Quarter ended   Nine months ended










Key figures: (US$ million)
Sales 1,602 1,576 1,316 4,798 3,816
Operating profit (loss) 154 28 (7) 183 56
Special items – (gains) losses 1 (79) 26 (6) 27 (61)
Operating profit (loss) excluding special items 2 75 54 (13) 210 (5)
EBITDA excluding special items 3 176 156 93 525 281
Basic Earnings (loss) Per Share (US cents) 12 (6) (12) (3) (16)
Net debt 4 2,337 2,429 2,770 2,337 2,770
Key ratios: (%)
Operating profit (loss) to sales 9.6 1.8 (0.5) 3.8 1.5
Operating profit (loss) excluding special items to sales 4.7 3.4 (1.0) 4.4 (0.1)
Operating profit (loss) excluding special items to Capital

Employed (ROCE)





EBITDA excluding special items to sales 11.0 9.9 7.1 10.9 7.4
Return on average equity (ROE) 5 15.0 (7.3) (12.7) (1.4) (5.4)
Net debt to total capitalisation 5   57.6   59.1   57.5   57.6   57.5
        1 Refer to information in the published results regarding more details on special items
2Refer to Supplemental Information in the published results for the definition of the term and reconciliation of operating profit/ loss excluding special items for the period to operating profit/ loss
3Refer to Supplemental Information in the published results for the definition of the term and reconciliation of EBITDA excluding special items for the period to profit/ loss before taxation
4Refer to Supplemental Information for the reconciliation of net debt to interest-bearing borrowings
5Refer to Supplemental Information in the published results for the definition of the term
The table above has not been audited or reviewed.

The quarter under review

Commenting on the results, Sappi (NYSE: SPP) chief executive Ralph Boëttger said:

“Demand for our products continued to grow during the quarter and the financial performance of the group improved significantly compared to a year ago and also improved compared to the previous quarter. The North American business performed strongly during the quarter and there was a significant improvement in the southern African results. Sales increased to US$1.6 billion, up 22% compared to a year earlier and up 2% compared to the March quarter.

“Average prices realised by the group were 4% higher than a year ago in US dollar terms. Coated woodfree paper prices increased in Europe during the quarter. In addition, the southern African and North American businesses were favourably impacted by higher pulp prices. As an example, the NBSK pulp price increased to US$976 per ton at the end of June, an increase of US$87 per ton since March. Despite increasing prices for coated fine paper, the performance of our European business has been constrained by an 18% increase in variable costs compared to a year ago, largely due to pulp price increases.

“The synergies achieved from the European Acquisition have reached our announced level of €120 million of synergies per annum, ahead of the target date of 2011.

“Operating profit excluding special items was US$75 million for the quarter, a substantial improvement compared to the US$13 million loss a year ago and an improvement on the March quarter. Including special items, operating profit was US$154 million, compared to a loss of US$7 million in the equivalent quarter last year.

“Net finance costs of US$57 million were US$5 million lower than in the prior quarter as a result of foreign currency exchange movements and the repayment of US$235 million of long-term debt out of cash in the last two quarters. Cash generated from operations was US$188 million for the quarter, which was higher than the US$77 million a year ago largely due to improved profitability. Net debt decreased to US$2.3 billion for the quarter. Liquidity remains strong and cash and cash equivalents were US$534 million at the end of the quarter. The €209 million (US$259 million) revolving credit facility remains undrawn.

“Earnings per share for the quarter were 12 US cents (including a gain of 10 US cents in respect of special items), compared to a loss of 12 US cents (including a loss of 2 US cents in respect of special items) a year ago.”

Looking forward, Boëttger commented:

“Although demand in most of our markets has continued growing, our outlook remains cautious in light of ongoing uncertainty in global economies and demand levels.

“In Europe, prices for coated woodfree paper have risen twice since April 2010 and we have announced further increases of at least 7% from September 2010, which we believe are necessary to start restoring margins. Prices for coated mechanical paper started to rise in July 2010 but remain low. North American prices for coated paper are also increasing gradually.

“The rate of increase of pulp prices started flattening in the latter part of the quarter and we expect a period of softer pulp prices over the next few months.

“Demand for our products in Europe is expected to further accelerate in the fourth financial quarter, and our European order books are firm. Order books in our other businesses have lengthened.

“The costs of our non-pulp raw material inputs have started increasing and we are actively managing our processes to minimise the impact of such increases. We expect that pulp input costs will continue to affect the performance of our European business.

“Under current market conditions, we expect operating profit (excluding special items) as well as net cash generation to continue to improve in our fourth financial quarter.

“Mr Valli Moosa, a Director of Sappi’s Broad Based Black Economic Empowerment Partner, Lereko Limited, has been appointed a non-executive director of Sappi Limited with effect from 01 August 2010.”

The full results announcement is available at

There will be a conference call to which investors are invited. Full details are available at using the links Investor Info; Investor Calendar; 3Q10 Financial Results

Forward-looking statements

Certain statements in this release that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives. The words ‘believe’, ‘anticipate’, ‘expect’, ‘intend’, ‘estimate’, ‘plan’, ‘assume’, ‘positioned’, ‘will’, ‘may’, ‘should’, ‘risk’ and other similar expressions, which are predictions of or indicate future events and future trends, 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 impact of the global economic downturn, the risk that the European Acquisition (“Acquisition”) will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, expected revenue synergies and cost savings from the Acquisition may not be fully realised or realised within the expected time-frame, revenues following the Acquisition may be lower than expected, any anticipated benefits from the consolidation of the European paper business may not be achieved, 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), 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, changing regulatory requirements, possible early termination of alternative fuel tax credits, unanticipated production disruptions (including as a result of planned or unexpected power outages), economic and political conditions in international markets, the impact of investments, acquisitions and dispositions (including related financing), any delays, unexpected costs or other problems experienced with 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.

We have included in this announcement an estimate of total synergies from the Acquisition and the integration of the acquired business into our existing business. The estimate of synergies is based on assumptions which in the view of our management were prepared on a reasonable basis, reflect the best currently available estimates and judgements, and present, to the best of our management’s knowledge and belief, the expected course of action and the expected future financial impact on our performance due to the Acquisition. However, the assumptions about these expected synergies are inherently uncertain and, though considered reasonable by management as of the date of preparation, are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in this estimate of synergies. There can be no assurance that we will be able to successfully implement the strategic or operational initiatives that are intended, or realise the estimated synergies. This synergy estimate is not a profit forecast or a profit estimate and should not be treated as such or relied on by shareholders or prospective investors to calculate the likely level of profits or losses for Sappi.

Copyright Business Wire 2010