Sappi Limited Announces Results For the Quarter and Year Ended September 2001.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)--Nov. 12, 2001 Sappi Limited (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 largest producer of coated fine paper, today announced results for the quarter and year-ended September September: see month. 2001.
Results for the quarter and year ended September 2001
-- Difficult market conditions
-- Headline EPS - Quarter 23 US cents
- Year 113 US cents
-- Strong balance sheet
-- Dividend increased to 26 US cents
Summary
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Quarter ended Year ended
--------------------- ---------------
Sept. June Sept. Sept. Sept.
2001 2001 2000 2001 2000
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--------------------------- ----- --------- -------- ---------
Sales
(US$ million) 998 967 1,246 4,184 4,718
Operating
profit
(US$ million) 91 91 199 446 672
EBITDA
(US$ million) 175 175 285 797 1,052
Operating
profit to
sales (%) 9.1 9.4 16.0 10.7 14.2
EBITDA to
sales (%) 17.5 18.1 22.9 19.0 22.3
Operating profit
to average net
assets (%) 11.1 10.5 20.6 13.1 18.2
EPS before
exceptional items
(Headline)
(US cents) 23 24 49 113 146
EPS (US cents) 20 (27) 54 59 153
Return on
equity (%) 9.9(b) 14.1(b) 32.3 15.9(b) 23.8
Net debt
(US$ million) 1,128 1,250 1,270(a) 1,128 1,270(a)
--------------------------- ----- --------- -------- ---------
(a) Restated for reclassification of minority interest to debt
(b) Before Mobile closure costs
Comment for the year The year was characterised by difficult market conditions resulting in low demand for most of our products. Apparent consumption for coated woodfree paper as measured by shipments from producers net of imports and exports was 14% below the equivalent period last year in the US and 8% in 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). . Real consumption was probably considerably better than was
indicated by apparent consumption, as most customers reduced inventory
throughout the period.Sappi Fine Paper It was a tough year in the fine paper markets, particularly 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. , which experienced its biggest ever percentage decline in demand. A significant portion of reduced North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. shipments was due to de-stocking amongst merchants and printers. Local US producers were further affected by a high level of imports from Europe and Asia, which resulted in significant pressure on price and volume. The North American business responded to this softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. market with rigorous cost control and was also helped by the falling pulp price. Sappi's strong brands held up better than most in this difficult period. In Europe there was also a significant decline in orders throughout the coated woodfree sector as the inventory throughout the pipeline was reduced. Producers reduced production to keep supply and demand in balance. Against this background, Sappi Fine Paper Europe performed well due to a relentless focus on managing fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). , curtailing production and by driving for maximum efficiency from operations. Sappi Fine Paper 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. had an excellent year, producing record profits in Rand Rand See Witwatersrand. rand 1 n. See Table at currency. [Afrikaans, after(Witwaters)rand. terms. It recovered its coated market position in South Africa, which had been eroded e·rode v. e·rod·ed, e·rod·ing, e·rodes v.tr. 1. To wear (something) away by or as if by abrasion: Waves eroded the shore. 2. To eat into; corrode. in the previous year by imports. The uncoated and tissue markets remained strong. As in the other producing regions, cost control and lower pulp price helped. Sappi Forest Products Paper pulp Paper pulp is a material for making paper. It is usuallly cellulose fibre, and could be wood pulp or non-wood pulp See also
tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict production and by year end inventories of the North American and Scandinavian producers had dropped to 1.5 million tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. and consumer inventories were at the lowest September level for at least 5 years. Price increases of US$30 per ton were announced for October October: see month. . Despite the significant reduction in the pulp price the Forest Products business delivered good results, primarily due to its low cost base and some currency benefits. In a tough environment both locally and internationally, the division continued to generate good returns against the weighted average cost of capital Weighted average cost of capital (WACC) Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment. Often the weighted average of the cost of equity and the cost of debt The weights are determined by the relative proportions of equity . Group Against this very challenging background the group produced robust results, reflecting the benefits of strong fundamentals. In particular, the geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. spread of our assets allowed us to take advantage of strong markets and minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. the impact of weaker markets and reduced the impact of any one currency movement. In addition, the scale and efficiency of our operating assets Operating Assets Another term for working capital. and our leading brands combined to assist the group perform at the top end of the sector. We continued to idle capacity and cut back production to match demand. In the final quarter of the year we curtailed over 250,000 tons of production. The group's net profit before exceptional items for the year was US$263 million, 24% below last year and earnings per share before exceptional items were 113 US cents, 23% below last year, an acceptable performance in the very difficult 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 that prevailed. We closed the Mobile mill in Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). , US and have provided for the write off of the assets and closure costs. Subsequent to year end we announced the intention to close 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 in Scotland Scotland, political division of Great Britain (1991 pop. 4,957,000), 30,414 sq mi (78,772 sq km), comprising the northern portion of the island of Great Britain and many surrounding islands. . Had the Mobile mill been closed (with associated overhead cost reductions) at the beginning of the year, there would have been a benefit of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $35 million before tax or approximately 9 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. after tax in this year. The group's earnings after closure and one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. adjustments were $138 million, 62% below last year, and earnings per share were 59 cents. Sales volumes were 5% below last year on a comparable basis. This reflects the slowing economic activity and the inventory reduction by merchants and printers. Average prices achieved were 2% lower in dollar terms than a year earlier, although prices in the last quarter were 5% lower than a year ago. The lower sales volume and prices impacted operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. was 34% lower at $446 million. We have continued to reduce our finance costs through both lower indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. and refinancing Refinancing An extension and/or increase in amount of existing debt. at lower cost. Net finance costs paid before capitalised interest were 13% lower than a year earlier. The finance charge for the final quarter was however adversely impacted by marking foreign exchange contracts to market mainly as a result of the weakness of the Rand towards the end of September. The group tax charge for the year was reduced by the $73 million tax credit relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Mobile closure charge, resulting in a 6% effective rate for the year. The effective rate for ongoing operations excluding Mobile and Transcript was approximately 25% for the full financial year and was reduced by the geographic split of earnings, in particular the lower proportion of earnings in North America, and a reduction in the German tax rate. We expect the effective tax rate to be similar in the new financial year. Cash flow and debt The group ends the year with a strong balance sheet and our business continues to generate healthy cash flows. The group generated a cash flow of US$797 million (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 ) for the year. Capital expenditure for the year of US$321 million represented 91% of depreciation amortization and fellings. This percentage is expected to decline to approximately 70% next year. Net debt declined in the final quarter to US$1,128 million, a reduction of US$142 million for the full year. 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 30.4% compared to 32.5% a year ago. In September we completed the refinancing of the North American credit and revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility utilising part of the facilities available to the group. This resulted in the write off of $9.1 million of deferred finance costs and will result in lower ongoing cash finance costs. We will refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. the approximately $140 million 14% debentures remaining in the US structure in December December: see month. which will result in future savings of approximately $12 million before tax in a full year and eliminate the last of the high cost debt incurred to acquire SD Warren Warren. 1 City (1990 pop. 144,864), Macomb co., SE Mich., a suburb of Detroit; est. 1837, inc. as a city 1957. It is an important metalworking center where steel is processed. . Thereafter, net finance costs are expected to be approximately $17 million per quarter. We ended the year with an increased proportion of short term borrowings, mainly as a result of the $243 million convertible notes which mature in August 2002. The company has adequate cash on hand and long term banking facilities to meet these short term commitments.
Operating Review for the Quarter
Sappi Fine Paper
Quarter Ended
------------------------------------- ------------------ -------------
Sept. 2001 Sept. 2000 %
US$ million US$ million change
------------------------------------- ------------------ -------------
------------------------------------- ------------------ -------------
Sales 826 1,006 (18)
------------------------------------- ------------------ -------------
------------------------------------- ------------------ -------------
Operating profit 65 124 (48)
------------------------------------- ------------------ -------------
------------------------------------- ------------------ -------------
Operating margin (%) 7.9 12.3 -
------------------------------------- ------------------ -------------
------------------------------------- ------------------ -------------
EBITDA 130 189 (31)
------------------------------------- ------------------ -------------
------------------------------------- ------------------ -------------
EBITDA Margin (%) 15.7 18.8 -
------------------------------------- ------------------ -------------
------------------------------------- ------------------ -------------
RONOA p.a. (%) 10.5 18.1 -
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Production curtailments were again taken in all our operations in a difficult quarter and pressure to reduce prices continued. This was partly offset by lower pulp prices that dropped to US$450 per ton in the quarter before showing some improvement in prices in October. As a result of our geographic spread, strong market positions and well invested assets we produced strong results in Europe and Southern Africa
Europe Due to low order levels for coated woodfree paper, sales volumes were 16% lower than a year earlier. Average prices achieved were at a similar level in Euros and only slightly lower in dollars. We curtailed production by approximately one week per month. Tight control over manufacturing and overhead costs overhead costs see fixed costs. and the favourable impact of lower pulp prices helped maintain margins. The return on net operating assets was a healthy 17%.
Quarter ended
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Sept. 2001 Sept. 2000 % change % change
US$ million US$ million (US$) (Euros)
---------------------------------------------------------------------
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Sales 444 535 (17) (15)
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Operating
profit 57 67 (15) (12)
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Operating
margin (%) 12.8 12.5 - -
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EBITDA 94 99 (5) (2)
---------------------------------------------------------------------
---------------------------------------------------------------------
EBITDA
Margin (%) 21.1 18.5 - -
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---------------------------------------------------------------------
RONOA p.a. (%) 17.0 19 - -
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North America Operating conditions in North America worsened in the quarter even before September 11. Overall apparent consumption of coated woodfree paper was considerably lower than a year earlier and imports had a further impact on local producers' market shares. Although our volumes excluding Mobile mill grew relative to the previous quarter, total volumes were 11% lower than the equivalent quarter last year. There has been ongoing pressure on prices and our prices for the benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. No. 3 coated woodfree in 60lb rolls declined 7% for the quarter compared to a year earlier. Operating margins for the quarter were at break-even. Strong action has been taken through the closure of Mobile mill and corporate overhead reductions. Our business is now lean and well positioned to improve performance once the shock waves of recent events have passed and the US economy starts to strengthen.
Quarter ended
--------------------------------------- ------------------ -----------
Sept. 2001 Sept. 2000 %
US$ million US$ million change
--------------------------------------- ------------------ -----------
--------------------------------------- ------------------ -----------
Sales 323 419 (23)
--------------------------------------- ------------------ -----------
--------------------------------------- ------------------ -----------
Operating profit - 52 (100)
--------------------------------------- ------------------ -----------
--------------------------------------- ------------------ -----------
Operating margin (%) - 12.4 -
--------------------------------------- ------------------ -----------
--------------------------------------- ------------------ -----------
EBITDA 26 83 (68)
--------------------------------------- ------------------ -----------
--------------------------------------- ------------------ -----------
EBITDA Margin (%) 8.0 19.8 -
--------------------------------------- ------------------ -----------
--------------------------------------- ------------------ -----------
RONOA p.a. (%) - 17.3 -
--------------------------------------- ------------------ -----------
Fine Paper SA The Southern African business had a good quarter. Sales volumes were 7% higher than a year ago. Average prices achieved in local currency were 17% higher but in dollars were slightly lower. Costs, which are predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. in local currency, were tightly controlled. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 60%, resulting in a 14% operating margin and a healthy 32% return on net operating assets. Forest Products Our forest products business has been impacted by weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. international prices, particularly for pulp. 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 demand remained low and we continued to cut back on production to match customer requirements. Demand in the South African market has not yet been affected significantly by global conditions and prices for paper were higher in local currency than a year earlier. Volumes for ongoing business for the quarter were 6% lower than a year earlier and average prices achieved were 9% lower in dollar terms and 9% higher in Rands Rands is a grey-styled alien character in the webcomic Jerkcity. He represents the real-life Michael Lopp, internet comic author and software engineering manager, who has been an active member of the blogosphere since 1996. .
Quarter ended
------------------------------------------------------------------
Sept. 2001 Sept. 2000 % change % change
US$ million US$ million (US$) (Rands)
------------------------------------------------------------------
------------------------------------------------------------------
Sales 172 240(a) (28) (14)
------------------------------------------------------------------
------------------------------------------------------------------
Operating
profit 31 78 (60) (52)
------------------------------------------------------------------
------------------------------------------------------------------
Operating
margin (%) 18.0 32.5 - -
------------------------------------------------------------------
------------------------------------------------------------------
EBITDA 50 99 (50) (40)
------------------------------------------------------------------
------------------------------------------------------------------
EBITDA
Margin (%) 29.1 41.3 - -
------------------------------------------------------------------
------------------------------------------------------------------
RONOA p.a. (%) 14.4 31.8 - -
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(a) Includes sales of $14 million in respect of Novobord and Mining
Timber since sold.
Post balance sheet events - Insurance The group renews its insurance cover annually on 1 November November: see month. and its stated policy has been to self-insure manageable risks, but to take out full insurance cover for all eventualities on the full value basis for all its assets. Subsequent to September 11, 2001 it is no longer possible to get cover for acts of terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. , nor has it been practical to re-instate its policies on the former basis, in North America. The board is, however, satisfied that the group has adequate cover to deal with any foreseeable risk foreseeable risk n. a danger which a reasonable person should anticipate as the result from his/her actions. Foreseeable risk is a common affirmative defense put up as a response by defendants in lawsuits for negligence. that might arise. - Splitting the role of Chairman and Chief Executive Sappi's Chairman and Chief Executive, 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, will reach the Group's normal retirement age next year. The board has decided to split the role of Chairman and Chief Executive. It will evaluate both external and internal candidates for the 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. position to ensure that the best person is appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. to lead this global company. The board expects to be able to make a further announcement towards the middle of next year and has asked Mr. van As to continue in the role of Non-executive non-executive adj non-executive director → direttore m senza potere esecutivo Chairman after the new Chief Executive is appointed. He has agreed to do so. Share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. During the quarter we continued to buy back shares and since December 2000 have repurchased 12 million shares, approximately 5% of the issued share capital. The average price paid in the quarter was R82.00 per share with a high of R84.70 and a low of R77.62 per share. We have budgeted to continue the programme this financial year. Dividend The Directors have declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a dividend of 26 US cents for the year ended September 2001. A dividend of 25 US cents was paid the previous year. Outlook World economic conditions, which were looking difficult prior to the tragic events of September 11, have worsened and the timing of any upturn has become more obscure OBSCURE - "A Formal Description of the Specification Language OBSCURE", J. Loeckx, TR A85/15, U Saarlandes, Saarbrucken, 1985. . In our North American business the shock will be fully felt in the first quarter of 2002 as the drop in advertising flows through to paper demand. On the positive side, the high level of curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. by producers means that pulp and paper inventories are being well controlled. North American and Scandinavian pulp inventories dropped to almost 1.5 million tons in September and pulp prices lifted off their recent trough Trough The stage of the economy's business cycle that marks the end of a period of declining business activity and the transition to expansion. level of US$450 per ton. We expect a slow start to the year with the North American business bearing the brunt brunt n. 1. The main impact or force, as of an attack. 2. The main burden: bore the brunt of the household chores. of the downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. . In Europe, however, demand for coated free sheet is reasonably stable. Global industry inventory levels are low at consumer and merchant level, as best we can judge, and although end use consumption is likely to be lower because of a weaker economy, demand for our products should not decline much, if at all, in the coming year. Our results in the first quarter will be sharply down, however, not only because of the US situation and curtailment on all continents, but in particular because two of the group's largest profit contributors, Somerset Somerset, cities, United States Somerset. 1 City (1990 pop. 10,733), seat of Pulaski co., S Ky., in a farm, coal, and limestone area of the Cumberland foothills; inc. 1810. and Ngodwana, will have their main maintenance shuts (held every 30 months) in October. In terms of the new international accounting standard the charges will be taken in the quarter and not spread over the period between shuts as in the past. With the information now at our disposal and 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 after the first quarter to return to levels similar to the recent past. The group has a strong balance sheet, a high cash interest cover and is geographically ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge spread, which puts us in a position to take advantage of an upturn when it comes. On behalf of the board E van As D G Wilson Director Director 12 November 2001 Dividend Announcement The directors have declared a dividend (number 78) of 26 US cents per share for the year ended September 2001. In compliance with the requirements of STRATE STRATE Share Trading Transactions Totally Electronic (Johannesburg Stock Exchange) , the JSE JSE See: Johannesburg Stock Exchange Securities Exchange's electronic settlement system which is applicable to Sappi, the Salient dates in respect of the dividend will be as follows: Last day to trade cum dividend: Friday, January 4, 2002 Date on which shares commence trading ex-dividend: Monday, January 7, 2002 Record date: Friday, January 11, 2002 Payment date: Monday, January 14, 2002 Dividends payable Dividends payable The declared dividend dollar amount that a company is obligated to pay. from the Johannesburg transfer office will be paid in South African Rands “ZAR” redirects here. For the former republic, see South African Republic. The rand is the currency of South Africa. It takes its name from the Witwatersrand (White-waters-ridge (except that nominee nominee n. 1) a person or entity who is requested or named to act for another, such as an agent or trustee. 2) a potential successor to another's rights under a contract. shareholders, including the nominees of the US ADR ADR - Astra Digital Radio depositary DEPOSITARY, contracts. He with whom a deposit is confided or made. 2. It is, the essence of the contract of deposits that it should be gratuitous on the part 'of the depositary. 9 M. R. 470. bank, who are nominees for South African non-residents may elect, on or before Thursday Thursday: see week. , December 27, 2001, to receive payment in 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. dollars) and dividends payable from the 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. transfer office will be paid in British pounds sterling or in the case of shareholders with registered addresses in the US, in United States dollars. Dividends payable other than in United States dollars will be calculated at the respective rates of exchange ruling on Thursday, December 27, 2001. The full conditions relating to the payment of the dividend may be inspected at the registered office of the company and also at the offices of the South African and United Kingdom Registrars, and the ADR depositary bank respectively. There will not be any de-materialisation nor re-materialisation of Sappi Limited share certificates from December 28, 2001 to January January: see month. 11, 2002, both days inclusive (theory) inclusive - In domain theory, a predicate P : D -> Bool is inclusive iff For any chain C, a subset of D, and for all c in C, P(c) => P(lub C) In other words, if the predicate holds for all elements of an increasing sequence then it holds for their least upper . Sappi Management Services (Pty) Limited Secretaries Per D J O'Connor November 12, 2001 Sappi Limited (Registration No. 1936/008963/06) 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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 or otherwise. 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. Sappi's net operating assets of approximately R29 billion are located mainly in Europe (41%), North America (31%) and Southern Africa (28%). 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 is equal to one ordinary share). Sappi shares are also traded in London and Frankfurt Frankfurt (frängk`f rt) or Frankfurt am Main (frängk`f .
SAPPI LIMITED
Group income statements
Unaudited
Quarter ended
Sept. 2001 Sept. 2000 %
US$ million US$ million change
-----------------------------
-----------------------------
Sales 998 1,246 (19.9)
Cost of sales 816 941
------- ---------- --------
Gross profit 182 305 (40.3)
Selling, general
& administrative
expenses 91 106
------- ---------- --------
Operating profit 91 199 (54.3)
Non-trading (loss)
profit (3) 13
Net finance costs 36 13
------- ---------- --------
Net paid (a) 42 33
Capitalised (6) (20)
------- ---------- --------
------- ---------- --------
Profit before tax 52 199
Taxation - current 47 27
- deferred (42) 38
------- ---------- --------
Profit after tax 47 134
Income attributable
to minority
interests - 5
------- ---------- --------
Net profit 47 129
----------------------------
EBITDA
175 285 (38.6)
----------------------------
Basic earnings
per share
(US cents) 20 54
Basic earnings
before
exceptional
items
(Headline earnings)
per share
(US cents) 23 49
Weighted average
number of shares
in issue
(millions) 229.6 239.1
Diluted earnings
per share
(US cents) 20 52
Diluted earnings
before exceptional
items
(Headline earnings)
per share
(US cents) 23 48
Weighted average
number of shares
on fully diluted
basis (millions) 232.6 259.8
Calculation of
Earnings before
exceptional items
(Headline) net
of tax
Net profit 47 129
Loss / (profit) on
disposal of business
and fixed assets 4 (21)
Mill closure costs
and asset
impairments (2) 8
Deferred finance fees
written off on
early settlement of
loans 5 -
Decrease in other
provisions (1) (1)
----------------------------
Earnings before
exceptional items
(Headline) 53 115
----------------------------
Audited
Year ended
Sept. 2001 Sept. 2000 $
US$ million US$ million change
----------------------------------
----------------------------------
Sales 4,184 4,718 (11.3)
Cost of sales 3,375 3,650
---------------------
Gross profit 809 1,068 (24.3)
Selling, general
& administrative
expenses 363 396
---------------
Operating profit 446 672 (33.6)
Non-trading (loss)
profit (207) (2)
Net finance costs 92 97
---------------
Net paid 125 144
Capitalised (33) (47)
---------------
---------------
Profit before tax 147 573
Taxation - current 88 73
- deferred (79) 124
---------------
Profit after tax 138 376 (63.3)
-----------------------------
Income attributable
to minority
interests - 13
---------------
Net profit 138 363 (62.0)
-----------------------------
EBITDA 797 1,052 (24.3)
-----------------------------
Basic earnings
per share
(US cents) 59 153
Basic earnings
before
exceptional
items
(Headline earnings)
per share
(US cents) 113 146
Weighted average
number of shares
in issue
(millions) 232.8 236.9
Diluted earnings
per share
(US cents) 59 151
Diluted earnings
before exceptional
items
(Headline earnings)
per share
(US cents) 112 144
Weighted average
number of shares
on fully diluted
basis (millions) 235.2 245.5
Calculation of
Earnings before
exceptional items
(Headline) net
of tax
Net profit 138 363
Loss / (profit) on
disposal of
business
and fixed assets 4 (22)
Mill closure costs
and asset
impairments 118 8
Deferred finance fees
written off on
early settlement of
loans 5 11
Decrease in other
provisions (2) (13)
-------------------------
Earnings before
exceptional items
(Headline) 263 347
-------------------------
(a) Including marking foreign currency contracts to market and other
foreign exchange losses of US$ 13 million
SAPPI LIMITED
Group balance sheet
Audited Audited
September 2001 September 2000
US$ million US$ million
--------------------------------------------
ASSETS
Non-current assets 3,346 3,600
------------------- ----------------------
Property, plant and
equipment 2,890 3,095
Plantations 324 372
Deferred taxation 4 37
Other non-current
assets 128 96
------------------- ----------------------
Current assets 1,160 1,168
------------------- ----------------------
Cash and cash
equivalents 445 294
Trade and other
receivables 202 319
Inventories 513 555
------------------- ----------------------
--------------------------------------------
Total assets 4,506 4,768
--------------------------------------------
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders'
interest 1,503 1,618
Minority interest 3 53
Non-current liabilities 1,640 1,996
------------------- ----------------------
Interest bearing
borrowings 1,014 1,278
Deferred taxation 385 500
Other non-current
liabilities 241 218
------------------- ----------------------
Current liabilities 1,360 1,101
------------------- ----------------------
Interest bearing borrowings
and bank overdraft 559 238
Other current liabilities 801 863
------------------- ----------------------
----------------------- --------------------
Total equity and liabilities 4,506 4,768
--------------------------------------------
Number of shares in
issue (millions) 229.5 239.1
Net Debt (US$ million) 1,128 1,270(a)
Net Debt to Total
Capitalisation (%) 30.4 32.5(a)
Net asset value per
share (US cents) 821 870
(a) Restated for reclassification of minority interest to debt in
September 2001, as if processed in September 2000
SAPPI LIMITED
Group cash flow statement
Audited Audited
Year ended Year ended
September 2001 September 2000
US$ million US$ million
----------------------------------------
Cash generated by operations 771 1,048
Movement in working capital 51 (61)
Net finance costs (125) (144)
Taxation paid (94) (12)
Dividends paid (60) (42)
-----------------------------------
Cash retained from
operating activities 543 789
Cash effects of
investing activities (305) (68)
-----------------------------------
238 721
Cash effects of financing
activities (88) (564)
-----------------------------------
Net movement in cash and
cash equivalents 150 157
-----------------------------------
SAPPI LIMITED
Group statement of
changes in shareholders' equity
Audited Audited
Year ended Year ended
September 2001 September 2000
US$ million US$ million
------------------------------------------------------
Balance - beginning
of year restated 1,618 1,436
Net profit 138 363
Foreign currency
translation reserve (118) (248)
Dividends declared -
US$ 0.25 (2000:
US$ 0.19) per share (60) (45)
Goodwill written off
to equity - (2)
(Share buybacks and
issues to Share
Purchase Trust) /
Issuance of
ordinary shares (83) 114
Revaluation of
derivative instruments 8 -
---------------------------------------
Balance - end of year 1,503 1,618
---------------------------------------
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 2000, except for new or revised accounting
standards adopted in the first quarter of the current year.
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 Audited
Quarter ended Year ended
Sept. 2001 Sept. 2000 Sept. 2001 Sept. 2000
US$ million US$ million US$ million US$ million
------------------------------------------------------------------
2. Operating profit
Included in
operating
profit are:
Depreciation 73 70 300 320
Fellings 6 8 30 36
Amortisation 5 8 21 24
------------------------------------------------------------------
84 86 351 380
------------------------------------------------------------------
3. Capital
expenditure
Fixed assets 293 221
Plantations 28 32
------------------------------------------------------------------
321 253
------------------------------------------------------------------
4. Capital commitments
Contracted but
not provided 78 73
Approved but
not contracted 109 150
------------------------------------------------------------------
187 223
------------------------------------------------------------------
5. Contingent liabilities
Guarantees and
suretyships 79 80
Other contingent
liabilities 27 46
------------------------------------------------------------------
SAPPI LIMITED
Regional Information
Unaudited
Quarter ended
Sept. 2001 Sept. 2000
US$ million US$ million % change
----------------------------------------------------------------------
Sales - Metric tons (000's)
Fine Paper -
North America 287 321 (10.6)
Europe 551 654 (15.7)
Southern Africa 78 67 16.4
----------------------------------------------------------------------
Total 916 1,042 (12.1)
Forest Products(a) 585 740 (20.9)
----------------------------------------------------------------------
Total 1,501 1,782 (15.8)
----------------------------------------------------------------------
Sales
Fine Paper -
North America 323 419 (22.9)
Europe 444 535 (17.0)
Southern Africa 59 52 13.5
----------------------------------------------------------------------
Total 826 1,006 (17.9)
Forest Products(a) 172 240 (28.3)
----------------------------------------------------------------------
Total 998 1,246 (19.9)
----------------------------------------------------------------------
Operating profit
Fine Paper -
North America -- 52 (100.0)
Europe 57 67 (14.9)
Southern Africa 8 5 60.0
----------------------------------------------------------------------
Total 65 124 (47.6)
Forest Products 31 78 (60.3)
Corporate (5) (3)
----------------------------------------------------------------------
Total 91 199 (54.3)
----------------------------------------------------------------------
Earnings before interest, tax,
depreciation and amortisation
charges(b)
Fine Paper -
North America 26 83 (68.7)
Europe 94 99 (5.1)
Southern Africa 10 7 42.9
----------------------------------------------------------------------
Total 130 189 (31.2)
----------------------------------------------------------------------
Forest Products 50 99 (49.5)
Corporate (5) (3)
----------------------------------------------------------------------
Total 175 285 (38.6)
----------------------------------------------------------------------
Net operating assets
Fine Paper -
North America 1,011 1,205 (16.1)
Europe 1,333 1,336 (0.2)
Southern Africa 100 112 (10.7)
----------------------------------------------------------------------
Total 2,444 2,653 (7.9)
Forest Products 825 941 (12.3)
Corporate (13) (20)
----------------------------------------------------------------------
Total 3,256 3,574 (8.9)
----------------------------------------------------------------------
Audited
Year ended
Sept. 2001 Sept. 2000
US$ million US$ million % change
----------------------------------------------------------------------
Sales - Metric tons (000's)
Fine Paper -
North America 1,238 1,318 (6.1)
Europe 2,168 2,383 (9.0)
Southern Africa 288 269 7.1
----------------------------------------------------------------------
Total 3,694 3,970 (7.0)
Forest Products(a) 2,412 2,770 (12.9)
Total 6,106 6,740 (9.4)
----------------------------------------------------------------------
Sales
Fine Paper -
North America 1,442 1,607 (10.3)
Europe 1,781 1,994 (10.7)
Southern Africa 229 227 0.9
----------------------------------------------------------------------
Total 3,452 3,828 (9.8)
Forest Products(a) 732 890 (17.8)
----------------------------------------------------------------------
Total 4,184 4,718 (11.3)
----------------------------------------------------------------------
Operating profit
Fine Paper -
North America 40 179 (77.7)
Europe 177 252 (29.8)
Southern Africa 31 20 55.0
----------------------------------------------------------------------
Total 248 451 (45.0)
Forest Products 194 224 (13.4)
Corporate 4 (3)
----------------------------------------------------------------------
Total 446 672 (33.6)
----------------------------------------------------------------------
Earnings before interest, tax,
depreciation and amortisation
charges(b)
Fine Paper -
North America 150 290 (48.3)
Europe 325 410 (20.7)
Southern Africa 38 28 35.7
----------------------------------------------------------------------
Total 513 728 (29.5)
Forest Products 280 327 (14.4)
Corporate 4 (3)
----------------------------------------------------------------------
Total 797 1,052 (24.2)
----------------------------------------------------------------------
Net operating assets
Fine Paper -
North America 1,011 1,205 (16.1)
Europe 1,333 1,336 (0.2)
Southern Africa 100 112 (10.7)
----------------------------------------------------------------------
Total 2,444 2,653 (7.9)
Forest Products 825 941 (12.3)
Corporate (13) (20)
----------------------------------------------------------------------
Total 3,256 3,574 (8.9)
----------------------------------------------------------------------
(a) Included in September 2000 are sales for Novobord and Mining
Timber businesses which have now been sold. Their sales amounted
to US$14m (118K tons) for the quarter and US$65m (326K tons) year
to September 2000
(b) before non trading profit (loss)
SAPPI LIMITED
Summary Rand Convenience Translation
Unaudited
Quarter Unaudited
ended Year
ended
Sept. Sept. % Sept. Sept. %
2001 2000 change 2001 2000 change
----------------------------------------------------------------------
Sales (ZAR million) 8,370 8,718 (4.0) 33,294 30,889 7.8
Operating profit (ZAR million) 763 1,392 (45.2) 3,549 4,400 (19.3)
Profit after taxation
(ZAR million) 394 938 1,098 2,462 (55.4)
EBITDA (ZAR million) 1,468 1,994 (26.4) 6,342 6,888 (7.9)
Operating profit to sales (%) 9.1 16.0 10.7 14.2
EBITDA to sales (%) 17.5 22.9 19.0 22.3
Operating profit to average
net assets (%) 11.0 20.5 13.0 18.0
Basic EPS before exceptional
items (Headline)
(SA cents) 193 343 (43.8) 899 959 (6.3)
Basic EPS (SA cents) 168 377 469 1,003 (53.2)
EBITDA per share (SA cents) 639 834 (23.4) 2,724 2,907 (6.3)
Net debt (ZAR million) 10,083 9,174(a) 9.9 10,083 9,174(a) 9.9
Net debt to total
capitalisation (%) 30.4 32.5(a) 30.4 32.5(a)
Cash generated by operations
(ZAR million) 6,135 6,861 (10.6)
Cash retained from operating
activities (ZAR million) 4,321 5,166
Net movement in cash and cash
equivalents (ZAR million) 1,194 1,028
Exchange rates:
Period end rate: US $1 = R 8.9386 7.2240 8.9386 7.2240
Average rate: US $1 = R 8.3871 6.9966 7.9574 6.5472
Period end rate:
US $1 = EURO 1.0909 1.1393 1.0909 1.1393
Average rate:
US $1 = EURO 1.1251 1.0940 1.1293 1.0288
(a) Restated for reclassification of minority interest to debt
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