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 November, 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 No

-------

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

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

INCORPORATION BY REFERENCE

Sappi Limited’s report for the conformed fourth quarter results ended September 2007, furnished by

the Registrant under this Form 6-K, is incorporated by reference into (i) the Registration

Statements on Form S-8 of the Registrant filed December 23, 1999 and December 15, 2004 in

connection with The Sappi Limited Share Incentive Scheme, (ii) the Section 10(a) Prospectus

relating to the offer and sale of the Registrant’s shares to Participants under The Sappi Limited

Share Incentive Scheme, (iii) the Registration Statements on Form S-8 of the Registrant filed

December 15, 2004 and December 21, 2005 in connection with The Sappi Limited 2004 Performance

Share Incentive Plan and (iv) the Section 10(a) Prospectus relating to the offer and sale of the

Registrant’s shares to Participants under The Sappi Limited 2004 Performance Share Incentive

Plan. This Form 6-K includes a conformed version of the earnings announcement sent by the

Registrant to its shareholders. This conformed version was prepared solely

for purposes of supplementing the documents referred to in clauses (i) - (iv) above.

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

and achieving expected savings and synergies; consequences of the Group’s leverage; adverse

changes in the political situation and economies in the countries in which we operate 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 year

ended September 2007

Form S-8 Version

4th

* for the year ended September 2007

** as at 30 September 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

62%

■

Uncoated fine paper

■

Coated specialities

■

Packaging and newsprint

■

Pulp

15%

■

Other

■

North America

29%

■

Europe

39%

■

Southern Africa

15%

■

Asia and other

17%

■

South Africa

71%

■

North America

21%

■

Europe and ROW †

■

North America

28%

■

Europe

45%

■

Southern Africa

27%

Sappi is a leading producer of
coated fine paper

●

Improved operating performance

●

Basic EPS increased to 27 US cents for the quarter

●

Strong cash generation

●

Input costs continue to rise

●

Prices improved except for Fine Paper Europe

●

Dividend of 32 US cents per share declared

financial highlights

summary

Quarter ended

Year ended

Sept

June

Sept

2007

2006

2007

2006

Key figures: (US$ million)

Sales

1,422

1,297

1,296

5,304

4,941

Operating profit

383

125

EBITDA *

178

182

151

758

517

Basic EPS (US cents)

(2)

Key ratio: (%)

Operating profit to sales

6.1

6.7

3.9

7.2

2.5

* Refer to note 1, additional information in Supplemental Information for the reconciliation of EBITDA to profit.

comment

Our operating performance improved further in the quarter with all of our fine paper businesses improving

their margins and returns. Forest Products reported a strong quarter supported by strong pulp prices and

good demand in the southern African markets. Although improved, Fine Paper’s margins and returns are

still well short of acceptable levels. A major factor was high input costs including wood, chemical and

energy costs. As a group we sell slightly more pulp than we purchase which provides an economic hedge

in terms of pulp prices, but the European and southern African Fine Paper businesses purchase more than

half of their pulp requirements, consequently their margins continue to be squeezed by high pulp prices

and other input costs.

Coated fine paper prices in North America have started improving but margins remain under pressure from

high input costs. In Europe, the price gains made earlier in the year have largely been surrendered due to

very competitive markets despite high operating rates for us and the industry as a whole.

Demand for coated fine paper grew at about 1% in Europe compared with the previous year. In North

America shipments by local producers declined largely as a result of capacity closures. Pulp markets

remain very strong; NBSK prices for the quarter averaged US$800 per ton, up about US$100 compared

to a year ago.

Our sales were US$1.42 billion, an increase of 10%, reflecting strong order books in all our businesses.

Operating profit increased 70% to US$87 million.

Operating profit in the quarter includes fire damage to our southern African forests of US$8 million, profit

on sale of assets US$1 million and a loss from a change in the fair value of plantations of US$2 million.

Net finance costs were US$27 million compared to US$37 million a year ago and included interest

capitalised of US$6 million, foreign exchange gains of US$4 million and a favourable change in fair value

of financial instruments of US$3 million.

Basic earnings per share for the quarter grew to 27 US cents compared to 18 US cents last year.

sappi limited – fourth quarter page 2

sappi limited – fourth quarter page 3

year ended September 2007 compared to
year ended September 2006

There has been a continuing trend of improvement in operating performance quarter by quarter through

the year. Sales for the year increased 7% to US$5.3 billion. Operating profit increased to US$383 million

from US$125 million last year. Included in operating profit for the year is a US$54 million plantation fair value

gain, US$26 milion profit on sale of fixed assets and US$15 million fire damage.

Net finance costs for the year were US$134 million compared to US$130 million in the prior year and

included interest capitalised of US$14 million and an unfavourable change in fair value of financial

investments of US$9 million.

The effective tax rate for the year was 19% and was reduced by rate changes offset by non-recognition of

deferred tax assets.

Basic earnings per share for the year was 89 US cents compared to a loss of 2 US cents last year.

cash flow

Cash generated by operations increased to US$182 million for the quarter from US$158 million a year ago.

Working capital was reduced by US$140 million compared to a reduction of US$80 million a year ago as

a result of tight management of working capital in all regions.

During the quarter net finance costs paid increased to US$52 million compared to US$22 million a year

ago as a result of the roll-over of forward exchange contracts related to long term debt.

The cash effect of investing activities was US$120 million in the quarter compared to US$109 million a year

ago and US$154 million in the prior quarter.

A South African subsidiary issued bonds, maturing in four years, to the value of ZAR1 billion (US$140 million)

on 25 September 2007 to replace short term debt.

operating review for the quarter

Sappi Fine Paper

Quarter

ended

Sept 2007

Sept 2006

June 2007

US$ million

change

US$ million

Sales

1,118

1,029

8.6

1,037

Operating profit

(40)

–

Operating profit to sales (%)

2.6

(3.9)

–

2.4

All the regions improved operating profit and margins compared to a year ago.

Sales volumes increased by 3.3% compared to a year ago and net sales increased by 8.6% to

US$1.1 billion, mainly as a result of the higher volumes, improved prices in North America and southern

Africa, and the currency conversion of non-dollar sales to a weaker US Dollar. The operating margin of

2.6% remains well below target.

sappi limited – fourth quarter page 4

sappi limited – fourth quarter page 5

Europe

Quarter

ended

Sept 2007

Sept 2006

change

June 2007

US$ million

(US$)

(Euro)

US$ million

Sales

619

569

8.8

0.6

584

Operating profit

(48)

–

Operating profit to sales (%)

2.7

(8.4)

–

2.4

Sales volume increased 1% compared to a year ago but 6% compared to the prior quarter as we regained

some market share lost when we held a strong position on prices earlier in the year. Average prices

realised were at similar levels to a year earlier and 1.5% below the previous quarter due to fiercely

competitive market conditions.

The cost reduction programme initiated in 2005 continues to help offset the impact of high input costs

including wood, pulp, chemical and energy costs as well as employment inflation.

In Europe apparent consumption for coated fine paper grew 1% compared to a year ago. Despite reported

industry operating rates of 93% for coated fine paper, prices retreated during the quarter, giving up the

gains achieved earlier in the year. There have been some price improvements in specific markets.

North America

Quarter

ended

Sept 2007

Sept 2006

June 2007

US$ million

change

US$ million

Sales

404

373

8.3

362

Operating profit

28.6

Operating profit to sales (%)

2.2

1.9

–

2.2

The three new products launched in the past two quarters have been well received in the market. Sales

volumes increased by 8% compared to a year ago after we regained some market share lost in the

previous year. Average prices realised for paper increased compared to a year ago and compared to the

previous quarter. Further increases are being implemented.

We continue to implement cost reductions throughout our operations to offset high input costs.

Apparent consumption for coated fine paper declined significantly. It was impacted by reduced imports of

coated fine paper. It appears that inventories of imported product have declined and that some of these

imports are now recorded as coated mechanical paper, which is free of the anti-dumping and

countervailing duties recently applied to certain Asian exporters. Shipments from domestic producers

declined 4% reflecting a reduction in capacity following the closure of approximately 800,000 tons of higher

cost coated fine paper capacity over the past two years.

sappi limited – fourth quarter page 6

sappi limited – fourth quarter page 7

South Africa

Quarter

ended

Sept 2007

Sept 2006

change

June 2007

US$ million

(US$)

(Rand)

US$ million

Sales

9.2

6.1

Operating profit

200.0

191.6

Operating profit to sales (%)

3.2

1.1

–

3.3

Demand in the southern African markets was strong. Sales in US Dollars and operating profit improved

as a result of improved prices but margins remain under pressure from cost increases including wood,

pulp, energy and employment costs.

Forest Products

Quarter

ended

Sept 2007

Sept 2006

change

June 2007

US$ million

(US$)

(Rand)

US$ million

Sales

304

267

13.9

10.7

260

Operating profit

(38.8)

(40.5)

Operating profit to sales (%)

17.1

31.8

–

25.0

The business performed strongly reflecting increasing international pulp prices and good demand for our

products, particularly packaging paper in southern Africa. Demand for chemical cellulose was strong.

Operating efficiency continued to improve, however there is scope for further improvement. Energy and

employment costs have continued to rise at a rate exceeding the local rate of inflation, which is

approximately 6%. A general shortage of technical skills is exacerbating employment cost pressures.

Managing these costs is a priority going forward.

During the quarter we experienced extensive plantation fires resulting in a charge of US$8 million (before

tax). The fires suffered in the third and fourth quarter were the worst fires ever experienced in South Africa.

The combined pre-tax charge for the two quarters was US$15 million before tax. Good rains have virtually

ended the risk of more fires this season.

The result for the quarter included a plantation fair value price charge of US$2 million compared to a gain

of US$10 million a year ago. The reversal of the Usutu impairment of US$40 million occurred in the fourth

quarter 2006.

The Saiccor expansion project is progressing well and is on track for a second calendar quarter 2008 start

up. The estimated capital expenditure for the project will be approximately US$500 million.

dividend

The board has approved a dividend, Number 84, of 32 US cents for the year ended September 2007.

A dividend of 30 US cents was paid for the previous year.

sappi limited – fourth quarter page 8

directors

Ralph Boëttger, who joined the board as Chief Executive Officer on 01 July 2007, took executive authority

for the company in August following an intensive introductory tour. At that date, the group’s Chairman,

Eugene van As, resumed his non-executive role.

John (Jock) McKenzie joined the board as non-executive director on 01 September 2007.

outlook

Management’s priority is the continuing improvement of our margins and operating efficiencies. We expect

the turnaround of our North American business, which is well under way, to continue. In Europe our focus

is on further improving operational efficiencies, continuous cost reductions and price recovery, to help

restore margins. The southern African business continues to benefit from strong local demand and the high

international pulp prices.

Supply/demand conditions for coated fine paper in North America remain favourable for improved pricing;

however, there are signs of the economy cooling, which could have some impact on demand during 2008.

Despite the high operating rates in Europe prices remain low and industry margins continue to decline.

Pulp prices have continued to rise in October 2007 and NBSK prices are US$30 per ton higher than the

average for the September quarter.

Input cost pressures remain high in all our businesses. While we expect to be able to offset these costs to

some extent through cost reduction efforts and improved efficiency, improving our revenue line through

volume and mix improvements, improved margin management, innovation and improved pricing, is a

priority. We will also continue to focus on working capital management and cash generation.

The weakness in the US Dollar at the time of writing is expected to have an unfavourable impact on our

European and southern African businesses.

Our first financial quarter is usually weaker than the fourth financial quarter due to a seasonal slowdown in

activity at the end of the calendar year. We do, however, expect earnings excluding the impact of the plantation

price fair value adjustment, which is unpredictable to be stronger than the equivalent quarter last year.

We expect some increase in debt as the Saiccor expansion nears completion over the next two quarters,

but expect it to return to current levels by the end of the financial year.

Maintaining momentum of the trend of continuous improvement in the profitability of Sappi remains the top

priority. A key focus is our commitment to excellence in customer service and innovation in our product offerings.

On behalf of the board

R J Boëttger

M R Thompson

Director

08 November 2007

sappi limited

(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN Code: ZAE 000006284

sappi limited – fourth quarter page 9

dividend announcement

The directors have declared a dividend (number 84) of 32 US cents per share for the year ended

September 2007.

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:

Last day to trade to qualify for dividend

Thursday, 27 December 2007

Date on which shares commence trading ex-dividend

Friday, 28 December 2007

Record date

Friday, 04 January 2008

Payment date

Tuesday, 08 January 2008

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 currency 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.

Dividends payable other than in United States Dollars will be calculated at the respective rates of exchange

ruling at 01:30 Central European Time as per Reuters on Tuesday, 18 December 2007, and announced

on Tuesday, 18 December 2007.

There will not be any de-materialisation nor re-materialisation of Sappi Limited share certificates from Friday

28 December 2007 to Friday 04 January 2008, both days inclusive.

Sappi Management Services (Pty) Limited

Secretaries

Per D J O’Connor

08 November 2007

sappi limited – fourth quarter page 10

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 – fourth quarter page 11

notes

sappi limited – fourth quarter page 12

conformed financial results

for the quarter and year ended September 2007

sappi limited – fourth quarter page 13

Form S-8 Version

group income statement

sappi limited – fourth quarter page 14

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

change

US$ million

change

Sales

1,422

1,296

9.7

5,304

4,941

7.3

Cost of sales

1,242

1,137

4,591

4,419

Gross profit

180

159

13.2

713

522

36.6

Selling, general and

administrative expenses

362

367

Share of (profit) loss from

associates and joint ventures

(4)

–

(10)

Other operating expenses

(income)

(22)

Operating profit

70.6

383

125

206.4

Net finance costs

134

130

Net paid

152

136

Capitalised

(6)

(1)

(14)

(2)

Net foreign exchange gains

(4)

(2)

(13)

(7)

Change in fair value

of financial instruments

(3)

Profit (loss) before tax

328.6

249

(5)

–

Taxation – current

(11)

– deferred

(7)

(15)

(6)

Profit (loss) for the period

52.5

202

(4)

–

Basic earnings (loss)

per share (US cents)

(2)

Weighted average

number of shares

in issue (millions)

228.4

226.5

227.8

226.2

Diluted basic

earnings (loss)

per share (US cents)

(2)

Weighted average

number of shares

on fully diluted

basis (millions)

231.2

228.6

230.5

226.2

group balance sheet

Sept 2007

Sept 2006

US$ million

ASSETS

Non-current assets

4,608

3,997

Property, plant and equipment

3,491

3,129

Plantations

636

520

Deferred taxation

Other non-current assets

421

274

Current assets

1,736

1,500

Inventories

712

699

Trade and other receivables

660

577

Cash and cash equivalents

364

224

Assets held for sale

–

Total assets

6,344

5,517

EQUITY AND LIABILITIES

Shareholders’ equity

Ordinary shareholders’ interest

1,816

1,386

Non-current liabilities

2,612

2,465

Interest-bearing borrowings

1,828

1,634

Deferred taxation

385

336

Other non-current liabilities

399

495

Current liabilities

1,916

1,666

Interest-bearing borrowings

771

694

Bank overdraft

Other current liabilities

998

862

Taxation payable

125

101

Total equity and liabilities

6,344

5,517

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

228.5

227.0

sappi limited – fourth quarter page 15

group cash flow statement

sappi limited – fourth quarter page 16

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Operating profit

383

125

Depreciation, fellings and other amortisation

109

119

445

466

Other non-cash items (including impairment

charges)

(14)

(12)

(142)

(127)

Cash generated by operations

182

158

686

464

Movement in working capital

140

(17)

Net finance costs

(52)

(22)

(162)

(138)

Taxation paid

(9)

(1)

(27)

(13)

Dividends paid *

–

(68)

Cash retained from operating activities

261

215

489

228

Cash utilised in investing activities

(120)

(109)

(465)

(355)

141

106

(127)

Cash effects of financing activities

(55)

(21)

Net movement in cash and cash equivalents

165

122

(148)

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

group statement of recognised income and expense

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Pension fund asset recognised (not recognised)

(37)

(43)

Actuarial gains on pension and other post

employment benefit liabilities

101

105

101

100

Fair value adjustment on available

for sale financial instruments

–

Deferred taxation on above items

(38)

(20)

(52)

(19)

Valuation allowance against deferred

tax asset and actuarial gains recognised

Exchange differences on translation

of foreign operations

(67)

151

(189)

Net income (expense) recorded directly

in equity

119

(10)

277

(142)

Profit (loss) for the period

202

(4)

Total recognised income (expense)

for the period

180

479

(146)

notes to the group results

sappi limited – fourth quarter page 17

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 the English language version of International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board.

Reconciliation of movement in shareholders’ equity

Year

ended

Sept 2007

Sept 2006

US$ million

Balance – beginning of year

1,386

1,589

Total recognised income (expense) for the period

479

(146)

Dividends paid

(68)

Transfers to participants of the share purchase trust

Share Based Payment Reserve

Balance – end of year

1,816

1,386

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Operating profit
Included in operating profit are the following

non-cash items:

Depreciation and amortisation

Depreciation of property,

plant and equipment

374

390

Other amortisation

–

100

375

392

Fair value adjustment on plantations

(included in cost of sales)

Changes in volume

Fellings

Growth

(19)

(14)

(76)

(70)

(1)

(6)

Plantation price fair value adjustment

(54)

(34)

(60)

(30)

Included in other operating expenses

(income) are the following:

Asset impairments (reversals)

–

(39)

–

(31)

Restructuring and closure provisions

raised (released)

–

(7)

Pension restructuring gain

–

(28)

Profit on sale of assets

(1)

–

(26)

–

Fire, flood, storm and related events

–

notes to the group results

sappi limited – fourth quarter page 18

Material balance sheet movements
Non-current interest-bearing borrowings
A South African subsidiary issued bonds to the value of ZAR1 billion (US$140 million) on 25 September 2007. The bonds were issued at a fixed rate of 10.64% and mature on 14 October 2011.

Other non-current assets
The increase in other non-current assets relates largely to the recognition of the pension fund asset in our South African subsidiary and the recognised actuarial gain on the pension asset to the value of ZAR599 million
(US$83 million).

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Capital expenditure

Property, plant and equipment

128

458

303

Capital commitments

Contracted but not provided

188

294

Approved but not contracted

249

255

437

549

Contingent liabilities

Guarantees and suretyships

Other contingent liabilities *

* The increase in other contingent liabilities relates to tax issues upon which the group is awaiting further clarification.

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 in the March quarter’s results 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

sappi limited – fourth quarter page 19

additional information

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Profit (loss) for the period to EBITDA

(1)

reconciliation

Profit (loss) for the period

202

(4)

Net finance costs

134

130

Taxation – current

(11)

– deferred

(7)

(15)

(6)

Depreciation

374

390

Amortisation

–

EBITDA

(1) (2)

178

(5)

758

517

Sept 2007

Sept 2006

US$ million

Net debt (US$ million)

(3)

2,257

2,113

Net debt to total capitalisation (%)

(3)

43.2

46.4

Net asset value per share (US$)

(3)

9.37

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
determining the EBITDA performance measure in future both for internal and reporting purposes. Prior year figures have been
recalculated for comparison purposes as follows: September 2006 quarter: decreased by US$19 million; September 2006
year to date: decreased by US$74 million.

supplemental information

sappi limited – fourth quarter page 20

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Calculation of Headline earnings (loss) *

Profit (loss) for the period

202

(4)

Profit on disposal of property, plant

and equipment

–

(20)

(2)

Write-off of assets

Asset impairments (reversals)

(39)

(31)

Headline earnings (loss) per share

Headline earnings (loss) per share (US cents) *

(11)

Weighted average number of shares

in issue (millions)

228.4

226.5

227.8

226.2

Diluted headline earnings (loss)

per share (US cents) *

(11)

Weighted average number of shares

on fully diluted basis (millions)

231.2

228.6

230.5

226.2

Headline earnings (loss)

186

(26)

* Headline earnings disclosure is required by the JSE Limited.

Sept

June

March

Dec

Sept

2007

2006

Exchange rates

Exchange rates:

Period end rate: US$1 = ZAR

6.8713

7.0393

7.2650

7.0076

7.7738

Average rate for the Quarter: US$1 = ZAR

7.0453

7.1095

7.1532

7.3358

7.2475

Average rate for the YTD: US$1 = ZAR

7.1741

7.2121

7.2783

7.3358

6.6039

Period end rate: EUR 1 = US$

1.4272

1.3542

1.3358

1.3199

1.2672

Average rate for the Quarter: EUR 1 = US$

1.3782

1.3498

1.3160

1.2926

1.2744

Average rate for the YTD: EUR 1 = US$

1.3336

1.3178

1.3021

1.2926

1.2315

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.

supplemental information

sappi limited – fourth quarter page 21

regional information

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

Metric tons

(000’s)

(000’s) change

(000’s)

(000’s) change

Sales volumes

Fine Paper –

North America

398

368

8.2

1,506

1,426

5.6

Europe

633

626

1.1

2,493

2,450

1.8

Southern Africa

(1.1)

350

328

6.7

Total

1,121

1,085

3.3

4,349

4,204

3.4

Forest Products – Pulp and paper

operations

417

400

4.3

1,484

1,470

1.0

Forestry operations

242

383

(36.8)

1,030

1,525

(32.5)

Total

1,780

1,868

(4.7)

6,863

7,199

(4.7)

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

change

US$ million

US$ million change

Sales

Fine Paper –

North America

404

373

8.3

1,511

1,439

5.0

Europe

619

569

8.8

2,387

2,194

8.8

Southern Africa

9.2

358

325

10.2

Total

1,118

1,029

8.6

4,256

3,958

7.5

Forest Products – Pulp and paper

operations

285

245

16.3

979

896

9.3

Forestry operations

(13.6)

(20.7)

Total

1,422

1,296

9.7

5,304

4,941

7.3

Operating profit

Fine Paper –

North America

28.6

(16)

–

Europe

(48)

–

(27)

–

Southern Africa

200.0

(6)

–

Total

(40)

–

119

(49)

–

Forest Products

(38.8)

264

175

50.9

Corporate

–

(1)

–

Total

70.6

383

125

206.4

sappi limited – fourth quarter page 22

sappi ordinary shares

ADR price (NYSE TICKER: SPP)

note: (1 ADR = 1 sappi share)

ZAR

140

120

100

31 Oct

2003

31 Jan

2004

30 Apr

2004

31 Jul

2004

31 Oct

2004

31 Jan

2005

30 Apr

2005

31 Jul

2005

31 Oct

2005

31 Jan

2006

30 Apr

2006

31 Jul

2006

31 Oct

2006

31 Jan

2007

30 Apr

2007

31 Jul

2007

31 Oct

2007

US$

31 Oct

2003

31 Jan

2004

30 Apr

2004

31 Jul

2004

31 Oct

2004

31 Jan

2005

30 Apr

2005

31 Jul

2005

31 Oct

2005

31 Jan

2006

30 Apr

2006

31 Jul

2006

31 Oct

2006

31 Jan

2007

30 Apr

2007

31 Jul

2007

31 Oct

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

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: November 12, 2007

SAPPI LIMITED,

by: /s/ M. R. Thompson

Title: Chief Financial Officer

Name: M. R. Thompson