FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of August, 2013
Commission file number: 1-14872
SAPPI LIMITED
(Translation of registrant’s name into English)
48 Ameshoff Street
Braamfontein
Johannesburg 2001
REPUBLIC OF SOUTH AFRICA
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F.
Form 20-F
X
-------
Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b) (1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b) (7):
Indicate by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
the Securities Exchange Act of 1934.
Yes
No
X
-------
If “Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): n/a
INCORPORATION BY REFERENCE
Sappi Limited’s report for the conformed third quarter results ended June 2013, furnished by the Registrant under this Form 6-K,
is incorporated by reference into (i) the Registration Statements on Form S-8 of the Registrant filed December 23, 1999, December
15, 2004 and February 2, 2010 in connection with The Sappi Limited Share Incentive Scheme, (ii) the Section 10(a) Prospectus
relating to the offer and sale of the Registrant’s shares to Participants under The Sappi Limited Share Incentive Scheme, (iii) the
Registration Statements on Form S-8 of the Registrant filed December 15, 2004 and December 21, 2005 in connection with The
Sappi Limited 2004 Performance Share Incentive Plan and (iv) the Section 10(a) Prospectus relating to the offer and sale of the
Registrant’s shares to Participants under The Sappi Limited 2004 Performance Share Incentive Plan. This Form 6-K includes a
conformed version of the earnings announcement sent by the Registrant to its shareholders. This conformed version was prepared
solely for purposes of supplementing the documents referred to in clauses (i) - (iv) above.
FORWARD-LOOKING STATEMENTS
In order to utilize the ”Safe Karbor ” provisions of the United States Private Securities Litigation Reform Act of 1995 (the ”Reform
Act”), Sappi Limited (the ”Company”) is providing the following cautionary statement. Except for historical information contained herein,
statements contained in this Report on Form 6-K may constitute”forward-looking statements” within the meaning of the Reform Act.
The words ”believe”, ”anticipate”, ”expect”,”intend”, ”estimate ”, ”plan”, ”assume”, ”positioned”, ”will”, ”may”, ”should”, ”risk” and other
similar expressions, which are predictions of or indicate future events and future trends, which do not relate to historical matters,
identify forward-looking statements. In addition, this Report on Form 6-K may include forward-looking statements relating to the
Company’s potential exposure to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity
price risk. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties
and other factors which are in some cases beyond the control of the Company, together with its subsidiaries (the ”Group”), and may
cause the actual results, performance or achievements of the Group to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements (and from past results, performance or achievements).
Certain factors that may cause such differences include but are not limited to:
Sappi Limited’s report for the conformed third quarter results ended June 2013, furnished by the Registrant under this Form 6-K,
is incorporated by reference into (i) the Registration Statements on Form S-8 of the Registrant filed December 23, 1999, December
15, 2004 and February 2, 2010 in connection with The Sappi Limited Share Incentive Scheme, (ii) the Section 10(a) Prospectus
relating to the offer and sale of the Registrant’s shares to Participants under The Sappi Limited Share Incentive Scheme, (iii) the
Registration Statements on Form S-8 of the Registrant filed December 15, 2004 and December 21, 2005 in connection with The
Sappi Limited 2004 Performance Share Incentive Plan and (iv) the Section 10(a) Prospectus relating to the offer and sale of the
Registrant’s shares to Participants under The Sappi Limited 2004 Performance Share Incentive Plan. This Form 6-K includes a
conformed version of the earnings announcement sent by the Registrant to its shareholders. This conformed version was prepared
solely for purposes of supplementing the documents referred to in clauses (i) - (iv) above.
FORWARD-LOOKING STATEMENTS
In order to utilize the ”Safe Karbor ” provisions of the United States Private Securities Litigation Reform Act of 1995 (the ”Reform
Act”), Sappi Limited (the ”Company”) is providing the following cautionary statement. Except for historical information contained herein,
statements contained in this Report on Form 6-K may constitute”forward-looking statements” within the meaning of the Reform Act.
The words ”believe”, ”anticipate”, ”expect”,”intend”, ”estimate ”, ”plan”, ”assume”, ”positioned”, ”will”, ”may”, ”should”, ”risk” and other
similar expressions, which are predictions of or indicate future events and future trends, which do not relate to historical matters,
identify forward-looking statements. In addition, this Report on Form 6-K may include forward-looking statements relating to the
Company’s potential exposure to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity
price risk. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties
and other factors which are in some cases beyond the control of the Company, together with its subsidiaries (the ”Group”), and may
cause the actual results, performance or achievements of the Group to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements (and from past results, performance or achievements).
Certain factors that may cause such differences 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, input costs including rawmaterial, energy and employee costs,
and pricing);
levels of demand, production capacity, production, input costs including rawmaterial, energy and employee costs,
and pricing);
·
the impact on the business of the global economic downturn;
·
unanticipated production disruptions (including as a result of planned or unexpected power
outages);
outages);
·
changes in environmental, tax and other laws and regulations;
·
adverse changes in the markets for the Group’s products;
·
the emergence of new technologies and changes in consumer trends including increase
preferences for digital media;
·
consequences of the Group’s leverage, including as a result of adverse changes in credit markets that affect the
Group’s ability to raise capital when needed;
Group’s ability to raise capital when needed;
·
adverse changes in the political situation and economy in the countries in which the Group operates or the
effect of governmental efforts to address present or future economic or social problems;
effect of governmental efforts to address present or future economic or social problems;
·
the impact of restructurings, investments, acquisitions,
dispositions and other strategic initiatives (including related financing),
any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions
or implementing restructuring or strategic initiatives (including dissolving wood pulp conversion projects), and achieving
expected savings and synergies; and
any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions
or implementing restructuring or strategic initiatives (including dissolving wood pulp conversion projects), and achieving
expected savings and synergies; and
·
currency fluctuations.
These and other risks, uncertainties and factors are discussed in the Company’s Annual Report on Form 20- F and other filings with
and submissions to the Securities and Exchange Commission, including this Report on Form 6-K. Shareholders and prospective
investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made
as of the date of the submission of this Report on Form 6-K and are not intended to give any assurance as to future results. 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.
and submissions to the Securities and Exchange Commission, including this Report on Form 6-K. Shareholders and prospective
investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made
as of the date of the submission of this Report on Form 6-K and are not intended to give any assurance as to future results. 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.
results
period ended
June 2013
Form S-8 Version
Third Quarter
for
the
the
3rd quarter results
Sappi works closely with customers,
both direct and indirect, in over
100 countries to provide them with
relevant and sustainable paper,
paper-pulp and dissolving wood pulp
products and related services and
innovations.
Our market-leading range of paper
products includes: coated fine
papers used by printers, publishers
and corporate end-users in the
production of books, brochures,
magazines, catalogues, direct mail
and many other print applications;
casting release papers used by
suppliers to the fashion, textiles,
automobile and household industries;
and in our Southern African region,
newsprint, uncoated graphic and
business papers, premium-quality
packaging papers, paper-grade pulp
and dissolving wood pulp.
Our dissolving wood pulp products
are used worldwide by converters
to create viscose fibre, acetate tow,
pharmaceutical products as well as
a wide range of consumer products.
The pulp needed for our products
is either produced within Sappi or
bought from accredited suppliers.
Across the group, Sappi is close to
‘pulp neutral’, meaning that we sell
almost as much pulp as we buy.
both direct and indirect, in over
100 countries to provide them with
relevant and sustainable paper,
paper-pulp and dissolving wood pulp
products and related services and
innovations.
Our market-leading range of paper
products includes: coated fine
papers used by printers, publishers
and corporate end-users in the
production of books, brochures,
magazines, catalogues, direct mail
and many other print applications;
casting release papers used by
suppliers to the fashion, textiles,
automobile and household industries;
and in our Southern African region,
newsprint, uncoated graphic and
business papers, premium-quality
packaging papers, paper-grade pulp
and dissolving wood pulp.
Our dissolving wood pulp products
are used worldwide by converters
to create viscose fibre, acetate tow,
pharmaceutical products as well as
a wide range of consumer products.
The pulp needed for our products
is either produced within Sappi or
bought from accredited suppliers.
Across the group, Sappi is close to
‘pulp neutral’, meaning that we sell
almost as much pulp as we buy.
Sales by source*
North America
Europe
Southern Africa
54%
23%
23%
Sales by product*
Coated paper
Uncoated paper
Speciality paper
Commodity paper
Dissolving wood pulp
Paper pulp
Other
65%
1%
3%
10%
8%
6%
7%
Sales by destination*
North America
Europe
Southern Africa
Asia and other
46%
18%
12%
24%
Cover picture – Shutterstock
The picture depicts viscose clothing. Viscose clothing is made from one of our specialised
cellulose products. Viscose staple fibre is a biodegradable product, with breathability and
moisture absorbency properties, ideal for use in clothing.
cellulose products. Viscose staple fibre is a biodegradable product, with breathability and
moisture absorbency properties, ideal for use in clothing.
* for the period ended June 2013
1
sappi
3rd quarter results
·
Successful start-up of both dissolving wood pulp projects
·
Operating loss US$11 million (Q3 2012 US$34 million profit)
·
Operating profit excluding special items US$8 million
(Q3 2012 US$60 million)
(Q3 2012 US$60 million)
·
Loss for the period US$42 million (Q3 2012 US$106 million loss)
·
Loss per share 8 US cents (Q3 2012 loss of 20 US cents)
·
Net finance costs of US$42 million (Q3 2012 US$141 million)
·
Interest-bearing borrowings (including bank overdrafts) less cash and
cash equivalents (‘net debt’) US$2,297 million (Q3 2012 US$2,213 million)
cash equivalents (‘net debt’) US$2,297 million (Q3 2012 US$2,213 million)
Financial summary for the quarter
Quarter ended
Nine months ended
Jun 2013
Jun 2012
Mar 2013
Jun 2013
Jun 2012
Key figures: (US$ million)
Sales
1,417
1,544
1,503
4,395
4,762
Operating (loss) profit
(11)
34
78
137
261
Special items – losses (gains)
(1)
19
26
(38)
(16)
24
Operating profit excluding
special items
special items
(2)
8
60
40
121
285
EBITDA excluding special items
(2)
91
150
128
381
561
(Loss) profit for the period
(42)
(106)
7
(18)
(3)
Basic (loss) earnings per share
(US cents)
(US cents)
(8)
(20)
1
(3)
(1)
Key ratios: (%)
Operating (loss) profit to sales
(0.8)
2.2
5.2
3.1
5.5
Operating profit excluding
special items to sales
special items to sales
0.6
3.9
2.7
2.8
6.0
EBITDA excluding special items
to sales
to sales
6.4
9.7
8.5
8.7
11.8
Net asset value per share
(US cents)
(US cents)
257
299
277
257
299
(1) Refer to note 8 to the group results for details on special items.
(2) Refer to note 8 to the group results for the reconciliation of EBITDA excluding special items and operating profit excluding
special items to segment operating (loss) profit, and loss for the period.
2
Commentary on the quarter
Market conditions, particularly in our European paper business, deteriorated further during the quarter.
This, coupled with our conversion projects and planned annual maintenance shuts, impacted the group’s
operating results which consequently resulted in an operating loss of US$11 million.
This, coupled with our conversion projects and planned annual maintenance shuts, impacted the group’s
operating results which consequently resulted in an operating loss of US$11 million.
The third financial quarter is seasonally our weakest with typically lower demand in Europe and North
America and with planned annual maintenance shuts at most of our major pulp mills. In this transitional
year, the quarter was also impacted by the extended shuts at both the Cloquet and Ngodwana mills as
they completed the capital projects to convert existing paper pulp lines to produce dissolving wood pulp.
America and with planned annual maintenance shuts at most of our major pulp mills. In this transitional
year, the quarter was also impacted by the extended shuts at both the Cloquet and Ngodwana mills as
they completed the capital projects to convert existing paper pulp lines to produce dissolving wood pulp.
The third quarter results were also impacted by special items including a charge of US$11 million related
to a plantation price fair value adjustment and a charge of US$4 million due to plantation fire damage in
South Africa.
to a plantation price fair value adjustment and a charge of US$4 million due to plantation fire damage in
South Africa.
Net finance costs for the quarter of US$42 million were in line with those of the prior quarter. The
comparative Q3 2012 net finance costs of US$141 million included the once-off charges of US$89 million
related to the bond refinancing during that quarter.
comparative Q3 2012 net finance costs of US$141 million included the once-off charges of US$89 million
related to the bond refinancing during that quarter.
Both the dissolving wood pulp projects at the Ngodwana and Cloquet pulp mills have now started
production. The Cloquet mill produced the first bales of dissolving wood pulp in early June, and the
ramp-up has progressed according to schedule with production and quality targets having been met.
The Ngodwana mill started up in late July, a few weeks later than scheduled, and we expect this mill
to ramp-up to full production over the coming months.
production. The Cloquet mill produced the first bales of dissolving wood pulp in early June, and the
ramp-up has progressed according to schedule with production and quality targets having been met.
The Ngodwana mill started up in late July, a few weeks later than scheduled, and we expect this mill
to ramp-up to full production over the coming months.
Cash flow and debt
Net cash utilised in operating and investing activities for the quarter was US$157 million, compared to
net cash utilisation of US$56 million in the equivalent quarter last year. This increase in cash utilisation
was mainly as a result of capital expenditure of US$174 million which related primarily to strategic
investments in expanding our dissolving wood pulp capacity and lower profits from operations. We
expect that capital expenditure for the full year will not exceed US$600 million.
net cash utilisation of US$56 million in the equivalent quarter last year. This increase in cash utilisation
was mainly as a result of capital expenditure of US$174 million which related primarily to strategic
investments in expanding our dissolving wood pulp capacity and lower profits from operations. We
expect that capital expenditure for the full year will not exceed US$600 million.
The expected marginal increase in net debt to US$2,297 million compared to both the equivalent quarter
last year (US$2,213 million) and the prior quarter (US$2,152 million), was largely as a result of the capital
expenditure incurred during the quarter.
last year (US$2,213 million) and the prior quarter (US$2,152 million), was largely as a result of the capital
expenditure incurred during the quarter.
At quarter-end, liquidity remained strong with cash on hand of US$236 million and US$561 million
available from the undrawn committed revolving credit facilities in Europe and South Africa and we have
sufficient liquidity to complete the spending on the various capital projects. During the quarter, the
€330 million international securitisation programme was renewed and the facility maturity date extended
to 2016.
available from the undrawn committed revolving credit facilities in Europe and South Africa and we have
sufficient liquidity to complete the spending on the various capital projects. During the quarter, the
€330 million international securitisation programme was renewed and the facility maturity date extended
to 2016.
3
sappi
3rd quarter results
Operating Review for the Quarter
Europe
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Mar 2013
US$ million
Quarter
ended
Dec 2012
US$ million
Quarter
ended
Sept 2012
US$ million
Quarter
ended
Jun 2012
US$ million
Sales
749
824
799
826
795
Operating (loss) profit
(19)
(3)
18
87
4
Operating (loss) profit
to sales (%)
to sales (%)
(2.5)
(0.4)
2.3
10.5
0.5
Special items – losses (gains)
3
1
3
(42)
6
Operating (loss) profit excluding
special items
special items
(16)
2
21
45
10
Operating (loss) profit excluding
special items to sales (%)
special items to sales (%)
(2.1)
(0.2)
2.6
5.4
1.3
This seasonally slow quarter saw a significant decline in demand for our major paper grades, with total
European industry deliveries of coated woodfree and coated mechanical paper down 8% year-on-year
for the quarter. Our total sales volumes were 6% below that of the equivalent quarter last year despite
good growth in specialities volumes.
European industry deliveries of coated woodfree and coated mechanical paper down 8% year-on-year
for the quarter. Our total sales volumes were 6% below that of the equivalent quarter last year despite
good growth in specialities volumes.
Average prices realised were slightly higher than in the previous quarter, as a result of marginal price
increases for coated woodfree paper, but remain on average below those of the equivalent quarter in the
prior year. We continue to focus on tightly managing our costs, both fixed and variable costs per ton were
lower than those of the equivalent quarter last year, although hardwood pulp prices continue to put
pressure on margins.
increases for coated woodfree paper, but remain on average below those of the equivalent quarter in the
prior year. We continue to focus on tightly managing our costs, both fixed and variable costs per ton were
lower than those of the equivalent quarter last year, although hardwood pulp prices continue to put
pressure on margins.
The coated woodfree paper machine conversion project at the Alfeld mill, which will increase our
speciality paper production, remains on track for start-up during the first financial quarter of 2014.
speciality paper production, remains on track for start-up during the first financial quarter of 2014.
4
North America
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Mar 2013
US$ million
Quarter
ended
Dec 2012
US$ million
Quarter
ended
Sept 2012
US$ million
Quarter
ended
Jun 2012
US$ million
Sales
324
341
346
377
360
Operating profit
3
26
16
40
13
Operating profit to sales (%)
0.9
7.6
4.6
10.6
3.6
Special items – (gains) losses
(1)
(5)
2
2
5
Operating profit excluding
special items
special items
2
21
18
42
18
Operating profit excluding
special items to sales (%)
special items to sales (%)
0.6
6.2
5.2
11.1
5.0
The North American business successfully completed the conversion of the Cloquet pulp mill to produce
dissolving wood pulp during the quarter and started production of dissolving wood pulp at the beginning
of June. The start-up has proceeded according to plan with the first deliveries of dissolving wood pulp
leaving the mill during the quarter with good quality levels being achieved. Operating profit for the current
quarter was negatively impacted by an estimated US$12 million due to 22 days of incremental downtime
taken for the Cloquet pulp mill conversion project and related ramp-up of operations.
dissolving wood pulp during the quarter and started production of dissolving wood pulp at the beginning
of June. The start-up has proceeded according to plan with the first deliveries of dissolving wood pulp
leaving the mill during the quarter with good quality levels being achieved. Operating profit for the current
quarter was negatively impacted by an estimated US$12 million due to 22 days of incremental downtime
taken for the Cloquet pulp mill conversion project and related ramp-up of operations.
Pulp sales volumes were heavily impacted by downtime related to the conversion and the building of
stock to service the dissolving wood pulp business in the quarter. Dissolving wood pulp sales will
increase over the next quarter as the business continues the ramp-up to full capacity.
stock to service the dissolving wood pulp business in the quarter. Dissolving wood pulp sales will
increase over the next quarter as the business continues the ramp-up to full capacity.
Coated paper sales volumes were essentially flat year-on-year; however the average net sales price per
ton was 4% lower than in the prior year due to a competitive local market and increased import pressure.
Prices appeared to have stabilised during the quarter and we expect to realise some price increases on
economy sheets and web products over the coming months.
ton was 4% lower than in the prior year due to a competitive local market and increased import pressure.
Prices appeared to have stabilised during the quarter and we expect to realise some price increases on
economy sheets and web products over the coming months.
The release business continues to perform well and sales volumes were up 11% compared to last year
driven by improved demand and the success of our key new patterns.
driven by improved demand and the success of our key new patterns.
5
sappi
3rd quarter results
Sappi Southern Africa
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Mar 2013
US$ million
Quarter
ended
Dec 2012
US$ million
Quarter
ended
Sept 2012
US$ million
Quarter
ended
Jun 2012
US$ million
Sales
344
338
330
382
389
Operating profit
5
62
33
30
16
Operating profit to sales (%)
1.5
18.3
10.0
7.9
4.1
Special items – losses (gains)
14
(42)
(2)
3
15
Operating profit excluding
special items
special items
19
20
31
33
31
Operating profit excluding
special items to sales (%)
special items to sales (%)
5.5
5.9
9.4
8.6
8.0
The Southern African Specialised Cellulose business’ sales volumes for the quarter were 183,000 tons,
similar to the prior quarter and 8% lower than the equivalent quarter last year due to the timing of
shipments. During the quarter, the planned annual maintenance shut of one of the pulp lines at Saiccor
took place.
similar to the prior quarter and 8% lower than the equivalent quarter last year due to the timing of
shipments. During the quarter, the planned annual maintenance shut of one of the pulp lines at Saiccor
took place.
The estimated adverse operating profit impact of the conversion to produce dissolving wood pulp at
the Ngodwana mill and the extended pulp mill downtime was approximately US$9 million during the
quarter.
the Ngodwana mill and the extended pulp mill downtime was approximately US$9 million during the
quarter.
NBSK dollar pulp prices to which our dissolving pulp prices are linked, were higher than both the
equivalent quarter last year as well as the prior quarter, with the weaker Rand/Dollar exchange rate also
contributing to higher price levels. However, the dissolving pulp spot market remains competitive, with
new dissolving wood pulp capacity and an oversupplied viscose staple fibre market increasing the
pressure on sales prices.
equivalent quarter last year as well as the prior quarter, with the weaker Rand/Dollar exchange rate also
contributing to higher price levels. However, the dissolving pulp spot market remains competitive, with
new dissolving wood pulp capacity and an oversupplied viscose staple fibre market increasing the
pressure on sales prices.
The domestic paper packaging and office paper markets were weak during the quarter; although,
towards the end of the quarter and to date, there have been encouraging indications in the containerboard
segment of a possible improvement in volumes.
towards the end of the quarter and to date, there have been encouraging indications in the containerboard
segment of a possible improvement in volumes.
Variable costs, particularly purchased timber and pulp, remain a challenge, with the imported
components especially problematic due to the weaker Rand exchange rate. Fixed costs were flat
compared to the prior quarter and the equivalent quarter last year and we are pleased that we were able
to reach an agreement with labour on wage increases for the forthcoming year.
components especially problematic due to the weaker Rand exchange rate. Fixed costs were flat
compared to the prior quarter and the equivalent quarter last year and we are pleased that we were able
to reach an agreement with labour on wage increases for the forthcoming year.
6
Outlook
The past quarter saw a further deterioration in European paper industry conditions, exacerbating
an already weak market, and demand is expected to remain subdued. Input costs, particularly pulp,
remain high and we do not expect to see any price increases in our major paper grades in the
coming quarter. Plans are being finalised that will result in significant capacity closure, lower costs
and improved operating margins in Europe. We envisage these actions will occur over a three-year
period and that any cash costs will be self-funded. The benefits of these actions will begin to flow
in the 2014 financial year.
an already weak market, and demand is expected to remain subdued. Input costs, particularly pulp,
remain high and we do not expect to see any price increases in our major paper grades in the
coming quarter. Plans are being finalised that will result in significant capacity closure, lower costs
and improved operating margins in Europe. We envisage these actions will occur over a three-year
period and that any cash costs will be self-funded. The benefits of these actions will begin to flow
in the 2014 financial year.
The South African paper business expects to see growth in containerboard volumes, although
demand continues to be weak in other grades. Cost pressures and weak demand have resulted in
further actions to improve the profitability being implemented.
demand continues to be weak in other grades. Cost pressures and weak demand have resulted in
further actions to improve the profitability being implemented.
The North American paper business is positioned to perform well in an increasingly competitive
market and we expect to realise some price increases on economy sheets and web products over
the coming months.
market and we expect to realise some price increases on economy sheets and web products over
the coming months.
Our expanded global Specialised Cellulose business is focussed on selling the increasing dissolving
wood pulp volumes, as the mills continue on their start-up curves, and cementing our position as
the leading producer in this market. Dissolving wood pulp prices are under pressure in this
competitive market and could have an impact on margins going forward.
wood pulp volumes, as the mills continue on their start-up curves, and cementing our position as
the leading producer in this market. Dissolving wood pulp prices are under pressure in this
competitive market and could have an impact on margins going forward.
Debt remains within the levels previously indicated despite the weaker operating performance.
We expect debt levels to peak during the fourth quarter, as the final outlays for the dissolving wood
pulp projects occur, and to end the quarter slightly lower than that reported for the third quarter.
We expect debt levels to peak during the fourth quarter, as the final outlays for the dissolving wood
pulp projects occur, and to end the quarter slightly lower than that reported for the third quarter.
We expect our European business to make an operating loss in the fourth financial quarter which
will result in the group making a small net loss for the financial year. Our full year results may be
impacted by the aforementioned strategic initiatives and, any asset impairments and restructuring
costs that may arise.
will result in the group making a small net loss for the financial year. Our full year results may be
impacted by the aforementioned strategic initiatives and, any asset impairments and restructuring
costs that may arise.
On behalf of the board
R J Boëttger
S R Binnie
Director
Director
02 August 2013
7
sappi
3rd quarter results
Condensed group income statement
Note
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
Sales
1,417
1,544
4,395
4,762
Cost of sales
1,327
1,404
3,900
4,189
Gross profit
90
140
495
573
Selling, general and administrative
expenses
expenses
95
103
290
315
Other operating expenses (income)
8
3
73
(3)
Share of profit from associates and
joint ventures
joint ventures
(2)
–
(5)
–
Operating (loss) profit
2
(11)
34
137
261
Net finance costs
42
141
124
246
Net interest expense
42
140
124
249
Net foreign exchange loss (gain)
1
1
1
(1)
Net fair value gain on financial
instruments
instruments
(1)
–
(1)
(2)
(Loss) profit before taxation
(53)
(107)
13
15
Taxation
(11)
(1)
31
18
Current
(9)
7
(6)
12
Deferred
(2)
(8)
37
6
Loss for the period
(42)
(106)
(18)
(3)
Basic loss per share (US cents)
(8)
(20)
(3)
(1)
Weighted average number of
shares in issue (millions)
shares in issue (millions)
521.5
520.8
521.3
520.7
Diluted loss per share (US cents)
(8)
(20)
(3)
(1)
Weighted average number of
shares on fully diluted basis
(millions)
shares on fully diluted basis
(millions)
521.5
520.8
521.3
520.7
Condensed group statement of comprehensive income
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
Loss for the period
(42)
(106)
(18)
(3)
Other comprehensive (loss) income,
net of tax
net of tax
(64)
18
(176)
71
Exchange differences on translation
of foreign operations
of foreign operations
(76)
(70)
(184)
(10)
Actuarial gains on post-employment
benefit funds
benefit funds
20
–
20
–
Movements in hedging reserves
1
(14)
(4)
(23)
Deferred tax effect of above items
(9)
1
(8)
3
Recognition of previously unrecognised
deferred tax asset
deferred tax asset
–
101
–
101
Total comprehensive (loss) income
for the period
for the period
(106)
(88)
(194)
68
8
Condensed group balance sheet
Jun 2013
US$ million
Sept 2012
US$ million
ASSETS
Non-current assets
3,839
3,990
Property, plant and equipment
3,110
3,157
Plantations
481
555
Deferred taxation
120
154
Other non-current assets
128
124
Current assets
1,746
2,178
Inventories
754
726
Trade and other receivables
756
807
Cash and cash equivalents
236
645
Assets held for sale
87
–
Total assets
5,672
6,168
EQUITY AND LIABILITIES
Shareholders’ equity
Ordinary shareholders’ interest
1,340
1,525
Non-current liabilities
3,332
3,328
Interest-bearing borrowings
2,434
2,358
Deferred taxation
285
319
Other non-current liabilities
613
651
Current liabilities
995
1,315
Interest-bearing borrowings
98
261
Bank overdraft
1
5
Other current liabilities
883
1,023
Taxation payable
13
26
Liabilities associated with assets held for sale
5
–
Total equity and liabilities
5,672
6,168
Number of shares in issue at balance sheet date (millions)
521.5
520.8
9
sappi
3rd quarter results
Condensed group statement of cash flows
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
Loss for the period
(42)
(106)
(18)
(3)
Adjustment for:
Depreciation, fellings and amortisation
100
108
310
333
Taxation
(11)
(1)
31
18
Net finance costs
42
141
124
246
Defined post-employment benefits paid
(22)
(16)
(54)
(39)
Plantation fair value adjustments
(10)
(1)
(151)
(40)
Asset (impairment reversals) impairments
(1)
(3)
46
(3)
Net restructuring provisions
2
–
16
1
Other non-cash items
3
15
22
33
Cash generated from operations
61
137
326
546
Movement in working capital
8
(27)
(128)
(217)
Net finance costs paid
(57)
(56)
(144)
(157)
Taxation paid
(2)
(2)
(15)
(12)
Cash generated from operating
activities
activities
10
52
39
160
Cash utilised in investing activities
(167)
(108)
(397)
(236)
Capital expenditure
(174)
(112)
(449)
(246)
Proceeds on disposal of
non-current assets
non-current assets
7
4
50
11
Other movements
–
–
2
(1)
Net cash utilised in operating and
investing activities
investing activities
(157)
(56)
(358)
(76)
Cash effects of financing activities
(7)
32
(42)
(142)
Net movement in cash and
cash equivalents
cash equivalents
(164)
(24)
(400)
(218)
Condensed group statement of changes in equity
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
Balance – beginning of period
1,525
1,478
Total comprehensive (loss) income for the period
(194)
68
Transfers from the share purchase trust
3
2
Transfers of vested share options
(3)
(2)
Share-based payment reserve
9
11
Balance – end of period
1,340
1,557
10
Notes to the condensed group results
1.
Basis of preparation
The condensed consolidated interim financial statements are prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting (IAS 34), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and the requirements of the
Companies Act of South Africa. The accounting policies applied in the preparation of these interim
financial statements are consistent with those applied in the previous annual financial statements.
International Accounting Standard 34 Interim Financial Reporting (IAS 34), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and the requirements of the
Companies Act of South Africa. The accounting policies applied in the preparation of these interim
financial statements are consistent with those applied in the previous annual financial statements.
The preparation of this condensed consolidated interim financial information was supervised by the
Chief Financial Officer, S R Binnie CA(SA).
Chief Financial Officer, S R Binnie CA(SA).
The results are unaudited.
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
2.
Operating (loss) profit
Included in operating (loss) profit are the
following non-cash items:
following non-cash items:
Depreciation and amortisation
83
90
260
276
Fair value adjustment on plantations
(included in cost of sales)
(included in cost of sales)
Changes in volume
Fellings
17
18
50
57
Growth
(21)
(21)
(58)
(64)
(4)
(3)
(8)
(7)
Plantation price fair value adjustment
11
20
(93)
24
7
17
(101)
17
Included in other operating expenses
(income) are the following:
(income) are the following:
Asset (impairment reversals)
impairments
impairments
(1)
(3)
46
(3)
Loss (profit) on disposal of property,
plant and equipment
plant and equipment
–
2
(1)
(7)
Net restructuring provisions
2
–
16
1
Black Economic Empowerment charge
1
1
3
3
11
sappi
3rd quarter results
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
3.
Headline (loss) earnings per share
Headline (loss) earnings per share
(US cents)
(US cents)
(8)
(20)
2
(2)
Weighted average number of shares
in issue (millions)
in issue (millions)
521.5
520.8
521.3
520.7
Diluted headline (loss) earnings per share
(US cents)
(US cents)
(8)
(20)
2
(2)
Weighted average number of shares on
fully diluted basis (millions)
fully diluted basis (millions)
521.5
520.8
523.5
520.7
Calculation of headline (loss) earnings
Loss for the period
(42)
(106)
(18)
(3)
Asset (impairment reversals) impairments
(1)
(3)
46
(3)
Loss (profit) on disposal of property,
plant and equipment
plant and equipment
–
2
(1)
(7)
Tax effect of above items
1
1
(15)
1
Headline (loss) earnings
(42)
(106)
12
(12)
Jun 2013
US$ million
Sept 2012
US$ million
4.
Capital commitments
Contracted
121
267
Approved but not contracted
169
244
290
511
5.
Contingent liabilities
Guarantees and suretyships
24
31
Other contingent liabilities
15
10
39
41
6.
Material balance sheet movements
Since the 2012 financial year-end, the period end ZAR rate has weakened by approximately 19% to
the US Dollar, the group’s presentation currency, resulting in a similar decrease on translation of the
group’s ZAR functional currency assets and liabilities to US Dollar.
the US Dollar, the group’s presentation currency, resulting in a similar decrease on translation of the
group’s ZAR functional currency assets and liabilities to US Dollar.
Property, plant and equipment
As a result of continuing difficult market conditions, Sappi Southern Africa (‘SSA’) impaired plant and
equipment at its Tugela and Stanger mills to the value of US$51 million (ZAR462 million). In addition,
there was a recovery in Sappi Fine Paper Europe of US$9 million (€7 million) through the sale of
certain assets that had previously been impaired as well as further asset impairments of US$4 million
(€3 million).
equipment at its Tugela and Stanger mills to the value of US$51 million (ZAR462 million). In addition,
there was a recovery in Sappi Fine Paper Europe of US$9 million (€7 million) through the sale of
certain assets that had previously been impaired as well as further asset impairments of US$4 million
(€3 million).
Deferred taxation assets
Deferred tax assets of US$24 million (€18 million) were reversed within the Sappi Fine Paper Europe
region as they were no longer deemed recoverable.
region as they were no longer deemed recoverable.
12
Plantations
Due to the Ngodwana mill dissolving wood pulp conversion project and the closure of the Kraft
Continuous Digester at Tugela mill, a certain portion of SSA’s softwood plantations that were
previously utilised in the paper pulp production will now be sold to the local saw log markets.
Consequently, SSA’s plantations were revalued resulting in a once-off favourable price fair value
adjustment of US$96 million (ZAR863 million).
Continuous Digester at Tugela mill, a certain portion of SSA’s softwood plantations that were
previously utilised in the paper pulp production will now be sold to the local saw log markets.
Consequently, SSA’s plantations were revalued resulting in a once-off favourable price fair value
adjustment of US$96 million (ZAR863 million).
Inventories, trade and other receivables and other current liabilities
The group increased its inventory levels in anticipation of the dissolving wood pulp conversion
projects. The decrease in trade and other payables is due to seasonality together with a decline in
operating volumes and the decrease in trade and other receivables is primarily due to the receipt of
US$42 million on the sale of the previously equity accounted 34% shareholding in Jiangxi Chenming
Paper Company.
projects. The decrease in trade and other payables is due to seasonality together with a decline in
operating volumes and the decrease in trade and other receivables is primarily due to the receipt of
US$42 million on the sale of the previously equity accounted 34% shareholding in Jiangxi Chenming
Paper Company.
Cash and cash equivalents and interest-bearing borrowings
Cash and cash equivalents decreased largely due to the capital expenditure outflows of
US$449 million which relates mostly to the dissolving wood pulp conversion projects. In addition, the
remaining stub of the group’s senior secured notes due 2014 of US$41 million (€31 million),
the US$111 million (ZAR1.0 billion) public bond maturing in June 2013 as well as the group’s private
placement bonds in South Africa amounting to US$42 million (ZAR382 million) were repaid. These
outflows were partially offset by the placement of a public bond offering of US$166 million
(ZAR1.5 billion) and a seven-year bullet loan from GroCapital of US$44 million (ZAR400 million).
US$449 million which relates mostly to the dissolving wood pulp conversion projects. In addition, the
remaining stub of the group’s senior secured notes due 2014 of US$41 million (€31 million),
the US$111 million (ZAR1.0 billion) public bond maturing in June 2013 as well as the group’s private
placement bonds in South Africa amounting to US$42 million (ZAR382 million) were repaid. These
outflows were partially offset by the placement of a public bond offering of US$166 million
(ZAR1.5 billion) and a seven-year bullet loan from GroCapital of US$44 million (ZAR400 million).
7.
Assets held for sale
During the quarter, Sappi entered into an agreement to sell its shares in Usutu Forest Products
Company Limited (‘Usutu’) as well as the shareholder loan claim against Usutu, to Montigny
Investments Limited subject to the fulfilment of certain conditions precedent. The disposal group,
consisting mainly of plantations, has been reclassified as held for sale.
Company Limited (‘Usutu’) as well as the shareholder loan claim against Usutu, to Montigny
Investments Limited subject to the fulfilment of certain conditions precedent. The disposal group,
consisting mainly of plantations, has been reclassified as held for sale.
8.
Segment
information
Quarter
ended
Jun 2013
Metric tons
(000’s)
Quarter
ended
Jun 2012
Metric tons
(000’s)
Nine
months
ended
Jun 2013
Metric tons
(000’s)
Nine
months
ended
Jun 2012
Metric tons
(000’s)
Sales volume
Sappi Fine Paper North America
297
351
963
1,031
Sappi Fine Paper Europe
796
843
2,527
2,611
Sappi Southern Africa –
Pulp and paper
405
435
1,172
1,253
Forestry
309
294
888
830
Total
1,807
1,923
5,550
5,725
13
sappi
3rd quarter results
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
Sales
Sappi Fine Paper North America
324
360
1,011
1,061
Sappi Fine Paper Europe
749
795
2,372
2,524
Sappi Southern Africa –
Pulp and paper
324
367
953
1,114
Forestry
20
22
59
63
Total
1,417
1,544
4,395
4,762
Operating profit (loss) excluding
special items
special items
Sappi Fine Paper North America
2
18
41
52
Sappi Fine Paper Europe
(16)
10
3
88
Sappi Southern Africa
19
31
70
145
Unallocated and eliminations
(1)
3
1
7
–
Total
8
60
121
285
Special items – loss (gain)
Sappi Fine Paper North America
(1)
5
(4)
5
Sappi Fine Paper Europe
3
6
7
(3)
Sappi Southern Africa
14
15
(30)
22
Unallocated and eliminations
(1)
3
–
11
–
Total
19
26
(16)
24
Segment operating (loss) profit
Sappi Fine Paper North America
3
13
45
47
Sappi Fine Paper Europe
(19)
4
(4)
91
Sappi Southern Africa
5
16
100
123
Unallocated and eliminations
(1)
–
1
(4)
–
Total
(11)
34
137
261
EBITDA excluding special items
Sappi Fine Paper North America
20
38
99
110
Sappi Fine Paper Europe
31
60
146
237
Sappi Southern Africa
37
52
129
214
Unallocated and eliminations
(1)
3
–
7
–
Total
91
150
381
561
Segment assets
Sappi Fine Paper North America
1,027
926
1,027
926
Sappi Fine Paper Europe
1,793
1,852
1,793
1,852
Sappi Southern Africa
1,607
1,653
1,607
1,653
Unallocated and eliminations
(1)
(12)
66
(12)
66
Total
4,415
4,497
4,415
4,497
(1) Includes the group’s treasury operations and the self-insurance captive.
14
Reconciliation of EBITDA excluding special items and operating profit excluding special items to
segment operating (loss) profit and loss for the period
segment operating (loss) profit and loss for the period
(1)
Special items cover those items which management believe are material by nature or amount to the
operating results and require separate disclosure.
operating results and require separate disclosure.
Quarter
ended
Jun 2013
US$ million
Quarter
ended
Jun 2012
US$ million
Nine
months
ended
Jun 2013
US$ million
Nine
months
ended
Jun 2012
US$ million
EBITDA excluding special items
91
150
381
561
Depreciation and amortisation
(83)
(90)
(260)
(276)
Operating profit excluding special
items
items
8
60
121
285
Special items – (losses) gains
(19)
(26)
16
(24)
Plantation price fair value adjustment
(11)
(20)
93
(24)
Net restructuring provisions
(2)
–
(16)
(1)
(Loss) profit on disposal of property,
plant and equipment
plant and equipment
–
(2)
1
7
Asset impairment reversals
(impairments)
(impairments)
1
3
(46)
3
Black Economic Empowerment
charge
charge
(1)
(1)
(3)
(3)
Fire, flood, storm and related events
(6)
(6)
(13)
(6)
Segment operating (loss) profit
(11)
34
137
261
Net finance costs
(42)
(141)
(124)
(246)
(Loss) profit before taxation
(53)
(107)
13
15
Taxation
11
1
(31)
(18)
Loss for the period
(42)
(106)
(18)
(3)
Reconciliation of segment assets
to total assets
to total assets
Segment assets
4,415
4,497
4,415
4,497
Deferred taxation
120
144
120
144
Cash and cash equivalents
236
403
236
403
Other current liabilities
883
950
883
950
Taxation payable
13
19
13
19
Liabilities associated with assets held
for sale
for sale
5
–
5
–
Total assets
5,672
6,013
5,672
6,013
(1)
In compliance with the U.S. Securities Exchange Commission (“SEC”) rules relating to “Conditions for Use of Non-GAAP
Financial Measures”, we have reconciled both operating profit excluding special items and EBITDA excluding special items to
loss for the period, rather than operating (loss) profit.
We use operating profit excluding special items and EBITDA excluding special items as internal measures of performance to
benchmark and compare performance, both between our own operations and as against other companies. Operating profit
excluding special items and EBITDA excluding special items are used as measures by the group, together with measures of
performance under IFRS, to compare the relative performance of operations in planning, budgeting and reviewing the
performances of various businesses. We believe operating profit excluding special items and EBITDA excluding special items
are useful measures of financial performance in addition to profit (loss) for the period, operating profit (loss) and other profitability
measures under IFRS because it facilitates operating performance comparisons from period to period and company to
company. For these reasons, we believe operating profit excluding special items, EBITDA excluding special items and other
similar measures are regularly used by the investment community as a means of comparison of companies in our industry.
Different companies and analysts may calculate operating profit excluding special items and EBITDA excluding special items
differently, so making comparisons among companies on this basis should be done very carefully. Operating profit excluding
special items and EBITDA excluding special items are not measures of performance under IFRS and should not be considered
in isolation or construed as a substitute for operating profit or profit for the period as an indicator of the company’s operations
in accordance with IFRS.
loss for the period, rather than operating (loss) profit.
We use operating profit excluding special items and EBITDA excluding special items as internal measures of performance to
benchmark and compare performance, both between our own operations and as against other companies. Operating profit
excluding special items and EBITDA excluding special items are used as measures by the group, together with measures of
performance under IFRS, to compare the relative performance of operations in planning, budgeting and reviewing the
performances of various businesses. We believe operating profit excluding special items and EBITDA excluding special items
are useful measures of financial performance in addition to profit (loss) for the period, operating profit (loss) and other profitability
measures under IFRS because it facilitates operating performance comparisons from period to period and company to
company. For these reasons, we believe operating profit excluding special items, EBITDA excluding special items and other
similar measures are regularly used by the investment community as a means of comparison of companies in our industry.
Different companies and analysts may calculate operating profit excluding special items and EBITDA excluding special items
differently, so making comparisons among companies on this basis should be done very carefully. Operating profit excluding
special items and EBITDA excluding special items are not measures of performance under IFRS and should not be considered
in isolation or construed as a substitute for operating profit or profit for the period as an indicator of the company’s operations
in accordance with IFRS.
15
sappi
3rd quarter results
Supplemental information
Reconciliation of net debt to interest-bearing borrowings
Jun 2013
US$ million
Sept 2012
US$ million
Interest-bearing borrowings
2,533
2,624
Non-current interest-bearing borrowings
2,434
2,358
Current interest-bearing borrowings
98
261
Bank overdraft
1
5
Cash and cash equivalents
(236)
(645)
Net debt
2,297
1,979
Exchange rates
Jun
2013
Mar
2013
Dec
2012
Sept
2012
Jun
2012
Exchange rates:
Period end rate: US$1 = ZAR
9.8800
9.2363
8.4851
8.3096
8.1650
Average rate for the Quarter: US$1 = ZAR
9.4756
8.9349
8.6975
8.2567
8.1229
Average rate for the YTD: US$1 = ZAR
9.0364
8.8173
8.6975
8.0531
7.9885
Period end rate: €1 = US$
1.3010
1.2821
1.3217
1.2859
1.2660
Average rate for the Quarter: €1 = US$
1.3060
1.3206
1.2970
1.2514
1.2838
Average rate for the YTD: €1 = US$
1.3078
1.3088
1.2970
1.2988
1.3145
16
Sappi ordinary shares (JSE:SAP)
US Dollar share price conversion
ZAR
0
5
10
15
20
25
30
35
40
30
Jun
09
Jun
09
31
Mar
10
Mar
10
30
Sep
09
Sep
09
31
Dec
09
Dec
09
30
Jun
10
Jun
10
31
Dec
10
Dec
10
30
Sep
10
Sep
10
31
Mar
11
Mar
11
31
Mar
12
Mar
12
31
Dec
11
Dec
11
30
Jun
12
Jun
12
30
Sep
12
Sep
12
19
Jul
13
Jul
13
30
Jun
11
Jun
11
30
Sep
11
Sep
11
31
Dec
12
Dec
12
31
Mar
13
Mar
13
30
Jun
13
Jun
13
0
1
2
3
4
5
6
USD
30
Jun
09
Jun
09
31
Mar
10
Mar
10
30
Sep
09
Sep
09
31
Dec
09
Dec
09
30
Jun
10
Jun
10
31
Dec
10
Dec
10
30
Sep
10
Sep
10
31
Mar
11
Mar
11
31
Mar
12
Mar
12
31
Dec
11
Dec
11
30
Jun
12
Jun
12
30
Sep
12
Sep
12
19
Jul
13
Jul
13
30
Jun
11
Jun
11
30
Sep
11
Sep
11
31
Dec
12
Dec
12
31
Mar
13
Mar
13
30
Jun
13
Jun
13
Sappi has a primary listing on the JSE Limited and a secondary listing on
the New York Stock Exchange
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
NYSE Code: SPP
ISIN: ZAE000006284
South
Africa:
United States:
Computershare Investor
ADR Depositary:
Services (Proprietary) Limited
The Bank of New York Mellon
70 Marshall Street
Investor Relations
Johannesburg 2001
PO Box 11258
PO Box 61051
Church Street Station
Marshalltown 2107
New York, NY 10286-1258
Tel +27 (0)11 370 5000
Tel +1 610 382 7836
www.sappi.com
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 02, 2013
SAPPI LIMITED,
By:
/s/ S.R. Binnie
Name: S.R. Binnie
Title: Chief Financial Officer
Title: Chief Financial Officer