JOHANNESBURG, Feb. 6, 2013 /PRNewswire/ --
Financial summary for the quarter
- Profit for the period US$17
million (Q1 2012 US$45
million)
- EPS 3 US cents (Q1 2012 9 US cents)
- Operating profit excluding special items US$73 million (Q1 2012 US$100 million)
- Net finance costs of US$42
million (Q1 2012 US$54
million)
- Net debt US$2,095 million (Q1
2012 US$2,175 million)
(Logo: http://photos.prnewswire.com/prnh/20110728/MM43821LOGO
)
Commenting on the result, Sappi (NYSE: SPP, JSE:
SAP) Chief Executive Officer Ralph
Boettger said:
"2013 is an important transitional
year as specialised cellulose capacity is expanded. The group
performance for the quarter was impacted by generally lower selling
prices for pulp and paper. The North American business
performed well as a result of higher coated paper sales volumes
despite lower average sales prices. Conversely, we experienced a
slightly weaker than expected performance in our Southern African
and European businesses. While Europe remains challenging and
conditions worsened during the quarter, Sappi's operating and sales
achievements were ahead of the market. Lower pricing across all
graphic paper grades led to lower profitability for the European
paper business. In South
Africa, the impact of lower dissolving wood pulp prices
compared to the equivalent quarter in the prior year combined with
the three-week road transport strike negatively affected the
result, however volume and pricing momentum picked up towards the
end of the quarter.
"This financial year is an important transitional year for the
group as we consolidate the three pillars of our strategy, more
specifically as we expand our Specialised Cellulose business,
continue to optimise our paper businesses and deleverage our
balance sheet. The conversion projects at the Ngodwana and the
Cloquet Mills are on schedule for start-up in the third quarter of
the year.
"Given prevailing market conditions, we expect the second
quarter operating profit excluding special items to be below that
of the first quarter. This is due in large part to the extended
planned maintenance shut at our Ngodwana Mill for the Specialised
Cellulose conversion project as well as continued challenging
market conditions in particular in the European paper
business.
"We expect the operating profit in the second half of the
financial year to be stronger than in the first half."
|
Quarter
ended
|
|
Dec
2012
|
Dec 2011
|
Sept 2012
|
Key
figures: (US$ million)
|
|
|
|
Sales
|
1,475
|
1,585
|
1,585
|
Operating profit
|
70
|
107
|
160
|
Special
items – losses (gains) *
|
3
|
(7)
|
(42)
|
Operating
profit excluding special items*
|
73
|
100
|
118
|
EBITDA
excluding special items *
|
162
|
194
|
211
|
Profit for
the period
|
17
|
45
|
107
|
Basic
earnings per share (US cents)
|
3
|
9
|
21
|
Net
debt*
|
2,095
|
2,175
|
1,979
|
|
|
|
|
Key
ratios: (%)
|
|
|
|
Operating profit to sales
|
4.8
|
6.8
|
10.1
|
Operating
profit excluding special items to sales
|
5.0
|
6.3
|
7.4
|
Operating
profit excluding special items to capital employed
(ROCE)
|
8.2
|
11.0
|
13.0
|
EBITDA
excluding special items to sales
|
11.0
|
12.2
|
13.3
|
Return on
average equity (ROE)*
|
4.5
|
12.0
|
27.8
|
Net debt
to total capitalisation*
|
58.1
|
58.9
|
56.5
|
Net asset
value per share (US cents)
|
290
|
291
|
293
|
|
* Refer to the
published results for details on special items, the definition of
the terms and the reconciliation of
EBITDA
excluding special items to profit/loss for the
period.
|
The
table above has not been audited or reviewed.
|
The quarter under review
Operating profit excluding
special items of US$73 million was in
line with our expectations given generally lower selling prices for
pulp and paper. This compares to an operating profit excluding
special items of US$100 million in
the equivalent quarter last year and US$118
million in the quarter ended September 2012.
Our North American coated paper business performed well, with
increased coated paper sales volumes partially offset by lower
average sales prices which were 3% when compared to the equivalent
quarter last year. Release paper sales volumes were markedly higher
than in both the equivalent quarter last year, and the prior
quarter. Average sales prices, whilst stable compared to the
prior quarter were below those of the equivalent quarter last year.
The North American business was however negatively impacted by
lower pulp prices, which were 5% lower than the equivalent quarter
last year, and 3% lower than the prior quarter. Sales volumes were
also lower in both comparative periods, partly due to a planned
increase in pulp inventories at the Cloquet mill ahead of the
conversion to dissolving wood pulp.
Despite tough market conditions in Europe during the quarter and depressed
industry volumes year-on-year, in the case of mechanical coated
paper by as much as 7%, the European paper business achieved sales
volumes for the quarter equal to the equivalent quarter in the
prior year. During the quarter we experienced strong
downward pressure on pricing for all graphic paper grades, and
average graphic paper sales prices were 2% lower than in the
equivalent quarter last year. The coated specialities business
continues to perform well, with increased sales volumes and stable
to increasing price movements compared with the equivalent quarter
last year.
The Southern African business posted similar results to the
prior quarter despite the impact of the three-week road transport
strike which spilled over into the first quarter. However, compared
with the equivalent quarter last year, it was a weaker quarter due
to lower sales volumes, lower average prices in the Specialised
Cellulose business and higher variable costs. The Specialised
Cellulose business generated an EBITDA excluding special items of
ZAR351 million, representing an
EBITDA excluding special items margin of 28%. The Southern African
paper business further improved their performance, compared both to
the equivalent quarter last year and the prior quarter. While
sales volumes were lower predominantly due to the restructuring of
the business and resultant machine closures, sales prices were
higher for both local and export sales.
There was a strong focus on cost containment across the
group. Variable costs in Europe and North
America were 2% and 4% lower respectively, than the
equivalent quarter last year. In South
Africa the weaker Rand/US Dollar exchange rate put pressure
on input costs, particularly purchased wood and pulp.
Our major input costs such as energy, wood and chemicals were
generally lower than in the equivalent quarter last year, with the
exception of the Southern African business. NBSK pulp prices, to
which most of our paper pulp and dissolving wood pulp sales are
linked, increased during the quarter from the recent lows reached
at the end of September 2012. Average NBSK prices were
essentially flat compared to the prior quarter and were
approximately US$90 per ton lower
than in the equivalent quarter last year. However, hardwood pulp
prices were significantly higher than the equivalent quarter last
year, which negatively affected costs in our European operations as
they are significant buyers of hardwood pulp.
Sappi continues to benefit from the refinancing of debt which
was completed over the past year as well as the reduction in gross
debt. This has lowered the group's finance costs from US$54 million to US$42 million when compared to
the equivalent quarter last year.
Earnings per share for the quarter was 3 US cents (including a
charge of 1 US cent in respect of special items) compared with 9 US
cents (including a gain of 2 US cents in respect of special items)
in the equivalent quarter last year.
Net cash utilised for the quarter was US$102 million, an improvement from the same
quarter last year. Capital expenditure in the quarter
increased to US$97 million compared
to US$75 million a year ago,
reflecting the continued expenditure on the dissolving wood pulp
projects.
Net debt of US$2,095 million is
down from US$2,175 million in
December 2011, but up from
US$1,979 million in the quarter ended
September 2012 as a result of the
seasonal increase in cash utilisation.
Liquidity remains strong with cash on hand of US$504 million and the €350 million (US$463 million) available from the undrawn
committed revolving credit facility at quarter end.
Outlook
Financial year 2013 is an important
transitional year for the group as we expand our Specialised
Cellulose business and continue to optimise our paper
businesses.
Market conditions for the paper business, particularly in
Europe, are expected to remain
challenging for the remainder of the fiscal year, particularly with
regards to pricing and input costs. Pulp prices, a major input cost
for our European business in particular, have increased since the
end of the quarter. Conversely, paper pulp and dissolving
wood pulp sales from our North American and Southern African
operations should benefit from these higher pulp prices. Overall
the group benefits from higher pulp prices as a result of the
higher margins in the North American and Southern African
businesses.
Price increases were announced for coated woodfree paper in
Europe effective from 1 January
2013. The impact of these increases is expected to gradually
come though over the coming months and be fully in place during the
course of the third financial quarter. Prices for coated
mechanical paper decreased in January, and are unlikely to recover
before July.
The Specialised Cellulose business continues to sell all
available production volumes. The Specialised Cellulose
expansion projects at both the Ngodwana and Cloquet mills proceed
on schedule for start-up in the third financial quarter. The
Ngodwana mill will take an extended planned annual maintenance shut
during the second financial quarter due to the conversion
project. We expect that this will negatively impact the
quarter operating profit by approximately US$ 20 million.
As previously indicated, as a result of the capex spend on the
dissolving wood pulp projects we expect net debt to increase from
the September 2012 level during the
2013 fiscal year, and to reduce again post the completion of the
projects.
Given prevailing market conditions, we expect the second quarter
operating profit excluding special items to be below that of the
first quarter for the reasons described above. However, we
expect the operating profit in the second half of the financial
year to be stronger than in the first half.
The full results announcement is available at
www.sappi.com
There will be a conference call to which investors are invited.
Full details are available at www.sappi.com using the links
Investor Info; Investor Calendar; 1Q13 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.
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. You should not rely on forward-looking statements
because they involve known and unknown risks, uncertainties and
other factors which are in some cases beyond our control and may
cause our actual results, performance or achievements to differ
materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking
statements (and from past results, performance or achievements).
Certain factors that may cause such differences include but are not
limited to:
- the highly cyclical nature of the pulp and paper industry (and
the factors that contribute to such cyclicality, such as levels of
demand, production capacity, production, input costs including raw
material, energy and employee costs, and pricing);
- the impact on our business of the global economic
downturn;
- unanticipated production disruptions (including as a result of
planned or unexpected power outages);
- changes in environmental, tax and other laws and
regulations;
- adverse changes in the markets for our products;
- the emergence of new technologies and changes in consumer
trends including increased preferences for digital media;
- consequences of our leverage, including as a result of adverse
changes in credit markets that affect our ability to raise capital
when needed;
- adverse changes in the political situation and economy in the
countries in which we operate or the effect of governmental efforts
to address present or future economic or social problems;
- the impact of restructurings, investments, acquisitions,
dispositions and other strategic initiatives (including related
financing), any delays, unexpected costs or other problems
experienced in connection with dispositions or with integrating
acquisitions or implementing restructuring or strategic initiatives
(including our announced dissolving wood pulp conversion projects),
and achieving expected savings and synergies; and
- currency fluctuations.
We undertake 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.
Issued by
Brunswick
on behalf of Sappi Limited
Tel + 27 (0) 11 502 7300
For further information
Andre F Oberholzer
Group Head Corporate Affairs
Sappi Limited
Tel +27 (0)11 407 8044
Mobile +27 (0)83 235 2973
Andre.oberholzer@sappi.com
Graeme Wild
Group Head Investor Relations and Sustainability
Sappi Limited
Tel +27 (0)11 407 8391
Mobile +27 (0)83 320 8624
Graeme.wild@sappi.com
SOURCE Sappi Limited