Our performance in 2009 - Sappi

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Letter to shareholders continued
depreciation for the year. Our target for capital expenditure is below US$200 million a year for the next two
financial years.
At year-end, the group had cash available of US$770 million and an unutilised committed revolving credit
facility (RCF) of approximately US$300 million. This is well in excess of our interest-bearing short-term debt,
including the receivables securitisation programme which runs to December 2011 but is treated as shortterm
debt. We are of the opinion that it is prudent to maintain a higher cash balance as a cushion in view
of the economic uncertainty, and are confident the group has sufficient liquidity to meet its business
requirements going forward.
We also set out to improve the structure of our balance sheet, which we achieved in two ways. Firstly, we
financed the acquisition mainly with equity, marginally improving the group’s debt to total capitalisation ratio,
and took on additional debt with a four-year term. Secondly, we committed to refinancing our RCF, which
was due to expire in May 2010, and a r400 million bank loan maturing in December 2010. The major
refinancing is described fully in the chief financial officer’s report, but suffice to say it has extended our debt
maturities significantly and provided strong liquidity. There are no major debt maturities until the repayment
of our US$500 million bonds in June 2012.
Following the refinancing, our net finance costs are expected to increase to US$250 million in the 2010
financial year. Consequently, management has set an objective to substantially reduce gearing and net debt
within three years.
Financial performance
Group operating profit, excluding special items declined sharply to US$33 million from US$366 million last
year. While we reported losses in the second and third quarters, we achieved a turnaround in the fourth
quarter. This resulted in a small operating profit, excluding special items for the year.
Special items reduced operating profit by US$106 million. The major unfavourable items, which were mainly
non-cash, were a plantation price fair value adjustment, impairment of the coated mechanical business unit
Kirkniemi Mill, Finland