Our performance in 2009 - Sappi

Directors’ report
for the year ended September 2009
Your directors submit their report for the year ended
September 2009.
Business of Sappi Limited (Sappi or the company)
and its operating companies mentioned below
(the group)
The group manufactures and sells a wide range of pulp, paper
and wood products for use in almost every sphere of economic
activity. The group conducts its business through two business
units, namely:
• Sappi Fine Paper; and
• Sappi Forest Products.
Sappi Fine Paper has manufacturing and marketing facilities
in Europe, North America, Southern Africa and Asia and
produces mainly high quality branded coated fine paper. It also
manufactures uncoated graphic and business paper, coated
and uncoated specialities papers, and casting release paper
used in the manufacture of artificial leather and textured
polyurethane applications. Sappi Forest Products, based in
Southern Africa, produces packaging paper and newsprint,
pulp, chemical cellulose, and forest and timber products for
Southern Africa and export markets. Sappi Trading operates a
trading network for the marketing and distribution of chemical
cellulose and market pulp throughout the world and of the
group’s other products in areas outside our core operating
regions of North America, Europe and Southern Africa.
Reporting period
The group’s financial period ends on the Sunday closest to the
year end date and results are reported as if at the year end date.
International Financial Reporting Standards (IFRS)
As a South African company and in terms of the requirements
of the JSE Limited (JSE), Sappi’s financial reporting is based
on IFRS as issued by the International Accounting Standards
Board (IASB).
The US Dollar is the major trading currency of the pulp and
paper industry. The group reports its results in US Dollars in
order to facilitate the understanding of the results.
For the convenience of users, the income statement, the
statement of comprehensive income, balance sheet and cash
flow statement of the group have been translated into South
African Rands on pages 104 to 106.
Share capital
As at September 2009 the authorised and issued share capital
of Sappi were as follows:
Authorised:
725,000,000 ordinary shares of ZAR1 each
for an authorised share capital of ZAR725 million
Issued:
537,117,864 ordinary shares of ZAR1 each
for an issued share capital of US$70 million
Share premium US$1,471 million
2009 annual report
The authorised ordinary share capital was increased during the
year from 325,000,000 to 1,325,000,000 ordinary shares with a
par value of ZAR1.00 per share to facilitate the rights offer in
December 2008. The authorised ordinary share capital was then
subsequently reduced from 1,325,000,000 to 725,000,000
ordinary shares with a par value ZAR1.00 per share. The
issued ordinary share capital increased during the year from
ZAR239,071,892 comprising of 239,071,892 shares of ZAR1.00
per share, to ZAR537,117,864 with the issue of 286,886,270
rights offer shares of ZAR1.00 each at a premium of ZAR19.27
and of 11,159,702 shares of ZAR1.00 at a premium of ZAR36.60
each in settlement of part of the consideration for the acquisition
of M-real’s coated graphic paper business. Of the 537,117,864
shares in issue, at year end 21,384,559 shares were held by
the group through a wholly-owned subsidiary company (see
paragraph below).
Purchase of shares by a subsidiary
Through a wholly-owned subsidiary, the Sappi group has to
date acquired approximately 21.4 million Sappi shares (treasury
shares) on the open market of the JSE Limited for approximately
US$186.7 million. This accords with Sappi’s stated intention,
announced on 09 November 2000, and the approval given at all
subsequent annual general meetings of the company’s shareholders
up to and including 2008, for a wholly-owned Sappi
subsidiary to acquire Sappi shares, if prevailing circumstances
(including market conditions) so warrant. None of these shares
were acquired during the 2009 financial year. However, in
December 2008, the subsidiary company acquired a further
11,860,873 shares by exercising its rights in terms of the
rights offer.
Some of the treasury shares, have been, and will continue to
be, utilised to meet the requirements of the Sappi Limited Share
Incentive Trust and the Sappi Limited Performance Share
Incentive Trust from time to time. During the year, approximately
382,975 treasury shares were issued to participants of the
Sappi Limited Share Incentive Trust. Refer to note 29 of the
group annual financial statements for additional details relating
to these treasury shares. Following the rights offer in December
2008, and considering that it is the group’s stated intention to
reduce debt, it is unlikely that the group will seek approval for
the purchase of Sappi shares in the foreseeable future.
Significant announcements during the year under
review and subsequent to year end
During the 2009 financial year, the following significant announcements
were made:
• On 31 December 2008, Sappi announced the successful
conclusion of its acquisition of M-real’s coated graphic paper
business. The acquisition was financed through a combination
of equity, assumed debt, the cash proceeds from a fully
subscribed rights offering and a vendor loan note
• On 26 August 2009, Sappi announced that it would per-
manently cease operations at its coated fine paper mill in
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financials