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Qnb Fin 24 | LSE:79CK | London | Medium Term Loan |
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RNS Number:9491M Sappi Ld 12 November 2001 Press Release Johannesburg, 12th November 2001 Sappi increases dividend on robust results despite difficult market conditions Sappi, the world's leading producer of coated fine paper, today announced year-end and fourth quarter results for the period to September 2001. Annual results - Highlights * Net profit before exceptional items for the year was US$263 million, 24% below last year * Earnings per share before exceptional items were 113 US cents, 23% below last year * In Rand terms, earnings per share only 6% down at 899 SA cents * Closure of Mobile Mill creates pro forma benefit of US$35 million before tax profit * Group ends the year with strong balance sheet - Generated cash flow of US$797 million (EBITDA) - Gearing reduced further to 30.4% * Dividend 26 US cents or approximately R2.50 - an increase of 33% in Rands Commenting on the results, Sappi Executive Chairman, Eugene van As, said: "Against a very challenging background of difficult market conditions resulting in low demand for most of our products the group produced robust results. In particular, the geographic spread of our assets allowed us to take advantage of strong markets and minimize the impact of weaker markets and reduced the impact of any one currency movement. In addition, the scale and efficiency of our operating assets and our leading brands combined to assist the group perform at the top end of the sector. For South African investors, the group has confirmed its status as a strong Rand hedge." Results for the Year The group's net profit before exceptional items for the year was US$263 million, 24% below last year and earnings per share before exceptional items were 113 US cents, 23% below last year, a good performance in the very difficult circumstances that prevailed. Had the Mobile mill been closed (with associated overhead cost reductions) at the beginning of the year there would have been a benefit of approximately US$35 million before tax or approximately 9 US cents per share after tax. Earnings after closure costs and one-time adjustments were US$138 million, 62% below last year, and earnings per share were 59 US cents. Finance costs continued to decline because of lower indebtedness and lower interest. Net finance costs paid before capitalised interest were 13% lower than a year earlier. Sappi ended the year with a strong balance sheet and the business continued to generate healthy cash flow of US$797 million (EBITDA) for the year. The net debt to total capitalisation ratio dropped to 30.4% compared to 32.5% a year ago. In keeping with Sappi's stated policy to grow dividends by at least inflation, the Board has declared a dividend of 26 US cents, representing a 4% increase over the previous year. The Rand hedge quality of the Sappi share is shown by the fact that this represents a 33% increase in the Rand dividend to approximately R2.50. Operational Review Fine Paper It was a difficult year in the fine paper markets, particularly in North America, which experienced its biggest ever percentage decline in demand. A significant portion of reduced North American shipments was due to de-stocking by merchants and printers. Local US producers were further affected by increasing imports from Europe and Asia, which resulted in significant pressure on price and volume. In Europe there was also a significant decline in orders throughout the coated woodfree sector as the inventory throughout the pipeline was reduced. Producers reduced production to keep supply and demand in balance. Sappi Fine Paper South Africa had an excellent year, producing record profits in Rand terms. It recovered its coated market position in South Africa, which had been eroded in the previous year by imports. Commenting on the fine paper division's overall performance Bill Sheffield, Fine Paper CEO said. "Against very tough market conditions the division held up well. The North American business responded to its softening market with rigorous cost control and was also helped by the falling pulp price. Sappi Fine Paper Europe performed well due to a relentless focus on managing fixed costs, curtailing production and by driving for maximum efficiency from operations. Across all our markets, Sappi's strong brands held up better than most during this difficult period." Forest Products Despite the significant reduction in the pulp price the Forest Products business delivered good results, due in the main to its low cost base and some currency benefits. In a tough environment both locally and internationally, the division continued to generate good returns against its weighted average cost of capital. John Job, Forest Products CEO said "Our southern African markets have held up well and both our forest products and global fine papers businesses have demonstrated their value as Rand hedges". Outlook Sappi said that the group was expecting a slow start to the year with the North American business bearing the brunt of the downturn. In Europe however demand for coated free sheet is reasonably stable. Global industry inventory levels are low at consumer and merchant level, and although end use consumption is likely to be lower because of a weaker economy, demand for the group's products should not decline much, if at all, in the coming year. Sappi's results in the first quarter will be sharply down because of the USA situation and curtailment on all continents but particularly because two of the group's largest profit contributors, the Somerset and Ngodwana mills, will have their main maintenance shuts (held every 30 months) in October. In terms of new international accounting standards the charges will be taken in the quarter and not spread over the period between shuts as in the past. Commenting on the outlook Eugene van As said; "Despite these difficulties anticipated in the first quarter, with the information now at our disposal and barring further deterioration of the global economic outlook, we expect earnings, after the first quarter, to return to levels similar to the recent past. The group has a strong balance sheet, a high cash interest cover and is geographically spread which puts us in a position to take advantage of an upturn when it comes." ends 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. Released on behalf of Sappi by Brunswick, telephone 44 11 442 8803 For further information contact: Robert Hope, Director Strategic Development Sappi Limited Tel: +27 (0) 11 407 8492 Fax: +27 (0) 11 403 1493 robho@za.sappi.com Andre F Oberholzer, Corporate Affairs and Communication Manager Sappi Limited +27(0) 11-407 8044 work (direct) +27(0) 11-403 8236 fax +27(0) 82-906 0638 cellular andreo@za.sappi.com SAPPI LIMITED Group income statements Unaudited Quarter ended Sept.2001 Sept.2000 US$ million US$ million % change Sales 998 1,246 (19.9) Cost of sales 816 941 _________________________________ Gross profit 182 305 (40.3) Selling, general & administrative expenses 91 106 _________________________________ Operating profit 91 199 (54.3) _________________________________ Non-trading (loss) profit (3) 13 Net finance costs 36 13 _________________________________ Net paid * 42 33 Capitalised (6) (20) _________________________________ Profit before tax 52 199 Taxation - current 47 27 - deferred (42) 38 _________________________________ Profit after tax 47 134 Income attributable to minority interests - 5 _________________________________ Net profit 47 129 _________________________________ EBITDA 175 285 (38.6) _________________________________ Basic earnings per share (US cents) 20 54 Basic earnings before exceptional items (Headline earnings) per share (US cents) 23 49 Weighted average number of shares in issue 229.6 239.1 (millions) Diluted earnings per share (US cents) 20 52 Diluted earnings before exceptional items (Headline earnings) per share (US cents) 23 48 Weighted average number of shares on fully diluted basis (millions) 232.6 259.8 Calculation of Earnings before exceptional items (Headline) net of tax Net profit 47 129 Loss / (profit) on disposal of business and fixed assets 4 (21) Mill closure costs and asset impairments (2) 8 Deferred finance fees written off on early settlement of 5 - loans Decrease in other provisions (1) (1) _________________________________ Earnings before exceptional items (Headline) 53 115 _________________________________ Audited Year ended Sept. 2001 Sept. 2000 US$ million US$ million % change Sales 4,184 4,718 (11.3) Cost of sales 3,375 3,650 _____________________________________ Gross profit 809 1,068 (24.3) Selling, general & administrative expenses 363 396 _____________________________________ Operating profit 446 672 (33.6) Non-trading (loss) profit (207) (2) Net finance costs 92 97 _____________________________________ Net paid 125 144 Capitalised (33) (47) _____________________________________ Profit before tax 147 573 Taxation - current 88 73 - deferred (79) 124 _____________________________________ Profit after tax 138 376 (63.3) Income attributable to minority interests - 13 _____________________________________ Net profit 138 363 (62.0) EBITDA 797 1,052 (24.3) _____________________________________ Basic earnings per share (US cents) 59 153 Basic earnings before exceptional items (Headline earnings) per share (US cents) 113 146 Weighted average number of shares in issue (millions) 232.8 236.9 Diluted earnings per share (US cents) 59 151 Diluted earnings before exceptional items (Headline earnings) per share (US cents) 112 144 Weighted average number of shares on fully diluted basis (millions) 235.2 245.5 Calculation of Earnings before exceptional items (Headline) net of tax Net profit 138 363 Loss / (profit) on disposal of business and fixed assets 4 (22) Mill closure costs and asset impairments 118 8 Deferred finance fees written off on early settlement of loans 5 11 Decrease in other provisions (2) (13) _____________________________________ Earnings before exceptional items (Headline) 263 347 _____________________________________ * Including marking foreign currency contracts to market and other foreign exchange losses of US$ 13 million SAPPI LIMITED Group balance sheet Audited Audited September 2001 September 2000 US$ million US$ million ________________________________ ASSETS Non-current assets 3,346 3,600 ________________________________ Property, plant and equipment 2,890 3,095 Plantations 324 372 Deferred taxation 4 37 Other non-current assets 128 96 ________________________________ Current assets 1,160 1,168 ________________________________ Cash and cash equivalents 445 294 Trade and other receivables 202 319 Inventories 513 555 ________________________________ Total assets 4,506 4,768 ________________________________ EQUITY AND LIABILITIES Capital and reserves Ordinary shareholders' interest 1,503 1,618 Minority interest 3 53 Non-current liabilities 1,640 1,996 ________________________________ Interest bearing borrowings 1,014 1,278 Deferred taxation 385 500 Other non-current liabilities 241 218 ________________________________ Current liabilities 1,360 1,101 ________________________________ Interest bearing borrowings and bank overdraft 559 238 Other current liabilities 801 863 ________________________________ Total equity and liabilities 4,506 4,768 ________________________________ Number of shares in issue (millions) 229.5 239.1 Net Debt (US$ million) 1,128 1,270 Net Debt to Total Capitalisation (%) 30.4 32.5 Net asset value per share (US cents) 821 870 * Restated for reclassification of minority interest to debt in September 2001, as if processed in September 2000 SAPPI LIMITED Group cash flow statement Audited Audited Year ended Year ended September 2001 September 2000 US$ million US$ million ________________________________ Cash generated by operations 771 1,048 Movement in working capital 51 (61) Net finance costs (125) (144) Taxation paid (94) (12) Dividends paid (60) (42) ________________________________ Cash retained from operating activities 543 789 Cash effects of investing activities (305) (68) ________________________________ 238 721 Cash effects of financing activities (88) (564) ________________________________ Net movement in cash and cash equivalents 150 157 ________________________________
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