Our performance in 2009 - Sappi

As in the case of the other regions, the South African businesses also places great emphasis on
the management of fixed costs. We were able to contain fixed costs to a 1% increase over 2008
through various cost reduction actions.
As of fiscal 2010, Sappi Fine Paper South Africa will be incorporated into the Sappi Forest
Products division. We do not consider this change in our future reporting to be material.
Sappi Forest Products
2009 annual report 47
2009 2008 2009 2008
Sales volume (metric tons ’000) 2,172 2,413
ZAR million ZAR per ton
Sales
Variable manufacturing and
7,761 8,165 3,573 3,384
delivery costs (4,618) (4,117) (2,126) (1,706)
Contribution 3,143 4,048 1,447 1,678
Fixed costs
Other income and
(3,335) (2,991) (1,535) (1,240)
consolidation entries
Operating profit
354 451 163 187
excluding special items 162 1,508 75 625
Special items – (losses) gains (631) 520
Operating (loss) profit (469) 2,028
Our Forest Products business produces various types of packaging paper and board, newsprint,
paper pulp (for own use and sale as market pulp) and chemical cellulose pulp. All chemical
cellulose pulp is sold in the export market.
As with our other businesses, our Forest Products business experienced a severe decline in
demand for all major products, particularly in our chemical cellulose business during the first half
of fiscal 2009. The two major factors impacting our revenue from chemical cellulose are the
Rand/US Dollar exchange rate and the NBSK market price. The Rand was weak against the
US Dollar during the first half of our fiscal year, which is beneficial for our exports, but this benefit
from the exchange rate was largely negated by the depressed demand levels for export product.
As demand for chemical cellulose and NBSK pulp prices started to recover from March 2009,
the Rand started to strengthen against the US Dollar, negatively affecting the benefit of increased
export volumes and improved selling prices. The average NBSK price was 26% lower during
2009 compared to fiscal 2008.
Local sales in the region benefited from the weaker Rand to the US Dollar during the early part
of 2009, which reduced import substitution and improved local pricing. The Rand strengthened
against the US Dollar during the second half of the year, increasing competition from imports and
placing pressure on local product prices.
2009 2008 2009 2008
ZAR million ZAR per ton
Variable manufacturing costs
Wood 2,100 1,966 967 815
Energy 738 597 340 247
Chemicals 706 585 325 242
Other 211 190 97 79
Delivery costs 863 779 397 323
Total 4,618 4,117 2,126 1,706
our performance