Our performance in 2009 - Sappi

Finance costs
Details of net finance costs are set out below:
Net interest paid (interest paid less interest earned) in fiscal 2009 was US$137 million compared
to US$143 million in 2008. While interest rates remained low in all our borrowing currencies, net
interest paid was unusually low in fiscal 2009 because of the US$41 million discount obtained on
repaying the r220 million M-real vendor loan notes in the last quarter of our financial year. The
finance costs capitalised in fiscal 2008 relate to the Saiccor Mill expansion project in South Africa.
The net fair value financial instrument loss includes an amount of US$20 million arising from our
unwinding fixed to variable swaps with a notional value of US$857 million. The unwinding of these
swaps resulted in a positive cash inflow of US$55 million. In view of the refinancing transactions
completed in the last quarter of our financial year, and as outlined in more detail below, the net
interest paid will increase substantially in future years as interest margins on the new financing
reflect current market conditions and the current Sappi credit rating.
The group’s policy is to identify foreign exchange transaction risks when they arise and to cover
these risks to the functional currency of the division where the risk lies. The majority of the group’s
foreign exchange exposures are covered centrally by the group treasury which nets the internal
exposures and hedges the residual exposure with third party banks.
Taxation
2009 annual report 53
US$ million 2009 2008
Net interest paid 137 143
Finance costs capitalised – (16)
Net foreign exchange gains (17) (8)
Net fair value loss on financial instruments 25 7
Net finance costs 145 126
US$ million 2009 2008
(Loss) profit before taxation (218) 188
Expected taxation (benefit) charge (60) 38
Tax rate reductions
Net effect of losses with no tax relief and
(3) (9)
permanent differences 18 35
Secondary Tax on Companies 4 7
Other – 15
Taxation (benefit) charge (41) 86
Effective tax rate 19% 46%
With a loss before taxation of US$218 million, the total taxation relief to the income statement of
US$41 million resulted in a tax rate of 19%. The expected taxation relief of US$60 million was
reduced due to no tax relief being taken on the losses of certain loss-making entities because, in
our judgement, these losses may not be recoverable in the near future. In addition, certain of the
group’s profit is not taxed as a result of losses carried forward or favourable permanent differences.
Earnings per share
The loss per share for fiscal 2009 was 37 US cents. As required by IFRS, prior period earnings
per share figures have been restated to take into account the bonus element of the rights issue
concluded in December 2008 by adjusting the weighted average number of shares in each prior
year by a factor of 1.58. Please refer to note 7 to the annual financial statements for an explanation
of how this adjustment factor is calculated.
our performance