Sappi Limited Results for the Fourth Quarter and Year End September 2009

JOHANNESBURG, Nov. 9 /PRNewswire-FirstCall/ --

-- Net cash generated US$225 million
-- Refinancing completed; improved liquidity and extended maturities
-- Saiccor Mill ramp up near full capacity at quarter end
-- Stronger Rand impacted SA business unfavourably
-- Return to operating profit excluding special items
-- Basic loss per share 20 US cents (unfavourably impacted by 18 US cents
special items)

-- Acquisition synergies exceed target

(Logo: http://www.newscom.com/cgi-bin/prnh/20090826/NE66332LOGO )

Summary

Quarter ended Year ended
------------- ----------
Sept June Sept Sept Sept
2009 2009 2008 2009 2008
---- ---- ---- ---- ----

Key figures: (US$ million)
Sales 1,553 1,316 1,519 5,369 5,863
Operating (loss) profit (129) (7) 25 (73) 314
Special items - losses (gains)* 167 (6) 64 106 52
Operating profit (loss)
excluding special items 38 (13) 89 33 366
EBITDA excluding special items * 150 93 180 431 740
Basic (loss) earnings per share
(US Cents) (20) (12) (9) (37) 28
Net debt* 2,576 2,770 2,405 2,576 2,405

Key ratios: (%)
Operating (loss) profit to sales (8.3) (0.5) 1.6 (1.4) 5.4
Operating profit (loss)
excluding special items to sales 2.4 (1.0) 5.9 0.6 6.2
Operating profit (loss)
excluding special items to
Capital Employed (ROCE)* 3.3 (1.1) 8.5 0.8 9.1
EBITDA excluding special items
to sales 9.7 7.1 11.8 8.0 12.6
Return on average equity (ROE)* (21.4) (12.7) (7.8) (10.4) 6.0
Net debt to total capitalisation* 58.9 57.5 60.0 58.9 60.0

* Refer to the published results for details on special items, the
definition of the terms, the reconciliation of profit/loss for the
period to EBITDA excluding special items.

The table above has not been audited or reviewed.

Commenting on the results, Sappi (NYSE: SPP) chief executive officer Ralph
Boettger said:

"As economic conditions remained weak in our major markets we have taken
decisive action in all our businesses, resulting in a return to operating
profit excluding special items in our North American and European businesses
in the quarter and progress towards a return to operating profit excluding
special items in Southern Africa. The group met its expectation of a return to
operating profit excluding special items for the quarter.

We are also pleased that cash flow for the group was again strong for the
quarter with net cash generated of US$225 million.

The integration of the Acquisition progressed well. Achievement of synergies
to September 2009 was 73 million euro (annualised rate of 97 million euro),
which exceeded our nine month target of 60 million euro, and we remain on
track to achieve the previously announced 120 million euro of annual synergies
within three years.

Operating profit excluding special items was US$38 million compared to US$89
million in the equivalent quarter last year. This represents a significant
turnaround from the previous quarter's operating loss excluding special items
of US$13 million. The North American and European businesses, which had
improved volumes and lower costs, were key to the turnaround. The Southern
African businesses recorded a loss as a result of weak domestic demand, a
stronger Rand/US Dollar exchange rate which resulted in both lower export
revenue and downward pressure on domestic prices as a result of increased
competition from imports. In addition, operations were interrupted for two
weeks, particularly at the Saiccor Mill, as a result of an industry-wide
strike over wages. EPS for the quarter was a loss of 20 US cents (including a
loss of 18 US cents of special items including financing items) compared to a
loss of 9 US cents in the equivalent quarter last year (including a loss of 23
US cents of special items).

For the full year operating profit excluding special items was US$33 million
compared to US$366 million last year. EPS for the year was a loss of 37 US
cents (including a loss of 13 US cents of unfavourable special items including
financing items) compared with last year's earnings of 28 US cents (including
a loss of 23 US cents of special items)."

Outlook
Looking forward, Boettger commented:

"Although global economic conditions remain unpredictable and growth
expectations vary considerably among commentators, we expect demand to
continue to grow for our major products in most markets compared to our
financial 2009.

For coated woodfree paper, we expect demand in North America and Europe to
continue the gradual improvement seen in recent months. We also expect some
improvement in demand for coated mechanical paper from the current low base.
The supply/demand balance in Europe is, however, expected to remain weak
unless there are further closures of operations. We continue to review our
operations to ensure that we optimise our capacity footprint and provide a
high quality service to our customers.

New coated woodfree paper capacity is expected to start up over the next year
in China, which is likely to unfavourably impact the global supply/demand
balance; however, much of this should be absorbed by the rapid growth of Asian
markets.

We acted decisively to take advantage of improved demand conditions and to
improve the competitiveness of our businesses. We have devoted resources at
all levels of the business to improving our understanding of customer needs
and developing products and services to meet them. In particular, we have
expanded our chemical cellulose business, we have increased our market
position in Europe and enhanced the breadth of our product and service
offerings, and in North America we have adapted our product line to match
changing market needs and economics.

In addition to temporary production curtailment over the past year, we have
closed or announced the possible closure of two mills and one paper machine in
Europe, one paper mill in North America, a pulp mill in Southern Africa, and
further measures to reduce fixed costs in each region. We expect all of these
measures to continue to improve operating performance over the next year.

Following our refinancing we have an improved liquidity position with cash of
US$770 million available at the end of September and we have no major debt
maturities before 2012. We are of the opinion that it is prudent to maintain
an increased cash balance as a cushion in times of economic uncertainty. Our
finance costs have increased significantly and at current interest rates we
expect our net finance costs for 2010 to increase to US$250 million. In order
to continue reducing our net debt we will focus on cash generation and will
manage our capital expenditures tightly but at a level which ensures we
maintain our assets in good condition.

The first financial quarter is typically a seasonally weak quarter as a result
of the holiday period in December. Nevertheless we expect demand to remain
firm until then and price levels for coated paper to stabilise, and for pulp
prices to improve. We have taken major annual maintenance shuts at two of our
North American mills during the current quarter which will impact output and
maintenance expenses. We expect alternative fuel tax credits to remain
available through December 2009 although the credits could expire earlier.

Despite our first quarter historically being a seasonally weaker quarter,
given current market conditions we expect to remain profitable at operating
level excluding special items. We expect the full year's performance to be
better than financial 2009 based on a gradual recovery in world economic
conditions and the decisive actions we have taken to improve our business."

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 on www.sappi.com using the links Investor Info; Investor
Calendar; 4Q09 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.

Issued by:

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

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