Our performance in 2009 - Sappi

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2009 annual report US$ million 2009 2008 16. Trade and other receivables 16.1 Reconciliation of the allowance for credit losses Balance at beginning of year 5 13 Raised during the year 16 3 Released during the year (6) (9) Utilised during the year – (2) Balance at end of year 15 5 An allowance has been made for estimated irrecoverable amounts from the sale of goods of US$15 million (2008: US$5 million). This allowance has been determined by reference to past default experience. 16.2 Analysis of amounts past due September 2009 The following provides an analysis of the amounts that are past the due contractual maturity dates: Not impaired Impaired Total Less than 7 days overdue 9 – 9 Between 7 and 30 days overdue 29 – 29 Between 30 and 60 days overdue 9 – 9 More than 60 days overdue 19 15 34 September 2008 The following provides an analysis of the amounts that are past the due contractual maturity dates: 66 15 81 Not impaired Impaired Total Less than 7 days overdue 15 – 15 Between 7 and 30 days overdue 18 – 18 Between 30 and 60 days overdue 6 – 6 More than 60 days overdue 7 5 12 46 5 51 All amounts due which are beyond their contractual repayment terms are reported to regional management on a regular basis. Any provision for impairment is required to be approved by the regional credit controller. All provisions for impairment greater than US$50,000 are required to be approved by regional management. The group has a provision of US$15 million (2008: US$5 million) against trade receivables that are past due. The group holds collateral of US$17 million (2008: US$17 million) against these trade receivables that are past due. The group has granted facilities to customers to buy on credit for the following amounts: 2009 2008 Less than US$0.5 million 332 280 Less than US$1 million but equal to or greater than US$0.5 million 275 246 Less than US$3 million but equal to or greater than US$1 million 495 426 Less than US$5 million but equal to or greater than US$3 million 212 207 Equal to or greater than US$5 million 951 812 135 2,265 1,971 financials
136 Notes to the group annual financial statements continued 16. Trade and other receivables continued 16.3 Fair value The directors consider that the carrying amount of trade and other receivables approximates their fair value. 16.4 Trade receivables pledged as security Trade receivables with a value of US$460 million (2008: US$415 million) have been pledged as collateral for amounts received from the banks in respect of the securitisation programme. The value of the associated liabilities at year end amounted to US$400 million (2008: US$360 million). The group is restricted from selling and repledging the trade receivables that have been pledged as collateral for the liability. 16.5 Off balance sheet structures Letters of credit discounting To improve the group working capital, the group sells certain letters of credit to ABN AMRO Hong Kong and DBS Bank (London) at every financial month end on a non-recourse basis. ‘Scheck-Wechsel’ The Scheck-Wechsel is a financial guarantee supplied by Sappi to the bank of certain customers (trade receivables) who wish to obtain a loan to finance early payment of specified trade receivables (thereby benefiting from an early settlement discount). By signing the Scheck-Wechsel, Sappi provides a financial guarantee to the bank of the customer. This financial guarantee contract is initially recognised at fair value. At inception the risk for Sappi having to reimburse the bank is nil because there is no evidence that the customer will not reimburse its loan to the bank. There is also no guarantee fee due by the bank and the Scheck-Wechsel is a short-term instrument (maximum 90 days). Therefore the fair value is zero at inception. Subsequently, the financial guarantee contract is measured at the higher of: (i) the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognised less any cumulative amortisation. As no event of default has occurred, no provision has been set up and the fair value at year end remains at zero. However, according to IAS 37 a contingent liability of US$25 million (2008: US$20 million) has been disclosed in this respect. Trade receivables securitisation To improve their cash flows in a cost-effective manner, Sappi Fine Paper North America, Sappi Fine Paper Europe and Sappi Trading sell all eligible trade receivables on a non-recourse basis to special purpose entities (SPEs) that are owned and controlled by third party financial institutions. These SPEs are funded with us but securitise assets on behalf of their sponsors for a diverse range of unrelated parties. We have a servicing agreement with the entities acquiring our receivables, acting as servicers for the collection of cash and administration of the trade receivables sold. Sappi Forest Products securitisation facility Sappi sells the majority of its ZAR receivables to FirstRand Bank Limited, which issues commercial paper to finance the purchase of the receivables. Sappi does not guarantee the recoverability of any amounts, but shares proportionately with FirstRand Bank Limited the credit risk of each underlying receivable, after all recoveries, including insurance recoveries, with Sappi bearing 15% of such risk (and FirstRand Bank Limited the remainder). Sappi administers the collection of all amounts processed on behalf of the bank that are due from the customer. The purchase price of these receivables is adjusted dependent on the timing of the payment received from the client. The rate of discounting that is charged on the receivables is JIBAR (Johannesburg Interbank Agreed Rate) plus a spread. This structure is currently treated as an off balance sheet arrangement. The total amount of trade receivables sold at the end of September 2009 amounted to US$171 million (September 2008: US$194 million). Details of the securitisation programme at the end of fiscal 2009 and 2008 are disclosed in the tables below. If this securitisation facility were to be terminated, we would discontinue further sales of trade receivables and would not incur any losses in respect of receivables previously sold in excess of the 15% mentioned above. There are a number of events which may trigger termination of the facility, amongst others, an amount of defaults above a specified level; terms and conditions of the agreement not being met; or breaches of various credit insurance ratios. The impact on liquidity varies according to the terms of the agreement; generally, however, future trade receivables would be recorded on balance sheet until a replacement agreement was entered into.
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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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2009 annual report 77 employment of
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2009 annual report 79 board to esta
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As part of continuous improvement t
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Compensation report In 2009, the co
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30. Financial instruments continued
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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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