Our performance in 2009 - Sappi

Looking forward
Although global economic conditions remain uncertain, we expect demand conditions to be significantly
better in the year ahead. Demand on paper producers should be similar to that on end-users which, even
if it remains at 2009 levels, will result in up to a 10% improvement on the previous year for paper producers.
Any improvement in end-user demand from current low levels will be a welcome bonus. We expect demand
for chemical cellulose and paper pulp to remain firm, and modest price improvements in financial 2010.
The low point in commodity prices was reached earlier in 2009 and we expect some increase in input costs
in the next few quarters. Pulp prices have risen since March and the crude oil price has more than doubled
from its low in December 2008.
All our operations have acted to improve energy efficiency and self-sufficiency. The benefits of greater energy
self-sufficiency at the Saiccor Mill, which generates some 70% of the power it needs, will be realised now
that the expansion is fully operational. Our North American business is most advanced in using renewable
energy resources with 83% of energy provided from renewable sources (Southern Africa 41% and
Europe 30%).
Management’s actions over the last year have helped us navigate turbulent economic conditions and will
stand us in good stead going forward. The refinancing undertaken has provided sufficient liquidity to deal
with the foreseeable cash requirements of our business. We have also devoted resources at all levels of the
business to improving our understanding of customer needs and meeting them by developing new products
and services.
We expect an improvement in operating profitability excluding special items in financial 2010, based on a
gradual recovery in global economic conditions and the decisive action taken to improve our businesses.
While we will continue to face volatile market conditions and our finance costs will be substantially higher
than in the past, we believe we are on the way to improved profitability and returns, and lower debt levels.
Appreciation
This has been an exceptionally difficult year for all our stakeholders and we value their ongoing support. Our
customers have given us tremendous encouragement as we have integrated our new businesses in Europe
and ramped up our Saiccor Mill expansion. We will continue to work closely with our customers to develop
even stronger relationships.
Our more than 16,000 people have tackled the challenges of the global downturn wholeheartedly, despite
the uncertainty that has characterised this period. Regrettably, we had to reduce the number of people we
employ and although we have endeavoured to approach these reductions fairly and compassionately, we
fully understand this has resulted in hardship for individuals, families and communities.
There have been no bonuses awarded under the group’s management incentive scheme related to the
2009 financial year irrespective of personal or business unit performance, given the group’s poor profitability.
While this was well accepted by all concerned, it is important to record that staff and management at all
levels made huge personal and collective contributions to the group’s progress. The many actions on
different fronts to deal with the economic downturn and to position the group for the upturn were deftly
handled and we thank all our people for their efforts.
The confidence and insight provided by our board has allowed the group to tackle many challenges promptly
and effectively, and we thank them for their guidance and accessibility.
Dave Brink and Franklin Sonn will be retiring from the board at the end of December 2009 after 15 and 10
years of service respectively. Dave has held the role of senior independent director since 2006. Both have
made considerable contributions to the group and we thank them for their support and the wisdom they
have brought to Sappi’s development.
We thank our shareholders for their support in a difficult year, and assure you of our best efforts to generate
better returns in the years ahead.
Danie Cronjé Ralph Boëttger
chairman chief executive officer
04 December 2009
2009 annual report 23
our performance