2012 Integrated report - Sappi

Chief financial officer’s report continued
Section 5
Balance sheet
Summarised balance sheet
US$ million 2012 2011
Property, plant and equipment 3,157 3,235
Plantations 555 580
Net working capital 511 409
Other assets 278 273
4,501 4,497
Net post-employment liabilities (510) (450)
Other liabilities (487) (469)
Employment of capital 3,504 3,578
Equity 1,525 1,478
Net debt 1,979 2,100
Capital employed 3,504 3,578
Property, plant and equipment
The cost, depreciation and impairments related to our property,
plant and equipment are set out in the table below.
We have 17 mills in seven countries capable of producing
approximately four million tons of pulp and six million tons of paper
products. For more information on our mills, their production
capacities and products, please refer to pages 36 and 41.
Book value of property, plant and equipment
2012 2011
Cost 9,375 9,531
Accumulated depreciation and impairments 6,218 6,296
Net book value 3,157 3,235
During 2012, capital expenditure for property, plant and
equipment was US$404 million, including US$190 million for the
dissolving pulp projects. We depreciated fixed assets by a further
US$367 million. In addition, we processed net asset impairments
of US$10 million, principally related to the curtailing of certain
production lines in South Africa.
Currency translation differences reduced the net book value
by US$86 million compared with 2011.
The capacity replacement value of the property, plant and
equipment for insurance purposes has been assessed at
approximately US$23 billion.
Plantations
We regard ownership of our plantations in Southern Africa as
a key strategic resource which gives us access to low cost fibre
to feed our pulp production. We currently have access to
approximately 400,000 hectares of plantable land of which
approximately 378,000 hectares are planted with pine and
eucalyptus. Our plantations provide approximately 70% of
the wood requirements for our Southern Africa mills.
The reduction in the carrying value of plantations in fiscal 2012
was mainly due to the weaker South African Rand versus the
US Dollar at year end when translating our reporting currency.
In terms of the relevant accounting standard, we value these
plantations on our balance sheet at fair value less the estimated
cost of delivery, including harvesting and transport costs.
In notes 2.3.5 and 10 to the financial statements considerable
detail is provided about our accounting policies for plantations.
Working capital
The component parts of our working capital at the 2012 and
2011 financial year ends are shown in the table below:
Net working capital
2012 2011
Inventories 726 750
Trade and other receivables 807 831
Trade and other payables (1,022) (1,172)
Net working capital 511 409
Optimising working capital remains a key focus area for us and is
incorporated into the management incentive schemes for all
businesses. We benchmark our working capital ratios against
those of industry peers.
The working capital investment is seasonal and typically peaks
during quarter 3 of the financial year. Net working capital
increased by US$102 million during fiscal 2012. The material
reasons for the change are the following:
> Inventories decreased by US$24 million reflecting lower sales
volumes across all three regions;
> Receivables continue to be tightly managed and reduced by
US$24 million. This was achieved despite a sundry debtor of
US$42 million for the sale of the Jiangxi Joint Venture. The
quality of credit management is demonstrated by a bad debt
charge of US$11 million for 2012, only 0.2% of sales; and
> Payables decreased by US$150 million, largely as a result
of the utilisation of restructuring provisions that existed at
September 2011 for the closure of the Biberist Mill and
the rationalisation of regional management structures.
Post-employment liabilities
We operate various defined benefit, post-retirement, medical aid
and other types of funds in the various countries in which
we operate. A summary of defined benefit assets and liabilities
is as follows:
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