Wrap Text
First quarter results for the period ended December 2015
Sappi Limited
Registration number: 1936/008963/06
JSE code: SAP
ISIN code: ZAE000006284
Issuer code: SAVVI
First quarter results for the period ended December 2015
Sappi is a global company focused on providing dissolving wood pulp, paper pulp and paper-based solutions to its
direct and indirect customer base across more than 160 countries.
Our dissolving wood pulp products are used worldwide by converters to create viscose fibre for fashionable clothing
and textiles, acetate tow, pharmaceutical products as well as a wide range of consumer and household products. 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 newsprint, uncoated graphic
and business papers and premium quality packaging papers and tissue products in the Southern Africa region.
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$75 million (Q1 2015 US$24 million)
EPS excluding special items 13 US cents (Q1 2015 5 US cents)
EBITDA excluding special items US$175 million (Q1 2015 US$145 million)
Net debt US$1,734 million, down US$306 million year-on-year
Quarter ended
Dec 2015 Dec 2014 Sept 2015
Key figures: (US$ million)
Sales 1,284 1,377 1,403
Operating profit excluding special items(1) 112 74 136
Special items - (gains) losses(2) (11) 5 1
EBITDA excluding special items(1) 175 145 201
Profit for the period 75 24 83
Basic earnings per share (US cents) 14 5 16
EPS excluding special items (US cents)(3) 13 5 16
Net debt(3) 1,734 2,040 1,771
Key ratios: (%)
Operating profit excluding special items to sales 8.7 5.4 9.7
Operating profit excluding special items to capital employed (ROCE)(3) 16.2 9.7 18.7
EBITDA excluding special items to sales 13.6 10.5 14.3
Net debt to EBITDA excluding special items(3) 2.6 3.1 2.8
Interest cover(3) 5.1 3.8 4.4
Net asset value per share (US cents) 192 202 193
(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.
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(2) Refer to note 10 to the group results for details on special items.
(3) Refer supplemental information for the definition of the term.
Sales by source*
Europe 51%
North America 27%
Southern Africa 22%
Sales by product*
Coated paper 62%
Uncoated paper 5%
Speciality paper 10%
Commodity paper 5%
Dissolving wood pulp 16%
Paper pulp 1%
Other 1%
Sales by destination*
Europe 45%
North America 24%
Southern Africa 9%
Asia and other 22%
Net |operating assets**
Europe 40%
North America 30%
Southern Africa 30%
* for the period ended December 2015
** as at December 2015
Commentary on the quarter
Operating performance in the quarter was strong and substantially above the equivalent quarter last year. The group
generated EBITDA excluding special items of US$175 million, an increase of 21%. Operating profit excluding special items
was up 51% to US$112 million. Profit for the period increased from US$24 million to US$75 million. The successful result
was attributable to higher graphic paper volumes, improved pricing for dissolving wood pulp and cost containment
initiatives. The results are confirmation that the strategy to reposition Sappi into a profitable and cash-generative
diversified woodfibre group is well on track.
The Specialised Cellulose business continued to generate good returns during the quarter, with EBITDA excluding
special items of US$74 million, despite the impact of a severe drought in South Africa which had a negative impact of US$6
million on these results. US Dollar spot prices for dissolving wood pulp increased for most of the quarter. However, as the
quarter ended, lower textile prices and the weaker Chinese RMB placed pressure on our viscose staple fibre customers.
The weaker Rand/Dollar exchange rate led to increased Rand prices.
The European business delivered a satisfactory performance, close to the targeted EBITDA excluding special items
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margin. Price increases in the past year, excellent variable and fixed cost control and the transfer of volumes from Metsä’s
Husum Mill all contributed positively to the result.
A recovery in our coated paper sales volumes, the stabilisation of selling prices and lower variable costs enabled the
North American business to deliver higher profits than in the comparable quarter last year. The first quarter of fiscal
2015 was impacted by an extended annual maintenance shut.
Profitability for the paper business in South Africa progressed further in this quarter, notwithstanding the sale of
the Cape Kraft and Enstra Mills. Higher selling prices for packaging grades offset raw material cost pressures from the
weaker Rand.
Net finance costs for the quarter were US$25 million, a reduction from the US$37 million in the equivalent quarter
last year as a result of the refinancing of debt at lower rates in the past year and reduced debt levels.
Earnings per share excluding special items for the quarter were 13 US cents, a substantial improvement over the 5 US
cents generated in the equivalent quarter last year. Special items for the quarter resulted in a gain of US$11 million
and relates principally to a profit on the sale of the Cape Kraft Mill.
Cash flow and debt
Net cash generated for the quarter was US$19 million, compared to net cash utilised of US$121 million in the
equivalent quarter last year. The increase in cash generation was as a result of the improved operating performance and the
proceeds from the sale of our Cape Kraft and Enstra Mills. Capital expenditure in the quarter of US$40 million was less than
the US$68 million spent in the equivalent quarter last year.
Net debt of US$1,734 million is down substantially from US$2,040 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.
Liquidity comprises cash on hand of US$383 million and US$576 million available from the undrawn committed revolving
credit facilities in South Africa and Europe.
Operating review for the quarter
Europe
Quarter
ended
Dec 2015 Sept 2015 Jun 2015 Mar 2015 Dec 2014
€ million € million € million € million € million
Sales 601 609 567 590 547
Operating profit excluding 29 23 5 24 12
special items
Operating profit excluding 4.8 3.8 0.9 4.1 2.2
special items to sales (%)
EBITDA excluding special items 59 51 35 54 42
EBITDA excluding special items to sales (%) 9.8 8.4 6.2 9.2 7.7
RONOA pa (%) 9.7 7.8 1.7 8.0 4.0
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The performance of the European business improved compared to both the prior quarter as well as that of the equivalent
period last year, a quarter which was negatively impacted by €12 million due to the upgrade of the paper machine at
Gratkorn.
The business was able to maintain a portion of the price increases announced in the last financial year for graphic
paper. As a result, selling prices were higher than a year ago. In addition, coated woodfree markets stabilised and,
together with market share gains, resulted in higher volumes. There were further gains from the transfer of volumes from the
Husum Mill, a mill from which we previously sold on an agency basis.
The specialities market experienced a weak period through to November, however, orders recovered strongly in the last
month and sales volumes for the quarter were nonetheless substantially higher than those of a year ago.
Fixed and variable costs were flat year-on-year, with higher pulp costs being offset by lower energy, post the
completion of the multifuel boiler at Kirkniemi, and chemical costs.
North
America
Quarter
ended
Dec 2015 Sept 2015 Jun 2015 Mar 2015 Dec 2014
US$ million US$ million US$ million US$ million US$ million
Sales 343 369 313 342
353
Operating profit (loss) excluding special items 13 31 (7) 7
(4)
Operating profit (loss) excluding special items to sales (%) 3.8 8.4 (2.2) 2.0 (1.1)
EBITDA excluding special items 31 50 11 26
15
EBITDA excluding special items to sales (%) 9.0 13.6 3.5 7.6
4.2
RONOA pa (%) 5.2 12.2 (2.7) 2.7 (1.6)
Following a difficult 2015, the business made a stronger start to the current year. Profits were significantly above
the equivalent quarter last year due to higher coated paper sales volumes and lower variable costs. In addition, the
comparative quarter was negatively impacted by US$10 million for an extended annual maintenance shut at the Somerset Mill.
The US coated paper market remained under pressure as a result of the strong US Dollar. This led to an increase in
coated paper imports and, more importantly, a large decline in exports. However, our market share gains from other domestic
producers led to sales volumes that were higher than in the equivalent quarter last year. Sales prices held,
quarter-on-quarter, but were 3% below those of the equivalent quarter last year.
Dissolving wood pulp sales volumes were flat compared to the prior quarter, with higher average sales prices compared
to both the equivalent quarter last year and the prior quarter. Sales volume was 22% below the equivalent quarter last
year as the Cloquet Mill took advantage of the pulp mill’s swing-capability to make kraft pulp for the paper machines in
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order to enhance margins.
The casting release paper business continues to be adversely affected by a weak patterned textile market in China.
Sales prices improved compared to the equivalent quarter last year due to price increases implemented during 2015.
Variable costs were lower than the equivalent quarter last year driven mainly by lower fibre and energy prices. Fixed
costs were well controlled and were flat year-on-year.
Southern
Africa
Quarter
ended
Dec 2015 Sept 2015 Jun 2015 Mar 2015 Dec 2014
ZAR million ZAR million ZAR million ZAR million ZAR million
Sales 3,993 4,556 4,002 3,817 3,812
Operating profit excluding 949 1,047 538 772
706
special items
Operating profit excluding special items to sales (%) 23.8 23.0 13.4 20.2 18.5
EBITDA excluding special items 1,119 1,228 707 947
863
EBITDA excluding special items to sales (%) 28.0 27.0 17.7 24.8 22.6
RONOA pa (%) 25.2 28.1 14.3 20.4 19.1
The Southern African business continued to enhance margins, as a result of higher net selling prices for dissolving
wood pulp and paper. Margins were further boosted by the weaker Rand.
Dissolving wood pulp sales volumes were lower than both the prior quarter and the equivalent quarter last year as a
result of the severe drought experienced in South Africa as well as a delayed shipping of a break bulk vessel past quarter
end. The drought slowed production at the Saiccor Mill for a few weeks and reduced the EBITDA excluding special items
of the South African business by US$6 million (ZAR87 million). Higher average Dollar prices and a weaker Rand/Dollar
exchange rate led to substantially higher dissolving wood pulp prices.
The improvement in the paper business was due to the realisation of higher local selling prices and, despite pressure
on raw material prices from the weaker Rand, a tight control of costs. Demand for containerboard continues to be robust.
During the quarter the sale of the Cape Kraft and Enstra Mills was completed.
Fixed and variable costs were flat year-on-year as a result of the sale of the mills, with energy cost savings
offsetting increased fibre costs.
Directorate
During the quarter we announced the retirement of Dr Danie Cronje as independent Chairman of the board at the end of
February 2016. Sir Nigel Rudd, currently the lead independent director, will succeed Dr Cronje as independent Chairman of
the company with effect from 01 March 2016. The board thanks Dr Cronje for his significant contribution and leadership
shown over the past eight years. We further announced the appointment of Mr Rob Jan Renders as independent non-executive
director to the board of directors of Sappi Limited with effect from 01 October 2015.
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Outlook
The Specialised Cellulose business is benefiting from higher average US Dollar prices for dissolving wood pulp and,
for our South African mills, the added benefit of a weaker Rand/Dollar exchange rate. US Dollar spot prices for dissolving
wood pulp have come under pressure since December 2015 due to lower textile prices and a weaker Chinese currency.
Demand remains strong and we remain confident that, at current pricing levels and exchange rates, the outlook for this
business is positive.
In North America, graphic paper is performing solidly in a difficult and competitive environment, which is being
impacted by the strength of the US Dollar. Variable costs are reducing and sales volumes have improved after a particularly
difficult third fiscal quarter in 2015. The European business is improving due to actions we have taken to reduce costs
and enhance returns over the past few years. Strong demand for fruit exports, a key market for our packaging products, is
supporting South African growth.
We expect the second quarter EBITDA to be in line with the first quarter and slightly ahead of the equivalent quarter
last year. The quarter will be impacted by an extended annual maintenance shut at our Ngodwana Mill in South Africa and
the annual maintenance stoppage at Saiccor which traditionally occurs in the third quarter. The total scheduled
maintenance work in the group will negatively impact the quarter by approximately US$12 million when compared to the equivalent
quarter last year.
Based on current market conditions, and assuming current exchange rates, we expect that EBITDA excluding special items
in the 2016 financial year will be higher than 2015. As a result of improved operating profits and lower expected
finance costs, offset somewhat by increased tax charges, we expect strong growth in our earnings.
Capex in 2016 is expected to be in line with 2015 and is focused largely in energy and debottlenecking projects in
South Africa, together with the annual maintenance at the mills.
Depending on market conditions, we are considering utilising some of our cash reserves to repay and refinance a
portion of our debt in order to lower future interest costs. We expect to reduce our net debt further over the course of the
year and reduce our financial leverage closer to our targeted ceiling of two times net debt to EBITDA.
On behalf of the board
S R Binnie
Director
G T Pearce
Director
10 February 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
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of or indicate future events and future trends and which do not relate to historical matters, and 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 a 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 and 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
Note Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
Sales 1,284 1,377
Cost of sales 1,090 1,224
Gross profit 194 153
Selling, general and administrative expenses 82 84
Other operating (income) expenses (9) 2
Share of profit from equity investments (2) (2)
Operating profit 2 123 69
Net finance costs 25 37
Net interest expense 27 40
Net foreign exchange gain (2) (2)
Net fair value gain on financial instruments - (1)
Profit before taxation 98 32
Taxation 23 8
Profit for the period 75 24
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Basic earnings per share (US cents) 14 5
Weighted average number of shares in issue (millions) 527.4 524.5
Diluted earnings per share (US cents) 14 5
Weighted average number of shares on fully diluted basis (millions) 535.4 529.1
Condensed group statement of comprehensive income
Reviewed
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
Profit for the period 75 24
Other comprehensive (loss) income, net of tax
Items that must be reclassified subsequently to profit or loss (79) (12)
Exchange differences on translation of foreign operations (71) (8)
Movements in hedging reserves (9) (4)
Tax effect of above items 1 -
Total comprehensive (loss) income for the period (4) 12
Condensed group balance sheet
Reviewed
Dec 2015 Sept 2015
US$ million US$ million
ASSETS
Non-current assets 3,026 3,174
Property, plant and equipment 2,396 2,508
Plantations 348 383
Deferred tax assets 158 162
Other non-current assets 124 121
Current assets 1,634 1,711
Inventories 636 595
Trade and other receivables 605 650
Taxation receivable 10 10
Cash and cash equivalents 383 456
Assets held for sale - 28
Total assets 4,660 4,913
EQUITY AND LIABILITIES
Shareholders’ equity
Ordinary shareholders’ interest 1,015 1,015
Non-current liabilities 2,733 2,806
Interest-bearing borrowings 1,983 2,031
Deferred tax liabilities 229 245
Other non-current liabilities 521 530
Current liabilities 912 1,091
Interest-bearing borrowings 134 196
Other current liabilities 753 865
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Taxation payable 25 30
Liabilities associated with assets held for sale - 1
Total equity and liabilities 4,660 4,913
Number of shares in issue at balance sheet date (millions) 529.6 526.4
Condensed group statement of cash flows
Reviewed
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
Profit for the period 75 24
Adjustment for:
Depreciation, fellings and amortisation 77 85
Taxation 23 8
Net finance costs 25 37
Defined post-employment benefits paid (11) (14)
Plantation fair value adjustments (16) (18)
Net restructuring provisions 3 1
Profit on disposal of assets held for sale (15) -
Other non-cash items 10 14
Cash generated from operations 171 137
Movement in working capital (100) (136)
Net finance costs paid (36) (52)
Taxation paid (18) (3)
Cash generated from (utilised in) operating activities 17 (54)
Cash generated from (utilised in) investing activities 2 (67)
Capital expenditure (40) (68)
Net proceeds on disposal of assets 41 -
Other movements 1 1
Net cash generated (utilised) 19 (121)
Cash effects of financing activities (72) (61)
Net movement in cash and cash equivalents (53) (182)
Cash and cash equivalents at beginning of period 456 528
Translation effects (20) (17)
Cash and cash equivalents at end of period 383 329
Condensed group statement of changes in equity
Reviewed
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
Balance - beginning of period 1,015 1,044
Total comprehensive (loss) income for the period (4) 12
Transfers from the share purchase trust 11 5
Transfers of vested share options (8) (4)
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Share-based payment reserve 1 2
Balance - end of period 1,015 1,059
Notes to the condensed group results
1. Basis of
preparation
The condensed consolidated interim financial statements for the three months ended December 2015 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 three months ended December 2015 as set
out on pages 8 to 17 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
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
2. Operating profit
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Included in operating profit are the following items:
Depreciation and amortisation 63 71
Fair value adjustment on plantations (included in cost of sales)
Changes in volume
Fellings 14 14
Growth (14) (17)
- (3)
Plantation price fair value adjustment (2) (1)
(2) (4)
Net restructuring provisions 3 1
Profit on disposal of assets held for sale (15) -
Reviewed
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
3. Earnings per share
Basic earnings per share (US cents) 14 5
Headline earnings per share (US cents) 12 5
EPS excluding special items (US cents) 13 5
Weighted average number of shares in issue (millions) 527.4 524.5
Diluted earnings per share (US cents) 14 5
Diluted headline earnings per share (US cents) 12 5
Weighted average number of shares on fully diluted basis (millions) 535.4 529.1
Calculation of headline earnings
Profit for the period 75 24
Profit on disposal of assets held for sale (15) -
Tax effect of above items 4 -
Headline earnings 64 24
Calculation of earnings excluding special items
Profit for the period 75 24
Special items after tax (7) 4
Special items (11) 5
Tax effect 4 (1)
Earnings excluding special items 68 28
Reviewed
Dec 2015 Sept 2015
US$ million US$ million
4. Capital commitments
Contracted 59 60
Approved but not contracted 101 73
160 133
5. Contingent liabilities
Guarantees and suretyships 19 13
Other contingent liabilities 12 11
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31 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 is
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
Dec 2015 Sept 2015
US$ million US$ million
Fair value of plantations at beginning of year 383 430
Gains arising from growth 14 65
Fire, flood, storm and related events (2) (7)
In-field inventory - (1)
Gain arising from fair value price changes 2 41
Harvesting - agriculture produce (fellings) (14) (57)
Translation difference (35) (88)
Fair value of plantations at end of period 348 383
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 Dec 2015 Sept 2015
hierarchy US$ million US$ million
Available for sale assets Level 1 8 8
Derivative financial assets Level 2 52 46
Derivative financial liabilities Level 2 7 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
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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 10% 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.
Trade and other receivables, cash and cash equivalents and other current
liabilities
The decrease in trade and other receivables, cash and cash equivalents and other current liabilities is largely
attributable to seasonal working capital movements.
Assets held for sale
During the quarter, the conditions precedent related to the sale of the group’s Enstra and Cape Kraft mills
were fulfilled. Proceeds of US$40 million were received and a combined profit on disposal of US$15 million was
recorded.
Interest-bearing borrowings
During the quarter, the group repaid the amount owing under the partially drawn US$510 million (€465 million)
revolving credit facility of US$55 million (€50 million) as well as US$20 million (€18 million) under the OekB
term loan from existing cash resources.
9. Events after balance sheet date
There have been no reportable events that occurred between the balance sheet date and the date of authorisation
for issue of these financial statements.
10. Segment information
Quarter ended
Dec 2015 Dec 2014
Metric tons Metric tons
(000’s) (000’s)
Sales volume
North America 330 333
Europe 836 775
Southern Africa - Pulp and paper 386 426
Forestry 259 228
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Total 1,811 1,762
Which consists of:
Specialised cellulose 255 300
Paper 1,297 1,234
Forestry 259 228
Reviewed
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
Sales
North America 343 353
Europe 659 684
Southern Africa - Pulp and paper 268 325
Forestry 14 15
Total 1,284 1,377
Which consists of:
Specialised cellulose 209 243
Paper 1,061 1,119
Forestry 14 15
Reviewed
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
Operating profit (loss) excluding special items
North America 13 (4)
Europe 32 15
Southern Africa 67 63
Total 112 74
Which consists of:
Specialised cellulose 62 56
Paper 50 18
Special items - (gains) losses
North America - -
Europe 4 1
Southern Africa (15) 4
Total (11) 5
Segment operating profit (loss)
North America 13 (4)
Europe 28 14
Southern Africa 82 59
Total 123 69
EBITDA excluding special items
North America 31 15
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Europe 65 53
Southern Africa 79 77
Total 175 145
Which consists of:
Specialised cellulose 74 70
Paper 101 75
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
Quarter Quarter
ended ended
Dec 2015 Dec 2014
US$ million US$ million
EBITDA excluding special items 175 145
Depreciation and amortisation (63) (71)
Operating profit excluding special items 112 74
Special items - gains (losses) 11 (5)
Plantation price fair value adjustment 2 1
Net restructuring provisions (3) (1)
Profit on disposal of assets held for sale 15 -
Fire, flood, storm and other events (3) (5)
Segment operating profit 123 69
Net finance costs (25) (37)
Profit before taxation 98 32
Taxation (23) (8)
Profit for the period 75 24
Reviewed
Dec 2015 Dec 2014
US$ million US$ million
Segment assets
North America 983 1,004
Europe 1,325 1,495
Southern Africa 1,004 1,305
Unallocated and eliminations(1) 29 (15)
Total 3,341 3,789
Reconciliation of segment assets to total assets
Segment assets 3,341 3,789
Deferred taxation 158 141
Cash and cash equivalents 383 329
Other current liabilities 753 865
Taxation payable 25 21
Total assets 4,660 5,145
(1) Includes the group’s treasury operations and our insurance captive.
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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
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- 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 believes 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
Dec 2015 Dec 2014
Key figures: (ZAR million)
Sales 18,178 15,439
Operating profit excluding special items(1) 1,586 830
Special items - (gains) losses(1) (156) 56
EBITDA excluding special items(1) 2,478 1,626
Profit for the period 1,062 269
Basic earnings per share (SA cents) 201 51
Net debt(1) 26,507 23,664
Key ratios: (%)
Operating profit excluding special items to sales 8.7 5.4
Operating profit excluding special items to capital employed (ROCE)(1) 15.7 9.6
EBITDA excluding special items to sales 13.6 10.5
(1) Refer to page 18, supplemental information for the definition of the term.
The above financial results have been translated into Rand from US Dollar 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
Dec Sept Jun Mar Dec
2015 2015 2015 2015 2014
Exchange rates:
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Period end rate: US$1 = ZAR 15.2865 13.9135 12.2025 12.0450 11.6001
Average rate for the Quarter: US$1 = ZAR 14.1577 12.9364 12.0820 11.7236 11.2122
Average rate for the year to date: 14.1577 11.9641 11.6540 11.4552 11.2122
US$1 = ZAR
Period end rate: €1 = US$ 1.0977 1.1195 1.1166 1.0889 1.2177
Average rate for the Quarter: €1 = US$ 1.0968 1.1125 1.1060 1.1316 1.2504
Average rate for the year to date: €1 = US$ 1.0968 1.1501 1.1627 1.1910 1.2504
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
48 Ameshoff Street, Braamfontein, Johannesburg, South Africa
Tel +27 (0)11 407 8111
This report is available on the Sappi website: www.sappi.com
JSE Sponsor:
UBS South Africa (Pty) Ltd
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Date: 10/02/2016 08:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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