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 May, 2004
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.
Yes No X
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If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
FORWARD-LOOKING STATEMENTS
In order to utilize the "Safe Harbor" 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;
pulp and paper production, production capacity and pricing levels in North
America, Europe, Asia and southern Africa; any major disruption in production
at the Group's key facilities; changes in environmental, tax and other laws
and regulations; adverse changes in the markets for the Group's products; any
delays, unexpected costs or other problems experienced with any business
acquired or to be acquired; consequences of the Group's leverage; adverse
changes in the South African political situation and economy or the effect of
governmental efforts to address present or future economic or social problems;
and the impact of future investments, acquisitions and dispositions (including
the financing of investments and acquisitions) and any delays, unexpected
costs or other problems experienced in connection with dispositions. 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.
SAPPI
The word for fine paper
results for the quarter and half-year ended
March 2004
[graphic omitted]
second quarter 2004
Sappi is the world's leading
producer of coated fine paper
Sales by product group *
[pie chart omitted] -----Coated fine paper 64% magno
-----Uncoated fine paper 5%
-----Coated specialities 9%
-----Pulp 12% HannoArt
-----Commodity paper 9%
-----Other 1%
Lustro
Sales: where the product is manufactured*
[pie chart omitted] -----North America 28% Somerset
-----Europe 47%
-----Southern Africa 25%
McCoy
Sales: where the product is sold*
[pie chart omitted] -----North America 30% AVALON
-----Europe 43%
-----Asia and other 13%
-----Southern Africa 14% enigma
Georgraphic ownership**
Typek
[pie chart omitted] -----Europe and ROW+ 14%
-----Southern Africa 48%
-----North America 38%
* ended March 2004
** as at 31 March 2004
+ Rest of the world
SAPPI LIMITED
RESULTS FOR THE QUARTER ENDED MARCH 2004
o EPS 10 US cents
o Coated paper prices low; increases announced in Europe and North America
o Strong demand in Europe
o US shipments increasing
o Forest Products performance strong despite continued Rand strength
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SUMMARY
Quarter ended Half-year ended
March Dec March** March March**
2004 2003 2003 2004 2003
--------------------------------------------- --------- --------- ----------- --------- ----------
Sales (US$ million) 1,185 1,120 1,095 2,305 2,114
Operating profit (US$ million) 56 - 108 56 203
EBITDA (US$ million) * 173 114 194 287 383
Operating profit to sales (%) 4.7 - 9.9 2.4 9.6
EBITDA to sales (%) * 14.6 10.2 17.7 12.5 18.1
Operating profit to average net assets (%) 4.9 - 10.9 2.5 10.5
Headline EPS (US cents) 10 (9) 25 1 47
EPS (US cents) 10 (9) 25 1 47
Return on equity (%) * 4.7 (4.3) 13.1 0.2 12.7
Net debt (US$ million) * 1,753 1,694 1,509 1,753 1,509
Net debt to total capitalisation (%) * 35.6 34.7 34.6 35.6 34.6
--------------------------------------------- --------- --------- ----------- --------- ----------
*Refer to page 15, Supplemental Information for the definition of the term
**Restated for AC137
2004 second quarter 1
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COMMENT
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The underlying performance for the quarter improved compared to the prior
quarter as a result of a better performance from our European fine paper and
South African forest products businesses and a reduction in the losses from
our North American business.
In North America, commercial printers are starting to show clear signs of a
turnaround in demand for paper, reflecting improvements in the US economy.
This pick-up in consumption was only evident towards the end of the quarter
and did not have a major impact on demand statistics. Shipments of coated fine
paper from US producers were up 3% on the same quarter last year while net
imports fell sharply. Magazine advertising pages were 2% below the equivalent
quarter last year. Demand for coated fine paper in Western Europe continued to
show healthy improvement with apparent consumption for the quarter 6% above
the equivalent quarter last year and total shipments by European manufacturers
were up 8% on the prior year.
Prices in both major markets remained at cyclical lows in the quarter.
Tightening supply conditions only presented the opportunity to announce price
increases for implementation after the end of the reporting period.
Against this background, Sappi's earnings and headline earnings per share were
10 US cents compared to 25 US cents a year earlier and a loss in the December
quarter, after charges related to a machine closure and additional maintenance
shut costs.
We maintain our focus on costs, which were generally well managed in local
currency terms in the quarter. Costs of wood and energy remain high in North
America. Selling, General and Administrative costs fell from the prior quarter
but were US$24 million higher than last year primarily due to currency (US$10
million) and the US$10 million credit relating to retirement costs reported
last year. The favourable impact of applying the Agriculture Accounting
Standard - AC137 (IAS41) in the quarter compared to applying our previous
accounting policy was US$7 million after tax.
Net finance costs at US$26 million were US$2 million below the December
quarter.
Taxation for the quarter was at an effective rate of 23%, which is higher than
the expected rate for the full year.
2 2004 second quarter
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CASH FLOW AND DEBT
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Cash generated by operations increased strongly compared to the December
quarter to US$184 million, a similar level to last year.
Working capital increased by US$31 million mainly as a result of higher
inventories.
Capital expenditure for the quarter was US$84 million, similar to the first
quarter and approximately 82% of depreciation.
Net debt increased by US$59 million during the quarter. The annual dividend
payment of US$66 million was paid in January 2004 and a pension funding
payment of US$19 million was also made in the quarter.
2004 second quarter 3
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OPERATING REVIEW FOR THE QUARTER
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SAPPI FINE PAPER
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QUARTER ENDED Quarter ended
MARCH 2004 March 2003 %
US$ MILLION US$ million change
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Sales 967 904 7.0
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Operating profit 10 72 (86.1)
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Operating profit to sales (%) 1.0 8.0 -
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EBITDA 98 147 (33.3)
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EBITDA to sales (%) 10.1 16.3 -
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RONOA pa (%) 1.2 9.2 -
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Sappi Fine Paper volumes and average prices in Dollar terms both increased;
however, low prices in local currencies and increases in pulp, wood and energy
costs continue to squeeze our margins.
Demand in Europe and South Africa remains good and we are seeing signs of a
pick up, in domestic volumes, in North America.
EUROPE
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QUARTER ENDED Quarter ended
MARCH 2004 March 2003 % change % change
US$ MILLION US$ million (US$) (Euros)
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Sales 556 503 10.5 ( 5.5)
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Operating profit 27 42 (35.7) (45.0)
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Operating profit to sales (%) 4.9 8.3 - -
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EBITDA 77 83 (7.2) (20.7)
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EBITDA to sales (%) 13.8 16.5 - -
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RONOA pa (%) 6.1 11.0 - -
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Our sales volume has continued to grow and was 3% higher than the equivalent
quarter last year and 4% above the December quarter. Domestic European sales
volumes increased 6% on the prior quarter but export volumes to the US which
are included in Sappi Fine Paper Europe's total volumes have declined.
Prices in European and overseas markets fell early in the quarter but
stabilised in March. Average prices realised in Euros were 9% below a year
earlier and slightly down on the December quarter.
During the quarter we announced a price increase of 5% to 7% for coated fine
paper which should become effective in the June quarter.
We have continued to manage our costs effectively and despite the low prices
have achieved an EBITDA to sales margin of 13.8% for the quarter.
4 2004 second quarter
North America
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QUARTER ENDED Quarter ended
MARCH 2004 March 2003 %
US$ MILLION US$ million change
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Sales 339 338 0.3
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Operating profit (20) 20 -
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Operating profit to sales (%) (5.9) 5.9 -
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EBITDA 15 51 (70.6)
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EBITDA to sales (%) 4.4 15.1 -
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RONOA pa (%) 5.8 5.4 -
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Although our North American business improved on the prior quarter, it still
reported an operating loss in the quarter under review.
Volumes sold were higher than the equivalent quarter last year representing
some gain in share. Volumes were up 7% from the December quarter.
Prices remained at approximately the same low level as in the December
quarter. As a result of improving operating rates and order backlogs, we have
announced a price increase of US$50 per ton on certain coated fine paper
sheets and an increase of US$60 per ton on coated fine paper web products
which becomes effective in June.
Costs of wood and energy continue to impact profitability and remain at high
levels. These costs were US$9 million above the same quarter last year and
US$3 million higher than the prior quarter.
South Africa
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QUARTER ENDED Quarter ended
MARCH 2004 March 2003 % change % change
US$ MILLION US$ million (US$) (Rands)
---------------------------------------------------------------------------------------------------------
Sales 72 63 14.3 (6.9)
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Operating profit 3 10 (70.0) (75.6)
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Operating profit to sales (%) 4.2 15.9 - -
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EBITDA 6 13 (53.8) (62.4)
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EBITDA to sales (%) 8.3 20.6 - -
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RONOA pa (%) 7.4 33.3 - -
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2004 second quarter 5
The performance of our South African fine paper business was affected by low
prices resulting from increased competition and the strong Rand. There are
some signs that growing demand in Asia will absorb greater volumes and
therefore reduce import pressure.
SAPPI FOREST PRODUCTS
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QUARTER ENDED Quarter ended
MARCH 2004 March 2003 % change % change
US$ MILLION US$ million (US$) (Rands)
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Sales 218 191 14.1 (7.0)
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Operating profit 48 33 45.5 18.5
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Operating profit to sales (%) 22.0 17.3 - -
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EBITDA 77 44 75.0 42.5
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EBITDA to Sales (%) 35.3 23.0 - -
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RONOA pa (%) 15.4 14.4 - -
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Demand for our pulp and packaging paper was firm during the quarter. Our paper
exports were lower as a result of the strong Rand and newsprint sales were
lower as customers adjusted inventories.
Demand for dissolving pulp produced by our Saiccor mill remains strong.
Saiccor has a world-class cost position and is taking a number of steps to
increase capacity through de-bottlenecking projects. The first step, which is
already underway, will increase output by 20,000 tons based on the current
product mix. Further plans are being investigated to add an additional 30,000
tons of capacity.
Pulp prices have continued to increase with average NBSK prices for the
quarter up US$ 35 per ton on the previous quarter and have partly offset the
impact of the strong Rand on our pricing.
6 2004 second quarter
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OUTLOOK
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We are seeing signs of a turnaround in profitability for coated fine paper.
Advertising spending in Europe is growing, as is apparent consumption of
coated fine paper, which bodes well for the price increases currently being
introduced.
Imports of coated fine paper to the US from Asia and Europe have declined
partly as a result of improved demand in those regions and partly as a result
of less attractive price realisations. US domestic shipments have strengthened
and order backlogs are increasing. The combination of these factors and signs
of improved printer activity will support the announced price increases.
However, these coated paper price increases in North America are not expected
to have a major impact on our results until the fourth fiscal quarter.
Pulp prices continue to strengthen, which will support the performance of our
Forest Products business.
We will have to absorb the costs of two major maintenance shuts next quarter
at our Cloquet and Ngodwana mills. In addition to this, we face continued
pressure from rising energy costs globally and high wood costs in North
America.
Overall, market developments are encouraging and with rising price trends, we
expect to see further improvement in our earnings in our third quarter
compared to the second quarter.
On behalf of the Board
J C A LESLIE D G WILSON
Director Director 10 May 2004
sappi limited
(Registration number 1936/008963/06)
ISSUER CODE: SAVVI
JSE CODE: SAP
ISIN CODE: ZAE 000006284
2004 second quarter 7
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FORWARD-LOOKING STATEMENTS
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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 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), 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.
8 2004 second quarter
FINANCIAL RESULTS FOR THE QUARTER AND
HALF-YEAR ENDED MARCH 2004
[graphic omitted]
2004 second quarter 9
Sappi Limited
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GROUP INCOME STATEMENT
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Reviewed Reviewed
Reviewed Reviewed Half-year Half-year
Quarter ended Quarter ended ended ended
March 2004 March 2003 March 2004 March 2003
US$ million US$ million % change US$ million US$ million % change
------------------------------------------------------------------------------------------------------------------------
Sales 1,185 1,095 8.2 2,305 2,114 9.0
Cost of sales 1,030 913 2,025 1,760
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Gross profit 155 182 (14.8) 280 354 (20.9)
Selling, general & administrative expenses 99 75 224 152
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56 107 56 202
Other income - 1 - 1
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Operating profit 56 108 (48.1) 56 203 (72.4)
Net finance costs 26 32 54 61
------------- ------------ ------------- ----------
Net paid | 26 | | 29 | | 52 | | 54 |
Capitalised | - | | - | | (1) | | (1)|
Net foreign exchange (gains) losses | (4)| | 3 | | (6) | | 8 |
Change in fair value of financial instruments | 4 | | - | | 9 | | - |
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Profit before tax 30 76 (60.5) 2 142 (98.6)
Taxation - current 10 17 18 31
- deferred (3) 1 (18) 2
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Net profit 23 58 (60.3) 2 109 (98.2)
=====================================================================
Earnings per share (US cents) 10 25 1 47
Headline earnings per share (US cents) * 10 25 1 47
Weighted average number of shares in issue
(millions) 226.1 229.4 226.3 229.8
Diluted earnings per share (US cents) 10 25 1 47
Diluted headline earnings per share (US cents) * 10 25 1 47
Weighted average number of shares on fully
diluted basis (millions) 228.3 232.1 228.4 232.5
Calculation of Headline earnings *
Net profit 23 58 2 109
Profit on disposal of business and property,
plant & equipment - (1) - (1)
Mill closure costs - 1 - 1
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Headline earnings 23 58 2 109
=====================================================================
* Headline earnings disclosure is required by the JSE Securities Exchange South Africa.
10 2004 second quarter
Sappi Limited
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GROUP BALANCE SHEET
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Reviewed Audited
March 2004 Sept 2003
US$ million US$ million
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ASSETS
Non-current assets 4,501 4,242
--------------------------------
Property, plant and equipment 3,679 3,554
Plantations 491 432
Deferred taxation 51 41
Other non-current assets 280 215
--------------------------------
Current assets 1,373 1,575
--------------------------------
Cash and cash equivalents 332 584
Trade and other receivables 265 290
Inventories 776 701
--------------------------------
--------------------------------
Total assets 5,874 5,817
--------------------------------
EQUITY AND LIABILITIES
Shareholders' equity
Ordinary shareholders' interest 1,991 1,945
Non-current liabilities 2,506 2,541
--------------------------------
Interest-bearing borrowings 1,652 1,742
Deferred taxation 537 517
Other non-current liabilities 317 282
--------------------------------
Current liabilities 1,377 1,331
--------------------------------
Interest-bearing borrowings and bank overdraft 433 333
Taxation payable 85 82
Other current liabilities 859 916
--------------------------------
--------------------------------
Total equity and liabilities 5,874 5,817
--------------------------------
Number of shares in issue at balance sheet date (millions) 226.2 226.9
2004 second quarter 11
Sappi Limited
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GROUP CASH FLOW STATEMENT
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Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2004 March 2003 March 2004 March 2003
US$ million US$ million US$ million US$ million
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Cash generated by operations 184 195 290 373
Movement in working capital (31) (23) (144) (165)
Net finance costs (26) (31) (52) (61)
Taxation (paid) recovered (4) 30 (19) 25
Dividends paid (66) (65) (66) (65)
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Cash retained from operating activities 57 106 9 107
Cash effects of investing activities (96) (58) (185) (92)
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(39) 48 (176) 15
Cash effects of financing activities (25) (36) (99) 3
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Net movement in cash and cash equivalents (64) 12 (275) 18
======================================================================
Sappi Limited
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GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
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Reviewed Reviewed
Half-year ended Half-year ended
March 2004 March 2003
US$ million US$ million
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Balance - beginning of year 1,958 1,601
Change in accounting policy (13) (4)
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Balance - beginning of year restated 1,945 1,597
Net profit 2 109
Foreign currency translation reserve 128 224
Revaluation of derivative instruments (7) (17)
Dividends declared - US$ 0.29 (2003: US$ 0.28) per share (66) (65)
Share buybacks net of transfers to participants of the share
purchase trust (11) (19)
------------------------------------------
Balance - end of period 1,991 1,829
==========================================
12 2004 second quarter
Sappi Limited
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NOTES TO THE GROUP RESULTS
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1. Basis of preparation
The annual financial statements are prepared in conformity with South
African Statements of Generally Accepted Accounting Practice (SA GAAP).
These quarterly results have been prepared in compliance with AC 127
(Interim financial reporting) and are based on accounting policies which
are consistent with those used in the annual financial statements. The same
accounting policies have been followed as in the annual financial
statements for September 2003, except for the new agriculture accounting
standard - Agriculture - AC 137 (IAS 41) which became effective from the
beginning of the current financial year.
The effect on equity for the above change is reflected in the Group
statement of changes in shareholders' equity. The effect on net profit for
the current quarter is an increase of US$7 million, net of US$3 million tax
(December 2003 quarter: increase of US$7 million, net of US$3 million tax;
March 2003 quarter: minimal impact) and an increase of US$14 million, net
of US$6 million tax for the half-year end (March 2003: a decrease of US$1
million, net of US$1 million tax). Where appropriate, comparative figures
have been restated.
The preliminary results for the quarter have been reviewed by the group's
auditors, Deloitte & Touche. Their unqualified review report is available
for inspection at the company's registered offices.
2. Comparative figures
Comparative figures have been restated to take into account the effects
of the new agriculture accounting standard which became effective from
the beginning of the current financial year. The effect on operating
profit is the inclusion of the fair value changes in the value of
plantations and the expensing of the costs incurred to establish and
maintain plantations (silviculture costs) and the amortisation of
interest which had been previously capitalised. Net finance costs have
increased. In terms of the new accounting standard, interest is no longer
capitalised to the carrying value of plantations.
The effect on the cash flow statement is a reclassification of investments
in plantations from cash utilised in investing activities to cash generated
by operations. Net cash flows remain the same.
Operating profit has been restated to take into account the requirements of
circular 3/2004 issued by the South African Institute of Chartered
Accountants. Previously non-trading (profit) loss items were excluded from
operating profit. The impact of the inclusion is an increase in operating
profit of US$1 million for the quarter and half-year ended March 2003.
In September 2003, cash and overdraft were restated to gross up amounts
previously set-off. The March 2003 cash flow statement has been restated to
take the effects of this into account.
2004 second quarter 13
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NOTES TO GROUP RESULTS (CONTINUED)
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Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2004 March 2003 March 2004 March 2003
US$ million US$ million US$ million US$ million
----------------------------------------------------------------------------------------------------------------------
3. Operating profit
Included in operating profit are the following
non-cash items:
Depreciation and amortisation
Depreciation of property, plant and equipment 103 85 203 170
Fellings 13 1 27 9
Other amortisation 1 - 1 1
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117 86 231 180
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Fair value adjustment (gains) on plantations
(included in cost of sales)
Changes in volume (13) (10) (28) (20)
Changes in fair value (17) (2) (24) (1)
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(30) (12) (52) (21)
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4. Capital expenditure
Property, plant and equipment 84 62 167 100
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Reviewed Audited
March 2004 Sept 2003
US$ million US$ million
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5. Capital commitments
Contracted but not provided 101 86
Approved but not contracted 174 193
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275 279
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6. Contingent liabilities
Guarantees and suretyships 49 47
Other contingent liabilities 25 24
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14 2004 second quarter
Sappi Limited
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SUPPLEMENTAL INFORMATION
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DEFINITIONS
Average - averages are calculated as the sum of the opening and closing
balances for the relevant period divided by two
* EBITDA - earnings before interest (net finance costs), tax,
depreciation and amortisation
* EBITDA to sales - EBITDA divided by sales
Fellings - the amount charged against the income statement representing
the standing value of the plantations harvested
Headline earnings - as defined in circular 7/2002 issued by the South
African Institute of Chartered Accountants, separates from earnings all
items of a capital nature. It is not necessarily a measure of
sustainable earnings. It is a listing requirement of the JSE Securities
Exchange South Africa to disclose headline earnings per share.
* Net assets - total assets less current liabilities
* Net asset value - shareholders' equity plus net deferred tax
* Net asset value per share - net asset value divided by the number of
shares in issue at balance sheet date.
* Net debt - current and non-current interest-bearing borrowings, and
bank overdrafts (net of cash, cash equivalents and short-term deposits)
* Net debt to total capitalisation - Net debt divided by shareholders'
equity plus minority interest, non-current liabilities, current
interest-bearing borrowings and overdraft
* ROE - return on average equity. Net profit divided by average
shareholders' equity
* RONA - operating profit divided by average net assets
* RONOA - operating profit divided by average net operating assets. Net
operating assets are total assets (excluding deferred taxation and cash)
less current liabilities (excluding interest-bearing borrowings and bank
overdraft)
* The above financial measures, other than headline earnings per share,
are presented to assist our shareholders and the investment community in
interpreting our financial results. These financial measures are
regularly used and compared between companies in our industry.
2004 second quarter 15
Sappi Limited
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SUPPLEMENTAL INFORMATION
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additional information
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2004 March 2003 March 2004 March 2003
US$ million US$ million US$ million US$ million
---------------------------------------------------------------------------------------------------------------------
Net profit to EBITDA * reconciliation
Net profit 23 58 2 109
Net finance costs 26 32 54 61
Taxation - current 10 17 18 31
- deferred (3) 1 (18) 2
Depreciation 103 85 203 170
Amortisation (including fellings) 14 1 28 10
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EBITDA * 173 194 287 383
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Reviewed Audited
March 2004 Sept 2003
US$ million US$ million
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Net debt (US$ million) ** 1,753 1,491
Net debt to total capitalisation (%) ** 35.6 30.9
Net asset value per share (US$) ** 10.95 10.67
* In connection with the US Securities Exchange Commission ("SEC") rules relating to "Conditions for Use of
Non-GAAP Financial Measures", we have reconciled EBITDA to net profit rather than operating profit and
recalculated EBITDA to exclude interest (net finance costs), taxes, depreciation and amortisation (including
fellings). As a result our definition has been amended to retain other income/expenses (previously
non-trading profit/loss) as part of EBITDA. The comparative information has been restated to take this into
account. The effect on EBITDA for the amended definition is an increase of US$1m for the quarter and half-
year ended March 2003. There was no impact on the current quarter and half-year ended March 2004.
We use EBITDA as an internal measure of performance and believe it is a useful and commonly used
measure of financial performance in addition to operating profit and other profitability measures under SA
GAAP. EBITDA is not a measure of performance under SA GAAP. EBITDA should not be construed as an
alternative to operating profit as an indicator of the company's operations in accordance with SA GAAP.
EBITDA is also presented to assist our shareholders and the investment community in interpreting our
financial results. This financial measure is regularly used as a means of comparison of companies in our
industry by removing certain differences between companies such as depreciation methods, financing
structures and taxation regimes. Different companies and analysts may calculate EBITDA differently, so
making comparisons among companies on this basis should be done very carefully.
**Refer to page 13, Supplemental Information for the definition of the term.
16 2004 second quarter
Sappi Limited
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SUPPLEMENTAL INFORMATION
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regional information
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2004 March 2003 March 2004 March 2003
Metric tons Metric tons Metric tons Metric tons
(000's) (000's) % change (000's) (000's) % change
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Sales -
Fine Paper -North America 362 343 5.5 699 711 (1.7)
Europe 611 592 3.2 1,199 1,117 7.3
Southern Africa 74 69 7.2 146 143 2.1
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Total 1,047 1,004 4.3 2,044 1,971 3.7
Forest Products Pulp and paper operations 373 395 (5.6) 757 732 3.4
Forestry operations 341 309 10.4 658 607 8.4
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Total 1,761 1,708 3.1 3,459 3,310 4.5
=======================================================================================================================
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2004 March 2003 March 2004 March 2003
US$ million US$ million US$ million US$ million
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Sales
Fine Paper -North America 339 338 0.3 655 707 (7.4)
Europe 556 503 10.5 1,074 937 14.6
Southern Africa 72 63 14.3 143 122 17.2
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Total 967 904 7.0 1,872 1,766 6.0
Forest Products Pulp and paper operations 203 178 14.0 404 323 25.1
Forestry operations 15 13 15.4 29 25 16.0
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Total 1,185 1,095 8.2 2,305 2,114 9.0
=======================================================================================================================
Operating profit
Fine Paper -North America (20) 20 - (74) 29 -
Europe 27 42 (35.7) 42 81 (48.1)
Southern Africa 3 10 (70.0) 8 19 (57.9)
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Total 10 72 (86.1) (24) 129 -
Forest Products 48 33 45.5 83 70 18.6
Corporate (2) 3 - (3) 4 -
-----------------------------------------------------------------------------------------------------------------------
Total 56 108 (48.1) 56 203 (72.4)
=======================================================================================================================
Earnings before interest, tax, depreciation and amortisation charges
Fine Paper -North America 15 51 (70.6) (5) 91 -
Europe 77 83 (7.2) 140 165 (15.2)
Southern Africa 6 13 (53.8) 14 24 (41.7)
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Total 98 147 (33.3) 149 280 (46.8)
Forest Products 77 44 75.0 141 99 42.4
Corporate (2) 3 - (3) 4 -
-----------------------------------------------------------------------------------------------------------------------
Total 173 194 (10.8) 287 383 (25.1)
=======================================================================================================================
Net operating assets
Fine Paper -North America 1,396 1,458 (4.3) 1,396 1,458 (4.3)
Europe 1,742 1,560 11.7 1,742 1,560 11.7
Southern Africa 166 130 27.7 166 130 27.7
-----------------------------------------------------------------------------------------------------------------------
Total 3,304 3,148 5.0 3,304 3,148 5.0
Forest Products 1,283 946 35.6 1,283 946 35.6
Corporate (40) (49) 18.4 (40) (49) 18.4
-----------------------------------------------------------------------------------------------------------------------
Total 4,547 4,045 12.4 4,547 4,045 12.4
=======================================================================================================================
2004 second quarter 17
Sappi Limited
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SUPPLEMENTAL INFORMATION
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summary and convenience translation
------------------------------------------------------------------------------------------------------------------------------------
Reviewed Reviewed Reviewed Reviewed
Quarter ended Quarter ended Half-year ended Half-year ended
March 2004 March 2003 % change March 2004 March 2003 % change
------------------------------------------------------------------------------------------------------------------------------------
Sales (ZAR million) 8,064 9,149 (11.9) 15,758 19,209 (18.0)
Operating profit (ZAR million) 381 902 (57.8) 383 1,845 (79.2)
Net profit (ZAR million) 157 485 (67.6) 14 990 (98.6)
EBITDA * (ZAR million) 1,177 1,621 (27.4) 1,962 3,480 (43.6)
Operating profit to sales (%) 4.7 9.9 2.4 9.6
EBITDA * to sales (%) 14.6 17.7 12.5 18.1
Operating profit to average net assets (%) 5.0 10.9 2.5 10.4
EPS (SA cents) 68 209 (67.5) 7 427 (98.4)
Headline EPS (SA cents) * 68 209 (67.5) 7 427 (98.4)
Net debt (ZAR million) * 11,524 12,004 (4.0)
Net debt to total capitalisation (%) * 35.6 34.6
Cash generated by operations (ZAR million) 1,252 1,629 (23.1) 1,983 3,389 (41.5)
Cash retained from operating activities (ZAR million) 388 886 (56.2) 62 972 (93.6)
Net movement in cash and cash equivalents (ZAR million) (436) 100 - (1,880) 164 -
------------------------------------------------------------------------------------------------------------------------------------
* Refer to page 15, Supplemental Information for the definition of the term.
exchange rates
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March Dec Sept June March
2004 2003 2003 2003 2003
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Exchange rates :
Period end rate: US$1 = ZAR 6.5738 6.7951 7.1288 7.4300 7.9550
Average rate for the Quarter: US$1 = ZAR 6.8054 6.8569 7.3866 7.6305 8.3550
Average rate for the YTD: US$1 = ZAR 6.8363 6.8569 8.3300 8.6173 9.0866
Period end rate: EUR1 = US$ 1.2150 1.2410 1.1475 1.1417 1.0729
Average rate for the Quarter: EUR1 = US$ 1.2497 1.1887 1.1328 1.1236 1.0686
Average rate for the YTD: EUR1 = US$ 1.2161 1.1887 1.0804 1.0655 1.0334
The financial results of entities with reporting currencies other than the US Dollar are translated into US Dollars as follows:
- Assets and liabilities at rates of exchange ruling at period end; and
- Income, expenditure and cash flow items at average exchange rates.
18 2004 second quarter
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SAPPI ORDINARY SHARES
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ADR PRICE (NYSE TICKER: SPP) NOTE: (1 ADR = 1 SAPPI SHARE)
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2004 second quarter 19
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NOTES
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20 2004 second quarter
this report is available on the Sappi website - www.sappi.com
[GRAPHIC OMITTED]
Other interested parties can obtain printed copies of this report from:
South Aftica: United States United Kingdom:
Computershare Limited ADR Depository: Capita Registrars
70 Marshall Street The Bank of New York The Registry
Johannesburg 2001 Investor Relations 34 Beckenham Road
PO Box 61051 PO Box 11258 Beckenham, Kent
Marshallton 2107 Church Street Station BR3 4TU, DX 91750
Tel +27 (0)11 370-5000 New York, NY 10286-1258 Beckenham West
Tel +1 610 382 7836 Tel +44 (0)208 639-2157
2004 second quarter 21
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.
Date: May 10, 2004
SAPPI LIMITED,
by /s/ D.G. Wilson
----------------------------------
Name: D. G. Wilson
Title: Executive Director: Finance