Sappi Results for the Third Quarter Ended June 2009

JOHANNESBURG, July 30 /PRNewswire-FirstCall/ --

-- Net cash generated US$106 million
-- Good progress on debt refinancing
-- Global economy remains weak
-- Production curtailed in all regions to match supply to demand
-- Stronger Rand impacts SA margins unfavourably
-- Basic loss per share 12 US cents

-- Acquisition synergies on track

Summary

Quarter ended Nine months ended
------------- -----------------
June March June June June
2009 2009 2008 2009 2008
Key figures: (US$million)
Sales 1,316 1,313 1,494 3,816 4,344
Operating (loss) profit (7) 6 (23) 56 289
Special items - (gains)
losses * (6) (23) 111 (61) (12)
Operating (loss) profit
excluding special items (13) (17) 88 (5) 277
EBITDA excluding special
items ** 93 82 182 281 560
Basic (loss) Earnings Per
Share (US cents)*** (12) (7) (17) (16) 37
Net debt **** 2,770 2,735 2,667 2,770 2,667
Key ratios (%)
Operating (loss) profit
to sales (0.5) 0.5 (1.5) 1.5 6.7
Operating (loss) profit
excluding special items
to sales (1.0) (1.3) 5.9 (0.1) 6.4
Operating (loss) profit
excluding special items
to Capital (1.1) (1.6) 8.1 (0.2) 8.8
Employed (ROCE)**
EBITDA excluding special
items to sales 7.1 6.2 12.2 7.4 12.9
Return on average equity
(ROE) (%) **** (12.7) (7.5) (15.1) (5.4) 10.3
Net debt to total
capitalisation **** 57.5 59.4 61.5 57.5 61.5

-- *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
-- ***Comparative figures have been revised in accordance with IAS33 to
reflect the impact of the rights offer
-- ****Refer to Supplemental Information in the published results for the
definition of the term

-- The table above has not been audited or reviewed.

The quarter under review
Commenting on the results, Sappi (NYSE: SPP) chief executive Ralph Boettger
said:

"Strong cash generation of US$106 million was a feature of our results for the
quarter and benefited from management's actions to reduce working capital and
limit capital expenditure to essential items.

Global economic conditions remained depressed in the quarter resulting in
continued weak conditions in most of our coated paper markets. Conditions in
pulp markets, including the chemical cellulose markets, improved significantly
in terms of both demand and US Dollar prices, late in the quarter.

Globally our sales increased marginally on the prior quarter but were 3% down
on the equivalent quarter last year, despite the additional capacity from our
European acquisition earlier in the year. Average selling prices realised by
the group for the quarter were approximately 9% lower than average prices
realised a year ago. We continued to match our supply to demand and manage our
inventory levels by curtailing production during the quarter.

Prices of our inputs continued to reduce and had a favourable effect on
variable costs during the quarter, in most regions. Our actions to manage raw
material usage had a further favourable effect.

Operating loss excluding special items was US$13 million for the quarter, an
improvement on the loss of US$17 million in the prior quarter and compares
with a profit of US$88 million a year ago. Our European business returned to
profitability, excluding special items, as a result of the ramp up of synergy
achievement and cost reduction, despite poor operating levels. The North
American business improved its performance and its run rate by the end of the
quarter had returned to operating profitability excluding special items. The
Southern African business was impacted by the strengthening of the Rand
relative to the US Dollar, weak domestic demand and low pulp prices in the
quarter, resulting in an operating loss excluding special items.

The basic loss per share for the quarter was 12 US cents compared to a loss of
17 US cents in the equivalent quarter a year ago."

Looking forward, Boettger commented:
"Although global economic conditions remain weak we have seen improvement in
pulp markets and some of our coated graphic paper export markets. In
addition, inventory reduction in the coated graphic paper supply chain has
largely run its course and we have started seeing order levels closer to end
use demand levels. We also expect demand, particularly for reels, to
strengthen during the next quarter which is historically the seasonally
strongest quarter, and for our operating rates to improve in Europe and North
America.

The chemical cellulose market improved markedly during our third financial
quarter in terms of both demand and pricing. Sappi Saiccor Mill is responding
by ramping up its production following the 30% capacity expansion commissioned
last September, and expects to achieve close to full capacity by our financial
year end and improve sales volumes during the next quarter as production
increases.

Other factors which are expected to improve results are the achievement of
further alternative fuel tax credits in North America of approximately US$40
million which will be reported as a special item, subject to continued
availability under US law, accelerated synergy achievement in respect of the
European acquisition integration, the benefits of fixed and variable cost
reduction action and potential for some further input price reduction
realisation.

Against this background, we expect to return to operating profitability
excluding special items during the next quarter. Cash generation is expected
to be positive for the quarter.

We will continue to focus on cash generation and debt reduction. We expect
capital expenditure for the full year to be less than US$200 million and to
continue to carefully manage capex at that level in order to prioritise debt
reduction.

The successful completion of our refinancing will take care of our liquidity
and significant debt maturities for at least the next three years. With our
well structured business and decisive management action, we are strongly
placed to ride out the current economic downturn and take full advantage of
our leading market positions and efficient asset base when conditions
improve."

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; 3Q09 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 impact of the global economic
downturn, the risk that the European Acquisition will not be integrated
successfully or such integration may be more difficult, time-consuming or
costly than expected, expected revenue synergies and cost savings from the
acquisition may not be fully realized or realized within the expected time
frame, revenues following the acquisition may be lower than expected, any
anticipated benefits from the consolidation of the European paper business may
not be achieved, 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, possible early
termination of alternative fuel tax credits, 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.

We have included in this announcement an estimate of total synergies from the
acquisition of M-real's coated graphic paper business and the integration of
the acquired business into our existing business. The estimate of synergies
that we expect to achieve following the completion of the acquisition is based
on assumptions which in the view of our management were prepared on a
reasonable basis, reflect the best currently available estimates and
judgments, and present, to the best of our management's knowledge and belief,
the expected course of action and the expected future financial impact on our
performance due to the acquisition. However, the assumptions about these
expected synergies are inherently uncertain and, though considered reasonable
by management as of the date of preparation, are subject to a wide variety of
significant business, economic and competitive risks and uncertainties that
could cause actual results to differ materially from those contained in this
estimate of synergies. There can be no assurance that we will be able to
successfully implement the strategic or operational initiatives that are
intended, or realise the estimated synergies. This synergy estimate is not a
profit forecast or a profit estimate and should not be treated as such or
relied on by shareholders or prospective investors to calculate the likely
level of profits or losses for Sappi for fiscal 2009 or beyond.

Issued by:

Brunswick South Africa on behalf of Sappi Limited
Tel + 27 (0)11 502 7300
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