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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