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 August, 2008

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 (including as a result of adverse changes in credit markets that affect our ability
to raise capital when needed); 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

ended June

Quarter 3

2008

* for the nine months ended June 2008

** as at June 2008

† Rest of World

Sales by product group

Sales by source

Sales by destination

Geographic ownership **

■

Coated fine paper

64%

■

Uncoated fine paper

■

Coated specialities

■

Commodity paper

■

Pulp

14%

■

Other

■

North America

29%

■

Europe

40%

■

Southern Africa

15%

■

Asia and other

16%

■

South African

71%

■

North America

17%

■

Europe and ROW †

12%

■

North America

28%

■

Europe

47%

■

Southern Africa

25%

sappi

Flo

sappi limited

third quarter

■

Operating profit excluding special items US$88 million
(Q3 2007: US$81 million)

■

Special items an unfavourable pre-tax adjustment
of US$111 million – mainly plantation price fair value

■

Basic EPS a loss of 28 US cents (unfavourably impacted
by special items)

■

Selling price increases in North America and South Africa

■

Severe input cost increases

■

Saiccor expansion commissioning in the fourth quarter

Financial summary

Quarter ended

Nine months ended

Restated ****

June 2008

March 2008

June 2007

June 2008

June 2007

Key figures: (US$ million)
Sales

1,494

1,473

1,297

4,344

3,882

Operating (loss) profit

(23)

221

289

296

Special items – losses (gains) *

111

(124) (6)

(12)

(79)

Operating profit excluding

special items

277

217

EBITDA excluding special

items ***

182

190

176

560

501

Basic EPS (US cents)

(28)

68 17

Net debt **

2,667

2,661 2,313

2,667

2,313

Key ratios: (%)
Operating (loss) profit to sales

(1.5)

15.0

6.7

7.6

Operating profit excluding

special items to sales

5.9

6.6

6.2

6.4

5.6

EBITDA excluding special items

to sales

12.2

12.9

13.6

12.9

Operating profit excluding

special items to average
net assets **

8.1

8.9

8.0

8.5

7.2

Return on average equity (ROE) **

(15.1)

35.9

10.0

10.3

11.2

Net debt to total capitalisation **

50.2

50.3

46.1

50.2

46.1

* Refer to page 9 for more details on special items.
** Refer to page 18, Supplemental Information for the definition of the term.
*** Refer to page 19, Supplemental Information for the reconciliation of EBITDA excluding special items to (loss) profit for the period.
**** Refer to note 2 page 15.
The results presented above have not been audited or reviewed.

sappi limited

third quarter

Comment

In a seasonally slower quarter, operating performance improved compared to last year. The quarter was

marked by severe input cost increases, offset to some extent by our cost savings efforts across the group

and successful price increases in North America and South Africa. Selling prices in Europe were flat

quarter-on-quarter, but declined from last year. The unfavourable impact of wood, energy and chemical

price increases on the group results was US$19 million compared to the prior quarter and US$45 million

compared to a year earlier.

Pulp prices continued to increase with NBSK increasing to an average of US$900 per ton from an average

of US$880 per ton in the previous quarter. The increase in pulp prices was beneficial to the group as we

sell slightly more pulp than we purchase.

Operating profit excluding special items improved to US$88 million from US$81 million last year, but the

group operating profit margin excluding special items declined from 6.2% last year to 5.9% this quarter.

Special items of US$111 million include an unfavourable plantation price fair value revaluation adjustment

of US$105 million and a loss of contribution resulting from a flood at Saiccor amounting to US$6 million.

The negative plantation price fair value adjustment was mainly due to a sharp increase in fuel prices.

More details of special items are set out on page 9.

An operating loss of US$23 million (including special items) was recorded, compared to an operating profit

of US$87 million a year ago.

Group sales for the quarter were US$1.5 billion, a 15.2% increase compared to the third quarter last year,

mainly as a result of higher sales volumes in our fine paper businesses together with improved selling prices

in North America and Southern Africa.

Net finance costs of US$45 million for the quarter increased by US$8 million from last year due to

discontinuing capitalisation of interest on the Saiccor expansion project during the quarter, higher debt

levels and higher interest rates.

Tax relief on the reported loss before taxation of US$68 million was limited due to tax losses in certain

regions that could not be brought to account.

Basic earnings per share (unfavourably impacted by special items) for the quarter was a loss of 28 US cents,

compared to earnings of 23 US cents a year ago.

Cash flow and debt

Cash generated from operations for the quarter was US$156 million compared to US$142 million a year

ago. Working capital decreased by US$29 million during the quarter compared to an increase of

US$36 million during the third quarter last year. We expect a further significant reduction in working capital

in our fourth quarter.

Included in our cash flow for the quarter were post employment benefit payments of US$12 million

compared to US$35 million in the equivalent quarter last year. Post employment benefit payments are

expected to be US$90 million for the year, compared to US$101 million last year, and are expected to

decline in 2009.

Net finance costs paid increased to US$83 million compared to US$42 million a year ago, mainly as a

result of the settlement of forward exchange contracts related to long term debt and higher debt levels.

sappi limited

third quarter

Taxation paid of US$40 million, was US$25 million higher than a year ago mainly due to a provisional tax

payment made by our South African business.

Capital expenditure of US$103 million included US$52 million for the Saiccor expansion project. We expect

to make the final capital expenditure payments on the Saiccor expansion project of approximately

US$50 million over the next two quarters.

Net debt was US$2,667 million at quarter end, a net increase of US$6 million from the prior quarter. This

increase was the net effect of cash utilised offset by a positive currency movement for the quarter.

Current interest-bearing borrowings of US$990 million include US$393 million of securitised trade debtors

under a facility, which in the normal course of business is expected to run until 2012. The group has access

to US$620 million as part of a committed revolving loan facility as at the end of June 2008 and cash

resources of US$227 million.

Net debt to total capitalisation was 50.2% at the end of the quarter compared to 50.3% for the prior

quarter.

Operating review for the quarter

Sappi Fine Paper

Quarter

Quarter Quarter

ended

June 2008

June 2007

March 2008

US$ million

change

US$ million

Sales

1,224

1,037

18.0

1,209

Operating profit

44.0

Operating profit to sales (%)

2.9

2.4

–

3.9

Special items * (gains)

–

(2)

Operating profit excluding

special items

44.0

Operating profit excluding

special items to sales (%)

2.9

2.4

–

3.7

EBITDA excluding special items

113

100

13.0

120

EBITDA excluding special items

to sales (%)

9.2

9.6

–

9.9

RONOA pa (%)

4.4

3.2

–

5.5

* See page 9 for more details on special items

Sales volumes for our Fine Paper business increased by 6.5% from last year, while average prices in Dollar

terms improved 11%, partly due to currency movements. Pricing and margins improved in our North

American business, but worsened in our European business.

Cost pressure, particularly in raw materials and energy, increased in all regions.

sappi limited

third quarter

Europe

Quarter

Quarter Quarter

ended

June 2008

June 2007

change

March 2008

US$ million

(US$)

(Euro)

US$ million

Sales

705

584

20.7

3.5

697

Operating profit

(28.6)

(40.0)

Operating profit to sales (%)

1.4

2.4

–

2.6

Special items * (gains)

–

(2)

Operating profit excluding

special items

(28.6)

(40.0)

Operating profit excluding

special items to sales (%)

1.4

2.4

–

2.3

EBITDA excluding special items

(3.5)

(16.7)

EBITDA excluding special items

to sales (%)

7.8

9.8

–

8.8

RONOA pa (%)

1.9

2.9

–

3.1

* See page 9 for more details on special items

In a tough economic and trading environment, we recovered some market share in Europe during the

quarter with sales volumes improving 6% compared to last year. Selling prices for coated fine paper sheets

were down from last year and flat compared to last quarter, while there was an improvement in coated fine

paper reel prices in some European countries.

Demand for our graphics paper was seasonally weaker in the quarter, except for coated mechanical paper,

which showed no sign of seasonal decline. Our speciality paper performed well in the quarter.

Despite our continued focus on cost savings efforts, our operating margin excluding special items declined

from 2.4% to 1.4%, mainly due to significant increases in input cost prices. The impact of energy and

chemical cost increases compared to the equivalent quarter last year was US$18 million. These cost

increases were partially offset by the sale of carbon credits to the value of US$9 million during the quarter.

We have announced price increases effective from 1 September 2008 of between 8% and 10%, in order

to offset the input cost price increases.

sappi limited

third quarter

North America

Quarter

Quarter Quarter

ended

June 2008

June 2007

March 2008

US$ million

change

US$ million

Sales

424

362

17.1

423

Operating profit

212.5

Operating profit to sales (%)

5.9

2.2

–

6.1

Special items * losses

–

Operating profit excluding

special items

212.5

Operating profit excluding

special items to sales (%)

5.9

2.2

–

6.1

EBITDA excluding special items

47.2

EBITDA excluding special items

to sales (%)

12.5

9.9

–

12.1

RONOA pa (%)

9.2

3.0

–

9.7

* See page 9 for more details on special items

Our North American business continued to improve with stronger reel volumes and increased reel and pulp

selling prices, compared to last year. Sales volumes increased 8% compared to the equivalent quarter last

year. Our order books for reels remained strong; however, we saw the impact of a slowing US economy

on our sheet business.

Realised paper prices improved 6% on last year, while realised pulp prices increased by 14%. During the

quarter, coated fine paper price increases have been widely announced by the US industry.

The operating profit margin increased to 5.9% compared to 2.2% last year despite significant input cost

increases, particularly in wood, energy and chemicals. Price escalation of these input costs had a negative

impact of US$20 million compared to the equivalent quarter last year.

US imports of coated paper continued to decline during the quarter due to the weakness of the US Dollar,

increased transport costs and improved demand in the Far East.

sappi limited

third quarter

South Africa

Quarter

Quarter Quarter

ended

June 2008

June 2007

change

March 2008

US$ million

(US$)

(Rand)

US$ million

Sales

4.4

15.1

Operating profit

(66.7)

(61.9)

Operating profit to sales (%)

1.0

3.3

–

3.4

Special items *

–

Operating profit excluding

special items

(66.7)

(61.9)

Operating profit excluding special

items to sales (%)

1.1

3.3

–

3.4

EBITDA excluding special items

(28.6)

(22.0)

EBITDA excluding special items

to sales (%)

5.3

7.7

–

9.0

RONOA pa (%)

3.2

7.8

–

8.6

* See page 9 for more details on special items

Although we saw improved pricing during the quarter, margins came under pressure from increased input

costs, mainly pulp and chemicals. Sales volume was flat on last year. The results were negatively impacted

by a seasonal slowing of demand and a temporary shut of the pulp plant at Stanger due to the unavailability

of bagasse fibre.

sappi limited

third quarter

Forest Products

Quarter

Quarter Quarter

ended

June 2008

June 2007

change

March 2008

US$ million

(US$)

(Rand)

US$ million

Sales

270

260

3.8

14.5

264

Operating profit

(60)

–

172

Operating profit to sales (%)

(22.2)

25.0

–

65.2

Special items * losses (gains)

111

(8)

–

(122)

Operating profit excluding

special items

(10.5)

(1.2)

Operating profit excluding

special items to sales (%)

18.9

21.9

–

18.9

EBITDA excluding special items

(10.5)

(1.3)

EBITDA excluding special items

to sales (%)

25.2

29.2

–

25.4

RONOA pa (%)

12.0

15.1

–

11.3

* See page 9 for more details on special items

Demand remained strong for chemical cellulose, but softened for our other products. Our pulp and paper

sales volumes were down 3% for the quarter compared to a year ago.

Pricing improved in our Kraft business, chemical cellulose prices remained strong and our export margins

benefited from a weaker Rand against the US Dollar compared to last year.

Special items include an unfavourable plantation price fair value adjustment of US$105 million. The

valuation takes into account the cost of delivering wood to market which was impacted by increased fuel

prices.

The results of Saiccor were negatively impacted by production interruptions related to our expansion

project and a severe flood giving rise to property damage and business interruption that was self-insured.

The US$6 million financial impact of the flood is included under special items. The Saiccor expansion is

substantially complete and is now expected to be commissioned towards the end of August.

Input cost pressure, particularly from chemicals, has increased in recent months and has put increased

pressure on margins.

sappi limited

third quarter

Outlook

Continued upward pressure on input costs remains our biggest challenge in the short term. Further

increases are expected in energy, fibre and chemical costs during the fourth quarter. In South Africa

wage negotiations have been completed. Wage inflation remains an important factor in all our businesses.

To mitigate high energy costs, we have initiated further energy projects in all regions.

Although demand remains fairly robust for our products in all regions, a global economic slow-down

would impact demand. We are responding to these challenges by continuing to focus on cost control,

harnessing our buying power through a global procurement drive and through maximising manufacturing

efficiencies. Increasing selling prices continues to be essential to restore and improve profitability. We

are implementing price increases in all our businesses.

The operating performance for our Southern African and US businesses is expected to remain strong,

while margins in all our businesses, particularly in Europe, will be under pressure due to high input costs.

Our Southern African business will be further impacted by a recovery boiler rebuild at our Usutu mill, which

will have an unfavourable impact of approximately US$12 million on operating profit in the fourth quarter.

In light of unrelenting input cost increases, we expect our fourth quarter operating profit, excluding special

items, to be lower than the third quarter, however for the full year, we expect operating profit, excluding

special items, to be well above last year.

On behalf of the board

R J Boëttger

M R Thompson

Director

31 July 2008

sappi limited

(Registration number 1936/008963/06)

Issuer Code: SAVVI

JSE Code: SAP

ISIN: ZAE000006284

sappi limited

third quarter

Other information

(This information has not been reviewed)

special items

Special items cover those operating items which management believe are material by nature or amount to the 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.

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

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

Plantation price fair value adjustment

105

(15)

(12)

(56)

Restructuring provisions released

–

(3)

(7)

Profit on sale of assets

(1)

–

(5)

(25)

Asset impairments

–

Fire, flood, storm and related events

(1)

111

(6)

(12)

(79)

(1)

The quarter ended June 2008 includes the US$6 million business interruption impact of the flood at Saiccor mill in South Africa.

key regional figures

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

Metric tons

(000’s)

Sales volume

Fine Paper –

North America

389

360

1,164

1,108

Europe

637

599

1,918

1,860

Southern Africa

246

260

Total

1,113

1,045

3,328

3,228

Forest Products –

Pulp and paper operations

347

358

1,039

1,067

Forestry operations

279

259

726

788

Total

1,739

1,662

5,093

5,083

US$ million

Sales

Fine Paper –

North America

424

362

1,231

1,107

Europe

705

584

2,040

1,768

Southern Africa

271

263

Total

1,224

1,037

3,542

3,138

Forest Products –

Pulp and paper operations

249

242

747

694

Forestry operations

Total

1,494

1,297

4,344

3,882

sappi limited

third quarter

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

Operating (loss) profit

Fine Paper –

North America

Europe

Southern Africa

Total

114

Forest Products

(60)

167

212

Corporate

(3)

(6)

Total

(23)

289

296

Special – losses (gains)

Fine Paper –

North America

–

Europe

–

(4)

(32)

Southern Africa

–

Total

–

(2)

(32)

Forest Products

111

(8)

(10)

(49)

Corporate

–

Total

111

(6)

(12)

(79)

Operating profit excluding special items

Fine Paper –

North America

Europe

Southern Africa

Total

112

Forest Products

157

163

Corporate

(1)

(4)

Total

277

217

EBITDA excluding special items

Fine Paper –

North America

144

Europe

178

174

Southern Africa

Total

113

100

339

284

Forest Products

212

220

Corporate

–

(3)

Total

182

176

560

501

Other information

(This information has not been reviewed)

sappi limited

third quarter

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,

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.

sappi limited

third quarter

Group income statement

Restated

Reviewed

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

Notes

US$ million

US$ million % change

US$ million

US$ million % change

Sales

1,494

1,297

15.2

4,344

3,882

11.9

Cost of sales

1,428

1,116

3,782

3,349

Gross profit

181

(63.5)

562

533

5.4

Selling, general &

administrative expenses

294

268

Other operating expenses

(income)

–

(6)

(25)

Share of profit from

associates and joint
ventures

(6)

(2)

(15)

(6)

Operating (loss) profit

(23)

–

289

296

(2.4)

Net finance costs

100

107

Net interest

106

112

Finance cost capitalised

(1)

(4)

(16)

(8)

Net foreign exchange

losses (gains)

(3)

(9)

Net fair value loss on

financial instruments

(Loss) profit before taxation

(68)

–

189

–

Taxation

(5)

Current

Deferred

(12)

(6)

(Loss) profit for the period

(63)

–

134

127

5.5

Basic (loss) earnings per

share (US cents)

(28)

Weighted average number

of shares in issue (millions)

228.9

227.9

228.7

227.5

Diluted basic (loss) earnings

per share (US cents)

(28)

Weighted average number

of shares on fully
diluted basis (millions)

231.2

231.4

230.9

230.4

sappi limited

third quarter

Group balance sheet

Reviewed

June 2008

Sept 2007

US$ million

ASSETS
Non-current assets

4,574

4,608

Property, plant and equipment

3,568

3,491

Plantations

556

636

Deferred taxation

Other non-current assets

394

421

Current assets

1,758

1,736

Inventories

789

712

Trade and other receivables

742

660

Cash and cash equivalents

227

364

Total assets

6,332

6,344

EQUITY AND LIABILITIES
Shareholders’ equity
Ordinary shareholders’ interest

1,669

1,816

Non-current liabilities

2,629

2,612

Interest-bearing borrowings

1,882

1,828

Deferred taxation

384

385

Other non-current liabilities

363

399

Current liabilities

2,034

1,916

Interest-bearing borrowings

990

771

Bank overdraft

Other current liabilities

946

998

Taxation payable

125

Total equity and liabilities

6,332

6,344

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

229.1

228.5

sappi limited

third quarter

Group cash flow statement

Restated

Reviewed

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

(Loss) profit for the period

(63)

134

127

Adjustment for:

Depreciation, fellings and amortisation

115

113

344

336

Taxation (relief) charge

(5)

Net finance costs

100

107

Post employment benefits **

(12)

(35)

(65)

(80)

Other non-cash items

(23)

(81)

(128)

Cash generated from operations **

156

142

487

424

Movement in working capital

(36)

(134)

(80)

Net finance costs paid

(83)

(42)

(150)

(110)

Taxation paid

(40)

(15)

(56)

(18)

Dividends paid *

–

(73)

(68)

Cash retained from operating activities

148

Cash utilised in investing activities **

(98)

(119)

(351)

(265)

(36)

(70)

(277)

(117)

Cash effects of financing activities

161

Net movement in cash and cash equivalents

(51)

(116)

(43)

* Dividend number 84: 32 US cents per share (2007: 30 US cents per share)

** Reclassification – Refer note 1

Group statement of recognised income and expense

Restated

Reviewed

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

Exchange differences on translation of

foreign operations

(222)

123

Pension fund asset not recognised

–

Deferred tax asset (raised) released

–

(13)

(14)

Sundry other movements in equity

(1)

–

(1)

Net income (expense) recorded directly

in equity

(221)

158

(Loss) profit for the period

(63)

134

127

Total recognised (expense) income for

the period

(14)

119

(87)

285

sappi limited

third quarter

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 2007
which are compliant with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.

The preliminary results for the quarter and nine month period ended June 2008 as set out on pages 12 to 17 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. The results
for the quarters ended March 2008 and December 2007 have not been audited or reviewed on a stand-alone basis
by the auditors.

Reclassification of comparative figures – Cash outflows relating to contributions to post employment benefit funds
previously reflected in cash utilised in investing activities, have been included in cash generated from operations.

Restatement

During third quarter 2007, the group recognised a taxation credit of US$14 million related to a tax rate change in
Germany. The recognition was based on the group’s judgment that the change in the German tax rate from 38% to
30% had been substantively enacted during the quarter ended June 2007. The group has subsequently concluded
that the tax law change was substantively enacted on 6 July 2007, and accordingly, the impact of the tax rate change
should have been reflected in its fourth quarter results. The change has no impact on the group’s results for the year
ended September 2007, however it does impact the deferred taxation and profit for the period for the quarters ended
June and September 2007 and for the nine months ended June 2007 as follows:

Reviewed

Quarter

Nine months

Year

ended

June 2007

Sept 2007

June 2007

Sept 2007

US$ million

Deferred taxation as reported

(20)

(7)

Change in timing of taxation credit

(14)

–

Deferred taxation as restated

(6)

(21)

Profit for the period as reported

141

202

Taxation credit

(14)

–

Profit for the period as restated

127

202

Basic earnings per share (US cents) as reported

Basic earnings per share (US cents) as restated

Diluted basic earnings per share (US cents)

as reported

Diluted basic earnings per share (US cents)

as restated

Reconciliation of movement in shareholders’ equity

Restated

Reviewed

Nine months

ended

June 2008

June 2007

US$ million

Balance – beginning of year

1,816

1,386

Total recognised (expense) income for the period

(87)

285

Dividends paid

(73)

(68)

Transfers to participants of the share purchase trust

Share-based payment reserve

Balance – end of period

1,669

1,621

sappi limited

third quarter

Restated

Reviewed

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

Operating (loss) profit

Included in operating (loss) profit are the following

non-cash items:

Depreciation and amortisation

283

284

Fair value adjustment on plantations

(included in cost of sales)

Changes in volume

Fellings

Growth

(20)

(22)

(55)

(57)

(4)

(5)

Plantation price fair value adjustment

105

(15)

(12)

(56)

106

(19)

(6)

(61)

Included in other operating (expenses) income

are the following:

Asset impairments

–

Profit on disposal of property, plant & equipment

(1)

(5)

(24)

Restructuring provisions released

–

(1)

(3)

(11)

Headline (loss) earnings per share

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

(27)

Weighted average number of shares in issue (millions)

228.9

227.9

228.7

227.5

Diluted headline (loss) earnings per share (US cents) *

(27)

Weighted average number of shares on fully diluted

basis (millions)

231.2

231.4

230.9

230.4

Calculation of Headline (loss) earnings *

(Loss) profit for the period

(63)

134

127

Asset impairments

–

Profit on disposal of property, plant & equipment

(1)

(5)

(24)

Tax effect of above items

–

Headline (loss) earnings

(62)

133

109

* Headline earnings disclosure is required by the JSE Limited.

Capital expenditure

Property, plant and equipment

103

116

377

330

June 2008

Sept 2007

US$ million

Capital commitments

Contracted

102

188

Approved but not contracted

169

249

271

437

notes to the group results

sappi limited

third quarter

Reviewed

June 2008

Sept 2007

US$ million

Contingent liabilities

Guarantees and suretyships

Other contingent liabilities *

* The decrease in contingent liabilities reflects management’s revised estimate of losses which could arise from taxation queries to which

certain group companies are subject. These amounts have now been recognised as liabilities.

Material balance sheet movements

Current and non-current interest bearing borrowings

The movement on these balances between September 2007 and June 2008 is largely due to (i) US$190 million of
expenditure on the Saiccor expansion project, (ii) financing for the purchase of leased equipment for US$75 million
and (iii) US$133 million of currency movements and fair value adjustments.

Taxation

The movement is a result of certain tax liabilities which the group has settled in the past nine months.

10. Regional information

Reviewed

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

US$ million % change

US$ million

US$ million % change

Sales
Fine Paper –

North America

424

362

17.1

1,231

1,107

11.2

Europe

705

584

20.7

2,040

1,768

15.4

Southern Africa

4.4

271

263

3.0

Total

1,224

1,037

18.0

3,542

3,138

12.9

Forest Products – Pulp and paper

operations

249

242

2.9

747

694

7.6

Forestry operations

16.7

10.0

Total

1,494

1,297

15.2

4,344

3,882

11.9

Operating (loss) profit
Fine Paper –

North America

212.5

376.9

Europe

(28.6)

(33.8)

Southern Africa

(66.7)

(16.7)

Total

44.0

114

26.7

Forest Products

(60)

–

167

212

(21.2)

Corporate

(3)

–

(6)

–

Total

(23)

–

289

296

(2.4)

Net operating assets
Fine Paper –

North America

1,064

1,061

0.3

1,064

1,061

0.3

Europe

2,098

1,947

7.8

2,098

1,947

7.8

Southern Africa

124

153

(19.0)

124

153

(19.0)

Total

3,286

3,161

4.0

3,286

3,161

4.0

Forest Products

1,714

1,572

9.0

1,714

1,572

9.0

Corporate and other

(32.5)

Total

5,027

4,773

5.3

5,027

4,773

5.3

notes to the group results

sappi limited

third quarter

(

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 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

EBITDA excluding special items – earnings before interest (net finance costs), tax, 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 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 deferred tax liabilities minus deferred tax assets

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 – return on 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 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

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

third quarter

Supplemental information

(This information has not been reviewed)

Restated

Quarter

Nine months

ended

June 2008

June 2007

June 2008

June 2007

US$ million

(Loss) profit for the period to EBITDA excluding

special items

(1)

reconciliation

(Loss) profit for the period

(63)

134

127

Net finance costs

100

107

Taxation

(5)

Special items – losses (gains)

111

(6)

(12)

(79)

Operating profit excluding special items

277

217

Depreciation and amortisation

283

284

EBITDA excluding special items

(1)

182

176

560

501

June 2008

Sept 2007

US$ million

Net debt (US$ million)

(2)

2,667

2,257

Net debt to total capitalisation (%)

(2)

50.2

43.2

Net asset value per share (US$)

(2)

8.72

9.37

(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 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 18, Supplemental Information for the definition of the term.

sappi limited

third quarter

Supplemental information

(This information has not been reviewed)

summary Rand convenience translation

Restated

Quarter

Nine months

ended

June 2008

June 2007

change

June 2008

June 2007 change

Key figures: (ZAR million)
Sales

11,711

9,221

27.0

31,814

27,997

13.6

Operating (loss) profit

(180)

619

–

2,117

2,135

(0.8)

Special items – losses (gains) *

870

(43)

–

(88)

(570)

–

Operating profit excluding

special items

690

576

19.8

2,029

1,565

29.6

EBITDA excluding special items *

1,427

1,251

14.1

4,101

3,613

13.5

(Loss) profit for the period

(494)

277

–

981

916

7.1

Basic EPS (SA cents)

(219)

121

–

432

404

6.9

Net debt *

21,108

16,282

29.6

21,108

16,282

29.6

Cash generated from operations

1,223

1,010

21.1

3,567

3,058

16.6

Cash retained from operating

activities

486

348

39.7

542

1,067

(49.2)

Net movement in cash and

cash equivalents

157

(363)

–

(850)

(310)

–

Key ratios: (%)
Operating (loss) profit to sales

(1.5)

6.7

7.6

Operating profit excluding special

items to sales

5.9

6.2

6.4

5.6

EBITDA excluding special items

to sales

12.2

13.6

12.9

Operating profit excluding special

items to average net assets

8.0

7.8

8.4

7.1

Net debt to total capitalisation *

50.2

46.1

50.2

46.1

* Refer to page 18, 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

June

March

Dec

Sept

June

2008

2007

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

7.9145

8.1432

6.8068

6.8713

7.0393

Average rate for the Quarter: US$1 = ZAR

7.8385

7.4593

6.7488

7.0453

7.1095

Average rate for the YTD: US$1 = ZAR

7.3236

7.1465

6.7488

7.1741

7.2121

Period end rate: EUR 1 = US$

1.5795

1.5802

1.4717

1.4272

1.3542

Average rate for the Quarter: EUR 1 = US$

1.5747

1.5006

1.4556

1.3782

1.3498

Average rate for the YTD: EUR 1 = US$

1.5071

1.4790

1.4556

1.3336

1.3178

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

third quarter

Sappi ordinary shares

ADR price (NYSE TICKER: SPP)

160

140

120

100

Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Jul 07 Oct 07 Apr 07 Jan 08 Apr 08 22 Jul 08

ZAR

US$

Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Jul 07 Oct 07 Apr 07 Jan 08 Apr 08 22 Jul 08

sappi limited

third quarter

Notes

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

sappi limited

third quarter

Notes

sappi limited

third quarter

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

South Africa:

United States

United Kingdom:

Computershare Investor

ADR Depositary:

Capita Registrars

Services (Proprietary) Limited

The Bank of New York Mellon

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 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: August 01, 2008

SAPPI LIMITED,

By: /s/ M. R. Thompson

Title: Chief Financial Officer

Name: M. R. Thompson