Brunswick, South Africa, 25 July 2009 -- Sappi is issuing this trading update in connection with the capital markets transaction that it announced today and the ongoing syndication of a new secured revolving credit facility and a new secured OeKB term loan facility.

Market conditions remained weak in the quarter in all of Sappi's major markets. Sales volumes for the group were similar to the prior quarter. Prices realized were under pressure in most regions.

For the quarter ended June 2009, Sappi expects to report improved operating results, excluding special items, compared to the quarter ended March 2009 for its European business, which it expects to return to profitability and for its North American business, as a result of synergy achievements in Europe, and cost and input price reductions. In addition the North American business expects to report the benefit of alternative fuel credits in the range of USD 30 million – USD 40 million.

Sappi's southern African business was affected by the strengthening of the rand relative to the U.S. dollar, weak domestic demand, and low pulp prices, which the company expects will result in a loss before special items for the quarter for the region.

For the group, operating loss excluding special items for the quarter is expected to be largely in line with the quarter ended March 2009.

The group continues to prioritise cash generation and expects to report a positive net cash generation for the quarter.

Financial statements for the quarter ended June 2009 are not yet finalized and is subject to change.

Demand and prices for chemical cellulose have strengthened and the Saiccor mill has a strong order book. The mill is progressing well with the ramp up of production and expects to improve sales volumes in the next quarter. Global markets for coated paper remain depressed; however, Sappi expects stronger seasonal demand during the next quarter for web products and stable demand for sheet products. The extent of inventory reduction in Sappi's customer supply chain appears to be reducing and it therefore expects an improvement in coated paper demand on paper producers. Sappi expects alternative fuel credits of approximately USD 40 million in the next quarter.

The company expects to generate positive net cash flow in the quarter ended September 2009.