Wrap Text
First Quarter results for the period ended December 2013
Sappi
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
First Quarter results for the period ended December 2013
1st quarter results
Sappi works closely with customers, both direct and indirect, in over 100
countries to provide them with relevant and sustainable paper, paper-
pulp and dissolving wood pulp products and related services and innovations.
Our market-leading range of paper products includes: coated
fine papers used by printers,publishers and corporate
end-users in the production of books, brochures, magazines,
catalogues, direct mail and many other print applications;
casting release papers used by suppliers to the fashion, textiles,
automobile and household industries; and in our Southern
African region, newsprint, uncoated graphic and business
papers, premium-quality packaging papers, paper-grade
pulp and dissolving wood pulp.
Our dissolving wood pulp products are used worldwide by converters to create
viscose fibre, acetate tow, pharmaceutical products as well as a wide range
of consumer products.
The 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.
Financial summary for the quarter
- Profit for the period US$18 million (Q1 2013 US$12 million)
- EPS excluding special items 2 US cents (Q1 2013 3 US cents)
- EBITDA excluding special items US$147 million (Q1 2013 US$159 million)
- Net debt US$2,348 million (Q1 2013 US$2,095 million)
Quarter ended
Restated(1) Restated(1)
Dec 2013 Dec 2012 Sept 2013
Key figures: (US$ million)
Sales 1,499 1,475 1,530
Operating profit (loss) 70 67 (110)
Special items – (gains) losses(2) (10) 3 177
Operating profit excluding special items(3) 60 70 67
EBITDA excluding special items(3) 147 159 155
Profit (loss) for the period 18 12 (149)
Basic earnings (loss) per share (US cents) 3 2 (29)
Net debt(4) 2,348 2,095 2,214
Key ratios: (%)
Operating profit (loss) to sales 4.7 4.5 (7.2)
Operating profit excluding special items to sales 4.0 4.8 4.4
Operating profit excluding special items to capital
employed (ROCE) 7.0 7.9 7.7
EBITDA excluding special items to sales 9.8 10.8 10.1
Return on average equity (ROE)(5) 6.4 3.2 (48.0)
Net debt to total capitalisation(5) 67.7 58.1 65.9
Net asset value per share (US cents) 215 290 219
(1) Restated for the adoption of IAS 19 (Revised) Employee Benefits. Refer to note 2 to the group results for more detail.
(2) Refer to note 8 to the group results for details on special items.
(3) Refer to note 8 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.
(4) Refer to supplemental information for the reconciliation of net debt to interest-bearing borrowings.
(5) Refer to supplemental information for the definition of the term.
Commentary on the quarter
The group returned to positive earnings in the quarter with an EBITDA excluding special items of
US$147 million, an operating profit excluding special items of US$60 million and a profit for the period of
US$18 million.
We continue to generate good returns in the Specialised Cellulose business, and
the dissolving wood pulp market experienced strong demand in an increasingly
competitive market. Conditions are generally difficult in the global graphic paper markets, in line
with our expectations in Europe and more challenging than anticipated in North America.
The South African business had another good quarter, benefiting from additional sales volumes in the
Specialised Cellulose business from the Ngodwana Mill, the weaker Rand/Dollar exchange rate and a
gradual improvement in the paper business. The European business returned to a small operating profit
after three quarters of losses, with a reduction in fixed cost offsetting lower selling prices. The North
American business experienced a difficult quarter, with volume and price declines in the paper segment
as well as increased variable costs leading to a small operating loss.
The group has benefited from the strategic decision to invest in and grow the Specialised Cellulose
business, with 286kt of dissolving wood pulp sold during the quarter (an increase of 63% over the
equivalent quarter last year), generating US$74 million in EBITDA excluding special items at an EBITDA
margin of 30%. We continue to benefit from our low cost position at each of our dissolving wood pulp
mills and the weaker Rand/Dollar exchange rate during the quarter.
NBSK paper pulp list prices, to which most of our dissolving wood pulp sales are linked, increased during
the quarter, reaching its highest levels in two years. Due to the competitive nature of the market and
weak viscose pricing, we expect increased pressure on our NBSK linked prices going forward.
There were no major special items for the quarter. The gain of US$10 million included a positive plantation
fair value price adjustment of US$8 million and an asset impairment reversal of US$2 million.
During the year, the group adopted the revised IAS 19 (refer to note 2 to the group results). Finance costs
of US$48 million were in line with the restated equivalent quarter last year.
Earnings per share for the quarter was 3 US cents (including a gain of 1 US cent in respect of special
items), compared to 2 US cents (including a charge of 1 US cent in respect of special items) in the
equivalent quarter last year.
Cash flow and debt
Net cash utilised for the quarter was US$133 million, an increase compared to the net cash utilised
of US$102 million in the equivalent quarter last year which included the proceeds from the disposal of
assets. This cash outflow for the quarter was mainly a result of a seasonal increase in working capital.
Capital expenditure in the quarter declined to US$71 million compared to US$96 million a year ago,
reflecting the completion of the expenditure on the dissolving wood pulp projects.
Net debt of US$2,348 million is up, compared to both the prior quarter, US$2,214 million, and the
equivalent quarter last year, US$2,095 million, as a result of the seasonal increase in cash utilisation and
the past year's capital expenditure respectively.
Liquidity comprises cash on hand of US$210 million and US$581 million available from the undrawn
committed revolving credit facilities in South Africa and Europe.
Operating review for the quarter
Europe
Restated(1) Restated(1) Restated(1) Restated(1)
Quarter quarter quarter quarter quarter
ended ended ended ended ended
Dec 2013 Sept 2013 Jun 2013 Mar 2013 Dec 2012
€ million € million € million € million € million
Sales 581 591 574 624 616
Operating profit (loss) excluding
special items 3 (9) (12) (1) 16
Operating profit (loss) excluding
special items to sales (%) 0.5 (1.5) (2.1) (0.2) 2.6
EBITDA excluding special items 38 27 24 35 54
EBITDA excluding special items to
sales (%) 6.5 4.6 4.2 5.6 8.8
RONOA pa (%) 1.0 (2.8) (3.5) (0.3) 4.6
(1) The group adopted IAS 19 (Revised) Employee Benefits for the year ended September 2014. Refer to note 2 to the group results
for more detail.
The strategic actions to reduce costs and improve our profitability enabled the business to return to an
operating profit this quarter. The paper market remains tough, with demand continuing to decline and
pricing under pressure, particularly in a strong Euro/Dollar exchange rate environment.
We continue to take action to reduce costs, and both fixed and variable costs are below those of the
equivalent quarter last year. Negotiations with interested stakeholders to relocate production from
Nijmegen to other mills are ongoing.
The Alfeld PM2 conversion to speciality paper has been completed with successful trial runs and
customer quality acceptance.
North America
Restated(1) Restated(1) Restated(1) Restated(1)
Quarter quarter quarter quarter quarter
ended ended ended ended ended
Dec 2013 Sept 2013 Jun 2013 Mar 2013 Dec 2012
US$ million US$ million US$ million US$ million US$ million
Sales 365 366 324 341 346
Operating (loss) profit excluding
special items (3) 27 (2) 18 14
Operating (loss) profit excluding
special items to sales (%) (0.8) 7.4 (0.6) 5.3 4.0
EBITDA excluding special items 17 47 16 39 33
EBITDA excluding special items
to sales (%) 4.7 12.8 4.9 11.4 9.5
RONOA pa (%) (1.2) 10.4 (0.8) 7.6 6.1
(1) The group adopted IAS 19 (Revised) Employee Benefits for the year ended September 2014. Refer to note 2 to the group results
for more detail.
The North American business experienced a challenging quarter, and the graphic paper business was
particularly difficult with lower sales volumes and prices in very competitive markets. Domestic coated
freesheet paper demand in North America declined some 5% compared to the prior year, and whilst our
sales declined by less than this, the loss of volume and a decline in coated web pricing over the past year
had a significant impact. Higher cost purchased fibre also impacted paper costs compared to the prior
year.
Dissolving wood pulp production and sales volumes were close to full capacity with excellent quality. In
optimising the global Specialised Cellulose business, we have seen lower average pricing and higher
logistics costs in our North American operation, resulting in lower average returns for the business in North America.
The release paper business had a slow Chinese winter garment season as distributors reduced inventory;
however, European demand and pricing remains good.
Results were also impacted by our planned annual pulp and recovery boiler shut at our Somerset Mill
during the quarter.
Southern Africa
Restated(1) Restated(1) Restated(1) Restated(1)
Quarter quarter quarter quarter quarter
ended ended ended ended ended
Dec 2013 Sept 2013 Jun 2013 Mar 2013 Dec 2012
ZAR million ZAR million ZAR million ZAR million ZAR million
Sales 3,488 3,779 3,255 3,020 2,870
Operating profit excluding
special items 568 509 192 181 278
Operating profit excluding
special items to sales (%) 16.3 13.5 5.9 6.0 9.7
EBITDA excluding special items 761 709 364 359 461
EBITDA excluding special items
to sales (%) 21.8 18.8 11.2 11.9 16.1
RONOA pa (%) 14.4 13.0 4.9 4.8 8.0
(1) The group adopted IAS 19 (Revised) Employee Benefits for the year ended September 2014. Refer to note 2 to the group results
for more detail.
The Southern African Specialised Cellulose business continues to perform well, and this quarter included
sales from the recently converted Ngodwana Mill for the first time. Average net selling prices for dissolving
wood pulp were flat compared to the prior quarter, but significantly higher than for the equivalent quarter
in the prior year due to higher NBSK reference prices as well as a weaker Rand/Dollar exchange rate.
The South African paper business returned to profitability, aided by the weaker Rand/Dollar exchange
rate. However, the local graphic paper market remains weak, with continued cost pressure and a
competitive import market. The domestic packaging market, though seasonally weaker in this quarter,
continues to see good demand levels and improved pricing.
Variable costs continue to increase, particularly for energy and chemicals and other Dollar denominated
costs. Fixed costs were well managed, and were 3% below those of the prior quarter despite additional
maintenance costs due to a planned annual maintenance shut at Saiccor.
Directorate
On 15 January, the company announced that Ralph Boëttger, Chief Executive Officer, will be
relinquishing his position as CEO and Director on 30 June 2014 due to a serious illness. A process is in
place to identify a successor and to allow for a timeous and smooth hand-over.
Outlook
The past year has reinforced the importance of our strategy to reposition Sappi for growth, higher
margins, improved profitability, and with less reliance on graphic paper. The two major dissolving
wood pulp conversion projects are now both contributing to earnings and profitability, whilst the paper
businesses, although dealing with difficult market conditions, continue to generate cash that will enable us
to reduce debt.
Both the European and South African paper businesses returned to profitability during the quarter and we
expect to see further improvement in the performance of these paper businesses. Plans are in place to
return the North American paper business to previous profitability levels.
Paper markets are expected to remain challenging for the remainder of the year and we continue to focus
on costs across all our regions, with each of them striving to ensure that they are amongst the lowest cost
producers in their respective markets.
Demand in the Specialised Cellulose business is expected to remain firm, but with continued pressure on
pricing. Currency, particularly the Rand/Dollar exchange rate will continue to remain a factor in the overall
profitability of this business.
Capital expenditure for the full year is expected to be less than US$300 million and, along with the
expected improvement in profitability when compared to the prior year, should allow the group to reduce
debt levels to approximately US$2 billion by the end of the fiscal year.
Our outlook for the year continues to be one of improved profitability for the 2014 financial year when
compared to 2013.
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, may be used to identify forward-looking statements. 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 the global economic downturn;
- 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 restructuring or strategic
initiatives (including our announced dissolving wood pulp conversion projects), 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
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
Note US$ million US$ million
Sales 1,499 1,475
Cost of sales 1,339 1,304
Gross profit 160 171
Selling, general and administrative expenses 94 95
Other operating (income) expenses (2) 10
Share of profit from equity investments (2) (1)
Operating profit 3 70 67
Net finance costs 48 47
Net interest expense 48 46
Net foreign exchange (gain) loss (1) 1
Net fair value loss on financial instruments 1 –
Profit before taxation 22 20
Taxation 4 8
Profit for the period 18 12
Basic earnings per share (US cents) 3 2
Weighted average number of shares in issue (millions) 521.7 520.9
Diluted earnings per share (US cents) 3 2
Weighted average number of shares on fully
diluted basis (millions) 523.4 522.2
Condensed group statement of comprehensive income
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Profit for the period 18 12
Other comprehensive loss, net of tax
Items that will not be reclassified subsequently to profit
or loss – 5
Actuarial gains on post-employment benefit funds – 8
Tax effect on above item – (3)
Items that must be reclassified subsequently to profit or loss (42) (33)
Exchange differences on translation of foreign operations (54) (24)
Movements in hedging reserves 13 (9)
Movement on available for sale financial assets (1) –
Total comprehensive loss for the period (24) (16)
Condensed group balance sheet
Restated
Dec 2013 Sept 2013
US$ million US$ million
ASSETS
Non-current assets 3,675 3,754
Property, plant and equipment 3,012 3,078
Plantations 451 464
Deferred tax assets 96 92
Other non-current assets 116 120
Current assets 1,867 1,973
Inventories 771 728
Trade and other receivables 776 748
Taxation receivable 17 18
Cash and cash equivalents 210 385
Assets held for sale 93 94
Total assets 5,542 5,727
EQUITY AND LIABILITIES
Shareholders' equity
Ordinary shareholders' interest 1,122 1,144
Non-current liabilities 3,322 3,371
Interest-bearing borrowings 2,444 2,499
Deferred tax liabilities 267 267
Other non-current liabilities 611 605
Current liabilities 1,098 1,212
Interest-bearing borrowings 114 99
Overdrafts – 1
Other current liabilities 971 1,094
Taxation payable 8 12
Liabilities associated with assets held for sale 5 6
Total equity and liabilities 5,542 5,727
Number of shares in issue at balance sheet date (millions) 522.5 521.5
Condensed group statement of cash flows
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Profit for the period 18 12
Adjustment for:
Depreciation, fellings and amortisation 102 106
Taxation 4 8
Net finance costs 48 47
Defined post-employment benefits paid (17) (15)
Plantation fair value adjustments (26) (26)
Net restructuring provisions 1 7
Other non-cash items 6 11
Cash generated from operations 136 150
Movement in working capital (149) (130)
Net finance costs paid (56) (59)
Taxation paid (1) (10)
Cash utilised in operating activities (70) (49)
Cash utilised in investing activities (63) (53)
Capital expenditure (71) (96)
Proceeds on disposal of non-current assets 6 42
Other movements 2 1
Net cash utilised (133) (102)
Cash effects of financing activities (43) (46)
Net movement in cash and cash equivalents (176) (148)
Cash and cash equivalents at beginning of period 385 645
Translation effects 1 7
Cash and cash equivalents at end of period 210 504
Condensed group statement of changes in equity
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Balance – beginning of period 1,144 1,525
Total comprehensive loss for the period (24) (16)
Share-based payment reserve 2 4
Balance – end of period 1,122 1,513
Notes to the condensed group results
1. Basis of preparation
The condensed consolidated interim financial results for the three months ended December 2013
have been prepared in accordance with the Listings Requirements of the JSE Limited, the framework
concepts and the measurement and recognition requirements of International Financial Reporting
Standards and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and, the Financial Reporting Pronouncements as issued by Financial Reporting Standards
Council and must contain the information required by IAS 34, Interim Financial Reporting. The
accounting policies applied in the preparation of these interim financial statements are consistent
with those applied in the previous annual financial statements, other than for the adoption of IFRS 10
Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests
in Other Entities, IFRS 13 Fair Value Measurement, IAS 19 (Revised) Employee Benefits, IAS 27
Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures and various other
improvements. The adoption of these accounting standards did not have a material impact on the
group results other than as described in note 2 below.
The preparation of this condensed consolidated interim financial information was supervised by the
Chief Financial Officer, S R Binnie CA(SA).
The results are unaudited.
2. Restatement due to adoption of IAS 19 (Revised) Employee Benefits
The group adopted IAS 19 (Revised) Employee Benefits for the year ended September 2014.
This adoption requires retrospective effect. As a result of the change, the group now determines
the net interest expense (income) for the period by applying the discount rate used to measure the
defined benefit obligation at the beginning of the annual period adjusted for any changes as a result
of contributions and benefit payments to the net defined benefit liability (asset). Previously, the group
determined interest income on plan assets based on their long-term rate of expected return.
The group also reclassified the net interest expense (income) from operating profit (loss) to finance
costs as an accounting policy choice.
The impact on profit or loss and other comprehensive loss for the quarter ended December 2012 is
as follows:
As previously
reported Adjustment Restated
US$ million US$ million US$ million
Condensed group income statement
Cost of sales 1,301 3 1,304
Net finance costs 42 5 47
Taxation 11 (3) 8
Profit before taxation 17 (5) 12
Condensed group statement of comprehensive
income
Items that will not be reclassified subsequently
to profit or loss – 5 5
Actuarial gains on post-employment benefit funds – 8 8
Tax effect on above item – (3) (3)
Earnings per share
Basic earnings per share (US cents) 3 (1) 2
Diluted earnings per share (US cents) 3 (1) 2
3. Operating profit
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Included in operating profit are the following non-cash items:
Depreciation and amortisation 87 89
Fair value adjustment on plantations (included in cost of sales)
Changes in volume
Fellings 15 17
Growth (18) (18)
(3) (1)
Plantation price fair value adjustment (8) (8)
(11) (9)
Included in other operating (income) expenses are the following:
Net restructuring provisions 1 7
Profit on disposal of property, plant and equipment (1) –
Asset impairment reversals (2) –
Black Economic Empowerment charge – 1
4. Headline earnings per share
Headline earnings per share (US cents) 3 2
Weighted average number of shares in issue (millions) 521.7 520.9
Diluted headline earnings per share (US cents) 3 2
Weighted average number of shares on fully diluted basis (millions) 523.4 522.2
Calculation of headline earnings
Profit for the period 18 12
Asset impairment reversals (2) –
Profit on disposal of property, plant and equipment (1) –
Headline earnings 15 12
5. Capital commitments
Reviewed
Dec 2013 Sept 2013
US$ million US$ million
Contracted 99 62
Approved but not contracted 250 195
349 257
6. Contingent liabilities
Guarantees and suretyships 34 33
Other contingent liabilities 11 11
45 44
7. Material balance sheet movements
Other current liabilities, inventories and cash and cash equivalents
The decrease in cash and cash equivalents is largely due to seasonal working capital movements
which include an increase in inventory levels and the payment of creditors which included capital
accruals related to our dissolving wood pulp projects.
8. Segment information
Quarter Quarter
ended ended
Dec 2013 Dec 2012
Metric tons Metric tons
(000's) (000's)
Sales volume
North America 348 334
Europe 836 849
Southern Africa – Pulp and paper 403 380
Forestry 257 284
Total 1,844 1,847
Which consists of:
Specialised cellulose 286 175
Paper 1,558 1,672
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Sales
North America 365 346
Europe 790 799
Southern Africa – Pulp and paper 327 310
Forestry 17 20
Total 1,499 1,475
Which consists of:
Specialised cellulose 247 146
Paper 1,252 1,329
Operating profit (loss) excluding special items
North America (3) 14
Europe 4 21
Southern Africa 56 32
Unallocated and eliminations(1) 3 3
Total 60 70
Which consists of:
Specialised cellulose 55 28
Paper 2 39
Unallocated and eliminations(1) 3 3
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Special items – (gains) losses
North America (1) 2
Europe – 3
Southern Africa (10) (2)
Unallocated and eliminations(1) 1 –
Total (10) 3
Segment operating profit (loss)
North America (2) 12
Europe 4 18
Southern Africa 66 34
Unallocated and eliminations(1) 2 3
Total 70 67
EBITDA excluding special items
North America 17 33
Europe 52 70
Southern Africa 75 53
Unallocated and eliminations(1) 3 3
Total 147 159
Which consists of:
Specialised cellulose 74 38
Paper 70 118
Unallocated and eliminations(1) 3 3
Quarter Quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
Segment assets
North America 1,030 913
Europe 1,698 1,847
Southern Africa 1,534 1,708
Unallocated and eliminations(1) (10) (3)
Total 4,252 4,465
(1) Includes the group's treasury operations and the self-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.
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
US$ million US$ million
EBITDA excluding special items 147 159
Depreciation and amortisation (87) (89)
Operating profit excluding special items 60 70
Special items – gains (losses) 10 (3)
Plantation price fair value adjustment 8 8
Net restructuring provisions (1) (7)
Profit on disposal of property, plant and equipment 1 –
Asset impairment reversals 2 –
Black Economic Empowerment charge – (1)
Fire, flood, storm and related events – (3)
Segment operating profit 70 67
Net finance costs (48) (47)
Profit before taxation 22 20
Taxation (4) (8)
Profit for the period 18 12
Reconciliation of segment assets to total assets
Segment assets 4,252 4,465
Deferred taxation 96 152
Cash and cash equivalents 210 504
Other current liabilities 971 969
Taxation payable 8 19
Liabilities associated with assets held for sale 5 –
Total assets 5,542 6,109
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
Black Economic Empowerment – as envisaged in the Black Economic Empowerment (BEE) legislation
in South Africa
Black Economic Empowerment charge – represents the IFRS 2 non-cash charge associated with the
BEE transaction implemented in fiscal 2010
Fellings – the amount charged against the income statement representing the standing value of the
plantations harvested
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
SG&A – selling, general and administrative expenses
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
Capital employed – shareholders' equity plus net debt
EBITDA excluding special items – earnings before interest (net finance costs), taxation, depreciation,
amortisation and special items
Headline earnings – as defined in circular 2/2013 issued by the South African Institute of Chartered
Accountants, separates from earnings all separately identifiable re-measurements. It is not necessarily
a measure of sustainable earnings. It is a Listings Requirement of the JSE Limited to disclose headline
earnings per share
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, and bank overdraft (net of cash, cash
equivalents and short-term deposits)
Net debt to total capitalisation – net debt divided by capital employed
Net operating assets – total assets (excluding deferred taxation and cash) less current liabilities
(excluding interest-bearing borrowings and overdraft). Net operating assets equate to segment assets
ROCE – annualised return on average capital employed. Operating profit excluding special items divided
by average capital employed
ROE – annualised return on average equity. Profit for the period divided by average shareholders' equity
RONOA – return on average net operating assets. Operating profit excluding special items divided by
average segment 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
Restated
Quarter quarter
ended ended
Dec 2013 Dec 2012
Key figures: (ZAR million)
Sales 15,201 12,829
Operating profit 710 583
Special items – (gains) losses(1) (101) 26
Operating profit excluding special items(1) 609 609
EBITDA excluding special items(1) 1,491 1,383
Profit for the period 183 104
Basic earnings per share (SA cents) 30 17
Net debt(1) 24,724 17,776
Key ratios: (%)
Operating profit to sales 4.7 4.5
Operating profit excluding special items to sales 4.0 4.8
Operating profit excluding special items to capital employed (ROCE)(1) 6.9 8.2
EBITDA excluding special items to sales 9.8 10.8
Return on average equity (ROE) 6.3 3.3
Net debt to total capitalisation(1) 67.7 58.1
(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.
Reconciliation of net debt to interest-bearing borrowings
Dec 2013 Sept 2013
US$ million US$ million
Interest-bearing borrowings 2,558 2,599
Non-current interest-bearing borrowings 2,444 2,499
Current interest-bearing borrowings 114 99
Bank overdraft – 1
Cash and cash equivalents (210) (385)
Net debt 2,348 2,214
Supplemental information (this information has not been audited or reviewed)
Exchange rates
Dec Sept Jun Mar Dec
2013 2013 2013 2013 2012
Exchange rates:
Period end rate: US$1 = ZAR 10.5300 10.0930 9.8800 9.2363 8.4851
Average rate for the Quarter: US$1 = ZAR 10.1406 9.9931 9.4756 8.9349 8.6975
Average rate for the YTD: US$1 = ZAR 10.1406 9.2779 9.0364 8.8173 8.6975
Period end rate: €1 = US$ 1.3742 1.3522 1.3010 1.2821 1.3217
Average rate for the Quarter: €1 = US$ 1.3607 1.3248 1.3060 1.3206 1.2970
Average rate for the YTD: €1 = US$ 1.3607 1.3121 1.3078 1.3088 1.2970
05 February 2014
Sponsor: UBS South Africa (Pty) Ltd
Date: 05/02/2014 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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