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SAPPI LIMITED
REPORT FOR THE QUARTER AND NINE MONTHS ENDED 30 JUNE 1999
SUMMARY STATISTICS
QUARTER ENDED NINE MONTHS ENDED
30 JUNE 31 MARCH 30 JUNE 30 JUNE 30 JUNE
1999 1999 1998 1999 1998
SALES
- (R BILLION) 6.2 6.6 5.6 18.5 15.0
- (US$ BILLION) 1.0 1.1 1.1 3.1 3.0
OPERATING INCOME
- (R MILLION) 604 604 447 1,657 1,495
- (US$ MILLION) 98 99 85 277 298
EBITDA
- (R MILLION) 1,144 1,195 947 3,354 2,828
- (US$ MILLION) 186 197 180 560 564
OPERATING INCOME TO SALES(%)9.7 9.2 8.0 9.0 10.0
OPERATING INCOME TO
AVERAGE NET ASSETS (%) 10.0 9.1 6.6 12.7 12.8
EPS BEFORE EXCEPTIONAL
ITEMS (HEADLINE)
- (SA CENTS) 118 100 11 293 196
- (US CENTS) 19 17 2 49 39
EARNINGS BEFORE EXCEPTIONAL
ITEMS PER ADR
- (US CENTS) 190 170 20 490 390
COMMENT
MARKETS
AN UPTURN IN PRICES OF PAPER PRODUCTS NOW APPEARS TO BE UNDERWAY. ON THE BACK
OF STRONG DEMAND FOR COATED WOODFREE PAPER THE EUROPEAN PRICE INCREASES
ANNOUNCED FOR MAY HAVE BEEN IMPLEMENTED FOR INDENT BUSINESS - STOCK AND INDENT
PRICES ARE EXPECTED TO RISE AGAIN IN SEPTEMBER. IN THE USA THE US$40 PER TON
SHEET PRICE INCREASE HAS BEEN FOLLOWED BY THE ANNOUNCEMENT OF A US$60 PER TON
WEB PRICE INCREASE FROM MID-JULY. INTERNATIONAL KRAFTLINERBOARD PRICES ARE
CONTINUING TO INCREASE AND INCREASES FOR NEWSPRINT PRICES IN THE USA HAVE BEEN
ANNOUNCED EFFECTIVE FROM THE FOURTH CALENDAR QUARTER.
PAPER PULP (NBSK) INVENTORIES HAVE CONTINUED TO DECLINE AND NORTH AMERICAN AND
SCANDINAVIAN INVENTORIES ARE NOW 1.36 MILLION TONS COMPARED TO 1.48 MILLION
TONS IN APRIL. PAPER PULP PRICE INCREASES ACHIEVED IN RECENT MONTHS ARE LIKELY
TO BE UNDERPINNED BY THIS INVENTORY REDUCTION AND TO INCREASE FURTHER.
DISSOLVING PULP PRICES HAVE INCREASED DURING THE FOURTH FINANCIAL QUARTER.
OPERATING REVIEW FOR THE THREE MONTHS TO 30 JUNE 1999
THIRD QUARTER EARNINGS BEFORE EXCEPTIONAL ITEMS REFLECT AN IMPROVEMENT OVER THE
SECOND QUARTER AND OVER THE COMPARATIVE QUARTER LAST YEAR. A BRIEF REVIEW OF
SAPPI'S BUSINESSES AND REGIONAL PERFORMANCE FOLLOWS:
FINE PAPER BUSINESS
EUROPE
QUARTER ENDED
30 JUNE 30 JUNE
1999 1998 %
US$ MILLION US$ MILLION CHANGE
SALES 399.3 472.5 (15.5)
OPERATING INCOME 34.2 20.6 66.0
OPERATING MARGIN (%) 8.6 4.4 -
EBITDA 77.1 63.8 20.8
EBITDA MARGIN (%) 19.3 13.8 -
NET OPERATING ASSETS 1,701.4 2,268.7 (25.0)
RONA P.A. (%) 8.0 3.6 -
THE STRONG ORDER INFLOW FOR COATED WOODFREE PAPER WHICH HAS BEEN APPARENT SINCE
JANUARY CONTINUED THROUGH THE QUARTER, BUT THE ORDER INFLOW FOR COATED
MECHANICAL PAPER WAS RATHER WEAK. THE MARKET HAS NEVERTHELESS REMAINED VERY
COMPETITIVE AND THE COATED WOODFREE PAPER PRICE INCREASES ANNOUNCED FOR MAY
WERE ACHIEVED TOWARDS THE END OF THE QUARTER. LIGHTWEIGHT COATED (LWC) PAPER
PRICES REMAINED UNDER PRESSURE.
DESPITE THE RECENT PRICE INCREASES, PRICES ACHIEVED WERE BELOW THE COMPARATIVE
QUARTER LAST YEAR.
ALTHOUGH VOLUMES SOLD WERE SIMILAR TO THE COMPARATIVE QUARTER LAST YEAR THE
DECLINE IN PRICES ACHIEVED, A CHANGE IN PRODUCT MIX AND THE WEAKENING OF THE
EURO AGAINST THE US DOLLAR RESULTED IN LOWER SALES.
HOWEVER, CONTINUED FOCUS ON ACHIEVING COST REDUCTIONS AND THE ACHIEVEMENT OF
MERGER SYNERGIES RESULTED IN AN IMPROVEMENT IN MARGINS AND OPERATING INCOME.
NORTH AMERICA
QUARTER ENDED
30 JUNE 30 JUNE
1999 1998 %
US$ MILLION US$ MILLION CHANGE
SALES 322.9 329.7 (2.1)
OPERATING INCOME 28.8 43.2 (33.3)
OPERATING MARGIN (%) 8.9 13.1 -
EBITDA 50.8 64.9 (21.7)
EBITDA MARGIN (%) 15.7 19.7 -
NET OPERATING ASSETS 1,278.7 1,343.9 (4.9)
RONA P.A. (%) 9.0 12.9 -
SHIPMENTS OF COATED WOODFREE PAPER BY US PRODUCERS FOR THE QUARTER WERE AT THE
SAME LEVEL AS THE COMPARATIVE QUARTER LAST YEAR AND SLIGHTLY BELOW THE PRIOR
QUARTER. PRICES CONTINUED TO BE VERY COMPETITIVE, IN PART DUE TO IMPORT
PRESSURE, BUT STRENGTHENING DEMAND DURING THE QUARTER AND RISING PULP PRICES
RESULTED IN INDUSTRY PRICE INCREASE ANNOUNCEMENTS.
AVERAGE PRICES ACHIEVED WERE SLIGHTLY LOWER THAN THE PRIOR QUARTER AND DOWN 9%
FROM LAST YEAR. AS A RESULT THE OPERATING MARGIN HAS DECLINED VERSUS LAST YEAR.
COST OF GOODS SOLD WAS DOWN 1% COMPARED TO LAST YEAR ON A PER TON BASIS DUE TO
LOWER PULP PRICING AND CONTINUING COST REDUCTION INITIATIVES.
SOUTH AFRICA
QUARTER ENDED
30 JUNE 30 JUNE
1999 1998 %
US$ MILLION US$ MILLION CHANGE
SALES 53.4 48.4 10.3
OPERATING INCOME 10.3 5.6 83.9
OPERATING MARGIN (%) 19.3 11.6 -
EBITDA 12.4 7.8 59.0
EBITDA MARGIN (%) 23.2 16.1 -
NET OPERATING ASSETS 173.5 199.6 (13.1)
RONA P.A. (%) 23.7 11.2 -
THE LOCAL MARKETS HAVE STARTED SHOWING SOME BUOYANCY PARTLY AS A RESULT OF THE
EFFECTS OF LOWER INTEREST RATES WHICH FELL 1.5 PERCENTAGE POINTS DURING THE
QUARTER. A FURTHER 1 PERCENTAGE POINT DECREASE IN INTEREST RATES TO DATE SHOULD
POSITIVELY IMPACT ON DEMAND IN THE FOURTH QUARTER.
SALES VOLUMES INCREASED BY 14% COMPARED TO THE SAME QUARTER LAST YEAR AND THE
OUTLOOK FOR THE FINAL QUARTER REMAINS POSITIVE. DOLLAR PRICES IN BOTH THE
DOMESTIC AND EXPORT MARKETS ARE STILL BELOW THE SAME QUARTER LAST YEAR.
COSTS CONTINUE TO BE TIGHTLY CONTROLLED AND MARGINS INCREASED FOR THE QUARTER.
FOREST PRODUCTS BUSINESS
QUARTER ENDED
30 JUNE 30 JUNE
1999 1998 %
US$ MILLION US$ MILLION CHANGE
SALES 227.1 203.4 11.7
OPERATING INCOME 22.5 7.5 200.0
OPERATING MARGIN (%) 9.9 3.7 -
EBITDA 42.9 35.4 21.2
EBITDA MARGIN (%) 18.9 17.4 -
NET OPERATING ASSETS 1,255.1 1,339.8 (6.3)
RONA P.A. (%) 7.2 2.2 -
SALES VOLUMES INCREASED COMPARED TO THE PREVIOUS QUARTER AND WERE UP
SIGNIFICANTLY ON THE SAME QUARTER LAST YEAR. THE LOCAL MARKET HAS SHOWN SOME
RECOVERY AND IS EXPECTED TO MAINTAIN THIS TREND AS INTEREST RATES DECLINE. THE
EXPORT MARKETS ARE ALSO IMPROVING BOTH IN TERMS OF VOLUME AND PRICE, WITH THE
PAPER PULP (NBSK) PRICE RISING FROM US$470 PER TON AT THE START OF THE QUARTER
TO US$520 PER TON AT PRESENT. ASIA IS SHOWING SIGNS OF ECONOMIC RECOVERY AND
ORDER INTAKE FROM THIS REGION WAS STRONGER IN BOTH VOLUME AND VALUE TERMS THIS
QUARTER. MANUFACTURING AND DISTRIBUTION COSTS CONTINUE TO BE WELL CONTAINED
WHICH COMBINED WITH PRICE AND VOLUME IMPROVEMENTS RESULTED IN THE MORE THAN
DOUBLING OF THE OPERATING INCOME MARGINS.
GROUP RESULTS FOR THE 9 MONTHS TO 30 JUNE 1999
CONSOLIDATED SALES FOR THE NINE MONTHS WERE R18.5 BILLION (US$ 3.1 BILLION)
(1998: R15.0 BILLION (US$3.0 BILLION). R1.8 BILLION OF THIS INCREASE RELATES TO
THE INCLUSION OF KNP LEYKAM FOR THE FULL PERIOD OF 1999.
COSTS WERE WELL CONTAINED AND REMAIN A KEY RESULTS AREA.
NET FINANCE COSTS BEFORE CAPITALISATION OF INTEREST WERE SLIGHTLY BELOW LAST
YEAR IN RAND TERMS BUT SIGNIFICANTLY LOWER IN DOLLAR TERMS. AFTER CAPITALISED
INTEREST NET FINANCE COSTS WERE R60 MILLION HIGHER THAN THE COMPARABLE PERIOD
AS A RESULT OF A REDUCTION IN INTEREST CAPITALISED. IN DOLLAR TERMS NET FINANCE
COSTS AFTER INTEREST CAPITALISED WERE US$13 MILLION BELOW THE COMPARABLE PERIOD
LAST YEAR.
DURING THE THIRD QUARTER THE GROUP TOOK A CHARGE IN CONNECTION WITH THE
WESTBROOK (USA) PULPMILL AND ONE PAPER MACHINE WHICH WERE CLOSED ON 23 JUNE
1999. THE AFTER TAX EFFECT OF THE CHARGE WAS R152 MILLION (US$25 MILLION). THE
AFTER TAX CASH EFFECT IS EXPECTED TO BE LIMITED TO R55 MILLION (US$9 MILLION).
CURRENT TAX WAS R203 MILLION (US$34 MILLION) AND DEFERRED TAX, NOW ACCOUNTED
FOR ON THE COMPREHENSIVE BASIS, WAS MADE UP AS FOLLOWS FOR THE NINE MONTHS TO
30 JUNE 1999:
R MILLION
DEFERRED TAX ON INCOME 91
DEFERRED TAX RELEASED ON -
- SALE OF US TIMBERLANDS (73)
- RESTRUCTURING OF WESTBROOK MILL (33)
75% OF SOUTH AFRICAN CORPORATE TAX RATE ADJUSTMENT (119)
(134)
EARNINGS BEFORE EXCEPTIONAL ITEMS AMOUNTED TO R655.8 MILLION (US$109.6 MILLION)
REFLECTING AN INCREASE OF R278.7 MILLION COMPARED TO 1998 AND EARNINGS BEFORE
EXCEPTIONAL ITEMS PER SHARE WERE 293 SA CENTS (49 US CENTS). EARNINGS PER SHARE
WERE 161 CENTS (27 US CENTS). THE ADJUSTMENTS TO NET INCOME TO ARRIVE AT
EARNINGS BEFORE EXCEPTIONAL ITEMS INCLUDE THE SALE OF THE US TIMBERLANDS, THE
PROVISIONS FOR RESTRUCTURING AND CHANGES TO OTHER PROVISIONS.
CAPITAL STRUCTURE
THE GROUP'S NET DEBT WAS R13.8 BILLION (US$2.3 BILLION) REFLECTING A 10%
DECREASE IN RANDS AND 13% IN DOLLARS ON SEPTEMBER 1998 LEVELS.
NET DEBT TO TOTAL CAPITALISATION WAS 48%, THE SAME LEVEL AS SEPTEMBER 1998.
IN JUNE, SAPPI FINE PAPER NORTH AMERICAN PREFERRED STOCK OF US$133 MILLION WAS
CONVERTED INTO AN EQUIVALENT VALUE OF DEBENTURES, LOWERING THE AFTER TAX COST
OF FINANCING BY APPROXIMATELY US$7 MILLION PER ANNUM BUT RAISING THE DEBT TO
TOTAL CAPITALISATION RATIO. THE POSITIVE IMPACT ON EARNINGS WILL BE FELT IN
FUTURE QUARTERS.
THE GROUP HAS AGREED THE PRINCIPLES OF REFINANCING THE MAJOR PORTION OF CURRENT
FINANCIAL LIABILITIES, IN PARTICULAR THE ZERO COUPON NOTES ISSUED IN CONNECTION
WITH THE ACQUISITION OF KNP LEYKAM, WHICH MATURE IN DECEMBER 1999
YEAR 2000
FURTHER PROGRESS HAS BEEN MADE IN ADDRESSING YEAR 2000 ISSUES RELATED TO THE
GROUP'S OPERATIONS. THE GROUP IS ON SCHEDULE TO BE COMPLIANT ACROSS THE
BUSINESS, OPERATIONAL AND EMBEDDED SYSTEMS BY 30 SEPTEMBER 1999.
FOCUS IS CURRENTLY ON THE FINALISATION OF CONTINGENCY PLANS PARTICULARLY
RELATING TO THE COMPLIANCE OF KEY SUPPLIERS AND CUSTOMERS.
IN 1995 THE GROUP INITIATED THE IMPLEMENTATION OF THE YEAR 2000 COMPLIANT SAP
R/3 SYSTEM, AT A COST OF APPROXIMATELY R500 MILLION (US$83 MILLION). TO THE
EXTENT REQUIRED TO ACHIEVE YEAR 2000 COMPLIANCE, THE SAP R/3 IMPLEMENTATION IS
COMPLETE.
IN ADDITION TO THE SAP R/3 IMPLEMENTATION, THE ANTICIPATED COST OF ACHIEVING
YEAR 2000 COMPLIANCE IS APPROXIMATELY R170 MILLION (US$28 MILLION) OF WHICH
APPROXIMATELY 80% HAD BEEN EXPENSED BY JUNE 1999.
THE SAPPI GROUP YEAR 2000 STATEMENT AND THE PROJECT STATUS UPDATE AT THE END OF
JUNE 1999 ARE PUBLISHED ON THE SAPPI WEB SITE - WWW.SAPPI.COM.
APPOINTMENTS
A NUMBER OF BOARD AND SENIOR MANAGEMENT APPOINTMENTS HAVE BEEN ANNOUNCED.
DR FRANKLIN SONN, FORMER SOUTH AFRICAN AMBASSADOR TO THE UNITED STATES, HAS
JOINED THE BOARD AS A NON-EXECUTIVE DIRECTOR.
IAN FORBES, MANAGING DIRECTOR OF SAPPI FOREST PRODUCTS, HAS DECIDED TO RESIGN
FROM THE SAPPI BOARD AND THE COMPANY AT THE END OF SEPTEMBER 1999.
DR JOHN JOB, FORMER CHIEF EXECUTIVE OF SENTRACHEM LIMITED, WILL TAKE OVER THE
DIRECTION OF THE SOUTHERN AFRICAN BUSINESSES AND WILL JOIN THE SAPPI LIMITED
BOARD. HE WILL ALSO HAVE GLOBAL RESPONSIBILITY FOR THE CO-ORDINATION OF
TECHNOLOGY.
SAPPI FINE PAPER PLC IN LONDON WILL BE FULLY STAFFED AS THE HEADQUARTERS FOR
THE FINE PAPER BUSINESS. TREVOR LARKAN, PREVIOUSLY CHIEF FINANCIAL OFFICER OF
SAPPI SOUTHERN AFRICA AND SINCE 1995, OF THE NORTH AMERICAN BUSINESS, WILL
BECOME CHIEF FINANCIAL OFFICER OF SAPPI FINE PAPER PLC BASED IN LONDON FROM 1
SEPTEMBER 1999. HANK MOLLENHAUER, VICE PRESIDENT AND GENERAL MANAGER OF THE
PRINTING AND PUBLISHING PAPER DIVISION OF THE NORTH AMERICAN BUSINESS WILL MOVE
TO LONDON AS HEAD OF SALES AND MARKETING.
IN NORTH AMERICA, JOHN HEALD, FORMERLY EXECUTIVE VICE PRESIDENT OF UNION CAMP
HAS BEEN APPOINTED EXECUTIVE VICE PRESIDENT OF OPERATIONS.
THE MANAGING DIRECTOR OF SAPPI FINE PAPER SOUTH AFRICA WILL FROM OCTOBER 1999
REPORT TO THE CHIEF EXECUTIVE OFFICER OF SAPPI FINE PAPER PLC.
SAPPI'S EXECUTIVE CHAIRMAN, EUGENE VAN AS, WILL CONTINUE TO ACT AS CHIEF
EXECUTIVE OF THE FINE PAPER BUSINESS UNTIL AN APPOINTMENT TO THIS POSITION IS
MADE.
DIVIDENDS
DIVIDENDS ARE CONSIDERED ONLY ON AN ANNUAL BASIS AND WILL BE DECIDED IN
NOVEMBER 1999.
OUTLOOK
THE EUROPEAN MARKET CONTINUES TO GROW STRONGLY AND NORTH AMERICA IS ALSO
BUOYANT. MANY OF THE ASIAN MARKETS HAVE ALSO RETURNED TO GROWTH. IN SOUTH
AFRICA INTEREST RATES HAVE DROPPED SIGNIFICANTLY OVER RECENT MONTHS AND THIS IS
EXPECTED TO IMPROVE GROWTH PROSPECTS.
PAPER PRICES HAVE STARTED TURNING UPWARDS AND THE EXPECTATION IS THAT PULP
PRICES WILL ALSO CONTINUE THEIR RECENT UPWARD MOVEMENT.
WE EXPECT VOLUMES AND PRICES FOR DISSOLVING PULP TO BE STRONGER IN THE FOURTH
QUARTER AS A RESULT OF IMPROVED DEMAND FOR TEXTILE FIBRE IN ASIA AND AN
IMPROVED OUTLOOK FOR VISCOSE PRICES FOLLOWING THE RECENT PICK UP IN POLYESTER
PRICES.
THE OUTLOOK FOR THE COATED WOODFREE PAPER CAPACITY/DEMAND BALANCE IS IMPROVING,
HOWEVER IN EUROPE THERE IS A CONTINUED NEED FOR THE INDUSTRY TO MANAGE OUTPUT
TO MARKET DEMAND LEVELS.
SAPPI WILL CONTINUE TO FOCUS ON TIGHT COST MANAGEMENT AND IN PARTICULAR ON THE
ACHIEVEMENT OF THE SYNERGIES ARISING FROM COMBINING THE EUROPEAN BUSINESSES.
FULL YEAR EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS (HEADLINE) ARE NOW
EXPECTED TO BE SOMEWHAT BETTER IN RAND TERMS THAN THE R3,76 AND SIMILAR IN
DOLLAR TERMS TO THE 71 US CENTS REPORTED FOR LAST YEAR. THE OUTLOOK FOR NEXT
YEAR REMAINS POSITIVE.
3 AUGUST 1999
CONSOLIDATED INCOME STATEMENTS
UNAUDITED
QUARTER ENDED NINE MONTHS ENDED
30 JUNE 99 30 JUNE 98 30 JUNE 99 30 JUNE 98
R MILLION R MILLION % CHANGE R MILLION R MILLION %CHANGE
SALES 6,162.1 5,553.8 11.0 18,459.4 15,008.2 23.0
COST OF
GOODS SOLD 4,474.6 4,142.8 8.0 13,691.0 11,119.4 23.1
GROSS PROFIT 1,687.5 1,411.0 19.6 4,768.4 3,888.8 22.6
DEPRECIATION 489.2 391.2 25.0 1,497.6 1,092.7 37.1
SELLING,
GENERAL AND
ADMINISTRATIVE
EXPENSES 594.4 572.5 3.8 1,613.6 1,301.4 24.0
OPERATING
INCOME 603.9 447.3 35.0 1,657.2 1,494.7 10.9
NON-TRADING
INCOME/(LOSS)(305.5) 54.9 - (434.4) 18.4 -
NET FINANCE
COSTS 247.4 212.9 16.2 747.6 688.8 8.5
PAID 310.8 313.7 (0.9) 962.0 987.1 (2.5)
CAPITALISED (63.4) (100.8) (37.1) (214.4) (298.3) (28.1)
INCOME
BEFORE
TAXATION 51.0 289.3 (82.4) 475.2 824.3 (42.4)
TAXATION
- CURRENT 19.7 53.6 (63.2) 202.7 189.2 7.1
- DEFERRED (47.7) 116.2 (133.8) 188.8 - -
INCOME AFTER
TAXATION 79.0 119.5 (33.9) 406.3 446.3 (9.0)
INCOME
ATTRIBUTABLE
TO MINORITY
INTERESTS 17.9 17.8 0.6 46.7 95.8 (51.3)
NET INCOME 61.1 101.7 (39.9) 359.6 350.5 2.6
EBITDA 1,143.6 947.2 20.7 3,354.3 2,827.7 18.6
EARNINGS
PER SHARE *
(CENTS) 27 47 - 161 182 -
EARNINGS
BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE
EARNINGS)
PER SHARE*
(CENTS) 118 11 - 293 196 -
WEIGHTED
AVERAGE
NUMBER OF
SHARES IN
ISSUE
(MILLIONS) 223.8 216.0 - 223.8 192.8 -
CALCULATION
OF EARNINGS
BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE)
NET OF TAX
NET INCOME 61.1 101.7 - 359.6 350.5 -
(PROFIT)/LOSS
ON DISPOSAL
OF BUSINESS
AND FIXED
ASSETS 2.4 (3.8) - 20.7 (79.2) -
RESTRUCTURING
COST
PROVISIONS 186.4 (15.2) - 261.4 136.6 -
INCREASE IN
OTHER
PROVISIONS 13.6 (59.7) - 14.1 (30.8) -
EARNINGS
BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE) 263.5 23.0 - 655.8 377.1 -
* THE DILUTED EPS FOR THE NINE MONTHS ENDED JUNE HAVE NOT BEEN PRESENTED AS THE
DIFFERENCE IS NEGLIGIBLE.
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 CONVENIENCE TRANSLATION**)
UNAUDITED
QUARTER ENDED NINE MONTHS ENDED
30 JUNE 99 30 JUNE 98 30 JUNE 99 30 JUNE 98
US$ MILLION US$ MILLION % CHANGE US$ MILLION US$ MILLION %CHANGE
SALES 1,002.7 1,054.1 (4.9) 3,080.5 2,993.4 2.9
COST OF
GOODS SOLD 728.1 786.3 (7.4) 2,284.7 2,217.7 3.0
GROSS
PROFIT 274.6 267.8 2.5 795.8 775.7 2.6
DEPRECIATION 79.6 74.2 7.3 249.9 217.9 14.7
SELLING,
GENERAL AND
ADMINISTRATIVE
EXPENSES 96.7 108.7 (11.0) 269.3 259.6 3.7
OPERATING
INCOME 98.3 84.9 15.8 276.6 298.2 (7.2)
NON-TRADING
INCOME
(LOSS) (49.7) 10.4 - (72.5) 3.7 -
NET FINANCE
COSTS 40.3 40.4 (0.2) 124.7 137.4 (9.2)
PAID 50.6 59.5 (15.0) 160.5 196.9 (18.5)
CAPITALISED(10.3) (19.1) (46.1) (35.8) (59.5) (39.8)
INCOME
BEFORE
TAXATION 8.3 54.9 (84.9) 79.4 164.5 (51.7)
TAXATION
- CURRENT 3.2 10.2 (68.6) 33.8 37.7 (10.3)
- DEFERRED (7.8) 22.1 - (22.3) 37.7 -
INCOME
AFTER
TAXATION 12.9 22.6 (42.9) 67.9 89.1 (23.8)
INCOME
ATTRIBUTABLE
TO MINORITY
INTERESTS 2.9 3.4 (14.7) 7.8 19.1 (59.2)
NET INCOME 10.0 19.2 (47.9) 60.1 70.0 (14.1)
EBITDA 186.1 179.8 3.5 559.8 564.0 (0.7)
EARNINGS
PER SHARE*
(CENTS) 4 9 - 27 36 -
EARNINGS
BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE
EARNINGS)
PER SHARE*
(CENTS) 19 2 - 49 39 -
WEIGHTED
AVERAGE
NUMBER OF
SHARES IN
ISSUE
(MILLIONS) 223.8 216.0 - 223.8 192.8 -
CALCULATION
OF EARNINGS
BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE)
NET OF TAX
NET INCOME 10.0 19.2 - 60.1 70.0 -
(PROFIT)
/LOSS ON
DISPOSAL OF
BUSINESS
AND FIXED
ASSETS 0.4 (0.7) - 3.5 (15.8) -
RESTRUCTURING
COST
PROVISIONS 30.3 (2.9) - 43.6 27.2 -
INCREASE IN
OTHER
PROVISIONS 2.2 (11.3) - 2.4 (6.1) -
EARNINGS
BEFORE
EXCEPTIONAL
ITEMS
(HEADLINE) 42.9 4.3 - 109.6 75.3 -
** CONVENIENCE
EXCHANGE
RATE
$ 1.00 = R 6.1454 5.2688 5.9924 5.0138
* THE DILUTED EPS FOR THE NINE MONTHS ENDED JUNE HAVE NOT BEEN PRESENTED AS THE
DIFFERENCE IS NEGLIGIBLE.
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
UNAUDITED AT AUDITED AT
30 JUNE 30 SEPTEMBER
1999 1998
R MILLION R MILLION
FUNDS EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 9,285.1 9,171.9
MINORITY INTERESTS 883.0 878.3
LONG-TERM BORROWINGS 9,940.6 14,698.1
OTHER LONG-TERM LIABILITIES 1,535.3 1,521.3
DEFERRED TAXATION 2,154.4 2,320.7
23,798.4 28,590.3
EMPLOYMENT OF FUNDS
FIXED ASSETS 22,394.7 23,485.8
PLANTATIONS AND TIMBERLANDS 2,383.9 3,289.7
OTHER NON-CURRENT ASSETS 2,036.2 1,652.1
CURRENT ASSETS 6,899.0 9,115.5
BANK BALANCES AND DEPOSITS 1,076.9 2,965.6
OTHER CURRENT ASSETS 5,822.1 6,149.9
TOTAL ASSETS 33,713.8 37,543.1
CURRENT LIABILITIES 9,915.4 8,952.8
INTEREST-BEARING LIABILITIES 4,401.0 825.7
BANK OVERDRAFT 543.5 2,753.9
OTHER CURRENT LIABILITIES 4,970.9 5,373.2
23,798.4 28,590.3
NUMBER OF SHARES IN ISSUE (MILLIONS) 223.8 223.8
NET DEBT (R MILLION) 13,808.2 15,312.1
NET DEBT TO TOTAL CAPITALISATION (%) 48.0 47.6
CONSOLIDATED BALANCE SHEET (US DOLLAR CONVENIENCE TRANSLATION*)
UNAUDITED AUDITED AT
30 JUNE 30 SEPTEMBER
1999 1998
US$ MILLION US$ MILLION
FUNDS EMPLOYED
ORDINARY SHAREHOLDERS' INTEREST 1,533.5 1,577.3
MINORITY INTERESTS 145.8 151.0
LONG-TERM BORROWINGS 1,641.8 2,527.6
OTHER LONG-TERM LIABILITIES 253.6 261.6
DEFERRED TAXATION 355.8 399.1
3,930.5 4,916.6
EMPLOYMENT OF FUNDS
FIXED ASSETS 3,698.7 4,038.8
PLANTATIONS AND TIMBERLANDS 393.7 565.7
OTHER NON-CURRENT ASSETS 336.3 284.1
CURRENT ASSETS 1,139.5 1,567.6
BANK BALANCES AND DEPOSITS 177.9 510.0
OTHER CURRENT ASSETS 961.6 1,057.6
TOTAL ASSETS 5,568.2 6,456.2
CURRENT LIABILITIES 1,637.7 1,539.6
INTEREST-BEARING LIABILITIES 726.9 142.0
BANK OVERDRAFT 89.8 473.6
OTHER CURRENT LIABILITIES 821.0 924.0
930.5 4,916.6
NUMBER OF SHARES IN ISSUE (MILLIONS) 223.8 223.8
NET DEBT ($ MILLION) 2,280.6 2,633.2
DEBT TO TOTAL CAPITALISATION (%) 48.0 47.6
* CONVENIENCE EXCHANGE RATE $1,00 = R 6.0547 5.8150
REGIONAL INFORMATION
UNAUDITED
QUARTER ENDED NINE MONTHS ENDED
30 JUNE 30 JUNE 30 JUNE 30 JUNE
1999 1998 1999 1998
R MILLION R MILLION % CHANGE R MILLION R MILLION % CHANGE
SALES - METRIC TONS ('000)
FINE PAPER -
NORTH AMERICA 327.5 329.9 (0.7) 1,023.8 983.8 4.1
EUROPE 586.1 586.6 (0.1) 1,637.8 1,221.4 34.1
SOUTHERN AFRICA 72.5 63.5 14.2 205.2 196.0 4.7
TOTAL 986.1 980.0 0.6 2,866.8 2,401.2 19.4
FOREST PRODUCTS 649.0 572.7 13.3 1,766.6 1,706.0 3.6
TOTAL 1,635.1 1,552.7 5.3 4,633.4 4,107.2 12.8
SALES
FINE PAPER -
NORTHAMERICA 1,984.3 1,737.1 14.2 6,168.7 5,385.5 14.5
EUROPE 2,454.2 2,489.7 (1.4) 7,519.6 5,350.1* 40.6
SOUTHERN AFRICA 328.0 255.1 28.5 920.0 770.3 19.4
TOTAL 4,766.5 4,481.9 6.3 14,608.3 11,505.9 27.0
FOREST PRODUCTS 1,395.6 1,071.9 30.2 3,851.1 3,502.310.0
TOTAL 6,162.1 5,553.8 11.0 18,459.4 15,008.2 23.0
OPERATING INCOME
FINE PAPER -
NORTH AMERICA 176.8 227.5 (22.3) 570.2 692.7 (17.7)
EUROPE 210.5 108.7 93.7 547.0 403.9 35.4
SOUTHERN AFRICA 63.0 29.4 114.3 150.4 139.6 7.7
TOTAL 450.3 365.6 23.2 1,267.6 1,236.2 2.5
FOREST PRODUCTS 138.0 39.7 247.6 303.5 164.1 84.9
SAPPI TRADING
AND CORPORATE 15.6 42.0 (62.9) 86.1 94.4 (8.8)
TOTAL 603.9 447.3 35.0 1,657.2 1,494.7 10.9
EBITDA**
FINE PAPER -
NORTH AMERICA 312.4 342.0, (8.7) 1,009.5 1,040.8 (3.0)
EUROPE 473.4 336.1 40.8 1,363.2 906.4 50.4
SOUTHERN AFRICA 76.0 41.2 84.4 189.5 179.5 5.6
TOTAL 861.9 719.4 19.8 2,562.3 2,126.8 20.5
FOREST PRODUCTS 263.9 186.8 41.3 702.4 606.5 15.8
SAPPI TRADING
AND CORPORATE 17.8 41.0 (56.5) 89.6 94.4 (5.1)
TOTAL 1,143.6 947.2 20.7 3,354.3 2,827.7 18.6
NET OPERATING ASSETS
FINE PAPER -
NORTH AMERICA 7,741.9 7,888.5 (1.9) 7,741.9 7,888.5 (1.9)
EUROPE 10,301.6 13,317.6 (22.6) 10,301.6 13,317.6 (22.6)
SOUTHERN AFRICA 1,050.3 1,171.5 (10.3) 1,050.3 1,171.5 (10.3)
TOTAL 19,093.9 22,377.6 (14.7) 19,093.9 22,377.6 (14.7)
FOREST PRODUCTS 7,599.5 7,864.6 (3.4) 7,599.5 7,864.6 (3.4)
SAPPI TRADING
AND CORPORATE 972.6 566.3 71.8 972.6 566.3 71.8
TOTAL 27,666.0 30,808.5 (10.2) 27,666.0 30,808.5 (10.2)
*KNP LEYKAM ACQUISITION EFFECTIVE FROM SECOND QUARTER 1998
**BEFORE NON-TRADING INCOME/LOSS
REGIONAL INFORMATION (US DOLLAR CONVENIENCE TRANSLATION )
UNAUDITED
QUARTER ENDED NINE MONTHS ENDED
30 JUNE 30 JUNE 30 JUNE 30 JUNE
1999 1998 1999 1998
US$ US$ % CHANGE US$ US$ % CHANGE
MILLION MILLION MILLION MILLION
SALES - METRIC TONS ('000)
FINE PAPER -
NORTH AMERICA 327.5 329.9 (0.7) 1,023.8 983.8 4.1
EUROPE 586.1 586.6 (0.1) 1,637.8 1,221.4 34.1
SOUTHERN AFRICA 72.5 63.5 14.2 205.2 196.0 4.7
TOTAL 986.1 980.0 0.6 2,866.8 2,401.2 19.4
FOREST PRODUCTS 649.0 572.7 13.3 1,766.6 1,706.0 3.6
TOTAL 1,635.1 1,552.7 5.3 4,633.4 4,107.2 12.8
SALES
FINE PAPER -
NORTH AMERICA 322.9 329.7 (2.1) 1,029.4 1,074.1 (4.2)
EUROPE 399.3 472.5 (15.5) 1,254.8 1,067.1* 17.6
SOUTHERN AFRICA 53.4 48.4 10.3 153.5 153.6 (0.1)
TOTAL 775.6 850.6 (8.8) 2,437.7 2,294.8 6.2
FOREST PRODUCTS 227.1 203.4 11.7 642.7 698.5 (8.0)
TOTAL 1,002.7 1,054.0 (4.9) 3,080.4 2,993.3 2.9
OPERATING INCOME
FINE PAPER -
NORTH AMERICA 28.8 43.2 (33.3) 95.2 138.2 (31.1)
EUROPE 34.2 20.6 66.0 91.2 80.6 13.2
SOUTHERN AFRICA 10.3 5.6 83.9 25.1 27.8 (9.7)
TOTAL 73.3 69.4 5.6 211.5 246.6 (14.2)
FOREST PRODUCTS 22.5 7.5 200.0 50.6 32.7 54.7
SAPPI TRADING
AND CORPORATE 2.6 7.9 (67.1) 14.4 18.8 (23.4)
TOTAL 98.4 84.8 16.0 276.5 298.1 (7.2)
EBITDA**
FINE PAPER -
NORTH AMERICA 50.8 64.9 (21.7) 168.5 207.6 (18.8)
EUROPE 77.1 63.8 20.8 227.5 180.7 25.9
SOUTHERN AFRICA 12.4 7.8 59.0 31.6 35.8 (11.7)
TOTAL 140.3 136.5 2.8 427.6 424.1 0.8
FOREST PRODUCTS 42.9 35.4 21.2 117.2 121.0 (3.1)
SAPPI TRADING
AND CORPORATE 2.9 7.7 (62.3) 15.0 18.8 (20.2)
TOTAL 186.1 179.6 3.6 559.8 563.9 (0.7)
NET OPERATING ASSETS
FINE PAPER -
NORTH AMERICA 1,278. 71,343.9 (4.9) 1,278.7 1,343.9 (4.9)
EUROPE 1,701.4 2,268.7 (25.0) 1,701.4 2,268.7 (25.0)
SOUTHERN AFRICA 173.5 199.6 (13.1) 173.5 199.6 (13.1)
TOTAL 3,153.6 3,812.2 (17.3) 3,153.6 3,812.2 (17.3)
FOREST PRODUCTS 1,255.1 1,339.8 (6.3) 1,255.1 1,339.8 (6.3)
SAPPI TRADING
AND CORPORATE 160.6 96.5 66.4 160.6 96.5 66.4
TOTAL 4,569.3 5,248.5 (12.9) 4,569.3 5,248.5 (12.9)
CONVENIENCE EXCHANGE RATE
(INCOME STATEMENT)
$ 1,00 = R 6.1454 5.2688 5.9924 5.0138
CONVENIENCE EXCHANGE RATE
(BALANCE SHEET)
$ 1,00 = R 6.0547 5.8700 6.0547 5.8700
*KNP LEYKAM ACQUISITION EFFECTIVE FROM SECOND QUARTER 1998
**BEFORE NON-TRADING INCOME/LOSS
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.
HTTP://WWW.SAPPI.COM
OTHER INTERESTED PARTIES CAN OBTAIN COPIES FROM:
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SAPPI LIMITED (REG. NO. 05/08963/06)
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