1st Quarter Results
24 1월 2001 - 4:32PM
UK Regulatory
RNS Number:7331X
Sappi Ld
24 January 2001
Press Release
Johannesburg, 24th January 2001
Sappi announces further growth in first quarter
Sappi, one of the world's leading producers of fine paper, today announced
results for the first quarter 2001.
Results - Highlights
* Operating profit up 13% to US$ 143 million
* Headline EPS up 31% to 34 US cents
* Inventory correction slows sales
* Forest Products continues its strong performance
* Share buy-back commenced
"Despite a tougher operating environment in North America in particular, we
had another strong earnings quarter, and our margins and returns are better
than a year earlier. This is a direct result of our strategy over the past
decade to spread our asset base geographically, to minimise risk, deliver
growth and value to shareholders and show greater consistency of earnings,"
said Sappi Executive Chairman Eugene van As.
Results for the Quarter
There have been numerous changes to South African accounting standards to
harmonise them with recently changed International Accounting Standards.
Sappi has adopted the new policies for 2001 and, to avoid further changes,
also those applicable for 2002. These changes have had negligible effect on
the earnings per share but many balance sheet positions have changed
marginally.
The group's earnings increased 24% compared to the comparative quarter last
year, to US$ 82 million. Earnings per share before exceptional items were 31%
up to 34 US cents.
Operating profit increased 13% to US$ 143 million with all the businesses,
except North America, contributing to the improvement.
Net finance costs for the quarter were US$24 million, 19% below last year on a
comparative basis. As AC 133 does not allow restatement, the finance costs
reported are 11% below last year.
Taxation for the quarter was US$36 million, an effective tax rate of
approximately 30%, which is lower than the rate last year largely as a result
of the regional split of profit and the impact of the lower German tax rate.
Sappi's strong cash flow continued with EBITDA of US$237 million. This was
offset by a seasonal increase in working capital of US$80 million and capital
expenditure of US$93 million, much of which (US$29 million) related to one-off
environmental expenditure in North America (to comply with the EPA "cluster
rules") and in Southern Africa.
Continued debt reduction was offset during the quarter by the effect of
accounting standards changes and currency movements.
Operational Review
Fine Paper
In North America operating profit of US$18 million was extremely weak and only
half of last year. Volumes for the quarter were essentially flat with
shipments dropping off sharply in November and December. Two capital projects
- one involving EPA "Cluster Rule" compliance and the other relating to paper
quality improvement - resulted in downtime during the quarter. The impact of
buying pulp during the downtime, pulp price increases and the increase in the
cost of energy could not be covered by price increases, which were only 2%
higher than last year. Management expects both performance and returns in
North America to improve in the next periods, although they are unlikely to
match last year.
In Europe, sales volumes were slightly lower than a year earlier as a result
of some inventory correction. However profits increased slightly as a result
of continued tight cost control and excellent operating efficiencies.
In South Africa, the fine paper operations showed a much improved performance.
Operating income increased by 20% to US$6 million, operating margins increased
to 10.5% and return on net operating assets increased to 22.3%.
Forest Products
Forest Products continued its strong performance. It provides the group with
an economic hedge for the pulp purchase of its paper businesses. Sales volumes
increased by 10% and average prices achieved increased by 20% in local
currency. The operating margin was 31.5% with the return on net operating
assets at 26.4%, two and a half times the return a year earlier.
Share buy back
Shareholder approval was obtained on 15th December 2000 for the purchase of up
to 10% of Sappi's shares by a subsidiary. This buy back has now commenced. To
date, the subsidiary has bought 5,7 million shares representing approximately
2.4 % of the issued share capital, at an average price of R53,47 per share.
Prospects
Many market analysts are expecting a slower start to the calendar year,
although to date contract pulp prices have remained at US$ 710 per ton and
producer and customer inventories remain at reasonable levels. Demand for
woodfree paper remains firm and although there is continued pressure on prices
in North America, prices in Europe are firm.
Commenting on group prospects van As said that Sappi was well positioned.
"Through our focus on cost control and operational efficiencies we are driving
good performance from our asset base despite toughening operating environments
in some of our markets " he said. "Performance in North America is expected to
improve and global growth should still be reasonable. In these circumstances
we still expect to match last year's US dollar earnings per share for the full
year."
ENDS
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 forward-looking 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.
Released on behalf of Sappi by Brunswick. For further information:
Robert Hope
Director Strategic Development
Sappi Limited
Tel: +27 (0) 11 407 8492
Fax: +27 (0) 11 403 1493
robho@za.sappi.com
SAPPI LIMITED
Group income statement
Unaudited
Quarter ended
December 2000 December 1999
US$ million US$ million % change
Sales 1,115 1,116 (0.1)
Cost of sales 882 900
Gross profit 233 216 7.9
Selling, general & 90 89
administrative expenses
Operating profit 143 127 12.6
Non-trading (loss) profit (1) 6
Net finance costs 24 27
Net paid 32 36
Capitalised (8) (9)
Profit before tax 118 106
Taxation - current 23 12
- deferred 13 25
Profit after tax 82 69 18.8
Income attributable to 3
minority interests
Net profit 82 66 24.2
EBITDA 237 227 4.4
Basic earnings per share (US 34 29
cents)
Basic earnings before
exceptional items
(Headline earnings) per share 34 26
(US cents)
Weighted average number of 238.9 230.6
shares in issue (millions)
Diluted earnings per share 34 28
(US cents)
Diluted earnings before
exceptional items
(Headline earnings) per share 34 26
(US cents)
Weighted average number of
shares on fully
diluted basis (millions) 245.0 236.3
Calculation of Earnings
before exceptional items
(Headline) net of tax
Net profit 82 66
Profit on disposal of (4)
business and fixed assets
Decrease in other provisions (1) (3)
Earnings before exceptional 81 59
items (Headline)
SAPPI LIMITED
Group balance sheet
Unaudited Audited
December 2000 September 2000
US$ million US$ million
ASSETS
Non-current assets 3,633 3,600
Property, plant and equipment 3,139 3,095
Plantations 362 372
Deferred taxation 35 37
Other non-current assets 97 96
Current assets 1,165 1,168
Cash and cash equivalents 211 294
Trade and other receivables 323 319
Inventories 631 555
Total assets 4,798 4,768
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' interest 1,649 1,618
Minority interest 5 53
Non-current liabilities 1,938 1,996
Interest bearing liabilities 1,198 1,278
Deferred taxation 515 500
Other non-current liabilities 225 218
Current liabilities 1,206 1,101
Interest bearing liabilities 245 162
Bank overdraft 37 76
Other current liabilities 924 863
Total equity and liabilities 4,798 4,768
Number of shares in issue 237.8 239.1
(millions)
Net Debt (US$ million) 1,269 1,270 *
Net Debt to Total Capitalisation (%) 32.8 32.5 *
Net asset value per share (US 895 870
cents)
* - Restated for reclassification
of minority interest to debt in
December 2000, as if processed in
September 2000.
SAPPI LIMITED
Group cash flow statement
Unaudited Unaudited
Quarter ended Quarter ended
December 2000 December
1999
US$ million US$ million
Cash generated by operations 231 254
Movement in working capital (80) (220)
Net finance costs (32) (36)
Taxation paid (1) 3
Cash retained from operating activities 118 1
Cash effects of investing activities (94) 23
24 24
Cash effects of financing activities (109) 141
Net movement in cash and cash equivalents (85) 165
SAPPI LIMITED
Group statement of changes in
shareholders' equity
Unaudited Unaudited
Quarter ended Quarter ended
December 2000 December
1999
US$ million US$ million
Balance - beginning of year 1,618 1,463
Changes in accounting policies 8 (27)
Balance - beginning of year restated 1,626 1,436
Net profit 82 66
Foreign currency translation reserve 9 3
Dividends declared - US$ 0.25 (1999: US$ (60) (45)
0.19) per share
(Share buybacks) / issuance of ordinary (8) 114
shares
Balance at 31 December 1,649 1,574
Reconciliation of opening balance of
equity
Balance - September 2000 as previously 1,621
reported
Changes in accounting policies:
Events after balance sheet date 60
(dividends)
Employee benefits (53)
Provisions (3)
Special purpose entities (7)
Restated balance - September 2000 1,618
SAPPI LIMITED
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. The same
accounting policies have been followed as in the annual financial
statements for September 2000, except for the following new or
revised accounting standards adopted for this period: Leases - AC 105
(revised), Events after the balance sheet date - AC 107 (revised),
Employee Benefits - AC 116 (revised), Discontinuing operations - AC
117 (revised), Impairment of Assets - AC 128, Intangible Assets - AC
129, Provisions, contingent liabilities and contingent assets - AC
130, Business combinations - AC 131, Consolidated financial
statements and accounting for investments in subsidiaries - AC 132,
Financial instruments: recognition and measurement - AC 133,
Government grants - AC 134, Consolidation: special purpose entities -
AC 412 and Share capital - reacquired own equity instruments
(Treasury shares) - AC 416. The effect on equity for the above
changes is reflected in the Group statement of changes in
shareholders' equity. The effect on net profit for the current and
comparable period is not material. Where appropriate, comparative
figures have been restated. The financial results for the quarter
have been reviewed by the group's auditors, Deloitte & Touche. Their
report is available for inspection at the company's registered
offices.
Unaudited
Quarter ended
December 2000 December 1999
US$ million US$ million
2. Cost of sales
Included in cost of sales are:
Depreciation 80 84
Fellings 8 10
88 94
3. Capital expenditure
Fixed assets 86 32
Plantations 7 8
Unaudited Audited
December 2000 September 2000
US$ million US$ million
4. Capital Commitments
Contracted but not provided 96 73
Approved but not contracted 215 150
311 223
5. Contingent liabilities
Guarantees and suretyships 63 80
Bills discounted -
Other contingent liabilities 51 46
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