Sappi Limited · JSE:SAP
Sappi — Q3 FY2016 Earnings Presentation
43 slides from Sappi's earnings presentation, Aug 4, 2016
Slide 1: Q3 FY16 financial results
Q3 FY16 financial results 4 August 2016 Steve Binnie Chief Executive Officer Sappi Limited
Slide 2: Forward-looking statements and Regulation G
Forward-looking statements and Regulation G 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 e
Slide 3: Summary
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Slide 4: Highlights
Highlights Q3 FY16 EBITDA ex-special items US$160m (Q3 FY15 US$109m) Profit for the period US$32m (Q3 FY15 US$4m) EPS ex-special items 11 US cents (Q3 FY15 2 US cents) Net debt US$1,583m, down US$334m year-on-year 4
Slide 5: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 180 Key ratios 160 Q3 Q3 Q3 160 140 FY14 FY15 FY16 140 120 Net Debt/ 3.7 3.1 2.2 97 LTM EBITDA 109 100 US$ million 80 Interest Cover 3.4 3.9 7.0 67 60 EBITDA % 9.4 8.6 13.1 43 40 ROCE % 7.8 5.7 14.0 20 0 Q3 FY14 Q3 FY15 Q3 FY16 EBITDA Operating pr
Slide 6: EBITDA Bridge
EBITDA Bridge* Q3 FY15 to Q3 FY16 180 -4 -9 160 21 140 50 120 USD million Sales revenue 100 -15 160 8 80 109 60 40 EBITDA Sales Volume Price & Mix Variable & Exchange Rate Fixed Costs Other EBITDA Q3 FY15 Delivery Costs Q3 FY16 o All variances calculated excluding Sappi Forestry. o “Exchange rate” r
Slide 7: Product contribution split - LTM
Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Specialised Paper cellulose 54% Specialised 61% Paper cellulose 39% 46% 7 * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profi
Slide 8: Net debt/EBITDA development
Net debt/EBITDA development 2 600 4.6 5.0 4.5 2 400 2 380 4.0 2 286 2 200 2 248 3.5 2 000 2.2 2 040 3.0 US$ million 1 946 1 917 1 916 1 800 2.5 1 771 1 734 2.0 1 600 1 652 1583 1.5 1 400 1.0 1 200 0.5 1 000 0.0 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 N
Slide 9: Cumulative Cash Flow
9 100 300 500 700 (500) (300) (100) Oct-12 US$m Dec-12 Feb-13 Apr-13 Jun-13 Cloquet projects completed Aug-13 Ngodwana and Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Cumulative Cash Flow Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16
Slide 10: Maturity profile
Maturity profile Fiscal years 600 542 512 500 Includes EUR 350m bond 500 US$400m bond EUR450m bond 389 400 US$221m bond US$ million 309 300 221 200 76 100 33 33 65 0 2016 2017 2018 2019 2020 2021 2022 2023 2032 Cash Short-term SPH term debt SSA Securitisation 10
Slide 11: Capex development
Capex development 600 500 400 US$ million 300 200 100 0 2012 2013 2014 2015 2016 Estimate Maintenance Efficiency 11
Slide 12: Divisional overviews
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Slide 13: Global paper market trends
Global paper market trends Supply and demand Uncertain macro backdrop leads to decline in consumer confidence and advertising spend Operating rates declining Industry closures/conversions required in coming periods Selling prices and input costs Selling prices declining – driven by opera
Slide 14: Sappi Europe
Sappi Europe W. Europe Flexible Apparent Consumption Forecast** Packaging 100 12% and Label Papers 16 v 15 17 v 16 EBITDA* EBITDA Margin* 0% 10% 80 -1% 8% 60 -2% US$ million 6% -3% 40 4% -4% 20 2% -5% 0 0% -6% Q3 FY13 Q3 FY14 Q3 FY15 Q3 FY16 CWF CM Improved year-on-year performance despite soft de
Slide 15: Sappi North America
Sappi North America N. America Apparent Consumption Forecast** 30 6% 16 v 15 17 v 16 EBITDA* EBITDA Margin* 0% 5% 20 4% -1% US$ million 3% -2% 10 2% -3% 1% 0 0% -4% Q3 FY13 Q3 FY14 Q3 FY15 Q3 FY16 CWF Market conditions remain challenging – realised paper prices down 5% from last year DWP busines
Slide 16: Global specialised cellulose market trends
Global specialised cellulose market trends Supply and demand Most swing capacity has entered the market as hardwood paper pulp prices fell Continued strong demand Selling prices and input costs Spot prices rising alongside cotton and VSF prices Currency fluctuations generally favour prod
Slide 17: Sappi Southern Africa
Sappi Southern Africa Market price - Staple Grade DWP (US$/ton)** 100 35% 920 EBITDA* EBITDA Margin* 30% 900 80 25% 880 60 US$ million 20% 860 15% 840 40 10% 820 20 5% 800 0 0% 780 Jan-15 May-15 Nov-15 Dec-15 Jun-15 Jan-16 May-16 Jun-16 July-16 Feb-15 Mar-15 Oct-15 Apr-15 Jul-15 Aug-15 Sep-15 Feb-16
Slide 18: Strategic focus
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Slide 19: Focus areas: Achieve cost advantages
Focus areas Achieve cost advantages We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages Saiccor and Tugela turbines – FY2016/17 Ngodwana boiler upgrade for future debottlecking – Q2 FY2016 Group procurement initiatives >$100m annually by 2020
Slide 20: Focus areas: Rationalise and optimise declining businesses
Focus areas Rationalise and optimise declining businesses 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 Ev
Slide 21: Focus areas: Grow through moderate investments
Focus areas Grow through moderate investments We will make smaller investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers Additional packaging at Ngodwana and Tugela Electricity opportunities in South Africa Debottlenecking of Saicc
Slide 22: Focus areas: Generate cash to strengthen balance sheet
Focus areas Generate cash to strengthen the balance sheet US$400m 2017 bonds callable in April Sale of both Enstra and Cape Kraft Mills completed Refinancing and debt reduction leads to lower finance cost 22
Slide 23: Focus areas: Accelerate growth in adjacent businesses
Focus areas Accelerate growth in adjacent businesses from a strong base We will continue our focus on having a cleaner, stronger balance sheet so that we can then accelerate our growth in adjacent businesses Speciality packaging paper Biomaterials, biochemicals – lignins, sugars Expanded DWP
Slide 24: Outlook
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Slide 25: Outlook
Outlook Demand for DWP remains positive, but drought conditions in SA may force us to curtail production – swing capacity at Cloquet expected to mitigate impact Graphic paper markets have weakened but low input costs are allowing us to maintain margins. Q4 orders have been robust Based on curr
Slide 26: Thank you
Thank you — moro) Inspired by life |
Slide 27: Supplementary information
Supplementary information 27
Slide 28: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 600 Key ratios FYTD FYTD FYTD 530 500 ‘14 ’15 ‘16 458 400 Net Debt/ 424 342 3.7 3.1 2.2 LTM EBITDA US$ million 300 Interest Cover 3.4 3.9 7.0 222 221 200 EBITDA % 10.1 10.6 13.9 ROCE % 8.7 9.8 16.4 100 0 FYTD '14 FYTD '15 FYTD '16 EBITDA Operating
Slide 29: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 200 201 200 195 175 171 136 170 133 US$ million 150 160 124 147 112 145 140 104 97 95 100 109 74 67 60 43 50 0 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 EBITDA Operating profit ex-items 29 * Refer
Slide 30: Coated paper deliveries and prices
Coated paper deliveries and prices Western Europe CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices 1.2 1.1 Q1 2008 = 1 1.0 0.9 0.8 0.7 0.6 0.5 Q1 08 Q2 Q3 Q4 Q1 09 Q2 Q3 Q4 Q1 10 Q2 Q3 Q4 Q1 11 Q2 Q3 Q4 Q1 12 Q2 Q3 Q4 Q1 13 Q2 Q3 Q4 Q1 14 Q2 Q3 Q4 Q1 15 Q2 Q3 Q4 Q1 16 Q2 30 Western Eur
Slide 31: W. Europe CWF Shipments
W. Europe CWF Shipments Sappi fiscal quarters 1 900 1 800 ‘000 Metric tons 1 700 1 600 1 500 1 400 1 300 1 200 Q1 Q2 Q3 Q4 2013 2014 2015 2016 31 Western Europe shipments including export. Source: Cepifine, Cepiprint
Slide 32: Sappi Europe
Sappi Europe Q3 FY16 Q3 FY15 YTD 16 YTD 15 Tons sold (‘000) 760 792 2,430 2,395 Sales (EURm) 540 567 1,745 1,704 Price/Ton (EUR) 711 716 718 711 Cost/Ton* (EUR) 678 710 682 694 Operating profit excluding 25 5 87 41 special items** (EURm) 32 * Sales less operating profit excluding special items divid
Slide 33: Coated paper prices and shipments
Coated paper prices and shipments United States Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices 1.2 1.1 Q1 FY08 = 1 1.0 0.9 0.8 0.7 0.6 0.5 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 33 * U
Slide 34: Sappi Packaging and Speciality Papers
Sappi Packaging and Speciality Papers Global production sites Sappi Alfeld (Germany) Sappi Maastricht (Netherlands) Sappi Ehingen (Germany) Sappi Cloquet (USA) Flexible Packaging, Label, SBB Label Paper – LusterCote® Folding Box Board - atelier™ Topliner - Fusion® Board, Topliner and Release Liner S
Slide 35: Markets and Growth rates
Markets and Growth rates Global Market size – Speciality packaging Flexible Packaging Release Liner Rigid Packaging Containerboard Functional Papers and Label Papers o C1S papers o CCK graphic arts o SBS printing and o Coated White o Barrier and grease o 1.2 mtons o 300 ktons converting Topliner res
Slide 36: NA CWF Apparent Consumption
NA CWF Apparent Consumption Sappi fiscal quarters 1 100 1 000 ‘000 short tons 900 800 700 Q1 Q2 Q3 Q4 2013 2014 2015 2016 36 *Source: AF&PA
Slide 37: Sappi North America
Sappi North America Q3 FY16 Q3 FY15 YTD 16 YTD 15 Tons sold (‘000) 305 294 966 948 Sales (US$m) 325 313 1,007 1,008 Price/Ton (US$) 1,066 1,065 1,042 1,063 Cost/Ton* (US$) 1,072 1,088 1,018 1,068 Operating profit excluding (2) (7) 24 (4) special items** (US$m) 37 * Sales less operating profit exclud
Slide 38: Pulp prices
Pulp prices* 1 000 900 US$/ton 800 700 600 NBSK Europe BHKP Europe Commodity DWP 38 • Source: FOEX, CCF group
Slide 39: Textile Fibre Prices
Textile Fibre Prices VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" Index US$/t 2 800 2 400 2 000 1 600 1 200 800 Feb-16 Jul-15 May-16 Jul-16 Nov-15 Dec-15 Oct-15 Aug-15 Sep-15 Jan-16 Mar-16 Apr-16 Jun-16 39
Slide 40: Sappi South Africa
Sappi South Africa Excluding Sappi Forests Q3 FY16 Q3 FY15 YTD 16 YTD 15 Tons sold (‘000) 407 436 1,197 1,286 Sales (ZARm) 4,097 3,798 12,267 11,095 Price/Ton (ZAR) 10,066 8,711 10,248 8,627 Cost/Ton* (ZAR) 7,486 7,477 7,530 7,059 Operating profit excluding 1,050 538 3,254 2,016 special items** (ZAR
Slide 41: Cash flow
Cash flow US$m Q3 16 Q3 15 YTD 16 YTD 15 Cash generated from operations 144 90 502 363 Movement in working capital 56 16 (66) (97) Net finance costs paid (29) (21) (87) (111) Taxation paid (32) (12) (54) (16) Cash generated from operating activities 139 73 295 139 Cash utilised in investing activiti
Slide 42: EBITDA and operating profit reconciliation
EBITDA and operating profit Excluding special items reconciliation to reported operating profit US$m Q3 FY16 Q3 FY15 YTD 16 YTD 15 EBITDA excluding special items* 160 109 530 424 Depreciation and amortisation (63) (66) (188) (203) Operating profit excluding special items* 97 43 342 221 Special Items
Slide 43: Thank you
Thank you sappi Inspired by life