Our performance in 2009 - Sappi

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Review of operations | Sappi Fine Paper continued
Sappi Fine Paper’s main product line, coated graphic paper, contributes 67% of group
sales by value, and is used in producing calendars, catalogues, brochures, books, premium
magazines, direct mailings and annual reports. Sappi Fine Paper also produces a range of
uncoated graphic and business paper, coated and uncoated speciality paper, like that used
in flexible packaging, and casting release paper, used in the manufacture of synthetic
leather and decorative laminate products. Total paper sales represent 84% of group sales.
The geographic spread of our operations allows us to optimise our global knowledge of
market developments, operating best practices and technology. Sappi Fine Paper is
approximately 63% integrated in pulp, with Europe a major net buyer of pulp and North
America a net seller of pulp.
Europe
As we completed the acquisition at the end of December 2008 demand across Europe began
falling as a result of the global economic downturn. We acted quickly to curtail output to match
demand and took account of the unprecedented market conditions as we integrated the new
business.
The European team was well prepared for the integration, which went smoothly. We placed
particular emphasis on customer relations and service and our market shares for coated fine
paper and coated magazine paper, at year end, were in line with the theoretical market shares
of the two businesses combined. It is pleasing that our people came together enthusiastically
and our team in Europe is highly motivated and focused on further optimising our business.
We achieved synergy benefits in excess of the r60 million target for the nine months to
September 2009, and we expect to achieve the full target of r120 million a year ahead of the
three-year timeframe.
The team is currently working with customers to find ways to improve their profitability and ours,
based on improving our understanding of their needs and serving them better while reducing
complexity and cost throughout the supply chain. We expect these initiatives to deliver significant
benefits over the next few years.
Acquisition synergies: Synergy achievement
Sources of synergies
Nine months to
September 2009
EUR million
Procurement (excluding market effects) 30
Asset optimisation (including benefits of acquired order books) 23
SG&A reduction 22
Other (including recipe changes and manufacturing efficiency) 11
Transitional and once-off costs (13)
Total 73*
* Annualised – r97 million.
– Nine-month target – r60 million.
– Full target – r120 million per annum within three years.
Our lower production levels resulted in a reduced environmental impact in terms of lower water
consumption (11%) and reduced carbon dioxide emissions (18%). However, the frequent stops
and starts necessitated by market conditions reduced our efficiencies resulting in higher emissions
per ton produced.
During the year, we launched a revolutionary coated fine paper, Tempo, which was named as
the innovation of the year by Pulp & Paper International (PPI). The product markedly reduces ink
drying time, providing major efficiencies for printers, and allowing them to reduce the use of
dusting powder resulting in cost and environmental benefits.