Half Yearly Report
05 May 2009 - 5:00PM
UK Regulatory
TIDMSAZ
RNS Number : 6579R
Sappi Ld
05 May 2009
+-----------------------------------------------------------+---------------------+
| | Sappi Limited |
+-----------------------------------------------------------+---------------------+
Press Release
Johannesburg, 05 May 2009
Results for the second quarter ended March 2009
* Global economic downturn/ weak demand impacted operating profitability
* Continued production curtailment
* Basic loss per share of 7 US cents
* Positive cash generation
* Acquisition synergies on track
Summary
+----------------+--------+--------+--------+--------+--------+
| | Quarter ended |Half-year ended |
+----------------+--------------------------+-----------------+
| | March | March | Dec. | March | March |
| | 2009 | 2008 | 2008 | 2009 | 2008 |
+----------------+--------+--------+--------+--------+--------+
| Key | | | | | |
| figures: | | | | | |
| (US$ | | | | | |
| million) | | | | | |
+----------------+--------+--------+--------+--------+--------+
| Sales | 1,313 | 1,473 | 1,187 | 2,500 | 2,850 |
+----------------+--------+--------+--------+--------+--------+
| Operating | 6 | 221 | 57 | 63 | 312 |
| profit | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | (23) | (124) | (32) | (55) | (123) |
| Special | | | | | |
| items - | | | | | |
| (gains) | | | | | |
| * | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | (17) | 97 | 25 | 8 | 189 |
| Operating | | | | | |
| (loss) profit | | | | | |
| excluding | | | | | |
| special items | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | 82 | 190 | 106 | 188 | 378 |
| EBITDA | | | | | |
| excluding | | | | | |
| special | | | | | |
| items * | | | | | |
+----------------+--------+--------+--------+--------+--------+
| Basic | (7) | 43 | 6 | (3) | 54 |
| EPS | | | | | |
| (US | | | | | |
| cents) | | | | | |
+----------------+--------+--------+--------+--------+--------+
| Net | 2,735 | 2,661 | 2,497 | 2,735 | 2,661 |
| debt * | | | | | |
| (excluding | | | | | |
| rights | | | | | |
| offer cash | | | | | |
| in Dec 08) | | | | | |
+----------------+--------+--------+--------+--------+--------+
| Key | | | | | |
| ratios | | | | | |
| (%) | | | | | |
+----------------+--------+--------+--------+--------+--------+
| Operating | 0.5 | 15.0 | 4.8 | 2.5 | 11.0 |
| profit to | | | | | |
| sales | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | (1.3) | 6.6 | 2.1 | 0.3 | 6.6 |
| Operating | | | | | |
| (loss) | | | | | |
| profit | | | | | |
| excluding | | | | | |
| special | | | | | |
| items to | | | | | |
| sales | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | (1.6) | 9.0 | 2.6 | 0.4 | 9.0 |
| Operating | | | | | |
| (loss) | | | | | |
| profit | | | | | |
| excluding | | | | | |
| special | | | | | |
| items to | | | | | |
| Capital | | | | | |
| Employed | | | | | |
| (ROCE)* | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | 6.2 | 12.9 | 8.9 | 7.5 | 13.3 |
| EBITDA | | | | | |
| excluding | | | | | |
| special | | | | | |
| items to | | | | | |
| sales | | | | | |
+----------------+--------+--------+--------+--------+--------+
| | (7.5) | 35.9 | 5.3 | (1.4) | 22.6 |
| Return | | | | | |
| on | | | | | |
| average | | | | | |
| equity | | | | | |
| (ROE) | | | | | |
| (%) * | | | | | |
+----------------+--------+--------+--------+--------+--------+
| Net | 59.4 | 61.3 | 57.3 | 59.4 | 61.3 |
| debt | | | | | |
| to | | | | | |
| total | | | | | |
| capitalisation | | | | | |
| * (excluding | | | | | |
| rights offer | | | | | |
| Cash in Dec | | | | | |
| 08) | | | | | |
+----------------+--------+--------+--------+--------+--------+
* 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 and the revision of comparative figures in
accordance with IAS33 to reflect the impact of the rights offer.
The table presented above has not been audited or reviewed.
The quarter under review
Commenting on the results, Sappi chief executive Ralph Boëttger said:
"The quarter was characterised by a sharp decline in our sales volumes, which
was driven by declines in demand for coated paper and pulp in our major markets.
Average prices realised by the group in the quarter were 6% lower in US dollar
terms than a year ago mainly as a result of the sharp fall in pulp prices, which
fell 32% relative to a year earlier. Prices realised for coated paper were
higher than in the corresponding quarter a year ago. We curtailed production
extensively in each of our regions during the quarter to match supply with
demand and reduce inventories. Raw material, in particular pulp, and energy
prices were lower in the quarter compared to the prior quarter and corresponding
quarter last year. This had some effect on costs in the quarter; however, we
expect that a greater effect on costs will be apparent in our third quarter now
that higher cost inventories have been depleted.
Net cash generated (excluding cash invested in the Acquisition) was US$75
million for the quarter compared to an outflow of US$108 million a year ago.
Our liquidity situation is soundly managed. At March Sappi had cash and cash
equivalents of US$711 million and undrawn commitments under the revolving credit
facility of US$266 million. We do not have any major borrowings maturing in the
next 12 months.
While the recently acquired European mills were also impacted by low operating
rates as a result of global economic conditions, the integration of the
Acquisition has progressed well and the achievement of our previously announced
synergies of Euro 120 million per annum within 3 years is on track."
Outlook
Looking forward, Boëttger commented:
"The general economic outlook and market conditions remain depressed. In these
circumstances we expect demand for our products to remain weak and we will
therefore continue to curtail production to match supply with demand.
It has been difficult to identify the extent to which the fall in apparent
demand for our products is an inventory effect, but it appears that the decline
of inventories in the downstream supply chain has been significant. We are of
the opinion that downstream inventories are stabilising and therefore expect
apparent demand to start improving slightly in many of our markets.
Demand for chemical cellulose, particularly in Asia, has started to improve and
we are continuing to ramp up production at Saiccor Mill. We expect the operating
rate to be close to the total expanded capacity by our financial year end.
Pricing, however, is expected to remain weak for the rest of the year. The other
Southern African businesses will continue to manage production to match demand.
The Rand has recently strengthened relative to the US Dollar, which, if
sustained, will put pressure on margins.
In Europe stabilisation of downstream inventories is expected to help improve
the supply/demand balance. M-real ceased coated fine paper production at Hallein
and Gohrsmühle at the end of April 2009. We were selling the output of these
mills for M-real on an agency basis and therefore expect the operating rates of
our own mills to improve following this cessation as we transfer this production
to our mills. This, together with the continued achievement of Acquisition
synergies, is expected to improve the region's profitability.
In North America we do not expect a significant market improvement this year.
The actions taken to restructure the business including suspending operations at
Muskegon Mill are expected to help improve profitability.
Although market conditions remain difficult and there is still little
visibility, we expect our profitability to improve in the next quarter as a
result of the actions we have taken to manage costs, continued declines in input
costs and the gradual achievement of Acquisition synergies.
Prioritising cash generation and liquidity remains our critical objective as we
stated in our trading update at the group's Annual General Meeting in March.
Each of our operating businesses is implementing production curtailment and
variable and fixed cost reduction plans to minimise the cash impact of the
current weak market conditions, including the suspension of operations at
Muskegon Mill. We are also tightly managing working capital down to minimum
levels without compromising on service excellence. We are targeting a further
reduction in working capital by our financial year end. In addition, we are
reducing capital expenditure to a minimum. In the current financial year we
expect capital expenditure in our operations to be below US$200 million compared
to US$505 million last year. As a result of these actions we expect positive
cash generation for the full financial year.
Given the weak global market conditions, we are expecting the rest of 2009 to
remain challenging. Our actions and plans are focused on dealing with these
tough market conditions and importantly to ensure that Sappi develops even
closer relationships with our customers through the quality of our service and
continued improvements in efficiencies and remains well positioned to take full
advantage of our leading positions in coated graphic paper and chemical
cellulose when markets start to recover."
ENDS
The full results announcement is available at www.sappi.com
There will be a conference call to which investors are invited. Full details are
available at www.sappi.com using the links Investor Info; Investor Calendar;
2Q09 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. 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 impact of the global economic downturn, the risk that the
Acquisition will not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected, expected revenue synergies
and cost savings from the acquisition may not be fully realized or realized
within the expected time frame, revenues following the acquisition may be lower
than expected, any anticipated benefits from the consolidation of the European
paper business may not be achieved, 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,
including as a result of adverse changes in credit markets that affect our
ability to raise capital when needed, changing regulatory requirements,
unanticipated production disruptions (including as a result of planned or
unexpected power outages), 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.
We have included in this announcement an estimate of total synergies from the
acquisition of M-real's coated graphic paper business and the integration of the
acquired business into our existing business. The estimate of synergies that we
expect to achieve following the completion of the acquisition is based on
assumptions which in the view of our management were prepared on a reasonable
basis, reflect the best currently available estimates and judgments, and
present, to the best of our management's knowledge and belief, the expected
course of action and the expected future financial impact on our performance due
to the acquisition. However, the assumptions about these expected synergies are
inherently uncertain and, though considered reasonable by management as of the
date of preparation, are subject to a wide variety of significant business,
economic and competitive risks and uncertainties that could cause actual results
to differ materially from those contained in this estimate of synergies. There
can be no assurance that we will be able to successfully implement the strategic
or operational initiatives that are intended, or realise the estimated
synergies. This synergy estimate is not a profit forecast or a profit estimate
and should not be treated as such or relied on by shareholders or prospective
investors to calculate the likely level of profits or losses for Sappi for
fiscal 2009 or beyond.
Issued by:
Brunswick South Africa on behalf of Sappi Limited
Tel + 27 (0) 11 502 7300
For further information contact:
Robert Hope
Group Head Strategic Development
Sappi Limited
Tel +27 (0) 11 407 8492
Robert.Hope@sappi.com
André F Oberholzer
Group Head Corporate Affairs
Sappi Limited
Tel +27 (0) 11 407 8044
Mobile +27 (0) 83 235 2973
Andre.Oberholzer@sappi.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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