Geographic Spread Helps Sappi in Difficult First Quarter.Business Editors JOHANNESBURG Johannesburg (jōhăn`ĭsbörg', yōhä`nəsbörkh'), city (1991 pop. 1,574,631), Gauteng, NE South Africa, on the southern slopes of the Witwatersrand at an altitude of 5,750 ft (1,753 m). , South Africa--(BUSINESS WIRE)--Jan. 28, 2002 Sappi Ltd (NYSE NYSE See: New York Stock Exchange : SPP (1) (Scalable Parallel Processor) A multiprocessing computer that can be upgraded by adding more CPUs. (2) (Standard Parallel Port) The Centronics parallel port that was used on the first PCs. ), the world's leading producer of coated fine paper, today announced results for the first quarter 2002. Highlights - Impact of September 11th felt in quarter, but group holds up well - Weak performance by North American operations partly offset by robust performances from Europe and South Africa - Performance dented by one off maintenance shuts of major profit contributing mills - Strong balance sheet maintained Commenting on the results, Sappi Executive Chairman, Eugene Eugene, city (1990 pop. 112,669), seat of Lane co., W Oregon, on the Willamette River; inc. 1862. A processing and shipping center in a farming area, the "Emerald City" has lumbering, food-processing, and microchip and other electronics industries. van As, said: "As anticipated, the Group continued to experience difficult market conditions during the first quarter, but held up well overall. Much of the impact of September September: see month. 11th was felt in this quarter with the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market particularly weak. The results were further impacted on by the fact that two of our largest operations took their 30-month maintenance shuts in the period. This impact, which would previously have been spread over 30 months, was reflected in the quarter as per the new International Accounting Standard (IAS See iPlanet Application Server. 1. (computer) IAS - The first modern computer. It had main registers, processing circuits, information paths within the central processing unit, and used Von Neumann's fetch-execute cycle. ) guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. . However, we benefited from the geographic spread of our assets as both Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. continued to perform well despite challenging
trading conditions in their markets, this offsetting some of the
difficulties in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. ."Results for the Quarter These difficult conditions lead to sales volumes which were 10% below the same quarter last year, excluding Mobile (which was closed at the end of last year). Average prices in US$ were 14% lower than a year ago. This reflects in part the change in other currencies vs. the US$ and in part real price reductions. However, manufacturing costs continued to be well controlled. In this environment the group did well to achieve an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margin of 17% which lead to net profit before exceptional items of US$31 million, although this was 62% below last year. Earnings per share before exceptional items were 14 US cents. After one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. adjustments for refinancing Refinancing An extension and/or increase in amount of existing debt. the North American 14% debentures and the closure of Transcript A generic term for any kind of copy, particularly an official or certified representation of the record of what took place in a court during a trial or other legal proceeding. A transcript of record Mill, net profit was US$22 million and basic earnings per share were 10 US cents. Despite these adverse market conditions, the group generated a robust cash flow (EBITDA) for the quarter of US$148 million. Capital expenditure continued to be below depreciation and amounted to US$67 million. The group continues to maintain a strong balance sheet, although net debt increased slightly in September from US$1,128 million to US$1,156 million. The net debt to total capitalisation n. 1. same as capitalization. Noun 1. capitalisation - writing in capital letters capitalization writing - letters or symbols that are written or imprinted on a surface to represent the sounds or words of a language; "he turned the paper ratio was affected by the US$ value of our Euro and Rand Rand See Witwatersrand. rand 1 n. See Table at currency. [Afrikaans, after(Witwaters)rand. assets, but is an acceptable 35%. This ratio will vary from time to time with currency changes. Net finance costs for the quarter were US$25 million, which included the cost of marking foreign exchange contracts to market and other foreign exchange losses of US$7 million. The group declared a dividend of 26 US cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. for the year ended September 2001, which was paid to shareholders on 14 January January: see month. 2002. Whilst the dividend increase in US$ terms was modest, the dividend showed the excellent Rand hedge quality Hedge quality Measured by the R-square in a regression of spot rate changes on futures price changes. for South African shareholders as it increased in Rand terms by approximately 65%. Fine Paper Commenting on the fine paper division's overall performance, Bill Sheffield William Jennings Sheffield (born June 26, 1928 in Spokane, Washington) is an American Democratic politician who was Governor of Alaska from 1982 to 1986. Sheffield term in the governors mansion was marked by controversy including attempts to have him impeached. , Fine Paper CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. said: "Market conditions for Sappi Fine Paper were difficult in the quarter. In addition to the general global economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , the recession in the US and the additional adverse impact of 11 September had a strong detrimental det·ri·men·tal adj. Causing damage or harm; injurious. det  ri·men effect on our
business. These conditions resulted in a 24% fall in sales compared to
last year. Despite this, the division's operating margin Operating MarginA ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: fell only 3.3 percentage points. We continued to curtail cur·tail tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict production in Europe and North America to balance supply with demand". "Against very tough market conditions the division held up well. The North American business was particularly affected, but our ability to supply part of the US market with high quality European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. paper at good margins once again proves the benefits of our strategy to have well-invested assets in each major global market". The closure of the Transcript Mill is progressing well, with a complete exit from the carbonless business expected by March 2002. He went on to say: "The outlook for our European and South African businesses Business in South Africa is vibrant and alive. Business varies from informal traders selling anything from potatoes to plastic ware. Business may be incorporated in various forms including
Forest Products John Job, Forest Products CEO commented: "Our southern African markets were stable during the quarter and both our forest products and global fine paper businesses remain strong Rand hedges for the group. Local costs were driven down in US$ terms and local selling prices now lag those of imported competitors. Sales volumes dropped 10% on last year, but the operating margin at 16% and return on net operating assets Operating Assets Another term for working capital. at 11.9% were both good under the adverse market conditions. South African demand for pulp and paper products had been reasonably strong during the quarter, however export markets continued to be depressed. Dissolving dis·solve v. dis·solved, dis·solv·ing, dis·solves v.tr. 1. To cause to pass into solution: dissolve salt in water. 2. pulp markets remained soft and were characterised by high customer inventories and low prices. There had been some firming in international unbleached kraft pulp markets recently but generally, prices remained steady, albeit at low levels. Referring to efforts to secure the future of Sappi's Usutu pulp mill A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a thick fiber board which can be shipped to a paper mill for further processing. in Swaziland Swaziland (swä`zēlănd), officially Kingdom of Swaziland, kingdom (2005 est. pop. 1,174,000), 6,705 sq mi (17,366 sq km), SE Africa. It is bordered on the S, W, and N by the Republic of South Africa and on the E by Mozambique. , Job indicated that agreement had been reached with the labour union and the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). would follow in the next quarter. "We are confident that completion of this restructuring will secure Usutu's position as a competitive and profitable mill," he said. Job confirmed that the outlook for the Forest Products business is better for the balance of the year. Any improvement in world economic conditions will have an immediate impact. In the short term, the benefit of the weaker Rand will improve margins and enable the division to maintain its planned US$ earnings. Outlook Sappi expects order levels to improve as the year progresses. The US economy has bottomed and may rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective . Evidence exists that end-user (job) end-user - The person who uses a computer application, as opposed to those who developed or support it. The end-user may or may not know anything about computers, how they work, or what to do if something goes wrong. consumption of coated woodfree paper has declined much less over the past year than shipments and that much of the decline in apparent demand stemmed stemmed adj. 1. Having the stems removed. 2. Provided with a stem or a specific type of stem. Often used in combination: stemmed goblets; long-stemmed roses. from a reduction of inventory in the supply chain. Shipments are expected to rise modestly to match consumption and there is the potential for a significant rebound in demand if merchants and end-users start to bring their inventories back up to normal levels. Commenting on the outlook, Eugene van As said: "We operate in a challenging environment, but the geographic spread of our assets will continue to allow us to take advantage of strong markets and weak currencies, and reduce the impact of fluctuations in regional demand on our business. "We are cautiously optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op " van As indicated. "Barring further deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. of the global economic outlook, we expect earnings per share for the rest of the year to improve and reach a similar level to those seen in the last financial quarter of our 2001 year." Sappi Limited is the largest producer of coated free sheet paper in the world and produces fine papers in South Africa, the United Kingdom, Austria Austria (ô`strēə), Ger. Österreich [eastern march], officially Republic of Austria, federal republic (2005 est. pop. 8,185,000), 32,374 sq mi (83,849 sq km), central Europe. , Belgium Belgium (bĕl`jəm), Du. België, Fr. La Belgique, officially Kingdom of Belgium, constitutional kingdom (2005 est. pop. 10,364,000), 11,781 sq mi (30,513 sq km), NW Europe. , The Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. , Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). and in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Sappi's net operating assets of approximately R29 billion are located mainly in Europe (41%), North America (31%) and Southern Africa
Sappi ordinary shares trade on the Johannesburg Stock Exchange Johannesburg Stock Exchange (JSE) Established in 1886, the Johannesburg Stock Exchange is the only stock exchange in South Africa. Gold and mining stocks form the majority of shares listed. and may be accessed on Bloomberg Bloomberg A major global provider of 24-hour financial news and information including real-time and historic price data, financials data, trading news and analyst coverage, as well as general news and sports. under the symbol SAP sap, fluid in plants consisting of water and dissolved substances. Cell sap refers to this fluid present in the large vacuole, or cell cavity, that occupies most of the central portion of mature plant cells. SJ, and on the Reuters Reuters British cooperative news agency. Founded in 1851 by Paul Julius Reuter, it was initially concerned with commercial news but began to serve a growing newspaper clientele after the London Morning Advertiser subscribed in 1858. Equities 2000 Service under SAPJ.J. In the US its ADRs trade on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors SPP (each ADR ADR - Astra Digital Radio is equal to one ordinary share). Sappi shares are also traded in London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. and Frankfurt. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements in this report that are neither reported financial results nor other historical information, are forward-looking statements, including, but not limited to statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors, that could cause actual results and company plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results). Such risks, uncertainties and factors include, but are not limited to the highly cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the pulp and paper industry The global pulp and paper industry is dominated by North American (United States, Canada), northern European (Finland, Sweden) and East Asian countries (such as Japan). Australasia and Latin America also have significant pulp and paper industries. (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production and pricing), adverse changes in the markets for the group's products, consequences of substantial leverage, changing regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. , unanticipated production disruptions, economic and political conditions in international markets, the impact of investments, acquisitions and dispositions (including related financing) and currency fluctuations. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or otherwise.
SAPPI LIMITED
Summary
December 2001
----------------------------------------------------------------------
Quarter ended
December September December
2001 2001 2000
----------------------------------------------------------------------
Sales (US$ million) 832 998 1,115
Operating profit
(US$ million) 65 91 143
EBITDA (US$ million) 148 175 237
Operating profit
to sales (%) 7.8 9.1 12.8
EBITDA to sales (%) 17.8 17.5 21.3
Operating profit to
average net assets (%) 8.8 11.1 15.8
EPS before exceptional
items (Headline) (US cents) 14 23 34
Basic EPS (US cents) 10 20 34
Return on equity (%) 6.3 9.9(a) 20.1
Net Debt (US$ million) 1,156 1,128 1,269
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(a) Before Mobile closure costs
----------------------------------------------------------------------
SAPPI LIMITED
Group income statement
Unaudited
Quarter ended
US$ million December 2001 December 2000 % change
----------------------------------------------------------------------
Sales 832 1,115 (25.4)
Cost of sales 689 882
----------------------------------------------
Gross profit 143 233 (38.6)
Selling, general &
administrative expenses 78 90
----------------------------------------------
Operating profit 65 143 (54.5)
Non-trading loss 12 1
Net finance costs 25 24
Net paid (a) 32 32
Capitalised (7) (8)
----------------------------------------------
Profit before tax 28 118
Taxation - current (9) 23
- deferred 15 13
----------------------------------------------
Net profit 22 82
==============================================
EBITDA 148 237 (37.7)
==============================================
Basic earnings per
share (US cents) 10 34
Earnings before
exceptional items
(Headline earnings) per
share (US cents) 14 34
Weighted average number
of shares in
issue (millions) 229.7 238.9
Diluted earnings per
share (US cents) 9 34
Diluted earnings before
exceptional items
(Headline earnings) per
share (US cents) 13 34
Weighted average number of
shares on fully diluted
basis (millions) 233.2 245.0
Calculation of Earnings before
exceptional items
(Headline) net of tax
Net profit 22 82
Mill closure costs 4 -
Debt restructuring costs 6 -
Decrease in provisions (1) (1)
----------------------------------------------
Earnings before
exceptional items
(Headline) 31 81
==============================================
(a) Includes foreign exchange losses of US$ 7 million (December
2000: US$ 1m)
SAPPI LIMITED
Group balance sheet
Unaudited Audited
US$ million December 2001 September 2001
ASSETS
Non-current assets 3,076 3,346
-------------------------------
Property, plant and equipment 2,693 2,890
Plantations 247 324
Deferred taxation - 4
Other non-current assets 136 128
--------------------------------
Current assets 1,010 1,160
--------------------------------
Cash and cash equivalents 245 445
Trade and other receivables 263 202
Inventories 502 513
-------------------------------
Total assets 4,086 4,506
===============================
EQUITY AND LIABILITIES
Shareholders' equity
Ordinary shareholders' interest 1,287 1,503
Minority interest 2 3
Non-current liabilities 1,502 1,640
-------------------------------
Interest-bearing borrowings 912 1,014
Deferred taxation 355 385
Other non-current liabilities 235 241
-------------------------------
Current liabilities 1,295 1,360
-------------------------------
Interest-bearing borrowings
and bank overdraft 489 559
Other current liabilities 806 801
-------------------------------
-------------------------------
Total equity and liabilities 4,086 4,506
=============================
Number of shares in issue (millions) 229.7 229.5
Net debt (US$ million) 1,156 1,128
Net debt to total capitalisation (%) 35.2 30.4
Net asset value per share (US cents) 715 821
SAPPI LIMITED
Group cash flow statement
Unaudited
Quarter ended
US$ million December 2001 December 2000
Cash generated by operations 130 231
Movement in working capital (100) (80)
Net finance costs (32) (32)
Taxation paid (1) (1)
----------------------------------
Cash retained from
operating activities (3) 118
Cash effects of
investing activities (63) (94)
----------------------------------
(66) 24
Cash effects of
financing activities (115) (109)
----------------------------------
Net movement in cash
and cash equivalents (181) (85)
----------------------------------
SAPPI LIMITED
Group statement of changes in shareholders' equity
Unaudited
Quarter ended
US$ million December 2001 December 2000
Balance - beginning of year 1,503 1,618
Net profit 22 82
Foreign currency
translation reserve (193) 17
Revaluation of
derivative instruments 14 -
Dividends declared - US$ 0.26
(2001: US$ 0.25) per share (60) (60)
Net transfers to share
purchase trust (share buybacks) 1 (8)
----------------------------------
Balance - end of period 1,287 1,649
----------------------------------
SAPPI LIMITED
Notes to the group results
1. Basis of preparation
The group results have been prepared in conformity with South African
Statements of Generally Accepted Accounting Practice. The same
accounting policies have been followed as in the annual financial
statements for September 2001.
The financial results for the quarter have been reviewed by the
group's auditors, Deloitte & Touche.
Their report is available for inspection at the company's registered
offices.
----------------------------------------------------------------------
Unaudited
Quarter ended
US$ million December 2001 December 2000
----------------------------------------------------------------------
2. Operating profit
Included in operating profit are:
Depreciation 72 80
Fellings 7 8
Amortisation 4 6
----------------------------------------------------------------------
83 94
======================================================================
3. Capital expenditure
Fixed assets 62 86
Plantations 5 7
----------------------------------------------------------------------
67 93
======================================================================
Unaudited Audited
December 2001 September 2001
US$ million
----------------------------------------------------------------------
4. Capital commitments
Contracted but not provided 48 78
Approved but not contracted 97 109
----------------------------------------------------------------------
145 187
======================================================================
5. Contingent liabilities
Guarantees and suretyships 73 79
Other contingent liabilities 20 27
----------------------------------------------------------------------
SAPPI LIMITED
Regional Information
Unaudited
Quarter ended
US$ million December December % change
2001 2000
----------------------------------------------------------------------
Sales - Metric tons (000's)
Fine Paper - North America 218 328 (33.5)
Europe 518 563 (8.0)
Southern Africa 73 71 2.8
--------------------------------------
Total 809 962 (15.9)
Forest Products 560 621 (9.8)
--------------------------------------
Total 1,369 1,583 (13.5)
======================================
Sales
Fine Paper - North America 239 395 (39.5)
Europe 410 466 (12.0)
Southern Africa 48 57 (15.8)
--------------------------------------
Total 697 918 (24.1)
Forest Products 135 197 (31.5)
--------------------------------------
Total 832 1,115 (25.4)
======================================
Operating profit
Fine Paper - North America (10) 18 -
Europe 39 54 (27.8)
Southern Africa 7 6 16.7
--------------------------------------
Total 36 78 (53.8)
Forest Products 22 62 (64.5)
Corporate 7 3 133.3
--------------------------------------
Total 65 143 (54.5)
======================================
Earnings before interest, tax,
depreciation and amortisation
charges (a)
Fine Paper - North America 15 46 (67.4)
Europe 77 92 (16.3)
Southern Africa 9 9 -
--------------------------------------
Total 101 147 (31.3)
Forest Products 40 87 (54.0)
Corporate 7 3 133.3
--------------------------------------
Total 148 237 (37.6)
======================================
Net operating assets
Fine Paper - North America 1,085 1,238 (12.4)
Europe 1,299 1,428 (9.0)
Southern Africa 80 102 (21.6)
--------------------------------------
Total 2,464 2,768 (11.0)
Forest Products 657 940 (30.1)
Corporate (86) (80) -
--------------------------------------
Total 3,035 3,628 (16.3)
======================================
(a) before non-trading loss
SAPPI LIMITED
Summary rand convenience translation
----------------------------------------------------------------------
Unaudited
Quarter ended
December December %
2001 2000 change
----------------------------------------------------------------------
Sales (ZAR million) 8,364 8,425 (0.7)
Operating profit (ZAR million) 653 1,081 (39.5)
Profit after taxation (ZAR million) 221 620
EBITDA (ZAR million) 1,488 1,791 (16.9)
Operating profit to sales (%) 7.8 12.8
EBITDA to sales (%) 17.8 21.3
Operating profit to
average net assets (%) 8.5 16.1
EPS before exceptional
items (Headline) (SA cents) 141 257 (45.3)
Basic EPS (SA cents) 101 257
EBITDA per share (SA cents) 648 750 (13.6)
Net debt (ZAR million) 13,768 9,594 43.5
Net debt to total capitalisation (%) 35.2 32.8
Cash generated by
operations (ZAR million) 1,307 1,745
Cash retained from
operating activities (ZAR million) (30) 892
Net movement in cash and
cash equivalents (ZAR million) (1,820) (642)
Exchange rates :
Period end rate: US $1 = ZAR 11.9100 7.5600
Average rate: US $1 = ZAR 10.0530 7.5560
Period end rate: US $1 = EUR 1.1321 1.0730
Average rate: US $1 = EUR 1.1192 1.1486
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