Chief Financial Officer's Report

Section 6 – Share price performance

A dividend of 17 US cents has been declared

Sappi share price – October 2015 to September 2018 (ZAR)
Sappi share price – October 2015 to September 2018 (ZAR)

We embarked on major capital expenditure projects in all three operating regions during the year under review. The growth in our specialities and packaging papers and dissolving wood pulp (DWP) sectors was in line with expectations and confirmed our decision to invest in these areas. The steep increase in variable costs was offset by selling price increases, but the lag in implementing the price increases reduced margins.

The four main objectives of our strategy were evident during the year. The increase in purchased pulp and delivery costs was tempered by internal cost reduction initiatives of US$82 million. We rationalised the business by converting coated woodfree paper capacity in Europe and North America to packaging paper capacity. The balance sheet was managed close to the leverage target of two times net debt to EBITDA during a transition year which included capital expenditure of US$541 million and the acquisition of the Cham Paper Group of US$132 million. There was growth in higher margin products as we completed debottlenecking projects at Saiccor and Ngodwana Mills to increase production of DWP and invested in specialities and packaging papers capacity.

We start fiscal 2019 on a sound financial platform.

G T Pearce

Chief Financial Officer