Sappi October-December 2006 operating profit up 80.4% to $92 million

In million dollars

Commenting on the results, Sappi chairman, Eugene van As said, "We are pleased to note that group operating result improved compared to both the prior quarter and the equivalent quarter last year. The profit after tax for the quarter was $30 million compared to a break-even in the equivalent quarter last year. Cash generated by operations for the quarter rose approximately 25% to $152 million from a year ago. The operating profit for the quarter increased to $92 million, driven largely by the forest products business, which was supported by strong pulp prices and a slightly weaker currency. Each of the fine paper businesses generated operating profits during the quarter. However, the returns are still far from acceptable so we continue to focus on reducing unit costs and achieving appropriate price increases."

Looking forward van As commented, "The industry continues to record high global operating rates for coated fine paper. The combination of strong consumption growth, capacity closures and limited new capacity additions indicate that operating rates should remain high. We have implemented price increases in Europe which are essential to restore margins after five years of declining coated fine paper prices and two years of input cost escalations. We expect earnings in the next quarter to improve compared to this quarter (excluding unpredictable plantation fair value adjustments)."

A global leader in the pulp and paper industry, Sappi Limited conducts its business through two business units, Sappi fine paper and Sappi Forest Products. Sappi Fine Paper, operating in Europe, North America and South Africa, produces a wide range of coated fine paper brands with an international reputation for quality and innovation. The company also produces a range of uncoated graphic and business papers, coated and uncoated specialty papers, as well as casting release papers.  Sappi Forest Products owns or manages approximately 540 000 hectares of plantations through Sappi Forests; is a leading Southern African fully integrated pulp, packaging paper and newsprint business through Sappi Kraft ;  and is the world's leading producer of chemical cellulose used in the manufacture of viscose fibre through Sappi Saiccor; Sappi Trading, based in Hong Kong, operates a trading network for the international sales and distribution of the products of the two divisions outside their core operation regions.