Our performance in 2009 - Sappi

42 Chief financial officer’s report continued
Operating performance of our divisions
We believe that operating profit excluding special items is a good indicator of underlying
operating performance as it excludes what management believes are items that are non-recurring
and/or uncontrollable in the normal course. Please see page 52 further on for a full explanation
of special items.
Operating profit excluding special items declined significantly compared to fiscal 2008 from
US$366 million to US$33 million.
The contribution by each of our divisions to the group operating profit excluding special items
was as follows:
US$ million 2009 2008
Europe 12 55
North America (2) 95
South Africa (1) 6
Fine Paper 9 156
Forest Products 18 203
Corporate and other 6 7
Sappi group 33 366
Three of our four business units have home or ‘functional’ currencies other than the US Dollar
(which is our reporting currency) as follows:
Functional
% of
group
Business unit currency sales
Sappi Fine Paper
Sappi Fine Paper Europe (SFPE) EUR 54
Sappi Fine Paper North America (SFPNA) US Dollar 24
Sappi Fine Paper South Africa (SFPSA) SA Rand 6
Forest Products SA Rand 16
The revenue and cost items of each of the non-US Dollar units (which constitute approximately
75% of the group’s sales) are translated into US Dollars at the average exchange rate for the
period in order to arrive at the group revenue and costs in US Dollars. When exchange rates
differ from one period to the next, the impact on our revenue and costs in US Dollars can be
large, but largely off-set one another at the net level (when netting costs against revenue). Indeed
in fiscal 2009, the impact of translating the sales of our European and South African businesses
into US Dollars had a big (US$547 million) negative impact on group sales revenue compared to
fiscal 2008, but this was offset by a positive impact of US$553 million on costs translated into
US Dollars.
Thus, while the translation impact is large on sales and costs, on a net basis, this impact is
relatively small. This translation impact complicates and distorts the comparison of sales and
costs in US Dollars year-on-year and for this reason we believe it is more instructive to analyse
the performance of each division compared to fiscal 2008 in that division’s home currency. This
we do starting on the next page.
Information about the mills (and their capacities and products, etc) in each of the divisions is set
out on pages 31 and 37. Also, further information about each of the divisions is given in the
operational reviews on pages 30 to 39 and in the group annual financial statements.
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