Sharenet Sites 
Sharenet Sites
Second quarter results for the period ended March 2016
Sappi
Registration number: 1936/008963/06
JSE code: SAP
ISIN code: ZAE000006284
Issuer code: SAVVI
Second quarter results for the period ended March 2016
Sappi is a global diversified woodfibre company focused on providing graphic papers, packaging and speciality papers,
dissolving wood pulp as well as products in adjacent fields including nanocellulose and lignosulphonate to our direct
and indirect customer base across more than 150 countries.
Our market-leading range of graphic paper products are used by printers in the production of books, brochures,
magazines, catalogues, direct mail and many other print applications; quality packaging and speciality papers are used in the
manufacture of such products as soup sachets, luxury carry bags, cosmetic and confectionary packaging, boxes for
agricultural products for export, tissue wadding for household tissue products and casting release papers used by suppliers to
the fashion, textiles, automobile and household industries; our dissolving wood pulp (specialised cellulose) products are
used worldwide by converters to create viscose fibre for fashionable clothing and textiles, pharmaceutical products as
well as a wide range of consumer and household products.
The wood and pulp needed for our products is either produced within Sappi or bought from accredited suppliers. Across
the group, Sappi is close to ‘pulp neutral’, meaning that we sell almost as much pulp as we buy.
Highlights for the quarter
Profit for the period US$100 million (Q2 2015 US$56 million)
EPS excluding special items 16 US cents (Q2 2015 11 US cents)
EBITDA excluding special items US$195 million (Q2 2015 US$170 million)
Net debt US$1,652 million, down US$264 million year-on-year
Quarter ended Half-year ended
Mar 2016 Mar 2015 Dec 2015 Mar 2016 Mar 2015
Key figures: (US$ million)
Sales 1,294 1,338 1,284 2,578 2,715
Operating profit excluding special items(1) 133 104 112 245 178
Special items - gains(2) (22) (68) (11) (33) (63)
EBITDA excluding special items(1) 195 170 175 370 315
Profit for the period 100 56 75 175 80
Basic earnings per share (US cents) 19 11 14 33 15
EPS excluding special items (US cents)(3) 16 11 13 29 16
Net debt(3) 1,652 1,916 1,734 1,652 1,916
Key ratios: (%)
Operating profit excluding special items to sales 10.3 7.8 8.7 9.5 6.6
Operating profit excluding special items to capital
employed (ROCE)(3) 19.3 13.5 16.2 17.7 11.8
EBITDA excluding special items to sales 15.1 12.7 13.6 14.4 11.6
Net debt to EBITDA excluding special items(3) 2.4 2.9 2.6 2.4 2.9
Interest cover(3) 6.5 3.7 5.1 6.5 3.7
Net asset value per share (US cents) 210 216 192 210 216
(1) Refer to note 10 to the group results for the reconciliation of EBITDA excluding special items and operating profit
excluding special items to segment operating profit, and profit for the period.
(2) Refer to note 10 to the group results for details on special items.
(3) Refer to supplemental information for the definition of the term.
Sales by source*
Europe – 51%
North America – 27%
Southern Africa – 22%
Sales by product*
Coated paper – 61%
Uncoated paper – 5%
Speciality paper – 10%
Commodity paper – 5%
Dissolving wood pulp – 17%
Paper pulp – 1%
Other – 1%
Sales by destination*
Europe – 44%
North America – 25%
Southern Africa – 8%
Asia and other – 23%
Net operating assets**
Europe – 39%
North America – 30%
Southern Africa – 31%
* for the period ended March 2016
** as at March 2016
Commentary on the quarter
Operating performance in the quarter continued to be strong despite the US$10 million adverse impact of planned
maintenance shuts across the group when compared to the equivalent quarter last year. The group generated EBITDA excluding
special items of US$195 million, an increase of 15% over the prior year. Operating profit excluding special items was up
28% to US$133 million. Profit for the period increased from US$56 million to US$100 million. The improvement was
attributable mainly to higher dissolving wood pulp sales volumes and prices, savings from cost containment initiatives and
lower finance charges.
The Specialised Cellulose business improved during the quarter, with EBITDA excluding special items of US$94 million,
despite the annual maintenance shuts which occurred at both Ngodwana and Saiccor Mills during the quarter. Average US
Dollar prices in the quarter were higher than both those of the prior quarter and the equivalent quarter last year due to
higher average Chinese spot prices for dissolving wood pulp. The weaker Rand/Dollar exchange rate led to increased Rand
prices.
The European business delivered another satisfactory performance, with stable sales volumes and higher selling prices,
aided by good variable and fixed cost control.
Increased sales volumes and lower variable costs more than offset a decline in average sales prices for the North
American business when compared to the equivalent quarter last year.
The paper business in South Africa was impacted negatively by the extended annual maintenance shut at Ngodwana, which
commenced in March. The later onset of the citrus picking season also delayed some containerboard sales destined for the
agricultural market. Higher sales prices offset variable cost increases, driven primarily by a weaker Rand/Dollar
exchange rate.
Net finance costs for the quarter were US$25 million, a reduction from the US$97 million in the equivalent quarter
last year (which included US$63 million in once-off charges relating to the refinancing of the 2018 and 2019 bonds).
Earnings per share excluding special items for the quarter were 16 US cents, a healthy improvement over the 11 US cents
generated in the equivalent quarter last year. Special items for the quarter resulted in a gain of US$22 million,
related mainly to a plantation fair value price adjustment.
Our strategy to reposition Sappi as a profitable and cash-generative diversified woodfibre group remains well on
track.
Cash flow and debt
Net cash generated for the quarter was US$90 million, compared to the US$82 million generated in the equivalent
quarter last year. This increase was as a result of the improved operating performance and lower finance costs, offset
somewhat by a rise in working capital. Capital expenditure in the quarter of US$45 million was in line with the equivalent
quarter last year.
Net debt of US$1,652 million is substantially lower than the US$1,916 million at the end of the equivalent quarter
last year as a result of strong cash generation in the past financial year and the translation benefit of the weaker Euro
on the Euro denominated debt.
Since quarter-end we have completed the refinancing of our 2021 bonds. This will result in a reduction in the interest
charge of approximately US$8 million per annum going forward. The transaction costs of US$23 million for the
refinancing will be expensed during our third quarter.
Liquidity comprises cash on hand of US$457 million and US$584 million available from undrawn committed revolving
credit facilities.
Operating review for the quarter
Europe
Quarter ended
Mar 2016 Dec 2015 Sept 2015 Jun 2015 Mar 2015
€ million € million € million € million € million
Sales 604 601 609 567 590
Operating profit excluding special items 33 29 23 5 24
Operating profit excluding special items to sales (%) 5.5 4.8 3.8 0.9 4.1
EBITDA excluding special items 62 59 51 35 54
EBITDA excluding special items to sales (%) 10.3 9.8 8.4 6.2 9.2
RONOA pa (%) 11.0 9.7 7.8 1.7 8.0
The performance of the European business improved compared to both the prior quarter as well as the equivalent period
last year, a quarter that benefited from the transfer of the Sappi Dutch pension fund.
Coated woodfree markets were relatively stable and sales volumes and selling prices were higher than a year ago.
Conversely, coated mechanical markets continued to experience challenging conditions. Market share gains offset overall
declines in demand for coated papers.
The specialities market improved in the quarter, and sales volumes for the quarter were up 19% year-on-year, well
above average market growth rates of 1 to 5% for our products. Selling prices were stable compared to both the prior quarter
and equivalent quarter last year.
Variable and delivery costs were 5% lower year-on-year as a result of lower energy, chemical and softwood pulp prices.
Hardwood pulp prices declined significantly during the quarter, but on average were still higher than the equivalent
quarter last year.
North America
Quarter ended
Mar 2016 Dec 2015 Sept 2015 Jun 2015 Mar 2015
US$ million US$ million US$ million US$ million US$ million
Sales 339 343 369 313 342
Operating profit (loss) excluding special items 13 13 31 (7) 7
Operating profit (loss) excluding special items to
sales (%) 3.8 3.8 8.4 (2.2) 2.0
EBITDA excluding special items 32 31 50 11 26
EBITDA excluding special items to sales (%) 9.4 9.0 13.6 3.5 7.6
RONOA pa (%) 5.2 5.2 12.2 (2.7) 2.7
The business continues to improve on the prior year performance, with increased sales volumes and significantly lower
delivery and variable costs offsetting lower coated paper prices.
The US coated paper market remained challenging, particularly for lightweight web products. However, strong sales of
heavyweight web resulted in higher overall paper sales volumes. Pricing, particularly for sheets and lightweight web,
continued to be under pressure. This was primarily due to the impact of an increase in coated paper imports from the prior
quarter as a result of the strong Dollar.
Dissolving wood pulp sales volumes were also higher year-on-year as we increased production at Cloquet Mill to offset
some of the loss of production at Saiccor Mill in the prior quarter due to the impacts of the drought in South Africa.
Average sales prices were higher than both the prior quarter and the equivalent quarter last year.
The casting release paper business experienced improved sales volumes to China, particularly after the Chinese New
Year. Overall volumes were 4% higher than last year, with growth in the classics segment.
Variable costs were significantly lower than both the prior quarter and equivalent quarter last year, driven by lower
wood, paper pulp, chemicals and energy prices.
Southern Africa
Quarter ended
Mar 2016 Dec 2015 Sept 2015 Jun 2015 Mar 2015
ZAR million ZAR million ZAR million ZAR million ZAR million
Sales 4,568 3,993 4,556 4,002 3,817
Operating profit excluding special items 1,255 949 1,047 538 772
Operating profit excluding special items to
sales (%) 27.5 23.8 23.0 13.4 20.2
EBITDA excluding special items 1,430 1,119 1,228 707 947
EBITDA excluding special items to sales (%) 31.3 28.0 27.0 17.7 24.8
RONOA pa (%) 32.2 25.2 28.1 14.3 20.4
The South African business further enhanced margins as a result of higher net selling prices for both dissolving wood
pulp and paper, notwithstanding the impact of the extended planned maintenance shut at Ngodwana which commenced during
March, and the shift in the maintenance shut at Saiccor.
Dissolving wood pulp sales volumes were higher than both the prior quarter and the equivalent quarter last year.
Higher average US Dollar spot prices in the preceding quarter and a weaker Rand/Dollar exchange rate led to substantially
increased dissolving wood pulp prices. Spot prices in China declined early in the quarter but, post the Chinese New Year,
prices started to rebound with Chinese VSF producers operating at close to capacity.
The sale of the Enstra and Cape Kraft Mills during the prior quarter as well as the later onset of the citrus picking
season, which impacted agricultural containerboard demand, led to lower paper sales volumes.
Variable costs increased for wood and chemicals as a result of the weaker exchange rate. Fixed costs were higher due
to the timing of the shuts at Ngodwana and Saiccor Mill.
Directorate
Dr Danie Cronjé retired as independent Chairman of the board at the end of February 2016. Sir Nigel Rudd, the lead
independent director, succeeded Dr Cronjé as independent Chairman of the company with effect from 01 March 2016.
Outlook
The Specialised Cellulose business has benefited from rising US Dollar sales prices for dissolving wood pulp over the
past year. Spot prices peaked in November 2015, declining through to February and have since partially recovered. Our
expectation is for US Dollar spot prices to remain fairly stable for the remainder of the financial year but, for our
South African mills, there will be the added benefit of a weaker Rand/Dollar exchange rate when compared to the prior year.
Demand remains positive and we remain confident that, at current pricing levels and exchange rates, the outlook for this
business is positive.
In North America, our graphic paper business is performing solidly in a difficult and competitive environment which is
being impacted negatively by the strength of the US Dollar and the weak publication paper market. Variable costs have
reduced significantly over the past year and sales volumes are stable heading into a seasonally slow third quarter. Our
European business continues to improve with reasonable operating rates and lower variable costs. However, graphic paper
markets have softened in recent months. The outlook for the specialities market in Europe remains positive, with growth
of 3% in our key product categories expected in the coming year. The large exposure to the export market through our
South African agricultural containerboard sales is driving good sales volumes in a weak ZAR exchange rate environment.
Based on current market conditions, and assuming current exchange rates, we expect the growth in the second half
EBITDA excluding special items to be in line with that of the first half of the year. As a result of improved operating
profits and lower expected finance costs, offset somewhat by increased tax charges, we expect a strong increase in our
earnings.
Capex in 2016 is expected to be in line with 2015 and is focused largely on energy and debottlenecking projects in
South Africa together with the annual maintenance at the mills.
We expect to reduce our net debt further over the course of the year and improve our financial leverage closer to our
target of less than two times net debt to EBITDA.
On behalf of the board
S R Binnie
Director
G T Pearce
Director
09 May 2016
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 and which do not relate to historical matters, identify forward-looking
statements. In addition, this document includes forward-looking statements relating to our potential exposure to various
types of market risks, such as interest rate risk, foreign exchange rate risk and commodity price risk. You should not
rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which
are in some cases beyond our control and may cause our actual results, performance or achievements to differ materially
from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and
from past results, performance or achievements). Certain factors that may cause such differences 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);
- the impact on our business of adverse changes in global economic conditions;
- unanticipated production disruptions (including as a result of planned or unexpected power outages);
- changes in environmental, tax and other laws and regulations;
- adverse changes in the markets for our products;
- the emergence of new technologies and changes in consumer trends including increased preferences for digital media;
- consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to
raise capital when needed;
- adverse changes in the political situation and economy in the countries in which we operate or the effect of
governmental efforts to address present or future economic or social problems;
- the impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including
related financing), any delays, unexpected costs or other problems experienced in connection with dispositions or with
integrating acquisitions or implementing restructurings or other strategic initiatives, 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.
Condensed group income statement
Reviewed Reviewed
Note Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
US$ million US$ million US$ million US$ million
Sales 1,294 1,338 2,578 2,715
Cost of sales 1,048 1,138 2,138 2,362
Gross profit 246 200 440 353
Selling, general and administrative expenses 93 84 175 168
Other operating expenses (income) 1 (53) (8) (51)
Share of profit from equity investments (3) (3) (5) (5)
Operating profit 2 155 172 278 241
Net finance costs 25 97 50 134
Net interest expense 27 86 54 126
Net foreign exchange gain (2) (4) (4) (6)
Net fair value loss on financial instruments - 15 - 14
Profit before taxation 130 75 228 107
Taxation 30 19 53 27
Profit for the period 100 56 175 80
Basic earnings per share (US cents) 19 11 33 15
Weighted average number of shares in issue (millions) 529.7 525.7 528.6 525.1
Diluted earnings per share (US cents) 18 11 33 15
Weighted average number of shares on fully diluted basis (millions) 541.4 531.5 538.4 530.4
Condensed group statement of comprehensive income
Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
US$ million US$ million US$ million US$ million
Profit for the period 100 56 175 80
Other comprehensive income (loss), net of tax
Items that will not be reclassified subsequently to profit or loss - (10) - (10)
Actuarial losses on post-employment benefit funds - (10) - (10)
Items that must be reclassified subsequently to profit or loss (8) 26 (87) 14
Exchange differences on translation of foreign operations (15) 28 (86) 20
Movements in hedging reserves 9 (3) - (7)
Tax effect of above items (2) 1 (1) 1
Total comprehensive income for the period 92 72 88 84
Condensed group balance sheet
Reviewed
Mar 2016 Sept 2015
US$ million US$ million
ASSETS
Non-current assets 3,033 3,174
Property, plant and equipment 2,389 2,508
Plantations 369 383
Deferred tax assets 157 162
Other non-current assets 118 121
Current assets 1,750 1,711
Inventories 646 595
Trade and other receivables 636 650
Taxation receivable 11 10
Cash and cash equivalents 457 456
Assets held for sale - 28
Total assets 4,783 4,913
EQUITY AND LIABILITIES
Shareholders' equity
Ordinary shareholders' interest 1,114 1,015
Non-current liabilities 2,732 2,806
Interest-bearing borrowings 1,974 2,031
Deferred tax liabilities 235 245
Other non-current liabilities 523 530
Current liabilities 937 1,091
Interest-bearing borrowings 135 196
Other current liabilities 759 865
Taxation payable 43 30
Liabilities associated with assets held for sale - 1
Total equity and liabilities 4,783 4,913
Number of shares in issue at balance sheet date (millions) 530.0 526.4
Condensed group statement of cash flows
Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
US$ million US$ million US$ million US$ million
Profit for the period 100 56 175 80
Adjustment for:
Depreciation, fellings and amortisation 73 80 150 165
Taxation 30 19 53 27
Net finance costs 25 97 50 134
Defined post-employment benefits paid (13) (17) (24) (31)
Plantation fair value adjustments (38) (34) (54) (52)
Net restructuring provisions 1 2 4 3
Profit on disposal of assets held for sale and other assets (1) - (16) -
Non-cash employee benefit liability settlement - (70) - (70)
Other non-cash items 10 3 20 17
Cash generated from operations 187 136 358 273
Movement in working capital (22) 23 (122) (113)
Net finance costs paid (22) (38) (58) (90)
Taxation paid (4) (1) (22) (4)
Cash generated from operating activities 139 120 156 66
Cash utilised in investing activities (49) (38) (47) (105)
Capital expenditure (45) (46) (85) (114)
Net proceeds on disposal of assets (3) - 38 -
Other movements (1) 8 - 9
Net cash generated (utilised) 90 82 109 (39)
Cash effects of financing activities (22) 28 (94) (33)
Net movement in cash and cash equivalents 68 110 15 (72)
Cash and cash equivalents at beginning of period 383 329 456 528
Translation effects 6 (40) (14) (57)
Cash and cash equivalents at end of period 457 399 457 399
Condensed group statement of changes in equity
Reviewed
Half-year Half-year
ended ended
Mar 2016 Mar 2015
US$ million US$ million
Balance - beginning of period 1,015 1,044
Total comprehensive income for the period 88 84
Transfers from the share purchase trust 12 9
Transfers of vested share options (5) (6)
Share-based payment reserve 4 4
Balance - end of period 1,114 1,135
Notes to the condensed group results
1. Basis of preparation
The condensed consolidated interim financial statements for the quarter and half-year ended March 2016 have been
prepared in accordance with the Listings Requirements of the JSE Limited, International Financial Reporting Standard,
IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies
Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are in
terms of International Financial Reporting Standards and are consistent with those applied in the previous annual financial
statements.
The preparation of these interim condensed consolidated financial statements was supervised by the Chief Financial Officer,
G T Pearce, CA(SA).
The interim condensed consolidated financial statements for the quarter and half-year ended March 2016 have been
reviewed in accordance with 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 office. The auditor’s report does
not necessarily report on all of the information contained in this announcement/financial results. Shareholders are
therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should
obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered
office. Any reference to future financial performance included in this announcement, has not been reviewed or reported
on by the company’s auditors.
Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
US$ million US$ million US$ million US$ million
2. Operating profit
Included in operating profit are the following items:
Depreciation and amortisation 62 66 125 137
Fair value adjustment on plantations (included in cost of sales)
Changes in volume
Fellings 11 14 25 28
Growth (12) (16) (26) (33)
(1) (2) (1) (5)
Plantation price fair value adjustment (26) (18) (28) (19)
(27) (20) (29) (24)
Net restructuring provisions 1 2 4 3
Profit on disposal of assets held for sale and other assets (1) - (16) -
Employee benefit liability settlement - (70) - (70)
3. Earnings per share
Basic earnings per share (US cents) 19 11 33 15
Headline earnings per share (US cents) 19 11 31 15
EPS excluding special items (US cents) 16 11 29 16
Weighted average number of shares in issue (millions) 529.7 525.7 528.6 525.1
Diluted earnings per share (US cents) 18 11 33 15
Diluted headline earnings per share (US cents) 18 11 30 15
Weighted average number of shares on fully diluted basis (millions) 541.4 531.5 538.4 530.4
Calculation of headline earnings
Profit for the period 100 56 175 80
Profit on disposal of assets held for sale and other assets (1) - (16) -
Tax effect of above items - - 4 -
Headline earnings 99 56 163 80
Calculation of earnings excluding special items
Profit for the period 100 56 175 80
Special items after tax (15) (63) (22) (59)
Special items (22) (68) (33) (63)
Tax effect 7 5 11 4
Refinancing costs - 63 - 63
Earnings excluding special items 85 56 153 84
Reviewed
Mar 2016 Sept 2015
US$ million US$ million
4. Capital commitments
Contracted 58 60
Approved but not contracted 74 73
132 133
5. Contingent liabilities
Guarantees and suretyships 18 13
Other contingent liabilities 10 11
28 24
6. Plantations
Plantations are stated at fair value less estimated cost to sell at the harvesting stage. In arriving at plantation
fair values, the key assumptions are estimated prices less cost of delivery, discount rates (pre-tax weighted average
cost of capital), and volume and growth estimations.
Expected future price trends and recent market transactions involving comparable plantations are also considered in
estimating fair value. Mature timber that is expected to be felled within 12 months from the end of the reporting
period are valued using unadjusted current market prices. Immature timber and mature timber that is to be felled in
more than 12 months from the reporting date are valued using a 12 quarter rolling historical average price which,
taking the length of the growth cycle of a plantation into account, is considered reasonable.
The fair value of plantations is a Level 3 measure in terms of the fair value measurement hierarchy as established
by IFRS 13 Fair Value Measurement.
Reviewed
Mar 2016 Sept 2015
US$ million US$ million
Fair value of plantations at beginning of year 383 430
Gains arising from growth 26 65
Fire, flood, storm and related events (2) (7)
In-field inventory (1) (1)
Gain arising from fair value price changes 28 41
Harvesting - agriculture produce (fellings) (25) (57)
Translation difference (40) (88)
Fair value of plantations at end of period 369 383
7. Financial instruments
The group’s financial instruments that are measured at fair value on a recurring basis consist of cash and cash
equivalents, derivative financial instruments and available for sale financial assets. These have been categorised
in terms of the fair value measurement hierarchy as established by IFRS 13 Fair Value Measurement per the table
below.
Fair value(1)
Reviewed
Fair value Mar 2016 Sept 2015
hierarchy US$ million US$ million
Available for sale assets Level 1 8 8
Derivative financial assets Level 2 46 46
Derivative financial liabilities Level 2 1 5
(1) The fair values of the financial instruments are equal to their carrying values.
There have been no transfers of financial assets or financial liabilities between the categories of the fair value
hierarchy.
The fair value of all external over-the-counter derivatives is calculated based on the discount rate adjustment
technique. The discount rate used is derived from observable rates of return for comparable assets or liabilities
traded in the market. The credit risk of the external counterparty is incorporated into the calculation of fair
values of financial assets and own credit risk is incorporated in the measurement of financial liabilities. The
change in fair value is therefore impacted by the move of the interest rate curves, by the volatility of the applied
credit spreads, and by any changes to the credit profile of the involved parties.
There are no financial assets and liabilities that have been remeasured to fair value on a non-recurring basis.
The carrying amounts of other financial instruments which include accounts receivable, certain investments, accounts
payable and current interest-bearing borrowings approximate their fair values.
8. Material balance sheet movements
Since the 2015 financial year-end, the ZAR has weakened by approximately 11% against the US Dollar, the group’s
presentation currency. This has resulted in a similar decrease of the group’s South African assets and liabilities,
which are held in the aforementioned functional currency, on translation to the presentation currency.
Inventory and other current liabilities
The movements in inventory and other current liabilities are largely attributable to seasonal working capital movements.
Assets held for sale
During the financial year, the conditions precedent related to the sale of the group’s Enstra and Cape Kraft mills
were fulfilled. Proceeds of US$38 million were received and a combined profit on disposal of US$15 million was recorded.
Interest-bearing borrowings
During the financial year, the group repaid the amount owing under the partially drawn US$519 million (€465 million)
revolving credit facility of US$55 million (€50 million) as well as US$19 million (€18 million) under the OekB term
loan from existing cash resources.
9. Events after balance sheet date
Subsequent to quarter end, the group issued an aggregate principal amount of €350 million (US$391 million) in senior
secured notes due 2023 at a coupon of 4.00% per annum. The proceeds from these notes was used to redeem the full
amount of the group’s US$350 million senior secured notes due 2021 at a price of 103.313% of the principal amount
thereof. The coupon on the notes redeemed was 6.625%.
In addition, the group utilised existing cash resources to redeem its ZAR255 million public bond which became due in
April 2016.
10. Segment information
Quarter ended Half-year ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
Metric tons Metric tons Metric tons Metric tons
(000’s) (000’s) (000’s) (000’s)
Sales volume
North America 331 321 661 654
Europe 834 828 1,670 1,603
Southern Africa - Pulp and paper 404 424 790 850
Forestry 241 233 500 461
Total 1,810 1,806 3,621 3,568
Which consists of:
Specialised cellulose 289 267 544 567
Paper 1,280 1,306 2,577 2,540
Forestry 241 233 500 461
Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
US$ million US$ million US$ million US$ million
Sales
North America 339 342 682 695
Europe 666 670 1,325 1,354
Southern Africa - Pulp and paper 277 312 545 637
Forestry 12 14 26 29
Total 1,294 1,338 2,578 2,715
Which consists of:
Specialised cellulose 238 205 447 448
Paper 1,044 1,119 2,105 2,238
Forestry 12 14 26 29
Operating profit excluding special items
North America 13 7 26 3
Europe 36 28 68 43
Southern Africa 80 66 147 129
Unallocated and eliminations(1) 4 3 4 3
Total 133 104 245 178
Which consists of:
Specialised cellulose 84 53 146 109
Paper 45 48 95 66
Unallocated and eliminations(1) 4 3 4 3
Special items - (gains) losses
North America 3 - 3 -
Europe (2) (56) 2 (55)
Southern Africa (25) (19) (40) (15)
Unallocated and eliminations(1) 2 7 2 7
Total (22) (68) (33) (63)
Segment operating profit (loss)
North America 10 7 23 3
Europe 38 84 66 98
Southern Africa 105 85 187 144
Unallocated and eliminations(1) 2 (4) 2 (4)
Total 155 172 278 241
EBITDA excluding special items
North America 32 26 63 41
Europe 68 61 133 114
Southern Africa 91 81 170 158
Unallocated and eliminations(1) 4 2 4 2
Total 195 170 370 315
Which consists of:
Specialised cellulose 94 65 168 135
Paper 97 103 198 178
Unallocated and eliminations(1) 4 2 4 2
(1) Includes the group’s treasury operations and our insurance captive.
Reconciliation of EBITDA excluding special items and operating profit excluding special items to segment operating
profit and profit for the period
Special items cover those items which management believe are material by nature or amount to the operating results
and require separate disclosure.
Reviewed Reviewed
Quarter Quarter Half-year Half-year
ended ended ended ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
US$ million US$ million US$ million US$ million
EBITDA excluding special items 195 170 370 315
Depreciation and amortisation (62) (66) (125) (137)
Operating profit excluding special items 133 104 245 178
Special items - gains (losses) 22 68 33 63
Plantation price fair value adjustment 26 18 28 19
Net restructuring provisions (1) (2) (4) (3)
Profit on disposal of assets held for sale and other assets 1 - 16 -
Employee benefit liability settlement - 57 - 57
Black Economic Empowerment charge (1) (1) (1) (1)
Fire, flood, storm and other events (3) (4) (6) (9)
Segment operating profit 155 172 278 241
Net finance costs (25) (97) (50) (134)
Profit before taxation 130 75 228 107
Taxation (30) (19) (53) (27)
Profit for the period 100 56 175 80
Reviewed
Mar 2016 Mar 2015
US$ million US$ million
Segment assets
North America 1,013 1,049
Europe 1,324 1,278
Southern Africa 1,026 1,262
Unallocated and eliminations(1) 4 33
Total 3,367 3,622
Reconciliation of segment assets to total assets
Segment assets 3,367 3,622
Deferred taxation 157 138
Cash and cash equivalents 457 399
Other current liabilities 759 801
Taxation payable 43 31
Total assets 4,783 4,991
(1) Includes the group’s treasury operations and our insurance captive.
Supplemental information (this information has not been audited or reviewed)
General definitions
Average - averages are calculated as the sum of the opening and closing balances for the relevant period divided by
two
Broad-based Black Economic Empowerment (BBBEE) charge - represents the IFRS 2 non-cash charge associated with the
BBBEE transaction implemented in fiscal 2010 in terms of BBBEE legislation in South Africa
Capital employed - shareholders’ equity plus net debt
EBITDA excluding special items - earnings before interest (net finance costs), taxation, depreciation, amortisation
and special items
EPS excluding special items - earnings per share excluding special items and certain once-off finance and tax items
Fellings - the amount charged against the income statement representing the standing value of the plantations
harvested
Headline earnings - as defined in circular 2/2015, issued by the South African Institute of Chartered Accountants in
October 2015, which separates from earnings all separately identifiable remeasurements. It is not necessarily a measure
of sustainable earnings. It is a Listings Requirement of the JSE Limited to disclose headline earnings per share
Interest cover - Last 12 months EBITDA excluding special items to net interest adjusted for refinancing costs
NBSK - Northern Bleached Softwood Kraft pulp. One of the main varieties of market pulp, produced from coniferous trees
(ie spruce, pine) in Scandinavia, Canada and northern USA. The price of NBSK is a benchmark widely used in the pulp and
paper industry for comparative purposes
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
Net debt - current and non-current interest-bearing borrowings, bank overdrafts less cash and cash equivalents
Net debt to EBITDA excluding special items - net debt divided by the last 12 months EBITDA excluding special items
Net operating assets - total assets (excluding deferred tax assets and cash) less current liabilities (excluding
interest-bearing borrowings and overdraft). Net operating assets equate to segment assets
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
ROCE - annualised return on average capital employed. Operating profit excluding special items divided by average
capital employed
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, non-recurring integration costs related to
acquisitions, financial impacts of natural disasters, non-cash gains or losses on the price fair value adjustment of
plantations and alternative fuel tax credits receivable in cash
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 audited or reviewed)
Summary Rand convenience translation
Quarter ended Half-year ended
Mar 2016 Mar 2015 Mar 2016 Mar 2015
Key figures: (ZAR million)
Sales 20,474 15,686 38,650 31,101
Operating profit excluding special items(1) 2,104 1,219 3,673 2,039
Special items - gains(1) (348) (797) (495) (722)
EBITDA excluding special items(1) 3,085 1,993 5,547 3,608
Profit for the period 1,582 657 2,624 916
Basic earnings per share (SA cents) 299 125 496 174
Net debt(1) 25,531 23,078 25,531 23,078
Key ratios: (%)
Operating profit excluding special items to sales 10.3 7.8 9.5 6.6
Operating profit excluding special items to capital employed (ROCE)(1) 19.9 13.4 18.0 11.6
EBITDA excluding special items to sales 15.1 12.7 14.4 11.6
(1) Refer to supplemental information for the definition of the term.
The above financial results have been translated into Rands 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 Jun Mar
2016 2015 2015 2015 2015
Exchange rates:
Period end rate: US$1 = ZAR 15.4548 15.2865 13.9135 12.2025 12.0450
Average rate for the Quarter: US$1 = ZAR 15.8226 14.1577 12.9364 12.0820 11.7236
Average rate for the year to date: US$1 = ZAR 14.9921 14.1577 11.9641 11.6540 11.4552
Period end rate: €1 = US$ 1.1166 1.0977 1.1195 1.1166 1.0889
Average rate for the Quarter: €1 = US$ 1.1020 1.0968 1.1125 1.1060 1.1316
Average rate for the year to date: €1 = US$ 1.0994 1.0968 1.1501 1.1627 1.1910
Sappi has a primary listing on the JSE Limited and a Level 1 ADR programme that trades in the over-the-counter market in the
United States
South Africa
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg 2001
PO Box 61051, Marshalltown 2107
Telephone +27 (0)11 370 5000
United States ADR Depositary
The Bank of New York Mellon
Investor Relations
PO Box 11258
Church Street Station
New York, NY 10286-1258
Tel +1 610 382 7836
JSE Sponsor:
UBS South Africa (Pty) Ltd
Date: 09/05/2016 09:00:00 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.
