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Name | Symbol | Market | Type |
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Qnb Fin 24 | LSE:79CK | London | Medium Term Loan |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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RNS Number:6948O Sappi Ld 31 July 2000 Highlights - Markets remain buoyant - Quarterly performance year on year - Earnings per share doubled to 39 US cents - Operating profit up 85% - Strong returns - On net assets 17% - On equity 23% - Further decline in net debt Summary Quarter ended Nine months ended 30 June 31 March 30 June 30 June 30 June 2000 2000 1999 2000 1999 Sales (US$ million) 1,170 1,187 1,042 3,472 3,157 Operating profit (US$ million) 181 165 98 473 277 EBITDA (US$ million) 278 262 186 767 560 Operating profit to sales (%) 15.5 13.9 9.4 13.6 8.8 EBITDA to Sales (%) 23.7 22.1 17.9 22.1 17.7 Operating profit to average net assets (%) 17.5 15.8 9.9 15.8 8.3 EPS before exceptional items (Headline) (US cents) 39 32 19 97 49 EPS (US cents) 41 29 4 99 27 Net Assets (US$ million) 4,188 4,091 3,931 4,188 3,931 Net Debt (US$ million) 1,495 1,553 2,281 1,495 2,281 Tons referred to in this report are metric tons. Comment Operating review The upward momentum in our major business sectors continued through the quarter with firm to strong demand in the major markets and achievement of further price increases. The margins of the Fine Paper business grew less rapidly than the Forest Products business as a result of the difficulty in increasing paper prices at the pace of pulp prices which increased to US$670 per ton in April, up from US$450 per ton a year earlier. The group as a whole is close to 90% pulp integrated and is therefore largely insulated from the rising pulp costs. Fine paper The Fine Paper business has leading market shares in the fast growing coated woodfree paper sector. Europe The European market was strong with good order inflows. The Euro weakened to record low levels against the US Dollar during the quarter before regaining some ground. This boosted coated paper exports from Europe to the Americas and Asia. European coated woodfree paper prices increased by approximately 5% effective from April. These increases were fully implemented in May for all coated paper grades and further increases of around 5% were implemented in July. We launched two new products during the quarter to meet the future needs of our customers. Xpress is a new coated nearwoodfree publications grade in lighter weights, and Magno Pearl is a new luxury-finish in the leading Magno range. Gratkorn Mill's Paper Machine 11 which produces triple coated paper is now consistently running at its design capacity, well ahead of the original timetable. Quarter ended 30 June 2000 30 June 1999 % US$ million US$ million Change Sales 489 423 16 Operating profit 65 34 91 Operating margin (%) 13 8 63 EBITDA 108 77 40 EBITDA margin (%) 22 18 22 RONOA p.a (%) 18 8 125 The 16% increase in sales was made up of 5% sales volume growth and 11% increase in prices in dollars. In Euro terms prices were 21% higher than the equivalent quarter last year. Paper price increases were accelerated by the rapid increase in the Euro cost of pulp. Tight cost control and continued achievement of acquisition synergies resulted in significant fixed cost savings. We are on track to achieve US$200 million per annum of synergies arising from the acquisition by the end of this financial year. The operating margin at 13% and the return on net operating assets in the third quarter of 18% were both substantially higher than a year ago. North America The North American market for coated paper was hurt by imports from Asia and Europe as a result of the relatively strong dollar. Producer inventories have increased since October 1999 and are now at a similar level to last year. Demand typically increases in our fourth financial quarter, which is the catalogue season and we expect our inventories of finished goods and work in progress to decrease to normal over this period. Price increases for coated woodfree web paper were realised during the quarter. A further price increase of US$36 per ton has been announced by many producers for July 2000 but the implementation is slow and the full benefit is unlikely to be felt until October. Quarter ended 30 June 2000 30 June 1999 % US$ million US$ million Change Sales 400 368 9 Operating profit 45 29 55 Operating margin (%) 11 8 38 EBITDA 72 51 41 EBITDA margin (%) 18 14 29 RONOA p.a. (%) 15 9 67 Sales increased by 9% as a result of volume and price increases. Volumes were, however, weaker than the March quarter partly as a result of seasonal factors and partly as a result of strong imports. The increases in variable costs driven by rising pulp prices were partly offset by tight cost control. Fixed costs per ton declined 8% as a result of the team initiatives developed throughout the business and improved productivity compared to the equivalent quarter last year. Operating profit increased 55% compared to a year earlier as a result of these factors. The operating margin for the quarter of 11% and the return on net operating assets of 15% were respectively substantially higher than a year ago. South Africa The South African fine paper business, which represents approximately 5% of group sales, showed some improvement improvement in the quarter but was still down on the equivalent quarter last year. Quarter ended 30 June 2000 30 June 1999 % US$ million US$ million Change Sales 59 60 (2) Operating profit 5 10 (50) Operating margin (%) 8 17 (53) EBITDA 7 12 (42) EBITDA margin (%) 12 20 (40) RONOA p.a. (%) 11 24 (54) Selling prices still suffered from strong competition from Europe at lower prices as a result of the weak Euro and strong Rand earlier in the year. This has since been counteracted by the weakening of the Rand. Variable costs have been influenced by rising pulp prices (supplied by Sappi Forest Products). Fixed costs were high as a result of non-routine maintenance in the period and increased promotional spending. Underlying performance has shown an improving trend through the quarter, and we expect that to continue through the fourth quarter. The Forest Products business comprises primarily market pulp (including dissolving pulp), packaging paper and solid wood products. Demand has been strong during the quarter. NBSK pulp prices have continued to rise as have dissolving pulp prices, influenced not only by paper pulp prices but also by strengthening demand for viscose. The market pulp income stream provides the Sappi group with an economic hedge for the pulp which its fine paper business purchases. Quarter ended 30 June 2000 30 June 1999 % US$ million US$ million Change Sales 222 191 16 Operating profit 61 22 177 Operating margin (%) 27 12 125 EBITDA 86 43 100 EBITDA Margin (%) 39 23 70 RONOA p.a. (%) 22 7 214 Sales increased by 16% as a result of the strong increase in prices. Costs were well contained and productivity continued to improve. Usutu Mill, which had performed poorly last year, improved further and the mill reported a significant operating profit for the quarter. The Forest Products' operating profit for the quarter trebled compared to the same quarter last year. The bulk of the improvement was related to price and a more favourable product mix and the balance came from improved cost control and productivity. The operating margin reached 27% and can be expected to improve further. Return on net operating assets was a very pleasing 22% and reflects the benefit of having this low cost operation in the group. Group Results for the Quarter Consolidated sales were US$1170 million for the quarter, a 12% increase on the same period last year, largely as a result of higher prices. Earnings per share before exceptional items of 39 US cents were 105% above the 19 US cents in the equivalent period last year and 22% higher than the 32 US cents in the preceding quarter. Operating profit increased 85% to US$181 million compared to the equivalent quarter last year. Average selling prices increased by 12% but cost per ton increases were contained to only 4% largely as a result of pulp price increases partly offset by operating fixed costs. The operating margin increased to 15.5% and RONA rose to 17.5%, well in excess of the group's cost of capital. Net finance costs continued to decline in line with the reducing debt and refinancing action reported last quarter and were US$9 million (22%) lower than the equivalent quarter last year. The net tax rate for the quarter declined compared to the previous quarter as a result of the restructuring following the acquisition of the Leykam Murztaler minorities. The low deferred tax rate in the comparative quarter last year was mainly the result of a decrease in South African tax rates. The acquisition of Leykam Murztaler shares, which was completed during the quarter, was accounted for with effect from 1 April 2000. As a result of owning 100% of the business and the resulting impact on taxation, the acquisition is expected to have an annual impact on after tax profit of approximately US$25 million. The improved operating performance and lower finance costs and higher pulp prices resulted in a 119% increase in earnings before exceptional items compared to the equivalent period last year and a 24% increase compared to the March quarter. Cash Flow and Debt Reduction Cash flow was strong during the quarter resulting in a continued reduction in the net debt, which fell a further US$58 million after payment of approximately US$90 million to acquire the Leykam Murztaler minorities and a seasonal increase in inventories. Debt to total capitalisation declined to 33.9% from 44.3% in September 1999 and 35.3% the previous quarter. Net debt has declined by US$786 million over 12 months to US$1,495 million. Sale of Novobord In May we announced the sale of Sappi Novobord, which manufactures particleboard, to Sonae Industria, the world's largest producer of particleboard. The sale is subject to Competition Commission approval. The Commission's decision is expected during August, in time for the completion of the sale in this financial year. The sale will result in a significant one-time gain but is not expected to have any material impact on future earnings. Outlook Continued strong growth in our major markets has led to further paper and pulp demand and price increases in July. These increases are already being realised in Europe but will not be fully realised in the United States until October. Producer inventories were slightly above the level of a year ago in the United States. We will manage production to meet our customers' demand and avoid any unnecessary build up in our inventories. In Europe we continue to see strong demand and no indication of the typical summer slow-down. Overall, the momentum achieved in the first three quarters is expected to continue and we therefore expect continued strong earnings in the final quarter. On behalf of the board E van As Director D G Wilson Director 28 July 2000 sappi limited (Registration No.1936/008963/06) Forward-looking statements Certain statements in this report that are neither reported financial results nor other historical information, are forward-looking statements, including, but not limited to statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors, that could cause actual results and company plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results). Such risks, uncertainties and factors include, but are not limited to the highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production and pricing), adverse changes in the markets for the group's products, consequences of substantial leverage, changing regulatory requirements, unanticipated production disruptions, economic and political conditions in international markets, the impact of investments, acquisitions and dispositions (including related financing) and currency fluctuations. The company undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise. consolidated income statements Unaudited Unaudited Quarter ended Nine months ended 30 June 30 June % 30 June 30 June % 2000 1999 change 2000 1999 change US$ US$ US$ US$ million million million million Sales 1,170 1,042 12.3 3,472 3,157 10.0 Cost of sales 889 847 2,709 2,611 ---------------- ---------------- Gross profit 281 195 44.1 763 546 39.7 Selling, general & administrative expenses 100 97 290 269 ---------------- ---------------- Operating profit 181 98 84.7 473 277 70.8 Non-trading income (loss) (2) (50) 2 (73) Net finance costs 31 40 101 125 Net paid 39 50 128 161 Capitalised (8) (10) (27) (36) Profit before tax 148 8 374 79 Taxation - current 10 3 46 34 - deferred 39 (8) 86 (23) ---------------- ---------------- Profit after tax 99 13 661.5 242 68 255.9 Income attributable to minority interests 1 3 8 8 ---------------- ---------------- Net profit for the period 98 10 880.0 234 60 290.0 ---------------- ---------------- EBITDA 278 186 49.0 767 560 36.9 Basic earnings per share (US cents) 41 4 99 27 Basic earnings before exceptional items (Headline earnings) per share (US cents) 39 19 97 49 Weighted average number of shares in issue (millions) 239.1 223.8 236.2 223.8 Diluted earnings per share (US cents) 40 4 98 27 Diluted earnings before exceptional items Headline earnings) per share (US cents) 39 19 96 48 Weighted average number of shares on fully diluted basis (millions) 244.8 224.5 241.9 229.4 Calculation of earnings before exceptional items (Headline) not of tax Net profit 98 10 234 60 (Profit) loss on disposal of business and fixed assets 1 - (1) 4 Accelerated cost of early buy back of loan notes - - 11 - (Decrease) increase in other provisions (5) 33 (14) 46 ---------------- ---------------- Earnings(before exceptional items Headline) 94 43 230 110 ---------------- ---------------- Consolidated Balance Sheet Unaudited at Audited at 30 June 2000 30 September 1999 US$ million US$ million ASSETS Non-current assets 3,890 4,324 Property, plant and equipment 3,256 3,665 Plantations 376 406 Deferred taxation 68 69 Other non-current assets 190 184 Current assets 1,322 1,154 Bank balances and deposits 394 154 Collateral deposits - 104 Other current assets 928 896 Total assets 5,212 5,478 EQUITY AND LIABILITIES Capital and reserves Ordinary shareholders' interest 1,719 1,559 Minority Interest 63 155 Non-current liabilities 2,406 2,075 Long-term borrowings 1,661 1,376 Deferred taxation 503 454 Other long-term liabilities 242 245 Current liabilities 1,024 1,689 Interest bearing liabilities 143 698 Bank overdraft 85 118 Other current liabilities 796 873 Total equity and liabilities 5,212 5,478 Number of shares in issue (millions) 239.1 224.6 Net debt (US$ million) 1,495 2,038 Net debt to Total Capitalisation (%) 33.9 44.3 Net asset value per share (US cents) 901 866 Consolidated Cash Flow Statement Unaudited Unaudited Nine months ended Nine months ended 30 June 2000 30 June 1999 US$ million US$ million Cash generated by operations 784 511 Movement in working capital (115) 23 Net finance cost (128) (161) Taxation (16) (36) Dividends paid (45) (37) Cash retained from operating activities 480 300 Cash effects of investing activities (54) (57) ------- ------ 426 243 Cash effects of financing activities (168) (558) ------- ------ Net movement in cash and cash equivalents 258 (315) ======= ====== Consolidated Statement of Changes in Shareholders' Equity Unaudited Unaudited Nine months ended Nine months ended 30 June 2000 30 June 1999 US$ million US$ million Balance at 1 October 1,559 1,597 Net profit for the period 234 60 Foreign currency translation reserve (179) (114) Issuance of ordinary shares 116 - Goodwill written off to equity (11) (9) ------ ------ Balance at 30 June 1,719 1,534 ====== ====== Interim Results - Three and Nine months ended 30 June 2000 Notes to the interim report 1. Basis of Preparation This interim report has been prepared in conformity with South African statements of Generally Accepted Accounting Practice. The same accounting policies have been followed in this interim report, as were used in the September 1999 annual financial statements. The financial results for the quarter have been reviewed by the group's auditors, Deloitte & Touche. Their report is available for inspection at the company's registered offices. Sappi has prepared this financial report in US Dollars Unaudited Unaudited Quarter ended Nine months ended 30 June 2000 30 June 1999 30 June 2000 30 June 1999 US$ million US$ million US$ million US$ million 2. Cost of sales Included in cost of sales are: Depreciation 83 80 250 250 Amortisation and fellings 14 8 44 33 ----------------------------------------------------- 97 88 294 283 ----------------------------------------------------- 3. Capital expenditure Fixed assets 122 149 Plantations 25 19 ---------------------- 147 168 ---------------------- Unaudited Audited 30 June 2000 30 September 1999 US$ million US$ million 4. Capital Commitments Contracted but not provided 57 39 Approved but not contracted 170 62 --------------------------- 227 101 =========================== 5. Contingent liabilities Guarantees and suretyships 104 83 Bills discounted - 6 Other contingent liabilities 56 59 Interim Results - Three and Nine months ended 30 June 2000 Regional Information Unaudited Quarter ended Nine months ended 30 June 30 June % 30 June 30 June % 2000 1999 change 2000 1999 change US$ US$ US$ US$ million million million million Sales - Metric tons Fine Paper - North America 327 320 2.2 1,028 962 6.9 Europe 581 554 4.9 1,694 1,588 6.7 Southern Africa 71 69 2.9 206 195 5.6 Total 979 943 3.8 2,928 2,745 6.7 Forest products 669 694 (3.6) 2,030 1,902 6.7 ---------------- ---------------- Total 1,648 1,637 0.7 4,958 4,647 6.7 ---------------- ---------------- Sales Fine Paper - North America 400 368 8.7 1,226 1,126 8.9 Europe 489 423 15.6 1,418 1,324 7.1 Southern Africa 59 60 (1.7) 178 171 4.1 --------------- ---------------- Total 948 851 11.4 2,822 2,621 7.7 Forest Products 222 191 16.2 650 536 21.3 --------------- ---------------- Total 1,170 1,042 12.3 3,472 3,157 10.0 --------------- ---------------- Operating profit Fine Paper - North America 45 29 55.2 125 95 31.6 Europe 65 34 91.2 182 91 100.0 Southern Africa 5 10 (50.0) 14 25 (44.0) --------------- ---------------- Total 115 73 57.5 321 211 52.1 Forest Products 61 22 177.3 135 51 164.7 Sappi Trading & Corporate 5 3 66.7 17 15 13.3 --------------- ---------------- Total 181 98 84.7 473 277 70.8 --------------- ---------------- Earnings before interest, tax, depreciation and amortisation charges ** Fine Paper - North America 72 51 41.2 205 168 22.0 Europe 108 77 40.3 308 228 35.1 Southern Africa 7 12 (41.7) 20 32 (37.5) --------------- ---------------- Total 187 140 33.6 533 428 24.5 Forest Products 86 43 100.0 216 117 84.6 Sappi Trading & Corporate 5 3 66.7 18 15 20.0 --------------- ---------------- Total 278 186 49.5 767 560 37.0 --------------- ---------------- Net operating assets Fine Paper North America 1,200 1,279 (6.2) 1,200 1,279 (6.2) Europe 1,455 1,701 (14.5) 1,455 1,701 (14.5) Southern Africa 171 174 (1.7) 171 174 (1.7) --------------- ---------------- Total 2,826 3,154 (10.4) 2,826 3,154 (10.4) Forest Products 1,099 1,255 (12.4) 1,099 1,255 (12.4) Sappi Trading & Corporate 29 160 (81.9) 29 160 (81.9) --------------- ---------------- Total 3,954 4,569 (13.5) 3,954 4,569 (13.5) --------------- ---------------- ** before non-trading income (loss) Summary 30 June 2000 Quarter ended Nine months ended 30 June 31 March 30 June 30 June 30 June 2000 2000 1999 2000 1999 Sales (US$ million) 1,170 1,187 1,042 3,472 3,157 Operating profit (US$ million) 181 165 98 473 277 EBITDA (US$ million) 278 262 186 767 560 Operating profit to sales (%) 15.5 13.9 9.4 13.6 8.8 EBITDA to sales (%) 23.7 22.1 17.9 22.1 17.7 Operating profit to average net assets (%) 17.5 15.8 9.9 15.8 8.3 Basic EPS before exceptional items (Headline) (US cents) 39 32 19 97 49 Basic EPS (US cents) 41 29 4 99 27 EBITDA per share (US cents) 116 110 83 325 250 Net Assets (US$ million) 4,188 4 091 3 931 4,188 3 931 Net Debt (US$ million) 1,495 1,553 2,281 1,495 2,281 Return on Equity 22.9 16.3 2.7 19.0 5.1 Summary Rand Transaction 30 June 2000 Quarter ended Nine months ended 30 June 30 June % 30 June 30 June % 2000 1999 change 2000 1999 change Sales (ZAR million) 7,927 6,404 23.8 22,207 18,918 17.4 Operating profit (ZAR million) 1,226 604 103.0 3,025 1,657 82.6 Profit after taxation (ZAR million) 671 79 749.4 1,548 406 281.2 EBITDA (ZAR million) 1,881 1,144 64.4 4,903 3,354 46.2 Operating profit to sales (%) 15.5 9.4 13.6 8.8 EBITDA to sales (%) 23.7 17.9 22.1 17.7 Operating profit to average net assets (%) 17.8 9.9 15.7 8.4 Basic EPS before exceptional items (Headline) (SA cents) 266 118 125.5 623 293 112.6 Basic EPS (SA cents) 278 27 929.6 634 161 293.8 EBITDA per share (SA cents) 787 511 54.0 2,076 1,499 38.5 Net debt (ZAR million) 10,218 13,808 (26.0) 10,218 13,808 (26.0) Net debt to total capitalisation 33.9 48.0 33.9 48.0 Cash generated by operations (ZAR million) 5,015 3,062 63.8 Cash retained from operating activities (ZAR million) 3,070 1,798 Net movement in cash and cash equivalents (ZAR million) 1,650 (1,888) Exchange rates: Period end rate: US $1 = R 6.835 6.055 6.835 6.055 Average rate: US $1 = R 6.775 6.145 6.396 5.992 Period end rate: US $1 = EURO 1.063 0.967 1.063 0.967 Average rate: US $1 = EURO 1.065 0.945 1.008 0.895
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