JOHANNESBURG, July 30 /PRNewswire-FirstCall/ -- -- Net cash generated US$106 million -- Good progress on debt refinancing -- Global economy remains weak -- Production curtailed in all regions to match supply to demand -- Stronger Rand impacts SA margins unfavourably -- Basic loss per share 12 US cents -- Acquisition synergies on track Summary Quarter ended Nine months ended ------------- ----------------- June March June June June 2009 2009 2008 2009 2008 Key figures: (US$million) Sales 1,316 1,313 1,494 3,816 4,344 Operating (loss) profit (7) 6 (23) 56 289 Special items - (gains) losses * (6) (23) 111 (61) (12) Operating (loss) profit excluding special items (13) (17) 88 (5) 277 EBITDA excluding special items ** 93 82 182 281 560 Basic (loss) Earnings Per Share (US cents)*** (12) (7) (17) (16) 37 Net debt **** 2,770 2,735 2,667 2,770 2,667 Key ratios (%) Operating (loss) profit to sales (0.5) 0.5 (1.5) 1.5 6.7 Operating (loss) profit excluding special items to sales (1.0) (1.3) 5.9 (0.1) 6.4 Operating (loss) profit excluding special items to Capital (1.1) (1.6) 8.1 (0.2) 8.8 Employed (ROCE)** EBITDA excluding special items to sales 7.1 6.2 12.2 7.4 12.9 Return on average equity (ROE) (%) **** (12.7) (7.5) (15.1) (5.4) 10.3 Net debt to total capitalisation **** 57.5 59.4 61.5 57.5 61.5 -- *Refer to information in the published results regarding more details on special items -- **Refer to Supplemental Information in the published results for the definition of the term and reconciliation of profit/ loss for the period to EBITDA -- ***Comparative figures have been revised in accordance with IAS33 to reflect the impact of the rights offer -- ****Refer to Supplemental Information in the published results for the definition of the term -- The table above has not been audited or reviewed. The quarter under review Commenting on the results, Sappi (NYSE:SPP) chief executive Ralph Boettger said: "Strong cash generation of US$106 million was a feature of our results for the quarter and benefited from management's actions to reduce working capital and limit capital expenditure to essential items. Global economic conditions remained depressed in the quarter resulting in continued weak conditions in most of our coated paper markets. Conditions in pulp markets, including the chemical cellulose markets, improved significantly in terms of both demand and US Dollar prices, late in the quarter. Globally our sales increased marginally on the prior quarter but were 3% down on the equivalent quarter last year, despite the additional capacity from our European acquisition earlier in the year. Average selling prices realised by the group for the quarter were approximately 9% lower than average prices realised a year ago. We continued to match our supply to demand and manage our inventory levels by curtailing production during the quarter. Prices of our inputs continued to reduce and had a favourable effect on variable costs during the quarter, in most regions. Our actions to manage raw material usage had a further favourable effect. Operating loss excluding special items was US$13 million for the quarter, an improvement on the loss of US$17 million in the prior quarter and compares with a profit of US$88 million a year ago. Our European business returned to profitability, excluding special items, as a result of the ramp up of synergy achievement and cost reduction, despite poor operating levels. The North American business improved its performance and its run rate by the end of the quarter had returned to operating profitability excluding special items. The Southern African business was impacted by the strengthening of the Rand relative to the US Dollar, weak domestic demand and low pulp prices in the quarter, resulting in an operating loss excluding special items. The basic loss per share for the quarter was 12 US cents compared to a loss of 17 US cents in the equivalent quarter a year ago." Looking forward, Boettger commented: "Although global economic conditions remain weak we have seen improvement in pulp markets and some of our coated graphic paper export markets. In addition, inventory reduction in the coated graphic paper supply chain has largely run its course and we have started seeing order levels closer to end use demand levels. We also expect demand, particularly for reels, to strengthen during the next quarter which is historically the seasonally strongest quarter, and for our operating rates to improve in Europe and North America. The chemical cellulose market improved markedly during our third financial quarter in terms of both demand and pricing. Sappi Saiccor Mill is responding by ramping up its production following the 30% capacity expansion commissioned last September, and expects to achieve close to full capacity by our financial year end and improve sales volumes during the next quarter as production increases. Other factors which are expected to improve results are the achievement of further alternative fuel tax credits in North America of approximately US$40 million which will be reported as a special item, subject to continued availability under US law, accelerated synergy achievement in respect of the European acquisition integration, the benefits of fixed and variable cost reduction action and potential for some further input price reduction realisation. Against this background, we expect to return to operating profitability excluding special items during the next quarter. Cash generation is expected to be positive for the quarter. We will continue to focus on cash generation and debt reduction. We expect capital expenditure for the full year to be less than US$200 million and to continue to carefully manage capex at that level in order to prioritise debt reduction. The successful completion of our refinancing will take care of our liquidity and significant debt maturities for at least the next three years. With our well structured business and decisive management action, we are strongly placed to ride out the current economic downturn and take full advantage of our leading market positions and efficient asset base when conditions improve." ENDS The full results announcement is available at http://www.sappi.com/ There will be a conference call to which investors are invited. Full details are available at http://www.sappi.com/ using the links Investor Info; Investor Calendar; 3Q09 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 European 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, possible early termination of alternative fuel tax credits, 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 Fax + 27 (0)11 268 5747 DATASOURCE: Sappi Limited CONTACT: Robert Hope, Group Head Strategic Development, +27-0-11-407-8492, , or Andre F Oberholzer, Group Head Corporate Affairs, +27-0-11-407-8044, Mobile +27-0-83-235-2973, , both of Sappi Limited Web Site: http://www.sappi.com/

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