Our performance in 2009 - Sappi

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2009 annual report 9. Property, plant and equipment continued Details of land and buildings are available at the registered offices of the respective companies who own the assets (refer to note 24 for details of encumbrances). Asset impairments September 2009 Usutu Mill Usutu Mill is an unbleached pulp mill and forms part of the Sappi Forest Products reporting segment. In 2008, forest fires caused by severe weather conditions resulted in the loss of approximately 28% of the mill’s fibre supply and 40% of its plantations, resulting in insufficient fibre for the mill to continue operating in the long term under its existing regime. An impairment loss of US$37 million was recognised in 2008 and subsequent capital expenditure of US$5 million, incurred in 2009, has been impaired. The recoverable amount of the various assets has been determined on the basis of value in use. The value in use was established using a pre-tax real discount rate of 10.92%. Muskegon Mill On 26 August 2009, Sappi announced that it would permanently cease operations at its coated fine paper mill in Muskegon, Michigan, North America. The property, plant and equipment at the mill had already been fully impaired in prior years. European mechanical coated cash-generating unit The mechanical coated cash-generating unit forms part of the Fine Paper segment. Due to the downturn in the market, the net present value of the future cash flows of the cash-generating unit was lower than its carrying amount. As a result, a noncash impairment charge of US$74 million has been recognised. The recoverable amount of the various assets within the cash-generating unit has been determined on the basis of value in use. The value in use was established using a pre-tax real discount rate of 7.22%. September 2008 Blackburn and Maastricht Mills Maastricht and Blackburn Mills form part of Sappi Fine Paper Europe. Maastricht Mill produces coated fine and label paper while Blackburn produces coated fine and board paper. Due to the ongoing increases in input costs and the overcapacity in the European market, Blackburn Mill and Maastricht Paper Machine No 5 have been unable to produce acceptable returns on investment, despite significant efforts to curb costs and improve profitability. Production at Blackburn Mill ceased on 17 October 2008. No alternative to the closure of the mill was found during the employee representative consultation process, which ended on 11 November 2008. In respect of Paper Machine No 5 at Maastricht Mill, consultations and social plan negotiations with works council and unions were concluded in early October 2008. Production on Paper Machine No 5 at Maastricht Mill ceased on 19 December 2008. A non-cash impairment charge of US$78 million was recognised as a result of these closures. 127 financials
128 Notes to the group annual financial statements continued US$ million 2009 2008 10. Plantations Fair value of plantations at beginning of year 631 636 Gains arising from growth 73 70 Fire, hazardous weather and other damages (2) (10) Additions 1 – (Loss) gain arising from fair value price changes (67) 120 Harvesting – agriculture produce (fellings) (69) (80) Translation difference 44 (105) Fair value of plantations at end of year 611 631 Sappi manages the establishment, maintenance and harvesting of its plantations on a compartmentalised basis. These plantations are comprised of pulpwood and sawlogs and are managed in such a way so as to ensure that the optimum fibre balance is supplied to its paper and pulping operations in Southern Africa. Sappi owns approximately 371,000 (2008: 369,000) hectares of plantation directly and indirectly manages a further 156,000 (2008: 166,000) hectares. 380,000 (2008: 389,000) hectares of this land is forested with approximately 34 million (2008: 35 million) standing tons of timber. As Sappi manages its plantations on a rotational basis, the respective increases by means of growth are negated by depletions over the rotation period for the group’s own production or sales. Estimated volume changes on a rotational basis amount to approximately five million tons per annum. We own plantations on land that we own, as well as on land that we lease. We disclose both of these as directly managed plantations. With regard to indirectly managed plantations, Sappi has several different types of agreements with over 4,300 independent farmers. The agreements depend on the type and specific needs of the farmer and the areas planted. These agreements range in time from one to more than 20 years. In certain circumstances we provide loans to farmers, which are disclosed as accounts receivable in the group balance sheet (these loans are considered immaterial to the group). If Sappi provides seedlings, silviculture and/or technical assistance, the costs are expensed when incurred by the group.
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SAPPI GROUP (Sappi Limited) ANNUAL
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• the impact of future investment
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Our reporting strategy As a leading
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1 2 North America 2 4 1 San Francis
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4 Our performance in 2009 Financial
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6 Our performance against financial
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8 Our performance against sustainab
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10 Our performance against sustaina
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12 Our performance against sustaina
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14 Our sustainable business cycle T
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16 Our products 1 2 3 Coated paper
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Our objectives for 2010 Improve pro
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20 Letter to shareholders continued
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22 Letter to shareholders continued
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24 Interview with Ralph Boëttger,
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26 Our leadership Independent non-e
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28 Our leadership continued Indepen
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30 Review of operations Sappi Fine
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32 Review of operations | Sappi Fin
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34 Review of operations | Sappi Fin
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36 Review of operations Sappi Fores
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38 Review of operations | Sappi For
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40 Value added statement for the ye
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42 Chief financial officer’s repo
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62 Five-year review for the year en
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64 Share statistics at September 20
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Risk management Global economic con
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Risk philosophy The Sappi Limited b
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Independence Accountability Given t
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Fairness Social responsibility Lege
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2009 annual report 75 Induction and
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30. Financial instruments continued
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2009 annual report 31. Related-part
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2009 annual report 33. Environmenta
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Company auditor’s report for the
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Condensed Sappi Limited company bal
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2009 annual report Notes to the con
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Glossary General definitions bleach
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not be comparable with similarly ti
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No issue and/or sale of these share
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Notes Confirmation of appointment o
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Proxy form for annual general meeti
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forward-looking statements Certain
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Our performance in 2009 - Sappi

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