Wrap Text
First quarter results for the period ended December 2016
Sappi Limited
(Incorporated in the Republic of South Africa)
Registration number: 1936/008963/06
JSE code: SAP
ISIN code: ZAE000006284
Issuer code: SAVVI
First quarter results
for the period ended December 2016
1st quarter results
Sappi is a global diversified woodfibre company focused on providing graphic/printing papers, packaging and
speciality papers, dissolving wood pulp as well as products in adjacent fields including nanocellulose
and lignosulphonate to our direct and indirect customer base across more than 150 countries.
Our market-leading range of graphic paper products are used by printers in the production of books, brochures,
magazines, catalogues, direct mail and many other print applications; quality packaging and speciality papers
are used in the manufacture of such products as soup sachets, luxury carry bags, cosmetic and confectionery
packaging, boxes for agricultural products for export, tissue wadding for household tissue products and casting
release papers used by suppliers to the fashion, textiles, automobile and household industries; our dissolving
wood pulp (specialised cellulose) products are used worldwide by converters to create viscose fibre for
fashionable clothing and textiles, pharmaceutical products as well as a wide range of consumer and
household products.
The wood and pulp needed for our products is either produced within Sappi or bought from accredited suppliers.
Across the group, Sappi is close to 'pulp neutral', meaning that we sell almost as much pulp as we buy.
Sales by source*
Europe 50%
North America 27%
Southern Africa 23%
Sales by product*
Coated paper 59%
Uncoated paper 5%
Speciality paper 11%
Commodity paper 5%
Dissolving wood pulp 19%
Other 1%
Sales by destination*
Europe 43%
North America 24%
Southern Africa 9%
Asia and other 24%
Net operating assets**
Europe 35%
North America 28%
Southern Africa 37%
* For the period ended December 2016
** As at December 2016
Highlights for the quarter
- EBITDA excluding special items US$201 million (Q1 2016 US$175 million)
- Profit for the period US$90 million (Q1 2016 US$75 million)
- EPS excluding special items 16 US cents (Q1 2016 13 US cents)
- Net debt US$1,338 million, down US$396 million year-on-year
Quarter ended
Dec 2016 Dec 2015 Sept 2016
Key figures: (US$ million)
Sales 1,309 1,284 1,340
Operating profit excluding special items(1) 136 112 145
Special items - (gains) losses(2) (7) (11) (25)
EBITDA excluding special items(1) 201 175 209
Profit for the period 90 75 112
Basic earnings per share (US cents) 17 14 21
EPS excluding special items (US cents)(3) 16 13 18
Net debt(3) 1,338 1,734 1,408
Key ratios: (%)
Operating profit excluding special items to sales 10.4 8.7 10.8
Operating profit excluding special items to capital
employed (ROCE)(3) 19.5 16.2 20.9
EBITDA excluding special items to sales 15.4 13.6 15.6
Net debt to EBITDA excluding special items 1.7 2.6 1.9
Interest cover(3) 7.7 5.1 7.3
Net asset value per share (US cents)(3) 270 192 260
(1) Refer to note 2 to the group results for the reconciliation of EBITDA excluding special items and
operating profit excluding special items to segment operating profit, and profit for the period.
(2) Refer to note 2 to the group results for details on special items.
(3) Refer to supplemental information for the definition of the term.
Commentary on the quarter
Operating performance in the quarter was satisfactory and the group generated EBITDA excluding special items of
US$201 million. Profit for the comparative period increased from US$75 million to US$90 million. The improvement
was attributable to greater sales volumes across all major categories, higher dissolving wood pulp (DWP) prices
and cost savings initiatives. These were offset partially by lower selling prices for graphic paper. An additional
accounting week in the quarter augmented sales and boosted EBITDA by approximately US$20 million.
DWP markets remained robust, with strong demand driving spot prices to four year highs in October, before declining
towards the end of the quarter, albeit still at relatively high levels. As a result, the Specialised Cellulose business
delivered strong returns, with EBITDA excluding special items of US$95 million.
Consistent with recent quarters, the European business achieved strong results, aided by an extra week of sales.
A focus on controlling variable costs and excellent growth in the specialities categories enabled the business
to deliver enhanced margins.
In the US market, despite further declines in coated paper demand, year-on-year sales volumes improved leading to gains
in market share. Lower coated paper prices were partially offset by a number of cost and efficiency improvements.
The North American business further benefited from strong DWP volumes and prices.
The South African business continued to deliver excellent margins, with higher DWP and paper prices. Paper volumes
were lower due to weak December sales as customers focused on reducing inventory.
Earnings per share excluding special items for the quarter was 16 US cents, an improvement over the 13 US cents
generated in the equivalent quarter last year. Special items in the quarter resulted in a gain of US$7 million and
related mainly to a positive plantation fair value adjustment.
Cash flow and debt
Net cash generated for the quarter was US$17 million, compared to US$19 million in the equivalent quarter last year,
which included the proceeds from the sale of our Cape Kraft and Enstra Mills. Capital expenditure in the quarter of
US$37 million was less than the US$40 million spent in the comparative period last year.
Tax payments of US$34 million were higher than last year as a result of increased taxable income in South Africa.
Net debt of US$1,338 million was down substantially from US$1,734 million at the end of the equivalent quarter last
year as a result of strong cash generation over the past 12 months.
Liquidity comprised cash on hand of US$681 million and US$562 million available from the undrawn committed revolving
credit facilities in South Africa and Europe.
Operating review for the quarter
Europe Quarter ended
Dec 2016 Sept 2016 Jun 2016 Mar 2016 Dec 2015
€ million € million € million € million € million
Sales 602 579 540 604 601
Operating profit excluding
special items 40 31 25 33 29
Operating profit excluding special
items to sales (%) 6.6 5.4 4.6 5.5 4.8
EBITDA excluding special items 69 61 53 62 59
EBITDA excluding special
items to sales (%) 11.5 10.5 9.8 10.3 9.8
RONOA pa (%) 14.3 11.0 8.6 11.0 9.7
The performance of the European business improved compared to both the prior quarter and the equivalent period last
year. Sales volumes were higher due to the additional trading week and market share gains for coated woodfree paper.
However, selling prices for graphic paper were lower due to the difficult market environment. Profitability was
boosted further by substantial savings on raw material costs.
The Specialities business experienced a much stronger first quarter than that of a year ago, and sales volumes
increased by 26%. Average selling prices remained constant compared to both equivalent periods.
All major variable cost categories with the exception of latex showed significant reductions compared to the
equivalent quarter last year. During the quarter we experienced a moderate increase in purchased softwood pulp
and energy prices. Fixed costs increased slightly as a result of annual personnel cost increases.
North America Quarter ended
Dec 2016 Sept 2016 Jun 2016 Mar 2016 Dec 2015
US$ million US$ million US$ million US$ million US$ million
Sales 354 360 325 339 343
Operating profit (loss) excluding
special items 8 25 (2) 13 13
Operating profit
(loss) excluding special
items to sales (%) 2.3 6.9 (0.6) 3.8 3.8
EBITDA excluding special items 28 43 18 32 31
EBITDA excluding special
items to sales (%) 7.9 11.9 5.5 9.4 9.0
RONOA pa (%) 3.3 10.2 (0.8) 5.2 5.2
The performance of the North American business was impacted negatively by lower coated paper pricing, somewhat offset
by strong dissolving wood pulp volumes and prices. The annual pulp mill maintenance outage at Somerset Mill, which
occurs each first quarter, also impacted the results by approximately US$10 million compared to the prior quarter.
The US coated paper market remains under pressure due to declining demand and lower pricing, exacerbated by the strong
US Dollar. Sales volumes increased marginally year-on-year despite declines in overall demand in the US. Sales prices
however were 6% lower than the equivalent quarter last year.
The dissolving wood pulp market strengthened through the quarter, while paper pulp pricing remained at low levels.
The Cloquet Mill optimised DWP production in order to benefit from the wider spread between northern bleached
hardwood kraft pulp and DWP pricing.
The release paper business continues to experience weak sales volumes into the Chinese garment industry as well as
lower average selling prices due to the sales mix.
Ongoing procurement and efficiency initiatives along with lower market prices for wood and purchased paper pulp led to
lower average variable costs for the quarter. Fixed costs increased compared to the prior quarter largely as a result
of increased annual personnel costs.
Southern Africa Quarter ended
Dec 2016 Sept 2016 Jun 2016 Mar 2016 Dec 2015
ZAR million ZAR million ZAR million ZAR million ZAR million
Sales 4,230 4,760 4,306 4,568 3,993
Operating profit excluding
special items 1,169 1,256 1,050 1,255 949
Operating profit excluding
special items to sales (%) 27.6 26.4 24.4 27.5 23.8
EBITDA excluding special items 1,364 1,441 1,215 1,430 1,119
EBITDA excluding special
items to sales (%) 32.2 30.3 28.2 31.3 28.0
RONOA pa (%) 27.8 31.1 26.2 32.2 25.2
The South African business delivered enhanced margins compared to the comparative quarter last year as a result of
higher net selling prices for dissolving wood pulp, which more than offset increased variable costs and a stronger
Rand/US Dollar exchange rate.
Dissolving wood pulp sales volumes were greater than the equivalent quarter last year, a quarter in which production
was interrupted at the Saiccor Mill due to the drought conditions experienced during that period. Higher average US
Dollar prices more than offset the impact of a stronger Rand/US Dollar exchange rate for the period.
A number of tube leaks at Saiccor were experienced at the start of the quarter, but operations have since stabilised
and we will replace the affected equipment during the annual maintenance shut in March.
Lower than expected demand over the Christmas period impacted containerboard and tissue sales for the quarter,
though recent good rains over parts of South Africa have improved the outlook of packaging sales for the rest of
the financial year due to better prospects for various fruit exports.
Fixed and variable costs remain well controlled and were consistent with the prior quarter.
Outlook
Demand for DWP remains favourable and pricing has recovered during January. Therefore a higher average US Dollar
price is expected in the second quarter of 2017.
Graphic paper markets continue to be weak in Europe and the United States, however prices have started to stabilise.
Raw material costs have started to rise, particularly for paper pulp, energy and chemicals but we remain focused on
various efficiency and procurement initiatives in order to mitigate the effect of these increased costs.
Demand for speciality packaging grades remains robust and we will be undertaking a number of significant projects over
the next two years in order to increase our production capacity in these grades while maintaining our focus on being a
leading coated paper producer in both North America and Europe.
In North America we will be investing approximately US$165 million to convert PM1 at the Somerset Mill. The machine
will have the capability to produce both coated graphics paper and paper packaging products. The project is expected
to be completed in 2018.
In Europe we will undertake a number of projects that will result in a significant increase in our speciality
packaging paper capacity and capability. The Maastricht Mill will be converted to focus predominantly on speciality
grades and we will invest at Ehingen and Alfeld to enhance the specialities offerings. Lanaken Mill PM8 will
progressively transition to coated woodfree production over the next three years in line with the expected decline in
the coated mechanical market. In total these projects will cost approximately US$140 million over a three year period.
Capital expenditure in 2017 is expected to be approximately US$350 million as we continue the debottlenecking of DWP
production at Saiccor and Ngodwana, and undertake the first phases of the speciality packaging investments outlined
previously.
Based on current market conditions; in particular the recent strength of the Rand, continued strength in US Dollar
pricing for DWP and further weakness in graphic paper demand and pricing in Europe and the US, we expect the group's
operating performance for the second quarter to be broadly in line with that of 2016. Further Rand strength could
result in a weaker performance for the remainder of the year. The board is mindful of uncertainty wrought by
global political events.
We expect to reduce net debt levels further during the course of 2017 and it remains our intention to repay the
maturing 2017 bonds from current liquidity sources in order to lower future finance costs.
On behalf of the board
S R Binnie
Director
G T Pearce
Director
08 February 2017
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, 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
Quarter Quarter
ended ended
Dec 2016 Dec 2015
Note US$ million US$ million
Sales 1,309 1,284
Cost of sales 1,082 1,090
Gross profit 227 194
Selling, general and administrative expenses 82 82
Other operating (income) expenses 4 (9)
Share of profit from equity investments (2) (2)
Operating profit 3 143 123
Net finance costs 25 25
Net interest expense 27 27
Net foreign exchange gain (2) (2)
Profit before taxation 118 98
Taxation 28 23
Profit for the period 90 75
Basic earnings per share (US cents) 17 14
Weighted average number of shares in issue (millions) 531.6 527.4
Diluted earnings per share (US cents) 17 14
Weighted average number of shares on fully diluted basis (millions) 544.0 535.4
Condensed group statement of comprehensive income
Reviewed
Quarter Quarter
ended ended
Dec 2016 Dec 2015
US$ million US$ million
Profit for the period 90 75
Other comprehensive income (loss), net of tax
Items that must be reclassified subsequently to profit or loss 33 (79)
Exchange differences on translation of foreign operations 33 (71)
Movements in hedging reserves 1 (9)
Tax effect of above items (1) 1
Total comprehensive income (loss) for the period 123 (4)
Condensed group balance sheet
Reviewed
Dec 2016 Sept 2016
US$ million US$ million
ASSETS
Non-current assets 3,077 3,171
Property, plant and equipment 2,404 2,501
Plantations 445 441
Deferred tax assets 150 152
Derivative financial instruments 1 1
Other non-current assets 77 76
Current assets 1,968 2,006
Inventories 647 606
Trade and other receivables 559 642
Derivative financial instruments 69 44
Taxation receivable 12 11
Cash and cash equivalents 681 703
Total assets 5,045 5,177
EQUITY AND LIABILITIES
Shareholders' equity
Ordinary shareholders' interest 1,442 1,378
Non-current liabilities 2,250 2,325
Interest-bearing borrowings 1,473 1,535
Deferred tax liabilities 276 272
Other non-current liabilities 501 518
Current liabilities 1,353 1,474
Interest-bearing borrowings 546 576
Other current liabilities 717 854
Derivative financial instruments 2 2
Taxation payable 39 42
Shareholders for dividend 49 -
Total equity and liabilities 5,045 5,177
Number of shares in issue at balance sheet date (millions) 534.5 530.6
Condensed group statement of cash flows
Reviewed
Quarter Quarter
ended ended
Dec 2016 Dec 2015
US$ million US$ million
Profit for the period 90 75
Adjustment for:
Depreciation, fellings and amortisation 83 77
Taxation 28 23
Net finance costs 25 25
Defined post-employment benefits paid (9) (11)
Plantation fair value adjustments (26) (16)
Net restructuring provisions - 3
Profit on disposal of assets held for sale - (15)
Other non-cash items 11 10
Cash generated from operations 202 171
Movement in working capital (97) (100)
Net finance costs paid (17) (36)
Taxation paid (34) (18)
Cash generated from operating activities 54 17
Cash (utilised in) generated from investing activities (37) 2
Capital expenditure (37) (40)
Net proceeds on disposal of assets 2 41
Other movements (2) 1
Net cash generated 17 19
Cash effects of financing activities (6) (72)
Net movement in cash and cash equivalents 11 (53)
Cash and cash equivalents at beginning of period 703 456
Translation effects (33) (20)
Cash and cash equivalents at end of period 681 383
Condensed group statement of changes in equity
Reviewed
Quarter Quarter
ended ended
Dec 2016 Dec 2015
US$ million US$ million
Balance - beginning of period 1,378 1,015
Total comprehensive income (loss) for the period 123 (4)
Shareholders for dividend (59) -
Transfers from the share purchase trust 2 11
Transfers of vested share options (3) (8)
Share-based payment reserve 1 1
Balance - end of period 1,442 1,015
Notes to the condensed group results
1. Basis of preparation
The condensed consolidated interim financial statements for the three months ended December 2016 have
been prepared in accordance with the Listings Requirements of the JSE Limited, the framework concepts and
measurement recognition requirements of International Financial Reporting Standards, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, Financial Pronouncements as issued by
Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and containing
the minimum information required by IAS 34 Interim Financial Reporting. 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 group 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 results are unaudited.
2. Segment information
Quarter Quarter
ended ended
Dec 2016 Dec 2015
Metric Metric
tons tons
(000's) (000's)
Sales volume
North America 353 330
Europe 867 836
Southern Africa - Pulp and paper 364 386
Forestry 244 259
Total 1,828 1,811
Which consists of:
Specialised cellulose 281 255
Paper 1,303 1,297
Forestry 244 259
Reviewed
Quarter Quarter
ended ended
Dec 2016 Dec 2015
US$ million US$ million
Sales
North America 354 343
Europe 651 659
Southern Africa - Pulp and paper 289 268
Forestry 15 14
Total 1,309 1,284
Which consists of:
Specialised cellulose 247 209
Paper 1,047 1,061
Forestry 15 14
Operating profit (loss) excluding special items
North America 8 13
Europe 43 32
Southern Africa 84 67
Unallocated and eliminations(1) 1 -
Total 136 112
Which consists of:
Specialised cellulose 82 62
Paper 53 50
Unallocated and eliminations(1) 1 -
Special items - (gains) losses
North America - -
Europe - 4
Southern Africa (7) (15)
Unallocated and eliminations(1) - -
Total (7) (11)
Segment operating profit (loss)
North America 8 13
Europe 43 28
Southern Africa 91 82
Unallocated and eliminations(1) 1 -
Total 143 123
EBITDA excluding special items
North America 28 31
Europe 75 65
Southern Africa 98 79
Unallocated and eliminations(1) - -
Total 201 175
Which consists of:
Specialised cellulose 95 74
Paper 106 101
Unallocated and eliminations(1) - -
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.
EBITDA excluding special items 201 175
Depreciation and amortisation (65) (63)
Operating profit excluding special items 136 112
Special items - gains (losses) 7 11
Plantation price fair value adjustment 11 2
Net restructuring provisions - (3)
Profit on disposal of assets held for sale - 15
Fire, flood, storm and other events (4) (3)
Segment operating profit 143 123
Net finance costs (25) (25)
Profit before taxation 118 98
Taxation (28) (23)
Profit for the period 90 75
Reviewed
Dec 2016 Dec 2015
US$ million US$ million
Segment assets
North America 956 983
Europe 1,184 1,325
Southern Africa 1,265 1,004
Unallocated and eliminations(1) 2 29
Total 3,407 3,341
Reconciliation of segment assets to total assets
Segment assets 3,407 3,341
Deferred taxation 150 158
Cash and cash equivalents 681 383
Other current liabilities 717 753
Derivative financial instruments 2 -
Taxation payable 39 25
Shareholders for dividend 49 -
Total assets 5,045 4,660
(1) Includes the group's treasury operations and our insurance captive.
3. Operating profit
Reviewed
Quarter Quarter
ended ended
Dec 2016 Dec 2015
US$ million US$ million
Included in operating profit are
the following items:
Depreciation and amortisation 65 63
Fair value adjustment on plantations
(included in cost of sales)
Changes in volume
Fellings 18 14
Growth (15) (14)
3 -
Plantation price fair value adjustment (11) (2)
(8) (2)
Net restructuring provisions - 3
Profit on disposal of assets held for sale - (15)
4. Earnings per share
Reviewed
Quarter Quarter
ended ended
Dec 2016 Dec 2015
US$ million US$ million
Basic earnings per share (US cents) 17 14
Headline earnings per share (US cents) 17 12
EPS excluding special items (US cents) 16 13
Weighted average number of shares in issue (millions) 531.6 527.4
Diluted earnings per share (US cents) 17 14
Diluted headline earnings per share (US cents) 17 12
Weighted average number of shares on fully diluted basis (millions) 544.0 535.4
Calculation of headline earnings
Profit for the period 90 75
Profit on disposal of assets held for sale - (15)
Tax effect of above items - 4
Headline earnings 90 64
Calculation of earnings excluding special items
Profit for the period 90 75
Special items after tax (5) (7)
Special items (7) (11)
Tax effect 2 4
Earnings excluding special items 85 68
5. Plantations
Plantations are stated at fair value less estimated cost to sell at the harvesting stage. In arriving at
plantation fair values, the key assumptions are estimated prices less cost of delivery, discount rates (pre-tax
weighted average cost of capital), and volume and growth estimations.
Expected future price trends and recent market transactions involving comparable plantations are also considered
in estimating fair value. Mature timber that is expected to be felled within 12 months from the end of the reporting
period are valued using unadjusted current market prices. Immature timber and mature timber that is to be felled in
more than 12 months from the reporting date are valued using a 12 quarter rolling historical average price which,
taking the length of the growth cycle of a plantation into account, is considered reasonable.
The fair value of plantations is a Level 3 measure in terms of the fair value measurement hierarchy as established
by IFRS 13 Fair Value Measurement.
Reviewed
Dec 2016 Sept 2016
US$ million US$ million
Fair value of plantations at beginning of year 441 383
Gains arising from growth 15 56
Fire, flood, storm and other events (4) (13)
In-field inventory - (1)
Gain arising from fair value price changes 11 64
Harvesting - agriculture produce (fellings) (18) (56)
Disposals - (1)
Translation difference - 9
Fair value of plantations at end of period 445 441
6. 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 2016 Sept 2016
hierarchy US$ million US$ million
Available for sale assets(2) Level 1 7 7
Derivative financial assets Level 2 70 45
Derivative financial liabilities Level 2 2 2
(1) The fair value of the financial instruments are equal to their carrying value.
(2) Included in other non-current assets.
There have been no transfers of financial assets or financial liabilities between the categories of the
fair value hierarchy.
The fair value of all external over-the-counter derivatives is calculated based on the discount rate adjustment
technique. The discount rate used is derived from observable rates of return for comparable assets or liabilities
traded in the market. The credit risk of the external counterparty is incorporated into the calculation of fair
values of financial assets and own credit risk is incorporated in the measurement of financial liabilities. The change
in fair value is therefore impacted by the move of the interest rate curves, by the volatility of the applied credit
spreads, and by any changes to the credit profile of the involved parties.
There are no financial assets and liabilities that have been remeasured to fair value on a non-recurring basis.
The carrying amounts of other financial instruments which include accounts receivable, certain investments, accounts
payable and current interest-bearing borrowings approximate their fair values.
7. Capital commitments
Reviewed
Dec 2016 Sept 2016
US$ million US$ million
Contracted 55 42
Approved but not contracted 442 71
497 113
8. Contingent liabilities
Guarantees and suretyships 10 10
Other contingent liabilities 12 11
22 21
9. Material balance sheet movements
Inventories, trade and other receivables and other current liabilities
The increase in inventories with a decrease in both trade and other receivables and other current liabilities
is largely attributable to seasonal working capital movements.
10. Related parties
There has been no material change, by nature or amount, in transactions with related parties since the
2016 financial year-end.
11. 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.
Supplemental information (this information has not been audited or reviewed)
General definitions
Average - averages are calculated as the sum of the opening and closing balances for the relevant period divided by
two
Broad-based Black Economic Empowerment (BBBEE) charge - represents the IFRS 2 non-cash charge associated with the
BBBEE transaction implemented in fiscal 2010 in terms of BBBEE legislation in South Africa
Capital employed - shareholders' equity plus net debt
EBITDA excluding special items - earnings before interest (net finance costs), taxation, depreciation, amortisation
and special items
EPS excluding special items - earnings per share excluding special items and certain once-off finance and tax items
Fellings - the amount charged against the income statement representing the standing value of the plantations
harvested
Headline earnings - as defined in circular 2/2015, issued by the South African Institute of Chartered Accountants in
October 2015, which separates from earnings all separately identifiable remeasurements. It is not necessarily a measure
of sustainable earnings. It is a Listings Requirement of the JSE Limited to disclose headline earnings per share
Interest cover - last 12 months EBITDA excluding special items to net interest adjusted for refinancing costs
NBSK - Northern Bleached Softwood Kraft pulp. One of the main varieties of market pulp, produced from coniferous
trees (ie spruce, pine) in Scandinavia, Canada and northern USA. The price of NBSK is a benchmark widely used in
the pulp and paper industry for comparative purposes
Net assets - total assets less total liabilities
Net asset value per share - net assets divided by the number of shares in issue at balance sheet date
Net debt - current and non-current interest-bearing borrowings, bank overdrafts less cash and cash equivalents
Net debt to EBITDA excluding special items - net debt divided by the last 12 months EBITDA excluding special items
Net operating assets - total assets (excluding deferred tax assets and cash) less current liabilities (excluding
interest-bearing borrowings and overdraft). Net operating assets equate to segment assets
Non-GAAP measures - the group believes that it is useful to report certain non-GAAP measures for the following
reasons:
- these measures are used by the group for internal performance analysis;
- the presentation by the group's reported business segments of these measures facilitates comparability with other
companies in our industry, although the group's measures may not be comparable with similarly titled profit
measurements reported by other companies; and
- it is useful in connection with discussion with the investment analyst community and debt rating agencies
These non-GAAP measures should not be considered in isolation or construed as a substitute for GAAP measures in
accordance with IFRS
ROCE - annualised return on average capital employed. Operating profit excluding special items divided by average
capital employed
RONOA - return on average net operating assets. Operating profit excluding special items divided by average net
operating assets
Special items - special items cover those items which management 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.
Summary Rand convenience translation
Quarter ended
Dec 2016 Dec 2015
Key figures: (ZAR million)
Sales 18,215 18,178
Operating profit excluding special items(1) 1,893 1,586
Special items - (gains) losses(1) (97) (156)
EBITDA excluding special items(1) 2,797 2,478
Profit for the period 1,252 1,062
Basic earnings per share (SA cents) 236 201
Net debt(1) 18,382 26,507
Key ratios: (%)
Operating profit excluding special items to sales 10.4 8.7
Operating profit excluding special items to capital
employed (ROCE)(1) 19.8 15.7
EBITDA excluding special items to sales 15.4 13.6
(1) Refer to 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
2016 2016 2016 2016 2015
Exchange rates:
Period end rate: US$1 = ZAR 13.7386 13.7139 15.0650 15.4548 15.2865
Average rate for the Quarter: US$1 = ZAR 13.9155 14.1648 15.0053 15.8226 14.1577
Average rate for the year to date: 13.9155 14.7879 14.9966 14.9921 14.1577
US$1 = ZAR
Period end rate: €1 = US$ 1.0516 1.1226 1.1117 1.1166 1.0977
Average rate for the Quarter: €1 = US$ 1.0814 1.1150 1.1304 1.1020 1.0968
Average rate for the year to date: €1 = US$ 1.0814 1.1111 1.1097 1.0994 1.0968
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
Rosebank Towers, 15 Biermann Avenue
Rosebank 2196, South Africa
PO Box 61051, Marshalltown 2107, South Africa
www.computershare.com
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
08 February 2017
JSE Sponsor:
UBS South Africa (Pty) Ltd
Date: 08/02/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
