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
November 2005
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, indicated 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; pulp and paper production, production capacity, input costs including raw material,
energy and employee costs, and pricing levels in North America, Europe, Asia and southern Africa; any
major disruption in production at the Group's key facilities; changes in environmental, tax and other laws
and regulations; adverse changes in the markets for the Group's products; any delays, unexpected costs
or other problems experienced with any business acquired or to be acquired; consequences of the Group's
leverage; adverse changes in the South African political situation and economy or the effect of
governmental efforts to address present or future economic or social problems; and the impact of future
investments, acquisitions and dispositions (including the financing of investments and acquisitions) and any
delays, unexpected costs or other problems experienced in connection with dispositions. 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.
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; pulp and paper production, production capacity, input costs including raw material,
energy and employee costs, and pricing levels in North America, Europe, Asia and southern Africa; any
major disruption in production at the Group's key facilities; changes in environmental, tax and other laws
and regulations; adverse changes in the markets for the Group's products; any delays, unexpected costs
or other problems experienced with any business acquired or to be acquired; consequences of the Group's
leverage; adverse changes in the South African political situation and economy or the effect of
governmental efforts to address present or future economic or social problems; and the impact of future
investments, acquisitions and dispositions (including the financing of investments and acquisitions) and any
delays, unexpected costs or other problems experienced in connection with dispositions. 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.
sappi
1st
2nd
3rd
4th
quarter results and year ended September 2005
Sappi is the world’s leading
producer of coated fine paper
producer of coated fine paper
*
for the year ended September 2005
** as at 30 September 2005
† Rest of World
Sales by product group *
Sales: where the product
is sold *
is sold *
Sales: where the product
is manufactured *
is manufactured *
Geographic ownership **
■
Coated fine paper
■
Uncoated fine paper
■
Coated specialities
■
Commodity paper
■
Pulp
■
Other
63%
4%
9%
9%
13%
2%
■
North America
■
Europe
■
Southern Africa
■
Asia and other
30%
40%
15%
15%
■
North America
■
Europe
■
Southern Africa
29%
45%
26%
■
South Africa
■
North America
■
Europe and ROW
42%
46%
12%
†
●
Headline loss 7 US cents per share for the quarter; net loss
14 US cents per share
14 US cents per share
●
Headline EPS for the year 7 US cents; net loss 94 US cents
●
Prices flat despite input cost escalation
●
Significant production downtime; inventories reduced by
120,000 tons
120,000 tons
●
Improved cash generation; debt reduced
●
Market share recovery in Europe and North America
●
Dividend of 30 US cents
summary
Quarter ended
Year ended
Sept
June
Sept
Sept
Sept
2005
2005
2004
2005
2004
Sales (US$ million)
1,388
1,144
1,235
5,018
4,728
Operating profit (loss) (US$ million) **
5
(193)
72
(137)
188
EBITDA * (US$ million) **
128
(76)
191
353
653
Operating profit (loss) to sales (%)
0.4
(16.9)
5.8
(2.7)
4.0
EBITDA to sales (%) *
9.2
(6.6)
15.5
7.0
13.8
Operating profit(loss)to average net assets(%)*
0.5
(17.7)
6.3
(3.1)
4.1
Headline EPS (US cents) *
(7)
(4)
26
7
43
EPS (US cents)
(14)
(77)
25
(94)
42
Return on average equity (ROE) (%) *
(7.0)
(34.6)
10.5
(10.5)
4.6
Net debt (US$ million) *
1,662
1,823
1,584
1,662
1,584
Net debt to total capitalisation (%) *
35.7
39.7
31.7
35.7
31.7
* Refer to page 19, Supplemental Information for the definition of the term.
** Includes pre-tax charge of US$183 million (September 2005 quarter: US$3 million) in respect of Muskegon mill impairment
and US$50 million (September 2005 quarter: US$7 million) for Usutu mill.
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
financial highlights
Operating conditions continued to present major challenges this quarter. Input costs, especially
energy and chemicals, escalated still further due in part to the hurricanes in the US. There were
no paper price increases to offset these higher costs but there were some encouraging signs in
terms of demand improvement. As highlighted in last quarter’s outlook, our results were
negatively impacted by a charge related to the restructuring of the Muskegon mill and the fact
that we took a considerable amount of commercial downtime in order to reduce our inventories.
Notwithstanding these issues, our businesses generally performed better in terms of cost
containment and market share.
energy and chemicals, escalated still further due in part to the hurricanes in the US. There were
no paper price increases to offset these higher costs but there were some encouraging signs in
terms of demand improvement. As highlighted in last quarter’s outlook, our results were
negatively impacted by a charge related to the restructuring of the Muskegon mill and the fact
that we took a considerable amount of commercial downtime in order to reduce our inventories.
Notwithstanding these issues, our businesses generally performed better in terms of cost
containment and market share.
After several below-trend quarters, European apparent consumption (purchases) of coated fine
paper grew 7.2% in comparison to the same quarter last year. Prices were, however, flat.
paper grew 7.2% in comparison to the same quarter last year. Prices were, however, flat.
Indicators of actual end-use in North America suggest that underlying demand of coated fine
paper remained firm in comparison to the same quarter last year. Industry apparent consumption
(purchases), however, fell 5.1%. The discrepancy is likely to be due to customers reducing their
inventory levels. Prices were stable.
paper remained firm in comparison to the same quarter last year. Industry apparent consumption
(purchases), however, fell 5.1%. The discrepancy is likely to be due to customers reducing their
inventory levels. Prices were stable.
Pulp price developments were mixed. Hardwood pulp prices in US$ terms were flat, while
softwood pulp prices fell 5.5%. After the end of the quarter, pulp prices started to recover due
to increased demand.
softwood pulp prices fell 5.5%. After the end of the quarter, pulp prices started to recover due
to increased demand.
Group sales were US$1.388 billion, an improvement of US$244 million on the prior quarter and
US$153 million on the same quarter last year. This increase in sales does reflect a recovery of
our market shares after the sharp losses in the prior quarter; however, another significant
reason for the increase is the fact that this quarter included an additional accounting week.
The additional week had a minimal impact at the earnings level, however, based on average
weekly sales, it resulted in a sales volume increase of 153,000 tons and US$99 million
increase in sales value.
US$153 million on the same quarter last year. This increase in sales does reflect a recovery of
our market shares after the sharp losses in the prior quarter; however, another significant
reason for the increase is the fact that this quarter included an additional accounting week.
The additional week had a minimal impact at the earnings level, however, based on average
weekly sales, it resulted in a sales volume increase of 153,000 tons and US$99 million
increase in sales value.
Raw material costs continued to escalate this quarter. The price impact of higher wood, energy
and chemical costs reduced our operating earnings by US$9 million compared to last quarter
and US$38 million compared to the same quarter last year. For the full year, this impact was
US$136 million. We have been extremely vigilant in controlling costs and offsetting increases
where possible. On a constant currency basis, group fixed costs for the year increased only 1%
in comparison to the prior year. The many initiatives that we put in place to offset cost increases
delivered US$96 million in savings for the fiscal year.
and chemical costs reduced our operating earnings by US$9 million compared to last quarter
and US$38 million compared to the same quarter last year. For the full year, this impact was
US$136 million. We have been extremely vigilant in controlling costs and offsetting increases
where possible. On a constant currency basis, group fixed costs for the year increased only 1%
in comparison to the prior year. The many initiatives that we put in place to offset cost increases
delivered US$96 million in savings for the fiscal year.
comment
sappi limited – fourth quarter page 2
SG&A costs increased US$19 million in comparison to the same quarter last year. US$8 million
of the increase relates to the additional accounting week and a further US$6 million is due to
currency and pension and IT costs. For the full year, SG&A costs including the impact of the
additional accounting week and an increase of US$11 million due to currency were
US$11 million higher than the prior year.
of the increase relates to the additional accounting week and a further US$6 million is due to
currency and pension and IT costs. For the full year, SG&A costs including the impact of the
additional accounting week and an increase of US$11 million due to currency were
US$11 million higher than the prior year.
The overall operating profit of US$5 million was negatively impacted by other expenses including
the Muskegon restructuring charge of US$21 million, US$10 million of impairment charges
related to the Usutu and Muskegon mills, and a gain of US$6 million from the release of a
European restructuring provision. Also included in the operating result was a gain of
US$27 million from the fair value adjustment on plantations net after fellings. We estimate that
overhead under-recovery from US commercial downtime was approximately US$30 million.
the Muskegon restructuring charge of US$21 million, US$10 million of impairment charges
related to the Usutu and Muskegon mills, and a gain of US$6 million from the release of a
European restructuring provision. Also included in the operating result was a gain of
US$27 million from the fair value adjustment on plantations net after fellings. We estimate that
overhead under-recovery from US commercial downtime was approximately US$30 million.
Finance costs for the quarter were US$27 million, US$1 million higher than a year ago.
Despite the loss this quarter, a tax charge of US$11 million was recorded mainly as a result of
losses in North America not receiving tax relief.
losses in North America not receiving tax relief.
The headline loss for the quarter was 7 US cents per share and the net loss was 14 US cents
per share. Headline earnings for the full year were 7 US cents per share compared to headline
earnings of 43 US cents per share last year. The net loss for the full year was 94 US cents per
share compared to a net profit of 42 US cents per share last year.
per share. Headline earnings for the full year were 7 US cents per share compared to headline
earnings of 43 US cents per share last year. The net loss for the full year was 94 US cents per
share compared to a net profit of 42 US cents per share last year.
cash flow and net debt
Our focus on reducing inventories and lowering working capital this quarter resulted in a
significant improvement in cash flow. Cash generated by operations for the quarter was
US$159 million, US$69 million higher than the prior quarter and slightly higher than the same
quarter last year.
significant improvement in cash flow. Cash generated by operations for the quarter was
US$159 million, US$69 million higher than the prior quarter and slightly higher than the same
quarter last year.
Working capital decreased by US$140 million during the quarter mainly due to inventory
reduction from commercial downtime.
reduction from commercial downtime.
Capital expenditure of US$124 million included US$31 million of non-cash transfers from stores
inventory to property, plant and equipment. The ratio of capital expenditure to depreciation for
the full year, at 82%, is in line with our stated target.
inventory to property, plant and equipment. The ratio of capital expenditure to depreciation for
the full year, at 82%, is in line with our stated target.
Net debt decreased by US$161 million during the quarter to US$1.662 billion. Our net debt
to total capitalization level, currently 35.7%, remained comfortably within our target range of
25%-50% throughout the fiscal year.
to total capitalization level, currently 35.7%, remained comfortably within our target range of
25%-50% throughout the fiscal year.
sappi limited – fourth quarter page 3
sappi limited – fourth quarter page 4
Sappi Fine Paper
Quarter
Quarter
Quarter
ended
ended
ended
Sept 2005
Sept 2004
%
June 2005
US$ million
US$ million
change
US$ million
Sales
1,119
982
14.0
905
Operating (loss) profit
(27)
26
–
(213)
Operating (loss) profit to sales (%)
(2.4)
2.6
(23.5)
EBITDA
60
112
(46.4)
(128)
EBITDA to sales (%)
5.4
11.4
(14.1)
RONOA pa (%)
(3.6)
3.2
(26.3)
Industry shipments in our major markets were better than the levels seen in the last two
quarters, and order inflow picked up in line or ahead of normal seasonal movements. However,
the operating result for Sappi Fine Paper was heavily impacted by downtime related to inventory
reduction in North America as well as the Muskegon mill restructuring charge. The performance
of our South African fine paper business also deteriorated as a result of a lower than expected
proportion of domestic sales and commercial downtime to reduce inventories.
quarters, and order inflow picked up in line or ahead of normal seasonal movements. However,
the operating result for Sappi Fine Paper was heavily impacted by downtime related to inventory
reduction in North America as well as the Muskegon mill restructuring charge. The performance
of our South African fine paper business also deteriorated as a result of a lower than expected
proportion of domestic sales and commercial downtime to reduce inventories.
Europe
Quarter
Quarter
Quarter
ended
ended
%
%
ended
Sept 2005
Sept 2004
change
change
June 2005
US$ million
US$ million
(US$)
(Euro)
US$ million
Sales
596
541
10.2
11.0
498
Operating profit (loss)
40
23
73.9
75.3
(13)
Operating profit (loss)
to sales (%)
6.7
4.3
(2.6)
EBITDA
91
70
30.0
31.0
36
EBITDA to sales (%)
15.3
12.9
7.2
RONOA pa (%)
9.8
5.4
(3.0)
The market share of our European business recovered this quarter after suffering a severe
decline in volumes in the prior quarter in relation to our attempt to increase prices.
Sales volumes rose 135,000 tons on the prior quarter and 64,000 tons on the same quarter
last year. Based on average weekly sales, the additional accounting week in the quarter
accounted for 48,000 tons of the increase.
decline in volumes in the prior quarter in relation to our attempt to increase prices.
Sales volumes rose 135,000 tons on the prior quarter and 64,000 tons on the same quarter
last year. Based on average weekly sales, the additional accounting week in the quarter
accounted for 48,000 tons of the increase.
operating review for the quarter
Demand trends were positive this quarter, with Europe’s apparent consumption growing 7.2%
in comparison to last year. Exports, however, fell sharply and overall shipments therefore
increased only 1.8% on last year. Producer inventories declined substantially to 24 days at the
end of September versus the peak of 31 days in July.
in comparison to last year. Exports, however, fell sharply and overall shipments therefore
increased only 1.8% on last year. Producer inventories declined substantially to 24 days at the
end of September versus the peak of 31 days in July.
Average prices realised by our European business were unchanged in local currency terms in
comparison to the prior quarter although prices slipped towards the end of the quarter.
comparison to the prior quarter although prices slipped towards the end of the quarter.
Overall costs per ton were much improved over the prior quarter due to improved sales
volumes. Raw material input costs, however, continued to increase; the price impact of
chemicals and energy increases was US$14 million in comparison to the same quarter last year.
volumes. Raw material input costs, however, continued to increase; the price impact of
chemicals and energy increases was US$14 million in comparison to the same quarter last year.
North America
Quarter
Quarter
Quarter
ended
ended
ended
Sept 2005
Sept 2004
%
June 2005
US$ million
US$ million
change
US$ million
Sales
424
355
19.4
338
Operating loss
(53)
(1)
–
(200)
Operating loss to sales (%)
(12.5)
(0.3)
(59.2)
EBITDA
(20)
35
–
(168)
EBITDA to sales (%)
(4.7)
9.9
(49.7)
RONOA pa (%)
(18.1)
(0.3)
(60.7)
Although much better than the prior quarter, US industry apparent consumption was still weak,
declining 5.1% in comparison to the same quarter last year. The year on year change in
advertising pages, however, was only marginally negative for the quarter and printer
consumption of coated fine paper increased 3.4%, suggesting that the poor apparent
consumption data does not reflect underlying demand. A rapid decline in imports meant that
shipments by domestic manufacturers actually increased 1.5% in comparison to the same
quarter last year, which is a sharp turnaround from the 9.5% decline seen in the prior quarter.
declining 5.1% in comparison to the same quarter last year. The year on year change in
advertising pages, however, was only marginally negative for the quarter and printer
consumption of coated fine paper increased 3.4%, suggesting that the poor apparent
consumption data does not reflect underlying demand. A rapid decline in imports meant that
shipments by domestic manufacturers actually increased 1.5% in comparison to the same
quarter last year, which is a sharp turnaround from the 9.5% decline seen in the prior quarter.
Sappi Fine Paper North America’s sales volumes increased 104,000 tons in comparison to the
prior quarter and 64,000 tons in comparison to the same quarter last year. 31,000 tons of this
increase was due to the additional accounting week (based on average weekly sales).
prior quarter and 64,000 tons in comparison to the same quarter last year. 31,000 tons of this
increase was due to the additional accounting week (based on average weekly sales).
Price realisations per ton fell 5.0% in comparison to the prior quarter due to a significant mix
effect. Volumes of lower-priced web grades typically increase sharply in the fourth fiscal quarter
in response to the US catalogue season.
effect. Volumes of lower-priced web grades typically increase sharply in the fourth fiscal quarter
in response to the US catalogue season.
The price impact of raw material cost escalation was US$6 million in comparison to the prior
quarter and US$19 million in comparison to the same quarter last year. In addition to continued
cost increases and overhead under-recovery from the large amount of commercial downtime
quarter and US$19 million in comparison to the same quarter last year. In addition to continued
cost increases and overhead under-recovery from the large amount of commercial downtime
sappi limited – fourth quarter page 5
taken in the quarter, the operating loss of US$53 million included a restructuring charge of
US$21 million.
US$21 million.
The process of turning around the earnings of our North American business is gaining traction.
Inventories were successfully reduced through the combination of increased sales and
commercial downtime this quarter by 97,000 tons in comparison to the prior quarter. Despite
the increase in fuel prices, domestic delivery costs were almost 30% lower by the end of the
fiscal year than the peak seen in the first quarter. On-time delivery performance has increased
sharply and complaint levels have reduced significantly. These improvements have resulted in a
recovery of our market share.
Inventories were successfully reduced through the combination of increased sales and
commercial downtime this quarter by 97,000 tons in comparison to the prior quarter. Despite
the increase in fuel prices, domestic delivery costs were almost 30% lower by the end of the
fiscal year than the peak seen in the first quarter. On-time delivery performance has increased
sharply and complaint levels have reduced significantly. These improvements have resulted in a
recovery of our market share.
The restructuring plan at the Muskegon mill and the Boston head office is progressing well.
Paper Machine #4 and the pulp mill were both closed in August. Approximately 60% of the
targeted headcount reduction has already been completed, with further significant reductions to
come in the first fiscal quarter of 2006. The headcount reduction target remains the same as
that announced last quarter; however, the restructuring charge taken this quarter was lower than
anticipated due to reduced severance costs from attrition and a shorter than expected service
profile of departing employees.
Paper Machine #4 and the pulp mill were both closed in August. Approximately 60% of the
targeted headcount reduction has already been completed, with further significant reductions to
come in the first fiscal quarter of 2006. The headcount reduction target remains the same as
that announced last quarter; however, the restructuring charge taken this quarter was lower than
anticipated due to reduced severance costs from attrition and a shorter than expected service
profile of departing employees.
South Africa
Quarter
Quarter
Quarter
ended
ended
%
%
ended
Sept 2005
Sept 2004
change
change
June 2005
US$ million
US$ million
(US$)
(Rands)
US$ million
Sales
99
86
15.1
17.7
69
Operating (loss) profit
(14)
4
–
–
0
Operating (loss) profit
to sales (%)
to sales (%)
(14.1)
4.7
0
EBITDA
(11)
7
–
–
4
EBITDA to sales (%)
(11.1)
8.1
5.8
RONOA pa (%)
(34.6)
9.7
0
In relation to the prior quarter, the performance of the South African fine paper business
deteriorated as a result of lower than expected proportion of domestic sales. Earnings were
further depressed by the taking of commercial downtime to manage inventories. Adjusting for
the additional accounting week, sales volumes increased 8.9% in comparison to the same
quarter last year.
deteriorated as a result of lower than expected proportion of domestic sales. Earnings were
further depressed by the taking of commercial downtime to manage inventories. Adjusting for
the additional accounting week, sales volumes increased 8.9% in comparison to the same
quarter last year.
Despite a slight weakening of the Rand against the US Dollar, continued import pressure
affected domestic prices. Overall price levels fell 2% in local currency terms in comparison to
the prior quarter.
affected domestic prices. Overall price levels fell 2% in local currency terms in comparison to
the prior quarter.
sappi limited – fourth quarter page 6
operating review for the quarter (continued)
sappi limited – fourth quarter page 7
Margins were further squeezed by raw material and energy cost increases, higher usage of
purchased pulp and a charge for spares obsolescence.
purchased pulp and a charge for spares obsolescence.
Sappi Forest Products
Quarter
Quarter
Quarter
ended
ended
%
%
ended
Sept 2005
Sept 2004
change
change
June 2005
US$ million
US$ million
(US$)
(Rands)
US$ million
Sales
269
253
6.3
8.8
239
Operating profit
33
46
(28.3)
(26.6)
21
Operating profit to sales (%)
12.3
18.2
8.8
EBITDA
69
80
(13.8)
(11.8)
52
EBITDA to sales (%)
25.7
31.6
21.8
RONOA pa (%)
10.5
14.1
6.5
Consensus estimates suggest that South African GDP growth was buoyant this quarter at
approximately 4.5%. This had a positive effect on domestic demand for packaging grades
which was further bolstered by strong fruit exports. Newsprint demand is currently strong, driven
by higher publishing and advertising activity. The structural timber market is also very strong, with
sawn timber prices increasing sharply.
approximately 4.5%. This had a positive effect on domestic demand for packaging grades
which was further bolstered by strong fruit exports. Newsprint demand is currently strong, driven
by higher publishing and advertising activity. The structural timber market is also very strong, with
sawn timber prices increasing sharply.
Demand for chemical cellulose was again strong and is likely to be supported by the
announcement of the closure in 2006 of 125,000 tons of capacity by a competitor. The
environmental impact assessment study being conducted as a precursor to a decision on a
major expansion of chemical cellulose capacity at the Saiccor mill has progressed well but is not
yet complete.
announcement of the closure in 2006 of 125,000 tons of capacity by a competitor. The
environmental impact assessment study being conducted as a precursor to a decision on a
major expansion of chemical cellulose capacity at the Saiccor mill has progressed well but is not
yet complete.
Although the Rand weakened somewhat this quarter, it remains at a high level in relation to the
US Dollar and this continues to negatively affect our margins on exports and in the domestic
market as a result of increased import competition.
US Dollar and this continues to negatively affect our margins on exports and in the domestic
market as a result of increased import competition.
international financial reporting standards (IFRS)
Sappi is required by the JSE Limited to report under IFRS from fiscal 2006. Our preparation for
the adoption of IFRS is advanced. The major differences are the treatment of employee benefit
liabilities and expenses, share based payments, and securitised receivables. No significant
reporting adjustments for property, plant and equipment are currently foreseen.
the adoption of IFRS is advanced. The major differences are the treatment of employee benefit
liabilities and expenses, share based payments, and securitised receivables. No significant
reporting adjustments for property, plant and equipment are currently foreseen.
Previously unrecognised actuarial employee benefit gains and losses will be recognised,
resulting in an increase in pension and other post retirement benefit liabilities and a
corresponding reduction in equity. This adjustment will lead to a reduction in employee benefit
expenses in 2006 and future financial years because the amortisation of past losses is no
longer required. The cost of share options and grants, as calculated using the binomial method
will be reflected in the income statement over the vesting period. A significant portion of our
resulting in an increase in pension and other post retirement benefit liabilities and a
corresponding reduction in equity. This adjustment will lead to a reduction in employee benefit
expenses in 2006 and future financial years because the amortisation of past losses is no
longer required. The cost of share options and grants, as calculated using the binomial method
will be reflected in the income statement over the vesting period. A significant portion of our
securitised receivables will be brought on to the balance sheet, increasing both trade
receivables and short-term debt. The related expense will no longer be reflected in SG&A, but
will be included in finance costs. There will be other changes which are not expected to have a
significant impact on earnings or balance sheet ratios.
receivables and short-term debt. The related expense will no longer be reflected in SG&A, but
will be included in finance costs. There will be other changes which are not expected to have a
significant impact on earnings or balance sheet ratios.
The net impact of these changes is currently not expected to have a material impact on
earnings per share in fiscal 2006.
earnings per share in fiscal 2006.
Further information on the adoption of IFRS will be included in the 2005 annual report.
dividend
The board has declared a dividend of 30 US cents for the year ended September 2005.
A dividend of 30 US cents was paid in the previous year.
A dividend of 30 US cents was paid in the previous year.
outlook
The paper industry continues to face persistent increases in input costs without commensurate
price increases and, until recently, an apparent unwillingness to close inefficient excess capacity.
price increases and, until recently, an apparent unwillingness to close inefficient excess capacity.
This volatile environment provides poor earnings visibility. However, it is clear that some of the
prerequisites for earnings improvement including sharply reduced inventories and improving order
and shipment levels are now in place. The drivers of coated paper demand, namely advertising
spend and GDP growth, continue to support demand growth in excess of that seen in fiscal
2005, although customer inventory movements make it difficult to discern actual trends in the
end-use of our products. The capacity closures announced thus far in the grades in which we
participate, while not sufficient on their own to effect a major change, will still go some way to
improving the supply-demand balance. We have targeted similar cost savings in fiscal 2006 to
those achieved this year in order to help offset continued input cost escalation.
prerequisites for earnings improvement including sharply reduced inventories and improving order
and shipment levels are now in place. The drivers of coated paper demand, namely advertising
spend and GDP growth, continue to support demand growth in excess of that seen in fiscal
2005, although customer inventory movements make it difficult to discern actual trends in the
end-use of our products. The capacity closures announced thus far in the grades in which we
participate, while not sufficient on their own to effect a major change, will still go some way to
improving the supply-demand balance. We have targeted similar cost savings in fiscal 2006 to
those achieved this year in order to help offset continued input cost escalation.
In light of these factors, we remain positive about the outlook for our business. We expect an
improvement in earnings in the first quarter of 2006 compared to the fourth quarter of 2005 but
this is likely to be limited by further input cost increases and it will be a challenge to achieve
earnings for the quarter much above breakeven.
improvement in earnings in the first quarter of 2006 compared to the fourth quarter of 2005 but
this is likely to be limited by further input cost increases and it will be a challenge to achieve
earnings for the quarter much above breakeven.
On behalf of the Board
J C A Leslie
D G Wilson
Director
Director
10 November 2005
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN Code: ZAE000006284
sappi limited – fourth quarter page 8
dividend announcement
The directors have declared a dividend (number 82) of 30 US cents per share for the year
ended September 2005.
ended September 2005.
In compliance with the requirements of STRATE, the JSE electronic settlement system which is
applicable to Sappi, the salient dates in respect of the dividend will be as follows:
applicable to Sappi, the salient dates in respect of the dividend will be as follows:
Last day to trade to qualify for dividend
Thursday 29 December 2005
Date on which shares commence trading ex-dividend
Friday 30 December 2005
Record date
Friday 6 January 2006
Payment date
Monday 9 January 2006
Dividends payable from the Johannesburg transfer office will be paid in South African Rands
except that dividends payable to nominee shareholders in respect of shares which they hold on
behalf of non-residents of the Republic of South Africa will without exception be paid in United
States Dollars. There will not be any election.
except that dividends payable to nominee shareholders in respect of shares which they hold on
behalf of non-residents of the Republic of South Africa will without exception be paid in United
States Dollars. There will not be any election.
Dividends payable from the London transfer office will be paid in British Pounds Sterling or in the
case of shareholders with registered addresses in the USA, in United States Dollars.
case of shareholders with registered addresses in the USA, in United States Dollars.
Dividends payable other than in United States Dollars will be calculated at the respective rates of
exchange ruling on the London Reuters Exchange at midnight on Monday 19 December 2005,
and announced on Tuesday 20 December 2005.
exchange ruling on the London Reuters Exchange at midnight on Monday 19 December 2005,
and announced on Tuesday 20 December 2005.
There will not be any de-materialisation nor re-materialisation of Sappi Limited share certificates
from Friday 30 December 2005 to Friday 6 January 2006, both days inclusive.
from Friday 30 December 2005 to Friday 6 January 2006, both days inclusive.
Sappi Management Services (Pty) Limited
Secretaries
Secretaries
Per D J O’Connor
10 November 2005
sappi limited – fourth quarter page 9
sappi limited – fourth quarter page 10
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.
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 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, changing regulatory requirements, unanticipated production disruptions,
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. 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.
forward-looking statements
financial results
for the quarter and year ended September 2005
sappi limited – fourth quarter page 11
group income statement
sappi limited – fourth quarter page 12
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
US$ million
US$ million
% change
US$ million
US$ million
% change
Sales
1,388
1,235
12.4
5,018
4,728
6.1
Cost of sales
1,246
1,071
4,514
4,133
Gross profit
142
164
(13.4)
504
595
(15.3)
Selling, general and
administrative expenses
107
88
382
371
35
76
122
224
Other expenses
30
4
259
36
Operating profit (loss)
5
72
(93.1)
(137)
188
–
Net finance costs
27
26
87
110
Net paid
27
28
110
106
Capitalised
–
–
(1)
(2)
Net foreign exchange loss(gains)
1
–
(5)
(5)
Change in fair value of financial
instruments
(1)
(2)
(17)
11
(Loss) profit before tax
(22)
46
–
(224)
78
–
Taxation – current
22
15
45
48
– deferred
(11)
(25)
(56)
(65)
Net (loss) profit
(33)
56
–
(213)
95
–
(Loss) earnings per share
(US cents)
(14)
25
(94)
42
Headline (loss) earnings per
share (US cents) *
(7)
26
7
43
Weighted average number of
shares in issue (millions)
225.8
226.5
225.8
226.3
Diluted (loss) earnings per share
(US cents)
(14)
25
(94)
42
Diluted headline (loss) earnings
per share (US cents) *
(7)
26
7
43
Weighted average number of
shares on fully diluted basis
(millions)
(millions)
226.6
228.3
226.7
228.2
Calculation of Headline
(loss) earnings *
Net (loss) profit
(33)
56
(213)
95
Profit on disposal of business
and property, plant & equipment
1
–
2
–
Write-off of assets
2
3
6
3
Impairment of property,
plant & equipment
12
–
219
–
Debt restructuring costs
2
–
2
–
Headline (loss) earnings
(16)
59
16
98
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
* Headline (loss) earnings disclosure is required by the JSE Limited.
Reviewed
Reviewed
Sept
Sept
2005
2004
US$ million
US$ million
ASSETS
Non-current assets
4,332
4,564
Property, plant and equipment
3,333
3,670
Plantations
604
548
Deferred taxation
72
84
Other non-current assets
323
262
Current assets
1,376
1,580
Inventories
711
765
Trade and other receivables
298
331
Cash and cash equivalents
367
484
Total assets
5,708
6,144
EQUITY AND LIABILITIES
Shareholders’ equity
Ordinary shareholders’ interest
1,881
2,157
Non-current liabilities
2,342
2,463
Interest-bearing borrowings
1,600
1,693
Deferred taxation
411
453
Other non-current liabilities
331
317
Current liabilities
1,485
1,524
Interest-bearing borrowings
270
364
Bank overdraft
159
11
Other current liabilities
936
1,012
Taxation payable
120
137
Total equity and liabilities
5,708
6,144
Number of shares in issue at balance sheet date (millions)
225.9
226.5
group balance sheet
sappi limited – fourth quarter page 13
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
US$ million
US$ million
US$ million
US$ million
Operating profit (loss)
5
72
(137)
188
Depreciation, fellings and other
amortisation
123
119
490
465
Other non-cash items
(including impairment charges)
31
(34)
201
(52)
Cash generated by operations
159
157
554
601
Movement in working capital
140
79
(60)
(50)
Net finance costs
(24)
(28)
(112)
(109)
Taxation paid
(3)
(1)
(43)
(31)
Dividends paid
–
–
(68)
(66)
Cash retained from operating activities
272
207
271
345
Cash effects of investing activities
(109)
(109)
(379)
(356)
163
98
(108)
(11)
Cash effects of financing activities
32
(9)
(7)
(121)
Net movement in cash and cash
equivalents
195
89
(115)
(132)
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
group cash flow statement
sappi limited – fourth quarter page 14
Reviewed
Reviewed
Year
Year
ended
ended
Sept
Sept
2005
2004
US$ million
US$ million
Balance – beginning of year as reported
2,119
1,945
Change in accounting policy – refer to note 1
38
38
Balance – beginning of year restated
2,157
1,983
Net (loss) profit
(213)
95
Foreign currency translation reserve
3
153
Revaluation of derivative instruments
16
1
Dividends paid – US$ 0.30 (2004: US$ 0.29) per share
(68)
(66)
Share buybacks net of transfers to participants of the
share purchase trust
(14)
(9)
Balance – end of year
1,881
2,157
group statement of changes in
shareholders’ equity
shareholders’ equity
sappi limited – fourth quarter page 15
1. Basis of preparation
The annual financial statements are prepared in conformity with South African Statements of
Generally Accepted Accounting Practice (SA GAAP). These quarterly results have been
prepared in compliance with AC 127 (Interim financial reporting) and are based on
accounting policies which are consistent with those used in the annual financial statements.
The same accounting policies have been followed as in the annual financial statements for
September 2004, except for the new accounting standard AC 501 – Accounting for
“Secondary Tax on Companies (STC)”– which became effective from the beginning of the
current financial year. This has resulted in the recognition of a deferred tax asset for unused
tax credits to the extent that they will be utilised in the future.
The adoption of the new accounting policy resulted in an increase in shareholders’ equity
of US$38 million at September 2004 (September 2003: increase of US$38 million).
The effect on net profit for the quarter is nil (September 2004 quarter: nil) and a decrease
of US$8 million for the year ended September 2005 (September 2004: a decrease of
US$3 million). Where appropriate, comparative figures have been restated.
The preliminary results for the quarter have been reviewed in terms of International Standards
on Review Engagements by the group’s auditors, Deloitte & Touche. Their unqualified review
report is available for inspection at the company’s registered offices.
2. Comparative figures
Restructuring costs of US$32 million incurred in the year ended September 2004
(September 2004 quarter: nil) have been reclassified from selling, general and administrative
expenses to other expenses in the income statement.
notes to the group results
sappi limited – fourth quarter page 16
sappi limited – fourth quarter page 17
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
US$ million
US$ million
US$ million
US$ million
3. Operating profit
Included in operating profit are the
following non-cash items:
Depreciation and amortisation
Depreciation of property, plant and
equipment
105
103
422
408
Other amortisation
1
–
2
2
106
103
424
410
Impairment of property,
plant & equipment *
10
–
233
–
Impairment of other assets *
–
–
3
–
Impairment reversal of property,
plant & equipment
–
–
(4)
–
116
103
656
410
Fair value adjustment (gains) on
plantations (included in cost of sales)
Changes in volume
Fellings
17
16
66
55
Growth
(9)
(10)
(58)
(54)
8
6
8
1
Changes in fair value
(35)
(18)
(60)
(71)
(27)
(12)
(52)
(70)
The above fair value adjustment gains
have been offset by silviculture
costs
11
11
45
39
4. Capital expenditure
Property, plant and equipment **
124
110
345
334
* Includes pre-tax charge of US$183 million (September 2005 quarter: US$3 million ) in respect of Muskegon Mill impairment
and US$50 million (September 2005 quarter: US$7 million) for Usutu Mill.
** Includes transfers from inventory to property, plant and equipment during the quarter ended September 2005 of US$31 million.
notes to the group results (continued)
sappi limited – fourth quarter page 18
Reviewed
Reviewed
Sept
Sept
2005
2004
US$ million
US$ million
5. Capital commitments
Contracted but not provided
115
76
Approved but not contracted
198
198
313
274
6. Contingent liabilities
Guarantees and suretyships
86
68
Other contingent liabilities
11
15
sappi limited – fourth quarter page 19
supplemental information
definitions
Average – averages are calculated as the sum of the opening and closing balances for the
relevant period divided by two
relevant period divided by two
*
EBITDA – earnings before interest (net finance costs), tax, depreciation and amortisation
*
EBITDA to sales – EBITDA divided by sales
Fellings – the amount charged against the income statement representing the standing value
of the plantations harvested
of the plantations harvested
Headline earnings – as defined in circular 7/2002 issued by the South African Institute of
Chartered Accountants, separates from earnings all items of a capital nature. It is not necessarily
a measure of sustainable earnings. It is a listing requirement of the JSE Limited to disclose
headline earnings per share
Chartered Accountants, separates from earnings all items of a capital nature. It is not necessarily
a measure of sustainable earnings. It is a listing requirement of the JSE Limited to disclose
headline earnings per share
NBSK – Northern Bleached Softwood Kraft pulp. One of the main varieties of market pulp,
mainly produced from spruce trees in Scandinavia, Canada and north eastern USA. The NBSK
is a benchmark widely used in pulp and paper industry for comparative purposes
mainly produced from spruce trees in Scandinavia, Canada and north eastern USA. The NBSK
is a benchmark widely used in pulp and paper industry for comparative purposes
*
Net assets – total assets less current liabilities
*
Net asset value – shareholders’ equity plus net deferred tax
*
Net asset value per share – net asset value divided by the number of shares in issue at
balance sheet date
balance sheet date
*
Net debt – current and non-current interest-bearing borrowings, and bank overdrafts
(net of cash, cash equivalents and short-term deposits)
(net of cash, cash equivalents and short-term deposits)
*
Net debt to total capitalisation – Net debt divided by shareholders’ equity plus minority
interest, non-current liabilities, current interest-bearing borrowings and overdraft
interest, non-current liabilities, current interest-bearing borrowings and overdraft
*
ROE – return on average equity. Net profit divided by average shareholders’ equity
*
RONA – operating profit divided by average net assets
*
RONOA – operating profit divided by average net operating assets. Net operating assets are
total assets (excluding deferred taxation and cash) less current liabilities (excluding interest-
bearing borrowings and bank overdraft)
total assets (excluding deferred taxation and cash) less current liabilities (excluding interest-
bearing borrowings and bank overdraft)
*
SG&A – selling, general and administrative expenses
* The above financial measures, other than headline earnings per share, 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.
financial measures are regularly used and compared between companies in our industry.
sappi limited – fourth quarter page 20
additional information
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
US$ million
US$ million
US$ million
US$ million
Net (loss) profit to EBITDA
(1)
reconciliation
Net (loss) profit
(33)
56
(213)
95
Net finance costs
27
26
87
110
Taxation – current
22
15
45
48
– deferred
(11)
(25)
(56)
(65)
Depreciation
105
103
422
408
Amortisation (including fellings)
18
16
68
57
EBITDA
(1) (3)
128
191
353
653
Reviewed
Reviewed
Sept
Sept
2005
2004
Net debt (US$ million)
(2)
1,662
1,584
Net debt to total capitalisation (%)
(2)
35.7
31.7
Net asset value per share (US$)
(2)
9.83
11.15
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
(1)
In connection with the U.S. Securities Exchange Commission (“SEC”) rules relating to “Conditions for Use of Non-GAAP
Financial Measures”, we have reconciled EBITDA to net profit rather than operating profit.
As a result our definition retains other income / expenses as part of EBITDA.
We use EBITDA as an internal measure of performance and believe it is a useful and commonly used measure of financial
performance in addition to operating profit and other profitability measures under SA GAAP. EBITDA is not a measure of
performance under SA GAAP. EBITDA should not be construed as an alternative to operating profit as an indicator of the
company’s operations in accordance with SA GAAP. EBITDA is also presented to assist our shareholders and the investment
community in interpreting our financial results. This financial measure is regularly used as a means of comparison of
companies in our industry by removing certain differences between companies such as depreciation methods, financing
structures and taxation regimes. Different companies and analysts may calculate EBITDA differently, so making comparisons
among companies on this basis should be done very carefully.
(2)
Refer to page 19, Supplemental Information for the definition of the term.
(3)
EBITDA for the year ended ended September 2005 reduced by US$232 million (September 2005 quarter: US$10 million)
in respect of asset impairments and asset impairment reversals.
supplemental information
sappi limited – fourth quarter page 21
supplemental information
regional information
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
Metric tons
Metric tons
Metric tons
Metric tons
(000’s)
(000’s)
% change
(000’s)
(000’s)
% change
Sales
Fine Paper –
Fine Paper –
North America
428
364
17.6
1,433
1,444
(0.8)
Europe
673
609
10.5
2,427
2,388
1.6
Southern Africa
102
87
17.2
317
318
(0.3)
Total
1,203
1,060
13.5
4,177
4,150
0.7
Forest Products –
Pulp and paper operations
411
390
5.4
1,565
1,516
3.2
Forestry operations
532
453
17.4
1,737
1,527
13.8
Total
2,146
1,903
12.8
7,479
7,193
4.0
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
US$ million
US$ million
% change
US$ million
US$ million
% change
Sales
Fine Paper –
Fine Paper –
North America
424
355
19.4
1,458
1,373
6.2
Europe
596
541
10.2
2,239
2,127
5.3
Southern Africa
99
86
15.1
323
311
3.9
Total
1,119
982
14.0
4,020
3,811
5.5
Forest Products –
Pulp and paper operations
239
231
3.5
908
847
7.2
Forestry operations
30
22
36.4
90
70
28.6
Total
1,388
1,235
12.4
5,018
4,728
6.1
Operating (loss) profit
Fine Paper –
Fine Paper –
North America *
(53)
(1)
–
(270)
(92)
(193.5)
Europe
40
23
73.9
76
83
(8.4)
Southern Africa
(14)
4
–
(12)
15
–
Total
(27)
26
–
(206)
6
–
Forest Products *
33
46
(28.3)
73
191
(61.8)
Corporate
(1)
–
–
(4)
(9)
55.6
Total *
5
72
(93.1)
(137)
188
–
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
* Operating profit and EBITDA for the year ended September 2005 reduced by US$232 million (September 2005 quarter:
US$10 million) in respect of asset impairments and asset impairment reversals.
sappi limited – fourth quarter page 22
supplemental information
regional information (continued)
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
2005
2004
US$ million
US$ million
% change
US$ million
US$ million % change
Earnings before interest, tax, depreciation
and amortisation charges
Fine Paper –
North America *
(20)
35
–
(133)
46
–
Europe
91
70
30.0
276
277
(0.4)
Southern Africa
(11)
7
–
3
28
(89.3)
Total
60
112
(46.4)
146
351
(58.4)
Forest Products *
69
80
(13.8)
210
311
(32.5)
Corporate
(1)
(1)
–
(3)
(9)
66.7
Total *
128
191
(33.0)
353
653
(45.9)
Net operating assets
Fine Paper –
Fine Paper –
North America
1,119
1,351
(17.2)
1,119
1,351
(17.2)
Europe
1,595
1,673
(4.7)
1,595
1,673
(4.7)
Southern Africa
156
153
2.0
156
153
2.0
Total
2,870
3,177
(9.7)
2,870
3,177
(9.7)
Forest Products
1,288
1,296
(0.6)
1,288
1,296
(0.6)
Corporate and other **
55
(46)
–
55
(46)
–
Total
4,213
4,427
(4.8)
4,213
4,427
(4.8)
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
* Operating profit and EBITDA for the year ended September 2005 reduced by US$232 million (September 2005 quarter:
US$10 million) in respect of asset impairments and asset impairment reversals.
** Includes investment in joint venture in China.
sappi limited – fourth quarter page 23
supplemental information
summary rand convenience translation
Reviewed
Reviewed
Reviewed
Reviewed
Quarter
Quarter
Year
Year
ended
ended
ended
ended
Sept
Sept
Sept
Sept
2005
2004
% change
2005
2004
% change
Sales (ZAR million)
9,062
7,883
15.0
31,321
31,594
(0.9)
Operating profit (loss)(ZAR million) **
33
460
(92.8)
(855)
1,256
–
Net (loss) profit (ZAR million)
(215)
357
–
(1,330)
635
–
EBITDA * (ZAR million) **
836
1,219
(31.4)
2,203
4,364
(49.5)
Operating profit (loss) to sales (%)
0.4
5.8
(2.7)
4.0
EBITDA * to sales (%)
9.2
15.5
7.0
13.8
Operating profit (loss) to average
net assets (%)
0.5
6.3
(3.0)
4.1
EPS (SA cents)
(91)
160
–
(587)
281
–
Headline EPS (SA cents) *
(46)
166
–
44
287
(84.7)
Net debt (ZAR million) *
10,580
10,184
3.9
Net debt to total capitalisation (%) *
35.7
31.7
Cash generated by operations
(ZAR million)
1,038
1,002
3.6
3,458
4,016
(13.9)
Cash from operating activities
(ZAR million)
1,776
1,321
34.4
1,692
2,305
(26.6)
Net movement in cash and cash
equivalents (ZAR million)
1,273
568
124.1
(718)
(882)
18.6
Note: 2005 fiscal year included 53 weeks (2004 fiscal year: 52 weeks), September 2005 quarter included 14 weeks
(June 2005 and September 2004 quarters: 13 weeks).
* Refer to page 19, Supplemental Information for the definition of the term.
** Operating profit and EBITDA for the year ended September 2005 reduced by ZAR1,448 million (September 2005 quarter:
ZAR78 million) in respect of asset impairments and asset impairment reversals.
exchange rates
Sept
June
March
Dec
Sept
2005
2005
2005
2004
2004
Exchange rates:
Period end rate: US $1 = ZAR
6.3656
6.7041
6.2059
5.6480
6.4290
Average rate for the Quarter: US $1 = ZAR
6.5289
6.3738
5.9577
6.0649
6.3830
Average rate for the YTD: US $1 = ZAR
6.2418
6.1732
6.0632
6.0649
6.6824
Period end rate: EUR 1 = US$
1.2030
1.2097
1.2982
1.3456
1.2309
Average rate for the Quarter: EUR 1 = US$
1.2139
1.2678
1.3110
1.2848
1.2233
Average rate for the YTD: EUR 1 = US$
1.2659
1.2811
1.2911
1.2848
1.2152
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.
note : (1 ADR = 1 sappi share)
sappi ordinary shares
ADR price (NYSE TICKER: SPP)
1 Jan
2003
1 Apr
2003
1 Jul
2003
2003
1 Oct
2003
1 Jan
2004
1 Apr
2004
1 Jul
2004
2004
1 Oct
2004
1 Jan
2005
1 Apr
2005
1 Jul
2005
2005
1 Oct
2005
140
120
100
80
60
40
20
0
18
16
14
12
10
8
6
4
2
0
9 Nov
2005
1 Jan
2003
1 Apr
2003
1 Jul
2003
2003
1 Oct
2003
1 Jan
2004
1 Apr
2004
1 Jul
2004
2004
1 Oct
2004
1 Jan
2005
1 Apr
2005
1 Jul
2005
2005
1 Oct
2005
9 Nov
2005
sappi limited – fourth quarter page 24
this report is available on the Sappi website
www.sappi.com
Other interested parties can obtain printed copies of this report from:
South Africa:
United States
United Kingdom:
Computershare Investor
ADR Depository:
Capita Registrars
Services 2004 Limited
The Bank of New York
The Registry
70 Marshall Street
Investor Relations
34 Beckenham Road
Johannesburg 2001
PO Box 11258
Beckenham, Kent
PO Box 61051
Church Street Station
BR3 4TU, DX 91750
Marshalltown 2107
New York, NY 10286-1258
Beckenham West
Tel +27 (0)11 370 5000
Tel +1 610 382 7836
Tel +44 (0)208 639 2157
Printed on Sappi Avalon Supreme Matt 250g/m
2
and 150g/m
2
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.
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:
November 23, 2005
SAPPI LIMITED,
by /s/ D. G. Wilson
Name: D. G. Wilson
Title: Executive Director: Finance
Title: Executive Director: Finance