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SAP - Sappi Limited - AGM Update Sappi Limited Registration Number 1936/008963/06 (Incorporated in the Republic of South Africa) Issuer Code: SAVVI JSE Code: SAP ISIN: ZAE000006284 Sappi Limited AGM UPDATE We reported our results for the our first financial quarter on the 31st of January, which reflected the 6th consecutive quarter of year-on-year improvements in operating performance excluding special items. At the same time we said that we expected the operating profit excluding special items to improve again in our second quarter on a year-on-year basis. We are on track to achieve this. Looking at our business on a region by region basis, the Southern African businesses and Forest Products in particular continue to perform strongly, supported by good demand, improving prices and the weakening Rand. Management is acutely aware of rising input and labour costs and this remains a key issue. The SA business was unfavourably impacted by the power disruptions earlier this quarter. After a major disruption for 3-4 days we reached agreement with the national utility, Eskom, to reduce our purchases by generating more of our own power. We have subsequently operated without further major disruptions; however, the additional power comes at additional cost. The US$500 million Saiccor expansion is due to be completed in the second calendar quarter. At full output the project will increase capacity of chemical cellulose by about a third. With pulp prices at current high levels the timing of the start up appears very favourable. The full impact will only be felt in the next financial year. The project will also improve Saiccor`s energy efficiency and result in a further reduction in our power purchases. Our North American business has shown a steadily improving trend as a result of improvements across all disciplines. We expect to see further improvements from this business but are conscious of the warnings from economists about a possible slow down in the US economy. Demand for coated fine paper in web form and price realisation continues to improve; however, in sheet form the markets continue to be influenced by low cost imports. We still have some way to go with the turnaround of this business and the improving trend is encouraging. Our most critical requirement is to fix our European business. The position has not improved and prices have edged up off the bottom in some markets; pressure remains on our sales force to increase prices further. Input cost pressure is continuing, as it is group-wide, and we are exploring every area of our business for efficiencies and cost reductions. While we continue to reduce our costs, returning to acceptable profitability in Europe with current high input cost levels does require material price increases. There seems to be general understanding in the market that prices have to go up and there are media reports of price increases by all major producers which sounds encouraging. After years of declining prices in Europe and high operating rates we are convinced that consolidation of the segment is needed to sustain long term profitability. 3 March 2008 Date: 03/03/2008 14:54:54 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
