Final Results
12 November 2001 - 6:45PM
UK Regulatory
RNS Number:9491M
Sappi Ld
12 November 2001
Press Release
Johannesburg, 12th November 2001
Sappi increases dividend on robust results despite difficult market
conditions
Sappi, the world's leading producer of coated fine paper, today announced
year-end and fourth quarter results for the period to September 2001.
Annual results - Highlights
* Net profit before exceptional items for the year was US$263 million, 24%
below last year
* Earnings per share before exceptional items were 113 US cents, 23% below last
year
* In Rand terms, earnings per share only 6% down at 899 SA cents
* Closure of Mobile Mill creates pro forma benefit of US$35 million before tax
profit
* Group ends the year with strong balance sheet
- Generated cash flow of US$797 million (EBITDA)
- Gearing reduced further to 30.4%
* Dividend 26 US cents or approximately R2.50 - an increase of 33% in Rands
Commenting on the results, Sappi Executive Chairman, Eugene van As, said:
"Against a very challenging background of difficult market conditions
resulting in low demand for most of our products the group produced robust
results. In particular, the geographic spread of our assets allowed us to
take advantage of strong markets and minimize the impact of weaker markets
and reduced the impact of any one currency movement. In addition, the scale
and efficiency of our operating assets and our leading brands combined to
assist the group perform at the top end of the sector. For South African
investors, the group has confirmed its status as a strong Rand hedge."
Results for the Year
The group's net profit before exceptional items for the year was US$263
million, 24% below last year and earnings per share before exceptional items
were 113 US cents, 23% below last year, a good performance in the very
difficult circumstances that prevailed. Had the Mobile mill been closed (with
associated overhead cost reductions) at the beginning of the year there would
have been a benefit of approximately US$35 million before tax or
approximately 9 US cents per share after tax.
Earnings after closure costs and one-time adjustments were US$138 million,
62% below last year, and earnings per share were 59 US cents.
Finance costs continued to decline because of lower indebtedness and lower
interest. Net finance costs paid before capitalised interest were 13% lower
than a year earlier.
Sappi ended the year with a strong balance sheet and the business continued
to generate healthy cash flow of US$797 million (EBITDA) for the year. The
net debt to total capitalisation ratio dropped to 30.4% compared to 32.5% a
year ago.
In keeping with Sappi's stated policy to grow dividends by at least
inflation, the Board has declared a dividend of 26 US cents, representing a
4% increase over the previous year. The Rand hedge quality of the Sappi share
is shown by the fact that this represents a 33% increase in the Rand dividend
to approximately R2.50.
Operational Review
Fine Paper
It was a difficult year in the fine paper markets, particularly in North
America, which experienced its biggest ever percentage decline in demand. A
significant portion of reduced North American shipments was due to
de-stocking by merchants and printers. Local US producers were further
affected by increasing imports from Europe and Asia, which resulted in
significant pressure on price and volume.
In Europe there was also a significant decline in orders throughout the
coated woodfree sector as the inventory throughout the pipeline was reduced.
Producers reduced production to keep supply and demand in balance.
Sappi Fine Paper South Africa had an excellent year, producing record profits
in Rand terms. It recovered its coated market position in South Africa, which
had been eroded in the previous year by imports.
Commenting on the fine paper division's overall performance Bill Sheffield,
Fine Paper CEO said. "Against very tough market conditions the division held
up well. The North American business responded to its softening market with
rigorous cost control and was also helped by the falling pulp price. Sappi
Fine Paper Europe performed well due to a relentless focus on managing fixed
costs, curtailing production and by driving for maximum efficiency from
operations. Across all our markets, Sappi's strong brands held up better than
most during this difficult period."
Forest Products
Despite the significant reduction in the pulp price the Forest Products
business delivered good results, due in the main to its low cost base and
some currency benefits. In a tough environment both locally and
internationally, the division continued to generate good returns against its
weighted average cost of capital.
John Job, Forest Products CEO said "Our southern African markets have held up
well and both our forest products and global fine papers businesses have
demonstrated their value as Rand hedges".
Outlook
Sappi said that the group was expecting a slow start to the year with the
North American business bearing the brunt of the downturn. In Europe however
demand for coated free sheet is reasonably stable. Global industry inventory
levels are low at consumer and merchant level, and although end use
consumption is likely to be lower because of a weaker economy, demand for the
group's products should not decline much, if at all, in the coming year.
Sappi's results in the first quarter will be sharply down because of the USA
situation and curtailment on all continents but particularly because two of
the group's largest profit contributors, the Somerset and Ngodwana mills,
will have their main maintenance shuts (held every 30 months) in October. In
terms of new international accounting standards the charges will be taken in
the quarter and not spread over the period between shuts as in the past.
Commenting on the outlook Eugene van As said; "Despite these difficulties
anticipated in the first quarter, with the information now at our disposal
and barring further deterioration of the global economic outlook, we expect
earnings, after the first quarter, to return to levels similar to the recent
past. The group has a strong balance sheet, a high cash interest cover and is
geographically spread which puts us in a position to take advantage of an
upturn when it comes."
ends
FORWARD-LOOKING STATEMENTS
Certain statements in this report 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
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 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) 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.
Released on behalf of Sappi by Brunswick, telephone 44 11 442 8803
For further information contact:
Robert Hope, Director Strategic Development
Sappi Limited
Tel: +27 (0) 11 407 8492
Fax: +27 (0) 11 403 1493
robho@za.sappi.com
Andre F Oberholzer, Corporate Affairs and Communication Manager
Sappi Limited
+27(0) 11-407 8044 work (direct)
+27(0) 11-403 8236 fax
+27(0) 82-906 0638 cellular
andreo@za.sappi.com
SAPPI LIMITED
Group income statements
Unaudited
Quarter ended
Sept.2001 Sept.2000
US$ million US$ million % change
Sales 998 1,246 (19.9)
Cost of sales 816 941
_________________________________
Gross profit 182 305 (40.3)
Selling, general & administrative expenses 91 106
_________________________________
Operating profit 91 199 (54.3)
_________________________________
Non-trading (loss) profit (3) 13
Net finance costs 36 13
_________________________________
Net paid * 42 33
Capitalised (6) (20)
_________________________________
Profit before tax 52 199
Taxation - current 47 27
- deferred (42) 38
_________________________________
Profit after tax 47 134
Income attributable to minority interests - 5
_________________________________
Net profit 47 129
_________________________________
EBITDA 175 285 (38.6)
_________________________________
Basic earnings per share (US cents) 20 54
Basic earnings before exceptional items
(Headline earnings) per share (US cents) 23 49
Weighted average number of shares in issue 229.6 239.1
(millions)
Diluted earnings per share (US cents) 20 52
Diluted earnings before exceptional items
(Headline earnings) per share (US cents) 23 48
Weighted average number of shares on fully
diluted basis (millions) 232.6 259.8
Calculation of Earnings before exceptional items (Headline) net of tax
Net profit 47 129
Loss / (profit) on disposal of business
and fixed assets 4 (21)
Mill closure costs and asset impairments (2) 8
Deferred finance fees written off on
early settlement of 5 -
loans
Decrease in other provisions (1) (1)
_________________________________
Earnings before exceptional items (Headline) 53 115
_________________________________
Audited
Year ended
Sept. 2001 Sept. 2000
US$ million US$ million % change
Sales 4,184 4,718 (11.3)
Cost of sales 3,375 3,650
_____________________________________
Gross profit 809 1,068 (24.3)
Selling, general & administrative
expenses 363 396
_____________________________________
Operating profit 446 672 (33.6)
Non-trading (loss) profit (207) (2)
Net finance costs 92 97
_____________________________________
Net paid 125 144
Capitalised (33) (47)
_____________________________________
Profit before tax 147 573
Taxation - current 88 73
- deferred (79) 124
_____________________________________
Profit after tax 138 376 (63.3)
Income attributable to minority interests - 13
_____________________________________
Net profit 138 363 (62.0)
EBITDA 797 1,052 (24.3)
_____________________________________
Basic earnings per share (US cents) 59 153
Basic earnings before exceptional items
(Headline earnings) per share (US cents) 113 146
Weighted average number of shares in
issue (millions) 232.8 236.9
Diluted earnings per share (US cents) 59 151
Diluted earnings before exceptional items
(Headline earnings) per share (US cents) 112 144
Weighted average number of shares on fully
diluted basis (millions) 235.2 245.5
Calculation of Earnings before exceptional items (Headline) net of tax
Net profit 138 363
Loss / (profit) on disposal of business
and fixed assets 4 (22)
Mill closure costs and asset impairments 118 8
Deferred finance fees written off on
early settlement of loans 5 11
Decrease in other provisions (2) (13)
_____________________________________
Earnings before exceptional items
(Headline) 263 347
_____________________________________
* Including marking foreign currency contracts to market and other foreign
exchange losses of US$ 13 million
SAPPI LIMITED
Group balance sheet
Audited Audited
September 2001 September 2000
US$ million US$ million
________________________________
ASSETS
Non-current assets 3,346 3,600
________________________________
Property, plant and equipment 2,890 3,095
Plantations 324 372
Deferred taxation 4 37
Other non-current assets 128 96
________________________________
Current assets 1,160 1,168
________________________________
Cash and cash equivalents 445 294
Trade and other receivables 202 319
Inventories 513 555
________________________________
Total assets 4,506 4,768
________________________________
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' interest 1,503 1,618
Minority interest 3 53
Non-current liabilities 1,640 1,996
________________________________
Interest bearing borrowings 1,014 1,278
Deferred taxation 385 500
Other non-current liabilities 241 218
________________________________
Current liabilities 1,360 1,101
________________________________
Interest bearing borrowings and bank
overdraft 559 238
Other current liabilities 801 863
________________________________
Total equity and liabilities 4,506 4,768
________________________________
Number of shares in issue (millions) 229.5 239.1
Net Debt (US$ million) 1,128 1,270
Net Debt to Total Capitalisation (%) 30.4 32.5
Net asset value per share (US cents) 821 870
* Restated for reclassification of minority interest to debt in September
2001, as if
processed in September 2000
SAPPI LIMITED
Group cash flow statement
Audited Audited
Year ended Year ended
September 2001 September 2000
US$ million US$ million
________________________________
Cash generated by operations 771 1,048
Movement in working capital 51 (61)
Net finance costs (125) (144)
Taxation paid (94) (12)
Dividends paid (60) (42)
________________________________
Cash retained from operating activities 543 789
Cash effects of investing activities (305) (68)
________________________________
238 721
Cash effects of financing activities (88) (564)
________________________________
Net movement in cash and cash equivalents 150 157
________________________________
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