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Press release from PR Newswire

Sappi Limited Announces Results for the Fourth Quarter and Year Ended September 2010

Monday, November 08, 2010

Sappi Limited Announces Results for the Fourth Quarter and Year Ended September 201003:05 EST Monday, November 08, 2010JOHANNESBURG, Nov. 8, 2010 /PRNewswire-FirstCall/ -- Financial Summary for the quarterOperating profit US$129 million (excluding special items); Q4 2009 US$38 million (excluding special items)EPS 16 US cents; Q4 2009 loss per share of 20 US centsEPS 9 US cents (excluding special items); Q4 2009 loss per share 2 US cents (excluding special items)Net cash generated US$238 million;  Q4 2009  US$225 millionCoated paper prices increasing; pulp prices highStrong DemandStrong Liquidity(Logo:  http://photos.prnewswire.com/prnh/20090826/NE66332LOGO )(Logo:  http://www.newscom.com/cgi-bin/prnh/20090826/NE66332LOGO )Quarter endedYear endedSept 2010June 2010Sept 2009Sept 2010Sept 2009Key figures: (US$ million)Sales 1,7741,6021,5536,5725,369Operating profit (loss)158154(129)341(73)Special items ? (gains) losses * (29)(79)167(2)106Operating profit excluding special items129753833933EBITDA excluding special items * 227176150752431Basic earnings (loss) per share (US Cents)1612(20)13(37)Net debt*2,2212,3372,5762,2212,576Key ratios: (%)Operating profit (loss) to sales8.99.6(8.3)5.2(1.4)Operating profit excluding special items to sales7.34.72.45.20.6Operating profit excluding special items to Capital Employed (ROCE)*12.67.33.38.00.8EBITDA excluding special items to sales12.811.09.711.48.0Return on average equity (ROE)*18.615.0(21.4)3.6(10.4)Net debt to total capitalisation*53.957.658.953.958.9* Refer to the published results for details on special items, the definition of the terms, the reconciliation of profit/loss for the period to EBITDA excluding special items.The table above has not been audited or reviewed.Commenting on the results, Sappi chief executive officer Ralph Boettger said:"The group had a much improved performance for the quarter and for the full year, achieving the highest quarterly operating profit excluding special items for a number of years and net cash generated of US$238 million. The performance of each of the businesses improved, particularly those of North America and Southern Africa which are net sellers of pulp and therefore benefited from high pulp prices."Demand conditions continued to improve gradually and almost all our mills ran at full capacity for the quarter. In Europe we implemented a price increase during September (the third since March) which has started to offset the effect of the substantial increase in pulp input costs experienced over the past year and to restore reasonable margins."Sales increased to US$1.8 billion, a 14% increase on sales in the equivalent quarter last year as a result of increased sales volumes and prices. For the full year sales were 22% higher than the prior year as a result of improved demand, favourable currency movements and the inclusion of the coated paper businesses acquired from M-real for the full year in 2010 compared to 9 months in 2009."Operating profit excluding special items was US$129 million for the quarter, a substantial improvement compared to US$38 million in the equivalent quarter last year and compared to US$75 million in the June 2010 quarter. Including special items, operating profit was US$158 million compared to a loss of US$129 million in the equivalent quarter last year. For the full year operating profit excluding special items was US$339 million compared to US$33 million in the prior year. While special items had an impact on quarterly results through the year the net effect for the full year was only US$2 million. Accordingly, operating profit including special items for the year was therefore similar at US$341 million compared to a loss of US$73 million last year. "Earnings per share for the quarter were 16 US cents (including a gain of 7 US cents in respect of special items including financing items), compared to a loss of 20 US cents in the equivalent quarter last year (which included a loss of 18 US cents in respect of special items including financing items). For the full year the group generated a net profit of US$66 million and earnings per share of 13 US cents (favourably impacted by 4 US cents of special items including financing items) compared to a net loss of US$177 million and a loss per share of 37 US cents (including a loss of 13 US cents of special items including financing items) last year."OutlookLooking forward, Boettger commented: "We expect continued gradual improvement in global economic conditions during the year ahead; however we remain cautious as a result of factors such as the volatility of exchange rates which could dampen growth."Against that background we expect demand for coated paper in our major markets to recover further during the year. We believe that input costs are likely to rise.  We intend to reduce our costs where possible and to grow revenue through sales volume, mix and higher price levels to achieve acceptable margins across the businesses."We expect continued strong demand and good price levels for chemical cellulose in the year ahead. The reorganisation of the paper business in Southern Africa is expected to help improve margins; however, the Rand is currently strong relative to the US dollar and remains volatile.  A strengthening Rand would be unfavourable for the performance of the Southern African business. "The extended outage at Somerset pulp mill in October 2010 will reduce the potential profitability of our North American business for the quarter but we expect the pulp mill to start ramping up production in early November and for energy costs to be reduced once the rebuilt energy complex reaches optimum efficiencies."With the expected improvement in the performance of our businesses and reduced uncertainty in financial markets we will gradually reduce our cash on hand with further repayment of debt.  This, together with our targeted continued reduction in net debt, will help reduce finance costs in the year ahead. "In our first financial quarter we expect the group's operating profit (excluding special items) to continue the improving trend relative to the equivalent quarter last year."ENDSThe full results announcement is available at www.sappi.com There will be a conference call to which investors are invited. Full details are available on www.sappi.com using the links Investor Info; Investor Calendar; 4Q10 Financial ResultsForward-looking statementsCertain 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. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and company plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results). Such risks, uncertainties and factors include, but are not limited to, the impact of the global economic downturn, the highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production, input costs including raw material, energy and employee costs, and pricing), adverse changes in the markets for the group's products, consequences of substantial leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital when needed, changing regulatory requirements, possible early termination of alternative fuel tax credits, unanticipated production disruptions (including as a result of planned or unexpected power outages), economic and political conditions in international markets, the impact of investments, acquisitions and dispositions (including related financing), any delays, unexpected costs or other problems experienced with integrating acquisitions and achieving expected savings and synergies and currency fluctuations. 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.SOURCE Sappi LimitedFor further information: Brunswick South Africa on behalf of Sappi Limited, + 27 (0) 11 502 7300, or Robert Hope, Group Head Strategic Development, Sappi Limited, +27 (0) 11 407 8492, Robert.Hope@sappi.com, or Andre F Oberholzer, Group Head Corporate Affairs, Sappi Limited, +27 (0) 11 407 8044, Mobile +27 (0) 83 235 2973, Andre.Oberholzer@sappi.com