Roadbook - Sappi Q1 FY18 Roadbook.pdf · Forward-looking statements and Regulation G. 2...

February 2018

Sappi Limited

Roadbook delivering on

strategy

2018

Vision2020

intentionalevolution

next phase

growth

1

Forward-looking statements and Regulation G

2

Forward-looking statementsCertain statements in this release that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited to statements that are predictions ofor indicate future earnings, savings, synergies, events, trends, plans or objectives. The words “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “assume”, “positioned”, “will”, “may”, “should”,“risk” and other similar expressions, which are predictions of or indicate future events and future trends and which do not relate to historical matters, identify forward-looking statements. In addition, thisdocument includes forward-looking statements relating to our potential exposure to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity price risk. Youshould not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actualresults, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and from past results,performance or achievements). Certain factors that may cause such differences include but are not limited to:

The highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production, input costs including rawmaterial, energy and employee costs, and pricing)

The impact on our business of adverse changes in global economic conditions Unanticipated production disruptions (including as a result of planned or unexpected power outages) Changes in environmental, tax and other laws and regulations Adverse changes in the markets for our products The emergence of new technologies and changes in consumer trends including increased preferences for digital media Consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital when needed Adverse changes in the political situation and economy in the countries in which we operate or the effect of governmental efforts to address present or future economic or social problems The impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including related financing), any delays, unexpected costs or other problems experienced in

connection with dispositions or with integrating acquisitions or implementing restructurings or other strategic initiatives, and achieving expected savings and synergies, and Currency fluctuations.

We undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.

Regulation G disclosureCertain non-GAAP financial information is contained in this presentation that management believe may be useful in comparing the company’s operating results from period to period. Reconciliation's ofcertain of the non-GAAP measures to the corresponding GAAP measures can be found in the quarterly results booklet for the relevant period. These booklets are available on our website:https://www.sappi.com/quarterly-reports.

https://www.sappi.com/quarterly-reports

3

Agenda

Overviewo Productso Strategyo Results

Divisionso Sappi Europeo Sappi North Americao Sappi Southern Africa

Sustainability Conclusions

4

Sappi Limited

#2 Global producer of coated woodfree paper (47% of sales*)

Forecast: Capacity down 2%, demand down 2% through 2022**

Overview

#1 Global producer of dissolving wood pulp (20% of sales*)

Forecast: Demand up 7% and capacity up 7% through 2021***

* Data reflects FY’17 sales ** RISI WGPF Jan 2018 *** Hawkins Wright Sept 2017, excludes CLP, other non-wood pulps

5

Sappi at a glanceSappi Limited

2017 sales = US$5.2 billion with over 12,000 employees

Sappi Europe48% 2017 sales

Printing papers

Packaging and speciality papers

Sappi North America26% 2017 sales

Printing papers

Dissolving wood pulp

Packaging and speciality papers

Sappi Southern Africa26% 2017 sales

Printing and packaging papers


Forests

Sappi Trading

6

Geographic diversificationOur global presence allows us take advantage of opportunities where markets are strong

North America1 Paper mill1 Speciality paper mill1 Paper and specialised

cellulose mill6 sales offices

Europe6 Paper mills1 Speciality paper mill18 Sales offices

Southern Africa2 Paper mills1 Specialised cellulose mill1 Paper and specialised cellulose mill1 Sawmill6 Sales offices492,000ha forests

7

Sales analysis

* Data reflects FY 2017

48%

26%

26%

Sales by source* (US$)

Europe North America

Southern Africa Asia and other 41%

23%

10%

26%

Sales by destination* (US$)

56%

20%

11%

7%5%

1%

Coated paper


Speciality paper

Commodity paper

Uncoated paper

Other

Sales by product*

8

Sales analysis

* Data reflects results from Q3 FY17** RISI (August 2017)

59%18%

11%

6%5%

1%Sales by product* (US$)

Coated paper Dissolving wood pulpSpeciality paper Commodity paperUncoated paper Other

Q1 FY2018

Coated paper#2 Global producer of coated paperEBITDA margins ~8%Forecast** demand down 2%paForecast** capacity down 2%pa

Sales analysis

* Data reflects results from Q3 FY17** Hawkins Wright (March 2017)

59%18%

11%

6%5%

1%Sales by product* (US$)

Coated paper Dissolving wood pulpSpeciality paper Commodity paperUncoated paper Other

Q1 FY2018

Commodity paperEBITDA margins ~14%Demand up 3%

Speciality paperEBITDA margins ~14%Demand up 1%-5%

Dissolving wood pulp#1 Global producer Demand forecast** up 5%paEBITDA margins ~35% Capacity forecast** up 5%pa

10

Major sensitivities

∆ EU NA SA Translation Group€m US$m ZARm US$m US$m

Net selling prices 1% 24 14 187 - 55DWP prices US$10 - 2 133 - 12Variable costs 1% 13 7 91 - 29Sales volume 1% 8 5 84 - 21Fixed costs 1% 6 4 47 - 14Paper pulp price US$10 6 2 11 - 9ZAR/US$ (weaker) 10c - - 82 -2 3EUR/US$ (weaker) 10c - -4 - -24 -28

Some of the more important factors which impact the group’s EBITDA excluding special items, based on current anticipated revenue and cost levels, are summarised below.

11

Agenda




12

Graphic and printing papers grade structure

Coated fine paper (CWF)

Uncoated woodfree (UWF)

Coated mechanical (CGW/LWC)

Supercalendered (SC-A)

Supercalendered (SC-B)

Machine finished specialities (MFS)

Improved newsprint

Newsprint

Fibr

e qu

ality

100% Chemical pulp fibre furnish

Increasing mechanical/recovered fibre content

Image quality

13

Global coated woodfree demand

* Source: RISI Aug 2017

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

North America Europe Far East Latin America Africa/ME Oceania

Forecast*

14

Dissolving wood pulp (DWP)o DWP is the most abundant natural organic polymer on earth and is found in all plant materialso The plant material (wood from certified forests or plantations) is processed and purified by

applying specialised chemistry to extract the cellulose polymers from the wood o The purified natural wood cellulose fibres are further dissolved by our customers and regenerated

or reformed for a host of applications

Cellulose45%

Hemi-cellulose30%

Lignin23%

Resins1% Inorganics

1%

15

Dissolving wood pulp End-uses

Dissolving wood pulp market

16

Viscose-grade DWP is used almost exclusively in textile applications

Source: Hawkins Wright; Fibre Year 2017; RISI ‘Dissolving Pulp Monitor’ (Jan 2017) and ‘Outlook for the Global Dissolving Pulp Market’.

OtherEurope Americas China

0.2

5.3

0.6

0.6

1.7

3.7

1.9

7.8

Market size 2016 Mtpa

CAGR 2010-16%

Viscose

Cellulose ethers and MCC

Cellulose acetate tow

Nitro-cellulose and other

Products (examples)

6.6 ~6-7Total

Rayon Grade

High-alpha/Speciality

DWP gradeDemand geography

Applications (examples)• Textiles (viscose)• Non-wovens• Cellophane• Sausage skins

• Construction• Food additives• Medicine fillers• Cosmetics

• Cigarette filters• Paints and coatings• Films• Plastics

• Explosives• Inks• Lacquers• Nail polish

17

CompetitionTop 10 producers by grade, 2017

Source: Hawkins Wright, March 2017

18

Why dissolving wood pulp?Capitalising on MEGA-TRENDS

o Global population growth from a current 6.9bn to 8.3bn by 2030

o Increasing need for food and clothes

o Increasing need for more comfortable clothing

o Rising urbanisation and standard of living in the greater Asian region Asian middle class population is likely to grow from

current 1.9bn to 2.7bn people by 2030 Asian consumers are likely to spend US$32 trillion/year

by 2030, accounting for 43% of total global consumption

39%

70%

94%112%

26%

49%70%

85%

0%11%

20% 27% 32%

-5% -10% -14% -18%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

2010 2020 2030 2040 2050

Textile fibres Food Population Arable land

65.8 72

.5 86.8 10

0.7 11

3.3

123.

5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2005 2010 2015 2020 2025 2030

Textile fibres consumptionMetric tons (millions)

19

There is still significant headroom to increase the level of cellulosic fibre blending in most sub-categories

Source: Expert interviews.

POLYESTER

Future Today Gap Today Future Gap Today Future Gap COTTON CELLULOSIC

Apparel

Home textile

Towels 5% 5% 0% 80% 75% -6% 15% 20% +33%

Bedding 45% 55% +22% 45% 40% -11% 1% 2% +100%

Denim 5% 5% 0 95% 95% 0% 0% 0% 0%

Shirts 35% 40% +14% 50% 40% -20% 15% 20% +33%

T-shirts 30% 50% +67% 70% 50% -29% 3% 5% 0%

Dresses 10% 10% 0% 35% 25% -29% 55% 65% +18%

Suits 35% 40% +14% 25% 20% -20% ~1% ~2% +100%

Sportswear 85% 85% 0% 0% 0% 0% 15% 15% 0%

Casual wear 45% 50% +11% 45% 35% -22% 10% 15% +50%

20

Cellulose gap theoryDissolving wood pulp share of the textiles market is expected to grow further

o Production of cotton is forecast to remain stagnant or shrink

o Growth in total fibre consumption will be covered by man-made fibres

o However, certain moisture management properties of cellulose fibres cannot be substituted by oil-based synthetic fibres, enhancing opportunity for cellulosics

Fibre properties and applications

21

Cellulosic fibre properties are superior to cotton and polyester for many textile applications

Source: IHS Global, RISI, Hawkins Wright.

Key strength Qualifies Issue

ApparelHome textilesNonwovens/Technical textiles

Overall value proposition

Applications

Function and feel

Appearance

Sustainability

1762

21

6627

7

5220

28

Cellulosic fibres Cotton Polyester

• On a pure property basis, cellulosic fibres are superior to cotton and differentiated on sustainability.

• Polyester is differentiated on strength/durability versus cotton and cellulosic fibres.

• Natural and attractive, ‘greener’ alternative to cotton

• Natural, functional and well established

• Cheap, durable and versatile

Durability

Absorbency Breathability Softness

Drape Dyeability

Brightness/Lustre

Renewable and biodegradeable

Resource efficiency

22

Textile fibre prices*

* Source: CCF group.

800

1 200

1 600

2 000

2 400

2 800

Cotton 328 Cotton "A" Index PSF 1.4 D VSF 1.2 D VSF 1.5 D

US$

/ton

Global production sites

23

Specialities and packaging

Alfeld Mill (Germany)

Flexible packaging, label, SBB board, topliner and release liner

Ehingen Mill (Germany)

Topliner – Fusion®

Somerset Mill (USA)

Label paper – LusterCote® and Flexpack paper – LusterPrint®

Tugela Mill (South Africa)

Liner – UltraTest® and Fluting – UltraFlute®

Maastricht Mill (The Netherlands)

Folding boxboard – atelier™

Cloquet Mill (USA)

Label paper – LusterCote®

Westbrook Mill (USA)

Casting and release paper – Ultracast® & different classic brands

Ngodwana Mill (South Africa)

Liner – KraftPride®

Global market sizes

24


Packaging boards48%

Printing and writing27%

Speciality papers

7%

Tissue8%

Newsprint10%

25mtpa

Specialities

• Pressure sensitive and wet adhesive applications, graphic art, outdoor applications

Label & self-adhesives

• Large format inkjet printing for home/personal textiles

Digital Imaging

• Limits oxygen, grease or water, prevents corrosion, fire

Functional/Barrier papers

• Embossing tactile patterns onto other surfaces for fashion industry, car upholstery, etc.

Casting Release papers

25


Demand for specialitiespapers is growing:o Consumer Preferenceo Innovation and

customization o Lighter weighto Recyclableo Sustainable

Packaging

• Consumer packaging, shelf-ready packaging, transport for agricultural and industrial uses

Containerboard, liners and fluting

• Luxury goods with graphic applications such as perfumes, premium beverages

Paperboard

• Food or non-food applications such as sachets, pouches and wrappers

Flexible packaging

26


Demand for paper-basedpackaging is growing:o Consumer Preferenceo Environmentally friendlyo Recyclableo Sustainable

Cham acquisition Cham Paper (2 Italian mills combined

capacity 150 k t.p.a) Complementary products to the existing Sappi

Europe portfolio Products include:

Coated one sided (for flexible packaging) food, non-food and tobacco

Industrial release (glassine paper) for the automotive and construction industries

Digital imaging (sublimation papers for digital textile printing)

28

Agenda




Maintaina healthybalancesheet

Rationalisedeclining

businesses

Accelerate growth in

higher margin growth

segments

Achievecost

advantages

Improveoperational

and machineefficiencies

Maximiseprocurement

benefits Optimisebusiness

processes

Continuouslybalance

paper supplyand demandin all regions

Wherepossible

convert papermachines tohigher marginbusinesses

Optimiseworkingcapital

Strongcash

generationSmart

financing

Expandpaper

packaginggrades

Enhancespecialised celluloseportfolio

Extractvalue from our

biorefinerystream

Our group strategy

29

At Sappi we do business with integrity and courage; making smart decisions which we execute with speed.Our values are underpinned by an unrelenting focus on and commitment to safety.

Achievecost

advantages

Improveoperational

and machine efficiencies

Maximiseprocurement

benefitsOptimisebusiness

processes

Our group strategy

30

We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages. Group efficiency and procurement initiatives

US$60m target for 2018. Ongoing continuous improvement across all mills. US$50m investment in Saiccor Mill woodyard. €30m upgrade to Gratkorn PM9

Rationalisedeclining

businesses

Continuouslybalance

paper supplyand demand in all regions

Wherepossible

convert paper machines tohigher margin

businesses

Our group strategy

31

Recognising the decreasing demand for graphic paper, we manage our capacity to strengthen our leadership position in these markets, realising their strategic importance to the group and maximising their significant cash flow generation. Progressive transition of Lanaken Mill out of LWC. Reduced CWF exposure at Maastricht Mill, Ehingen

Mill and Somerset Mill PM1. Conversion of Somerset PM1 and Maastricht Mill

Maintaina healthybalancesheet

Optimiseworkingcapital

Strongcash

generationSmart

financing

Our group strategy

32

Maintain leverage below 2x Net debt:EBITDA US$400m 2017 bonds called in April 2017. US$21m in net finance cost savings/annum.

Refinancing and debt reduction leads to lower finance cost - US$60-70m/annum going forward - and EPS growth.



segments


biorefinerystream

Enhancespecialisedcelluloseportfolio

Expandpaper

packaginggrades

Our group strategy

33

We will make investments in existing and adjacent areas with strong potential growth. Debottlenecking of Saiccor, Cloquet and Ngodwana

DWP. Investments in Speciality packaging incl. Rockwell

and Cham Paper Additional packaging at Ngodwana and Tugela Mills. Securing additional HW timber supply. Biomaterials, bio-chemicals – lignins, sugars. Expansion of Saiccor by 110kt/annum



segments


biorefinerystream

Enhancespecialisedcelluloseportfolio

Expandpaper

packaginggrades

Debottlenecking Saiccor – 10kt complete April 2018 Ngodwana – 50kt complete September 2018 Cloquet – 30kt complete Q3 2019

additional 70kt swing capacity available

Expansion Saiccor – 110kt ≈Q3 2020 subject to positive EIA

External Paper pulp prices impacting valuations and returns

DWP expansion plans

34

35

Agenda




Highlights

EBITDA ex-special items: US$172m (Q1 FY17: US$181m like-for-like)

Profit for the period: US$63m (Q1 FY17: US$90m)

EPS ex-special items: 14 US cents (Q1 FY17: 16 US cents)

Net debt: US$1,349m (Q1 FY17: US$1,338)

Q1 FY18

36

EBITDA and operating profitExcluding special items*

37

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

175

201

172

112

136

105

0

50

100

150

200

250

Q1 FY16 Q1 FY17 Q1 FY18

US$

milli

on

EBITDA Operating profit

Key ratios Q1 FY16 Q1 FY17 Q1 FY18

Net debt/LTM EBITDA 2.6 1.7 1.8

Interest cover 5.1 7.7 9.9

EBITDA % 13.6 15.4 12.9

ROCE % 16.2 19.5 13.5

http://www.sappi.com/

EBITDA bridge*Q1 FY17 to Q1 FY18

38

All variances calculated excluding Sappi Forests.'Exchange rate' reflects the impact of changes in the average rates of translation of foreign currency results.* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

201

12

9

8

6 33

172

130

140

150

160

170

180

190

200

210

EBITDAQ1 FY17

Sales volume Price and mix Variable anddelivery costs

Fixed costs Other Exchange rate EBITDAQ1 FY18

US$

milli

on Sales revenue


Product contribution split - LTM

39

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY18 financial results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.

49%

16%

35%SpecialisedCellulosePackaging &SpecialitiesPrinting papers

63%16%

21%

EBITDA excluding special items Operating profit excluding special items


Maturity profileFiscal years

40

618

7025 26 39 38

553

433

57

221

390

4093

0

100

200

300

400

500

600

700

2018 2019 2020 2021 2022 2023 2024 2032

US$

milli

on

Cash Short-term SPH term debt Securitisation SSA

EUR450m bond

EUR350m bond

US$221m bond

Capex development

41

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 2018E 2019E

US$

milli

on

Maintenance Efficiency and expansion

Saiccor expansion capex subject to EIA approval

42

Net debt/EBITDA development

* EBITDA is excluding special items.** The covenant Net debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above.

238

0

224

8

228

6

194

6 204

0

191

6

191

7

177

1

173

4

165

2

1583

1408

1338

1329

1318

1322 1349

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

2 600

Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18

US$

milli

on

Net debt Net debt/LTM EBITDA**

1.78

4.6

43

Highlights – five year review

44

Highlights – five year review

Cash flow

45

US$m Q1 FY18 Q4 FY17 Q1 FY17Cash generated from operations 162 204 202Movement in working capital (83) 103 (97)

Net finance costs paid (6) (20) (17)

Taxation refund (paid) 6 (38) (34)

Dividend paid - - -

Cash generated from operating activities 79 249 54Cash utilised in investing activities (93) (208) (37)Capital expenditure (88) (197) (37)

Net proceeds on disposal of assets - 1 2

Acquisition of subsidiary - (11) -

Other movements (5) (1) (2)

Net cash generated (utilised) (14) 41 17

Excluding special items reconciliation to reported operating profit

46

EBITDA and operating profit

* Refer to page 18 in our Q1 FY18 results booklet (available on www.sappi.com) for a definition of special items.

US$m Q1 FY18 Q4 FY17 Q1 FY17

EBITDA excluding special items* 172 221 201Depreciation and amortisation (67) (69) (65)

Operating profit excluding special items* 105 152 136

Special items* - gains (losses) 11 (1) 7

Plantation price fair value adjustment 16 7 11

Profit on disposal of assets - (2) -

Asset impairments - (6) -

Fire, flood, storm and other events (5) - (4)

Segment operating profit 116 151 143


47

Agenda




Sappi Europe

48

Divisional overview

Leading European coated paper producer FY17 Net sales: US$2.5b FY17 EBITDA: US$262m 3.5m tons per annum of paper capacity 1.1m tons per annum of pulp capacity (integrated) Well-invested assets in the heart of the European market

Sappi Europe

49

Divisional overview

Coated woodfree paper2 000

Uncoated woodfree paper245

Coated mechanical paper1 015

Speciality paper245

Sappi Europe saleable capacity (‘000tpa) European CWF and CM capacity shares**

Sappi

UPM

Lecta

Stora Enso

Burgo

Others*

0%

20%

40%

60%

80%

100%

CWF

UPM

Sappi

Burgo

Leipa

Others*

0%

20%

40%

60%

80%

100%

CM

* 22 producers * Nine producers

Western Europe

50

Coated paper deliveries and prices

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

Q1

08

Q1

09

Q1

10

Q1

11

Q1

12

Q1

13

Q1

14

Q1

15

Q1

16

Q1

17

CWF Demand MCR Demand CWF 100gsm Sheets LWC 60gsm offset reels

Western Europe shipments including export.Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008.

Solid performance, strong export volumes and price realisation on local graphics sales Input costs continue to rise, particularly paper pulp and latex Specialities volumes up 9% (normalised) Variable and fixed costs were both 2% higher.

51

Sappi Europe

0%

2%

4%

6%

8%

10%

12%

14%

0

20

40

60

80

100

Q1 FY15 Q1 FY16 Q1 FY17 Q1 FY18

Eur

mill

ion

EBITDA* EBITDA Margin*

* EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

600

700

800

900

Jan-

17

Feb-

17

Mar

-17

Apr

-17

May

-17

Jun-

17

Jul-1

7

Aug

-17

Sep

-17

Oct

-17

Nov

-17

Dec

-17

Jan-

18

Feb-

18

BHKP Europe (EUR) CWF-S 100g, Germany


Alfeld MillSpeciality conversion (December 2013)

Gratkorn and Kirkniemi MillsPulp mill and paper machine upgrades, power plant rebuild

Nanocellulose pilot plant (The Netherlands)Trial runs

Maastricht, Ehingen, Alfeld and Lanaken Mills ProjectsExpanding our speciality packaging offering, increasing asset flexibility to adapt to market

dynamics

Sappi Europe

52

Projects

Sappi Europe

53

Summary

o Highly competitive in service, quality and cost in Europeo Strong cash flowso Highly attractive and growing specialities business

o Flagship Alfeld Mill, plus Maastricht and Ehingen Mills

o Printing and writing paper market is in decline, capacity needs to be right-sizedo Intentionally transitioning CWF capacity to niche speciality paper products

54

Agenda




Sappi North America

55

Divisional overview

Leading North American coated freesheet paper producero FY17 Net sales: US$1.3bo FY17 EBITDA: US$126mo 1.1m tons per annum of coated paper

capacityo 700,000 tons per annum of integrated

paper pulp capacityo World’s only integrated DWP/paper mill

Sappi North America

56

Divisional overview

Coated freesheet paper1 120

Dissolving wood pulp330

Speciality paper40

NBHK30

Verso57%

Sappi37%

Catalyst6%

US Coated freesheet capacity shares*Sappi North America saleable capacity (‘000tpa)

Source: RISI

United States of America

57

Coated paper prices and shipments

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

Q1

08

Q1

09

Q1

10

Q1

11

Q1

12

Q1

13

Q1

14

Q1

15

Q1

16

Q1

17

Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60lb rollsUS industry purchases defined as industry shipments, plus imports, less exports.Source: AF&PA and RISI indexed to calendar Q1 FY08.

Sappi North America

58

Projects

Cloquet MillDissolving wood pulp conversion (2013), lime kiln rebuild

Westbrook MillCoater modernisation

Somerset MillNatural gas conversionWoodyard and chip processing investmentPM1 Conversion to speciality packaging

By end-user segment

59

Sappi’s release paper business

Fashion Automotive and commercial upholstery Decorative laminates Engineering films and

other

Sappi Sappi Sappi

Sappi

Sappi Other

Volumes were lower on production challenges and ongoing capital projects at Somerset. Average realised coated paper prices rose, more expected in coming quarter Increased DWP sales volumes, lower pricing however Extended shut for woodyard and PM1 conversion – additional US$6m impact in the quarter

60

Sappi North America

* EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.** Source: RISI

0%

2%

4%

6%

8%

10%

0

10

20

30

40

Q1 FY15 Q1 FY16 Q1 FY17 Q1 FY18

US

$ m

illio

n


800

820

840

860

880

900

920No 3 Coated freesheet - 60 lb (90g) rolls US$/ton - US East**


Sappi North America

61

Summary

o Well-invested, premier asset portfolioo Established brands with strong market position

o Exposure to most attractive end-market segmento Unmatched reputation for product innovation and customer service

o A low-cost producer with strong free cash flow profileo Defined and focused opportunities for driving further profitable growtho Intentionally transitioning CWF capacity to niche speciality paper products

62

Agenda




Sappi Southern Africa

63

Divisional overview

o Leading South African graphic and packaging paper producer

o FY17 Net sales: US$1.37bo FY17 EBITDA: US$396o 1m tons per annum of dissolving wood pulp

(DWP) capacityo 675,000 tons per annum of graphic and

packaging paper productiono 652,000 tons per annum of pulp production

(integrated)


64

Divisional overview

Forestry1 046


1 010

Paper and paper packaging

675

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Global dissolving wood pulp demand (‘000k Metric tons)*

Forecast

* Source: Hawkins Wright, Sept. 2017


65

Projects

Ngodwana MillDissolving wood pulp (DWP) conversion

Sale of Cape Kraft and Enstra Mills’ recycled packaging business

Debottleneck Tugela, Saiccor and Ngodwana pulp millso ~ 10% increase in volumes in both packaging and dissolving wood pulp

Increase access to more HW timber supply

66

Our DWP competitive advantageSappi Southern Africa

o Low-cost and fast-growing woodfibre from state-of-the-art plantationso Large-scale, modern and well-invested assetso Favourable currency trendo Well-positioned in dynamic market

Strong packaging paper demand Increased sales volumes and pricing for newsprint and office papers. Realised US$ prices for DWP were lower and ZAR strength impacted margins - spot prices have

risen since quarter-end. Costs well controlled, higher energy costs offset by reduced fiber usage.

67


* EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.** Source: CCF

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

200

400

600

800

1000

1200

1400

1600

Q1 FY15 Q1 FY16 Q1 FY17 Q1 FY18

ZAR

mill

ion


775.00

800.00

825.00

850.00

875.00

900.00

925.00

950.00

975.00

1000.00China market price – Hardwood DWP (US$/ton)**



68

Summary

Improving paper business Better use of timber Improving cost position Product and asset optimisation – printing and packaging papers

Investing in dissolving wood pulp Low-cost producer Fast-growing market Excellent customer relationships

'Growing' our forestry assets Profitable with growth opportunities

69

Agenda




70

Sustainability – PPP + IIRC

International Integrated Reporting Council’s ‘6 Capitals Model’1. Financial2. Manufactured3. Intellectual4. Human5. Social6. Natural

71

Sustainability

#1 – Financial capitalWe manage our financial capital, including shareholder equity,debt and reinvested capital to maintain a solid balance betweengrowth, profitability and liquidity.#2 – Manufactured CapitalInvesting in building, maintaining, operating, and improving thisinfrastructure requires significant financial capital, together withhuman and intellectual capital.#3 – Intellectual CapitalOur technology centres and R&D initiatives promote a culture ofinnovation to support the development of commercially andenvironmentally sustainable solutions for the company.

Inputs:• Total assets US$5.2B• 15 manufacturing sites worldwide• Technology centres in each region• R&D spend = US$29.5m

Outputs:• 6.4mt of saleable production• Dividends up by 36%• Nanocellulose pilot plant• Launched sugar extraction pilot plant

72

Sustainability

#4 – Human capitalBy creating a safe and healthy workplace for our people in whichdiversity is encouraged and valued, and providing them with ongoing development opportunities, we enhance productivity and our ability to service global markets.#5 – Social capitalBuilding relationships with our key stakeholders in a spirit of trust and mutual respect enhances both our license to trade and ourcompetitive advantage, thereby enabling shared value creation.

Inputs:• 12,158 employees, 851 contractors• CSR spend US$5.3m• Ongoing stakeholder engagement

Outputs:• 0.44 LTIFR – 0.46 in FY2016• 62% training spend allocated toward skills

development, 38% to compliance

73

Sustainability

#6 – Natural CapitalRecognising our business depends on natural capital, we focus on managing and mitigating our impacts.

Inputs:• 2,734MW energy purchased, 1,893 generated• Specific water process extracted 33.7m3/adt• 479kha owned or leased plantations, with

approximately 27.4mt of standing timber• Contracted supply covers a further almost 92kha

Outputs:• 92% of water drawn returned to the environment• 45.2% renewable energy, of which 73.6% own black

liquor• 73.5% of fibre used is certified• 1,515,014 tons of waste, of which 465,395 tons sent

to landfill

74

Agenda




75

Conclusionso Through intentional evolution, we are growing Sappi into a profitable and cash-

generative diversified woodfibre group.o Selective capital spending in adjacent, growing, and more profitable businesseso Costs remain a chief concerno Cash-generative paper business will fund growth in:

o Cellulose-based solutionso Speciality packaging paperso Complementary products

o Committed to accelerating value for shareholders through:o Debt reductiono Improved profito Strategic positioning

76

Supplementary information

77

Pulp prices*

* Source: FOEX, CCF group.

600

700

800

900

1 000

1 100

US$

/ton

NBSK Europe BHKP Europe Commodity DWP Cotton linter pulp

Thank you

78

Roadbook - Sappi Q1 FY18 Roadbook.pdf · Forward-looking statements and Regulation G. 2...

Documents

Transcript of Roadbook - Sappi Q1 FY18 Roadbook.pdf · Forward-looking statements and Regulation G. 2...