Sappi Limited · JSE:SAP
Sappi — Q4 FY2016 Earnings Presentation
41 slides from Sappi's earnings presentation, Nov 10, 2016
Slide 1: Q4 FY16 financial results
Q4 FY16 financial results 10 November 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 FY 2016 EBITDA ex-special items US$739m (FY15 US$625m) Profit for the period US$319m (FY15 US$167m) EPS ex-special items 57 US cents (FY15 34 US cents) Net debt US$1,408m, down US$363m year-on-year Dividend of 11 US cents per share declared Q4 FY16 EBITDA ex-special items US$2
Slide 5: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 Key ratios Q4 Q4 Q4 200 209 FY14 FY15 FY16 201 200 Net Debt/ 145 2.9 2.8 1.9 136 150 LTM EBITDA 124 US$ million Interest Cover 3.6 4.4 7.3 100 EBITDA % 13.3 14.3 15.6 50 ROCE % 15.4 18.7 20.9 0 Q4 FY14 Q4 FY15 Q4 FY16 EBITDA Operating profit 5
Slide 6: EBITDA Bridge
EBITDA Bridge* Q4 FY15 to Q4 FY16 230 220 -6 -2 9 210 Sales revenue 200 26 190 USD million -23 180 4 209 170 201 160 150 140 EBITDA Sales Volume Price & Mix Variable & Exchange Rate Fixed Costs Other EBITDA Q4 FY15 Delivery Costs Q4 FY16 o All variances calculated excluding Sappi Forestry. o “Exchan
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 2 040 3.0 US$ million 1.9 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 1408 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 F
Slide 9: Cumulative cash flow
9 100 300 500 700 900 (500) (300) (100) Oct-12 US$m Jan-13 Apr-13 Cloquet projects Jul-13 completed Ngodwana and Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Cumulative Cash Flow Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Slide 10: Maturity profile
Maturity profile Fiscal years US$m 800 703 700 EURO 350m bond 600 Includes USD 513 400m bond EURO 450m bond 505 500 USD 221m bond 393 400 314 300 221 200 100 65 83 36 0 2017 2018 2019 2020 2021 2022 2023 2032 Cash Short-Term SPH Term Debt Securitisation SSA 10
Slide 11: Capex development
Capex development 600 500 400 US$m 300 200 100 0 2012 2013 2014 2015 2016 2017 Estimate Maintenance Efficiency & Expansion 11
Slide 12: Divisional overviews
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Slide 13: Global paper market trends
Global paper market trends Supply and demand Uncertain macro backdrop leads to decline in consumer confidence and advertising spend Operating rates declining Industry closures/conversions required – CM & SC closures announced Speciality paper demand continues to grow 1-5% Selling prices
Slide 14: Sappi Europe
Sappi Europe W. Europe Flexible Apparent Consumption Forecast** Packaging 100 12% and Label Papers 16 v 15 17 v 16 EBITDA* EBITDA Margin* 0% 10% 80 -1% 8% -2% 60 US$ million -3% 6% -4% 40 4% -5% -6% 20 2% -7% 0 0% -8% Q4 FY13 Q4 FY14 Q4 FY15 Q4 FY16 CWF CM Improved year-on-year performance despite
Slide 15: Sappi North America
Sappi North America N. America Apparent Consumption Forecast** 60 16% 16 v 15 17 v 16 EBITDA* EBITDA Margin* 14% 0% 50 12% 40 -1% 10% US$ million 30 8% -2% 6% 20 4% -3% 10 2% 0 0% -4% Q4 FY13 Q4 FY14 Q4 FY15 Q4 FY16 CWF Market conditions remain challenging – realised paper prices down 5% from last
Slide 16: Global dissolving wood pulp market trends
Global dissolving wood pulp market trends Supply and demand Most swing capacity has entered the market as hardwood paper pulp prices fell Continued strong demand Constrained Cotton Linter Pulp supply – tightening DWP market Selling prices and input costs Spot prices rising alongside cott
Slide 17: Sappi Southern Africa
Sappi Southern Africa Market price - Staple Grade DWP (US$/ton)** 120 35% 1000 EBITDA* EBITDA Margin* 30% 975 100 950 25% 80 925 US$ million 20% 60 900 15% 875 40 10% 850 20 825 5% 800 0 0% Q4 FY13 Q4 FY14 Q4 FY15 Q4 FY16 775 Jan-15 May-15 Jun-15 Nov-15 Dec-15 Jul-15 Aug-15 Sep-15 Jan-16 May-16 Jun-
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: Cost Saving Initiative
Cost Saving Initiative US$100m target from all third-party spend- savings exclude market effects US$13million realised in 2016 in addition to usual CI Initiatives An additional US$50m expected to be realised in FY2017 – to offset lower graphic paper prices Major focus areas: Logistics and
Slide 21: Focus areas: rationalise 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 22: 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 23: Focus areas: generate cash
Focus areas Generate cash to strengthen the balance sheet US$400m 2017 bonds callable in April Sale of both Enstra and Cape Kraft Mills completed Refinancing and debt reduction leads to lower finance cost 23
Slide 24: Focus areas: accelerate growth in adjacent businesses
Focus areas Accelerate growth in adjacent businesses from a strong base We will continue our focus on having a cleaner, stronger balance sheet so that we can then accelerate our growth in adjacent businesses Speciality packaging paper Biomaterials, biochemicals – lignins, sugars Expanded DWP
Slide 25: Outlook
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Slide 26: Outlook
Outlook DWP demand and pricing remains positive Demand and prices for graphic paper have weakened - low input costs are allowing us to maintain margins. Based on current market conditions, and assuming current exchange rates, we expect FY17 EBITDA to be in-line with that of FY16. FY17 capex
Slide 27: Thank you
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Slide 28: Supplementary information
Supplementary information 28
Slide 29: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 800 Key ratios 739 700 FY 14 FY 15 FY 16 658 600 625 Net Debt/ 2.9 2.8 1.9 487 500 LTM EBITDA Interest Cover 3.6 4.4 7.3 US$ million 357 346 400 EBITDA % 10.9 11.6 14.4 300 ROCE % 10.8 12.4 17.5 200 100 0 FY 2014 FY 2015 FY 2016 EBITDA Operating p
Slide 30: EBITDA and operating profit by quarter
EBITDA and operating profit Excluding special items* 250 EBITDA Operating profit ex-items 200 209 201 200 195 145 175 171 136 170 133 US$ million 150 160 124 147 112 145 140 104 97 95 100 109 74 67 60 43 50 0 30 * Refer to the supplementary information in this presentation for a reconciliation of EB
Slide 31: 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 Q3 31 Western
Slide 32: Sappi Europe
Sappi Europe Q4 FY16 Q4 FY15 YTD 16 YTD 15 Tons sold (‘000) 822 847 3,252 3,242 Sales (EURm) 579 609 2,324 2,313 Price/Ton (EUR) 704 719 715 713 Cost/Ton* (EUR) 667 692 678 694 Operating profit excluding 31 23 118 64 special items** (EURm) 32 * Sales less operating profit excluding special items div
Slide 33: 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 34: 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 35: Sappi North America
Sappi North America Q3 FY16 Q3 FY15 YTD 16 YTD 15 Tons sold (‘000) 363 357 1,329 1,305 Sales (US$m) 360 369 1,367 1,377 Price/Ton (US$) 992 1,034 1,029 1,055 Cost/Ton* (US$) 923 947 992 1,034 Operating profit excluding 25 31 49 27 special items** (US$m) 35 * Sales less operating profit excluding spe
Slide 36: Pulp prices
Pulp prices* 1 000 900 US$/ton 800 700 600 NBSK Europe BHKP Europe Commodity DWP 36 • Source: FOEX, CCF group
Slide 37: Textile Fibre Prices
Textile Fibre Prices VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" Index US$/t 2 800 2 400 2 000 1 600 1 200 800 Dec-15 Sep-15 Sep-16 Mar-16 Jun-16 37
Slide 38: Sappi South Africa
Sappi South Africa Excluding Sappi Forests Q4 FY16 Q4 FY15 YTD 16 YTD 15 Tons sold (‘000) 429 482 1,626 1,768 Sales (ZARm) 4,532 4,375 16,799 15,470 Price/Ton (ZAR) 10,564 9,077 10,332 8,750 Cost/Ton* (ZAR) 7,636 6,905 7,558 7,017 Operating profit excluding 1,256 1,047 4,510 3,063 special items** (Z
Slide 39: Cash flow
Cash flow US$m Q4 FY16 Q4 FY15 F 2016 F 2015 Cash generated from operations 191 181 693 544 Movement in working capital 70 86 4 (11) Net finance costs paid (4) (24) (91) (135) Taxation paid (2) - (56) (16) Cash generated from operating activities 255 243 550 382 Cash utilised in investing activities
Slide 40: EBITDA and Operating Profit
EBITDA and Operating Profit Excluding special items reconciliation to reported operating profit US$m Q4 FY16 Q4 FY15 F 2016 F 2015 EBITDA excluding special items* 209 201 739 625 Depreciation and amortisation (64) (65) (252) (268) Operating profit excluding special items* 145 136 487 357 Special Ite
Slide 41: Thank you
Thank you sappl Inspired by life