Sappi Limited Results for the Third Quarter Ended June 2008

JOHANNESBURG, South Africa, July 31 /PRNewswire-FirstCall/ --
-- Operating profit excluding special items US$88 million (Q3 2007:
US$81 million)
-- Special items an unfavourable pre-tax adjustment of US$111 million --
mainly plantation price fair value
-- Basic EPS a loss of 28 US cents (unfavourably impacted by special
items) -- Selling price increases in North America and South Africa
-- Severe input cost increases
-- Saiccor expansion commissioning in the fourth quarter

Summary

Quarter ended Nine months ended
June March Restated June Restated
2008 2008 * 2008 *
June June
2007 2007
Key figures: (US$ million)
Sales 1,494 1,473 1,297 4,344 3,882
Operating (loss) profit (23) 221 87 289 296
Special items - losses (gains)** 111 (124) (6) (12) (79)
Operating profit excluding
special items 88 97 81 277 217
EBITDA excluding special items*** 182 190 176 560 501
Basic EPS (US cents) (28) 68 17 59 56
Net debt**** 2,667 2,661 2,313 2,667 2,313
Key ratios (%)
Operating (loss) profit to sales (1.5) 15.0 6.7 6.7 7.6
Operating profit excluding
special items to sales 5.9 6.6 6.2 6.4 5.6
EBITDA excluding special items
to sales 12.2 12.9 13.6 12.9 12.9
Operating profit excluding 8.1 8.9 8.0 8.5 7.2
special items to
average net assets****
Return on average equity (ROE)
(%)**** (15.1) 35.9 10.0 10.3 11.2
Net debt to total
capitalisation**** 50.2 50.3 46.1 50.2 46.1

* Refer to information in the published results regarding the restatement
of the results
** Refer to information in the published results regarding more details on
special items
*** Refer to Supplemental Information in the published results for the
definition of the term and reconciliation of profit/ loss for the period to
EBITDA
**** Refer to Supplemental Information in the published results for the
definition of the term The results presented above have not been audited or
reviewed.

The quarter under review
Commenting on the results, Sappi (NYSE: SPP) chief executive Ralph
Boettger said:
"In a seasonally slower quarter, our operating performance improved
compared to last year. The quarter was marked by severe input cost increases,
offset to some extent by our cost savings efforts across the group and
successful price increases in North America and South Africa.
Globally our sales increased by 15.2% compared to a year ago to
US$1.50 billion. Selling prices in Europe were flat quarter-on-quarter, but
declined from last year. We have announced price increases in Europe effective
01 September 2008 of between 8% and 10% in order to offset the input cost
price increases.
The unfavourable impact of wood, energy and chemical price increases on
the group results was US$19 million compared to the prior quarter and
US$45 million compared to a year earlier.
Operating profit excluding special items increased to US$88 million from
US$81 million a year ago. Special items of US$111 million include an
unfavourable plantation price fair value revaluation adjustment of
US$105 million, mainly due to a sharp increase in fuel prices, and a loss of
contribution resulting from a flood at Saiccor amounting to US$6 million.
Basic earnings per share for the quarter was unfavourably impacted by
special items, higher debt finance costs and a high tax charge resulting from
losses in certain regions that could not be brought to account."
Looking forward, Boettger commented:
"Continued upward pressure on input costs remains our biggest challenge in
the short term. Further increases are expected in energy, fibre and chemical
costs during the fourth quarter. In South Africa wage negotiations have been
completed. Wage inflation remains an important factor in all our businesses.
To mitigate high energy costs, we have initiated further energy projects in
all regions.
Although demand remains fairly robust for our products in all regions, a
global economic slow-down would impact demand. We are responding to these
challenges by continuing to focus on cost control, harnessing our buying power
through a global procurement drive and through maximising manufacturing
efficiencies. Increasing selling prices continues to be essential to restore
and improve profitability. We are implementing price increases in all our
businesses.
The operating performance for our Southern African and US businesses is
expected to remain strong, while margins in all our businesses, particularly
in Europe, will be under pressure due to high input costs. Our Southern
African business will be further impacted by a recovery boiler rebuild at our
Usutu mill, which will have an unfavourable impact of approximately
US$12 million on operating profit in the fourth quarter.
In light of unrelenting input cost increases, we expect our fourth quarter
operating profit, excluding special items, to be lower than the third quarter,
however for the full year, we expect operating profit, excluding special
items, to be well above last year."
ENDS

The full results announcement is available at www.sappi.com

There will be a conference call to which investors are invited. Full
details are available at www.sappi.com using the links Investor Info; Investor
Calendar; 3Q08 Financial Results
Forward-looking statements
Certain statements in this release 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 earnings, savings, synergies, 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, input
costs including raw material, energy and employee costs, and pricing), adverse
changes in the markets for the group's products, consequences of substantial
leverage, including as a result of adverse changes in credit markets that
affect our ability to raise capital when needed, changing regulatory
requirements, unanticipated production disruptions (including as a result of
planned or unexpected power outages), economic and political conditions in
international markets, the impact of investments, acquisitions and
dispositions (including related financing), any delays, unexpected costs or
other problems experienced with integrating acquisitions and achieving
expected savings and synergies 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.
Issued by:
Brunswick South Africa on behalf of Sappi Limited
Tel + 27 (0)11 268 5750
Fax + 27 (0)11 268 5747

SOURCE Sappi Limited

Robert Hope, Group Head Strategic Development, +27 (0)11 407 8492,
Robert.Hope@sappi.com, or Andre F Oberholzer, Group Head Corporate Affairs,
+27 (0)11 407 8044, Mobile, +27(0) 83 235 2973, Andre.Oberholzer@sappi.com,
both of Sappi Limited