2007 Annual Report - Sappi

Our strategy
Our priority is to deliver significant improvements in profit, returns and cash
flow. We will pay particular attention to further developing customer relations
and getting the basics right in the business. We aim to build on our leading
position in the coated fine paper market and to explore opportunities
across the broad spectrum of coated paper to utilise our experience in
paper coating. We plan to grow our chemical cellulose business and to
maintain a high level of economic pulp integration for the group. We see
opportunities to grow our low cost fibre base. We will continue to invest
in all our businesses where we can produce acceptable returns.
Strategic
objectives
Achieve our RONA
target of greater than
12% and therefore
exceed our cost
of capital.
Strengthen our
leadership position
in our core businesses
through organic
growth and selective
acquisitions.
Progress in 2007
Although we improved, our fine paper business fell short of target.
Our primary focus in the year ahead will be restoring the fortunes of these businesses and to
continue the improving trend.
During the year, as a result of our efforts to increase prices we lost coated fine paper market
share in Europe. In North America our position strengthened following our brand relaunch,
introduction of new products and improved engagement with our customers.
We are confident that we will make significant further improvements by focusing on getting the
basics right; however, in our opinion, significant restructuring of the coated fine paper industry
is needed and we will look for ways to participate in value adding opportunities.
Good progress has been made on the Saiccor Mill expansion which is expected to start up in
the second calendar quarter of 2007.
Maintain a high level
of economic pulp
integration.
The group sells slightly more pulp than it purchases and is therefore economically hedged in
respect of pulp. Our European business, however, is a net purchaser of pulp and its margins
were squeezed during the year by high and increasing pulp prices. The Forest Products
business benefited from the high prices.
Progress has been made in identifying areas for low cost afforestation in Africa.
Maintain cost efficient
asset base and invest
to increase efficiency/
productivity.
Drive growth through
market focus and
innovation.
Input cost pressure and inflation were important factors in the year.
The European cost reduction programme introduced in 2005 has been successful in helping to
offset input cost and inflationary pressure. In North America the focus has been on reduction of
variable costs through product design, reduced usage of raw materials and process innovation.
The South African businesses were faced with significant input cost and wage inflation pressure.
During the year our fine paper marketing team designed and launched several new products
including Flo web and sheet, Lustro ® Offset Environmental (LOE) and Typek ® Recycled.
Since year end we have launched a major break-through coated fine paper – Tempo
– invented for printers to increase quality and reduce time and costs in printing.
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sappi limited | 07 | annual report