2008 Annual report - Sappi

sappi
Business risks
We may not be able to successfully or timeously integrate the M-real coated graphic paper business (see description
on pages 32 and 33) into our existing business, and may not realise the full extent of the anticipated benefits.
We have a good track record with the integration of acquired businesses. The due diligence process was very comprehensive.
We have put in place an experienced integration team that will support line management and drive the achievement of synergies.
Our indebtedness may impair our financial and operating flexibility.
Cash generation and improving our balance sheet structure, including a reduction in borrowings, are priorities for management.
Fluctuations in the value of currencies, particularly the Rand and the Euro, in relation to the US Dollar have in the
past had and could in the future have a significant impact on our earnings.
We manage our economic and transactional currency exposures on a group basis. However, we do not manage translation exposure
which arises from translating the group’s assets, liabilities, income and expenditure into the US Dollar, our reporting currency.
There are risks relating to the countries in which we operate that could affect your investment in our company.
We manage these risks in each country. We do, however, operate in a broad spread of countries which helps mitigate the risk
in any individual country.
We face certain risks in dealing with HIV/Aids which may have an adverse effect on our southern African operations.
We have comprehensive programmes designed to mitigate the impact of the disease on our people and our business.
A limited number of customers account for a significant amount of our revenues.
We understand that the success of our business depends on working closely with our customers, providing a high level of
service and reliability. We manage and regularly review credit and other exposures. We also purchase credit insurance to cover
a major part of our outstanding receivables.
Because of the nature of our business and workforce, we are facing challenges in the retention and succession
planning of management that could adversely affect our business.
We have put in place a number of initiatives [including engagement management, performance management and incentives] to
mitigate this risk.
The inability to recover increasing input costs through increased prices
We approach this in several ways including a focus on improving procurement methods, finding alternative lower-cost fuels and
raw materials, minimising waste, improving manufacturing and logistics efficiencies and implementing energy reduction initiatives.
Catastrophic events, such as fires, affecting our plantations may adversely impact our ability to supply our southern
African mills with timber.
We have implemented a number of risk and fire control measures and are re-evaluating our processes after two years of
extensive damage.
// 2008 Annual report
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