2012 Integrated report - Sappi

9. Property, plant and equipment continued
September 2011
Sappi Fine Paper Europe
Biberist Mill. In March 2011, Sappi announced the potential closure of its Biberist Mill in Switzerland. The mill ceased production
during August 2011. The mill’s order book was transferred to the other Sappi European mills. An impairment charge of US$57 million
was recorded against plant and equipment for that year. The remaining fixed assets, comprising land and buildings, were sold for
US$56 million in fiscal 2012.
Sappi Southern Africa
Usutu Mill. Usutu Mill ceased operations at the end of January 2010, and the pulp mill was permanently closed. The mill’s remaining
property, plant and equipment which had already been substantially impaired in previous years, was fully impaired in fiscal 2011
resulting in a charge of US$9 million being recorded in that fiscal year. Sappi continues its forestry operations in Swaziland.
Adamas Mill. In May 2011, we announced the potential closure of Adamas Mill. The mill was closed in August 2011 and the more
profitable grades were transferred to Enstra Mill and Stanger Mill. The plant and equipment other than land and buildings was impaired
by US$10 million. The land and buildings were sold for US$5 million in fiscal 2012.
Sappi Paper and Paper Packaging Operations. A review of the paper and paper packaging operations completed in the fourth fiscal
quarter of 2011, indicated that the production of certain paper and paper packaging products would have to be curtailed. The curtailment
of the production of these products resulted in an impairment charge of US$49 million being recorded in that year.
US$ million 2012 2011
10. Plantations
Fair value of plantations at beginning of year 580 687
Gains arising from growth 83 81
Fire, hazardous weather and other damages (4) –
Loss arising from fair value price changes (15) (16)
Harvesting – agriculture produce (fellings) (73) (82)
Disposals (1) –
Translation difference (15) (90)
Fair value of plantations at end of year 555 580
Sappi manages the establishment, maintenance and harvesting of its plantations on a compartmentalised basis. These plantations are
comprised of pulpwood and sawlogs and are managed in such a way so as to ensure that the optimum fibre balance is supplied to its
paper and pulping operations in Southern Africa.
As the group manages its plantations on a rotational basis, the respective increases by means of growth are negated by depletions over
the rotation period for the group’s own production or sales.
The group owns plantations on land that the group owns, as well as on land that the group leases. The group discloses both of these as
directly managed plantations. With regard to indirectly managed plantations, the group has several different types of agreements with
many independent farmers. The terms of the agreements depend on the type and specific needs of the farmer and the areas planted and
range in duration from one to more than 20 years. In certain circumstances, the group provides loans to farmers that are disclosed as
accounts receivable on the group balance sheet (these loans are considered, individually and in aggregate, immaterial to the group). If the
group provides seedlings, silviculture and/or technical assistance, the costs are expensed when incurred by the group.
The group is exposed to financial risks arising from climatic changes, disease and other natural risks such as fire, flooding and storms as
well as human-induced losses arising from strikes, civil commotion and malicious damage. These risks are covered by an appropriate level
of insurance as determined by management. The plantations have an integrated management system that complies with FSC standards.
Changes in estimated prices, the discount rate, costs to sell and, volume and growth assumptions applied in the valuation of immature
timber may impact the calculated fair value as tabled below:
US$ million 2012 2011 2010
Market price changes
1% increase in market prices 4 4 2
1% decrease in market prices (4) (4) (2)
Discount rate (for immature timber)
1% increase in rate (4) (4) (5)
1% decrease in rate 4 4 5
Volume assumption
1% increase in estimate of volume 5 6 9
1% decrease in estimate of volume (5) (6) (9)
Costs to sell
1% increase in costs to sell (3) (3) (1)
1% decrease in costs to sell 3 3 1
Growth assumptions
1% increase in rate of growth 2 1 2
1% decrease in rate of growth (2) (1) (2)
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