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Sappi Expects Markets to Improve Slowly in Second Half

Press release from the issuing company

JOHANNESBURG---Feb. 25, 2002--Sappi, the world's largest producer of coated fine paper, today announced at its AGM today (25 February 2002) that it expects to return its North American business to profitability in the second half of the year and that, provided the world economy does not deteriorate from its current projections, it still expects quarterly earnings per share for the rest of the year to improve to levels similar to those of the fourth quarter 2001. "The state of the North American coated paper market is our biggest challenge as it is severely pressured by imported product at low prices. Our own imports there are also rising significantly,'' said Sappi Chairman Eugene van As. "Retail spending in the USA is increasing and the economy should start to recover soon. We are therefore confident of returning this business to profitability.'' The new Chief Executive in North America, Kathleen Walters, has now joined the group and Monte Haymon, the retiring chief executive, is working with her to effect a smooth transition of leadership. Consumer inventories of coated woodfree paper in all markets have been sharply reduced over the last eighteen months, resulting in shipments from producing mills being much lower than end user consumption. Sappi expects shipments to rise in the short term to match consumption, increasing substantially once the world economies turn, advertising spend begins to recover and end users of coated paper start normalising their inventories. Van As concluded by saying that: "We continue to focus on improving the fundamentals of our business within the constraints of the current market excess capacity. Growing our market share has been limited in the past year due to the extent of the downtime we have taken, but our geographic spread has minimised the impact of weaker regional markets and currency volatility on our total business. We will continue to control our costs and focus on the opportunities to grow our market share when the market changes.'' Sappi Limited is the largest producer of coated free sheet paper in the world and produces fine papers in South Africa, the United Kingdom, Austria, Belgium, The Netherlands, Germany and in the United States. Sappi's net operating assets of approximately R29 billion are located mainly in Europe (41%), North America (31%) and Southern Africa (28%). Sappi ordinary shares trade on the Johannesburg Stock Exchange and may be accessed on Bloomberg under the symbol SAP SJ, and on the Reuters Equities 2000 Service under SAPJ.J. In the US its ADRs trade on the New York Stock Exchange under the ticker symbol SPP (each ADR is equal to one ordinary share). Sappi shares are also traded in London and Frankfurt.