2007 Annual Report - Sappi

Directors’ report continued
for the year ended September 2007
Financing
Within the framework of the domestic South African mediumterm
note programme established by Sappi during the 2006
financial year, a second ZAR1 billion was raised in September
2007 maturing in 4 years. The proceeds were applied to reduce
short-term debt and to fund the Saiccor expansion. As a
consequence, the average tenure of the South African debt
increased to 5.3 years.
Of the EUR600 million 5 year revolving credit facility raised in
2005, EUR500 million remains unutilised and is considered as
a strategic back-up line.
There have been no changes on the group’s other long-term
debt. Covenants on all international term debt are identical and
long-term debt is supported by a Sappi Limited guarantee.
At the end of the financial year, Sappi’s long-term debt had an
average time to maturity of 6.6 years.
In the financial year, Sappi concluded no further interest rate
swaps and, at year end, the ratio of gross debt at fixed and
floating interest rates was 45:55.
Dividends
The directors have declared a dividend (number 84) of
32 US cents per share (2006: 30 US cents) for the year ended
September 2007. The record date for the dividend is
04 January 2008 and payment will be made on 08 January 2008.
The Sappi Limited Share Incentive Trust
and the Sappi Limited Performance Share
Incentive Plan
Sappi has in place two share-based incentive programmes. The
first is the Sappi Limited Share Incentive Trust which was
approved by shareholders in March 1997, and which has been
amended in certain respects from time to time. The second is
the Sappi Limited Performance Share Incentive Plan which was
approved by shareholders in 2005.
In approving the Sappi Limited Performance Share Incentive Plan,
shareholders fixed the maximum number of shares which may be
allocated in aggregate to the Sappi Limited Share Incentive Trust
and the Sappi Limited Performance Share Incentive Plan at
19 million shares (equivalent to 7.9% of the shares currently in
issue). See note 30 for further details.
Borrowing facilities
The group’s gross borrowings at September 2007 amounted to
US$2.6 billion (September 2006: US$2.3 billion). The company’s
Articles of Association allow net borrowings of up to
US$5.85 billion. Details of the non-current term borrowings are
set out in note 21 of the group annual financial statements.
Insurance
The group has an active programme of risk management in
each of its geographical operating regions to address and to
reduce exposure to property damage and business interruption.
All production and distribution units are subjected to regular risk
assessments by external risk engineering consultants, the
results of which receive the attention of senior management.
The risk mitigation programmes are co-ordinated at group level
in order to achieve a harmonisation of methods. Work on
improved enterprise risk management is on-going and aims
to lower the risk of incurring losses from uncontrolled
incidents. Further details of this programme are set out in the
Risk Management section on page 32.
Fixed assets
The only major changes in the nature of the fixed assets of the
group are as set out under note 10 in the group annual financial
statements. There was no change to the group’s policy relating
to the use of fixed assets.
Litigation
We become involved from time to time in various claims and
lawsuits incidental to the ordinary course of our business.
We are not currently involved in legal proceedings which,
either individually or in the aggregate, are expected to have a
material adverse effect on our business, assets or properties
(see page 129).
General authority to permit the company or any
subsidiary to acquire Sappi shares
The board is proposing that the general authority granted at the
annual general meeting on 05 March 2007 to permit Sappi
and/or subsidiary companies of Sappi to acquire Sappi shares,
be renewed at the forthcoming annual general meeting.
Appropriate resolutions will be submitted to the forthcoming
annual general meeting. Further details are set out in the notice
to members on page 190.
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