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 May, 2009

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, indicate 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.

We have included in this announcement an estimate of total synergies from the proposed
acquisition of M-real's coated graphic paper business and the integration of the acquired
business into our existing business. The estimate of synergies that we expect to achieve
following the completion of the proposed acquisition is based on assumptions which in the
view of our management were prepared on a reasonable basis, reflect the best currently
available estimates and judgments, and present, to the best of our management's knowledge
and belief, the expected course of action and the expected future financial impact on our
performance due to the proposed acquisition. However, the assumptions about these expected
synergies are in herently uncertain and, though considered reasonable by management as of
the date of preparation, are subject to a wide variety of significant business, economic and
competitive risks and uncertainties that could cause actual results to differ materially from
those contained in this estimate of synergies. There can be no assurance that we will be able
to successfully implement the strategic or operational initiatives that are intended, or realise
the estimated synergies. This synergy estimate is not aprofit forecast or a profit estimate and
should not be treated as such or relied on by shareholders or prospective investors to calculate
the likely level of profits or losses for Sappi for the fiscal 200

9 or beyond.

quarter results for
the period ended
March 2009

2nd

* for the period ended March 2009

** as at March 2009

Coated fine paper

68%

Uncoated fine paper

Coated specialities

Commodity paper

Pulp

11%

Other

North America

26%

Europe

52%

Southern Africa

22%

Sales by product group*

Sales by source*

North America

27%

Europe

47%

Southern Africa

13%

Asia and Other

13%

Fine paper

70%

Forest products

30%

Sales by destination*

Share of group’s operating assets**

sappi

// second quarter results

■

Global economic downturn/weak demand impacted

operating profitability

■

Continued production curtailment

■

Basic loss per share of 7 US cents

■

Positive cash generation

■

Acquisition synergies on track

Financial summary

Quarter ended

Half-year ended

Mar 2009

Mar 2008

Dec 2008

Mar 2009

Mar 2008

Key figures: (US$ million)

Sales

1,313

1,473 1,187 2,500

2,850

Operating profit

221 57 63

312

Special items – gains *

(23)

(124)

(32)

(55)

(123)

Operating (loss) profit excluding

special items

(17)

97 25 8

189

EBITDA excluding special items **

190 106 188

378

Basic EPS (US cents) ***

(7)

43 6 (3)

Net debt **** (excluding rights offer

cash in Dec 08)

2,735

2,661 2,497 2,735

2,661

Key ratios: (%)

Operating profit to sales

0.5

15.0 4.8 2.5

11.0

Operating (loss) profit excluding

special items to sales

(1.3)

6.6 2.1 0.3

6.6

Operating (loss) profit excluding

special items to
Capital Employed (ROCE) **

(1.6)

9.0 2.6 0.4

9.0

EBITDA excluding special

items to sales

6.2

12.9 8.9 7.5

13.3

Return on average equity (ROE) ****

(7.5)

35.9 5.

(1.4)

22.6

Net debt to total capitalisation ****

(excluding rights offer cash
in Dec 08)

59.4

61.3 57.3

59.4

61.3

* Refer to page 10 for details on special items.

** Refer to page 22, Supplemental Information for the reconciliation of EBITDA excluding special items to (loss) profit for the period.

*** Comparative figures have been revised in accordance with IAS 33 to reflect the impact of the rights offer.

**** Refer to page 21, Supplemental Information for the definition of the term.

The table above has not been audited or reviewed.

Commentary

The quarter was characterised by a sharp decline in our sales volumes, which was driven by declines in

demand for coated paper and pulp in our major markets. Our sales volumes declined approximately

24% compared to the corresponding quarter last year, including the mills acquired from M-real on

31 December 2008 (the Acquisition) in both periods. Actual sales volumes including the new business were

approximately 95% of volumes reported a year ago.

Average prices realised by the group in the quarter were 6% lower in US dollar terms than a year ago

mainly as a result of the sharp fall in pulp prices, which fell 32% relative to a year earlier. Prices realised for

coated paper were higher than in the corresponding quarter a year ago.

We curtailed production extensively in each of our regions during the quarter to match supply with demand

and reduce inventories. Our finished goods inventories were reduced by 13% in volume terms compared

to December 2008, excluding the Acquisition.

Raw material, in particular pulp, and energy prices were lower in the quarter compared to the prior quarter

and corresponding quarter last year. This had some effect on costs in the quarter; however, we expect that

a greater effect will be apparent in our third quarter now that higher cost inventories have been depleted.

We announced the suspension of operations at Muskegon Mill for at least six months and a further

restructuring affecting 70 people in the North American business in response to weak demand, as part of

our actions to manage costs and inventories. A restructuring provision of US$8 million was therefore

recorded in the quarter.

The acquired mills were also impacted by low operating rates as a result of global economic conditions.

The operating result for the Acquisition was a loss of US$2.6 million for the period since

31 December 2008. The integration of the Acquisition has progressed well and the achievement of our

previously announced synergies of Euro 120 million per annum within 3 years is on track.

Operating profit for the quarter was US$6 million compared to US$221 million in the corresponding period

last year. Special items comprising mainly a favourable adjustment to plantation price fair value offset by

the North American restructuring provision amounted to US$23 million in the quarter compared to a

favourable adjustment last year of US$124 million. We therefore report an operating loss excluding special

items of US$17 million for the quarter compared to a profit of US$97 million a year ago.

Net finance costs for the quarter increased to US$40 million compared to US$27 million last year as a

result of increased debt and the effect of interest capitalised a year ago.

The group did not benefit from tax relief on reported losses as a result of tax losses in certain regions that

could not be raised.

The basic loss per share was 7 US cents for the quarter compared to EPS of 43 US cents a year earlier,

which was favourably impacted by special items of 30 US cents per share.

// second quarter results

Cash flow and debt

During the quarter we completed the Acquisition, resulting in a net cash investment of US$586 million,

essentially from the proceeds of the rights offer completed in December 2008. In addition, the Acquisition

resulted in increased debt of US$359 million (Euro 220 million of Vendor Loan Notes and Euro 50 million

of interest bearing assumed debt). Details of the preliminary accounting for the Acquisition are included in

note 9.

Cash generated from operations for the quarter was US$99 million, down from US$176 million a year ago

as a result of lower operating profit, but much improved on the previous quarter. In addition US$28 million

was released from working capital in the quarter.

Capital expenditure during the quarter was US$39 million, a major reduction from US$164 million last year

which included part of the Saiccor expansion project.

Net cash generated (excluding cash invested in the Acquisition) was US$75 million for the quarter

compared to an outflow of US$108 million a year ago. Net debt increased from approximately

US$2.0 billion in December to US$2.7 billion as a result of the Acquisition, offset by the cash generated in

the business and currency effect of approximately US$100 million.

Liquidity

Our liquidity situation is soundly managed. At March Sappi had cash and cash equivalents of

US$711 million and undrawn commitments under the revolving credit facility of US$266 million

(Euro 200 million). Sappi’s short term borrowings of US$1,292 million include drawings under our

Euro 600 million long term revolving credit facility which runs until May 2010 (US$543 million), financing

under the securitised receivables programme which runs until 2012 (US$279 million) and a number of

smaller short term facilities, commercial paper programmes and overdrafts (US$470 million).

We do not have any major borrowings maturing in the next 12 months.

Operating review for the quarter ended March 2009
compared to the quarter ended March 2008

Sappi Fine Paper

Quarter

Quarter Quarter

ended

March 2009

March 2008

Dec 2008

US$ million

change

US$ million

Sales

1,112

1,209

(8.0)

998

Operating (loss) profit

(43)

–

Operating (loss) profit to sales (%)

(3.9)

3.9

–

0.8

Special items (gains) losses

(2)

–

Operating (loss) profit excluding

special items

(35)

–

Operating (loss) profit excluding special

items to sales (%)

(3.1)

3.7

–

0.8

EBITDA excluding special items

120

(60.0)

EBITDA excluding special items

to sales (%)

4.3

9.9

–

7.4

RONOA pa (%)

(4.3)

5.5

–

1.1

// second quarter results

Europe

Quarter

Quarter Quarter

ended

March 2009 March 2008

change

Dec 2008

US$ million

(US$)

(Euro)

US$ million

Sales

737

697

5.7

19.3

561

Operating (loss) profit

(21)

–

Operating (loss) profit to sales (%)

(2.8)

2.6

–

2.3

Special items (gains)

–

(2)

–

Operating (loss) profit excluding

special items

(21)

–

Operating (loss) profit excluding

special items to sales (%)

(2.8)

2.3

–

2.3

EBITDA excluding special items

(44.3)

(36.0)

EBITDA excluding special

items to sales (%)

4.6

8.8

–

8.9

RONOA pa (%)

(4.2)

3.1

–

3.1

Volumes for the quarter were impacted by the exceptionally weak market conditions. Apparent consumption

in Europe declined by 23% for coated woodfree paper and 27% for lightweight coated paper compared to

the corresponding quarter last year. Total shipments including exports declined approximately 28% and

30% respectively.

We curtailed production by approximately 30% during the quarter across all our European mills, including

the mills acquired from M-real, on 1 January 2009, to match our production to the reduced demand level

and to reduce inventories.

Average prices realised in the quarter in Euros were 3% above the corresponding quarter last year.

Further price increases for coated fine paper were implemented in Europe in the quarter.

The integration of the Acquisition has progressed well. The achievement of the synergy target of

Euro 120 million per annum within three years is on track as is the target for 2009, despite current difficult

market conditions.

North America

Quarter

Quarter Quarter

ended

March 2009

March 2008

Dec 2008

US$ million

change

US$ million

Sales

301

423

(28.8)

363

Operating (loss) profit

(24)

–

(7)

Operating (loss) profit to sales (%)

(8.0)

6.1

–

(1.9)

Special items – losses

–

Operating (loss) profit excluding

special items

(16)

–

(7)

Operating (loss) profit excluding

special items to sales (%)

(5.3)

6.1

–

(1.9)

EBITDA excluding special items

(84.3)

EBITDA excluding special

items to sales (%)

2.7

12.1

–

5.2

RONOA pa (%)

(5.9)

9.7

–

(2.6)

Total sales volumes declined about 30% compared to the corresponding quarter last year, with pulp sales

volumes declining 40%. Average prices realised were at the same level as a year ago. Paper prices realised,

although lower than the peak achieved in mid-2008, were 2% higher than a year ago. Pulp prices, however,

were more than 30% lower than the corresponding quarter last year.

We curtailed coated paper production by approximately 100,000 tons during the quarter and reduced our

paper inventories by 13% in volume terms. In addition we suspended operations at Muskegon Mill, which

has a capacity of 170,000 tons per annum, for at least six months. During this period 190 people have

been temporarily laid off. We have reduced a further 70 positions across the North American business to

help manage our costs. Costs of raw materials and energy declined in the quarter but were partly offset

by inefficiencies of stopping and starting operations.

// second quarter results

Southern Africa

Quarter

Quarter Quarter

ended

March 2009 March 2008

change

Dec 2008

US$ million

(US$)

(Rand)

US$ million

Sales

(16.9)

10.2

Operating profit

(33.3)

(9.1)

Operating profit to sales (%)

2.7

3.4

–

2.7

Special items

–

Operating profit excluding

special items

(33.3)

(9.1)

Operating profit excluding

special items to sales (%)

2.7

3.4

–

2.7

EBITDA excluding special items

(25.0)

(1.7)

EBITDA excluding special

items to sales (%)

8.1

9.0

–

6.8

RONOA pa (%)

4.6

8.6

–

5.7

The business generated a small operating profit; however, margins declined as a result of a 10% decline

in sales volumes and continued cost pressure.

Forest Products

Quarter

Quarter Quarter

ended

March 2009 March 2008

change

Dec 2008

US$ million

(US$)

(Rand)

US$ million

Sales

201

264

(23.9)

1.0

189

Operating profit

172

(72.1)

(63.0)

Operating profit to sales (%)

23.9

65.2

–

25.9

Special items – (gains)

(31)

(122)

–

(32)

Operating profit excluding

special items

(66.0)

(55.0)

Operating profit excluding

special items to sales (%)

8.5

18.9

–

9.0

EBITDA excluding special items

(52.2)

(36.6)

EBITDA excluding special

items to sales (%)

15.9

25.4

–

16.9

RONOA pa (%)

4.6

11.3

–

4.3

The forest products’ business was affected by weakening demand in the Southern African and export

markets for its packaging paper. Sales volumes of chemical cellulose, although well below Saiccor Mill’s

expanded capacity, were higher than volumes in the equivalent quarter last year.

Pulp prices continued to fall in US Dollar terms and were more than 30% lower than a year ago impacting

paper pulp and chemical cellulose sales.

Wood, other raw material and energy input costs in Rand terms increased significantly compared to a year

ago, partly as a result of the weakening of the Rand against the US Dollar.

// second quarter results

Outlook

The general economic outlook and market conditions remain depressed. In these circumstances we
expect demand for our products to remain weak and we will therefore continue to curtail production to
match supply with demand.

It has been difficult to identify the extent to which the fall in apparent demand for our products is an
inventory effect, but it appears that the decline of inventories in the downstream supply chain has been
significant. We are of the opinion that downstream inventories are stabilising and therefore expect apparent
demand to start improving slightly in many of our markets.

Demand for chemical cellulose, particularly in Asia, has started to improve and we are continuing to ramp
up production at Saiccor Mill. We expect the operating rate to be close to the total expanded capacity by
our financial year end. Pricing, however, is expected to remain weak for the rest of the year. The other
Southern African businesses will continue to manage production to match demand. The Rand has recently
strengthened relative to the US Dollar, which, if sustained, will put pressure on margins.

In Europe stabilisation of downstream inventories is expected to help improve the supply/demand balance.
M-real ceased coated fine paper production at Hallein and Gohrsmühle at the end of April 2009. We were
selling the output of these mills for M-real on an agency basis and therefore expect the operating rates of
our own mills to improve following this cessation as we transfer this production to our mills. This, together
with the continued achievement of Acquisition synergies, is expected to improve the region’s profitability.

In North America we do not expect a significant market improvement this year. The actions taken to
restructure the business including suspending operations at Muskegon Mill are expected to help improve
profitability.

Although market conditions remain difficult and there is still little visibility, we expect our profitability to
improve in the next quarter as a result of the actions we have taken to manage costs, continued declines
in input costs and the gradual achievement of Acquisition synergies.

Prioritising cash generation and liquidity remains our critical objective as we stated in our trading update at
the group’s Annual General Meeting in March. Each of our operating businesses is implementing
production curtailment and variable and fixed cost reduction plans to minimise the cash impact of the
current weak market conditions, including the suspension of operations at Muskegon Mill. We are also
tightly managing working capital down to minimum levels without compromising on service excellence.
We are targeting a further reduction in working capital by our financial year end. In addition, we are
reducing capital expenditure to a minimum. In the current financial year we expect capital expenditure in
our operations to be below US$200 million compared to US$505 million last year. As a result of these
actions we expect positive cash generation for the full financial year.

Given the weak global market conditions, we are expecting the rest of 2009 to remain challenging.
Our actions and plans are focused on dealing with these tough market conditions and importantly to
ensure that Sappi develops even closer relationships with our customers through the quality of our service
and continued improvements in efficiencies and remains well positioned to take full advantage of our
leading positions in coated graphic paper and chemical cellulose when markets start to recover.

On behalf of the board

R J Boëttger

M R Thompson

Director

05 May 2009

sappi limited

(Registration number 1936/008963/06)

Issuer Code: SAVVI

JSE Code: SAP

ISIN: ZAE000006284

Other information (this information has not been reviewed)

special items

Special items cover those items which management believe are material by nature or amount to the operating
results and require separate disclosure. Such items would generally include profit or loss on disposal of property,
investments and businesses, asset impairments, restructuring charges, financial impacts of natural disasters and
non-cash gains or losses on the price fair value adjustment of plantations.

Special items, excluding interest and tax effects, for the relevant periods are:

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

Plantation price fair value adjustment

(35)

(118)

(69)

(117)

Restructuring provisions raised (released)

(2)

(3)

Profit on disposal of property, plant and

equipment

–

(3)

(1)

(4)

Asset impairments

–

Fire, flood, storm and related events

(1)

(23)

(124)

(55)

(123)

key regional figures

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

Metric tons

(000’s)

Sales volume

Fine Paper –

North America

289

402

619

775

Europe

759

657

1,315

1,281

Southern Africa

152

159

Total

1,123

1,142

2,086

2,215

Forest Products – Pulp and paper operations

334

347

613

692

Forestry operations

189

247

431

447

Total

1,646

1,736

3,130

3,354

US$ million

Sales

Fine Paper –

North America

301

423

664

807

Europe

737

697

1,298

1,335

Southern Africa

148

176

Total

1,112

1,209

2,110

2,318

Forest Products – Pulp and paper operations

189

246

363

498

Forestry operations

Total

1,313

1,473

2,500

2,850

// second quarter results

Other information (this information has not been reviewed)

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

Operating profit (loss)

Fine Paper –

North America

(24)

(31)

Europe

(21)

(8)

Southern Africa

Total

(43)

(35)

Forest Products

172

227

Corporate and other

Total

221

312

Special items – (gains) losses

Fine Paper –

North America

–

Europe

–

(2)

–

(4)

Southern Africa

–

Total

(2)

Forest Products

(31)

(122)

(63)

(121)

Total

(23)

(124)

(55)

(123)

Operating (loss) profit excluding

special items

Fine Paper –

North America

(16)

(23)

Europe

(21)

(8)

Southern Africa

Total

(35)

(27)

Forest Products

106

Corporate and other

Total

(17)

189

EBITDA excluding special items

Fine Paper –

North America

Europe

123

Southern Africa

Total

120

122

226

Forest Products

144

Corporate and other

Total

190

188

378

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 impact of the global

economic downturn, the risk that the Acquisition will not be integrated successfully or such integration may

be more difficult, time-consuming or costly than expected, expected revenue synergies and cost savings

from the acquisition may not be fully realized or realized within the expected time frame, revenues following

the acquisition may be lower than expected, any anticipated benefits from the consolidation of the

European paper business may not be achieved, 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, including as a result of

adverse changes in credit markets that affect our ability to raise capital when needed, changing regulatory

requirements, unanticipated production disruptions (including as a result of planned or unexpected power

outages), 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.

We have included in this announcement an estimate of total synergies from the acquisition of M-real’s

coated graphic paper business and the integration of the acquired business into our existing business.

The estimate of synergies that we expect to achieve following the completion of the acquisition is based

on assumptions which in the view of our management were prepared on a reasonable basis, reflect the

best currently available estimates and judgments, and present, to the best of our management’s

knowledge and belief, the expected course of action and the expected future financial impact on our

performance due to the acquisition. However, the assumptions about these expected synergies are

inherently uncertain and, though considered reasonable by management as of the date of preparation, are

subject to a wide variety of significant business, economic and competitive risks and uncertainties that

could cause actual results to differ materially from those contained in this estimate of synergies. There can

be no assurance that we will be able to successfully implement the strategic or operational initiatives that

are intended, or realise the estimated synergies. This synergy estimate is not a profit forecast or a profit

estimate and should not be treated as such or relied on by shareholders or prospective investors to

calculate the likely level of profits or losses for Sappi for fiscal 2009 or beyond.

// second quarter results

Group income statement

Reviewed

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

Notes

US$ million

change

US$ million

change

Sales

1,313

1,473 (11)

2,500

2,850 (12)

Cost of sales

1,196

1,162

2,238

2,354

Gross profit

117

311 (62)

262

496 (47)

Selling, general and

administrative expenses

102

183

199

Other operating expenses

(income)

(7)

(6)

Share of loss (profit) from

associates and joint ventures

(5)

(9)

Operating profit

221 (97)

312 ( 80)

Net finance costs

Net interest

Finance cost capitalised

–

(6)

–

(15)

Net foreign exchange gains

(4)

(11)

(5)

Net fair value loss on

financial instruments

–

(Loss) profit before taxation

(34)

194

–

257 (99)

Taxation

Current

(6)

Deferred

(Loss) profit for the period

(35)

155

–

(12)

197

–

Basic (loss) earnings per

share (US cents)

(7)

(3)

Weighted average number of

shares in issue (millions)

515.8

362.3

449.4

361.9

Diluted basic (loss) earnings

per share (US cents)

(7)

(3)

Weighted average number

of shares on fully diluted

basis (millions)

517.8

365.0

451.5

364.9

Group balance sheet

Reviewed

Mar 2009

Sept 2008

US$ million

ASSETS

Non-current assets

4,669

4,408

Property, plant and equipment

3,626

3,361

Plantations

605

631

Deferred taxation

Other non-current assets

402

375

Current assets

2,373

1,701

Inventories

821

725

Trade and other receivables

841

702

Cash and cash equivalents

711

274

Total assets

7,042

6,109

EQUITY AND LIABILITIES

Shareholders’ equity

Ordinary shareholders’ interest

1,866

1,605

Non-current liabilities

2,873

2,578

Interest-bearing borrowings

2,154

1,832

Deferred taxation

334

399

Other non-current liabilities

385

347

Current liabilities

2,303

1,926

Interest-bearing borrowings

1,259

821

Bank overdraft

Other current liabilities

959

1,025

Taxation payable

Total equity and liabilities

7,042

6,109

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

515.8

229.2

// second quarter results

Group cash flow statement

Reviewed

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

(Loss) profit for the period

(35)

155

(12)

197

Adjustment for:

Depreciation, fellings and amortisation

114

112

211

229

Taxation

Net finance costs

Post employment benefits

(11)

(39)

(19)

(53)

Other non-cash items

(10)

(118)

(61)

(157)

Cash generated from operations

176

194

331

Movement in working capital

(30)

(68)

(163)

Net finance costs

(10)

(8)

(54)

(67)

Taxation paid

(3)

(9)

(2)

(16)

Dividends paid *

–

(73)

(37)

(73)

Cash retained from operating activities

114

Cash utilised in investing activities

(625)

(164)

(665)

(253)

Capital expenditure

(39)

(164)

(79)

(253)

Acquisition of M-real

(586)

–

(586)

–

(511)

(108)

(632)

(241)

Cash effects of financing activities

243

(118)

1,036

105

Net movement in cash and

cash equivalents

(268)

(226)

404

(136)

* Dividend no 85: 16 US cents per share paid on 28 November 2008.

Group statement of recognised income and expense

Reviewed

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

Exchange differences on translation of

foreign operations

(262)

(287)

(272)

Realised gain on cash flow hedge

(32)

–

Sundry other movements in equity

–

Net expense recorded directly in equity

(17)

(262)

(287)

(270)

(Loss) profit for the period

(35)

155

(12)

197

Total recognised expense for the period

(52)

(107)

(299)

(73)

Notes to the group results

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 2008 which are compliant with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board.

The preliminary results for the six month period and quarter ended March 2009 as set out on pages 13 to 20
have been reviewed in terms of the International Standard on Review Engagements 2410 by the group's
auditors, Deloitte & Touche. Their unmodified review report is available for inspection at the company's
registered offices.

In November and December 2008, Sappi conducted a renounceable rights offer of 286,886,270 new ordinary
shares of ZAR1.00 each to qualifying Sappi shareholders recorded in the shareholders register at the close
of business on Friday 21 November 2008, at a subscription price of ZAR20.27 per rights offer share in the
ratio of 6 rights offer shares for every 5 Sappi shares held. The rights offer was fully subscribed and the
shareholders received their shares on 15 December 2008. The rights offer raised ZAR5,8 billion which was
used to partly finance the acquisition of the coated graphic paper business of M-Real and the related costs.
In accordance with IAS 33, prior period basic, headline and diluted earnings per share have been restated to
take into account the bonus element of the rights offer. The prior period weighted average number of shares
has been adjusted by a factor of 1.58 (the adjustment factor). Please refer to page 21, Supplemental
Information for a summary of this calculation.

Reconciliation of movement in shareholders’ equity

Reviewed

Half-year

ended

Mar 2009

Mar 2008

US$ million

Balance – beginning of period

1,605

1,816

Total recognised expense for the period

(299)

(73)

Dividends paid

(37)

(73)

Rights offer

575

–

Costs directly attributable to the rights offer

(31)

–

Issue of new shares to M-real

–

Transfer to participants of the share purchase trust

Share based payment reserve

Balance – end of period

1,866

1,677

// second quarter results

Operating profit

Reviewed

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

Included in operating profit are the

following non-cash items:

Depreciation and amortisation

180

189

Fair value adjustment on plantations

(included in cost of sales)

Changes in volume

Fellings

Growth

(16)

(17)

(32)

(35)

(1)

Plantation price fair value

adjustment

(35)

(118)

(69)

(117)

(36)

(116)

(70)

(112)

Included in other operating expenses

are the following:

Asset impairments

–

Profit on disposal of property,

plant and equipment

–

(3)

(1)

(4)

Restructuring provisions

raised (released)

(2)

(3)

Headline earnings per share *

Headline earnings per share (US cents) **

(6)

(2)

Weighted average number of shares in

issue (millions) **

515.8

362.3

449.4

361.9

Diluted headline earnings per

share (US cents) **

(6)

(2)

Weighted average number of shares on

fully diluted basis (millions) **

517.8

365.0

451.5

364.9

Calculation of headline earnings *

(Loss) profit for the period

(35)

155

(12)

197

Asset impairments

–

Profit on disposal of property, plant

and equipment

–

(3)

(1)

(4)

Tax effect of above items

–

(1)

–

Headline (loss) earnings

(33)

151

(8)

195

* Headline earnings disclosure is required by the JSE Limited.
** Prior period headline earnings per share has been restated for the bonus element of the rights offer in accordance with IAS 33.

Please refer to page 21, Supplemental Information for a summary of this calculation.

Capital expenditure

Property, plant and equipment

165

274

Mar 2009

Sept 2008

US$ million

Capital commitments

Contracted

Approved but not contracted

160

130

256

206

Notes to the group results

Mar 2009

Sept 2008

US$ million

Contingent liabilities

Guarantees and suretyships

Other contingent liabilities

Material balance sheet movements

Acquisition of M-real’s coated graphic paper business

See note 9 for details of how the acquisition is recorded in the balance sheet.

Interest-bearing borrowings and cash and cash equivalents

Included in long term borrowings is the EUR220 million (US$293 million) vendor loan note and the assumed
interest bearing debt both used to partly finance the acquisition of M-real's coated graphic paper business.
During the six months ended March 2009, the group also drew down EUR200 million (US$266 million) of its
committed facilities and raised a further US$52 million in long term bank loans. All of this is currently held
in cash.

Acquisition

On 31 December 2008, Sappi acquired M-real’s coated graphic paper business for EUR750 million
(US$1.1 billion). The transaction includes M-real’s coated graphic paper business (excluding M-real’s South
African business), including brands and company knowledge, as well as four coated graphic mills.

The acquisition was financed through a combination of equity, assumed debt, the cash proceeds from a
rights offering and a vendor loan note.

The acquired business contributed revenues of US$280 million, a net operating loss of US$3 million and a
net loss of US$7 million to the group for the period from acquisition to 29 March 2009.

Details of net assets acquired and goodwill are as follows:

EURO

US$

Purchase consideration:
Cash consideration

400

563

Shares issued *

Vendor loan note

220

308

Adjustments to working capital

Gain on forward exchange contract covering purchase consideration

(24)

(32)

Direct costs relating to the acquisition

Total purchase consideration

655

922

Provisional fair value of net identifiable assets acquired (see below)

628

884

Provisional goodwill **

* 11,159,702 Sappi shares were issued to M-real as partial payment of the acquisition price. The fair value of US$45 million

(EUR32 million) was determined using Sappi's published market price at the date of exchange.

** The initial accounting for the business combination has been determined provisionally as at the end of the second quarter ended

March 2009 because the group is still in the process of finalising the fair values of the identifiable assets and liabilities of the acquired

business of M-real.

// second quarter results

The assets and liabilities arising from the acquisition are as follows:

EURO

US$

Acquiree’s Provisional Acquiree’s Provisional

carrying

fair carrying

fair

amount value

Property, plant and equipment

640

494

901

695

Information technology related intangibles

Brand names

–

Inventories

118

116 166 163

Trade

receivables

200

200 281 281

Prepayments and other debit balances

Cash and cash equivalents

Trade payables

(86)

(121)

Pension liabilities

(37)

(40)

(52)

(56)

Borrowings (46)

(47)

(65)

(66)

Provisions (4)

(4)

(6)

Other payables and accruals

(66)

(64)

(93)

(89)

Net deferred tax (liabilities) assets

(10)

(14)

Net identifiable assets acquired

731

628

1,028

884

Outflow of cash to acquire business, net of cash acquired:

EURO

US$

Cash consideration

400

563

Direct costs relating to acquisition

Cash and cash equivalents in subsidiary acquired

(5)

(7)

Cash outflow on acquisition

416

586

Notes to the group results

Reviewed

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

change

US$ million

change

10. Regional information

Sales
Fine Paper – North America

301

423

(29)

664

807

(18)

Europe

737

697

1,298

1,335

(3)

Southern Africa

(17)

148

176

(16)

Total

1,112

1,209

(8)

2,110

2,318

(9)

Forest
Products –

Pulp and paper
operations

189

246

(23)

363

498

(27)

Forestry operations

(33)

(21)

Total

1,313

1,473

(11)

2,500

2,850

(12)

Operating profit
Fine Paper – North America

(24)

–

(31)

–

Europe

(21)

–

(8)

–

Southern Africa

(33)

–

Total

(43)

–

(35)

–

Forest Products

172

(72)

227

(57)

Corporate and other

(50)

100

Total

221

(97)

312

(80)

Net operating assets
Fine Paper – North America

1,070

1,116

(4)

1,070

1,116

(4)

Europe

2,376

2,085

2,376

2,085

Southern Africa

181

127

181

127

Total

3,627

3,328

3,627

3,328

Forest Products

1,531

1,695

(10)

1,531

1,695

(10)

Corporate and other

126

–

126

–

Total

5,284

5,031

5,284

5,031

// second quarter results

Supplemental Information (this information has not been reviewed)

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 useful to report certain 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

Acquisition – the acquisition of M-real’s coated graphic paper business on 31 December 2008

Adjustment factor – This is calculated using the pre-announcement share price divided by the theoretical ex-
rights price (TERP). TERP is the [(Number of new shares multiplied by the Subscription price) plus the (Number of
shares held multiplied by the Ex-dividend share price)] all divided by the (Number of new shares plus the number
of shares held prior to the rights offer).

Capital employed – shareholders’ equity plus net debt

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

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 overdraft (net of cash, cash equivalents
and short-term deposits)

Net debt to total capitalisation – net debt divided by capital employed

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

Net assets – total assets less total liabilities

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

ROCE – return on average capital employed. Operating profit excluding special items divided by average capital
employed

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

RONOA – return on average net operating assets. 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 operating results and require separate disclosure. Such items would generally include profit or loss on disposal
of property, investments and businesses, asset impairments, restructuring charges, financial impacts of natural
disasters and non-cash gains or losses on the price fair value adjustment of plantations

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.

Supplemental Information (this information has not been reviewed)

EBITDA excluding special items

Quarter

Half-year

ended

Mar 2009

Mar 2008

Mar 2009

Mar 2008

US$ million

Reconciliation of (loss) profit for the period to

EBITDA excluding special items

(1)

(Loss) profit for the period

(35)

155

(12)

197

Net finance costs

Taxation

Special items – gains

(23)

(124)

(55)

(123)

Operating (loss) profit excluding special items

(17)

189

Depreciation and amortisation

180

189

EBITDA excluding special items

(1)

190

188

378

Mar 2009

Sept 2008

US$ million

Net debt (US$ million)

(2)

2,735

2,405

Net debt to total capitalisation (%)

(2)

59.4

60.0

Net asset value per share (US$)

(2)

3.62

7.00

(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 operating results and require separate
disclosure. Such items would generally include profit and loss on disposal of property, investments and businesses, asset impairments,
restructuring charges, financial impacts of 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,
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 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 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.

(2)

Refer to page 21, Supplemental Information for the definition of the term.

// second quarter results

Supplemental Information (this information has not been reviewed)

summary rand convenience translation

Quarter ended

Half-year ended

Mar 2009

Mar 2008

% change

Mar 2009

Mar 2008

% change

Key figures: (ZAR million)
Sales

12,996

10,988 18

24,754

20,368 22

Operating profit

1,649 (96)

624

2,230 (72)

Special items – gains *

(228)

(925)

–

(545)

(879)

–

Operating (loss) profit excluding

special items

(168)

724 –

1,351 (94)

EBITDA excluding special items *

812

1,417 (43)

1,861

2,701 (31)

Basic EPS (SA cents)

(69)

321 –

(30)

386 –

Net debt *

26,215

21,669 21

26,215

21,669 21

Key ratios: (%)
Operating profit to sales

0.5

15.0

2.5

10.9

Operating (loss) profit excluding

special items to sales

(1.3)

6.6

0.3

6.6

Operating (loss) profit excluding

special items to Capital
Employed (ROCE)

(1.7)

9.0

0.4

8.6

EBITDA excluding special items

to sales

6.2

12.9

7.5

13.3

Net debt to total capitalisation *

59.4

61.3

59.4

61.3

* Refer to page 21, Supplemental Information for the definition of the term.

The above financial results have been translated into ZAR from 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.

exchange rates

Mar

Dec

Sept

June

Mar

2009

2008

Exchange rates:
Period end rate: US$1 = ZAR

9.5849

9.7148

8.0751

7.9145

8.1432

Average rate for the Quarter: US$1 = ZAR

9.8979

9.8584

7.8150

7.8385

7.4593

Average rate for the YTD: US$1 = ZAR

9.9015

9.8584

7.4294

7.3236

7.1465

Period end rate: EUR 1 = US$

1.3301

1.4064

1.4615

1.5795

1.5802

Average rate for the Quarter: EUR 1 = US$

1.3300

1.3471

1.5228

1.5747

1.5006

Average rate for the YTD: EUR 1 = US$

1.3288

1.3471

1.5064

1.5071

1.4790

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.

US$

Apr 05

Jul 05

Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Jan 09

Apr 09

Oct 08

Oct 05

Jan 06

Apr 06

Jul 06

ZAR

Apr 05

Jul 05

Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Jan 09

Apr 09

Oct 08

Oct 05

Jan 06

Apr 06

Jul 06

Sappi ordinary shares* (JSE: SAP)

US Dollar share price conversion*

* Historic share prices revised to reflect rights offer

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

South Africa:

United States:

Channel Islands:

Computershare Investor

ADR Depositary:

Capita Registrars

Services (Proprietary) Limited

The Bank of New York Mellon

(Jersey) Limited

70 Marshall Street

Investor Relations

12 Castle Street

Johannesburg 2001

PO Box 11258

St Helier,

PO Box 61051

Church Street Station

Jersey

Marshalltown 2107

New York, NY 10286-1258

JE2 3RT

Tel +27 (0)11 370 5000

Tel +1 610 382 7836

Tel +44 (0)208 639 3399

Printed by

INCE

this report is available on the Sappi website

www.sappi.com

sappi

Printed on Magno Matt Classic 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:

May 5, 2009

SAPPI LIMITED,

Name:

M. R. Thompson

Title:

Chief Financial Officer

M. R. Thompson

By:

/s/