2012 Integrated report - Sappi

Chief financial officer’s report
Section 1
Financial highlights
A key highlight during
the year was the
successful refinancing
of the vast majority of
the 2014 bonds.
During 2012 Sappi benefited from actions undertaken the
previous year to improve operational efficiency and cut costs.
This enabled us to deliver much stronger results for the year
and, importantly, a return to bottom-line profitability. We lifted
net profit to US$104 million from a loss of US$232 million
last year.
Trading conditions continued to be difficult, with both pricing
and volumes in our primary markets under pressure. Against
this background it was a significant achievement that
operating profit before special items of US$403 million was
at the same level as the prior year.
Steve Binnie – Chief financial officer
Financial highlights
2012 2011 % Change
Sales 6,347 7,286 (13)
Operating profit excluding
special items 403 404 –
EBITDA excluding
special items 772 821 (6)
Profit (loss) for the period 104 (232) n/a
Operating profit excluding
special items to sales % 6.3 5.5 n/a
Operating profit excluding
special items to capital
employed (ROCE) % 11.4 10.5 n/a
Net cash generated 127 163 (22)
Net debt 1,979 2,100 (6)
Earnings (loss) per share
(US cents per share) 20 (45) n/a
Our financial position has improved and net debt at year end
was reduced to US$1,979 million, with net debt to EBITDA
excluding special items at 2.6 times. This is a major step
towards our long term target of between 1.5 and 2.0 times
and a vast improvement from a recent high of 6 times in 2009.
A key highlight during the year was the successful refinancing
of the vast majority of the 2014 bonds through the issue of a
US$400 million bond due in 2017 and a US$300 million bond
due in 2019 in September 2012. €31 million of the 2014 bonds
remained outstanding and we are currently in the process of
repurchasing these bonds. The benefits from the transaction
began to be realised in the fourth quarter of financial year
2012. The annual interest charge is expected to decrease by
approximately US$45 million as a result, with the cash interest
charge reducing by approximately US$30 million. Additionally,
the improved maturity profile provides greater flexibility to
implement our strategic growth initiatives and we now have
no substantial debt maturities outside South Africa until 2017.
Last year, we announced two major projects to convert
existing facilities in South Africa and North America to produce
dissolving wood pulp. Both projects are progressing according
to schedule and we anticipate commencing production in the
third quarter of 2013. The combined capital cost of these
projects is expected to be approximately US$500 million.
US$156 million and US$16 million has been paid in 2012
and 2011 respectively. During the 2013 financial year our
operating profit will be negatively impacted by once-off costs
of approximately US$40 million associated with the start-up
phase of the conversions. We are excited about the prospects
for the enlarged Specialised Cellulose business and the
projects will start contributing to operating profit and cash
flows towards the latter part of the 2013 financial year.
sappi Integrated Report 2012 49