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Name | Symbol | Market | Type |
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Qnb Fin 24 | LSE:79CK | London | Medium Term Loan |
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RNS Number:1266D Sappi Ld 4 May 2001 Johannesburg, 4th May 2001 Sappi second quarter headline earnings match last year's. Sappi, the world's leading producer of coated fine paper, today announced results for the second quarter 2001. Results - Highlights * Earnings per share before exceptional items in dollar terms match last year despite difficult trading conditions in North American and European markets. * Earnings per share before exceptional items in Rand terms up 27% (up 42% for the half year) * Operating profit down but net profit up 7% * Fine Paper South Africa performs well * Forest Products continues its strong performance * Inventory levels held through curtailed production * Cash flows remain strong * Share buy back successful * Mobile Mill to close The geographic diversity of Sappi's operations has helped the group during a tough second quarter. In addition, the strong underlying operating fundamentals of Sappi's businesses are reflected in the Group's above average performance during the quarter. Results for the Quarter The group's net profit for the quarter increased 7% compared to the same quarter last year to $75 million. Earnings per share were 32 US cents, up 10% compared to a year ago but earnings before exceptional items (Headline) of 32 US cents were the same as last year, but 27% up in Rand terms (half year up 42%). Operating profit however was down 27% to $121 million because of the tough trading conditions, particularly in North America. However, net finance costs for the quarter were $16 million, compared to $43 million last year, which included a $17 million charge relating to refinancing. Taxation for the quarter was $28 million, an effective tax rate of 27 %, lower than the prior quarter as a result of the regional mix of profit Sales volumes of continuing operations declined by 4% but market shares generally improved and prices were slightly above a year earlier in dollar terms, although in local currency terms the prices in Europe and Southern Africa were significantly higher. The group continued to generate a strong cash-flow (EBITDA $210 million) in the quarter. Over 30 % of this, approximately $66 million, was used to repurchase shares. Capital expenditure of $58 million was lower than the previous quarter. Expenditure in the first two quarters is in line with the plan for the year. A further $60 million was paid to shareholders in the form of the year 2000 dividend. Net debt was stable during the quarter at $1 277 million and the debt to total capitalisation ratio was 33.8%. Operational Review Fine Paper Overall the performance of Sappi Fine Paper was affected by weaker demand in Sappi's major markets combined with a decline in paper prices, resulting in reduced margins and returns. Fine Paper continued to control inventories and during the quarter idled more than 10 % of its coated woodfree capacity. Fine Paper Europe experienced reduced order inflows and subsequently cut back production levels to match customer requirements and hold inventory levels. Although prices achieved increased 9% in Euros they were slightly lower in dollar terms and this combined with lower volumes resulted in reduced operating income. Fixed costs were tightly managed. Fine Paper North America experienced particularly tough market conditions with pressure on coated fine paper volumes and prices and high pulp and energy costs. Sales volume was 6% down which although disappointing, still reflected an increase in market share. The continued drain of the uncoated fine paper business' operating loss, which amounted to approximately $10 million, further depressed the overall North American operating performance. The Mobile mill, where these products are made, was acquired through the SD Warren acquisition, and is located on a multi-user site. The energy supplier filed for bankruptcy after closure of a pulp mill on the site, resulting in dramatically increased energy costs. Sappi cannot invest in this site without a better overall cost structure and has therefore decided to close the facility subject to the completion of a final review. Although closure of Mobile would result in a restructuring charge of approximately $120 million after tax in the third quarter, it would result in a positive cash generation of approximately $30 million. Assuming the mill had been closed in December 2000, the second quarter operating profit in North America would have increased more than 75 % to $23 million and group earnings would have increased by 2.5 US cents per share for the quarter. The South African fine paper business experienced a good quarter. Operating income increased 80% to $9 million, albeit off a depressed performance in the previous year. Operating margin increased to 16% and return on net operating assets increased to 36%. Forest Products Sappi Forest Products had a strong quarter with good demand from the domestic market and better prices due to the strong dollar. Although sales volumes were down 5% due to the exclusion of Novobord and Mining Timber, operating profit increased by 25% as the cost per ton of goods sold declined by 14% in dollar terms, because of excellent cost control and the strength of the US dollar. Share buy back Commenting on the share buy back Finance Director, Don Wilson said that the group had received very positive feedback from the market. Since the commencement of the share repurchase in December 2000, Sappi repurchased 10.1 million shares at an average price of R55.84 with a low of R48.10 and a high of R67.50. He said that there had been strong foreign buying of Sappi shares and the spread of shareholders is now wider than ever. When Sappi listed on the New York stock exchange, the target was to attain 65% foreign shareholding in the company to reflect more or less the spread of the group's assets. At the end of April the foreign shareholding has risen to about 61%. Prospects Conditions in Sappi's main markets worsened in the past two months, although inventories in the coated paper pipeline are stable and demand on producers should rebound once economic prospects in the USA improve. Weakening pulp prices will lower the cost structure of the fine paper business but will have an unfavourable impact on the forest products business, the reverse of what happened last year as pulp prices increased. The Euro/dollar exchange rate has moved sharply recently. The strong dollar is likely to have a favourable impact on the South African business' dollar profit as prices are largely determined in dollars and costs are predominantly in Rands. In Europe, however, the strong dollar has a net negative effect both on costs and the translation of profit to dollars. The sensitivity to a move of 10 US cents in the $ / Euro rate amounts to approximately $40 million per annum in after tax profit. Commenting on Sappi's outlook Eugene van As said; "Overall the paper and pulp sector is facing very tough macro conditions. Whilst Sappi's fundamentals are strong and the group remains very well positioned in all its markets, if the difficult market and currency conditions persist, group earnings before exceptional items for the second half are unlikely to match the first half". 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. For further information: Robert Hope Director Strategic Development Sappi Limited Tel: +27 (0) 11 407 8492 Fax: +27 (0) 11 403 1493 robho@za.sappi.com Johan van Wyk Corporate Affairs Manager Sappi Limited Tel: +27 (0) 11 407 8044 Fax: +27 (0) 11 403 8236 johanvw@za.sappi.com SAPPI LIMITED Summary March 2001 Quarter ended Half-year ended March December March March March 2001 2000 2000 2001 2000 Sales (US$ million) 1,104 1,115 1,187 2,219 2,302 Operating profit (US$ million) 121 143 165 264 292 EBITDA (US$ million) 210 237 262 447 489 Operating profit to sales (%) 11.0 12.8 13.9 11.9 12.7 EBITDA to sales (%) 19.0 21.3 22.1 20.1 21.3 Operating profit to average 13.6 15.8 16.2 14.7 15.2 net assets (%) Basic EPS before exceptional 32 34 32 66 58 items (Headline) (US cents) Basic EPS (US cents) 32 34 29 66 58 EBITDA per share (US cents) 91 99 110 190 208 Net Debt (US$ million) 1,277 1,269 1,621* 1,277 1,621* Return on Equity (%) 18.6 20.1 17.9 19.6 18.2 * Restated for reclassification of minority interest to debt SAPPI LIMITED Group income statements Unaudited Unaudited Quarter ended Half-year ended -------- ------- ------- -------- -------- March March March March 2001 2000 2001 2000 -------- ------- ------- -------- -------- US$ US$ % US$ US$ % million million change million million change -------- ------- ------ -------- -------- ------- Sales 1,104 1,187 (7.0) 2,219 2,302 (3.6) Cost of sales 891 922 1,773 1,820 -------- ------- -------- -------- Gross profit 213 265 (19.6) 446 482 (7.5) Selling, general & 92 100 182 190 administrative expenses -------- ------- -------- -------- Operating profit 121 165 (26.7) 264 292 (9.6) Non-trading profit (loss) (2) (1) (3) 4 Net finance costs 16 43 40 70 -------- ------- -------- -------- Net paid 26 53 58 89 Capitalised (10) (10) (18) (19) -------- ------- -------- -------- -------- ------- -------- -------- Profit before tax 103 121 221 226 Taxation - current 20 24 43 36 - deferred 8 23 21 47 -------- ------- -------- -------- Profit after tax 75 74 1.4 157 143 9.8 Income attributable to - 4 - 7 minority interests -------- ------- -------- -------- Net profit 75 70 7.1 157 136 15.4 ======== ======= ======== ======== EBITDA 210 262 (19.9) 447 489 (8.6) ======== ======= ======== ======== Basic earnings per share 32 29 66 58 (US cents) Basic earnings before exceptional items (Headline earnings) per 32 32 66 58 share (US cents) Weighted average number of 231.7 239.1 235.4 234.8 shares in issue (millions) Diluted earnings per share 32 29 66 57 (US cents) Diluted earnings before exceptional items (Headline earnings) per 31 31 65 57 share (US cents) Weighted average number of shares on fully diluted basis (millions) 237.0 244.8 240.6 240.4 Calculation of Earnings before exceptional items (Headline) net of tax Net profit 75 70 157 136 Profit on disposal of 1 1 1 (2) business and fixed assets Accelerated cost of early - 11 - 11 buy back of loan notes Decrease in other (2) (6) (3) (9) provisions -------- ------- -------- -------- Earnings before 74 76 155 136 exceptional items (Headline) -------- ------- -------- -------- SAPPI LIMITED Group balance sheet Unaudited Audited March 2001 September 2000 ---------------------- ------------------------- US$ million US$ million ---------------------- ------------------------- ASSETS Non-current assets 3,481 3,600 ---------------------- ------------------------- Property, plant and 3,017 3,095 equipment Plantations 350 372 Deferred taxation 35 37 Other non-current assets 79 96 ---------------------- ------------------------- Current assets 1,116 1,168 ---------------------- ------------------------- Cash and cash equivalents 190 294 Trade and other receivables 333 319 Inventories 593 555 ---------------------- ------------------------- ---------------------- ------------------------- Total assets 4,597 4,768 ====================== ========================= EQUITY AND LIABILITIES Capital and reserves Ordinary shareholders' 1,584 1,618 interest Minority interest 4 53 Non-current liabilities 1,935 1,996 ---------------------- ------------------------- Long-term borrowings 1,207 1,278 Deferred taxation 506 500 Other long-term liabilities 222 218 ---------------------- ------------------------- Current liabilities 1,074 1,101 ---------------------- ------------------------- Interest bearing 243 162 liabilities Bank overdraft 17 76 Other current liabilities 814 863 ---------------------- ------------------------- ---------------------- ------------------------- Total equity and 4,597 4,768 liabilities ====================== ========================= Number of shares in issue 230.6 239.1 (millions) Net Debt (US$ million) 1,277 1,270 * Net Debt to Total 33.8 32.5 * Capitalisation (%) Net asset value per share 891 870 (US cents) * - Restated for reclassification of minority interest to debt in March 2001, as if processed in September 2000. SAPPI LIMITED Group cash flow statement Unaudited Unaudited Half-year ended Half-year ended March 2001 March 2000 ---------------------- ------------------------- US$ million US$ million ---------------------- ------------------------- Cash generated by 433 498 operations Movement in working capital (123) (56) Net finance costs (58) (89) Taxation paid (9) (8) Dividends paid (60) (44) ---------------------- ------------------------- Cash retained from 183 301 operating activities Cash effects of investing (137) 4 activities ---------------------- ------------------------- 46 305 Cash effects of financing (148) (156) activities ---------------------- ------------------------- Net movement in cash and (102) 149 cash equivalents ====================== ========================= SAPPI LIMITED Group statement of changes in shareholders' equity Unaudited Unaudited Half-year ended Half-year ended March 2001 March 2000 ---------------------- ------------------------- US$ million US$ million ---------------------- ------------------------- Balance - beginning of year 1,618 1,463 Changes in accounting 8 (27) policies ---------------------- ------------------------- Balance - beginning of year 1,626 1,436 restated Net profit 157 136 Foreign currency (72) (92) translation reserve Dividends declared - US$ (60) (45) 0.25 (2000: US$ 0.19) per share Goodwill written off to - (1) equity (Share buybacks) / Issuance (62) 114 of ordinary shares Loss on transfer of shares (5) - to Share Purchase Trust ---------------------- ------------------------- Balance - end of year 1,584 1,548 ====================== ========================= SAPPI LIMITED Notes to the group results 1. Basis of Preparation The group results have been prepared in conformity with South African Statements of Generally Accepted Accounting Practice. The same accounting policies have been followed as in the annual financial statements for September 2000, except for new or revised accounting standards adopted in the first quarter of the current year. 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. Unaudited Unaudited Quarter ended Half-year ended ------------ ------------ ------------- ----------- March 2001 March 2000 March 2001 March 2000 ----------- ------------ ------------- ----------- US$ million US$ million US$ million US$ million ----------- ----------- ------------- ----------- 2.Cost of sales Included in cost of sales are: Depreciation 76 84 156 167 Fellings 8 8 16 19 ------------ ------------ ------------- -------------- 84 92 172 186 ------------ ------------ ------------- -------------- 3. Capital expenditure Fixed assets 137 72 Plantations 14 16 ------------- -------------- 151 88 ------------- -------------- Unaudited Audited Half-year Year ended ended ------------- ------------- March 2001 September 2000 ------------- ------------- US$ million US$ million ------------- ------------- 4. Capital Commitments Contracted but not provided 116 73 Approved but not contracted 162 150 ------------- -------------- 278 223 ------------- -------------- 5. Contingent liabilities Guarantees and suretyships 53 80 Other contingent liabilities 61 46 --------------- ------ ------------ ------------ ------------- -------------- SAPPI LIMITED Regional Information Unaudited Unaudited Quarter ended Half-year ended -------- -------- ------- -------- ---------- ------- March March March March 2000 2001 2000 2001 -------- -------- ------- -------- ---------- ------- US$ US$ % US$ US$ % million million change million million change -------- -------- ------- -------- --------- ------- Sales - Metric tons (000's) Fine Paper North America 326 346 (5.8) 654 669 (2.2) Europe 557 580 (4.0) 1,120 1,148 (2.4) Southern Africa 67 62 8.1 138 132 4.5 -------- -------- -------- ---------- Total 950 988 (3.8) 1,912 1,949 (1.9) Forest Products 609 712 (14.5) 1,230 1,361 (9.6) -------- -------- -------- ---------- Total 1,559 1,700 (8.3) 3,142 3,310 (5.1) -------- -------- -------- ---------- Sales Fine Paper North America 384 408 (5.9) 779 88 (1.1) Europe 470 497 (5.4) 936 971 (3.6) Southern Africa 55 56 (1.8) 112 115 (2.6) -------- -------- -------- ---------- Total 909 961 (5.4) 1,827 1,874 (2.5) -------- -------- -------- ---------- Forest Products 195 226 (13.7) 392 428 (8.4) -------- -------- -------- ---------- Total 1,104 1,187 (7.0) 2,219 2,302 (3.6) -------- -------- -------- ---------- Operating profit Fine Paper North America 13 43 (69.8) 31 81 (61.7) Europe 40 66 (39.4) 94 119 (21.0) Southern Africa 9 5 80.0 15 10 50.0 -------- -------- -------- ---------- Total 62 114 (45.6) 140 210 (33.3) Forest Products 60 48 25.0 122 81 50.6 Corporate (1) 3 (133.3) 2 1 100.0 -------- -------- -------- ---------- Total 121 165 (26.7) 264 292 (9.6) -------- -------- -------- ---------- Earnings before interest, tax, depreciation and amortisation charges ** Fine Paper North America 43 69 (37.7) 89 134 (33.6) Europe 78 107 (27.1) 170 202 (15.8) Southern Africa 10 7 42.9 19 14 35.7 -------- -------- -------- --------- Total 131 183 (28.4) 278 350 (20.6) Forest Products 80 75 6.7 167 137 21.9 Corporate (1) 4 (125.0) 2 2 - -------- -------- -------- ---------- Total 210 262 (19.8) 447 489 (8.6) -------- -------- -------- ---------- Net operating assets Fine Paper North America 1,252 1,188 5.4 1,252 1,188 5.4 Europe 1,362 1,535 (11.3) 1,362 1,535 (11.3) Southern Africa 97 129 (24.8) 97 129 (24.8) -------- -------- -------- ---------- Total 2,711 2,852 (4.9) 2,711 2,852 (4.9) Forest Products 860 1,084 (20.7) 860 1,084 (20.7) Corporate (13) (13) - (13) (13) - -------- -------- -------- ---------- Total 3,558 3,923 (9.3) 3,558 3,923 (9.3) -------- -------- -------- ---------- **'before non trading profit (loss) SAPPI LIMITED Summary Rand Convenience Translation March 2001 Unaudited Unaudited Quarter ended Half-year ended March March % March March % 2001 2000 change 2001 2000 change Sales (ZAR million) 8,636 7,442 16.0 17,103 14,254 20.0 Operating profit 947 1,028 (8.0) 2,035 1,808 12.5 (ZAR million) Profit after 587 459 27.9 1,210 883 37.0 taxation (ZAR million) EBITDA 1,643 1,642 0.1 3,445 3,027 13.8 (ZAR million) Operating profit to 11.0 13.9 11.9 12.7 sales (%) EBITDA to sales (%) 19 22.1 20.1 21.3 Operating profit to 13.7 16.1 14.9 15.0 average net assets (%) Basic EPS before 250 197 26.7 508 356 42.5 exceptional items (Headline) (SA cents) Basic EPS 253 181 39.8 506 356 42.1 (SA cents) EBITDA per share (SA cents) 709 687 3.2 1,464 1,290 13.5 Net debt 10,226 10,504* (2.7) 10,226 10,504* (2.7) (ZAR million) Net debt to total 33.8 37.4* 33.8 37.4* capitalisation (%) Cash generated by 3,337 3,083 8.2 operations (ZAR million) Cash retained from 1,410 1,864 operating activities (ZAR million) Net movement in (786) 923 cash and cash equivalents (ZAR million) Exchange rates : Period end rate: 8.0075 6.4800 8.0075 6.4800 US $1 = R Average rate: 7.8224 6.2690 7.7076 6.1917 US $1 = R Period end rate: 1.1348 1.0358 1.1348 1.0358 US $1 = EURO Average rate: 1.0968 1.0044 1.1295 0.9820 US $1 = EURO * Restated for reclassification of minority interest to debt
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