FORM 6-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of
February, 2007
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 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): 82-
EXPLANATORY NOTE
This Form 6-K/A is being furnished solely to correct two clerical errors in the Form 6-K
previously furnished inadvertently on February 5, 2007 (the “Original Form 6-K”). This
Form 6-K/A, which amends and restates the Original Form 6-K in its entirety, adds the
“Forward-Looking Statements” legend set forth below (which was inadvertently omitted
from the Original Form 6-K) and is duly signed by, and correctly identifies as signatory,
M. R. Thompson (the Original Form 6-K was not duly signed by the indicated signatory).
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, input costs
including raw material, energy and employee costs, 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
quarter results ended
December 2006
1st
* for the quarter ended December 2006
** as at 31 December 2006
† Rest of World
Sales by product group *
Sales: where the product is manufactured *
Sales: where the product is sold *
Geographic ownership **
■
Coated fine paper
65%
■
Uncoated fine paper
4%
■
Coated specialities
8%
■
Packaging and newsprint
7%
■
Pulp
14%
■
Other
2%
■
North America
30%
■
Europe
43%
■
Southern Africa
14%
■
Asia and other
13%
■
South African
60%
■
North America
30%
■
Europe and ROW †
10%
■
North America
30%
■
Europe
46%
■
Southern Africa
24%
Sappi is the world’s leading
producer of coated fine paper
producer of coated fine paper
●
EPS 13 US cents
●
Demand for coated fine paper firm
●
Coated paper prices do not reflect high operating rates
●
Prices boost Forest Products performance
●
Input cost pressure abates, except in Europe
financial highlights
Quarter
ended
Dec
Sept
Dec
2006
2006
2005
Sales (US$ million)
1,267
1,296
1,175
Operating profit (US$ million)
92
51
49
Operating profit to sales (%)
7.3
3.9
4.2
EBITDA ** (US$ million) *
187
151
146
EBITDA ** to sales (%) *
14.8
11.7
12.4
Operating profit to average net assets (%) *
9.4
5.2
4.8
EPS (US cents)
13
18
–
Return on average equity (ROE) (%) *
8.4
11.7
–
Net debt (US$ million) *
2,278
2,113
2,072
Net debt to total capitalisation (%) *
46.7
46.4
42.3
* Refer to Supplemental Information for the definition of the term.
** The EBITDA calculation has been amended. Refer to note 2 additional information in Supplemental Information for the effects
of the change.
summary
The group operating result improved in the quarter compared to the prior quarter and the equivalent
quarter last year. The Forest Products business, supported by strong pulp prices and a slightly weaker
currency, generated most of the operating profit. The Fine Paper business, while profitable, has not yet
achieved acceptable margins and returns.
Demand for coated fine paper globally was firm in the quarter; however, apparent consumption growth in
Europe and North America was lower than in recent periods.
Raw material input costs remain high. There has been some moderation in North America and Southern
Africa but upward pressure continues in Europe.
Coated fine paper prices in Europe have drifted downwards for the last 5 years and despite concerted
reductions in our operating costs, the combination of higher prices for our inputs and lower selling prices
has depressed margins. To counteract this we implemented a price increase on stock orders in Europe in
December and continue to implement increases on all other graphic paper business in January.
Group sales were approximately US$1.3 billion for the quarter, an increase of 7.8% compared to a year
ago as a result of a 3% increase in sales of pulp and paper, improved pricing and currency movement
which resulted in an increase in the European business’ sales when reported in US Dollars.
The operating profit for the quarter increased to US$92 million, largely as a result of the contribution of the
Forest Products business. The plantation fair value price adjustment for the quarter was a pre-tax gain of
US$29 million compared to US$10 million a year ago.
Finance costs for the quarter were US$37 million, which was at the same level as the prior quarter but up
US$10 million year on year as a result of higher interest paid (higher debt and floating rates) and the change
in fair value of financial instruments.
The high effective tax rate is a result of unrelieved tax losses in certain countries; in addition taxation for the
quarter included Secondary Tax on Companies of US$8.5 million which relates to the dividend declared
during the quarter.
The profit after tax for the quarter was US$30 million compared to a break-even in the equivalent quarter
last year. Earnings per share were 13 US cents for the quarter.
comment
sappi limited – first quarter page 2
sappi limited – first quarter page 3
cash flow and debt
Cash generated by operations was US$152 million for the quarter, approximately 25% up on a year ago.
We recorded a US$39 million increase in working capital which was significantly less than the US$80
million increase last year.
Capital expenditure increased to US$138 million for the quarter. We had a number of upfront payments in
respect of the Saiccor expansion in the quarter. We aim to manage capital expenditure over the full year
to avoid a material increase in debt over the year.
Net debt increased by US$165 million to approximately US$2.3 billion during the quarter of which
US$73 million was a result of currency translations. Net debt to total capitalisation increased to 46.7% in
December from 46.4% in September.
operating review for the quarter
Sappi Fine Paper
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
%
Sept 2006
US$ million
US$ million
change
US$ million
Sales
1,044
943
10.7
1,029
Operating profit (loss)
16
15
6.7
(40)
Operating profit (loss) to sales (%)
1.5
1.6
–
(3.9)
EBITDA
94
95
(1.1)
43
EBITDA to sales (%)
9.0
10.1
–
4.2
RONOA pa (%)
2.1
1.9
–
(5.2)
Each of the Fine Paper businesses generated operating profits during the quarter; however, the returns are
still far from acceptable. Our focus is on reducing unit costs and achieving appropriate price increases.
Europe
Quarter
Quarter
ended
ended
%
%
Dec 2006
Dec 2005
change
change
Sept 2006
US$ million
US$ million
(US$)
(Euro)
US$ million
Sales
587
520
12.9
4.1
569
Operating profit
13
14
(7.1)
(14.4)
(48)
Operating profit to sales (%)
2.2
2.7
–
–
(8.4)
EBITDA
61
61
–
(7.8)
1
EBITDA to sales (%)
10.4
11.7
–
–
0.2
RONOA pa (%)
2.8
3.2
–
–
(10.8)
Our sales volume for the quarter grew approximately 6% year on year. The average price achieved in Euro
terms was only marginally up on the prior quarter despite the December stock price increase as a result
of product and geographic mix. The Euro strengthened 8.5% relative to the equivalent period last year.
The upward pressure on many of our input costs has continued in the quarter. In particular pulpwood costs
have continued to rise sharply as a result of demand for wood for use as subsidised “green” fuel.
Higher prices for purchased pulp had an impact of US$7 million on operating profit for the quarter
compared to the equivalent quarter last year. (This is a regional impact as the group as a whole is a net
seller of pulp.)
North America
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
%
Sept 2006
US$ million
US$ million
change
US$ million
Sales
374
345
8.4
373
Operating profit
2
1
100
7
Operating profit to sales (%)
0.5
0.3
–
1.9
EBITDA
28
31
(9.7)
37
EBITDA to sales (%)
7.5
9.0
–
9.9
RONOA pa (%)
0.7
0.3
–
2.5
The volume of paper sold increased by approximately 5% for the quarter. In addition we achieved strong
growth in pulp sales compared to a year ago, resulting in an overall increase of 8%.
Market conditions remain very competitive with continued pressure on prices. Average prices achieved
were marginally up compared to a year earlier.
Although input costs remain high, we have achieved reductions in wood, energy and certain other input
costs.
operating review for the quarter (continued)
sappi limited – first quarter page 4
Fine Paper South Africa
Quarter
Quarter
ended
ended
%
%
Dec 2006
Dec 2005
change
change
Sept 2006
US$ million
US$ million
(US$)
(Rand)
US$ million
Sales
83
78
6.4
20.4
87
Operating profit
1
–
–
–
1
Operating profit to sales (%)
1.2
–
–
–
1.1
EBITDA
5
3
66.7
88.5
5
EBITDA to sales (%)
6.0
3.8
–
–
5.7
RONOA pa (%)
2.5
–
–
–
2.5
The business had strong demand for its products and sales volumes for the quarter increased 10% year
on year. Average prices achieved in Rand terms have increased over the last year partly due to the weaker
Rand.
Margins remain under pressure as a result of high input costs, particularly purchased pulp.
Forest Products
Quarter
Quarter
ended
ended
%
%
Dec 2006
Dec 2005
change
change
Sept 2006
US$ million
US$ million
(US$)
(Rand)
US$ million
Sales
223
232
(3.9)
8.8
267
Operating profit
78
37
110.8
138.7
85
Operating profit to sales (%)
35.0
15.9
–
–
31.8
EBITDA
95
53
79.2
102.9
102
EBITDA to sales (%)
42.6
22.8
–
–
38.2
RONOA pa (%)
23.4
10.9
–
–
26.4
Plantation fair value gain (loss)
29
10
–
–
(10)
The forest products business had a strong performance despite the lower sales volume compared to the
equivalent quarter last year. Part of the shortfall in volume is the result of timing of export shipments relative
to the period end and lower sales by the Kraft business. We expect to catch up some volume in the next
quarter. The strong pulp prices and weaker currency contributed to the operating profit. Operating profit
also included US$29 million of plantation fair value price adjustment compared to US$10 million a year ago.
The manufacturing performance of the Kraft business has improved and has considerable scope for further
gains. Usutu Mill continued to perform well during the quarter.
Demand for chemical cellulose remains strong and Saiccor continues to perform well. Good progress has
been made on the expansion at Saiccor Mill; however, there has been pressure on civil construction costs
because of high demand in the South African construction industry.
sappi limited – first quarter page 5
directors
Klaas de Kluis retired as a non-executive director of the group in December 2006 on reaching the
mandatory retirement age.
outlook
The industry continues to record high global operating rates for coated fine paper. The combination of
strong expected consumption growth, capacity closures and limited new capacity additions indicate that
operating rates should remain high.
We have implemented price increases in Europe which are essential to restore margins after 5 years of
declining coated fine paper prices and 2 years of input cost escalations.
Pulp prices continue to be strong.
We expect earnings in the next quarter to improve compared to this quarter (excluding unpredictable fair
value adjustments).
This report is unaudited.
On behalf of the Board
E van As
M R Thompson
Director
Director
1 February 2007
sappi limited
(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN Code: ZAE 000006284
operating review for the quarter (continued)
sappi limited – first quarter page 6
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 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,
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.
sappi limited – first quarter page 7
notes
sappi limited – first quarter page 8
financial results (unaudited)
for the quarter ended December 2006
sappi limited – first quarter page 9
group income statement
sappi limited – first quarter page 10
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
% change
Sales
1,267
1,175
7.8
Cost of sales
1,091
1,042
Gross profit
176
133
32.3
Selling, general and administrative expenses
88
83
88
50
Other operating (income) expenses
(4)
1
Operating profit
92
49
87.8
Net finance costs
37
27
Net paid
36
32
Capitalised
(1)
(1)
Net foreign exchange gains
(2)
(1)
Change in fair value of financial instruments
4
(3)
Profit before tax
55
22
150.0
Taxation – current
6
8
– deferred
19
14
Profit for the period
30
–
–
Basic earnings per share (US cents)
13
–
Weighted average number of shares in issue (millions)
227.0
225.9
Diluted earnings per share (US cents)
13
–
Weighted average number of shares on a fully diluted
basis (millions)
229.9
226.7
Note: Refer to notes to the group results (page 13) for Headline earnings and calculation thereof.
group balance sheet
Dec 2006
Sept 2006
US$ million
US$ million
ASSETS
Non-current assets
4,323
3,997
Property, plant and equipment
3,319
3,129
Plantations
607
520
Deferred taxation
79
74
Other non-current assets
318
274
Current assets
1,556
1,500
Inventories
764
699
Trade and other receivables
560
577
Cash and cash equivalents
232
224
Assets held for sale
21
20
Total assets
5,900
5,517
EQUITY AND LIABILITIES
Shareholders’ equity
Ordinary shareholders’ interest
1,467
1,386
Non-current liabilities
2,528
2,465
Interest-bearing borrowings
1,625
1,634
Deferred taxation
387
336
Other non-current liabilities
516
495
Current liabilities
1,905
1,666
Interest-bearing borrowings
818
694
Bank overdraft
67
9
Other current liabilities
841
862
Taxation payable
111
101
Shareholders for dividend
68
–
Total equity and liabilities
5,900
5,517
Number of shares in issue at balance sheet date (millions)
227.7
227.0
sappi limited – first quarter page 11
group cash flow statement
group statement of recognised income and
expense
expense
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
Operating profit
92
49
Depreciation, fellings and other amortisation
112
114
Other non-cash items (including impairment charges)
(52)
(41)
Cash generated by operations
152
122
Movement in working capital
(39)
(80)
Net finance costs
(46)
(45)
Taxation paid
(4)
(7)
Cash retained (utilised) from operating activities
63
(10)
Cash effects of investing activities
(155)
(74)
Cash utilised before financing activities
(92)
(84)
Cash effects of financing activities
94
94
Net movement in cash and cash equivalents
2
10
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
Pension fund asset not recognised
(2)
(1)
Valuation allowance against deferred tax asset on actuarial
losses recognised
(1)
–
Exchange differences on translation of foreign operations
113
(11)
Net expense recorded directly in equity
110
(12)
Profit for the period
30
–
Recognised income (expense) for the period
140
(12)
sappi limited – first quarter page 12
notes to the group results
sappi limited – first quarter page 13
1.
Basis of preparation
The condensed quarterly financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) including International Accounting Standard (IAS) 34 Interim Financial Reporting.
The accounting policies used in the preparation of the quarterly results are compliant with IFRS and
consistent with those used in the annual financial statements for September 2006. A recent accounting
interpretation IFRIC 4: Determining whether an arrangement contains a lease, is still being evaluated. No
changes to previous disclosures on application of this interpretation have been made. At this stage it is not
envisaged that the impact of any adjustment required will be material to the results of operations.
Reporting Standards (IFRS) including International Accounting Standard (IAS) 34 Interim Financial Reporting.
The accounting policies used in the preparation of the quarterly results are compliant with IFRS and
consistent with those used in the annual financial statements for September 2006. A recent accounting
interpretation IFRIC 4: Determining whether an arrangement contains a lease, is still being evaluated. No
changes to previous disclosures on application of this interpretation have been made. At this stage it is not
envisaged that the impact of any adjustment required will be material to the results of operations.
These results are unaudited.
2.
Reconciliation of movement in shareholders’ equity
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
Balance – beginning of year
1,386
1,589
Total recognised income (expense) for the period
140
(12)
Dividends declared
(68)
(68)
Transfers to participants of the share purchase trust
7
1
Share Based Payment Reserve
2
2
Balance – end of period
1,467
1,512
3.
Operating profit
Included in operating profit are the following non-cash items:
Depreciation of property, plant and equipment
95
97
95
97
Fair value adjustment on plantations (included in cost of sales)
Changes in volume
Fellings
17
17
Growth
(17)
(14)
–
3
Changes in fair value
(29)
(10)
(29)
(7)
4.
Headline earnings per share
Headline earnings per share (US cents) *
13
1
Weighted average number of shares in issue (millions)
227.0
225.9
Diluted headline earnings per share (US cents) *
13
1
Weighted average number of shares on fully diluted basis (millions)
229.9
226.7
Calculation of Headline earnings *
Profit for the period
Profit for the period
30
-
Write-off of assets
–
1
Impairment of property, plant and equipment
–
1
Headline earnings
30
2
* Headline earnings disclosure is a listings requirement by the JSE Limited.
notes to the group results (continued)
sappi limited – first quarter page 14
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
5.
Capital expenditure
Property, plant and equipment
138
72
Dec 2006
Sept 2006
US$ million
US$ million
6.
Capital commitments
Contracted but not provided
201
294
Approved but not contracted
340
255
541
549
7.
Contingent liabilities
Guarantees and suretyships
61
52
Other contingent liabilities
11
11
supplemental information
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 Limited to disclose headline earnings per share
NBSK – Northern Bleached Softwood Kraft pulp. One of the main varieties of market pulp, mainly produced
from spruce trees in Scandinavia, Canada and north eastern USA. The NBSK is a benchmark widely used in
pulp and paper industry for comparative purposes
* 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. Profit (loss) for the period 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)
* SG&A – selling, general and administrative expenses
* 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.
companies in our industry.
sappi limited – first quarter page 15
supplemental information
additional information
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
Profit for the period to EBITDA
(1)
reconciliation
Profit for the period
30
-
Net finance costs
37
27
Taxation – current
6
8
– deferred
19
14
Depreciation
95
97
EBITDA
(1) (2)
187
146
Dec 2006
Sept 2006
US$ million
US$ million
Net debt (US$ million)
(3)
2,278
2,113
Net debt to total capitalisation (%)
(3)
46.7
46.4
Net asset value per share (US$)
(3)
7.80
7.26
(1)
In connection with the U.S. 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. As a result our definition retains non-
trading profit/loss and minority interest as part of EBITDA. EBITDA represents earnings before interest (net finance costs),
taxation, depreciation and amortisation. Net finance costs includes: gross interest paid; interest received; interest capitalised;
net foreign exchange gains; and net fair value adjustments on interest rate financial instruments. See the Group income
statement for an explanation of the computation of net finance costs. We use EBITDA as an internal measure of performance
to benchmark and compare performance, both between our own operations and as against other companies. EBITDA is a
measure used by the group, together with measures of performance under IFRS and US GAAP, to compare the relative
performance of operations in planning, budgeting and reviewing the performances of various businesses. We believe EBITDA
is a useful and commonly used measure of financial performance in addition to net profit, operating profit and other profitability
measures under IFRS or US GAAP because it facilitates operating performance comparisons from period to period and
company to company. By eliminating potential differences in results of operations between periods or companies caused by
factors such as depreciation and amortization methods, historic cost and age of assets, financing and capital structures and
taxation positions or regimes, we believe EBITDA can provide a useful additional basis for comparing the current performance
of the underlying operations being evaluated. For these reasons, we believe EBITDA and 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 EBITDA differently, so making comparisons among companies on this basis should be done very carefully. EBITDA is
not a measure of performance under IFRS or US GAAP and should not be considered in isolation or construed as a substitute
for operating profit or net profit as an indicator of the company’s operations in accordance with IFRS or US GAAP.
Financial Measures”, we have reconciled EBITDA to net profit rather than operating profit. As a result our definition retains non-
trading profit/loss and minority interest as part of EBITDA. EBITDA represents earnings before interest (net finance costs),
taxation, depreciation and amortisation. Net finance costs includes: gross interest paid; interest received; interest capitalised;
net foreign exchange gains; and net fair value adjustments on interest rate financial instruments. See the Group income
statement for an explanation of the computation of net finance costs. We use EBITDA as an internal measure of performance
to benchmark and compare performance, both between our own operations and as against other companies. EBITDA is a
measure used by the group, together with measures of performance under IFRS and US GAAP, to compare the relative
performance of operations in planning, budgeting and reviewing the performances of various businesses. We believe EBITDA
is a useful and commonly used measure of financial performance in addition to net profit, operating profit and other profitability
measures under IFRS or US GAAP because it facilitates operating performance comparisons from period to period and
company to company. By eliminating potential differences in results of operations between periods or companies caused by
factors such as depreciation and amortization methods, historic cost and age of assets, financing and capital structures and
taxation positions or regimes, we believe EBITDA can provide a useful additional basis for comparing the current performance
of the underlying operations being evaluated. For these reasons, we believe EBITDA and 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 EBITDA differently, so making comparisons among companies on this basis should be done very carefully. EBITDA is
not a measure of performance under IFRS or US GAAP and should not be considered in isolation or construed as a substitute
for operating profit or net profit as an indicator of the company’s operations in accordance with IFRS or US GAAP.
(2)
The EBITDA calculation has been amended to eliminate the adjustment for fellings which previously resulted in fellings being
added back in the calculation as part of amortisation. Given the current accounting treatment of plantations, management has
concluded that eliminating such an adjustment would be more appropriate in determining the EBITDA performance measure in
future both for internal and reporting purposes. Prior year figures have been recalculated for comparison purposes as follows:
December 2005 quarter: decrease by US$17 million; September 2006 quarter: decrease by US$19 million.
added back in the calculation as part of amortisation. Given the current accounting treatment of plantations, management has
concluded that eliminating such an adjustment would be more appropriate in determining the EBITDA performance measure in
future both for internal and reporting purposes. Prior year figures have been recalculated for comparison purposes as follows:
December 2005 quarter: decrease by US$17 million; September 2006 quarter: decrease by US$19 million.
(3)
Refer to page 15, Supplemental Information for the definition of the term.
sappi limited – first quarter page 16
supplemental information
regional information
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
Metric tons
Metric tons
(000’s)
(000’s)
% change
Sales volumes
Fine Paper –
North America
372
344
8.1
Europe
635
602
5.5
Southern Africa
87
79
10.1
Total
1,094
1,025
6.7
Forest Products – Pulp and paper operations
331
355
(6.8)
Forestry operations
271
376
(27.9)
Total
1,696
1,756
(3.4)
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
% change
Sales
Fine Paper –
North America
374
345
8.4
Europe
587
520
12.9
Southern Africa
83
78
6.4
Total
1,044
943
10.7
Forest Products – Pulp and paper operations
207
212
(2.4)
Forestry operations
16
20
(20.0)
Total
1,267
1,175
7.8
sappi limited – first quarter page 17
supplemental information
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
US$ million
US$ million
% change
Operating profit
Fine Paper –
North America
2
1
100.0
Europe
13
14
(7.1)
Southern Africa
1
-
-
Total
16
15
6.7
Forest Products
78
37
110.8
Corporate
(2)
(3)
-
Total
92
49
87.8
Earnings before interest, tax, depreciation
and amortisation charges *
Fine Paper –
North America
28
31
(9.7)
Europe
61
61
-
Southern Africa
5
3
66.7
Total
94
95
(1.1)
Forest Products
95
53
79.2
Corporate
(2)
(2)
-
Total
187
146
28.1
Net operating assets
Fine Paper –
North America
1,106
1,173
(5.7)
Europe
1,867
1,748
6.8
Southern Africa
170
171
(0.6)
Total
3,143
3,092
1.6
Forest Products
1,474
1,389
6.1
Corporate and other
(48)
(23)
-
Total
4,569
4,458
2.5
* The EBITDA calculation has been amended to eliminate the adjustment for fellings which previously resulted in fellings being
added back in the calculation as part of amortisation. Refer to note 2 Additional Information in Supplemental Information for the
effects of the change.
sappi limited – first quarter page 18
supplemental information
sappi limited – first quarter page 19
summary rand convenience translation
Quarter
Quarter
ended
ended
Dec 2006
Dec 2005
% change
Sales (ZAR million)
9,294
7,613
22.1
Operating profit (ZAR million)
675
317
112.9
Profit for the period (ZAR million)
220
–
–
EBITDA (ZAR million) *
1,372
946
45.0
Operating profit to sales (%)
7.3
4.2
EBITDA to sales (%) *
14.8
12.4
Operating profit to average net assets (%)
9.3
4.9
EPS (SA cents)
95
–
–
Net debt (ZAR million) *
15,963
13,111
Net debt to total capitalisation (%) *
46.7
42.3
Cash generated by operations (ZAR million)
1,115
790
41.1
Cash retained from operating activities (ZAR million)
462
(65)
–
Net movement in cash and cash equivalents (ZAR million)
15
65
–
*Refer to page 15, Supplemental Information for the definition of the term.
exchange rates
Dec
Sept
June
March
Dec
2006
2006
2006
2006
2005
Exchange rates:
Period end rate: US$ 1 = ZAR
7.0076
7.7738
7.1700
6.1655
6.3275
Average rate for the Quarter: US$ 1 = ZAR
7.3358
7.2475
6.4658
6.1858
6.4795
Average rate for the YTD: US$ 1 = ZAR
7.3358
6.6039
6.4031
6.3334
6.4795
Period end rate: EUR 1 = US$
1.3199
1.2672
1.2789
1.2119
1.1843
Average rate for the Quarter: EUR 1 = US$
1.2926
1.2744
1.2570
1.1983
1.1915
Average rate for the YTD: EUR 1 = US$
1.2926
1.2315
1.2191
1.1964
1.1915
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.
sappi ordinary shares
ADR price (NYSE TICKER: SPP)
n o t e : ( 1
A D R = 1 s a p p i s h a r e )
US$
18
16
14
12
10
8
6
4
2
0
ZAR
140
120
100
80
60
40
20
0
sappi limited – first quarter page 20
1 Apr
2004
1 Jul
2004
2004
1 Oct
2004
1 Jan
2005
1 Apr
2005
1 Jul
2005
2005
1 Oct
2005
1 Jan
2006
1 Apr
2006
1 Jul
2006
2006
1 Oct
2006
1 Jan
2007
29 Jan
2007
2007
1 Apr
2004
1 Jul
2004
2004
1 Oct
2004
1 Jan
2005
1 Apr
2005
1 Jul
2005
2005
1 Oct
2005
1 Jan
2006
1 Apr
2006
1 Jul
2006
2006
1 Oct
2006
1 Jan
2007
29 Jan
2007
2007
this report is available on the Sappi website
www.sappi.com
Other interested parties can obtain printed copies of this report from:
South Africa:
United States
United Kingdom:
Computershare Investor
ADR Depository:
Capita Registrars
Services 2004 Limited
The Bank of New York
The Registry
70 Marshall Street
Investor Relations
34 Beckenham Road
Johannesburg 2001
PO Box 11258
Beckenham, Kent
PO Box 61051
Church Street Station
BR3 4TU, DX 91750
Marshalltown 2107
New York, NY 10286-1258
Beckenham West
Tel +27 (0)11 370 5000
Tel +1 610 382 7836
Tel +44 (0)208 639 2157
Printed on Sappi Avalon Triple Green 250g/m
2
and 150g/m
2
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.
Date: February 6, 2007
SAPPI LIMITED,
By:
/s/ M. R. Thompson
Name:
M. R. Thompson
Title: Chief Financial Officer
Title: Chief Financial Officer