Sappi Limited · JSE:SAP
Sappi — Q3 2012 Earnings Presentation
33 slides from Sappi's earnings presentation, Aug 3, 2012
Slide 1: Q3 2012 Results Presentation
Q3 2012 Results Presentation 3 August 2012
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 | Q3 2012 Results | 3 August 2012
Slide 4: Q3 2012 Summary
4 Q3 2012 Summary • Operating profit excluding special items US$60m (Q3 2011 US$60m) • Market conditions deteriorated during the quarter • Extended maturities and lower finance cost from refinancing of 2014 bonds • Once‐off charges of US$89m related to refinancing – negative EPS • Impact of planned
Slide 5: Group Financial Summary
5 Group Financial Summary Q3 11 Q3 12 YTD 11 YTD 12 Key figures: (US$ million) Sales volume ('000) 1,911 1,923 5,920 5,725 Sales 1,802 1,544 5,499 4,762 EBITDA ex special items 164 150 638 561 Operating Profit ex special items* 60 60 324 285 Basic EPS (US cents) (13) (20) (20) (1) Key ratios: (%) Op
Slide 6: Operating Profit excluding special items
6 Operating Profit excluding special items* 160 2009: $33m 2010: $339m 2011: $404m 140 120 100 80 137 129 127 125 60 100 40 81 75 80 54 60 60 20 38 25 0 ‐17 ‐13 ‐20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1** Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 2012 *Refer to the supplementary information in this presentation for a r
Slide 7: EBITDA Trend
7 EBITDA* Trend 300 2009: $431m 2010: $752m 2011: $821m 250 200 150 246 227 228 217 100 193 194 176 183 156 164 150 150 50 106 82 93 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1** Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 2012 *EBITDA as shown above excludes special items. Refer to page 18 in our Q3 2012 Results announcemen
Slide 8: Earnings Versus Prior Quarter
8 Earnings Versus Prior Quarter Q2 12 Basic EPS 11 Add: Fair Value Pricing 2 Q2 2012 Less: (Profit)/Loss on Sale of Assets (1) Q2 12 Adjusted EPS 12 Q3 12 Basic EPS -20 Add: Fair Value Pricing 3 -17 Add: Flood Damage 1 Q3 2012 Add: Once-off Finance charges 17 Q3 12 Adjusted EPS 1 -25 -20 -15 -10 -5
Slide 9: Divisional Overviews
Divisional Overviews | Q3 2012 Results | 3 August 2012
Slide 10: Divisional Operating Margins
10 Divisional Operating Margins* 20.0% 15.0% 10.0% Q3 ‘12 Margins: S‐Africa 8.1% 5.0% N‐America 5.0% Europe 1.3% 0.0% ‐5.0% ‐10.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1** Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 2012 *The divisional operating margins exclude special items. Refer to page 18 in our Q3 2012 results annou
Slide 11: Sappi Fine Paper Europe
11 Sappi Fine Paper Europe • Volumes down sequentially due to seasonal factors and planned maintenance • YoY sales volumes down 7%, but all profitability metrics improved • Average prices realized were higher than last quarter, helped by weaker exchange rate and impact of export sales prices • Varia
Slide 12: Sappi Fine Paper North America
12 Sappi Fine Paper North America • Industry conditions worsened, but coated paper sales volumes were up, offsetting weaker market pulp and speciality paper businesses • Focus on cost containment and productivity improvements led to a decrease in our variable costs from last quarter and last year •
Slide 13: Sappi Southern Africa
13 Sappi Southern Africa • CC excellent production and sales quarter: • Higher average NBSK and weaker Rand than last quarter • R480m EBITDA ex-items = approximately 30% EBITDA margin • Delayed planned maintenance shut to July to capture good market conditions • Paper and packaging still underperfor
Slide 14: Strategic Focus
Strategic Focus | Q3 2012 Results | 3 August 2012
Slide 15: Focus Areas
15 Focus Areas Chemical Cellulose • Maintain excellent Saiccor production rates and customer service • Contracting of volumes – Dealing with overcapacity • Both CC projects on schedule (FQ3 2013) and on budget Europe • Further improvement in European cost base, improved competitiveness in weaker Eur
Slide 16: Focus Areas
16 Focus Areas North America • Restoration of margins and production efficiencies South Africa paper and packaging • Squeezing out benefits of South African restructure and restore profitability Debt • Non-essential asset sales to help reduce debt | Q3 2012 Results | 3 August 2012
Slide 17: Net Debt Development
17 Net Debt Development Rights Offer to finance European Acquisition European Acquisition US$ m completed 3,000 Major Refinancing completed 2,500 2,000 1,500 1,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1** Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 2012 * Cash proceeds of US$536m for European Acquisition from rights offer
Slide 18: Debt Refinancing
18 Debt Refinancing US$700m 2014 Bonds refinanced • US$300m at 12% and €319m at 11.75% repurchased • Once-off charge US$89m • US$44m non-cash accelerated amortisation of costs • US$45m cash cost early redemption • Unwinding of currency swaps expected to yield US$36m cash New Bonds Issued • US$400m 2
Slide 19: Debt Maturity Profile – Pro Forma June 2012
19 Debt Maturity Profile – Pro Forma June 2012 USD million 1,000 $700m refinanced 900 790 800 2017 $400m bond 700 RCF 2019 $300m 600 Headroom; bond Unutilised 500 403 400 400 341 350 317 318 300 300 221 200 180 127 98 100 61 4 21 26 0 2012 2013 2014 2015 2016 2017 2018 2019 2021 2032 Cash Securitisa
Slide 20: Outlook
Outlook | Q3 2012 Results | 3 August 2012
Slide 21: Outlook
21 Outlook • Market conditions are expected to remain tough, likely weaker than a year ago with lower volumes and pricing under pressure • Current US Dollar strength compared to the Euro and Rand should continue to be favorable • Saiccor production remains sold out – both conversion projects on trac
Slide 22: Outlook
22 Outlook • For the 4th quarter, operating profit is expected to be higher year-on-year. For the full year, operating profit excluding special items is expected to be below that of last year. • We expect positive EPS for the full year • Cash generation from operations is expected to be strong, aide
Slide 23: Q&A
Q&A | Q3 2012 Results | 3 August 2012
Slide 24: Supplementary Information
Supplementary Information | Q3 2012 Results | 3 August 2012
Slide 25: W. Europe Coated Paper Deliveries & Prices
25 W. Europe Coated Paper Deliveries & Prices 1.2 1.1 1.0 0.9 Q2 2007 = 100 0.8 0.7 0.6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008 2009 2010 2011 2012 CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe Shipments Incl. Export – Source Cepifi
Slide 26: Sappi Fine Paper Europe
26 Sappi Fine Paper Europe Q3 11 Q3 12 YTD 11 YTD 12 Tons Sold ('000) 909 843 2,903 2,611 Sales ($'m) 979 795 3,023 2,524 Price / Ton ($) 1,077 943 1,041 967 Price / Ton (€) 748 735 750 735 Cost / Ton* (€) 750 725 734 710 Operating profit ex items** ($'m) (2) 10 63 88 * Sales less operating profit e
Slide 27: US Coated Paper Prices and Shipments
27 US Coated Paper Prices and Shipments 1.3 1.2 1.1 1.0 Q2 2007= 1 0.9 0.8 0.7 0.6 0.5 0.4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008 2009 2010 2011 2012 Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices US Industry Shipments and total US consu
Slide 28: Sappi Fine Paper North America
28 Sappi Fine Paper North America Q3 11 Q3 12 YTD 11 YTD 12 Tons Sold ('000) 344 351 1,057 1,031 Sales ($'m) 371 360 1,125 1,061 Price / Ton ($) 1,078 1,026 1,064 1,029 Cost / Ton* ($) 985 974 974 979 Operating Profit ex items** ($'m) 32 18 95 52 * Sales less operating profit excluding special items
Slide 29: NBSK Pulp Price
29 NBSK Pulp Price* 1,100 NBSK (US$/ton) NBSK (EUR/ton) 1,000 900 $809/ton 800 700 €656/ton 600 500 400 300 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-12 Jul-11 • Pulp prices rose, then turned down during the quarter * Source: Average monthly FOEX delivered European prices | Q3 2012
Slide 30: Sappi Southern Africa
30 Sappi Southern Africa Q3 11 Q3 12 YTD 11 YTD 12 Tons Sold ('000) 406 435 1,272 1,253 Sales ($'m) 430 367 1,291 1,114 Price / Ton ($) 1,059 844 1,015 889 Price / Ton (ZAR) 7,190 6,853 6,997 7,102 Cost / Ton* (ZAR) 6,756 6,274 6,141 6,178 Operating Profit ex items** ($'m) 26 31 158 145 * Sales less
Slide 31: Cash Flow
31 Cash Flow Q3 11 Q3 12 YTD 11 YTD 12 Cash generated from operations 148 137 615 546 - Movement in working capital (46) (27) (364) (217) - Net finance costs paid (40) (56) (194) (157) - Taxation paid (17) (2) (31) (12) - Cash utilised in investing activities (65) (108) (142) (236) Net cash generate
Slide 32: Reconciliation of EBITDA excluding special items to profit (loss)
32 Reconciliation of EBITDA excluding special items to profit (loss) for the period* Q3 11 Q3 12 YTD 11 YTD 12 EBITDA ex-items 164 150 638 561 Depreciation and amortization (104) (90) (314) (276) Op. Profit excluding speical items 60 60 324 285 Special items - (losses) gains (6) (26) (150) (24) Plan
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