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Sappi Results for the 4Q '07; sales up 10%

Press release from the issuing company

Johannesburg, South Africa, Nov. 8 2007 -- Commenting on the results, Sappi chief executive Ralph Boettger said:
"We are pleased that 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. For the year, there has been a continuing trend of improvement in operating performance quarter by quarter since the fourth quarter of 2006. Of concern is that the fine paper margins and returns are still well short of acceptable levels and that input costs were again high, including wood, chemicals and energy costs."
"Our sales increased by 10% to US$1.42 billion, reflecting strong order books in all our businesses. Operating profit excluding special items increased 55% to US$96 million and basic earnings per share for the quarter grew to 27 US cents compared to 18 US cents last year. Our basic earnings per share for the year grew to 89 US cents from a loss of 2 US cents the previous year."
Looking forward, Boettger commented:
"Our priority is the continuing improvement of our margins and operating efficiencies. We expect the turnaround in 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 for 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."
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; 4Q07 Financial Results