2012 Integrated report - Sappi

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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. 14
Focus on product development Product development ensures that Sappi remains relevant to its existing customers and can attract and develop new customers. As customer requirements have changed, so too has Sappi’s product portfolio. The introduction of digital printing is one such example and customer requirements for improved surfaces for packaging printing is another. Sappi Fine Paper Europe’s Jaz Silk digital paper was recently nominated for a global PPI Award from RISI, the leading global information provider to the industry, and its Fusion premium white topliner designed for lamination onto corrugated board received the PPI Award for advanced innovation in speciality papers. Fusion is especially attractive for brand owners requiring high shelf impact for applications from displays to packaging for consumer electronics, bag in box and pet food. sappi Integrated Report 2012 15
Page 1 and 2: Sappi Group (Sappi Limited) INTEGRA
Page 4: About this report Introduction Our
Page 7 and 8: 2012 was a year that positioned us
Page 9 and 10: global Sales by source 2012: US$6,3
Page 11 and 12: Non-financial highlights Specific p
Page 13 and 14: performance the region as a whole.
Page 15 and 16: The restructuring of our paper oper
Page 17: Group overview continued Q&A with R
Page 21 and 22: 4 electricity steam black liquor pu
Page 23 and 24: commitment Europe Our European empl
Page 25 and 26: iodiversity Sustainable fibre suppl
Page 27 and 28: Exciter value delivery was US$23.9
Page 29 and 30: market leaders > Print is particula
Page 31 and 32: Focus on innovation Knowledge, insi
Page 33 and 34: Pulp Share of sales paper pulp + di
Page 35 and 36: governance Deenadayalen (Len) Konar
Page 37 and 38: guidance Executive management Mark
Page 39 and 40: Review of operations Sappi Fine Pap
Page 41 and 42: streamlined The closure of the Bibe
Page 43 and 44: Focus on skills development Sappi c
Page 45 and 46: accelerate Capacity (’000) Divisi
Page 47 and 48: progress The year ahead The demand
Page 49 and 50: US$ million September 2012 Septembe
Page 51 and 52: Share statistics 2012 2011 2010 200
Page 53 and 54: Chief financial officer’s report
Page 55 and 56: positive Section 2 Financial perfor
Page 57 and 58: improvement Operating profit exclud
Page 59 and 60: cost reduction Taxation The tax exp
Page 61 and 62: service Sappi Fine Paper North Amer
Page 63 and 64: priority Section 4 Cash flow In the
Page 65 and 66: Defined benefit liabilities US$ mil
Page 67 and 68: Group debt profile We show the majo
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performance Section 6 Share price p
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Governance and compensation Corpora
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encourage Audit committee The audit
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Group IT steering committee The Gro
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During 2012 a board committee was e
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Governance element Principle Summar
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External assurance providers Report
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Principle Chapter 7 - Internal audi
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Stakeholder engagement report Sappi
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Compensation report The two large s
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strategic The primary components of
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Component Purpose Characteristics V
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competitive The policy on fatalitie
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empower Service contracts Mr Boëtt
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The dissolving wood pulp capacity c
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Focus on local communities Our busi
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Directors’ approval The directors
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Audit committee report for the year
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Directors’ report for the year en
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Group income statements for the yea
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Group statements of cash flows for
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Group income statements in Rands (c
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Group statements of cash flows in R
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Notes to the group annual financial
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Annexure A - Investments at Septemb
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Glossary market pulp - pulp produce
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Glossary net operating assets - tot
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Notice to shareholders “Resolved
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Notice to shareholders “Resolved
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Notice to shareholders Annexure to
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Notice to shareholders The MOI prov
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Shareholder’s diary Annual genera
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Notes to proxy The form of proxy mu
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Inspired to co-create We operate wi
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2012 Integrated report - Sappi

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