sappi limited
The word for fine paper
(Registration number 1936/008963/06)
JSE Code: SAP
ISIN Code: ZAE 000006284
Results for the fourth quarter and year ended September 2002
Headline EPS - Quarter 30 US cents
- Year 98 US cents
Strong cash flow
US business improves
Dividend increased to 28 US cents
summary
+--------------------+---------------------------------------+-----------------------+
| | Quarter ended | Year ended |
+--------------------+------------+--------------+-----------+-----------+-----------+
| | Sept.| June| Sept.| Sept.| Sept.|
+--------------------+------------+--------------+-----------+-----------+-----------+
| | 2002| 2002| 2001| 2002| 2001|
+--------------------+------------+--------------+-----------+-----------+-----------+
|Sales | 1,052| 974| 998| 3,729| 4,184|
|(US$ million) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|Operating profit | 122| 97| 91| 389| 446|
|(US$ million) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|EBITDA | 219| 188| 175| 741| 797|
|(US$ million) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|Operating profit to | 11.6| 10.0| 9.1| 10.4| 10.7|
|sales (%) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|EBITDA to sales (%) | 20.8| 19.3| 17.5| 19.9| 19.0|
+--------------------+------------+--------------+-----------+-----------+-----------+
|Operating profit to | 13.0| 11.8| 11.1| 11.3| 13.1|
|average net assets | | | | | |
|(%) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|EPS before | 30| 28| 23| 98| 113|
|exceptional items | | | | | |
|(Headline) (US | | | | | |
|cents) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|EPS (US cents) | 32| 29| 20| 95| 59|
+--------------------+------------+--------------+-----------+-----------+-----------+
|Return on | 18.6| 18.2| 9.9*| 14.2| 15.9*|
|equity (%) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
|Net debt | 1,419| 1,572| 1,126| 1,419| 1,126|
|(US$ million) | | | | | |
+--------------------+------------+--------------+-----------+-----------+-----------+
*Before Mobile restructuring charge
comment
During the last two years the group's revenues have shrunk partly as a result of management's actions to close
underperforming facilities and largely due to lower overall demand, sharply declining prices, particularly in North
America, and the weakening of the Euro and the Rand relative to the US dollar. It is pleasing therefore to be able to
report that, helped by the acquisition of Potlatch's coated fine paper business in the USA, our sales have increased in
the past two quarters in spite of the continuing weak prices. The company is in a strong position to return to a growth
path.
Demand for coated fine paper as measured by shipments from producers plus the net of imports and exports was 6.8%
higher than the equivalent quarter last year in the USA and flat in Europe. For the full year, demand was flat in both
markets. Inventories have declined in the customer chain over the last two years but appear to have reached a trough
and started to stabilise. European industry exports of coated fine paper increased 26% compared to the previous full
year.
Published data indicates that bench mark coated fine paper prices dropped sharply in the USA and in September 2002 were
8.6% below a year earlier (Coated # 3 Web) whilst Europe recorded a 1.9% decline over the same period (100gsm sheets
Germany). We continued to curtail production and in the quarter reduced our output of paper and pulp by approximately
130,000 tons.
North American and Scandinavian pulp inventories increased during the quarter but remain at 1.6 million tons, a
reasonable level after the quiet summer period, representing only 27 days of supply. Pulp prices started moving upwards
in the second calendar quarter but dropped again slightly in the third calendar quarter.
Against this background, sales for the quarter increased 5% compared to a year earlier to US$1.1 billion.
Net profit before exceptional items of US$69 million was up 30% compared to the equivalent quarter last year. Earnings
per share before exceptional items were 30 US cents, 2 US cents up on the previous quarter. Basic earnings per share
were 32 US cents. Return on equity for the quarter was 18.6%.
Selling, general and administrative expenses declined by US$22 million compared with the same quarter last year. US$4
million was due to better management of expenses. The difference arose both from the reversal of accruals after the
withdrawal of pending litigation and the reduction of accruals related to an over-cautious response to higher insurance
deductibles post September 11, 2001.
Group operating profit increased 34% and the operating profit margin increased to 11.6% from 9.1% in the equivalent
quarter last year.
Although our North American business returned to profitability in the final quarter as a result of stronger demand and
the benefits of the Cloquet acquisition, its margins remain under pressure.
Net finance costs of US$29 million were 19% below the equivalent quarter last year despite increased debt following the
Cloquet acquisition. Foreign exchange losses and the marking to market of financial instruments included in net finance
costs were US$5 million for the quarter compared to US$15 million last year.
Sales for the year were US$3.7 billion, 11% lower than last year. Operating profit of US$389 million was 13% lower
reflecting the pressure on margins experienced during the year.
For the full year, net profit before exceptional items was US$226 million, down 14% compared to the previous year. The
year's earnings per share before exceptional items were 98 US cents and basic earnings per share were 95 US cents.
Return on equity for the year was 14.2%.
Net finance costs for the year of US$74 million were 20% lower than last year, despite the Cloquet acquisition, US$4
million lower interest capitalised and a net increase of US$8 million in respect of foreign exchange movements and
marking to market of financial instruments.
Last quarter, we indicated that we would enter into interest rate swaps in respect of a portion of our fixed long-term
debt to variable rates to reduce our interest cost. To date we have not swapped into variable rates because, while it
would be prudent to buy a collar, the requirement that such instruments be marked to market would likely result in
excessive volatility in quarterly earnings caused by the changes in interest rates. We will continue to monitor
interest rate developments and take action when appropriate.
cash flow and debt
EBITDA for the quarter was US$219 million, 25.1% higher than last year. Free cash flow for the year, after all cash
charges and Capex, but prior to dividends and the acquisition of assets, was US$150 million for the quarter and US$292
million for the year.
Working capital was well managed and declined by US$50 million in the quarter and a total of US$89 million over the
last two quarters.
During the quarter we repurchased approximately 984,000 shares at an average price of R119.48 per share (US$11.40) and
a cost of US$11.2 million. Since December 2000 we have repurchased 13.0 million shares or approximately 5.5% of total
shares in issue, at an average price of R64.16, some of which have been utilised by the share incentive scheme to meet
its obligations.
Capital expenditure for the full year on fixed assets and plantations was US$205 million, which was well below the
aggregate of depreciation, amortisation and fellings. Capital commitments have increased from US$162 million last
quarter to US$228 million at the end of September 2002 and assuming the business outlook continues to improve, we
expect capital expenditure to approach the level of depreciation next year. We continue rigorously to apply our
existing criteria for capital allocations to all new capital expenditure projects.
Net debt declined by US$153 million in the quarter to US$1,419 million at the end of September 2002. Net debt to total
capitalisation is 37.0%. We now have a very good debt maturity profile with the average maturity at approximately 10
years.
The group has reviewed its pension funds to take account of the recent significant changes in the performance and
outlook of financial markets. Using revised and lower discount rates and assumed rates of return, the pension funds in
our European businesses are adequately funded. There is a surplus in the South African fund (which has not been brought
to account) but, in the UK and USA funds, a shortfall is projected. It is anticipated that the projected future
additional annual charges required to correct the projected shortfall in those funds will be approximately 5 US cents
per share and this situation will continue to be reviewed annually. The estimated surplus of the South African defined
benefit plan has not been reflected on the group's balance sheet pending the outcome of the statutory allocation
analysis of the surplus between the company and the members of the fund.
operating review for the quarter
sappi fine paper
+-----------------------------+---------------------------------+----------+
| | Quarter ended | |
+---------------------------+-+---------------+-----------------+----------+
| | Sept. 2002| Sept. 2001| %|
+---------------------------+-----------------+-----------------+----------+
| | US$ million| US$ million| change|
+---------------------------+-----------------+-----------------+----------+
|Sales | 905| 826| 9.6|
+---------------------------+-----------------+-----------------+----------+
|Operating profit | 78| 65| 20.0|
+---------------------------+-----------------+-----------------+----------+
|Operating margin (%) | 8.6| 7.9| -|
+---------------------------+-----------------+-----------------+----------+
|EBITDA | 156| 130| 20.0|
+---------------------------+-----------------+-----------------+----------+
|EBITDA Margin (%) | 17.2| 15.7| -|
+---------------------------+-----------------+-----------------+----------+
|RONOA p.a. (%) | 10.4| 10.5| -|
+---------------------------+-+---------------+-----------------+----------+
+---------------------------+-+---------------+-----------------+----------+
Advertising spend and more specifically advertising print pages, which are key drivers of our performance have been
slow to pick up. Since July 2002 we have seen a gradual improvement from a very low base and the outlook is that this
should continue.
Our European and South African businesses performed well, but there is scope for improvement in our North American
business - we saw the beginning of this in the last quarter.
Operating profit increased 20% to US$78 million, a return on net operating assets of 10.4%.
Europe
Despite overcapacity in the market and difficult market conditions, our European business continued to report solid
results. Sales volume was about 2% up on a year earlier and 3% up on the previous quarter due to better exports.
Domestic shipments remained flat. Average prices realised in the domestic market held up well throughout the year and
were only 2% lower in Euro compared to the equivalent quarter last year.
Operating profit was 7% lower than a year earlier and the return on net operating assets was lower at 14.6 %.
+-------------------------+-----------------------------------+---------------------------+
| | Quarter ended | |
+-------------------------+-+----------------+----------------+-+------------+------------+
| | Sept. 2002| Sept. 2001| % change| % change|
+---------------------------+----------------+------------------+------------+------------+
| | US$ million| US$ million| (US$)| (Euro)|
+---------------------------+----------------+------------------+------------+------------+
|Sales | 459| 444| 3.4| (6.7)|
+---------------------------+----------------+------------------+------------+------------+
|Operating profit | 53| 57| (7.0)| (16.1)|
+---------------------------+----------------+------------------+------------+------------+
|Operating margin (%) | 11.5| 12.8| -| -|
+---------------------------+----------------+------------------+------------+------------+
|EBITDA | 96| 94| 2.1| (7.8)|
+---------------------------+----------------+------------------+------------+------------+
|EBITDA Margin (%) | 20.9| 21.1| -| -|
+---------------------------+----------------+------------------+------------+------------+
|RONOA p.a. (%) | 14.6| 17.0| -| -|
+-------------------------+-+----------------+----------------+-+------------+------------+
+-------------------------+-+----------------+----------------+-+------------+------------+
North America
Our North American business returned to profitability, benefiting from seasonally strong demand, the recent start of a
pick-up in print advertising and the benefits of the Cloquet acquisition and integration. The Cloquet integration is on
track and we achieved the targeted benefits in the quarter. We remain confident that the announced synergies will be
fully realised and that the acquisition will be accretive by 20 US cents per share in 2003.
There is still significant opportunity to improve the performance of our North American business including improving
operating efficiencies at all of the mills.
+---------------------------+-------------------------------------+---------+
| | Quarter ended | |
+---------------------------+-+----------------+----------------+-+---------+
| | Sept. 2002| Sept. 2001| %|
+-----------------------------+----------------+----------------+-----------+
| | US$ million| US$ million| change|
+-----------------------------+----------------+----------------+-----------+
|Sales | 388| 323| 20.1|
+-----------------------------+----------------+----------------+-----------+
|Operating profit | 15| 0| -|
+-----------------------------+----------------+----------------+-----------+
|Operating margin (%) | 3.9| 0| -|
+-----------------------------+----------------+----------------+-----------+
|EBITDA | 47| 26| 80.8|
+-----------------------------+----------------+----------------+-----------+
|EBITDA Margin (%) | 12.1| 8.0| -|
+-----------------------------+----------------+----------------+-----------+
|RONOA p.a. (%) | 4.2| 0| -|
+---------------------------+-+----------------+----------------+-+---------+
+---------------------------+-+----------------+----------------+-+---------+
Fine Paper SA
The Southern African fine paper order book remains strong. Compared to a year earlier, average prices realised declined
slightly in Dollar terms but were up 26% in Rand terms. We are focusing on cost control to avoid inflationary pressure
following the sharp weakening of the Rand last year. Return on net operating assets was 46.0%.
+---------------------------+---------------------------------+---------------------------+
| | Quarter ended | |
+--------------------------++----------------+----------------+-+------------+------------+
| | Sept. 2002| Sept. 2001| % change| % change|
+--------------------------+-----------------+------------------+------------+------------+
| | US$ million| US$ million| (US$)| (Rand)|
+--------------------------+-----------------+------------------+------------+------------+
|Sales | 58| 59| (1.7)| 22.8|
+--------------------------+-----------------+------------------+------------+------------+
|Operating profit | 10| 8| 25.0| 56.2|
+--------------------------+-----------------+------------------+------------+------------+
|Operating margin (%) | 17.2| 13.6| -| -|
+--------------------------+-----------------+------------------+------------+------------+
|EBITDA | 13| 10| 30.0| 62.5|
+--------------------------+-----------------+------------------+------------+------------+
|EBITDA Margin (%) | 22.4| 16.9| -| -|
+--------------------------+-----------------+------------------+------------+------------+
|RONOA p.a. (%) | 46.0| 32.3| -| -|
+--------------------------++----------------+----------------+-+------------+------------+
+--------------------------++----------------+----------------+-+------------+------------+
forest products
Demand in South Africa for packaging papers and newsprint remained firm on the back of solid GDP growth and continued
import replacement. International demand for pulp, including dissolving pulp, improved slightly. Although NBSK pulp
prices declined about US$20 during the quarter, they remain US$35 above the trough level of March/April 2002.
Dissolving pulp markets continued to be oversupplied leading to difficult trading conditions.
The sharp decline in the Rand at the end of 2001 has resulted in upward pressure on domestic costs, particularly of
imported goods. We will continue to maintain very tight control on all of our input costs to ensure we maintain our
very competitive cost base.
Operating profit increased 22.6% compared to the equivalent quarter last year.
Return on net operating assets was 21.3 %.
+-------------------------+-----------------------------------+---------------------------+
| | Quarter ended | |
+-------------------------+-+----------------+----------------+-+------------+------------+
| | Sept. 2002| Sept. 2001| % change| % change|
+---------------------------+----------------+------------------+------------+------------+
| | US$ million| US$ million| (US$)| (Rand)|
+---------------------------+----------------+------------------+------------+------------+
|Sales | 147| 172| (14.5)| 6.8|
+---------------------------+----------------+------------------+------------+------------+
|Operating profit | 38| 31| 22.6| 53.2|
+---------------------------+----------------+------------------+------------+------------+
|Operating margin (%) | 25.8| 18.0| -| -|
+---------------------------+----------------+------------------+------------+------------+
|EBITDA | 57| 50| 14.0| 42.5|
+---------------------------+----------------+------------------+------------+------------+
|EBITDA Margin (%) | 38.8| 29.1| -| -|
+---------------------------+----------------+------------------+------------+------------+
|RONOA p.a. (%) | 21.3| 14.4| -| -|
+-------------------------+-+----------------+----------------+-+------------+------------+
+-------------------------+-+----------------+----------------+-+------------+------------+
dividend
The Board has declared a dividend of 28 US cents for the year ended September 2002. A dividend of 26 US cents was paid
in the previous year.
outlook
There are signs that advertising spending is at last recovering. We also believe that the inventory reduction
throughout the coated fine paper customer chain in our major markets has come to an end. As a result of these factors
we expect apparent demand for coated fine paper to resume growth next year even if world economic growth is muted.
The industry capacity for coated fine paper in Europe remains above consumption and we therefore expect further growth
in exports. The closure of 600,000 tons of US coated finepaper capacity over the last six months should tighten the
supply-demand balance in the US and we expect a modest improvement in operating rates and prices, an expectation
supported by the late but healthy demand for catalogues this season.
In both regions we will continue to match our output to customer demand.
Pulp prices, which had strengthened since the beginning of the second calendar quarter, declined in recent weeks as
global inventories increased. We do not expect this decline to be a long-term trend. Provided there is reasonable
economic growth as predicted by most analysts in the year ahead, we would expect pulp demand to increase and pulp
prices to rise modestly in the second half of the year.
Overall we are cautiously optimistic that, barring a major shock in the world economy, our earnings will show
reasonable growth in the next year.
On behalf of the Board
E van As D G Wilson
Director Director
7 November 2002
dividend announcement
The Board has declared a dividend (number 79) of 28 US cents per share for the year ended September 2002.
In compliance with the requirements of STRATE, the JSE Securities Exchange's electronic settlement system which is
applicable to Sappi, the salient dates in respect of the dividend will be as follows:
Last day to trade cum dividend: Friday 3 January 2003
Date on which shares commence trading
ex-dividend: Monday 6 January 2003
Record date: Friday 10 January 2003
Payment date: Monday 13 January 2003
Dividends payable from the Johannesburg transfer office will be paid in South African rands (except that nominee
shareholders, including the nominees of the US ADR depositary bank, who are nominees for South African non-residents
may elect, on or before Wednesday 8 January 2003, to receive payment in United States dollars) and 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 on Monday 23 December 2002. Those rates will be announced on 24
December 2002.
There will not be any dematerialisation nor rematerialisation of Sappi Limited share certificates from 6 January to 10
January 2003, both days inclusive.
Sappi Management Services (Pty) Limited
Secretaries
Per D J O'Connor
7 November 2002
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 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.
definitions
Debt/total capitalisation - current and non-current interest-bearing borrowings, and bank overdrafts (net of cash, cash
equivalents and short-term deposits), divided by shareholders' equity plus minority interest, non-current liabilities,
current interest-bearing borrowings and overdraft
EBITDA - earnings before interest, tax, depreciation, amortisation and fellings (before non-trading profit/loss)
EBITDA Margin - EBITDA divided by sales
Fellings - the amount charged against the income statement representing the standing cost of the plantations harvested
Net asset value - shareholders' equity plus net deferred tax
Net assets - total assets less current liabilities
NOPAT - net operating profit after current tax
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, which are total assets (excluding deferred taxation
and cash) less current liabilities (excluding interest-bearing borrowings and bank overdraft)
Financial results for the fourth quarter and year ended September 2002
group income statement
+--------------------+----------+----------+--------+----------+---------+--------+
| | Reviewed| Reviewed| | Reviewed| Audited| |
+--------------------+----------+----------+--------+----------+---------+--------+
| | Quarter| Quarter| | Year| Year| |
+--------------------+----------+----------+--------+----------+---------+--------+
| | ended| ended| | ended| ended| |
+--------------------+----------+----------+--------+----------+---------+--------+
| |Sept. 2002|Sept. 2001| |Sept. 2002| Sept.| |
| | | | | | 2001| |
+--------------------+----------+----------+--------+----------+---------+--------+
| | US$| US$|% change| US$| US$|% change|
| | million| million| | million| million| |
+--------------------+----------+----------+--------+----------+---------+--------+
|Sales | 1,052| 998| 5.4| 3,729| 4,184| (10.9)|
+--------------------+----------+----------+--------+----------+---------+--------+
|Cost of sales | 861| 816| | 3,008| 3,375| |
+--------------------+----------+----------+--------+----------+---------+--------+
|Gross profit | 191| 182| 4.9| 721| 809| (10.9)|
+--------------------+----------+----------+--------+----------+---------+--------+
|Selling, general and| 69| 91| | 332| 363| |
|administrative | | | | | | |
|expenses | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Operating profit | 122| 91| 34.1| 389| 446| (12.8)|
+--------------------+----------+----------+--------+----------+---------+--------+
|Non-trading (profit)| (2)| 3| | 17| 207| |
|loss | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Net finance costs | 29| 36| | 74| 92| |
+--------------------+----------+----------+--------+----------+---------+--------+
|Net paid | 30| 27| | 96| 126| |
+--------------------+----------+----------+--------+----------+---------+--------+
|Capitalised | (6)| (6)| | (29)| (33)| |
+--------------------+----------+----------+--------+----------+---------+--------+
|Net foreign exchange| 1| 13| | (4)| (1)| |
|losses (gains) | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Mark to market of | 4| 2| | 11| -| |
|financial | | | | | | |
|instruments | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Profit before | 95| 52| | 298| 147| |
|taxation | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Taxation | 28| 47| | 52| 88| |
|- current | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|- deferred | (6)| (42)| | 26| (79)| |
+--------------------+----------+----------+--------+----------+---------+--------+
|Net profit for the | 73| 47| 55.3| 220| 138| 59.4|
|period | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|EBITDA | 219| 175| 25.1| 741| 797| (7.0)|
+--------------------+----------+----------+--------+----------+---------+--------+
+--------------------+----------+----------+--------+----------+---------+--------+
|Basic earnings per | 32| 20| | 95| 59| |
|share | | | | | | |
|(US cents) | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Earnings before | | | | | | |
|exceptional items | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|(Headline earnings) | 30| 23| | 98| 113| |
|per share (US cents)| | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Weighted average | 230.2| 229.6| | 230.2| 232.8| |
|number of shares in | | | | | | |
|issue (millions) | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Diluted earnings per| 31| 20| | 94| 59| |
|share | | | | | | |
|(US cents) | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Diluted earnings | | | | | | |
|before exceptional | | | | | | |
|items | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|(Headline earnings) | 30| 23| | 97| 112| |
|per share (US cents)| | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Weighted average | 233.4| 232.6| | 233.4| 235.2| |
|number of shares on | | | | | | |
|fully diluted basis | | | | | | |
|(millions) | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Calculation of | | | | | | |
|earnings before | | | | | | |
|exceptional items | | | | | | |
|(Headline) net of | | | | | | |
|tax | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Net profit for the | 73| 47| | 220| 138| |
|period | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|(Profit) loss on | (1)| 4| | 1| 4| |
|disposal of business| | | | | | |
|and fixed assets | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Mill closure costs | 1| (2)| | 6| 118| |
|and asset impairment| | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Debt restructuring | -| -| | 6| -| |
|costs | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Deferred finance | -| 5| | -| 5| |
|fees written off on | | | | | | |
|early settlement of | | | | | | |
|loans | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Decrease in | (4)| (1)| | (7)| (2)| |
|provisions | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
|Earnings before | 69| 53| | 226| 263| |
|exceptional items | | | | | | |
|(Headline) | | | | | | |
+--------------------+----------+----------+--------+----------+---------+--------+
group balance sheet
+--------------------------------------------------+---------------+---------------+
| | Reviewed| Audited|
+--------------------------------------------------+---------------+---------------+
| | Sept. 2002| Sept. 2001|
+--------------------------------------------------+---------------+---------------+
| | US$ million| US$ million|
+--------------------------------------------------+---------------+---------------+
|ASSETS | | |
+--------------------------------------------------+---------------+---------------+
|Non-current assets | 3,639| 3,344|
+--------------------------------------------------+---------------+---------------+
|Property, plant and equipment | 3,189| 2,890|
+--------------------------------------------------+---------------+---------------+
|Plantations | 298| 324|
+--------------------------------------------------+---------------+---------------+
|Deferred taxation | 6| 4|
+--------------------------------------------------+---------------+---------------+
|Other non-current assets | 146| 126|
+--------------------------------------------------+---------------+---------------+
|Current assets | 1,002| 1,160|
+--------------------------------------------------+---------------+---------------+
|Cash and cash equivalents | 161| 445|
+--------------------------------------------------+---------------+---------------+
|Trade and other receivables | 320| 202|
+--------------------------------------------------+---------------+---------------+
|Inventories | 521| 513|
+--------------------------------------------------+---------------+---------------+
|Total assets | 4,641| 4,504|
+--------------------------------------------------+---------------+---------------+
|EQUITY AND LIABILITIES | | |
+--------------------------------------------------+---------------+---------------+
|Shareholders' equity | | |
+--------------------------------------------------+---------------+---------------+
|Ordinary shareholders' interest | 1,601| 1,503|
+--------------------------------------------------+---------------+---------------+
|Minority interest | 2| 3|
+--------------------------------------------------+---------------+---------------+
|Non-current liabilities | 2,110| 1,638|
+--------------------------------------------------+---------------+---------------+
|Interest-bearing borrowings | 1,455| 1,012|
+--------------------------------------------------+---------------+---------------+
|Deferred taxation | 399| 385|
+--------------------------------------------------+---------------+---------------+
|Other non-current liabilities | 256| 241|
+--------------------------------------------------+---------------+---------------+
|Current liabilities | 928| 1,360|
+--------------------------------------------------+---------------+---------------+
|Interest-bearing borrowings and bank overdraft | 125| 559|
+--------------------------------------------------+---------------+---------------+
|Other current liabilities | 803| 801|
+--------------------------------------------------+---------------+---------------+
|Total equity and liabilities | 4,641| 4,504|
+--------------------------------------------------+---------------+---------------+
|Number of shares in issue (millions) | 230.2| 229.5|
+--------------------------------------------------+---------------+---------------+
|Net debt (US$ million) | 1,419| 1,126|
+--------------------------------------------------+---------------+---------------+
|Net debt to total capitalisation (%) | 37.0| 30.4|
+--------------------------------------------------+---------------+---------------+
|Net asset value per share (US$) | 8.66| 8.21|
+--------------------------------------------------+---------------+---------------+
group cash flow statement
+-----------------+---------------+---------------+---------------+---------------+
| | Reviewed| Reviewed| Reviewed| Audited|
+-----------------+---------------+---------------+---------------+---------------+
| | Quarter| Quarter| Year| Year|
+-----------------+---------------+---------------+---------------+---------------+
| | ended| ended| ended| ended|
+-----------------+---------------+---------------+---------------+---------------+
| | Sept. 2002| Sept. 2001| Sept. 2002| Sept. 2001|
+-----------------+---------------+---------------+---------------+---------------+
| | US$ million| US$ million| US$ million| US$ million|
+-----------------+---------------+---------------+---------------+---------------+
|Cash generated by| 226| 164| 744| 771|
|operations | | | | |
+-----------------+---------------+---------------+---------------+---------------+
|Movement in | 50| 177| (42)| 51|
|working capital | | | | |
+-----------------+---------------+---------------+---------------+---------------+
|Net finance costs| (35)| (42)| (103)| (125)|
+-----------------+---------------+---------------+---------------+---------------+
|Taxation paid | (26)| (41)| (89)| (94)|
+-----------------+---------------+---------------+---------------+---------------+
|Dividends paid | -| -| (60)| (60)|
+-----------------+---------------+---------------+---------------+---------------+
|Cash retained | 215| 258| 450| 543|
|from operating | | | | |
|activities | | | | |
+-----------------+---------------+---------------+---------------+---------------+
|Cash effects of | (60)| (81)| (701)| (303)|
|investing | | | | |
|activities | | | | |
+-----------------+---------------+---------------+---------------+---------------+
|Normal investing | (65)| (81)| (218)| (303)|
|activities | | | | |
+-----------------+---------------+---------------+---------------+---------------+
|Acquisition of | 5| -| (483)| -|
|net assets | | | | |
+-----------------+---------------+---------------+---------------+---------------+
| | 155| 177| (251)| 240|
+-----------------+---------------+---------------+---------------+---------------+
|Cash effects of | (189)| 40| (29)| (90)|
|financing | | | | |
|activities | | | | |
+-----------------+---------------+---------------+---------------+---------------+
|Net movement in | (34)| 217| (280)| 150|
|cash and cash | | | | |
|equivalents | | | | |
+-----------------+---------------+---------------+---------------+---------------+
group statement of changes in shareholders' equity
+--------------------------------------------------+---------------+---------------+
| | Reviewed| Audited|
+--------------------------------------------------+---------------+---------------+
| | Year| Year|
+--------------------------------------------------+---------------+---------------+
| | ended| ended|
+--------------------------------------------------+---------------+---------------+
| | Sept. 2002| Sept. 2001|
+--------------------------------------------------+---------------+---------------+
| | US$ million| US$ million|
+--------------------------------------------------+---------------+---------------+
|Balance - beginning of year | 1,503| 1,618|
+--------------------------------------------------+---------------+---------------+
|Net profit for the year | 220| 138|
+--------------------------------------------------+---------------+---------------+
|Foreign currency translation reserve | (62)| (118)|
+--------------------------------------------------+---------------+---------------+
|Revaluation of derivative instruments | 3| 8|
+--------------------------------------------------+---------------+---------------+
|Dividends paid - US$0.26 (2001: US$0.25) per share| (60)| (60)|
+--------------------------------------------------+---------------+---------------+
|Net transfers to share purchase trust (share | (3)| (83)|
|buybacks) | | |
+--------------------------------------------------+---------------+---------------+
|Balance - end of year | 1,601| 1,503|
+--------------------------------------------------+---------------+---------------+
notes to the group results
1. Basis of preparation
The group results have been prepared in conformity with South African Statements of Generally Accepted Accounting
Practice. The same accounting policies have been followed as in the annual financial statements for September 2001.
The financial results for the quarter have been reviewed by the group's auditors, Deloitte & Touche. Their report is
available for inspection at the company's registered offices.
+------------------+---------------+---------------+---------------+---------------+
| | Reviewed| Reviewed| Reviewed| Audited|
+------------------+---------------+---------------+---------------+---------------+
| | Quarter| Quarter| Year| Year|
+------------------+---------------+---------------+---------------+---------------+
| | ended| ended| ended| ended|
+------------------+---------------+---------------+---------------+---------------+
| | Sept. 2002| Sept. 2001| Sept. 2002| Sept. 2001|
+------------------+---------------+---------------+---------------+---------------+
| | US$ million| US$ million| US$ million| US$ million|
+------------------+---------------+---------------+---------------+---------------+
|2. Operating | | | | |
|profit | | | | |
|Included in | | | | |
|operating profit | | | | |
|are: | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Depreciation | 85| 73| 310| 300|
+------------------+---------------+---------------+---------------+---------------+
|Fellings | 7| 6| 26| 30|
+------------------+---------------+---------------+---------------+---------------+
|Amortisation | 5| 5| 16| 21|
+------------------+---------------+---------------+---------------+---------------+
| | 97| 84| 352| 351|
+------------------+---------------+---------------+---------------+---------------+
|3. Capital | | | | |
|expenditure | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Fixed assets | | | 180| 293|
|(excluding Cloquet| | | | |
|assets acquired) | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Plantations | | | 25| 28|
+------------------+---------------+---------------+---------------+---------------+
| | | | 205| 321|
+------------------+---------------+---------------+---------------+---------------+
|4. Capital | | | | |
|commitments | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Contracted but not| | | 55| 78|
|provided | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Approved but not | | | 173| 109|
|contracted | | | | |
+------------------+---------------+---------------+---------------+---------------+
| | | | 228| 187|
+------------------+---------------+---------------+---------------+---------------+
+------------------+---------------+---------------+---------------+---------------+
|5. Contingent | | | | |
|liabilities | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Guarantees and | | | 66| 79|
|suretyships | | | | |
+------------------+---------------+---------------+---------------+---------------+
|Other contingent | | | 14| 27|
|liabilities | | | | |
+------------------+---------------+---------------+---------------+---------------+
regional information
+---------------------+-----------+-----------+---------+-----------+----------+----------+
| | | | | | | |
+---------------------+-----------+-----------+---------+-----------+----------+----------+
| |Reviewed |Reviewed | |Reviewed |Audited | |
+---------------------+-----------+-----------+---------+-----------+----------+----------+
| |Quarter |Quarter | |Year |Year | |
+---------------------+-----------+-----------+---------+-----------+----------+----------+
| |ended |ended | |ended |ended | |
+---------------------+-----------+-----------+---------+-----------+----------+----------+
| |Sept. |Sept. | |Sept. |Sept. | |
| |2002 |2001 | |2002 |2001 | |
+---------------------+-----------+-----------+---------+-----------+----------+----------+
| |US$ million|US$ million|% change |US$ million|US$ |% change |
| | | | | |million | |
+---------------------+-----------+-----------+---------+-----------+----------+----------+
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Sales - | | | | | | | |
|Metric tons| | | | | | | |
|(000's) | | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Fine Paper |North | 398| 287| 38.7| 1,163| 1,238| (6.1)|
|- |America | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Europe | 560| 551| 1.6| 2,180| 2,168| 0.6|
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Southern | 76| 78| (2.6)| 310| 288| 7.6|
| |Africa | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Total | 1,034| 916| 12.9| 3,653| 3,694| (1.1)|
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Forest | | 605| 585| 3.4| 2,434| 2,412| 0.9|
|Products | | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Total | | 1,639| 1,501| 9.2| 6,087| 6,106| (0.3)|
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Sales | | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Fine Paper |North | 388| 323| 20.1| 1,197| 1,442| (17.0)|
|- |America | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Europe | 459| 444| 3.4| 1,744| 1,781| (2.1)|
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Southern | 58| 59| (1.7)| 215| 229| (6.1)|
| |Africa | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Total | 905| 826| 9.6| 3,156| 3,452| (8.6)|
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Forest | | 147| 172| (14.5)| 573| 732| (21.7)|
|Products | | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
|Total | | 1,052| 998| 5.4| 3,729| 4,184| (10.9)|
+-----------+-+----------+---------+----------+---------+------------+---------+----------+
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
|Operating | | | | | | | |
|profit | | | | | | | |
+-----------+-+----------+---------+----------+---------+------------+---------+----------+
|Fine Paper |North | 15| -| -| (21)| 40| -|
|- |America | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Europe | 53| 57| (7.0)| 217| 177| 22.6|
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Southern | 10| 8| 25.0| 34| 31| 9.7|
| |Africa | | | | | | |
+-----------+------------+---------+----------+---------+------------+---------+----------+
| |Total | 78| 65| 20.0| 230| 248| (7.3)|
+-----------+-+----------+---------+----------+---------+------------+---------+----------+
+-----------+-+----------+---------+----------+---------+------------+---------+----------+
+------------+-------------+---------+----------+---------+-----------+---------+----------+
|Forest | | 38| 31| 22.6| 141| 194| (27.3)|
|Products | | | | | | | |
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Corporate | | 6| (5)| -| 18| 4| 350.0|
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Total | | 122| 91| 34.1| 389| 446| (12.8)|
+------------+-----+-------+---------+----------+---------+-----------+---------+----------+
|Earnings before | | | | | | | |
|interest, tax, | | | | | | | |
|depreciation and | | | | | | | |
|amortisation | | | | | | | |
|charges * | | | | | | | |
+------------+-----+-------+---------+----------+---------+-----------+---------+----------+
|Fine Paper -|North America| 47| 26| 80.8| 89| 150| (40.7)|
+------------+-------------+---------+----------+---------+-----------+---------+----------+
| |Europe | 96| 94| 2.1| 378| 325| 16.3|
+------------+-------------+---------+----------+---------+-----------+---------+----------+
| |Southern | 13| 10| 30.0| 42| 38| 10.5|
| |Africa | | | | | | |
+------------+-------------+---------+----------+---------+-----------+---------+----------+
| |Total | 156| 130| 20.0| 509| 513| (0.8)|
+------------+-------------+---------+----------+---------+-----------+---------+----------+
|Forest | | 57| 50| 14.0| 214| 280| (23.6)|
|Products | | | | | | | |
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Corporate | | 6| (5)| -| 18| 4| 350.0|
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Total | | 219| 175| 25.1| 741| 797| (7.0)|
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Net operating | | | | | | | |
|assets | | | | | | | |
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Fine Paper -|North America| 1,483| 1,009| 47.0| 1,483| 1,009| 47.0|
+------------+-------------+---------+----------+---------+-----------+---------+----------+
| |Europe | 1,420| 1,333| 6.5| 1,420| 1,333| 6.5|
+------------+-------------+---------+----------+---------+-----------+---------+----------+
| |Southern | 90| 100| (10.0)| 90| 100| (10.0)|
| |Africa | | | | | | |
+------------+-------------+---------+----------+---------+-----------+---------+----------+
| |Total | 2,993| 2,442| 22.6| 2,993| 2,442| 22.6|
+------------+-------------+---------+----------+---------+-----------+---------+----------+
|Forest | | 714| 825| (13.5)| 714| 825| (13.5)|
|Products | | | | | | | |
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Corporate | | (36)| (13)| 176.9| (36)| (13)| 176.9|
+------------+-+-----------+---------+----------+---------+-----------+---------+----------+
|Total | | 3,671| 3,254| 12.8| 3,671| 3,254| 12.8|
+------------+-+---+-------+---------+----------+---------+-----------+---------+----------+
+------------+-+---+-------+---------+----------+---------+-----------+---------+----------+
* before non-trading (profit) loss
convenience translation into rands
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
| | Unaudited| Unaudited| | Unaudited| Unaudited| |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
| | Quarter| Quarter| | Year| Year| |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
| | ended| ended| | ended| ended| |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
| | Sept. 2002| Sept. 2001| % change| Sept. 2002| Sept. 2001| % change|
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Sales | 11,027| 8,370| 31.7| 39,301| 33,294| 18.0|
|(ZAR million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Operating profit | 1,279| 763| 67.6| 4,100| 3,549| 15.5|
|(ZAR million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Profit after | 765| 394| 94.2| 2,319| 1,098| 111.2|
|taxation | | | | | | |
|(ZAR million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|EBITDA | 2,296| 1,468| 56.4| 7,810| 6,342| 23.1|
|(ZAR million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Operating profit | 11.6| 9.1| | 10.4| 10.7| |
|to sales (%) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|EBITDA to sales | 20.8| 17.5| | 19.9| 19.0| |
|(%) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Operating profit | 13.1| 11.0| | 12.2| 13.0| |
|to average net | | | | | | |
|assets (%) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|EPS before | 314| 193| 62.7| 1,033| 899| 14.9|
|exceptional items| | | | | | |
|(Headline) | | | | | | |
|(SA cents) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Basic EPS | 335| 168| 99.4| 1,001| 469| 113.4|
|(SA cents) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|EBITDA per share | 997| 639| 56.0| 3,393| 2,724| 24.6|
|(SA cents) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Net debt | | | | 14,956| 10,065| 48.6|
|(ZAR million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Net debt to total| | | | 37.0| 30.4| |
|capitalisation | | | | | | |
|(%) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Cash generated by| 2,369| 1,375| 72.3| 7,841| 6,135| 27.8|
|operations (ZAR | | | | | | |
|million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Cash retained | 2,254| 2,164| | 4,743| 4,321| |
|from operating | | | | | | |
|activities (ZAR | | | | | | |
|million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Net movement in | (356)| 1,820| | (2,951)| 1,194| |
|cash and cash | | | | | | |
|equivalents (ZAR | | | | | | |
|million) | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Exchange rates: | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Period end rate: | 10.5400| 8.9386| | 10.5400| 8.9386| |
|US$1 = ZAR | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Average rate: | 10.4818| 8.3871| | 10.5393| 7.9574| |
|US$1 = ZAR | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Period end rate: | 1.0216| 1.0909| | 1.0216| 1.0909| |
|US$1 = EUR | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
|Average rate: | 1.0153| 1.1251| | 1.0884| 1.1293| |
|US$1 = EUR | | | | | | |
+-----------------+-----------+-----------+---------+-----------+-----------+---------+
This report is available on the Sappi website -
www.sappi.com
Other interested parties can obtain printed copies of this report from:
South Africa:
Computershare Investor Services Limited,
8th Floor, 11 Diagonal Street, Johannesburg, 2001
PO Box 1053, Johannesburg, 2000. Tel +27 (0)11 370-5000.
United Kingdom:
Capita IRG plc, Bourne House, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU, DX 91750, Beckenham West.
Tel +44 (0)208 639-2157.
United States ADR Depositary:
Bank of New York, ADR Department,
101 Barclay Street, New York, NY 10286. Tel +1 212 815-5800.
www.sappi.com
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