2006 20-F - Sappi

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SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) for the year ended September 2006 24.5 REPLACEMENT OF NON-CURRENT ASSETS 2006 2005 US$ million Property, plant and equipment .................................................... (160 ) (183) Plantations...................................................................... — — (160 ) (183) 24.6 PROCEEDS ON DISPOSAL OF NON-CURRENT ASSETS 2006 2005 US$ million Book value of property, plant and equipment disposed of............................. 2 15 Profit (loss) on disposal........................................................... 2 (10) 4 5 24.7 CASH AND CASH EQUIVALENTS 2006 2005 US$ million Cash and deposits on call......................................................... 218 361 Money market instruments........................................................ 6 6 224 367 Cash and cash equivalents include restricted cash of US$ nil (September 2005: US$83 million) 25. ENCUMBERED ASSETS Suspensive sale agreements are instalment sale agreements which the group has entered into in respect of certain property, plant and equipment and the assets purchased are encumbered as security for the outstanding liability until such time as the liability is discharged. In addition, the group uses a substantial portion of the plant and machinery at its Cloquet Mill in terms of a capitalised lease. The group has the right to acquire full ownership of these assets at the end of the lease term at the fair market value. Early termination of the lease may occur under three different scenarios; namely, under Scenario A payment would be made by Sappi as a result of the following events: voluntary early termination, termination due to default and total loss of plant and equipment without substitution; under Scenario B payment would be made by Sappi as a result of changes in statute rendering the agreement illegal or unenforceable; and under Scenario C the lease naturally expires or early termination is triggered by the lessor. As at September 2006 the termination value of this lease is approximately US$11 million (September 2005: US$11 million). F-74
SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) 25. ENCUMBERED ASSETS (Continued) for the year ended September 2006 The book values of assets which are mortgaged, hypothecated or subject to a pledge as security for borrowings, subject to third party ownership in terms of capitalised leases or suspensive sale agreements are as follows: 2006 2005 US$ million Land and buildings............................................................... 166 164 Plant and equipment............................................................. 377 387 543 551 (Refer to note 10 for details on property, plant and equipment) 26. COMMITMENTS F-75 2006 2005 US$ million Capital commitments Contracted but not provided ...................................................... 294 115 Approved but not contracted...................................................... 255 198 549 313 The capital expenditure will be financed by funds generated by the business, existing cash resources and borrowing facilities available to the Group. Lease commitments Future minimum obligations under operating leases: 2006 2005 US$ million Payable in the year ended September: 2006 ........................................................................... — 50 2007 ........................................................................... 54 40 2008 ........................................................................... 43 33 2009 ........................................................................... 34 25 2010 ........................................................................... 24 22 2011 (September 2005: Thereafter) ................................................ 21 55 2012 (September 2006: Thereafter) ................................................ 59 — 235 225 Future minimum obligations under operating leases include the following two significant arrangements: Sale and Lease Back of the Somerset Paper Machine: In 1997 we sold one of our paper machines at our Somerset Mill for US$150 million and entered into a leaseback arrangement. This transaction
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As filed with the Securities and Ex
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OUR USE OF TERMS AND CONVENTIONS IN
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FORWARD-LOOKING STATEMENTS In order
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2 Year Ended September 2006 2005 (U
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Risk Factors In addition to other i
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New technologies or changes in cons
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Several customers account for a sig
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Maintain a global presence. One of
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Major Product Categories Descriptio
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market share was negatively affecte
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The chart below represents the oper
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The following table sets forth appr
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Paper North America’s on-line fin
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of 860,000 metric tonnes of triple-
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a capacity of 60,000 metric tonnes
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customers use our products in the p
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(1) The following table sets forth
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The mill markets paper and excess p
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Pulp Sappi Fine Paper North America
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equired for its operations. Sappi F
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• The National Environmental Mana
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PROPERTY, PLANT AND EQUIPMENT For a
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ITEM 5. OPERATING AND FINANCIAL REV
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) Movement in market prices for our
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The recent price history for benchm
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Demand from all of the market segme
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Raw Material and Other Input Costs
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The exchange rate impact on raw mat
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Our South African businesses have f
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• Any debtors or creditors not in
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Year Ended September 2006 Compared
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US$28 million. Decreased selling pr
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enefit of the reversal of the Usutu
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accounting mismatch, as a result of
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South African residents, who are na
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The increase of US$11 million in fi
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June 2010. The OeKB A tranche and t
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impact on liquidity varies accordin
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Contractual Obligations We have var
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mill is located in Nanchang, the ca
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product pricing, raw material costs
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flows of the related underlying exp
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increases, health care cost trends,
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alance sheet date. Risks, uncertain
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If the Group had applied IFRS 3 ret
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IFRS. The Group did not apply the e
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Where BEE equity credentials are ob
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Environmental Matters We operate in
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Klaas de Kluis (70) (independent).
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Mark Richard Thompson (54) BCom, BA
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Audit Committee An Audit Committee
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estructuring initiatives that occur
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Levies Act, was paid via Internal R
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Pursuant to the Companies Amendment
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on Restitution of Land Rights and a
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(“the Depositary”) with respect
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• any proposal concerning the ado
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Voting Rights Subject to any rights
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equest not less than one-twentieth
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Financial Assistance The Bill enhan
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At the Annual General Meeting of Sh
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African shareholders will be paid t
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purpose of Capital Gains Tax in Sou
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Distributions. The gross amount of
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US Federal Income Tax Consequences
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PART II ITEM 13. DEFAULTS, DIVIDEND
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the controls may become inadequate
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ITEM 16E. PURCHASES OF EQUITY SECUR
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4.10 Credit Facility, dated May 7,
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SAPPI Group Annual Financial Statem
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SAPPI GROUP INCOME STATEMENT for th
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SAPPI GROUP CASH FLOW STATEMENT for
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1. BUSINESS SAPPI NOTES TO THE GROU
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SAPPI NOTES TO THE GROUP ANNUAL FIN
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SAPPI CONDENSED COMPANY BALANCE SHE
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SAPPI CONDENSED COMPANY STATEMENT O
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5. OTHER INCOME 2006 2005 ZAR milli
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2006 20-F - Sappi

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