Sappi Limited · JSE:SAP
Sappi — Q2 2014 Earnings Presentation
35 slides from Sappi's earnings presentation, May 12, 2014
Slide 1: 2nd Quarter 2014 Financial Results Presentation
2nd Quarter 2014 Financial Results Presentation 12 May 2014
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 | Q2 2014 Results | 12 May 2014
Slide 4: Q2 2014 Summary
4 Q2 2014 Summary • Strong cash generation • Good performance from South African business • Profit for the period US$32m (Q2 2013 US$2m) • EPS 6 US cents (Q2 2013 0 US cents) • EBITDA excluding special items US$171m (Q2 2013 US$126m) • Net debt US$2,248m (Q1 2014 US$2,380m) | Q2 2014 Results |12 May
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 19 in our Q2 2014 Results booklet (available on www.sappi.com) for a definition of special items. **2013 figures restate
Slide 6: Q2 Product Contribution Split
6 Q2 Product Contribution Split EBITDA excluding special items* Operating Profit excluding special items* *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Profit and page 19 in our Q2 2014 Results booklet (available on www.sappi.com) f
Slide 7: Net Debt Development
7 Net Debt Development $510m Specialised Cellulose Capex Projects US$132m Net cash generated USD million ‐ Targeted Net Debt Level *F2013 and Q1 14 figures restated per adoption of IFRS 10 ‐ Consolidated Financial Statements | Q2 2014 Results |12 May 2014
Slide 8: Maturity profile – Fiscal years
8 Maturity profile – Fiscal years Includes Includes €250m Bond US$400m Bond US$300m US$221m Bond Bond US$350m Bond | Q2 2014 Results |12 May 2014
Slide 9: Divisional Overviews
Divisional Overviews | Q2 2014 Results | 12 May 2014
Slide 10: Sappi Europe
10 Sappi Europe • Operating results continued to improve in the quarter reflecting strong cost control, with declines in both fixed and variable costs outpacing declines in volumes and prices. • Graphic paper markets are still difficult, albeit volumes are declining at a slower rate than we experien
Slide 11: Sappi North America
11 Sappi North America • Graphic paper markets have been more challenging than we expected throughout fiscal 2014; nevertheless the NA business returned to profitability this quarter from the prior quarter loss, largely due to improved performance from the specialities paper businesses, and lower fi
Slide 12: Sappi Southern Africa
12 Sappi Southern Africa • Excellent performance and an improvement to both the prior year and prior quarter on higher volumes and prices across all major product groups, and notwithstanding the annual maintenance shut at Ngodwana. • SA Specialized Cellulose business achieved another solid quarter,
Slide 13: Global Paper Market Trends
13 Global Paper Market Trends Supply & Demand Paper is still an important part of media mix for advertisers Demand is mixed regionally, globally flat‐to‐down Costs & Prices Internal cost control has been excellent – more to come Paper prices weak on overcapacity and declining demand Strategy Continu
Slide 14: Global Specialised Cellulose Market Trends
14 Global Specialised Cellulose Market Trends Supply & Demand Supply (+16%) grew faster than demand (+14%) in 2013 Capacity additions expected to slow or not materialize Costs & Prices Prices under pressure on downstream pricing weakness Our 1.3 million tons are among the world’s lowest‐cost Rand gi
Slide 15: Strategic Focus
Strategic Focus | Q2 2014 Results | 12 May 2014
Slide 16: Strategic Focus
16 Strategic Focus 3 themes: • Focused, low cost paper businesses with reasonable margins and strong cash flows • Growth in profitable specialised cellulose based solutions and other high margin businesses • Healthy balance sheet Accelerate our drive toward increased profitability, earnings growth,
Slide 17: Focus Areas
17 Focus Areas Focused, low cost paper businesses • North America – paper business maintains firm market share – industry dynamics disruptive • Europe – industry dynamics won’t improve without intervention • Continues gradual improvement • Significantly reduce graphic paper exposure with lower cost
Slide 18: Focus Areas
18 Focus Areas Growth in Specialised Cellulose and higher margin businesses • Demand for commodity DWP remains very strong • All three DWP mills running full On track • Alfeld conversion completed & product mix improving Healthy Balance Sheet • Net debt level has peaked, target US$2bn net debt level
Slide 19: Outlook
Outlook | Q2 2014 Results | 12 May 2014
Slide 20: Outlook
20 Outlook • Continued emphasis on lowering cost and optimizing sales in both coated paper and dissolving wood pulp markets have enabled us to compete effectively – these actions will continue in all regions to improve our competitiveness and enable us to reduce debt. • Demand in the Specialized Cel
Slide 21: Outlook (cont'd)
21 Outlook (cont’d) • The 3rd quarter is seasonally weaker in both NA and Europe, and scheduled maintenance shuts during the quarter in all three regions will also impact the results in the 3rd quarter, leading to a weaker operating performance than the past quarter. We expect the result to be subst
Slide 22: Q&A
Q&A | Q2 2014 Results | 12 May 2014
Slide 23: Supplementary Information
Supplementary Information | Q2 2014 Results | 12 May 2014
Slide 24: W. Europe Coated Paper Deliveries & Prices
24 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 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. Export – S
Slide 25: Sappi Fine Paper Europe
25 Sappi Fine Paper Europe Q2 14 Q2 13 1H 14 1H 13 Tons Sold ('000) 873 882 1,709 1,731 Sales (€) 603 624 1,184 1,240 Price / Ton (€) 691 707 693 716 Cost / Ton* (€) 675 709 683 708 Operating profit ex items (€m) ** 14 (1) 17 15 * Sales less operating profit excluding special items divided by tons s
Slide 26: US Coated Paper Prices and Shipments
26 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 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 US Industry Shipments and total U
Slide 27: Sappi Fine Paper North America
27 Sappi Fine Paper North America Q2 14 Q2 13 1H 14 1H 13 Tons Sold ('000) 369 332 717 666 Sales ($'m) 382 341 747 687 Price / Ton ($) 1,035 1,027 1,042 1,032 Cost / Ton* ($) 1,022 973 1,039 983 Operating profit ex items** ($'m) 5 18 2 32 * Sales less operating profit excluding special items divided
Slide 28: Pulp Prices - spread widening
28 Pulp Prices* - spread widening US$/ton $923/ton $759/ton * Source: Average weekly FOEX delivered European prices | Q2 2014 Results |12 May 2014
Slide 29: Sappi Southern Africa (ex-forestry)
29 Sappi Southern Africa (ex-forestry) Q2 14 Q2 13 1H 14 1H 13 Tons Sold ('000) 427 387 830 767 Sales (ZAR'm) 3,746 2,850 7,062 5,546 Price / Ton (ZAR) 8,773 7,364 8,509 7,231 Cost / Ton* (ZAR) 6,981 6,897 6,903 6,633 Operating profit ex items** (ZAR'm) 765 181 1,333 459 * Sales less operating profi
Slide 30: Cash Flow - US$m
30 Cash Flow - US$m Q2 14 Q2 13 1H 14 1H 13 Cash generated from operations 152 115 288 265 - Movement in working capital 59 (6) (90) (136) - Net finance costs paid (30) (28) (86) (87) - Taxation paid 4 (3) 3 (13) Cash generated from operating activities 185 78 115 29 Cash utilised in investing activ
Slide 31: EBITDA recon to reported operating profit
31 EBITDA recon to reported operating profit* Q2 14 Q2 13 1H 14 1H 13 EBITDA ex-items 171 126 318 285 Depreciation and Amortisation (76) (88) (163) (177) Operating Profit ex-items 95 38 155 108 Special Items - gains (losses) 4 38 14 35 Plantation price fair value adj. 5 96 13 104 Net restructuring p
Slide 32: Chinese VSF Production ('000 tons)
32 Chinese VSF Production (‘000 tons) Source: RISI | Q2 2014 Results |12 May 2014
Slide 33: DWP supply (+16%) growing faster than demand
33 DWP supply (+16%) growing faster than demand (+14%) Source: PPPC | Q2 2014 Results |12 May 2014
Slide 34: Market Prices in China (US$/ton)
34 Market Prices in China (US$/ton) Source: CCF | Q2 2014 Results |12 May 2014
Slide 35: Thank You
Thank You