Our performance in 2009 - Sappi

2009 annual report
33. Environmental matters continued
Our European facilities are subject to extensive environmental regulation in the various countries in which we operate.
For example:
• The Integrated Pollution Prevention and Control directive regulates air emissions, water discharges and defines permit
requirements and best available techniques for pollution control
• The national European laws regulate the waste disposal framework and place restrictions on landfilling materials in order
to reduce contaminated leachate and methane emissions. Prevention, re-use and recycling (material or thermal) are the
preferred waste management methods. In Austria, Germany and the Netherlands only inert ash or slag from thermal
recycling and incineration processes may be placed in landfills
• The EU Chemicals Regulation REACH (1907/2006/EC) intended to harmonise existing European and national regulations
to provide a better protection of human health and our environment is not directly applicable to pulp and paper. It does
apply to a number of raw materials that we source. We will also register some intermediate substances in our pulp
production processes. Registration requirements for intermediates are rather limited so that the registration costs are not
expected to be material
• In The Netherlands we, together with other paper manufacturers, have signed an agreement with the national government
to improve environmental management and further limit emissions.
The countries within which we operate in Europe have all ratified the Kyoto Protocol and we have developed a GHG strategy
to comply with applicable GHG restrictions and to manage emission reductions cost effectively. Our expenditures related to
GHG compliance in Europe are not expected to be material.
In South Africa, requirements under the National Water Act, National Environmental Management Act and the Air Quality Bill
may result in additional expenditures and/or operational constraints. South Africa is also a signatory of the Kyoto Protocol
and Sappi is currently identifying and initiating Clean Development Mechanism projects at a number of our South African
mills. Although we are uncertain as to the ultimate effect on our South African operations, our current assessment of the
legislation is that any compliance expenditures or operational constraints will not be material to our financial condition.
34. Acquisition
On 31 December 2008, Sappi acquired M-real’s coated graphic paper business for an enterprise value of €750 million
(approximately US$1.1 billion). The final purchase consideration was reduced by assumed debt and other adjustments
(including working capital) amounting to €102 million in total. The transaction included M-real’s coated graphic paper
business, including brands and company knowledge, as well as four coated graphic mills. This transaction has been
accounted for by the purchase method of accounting.
The acquisition was financed through a combination of equity, assumed debt, the cash proceeds from a rights offering and
a vendor loan note.
The acquired business contributed sales of US$890 million, net operating profit of US$33 million and net profit of US$38 million
to the group results for the period from acquisition to 27 September 2009. Included in the net profit of the acquired business
for the year, is the US$41 million discount received on the settlement of the vendor loan notes.
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financials