2006 20-F - Sappi

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SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) for the year ended September 2006 31. FINANCIAL INSTRUMENTS (Continued) Interest rate risk Sappi has a policy of maintaining a balance between fixed rate and variable rate loans that enables it to minimise, on a cost effective basis, the impact on reported earnings while maintaining a reasonably competitive, market-related cost of funding. The specific balance is determined separately for the European, North American and southern African businesses of Sappi to reflect more accurately the different interest rate environments in which these businesses operate. We monitor market conditions and may utilise interest rate derivatives to alter the existing balance between fixed and variable interest loans in response to changes in the interest rate environment. Currency risk Sappi’s foreign exchange policy consists of the following principal elements: • The majority of the borrowings in each country are made in the currency of that country. • Translation risks are not hedged. As a general rule we manage our relative debt and equity ratios by financing our investments in different currencies with similar debt to asset ratios. • All external borrowings raised in currencies other than the domestic operating currency of the borrowing entity are immediately and continuously protected by forward exchange contracts. • All consummated (i.e. invoiced) sales and purchases in foreign currencies are initially netted on a global basis, with the resulting net exposure generally being covered by forward exchange contracts against subsequent fluctuations in exchange rates. • Hedging against trading transactions not yet invoiced is limited. Deviations from these rules require specific board approval. The limitations referred relate to: • material capital expenditures for which forward exchange contracts are always taken out as and when the expenditure is committed; and • anticipated exports and imports where the purchase of forward exchange contracts/currency options is restricted to a limited portion of expected orders. • No speculative positions are permitted. Credit risk A significant portion of the group’s sales and accounts receivable are from major customers. Only one of the group’s major customers, represents more than 10% of our sales during the year ended September 2006. These sales were recorded in Sappi Fine Paper. The sales for the year ended September 2006 to PaperlinX Limited amounted to US$651 million (September 2005: US$580 million). The trade receivables balance, net of securitisation, outstanding on balance sheet at September 2006 was US$58 million (September 2005: US$42 million). Where appropriate, credit insurance has been taken out over the group’s trade receivables. F-90
SAPPI NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued) 31. FINANCIAL INSTRUMENTS (Continued) for the year ended September 2006 None of the group’s other receivable financial instruments represent a concentration of credit risk because the group has dealings with a variety of major banks and customers world-wide. The group has the following amounts due from major customers: 2006 2005 No of customers Value Percentage No of customers Value Percentage Greater than US$10 million . . . . 7 104 21% 6 86 18% Greater than US$5 million..... 8 47 9% 9 72 15% Other amounts............... 2,036 346 70% 2,046 321 67% 2,051 497 100% 2,061 479 100% 2. Derivative financial instruments The following tables indicates the different type of derivative financial instruments, included within the various categories on the face of the balance sheet. F-91 Restated 2006 2005 US$ million Assets Non-current.................................................................... 102 73 Interest rate swaps............................................................ — 3 Interest rate and currency swaps................................................ 102 70 Current........................................................................ 4 5 Foreign currency forward exchange contracts..................................... 4 5 106 78 Liabilities Non-current.................................................................... 23 5 Interest rate swaps............................................................ 23 5 Current........................................................................ 14 3 Interest rate currency swaps.................................................... — 3 Foreign currency forward exchange contracts..................................... 14 — 37 8 3. Interest rate risk and currency risk Interest-bearing borrowings The table below provides information about Sappi’s non-current borrowings that are sensitive to changes in interest rates. The table presents principal cash flows by expected maturity dates. The average fixed effective interest rates presented below are based on weighted average contract rates applicable to the amount expected to mature in each respective year. Forward looking average variable effective interest rates for the financial
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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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Page 267 and 268: 5. OTHER INCOME 2006 2005 ZAR milli
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2006 20-F - Sappi

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