The change in leadership of global pulp and paper producer Sappi has gone smoothly and new CEO Jonathan Leslie has already made his mark on the organisation, chairperson Eugene van As says.
Leslie, previously chief executive of the Diamonds and Gold Group of Rio Tinto plc, joined Sappi in April as CEO. He replaced Van As, who had been at Sappi’s helm since 1978, at the end of May. Van As remains chairperson of the group.
Writing in the group’s annual report, Van As said Leslie has taken decisive actions to improve returns and reduce costs including the flattening of the management structure and the termination of activities that have become uncompetitive.
Van As said that Leslie took over as CEO just as the group entered a period that turned out to be more difficult than any he could remember — particularly because, for the first time since Sappi internationalised its operations, it was faced with major market disruption and currency fluctuations in all its regional markets at the same time.
“The state of the global economy, the war in Iraq and the exceptional changes in the relative values of the major currencies have made the past year an extremely difficult one for the global pulp and paper industry. This was aggravated by punitive tariffs imposed in some Asian countries, which disrupted the normal supply pattern in that region and put further pressure on other markets, more particularly the United States,” he said.
As a result, the group’s headline earnings per share fell by 30% to 71 US cents in 2003, reflecting the testing conditions in the markets.
“Although this is a disappointing result, we can take some comfort from the fact that our return on net assets remain in the upper quartile of the industry and that cash generation remained positive,” he said.
Sappi’s balance sheet strengthened further and at the year-end it had $584-million of cash and cash equivalents on hand, partly a result of cash generated, but mainly as the result of taking advantage of the low interest rate environment to lock in long-term, low-cost funding instruments.
“With a net debt-to-total-capital ratio of 30,8%, we are well positioned to ride out the current storm and to take advantage of growth opportunities when they arise,” he said.
Sappi continued to see good value in its shares and repurchased approximately 4,2-million shares during the year, at a total cost of $54,6-million, representing an average cost per share of $13 — or about R103 — per share. — I-Net Bridge