Sappi Limited · JSE:SAP
Sappi — FY2015 Earnings Presentation
38 slides from Sappi's earnings presentation, Nov 12, 2015
Slide 1: Q4 and Full Year 2015 financial results
Q4 and Full Year 2015 financial results 12 November 2015 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
Summary sappi Inspired by life
Slide 4: Highlights
Highlights Q4 FY15 EPS ex-special items 16 US cents (Q4 FY14 12 US cents) EBITDA ex-special items US$201m (Q4 FY14 US$200m) Profit for the period $83m (Q4 FY14 US$68m) FY 2015 EPS ex-special items 34 US cents (FY14 22 US cents) EBITDA ex-special items US$625m (FY14 US$658m) Profit for th
Slide 5: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 200 201 200 171 170 136 159 150 US$ million 155 124 147 145 140 104 126 95 109 100 74 70 88 67 67 60 43 50 38 5 0 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 EBITDA Operating profit ex-items
Slide 6: EBITDA Bridge
EBITDA Bridge* Q4 FY14 vs. Q4 FY15 Sales revenue Variable & delivery Fixed costs 340 320 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0 200 16 92 (236) (25) 147 (17) 56 (32) 201 Q4 FY14 Sales volume Price & mix Exchange rate Variable & Exchange rate Fixed costs Exchange rate Other Q4 FY15
Slide 7: Product contribution split - LTM
Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Paper Specialised 55% cellulose Specialised 65% Paper cellulose 35% 45% 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 250 5.0 4.5 217 211 200 4.0 201 200 194 3.5 171 170 159 150 3.0 US$ million 155 150 147 145 140 2.5 126 109 100 2.0 88 1.5 50 1.0 0.5 0 0.0 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 EBIT
Slide 9: Maturity profile
Maturity profile Fiscal years 600 513 504 Includes 456 500 US$400m bond EUR450m bond 400 343 US$221m bond US$ million US$350m bond 300 221 200 82 100 56 54 36 65 0 2016 2017 2018 2019 2020 2021 2022 2032 Cash Short-term SPH term debt SSA RCF Securitisation 9
Slide 10: Capex development
Capex development 600 500 400 US$ million 300 200 100 0 2012 2013 2014 2015 2016 Estimate Maintenance Efficiency 10
Slide 11: Divisional overviews
Divisional overviews — ? pat = ©
Slide 12: Global paper market trends
Global paper market trends Supply and demand Strong Dollar causes shifts in trade flows Coated paper capacity shuts/conversions continue in Europe and NA Mechanical paper under significant pressure Selling prices and input costs CWF and CM sales prices moving up in Europe Fuel oil and
Slide 13: Global specialised cellulose market trends
Global specialised cellulose market trends Supply and demand Swing capacity leaves supply situation balanced for now Underlying demand trends still positive Selling prices and input costs Commodity grade DWP prices rising Prices for VSF and cotton stable, oil-based polyester still low
Slide 14: Sappi Europe
Sappi Europe Demand development** 100 12% CWF CM EBITDA* EBITDA Margin* 2014 v 2013 15 v 14 16 v 15 17 v 16 0.0% 10% 80 -1.0% 8% 60 US$ million -2.0% 6% -3.0% 40 4% -4.0% 20 2% -5.0% 0 0% Forecast -6.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15 FY15 FY15
Slide 15: Sappi North America
Sappi North America Demand development** 60 16% 2014 v 2013 15 v 14 16 v 15 17 v 16 EBITDA* EBITDA Margin* 2.0% 14% CWF 50 1.0% 12% 0.0% 40 10% US$ million -1.0% 30 8% -2.0% 6% 20 -3.0% 4% Forecast -4.0% 10 2% -5.0% 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -6.0% FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY
Slide 16: Sappi Southern Africa
Sappi Southern Africa Staple grade dissolving pulp (US$/ton)** 100 30% 900 EBITDA* EBITDA Margin* 25% 880 80 20% 860 60 US$ million 15% 840 40 10% 820 20 5% 800 0 0% 780 Nov-14 Dec-14 Jan-15 May-15 Jun-15 Oct-14 Sep-14 Feb-15 Mar-15 Oct-15 Apr-15 Jul-15 Aug-15 Sep-15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 17: Strategic focus
Strategic focus fax. Generate \ / Rationalise a _ Accelerate ~ growth in ean investments Intentional _ 2 = = v7 canny Act Ssticnalise Grose EVOIUNIOT \ oat ut ’
Slide 18: 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 Cloquet Mill’s kraft campaigns Somerset Mill’s natural gas conversion Gratkorn Mill’s paper machine and pulp mill upgrade K
Slide 19: 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 Ce
Slide 20: 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 Upgrades to Tugela and Ngodwana pulp mills – additional virgin packaging paper Nano-cellulose pilot plant in The
Slide 21: Focus areas: generate cash to strengthen the balance sheet
Focus areas Generate cash to strengthen the balance sheet Sale of both Enstra and Cape Kraft Mills nearing completion Refinancing and debt reduction has lead to lower finance cost 21
Slide 22: Focus areas: accelerate growth in adjacent businesses
Focus areas Accelerate growth in adjacent businesses from a strong base Over the next two years 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 New business – lignins, sugars Longer t
Slide 23: Outlook
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Slide 24: Outlook
Outlook Improved Q1 FY16 EBITDA and EPS ex-items expected compared to prior year due to better operational performance and lower interest costs. However, the drought in SA may adversely impact production and profitability should normal summer rainfall not be forthcoming. Dissolving wood pulp d
Slide 25: Outlook (cont'd)
Outlook (cont’d) Based on current market conditions, and exchange rates, we expect EBITDA ex-items in FY16 will be higher than FY15. With lower interest costs, offset somewhat by increased cash taxes, we expect strong growth in our EPS ex-items. Capital expenditure is expected to be in line wi
Slide 26: Thank you
Thank you — Inspired by life i
Slide 27: Supplementary information
Supplementary information 27
Slide 28: Coated paper deliveries and prices
Coated paper deliveries and prices Western Europe CWF MCR CWF 100gsm sheets LWC 60gsm offset reels 1.2 1.1 1 0.9 0.8 0.7 0.6 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q1 FY08 Q1 FY09 Q1 FY10 Q1 FY11 Q1 FY12 Q1 FY13 Q1 FY14 Q1 FY15 28 Western Europe shipments including expo
Slide 29: Sappi Europe
Sappi Europe Q4 FY15 Q4 FY14 FY 2015 FY 2014 Tons sold (‘000) 847 811 3,242 3,303 Sales (EURm) 609 561 2,313 2,288 Price/Ton (EUR) 719 692 713 693 Cost/Ton* (EUR) 692 660 694 676 Operating profit excluding special 23 26 64 55 items** (EURm) 29 * Sales less operating profit excluding special items di
Slide 30: 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 1.0 Q1 FY08 = 1 0.9 0.8 0.7 0.6 0.5 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q1 FY08 Q1 FY09 Q1 FY10 Q1 FY11 Q1 FY12 Q1 FY13 Q1 FY14 Q1 FY15 30
Slide 31: Sappi North America
Sappi North America Q4 FY15 Q4 FY14 FY 2015 FY 2014 Tons sold (‘000) 357 375 1,305 1,454 Sales (US$m) 369 390 1,377 1,517 Price/Ton (US$) 1,034 1,040 1,055 1,043 Cost/Ton* (US$) 947 973 1,034 1,031 Operating profit excluding special 31 25 27 18 items** (US$m) 31 * Sales less operating profit excludi
Slide 32: Pulp prices
Pulp prices* 1 100 1 000 900 800 US$/ton 700 600 500 400 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 NBSK Europe (USD) BHKP Europe (USD) 32 * Source: Average weekly FOEX delivered European prices
Slide 33: VSF Market Conditions
32 CCF O/R index 9 CCF inventory index 97 VSE Market Conditions VSF operating rate and inventory of China 32 81 sappi st €7@-OT-ST €2-6-ST ve-8-ST S¢-£-ST G¢-9-ST 9¢-S°ST 9¢-t-ST £¢-€-ST Seca 9¢-T-ST £e-@l-bT Le-TT-bT 8¢C-OL-bT 8¢-6- PT 6¢-8-vT O€-L£-bT O€-9-vT TE-S-bT T-S-bT T-v-vt C-E-bT TE-T-vT T
Slide 34: Textile Fibre Prices
Textile Fibre Prices VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" Index US$/t 3 200 2 800 2 400 2 000 1 600 1 200 800 34
Slide 35: Sappi Southern Africa
Sappi Southern Africa Excluding Sappi Forests Q4 FY15 Q4 FY14 FY 2015 FY 2014 Tons sold (‘000) 482 453 1,768 1,706 Sales (ZARm) 4,375 3,799 15,470 14,454 Price/Ton (ZAR) 9,077 8,386 8,750 8,472 Cost/Ton* (ZAR) 6,905 6,987 7,017 6,936 Operating profit excluding special 1,047 634 3,063 2,620 items** (
Slide 36: Cash flow
Cash flow US$m Q4 FY15 Q4 FY14 FY 2015 FY 2014 Cash generated from operations 181 160 544 566 Movement in working capital 86 153 (11) 34 Net finance costs paid (24) (26) (135) (162) Taxation paid - - (16) (1) Cash generated from operating 243 287 382 437 activities Cash utilised in investing activit
Slide 37: EBITDA and operating profit
EBITDA and operating profit Excluding special items reconciliation to reported operating profit US$m Q4 FY15 Q4 FY14 FY 2015 FY 2014 EBITDA excluding special items* 201 200 625 658 Depreciation and amortisation (65) (76) (268) (312) Operating profit excluding special items* 136 124 357 346 Special i
Slide 38: Thank you
Thank you sappi Inspired by life