Our performance in 2009 - Sappi

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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$41 million discount received on the settlement of the vendor loan notes. 191 financials
192 Notes to the group annual financial statements continued 34. Acquisition continued Details of net assets acquired and goodwill are as follows: Purchase consideration: EUR million US$ million Cash consideration 401 565 Shares issued* 32 45 Vendor loan note 220 307 Adjustments to working capital (4) (6) Gain on forward exchange contract covering purchase consideration (24) (32) Direct costs relating to the acquisition 23 32 Total purchase consideration 648 911 Provisional fair value of net identifiable assets acquired (see below) 648 911 Provisional goodwill** – – The assets and liabilities arising from the acquisition are as follows: EUR million Acquiree’s carrying amount EUR million Provisional fair value US$ million Acquiree’s carrying amount US$ million Provisional fair value Property, plant and equipment 634 531 892 747 Information technology related intangibles 2 2 3 3 Brand names – 18 – 25 Inventories 118 115 166 162 Trade receivables 200 192 281 270 Prepayments and other debit balances 15 18 21 25 Cash and cash equivalents 5 5 7 7 Trade payables (85) (85) (120) (120) Pension liabilities (37) (37) (52) (52) Borrowings (46) (42) (65) (59) Provisions (4) (4) (6) (6) Other payables and accruals (60) (65) (84) (91) Net deferred tax (liabilities) assets (11) – (15) – Net identifiable assets acquired 731 648 1,028 911 Outflow of cash to acquire business, net of cash acquired: EUR million US$ million Cash consideration 401 565 Direct costs relating to acquisition 23 32 Cash and cash equivalents in subsidiary acquired (5) (7) Net cash outflow on acquisition 419 590 ** 11,159,702 Sappi shares were issued to M-real as partial payment of the acquisition price. The fair value of US$45 million (€32 million) was determined using Sappi’s published market price at the date of exchange. ** The initial accounting for the business combination has been determined provisionally as at the end of September 2009 because the group is still in the process of finalising the fair values of the identifiable assets and liabilities of the acquired business of M-real.
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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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Balance between fixed and variable
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Executive directors (1) Details of
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2009 annual report 89 R J Boëttger
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2009 annual report 91 Board Committ
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Auditor’s report Independent audi
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Audit committee report The legal re
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Directors’ report for the year en
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Litigation We become involved from
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Group balance sheet at September 20
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Group statement of changes in equit
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Group balance sheet in Rands conven
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Notes to the group annual financial
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• Financial assets and financial
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2.2.10 Non-current assets held for
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(iii) Dividends Dividends are recog
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uyer and seller) multiple used in o
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2.4 Adoption of accounting standard
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Corporate and eliminations Group 20
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2009 annual report US$ million 2009
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6. Taxation (benefit) charge contin
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7. Earnings per share and headline
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2009 annual report 9. Property, pla
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US$ million 2009 annual report 2009
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13. Joint ventures and associates*
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16. Trade and other receivables con
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2009 annual report 17. Ordinary sha
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Our performance in 2009 - Sappi

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