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SAP - Sappi - Sappi Trading Update at the Annual General Meeting of 01 March
2010
Sappi Limited
(Registration number 1936/008963/06)
(Incorporated in the Republic of South Africa)
Share code : SAP & ISIN : ZAE000006284
("Sappi" or the "Company")
01 March 2009
Sappi Trading Update at the Annual General Meeting of 01 March 2010
Speaking today at the Annual General Meeting, Sappi non-executive chairman Dr
Danie Cronje provided the following update on trading conditions for the group:
We reported our results for our first financial quarter on 28 January 2010 which
reflected a substantial improvement in operating profit excluding special items
compared to the equivalent quarter last year and to the prior quarter.
Looking forward we see the same general outlook that we reported in our 2009
Annual Report and 2010 first quarter Results.
Conditions in our major markets are expected to improve gradually in 2010,
resulting in rising demand for our products. Although we expect demand and our
capacity utilisation to improve compared to financial 2009, we do not expect
demand to return to 2008 levels. We will therefore continue to manage our
output to meet customer demand. Current indications are that recovery of coated
mechanical paper is lagging that of coated woodfree paper, which will negatively
impact our European business.
Input prices for our raw materials and energy are likely to continue rising. The
strong demand for pulp and chemical cellulose, accompanied by rising prices, is
expected to have a favourable effect on the South African and North American
businesses, which are net pulp sellers.
Increased pulp prices are, however, expected to result in rising costs for our
European business, which purchases more than half of its pulp requirements. As
a result of the very low prices of coated woodfree paper, good capacity
utilisation and these cost pressures, we have announced price increases of at
least 10% for coated woodfree paper in Europe with effect from March 2010.
The achievement of synergies from our European acquisition last year is already
close to our target to achieve Euro120 million per annum within 3 years. This,
together with our cost reduction initiatives, mill and capacity closures over
the past year, is expected to help us to offset rising input costs.
We continue to expect an improvement in operating profitability excluding
special items in financial 2010. While we continue to face volatile market
conditions and our finance costs will be substantially higher than in the past,
we believe we are on the way to improved profitability and returns and lower
debt levels.
Looking specifically at the second financial quarter -
We completed a scheduled major pulp mill maintenance shut at Ngodwana Mill, and
a 5 day shut at Saiccor Mill in Southern Africa, during January and February
2010, which will negatively impact our result during the second financial
quarter.
In Europe the Stockstadt coated woodfree paper machine, which was shut as a
result of an electrical fire in December, is expected to restart towards the end
of March 2010. The cost of restoration and business interruption is expected to
be approximately US$30 million (not Euro30 million as reported in January), most
of which is self-insured.
It will be too early to see any major impact from the price increase in Europe
in the financial results for the quarter ending March.
We expect the operating profit excluding special items in our second financial
quarter to remain positive but to be below the level achieved in the first
quarter.
END
For further information contact:
Robert Hope
Group Head Strategic Development
Sappi Limited
Tel +27 (0) 11 407 8492
Robert.Hope@sappi.com
Andre F Oberholzer
Group Head Corporate Affairs
Sappi Limited
Tel +27 (0) 11 407 8044
Mobile +27 (0) 83 235 2973
Andre.Oberholzer@sappi.com
Or Brunswick South Africa Tel + 27 (0) 11 502 7300
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. The words `believe`,
`anticipate`, `expect`, `intend`, `estimate`, `plan`, `assume`, `positioned`,
`will`, `may`, `should`, `risk` and other similar expressions, which are
predictions of or indicate future events and future trends, which do not relate
to historical matters, identify forward-looking statements. 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, possible early termination of alternative fuel tax credits,
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. We undertake 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 and the integration of the acquired business into our existing
business. The estimate of synergies 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.
Date: 01/03/2010 16:54:09 Supplied by www.sharenet.co.za
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