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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:1623K Sappi Ld 8 May 2000 NOT FOR RELEASE IN THE UNITED STATES OF AMERICA REPORT FOR THE QUARTER ENDED 31 MARCH 2000 IN US DOLLARS HIGHLIGHTS * Quarterly performance year on year * Operating income up 65% * Earnings Per Share up 88% * RONA exceeds 15% * Balance sheet continues to strengthen * Debt down $485 million since September 1999 * Debt to total capitalisation - 35.3% * US Dollar reporting adopted Summary Quarter ended Half year ended 31 March 31 Dec 31 March 31 March 31 March 2000 1999 1999 2000 1999 Sales (US$ million) 1 187 1 116 1 087 2 302 2 108 Operating income (US$ million) 165 128 100 292 178 EBITDA (US$ million) 262 227 197 489 372 Operating income to sales (%) 13.9 11.5 9.2 12.7 9.4 EBITDA to sales (%) 22.1 20.3 18.1 21.2 17.7 Operating income to average net assets (%) 15.8 12.7 9.1 14.8 8.0 EPS before exceptional items (Headline)(US cents) 32 26 17 58 30 EPS (US cents) 29 29 11 58 22 Net assets (US$ million) 4 091 4 267 3 967 4 091 3 967 Net Debt (US$ million) 1 553 1 856 2 429 1 553 2 429 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. The majority of the group's sales are in US Dollars and the US Dollar is the major trading currency of the pulp and paper industry. The directors therefore believe that the change to US Dollar reporting will further facilitate understanding of the results. Comment Markets Markets for pulp and paper products have continued to improve through the quarter. Coated woodfree paper price increases of approximately 6% were implemented in January and February in the USA. Much of the latter increase will only affect results from April because of quarterly contract pricing. The upward price trend will thus continue beyond the end of the March quarter and a further increase of approximately 6% was implemented in Europe in April. Strong order inflow for the industry is supported by the underlying strength in the major economies. Inventories remain at normal levels. NBSK pulp prices started the calendar year at $630 per ton and have increased to $670 to $680 per ton in April for contract tonnages. Prices for spot tonnages are significantly higher than this and reflect the tighter supply to demand balance and the low North American/Scandinavian pulp inventory levels. The Sappi Group is largely insulated from these pulp price increases as a result of its pulp sales almost matching its pulp purchases. Operating review for the three months to 31 March 2000 The group's headline earnings per share for the quarter improved significantly compared to the equivalent quarter last year and the prior quarter reflecting strong demand, improved prices and efficiencies. A brief review of Sappi's businesses and regional performances follows: Fine Paper business Europe Quarter ended % change 31 March 31 March 2000 1999 US$ million US$ million Sales 477 463 3.0 Operating income 64 32 100.0 Operating margin (%) 13.4 6.9 - EBITDA 106 77 37.7 EBITDA Margin (%) 22.2 16.6 - RONOA p.a. (%) 17.0 7.1 - The sales increase of 3% was made up of a sales volume increase of approximately 3% and flat prices in Dollars. Prices increased by 13% in Euro but this was offset by the decline of the Euro against the Dollar. Despite the increase in pulp prices, variable costs per ton in Dollars were contained to same level as the equivalent quarter last year. The business continues to exceed the original cost savings identified at the time of acquisition of KNP Leykam. As a result of all these factors, operating income has doubled. The operating margin increased to 13% and the return on net operating assets increased to 17%. North America Quarter ended % change 31 March 31 March 2000 1999 US$ million US$ million Sales 426 387 10.1 Operating income 43 32 34.4 Operating margin (%) 10.1 8.3 - EBITDA 70 66 6.1 EBITDA Margin (%) 16.4 17.1 - RONOA p.a. (%) 14.5 10.2 - The sales increase of 10% comprised a sales volume increase of 7% and an increase in prices of 3%. Costs were tightly controlled so that despite pulp price increases the cost of goods sold per ton remained unchanged from the year earlier period. The result was a 34% increase in operating income. The operating margin increased to 10% and the return on net operating assets increased to 15%. South Africa Quarter ended % change 31 March 31 March 2000 1999 US$ million US$ million Sales 58 56 3.6 Operating income 4 8 (50.0) Operating margin (%) 6.9 14.3 - EBITDA 7 11 (36.4) EBITDA Margin (%) 12.1 19.6 - RONOA p.a. (%) 9.8 20.8 The sales increase of 4% comprised a marginal sales volume increase and a 3% price increase in Dollars. Prices were up 6% in Rand Terms. The operating performance was below expectation partially as a result of non-recurring costs, but are expected to improve in the second half. The operating margin declined to 7% but should increase in the second half. Forest Products business Quarter ended % change 31 March 31 March 2000 1999 US$ million US$ million Sales 226 181 24.9 Operating income 44 19 131.6 Operating margin (%) 19.5 10.5 - EBITDA 71 38 86.8 EBITDA Margin (%) 31.4 21.0 - RONOA p.a. (%) 15.1 6.1 - The 25% sales increase comprised an increase in sales volume on 13% and price increases of about 10% in Dollar terms, reflecting stronger local demand and improved exports to Asia. Performance has improved significantly as a result of tight cost control, improved productivity, together with rising prices for the business' major products and improving markets for dissolving pulp. This led to a 131% increase in operating income. The operating margin increased to 19% and return on net operating assets increased to 15%. Group Results for the quarter to 31 March 2000 Consolidated sales for the quarter were US$1.2 billion, a 9.2% increase on the same quarter last year. The increase comprised a 7.5% improvement in volumes but only a 1.5% improvement in dollar prices in spite of significant increases in local currency prices. Operating income was up 65% to US$165 million as a result of improved sales and lower costs per ton sold. The Forest Products business and Fine Paper Europe reported very significant improvements in operating performance. Net finance costs after capitalisation of interest were down 40% to US$26 million for the quarter, before inclusion of a once-off charge of US$17 million relating to the refinancing of the North American 12% high yield debt. As a result of refinancing, net finance costs will drop by a further US$3 million per quarter. The effective tax rate for the quarter was marginally higher than normal as a result of the regional composition of income and certain specific provisions in the quarter. The low deferred tax rate in the comparative period last year was mainly a result of a decrease in South African tax rates. The effective rate for the full current year is, however, expected to normalise. Earnings before exceptional items were US$76 million for the quarter, more than double in the same quarter last year and 25% up on the first quarter of the current financial year. Earnings before exceptional items per share of 32 US cents per share for the quarter were 88% up on the same quarter last year and 23% up on the prior quarter. Capital Structure The group continued to generate strong internal cash flows and the net debt declined by a further US$303 million for the quarter without any asset disposals. The decline was helped by limited capital expenditure and the impact of the translation benefit resulting from the decline of the Euro against the US Dollar. This resulted in net debt to total capitalisation declining to 35.3% down from 44.3% in September 1999. In March 2000 Sappi refinanced the $232 million balance of the North American 12% high yield debt at an effective interest rate of approximately 7%. Acquisition of Minorities The acquisition of the minorities in Leykam Murztaler was approved by Leykam Murztaler shareholders on 9 March 2000 and should be completed during May. We expect to complete the acquisition of the Usutu minorities during this financial year. Outlook Consensus among economists is that economic growth in our major markets is expected to remain strong for the rest of this year and 2001, and Asian growth has recovered and is expected to be sustained. In this industry worldwide capacity expansion remains at a low level-driven by the focus on creating shareholder value. The supply/demand balance should therefore continue to tighten which should lead to further improvements in shareholder returns. Growth in demand should absorb any additional capacity which may result from the conversion of existing machines to other grades. E-Commerce Sappi continues to focus on improving competitive advantage in the market. During May 2000, we will start rolling out an integrated electronic order management, production planning and logistics system which will implement globally over the coming year. This system of SAP AG, for which Sappi was the industry development partner, will enable us to give superior customer service and to interface seamlessly with our customers through any future electronic market place. The momentum achieved in the first half of this year should continue in the second half and we therefore expect earnings per share for the second half year to be materially better than the first half. Cash generation will continue to be strong and we expect the balance sheet to improve further. 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), currency fluctuations and the consequences of Year 2000 non-compliance and introduction of the euro. 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. Summary Statistics - US Dollar 31 March 2000 Quarter ended Half year ended 31 March 31 Dec 31 March 31 March 31 March 2000 1999 1999 2000 1999 Sales (US$ million) 1,187 1,116 1,087 2,302 2,108 Operating income (US$ million) 165 128 100 292 178 EBITDA (US$ million) 262 227 197 489 372 Operating income to sales (%) 13.9 11.5 9.2 12.7 8.4 EBITDA to sales (%) 22.1 20.3 18.1 21.2 17.7 Operating income to average net assets (%) 15.8 12.7 9.1 14.8 8.0 EPS before exceptional items (Headline)(US cents) 32 26 17 58 30 EPS (US cents) 29 29 11 56 22 Net assets (US$ million) 4,091 4,267 3,967 4,091 3,967 Net Debt (US$ million) 1,553 1,856 2,429 1,563 2,429 Interim Results - Three and Six months ended 31 March 2000 Consolidated Income Statement - US Dollar Unaudited Half year Quarter ended ended 31 Mar 00 31 Mar 99 % 31 Mar 00 31 Mar 99 % US$million US$million change US$million US$million change Sales 1,187 1,087 9.2 2,302 2,108 9.2 Cost of goods sold 838 823 1,653 1,589 Gross profit 349 264 32.2 649 519 25.1 Depreciation 84 86 167 170 Selling, general & administrative expenses 100 78 190 171 Operating income 165 100 65.0 292 178 64.0 Non-trading income (loss) (1) (14) 4 (22) Net finance costs 43 43 70 85 Paid 63 53 89 110 Capitalised (10) (10) (19) (25) Income before taxation 121 43 181.4 226 71 218.3 Taxation - current 24 16 36 31 - deferred 23 (1) 47 (15) Income after taxation 74 28 164.3 143 55 160.0 Income attributable to minority interests 4 2 7 5 Net income 70 26 169.2 136 50 172.0 EBITDA 262 197 33.0 489 372 31.5 Basic earnings per share (cents) 29 11 58 22 Earnings before exceptional items (Headline earnings) per share (cents) 32 17 58 30 Weighted average number of shares in issue (millions) 239.1 223.8 234.8 223.8 Diluted earnings per share (cents) 29 11 57 22 Diluted earnings before exceptional items (Headline earnings) per share (cents) 31 16 67 29 Weighted average number of shares on fully diluted basis (millions) 244.8 230.3 240.4 230.1 Calculation of Earnings before exceptional items (Headline) net of tax Net income 70 26 136 50 (Profit)loss on disposal of business and fixed assets 1 - (2) 3 Accelerated cost of early buy back of loan notes 11 - 11 - (Decrease)increase in other provisions (6) 11 (9) 13 Earnings before exceptional items (Headlines) 76 37 136 66 Interim Results - Three and Six months ended 31 March 2000 Consolidated Balance Sheet - US Dollar Unaudited at Audited at 31 March 2000 30 September 1999 US$million US$million Funds employed Ordinary shareholders' interest 1,698 1,559 Minority interests 141 155 Long-term borrowings 1,541 1,376 Other long-term liabilities 237 245 Deferred taxation 474 454 4,091 3,789 Employment of funds Fixed assets 3,376 3,665 Plantations and Timberlands 389 406 Deferred taxation 64 69 Other non-current assets 193 184 Current assets 1,190 1,154 Bank balances and deposits 291 154 Collateral deposits - 104 Other current assets 899 896 Total assets 5,212 5,478 Current Liabilities 1,121 1,689 Interest bearing liabilities 136 698 Bank overdraft 167 118 Other current liabilities 818 873 4,091 3,789 Number of shares in issue (millions) 239.1 224.6 Net Debt (US$ million) 1,553 2,038 Net Debt to Total Capitalisation (%) 35.3 44.3 Net asset value per share (cents) 882 866 Interim Results - Six months ended 31 March 2000 Consolidated Cash Flow Statement - US Dollar Unaudited Half year ended 31 March 2000 31 March 1999 US$ million US$ million Cash generated by operations 498 320 Movement in working capital (56) (143) Net finance cost (89) (110) Taxation (8) (28) Dividends paid (44) (38) Cash retained from operating vehicles 301 1 Cash effects of investing activities 4 62 305 63 Cash effects of financing activities (156) (371) Net movement in cash and cash equivalents 149 (308) Interim Results - Three and Six months ended 31 March 2000 Consolidated Statement of Changes in Shareholders' Equity - US Dollar Unaudited Unaudited 31 March 2000 31 March 1999 Total Total US$ million US$ million Balance at 1 October 1,559 1,597 Income before minority interests 143 55 Income attributable to minority interests (7) (5) Foreign currency translation reserve (112) (160) Issuance of ordinary shares 116 - Goodwill written off to equity (1) (6) Balance at 31 March 1,698 1,481 Results - Three and Six months ended 31 March 2000 Regional Information - US Dollar Unaudited Quarter ended Half year ended 31 Mar 00 31 Mar 99 % 31 Mar 00 31 Mar 99 % US$million US$million change US$million US$million change Sales - tons Fine paper North America 359 334 7.3 701 642 9.2 Europe 566 552 2.5 1,113 1,034 7.7 Southern Africa 64 64 0.2 135 126 7.4 Total 988 950 4.0 1,950 1,802 8.2 Forest Products 712 631 12.8 1,361 1,208 12.6 Total 1,700 1,582 7.5 3,310 3,010 10.0 Sales Fine Paper North America 426 387 10.1 826 755 9.4 Europe 477 463 3.0 929 898 3.5 Southern Africa 58 56 3.6 119 111 7.2 Total 961 906 6.1 1,874 1,764 6.2 Forest Products 226 181 24.9 428 344 24.5 Total 1,187 1,087 9.2 2,302 2,108 9.2 Operating income Fine Paper North America 43 32 34.4 80 66 21.2 Europe 64 32 100.0 117 57 105.3 Southern Africa 4 8 (50.0) 9 15 (40.0) Total 111 72 54.2 206 138 49.3 Forest Products 44 19 131.6 74 28 164.3 Sappi Trading & Corporate 10 9 14.1 12 12 - Total 165 100 65.5 292 178 64.0 Earnings before interest tax, depreciation and amortisation charges** Fine Paper North America 70 66 6.1 133 117 13.7 Europe 106 77 37.7 200 150 33.3 Southern Africa 7 11 (36.4) 13 19 (31.6) Total 183 154 18.8 346 286 21.0 Forest Products 71 38 86.8 130 74 75.7 Sappi Trading & Corporate 8 5 60.0 13 12 8.3 Total 262 197 33.0 489 372 31.5 Net operating assets Fine Paper North America 1,183 1,251 (5.4) 1,183 1,251 (5.4) Europe 1,503 1,796 (16.3) 1,503 1,796 (16.3) Southern Africa 163 154 5.8 163 154 5.8 Total 2,849 3,201 (11.0) 2,849 3,201 (11.0) Forest Products 1,162 1,236 (6.0) 1,162 1,236 (6.0) Sappi Trading & Corporate 28 271 (89.7) 28 271 (90.0) Total 4,039 4,708 (14.2) 4,039 4,708 (14.2) ** before non trading income/loss END QRSDGGGKLRFGGZG
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