AND WILL CONTINUE
TO ACHIEVE INTERNAL EFFICIENCIES PARTICULARLY IN RESPECT OF THE SYNERGIES IN
EUROPE WHICH WE NOW ANTICIPATE WILL EXCEED OUR ORIGINAL EXPECTATIONS.
THERE HAS BEEN CONSIDERABLE DEBATE ABOUT THE EXTENT OF THE MILLENNIUM EFFECT
BOTH IN TERMS OF BUILD UP OF SAFETY INVENTORY AND IN TERMS OF ADDITIONAL
CELEBRATORY CONSUMPTION. WHILE WE HAVE EXPERIENCED STRONG DEMAND DURING RECENT
MONTHS WE HAVE NOT BEEN ABLE TO IDENTIFY ANY SIGNIFICANT BUILD OF INVENTORY
AMONG OUR CUSTOMERS. WE ALSO BELIEVE THAT COATED PAPER WILL REMAIN IN HIGH
DEMAND THROUGHOUT THE MILLENNIUM YEAR AS ORGANISATIONS CELEBRATE THE MULTITUDE
OF FIRSTS OF THE NEW MILLENNIUM.
THE GROUP'S GLOBAL PLATFORM, MARKET SHARE AND MARKET FOCUS POSITIONS US WELL TO
TAKE ADVANTAGE OF THE MARKET FUNDAMENTALS.
WE EXPECT A SIGNIFICANT IMPROVEMENT IN EARNINGS IN OUR CURRENT YEAR. CAPITAL
EXPENDITURE WILL BE BELOW DEPRECIATION AND THE GROUP EXPECTS A STRONG FREE CASH
FLOW WHICH WILL FURTHER REDUCE DEBT AND STRENGTHEN THE BALANCE SHEET.
ON BEHALF OF THE BOARD
E VAN AS D G WILSON
DIRECTOR DIRECTOR
2 DECEMBER 1999
DIVIDEND ANNOUNCEMENT
THE DIRECTORS HAVE DECLARED A DIVIDEND (NUMBER 76) OF 115 CENTS PER SHARE FOR
THE YEAR ENDED 30 SEPTEMBER 1999 TO SHAREHOLDERS REGISTERED IN THE BOOKS OF THE
COMPANY AT THE CLOSE OF BUSINESS ON FRIDAY, 17 DECEMBER 1999.
THE DIVIDEND IS DECLARED IN THE CURRENCY OF THE REPUBLIC OF SOUTH AFRICA.
DIVIDENDS PAYABLE FROM THE JOHANNESBURG TRANSFER OFFICE WILL BE PAID IN SOUTH
AFRICAN RAND AND THOSE PAYABLE FROM THE LONDON TRANSFER OFFICE WILL BE PAID IN
BRITISH POUNDS STERLING OR IN THE CASE OF SHAREHOLDERS RESIDENT IN THE USA, IN
US DOLLARS, AT THE RESPECTIVE RATES OF EXCHANGE RULING ON 19 JANUARY 2000.
PAYMENT WILL BE MADE ON OR ABOUT 26 JANUARY 2000.
SAPPI MANAGEMENT SERVICES (PTY) LIMITED
SECRETARIES
PER D J O'CONNOR
2 DECEMBER 1999
CONSOLIDATED INCOME STATEMENTS
UNAUDITED AUDITED
QUARTER ENDED YEAR ENDED
30 SEPT. 30 SEPT. 30 SEPT. 30 SEPT.
1999 1998 1999 1998
R MILLION R MILLION % CHANGE R MILLION R MILLION % CHANGE
SALES 7,699.3 7,150.9 7.7 26,577.5 22,709.6 17.0
COST OF GOODS SOLD 5,668.7 5,453.5 19,778.5 17,123.4
GROSS PROFIT 2,030.6 1,697.4 19.6 6,799.0 5,586.2 21.7
DEPRECIATION 515.7 547.0 2,013.3 1,639.7
SELLING, GENERAL
& ADMINISTRATIVE
EXPENSES 721.6 437.2 2,335.2 1,738.6
OPERATING INCOME 793.3 713.2 11.2 2,450.5 2,207.9 11.0
NON-TRADING
(LOSS)/INCOME (10.5) 45.0 (444.9) 63.4
NET FINANCE COSTS 124.4 451.1 872.0 1,139.9
PAID 179.4 400.1 1,141.4 1,387.2
CAPITALISED (55.0) 51.0 (269.4) (247.3)
INCOME BEFORE
TAXATION 658.4 307.1 114.4 1,133.6 1,131.4 0.2
TAXATION
- CURRENT (76.7) 14.3 126.0 203.5
- DEFERRED 309.9 54.1 176.1 242.9
INCOME AFTER
TAXATION 425.2 238.7 78.1 831.5 685.0 21.4
INCOME
ATTRIBUTABLE TO
MINORITY
INTERESTS 47.6 (4.1) 94.3 91.7
NET INCOME 377.6 242.8 55.5 737.2 593.3 24.3
EBITDA 1,384.2 1,260.2 4,738.5 4,087.9
BASIC EARNINGS
PER SHARE
(CENTS) 168 109 329 296
EARNINGS BEFORE
EXCEPTIONAL
ITEMS (HEADLINE
EARNINGS)
PER SHARE
(CENTS) 162 58 456 253
WEIGHTED AVERAGE
NUMBER OF
SHARES IN
ISSUE
(MILLIONS) 224.1 223.6 223.8 200.5
DILUTED EARNINGS
PER SHARE
(CENTS) 166 107 327 294
DILUTED EARNINGS
BEFORE EXCEP-
TIONAL ITEMS
(DILUTED HEADLINE
EARNINGS) PER
SHARE (CENTS) 160 58 450 252
WEIGHTED AVERAGE
NUMBER OF SHARES
ON FULLY DILUTED
BASIS (MILLIONS) 229.8 229.4 230.0 205.8
CALCULATION OF
EARNINGS BEFORE
EXCEPTIONAL ITEMS
(HEADLINE) NET OF
TAX
NET INCOME 377.6 242.8 737.2 593.3
PROFIT ON DISPOSAL
OF BUSINESS AND
FIXED ASSETS (40.8) (137.8) (20.1) (217.0)
MILL CLOSURE
COSTS AND ASSET
IMPAIRMENTS 36.9 (0.3) 298.3 121.0
ACCELERATED COSTS
OF EARLY BUY BACK
OF LOAN NOTES 32.1 - 32.1 -
INCREASE (DECREASE)
IN PROVISIONS (42.0) 25.6 (27.9) 10.1
EARNINGS BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE) 363.8 130.3 1,019.6 507.4
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
THE INCOME STATEMENT FORMAT AND DISCLOSURE HAVE BEEN REVISED AND EXPANDED TO
IMPROVE DISCLOSURE.
CONSOLIDATED INCOME STATEMENTS US DOLLAR AVERAGE RATE TRANSLATION*
QUARTER ENDED YEAR ENDED
30 SEPT. 30 SEPT. 30 SEPT. 30 SEPT.
1999 1998 1999 1998
US$ US$ % CHANGE US$ US$ % CHANGE
MILLION MILLION MILLION MILLION
SALES 1,267.9 1,179.0 7.5 4,420.6 4,308.1 2.6
COST OF
GOODS SOLD 933.5 899.2 3,289.7 3,248.4
GROSS PROFIT 334.4 279.8 19.5 1,130.9 1,059.7 6.7
DEPRECIATION 84.9 90.2 334.9 311.1
SELLING, GENERAL
& ADMINISTRATIVE
EXPENSES 118.8 72.1 388.4 329.8
OPERATING
INCOME 130.7 117.5 11.2 407.6 418.8 (2.7)
NON-TRADING
INCOME (LOSS) (1.7) 7.4 (74.0) 12.0
NET FINANCE
COSTS 20.4 74.4 145.0 216.3
PAID 29.5 66.0 189.8 263.2
CAPITALISED (9.1) 8.4 (44.8) (46.9)
INCOME BEFORE
TAXATION 108.6 50.5 115.0 188.6 214.5 (12.1)
TAXATION
- CURRENT (12.6) 2.4 21.0 38.6
- DEFERRED 51.0 8.9 29.3 46.1
INCOME AFTER
TAXATION 70.2 39.2 79.1 138.3 129.8 6.5
INCOME
ATTRIBUTABLE TO
MINORITY
INTERESTS 7.8 (0.7) 15.7 17.4
NET INCOME 62.4 39.9 56.4 122.6 112.4 9.1
EBITDA 227.9 207.8 788.1 775.5
BASIC EARNINGS
PER SHARE
(CENTS) 28 18 55 56
EARNINGS BEFORE
EXCEPTIONAL
ITEMS (HEADLINE
EARNINGS)
PER SHARE
(CENTS) 27 10 76 48
WEIGHTED AVERAGE
NUMBER OF SHARES
IN ISSUE
(MILLIONS) 224.1 223.6 223.8 200.5
DILUTED EARNINGS
PER SHARE
(CENTS) 27 18 54 56
DILUTED EARNINGS
BEFORE EXCEPTIONAL
ITEMS (DILUTED
HEADLINE EARNINGS)
PER SHARE
(CENTS) 26 10 75 48
WEIGHTED AVERAGE
NUMBER OF SHARES
ON FULLY DILUTED
BASIS (MILLIONS) 229.8 229.4 230.0 205.8
CALCULATION OF
EARNINGS BEFORE
EXCEPTIONAL ITEMS
(HEADLINE) NET OF
TAX
NET INCOME 62.4 39.9 122.6 112.4
PROFIT ON DISPOSAL
OF BUSINESS AND
FIXED ASSETS (6.7) (22.7) (3.3) (41.2)
MILL CLOSURE
COSTS AND
ASSET
IMPAIRMENTS 6.1 - 49.6 23.0
ACCELERATED COSTS
OF EARLY BUY
BACK OF
LOAN NOTES 5.3 - 5.3 -
INCREASE
(DECREASE) IN
PROVISIONS (6.9) 4.2 (4.6) 1.9
EARNINGS BEFORE
EXCEPTIONAL ITEMS
(HEADLINE) 60.2 21.4 169.6 96.1
*EXCHANGE RATE
(AVERAGE)
$ 1.00 = R 6.0724 6.0650 6.0122 5.2714
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
THE INCOME STATEMENT FORMAT AND DISCLOSURE HAVE BEEN REVISED AND EXPANDED TO
IMPROVE DISCLOSURE.
CONSOLIDATED BALANCE SHEET
AUDITED AUDITED
30 SEPT. 30 SEPT.
1999 1998
R MILLION R MILLION
FUNDS EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 9,356.2 9,287.0
MINORITY INTERESTS 930.3 878.3
LONG-TERM BORROWINGS 8,256.8 14,698.1
OTHER LONG-TERM LIABILITIES 1,465.4 1,521.4
DEFERRED TAXATION 2,724.2 2,317.0
22,732.9 28,701.8
EMPLOYMENT OF FUNDS
FIXED ASSETS 21,991.3 23,485.9
PLANTATIONS AND TIMBERLANDS 2,437.2 3,289.7
DEFERRED TAXATION 411.5 170.8
OTHER NON-CURRENT ASSETS 1,102.7 1,592.7
CURRENT ASSETS 6,922.5 9,115.5
BANK BALANCES AND DEPOSITS 925.3 2,965.6
COLLATERAL DEPOSITS 624.0 -
OTHER CURRENT ASSETS 5,373.2 6,149.9
TOTAL ASSETS 32,865.2 37,654.6
CURRENT LIABILITIES 10,132.3 8,952.8
INTEREST BEARING LIABILITIES 4,186.8 825.7
BANK OVERDRAFT 709.8 2,753.9
OTHER CURRENT LIABILITIES 5,235.7 5,373.2
22,732.9 28,701.8
NUMBER OF SHARES IN ISSUE (MILLIONS) 224.6 223.8
NET DEBT (R MILLION) 12,228.1 15,312.1
NET DEBT TO TOTAL CAPITALISATION (%) 44.3 47.4
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
CONSOLIDATED BALANCE SHEET - US DOLLAR PERIOD END RATE TRANSLATION*
30 SEPT. 30 SEPT.
1999 1998
US$ MILLION US$ MILLION
FUNDS EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 1,559.4 1,597.1
MINORITY INTERESTS 155.1 151.0
LONG-TERM BORROWINGS 1,376.1 2,527.6
OTHER LONG-TERM LIABILITIES 244.2 261.6
DEFERRED TAXATION 454.0 398.5
3,788.8 4,935.8
EMPLOYMENT OF FUNDS
FIXED ASSETS 3,665.2 4,038.8
PLANTATIONS AND TIMBERLANDS 406.2 565.7
DEFERRED TAXATION 68.6 29.4
OTHER NON-CURRENT ASSETS 183.8 273.9
CURRENT ASSETS 1,153.7 1,567.6
BANK BALANCES AND DEPOSITS 154.2 510.0
COLLATERAL DEPOSITS 104.0 -
OTHER CURRENT ASSETS 895.5 1,057.6
TOTAL ASSETS 5,477.5 6,475.4
CURRENT LIABILITIES 1,688.7 1,539.6
INTEREST BEARING LIABILITIES 697.8 142.0
BANK OVERDRAFT 118.3 473.6
OTHER CURRENT LIABILITIES 872.6 924.0
3,788.8 4,935.8
NUMBER OF SHARES IN ISSUE (MILLIONS) 224.6 223.8
NET DEBT ($ MILLION) 2,038.0 2,633.2
DEBT TO TOTAL CAPITALISATION (%) 44.3 47.4
* EXCHANGE RATE (PERIOD END) $1.00 = R 6.0000 5.8150
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
CONSOLIDATED CASH FLOW STATEMENT
AUDITED AUDITED
30 SEPT. 30 SEPT.
1999 1998
R MILLION R MILLION
CASH GENERATED BY OPERATIONS 4,914.1 4,485.3
MOVEMENT IN WORKING CAPITAL 447.7 183.1
NET FINANCE COST (1,141.4) (1,387.2)
TAXATION (178.6) (178.9)
DIVIDENDS PAID (223.8) -
CASH RETAINED FROM OPERATING
ACTIVITIES 3,818.0 3,102.3
CASH EFFECTS OF INVESTING ACTIVITIES (562.3) (1,036.6)
3,255.7 2,065.7
CASH EFFECTS OF FINANCING ACTIVITIES (5,224.0) (887.0)
NET MOVEMENT IN CASH AND CASH
EQUIVALENTS (1,968.3) 1,178.7
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
AUDITED AUDITED
30 SEPT. 30 SEPT.
1999 1998
R MILLION R MILLION
BALANCE AT 1 OCTOBER 9,287.0 5,691.9
INCOME BEFORE MINORITY INTERESTS 831.5 685.0
INCOME ATTRIBUTABLE TO MINORITY
INTERESTS (94.3) (91.7)
FOREIGN CURRENCY TRANSLATION RESERVE (344.8) 916.1
DIVIDENDS DECLARED - 1999: R1.15 PER
SHARE (1998: R1.00) (274.9) (223.8)
ISSUANCE OF ORDINARY SHARES 20.6 2,460.0
GOODWILL WRITTEN OFF TO EQUITY (68.9) (150.5)
BALANCE AT 30 SEPTEMBER 9,356.2 9,287.0
CONSOLIDATED CASH FLOW STATEMENT - US DOLLAR AVERAGE RATE TRANSLATION*
30 SEPT. 30 SEPT.
1999 1998
US$ MILLION US$ MILLION
CASH GENERATED BY OPERATIONS 817.4 850.9
MOVEMENT IN WORKING CAPITAL 74.5 34.7
NET FINANCE COST (189.8) (263.2)
TAXATION (29.7) (33.9)
DIVIDENDS PAID (37.2) -
CASH RETAINED FROM OPERATING
ACTIVITIES 635.2 588.5
CASH EFFECTS OF INVESTING ACTIVITIES (93.5) (196.6)
541.7 391.9
CASH EFFECTS OF FINANCING ACTIVITIES (868.9) (168.3)
NET MOVEMENT IN CASH AND CASH
EQUIVALENTS (327.2) 223.6
*EXCHANGE RATE (AVERAGE) $1.00 = R 6.0122 5.2714
COMPARATIVE FIGURES HAVE BEEN RESTATED FOR ACCOUNTING POLICY CHANGES TO ENSURE
CONSISTENCY.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -
US DOLLAR PERIOD END RATE TRANSLATION*
30 SEPT. 30 SEPT.
1999 1998
US$ MILLION US$ MILLION
BALANCE AT 1 OCTOBER 1,547.8 978.8
INCOME BEFORE MINORITY INTERESTS 138.6 117.8
INCOME ATTRIBUTABLE TO MINORITY
INTERESTS (15.7) (15.8)
FOREIGN CURRENCY TRANSLATION RESERVE (57.5) 157.5
DIVIDENDS DECLARED - 1999: R1.15 PER
SHARE (1998: R1.00) (45.8) (38.4)
ISSUANCE OF ORDINARY SHARES 3.4 423.0
GOODWILL WRITTEN OFF TO EQUITY (11.4) (25.8)
BALANCE AT 30 SEPTEMBER 1,559.4 1,597.1
*EXCHANGE RATE (PERIOD END) $1.00 = R 6.0000 5.8150
REGIONAL INFORMATION
UNAUDITED AUDITED
QUARTER ENDED YEAR ENDED
30 SEPT. 30 SEPT. 30 SEPT. 30 SEPT.
1999 1998 1999 1998
R MILLION R MILLION % CHANGE R MILLION R MILLION % CHANGE
SALES
FINE PAPER -
NORTH AMERICA 2,742.0 2,589.7 5.9 9,447.0 8,447.0 11.8
EUROPE 3,209.5 2,989.7 7.4 11,142.2 8,665.0*** 28.6
SOUTHERN AFRICA 476.3 395.0 20.6 1,501.1 1,263.9 18.8
TOTAL 6,427.8 5,974.4 7.6 22,090.3 18,375.9 20.2
FOREST PRODUCTS 1,271.5 1,176.5 8.1 4,487.2 4,333.7 3.5
TOTAL 7,699.3 7,150.9 7.7 26,577.5 22,709.6 17.0
OPERATING INCOME
FINE PAPER -
NORTH AMERICA 278.4 322.2 (13.6) 848.6 1,014.9 (16.4)
EUROPE 180.5 211.0 (14.5) 727.5 614.9 18.3
SOUTHERN AFRICA 74.9 62.3 20.2 225.3 201.9 11.6
TOTAL 533.8 595.5 (10.4) 1,801.4 1,831.7 (1.7)
FOREST
PRODUCTS 220.1 135.5 62.4 523.6 299.6 74.8
SAPPI TRADING
AND CORPORATE 39.4 (17.8) - 125.5 76.6 63.8
TOTAL 793.3 713.2 11.2 2,450.5 2,207.9 11.0
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION CHARGES**
FINE PAPER -
NORTH AMERICA 465.5 517.6 (10.1) 1,475.0 1,558.4 (5.4)
EUROPE 512.9 511.6 0.3 1,876.2 1,418.1 32.3
SOUTHERN AFRICA 88.2 76.8 14.8 277.7 256.3 8.3
TOTAL 1,066.6 1,106.0 (3.6) 3,628.9 3,232.8 12.3
FOREST PRODUCTS 312.1 184.5 69.2 1,014.5 791.0 28.3
SAPPI TRADING
AND CORPORATE 5.5 (30.3) - 95.1 64.1 48.4
TOTAL 1,384.2 1,260.2 9.8 4,738.5 4,087.9 15.9
NET OPERATING ASSETS
FINE PAPER -
NORTH AMERICA 7,100.9 7,883.9 (9.9) 7,100.9 7,883.9 (9.9)
EUROPE 9,984.5 12,033.0 (17.0) 9,984.5 12,033.0 (17.0)
SOUTHERN AFRICA 1,149.0 1,106.4 3.9 1,149.0 1,106.4 3.9
TOTAL 18,234.4 21,023.3 (13.3) 18,234.4 21,023.3 (13.3)
FOREST
PRODUCTS 7,500.5 7,336.1 2.2 7,500.5 7,336.1 2.2
SAPPI TRADING
AND CORPORATE 557.8 785.6 (29.0) 557.8 785.6 (29.0)
TOTAL 26,292.7 29,145.0 (9.8) 26,292.7 29,145.0 (9.8)
** BEFORE NON TRADING INCOME/LOSS
*** KNP LEYKAM ACQUISITION EFFECTIVE FROM SECOND QUARTER 1998
REGIONAL INFORMATION US DOLLAR TRANSLATION*
QUARTER ENDED YEAR ENDED
30 SEPT. 30 SEPT. 30 SEPT. 30 SEPT.
1999 1998 1999 1998
US$ US$ % CHANGE US$ US$ % CHANGE
SALES
FINE PAPER -
NORTH AMERICA 451.6 427.0 5.8 1,571.3 1,602.4 (1.9)
EUROPE 528.5 492.9 7.2 1,853.3 1,643.7*** 12.8
SOUTHERN AFRICA 78.4 65.1 20.4 249.7 239.8 4.1
TOTAL 1,058.5 985.0 7.5 3,674.3 3,485.9 5.4
FOREST PRODUCTS 209.4 194.0 7.9 746.3 822.1 (9.2)
TOTAL 1,267.9 1,179.0 7.5 4,420.6 4,308.0 2.6
OPERATING INCOME
FINE PAPER -
NORTH AMERICA 45.8 53.1 (13.7) 141.1 192.5 (26.7)
EUROPE 29.7 34.8 (14.7) 121.0 116.7 3.7
SOUTHERN AFRICA 12.3 10.3 19.4 37.5 38.3 (2.1)
TOTAL 87.8 98.2 (10.6) 299.6 347.5 (13.8)
FOREST PRODUCTS 36.2 22.3 62.3 87.1 56.8 53.3
SAPPI TRADING
AND CORPORATE 6.5 (3.0) - 20.8 14.5 43.4
TOTAL 130.5 117.5 11.1 407.5 418.8 (2.7)
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION CHARGES**
FINE PAPER -
NORTH AMERICA 76.7 85.3 (10.1) 245.3 295.6 (17.0)
EUROPE 84.5 84.4 0.1 312.0 269.0 16.0
SOUTHERN AFRICA 14.5 12.7 14.2 46.2 48.6 (4.9)
TOTAL 175.7 182.4 (3.7) 603.5 613.2 (1.6)
FOREST PRODUCTS 51.4 30.4 69.1 168.7 150.1 12.4
SAPPI TRADING
AND CORPORATE 0.9 (5.0) - 15.8 12.2 29.5
TOTAL 228.0 207.8 9.7 788.0 775.5 1.6
NET OPERATING ASSETS
FINE PAPER -
NORTH AMERICA 1,183.5 1,355.8 (12.7) 1,183.5 1,355.8 (12.7)
EUROPE 1,664.1 2,069.3 (19.6) 1,664.1 2,069.3 (19.6)
SOUTHERN AFRICA 191.5 190.3 0.6 191.5 190.3 0.6
TOTAL 3,039.1 3,615.4 (15.9) 3,039.1 3,615.4 (15.9)
FOREST PRODUCTS 1,250.1 1,261.6 (0.9) 1,250.1 1,261.6 (0.9)
SAPPI TRADING
AND CORPORATE 92.9 135.1 (31.2) 92.9 135.1 (31.2)
TOTAL 4,382.1 5,012.1 (12.6) 4,382.1 5,012.1 (12.6)
* INCOME STATEMENT - EXCHANGE RATE
(AVERAGE)
$ 1.00 = R 6.0724 6.0650 6.0122 5.2714
* BALANCE SHEET - EXCHANGE RATE
(PERIOD END)
$ 1.00 = R 6.0000 5.8150 6.0000 5.8150
** BEFORE NON TRADING INCOME/LOSS
*** KNP LEYKAM ACQUISITION EFFECTIVE FROM SECOND QUARTER 1998
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS REPORT 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
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 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), CURRENCY FLUCTUATIONS AND THE
CONSEQUENCES OF YEAR 2000 NON-COMPLIANCE AND INTRODUCTION OF THE EURO. 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.
THIS REPORT IS AVAILABLE ON THE SAPPI WEBSITE.
OTHER INTERESTED PARTIES CAN OBTAIN PRINTED COPIES OF THIS REPORT FROM:
SOUTH AFRICA:
MERCANTILE REGISTARS LIMITED, 8TH FLOOR, 11 DIAGONAL STREET, JOHANNESBURG, 2001
PO BOX 1053, JOHANNESBURG, 2000. TEL: +27 (0) 11 370-5000
UNITED KINGDOM:
IRG PLC, BOURNE HOUSE, 34 BECKENHAM ROAD, BECKENHAM
KENT, BR3 4TU, DX 91750, BECKENHAM WEST. TEL: +44 (0) 181 639-2000
UNITED STATES ADR DEPOSITARY:
BANK OF NEW YORK, ADR DEPARTMENT, 101 BARCLAY STREET
NEW YORK, NY 10286. TEL: +1 212 815-5800
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