Edgar Filing: SAPPI LTD

Page 1

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of November, 2007

Commission file number: 1-14872

SAPPI LIMITED

(Translation of registrant’s name into English)

48 Ameshoff Street

Braamfontein

Johannesburg 2001

REPUBLIC OF SOUTH AFRICA

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F.

Form 20-F

-------

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted

by Regulation S-T Rule 101(b) (1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted

by Regulation S-T Rule 101(b) (7):

Indicate by check mark whether by furnishing the information contained in this Form, the

registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes

-------

If “Yes” is marked, indicated below the file number assigned to the registrant in

connection with Rule 12g3-2(b): 82-

FORWARD-LOOKING STATEMENTS

In order to utilize the “Safe Harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995 (the “Reform Act”), Sappi Limited (the “Company”) is
providing the following cautionary statement. Except for historical information contained
herein, statements contained in this Report on Form 6-K may constitute “forward-looking
statements” within the meaning of the Reform Act. The words “believe”, “anticipate”,
“expect”, “intend”, “estimate “, “plan”, “assume”, “positioned”, “will”, “may”, “should”,
“risk” and other similar expressions which are predictions of or indicate future events and
future trends which do not relate to historical matters identify forward-looking
statements. In addition, this Report on Form 6-K may include forward-looking statements
relating to the Company’s potential exposure to various types of market risks, such as
interest rate risk, foreign exchange rate risk and commodity price risk. Reliance should
not be placed on forward-looking statements because they involve known and unknown
risks, uncertainties and other factors which are in some cases beyond the control of the
Company, together with its subsidiaries (the “Group”), and may cause the actual results,
performance or achievements of the Group to differ materially from anticipated future
results, performance or achievements expressed or implied by such forward-looking
statements (and from past results, performance or achievements). Certain factors that may
cause such differences include but are not limited to: the highly cyclical nature of the
pulp and paper industry; pulp and paper production, production capacity, input costs
including raw material, energy and employee costs, and pricing levels in North America,
Europe, Asia and southern Africa; any major disruption in production at the Group’s key
facilities; changes in environmental, tax and other laws and regulations; adverse changes
in the markets for the Group’s products; any delays, unexpected costs or other problems
experienced with any business acquired or to be acquired; consequences of the Group’s
leverage; adverse changes in the South African political situation and economy or the
effect of governmental efforts to address present or future economic or social problems;
and the impact of future investments, acquisitions and dispositions (including the
financing of investments and acquisitions) and any delays, unexpected costs or other
problems experienced in connection with dispositions. These and other risks,
uncertainties and factors are discussed in the Company’s Annual Report on Form 20-F
and other filings with and submissions to the Securities and Exchange Commission,
including this Report on Form 6-K. Shareholders and prospective investors are cautioned
not to place undue reliance on these forward-looking statements. These forward-looking
statements are made as of the date of the submission of this Report on Form 6-K and are
not intended to give any assurance as to future results. 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.

sappi

quarter results and year

ended September 2007

4th

* for the year ended September 2007

** as at 30 September 2007

† Rest of World

Sales by product group *

Sales: where the product is manufactured *

Sales: where the product is sold *

Geographic ownership **

■

Coated fine paper

62%

■

Uncoated fine paper

■

Coated specialities

■

Packaging and newsprint

■

Pulp

15%

■

Other

■

North America

29%

■

Europe

39%

■

Southern Africa

15%

■

Asia and other

17%

■

South Africa

71%

■

North America

21%

■

Europe and ROW †

■

North America

28%

■

Europe

45%

■

Southern Africa

27%

Sappi is a leading producer of
coated fine paper

●

Improved operating performance

●

Basic EPS increased to 27 US cents for the quarter

●

Strong cash generation

●

Input costs continue to rise

●

Prices improved except for Fine Paper Europe

●

Dividend of 32 US cents per share declared

financial highlights

summary

Reviewed

Quarter ended

Year ended

Sept

June

Sept

2007

2006

2007

2006

Key figures: (US$ million)

Sales

1,422

1,297

1,296

5,304

4,941

Operating profit

383

125

Special items *

(6)

(70)

(34)

Operating profit excluding special items

313

EBITDA excluding special items * **

187

176

162

688

483

Basic EPS (US cents)

(2)

Net debt *

2,257

2,313

2,113

2,257

2,113

Key ratios: (%)

Operating profit to sales

6.1

6.7

3.9

7.2

2.5

Operating profit excluding special items to sales

6.8

6.2

4.8

5.9

1.8

EBITDA excluding special items * ** to sales

13.2

13.6

12.5

13.0

9.8

Operating profit excluding special items to

average net assets

9.1

8.0

6.4

7.6

2.3

Return on average equity (ROE) *

14.1

13.6

11.7

12.6

(0.3)

Net debt to total capitalisation *

43.2

46.1

46.4

43.2

46.4

Refer to page 19, Supplemental Information, for the definition of the term.

** Refer to page 20, additional information in Supplemental Information for the reconciliation of EBITDA excluding special items to profit.

comment

Our operating performance improved further in the quarter with all of our fine paper businesses improving

their margins and returns. Forest Products reported a strong quarter supported by strong pulp prices and

good demand in the southern African markets. Although improved, Fine Paper’s margins and returns are

still well short of acceptable levels. A major factor was high input costs including wood, chemical and

energy costs. As a group we sell slightly more pulp than we purchase which provides an economic hedge

in terms of pulp prices, but the European and southern African Fine Paper businesses purchase more than

half of their pulp requirements, consequently their margins continue to be squeezed by high pulp prices

and other input costs.

Coated fine paper prices in North America have started improving but margins remain under pressure from

high input costs. In Europe, the price gains made earlier in the year have largely been surrendered due to

very competitive markets despite high operating rates for us and the industry as a whole.

Demand for coated fine paper grew at about 1% in Europe compared with the previous year. In North

America shipments by local producers declined largely as a result of capacity closures. Pulp markets

remain very strong; NBSK prices for the quarter averaged US$800 per ton, up about US$100 compared

to a year ago.

Our sales were US$1.42 billion, an increase of 10%, reflecting strong order books in all our businesses.

Operating profit increased 70% to US$87 million. Operating profit excluding special items increased to

US$96 million (2006: US$62 million).

Special items excluded from operating profit in the quarter include fire damage to our southern African

forests of US$8 million, profit on sale of assets US$1 million and a loss from a change in the fair value of

plantations of US$2 million. Details of these are set out in note 4 to the financial statements.

Net finance costs were US$27 million compared to US$37 million a year ago and included interest

capitalised of US$6 million, foreign exchange gains of US$4 million and a favourable change in fair value

of financial instruments of US$3 million.

Basic earnings per share for the quarter grew to 27 US cents compared to 18 US cents last year.

sappi limited – fourth quarter page 2

sappi limited – fourth quarter page 3

year ended September 2007 compared to
year ended September 2006

There has been a continuing trend of improvement in operating performance quarter by quarter through

the year. Sales for the year increased 7% to US$5.3 billion. Operating profit increased to US$383 million

from US$125 million last year. Operating profit excluding special items increased to US$313 million from

US$91 million last year. Special items amounted to US$70 million which included US$54 million plantation

fair value gain, US$26 million profit on sale of fixed assets and US$15 million fire damage.

Net finance costs for the year were US$134 million compared to US$130 million in the prior year and

included interest capitalised of US$14 million and an unfavourable change in fair value of financial

investments of US$9 million.

The effective tax rate for the year was 19% and was reduced by rate changes offset by non-recognition of

deferred tax assets.

Basic earnings per share for the year was 89 US cents compared to a loss of 2 US cents last year.

cash flow and debt

Cash generated by operations increased to US$182 million for the quarter from US$158 million a year ago.

Working capital was reduced by US$140 million compared to a reduction of US$80 million a year ago as

a result of tight management of working capital in all regions.

During the quarter net finance costs paid increased to US$52 million compared to US$22 million a year

ago as a result of the roll-over of forward exchange contracts related to long term debt.

The cash effect of investing activities was US$120 million in the quarter compared to US$109 million a year

ago and US$154 million in the prior quarter.

Net debt at year end was US$2,257 million, compared to US$2,113 million at the start of the year. After

taking account of the non-cash currency impact of US$168 million on the value of debt, net debt was

reduced by US$24 million. This is in line with our commitment to proceed with the Saiccor expansion

project without materially increasing debt levels. Net debt to total capitalisation was 43.2% compared to

46.4% in September 2006.

A South African subsidiary issued bonds, maturing in four years, to the value of ZAR1 billion (US$140 million)

on 25 September 2007 to replace short term debt.

operating review for the quarter

Sappi Fine Paper

Quarter

ended

Sept 2007

Sept 2006

June 2007

US$ million

change

US$ million

Sales

1,118

1,029

8.6

1,037

Operating profit

(40)

–

Operating profit to sales (%)

2.6

(3.9)

–

2.4

Special items *

–

Operating profit excluding

special items

–

Operating profit excluding

special items to sales (%)

2.6

–

2.4

EBITDA excluding special items

102

22.9

100

EBITDA excluding special items

to sales (%)

9.1

8.1

–

9.6

RONOA pa (%)

3.7

–

3.2

* See note 4 to the financial statements on page 17

All the regions improved operating profit excluding special items and margins compared to a year ago.

Sales volumes increased by 3.3% compared to a year ago and net sales increased by 8.6% to

US$1.1 billion, mainly as a result of the higher volumes, improved prices in North America and southern

Africa, and the currency conversion of non-dollar sales to a weaker US Dollar. The operating profit

excluding special items improved to US$29 million compared to breaking even a year ago. The operating

margin of 2.6% remains well below target.

sappi limited – fourth quarter page 4

sappi limited – fourth quarter page 5

Europe

Quarter

ended

Sept 2007

Sept 2006

change

June 2007

US$ million

(US$)

(Euro)

US$ million

Sales

619

569

8.8

0.6

584

Operating profit

(48)

–

Operating profit to sales (%)

2.7

(8.4)

–

2.4

Special items *

–

Operating profit excluding

special items

(8)

–

Operating profit excluding

special items to sales (%)

2.7

(1.4)

–

2.4

EBITDA excluding special

items

46.3

35.3

EBITDA excluding special

items to sales (%)

9.7

7.2

–

9.8

RONOA pa (%

3.5

(1.7)

–

2.9

* See note 4 to the financial statements on page 17

Sales volume increased 1% compared to a year ago but 6% compared to the prior quarter as we regained

some market share lost when we held a strong position on prices earlier in the year. Average prices

realised were at similar levels to a year earlier and 1.5% below the previous quarter due to fiercely

competitive market conditions.

Operating profit excluding special items improved to US$17 million from a loss of US$8 million a year ago.

The cost reduction programme initiated in 2005 continues to help offset the impact of high input costs

including wood, pulp, chemical and energy costs as well as employment inflation.

In Europe apparent consumption for coated fine paper grew 1% compared to a year ago. Despite reported

industry operating rates of 93% for coated fine paper, prices retreated during the quarter, giving up the

gains achieved earlier in the year. There have been some price improvements in specific markets.

North America

Quarter

ended

Sept 2007

Sept 2006

June 2007

US$ million

change

US$ million

Sales

404

373

8.3

362

Operating profit

28.6

Operating profit to sales (%)

2.2

1.9

–

2.2

Operating profit excluding special items

28.6

Operating profit excluding special items

to sales (%)

2.2

1.9

–

2.2

EBITDA excluding special items

(5.4)

EBITDA excluding special items

to sales (%)

8.7

9.9

–

9.9

RONOA pa (%)

3.4

2.5

–

3.0

The three new products launched in the past two quarters have been well received in the market. Sales

volumes increased by 8% compared to a year ago after we regained some market share lost in the

previous year. Average prices realised for paper increased compared to a year ago and compared to the

previous quarter. Further increases are being implemented.

Operating profit excluding special items improved in the quarter to US$9 million compared to US$7 million

a year ago.

We continue to implement cost reductions throughout our operations to offset high input costs.

Apparent consumption for coated fine paper declined significantly. It was impacted by reduced imports of

coated fine paper. It appears that inventories of imported product have declined and that some of these

imports are now recorded as coated mechanical paper, which is free of the anti-dumping and

countervailing duties recently applied to certain Asian exporters. Shipments from domestic producers

declined 4% reflecting a reduction in capacity following the closure of approximately 800,000 tons of higher

cost coated fine paper capacity over the past two years.

sappi limited – fourth quarter page 6

sappi limited – fourth quarter page 7

South Africa

Quarter

ended

Sept 2007

Sept 2006

change

June 2007

US$ million

(US$)

(Rand)

US$ million

Sales

9.2

6.1

Operating profit

200.0

191.6

Operating profit to sales (%)

3.2

1.1

–

3.3

Operating profit excluding

special items

200.0

191.6

Operating profit excluding

special items to sales (%)

3.2

1.1

3.3

EBITDA excluding special

items

40.0

36.1

EBITDA excluding special

items to sales (%)

7.4

5.7

–

7.7

RONOA pa (%)

7.9

2.6

–

7.8

Demand in the southern African markets was strong. Sales in US Dollars and operating profit improved

as a result of improved prices but margins remain under pressure from cost increases including wood,

pulp, energy and employment costs.

Forest Products

Quarter

ended

Sept 2007

Sept 2006

change

June 2007

US$ million

(US$)

(Rand)

US$ million

Sales

304

267

13.9

10.7

260

Operating profit

(38.8)

(40.5)

Operating profit to sales (%)

17.1

31.8

–

25.0

Special items *

(29)

–

(8)

Operating profit excluding

special items

8.9

5.9

Operating profit excluding

special items to sales (%)

20.1

21.0

–

21.9

EBITDA excluding special items

8.2

5.2

EBITDA excluding special items

to sales (%)

26.0

27.3

–

29.2

RONOA pa (%)

15.1

18.4

–

15.1

* See note 4 to the financial statements on page 17

The business performed strongly reflecting increasing international pulp prices and good demand for our

products, particularly packaging paper in southern Africa. Demand for chemical cellulose was strong.

Operating efficiency continued to improve, however there is scope for further improvement. Energy and

employment costs have continued to rise at a rate exceeding the local rate of inflation, which is

approximately 6%. A general shortage of technical skills is exacerbating employment cost pressures.

Managing these costs is a priority going forward.

During the quarter we experienced extensive plantation fires resulting in a charge of US$8 million (before

tax) included in special items. The fires suffered in the third and fourth quarter were the worst fires ever

experienced in South Africa. The combined pre-tax charge for the two quarters was US$15 million before

tax. Good rains have virtually ended the risk of more fires this season.

Special items also included a plantation fair value price charge of US$2 million compared to a gain of

US$10 million a year ago. The reversal of the Usutu impairment of US$40 million in the fourth quarter 2006

is reported as a special item.

The Saiccor expansion project is progressing well and is on track for a second calendar quarter 2008 start

up. The estimated capital expenditure for the project will be approximately US$500 million.

dividend

The board has approved a dividend, Number 84, of 32 US cents for the year ended September 2007.

A dividend of 30 US cents was paid for the previous year.

sappi limited – fourth quarter page 8

directors

Ralph Boëttger, who joined the board as Chief Executive Officer on 01 July 2007, took executive authority

for the company in August following an intensive introductory tour. At that date, the group’s Chairman,

Eugene van As, resumed his non-executive role.

John (Jock) McKenzie joined the board as non-executive director on 01 September 2007.

outlook

Management’s priority is the continuing improvement of our margins and operating efficiencies. We expect

the turnaround of our North American business, which is well under way, to continue. In Europe our focus

is on further improving operational efficiencies, continuous cost reductions and price recovery, to help

restore margins. The southern African business continues to benefit from strong local demand and the high

international pulp prices.

Supply/demand conditions for coated fine paper in North America remain favourable for improved pricing;

however, there are signs of the economy cooling, which could have some impact on demand during 2008.

Despite the high operating rates in Europe prices remain low and industry margins continue to decline.

Pulp prices have continued to rise in October 2007 and NBSK prices are US$30 per ton higher than the

average for the September quarter.

Input cost pressures remain high in all our businesses. While we expect to be able to offset these costs to

some extent through cost reduction efforts and improved efficiency, improving our revenue line through

volume and mix improvements, improved margin management, innovation and improved pricing, is a

priority. We will also continue to focus on working capital management and cash generation.

The weakness in the US Dollar at the time of writing is expected to have an unfavourable impact on our

European and southern African businesses.

Our first financial quarter is usually weaker than the fourth financial quarter due to a seasonal slowdown in

activity at the end of the calendar year. We do, however, expect earnings excluding special items to be

stronger than the equivalent quarter last year.

We expect some increase in net debt as the Saiccor expansion nears completion over the next two

quarters, but expect it to return to current levels by the end of the financial year.

Maintaining momentum of the trend of continuous improvement in the profitability of Sappi remains the top

priority. A key focus is our commitment to excellence in customer service and innovation in our product offerings.

On behalf of the board

R J Boëttger

M R Thompson

Director

08 November 2007

sappi limited

(Registration number 1936/008963/06)
Issuer Code: SAVVI
JSE Code: SAP
ISIN Code: ZAE 000006284

sappi limited – fourth quarter page 9

dividend announcement

The directors have declared a dividend (number 84) of 32 US cents per share for the year ended

September 2007.

In compliance with the requirements of STRATE, the JSE electronic settlement system which is applicable

to Sappi, the salient dates in respect of the dividend will be as follows:

Last day to trade to qualify for dividend

Thursday, 27 December 2007

Date on which shares commence trading ex-dividend

Friday, 28 December 2007

Record date

Friday, 04 January 2008

Payment date

Tuesday, 08 January 2008

Dividends payable from the Johannesburg transfer office will be paid in South African Rands except that

dividends payable to nominee shareholders in respect of shares which they hold on behalf of non-residents

of the Republic of South Africa will without exception be paid in United States Dollars. There will not be

any currency election.

Dividends payable from the London transfer office will be paid in British Pounds Sterling or in the case of

shareholders with registered addresses in the USA, in United States Dollars.

Dividends payable other than in United States Dollars will be calculated at the respective rates of exchange

ruling at 01:30 Central European Time as per Reuters on Tuesday, 18 December 2007, and announced

on Tuesday, 18 December 2007.

There will not be any de-materialisation nor re-materialisation of Sappi Limited share certificates from Friday

28 December 2007 to Friday 04 January 2008, both days inclusive.

Sappi Management Services (Pty) Limited

Secretaries

Per D J O’Connor

08 November 2007

sappi limited – fourth quarter page 10

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,

changing regulatory requirements, unanticipated production disruptions, 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.

sappi limited – fourth quarter page 11

notes

sappi limited – fourth quarter page 12

financial results

for the quarter and year ended September 2007

sappi limited – fourth quarter page 13

group income statement

sappi limited – fourth quarter page 14

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

change

US$ million

change

Sales

1,422

1,296

9.7

5,304

4,941

7.3

Cost of sales

1,242

1,137

4,591

4,419

Gross profit

180

159

13.2

713

522

36.6

Selling, general and

administrative expenses

362

367

Share of (profit) loss from

associates and joint ventures

(4)

–

(10)

Other operating expenses

(income)

(22)

Operating profit

70.6

383

125

206.4

Net finance costs

134

130

Net paid

152

136

Capitalised

(6)

(1)

(14)

(2)

Net foreign exchange gains

(4)

(2)

(13)

(7)

Change in fair value

of financial instruments

(3)

Profit (loss) before tax

328.6

249

(5)

–

Taxation – current

(11)

– deferred

(7)

(15)

(6)

Profit (loss) for the period

52.5

202

(4)

–

Basic earnings (loss)

per share (US cents)

(2)

Weighted average

number of shares

in issue (millions)

228.4

226.5

227.8

226.2

Diluted basic

earnings (loss)

per share (US cents)

(2)

Weighted average

number of shares

on fully diluted

basis (millions)

231.2

228.6

230.5

226.2

group balance sheet

Reviewed

Sept 2007

Sept 2006

US$ million

ASSETS

Non-current assets

4,608

3,997

Property, plant and equipment

3,491

3,129

Plantations

636

520

Deferred taxation

Other non-current assets

421

274

Current assets

1,736

1,500

Inventories

712

699

Trade and other receivables

660

577

Cash and cash equivalents

364

224

Assets held for sale

–

Total assets

6,344

5,517

EQUITY AND LIABILITIES

Shareholders’ equity

Ordinary shareholders’ interest

1,816

1,386

Non-current liabilities

2,612

2,465

Interest-bearing borrowings

1,828

1,634

Deferred taxation

385

336

Other non-current liabilities

399

495

Current liabilities

1,916

1,666

Interest-bearing borrowings

771

694

Bank overdraft

Other current liabilities

998

862

Taxation payable

125

101

Total equity and liabilities

6,344

5,517

Number of shares in issue at balance sheet date (millions)

228.5

227.0

sappi limited – fourth quarter page 15

group cash flow statement

sappi limited – fourth quarter page 16

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Operating profit

383

125

Depreciation, fellings and other amortisation

109

119

445

466

Other non-cash items (including impairment

charges)

(14)

(12)

(142)

(127)

Cash generated by operations

182

158

686

464

Movement in working capital

140

(17)

Net finance costs

(52)

(22)

(162)

(138)

Taxation paid

(9)

(1)

(27)

(13)

Dividends paid *

–

(68)

Cash retained from operating activities

261

215

489

228

Cash utilised in investing activities

(120)

(109)

(465)

(355)

141

106

(127)

Cash effects of financing activities

(55)

(21)

Net movement in cash and cash equivalents

165

122

(148)

* Dividend number 83: 30 US cents per share (2006: 30 US cents per share)

group statement of recognised income and expense

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Pension fund asset recognised (not recognised)

(37)

(43)

Actuarial gains on pension and other post

employment benefit liabilities

101

105

101

100

Fair value adjustment on available

for sale financial instruments

–

Deferred taxation on above items

(38)

(20)

(52)

(19)

Valuation allowance against deferred

tax asset and actuarial gains recognised

Exchange differences on translation

of foreign operations

(67)

151

(189)

Net income (expense) recorded directly

in equity

119

(10)

277

(142)

Profit (loss) for the period

202

(4)

Total recognised income (expense)

for the period

180

479

(146)

notes to the group results

sappi limited – fourth quarter page 17

Basis of preparation
The condensed financial statements have been prepared in accordance with International Accounting Standard 34
Interim Financial Reporting. The accounting policies and methods of computation used in the preparation of the
results are consistent, in all material respects, with those used in the annual financial statements for September 2006
which are compliant with the English language version of International Financial Reporting Standards (IFRS) as
published by the International Accounting Standards Board.

The preliminary results for the year ended 30 September 2007 have been reviewed in terms of the International
Standard on Review Engagements 2400 by the group’s auditors, Deloitte & Touche. Their unmodified review report
is available for inspection at the company’s registered offices. The results for the quarters ended September 2007,
June 2007, March 2007 and December 2006 have not been audited or reviewed.

Reconciliation of movement in shareholders’ equity

Reviewed

year

ended

Sept 2007

Sept 2006

US$ million

Balance – beginning of year

1,386

1,589

Total recognised income (expense) for the period

479

(146)

Dividends paid

(68)

Transfers to participants of the share purchase trust

Share Based Payment Reserve

Balance – end of year

1,816

1,386

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Operating profit
Included in operating profit are the following

non-cash items:

Depreciation and amortisation

Depreciation of property,

plant and equipment

374

390

Other amortisation

–

100

375

392

Fair value adjustment on plantations

(included in cost of sales)

Changes in volume

Fellings

Growth

(19)

(14)

(76)

(70)

(1)

(6)

Plantation price fair value adjustment

(54)

(34)

(60)

(30)

Included in other operating expenses (income) for the years ended September 2007 and September 2006 are items
(b), (c), (e) and (f) as disclosed in note 4.

Special items
Special items cover those items which management believe are material by nature or amount to the year’s/quarter’s
results and require separate disclosure in accordance with IAS 1 paragraph 86. Such items would generally include
profit and loss on disposal of property, investments and businesses, asset impairments, restructuring charges, natural
disasters and non-cash gains or losses on the price fair value adjustment of plantations.

notes to the group results

sappi limited – fourth quarter page 18

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Special items, excluding interest and tax effects,

for the relevant periods are:

(a) Plantation price fair value adjustment

(54)

(34)

(b) Asset impairments (reversals)

–

(39)

–

(31)

raised (released)

–

(7)

(d) Pension restructuring gain

–

(28)

(e) Profit on sale of assets

(1)

–

(26)

–

(f) Fire, flood, storm and related events

–

(70)

(34)

Headline earnings (loss) per share
Headline earnings (loss) per share (US cents) *

(11)

Weighted average number of shares

in issue (millions)

228.4

226.5

227.8

226.2

Diluted headline earnings (loss)

per share (US cents) *

(11)

Weighted average number of shares

on fully diluted basis (millions)

231.2

228.6

230.5

226.2

Calculation of Headline earnings (loss) *
Profit (loss) for the period

202

(4)

Profit on disposal of property, plant

and equipment

–

(20)

(2)

Write-off of assets

Asset impairments (reversals)

(39)

(31)

Headline earnings (loss)

186

(26)

* Headline earnings disclosure is required by the JSE Limited.

Material balance sheet movements
Non-current interest-bearing borrowings
A South African subsidiary issued bonds to the value of ZAR1 billion (US$140 million) on 25 September 2007. The
bonds were issued at a fixed rate of 10.64% and mature on 14 October 2011.

Other non-current assets
The increase in other non-current assets relates largely to the recognition of the pension fund asset in our South African
subsidiary and the recognised actuarial gain on the pension asset to the value of ZAR599 million (US$83 million).

Reviewed

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Capital expenditure

Property, plant and equipment

128

458

303

Capital commitments

Contracted but not provided

188

294

Approved but not contracted

249

255

437

549

Contingent liabilities

Guarantees and suretyships

Other contingent liabilities *

* The increase in other contingent liabilities relates to tax issues upon which the group is awaiting further clarification.

10. Secondary Tax on Companies (STC)

During the annual South African ‘budget speech’ the Minister of Finance announced a rate reduction in South Africa’s
STC rate from 12.5% to 10% and the proposed replacement of STC with a tax on dividends. The rate reduction
resulted in a US$2 million charge in the March quarter’s results because of the write-down of the related STC asset.
There is a remaining asset of US$10 million which may be impacted by the proposed change in legislation in this area.

supplemental information

general definitions

Average – averages are calculated as the sum of the opening and closing balances for the relevant period divided
by two

Fellings – the amount charged against the income statement representing the standing value of the plantations
harvested

NBSK – Northern Bleached Softwood Kraft pulp. One of the main varieties of market pulp, mainly produced from
spruce trees in Scandinavia, Canada and north eastern USA. The NBSK is a benchmark widely used in the pulp
and paper industry for comparative purposes

SG&A – selling, general and administrative expenses

Non-GAAP measures

The group believes that it is both useful and necessary to report these non-GAAP measures for the following
reasons:

–

these measures are used by the group for internal performance analysis;

–

the presentation by the group’s reported business segments of these measures facilitates comparability with
other companies in our industry, although the group’s measures may not be comparable with similarly titled
profit measurements reported by other companies; and

–

it is useful in connection with discussion with the investment analyst community and debt rating agencies.

These non-GAAP measures should not be considered in isolation or construed as a substitute for GAAP
measures in accordance with IFRS.

Headline earnings – as defined in circular 8/2007 issued by the South African Institute of Chartered Accountants,
separates from earnings all separately identifiable re-measurements. It is not necessarily a measure of sustainable
earnings. It is a listing requirement of the JSE Limited to disclose headline earnings per share

Net debt – current and non-current interest-bearing borrowings, and bank overdrafts (net of cash, cash equivalents
and short-term deposits)

Net debt to total capitalisation – Net debt divided by shareholders’ equity plus minority interest, non-current
liabilities, current interest-bearing borrowings and overdraft

Net operating assets – total assets (excluding deferred taxation and cash) less current liabilities (excluding
interest-bearing borrowings and bank overdraft)

Net assets – total assets less current liabilities

Net asset value – shareholders’ equity plus net deferred tax

Net asset value per share – net asset value divided by the number of shares in issue at balance sheet date

ROE – return on average equity. Profit for the period divided by average shareholders’ equity

RONOA – operating profit excluding special items divided by average net operating assets

Special items – special items cover those items which management believe are material by nature or amount to the
year’s/quarter’s results and require separate disclosure in accordance with IAS 1 paragraph 86. Such items would
generally include profit and loss on disposal of property, investments and businesses, asset impairments,
restructuring charges, natural disasters and non-cash gains or losses on the price fair value adjustment of plantations.

EBITDA excluding special items – earnings before interest (net finance costs), tax, depreciation, amortisation and
special items

The above financial measures are presented to assist our shareholders and the investment community in interpreting our financial
results. These financial measures are regularly used and compared between companies in our industry.

sappi limited – fourth quarter page 19

supplemental information

sappi limited – fourth quarter page 20

additional information

Reviewed

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

Profit (loss) for the period to EBITDA

excluding special items

(1)

reconciliation

Profit (loss) for the period

202

(4)

Net finance costs

134

130

Taxation – current

(11)

– deferred

(7)

(15)

(6)

Special items

(70)

(34)

Operating profit excluding special items

313

Depreciation

374

390

Amortisation

–

EBITDA excluding special items

(1) (2)

187

162

688

483

Reviewed

Sept 2007

Sept 2006

US$ million

Net debt (US$ million)

(3)

2,257

2,113

Net debt to total capitalisation (%)

(3)

43.2

46.4

Net asset value per share (US$)

(3)

9.37

7.26

(1)

In connection with the U.S. Securities Exchange Commission (“SEC”) rules relating to “Conditions for Use of Non-GAAP Financial
Measures”, we have reconciled EBITDA excluding special items to net profit rather than operating profit. As a result our definition retains
minority interest as part of EBITDA excluding special items.

Operating profit excluding special items represents earnings before interest (net finance costs), taxation and special items. Net finance
costs includes: gross interest paid; interest received; interest capitalised; net foreign exchange gains; and net fair value adjustments on
interest rate financial instruments. See the group income statement for an explanation of the computation of net finance costs. Special
items cover those items which management believe are material by nature or amount to the year’s/quarter’s results and require separate
disclosure in accordance with IAS 1 paragraph 86. Such items would generally include profit and loss on disposal of property, investments
and businesses, asset impairments, restructuring charges, natural disasters and non-cash gains or losses on the price fair value
adjustment of plantations.

EBITDA excluding special items represents operating profit before depreciation, amortisation and special items.

We use both Operating profit excluding special items and EBITDA excluding special items as internal measures of performance to
benchmark and compare performance, both between our own operations and as against other companies. Operating profit excluding
special items and EBITDA excluding special items are measures used by the group, together with measures of performance under IFRS
and US GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performances of various
businesses. We believe they are useful and commonly used measures of financial performance in addition to net profit, operating profit
and other profitability measures under IFRS or US GAAP because they facilitate operating performance comparisons from period to period
and company to company. By eliminating potential differences in results of operations between periods or companies caused by factors
such as depreciation and amortisation methods, historic cost and age of assets, financing and capital structures and taxation positions
or regimes, we believe both Operating profit excluding special items and EBITDA excluding special items can provide a useful additional
basis for comparing the current performance of the operations being evaluated. For these reasons, we believe Operating profit excluding
special items and EBITDA excluding special items and similar measures are regularly used by the investment community as a means of
comparison of companies in our industry. Different companies and analysts may calculate Operating profit excluding special items and
EBITDA excluding special items differently, so making comparisons among companies on this basis should be done very carefully.
Operating profit excluding special items and EBITDA excluding special items are not measures of performance under IFRS or US GAAP
and should not be considered in isolation or construed as a substitute for operating profit or net profit as indicators of the company’s
operations in accordance with IFRS or US GAAP.

(2)

Operating profit excluding special items and EBITDA excluding special items have been presented for the first time this quarter. Previously
normal EBITDA was presented. The change reflects the current internal management emphasis on both Operating profit excluding special
items and EBITDA excluding special items.

(3)

Refer to page 19, Supplemental Information for the definition of the term.

supplemental information

sappi limited – fourth quarter page 21

regional information

Quarter

Year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

Metric tons

(000’s)

(000’s) change

(000’s)

(000’s) change

Sales volumes

Fine Paper –

North America

398

368

8.2

1,506

1,426

5.6

Europe

633

626

1.1

2,493

2,450

1.8

Southern Africa

(1.1)

350

328

6.7

Total

1,121

1,085

3.3

4,349

4,204

3.4

Forest Products – Pulp and paper

operations

417

400

4.3

1,484

1,470

1.0

Forestry operations

242

383

(36.8)

1,030

1,525

(32.5)

Total

1,780

1,868

(4.7)

6,863

7,199

(4.7)

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

change

US$ million

US$ million change

Sales

Fine Paper –

North America

404

373

8.3

1,511

1,439

5.0

Europe

619

569

8.8

2,387

2,194

8.8

Southern Africa

9.2

358

325

10.2

Total

1,118

1,029

8.6

4,256

3,958

7.5

Forest Products – Pulp and paper

operations

285

245

16.3

979

896

9.3

Forestry operations

(13.6)

(20.7)

Total

1,422

1,296

9.7

5,304

4,941

7.3

Operating profit

Fine Paper –

North America

28.6

(16)

–

Europe

(48)

–

(27)

–

Southern Africa

200.0

(6)

–

Total

(40)

–

119

(49)

–

Forest Products

(38.8)

264

175

50.9

Corporate

–

(1)

–

Total

70.6

383

125

206.4

supplemental information

sappi limited – fourth quarter page 22

Reviewed

Quarter

year

ended

Sept 2007

Sept 2006

Sept 2007

Sept 2006

US$ million

change

US$ million

US$ million change

Special items *

Fine Paper –

North America

–

(14)

Europe

–

(32)

–

Southern Africa

–

Total

–

(32)

–

Forest Products

(29)

–

(40)

(60)

–

Corporate

–

Total

(18.2)

(70)

(34)

–

Operating profit excluding special items

Fine Paper –

North America

28.6

(30)

–

Europe

(8)

–

330.8

Southern Africa

200.0

(6)

–

Total

–

(23)

–

Forest Products

8.9

224

115

94.8

Corporate

–

(1)

–

Total

54.8

313

244.0

EBITDA excluding special items *

Fine Paper –

North America

(5.4)

128

43.8

Europe

46.3

234

202

15.8

Southern Africa

40.0

140.0

Total

102

22.9

386

301

28.2

Forest Products

8.2

299

182

64.3

Corporate

–

Total **

187

162

15.4

688

483

42.4

Net operating assets

Fine Paper –

North America

1,031

1,108

(6.9)

1,031

1,108

(6.9)

Europe

1,941

1,796

8.1

1,941

1,796

8.1

Southern Africa

149

145

2.8

149

145

2.8

Total

3,121

3,049

2.4

3,121

3,049

2.4

Forest Products

1,655

1,188

39.3

1,655

1,188

39.3

Corporate and other

10.5

Total

4,797

4,256

12.7

4,797

4,256

12.7

Refer to page 19, Supplemental Information for the definition of the term.

** Refer to page 20, additional information in Supplemental Information for the reconciliation of EBITDA excluding special items to profit.

supplemental information

sappi limited – fourth quarter page 23

summary rand convenience translation

Quarter

Year

ended

Sept

2007

2006

change

2007

2006

change

Key figures: (ZAR million)

Sales

10,018

9,393

6.7

38,051

32,630

16.6

Operating profit

613

370

65.7

2,748

825

233.1

Special items *

(22.2)

(502)

(225)

–

Operating profit excluding special items

676

449

50.6

2,245

601

273.5

EBITDA excluding special items *

1,317

1,174

12.2

4,936

3,190

54.7

Profit (loss) for the period

430

290

48.3

1,449

(26)

–

Basic EPS (SA cents)

190

130

46.2

638

(13)

–

Net debt *

15,509

16,426

(5.6)

Cash generated by operations

1,282

1,145

12.0

4,921

3,064

60.6

Cash retained from operating activities

1,839

1,558

18.0

3,508

1,506

132.9

Net movement in cash and

cash equivalents

1,162

370

214.1

875

(977)

–

Key ratios: (%)

Operating profit to sales

6.1

3.9

7.2

2.5

Operating profit excluding special

items to sales

6.8

4.8

5.9

1.8

EBITDA excluding special items * to sales

13.2

12.5

13.0

9.8

Operating profit excluding special

items to average net assets

9.2

6.2

7.5

2.2

Net debt to total capitalisation *

43.2

46.4

* Refer to page 19, Supplemental Information for the definition of the term.

exchange rates

Sept

June

March

Dec

Sept

2007

2006

Exchange rates:

Period end rate: US$1 = ZAR

6.8713

7.0393

7.2650

7.0076

7.7738

Average rate for the Quarter: US$1 = ZAR

7.0453

7.1095

7.1532

7.3358

7.2475

Average rate for the YTD: US$1 = ZAR

7.1741

7.2121

7.2783

7.3358

6.6039

Period end rate: EUR 1 = US$

1.4272

1.3542

1.3358

1.3199

1.2672

Average rate for the Quarter: EUR 1 = US$

1.3782

1.3498

1.3160

1.2926

1.2744

Average rate for the YTD: EUR 1 = US$

1.3336

1.3178

1.3021

1.2926

1.2315

The financial results of entities with reporting currencies other than the US Dollar are translated into US Dollars as follows:

– Assets and liabilities at rates of exchange ruling at period end; and

– Income, expenditure and cash flow items at average exchange rates.

sappi limited – fourth quarter page 24

sappi ordinary shares

ADR price (NYSE TICKER: SPP)

note: (1ADR = 1 sappishare)

ZAR

140

120

100

31 Oct

2003

31 Jan

2004

30 Apr

2004

31 Jul

2004

31 Oct

2004

31 Jan

2005

30 Apr

2005

31 Jul

2005

31 Oct

2005

31 Jan

2006

30 Apr

2006

31 Jul

2006

31 Oct

2006

31 Jan

2007

30 Apr

2007

31 Jul

2007

31 Oct

2007

US$

31 Oct

2003

31 Jan

2004

30 Apr

2004

31 Jul

2004

31 Oct

2004

31 Jan

2005

30 Apr

2005

31 Jul

2005

31 Oct

2005

31 Jan

2006

30 Apr

2006

31 Jul

2006

31 Oct

2006

31 Jan

2007

30 Apr

2007

31 Jul

2007

31 Oct

2007

this report is available on the Sappi website

www.sappi.com

Other interested parties can obtain printed copies of this report from:

South Africa:

United States

United Kingdom:

Computershare Investor

ADR Depository:

Capita Registrars

Services 2004 Limited

The Bank of New York

The Registry

70 Marshall Street

Investor Relations

34 Beckenham Road

Johannesburg 2001

PO Box 11258

Beckenham, Kent

PO Box 61051

Church Street Station

BR3 4TU, DX 91750

Marshalltown 2107

New York, NY 10286-1258

Beckenham West

Tel +27 (0)11 370 5000

Tel +1 610 382 7836

Tel +44 (0)208 639 2157

Printed on Magno Matt Satin 250g/m

and 150g/m

www.sappi.com

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 12, 2007

SAPPI LIMITED,

: /s/ M. R. Thompson

Title:

Chief Financial Officer

Name: M. R. Thompson