sappi report for the quarter and year ended September 2000 in US Dollars th 4quarter

Transcription

1 sappi report for the quarter and year ended September in US Dollars th 4quarter

2 summary Sept. June Sept. Sept. Sept. Sales (US$ million) 1,246 1,170 1,268 4,718 4,422 Operating profit (US$ million) EBITDA (US$ million) , Operating profit to sales (%) EBITDA to sales (%) Operating profit to average net assets RONA (%) EPS before exceptional items (Headline) (US cents) EPS (US cents) Return on equity (%) Net assets (US$ million) 3,664 4,188 3,735 3,664 3,735 Net debt (US$ million) 1,205 1,495 2,038 1,205 2,038 Tons referred to in this report are metric tons. EBITDA (US$m) Net debt (US$m)

3 highlights Record quarterly earnings Annual results Operating profit up 65% EPS up 92% Return on equity 23% Dividend up 32% Positive outlook comment Our strong performance for the year demonstrates the success of Sappi s growth strategy over the last decade. Our margins and returns are now amongst the highest in the industry and we are well placed to continue to create value through the cycle. Sappi Boise Cascade Bowater Georgia Pacific International Paper Mead Corporation Westvaco Weyerhaeuser Willamette Holmen Metsa-Serla SCA Stora Enso UPM Kymmene 0 Peer Group Comparison Return on Equity % Source: UBS Warburg, Sappi Period: Oct. `99 - Sep. `00

4 Operating Review for the Quarter We had another strong quarter in both coated fine paper and forest product businesses. The global spread of our manufacturing assets helped moderate the distortions caused by the strength of the US Dollar. Further Euro price increases for coated woodfree paper were achieved in Europe in July; but the proposed price increases in the USA were deferred, primarily as a result of a continued growth in imports into the USA. Sales for the quarter were 6% above the June quarter but 2% lower than the same quarter last year, which had strong sales in the run up to Y2K. US$/Metric Ton Our Fine Paper business has leading market shares in the fast growing coated woodfree paper sector and continues to perform well and consolidate its position. Sappi Stora Enso Metsa-Serla APP Lecta(CVC) IP/Champion Oji Paper Nippon UPM-Kymmene Burgo Prices Coated Woodfree Paper Jan-94 Mar May Jul Sep Nov Jan-95 Mar May Jul Sep Nov Jan-96 Mar May Jul Sep Nov Jan-97 Mar May Jul Sep Nov Jan-98 Mar May Jul Sep Nov Jan-99 Mar May Jul Sep Nov Jan-00 Mar May Jul Sep fine paper 0 US CFS No lb rolls Germany CFS 90gsm sheets 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 DEM/Metric Ton Source: PPI Sappi has a leading global market position in Coated Woodfree Paper 500 1,000 1,500 2,000 2,500 3,000 3,500 Capacity (`000 Tons) Source: EMGE Sept. Sept. % US$ million US$ million change Sales 1,006 1,059 (5) Operating profit Operating margin (%) 12 8 EBITDA EBITDA Margin (%) RONOA p.a. (%) Europe During the quarter demand for our paper was significantly higher than the equivalent quarter in due to particularly strong demand of the web printing sector. The further decline of the Euro boosted exports to the US. Order intake for the European markets was typically lower because of the holiday season but in July sales prices in Euros rose by 5%. Towards the end of the quarter some downtime was taken to match output to demand. The new web grade Xpress produced in Lanaken (Belgium) has been well received and rounds out our range of coated paper for the web offset printers. Sept. Sept. % % * change change US$ million US$ million (US$) (Euros) Sales (3) 11 Operating profit 66 40* Onceoff charges (10) Net operating profit Operating margin (%) 12 7* EBITDA 97 84* EBITDA Margin (%) 18 15* RONOA p.a. (%) 20 10* *Adjusted for once-off charges

5 forest products We increased operating profit by 65% to US$66 million as a result of improved productivity, cost reductions and price increases in Euros, in spite of the soaring cost of purchased pulp, which reached record levels in Euros. The operating margin rose to 12% and the return on net operating assets reached 20% in the quarter. North America The 11% improvement in operating profit to US$51 million was accomplished despite significant pressure from pulp and energy costs, low-priced imports and excess producer inventories. Price realization, mix improvement and cost containment were major factors in the improvement. As the growth of the US economy began to slow, production was curtailed to match output to demand. Sales in the last quarter were slightly lower than the same quarter last year. Sept. Sept. % US$ million US$ million change Sales (2) Operating profit Operating margin (%) EBITDA EBITDA Margin (%) RONOA p.a. (%) The operating margin increased further to 12% and the return on net operating assets was 17%. South Africa The South African fine paper business, which represents 5% of group sales performed better than the previous quarter. Its return on net operating assets was only 9%, but it has a muchimproved outlook for the future. Our Forest Products business comprises primarily market pulp (including dissolving pulp), which provides us with an economic hedge for the pulp purchases of our paper businesses. The business posted record results in the quarter and in the year. Prices remained strong and demand was firm. Pulp (NBSK) prices increased to US$710 per ton. Dissolving pulp prices rose further, supported by strong demand for viscose. Sept. Sept. % % change change US$ US$ (US$) (rands) million million Sales Operating profit Operating margin (%) EBITDA EBITDA Margin (%) RONOA p.a. (%) Internal efficiencies and the weaker local currency combined to reduce the cost base in dollars. Cost of goods sold per ton was 11% lower in the quarter compared with a year earlier. As a result of strong prices, which were 9% higher in dollars than a year earlier and the lower costs, the business is now generating operating margins of 30% and a return on net operating assets of 30%. Sales are largely denominated in US Dollars which results in higher dollar margins when the Rand weakens. Group Results for the Year The group s earnings reached a new high of US$363 million, an increase of 198% on the previous year and the return on equity increased to 23%. Basic earnings per share were 153 cents and earnings per share before exceptional items rose to 146 US cents, 92% above the previous year.

6 comment Sappi Earnings Per Share (US cents) Free Cash Flow (US$m) Free Cash Flow US cents Operating profit increased 65% to US$672 million, the operating margin increased to 14.2% and RONA rose to 18%, well ahead of the group s cost of capital. Internal efficiencies and containment of costs reduced costs of sales per ton by 3.5% compared to last year. Our sales reached US$4.7 billion for the year, 6.7% better than the previous year, as a result of a 4.2% increase in volume and a 2.5% price increase in US Dollars. Finance costs continued to decline as a result of lower debt and refinancing higher cost loans. Normalised finance costs for the last quarter, before capitalised interest, were US$29 million. The effective tax rate of 34% was higher than last year mainly as a result of the reduced deferred tax following the reduction in the South African corporate tax rate last year. Cash Flow and Debt Reduction Gross cash flow (EBITDA) increased to US$1,052 million, up US$264 million and net debt reduced by US$833 million over the year. Net debt to total capitalisation now stands at 31%, well within our target range Free cash flow = cash retained from operating activities, less non-discretionary Capex The proceeds from the sale of Novobord, approximately US$58 million, were received during the fourth quarter. Following the acquisition of the Leykam Mürztaler minorities, which was completed in June and the acquisition of the Usutu minorities completed in October, Sappi now controls the cash flow from all its operations. Dividends The Directors have declared a dividend of 25 US cents for the year ended September. A dividend of 19 US cents was paid the previous year. Share Buybacks At Sappi s last annual general meeting Sappi obtained shareholder approval for a general buy back by Sappi (but not by a Sappi subsidiary) of Sappi shares. The board has decided that, at prevailing share prices and with the strengthening balance sheet, the group may proceed to buy back shares from time to time in accordance with the listing requirements of the Johannesburg Stock Exchange. Accordingly it is intended to call a general meeting of Sappi shareholders to consider and if deemed fit to pass a special resolution authorising a Sappi subsidiary to purchase Sappi shares. Outlook Most commentators agree that the world economy will grow next year by between 3% and 3.5% and demand for paper products should therefore continue to be strong. The fundamental market conditions remain firm and pulp prices seem to have stabilised for NBSK at around US$710. Capacity additions for the sector remain at near all time low levels and although some new capacity of coated free sheet will come on stream during 2001 there is increasing evidence that the industry

7 is learning to match output to demand. Over the next few months we expect some further inventory adjustment and we will take some additional commercial downtime to maintain our internal inventories at normal levels. Over the past decade the pulp and paper industry has failed to earn its cost of capital, but this has changed and increasingly companies are now making acceptable returns. For Sappi, prices are in general well above the average prices for the year ended September and we expect to at least maintain these prices in the year ahead. We have a positive outlook for On behalf of the board E van As Director 9 November dividend announcement D G Wilson Director The directors have declared a dividend (number 77) of 25 US cents per share for the year ended September to shareholders registered in the books of the company at the close of business on Friday, 1 December. 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 Friday 5 January 2001, 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 Friday 5 January Payment will be made on or about Wednesday 10 January The full conditions relating to the payment of the dividend may be inspected at the registered office of the company and also at the offices of the South African and United Kingdom Registrars, and the ADR depositary bank respectively. Sappi Management Services (Pty) Limited Secretaries Per D J O Connor 9 November sappi limited (Registration No. 1936/008963/06) 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 forwardlooking 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.

8 group income statements Unaudited Sept. Sept. Sept. Sept. % % US$ million US$ million change US$ million US$ million change Sales 1,246 1,268 (1.7) 4,718 4, Cost of sales 941 1,018 3,650 3,627 Gross profit , Selling, general & administrative expenses Operating profit Non-trading profit (loss) 13 (2) 15 (74) Net finance costs Net paid Capitalised (20) (9) (47) (45) Profit before tax Taxation current 27 (13) deferred Profit after tax Income attributable to minority interests Net profit EBITDA , Basic earnings per share (US cents) Basic earnings before exceptional items (Headline earnings) per share (US cents) Weighted average number of shares in issue (millions) Diluted earnings per share (US cents) Diluted earnings before exceptional items (Headline earnings) per share (US cents) Weighted average number of shares on fully diluted basis (millions) Calculation of earnings before exceptional items (Headline) net of tax Net profit Profit on disposal of business and fixed assets (21) (7) (22) (3) Mill closure costs and asset impairments Accelerated cost of early buy back of loan notes Decrease in other provisions (1) (7) (15) (5) Earnings before exceptional items (Headline)

9 group balance sheet Sept. Sept. US$ million US$ million ASSETS Non-current assets 3,655 4,274 Property, plant and equipment 3,083 3,615 Plantations Deferred taxation Other non-current assets Current assets 1,160 1,154 Cash and cash equivalents Collateral deposits 104 Trade and other receivables Inventories Total assets 4,815 5,428 EQUITY AND LIABILITIES Shareholders' equity 1,621 1,463 Ordinary share capital and premium 1,937 1,823 Non-distributable reserves (911) (662) Distributable reserves Minority interest Non-current liabilities 1,989 2,101 Long-term borrowings 1,256 1,376 Deferred taxation Other long-term liabilities Current liabilities 1,151 1,693 Interest bearing liabilities Bank overdraft Other current liabilities Total equity and liabilities 4,815 5,428 Number of shares in issue (millions) Net debt (US$ million) 1,205 2,038 Net debt to total capitalisation (%) Net asset value per share (US cents)

10 group cash flow statement Sept. Sept. US$ million US$ million Cash generated by operations 1, Movement in working capital (61) 77 Net finance costs (161) (190) Taxation paid (12) (24) Dividends paid (42) (36) Cash retained from operating activities Cash effects of investing activities (68) (97) Cash effects of financing activities (564) (868) Net movement in cash and cash equivalents 157 (348) group statement of changes in shareholders equity Sept. Sept. US$ million US$ million Balance beginning of year 1,463 1,583 Changes in accounting policies (88) Balance beginning of year restated 1,463 1,495 Net profit Foreign currency translation reserve (257) (100) Dividends declared US$ 0.25 (: US$ 0.19) per share (60) (45) Issuance of ordinary shares Goodwill written off to equity (2) (13) Balance end of year 1,621 1,463

11 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. Sappi has changed its accounting policy with regard to the revaluation of fixed assets. All fixed assets are now stated at cost. The revaluation reserves were reversed and comparative figures appropriately restated. All the other accounting policies are the same as those in the September annual financial statements. In May this year the group announced a change in its reporting currency from South African Rands to US Dollars. The negative balance in non-distributable reserves is caused by the Foreign Currency Translation Reserve which resulted from this change in reporting currency. This item represents the cumulative translation effect of the strength of the dollar on the group s equity in rands and other currencies. The translation effect of reporting in US Dollars has no impact on the underlying cash flows of the business. Unaudited Sept. Sept. Sept. Sept. US$ million US$ million US$ million US$ million 2. Cost of sales Included in cost of sales are: Depreciation Amortisation and fellings Capital expenditure Fixed assets Plantations Capital commitments Contracted but not provided Approved but not contracted Contingent liabilities Guarantees and suretyships Bills discounted 6 Other contingent liabilities 46 59

12 regional information Unaudited Sept. Sept. Sept. Sept. % % US$ million US$ million change US$ million US$ million change Sales - Metric tons Fine Paper North America (13.0) 1,349 1, Europe (1.7) 2,348 2, Southern Africa (21.2) (2.5) Total 1,042 1,119 (6.9) 3,970 3, Forest Products ,770 2, Total 1,782 1,821 (2.1) 6,740 6, Sales Fine Paper North America (2.3) 1,645 1, Europe (3.1) 1,953 1, Southern Africa (33.3) (8.0) Total 1,006 1,059 (5.0) 3,828 3, Forest Products Total 1,246 1,268 (1.7) 4,718 4, Operating profit Fine Paper North America Europe Southern Africa 5 12 (58.3) (50.0) Total Forest Products Sappi Trading & Corporate 4 7 (42.9) Total Earnings before interest, tax, depreciation and amortisation charges ** Fine Paper North America Europe Southern Africa 7 14 (50.0) (41.3) Total Forest Products Sappi Trading & Corporate Total , Net operating assets Fine Paper North America 1,198 1, ,198 1, Europe 1,305 1,668 (21.8) 1,305 1,668 (21.8) Southern Africa (27.1) (27.1) Total 2,632 3,028 (13.1) 2,632 3,028 (13.1) Forest Products 968 1,207 (19.8) 968 1,207 (19.8) Sappi Trading & Corporate (24) 93 (125.8) (24) 93 (125.8) Total 3,576 4,328 (17.4) 3,576 4,328 (17.4) ** before non-trading profit (loss)

13 summary rand convenience translation Unaudited Unaudited Sept. Sept. % Sept. Sept. % change change Sales (ZAR million) 8,718 7, ,889 26, Operating profit (ZAR million) 1, ,400 2, Profit after taxation (ZAR million) , EBITDA (ZAR million) 1,994 1, ,888 4, Operating profit to sales (%) EBITDA to sales (%) Operating profit to average net assets (%) Basic EPS before exceptional items (Headline) (SA cents) Basic EPS (SA cents) , EBITDA per share (SA cents) ,907 2, Net debt (ZAR million) 8,705 12,228 (28.8) 8,705 12,228 (28.8) Net debt to total capitalisation (%) Cash generated by operations (ZAR million) 6,973 4, Cash retained from operating activities (ZAR million) 5,166 3,710 Net movement in cash and cash equivalents (ZAR million) 1,028 (2,092) Exchange rates : Period end rate: US $1 = R Average rate: US $1 = R Period end rate: US $1 = EURO Average rate: US $1 = EURO

14 sappi This report is available on the Sappi website. Other interested parties can obtain printed copies of this report from: South Africa: Mercantile Registars Limited, 8th Floor, 11 Diagonal Street, Johannesburg, 2001 PO Box 1053, Johannesburg,. Tel: +27 (0) United Kingdom: Capita IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, DX 91750, Beckenham West. Tel: +44 (0) United States ADR Depositary: Bank of New York, ADR Department, 101 Barclay Street, New York, NY Tel:

15 sappi ordinary shares ZAR Jan 17 Feb 23 Mar 11 May 31 Jun 11 Aug 14 Sep 10 Nov 14 Dec 31 Jan 15 Mar 28 Apr 23 May 13 Jul 04 Sep 25 Oct 06 Nov sappi ADR price (NYSE TICKER: SPP) note: (1 ADR = 1 sappi share) US$ Jan 17 Feb 23 Mar 11 May 31 Jun 11 Aug 14 Sep 10 Nov 14 Dec 31 Jan 15 Mar 28 Apr 23 May 13 Jul 04 Sep 25 Oct 06 Nov sappi limited (Registration No. 1936/008963/06)

16 sappi FCB Jon$$ons Printed on HannoArt Gloss 250 gsm and 135 gsm