Results for the first quarter ended December 2011

Johannesburg, 07 February 2012

Supporting documentation:

Financial Summary for the quarter 

  • Profit for the period US$45 million; Q1 2011 US$37 million
  • EPS 9 US cents;  Q1 2011 7 US cents
  • Operating profit excluding special items US$100 million;  Q1 2011 US$137 million
  • European business performance benefits from restructuring and cost reduction actions
  • Southern African chemical cellulose business performed strongly
  • Net debt US$2,175 million, up US$75 million on seasonal working capital increase


*     Refer to the published results for details on special items, the definition of the terms, the reconciliation of profit/loss for the period to EBITDA excluding special items.

**    The quarter ended December 2010 included 14 weeks whereas the quarters ended September 2011 and December 2011 included 13 weeks.

The table above has not been audited or reviewed.



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

“Following a year in which various actions and strategies were initiated, primarily involving extensive restructuring charges and asset impairments, the group achieved a profit for the period of US$45 million (Q1 2011  US$37 million) and EPS of 9 US cents (Q1 2011 7 US cents) in the first quarter of the 2012 financial year.

“Market conditions remained uncertain as a result of the continued negative sentiment in financial markets.  Nevertheless, utilisation levels for our coated paper mills remained at high levels in North America and reasonable levels in Europe.

“Pulp prices continued to decline during the quarter but stabilised towards the end of the quarter.

“The coated paper businesses performed in line with expectations in North America and the improvement in Europe reflected the cost reduction and restructuring actions we implemented last year.

“The performance of the North American segment was unfavourably impacted by lower pulp output, declining pulp prices and weaker demand for casting release products particularly in the Chinese markets.

“The chemical cellulose business continued to perform strongly during the quarter, generating almost all of the operating profit excluding special items of the Southern African region for the quarter. 

“The Southern African paper business is proceeding with the restructuring announced last year for which the charges were reported in the fourth financial quarter of 2011.

“Group operating profit (excluding special items) has improved for two consecutive quarters coming in at US$100 million but was below the US$137 million in the equivalent quarter last year, partly as a result of the additional week in the comparative period.

“There were no major special items for the quarter, which is in line with our aim to minimise once-off charges or special items during the year ahead other than possible adjustments in plantation fair value.  The special item gain of US$7 million included a plantation fair value adjustment of US$3 million and profit on the sale of assets of US$5 million.

“Operating profit was therefore US$107 million compared to US$121 million in the equivalent quarter last year.

“Finance costs of US$54 million were significantly lower than the equivalent quarter last year (US$71 million) following the refinancing we concluded in the 2011 financial year and the use of cash to repay higher cost debt.

“Cash on hand was US$401 million at quarter end after debt repayments of approximately US$140 million during the quarter. Net debt at US$2,175 million is slightly higher than the previous quarter (US$2,100 million) but substantially down from US$2,432 million as at December 2010.”



Looking forward, Boëttger commented:

“Although market conditions remain uncertain, we are experiencing reasonable demand in our major markets. Our focus is on delivering the benefits of the restructuring and cost reduction actions announced and implemented in 2011 - in line with the group’s stated strategy.

“The European business has made good progress with its US$100 million per annum cost reduction plans and has further benefited from the reduction of prices for some raw materials, including pulp.  At current demand levels we expect to see further improvement in the performance of this business as the year progresses.

“We expect that the North American business’ overall performance will improve as a result of increased pulp production, as well as an improvement in Chinese demand for casting release paper. There are signs that pulp prices may have reached a turning point and we could see an increasing trend over the next few months.  The North American coated paper business is expected to continue performing well.

“The restructuring of the Southern African business is proceeding as planned and we expect the benefits to be realised from the second half of the financial year.

“Demand for our chemical cellulose remains relatively strong.  The performance of our Southern African chemical cellulose business is sensitive to the Rand price for our sales, based on the US Dollar chemical cellulose price and the Rand/Dollar exchange rates.  To date the exchange rate movement has largely offset the drop in prices, resulting in relatively stable Rand-denominated chemical cellulose prices realised and good margins for our business.  The chemical cellulose expansion projects announced last year are on track.

“We are committed to managing our debt levels with a view to reducing net debt below US$2 billion as soon as the current transforming capital expenditure has been completed and thereafter to reducing gearing (e.g. Net Debt to EBITDA) to a substantially lower level.  We expect net cash generation to turn positive for the full year after the increased capital expenditure and for debt levels, given constant exchange rates, to reduce by the year end.

“Provided there is no deterioration in market conditions, we expect the second quarter operating profit excluding special items to improve compared to the first quarter.”




The full results announcement is available at

There will be a conference call to which investors are invited. Full details are available using the links Investors; Investor Calendar; 1Q 2012 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:

  • he 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, cost-reduction programmes, 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



For further information contact:

Robert HopeGroup 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