SAPPI LIMITED

than we use. By region, the South African operations are net sellers of pulp, Sappi Fine Paper North
America produces slightly more pulp than it uses and the European operations are approximately 51%
integrated. The expansion of our Saiccor mill in South Africa increased pulp production by
approximately 200,000 tonnes. Approximately 70% of the wood requirements of Sappi Southern Africa
are from sources either owned or managed by us. Both the North American and European operations
are dependent on outside suppliers of wood for their pulp production requirements.
Beneficial Shareholding by Region
On November 5, 1998, our American Depositary Receipts commenced trading on the New York
Stock Exchange. Based on available information, as of September 23, 2010 we believe beneficial
shareholding by region is as follows:
2010
September
2009
%
2008
North America ................................. 16 12 17
Europe & elsewhere ............................. 13 13 14
Southern Africa ................................. 71 75 69
100 100 100
Source: Registered addresses and disclosure by nominee companies, excluding the shares owned by a subsidiary of
Sappi.
Principal Factors Impacting our Group Results
Our results of operations are affected by numerous factors. Given the high fixed cost base of pulp
and paper manufacturers, industry profitability is highly sensitive to changes in sales prices. Prices are
significantly affected by changes in industry capacity and output levels, customer inventory levels and
cyclical changes in the world economy. Profitability in the industry is, however, also influenced by factors
such as sales volume, the level of raw material, energy, chemicals and other input costs, exchange rates,
and operational efficiency.
The principal factors that have impacted the business during the fiscal periods presented in the
following discussion and analysis and that are likely to continue to impact the business are:
(a) New acquisitions, expansions, restructuring, cost-reduction initiatives, our ability to maintain
and continuously improve operational efficiencies and performance, and other significant
factors impacting costs;
(b) Cyclical nature of the industry and its impact on sales volume;
(c) Movement in market prices for products and for raw materials and other input costs of
manufacturing; and
(d) Sensitivity to currency movements and inflation rates.
Because many of these factors are beyond our control and certain of these factors have historically
been volatile, past performance is not necessarily indicative of future performance and it is difficult to
predict future performance with any degree of certainty.
Acquisitions, Expansions, Restructurings and Cost-reduction Initiatives
We continually evaluate the performance of our assets by maintaining a focus on profitability and we
actively manage our asset base on a regional basis, including closing non-performing assets and
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