SAPPI LIMITED

SAPPI
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)
for the year ended September 2010
6. TAXATION CHARGE (BENEFIT) (Continued)
Reconciliation of the tax rate
2010 2009
(US$ million)
2008
Profit (loss) before taxation ...................... 86 (218) 188
Profit-making regions .......................... 307 133 560
Loss-making regions ........................... (221) (351) (372)
Taxation at the average statutory tax rate ............ 35 (60) 72
Profit-making regions at 30% (2009: 28%; 2008: 30%) . . . 92 38 167
Loss-making regions at 26% (2009: 28%; 2008: 26%) . . . (57) (98) (95)
Net exempt income and non-tax deductible expenditure . (10) (32) (51)
Effect of tax rate changes ....................... — (3) (9)
Deferred tax asset not recognized ................. 65 72 103
Utilization of previously unrecognized tax assets ....... (54) (22) (19)
Secondary Tax on Companies (STC) ............... — 4 7
Prior year adjustments ......................... (20) (4) (19)
Other taxes ................................. 4 4 2
Taxation charge (benefit) ........................ 20 (41) 86
Effective tax rate for the year ..................... 23% 19% 46%
Our effective tax rate reflects the benefits from reduced tax rates in South Africa (2010: nil; 2009: nil;
2008: US$9 million) and Germany (2010: nil; 2009: US$3 million; 2008: nil). The corporate tax rate in
South Africa was reduced from 29% to 28% in 2008. The corporate tax rate (including trade tax) in
Germany was reduced from 30% to 28.6% in 2009.
7. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share (EPS)
EPS is based on the group’s profit (loss) for the year divided by the weighted average number of
shares in issue during the year under review.
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