Sappi Limited · JSE:SAP
Sappi — Q4 2005 Earnings Presentation
19 slides from Sappi's earnings presentation, Nov 10, 2005
Slide 1: Results for the 4th quarter ended September 2005
Results for the 4th quarter ended September 2005 10 November 2005 1 Forward looking statements Certain statements in this report that are neither reported financial results nor other historical information, are forward-looking statements, including, but not limited to statements that are predictions
Slide 2: Sappi Group Overview
Sappi Group Overview Sappi is the global leader in coated fine paper, chemical cellulose, and has a range of leading regional businesses Sales By Product Group* (US$) Sales By Source* (US$) Coated fine paper 63% Uncoated fine paper 4% Europe 45% 9% Coated specialities 29% North America 13% Pulp 9% 2
Slide 3: 2005 Review
2005 Review Focusing on the levers within our control • Achieved $96m cost savings 999 • Downtime / inventory reduction 99 • Good cash generation 99 • Building platform for future growth 99 • US restructuring and turnaround - • Pricing initiatives 8 8 5 2005 Review Continuously improving productivit
Slide 4: Fourth Quarter Highlights
Fourth Quarter Highlights • Headline loss 7 US cents per share • Prices flat despite input cost escalation • Significant production downtime; inventories reduced by 120,000 tons • Improved cash generation; debt reduced • Market share recovery in Europe and North America • Additional accounting week
Slide 5: Earnings Summary
Earnings Summary Quarterly Headline EPS (US cents per share) 40 30 32 29 26 25 26 20 22 18 10 14 11 11 12 10 6 0 (4) (7) (11) -10 -20 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 9 Earnings Summary Headline EPS Development Versus Prior Quarter (US cents per share)
Slide 6: Cash Flow Summary
Cash Flow Summary Cash Generated by Operations (US$ million) 250 226 200 205 195 183 178 184 150 168 154 157 159 149 130 137 122 100 106 90 50 0 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 11 Balance Sheet Summary Net Debt to Total Capitalisation Net Debt (US$ mil
Slide 7: Input Cost Escalation
Input Cost Escalation Raw Material Cost Escalation* (US$ million) Q1 05 Q2 05 Q3 05 Q4 05 FY 05 Wood 12 4 3 4 23 Chemicals 18 18 20 18 74 Energy 6 8 9 16 39 36 30 32 38 136 * Price impact vs equivalent period last year 13 Energy Costs Sappi Group 2005 Energy Usage (% split based on US$ consumption)
Slide 8: Chemicals Costs and Cost Reduction Actions
Chemicals Costs Sappi Group 2005 Chemicals Usage (% split based on US$ consumption) Fillers & Pigments 35% 16% Other Coating Chemicals 7% Caustic Soda 12% Other Pulping Chemicals Binders 30% • 2005 Group chemicals bill = US$660 million • EPS sensitivity: 1% change = 2 US cents 15 Cost Reduction Acti
Slide 9: Divisional Detail: Sappi Fine Paper Europe
Divisional Detail Sappi Fine Paper Europe Q4 04 Q3 05 Q4 05 Sales (US$ million) 541 498 596 Price / Ton (US$) 888 926 886 Price / Ton (EUR) 726 730 730 Cost / Ton* (EUR) 695 749 681 Op. Income (US$ million) 23 (13) 40 • Volume and market share recovery • Cost pressure: raw material cost** +US$14m vs
Slide 10: Divisional Detail: Sappi Fine Paper North America
Divisional Detail Sappi Fine Paper North America Q4 04 Q3 05 Q4 05 Sales (US$ million) 355 338 424 Price / Ton (US$) 975 1,043 991 Cost / Ton* (US$) 978 1,105 1,061 Op. Income (US$ million) (1) (200) (53) Op. income before impairment & restructuring charge (20) (29) • Average price -5% vs LQ; signif
Slide 11: Markets: US Coated Fine Paper Consumption and Demand
Markets US Coated Fine Paper Apparent Consumption (yoy % change) 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Jun-01 Sep-01 Jun-02 Sep-02 Jun-03 Sep-03 Jun-04 Sep-04 Jun-05 Sep-05 Dec-01 Dec-02 Dec-03 Dec-04 Mar-02 Mar-03 Mar-04 Mar-05 Source: AF & PA 21 Markets US Demand Indicators (yoy % change) 3
Slide 12: Divisional Detail: South Africa and Forest Products
Divisional Detail Sappi Fine Paper South Africa Q4 04 Q3 05 Q4 05 Sales (US$ million) 86 69 99 Price / Ton (US$) 989 1,015 971 Price / Ton (ZAR) 6,310 6,468 6,337 Cost / Ton* (ZAR) 6,016 6,468 7,233 Op. Income (US$ million) 4 - (14) • Average ZAR price -2% vs LQ; higher export sales • Operating resu
Slide 13: Changeover to IFRS and Outlook
Changeover to IFRS • Sappi will report under IFRS from Q1 2006 • Current view: EPS impact for 2006 not expected to be material • Increase in recognised liabilities; reduction in equity • Key changes: - Pension* liabilities brought on to balance sheet - Reduction of pension* expense - Share options &
Slide 14: Q&A Supplementary Information
Q&A 27 Supplementary Information 28
Slide 15: Earnings Summary and Cash Flow Summary
Earnings Summary Operating Profit to Sales Per Division 40% 30% 20% Forest Products* 10% Fine Paper Europe 0% -10% Fine Paper North America** Fine Paper South Africa -20% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2001 2002 2003 2004 2005 * Q1 2005 Forest Products data excludes US$4
Slide 16: Plantation Valuation Impact and Forest Products Operating Income
Divisional Detail Non-Cash Plantation Valuation Impact on Income Statement (US$ million) Q4 04 Q3 05 Q4 05 Growth 10 16 9 Fellings (16) (16) (17) Net Changes in Volume (6) - (8) Changes in Fair Value 18 8 35 Net Gain (Loss) 12 8 27 31 Divisional Detail Sappi Forest Products Operating Income (US$ mil
Slide 17: Markets: Coated Fine Paper Price Development
Markets Germany Coated Fine Paper Price Development (€/ton) 1,100 1,000 900 800 700 600 Germany 100gsm Sheets (€/ton) 500 Germany 100gsm Reels (€/ton) 400 Oct-94 Oct-95 Oct-96 Oct-97 Oct-98 Oct-99 Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Source: RISI, Pulp & Paper This Week 33 Markets US Coated Fin
Slide 18: Markets: US Coated Fine Paper Imports
Markets US Coated Fine Paper Net Imports (‘000 metric tons) 100 90 80 70 60 50 40 30 20 10 0 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Source: AF & PA 35 Markets US Coated Fine Paper Imports by region (‘000 short tons) 80 Asia Europe Canada Other 70 60 50 40 30 20 10 0 Au
Slide 19: Markets: Imports From Asia and NBSK Pulp Price
Markets US Coated Fine Paper Imports From Asia (‘000 metric tons) 50 South Korea China Japan Other 45 40 35 30 25 20 15 10 5 0 Aug-01 Nov-01 Feb-02 Aug-02 Nov-02 Feb-03 Aug-03 Nov-03 Feb-04 Aug-04 Nov-04 Feb-05 Aug-05 May-01 May-02 May-03 May-04 May-05 Source: AF & PA 37 Markets Europe NBSK Pulp Pri