2012 Integrated report - Sappi

Defined benefit liabilities
US$ million 2012 2011
Liabilities of funded defined
benefit plans (1,862) (1,693)
Assets of funded defined benefit plans 1,689 1,559
Net deficit on funded plans (173) (134)
Liabilities of unfunded plans (337) (316)
Net balance sheet liability (510) (450)
Cash contributions to defined
benefit plans 58 69
Income statement charge for defined
benefit plans 37 28
Portion of cash contributions deemed
‘Catch-up’* 12 23
* Contributions paid over and above current service cost.
The liabilities of our funded plans increased by US$169 million
and from our unfunded plans by US$21 million compared with
last year mainly due to lower discount rates adopted at this year
end compared with last year end, in turn due to yields in bond
markets falling over the year.
Assets increased by US$130 million due to strong investment
returns in all asset classes over the year.
Since the increase in liabilities exceeded the growth in assets,
the overall net liability for defined benefit plans increased by
US$60 million to US$510 million at September 2012. For next
year we expect our cash contributions and the income statement
charge to be similar to the amount reflected in the table above.
Equity
Year-on-year, equity increased by US$47 million to
US$1,525 million as summarised below:
Equity reconciliation
US$ million 2012
Equity at September 2011 1,478
Profit for the year 104
Actuarial losses on pension funds (88)
Exchange rate differences on translation of non-Dollar
operations (60)
Recognition of previously unrecognised deferred
tax asset 1 101
Share based payments 12
Other (22)
Equity at September 2012 1,525
1. Relates to amounts recognised within other comprehensive income in
previous financial years.
Debt
Debt is a major source of funding for the group. In the
management of debt we focus on net debt, which is the sum of
current and non-current interest-bearing borrowings and bank
overdrafts, net of cash and cash equivalents.
Refinancing activities during financial 2012
Below we highlight the many refinancing activities completed
during the year.
> In April 2012, a new ZAR750 million bond was raised in South
Africa, in anticipation of repaying a maturing ZAR500 million
bond, which was duly repaid in June 2012. The remainder of
the funds were earmarked for other debt repayments in 2012.
After swapping the floating rate bond to a fixed rate, the
funding cost of this new facility is a fixed rate of 7.78% which
is now the lowest cost debt in the South African portfolio and
compares favourably to the maturing bond which had a
coupon of 12.13%.
More detail on the movement in equity can be found in the
statement of changes in equity in the financial statements.
Defined benefit pension and other benefit plans
Sources of credits and debits to the balance sheet liability
(US$ million)
Net pension liability
at start of year
(450)
Net actuarial loss for
the year to OCI
58
Employer
contributions
Net pension cost
for the year (37)
Net pension liability
(510)
at end of year
(600) (500) (400) (300) (200) (100) 0 100
(88)
7
Foreign currency
exchange effect
Supercalendering paper at Gratkorn Mill in Europe.
sappi Integrated Report 2012 61