Our performance in 2009 - Sappi

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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
48 Chief financial officer’s report continued Variable input costs per ton increased significantly in the year compared to fiscal 2008. This was due to additional operating costs incurred as a result of the interrupted ramp up of the Saiccor Mill expansion and the decision to take commercial downtime as local demand in the packaging business weakened during the latter part of the year. Sub-optimal operating conditions included the use of additional oil to fire the boilers, and additional chemical loads and additional people required for the new Saiccor plant. Input costs remained high in the first half of the year but wood, chemical and coal costs have since decreased. The average wood costs increased significantly in 2009 compared to 2008, due to a wood shortage after severe forest fires in Southern Africa that occurred in 2007 and 2008. Energy costs increased sharply due to increased electricity prices in South Africa. 2009 ZAR million 2008 Fixed costs Personnel 1,415 1,319 Maintenance 593 574 Depreciation 629 471 Services and administration 698 627 Total 3,335 2,991 Personnel costs in our Forest Products division increased due to the skills shortage in South Africa, particularly in skilled technical functions. Fixed costs increased by 12% from ZAR2,991 million to ZAR3,335 million compared to fiscal 2008. This increase was mainly due to a 34% increase in depreciation, a significant increase in plantation fire prevention costs and also higher than usual plantation re-establishment costs. The increase in depreciation is a result of the capacity expansion at the Saiccor Mill. Special items in 2009 of ZAR631 million consist mainly of a negative plantation price fair value adjustment of ZAR606 million. Special items in 2008 of ZAR520 million consist mainly of a positive plantation price fair value adjustment of ZAR890 million offset by asset impairments and losses due to fire damage. Corporate and other 2009 US$ million 2008 Attributable profit from China joint venture 4 10 Other 2 (3) Operating profit excluding special items 6 7
Page 1 and 2: SAPPI GROUP (Sappi Limited) ANNUAL
Page 3 and 4: • the impact of future investment
Page 5 and 6: Our reporting strategy As a leading
Page 7 and 8: 1 2 North America 2 4 1 San Francis
Page 9 and 10: 4 Our performance in 2009 Financial
Page 11 and 12: 6 Our performance against financial
Page 13 and 14: 8 Our performance against sustainab
Page 15 and 16: 10 Our performance against sustaina
Page 17 and 18: 12 Our performance against sustaina
Page 19 and 20: 14 Our sustainable business cycle T
Page 21 and 22: 16 Our products 1 2 3 Coated paper
Page 23 and 24: Our objectives for 2010 Improve pro
Page 25 and 26: 20 Letter to shareholders continued
Page 27 and 28: 22 Letter to shareholders continued
Page 29 and 30: 24 Interview with Ralph Boëttger,
Page 31 and 32: 26 Our leadership Independent non-e
Page 33 and 34: 28 Our leadership continued Indepen
Page 35 and 36: 30 Review of operations Sappi Fine
Page 37 and 38: 32 Review of operations | Sappi Fin
Page 39 and 40: 34 Review of operations | Sappi Fin
Page 41 and 42: 36 Review of operations Sappi Fores
Page 43 and 44: 38 Review of operations | Sappi For
Page 45 and 46: 40 Value added statement for the ye
Page 47 and 48: 42 Chief financial officer’s repo
Page 51: 46 Chief financial officer’s repo
Page 67 and 68: 62 Five-year review for the year en
Page 69 and 70: 64 Share statistics at September 20
Page 72 and 73: Risk management Global economic con
Page 74 and 75: Risk philosophy The Sappi Limited b
Page 76 and 77: Independence Accountability Given t
Page 78 and 79: Fairness Social responsibility Lege
Page 80 and 81: 2009 annual report 75 Induction and
Page 82 and 83: 2009 annual report 77 employment of
Page 84 and 85: 2009 annual report 79 board to esta
Page 86 and 87: As part of continuous improvement t
Page 88 and 89: Compensation report In 2009, the co
Page 90 and 91: Balance between fixed and variable
Page 92 and 93: Executive directors (1) Details of
Page 94 and 95: 2009 annual report 89 R J Boëttger
Page 96 and 97: 2009 annual report 91 Board Committ
Page 98 and 99: Auditor’s report Independent audi
Page 100 and 101: Audit committee report The legal re
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Directors’ report for the year en
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Litigation We become involved from
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Group balance sheet at September 20
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Group statement of changes in equit
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Group balance sheet in Rands conven
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Notes to the group annual financial
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• Financial assets and financial
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2.2.10 Non-current assets held for
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(iii) Dividends Dividends are recog
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uyer and seller) multiple used in o
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2.4 Adoption of accounting standard
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Corporate and eliminations Group 20
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2009 annual report US$ million 2009
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6. Taxation (benefit) charge contin
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7. Earnings per share and headline
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2009 annual report 9. Property, pla
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US$ million 2009 annual report 2009
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13. Joint ventures and associates*
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16. Trade and other receivables con
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2009 annual report 17. Ordinary sha
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20. Interest-bearing borrowings con
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2009 annual report 20. Interest-bea
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22. Provisions continued September
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27. Post-employment benefits - pens
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27. Post-employment benefits - pens
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2009 annual report 2009 2008 27. Po
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2009 annual report 28. Post-employm
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28. Post-employment benefits - othe
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29. Share-based payments continued
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2009 annual report 29. Share-based
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2009 annual report 29. Share-based
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30. Financial instruments continued
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2009 annual report 30. Financial in
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2009 annual report 31. Related-part
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2009 annual report 33. Environmenta
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Company auditor’s report for the
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Condensed Sappi Limited company bal
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2009 annual report Notes to the con
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Glossary General definitions bleach
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not be comparable with similarly ti
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No issue and/or sale of these share
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Notes Confirmation of appointment o
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Proxy form for annual general meeti
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forward-looking statements Certain
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Our performance in 2009 - Sappi

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