2012 Integrated report - Sappi

Group overview continued
Q&A with Ralph Boëttger – chief executive officer continued
Q: With the large increase in capital spending on the
specialised cellulose projects, how do you expect to
meet your reduced debt targets?
A: Our businesses have always been strong cash generators.
With a sound business strategy, tight working capital and capital
expenditure management as well as a continued focus on cost
control and improved efficiencies they will continue to do so.
The increased capital expenditure during the next year will also
be offset to some extent by a reduction in cash interest costs of
approximately US$30 million per year as well as further cost
savings. We may also have additional sales of non-revenue
generating assets. We are confident that our debt targets are
realistic and attainable. During the next year we expect debt to be
slightly higher than where we ended 2012, but for net debt to end
the year essentially flat year-on-year. Once the conversion projects
are completed and running at design capacity, we aim to reduce
our Net Debt to EBITDA ratio to a range between 1.5 to 2 times.
Q: There appears to be growing political, social and
economic uncertainty in South Africa at the moment.
How are you dealing with these issues?
A: To date the effect on our South African operations has been
limited to disruptions to inbound and outbound logistics as a result
of the road transport strikes. The effect of these disruptions was
largely mitigated by actions we were able to implement, albeit at
some additional cost. It is critical that we continue to communicate
with our employees, unions, customers, suppliers and the
communities in which we operate. We have good relationships with
our stakeholders and we continue to listen and interact wherever
possible to address their concerns and to work together to unlock
potential new opportunities. We engage where appropriate with
relevant government departments on various aspects of our
business in South Africa. The investment in dissolving wood pulp
capacity at our Ngodwana and Cloquet Mills provides geographic
diversification of risk, which is important to our customers. Finally
our actions in the Southern African paper businesses to match
assets with market requirements, together with our Ngodwana
investment also places us in a position to offer more sustainable
work opportunities.
Q: Are you still confident that your strategy is sound, and
how do you see Sappi’s performance going forward?
A: Our strategy is relevant, clear and simple. It is to ensure that
we have a focused paper business with strong cash flows and
good profitability, to achieve profitable growth in specialised
cellulose and have a healthy balance sheet. The year ahead is
an important year for us and, at the same time, it is expected to
be a challenging year in terms of the economic environment. It is
important that we successfully complete the two specialised
cellulose projects, maintain our momentum of improved profitability
and contain our debt at the same time. Looking ahead I am
confident that we have put in place the right plans and that we
have highly motivated, committed and competent employees who
will enable us to deliver on our strategy. Through this strategy,
and as the world economy improves, I expect us to deliver good
returns and exciting growth in the near future.
Q: What is Sappi’s approach to sustainability and what do
you see as the key risks?
A: By understanding the environmental, social and financial
interactions that occur in our business on a daily basis, and through
the measurement and management of these interactions we can
improve the performance of the business, lessen any negative
impact on the world around us, generate value for our stakeholders
and offer a secure and rewarding workplace to our employees.
Sustainability is not merely about the reporting of statistics, but
the management of risks, whether by mitigation or positive action,
to secure long term profitability. These risks are dealt with in
more detail in our sustainability review elsewhere in this report,
and include our use of energy, water and fibre, the safety of our
employees, our impact in the communities where we operate
and how we deal with opportunities to grow the business.
Q: What is your main focus for the coming year?
A: 2013 is an important transitional year for us. We have achieved
much in the past two years in terms of reducing cost and
improving the margins in our paper businesses. In the coming
year the focus is on continuing that momentum but, most
importantly, on achieving the goals we set ourselves in regards
to our specialised cellulose expansion projects. Both projects are
progressing well and should start up on time. We need to ensure
this happens, that we supply the contracted volumes to our
customers, and that these volumes are of the consistent high
quality for which we are known.
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