Sappi Limited · JSE:SAP
Sappi — Q1 2015 Earnings Presentation
34 slides from Sappi's earnings presentation, Feb 11, 2015
Slide 1: 1st Quarter 2015 Financial Results Presentation
1st Quarter 2015 Financial Results Presentation 11 February 2015
Slide 2: Forward-looking statements
Forward-looking statements Certain statements in this release that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends,
Slide 3: Summary
Summary | Q1 2015 Results | 11 February 2015
Slide 4: Q1 2015 Summary
4 Q1 2015 Summary • Profit for the period US$24m (Q1 2014 US$18m) • EPS excluding special items 5 US cents (Q1 2014 2 US cents) • EBITDA excluding special items US$145m (Q1 2014 US$147m) • Net Debt US$2,040m, down US$340m year-on-year | Q1 2015 Results |11 February 2015
Slide 5: EBITDA & Operating Profit ex-items
5 EBITDA & Operating Profit ex-items* USD million *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Profit and page 20 in our Q1 2015 Results booklet (available on www.sappi.com) for a definition of special items. | Q1 2015 Results | 11
Slide 6: EBITDA in Q1 2015 vs Q1 2014
6 EBITDA in Q1 2015 vs Q1 2014 | Q1 2015 Results | 11 February 2015
Slide 7: Q1 2015 Product Contribution Split
7 Q1 2015 Product Contribution Split EBITDA excluding special items* Operating Profit excluding special items* Paper 24% Specialised Paper Cellulose 52% 48% Specialised Cellulose 76% *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Pro
Slide 8: Net Debt / EBITDA development
8 Net Debt / EBITDA development USD million % * EBITDA ex special items ** The covenant Net Debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above | Q1 2015 Results |11 February 2015
Slide 9: Maturity Profile – Fiscal Years
9 Maturity Profile – Fiscal Years Includes Includes US$400m Bond US$350m €250m Bond Bond US$221m US$300m Bond Bond | Q1 2015 Results |11 February 2015
Slide 10: Capex Development
10 Capex Development Maint Expansion 600 500 400 US$m 300 200 100 0 2012 2013 2014 2015 EST | Q1 2015 Results |11 February 2015
Slide 11: Divisional Overviews
Divisional Overviews | Q1 2015 Results | 11 February 2015
Slide 12: Sappi Europe
12 Sappi Europe Demand Development** EBITDA* EBITDA Margin* 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 US$ m 0% 100 12% 10% ‐2% 80 8% 60 ‐4% 6% 40 ‐6% 4% Forecast 20 ‐8% 2% 0 0% ‐10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 CWF CM • Better sales prices and strong fixed cost control helped to improve p
Slide 13: Sappi North America
13 Sappi North America Demand Development** 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 EBITDA* EBITDA Margin* US$ m 0.5% 50 14% 0.0% 12% 40 10% ‐0.5% 30 8% ‐1.0% 20 6% ‐1.5% 4% Forecast 10 ‐2.0% 2% 0 0% ‐2.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 ‐3.0% CWF • $10m impact from finalisation of capital
Slide 14: Sappi South Africa
14 Sappi South Africa EBITDA* EBITDA Margin* Global DWP Demand development** US$ m 12% 100 25% 10% 80 20% Forecast 8% 60 15% 6% 40 10% 4% 20 5% 2% 0 0% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 2013 2014 2015 • Improved performance due to exchange rate gains on export sal
Slide 15: Global Paper Market Trends
15 Global Paper Market Trends Supply & Demand Closures broadly offsetting demand declines CWF demand decline appears to be moderating CM declines worrisome Costs & Prices CWF sales prices have moved up in NA/Europe US$ and oil-based input costs falling Strategy Implement price increases when/where m
Slide 16: Global Specialised Cellulose Market Trends
16 Global Specialised Cellulose Market Trends Supply & Demand Capacity additions slowed in 2014 (200kt) v 2013 (1Mt) 100k tons expected online in 2015 Demand growth normalizing as competing fiber prices decline – long term prospects still strong Costs & Prices Dollar prices continue to decline Input
Slide 17: Strategic Focus
Strategic Focus | Q1 2015 Results | 11 February 2015
Slide 18: Strategic Focus
18 Strategic Focus Achieve cost Rationalise declining Grow through advantages businesses moderate investments • Continuously improving • Continuously balance • Growing paper operational performance graphic paper supply and packaging grades • Optimising energy usage demand in all regions • Growing sp
Slide 19: Focus Areas: Cost advantages, rationalise declining businesses
19 Focus Areas Achieve cost advantages We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages. • Somerset lime kiln and boiler gas conversion • Gratkorn paper machine and pulp mill upgrade • Kirkniemi power plant • Group procurement initiatives Optimise
Slide 20: Focus Areas: Moderate investment, strengthen balance sheet
20 Focus Areas Growth through moderate investment We will make smaller investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers. • Investment in lightweight recycled packaging paper at Enstra • Upgrades to Tugela and Ngodwana pulp mills Stren
Slide 21: Outlook
Outlook | Q1 2015 Results | 11 February 2015
Slide 22: Outlook
22 Outlook • Graphic paper markets remain challenging, but appear to be marginally better than our expectations in EU and NA. Demand has declined at a lower rate and pricing expectations have been met. Exchange rate volatility may affect selling prices, particularly in Europe. • DWP market under fur
Slide 23: Outlook (cont'd)
23 Outlook (cont’d) • As discussed last quarter, we are evaluating opportunities to utilise our cash resources to refinance a portion of our debt in order to lower future interest costs. We expect to reduce net debt levels by year-end to below that of 2014. • 2015 performance will be largely in-line
Slide 24: Q&A
Q&A | Q1 2015 Results | 11 February 2015
Slide 25: Supplementary Information
Supplementary Information | Q1 2015 Results | 11 February 2015
Slide 26: W. Europe Coated Paper Deliveries & Prices
26 W. Europe Coated Paper Deliveries & Prices 1.2 1.1 1.0 0.9 Q1 2008 = 1 0.8 0.7 0.6 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe Shipments Incl. E
Slide 27: Sappi Fine Paper Europe
27 Sappi Fine Paper Europe Q1 15 Q4 14 Q1 14 Tons Sold ('000) 775 811 836 Sales (€) 547 561 581 Price / Ton (€) 706 692 695 Cost / Ton* (€) 690 660 691 Operating profit ex items (€m) ** 12 26 3 * Sales less operating profit excluding special items divided by tons sold. ** Refer to the supplementary
Slide 28: US Coated Paper Prices and Shipments
28 US Coated Paper Prices and Shipments Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices 1.2 1.1 1.0 0.9 Q1 2008 = 1 0.8 0.7 0.6 0.5 Q1 2008 Q2 Q3 Q4 Q1 2009 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 US Industry Shipments an
Slide 29: Sappi Fine Paper North America
29 Sappi Fine Paper North America Q1 15 Q4 14 Q1 14 Tons Sold ('000) 333 375 348 Sales ($'m) 353 390 365 Price / Ton ($) 1,060 1,040 1,049 Cost / Ton* ($) 1,072 973 1,057 Operating profit ex items** ($'m) (4) 25 (3) * Sales less operating profit excluding special items divided by tons sold. ** Refer
Slide 30: Pulp Prices - historically wide spread
30 Pulp Prices* - historically wide spread US$/ton NBSK Europe (USD) BHKP Europe (USD) 1,100 1,000 $930/ton 900 800 $744/ton 700 600 500 400 Jan‐08 Jan‐09 Jan‐10 Jan‐11 Jan‐12 Jan‐13 Jan‐14 Jan‐15 * Source: Average weekly FOEX delivered European prices | Q1 2015 Results |11 February 2015
Slide 31: Sappi Southern Africa ex Forestry
31 Sappi Southern Africa ex Forestry Q1 15 Q4 14 Q1 14 Tons Sold ('000) 426 453 403 Sales (ZAR'm) 3,644 3,799 3,316 Price / Ton (ZAR) 8,554 8,386 8,228 Cost / Ton* (ZAR) 6,897 6,987 6,818 Operating profit ex items** (ZAR'm) 706 634 568 * Sales less operating profit excluding special items divided by
Slide 32: Cash Flow - US$m
32 Cash Flow - US$m Q1 15 Q4 14 Q1 14 Cash generated from operations 137 160 136 - Movement in working capital (136) 153 (149) - Net finance costs paid (52) (26) (56) - Taxation paid (3) - (1) Cash generated from operating activities (54) 287 (70) Cash utilised in investing activities (67) 1 (63) -
Slide 33: EBITDA & operating profit excluding special items reconciliation
33 EBITDA & operating profit excluding special items recon to reported operating profit Q1 15 Q4 14 Q1 14 EBITDA ex-items 145 200 147 Depreciation and Amortisation (71) (76) (87) Operating Profit ex-items* 74 124 60 Special Items - gains (losses) (5) (48) 10 Plantation price fair value adj. 1 - 8 Ne
Slide 34: Thank You
, | Thank You,