Edgar Filing: SAPPI LTD

Page 1

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 May, 2007

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 20-F

-------

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.

Yes

-------

If “Yes” is marked, indicate below the file number assigned to the registrant in

connection with Rule 12g3-2(b): 82-

FORWARD-LOOKING STATEMENTS

In order to utilize the “Safe Harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995 (the “Reform Act”), Sappi Limited (the “Company”) is
providing the following cautionary statement. Except for historical information contained
herein, statements contained in this Report on Form 6-K may constitute “forward-looking
statements” within the meaning of the Reform Act. The words “believe”, “anticipate”,
“expect”, “intend”, “estimate “, “plan”, “assume”, “positioned”, “will”, “may”, “should”,
“risk” and other similar expressions which are predictions of or indicate future events and
future trends which do not relate to historical matters identify forward-looking
statements. In addition, this Report on Form 6-K may include forward-looking statements
relating to the Company’s potential exposure to various types of market risks, such as
interest rate risk, foreign exchange rate risk and commodity price risk. Reliance should
not be placed on forward-looking statements because they involve known and unknown
risks, uncertainties and other factors which are in some cases beyond the control of the
Company, together with its subsidiaries (the “Group”), and may cause the actual results,
performance or achievements of the Group to differ materially from anticipated future
results, performance or achievements expressed or implied by such forward-looking
statements (and from past results, performance or achievements). Certain factors that may
cause such differences include but are not limited to: the highly cyclical nature of the
pulp and paper industry; 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

quarter results and half-year

ended March 2007

2nd

* for the six months ended March 2007

** estimate as at 31 March 2007

† Rest of World

Sales by product group *

Sales: where the product is manufactured *

Sales: where the product is sold *

Geographic ownership **

■

Coated fine paper

64%

■

Uncoated fine paper

■

Coated specialities

■

Packaging and newsprint

■

Pulp

14%

■

Other

■

North America

29%

■

Europe

41%

■

Southern Africa

15%

■

Asia and other

15%

■

South African

60%

■

North America

30%

■

Europe and ROW †

10%

■

North America

29%

■

Europe

46%

■

Southern Africa

25%

Sappi is the world’s leading
producer of coated fine paper

●

EPS 25 US cents

●

Forest Products performance strong

●

Price increase in Europe achieved

●

Nash mill site sold – contributed 8 US cents

●

Wood costs in Europe soar

●

Strong cash flow

financial highlights

Quarter

Half-year

ended

March

Dec

March

2007

2006

2007

2006

Sales (US$ million)

1,318

1,267

1,256

2,585

2,431

Operating profit (US$ million)

117

209

108

Operating profit to sales (%)

8.9

7.3

4.7

8.1

4.4

EBITDA ** (US$ million) *

211

187

158

398

304

EBITDA ** to sales (%) *

16.0

14.8

12.6

15.4

12.5

Operating profit to average net assets (%) *

11.7

9.4

5.9

10.7

5.3

EPS (US cents)

Return on average equity (ROE) (%) *

15.7

8.4

2.4

12.2

1.1

Net debt (US$ million) *

2,236

2,278

2,172

2,236

2,172

Net debt to total capitalisation (%) *

46.2

46.7

44.3

46.2

44.3

Refer to page 15, Supplemental Information for the definition of the term.

** Refer to page 16, additional information in Supplemental Information for the reconciliation of EBITDA to profit.

summary

The operating performance of the group continued to improve in the quarter and was led by the Forest

Products business which benefited from strong pulp prices and a weaker Rand against the US Dollar

compared to a year ago. The profitability of our European and North American regions has lagged despite

favourable market developments, largely as a result of high input costs.

Group sales increased 5% to US$1.3 billion reflecting higher volumes and price improvements in the

Southern African businesses and a price increase in Europe.

High raw material input costs and energy costs remain an issue. As a group we are economically integrated

as far as pulp is concerned. We sell slightly more pulp than we purchase and therefore have a net benefit

from strong pulp prices. However, high pulp prices squeeze the margin of our European business which is

only partially integrated. In Europe we also suffer from the impact of severely increased wood costs. In

other regions the rate of input price rises has abated to some extent but input prices remain very high.

Manufacturing fixed costs continue to be tightly managed with cost saving initiatives more than off-setting

inflation. Selling, General and Administrative (SG&A) costs of US$93 million were US$6 million higher than

a year ago largely as a result of credits for pension costs and the sale of carbon credits, which reduced

SG&A last year. The restructuring of our European business is progressing and we have been able to

release part of the provision we recorded in the fourth quarter last year in respect of this restructuring

because of higher natural attrition and lower severance costs than estimated. The release had a favourable

impact of US$6 million before tax in this quarter.

The plantation fair value price adjustment for the quarter was US$12 million (Q2 2006: US$57 million) as

a result of higher market prices for wood partly offset by higher costs to deliver the wood to market.

During the quarter we sold the site of the Nash mill, Hemel Hempstead, UK for GBP24.5 million

(US$46 million). We stopped operations at the mill in May 2006. A pre-tax profit of US$25 million on the

sale is reported in these results.

Operating profit for the quarter increased to US$117 million in the quarter up from US$59 million a year

ago. This includes the profit on the sale of Nash mill, the plantation fair value adjustment and the release

of the restructuring provision.

Net finance costs were US$33 million up US$2 million for the quarter compared to a year ago, largely as

a result of higher interest rates and average debt levels.

The effective tax rate for the group for the quarter was 31%. This rate was negatively impacted by the

regional split of profit (specifically the tax losses in our US business were not relieved) and the effect of tax

rate changes on deferred tax assets.

Net profit for the group increased to US$58 million compared to US$9 million in the equivalent quarter last

year. Earnings per share were 25 US cents per share which includes the profit from the sale of Nash mill

and the plantation fair value adjustment.

comment

sappi limited – second quarter page 2

sappi limited – second quarter page 3

cash flow and debt

Cash generated by operations was US$175 million for the quarter, approximately 50% higher than a year

ago. This excludes the sale of the Nash mill site.

Capital expenditure was US$72 million, a significant reduction from the prior quarter which included up

front payments for the Saiccor expansion. Cash utilised in investing activities includes the US$46 million

proceeds on the sale of the Nash mill site.

Cash retained after investing activities was US$45 million after paying the annual dividend of US$68 million

in the quarter which was declared in November 2006.

The net debt of US$2.2 billion was US$42 million lower than December 2006 despite funding the ongoing

Saiccor expansion. Net debt to total capitalisation was slightly lower at 46.2% compared to 46.7% at

December 2006.

operating review for the quarter

Sappi Fine Paper

Quarter

ended

March 2007 *

March 2006

Dec 2006

US$ million

change

US$ million

Sales

1,057

1,018

3.8

1,044

Operating profit (loss)

(6)

–

Operating profit (loss) to sales (%)

4.6

(0.6)

–

1.5

EBITDA *

122

62.7

EBITDA to sales (%)

11.5

7.4

–

9.0

RONOA pa (%)

6.3

(0.8)

–

2.1

* Includes profit before tax on sale of the Nash mill site of US$25 million

We experienced steady demand for coated fine paper in our major markets. Apparent consumption in

North America was slightly below that of a year ago but shipments from domestic suppliers grew 6%. In

Europe demand remained strong.

There were a number of favourable market developments in the quarter. The long trend of declining prices

in Europe was finally reversed when we realised higher coated fine paper prices during the quarter.

A preliminary determination by the United States Department of Commerce containing substantial

countervailing duties against Asian coated woodfree imports was announced at the end of the quarter.

These duties are expected to help pricing in the USA which has been dragged down for several years by

increasing volumes of lower priced imports from Asia.

The performance of our fine paper business continues to reflect inadequate margins as a result of

continued pressure on particular input costs.

Europe

Quarter

ended

March 2007

March 2006

change

Dec 2006

US$ million

(US$)

(Euro)

US$ million

Sales

597

569

4.9

(4.5)

587

Operating profit

44 *

–

Operating profit to sales (%)

7.4

1.1

–

2.2

EBITDA

88 *

66.0

51.2

EBITDA to sales (%)

14.7

9.3

–

10.4

RONOA pa (%)

9.4

1.4

–

2.8

* Includes profit before tax on sale of the Nash mill site of US$25 million

We increased prices in Europe at the beginning of the quarter and initially encountered strong resistance

and as a result sacrificed some market share. This was compensated for in the short-term by increasing

our exports, but we aim to regain the lost volumes. Our average price in Europe increased by Euro 10/ton

on the prior quarter. By the end of the quarter we had attained price increases of Euro 30/ton on sheets

and Euro 20/ton on reels. This is not sufficient to produce acceptable margins and further price increases

are needed.

Input costs remain high, particularly wood costs which increased by 15% from the last quarter and were

approximately 50% higher than a year ago. Manufacturing fixed costs are well managed and are below

those of a year ago.

North America

Quarter

ended

March 2007

March 2006

Dec 2006

US$ million

change

US$ million

Sales

371

367

1.1

374

Operating profit (loss)

(10)

–

Operating profit (loss) to sales (%)

0.8

(2.7)

–

0.5

EBITDA

52.6

EBITDA to sales (%)

7.8

5.2

–

7.5

RONOA pa (%)

1.1

(3.4)

–

0.7

Market conditions were competitive with pressure on prices particularly for publication paper. We

implemented price increases in the quarter on certain sheet products. We expect that the provisional

countervailing duties implemented in the USA against Asian imports will result in higher prices for these

imports and further opportunities to improve price levels for similar products. Pulp sales remain strong.

We are working to reduce unit costs and will start to see the benefit in our fourth quarter results. These

actions will help offset high input costs and contribute to improving margins.

operating review for the quarter (continued)

sappi limited – second quarter page 4

sappi limited – second quarter page 5

South Africa

Quarter

ended

March 2007

March 2006

change

Dec 2006

US$ million

(US$)

(Rand)

US$ million

Sales

8.5

25.5

Operating profit (loss)

(2)

–

Operating profit (loss) to sales (%)

2.2

(2.4)

–

1.2

EBITDA

66.7

92.7

EBITDA to sales (%)

5.6

3.7

–

6.0

RONOA pa (%)

4.9

(4.6)

–

2.5

The business had strong sales volumes and improved price realisation in the quarter. Although it continues

to generate a profit its margins are under pressure from high pulp prices as it purchases much of its pulp

from Forest Products at market prices.

Forest Products

Quarter

ended

March 2007

March 2006

change

Dec 2006

US$ million

(US$)

(Rand)

US$ million

Sales

261

238

9.7

26.8

223

Operating profit

–

15.6

Operating profit to sales (%)

26.4

29.0

–

35.0

EBITDA

3.4

19.6

EBITDA to sales (%)

34.5

36.6

–

42.6

RONOA pa (%)

18.9

19.2

–

23.4

Plantation fair value gain

–

Forest Products had a strong quarter with sales volumes of pulp and paper up 9% compared to a year

ago. Prices in Rand terms showed a substantial improvement largely as a result of strong pulp prices and

the weaker Rand relative to the US Dollar. The Saiccor and Usutu mills benefited particularly from the

strong pulp markets. The Kraft business continued to improve its productivity during the quarter and

benefited from modest price increases in the South African market.

The result for the quarter included the plantation fair value gain of US$12 million as a result of higher wood

prices and was partly offset by higher costs to deliver the wood to market. The gain in the equivalent

quarter last year was US$57 million.

The Saiccor expansion is progressing well.

directors

Karen Osar was appointed a non-executive director with effect from 01 May 2007.

outlook

The demand for all our products is strong and pulp prices have recently risen again, but coated fine paper

operating margins remain low. Global capacity utilisation for coated fine paper remains at a high level;

however, profitability in the sector does not yet reflect the improved market fundamentals. We expect to

see further coated fine paper price increases before the end of this financial year to restore margins.

In North America the implementation of duties against Asian imports is likely to lead to higher prices of

certain coated fine papers.

The Forest Products business is performing well and we expect further improvements particularly in

Sappi Kraft.

We continue to focus on the reduction of costs, which remain a challenge. We expect further improvement

in underlying earnings for the second half of the year.

On behalf of the Board

E van As

M R Thompson

Director

08 May 2007

sappi limited

(Registration number 1936/008963/06)

Issuer Code: SAVVI

JSE Code: SAP

ISIN Code: ZAE 000006284

operating review for the quarter (continued)

sappi limited – second quarter page 6

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. 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.

sappi limited – second quarter page 7

notes

sappi limited – second quarter page 8

financial results

for the quarter and half-year ended March 2007

sappi limited – second quarter page 9

group income statement

sappi limited – second quarter page 10

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

change

US$ million

change

Sales

1,318

1,256

4.9

2,585

2,431

6.3

Cost of sales

1,141

1,099

2,233

2,140

Gross profit

177

157

12.7

352

291

21.0

Selling, general and

administrative expenses

181

170

Share of (profit) loss from

associates and joint ventures

(3)

–

(4)

Other operating (income)

expenses

(30)

(34)

Operating profit

117

98.3

209

108

93.5

Net finance costs

Net paid

Capitalised

(3)

–

(4)

(1)

Net foreign exchange gains

(4)

(3)

(6)

(4)

Change in fair value

of financial instruments

(2)

Profit before tax

200.0

139

178.0

Taxation – current

– deferred

Profit for the period

544.4

877.8

Basic earnings

per share (US cents)

Weighted average

number of shares

in issue (millions)

227.7

226.0

227.4

225.9

Diluted earnings

per share (US cents)

Weighted average

number of shares

on fully diluted

basis (millions)

230.4

227.0

229.6

226.7

group balance sheet

Reviewed

Audited

March 2007

Sept 2006

US$ million

ASSETS

Non-current assets

4,253

3,997

Property, plant and equipment

3,284

3,129

Plantations

598

520

Deferred taxation

Other non-current assets

308

274

Current assets

1,569

1,500

Inventories

750

699

Trade and other receivables

581

577

Cash and cash equivalents

238

224

Assets held for sale

–

Total assets

5,822

5,517

EQUITY AND LIABILITIES

Shareholders’ equity

Ordinary shareholders’ interest

1,494

1,386

Non-current liabilities

2,497

2,465

Interest-bearing borrowings

1,626

1,634

Deferred taxation

374

336

Other non-current liabilities

497

495

Current liabilities

1,831

1,666

Interest-bearing borrowings

808

694

Bank overdraft

Other current liabilities

863

862

Taxation payable

120

101

Total equity and liabilities

5,822

5,517

Number of shares in issue at balance sheet date (millions)

227.9

227.0

sappi limited – second quarter page 11

group cash flow statement

sappi limited – second quarter page 12

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

Operating profit

117

209

108

Depreciation, fellings and other amortisation

111

117

223

231

Other non-cash items (including impairment

charges)

(53)

(59)

(105)

(100)

Cash generated by operations

175

117

327

239

Movement in working capital

(5)

(33)

(44)

(113)

Net finance costs

(22)

(23)

(68)

Taxation received (paid)

(5)

(3)

(12)

Dividends paid *

(68)

Cash retained from (absorbed by) operating

activities

(12)

144

(22)

Cash utilised in investing activities

(36)

(78)

(191)

(152)

(90)

(47)

(174)

Cash effects of financing activities

(39)

(91)

Net movement in cash and cash equivalents

(181)

(171)

* Dividend number 83: 30 US cents per share (2006: 30 US cents per share)

group statement of recognised income and expense

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

Pension fund asset not recognised

(2)

(4)

Deferred taxation on above

(1)

–

(1)

Valuation allowance against deferred

tax asset and actuarial losses recognised

–

Exchange differences on translation of

foreign operations

(35)

Net (expense) income recorded directly

in equity

(32)

Profit for the period

Total recognised income for the period

166

notes to the group results

sappi limited – second quarter page 13

Basis of preparation
The condensed financial statements have been prepared in accordance with International Accounting
Standard 34 Interim Financial Reporting. The accounting policies and methods of computation used in the
preparation of the results are consistent, in all material respects, with those used in the annual financial
statements for September 2006 which are compliant with International Financial Reporting Standards.

The preliminary results for the six month period ended March 2007 have been reviewed in terms of
International Standards on Review Engagements 2400 by the group’s auditors, Deloitte & Touche. Their
unmodified review report is available for inspection at the company’s registered offices. The results for the
quarters ended 31 March 2007 and 31 December 2006 have not been audited or reviewed on a stand-alone
basis by the auditors.

Reconciliation of movement in shareholders’ equity

Reviewed

Half-year

ended

March 2007

March 2006

US$ million

Balance – beginning of year

1,386

1,589

Total recognised income for the period

166

Dividends paid

(68)

Transfers to (from) participants of the share purchase trust

(1)

Share Based Payment Reserve

Balance – end of period

1,494

1,550

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

Operating profit
Included in operating profit are the
following

non-cash items:

Depreciation and amortisation

Depreciation of property,

plant and equipment

188

195

Other amortisation

189

196

Fair value adjustment on plantations

(included in cost of sales)

Changes in volume

Fellings

Growth

(18)

(21)

(35)

(1)

(3)

(1)

–

Changes in fair value

(12)

(57)

(41)

(67)

(13)

(60)

(42)

(67)

Included in other operating expenses

(income) are the following:

Asset impairments 1 5 1 6

Restructuring provision (released) raised (6) 4 (10) 3

Profit on sale of assets

(25)

(1)

(25)

(2)

Written off assets

–

notes to the group results (continued)

sappi limited – second quarter page 14

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

Headline earnings per share

Headline earnings per share (US cents) *

Weighted average number of shares

in issue (millions)

227.7

226.0

227.4

225.9

Diluted headline earnings per share

(US cents) *

Weighted average number of shares

on fully diluted basis (millions)

230.4

227.0

229.6

226.7

Calculation of Headline earnings *
Profit for the period

Profit on disposal of business and property,

plant and equipment

(19)

(2)

(19)

(2)

Write-off of assets

–

Impairment of property, plant and equipment

–

Headline earnings

* Headline earnings disclosure is a listings requirement by the JSE Limited.

Capital expenditure

Property, plant and equipment

214

139

Reviewed

Audited

March 2007

Sept 2006

US$ million

Capital commitments

Contracted but not provided

310

294

Approved but not contracted

167

255

477

549

Contingent liabilities

Guarantees and suretyships

Other contingent liabilities

Assets held for sale

Other operating income includes an amount of US$25 million in respect of the sale of the site of the Nash mill
which was previously classified as “assets held for sale”.

Secondary Tax on Companies (STC)

During the annual South African “budget speech” the Minister of Finance announced a rate reduction in South
Africa’s STC rate from 12.5% to 10% and the proposed replacement of STC with a tax on dividends. The rate
reduction resulted in a US$2 million charge because of the write-down of the related STC asset. There is a
remaining asset of US$10 million which may be impacted by the proposed change in legislation in this area.

supplemental information

definitions

Average – averages are calculated as the sum of the opening and closing balances for the 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

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

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

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

Net debt – current and non-current interest-bearing borrowings, and bank overdrafts (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

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)

SG&A – selling, general and administrative expenses

The above financial measures are presented to assist our shareholders and the investment community in interpreting our financial results. These financial measures are regularly used and compared between companies in our industry.

sappi limited – second quarter page 15

supplemental information

sappi limited – second quarter page 16

additional information

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

Profit for the period to EBITDA

(1)

reconciliation

Profit for the period

Net finance costs

Taxation – current

– deferred

Depreciation

188

195

Amortisation

EBITDA

(1) (2)

211

158

398

304

Reviewed

Audited

March 2007

Sept 2006

US$ million

Net debt (US$ million)

(3)

2,236

2,113

Net debt to total capitalisation (%)

(3)

46.2

46.4

Net asset value per share (US$)

(3)

7.92

7.26

(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 non-
trading profit/loss and minority interest as part of EBITDA. EBITDA represents earnings before interest (net finance costs),
taxation, depreciation and amortisation. Net finance costs includes: gross interest paid; interest received; interest capitalised;
net foreign exchange gains; and net fair value adjustments on interest rate financial instruments. See the Group income
statement for an explanation of the computation of net finance costs. We use EBITDA as an internal measure of performance
to benchmark and compare performance, both between our own operations and as against other companies. EBITDA is a
measure used by the group, together with measures of performance under IFRS and US GAAP, to compare the relative
performance of operations in planning, budgeting and reviewing the performances of various businesses. We believe EBITDA
is a useful and commonly used measure of financial performance in addition to net profit, operating profit and other profitability
measures under IFRS or US GAAP because it facilitates operating performance comparisons from period to period and
company to company. By eliminating potential differences in results of operations between periods or companies caused by
factors such as depreciation and amortisation methods, historic cost and age of assets, financing and capital structures and
taxation positions or regimes, we believe EBITDA can provide a useful additional basis for comparing the current performance
of the underlying operations being evaluated. For these reasons, we believe EBITDA and similar measures are regularly used by the investment community as a means of comparison of companies in our industry. Different companies and analysts may
calculate EBITDA differently, so making comparisons among companies on this basis should be done very carefully. EBITDA is not a measure of performance under IFRS or US GAAP and should not be considered in isolation or construed as a substitute for operating profit or net profit as an indicator of the company’s operations in accordance with IFRS or US GAAP.

(2) The EBITDA calculation was amended at the beginning of the financial year to eliminate the adjustment for fellings which
     previously resulted in fellings being added back in the calculation as part of amortisation. Given the current accounting
     treatment of plantations, management has concluded that eliminating such an adjustment would be more appropriate in
     etermining the EBITDA performance measure in future both for internal and reporting purposes. Prior year figures have been
     recalculated for comparison purposes as follows: March 2006 quarter: decreased by US$18 million; March 2006 half-year:
     decreased by US$35 million.

(3) Refer to page 15, Supplemental Information for the definition of the term.

supplemental information

sappi limited – second quarter page 17

regional information

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

Metric tons

(000’s)

(000’s) change

(000’s)

(000’s) change

Sales volumes

Fine Paper –

North America

376

365

3.0

748

709

5.5

Europe

626

646

(3.1)

1,261

1,248

1.0

Southern Africa

10.1

174

158

10.1

Total

1,089

1,090

(0.1)

2,183

2,115

3.2

Forest Products – Pulp and paper

operations

378

347

8.9

709

702

1.0

Forestry operations

258

372

(30.6)

529

748

(29.3)

Total

1,725

1,809

(4.6)

3,421

3,565

(4.0)

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

change

US$ million

US$ million change

Sales

Fine Paper –

North America

371

367

1.1

745

712

4.6

Europe

597

569

4.9

1,184

1,089

8.7

Southern Africa

8.5

172

160

7.5

Total

1,057

1,018

3.8

2,101

1,961

7.1

Forest Products – Pulp and paper

operations

245

215

14.0

452

427

5.9

Forestry operations

(30.4)

(25.6)

Total

1,318

1,256

4.9

2,585

2,431

6.3

supplemental information

sappi limited – second quarter page 18

Reviewed

Quarter

Half-year

ended

March 2007

March 2006

March 2007

March 2006

US$ million

change

US$ million

US$ million change

Operating profit

Fine Paper –

North America

(10)

–

(9)

–

Europe

633.3

185.0

Southern Africa

(2)

–

(2)

–

Total

(6)

–

622.2

Forest Products

–

147

106

38.7

Corporate and other

(1)

(4)

–

(3)

(7)

–

Total

117

98.3

209

108

93.5

Earnings before interest, tax,

depreciation and amortisation

charges

Fine Paper –

North America

52.6

14.0

Europe

66.0

149

114

30.7

Southern Africa

66.7

Total

122

62.7

216

170

27.1

Forest Products

3.4

185

140

32.1

Corporate and other

(1)

(4)

–

(3)

(6)

–

Total

211

158

33.5

398

304

30.9

Net operating assets

Fine Paper –

North America

1,067

1,163

(8.3)

1,067

1,163

(8.3)

Europe

1,864

1,781

4.7

1,864

1,781

4.7

Southern Africa

156

177

(11.9)

156

177

(11.9)

Total

3,087

3,121

(1.1)

3,087

3,121

(1.1)

Forest Products

1,443

1,490

(3.2)

1,443

1,490

(3.2)

Corporate and other

(72.4)

Total

4,538

4,640

(2.2)

4,538

4,640

(2.2)

supplemental information

sappi limited – second quarter page 19

summary rand convenience translation

Quarter

Half-year

ended

March

2007

2006

change

2007

2006

change

Sales (ZAR million)

9,428

7,769

21.4

18,814

15,396

22.2

Operating profit (ZAR million)

837

365

129.3

1,521

684

122.4

Profit for the period (ZAR million)

415

641.1

640

1,022.8

EBITDA (ZAR million) *

1,509

977

54.5

2,897

1,925

50.5

Operating profit to sales (%)

8.9

4.7

8.1

4.4

EBITDA to sales (%) *

16.0

12.6

15.4

12.5

Operating profit to average net assets (%)

11.7

6.1

10.3

5.3

EPS (SA cents)

179

616.0

277

1,008.0

Net debt (ZAR million) *

16,245

13,391

21.3

16,245

13,391

21.3

Net debt to total capitalisation (%) *

46.2

44.3

46.2

44.3

Cash generated by operations (ZAR million)

1,252

724

72.9

2,380

1,514

57.2

Cash from operating activities (ZAR million)

579

(74)

–

1,048

(139)

–

Net movement in cash and cash

equivalents (ZAR million)

(1,120)

–

(1,083)

–

*Refer to page 15, Supplemental Information for the definition of the term.

exchange rates

March

Dec

Sept

June

March

2007

2006

Exchange rates:

Period end rate: US$ 1 = ZAR

7.2650

7.0076

7.7738

7.1700

6.1655

Average rate for the Quarter/Period: US$ 1 = ZAR

7.1532

7.3358

7.2475

6.4658

6.1858

Average rate for the YTD: US$ 1 = ZAR

7.2783

7.3358

6.6039

6.4031

6.3334

Period end rate: EUR 1 = US$

1.3358

1.3199

1.2672

1.2789

1.2119

Average rate for the Quarter/Period: EUR 1 = US$

1.3160

1.2926

1.2744

1.2570

1.1983

Average rate for the YTD: EUR 1 = US$

1.3021

1.2926

1.2315

1.2191

1.1964

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.

sappi ordinary shares

ADR price (NYSE TICKER: SPP)

note : (1ADR=1sappishare)

US$

ZAR

140

120

100

sappi limited – second quarter page 20

1 Apr

2003

1 Jul
2003

1 Oct

2003

1 Jan

2004

1 Apr

2004

1 Jul
2004

1 Oct

2004

1 Jan

2005

1 Apr

2005

1 Jul
2005

1 Oct

2005

1 Jan

2006

1 Apr

2006

1 Jul
2006

1 Oct

2006

1 Jan

2007

1 Apr

2007

4 May

2007

1 Apr

2003

1 Jul
2003

1 Oct

2003

1 Jan

2004

1 Apr

2004

1 Jul
2004

1 Oct

2004

1 Jan

2005

1 Apr

2005

1 Jul
2005

1 Oct

2005

1 Jan

2006

1 Apr

2006

1 Jul
2006

1 Oct

2006

1 Jan

2007

1 Apr

2007

4 May

2007

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 Magno Matt Satin 250g/m

and 150g/m

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.

Date: May 9, 2007

SAPPI LIMITED,

Name:

M. R. Thompson

Title:

Chief Financial Officer

M. R. Thompson

By:

/s/