Sappi Limited · JSE:SAP
Sappi — Q4 2003 Earnings Presentation
29 slides from Sappi's earnings presentation, Nov 10, 2003
Slide 1: Results for the fourth quarter and fiscal year ended September 2003
fourth quarter 2003 Results for the fourth quarter and fiscal year ended September 2003 10 November 2003
Slide 2: Forward looking statements; Regulation G disclosure
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 of or indicate future earnings, savings, synergies, events, trends,
Slide 3: Fourth Quarter Highlights
Fourth Quarter Highlights • Headline EPS 11 US cents (71 cents FY) • 8 US cent papermachine closure charge* • EPS 4 US cents (65 cents FY) • Sluggish seasonal demand recovery • Costs well contained • Restructuring / cost initiatives • Dividend 29 US cents * 7 cents exceptional 3
Slide 4: Earnings Summary: Quarterly Headline EPS
Earnings Summary Quarterly Headline* EPS (US cents per share) 50 49 40 41 30 35 34 33 32 29 27 26 20 24 25 23 23 10 14 12 11 0 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 * 2000 - 2002 data restated for new JSE headline earnings definition which no longer includes
Slide 5: Earnings Summary: Sales Volume and Average Price
Earnings Summary Sales Volume (‘000 tons) 2000 8000 1500 1769 6000 1639 1596 6087 6675 1000 4000 500 2000 0 0 Q4 02 Q3 03 Q4 03 2002 2003 Average Price (US$/ton) 800 800 600 642 665 600 635 613 644 400 400 200 200 0 0 Q4 02 Q3 03 Q4 03 2002 2003 5
Slide 6: Earnings Summary: Sales and Total Cost per Ton
Earnings Summary Sales (US$ million) 1200 4500 900 1062 1123 4299 1052 3729 3000 600 1500 300 0 0 Q4 02 Q3 03 Q4 03 2002 2003 Total Cost per Ton* (US$/ton) 800 800 600 600 637 609 601 567 549 400 400 200 200 0 0 Q4 02 Q3 03 Q4 03 2002 2003 * Sales less operating income divided by tons sold. 6
Slide 7: Earnings Summary: Operating Profit and Net Profit
Earnings Summary Operating Profit (US$ million) 150 400 389 122 300 100 286 200 50 100 46 46 0 0 Q4 02 Q3 03 Q4 03 2002 2003 Net Profit (US$ million) 80 300 60 73 220 200 40 149 100 20 29 * 0 10 0 Q4 02 Q3 03 Q4 03 2002 2003 * Net profit impact of Westbrook PM14 closure charge 7
Slide 8: Operating Profit to Sales Per Division
Earnings Summary Operating Profit to Sales Per Division 40% 30% 20% Forest Products 10% Fine Paper South Africa Fine Paper Europe 0% Fine Paper North America -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2000 2001 2002 2003 8
Slide 9: Operating Profit to Net Assets (RONA)
Earnings Summary Operating Profit to Net Assets (RONA) 25% 20% 15% 10% 5% 0% 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 9
Slide 10: Cost Control
Cost Control Sappi Fine Paper Sales Price vs Total Cost per Ton (US$/Ton) 1000 Sales Price per Ton Total Cost per Ton* 964 900 908 851 860 800 700 600 2000 2003 * Sales less operating income divided by tons sold. 10
Slide 11: Closure of Operations
Closure of Operations • Westbrook PM14 closure Highest cost PM 85,000 tons CWF capacity Headcount reduction = approx. 170 US$31 million pre-tax charge in Q4 Further US$15 million pre-tax charge next quarter US$18 million annual pre-tax saving • Closure of Clan sawmill (South Africa) 11
Slide 12: Restructuring
Restructuring • Reduction in corporate staffing levels in 2004 100 positions in North America 150 positions in Europe • Sappi Fine Paper restructuring Streamlined reporting lines Europe and US CEOs report to Group CEO Coordination functions retained Closure of London Sappi Fine Paper office • US$13
Slide 13: Cash Flow Summary
Cash Flow Summary Cash Generated by Operations (US$ million) 300 250 200 150 100 50 0 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 13
Slide 14: Capital Expenditure
Capital Expenditure Capex vs Depreciation* (US$ million) Capex Depreciation % (Right-hand scale) 400 100% 352 300 335 80% 310 311 293 300 296 247 320 200 234 221 60% 180 100 40% 0 20% 1998 1999 2000 2001 2002 2003 *Capex on fixed assets (excludes forests), depreciation excludes fellings and amortisa
Slide 15: Balance Sheet Summary
Balance Sheet Summary Net Debt to Total Capitalisation 45% 40% 35% 30% 25% 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 15
Slide 16: Exchange Rates
Exchange Rates Rand / US$ Exchange Rate* 12 10 10.5 • Q4 Rand strength: 9.7 8 8.4 +42% vs LY 7.6 7.4 +3% vs LQ 6 6.9 4 • Current +6% vs Q4 4Q02 1Q03 2Q03 3Q03 4Q03 7-Nov- 03 US$ / EUR Exchange Rate* 1.2 1.12 1.13 1.15 • Q4 EUR strength: 1.0 1.07 0.98 1.00 +15% vs LY 0.8 +1% vs LQ 0.6 • Current +2% v
Slide 17: Divisional Detail: Sappi Fine Paper
Divisional Detail Sappi Fine Paper Q4 02 Q3 03 Q4 03 2002 2003 Sales (US$ million) 905 874 917 3,156 3,557 Tons Sold ('000) 1,034 925 1,020 3,653 3,916 Price / Ton (US$) 875 945 899 864 908 Cost / Ton* (US$) 800 912 869 801 860 Op. Income (US$ million) 78 30 31 230 190 * Sales less operating income
Slide 18: Divisional Detail: Sappi Fine Paper Europe
Divisional Detail Sappi Fine Paper Europe Q4 02 Q3 03 Q4 03 2002 2003 Sales (US$ million) 459 481 485 1,744 1,903 Tons Sold ('000) 560 546 570 2,180 2,233 Price / Ton (US$) 820 881 851 800 852 Price / Ton (EUR) 832 784 751 871 789 Cost / Ton* (EUR) 736 766 720 762 742 Op. Income (US$ million) 53 11
Slide 19: Divisional Detail: Sappi Fine Paper North America
Divisional Detail Sappi Fine Paper North America Q4 02 Q3 03 Q4 03 2002 2003 Sales (US$ million) 388 319 358 1,197 1,384 Tons Sold ('000) 398 301 371 1,163 1,383 Price / Ton (US$) 975 1,060 965 1,029 1,001 Cost / Ton* (US$) 937 1,030 951 1,047 970 Op. Income (US$ million) 15 9 5 (21) 43 * Sales less
Slide 20: Divisional Detail: Sappi Fine Paper South Africa
Divisional Detail Sappi Fine Paper South Africa Q4 02 Q3 03 Q4 03 2002 2003 Sales (US$ million) 58 74 74 215 270 Tons Sold ('000) 76 78 79 310 300 Price / Ton (US$) 763 949 937 694 900 Price / Ton (ZAR) 7,999 7,243 6,919 7,310 7,497 Cost / Ton* (ZAR) 6,620 6,265 6,358 6,154 6,525 Op. Income (US$ mil
Slide 21: Divisional Detail: Sappi Forest Products
Divisional Detail Sappi Forest Products Q4 02 Q3 03 Q4 03 2002 2003 Sales (US$ million) 147 188 206 573 742 Tons Sold ('000) 605 671 749 2,434 2,759 Price / Ton (US$) 243 280 275 235 269 Price / Ton (ZAR) 2,547 2,139 2,032 2,481 2,240 Cost / Ton* (ZAR) 1,888 1,934 1,815 1,871 1,935 Op. Income (US$ m
Slide 22: Markets: Europe and US CWF Apparent Consumption
Markets Europe + US Industry CWF Apparent Consumption* (‘000 metric tons) • Europe Sep. qtr: +2% vs LY 1,200 +4% vs LQ • US Sep. qtr: -6% vs LY 1,100 +9% vs LQ 1,000 900 800 700 2000 2001 2002 2003 600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Cepifine, AFPA *Total shipments by manufac
Slide 23: Markets: Germany CWF Price Development
Markets Germany CWF Price Development 1,300 Germany 100gsm Sheets (€/ton) 1,200 Germany 100gsm Reels (€/ton) 1,100 1,000 900 800 700 600 500 Sep-03 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Source: RISI, Pulp & Paper This Week 23
Slide 24: Markets: US CWF Price Development
Markets US CWF Price Development (#3 60lb rolls, US$/short ton) 1,300 1,200 1,100 1,000 900 800 700 600 500 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Oct-03 Source: RISI, Pulp & Paper Week 24
Slide 25: Markets: CWF Share of Total Coated Paper Consumption
Markets CWF Share of Total Coated Paper Consumption* 56% 54% 52% 50% 48% 46% 44% 42% 40% Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Source: Cepifine, AFPA *Europe + US combined consumption of coated woodfree and coated woodcontaining paper 25
Slide 26: Markets: European CWF Consumption vs OECD Indicator
Markets European CWF Consumption yoy % change vs OECD Composite Leading Indicator* Europe CWF Consumption - 6MMA (left-hand scale) 40 OECD Composite Leading Indicator* - Europe (right-hand scale) 20 30 15 20 10 10 5 0 0 -10 -5 -20 -10 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Se
Slide 27: Markets: USA CWF Shipments vs OECD Indicator
Markets USA CWF Shipments yoy % change vs OECD Composite Leading Indicator* USA CWF Shipments - 6MMA (left-hand scale) 20 OECD Composite Leading Indicator* - USA (right-hand scale) 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -20 -15 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep
Slide 28: Markets: World Producer CWF Inventories
Markets World Producer CWF Inventories* (days of supply) 55 50 45 40 35 30 2000 2001 2002 2003 25 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: AFPA *Days of supply calculated on 6 month average shipments 28
Slide 29: Outlook
Outlook • Additional curtailment and major maintenance shuts in Q1 2004 • Q1 earnings expected to be weaker than prior quarter • Early signs of market improvement • Earnings expected to improve after Q1 29