Results for the fourth quarter and year ended September 2011

Supporting documentation:


Johannesburg, 10 November 2011

Financial Summary for the quarter

  • Operating profit excluding special items: US$80 million, up 33% on Q3 2011 (Q4 2010 US$129 million)
  • Cash generation: US$279 million (Q4 2010 US$238 million)
  • Strategic initiatives result in asset impairment and restructuring charges of US$165 million
  • North American business and Southern African chemical cellulose business continued to perform strongly
  • High input costs continued to squeeze margins
  • Loss per share of 24 US cents (Q4 2010 EPS of 16 US cents)
  • Earnings per share excluding special items and once-off debt refinancing costs 2 US cents (Q4 2010 9 US cents)


Commenting on the results, Sappi Chief Executive Officer Ralph Boëttger said:

“Sappi continued its improving trend in operating performance for 2011. Sales for the year increased 11%, almost entirely as a result of higher prices in US Dollar terms. Operating profit excluding special items was US$404 million for the year, up 19% compared to 2010. Special items were largely a result of the strategic actions we have undertaken and planned. Impairment and restructuring charges amounted to US$302 million for the year, of which US$167 million are non-cash charges.

For the quarter, operating profit excluding special items of US$80 million was 33% higher than for the third fiscal quarter of 2011 but lower than the US$129 million for the equivalent quarter last year. The North American business and Southern African chemical cellulose business continued to perform well during the quarter. The European business generated positive operating profit excluding special items. In addition to the actions taken to improve the European business, we have announced actions to fix the Southern African paper business. We incurred impairment and restructuring charges in the quarter on these actions amounting to US$165 million of the US$168 million special items. Of this amount, US$98 million related to non-cash items.

Conditions in many of our markets remained uncertain throughout the quarter. As regards the chemical cellulose business, global demand showed some signs of softening largely as a result of lower growth in China. We, however, sold a record 190,000 tons of chemical cellulose during the quarter.

The prices of our major inputs of wood, pulp, energy and chemicals were approximately US$290 million higher than in 2010, which maintained pressure on margins in all of our businesses. These costs were high for the quarter under review, but did start to decline during the quarter as economic growth slowed.

As a result of the impairment and restructuring costs and once-off refinancing costs, the group incurred a net loss for the year as well as for the quarter under review. The loss per share for the year was 45 US cents (including a charge of 65 US cents in respect of special items including financing items) compared to earnings per share of 13 US cents (including a gain of 4 US cents of special items including financing items) in 2010. For the quarter under review, the loss per share was 24 US cents (including a charge of 26 US cents in respect of special items) compared to earnings per share of 16 US cents (including a gain of 7 US cents in respect of special items) in the equivalent quarter last year.

Net cash generated for the full year was US$163 million. Net cash generated for the quarter was US$279 million, of which US$266 million was generated from working capital. Cash generation for 2011 was lower than for 2010 as a result of higher working capital (largely as a result of the cut-off effect of including an additional accounting week), increased capital expenditure and once-off refinancing costs.

Net debt was further reduced from US$2.2 billion to US$2.1 billion, which is US$700 million below the peak level in mid-2009. During the year, we successfully refinanced US$1.1 billion of our debt in order to extend the maturities and reduce our finance costs.

At September 2011, we had adequate liquidity consisting of US$639 million of cash on hand and the undrawn balance of €250 million (US$335 million) of our committed revolving credit facility. We utilised US$125 million of our cash shortly after the year end to repay debt.”


Looking forward, Boëttger commented:

“Market conditions remain uncertain, making it difficult to forecast demand globally. Industry demand levels have softened in all our major markets. We are experiencing reasonable demand for graphic paper in North America and somewhat slower demand in Europe; however, the supply/demand balance in many of our export markets has been affected by the significant new paper capacity commissioned in China during the past six months.

Pulp prices have declined, partly as a result of weaker demand from China, but remain above historical average levels. The group as a whole sells slightly more pulp than it purchases and is therefore generally neutral to pulp prices. Our European business is a net purchaser and North America and South Africa are net sellers of pulp.

We expect the chemical cellulose business to continue to perform well, albeit with slightly lower prices in US Dollar terms.

The board has approved an additional investment in chemical cellulose. We will invest approximately US$170 million to convert the pulp mill at our Cloquet Mill in North America to produce 330,000 tons of low cost, high quality chemical cellulose. We expect the conversion to be commissioned during 2013. This investment, together with the Ngodwana Mill conversion will increase total group chemical cellulose capacity to over 1.3 million metric tons, further entrenching Sappi’s leading position in this business.

The volatility of currencies adds to the difficulty of forecasting. Sappi is very sensitive to the value of the Rand/US Dollar exchange rate. Other things being equal, a 10% weakening of the Rand adds approximately US$60 million to the group’s operating profit. The recent weakening of the Rand to the US Dollar is therefore favourable to Sappi.

There has been some relief from high input costs but they remain at historically high levels.

We will start benefiting from our European initiatives from the beginning of the new financial year. These include the closure of Biberist Mill which was completed in August 2011, and further fixed cost and variable cost saving actions, which together are expected to result in benefits of US$100 million per annum.

We do not expect any significant benefits from the Southern African restructuring until the second half of the 2012 financial year.

We expect net cash generation to remain positive for the year ahead, after increasing our capital expenditure on strategic investments. We expect our finance costs to be lower following our refinancing during 2011 and intend to continue to reduce our financing costs including through refinancing our existing higher cost debt, such as our 2014 bonds.

Provided there is no further major deterioration in global market conditions, we expect to continue the past two year’s trend in improving operating performance and to achieve a net profit for the full year of 2012.

We are confident that the actions we have taken and those planned will position the group well for the future, resulting in growth and improved returns for the group.”



The full results announcement is available at

There will be a conference call to which investors are invited. Full details are available on using the links Investor Info; Investor Calendar; 4Q11 Financial Results

Forward-looking statements

Certain statements in this release that are neither reported financial results nor other historical
information, are forward-looking statements, including but not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives.

The words “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “assume”, “positioned”, “will”, “may”, “should”, “risk” and other similar expressions, which are predictions of or indicate future events and future trends, which do not relate to historical matters, identify forward-looking statements. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results, performance or achievements 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 (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);
  • the impact on our business of the global economic downturn;
  • unanticipated production disruptions (including as a result of planned or unexpected power outages);
  • changes in environmental, tax and other laws and regulations; adverse changes in the markets for our products;
  • consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital when needed;
  • adverse changes in the political situation and economy in the countries in which we operate or the effect of governmental efforts to address present or future economic or social problems;
  • the impact of restructurings, investments, acquisitions and dispositions (including related financing), any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions and achieving expected savings and synergies; and currency fluctuations.

We undertake no obligation to publicly update or revise any of these forward looking statements, whether to reflect new information or future events or circumstances or otherwise.

Issued by:
Brunswick South Africa on behalf of Sappi Limited
Tel + 27 (0) 11 502 7300


Contact details 

Robert Hope

Group Head Strategic Development 

Sappi Limited

Tel +27 (0)11 407 8492




André F Oberholzer

Group Head Corporate Affairs

Sappi Limited

Tel  +27 (0)11 407 8044

Mobile +27 (0)83 235 2973