FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of February, 2011
Commission file number: 1-14872
SAPPI LIMITED
(Translation of registrant’s name into English)
48 Ameshoff Street
Braamfontein
Johannesburg 2001
REPUBLIC OF SOUTH AFRICA
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F.
Form 40-F.
Form 20-F
X
-------
Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b) (1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b) (7):
Indicate by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
the Securities Exchange Act of 1934.
Yes
No
X
-------
If “Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
FORWARD-LOOKING STATEMENTS
In order to utilize the “Safe Harbor” provisions of the United States Private Securities Litigation
Reform Act of 1995 (the “Reform Act”), Sappi Limited (the “Company”) is providing the following
cautionary statement. Except for historical information contained herein, statements contained in
this Report on Form 6-K may constitute “forward-looking statements” within the meaning of the
Reform Act. 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, which do not relate to historical matters, identify
forward-looking statements. In addition, this Report on Form 6-K may include forward-looking
statements relating to the Company’s potential exposure to various types of market risks, such as
interest rate risk, foreign exchange rate risk and commodity price risk. Reliance should not be
placed on forward-looking statements because they involve known and unknown risks,
uncertainties and other factors which are in some cases beyond the control of the Company,
together with its subsidiaries (the “Group”), and may cause the actual results, performance or
achievements of the Group 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 the 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;
· 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 investments, acquisitions and dispositions (including related financing), any
delays, unexpected costs or other problems experienced in connection with dispositions or
with integrating acquisitions and achieving expected savings and synergies; and
· currency fluctuations.
These and other risks, uncertainties and factors are discussed in the Company’s Annual Report
on Form 20-F and other filings with and submissions to the Securities and Exchange
Commission, including this Report on Form 6-K. Shareholders and prospective investors are
cautioned not to place undue reliance on these forward-looking statements. These forward-
looking statements are made as of the date of the submission of this Report on Form 6-K and are
not intended to give any assurance as to future results. The Company undertakes no obligation to
publicly update or revise any of these forward looking statements, whether to reflect new
information or future events or circumstances or otherwise.
In order to utilize the “Safe Harbor” provisions of the United States Private Securities Litigation
Reform Act of 1995 (the “Reform Act”), Sappi Limited (the “Company”) is providing the following
cautionary statement. Except for historical information contained herein, statements contained in
this Report on Form 6-K may constitute “forward-looking statements” within the meaning of the
Reform Act. 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, which do not relate to historical matters, identify
forward-looking statements. In addition, this Report on Form 6-K may include forward-looking
statements relating to the Company’s potential exposure to various types of market risks, such as
interest rate risk, foreign exchange rate risk and commodity price risk. Reliance should not be
placed on forward-looking statements because they involve known and unknown risks,
uncertainties and other factors which are in some cases beyond the control of the Company,
together with its subsidiaries (the “Group”), and may cause the actual results, performance or
achievements of the Group 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 the 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;
· 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 investments, acquisitions and dispositions (including related financing), any
delays, unexpected costs or other problems experienced in connection with dispositions or
with integrating acquisitions and achieving expected savings and synergies; and
· currency fluctuations.
These and other risks, uncertainties and factors are discussed in the Company’s Annual Report
on Form 20-F and other filings with and submissions to the Securities and Exchange
Commission, including this Report on Form 6-K. Shareholders and prospective investors are
cautioned not to place undue reliance on these forward-looking statements. These forward-
looking statements are made as of the date of the submission of this Report on Form 6-K and are
not intended to give any assurance as to future results. The Company undertakes no obligation to
publicly update or revise any of these forward looking statements, whether to reflect new
information or future events or circumstances or otherwise.
A
First Quarter
Results
sappi
1st
Quarter results
for the period ended
December 2010
December 2010
sappi
* for the period ended December 2010
** as at December 2010
Coated fine paper
63%
Uncoated fine paper
8%
Coated specialities
6%
Commodity paper
7%
Pulp
15%
Other
1%
Sales by product group*
North America
20%
Europe
55%
Southern Africa
25%
Sales by source*
North America
22%
Europe
48%
Southern Africa
12%
Asia and other
18%
Sales by destination*
Fine paper
60%
Southern Africa
40%
Net operating assets**
1st Quarter Results
1
First Quarter
Results
Quarter ended
Dec 2010
Dec 2009
Sept 2010
Key figures: (US$ million)
Sales
1,873
1,620
1,774
Operating profit
121
1
158
Special items – losses (gains)
1
16
80
(29)
Operating profit excluding special items
2
137
81
129
EBITDA excluding special items
3
246
193
227
Basic earnings (loss) per share (US cents)
7
(10)
16
Net debt
4
2,432
2,581
2,221
Key ratios: (%)
Operating profit to sales
6.5
0.1
8.9
Operating profit excluding special items to sales
7.3
5.0
7.3
Operating profit excluding special items to
capital employed (ROCE)
12.8
7.5
12.6
EBITDA excluding special items to sales
13.1
11.9
12.8
Return on average equity (ROE)
5
7.6
(11.6)
18.6
Net debt to total capitalisation
5
54.7
60.0
53.9
1. Refer to page 15 for details on special items.
2. Refer to page 15, note 9 to the group results for the reconciliation of operating profit excluding special items to operating profit.
3. Refer to page 15, note 9 to the group results for the reconciliation of EBITDA excluding special items to profit (loss) before taxation.
4. Refer to page 17, Supplemental information for the reconciliation of net debt to interest-bearing borrowings.
5. Refer to page 16, Supplemental information for the definition of the term.
The table above has not been audited or reviewed.
2. Refer to page 15, note 9 to the group results for the reconciliation of operating profit excluding special items to operating profit.
3. Refer to page 15, note 9 to the group results for the reconciliation of EBITDA excluding special items to profit (loss) before taxation.
4. Refer to page 17, Supplemental information for the reconciliation of net debt to interest-bearing borrowings.
5. Refer to page 16, Supplemental information for the definition of the term.
The table above has not been audited or reviewed.
EPS 7 US cents; Q1 2010 loss per share 10 US cents
Operating profit US$137 million (excluding special items);
Q1 2010 US$81 million (excluding special items)
Improved demand and pricing for the majority of our products
Financial summary for the quarter
2
First Quarter
Results
Commentary on the quarter
The trend of improving performance continued in the quarter. Operating profit improved further as a result
of the inclusion of an additional accounting week in the quarter, which occurs every six years in the group’s
accounting calendar. The group achieved an annualised return on capital employed (ROCE) of 12.8% for
the quarter, which was an improvement on the quarter ended September 2010 and ahead of our target
minimum of 12%.
Demand for our products remained good and prices increased gradually. Pulp prices remained high,
benefiting our Southern African and North American businesses, which performed strongly. Our North
American business had a planned outage for an upgrade of the pulp mill at Somerset mill commencing
in October 2010 which reduced output and profitability in the quarter. The European business generated
modest margins and continued to experience significant pressure as a result of high pulp input costs and
price increases for other raw materials.
Sales increased to US$1.9 billion, up 16% compared to the equivalent quarter last year as a result of
improved sales volumes and prices.
Average prices realised by the group were up 7.7% on the equivalent quarter last year in US Dollar terms.
In local currency, average prices increased by 11.6% in Europe, 5.6% in North America and 17.7% in
Southern Africa.
Raw material input costs were approximately US$100 million higher than a year ago as a result of the high
pulp prices and a gradual increase in chemical and energy costs.
Special items for the quarter amounted to a charge of US$16 million mainly in respect of the plantation
fair value adjustment.
Operating profit excluding special items was US$137 million for the quarter compared to US$81 million in
the equivalent quarter last year. Including special items, operating profit was US$121 million compared to
US$1 million in the equivalent quarter last year.
Earnings per share for the quarter was 7 US cents (which included a charge of 3 US cents of special items)
compared to a loss of 10 US cents per share (which included a charge of 11 US cents of special items)
in the equivalent quarter last year.
Cash flow and debt
Net cash utilised for the quarter was US$196 million. We expect positive cash generation for the rest of
our financial year and good net cash generation for the full year.
Cash generated from operations was US$245 million for the quarter; however, partly for seasonal and
accounting calendar reasons, our working capital increased by US$335 million during the quarter, much
of which will be reversed during the balance of the financial year.
Capital expenditure for the quarter was US$45 million. Our target for the year is a modest increase on
the US$188 million capital spent last year in order to ensure the continued sustainability of our business.
At quarter-end we had cash on hand of US$591 million and access to additional liquidity in the form of a
m209 million (US$280 million) committed revolving credit facility, which remains undrawn.
m209 million (US$280 million) committed revolving credit facility, which remains undrawn.
Net debt increased to US$2.4 billion as a result of the cash utilisation in the quarter. We are committed to
prudent cash flow management and the continued reduction of finance costs.
3
First Quarter
Results
Operating Review – Quarter ended December 2010 compared
with quarter ended December 2009
with quarter ended December 2009
Sappi Fine Paper
Quarter
Quarter
Quarter
ended
ended
ended
Dec 2010
Dec 2009
%
Sept 2010
US$ million
US$ million
change
US$ million
Sales
1,409
1,256
12
1,327
Operating profit
57
79
(28)
87
Operating profit to sales (%)
4.0
6.3
–
6.6
Special items (gains)
–
(35)
–
(11)
Operating profit excluding
special items
57
44
30
76
Operating profit excluding
special items to sales (%)
4.0
3.5
–
5.7
EBITDA excluding special items
137
130
5
151
EBITDA excluding special items
to sales (%)
9.7
10.4
–
11.4
RONOA pa (%)
7.3
5.3
–
10.0
The fine paper business’ operating profit (excluding special items) improved 30% compared to the
equivalent quarter last year. The performance of both the European and North American businesses
improved compared to last year. In North America, the operating profit was unfavourably impacted by
the planned outage at Somerset Mill during the upgrade of the chemical recovery complex, resulting in a
reduction in margins compared to the quarter ended September 2010.
4
First Quarter
Results
Europe
Quarter
Quarter
Quarter
ended
ended
%
%
ended
Dec 2010
Dec 2009
change
change
Sept 2010
US$ million
US$ million
(US$)
(Euro)
US$ million
Sales
1,027
936
10
20
963
Operating profit
34
12
183
213
40
Operating profit to sales (%)
3.3
1.3
–
–
4.2
Special items – losses (gains)
–
13
–
–
(6)
Operating profit excluding
special items
34
25
36
47
34
Operating profit excluding special
items to sales (%)
3.3
2.7
–
–
3.5
EBITDA excluding special items
95
88
8
17
90
EBITDA excluding special items
to sales (%)
9.3
9.4
–
–
9.3
RONOA pa (%)
6.2
4.3
–
–
6.5
Compared to a year earlier, the business has achieved a significant improvement in sales volumes and
average prices. However, as a result of input cost pressure particularly of purchased pulp, the business’
operating margins remain below expectations.
Demand for coated paper has remained generally robust and the third coated woodfree price increase of
2010, effective September 2010, was implemented during the quarter. A further price increase for both
coated woodfree and uncoated woodfree paper has been announced for March 2011. Prices for coated
mechanical paper remained depressed during the quarter, resulting in negative margins for this category.
Price increases for coated mechanical paper have been implemented in January 2011.
Our average prices realised in Europe in Euro terms were approximately 12% above the equivalent quarter
last year and similar to those realised in the September 2010 quarter.
5
First Quarter
Results
North America
Quarter
Quarter
Quarter
ended
ended
ended
Dec 2010
Dec 2009
%
Sept 2010
US$ million
US$ million
change
US$ million
Sales
382
320
19
364
Operating profit
23
67
(66)
47
Operating profit to sales (%)
6.0
20.9
–
12.9
Special items – (gains)
–
(48)
–
(5)
Operating profit excluding special items
23
19
21
42
Operating profit excluding special Items
to sales (%)
6.0
5.9
–
11.5
EBITDA excluding special items
42
42
–
61
EBITDA excluding special items to
sales (%)
11.0
13.1
–
16.8
RONOA pa (%)
9.9
7.8
–
17.8
Despite the planned outage of the Somerset Mill pulp mill, which dampened the strong underlying
performance during the quarter, the North American business’ operating profit (excluding special items)
was up 21% compared to the equivalent quarter last year. The upgraded chemical recovery complex is
now fully operational and delivering the expected reduction in energy costs and increase in pulp production
capacity.
Demand for our coated fine paper was firm and our mills were sold out during the quarter. Our average
price achieved for coated paper improved compared to both the equivalent quarter last year and the
quarter ended September 2010. Pulp demand and pricing remained high. Pulp production, however, was
lower during the quarter as a result of the pulp mill outage. Our speciality business also performed strongly
during the quarter, with price increases in key segments.
6
First Quarter
Results
Sappi Southern Africa
Quarter
Quarter
Quarter
ended
ended
%
%
ended
Dec 2010
Dec 2009
change
change
Sept 2010
US$ million
US$ million
(US$)
(Rand)
US$ million
Sales
464
364
27
18
447
Operating profit (loss)
66
(86)
–
–
84
Operating profit (loss)
to sales (%)
14.2
(23.6)
–
–
18.8
Special items – losses (gains)
13
115
(89)
(90)
(26)
Operating profit excluding
special items
79
29
172
151
58
Operating profit excluding special
items to sales (%)
17.0
8.0
–
–
13.0
EBITDA excluding special items
108
55
96
82
82
EBITDA excluding special items
to sales (%)
23.3
15.1
–
–
18.3
RONOA pa (%)
15.8
6.3
–
–
12.6
The performance of the Southern African business improved further during the quarter.
The chemical cellulose business achieved improved sales volumes and prices. Demand for this business
remains strong, driven by demand for viscose fibres, particularly in Asia. The Saiccor mill’s post expansion
output and efficiency continued to improve.
Our paper and packaging business had improved demand for containerboard, sackkraft and newsprint,
but weaker demand for fine paper. Competition from low-priced imports has continued as a result of
the strength of the Rand relative to the US Dollar, which squeezed margins in the paper and packaging
business.
7
First Quarter
Results
Outlook
We are pleased with the improving trend in the group’s financial performance. We expect demand for
coated paper to remain reasonably firm in our major markets. Prices for coated mechanical paper in
Europe increased in January 2011, which we expect to help restore this product category to profitability.
Our raw material input costs are gradually increasing as commodity prices rise. We continue to focus on
more efficient procurement and use of our inputs.
Our chemical cellulose business is performing strongly and we intend to accelerate our plans for expanding
this business through investment in additional capacity.
Although our net debt increased in the quarter as a result of working capital growth, we intend to continue
to reduce net debt this year. We also aim to reduce finance costs by, from time to time, applying a portion
of our cash on hand to further debt repayment. We have today announced a tender offer to repurchase
up to US$150 million of our senior notes, which mature in June 2012. This transaction will allow us to use
a portion of our available cash on hand more efficiently and to repurchase a portion of such notes well
ahead of their maturity.
In our second financial quarter we expect the group’s operating profit (excluding special items) to continue
the improving trend relative to the equivalent quarter last year, but to be below that of the first financial
quarter.
On behalf of the board
R J Boëttger
M R Thompson
Director
Director
09 February 2011
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN: ZAE000006284
8
First Quarter
Results
forward-looking statements
Certain statements in this report that are neither reported financial results nor 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, which do not relate to historical matters, identify forward-looking statements.
Undue reliance should not be placed on such statements because, by their nature, they are subject
to known and unknown risks and uncertainties and can be affected by other factors that could cause
actual results and company plans and objectives to differ materially from those expressed or implied
in the forward-looking statements (or from past results). Such risks, uncertainties and factors include,
but are not limited to:
•
the highly cyclical nature of the pulp and paper industry (and the factors that can 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 the group’s products;
•
consequences of substantial 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 government efforts to address present or future economic or social problems;
•
the impact of investments, acquisitions and dispositions (including related financing), any delays,
unexpected costs or other problems experienced in connection with dispositions or integrating
acquisitions 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.
9
First Quarter
Results
Group income statement
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
Notes
US$ million
US$
million
Sales
1,873
1,620
Cost of sales
1,637
1,531
Gross profit
236
89
Selling, general and administrative expenses
112
107
Other operating expenses (income)
5
(16)
Share of profit from associates and joint ventures
(2)
(3)
Operating profit 2
121
1
Net finance costs
71
73
Net interest
78
79
Net foreign exchange gains
(4)
(3)
Net fair value gains on financial instruments
(3)
(3)
Profit (loss) before taxation
50
(72)
Taxation
13
(21)
Current
2
4
Deferred
11
(25)
Profit (loss) for the period
37
(51)
Basic earnings (loss) per share (US cents)
7
(10)
Weighted average number of shares in issue (millions)
519.5
515.6
Diluted basic earnings (loss) per share (US cents)
7
(10)
Weighted average number of shares on fully diluted basis (millions)
524.5
515.6
Group statement of comprehensive income
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
US$ million
US$
million
Profit (loss) for the period
37
(51)
Other comprehensive income (loss), net of tax
78
(24)
Exchange differences on translation of foreign operations
82
(25)
Movements in hedging reserves
(3)
1
Deferred tax effects on above
(1)
–
Total comprehensive income (loss) for the period
115
(75)
10
First Quarter
Results
Group balance sheet
Reviewed
Dec 2010
Sept
2010
US$ million
US$
million
ASSETS
Non-current assets
Non-current assets
4,689
4,653
Property, plant and equipment
3,656
3,660
Plantations
717
687
Deferred taxation
52
53
Other non-current assets
264
253
Current assets
2,388
2,531
Inventories
890
836
Trade and other receivables
907
903
Cash and cash equivalents
591
792
Total assets
7,077
7,184
EQUITY AND LIABILITIES
Shareholders’ equity
Shareholders’ equity
Ordinary shareholders’ interest
2,016
1,896
Non-current liabilities
3,089
3,249
Interest-bearing borrowings
2,120
2,317
Deferred taxation
417
386
Other non-current liabilities
552
546
Current liabilities
1,972
2,039
Interest-bearing borrowings
899
691
Bank overdraft
4
5
Other current liabilities
1,030
1,307
Taxation payable
39
36
Total equity and liabilities
7,077
7,184
Number of shares in issue at balance sheet date (millions)
519.8
519.5
11
First Quarter
Results
Group cash flow statement
Quarter
Quarter
ended
ended
Dec 2010
Dec 2009
US$ million
US$ million
Profit (loss) for the period
37
(51)
Adjustment for:
Depreciation, fellings and amortisation
131
132
Taxation
13
(21)
Net finance costs
71
73
Post-employment benefits
(14)
(13)
Plantation price fair value adjustment
11
95
Other non-cash items
(4)
30
Cash generated from operations
245
245
Movement in working capital
(335)
(170)
Net finance costs
(63)
(64)
Taxation paid
(2)
(4)
Cash (utilised in) retained from operating activities
(155)
7
Cash utilised in investing activities
(41)
(37)
Net cash utilised
(196)
(30)
Cash effects of financing activities
(15)
57
Net movement in cash and cash equivalents
(211)
27
Group statement of changes in equity
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
US$ million
US$
million
Balance – beginning of period
1,896
1,794
Total comprehensive income (loss) for the period
115
(75)
Transfers from the share purchase trust
2
–
Share-based payment reserve
3
2
Balance – end of period
2,016
1,721
12
First Quarter
Results
Notes to the group results
1.
Basis of preparation
The condensed financial information has been prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board, the AC 500 standards issued by the Accounting Practices
Board and the information required by IAS 34 “Interim Financial Reporting”. The report has been prepared
using accounting policies that comply with IFRS which are consistent with those applied in the financial
statements for the year ended September 2010.
The results are unaudited.
Quarter
Quarter
ended
ended
Dec 2010
Dec 2009
US$ million
US$ million
2.
Operating profit
Included in operating profit are the following non-cash items:
Depreciation and amortisation
109
112
Fair value adjustment on plantations (included in cost of sales)
Changes in volume
Fellings
22
20
Growth
(21)
(19)
1
1
Plantation price fair value adjustment
11
95
12
96
Included in other operating expenses (income) are the following:
Asset impairment reversals
–
(8)
Loss on disposal of property, plant and equipment
–
2
Restructuring provisions raised
3
38
Black Economic Empowerment charge
1
–
Fuel tax credit
–
(49)
3.
Headline earnings (loss) per share *
Headline earnings (loss) per share (US cents)
7
(11)
Weighted average number of shares in issue (millions)
519.5
515.6
Diluted headline earnings (loss) per share (US cents)
7
(11)
Weighted average number of shares on fully diluted basis (millions)
524.5
515.6
Calculation of headline earnings (loss) *
Profit (loss) for the period
37
(51)
Asset impairment reversals
–
(8)
Loss on disposal of property, plant and equipment
–
2
Tax effect of above items
–
–
Headline earnings (loss)
37
(57)
*Headline earnings disclosure is required by the JSE Limited.
4.
Capital expenditure
Property, plant and equipment
45
37
13
First Quarter
Results
Dec 2010
Sept
2010
US$ million
US$
million
5.
Capital
commitments
Contracted
69
62
Approved but not contracted
175
109
244
171
6.
Contingent
liabilities
Guarantees and suretyships
52
48
Other contingent liabilities
8
8
60
56
7.
Material balance sheet movements
Cash and cash equivalents and other current liabilities
The decrease in cash and cash equivalents and in other current liabilities is largely due to the timing of creditor
payments as a result of the calendar month-end falling before the fiscal month-end when creditor payments
fell due.
payments as a result of the calendar month-end falling before the fiscal month-end when creditor payments
fell due.
Interest-bearing borrowings
An amount of US$213 million was transferred from non-current interest-bearing liabilities to current interest-
bearing liabilities due to the maturity profile of two loans falling due in the next twelve months.
bearing liabilities due to the maturity profile of two loans falling due in the next twelve months.
8.
Post balance sheet events
A tender offer to repurchase up to US$150 million of our senior notes, which mature in June 2012 was
announced on 9 February 2011.
announced on 9 February 2011.
9.
Segment
information
The information below is presented in the way that it is reviewed by the chief operating decision maker as
required by IFRS 8 “Operating Segments”.
required by IFRS 8 “Operating Segments”.
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
Metric tons
Metric
tons
(000’s)
(000’s)
Sales volume
Fine Paper –
Fine Paper –
North America
364
322
Europe
1,012
944
Total
1,376
1,266
Southern Africa –
Pulp and paper
452
450
Forestry
194
168
Total
2,022
1,884
US$ million
US$
million
Sales
Fine Paper -
Fine Paper -
North America
382
320
Europe
1,027
936
Total
1,409
1,256
Southern Africa –
Pulp and paper
447
350
Forestry
17
14
Total
1,873
1,620
14
First Quarter
Results
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
US$ million
US$
million
Operating profit excluding special items
Fine Paper –
Fine Paper –
North America
23
19
Europe
34
25
Total
57
44
Southern Africa
79
29
Unallocated and eliminations
1
1
8
Total
137
81
Special items – losses (gains)
Fine Paper –
Fine Paper –
North America
–
(48)
Europe
–
13
Total
–
(35)
Southern Africa
13
115
Unallocated and eliminations
1
3
–
Total
16
80
Segment operating profit (loss)
Fine Paper –
Fine Paper –
North America
23
67
Europe
34
12
Total
57
79
Southern Africa
66
(86)
Unallocated and eliminations
1
(2)
8
Total
121
1
EBITDA excluding special items
Fine Paper –
Fine Paper –
North America
42
42
Europe
95
88
Total
137
130
Southern Africa
108
55
Unallocated and eliminations
1
1
8
Total
246
193
Segment assets
Fine Paper –
Fine Paper –
North America
924
980
Europe
2,255
2,364
Total
3,179
3,344
Southern Africa
2,121
1,770
Unallocated and eliminations
1
65
15
Total
5,365
5,129
1
Includes the group’s treasury operations, the self-insurance captive and the investment in the Jiangxi Chenming joint venture.
Reconciliation of operating profit excluding special items to operating profit
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.
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.
15
First Quarter
Results
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
US$ million
US$
million
Operating profit excluding special items
137
81
Special items
(16)
(80)
Plantation price fair value adjustment
(11)
(95)
Restructuring provisions raised
(3)
(38)
Loss on disposal of property, plant and equipment
–
(2)
Asset impairment reversals
–
8
Fuel tax credit
–
49
Black Economic Empowerment charge
(1)
–
Fire, flood, storm and related events
(1)
(2)
Operating profit
121
1
Reconciliation of EBITDA excluding special items and operating profit excluding special items to
profit (loss) before taxation
profit (loss) before taxation
EBITDA excluding special items
246
193
Depreciation and amortisation
(109)
(112)
Operating profit excluding special items
137
81
Special items – losses
(16)
(80)
Net finance costs
(71)
(73)
Profit (loss) before taxation
50
(72)
Reconciliation of segment assets to total assets
Segment assets
5,365
5,129
Deferred tax
52
56
Cash and cash equivalents
591
786
Other current liabilities
1,030
1,092
Taxation payable
39
54
Liabilities associated with assets held for sale
–
28
Total assets
7,077
7,145
16
First Quarter
Results
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
divided by two
Black Economic Empowerment – as envisaged in the Black Economic Empowerment (BEE) legislation in
South Africa
South Africa
Black Economic Empowerment charge – represents the IFRS 2 non-cash charge associated with the BEE
transaction implemented in fiscal 2010
transaction implemented in fiscal 2010
Fellings – the amount charged against the income statement representing the standing value of the plantations
harvested
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
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
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
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
amortisation and special items
Headline earnings – as defined in circular 3/2009 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
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)
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 is considered to equal segment assets
interest-bearing borrowings and overdraft). Net operating assets is considered to equal segment assets
ROCE – return on average capital employed. Operating profit excluding special items divided by average capital
employed
employed
ROE – 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
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
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.
These financial measures are regularly used and compared between companies in our industry.
17
First Quarter
Results
Supplemental information (this information has not been audited or reviewed)
Summary Rand convenience translation
Quarter
Quarter
ended
ended
Dec 2010
Dec
2009
Key figures: (ZAR million)
Sales
Sales
13,011
12,151
Operating profit
841
8
Special items – losses *
111
600
Operating profit excluding special items *
952
608
EBITDA excluding special items *
1,709
1,448
Basic earnings (loss) per share (SA cents)
49
(75)
Net debt *
16,097
19,439
Key ratios: (%)
Operating profit to sales
Operating profit to sales
6.5
0.1
Operating profit excluding special items to sales
7.3
5.0
Operating profit excluding special items to
capital employed (ROCE) *
capital employed (ROCE) *
13.1
7.5
EBITDA excluding special items to sales
13.1
11.9
Return on average equity (ROE)
7.7
(11.7)
Net debt to total capitalisation *
54.7
60.0
*Refer to page 16, 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.
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 2010
Sept
2010
US$ million
US$
million
Interest-bearing borrowings
3,023
3,013
Non-current interest-bearing borrowings
2,120
2,317
Current interest-bearing borrowings
899
691
Bank overdraft
4
5
Cash and cash equivalents
(591)
(792)
Net debt
2,432
2,221
Exchange rates
Dec
Sept
Jun
Mar
Dec
2010
2010
2010
2010
2009
Exchange rates:
Period end rate: US$1 = ZAR
Period end rate: US$1 = ZAR
6.6190
7.0190
7.6250
7.4298
7.5315
Average rate for the Quarter: US$1 = ZAR
6.9464
7.3517
7.5821
7.5597
7.5009
Average rate for the YTD: US$1 = ZAR
6.9464
7.4917
7.5610
7.5302
7.5009
Period end rate: EUR 1 = US$
1.3380
1.3491
1.2377
1.3413
1.4397
Average rate for the Quarter: EUR 1 = US$
1.3516
1.2871
1.2937
1.3891
1.4737
Average rate for the YTD: EUR 1 = US$
1.3516
1.3658
1.3845
1.4302
1.4737
The financial results of entities with reporting currencies other than the US Dollar are translated into 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.
– Assets and liabilities at rates of exchange ruling at period end; and
– Income, expenditure and cash flow items at average exchange rates.
18
First Quarter
Results
ZAR
Jan 07
Apr 07
Jul 08
Oct 08
Jan 09
Apr 09
Jul 09
Oct 09
Jan 10
Apr 10
Oct 10
Jan 11
Jul 10
Jul 07
Oct 07
Jan 08
Apr 08
0
10
20
30
40
50
60
70
80
90
US$
Jan 07
Apr 07
Jul 08
Oct 08
Jan 09
Apr 09
Jul 09
Oct 09
Jan 10
Apr 10
Oct 10
Jan 11
Jul 10
Jul 07
Oct 07
Jan 08
Apr 08
0
2
4
6
8
10
12
14
* Historic share prices revised to reflect rights offer
Sappi ordinary shares* (JSE: SAP)
US Dollar share price conversion*
19
First
Quarter Results
Other interested parties can obtain printed copies of this report from:
South Africa:
United States:
Computershare Investor
ADR Depositary:
Services (Proprietary) Limited
The Bank of New York Mellon
70 Marshall Street
Investor Relations
Johannesburg 2001
PO Box 11258
PO Box 61051
Church Street Station
Marshalltown 2107
New York, NY 10286-1258
Tel +27 (0)11 370 5000
Tel +1 610 382 7836
Sappi has a primary listing on the JSE Limited and a secondary listing on
the New York Stock Exchange
Notes:
this report is available on the Sappi website
www.sappi.com
22
First Quarter
Results
www.sappi.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 09, 2011
SAPPI LIMITED,
Name:
M. R. Thompson
Title:
Chief Financial Officer
M. R. Thompson
By:
/s/