2025
Sappi Southern Africa Limited
Annual Financial Statements
for the year ended September 2025
Group and Company Annual Financial Statements
Directors' approval 1
Group Company Secretary's certificate 1
Directors' report 2
Independent auditor's report 7
Consolidated and company income statements 11
Consolidated and company statements of comprehensive income 11
Consolidated and company balance sheets 12
Consolidated and company statements of cash flows 13
Notes to the Group and Company Financial StatementsConsolidated and company statements of changes in equity 14
Basis of preparation 15
Material accounting policies 15
Judgement assumptions and estimation uncertainties 15
Summary of material accounting policies 16
Adoption of accounting standards in the current year 25
Accounting standards, interpretations and amendments to existing standards that are not yet effective 25
Operating profit 26
Net finance costs 27
Taxation charge 28
Property, plant and equipment 28
Right-of-use assets 29
Plantations 30
Deferred tax 31
Equity-accounted investee 32
Other non-current assets 32
Inventories 32
Trade and other receivables 33
Ordinary share capital and share premium 35
Other comprehensive (loss) income 36
Non-distributable reserves 36
Trade and other payables 36
Interest-bearing borrowings 37
Other non-current liabilities 38
Notes to the group and company statements of cash flows 38
Encumbered assets 40
Commitments 40
Contingent liabilities 40
Post-employment benefits - pensions 40
Post-employment benefits - post-retirement healthcare subsidy 45
Share-based payments 47
Derivative financial instruments 48
Financial instruments 49
Related party transactions 60
Compensation of key management personnel 62
Events after balance sheet date 62
Investment in subsidiaries 62
Segment information 63
Disposal of held-for-sale asset 65
The audited financial statements for the year ended September 2025 have been prepared by the corporate accounting staff
of Sappi Southern Africa Limited headed by John Shaw, Group Financial Manager. This process was supervised by Pramy Moodley, Chief Financial Officer.
The financial statements have been audited in compliance with section 30 of the Companies Act of South Africa. Sappi Southern Africa Limited (incorporated in the Republic of South Africa), registration number 1951/003180/06.
2025 Sappi Southern Africa Limited Annual Financial Statements
for the year ended September 2025The directors are responsible for the maintenance of adequate accounting records and the content, integrity and fair presentation of the Group and Company Annual Financial Statements and the related financial information included in this report. The annual consolidated financial statements for the year ended September 2025 have been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards), the financial pronouncements as issued by the Financial Reporting Standards Council and SAICA Financial Reporting Guides, JSE Listings Requirements and the Companies Act of South Africa. In preparing the group and company financial statements, appropriate accounting policies supported by reasonable judgements and estimates were applied. The auditors are responsible for auditing the group and company financial statements in the course of executing their statutory duties.
The directors acknowledge that they are ultimately responsible for the system of internal financial control established and are committed to maintaining a strong control environment. The directors are of the opinion that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the group and company financial statements. However, any system of internal financial control can provide only reasonable, and not absolute assurance against material misstatement or loss.
The directors have reviewed the group and company's budget and cash flow forecasts. This review, together with the group and company's financial position, existing borrowing facilities and cash on hand, have satisfied the directors that the group and company will continue as a going concern for the foreseeable future. The group and company, therefore, continue to adopt the going-concern basis in the preparation of the group and company financial statements.
Approval of the Group and Company Annual Financial StatementsThe directors' report and Group and Company Annual Financial Statements appear on pages 11 to 65 and were approved by the board of directors on 26 January 2026 and signed on its behalf by:
G Wild P Moodley
Chief Executive Officer Chief Financial Officer
Authorised director Authorised director
ANNUAL FINANCIAL STATEMENTS
Group Company Secretary's certificate for the year ended September 2025In terms of section 88(2)(e) of the Companies Act 71 of 2008 of South Africa, I hereby certify that, to the best of my knowledge and belief, the company has lodged with the Companies and Intellectual Property Commission of South Africa, for the financial year ended September 2025, all such returns as are required of a public company in terms of this Act and that such returns appear to be true, correct and up to date.
Sappi Limited
Secretaries
per A Mahendranath
Group Company Secretary
26 January 2026
for the year ended September 2025The directors submit their report for the year ended September 2025.
Business of Sappi Southern Africa Limited (Sappi Southern Africa or the company) and its operating companies (the group)The group and company was formed in 1951 and is incorporated and domiciled in the Republic of South Africa and produces dissolving wood pulp (DWP), packaging and speciality papers, graphics papers, biomaterials and biochemicals that are manufactured from woodfibre sourced from sustainably managed forests and plantations, in production facilities powered, in many cases, with bioenergy from steam and existing waste streams for our direct and indirect customer base in the Southern Africa and export markets.
As a diversified, innovative and trusted leader focused on sustainable processes and products, we are building a more circular economy by making what we should, not just what we can. Together with our partners, we work to build a thriving world by acting boldly to support prosperity, people and planet.
Sappi Southern Africa overviewThe Sappi Group is one of the world's largest manufacturer of DWP (branded as Verve) and exports almost all of the 1,145,000 tons produced by Sappi Southern Africa at the Saiccor and Ngodwana Mills. DWP is a highly purified form of cellulose extracted from sustainably grown and responsibly managed trees using unique cellulose chemistry technology that is renewable, biodegradable and compostable. Our DWP brand, Verve, is a significant player in this market. Verve is a truly sustainable brand that encompasses people, the environment and economic prosperity. From textiles to pharmaceuticals and food applications, Sappi has the expertise, technology and the track record to meet almost any challenge from these DWP market segments.
The South African paper business produces 660,000 tons of kraft linerboard, corrugating medium, newsprint, office paper and tissue paper which are largely sold regionally, where we have strong market positions in most of these products. This broad range of paper-based sustainable solutions is offered as an alternative to fossil fuel-based, non-renewable packaging. We supply the agricultural sector with carton board to protect fresh produce as it is shipped from farms to tables locally and around the world. We also produce 570,000 tons of paper pulp and collect 66,000 tons of recycled waste paper. On a net basis we are approximately self-sufficient for our pulp requirements.
Sappi Southern Africa owns or leases 405,103 hectares (ha) with approximately 29 million tons of standing timber and 140,828 ha being used for other purposes such as conservation. We are committed to sourcing woodfibre from forests and timber plantations in a manner that promotes their health and supports community wellbeing. Of the 264,275 ha planted at the end
of FY2025, 69% was hardwood and 31% softwood, and of contracted supply, 95% is hardwood. These plantations provide approximately 69% of the wood requirements for the Southern Africa mills. Contracted supply covers almost 129,684 ha. Our aim is to produce low-cost wood with the required pulping characteristics and increase yield per hectare. We actively pursue this aim, particularly through genetic improvement of planting stock.
SSA delivered an adjusted EBITDA of ZAR4,700 million (ZAR5,800 million in 2024), annual operating profit of ZAR2,095 million (ZAR3,676 million in 2024) for FY2025. The year began with a strong financial performance but market conditions deteriorated from the second quarter. This stemmed from uncertainty from global trade tensions which resulted in an economic slowdown and weakening of consumer confidence. This placed downward pressure on selling prices across all our market segments . In addition, the significant weakening of the US Dollar to the ZAR negatively impacted earnings. Global paper markets also remained oversupplied, creating headwinds for our paper business. Despite these challenges, dissolving wood pulp (DWP) and packaging and speciality paper sales volumes increased year-on-year. Scheduled maintenance shuts extended beyond the planned timelines resulting in production inefficiencies. We remain committed to optimising our asset utilisation and working capital and continuing on the cost efficiencies initiatives that are underway currently.
We regard ownership of our plantations as a key strategic resource as it gives us access to low cost fibre for our pulp production and ensures continuity of supply on an important raw material input source. Our plantations are instrumental in preserving natural and high-value forest ecosystems by providing a sustainable, alternative fibre source that reduces commercial pressure on natural forests. By cultivating eucalyptus and pine trees on plantations specifically designed for fibre production, we help meet the commercial demand for wood products without resorting to harvesting old-growth or high-value biodiversity-rich forests.
Safety is a fundamental, non-negotiable value at Sappi, seamlessly woven into our strategic framework and embodied in our values statement: As OneSappi, we do business safely, with integrity and courage, making smart decisions that we execute with speed. Recognising that a strong safety culture is vital to our success, we have embedded it across every facet of our operations. This unwavering commitment is a core element of our Thrive strategy, supporting our broader goals of sustainability, operational excellence, and building stakeholder trust. Safety performance during the year was challenging and remains an area of critical focus. Tragically, two fatalities occurred in the region, one involving a contractor and one involving an employee, a sobering reminder of the critical need for ongoing vigilance and an unwavering commitment to safety. These incidents deeply impact our organisation and strengthen our resolve to prevent such tragedies in the future. Our ambition of zero injuries remains firm, supported by ongoing investment in behavioural safety, leadership accountability and continuous improvement ensuring that everyone returns home safely each day.
We have a strong focus on social responsibility in South Africa, which is an economic imperative in the region. Recognising that we are part of the communities beyond our fence lines and that their prosperity and wellbeing are linked to our own, we strive to make a purpose-driven, meaningful contribution towards the wellbeing and development of our neighbouring communities.
ANNUAL FINANCIAL STATEMENTS
We work to create positive social impact by jointly identifying and leveraging opportunities, thereby demonstrating our commitment to transparency and collaboration. Community engagement meetings take various formats in our mills and forestry operations. These range from broad liaison forums for business, local government and communities to legally mandated environmental forums that form part of the licensing conditions of mills. We continue to make progress on each of the elements of our black economic empowerment scorecard.
Going concernThe directors believe that the group and company has sufficient resources and expected cash flows to continue as a going concern for the next financial year.
Events after balance sheet dateRefer to note 23 - Contingent liabilities and note 31 - Events after balance sheet date.
OutlookChallenging global macroeconomic conditions and global tensions are expected to persist and disrupt market stability. In addition the trade tensions are creating uncertainty. However, the strong balance sheet and healthy cash reserves provide us with the ability to maintain our financial health. Our immediate focus is to reduce debt and strengthen the balance sheet further through cost savings and operational efficiency improvements. Dissolving pulp market dynamics are expected to remain stable through the first quarter as viscose staple fibre (VSF) operating rates remain high and inventory levels through the value chain are low. Demand is expected to remain robust but the significant difference between DWP and paper pulp prices could slow the recovery of DWP prices. In addition, the weakening of US Dollar could impact profitability negatively. The long-term favourable outlook for our sustainably produced packaging and speciality paper products remains positive, and demand from our customers is healthy. We maintain a strong competitive position and the agricultural forecast for FY2026 is expected to support an increase in demand throughout the year. Prices for certain of our input cost remains low and we will actively pursue opportunities for further cost savings. However, we do expect that trade tensions may pose a risk and impact global inflation.
We remain focused on maximising our operational efficiency and will balance our production with demand to proactively manage our costs and preserve pricing, whilst prioritising cash generation. The medium to longer-term strategy to invest in growth opportunities and achieve our sustainability goals remains intact.
Share capitalThere were no changes in the authorised share capital during the financial year.
Authorised6,052,500 Ordinary shares of ZAR2 each
19,520 Class "A" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate 221,107 Class "B" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate 831 Class "C" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate 123,321 Class "D" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate
Issued6,015,769 Ordinary shares of ZAR2 each
19,520 Class "A" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate 216,950 Class "B" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate 678 Class "C" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate 117,121 Class "D" cumulative non-convertible redeemable preference shares of ZAR0.01 each with a variable coupon rate
Liquidity and financingAt September 2025, we had liquidity comprising ZAR1,426 million of cash on hand and ZAR5,875 million available committed facilities. Financial covenants apply to the revolving credit facility. These covenants are calculated on a rolling last four quarter basis and require that at the end of March and September each year, with regard to Sappi Southern Africa and its subsidiaries:
the ratio of net debt to equity at the end of March and September is not greater than 65%; and
the ratio of EBITDA to net interest paid is not less than 2.5 to 1.
Below we show that for the year ended September 2025 the South African financial covenants were comfortably met.
South African covenants | 2025 | Covenant |
Net debt to equity | 9.06% | <65% |
EBITDA to net interest | 35.14 | >2.50 |
Sappi Southern Africa Limited currently has the following credit ratings:
- Global Credit Rating (GCR): South African national rating AAA (za)/A1+(za)/Stable outlook (June 2025).
Net borrowingsSappi Southern Africa has sufficient cash to meet all its debt obligations. Details of the non-current term borrowings are set out in note 18 of the annual financial statements.
InsuranceWe have renewed our calendar 2025 asset property damage and business interruption (PDBI) insurance cover. The maximum self-insured retention for any one property damage incident is EUR20.5 million, with an annual aggregate of EUR33.0 million. For property damage and business interruption insurance, cost effective cover is not generally available to full replacement value. As at September 2025, the annual limit for claims under our property damage and business interruption insurance policy was EUR729.5 million. In addition to the property damage and business interruption policy there is a full programme of other insurance policies to mitigate any losses stemming from events not covered by the PDBI policy.
Property, plant and equipmentThere were no major changes in the nature of the group and company property, plant and equipment during the period under review. Capital expenditure of ZAR1,914 million was incurred during the year as per the cash flow statement. Capital expenditure increased slightly in 2025 due to an increase in maintenance and energy self sufficiency projects.
LitigationWe become involved from time to time in various claims and lawsuits incidental to the ordinary course of our business. We are not currently involved in legal proceedings which, either individually or in the aggregate, are expected to have a material adverse effect on our business, assets or properties.
Corporate governanceSappi is committed to high standards of corporate governance which form the foundation for long-term sustainability of our company and the creation of value for our stakeholders. Good governance at Sappi contributes to living our values through enhanced accountability, a transparent and ethical culture, strong risk management, a focus on performance, legitimacy and effective control of the business. Sappi endorses the corporate outcomes of ethical cultures, good performance, effective control and legitimacy promoted by the King IV Report on Corporate Governance for South Africa (released November 2019). Sappi Southern Africa Limited is a wholly owned subsidiary of Sappi Limited which has its equity shares listed on the main board of the JSE. Sappi Southern Africa adopts Sappi Limited's application of the King Code. The full details of how Sappi applies the King IV principles can be found on the Sappi website under https://www.sappi.com/en-za/investors/corporate-governance-and-risk and in the Sappi Limited 2025 Annual Integrated Report on pages 158 to 180.
Details of the Sappi Limited's and the Issuer's current policy dealing with the process for the nomination and appointment of directors can be found on the Sappi website under https://www.sappi.com/en-za/investors/corporate-governance-and-risk and in the Sappi Limited 2025 Annual Integrated Report on page 197. Furthermore we confirm that the board of directors has executed its responsibilities in terms of DLR 7.3(f) and the board charter is available on the link above. The company has appointed the Treasurer of Sappi Southern Africa Limited as the debt officer. The board of the company confirms that it has considered and is satisfied with the competence, qualifications and experience of the debt officer.
Details on Sappi's Limited's and the Issuer's current policy dealing with the conflicts of interest of the directors and the executive management can be found on the Sappi website under https://www.sappi.com/en-za/investors/corporate-governance-and-risk and in the Sappi Limited 2025 Annual Integrated Report on page 176. The issuers conflict of interest register can be found under the link above.
Audit and Risk CommitteeThe Sappi Southern Africa Limited group of companies (Group) is a major subsidiary of Sappi Limited (Sappi), a company that maintains its listing on the JSE Limited. Sappi complies in all material respects with the JSE listings requirements, regulations and codes. The Sappi Southern Africa Limited Audit Committee operates as a function of the Sappi Limited Audit Committee. The committee, in terms of the Companies Act of South Africa, and King Code has the responsibility for reviewing the effectiveness of the group's system of internal controls and risk management system. An internal audit function is responsible for advising the board of directors on the effectiveness of the group's risk management system. For further information on Sappi's application of the King Code please refer to the Sappi Limited 2025 Integrated Annual Report.
The committee oversees the relationship with the external auditors; is responsible for their appointment and remuneration; reviews the effectiveness of the external audit process; and ensures that the objectivity and independence of the external auditors is maintained. The committee has concluded that it is satisfied that the auditor independence and objectivity has been maintained. The comprehensive report of the committee is included in the Sappi Limited annual report.
The committee has considered and satisfied itself of the appropriateness of the expertise and experience of the Chief Financial Officer. In reaching this conclusion, the committee assessed the Chief Financial Officer's professional qualifications, technical competencies, industry knowledge, and financial management experience, as well as their performance in overseeing the financial reporting function. The committee is of the view that the Chief Financial Officer possesses the requisite skills, sound judgement, and integrity to effectively discharge the responsibilities of the role and to ensure the reliability and integrity of the issuer's financial statements and related disclosures.
Company SecretaryThe Company Secretary does not fulfil executive management functions outside of the duties of Company Secretary and is not a director. During the year, the board has assessed the independence, competence, qualifications and experience of the Company Secretary and has concluded that she is sufficiently independent (ie maintained an arm's-length relationship with the executive team, the board and individual directors), qualified, competent and experienced to hold this position. The Company Secretary is responsible for the duties set out in section 88 of the Companies Act 71 of 2008 (as amended) of South Africa.
Specific responsibilities include providing guidance to directors on discharging their duties in the best interests, informing directors of new laws affecting the group, as well as arranging for the induction of new directors.
Directors' and officers' disclosure of interest in contractsDuring the period under review, no significant contracts were entered into in which directors and officers had an interest and which affected the business of the group. The directors register of conflicts of interest can be found on the website under the following link: https://www.sappi.com/en-za/investors/corporate-governance-and-risk.
Subsidiary companiesDetails of the company's significant subsidiaries are given in note 32.
Registered office108 Oxford Road Houghton Estate 2198
AuditorsKPMG Inc
Holding companySappi Limited
Directors/other directorshipsSteven Binnie Qualifications: Bcom, B Acc, CA(SA), MBA
ANNUAL FINANCIAL STATEMENTS
Chief Executive Officer
Sappi Limited and Non-Executive Director Sappi Southern Africa Limited
Nationality: British
Appointed: September 2012
Skills and experience: Mr Binnie was appointed Chief Executive Officer of Sappi Limited in July 2014 and is a Non-Executive Director of Sappi Southern Africa Limited. He brings extensive experience in financial management, leadership, corporate activity and strategy to the role.
Directorships: Sappi Southern Africa Limited; Sappi Limited; Sappi Europe N.V;Sappi North America Inc.; and SDW Holdings Corporation
Glen Pearce Qualifications: BCom, BCom (Hons), CA(SA)Chief Financial Officer
Sappi Limited and Non-Executive Director Sappi Southern Africa Limited
Nationality: South African
Appointed: July 2014
Skills and experience: Mr Pearce joined Sappi Limited in June 1997 and was promoted to Chief Financial Officer and Non-Executive Director of Sappi Limited in July 2014. He was also appointed as Executive Director of Sappi Southern Africa Limited at the same time. Mr Pearce has extensive financial management experience, both locally and abroad.
Directorships: Ngodwana Energy (RF) Proprietary Limited; Sappi Southern Africa Limited; Sappi Limited; Sappi International Holdings Proprietary Limited; Sappi Holding GmbH; Sappi North America Inc.; SDW Holdings Corporation; Sappisure Försäkrings AB; and Sappi International SA
Graeme Wild (Executive Director) Qualifications: BSc (Forestry), MBA Chief Executive Officer Nationality: South African
Sappi Southern Africa Limited Appointed: December 2024
Skills and experience: Mr Wild joined Sappi in 1995 and was appointed Chief Executive Officer of Sappi Southern Africa Limited in December 2024. His experience and expertise include forestry, strategy, investor relations, sustainability, procurement and sales.
Directorships: Sappi Southern Africa Limited; Sappi Pulp Asia Limited; Bagasse Moulded Fibre Proprietary Limited
Pramy Moodley (Executive Director) Qualifications: B Acc, CA(SA) Chief Financial Officer Nationality: South African Sappi Southern Africa Limited Appointed: January 2017
Skills and experience: Ms Moodley joined Sappi Southern Africa Limited in June 2002 and subsequently held various finance roles before being promoted to Chief Financial Officer and Executive Director of Sappi Southern Africa Limited in January 2017.
Directorships: Tugela Energy (RF) Proprietary Limited; Sappi International Holdings Proprietary Limited; Waterton Timber Company Proprietary Limited; Sappi Southern Africa Limited; Umkomaas Energy (RF) Proprietary Limited; Sappi Forests Proprietary Limited; Ngodwana Cogen Energy (RF) Proprietary Limited; Canonbrae Development Company Proprietary Limited; Bagasse Moulded Fibre Proprietary Limited; Sappi Property Company Proprietary Limited; Sarprasel Estates;
G R Farms; Mkomazi Alien Fuels Proprietary Limited
Maarten van Hoven (Resigned) Qualifications: BProc, LLM (International Business Law) Non-Executive Director Nationality: South African
Sappi Southern Africa Limited Appointed: December 2024
Skills and experience: As an admitted attorney to the High Court of South Africa, Mr Van Hoven brings expertise in corporate, commercial and corporate law, in the private and public sectors, as well as experience in mergers and acquisitions.
Directorships: Sappi Southern Africa Limited; Sappi North America Inc.; KF Shelf Co 1; KF Shelf Co 2
Louis Kruyshaar (Resigned) Qualifications: BEng (Chemical Engineering), BTech (Pulp and Paper), MBA, EDP Non-Executive Director Nationality: South African
Sappi Southern Africa Limited Appointed: December 2024
Skills and experience: Mr Kruyshaar has more than 30 years experience in the pulp and paper industry with expertise in operations, technical management and innovation; and has held various leadership positions across the group in a range of related functions locally and abroad.
Directorships: Sappi Southern Africa Limited; Sappi Biotech UK and Sappi North America Inc.
Fergus Conan Salvador Marupen (Resigned)Qualifications: BA Hons (Psychology), Bed (Education Management), Masters Diploma (HR Management), MBA, LCOR
Non-Executive Director Nationality: South African Sappi Southern Africa Limited Appointed: December 2024
Skills and experience: Mr Marupen's experience across a variety of industries in South Africa enable him to offer insight into HR, governance and management, among many other fields.
Directorships: Sappi Southern Africa Limited; Sappi North America Inc. and Sappi Workers Trust
Debt OfficerName: Serena McGinn Appointed: 15 October 2020 Address: 108 Oxford Road Houghton Estate
2198
South Africa
Telephone: +27 11 407 8164 Email: serena.mcginn@sappi.com
SecretariesSappi Limited 108 Oxford Road
Houghton Estate 2198 South Africa
Telephone +27 (0) 11 407 8111
Telefax +27 (0) 11 339 1881
Email: Ami.Mahendranath@sappi.com
ANNUAL FINANCIAL STATEMENTS
Independent auditor's report for the year ended September 2025 To the shareholder of Sappi Southern Africa Limited Report on the audit of the consolidated and separate financial statements OpinionWe have audited the group and company financial statements of Sappi Southern Africa Limited (the Group and Company) set out on pages 11 to 65, which comprise the Consolidated and company balance sheets as at September 2025, and the Consolidated and company income statements, Consolidated and company statements of comprehensive income, Consolidated and company statements of changes in equity and the Consolidated and company statements of cash flows for the year then ended, and notes to the Group and Company financial statements, including material accounting policy information.
In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Sappi Southern Africa Limited as at September 2025, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards) and the requirements of the Companies Act of South Africa.
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated and separate financial statements section of our report. We are independent of the Group and Company in accordance with the Independent Regulatory Board for Auditors' Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In terms of the IRBA Rule on Enhanced Auditor Reporting for the Audit of Financial Statements of Public Interest Entities, published in Government Gazette No. 49309 dated 15 September 2023 (EAR Rule), we report:
Final materialityThe scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the group and company financial statements as a whole as follows:
Final materiality | ZAR 180 million (based on total revenue). |
Rationale for the benchmark and percentage applied | We selected total revenue as our materiality benchmark because, in our view, it is a benchmark which the users of the group and company financial statements are interested in. Given the fluctuations in profit before tax from continuing operations (PBTCO) we determined total revenue to be a more appropriate and stable benchmark. We applied 0.7% (rounded) to the total revenue in order to determine materiality. The materiality benchmark and threshold are consistent with the prior year and is an appropriate quantitative materiality threshold used for profit-oriented companies and is further based on our professional judgment after consideration of qualitative factors that impact the group and company. |
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.
We performed risk assessment procedures to determine which of the Group's components are likely to include risks of material misstatement to the group financial statements and which further audit procedures to perform at these components to address those risks. Our judgement included assessing the size of the components, nature of assets, liabilities and transactions within the components as well as specific risks.
In total, we identified 10 components. Of those, we identified 5 components at which further audit procedures were performed on the entire financial information of the component, either because audit evidence needed to be obtained on all or a significant proportion of the component's financial information, or that component represents a pervasive risk of material misstatement
to the consolidated financial statements.
We also performed an analysis at an aggregated group level on the remaining financial information of the remaining
5 components, to re-examine our assessment that there is less than a reasonable possibility of a material misstatement in the remaining financial information.
Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
In terms of the EAR Rule, we are required to report the outcome of audit procedures or key observations with respect to the key audit matters, and these are included below.
Valuation of plantations
Refer to note 2.2.17 Plantations, for the accounting policies applied and note 8 Plantations, to the consolidated and separate financial statements
Key audit matter | How the matter was addressed in our audit |
Plantations are measured at fair value less costs to sell and are classified as a Level 3 fair value measurement in terms of IFRS 13 Fair Value Measurement (IFRS 13). Determining the fair value of plantations involves complex valuation techniques and is subject to significant estimation uncertainty. The key assumptions that involve the most significant judgement and have the greatest impact on the fair value of the plantations include:
Given the complexity of the valuation model and the significant judgements required, the determination of the fair value of plantations was considered a key audit matter for both the consolidated and separate financial statements. | Our team included senior audit team members and valuation specialists with an understanding of the Group's and Company's business and industry. The procedures we performed to address this key audit matter included the following:
The results of our procedures were satisfactory, and we found the fair value estimate to be acceptable. |
Impairment of Cash-Generating Units (CGUs)
ANNUAL FINANCIAL STATEMENTS
Refer to note 2.2.14 Impairment of assets other than goodwill, for the accounting policies applied and note 6 Property, Plant and Equipment, to the consolidated and separate financial statements
Key audit matter | How the matter was addressed in our audit |
CGUs within Sappi Southern Africa Limited were assessed for impairment due to the presence of impairment indicators in the current year. Impairment tests were performed on relevant cash generating units to determine the CGU's recoverable amount. The recoverable amount is measured at the higher of fair value less cost of disposal and value in use. An impairment loss is recognised to the extent that the carrying amount of the CGU exceeds its recoverable amount. The impairment assessment involves significant estimation and judgement, particularly in relation to the following:
The value-in-use model applied is complex and highly sensitive to changes in these key assumptions, resulting in a high degree of estimation uncertainty. Given the complexity of the valuation model, the level of judgement involved, high level of estimation uncertainty and the degree of auditor attention required, this matter was considered a key audit matter for both the consolidated and separate financial statements. | The audit procedures we performed to address this key audit matter included the following:
The results of our procedures were satisfactory, and we found the impairment recognised to be appropriate. |
The directors are responsible for the other information. The other information comprises the information included in the document titled "2025 Sappi Southern Africa Limited Annual Financial Statements for the year ended September 2025", which includes the Group Company Secretary's certificate and the Directors' report as required by the Companies Act of South Africa. The other information does not include the consolidated and separate financial statements and our auditor's report thereon.
Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the consolidated and separate financial statementsThe directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting
Standards) and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the consolidated and separate financial statementsOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's and the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group and/or the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence, regarding the financial information of the entities or business units within the Group and Company, as a basis for forming an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit
of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirementsIn terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that KPMG Inc. has been the auditor of Sappi Southern Africa Limited for nine years.
KPMG Inc.
Per Mohammed Hassan Chartered Accountant (SA) Registered Auditor Director
26 January 2026
ANNUAL FINANCIAL STATEMENTS
Consolidated and company income statements for the year ended September 2025Group
Company
ZAR million | Note | 2025 | 2024 | 2025 | 2024 |
Revenue | 25,815 | 25,810 | 25,815 | 25,810 | |
Cost of sales | 3.1 | 22,420 | 21,009 | 22,420 | 21,009 |
Gross profit | 3,395 | 4,801 | 3,395 | 4,801 | |
Selling, general and administrative expenses Equity-accounted investee losses | 3.1 10 | 1,141 159 | 1,125 - | 1,151 159 | 1,125 - |
Operating profit | 3 | 2,095 | 3,676 | 2,085 | 3,676 |
Net finance costs | 4 | 160 | 175 | 160 | 175 |
Finance costs | 318 | 374 | 318 | 374 | |
Finance income | (184) | (186) | (184) | (186) | |
Net foreign exchange loss (gain) | 26 | (13) | 26 | (13) | |
Profit before taxation | 1,935 | 3,501 | 1,925 | 3,501 | |
Taxation charge | 5 | 587 | 826 | 585 | 826 |
Profit for the year | 1,348 | 2,675 | 1,340 | 2,675 | |
Group
Company
ZAR million Note | 2025 | 2024 | 2025 | 2024 |
Profit for the year | 1,348 | 2,675 | 1,340 | 2,675 |
Other comprehensive income, net of tax 15 | (119) | 113 | (119) | 113 |
Item that will not be reclassified | ||||
subsequently to profit or loss 15 | - | (12) | - | (12) |
Actuarial loss on post-employment benefit funds | - | (16) | - | (16) |
Deferred tax on above item | - | 4 | - | 4 |
Items that may be reclassified subsequently | (119) | 125 | (119) | 125 |
to profit or loss 15 | ||||
Movement in hedging reserves | (162) | 170 | (162) | 170 |
Tax on above items | 43 | (45) | 43 | (45) |
Total comprehensive income for the year | 1,229 | 2,788 | 1,221 | 2,788 |
Group
Company
ZAR million | Note | 2025 | 2024 | 2025 | 2024 |
ASSETS | |||||
Non-current assets | 30,730 | 30,944 | 30,729 | 30,944 | |
Property, plant and equipment | 6 | 19,919 | 20,042 | 19,925 | 20,048 |
Right-of-use assets | 7 | 405 | 459 | 405 | 459 |
Plantations | 8 | 9,673 | 9,611 | 9,673 | 9,611 |
Equity-accounted investee | 10 | 16 | 7 | 16 | 7 |
Other non-current assets | 11 | 717 | 825 | 710 | 819 |
Current assets | 8,352 | 9,808 | 8,352 | 9,808 | |
Inventories | 12 | 2,708 | 2,985 | 2,708 | 2,985 |
Trade and other receivables | 13 | 516 | 1,086 | 516 | 1,086 |
Derivative financial instruments | 27 | 39 | 201 | 39 | 201 |
Amounts owing by related parties | 29 | 3,628 | 3,616 | 3,628 | 3,616 |
Taxation receivable | 20.4 | 35 | - | 35 | - |
Cash and cash equivalents | 1,426 | 1,920 | 1,426 | 1,920 | |
Total assets | 39,082 | 40,752 | 39,081 | 40,752 | |
EQUITY AND LIABILITIES | |||||
Shareholders' equity | 23,275 | 24,556 | 23,265 | 24,554 | |
Ordinary share capital and share premium | 14 | 221 | 221 | 221 | 221 |
Non-distributable reserves | 16 | 135 | 145 | 133 | 143 |
Hedging reserves | 28 | 147 | 29 | 148 | |
Retained earnings | 22,891 | 24,043 | 22,882 | 24,042 | |
Non-current liabilities | 8,724 | 8,798 | 8,724 | 8,797 | |
Interest-bearing borrowings | 18 | 1,499 | 1,499 | 1,499 | 1,499 |
Lease liability - Long term | 423 | 489 | 423 | 489 | |
Deferred tax liabilities | 9 | 6,533 | 6,465 | 6,533 | 6,465 |
Other non-current liabilities | 19 | 269 | 345 | 269 | 344 |
Current liabilities | 7,083 | 7,398 | 7,092 | 7,401 | |
Interest-bearing borrowings | 18 | 1,500 | - | 1,500 | - |
Lease liability - Short term | 113 | 93 | 113 | 93 | |
Derivative financial instruments | 27 | 11 | 19 | 11 | 19 |
Trade and other payables | 17 | 3,826 | 5,132 | 3,826 | 5,132 |
Taxation payable | 20.4 | - | 561 | - | 561 |
Provisions | - | 6 | - | 6 | |
Amounts owing to related parties | 29 | 1,633 | 1,587 | 1,642 | 1,590 |
Total equity and liabilities | 39,082 | 40,752 | 39,081 | 40,752 | |
ANNUAL FINANCIAL STATEMENTS
Consolidated and company statements of cash flows for the year ended September 2025Group
Company
ZAR million | Note | 2025 | 2024 | 2025 | 2024 |
Cash retained from operating activities Cash generated from operations Increase in working capital | 20.1 20.2 | 93 | 2,965 | 101 | 2,965 |
4,261 (450) | 5,104 (320) | 4,261 (444) | 5,104 (320) | ||
Cash generated from operating activities | 3,811 | 4,784 | 3,817 | 4,784 | |
Finance costs paid | 20.3 | (331) | (314) | (331) | (314) |
Finance income received | 184 | 185 | 184 | 185 | |
Dividends paid | (2,500) | (1,560) | (2,514) | (1,560) | |
Dividends received | - | - | 14 | - | |
Taxation paid | 20.4 | (1,071) | (130) | (1,069) | (130) |
Cash utilised in investing activities | (1,983) | (1,876) | (1,991) | (1,876) | |
Investment to maintain operations | (1,431) | (1,410) | (1,431) | (1,410) | |
Investment to expand operations | (483) | (371) | (483) | (371) | |
Insurance proceeds on fixed assets | 25 | - | 25 | - | |
Proceeds on disposal of assets held for sale | 7 | - | 7 | - | |
Proceeds on disposal of property, plant and | |||||
equipment | 20.5 | 68 | 16 | 60 | 16 |
Investment in equity accounted investees | (6) | - | (6) | - | |
Advance in shareholder loans and other | |||||
non-current assets | (163) | (111) | (163) | (111) | |
Cash effects of financing activities | 1,396 | (840) | 1,396 | (840) | |
Repayment of interest-bearing borrowings | 20.6 | - | (3,250) | - | (3,250) |
Advance in interest-bearing borrowings | 20.6 | 1,500 | 2,500 | 1,500 | 2,500 |
Lease repayments | 7 | (104) | (90) | (104) | (90) |
Net movement in cash and cash equivalents | (494) | 249 | (494) | 249 | |
Cash and cash equivalents at beginning of year | 1,920 | 1,671 | 1,920 | 1,671 | |
Cash and cash equivalents at end of year | 1,426 | 1,920 | 1,426 | 1,920 | |
Ordinary | |||||||
share | |||||||
Ordinary | capital | Non- | |||||
Consolidated | share | Share | and share | distributable | Hedging | Retained | Total |
ZAR million | capital | premium | premium | reserves | reserves | earnings | equity |
Balance - September 2023 | 12 | 209 | 221 | 157 | 22 | 22,940 | 23,340 |
Share-based payments | - | - | - | (35) | - | - | (35) |
Sappi Limited Share Incentive Trust | - | - | - | 23 | - | - | 23 |
Profit for the year | - | - | - | - | - | 2,675 | 2,675 |
Dividend paid | - | - | - | - | - | (1,560) | (1,560) |
Other comprehensive income | - | - | - | - | 125 | (12) | 113 |
Balance - September 2024 | 12 | 209 | 221 | 145 | 147 | 24,043 | 24,556 |
Share-based payments | - | - | - | (37) | - | - | (37) |
Sappi Limited Share Incentive Trust | - | - | - | 27 | - | - | 27 |
Profit for the year | - | - | - | - | - | 1,348 | 1,348 |
Dividend paid | - | - | - | - | - | (2,500) | (2,500) |
Other comprehensive income | - | - | - | - | (119) | - | (119) |
Balance - September 2025 | 12 | 209 | 221 | 135 | 28 | 22,891 | 23,275 |
Note | 14 | 16 | |||||
Ordinary | Ordinary share capital | Non- | |||||
Company | share | Share | and share | distributable | Hedging | Retained | Total |
ZAR million | capital | premium | premium | reserves | reserves | earnings | equity |
Balance - September 2023 | 12 | 209 | 221 | 155 | 23 | 22,939 | 23,338 |
Share-based payments | - | - | - | (35) | - | - | (35) |
Sappi Limited Share Incentive Trust | - | - | - | 23 | - | - | 23 |
Profit for the year | - | - | - | - | - | 2,675 | 2,675 |
Dividend paid | - | - | - | - | - | (1,560) | (1,560) |
Other comprehensive income | - | - | - | - | 125 | (12) | 113 |
Balance - September 2024 | 12 | 209 | 221 | 143 | 148 | 24,042 | 24,554 |
Share-based payments | - | - | - | (37) | - | - | (37) |
Sappi Limited Share Incentive Trust | - | - | - | 27 | - | - | 27 |
Profit for the year | - | - | - | - | - | 1,340 | 1,340 |
Dividend paid | - | - | - | - | - | (2,514) | (2,514) |
Dividend received | - | - | - | - | - | 14 | 14 |
Other comprehensive loss | - | - | - | - | (119) | - | (119) |
Balance - September 2025 | 12 | 209 | 221 | 133 | 29 | 22,882 | 23,265 |
Note 14 16
ANNUAL FINANCIAL STATEMENTS
Notes to the Group and Company Financial Statements for the year ended September 2025-
Basis of preparation
The group and company financial statements of Sappi Southern Africa Limited (the company) as at and for the year ended September 2025 comprise the company and its subsidiaries (together referred to as the group and individually as 'group entities' or 'group entity') as well as the group's interests in associates and joint ventures.
The financial statements for the year ended September 2025 have been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IFRS® Accounting Standards), the Financial Pronouncements as issued by the Financial Reporting Standards Council, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee, JSE Listings Requirements and the Companies Act of South Africa. The Group and Company Annual Financial Statements were approved by the board of directors on 26 January 2026.
The Group and Company Annual Financial Statements are prepared on the historical cost basis, except as set out in the accounting policies which follow. Certain items, including derivatives, are stated at their fair value while plantations are stated at fair value less costs to sell.
Fair value is determined in accordance with IFRS 13 Fair Value Measurement and is categorised as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly
Level 3: Inputs for the asset or liability that are unobservable.
Transfers between fair value hierarchies are recorded when that change occurs.
The Group and Company Annual Financial Statements are presented in South African Rand (ZAR), which is the functional currency of Sappi Southern Africa Limited and is rounded to the nearest million except as otherwise indicated.
The preparation of the Group and Company Annual Financial Statements was supervised by P Moodley CA(SA).
The group amended its fiscal year from using a 52/53 week year to using calendar month ends at the beginning of the year ended 30 September 2025.
The Group and Company Annual Financial Statements are prepared on the going-concern basis.
Assets and liabilities and, income and expenses are not offset in the income statement or balance sheet unless specifically permitted by IFRS® Accounting Standards.
Going concernThe group and company generated a profit of ZAR1,348 million and ZAR1,340 million respectively for the year ended September 2025 (2024: ZAR2,675 million). The directors have reviewed the group's and company's financial position, existing borrowing facilities and cash on hand, and are satisfied that the group and company will continue as a going concern for the foreseeable future.
-
Material accounting policies
The following principal accounting policies have been consistently applied in dealing with items that are considered material in relation to the Group and Company Annual Financial Statements. Adoption of new accounting standards and changes to accounting standards are dealt with in section 2.4.
Changes in accounting estimates are recognised prospectively in profit or loss, except to the extent that they give rise to changes in the carrying amount of recognised assets and liabilities where the change in estimate is recognised immediately.
-
Judgement assumptions and estimation uncertainties
The group and company have made judgement assumptions and estimation uncertainties in the following areas:
Impairment assessments of assets other than goodwill and financial instruments
Methods of depreciation, useful lives and residual values for items of property, plant and equipment
Valuation of plantation assets at fair value less costs to sell
Post-employment benefits valuations
The elections are explained further in each specific policy in sections 2.2 and 2.3.
2. Material accounting policies continued -
Summary of material accounting policies
Foreign currencies
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Subsequent to initial recognition, monetary assets and liabilities denominated in foreign currencies are translated at the earlier of reporting or settlement date and the resulting foreign currency exchange gains or losses are recognised in profit or loss for the period.
Group accounting
Subsidiaries
An entity is consolidated when the group can demonstrate power over the investee, is exposed or has rights to variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee. The financial results of subsidiaries are consolidated into the group's results from acquisition date until disposal date.
Intra-group balances and transactions and, profits or losses arising from intra-group transactions are eliminated in the preparation of the Group and Company Annual Financial Statements.
Equity accounted investees
The financial results of associates and joint ventures are incorporated in the group's and company's results using the equity method of accounting from acquisition date until disposal date. Under the equity method, associates and joint ventures are carried at cost and adjusted for the post-acquisition changes in the group's share of the associates' and joint ventures' net assets. The share of the associates' or joint ventures' profit after tax is determined from their latest financial statements or, if their year-ends are different to those of the group, from their unaudited management accounts that correspond to the group's financial year-end.
Where there are indicators of impairment, the entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount (higher of value-in-use and fair value less costs
to sell) with its carrying amount. Any impairment loss recognised, which the group records in other operating expenses in profit or loss, is deducted from the carrying amount of the investment. Any reversal of an impairment loss increases the carrying amount of the investment to the extent recoverable, but not higher than the historical amount.
Financial instruments
Initial recognition
Financial instruments are recognised on the balance sheet when the group becomes a party to the contractual provisions of a financial instrument.
Initial measurement
A financial asset (unless it is a trade receivable without a significant financing component) or a financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
Classification and subsequent measurement
-
Judgement assumptions and estimation uncertainties
Financial assets
On initial recognition, a financial asset is classified and measured at: amortised cost, fair value through other comprehensive income (FVOCI) - debt investment, FVOCI - equity instrument or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as a FVTPL:
It is held within a business model whose objective is to hold assets to collect contractual cash flows
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as a FVTPL:
It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ANNUAL FINANCIAL STATEMENTS
2. Material accounting policies continued 2.2 Summary of material accounting policies continued2.2.3 Financial instruments continued
(iii) Classification and subsequent measurement continued
Financial assets continued
On initial recognition of an equity investment that is not held-for-trading, the group and company may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing
so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets - Business model assessment
The group and company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided
to management. The information considered includes:
The stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets
How the performance of the portfolio is evaluated and reported to the group's management
The risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed
How managers of the business are compensated - eg whether compensation is based on the fair value of the assets managed or the contractual cash flows collected
The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
The group and company has concluded that it holds its financial assets to collect the contractual cash flows.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the group's continuing recognition of the assets. Financial assets that are held-for-trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (eg liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the group considers:
Contingent events that would change the amount or timing of cash flows
Terms that may adjust the contractual coupon rate, including variable-rate features
Prepayment and extension features
Terms that limit the group's claim to cash flows from specified assets (eg non-recourse features).
A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.
-
Material accounting policies continued
-
Summary of material accounting policies continued
Financial instruments continued
Classification and subsequent measurement continued Financial assets - Subsequent measurement and gains and losses Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI
-
Summary of material accounting policies continued
These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method.
Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Derecognition
The group derecognises a financial asset when the rights to receive cash flows from the financial asset have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership of the financial asset.
A financial liability is derecognised when and only when the liability is extinguished, ie when the obligation specified
in the contract is discharged, cancelled or has expired. The group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. The difference in the respective carrying amounts is recognised in profit or loss for the period.
Impairment of financial assets
The group measures loss allowances at an amount equal to lifetime expected credit losses using a simplified approach. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the group's historical experience and informed credit assessment and including forward-looking information. Forward looking information incorporates actual and expected significant changes in the political, regulatory and technological environment of the debtor and its business activities.
Impairment losses are calculated taking into account the life time expected credit losses of trade and other receivables. The groups trade and other receivables are managed on a collective basis irrespective of the nature of its customers. The group does not have a history of significant trade receivables write-offs as the contractual terms entered with the customers help ensure that these balances are recoverable.
The group establishes an allowance for impairment that represents its estimate of credit losses in respect of trade and other receivables. The main component of this allowance is a specific loss component that relates to individual significant exposures and a collective loss component in respect of losses that may be incurred but have not yet been identified. The collective loss allowances are determined based on historical write-offs data over the last five years. This takes into account past circumstances which resulted in trade and other receivable balances that were not recovered. Individual significant exposures refer to customers that are under business rescue, in liquidation or unable to pay their obligations. These customers are credit impaired irrespective of their aging. This takes into account forward looking circumstances. Five years is considered to be a reasonable timeframe on which to calculate a loss rate given the nature of the group's operations and the contractual terms agreed to with its customers.
ANNUAL FINANCIAL STATEMENTS
-
Material accounting policies continued
-
Summary of material accounting policies continued
Financial instruments continued
-
Summary of material accounting policies continued
-
Material accounting policies continued
Finance income and finance costs
Finance income and finance costs are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or financial liability to that asset's or liability's net carrying amount on initial recognition.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost includes all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Cost is determined on the following basis:
Classification Cost formula
Finished goods First in first out (FIFO)
Raw materials, work in progress and consumable stores Weighted average
Cost of items that are not interchangeable Specific identification inventory valuation basis
Net realisable value is the estimated selling price in the ordinary course of business less necessary costs to make the sale.
Leases
At inception of a contract, the group and company assesses whether a contract is, or contains a lease. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. To assess whether a contract conveys the right to control the use of the identified asset the group assesses whether:
The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should
be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified
The group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use
The group has the right to direct the use of the asset. The group has the right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the group has the right to direct the use of the asset if either:
the group has the right to operate the asset; or
the group designed the asset in a way that predetermines how and for what purpose it will be used.
As a lessee
The group's leasing activities mainly relate to the lease of premises, plant and equipment. Information about leases to which the group is a lessee is presented in note 7.
The group applies the practical expedient not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component. This expedient is applied by class of underlying assets. Current identified class to which the practical expedient is applied
is building leases. For all other leases, the non-lease components are separated.
Contracts sometimes include amounts payable by the lessee for activities and costs that do not transfer a good
or service to the lessee. For example, a lessor may include in the total amount payable a charge for administrative tasks or other costs it incurs associated with the lease, that do not transfer a good or service to the lessee. Such amounts payable do not give rise to a separate component of the contract, but are considered to be part of the total consideration that is allocated to the separately identified components of the contract: eg property taxes, insurance and admin costs.
-
Material accounting policies continued
-
Summary of material accounting policies continued
Leases continued
As a lessee continued
The group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any prepaid and accrued lease payments plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The right-of-use asset is periodically reduced by impairment losses if any, and adjusted for certain remeasurements of the lease liability. The lease liability
is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group's incremental borrowing rate. Generally the group uses its incremental borrowing rate at the date of initial application as determined by Group Treasury which is based
on a portfolio of leases with similar lease terms. The lease liability is measured at amortised cost using the effective interest rate method. It is remeasured when there is a change in the future lease payments arising from a change in an index or rate, or if there is a change in the group's assessment of the amount expected to be payable under a residual value guarantee if the group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying amount of the right-of-use asset, or it is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The lease term is the non-cancellable period of a lease, together with both:
Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option
Periods after an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
Lease payments included in the measurement of the lease liability comprise the following:
Fixed payments, including in substance fixed payments
Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date
Amounts expected to be payable under a residual value guarantee
The exercise price under a purchase option that the group is reasonably certain to exercise, lease payments in an optional renewal period if the group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the group is reasonably certain not to terminate early.
Short-term leases and leases of low value assets
The group has elected not to recognise right-of-use assets and lease liabilities of low value assets and short-term leases. The group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Low value leases are deemed to be below that of ZAR80 thousand and mainly relate
to IT equipment.
-
Revenue
Revenue is recognised when a customer obtains control of the goods. Revenue is recognised at a point in time, with no deferral of revenue. Control of goods passes to the customer when the performance obligations are satisfied.
Sappi primarily has one performance obligation, which is the delivery of the goods to the customer. Control
is dependant on shipping inco terms where goods are sold to customers overseas. The transaction price is the expected consideration to be received, to the extent that it is highly probable that there will not be a significant reversal of revenue in future, after deducting discounts, volume rebates, value added tax and other sales taxes. When the period of time between delivery of goods and subsequent payment by the customer is less than one year, no adjustment for
a financing component is made. Depending on the shipping terms used, shipping and handlings activities may
be a separate performance obligation where these activities are performed after revenue is recognised from the sale of the goods. In these instances, revenue is recognised from the shipping and handling activities when these activities are fulfilled, which is at the same time revenue is recognised from the sale of goods. Sappi acts as an agent in the fulfilment of these shipping and handling performance obligations, and as such recognises revenue from this performance obligation net of the costs incurred to fulfil it. When shipping and handling activities are not a separate performance obligation, these costs are included in cost of sales.
Dividend income
Dividend income is recognised when the shareholders' right to receive payment is established.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits and call accounts with a maturity of three months or less and other short-term highly liquid investments that are readily convertible into cash. Cash and cash equivalents are measured at amortised cost.
ANNUAL FINANCIAL STATEMENTS
2. Material accounting policies continued 2.2 Summary of material accounting policies continuedShare-based payments
Equity-settled share-based payment transactions
The services or goods received in an equity-settled share-based payment transaction with counterparties are measured at the fair value of the equity instruments at grant date.
If the equity instruments granted vest immediately and the beneficiary is not required to complete a specified period of service before becoming unconditionally entitled to those instruments, the benefit received is recognised in profit or loss for the period in full on grant date with a corresponding increase in equity.
Where the equity instruments do not vest until the beneficiary has completed a specified period of service, it is assumed that the benefit received by the group as consideration for those equity instruments will be received over the vesting period. These benefits are accounted for in profit or loss as they are received with a corresponding increase
in equity. Share-based payment expenses are adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met.
Measurement of fair value of equity instruments granted
The equity instruments granted by the group are measured at fair value at the measurement date using either the modified binomial option pricing or the Monte-Carlo simulation model. The valuation technique is consistent with generally acceptable valuation methodologies for pricing financial instruments and incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price of the equity instruments.
Note 26 provides further detail on key estimates, assumptions and other information on share-based payments applicable as at the end of the year.
Derivatives and hedge accounting
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss. For the purpose of hedge accounting, hedges are classified as follows:
Fair value hedges
Fair value hedges are designated when hedging the exposure to changes in the fair value of a recognised asset
or liability or an unrecognised firm commitment. Changes in the fair value of derivatives that are designated as hedging instruments are recognised in profit or loss immediately together with any changes in the fair value of the hedged item that are attributable to the hedged risk. The change in the fair value of the hedging instrument is recognised in the same line of profit or loss as the change in the hedged item.
Cash flow hedges
Cash flow hedges are designated when hedging the exposure to variability in cash flows that are either attributable
to a particular risk associated with a recognised asset or liability, a highly probable forecast transaction, or the foreign currency risk in an unrecognised firm commitment. In relation to cash flow hedges which meet the conditions for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge
is recognised in OCI and the ineffective portion is recognised in profit or loss.
The gains or losses recognised in OCI are transferred to profit or loss in the same period in which the hedged transaction affects profit or loss.
If the forecast transaction results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is transferred from OCI to the underlying asset or liability on the transaction date.
Discontinuance of hedge accounting
Hedge accounting is discontinued on a prospective basis when the hedge no longer meets the hedge accounting criteria (including when it becomes ineffective), when the hedge instrument is sold, terminated or exercised and when, for cash flow hedges, the designation is revoked and the forecast transaction is no longer expected to occur. Where
a forecast transaction is no longer expected to occur, the cumulative gain or loss deferred in OCI is transferred to profit or loss.
The financial instruments that are used in hedging transactions are assessed both at inception and quarterly thereafter to ensure they are effective in offsetting changes in either the fair value or cash flows of the related underlying exposures. Hedge ineffectiveness is recognised immediately in profit or loss.
Refer to notes 27 and 28 for details of the fair value hedging relationships as well as the impact of the hedge on the pre-tax profit or loss for the period.
2. Material accounting policies continued 2.2 Summary of material accounting policies continued
Provisions
A provision is recognised when the group has a legal or constructive obligation arising from a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and which can be reliably measured. Where the effect of discounting (time value) is material, provisions are discounted and the discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
The establishment and review of the provisions requires judgement by management as to whether or not there is a probable obligation and as to whether or not a reliable estimate of the amount of the obligation can be made.
Restructuring provisions are recognised when the group has developed a detailed formal plan for restructuring and has raised a valid expectation that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it.
The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring and is recorded in other operating expenses in profit or loss.
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Share capital
Share capital comprises ordinary shares and are classified as equity. Issued ordinary shares are measured at the fair value of the proceeds received less any directly attributable issue costs. An amount equal to the par value of the shares issued is presented as share capital. The amount by which the fair value exceeds par value is presented as share premium. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.
Insurance recoveries
Sappi Southern Africa is insured through the Sappi Group. Insurance proceeds may compensate Sappi Southern Africa for asset damage or business interruption. The ability to claim these proceeds will depend on the specific terms of the insurance contract. Sappi Southern Africa recognises the compensation through insurance proceeds as a receivable when it has an unconditional right to receive the compensation.
A company would have an unconditional contractual right to receive compensation if:
It has an insurance contract under which it can make a claim for compensation
The loss event that creates a right for the company to assert a claim at the reporting date has occurred and the claim is not disputed by the insurer.
The compensation receivable would be measured based on the amount and timing of the expected cash flows discounted at the rate that reflects the credit risk of the insurer.
Impairment of assets other than goodwill and financial instruments
-
Summary of material accounting policies continued
The group assesses all assets other than goodwill at each balance sheet date for indications of impairment or whether an impairment reversal is required. Given the macroeconomic uncertainty, indicators of impairment were identified and, therefore, impairment tests were performed on relevant cash generating units (CGU) to determine the CGUs recoverable amount. The recoverable amount is measured at the higher of fair value less cost of disposal and
value-in-use. An impairment loss is recognised to the extent that the carrying amount of the CGU exceeds its recoverable amount.
In assessing assets for impairment, the group estimates the asset's value-in-use based on its useful life, future cash flows based on management's five-year plan, including appropriate bases for future product pricing in the appropriate markets, raw material and energy costs, volumes of product sold, the planned use of machinery or equipment or closing of facilities and the long-term growth rate. The pre-tax discount rate (impairment discount factor) is another sensitive input to the calculation. The pre-tax real discount rates used for impairment testing was 12.64% (2024: 12.38%). These assumptions reflect past experience and are consistent with external sources of information. For an asset whose cash flows are largely dependent on those of other assets, the recoverable amount is determined for the CGU to which the asset belongs. Additionally, where required, assets are also assessed against their fair value less costs of disposal. The group assessed its CGUs for impairment and for its impacted newsprint CGU at Ngodwana Mill, an impairment charge of R100 million was taken which fully impaired the newsprint CGU.
ANNUAL FINANCIAL STATEMENTS
-
Material accounting policies continued
-
Summary of material accounting policies continued
Impairment of assets other than goodwill and financial instruments continued
In cases where a revision to CGUs are required, the following key considerations are taken into account: (1) revenue separation, (2) assets separation and (3) management's monitoring and decision-making in respect of assets and operations. There were no changes in the identification of CGUs in the current year.
Where impairment exists, the losses are recognised in other operating expenses in profit or loss for the period.
A previously recognised impairment loss will be reversed through profit or loss if the recoverable amount increases as a result of a change in the estimates that were previously used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised in prior periods.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes, where specifically required in terms of legislative requirements or where a constructive obligation exists, the estimated cost of dismantling and removing the assets, professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the group's accounting policy. In addition, spare parts whose expected useful lives are anticipated to be more than 12 months are treated as property, plant and equipment.
Expenditure incurred to replace a component of property, plant and equipment is capitalised to the cost of related property, plant and equipment and the part replaced is derecognised.
Depreciation, which commences when the assets are ready for their intended use, is recognised in profit or loss over their estimated useful lives to estimated residual values using a method that reflects the pattern in which the asset's future economic benefits are expected to be consumed by the entity. Land is not depreciated.
Management judgement and assumptions are necessary in estimating the methods of depreciation, useful lives and residual values. The residual value for the majority of items of property, plant and equipment has been deemed to be zero by management due to the underlying nature of the property, plant and equipment.
The following methods and rates are used to depreciate property, plant and equipment to estimated residual values: Buildings Straight-line 10 to 40 years
Plant and equipment Straight-line Three to 30 years
The group reassesses the estimated useful lives and residual values of components of property, plant and equipment on an ongoing basis. As a result, depending on economic and other circumstances, a component of property, plant and equipment could exceed the estimated useful life as indicated in the categories above.
Taxation
Taxation on the profit or loss for the year comprises current and deferred taxation. Taxation is recognised in profit
or loss except to the extent that it relates to items recognised directly in OCI, in which case it is also recognised in OCI.
Current taxation
Current taxation is the expected taxation payable on the taxable income, which is based on the results for the period after taking into account necessary adjustments, using taxation rates enacted or substantively enacted at the balance sheet date, and any adjustment to taxation payable in respect of previous years.
The group estimates its income taxes in the jurisdiction in which it operates. This process involves estimating its current tax liability together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.
The group entities are subject to examination by tax authorities. The outcome of tax audits cannot be predicted with certainty. If any matters addressed in these tax audits are resolved in a manner not consistent with management's expectations or tax positions taken in previously filed tax returns, then the provision for income tax could be required to be adjusted in the period that such resolution occurs.
2. Material accounting policies continued 2.2 Summary of material accounting policies continuedTaxation continued
Deferred taxation
-
Summary of material accounting policies continued
Deferred taxation is provided using the balance sheet liability method, based on temporary differences. The amount of deferred taxation provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using taxation rates enacted or substantively enacted at the balance sheet date. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.
Before recognising a deferred tax asset, the group assesses the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent recovery is not probable, a deferred tax asset is not recognised. In recognising deferred tax assets, the group considers profit forecasts, including the effect of exchange rate fluctuations on sales, external market conditions and restructuring plans.
Plantations
Plantations are stated at fair value less costs to sell with all changes in fair value being recognised in profit or loss. The fair value of forestry assets is a Level 3 measure in terms of the fair value measurement hierarchy. The group uses
a combination of both the income approach and the market approach in determining fair value as it believes that these methods yield the most appropriate valuations. The income approach which uses discounted cash flows is applied
to immature timber due to the extended time period required for the timber to reach maturity whereas the market approach which is based on the selling price of similar assets is applied to mature timber due to its shorter time period to maturity.
The key inputs are the selling prices, costs to sell, discount rates, volume and growth estimations. The impact of these inputs are disclosed in note 8.
Selling prices and costs to sell
The net selling price is defined as the selling price less the costs to sell which include the costs of transport, harvesting, loading and overheads. The selling prices are based on external third-party transactions and are benchmarked against international pricing of recent market transactions and which are influenced by species, maturity profile and location
of timber. Forecast consumer price indexes are also considered for both timber prices and costs to sell.
A current net selling price is used for mature timber that is expected to be felled within 12 months from the end of the reporting period as such timber is expected to be used in the short term whereas a market trend related fair value price is used for immature timber and mature timber that is expected to be felled 12 months after the reporting date.
Discount rate
The discount rate used is the real pre-tax discount rate. This is applied to pre-tax cash flows.
Volume and growth estimations
The group focuses on good husbandry techniques which include ensuring that the rotation of plantations is met with adequate planting activities for future harvesting. The age threshold used for quantifying immature timber is dependent on the rotation period of the specific timber genus which varies between five and 18 years. In the Southern African region, softwood less than eight years and hardwood less than five years are classified as immature timber.
Trees are generally felled at the optimum age when ready for intended use. At the time the tree is felled, it is taken out of plantations and accounted for under inventory and reported as a depletion cost (fellings).
Depletion costs includes harvesting (fellings) and damages. The fair value of timber felled is determined using the current net selling price while damages are calculated using the market trend related fair value price. Damages are written off against standing timber to record loss or damage caused by fire, storms, disease and stunted growth. Harvesting (fellings) depletion costs are accounted for as actual tonnes multiplied by the current net selling price. Damages depletion costs are accounted for as actual damaged tonnes multiplied by the market trend related fair value price. Damaged tonnes are calculated using the projected growth to rotation age and are extrapolated to current age on a straight-line basis.
The group has projected growth estimation over a period of five to 18 years per rotation. In deriving this estimate, the group established a long-term sample plot network which is representative of the species and sites on which trees are grown and the measured data from these permanent sample plots were used as input into the group's growth estimation. Periodic adjustments are made to existing models for new genetic material. Volume and growth assumptions are used in determining standing tons at valuation date.
The associated costs for managing plantations are recognised as silviculture costs in cost of sales (see note 3.1). Silviculture costs are presented as operating activities in the statement of cash flows.
ANNUAL FINANCIAL STATEMENTS
-
Material accounting policies continued
- Summary of material accounting policies continued
-
Material accounting policies continued
Post-employment benefits
Defined benefit and defined contribution plans have been established for eligible employees of the group, with the assets held in separate trustee-administered funds.
The present value of the defined benefit obligations and related current service costs are calculated annually by independent actuaries using the projected unit credit method.
These actuarial models use an attribution approach that generally spread individual events over the service lives of the employees in the plan.
Estimates and assumptions used in the actuarial models include the discount rate, return on assets, salary increases, healthcare cost trends, longevity and service lives of employees.
The group's policy is to recognise actuarial gains or losses, which can arise from differences between expected and actual outcomes or changes in actuarial assumptions, in OCI. Any increase in the present value of plan liabilities expected to arise due to current service costs is charged to profit or loss.
Gains or losses on the curtailment or settlement of a defined benefit plan are recognised in profit or loss when the group is demonstrably committed to the curtailment or settlement. Past service costs or credits are recognised immediately.
Net interest for the period is determined by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period, adjusted for any changes as a result of contributions and benefit payments, to the net defined benefit liability and recorded in finance costs in profit or loss.
The net liability recognised in the balance sheet represents the present value of the defined benefit obligation reduced by the fair value of the plan assets. Where the calculation results in a benefit to the group, the recognised asset is limited to the present value of any future refunds from the plan or reductions in future contributions to the plan.
Refer to note 24 and 25 for the key estimates, assumptions and other information on post-employment benefits.
Dividends distributed to shareholders
Dividends are accounted for in the period that they have been declared by the company and are directly charged to equity.
-
Adoption of accounting standards in the current year
The following standards, interpretations, amendments and improvements to standards where effective and adopted in the current fiscal year, all of which had no material impact on the group's reported results or financial position:
IAS 1 Classification of Liabilities as Current or Non-Current
IFRS 16 Lease Liability in a Sale and Leaseback
IAS 1 Non-current Liabilities with Covenants
IAS 7 and IFRS 7 Supplier Finance Arrangements.
-
Accounting standards, interpretations and amendments to existing standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published but which are not yet effective and which have not yet been adopted by the group. The impact of these standards is being evaluated
by the group, and standards and amendments effective in the next financial year are not expected to have a material impact on the group's results or financial position. The effective dates denotes the fiscal year-end in which it will
be adopted.
IAS 21 Lack of Exchangeability - September 2026
Annual Improvements to IFRS® Accounting Standards - Volume 11 - September 2027
IFRS 7 and IFRS 9 amendments regarding the classification and measurement of financial instruments - September 2027
IFRS 18 Presentation and Disclosures in Financial Statements - September 2028
IFRS 19 Subsidiaries without Public Accountability: Disclosures - September 2028.
-
Adoption of accounting standards in the current year
- Operating profit
-
Cost of sales and selling, general and admin
Operating profit has been arrived at after charging (crediting):
Group
Company
2025
2024
2024
2025
ZAR million
Cost of sales
Selling, general
and administrative expenses
Cost of sales
Selling, general
and administrative expenses
Cost of sales
Selling, general
and administrative expenses
Cost of sales
Selling, general
and administrative expenses
Raw materials,
energy and other
14,839
-
14,416
-
14,839
-
14,416
-
direct input costs
Fair value
adjustment
on plantations
(1,266)
-
(2,008)
-
(1,266)
-
(2,008)
-
Employment costs
2,765
509
2,703
544
2,765
509
2,703
544
Depreciation
1,634
98
1,564
91
1,634
98
1,564
91
Delivery charges
1,429
-
1,443
-
1,429
-
1,443
-
Maintenance
1,412
-
1,281
-
1,412
-
1,281
-
Other overheads
1,607
-
1,609
-
1,607
-
1,610
-
Marketing and selling
expenses
-
24
-
26
-
24
-
26
Administrative and
general expenses
-
510
1
464
-
520
-
464
22,420
1,141
21,009
1,125
22,420
1,151
21,009
1,125
Group
Company
ZAR million
2025
2024
2025
2024
Fair value gains on plantations (note 8)
Changes in volumes
1,266
(1,674)
1,348
(1,991)
1,266
(1,674)
1,348
(1,991)
Plantation price fair value adjustment
(408)
408
(643)
(17)
(408)
408
(643)
(17)
-
(660)
-
(660)
Silviculture costs (included within cost of sales)
1,357
1,322
1,357
1,322
Cost on derecognition of trade receivables
87
120
87
120
Audit and related services
18
16
18
16
Research and development costs
180
182
180
182
Fellings
Growth
- Operating profit continued
-
Employee costs
Group
Company
ANNUAL FINANCIAL STATEMENTS
ZAR million
2025
2024
2025
2024
Employment costs consist of:
3,274
3,247
3,274
3,247
Wages and salaries
2,319
2,389
2,319
2,389
Defined contribution plan expense (refer to note 24)
235
222
235
222
Defined benefit pension plan expense
(refer to note 24)
2
9
2
9
Other defined benefit subsidy expense
(refer to note 25)
5
5
5
5
Other company contributions
214
187
214
187
Overtime
207
191
207
191
Share-based payment expense
27
24
27
24
Other
265
220
265
220
Other expenses (income) include
Profit on disposal of assets
(21)
(12)
(13)
(12)
Loss on disposal of plantations
8
-
8
-
Insurance recoveries
(162)
(351)
(162)
(351)
Impairment of property, plant and equipment
100
11
100
11
Impairment (reversal) of equity-accounted
investees
6
(4)
6
(4)
Loss on written off assets(1)
158
39
158
39
(1) The ZAR158 million in 2025 includes the scrapping of the Furfural plant amounting to ZAR137 million.
-
Net finance costs
Group
Company
ZAR million
2025
2024
2025
2024
Gross interest and other finance costs on liabilities carried at amortised cost
312
355
312
355
- Interest on bank overdrafts
4
6
4
6
- Interest on redeemable bonds and other loans
250
291
250
291
- Interest cost on lease obligations
58
58
58
58
Net interest on employee benefit liabilities
6
19
6
19
Finance income received on assets carried
at amortised cost
(184)
(186)
(184)
(186)
- Interest income on bank accounts
(131)
(145)
(131)
(145)
- Interest income on other loans and investments
(53)
(41)
(53)
(41)
Net foreign exchange loss (gain)
26
(13)
26
(13)
160
175
160
175
-
Taxation charge
Group
Company
ZAR million
2025
2024
2025
2024
Current taxation
Current year
524
547
522
547
Prior year overprovision
(5)
(47)
(5)
(47)
Deferred taxation
Current year
64
339
64
339
Prior year underprovision (overprovision)
4
(13)
4
(13)
587
826
585
826
In addition to income taxation charges to profit and loss, a deferred taxation relief of ZARnil million (2024: ZAR7 million charge) has been recognised directly in other comprehensive income
(refer note 9).
Reconciliation of the tax rate
%
%
%
%
Statutory tax rate
27.0
27.0
27.0
27.0
Non-deductible expenses (non-taxable income)(1)
3.6
(0.1)
3.6
(0.1)
Special tax allowances
-
(1.7)
-
(1.7)
Prior year adjustments
-
(1.7)
-
(1.7)
Effective taxation rate for the year
30.6
23.5
30.6
23.5
(1) This includes capital investment write-offs.
- Property, plant and equipment
Group
Company
ZAR million | 2025 | 2024 | 2025 | 2024 |
Land and buildings(1) | ||||
At cost | 4,473 | 4,242 | 4,502 | 4,271 |
Accumulated depreciation and impairments | (1,760) | (1,620) | (1,783) | (1,643) |
2,713 | 2,622 | 2,719 | 2,628 | |
Plant and equipment(2) | ||||
At cost | 31,434 | 30,195 | 31,434 | 30,195 |
Accumulated depreciation and impairments | (15,022) | (13,984) | (15,022) | (13,985) |
16,412 | 16,211 | 16,412 | 16,210 | |
Assets under construction At cost | 794 | 1,209 | 794 | 1,210 |
Aggregate cost | 36,701 | 35,646 | 36,730 | 35,676 |
Aggregate accumulated depreciation and | ||||
impairments | (16,782) | (15,604) | (16,805) | (15,628) |
Aggregate book value | 19,919 | 20,042 | 19,925 | 20,048 |
(1) Details of land and buildings are available at the registered offices of the respective companies who own the assets.
(2) Plant and equipment includes vehicles and furniture, the book value of which does not warrant disclosure as a separate class of assets.
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Disclaimer
Sappi Limited published this content on January 26, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on January 26, 2026 at 13:21 UTC.
