Our performance in 2009 - Sappi

Our performance against strategic objectives
Achieve our ROCE 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
Expand our low-cost plantation fibre
base in Southern Africa as a resource
to grow our pulp and chemical
cellulose businesses
Drive efficient manufacturing and
logistics to remain a low-cost producer
2009 annual report
Our goal is to be, on a sustainable basis, the most profitable company in paper, pulp and cellulose-based
solutions. Our key measures are Return on Capital Employed (ROCE) and to beat our cost of capital, as
a minimum. We also prioritise cash generation and improving our balance sheet structure.
We aim to build on our leading position in the coated fine paper market and explore opportunities across the
broad spectrum of coated paper, including growing our speciality business. We plan to grow our chemical cellulose
business and are expanding our low-cost fibre base in Southern Africa. We are investing in energy reduction and
self-sufficiency projects and extracting chemicals from renewable wood resources. Core to our business is our
Southern African portfolio of packaging paper, newsprint, printing and writing paper, and tissue paper.
Strategic objectives Progress in the financial year
Drive growth through customer service,
innovation and reliability
Entrench our core values:
Excellence
Integrity
Respect
Black Economic Empowerment (BEE)
in South Africa
We fell well short of our target in all regions.
We have acted to improve our performance, resulting in a turnaround in our
fourth quarter, particularly in North America.
We expect to see the results of these actions in the next year.
The Saiccor Mill expansion reached full production by year-end, increasing
chemical cellulose production capacity by 30%.
The M-real acquisition strengthened our position in the European coated
paper market. Performance in the combined business is expected to
improve as further synergies are achieved and market conditions improve.
We continued to expand our plantation investments in Southern Africa
through tree breeding and selected acquisitions. Subsequent to year-end
we agreed to acquire 14,000 hectares of developed softwood plantations
close to Ngodwana Mill.
Trial plantings of Eucalyptus in Mozambique have grown well and the
project is making progress.
We made significant progress in reducing variable costs with a focus on
product design, procurement, waste reduction and operating efficiency.
Actions to reduce fixed costs included the closure of Blackburn Mill,
Muskegon Mill, Paper Machine No 5 at Maastricht Mill, and discussions
with labour representatives about our intention to close Usutu Pulp Mill and
possibly Kangas Mill. The number of people employed in each region was
reduced through efficiency measures.
Synergy benefits following the M-real acquisition for the nine months to
September 2009 totalled r73 million, above our target of r60 million.
Our market research has shown that our customers place customer service
and reliability high on their list of requirements. We believe we have made
good progress in meeting customer needs during the year and continue to
work closely with customers on meeting their needs more profitably.
A higher proportion of our sales came from newly designed products,
particularly in North America.
Our values were derived from internal dialogue and incorporated in our
Code of Ethics, Strategy Statement and Sustainability Charter. The rollout of
our values as part of the integration of M-real has helped to create a
motivated single team in Europe.
We improved our audited BEE score to 54 points from 41 points.
We envisage undertaking a broad-based equity transaction within the
next year.
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our business