Sappi Limited · JSE:SAP
Sappi — Q2 2003 Earnings Presentation
33 slides from Sappi's earnings presentation, May 8, 2003
Slide 1: Second quarter 2003 results for the quarter ended March 2003
Second quarter 2003 Results for the quarter ended March 2003 May 8, 2003
Slide 2: Forward looking statements; Regulation G disclosure
Forward looking statements 2 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, trend
Slide 3: Second Quarter Highlights
3 Second Quarter Highlights • EPS up on prior quarter • Markets remain tough • Euro strength buffers performance • Rand strength squeezes SA Margins
Slide 4: Earnings Summary: Volume and Price
4 Earnings Summary Sales Volume (‘000 tons) 2000 • Volume: +14% vs LY 1500 1708 +7% vs LQ 1602 1494 • Forest Products strong 1000 • Cloquet included in N. America 500 • Europe in line with market 0 Q2/02 Q1/03 Q2/03 Average Price (US$/ton) 800 • Price: +10% vs LY 600 +1% vs LQ 636 641 400 583 • Curr
Slide 5: Earnings Summary: Sales and Operating Profit
5 Earnings Summary Sales (US$ million) 1200 1095 • Sales: +26% vs LY 900 1019 871 +7% vs LQ 600 • Fine paper +23% vs LY 300 • Forest Products +39% vs LY 0 Q2/02 Q1/03 Q2/03 Operating Profit (US$ million) 125 • Op. Profit: -3% vs LY 100 105 102 +11% vs LQ 75 92 • Currency impact on margins 50 • CWF p
Slide 6: Earnings Summary
6 Earnings Summary Q2/02 Q1/03 Q2/03 Sales 871 1,019 1,095 Cost of Sales 705 846 912 SG&A 61 81 81 Operating Profit 105 92 102 Non-Trading Loss (Profit) 7 - (1) Net Finance Costs 13 24 27 Tax 26 16 18 Net Profit 59 52 58 Basic EPS 0.25 0.23 0.25 Loss on disposal of fixed assets 1 - (1) Mill closure
Slide 7: Ratio Performance vs Targets
7 Ratio Performance vs Targets* Operating Profit to Sales (%) Net Profit to Equity1 (ROE) 16% 20% Target Range: 12-15% 12% 15% 17.8% Target: 11% 12.1% 8% 9.0% 9.3% 10% 12.5% 13.0% 4% 5% 0% 0% Q2/02 Q1/03 Q2/03 Q2/02 Q1/03 Q2/03 Operating Profit to Net Assets (RONA) 16% 15.1% Target: 12% 12% 8% 9.6%
Slide 8: Cash Flow Summary
8 Cash Flow Summary Cash Generated By Operations (US$ million) 200 183 194 • Cash generated: +6% vs LY 150 176 +10% vs LQ 100 • Working capital increase - 50 primarily currency driven 0 Q2/02 Q1/03 Q2/03 Capex1 vs Depreciation (US$ million) 400 Capex Depreciation 300 311 335 320 310 293 300 200 247
Slide 9: Balance Sheet Summary
9 Balance Sheet Summary Net Debt (US$ million) 2000 • BBB (stable) S&P rating 1500 • US$ 65 million dividend paid 1525 1509 1000 1194 • Weaker US$ - negative 500 translation impact 0 Q2/02 Q1/03 Q2/03 Net Debt / Total Capitalisation (%) 50% Target range: 25-50% • Within target range 40% 30% 36.6% 36
Slide 10: Strategy Review
Strategy Review sappl The word for fine paper
Slide 11: Strategy - Global
11 Strategy - Global Sales By Source1 (US$) Assets2 (US$) 44% 38% 26% 22% 36% 34% Operating Profit1 (US$) Europe North America 43% 42% Southern Africa 15% 1 2 For the 6 months ended March 31, 2003 Net operating assets as at March 31, 2003
Slide 12: Strategy - Global
12 Strategy - Global Sales By Destination1 (US$) Ownership2 39% 41% 14% 12% 9% 36% 49% North America Europe Southern Africa Asia & Other 1 2 For the 6 months ended March 31, 2003 As per March 2003 share register
Slide 13: Strategy - Focused
13 Strategy - Focused Sales By Product Group1 (US$) Coated fine paper Uncoated fine paper 66% 6% 8% Coated specialities 11% Pulp 8% Commodity paper 1% Other 1 For the 6 months ended March 31, 2003
Slide 14: Strategy - Pulp Integrated
14 Strategy - Pulp Integrated Sappi Group Pulp Balance1 (tons) 1200 Net sales Net Purchases 900 600 300 0 -300 -600 -900 Fine Paper Fine Paper Fine Paper Forest Sappi Europe N. America S. Africa Products Group 1 Based on capacities listed in Sappi 2002 20-F
Slide 15: Strategy - Low Cost & Using Capital Efficiently
15 Strategy - Low Cost & Using Capital Efficiently 10 Years of Restructuring: • Sold 6 businesses • Closed 4 mills • Shut 12 paper machines • Shut 1 pulp mill
Slide 16: Divisional Detail
Divisional Detail sappl The word for fine paper
Slide 17: Divisional Detail - Fine Paper
17 Divisional Detail - Fine Paper Q2/02 Q1/03 Q2/03 Sales (US$ million) 734 862 904 Tons Sold ('000) 873 967 1,004 Price / Ton (US$) 841 891 900 EBITDA (US$ million) 126 133 147 Op. Income (US$ million) 62 57 72
Slide 18: Divisional Detail - Fine Paper Europe
18 Divisional Detail - Fine Paper Europe Q2/02 Q1/03 Q2/03 Sales (US$ million) 433 434 503 Tons Sold ('000) 559 525 592 Price / Ton (US$) 775 827 850 Price / Ton (EUR) 885 827 795 EBITDA (US$ million) 101 82 83 Op. Income (US$ million) 65 39 42
Slide 19: Divisional Detail - Fine Paper North America
19 Divisional Detail - Fine Paper North America Q2/02 Q1/03 Q2/03 Sales (US$ million) 251 369 338 Tons Sold ('000) 234 368 343 Price / Ton (US$) 1,073 1,003 985 EBITDA (US$ million) 15 40 51 Op. Income (US$ million) (10) 9 20
Slide 20: Divisional Detail - Fine Paper South Africa
20 Divisional Detail - Fine Paper South Africa Q2/02 Q1/03 Q2/03 Sales (US$ million) 50 59 63 Tons Sold ('000) 80 74 69 Price / Ton (US$) 625 797 913 Price / Ton (ZAR) 7,159 7,755 7,628 EBITDA (US$ million) 10 11 13 Op. Income (US$ million) 7 9 10
Slide 21: Divisional Detail - Forest Products
21 Divisional Detail - Forest Products Q2/02 Q1/03 Q2/03 Sales (US$ million) 137 157 191 Tons Sold ('000) 621 635 704 Pulp & Paper Price/Ton (US$) 373 430 451 Pulp & Paper Price/Ton (ZAR) 4,271 4,185 3,765 EBITDA (US$ million) 59 56 44 Op. Income (US$ million) 42 34 27
Slide 22: Divisional Detail - Operating Profit to Sales per Division
22 Divisional Detail Operating Profit to Sales per Division 35% 30% 25% 20% Forest Products 15% Fine Paper South Africa 10% Fine Paper Europe Fine Paper North America 5% 0% -5% -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 1999 2000 2001 2002 2003
Slide 23: Divisional Detail - Currency
23 Divisional Detail - Currency Rand / US$ Exchange Rate1 12 11.5 10.7 • Q2 Rand strength: 9 10.5 9.7 8.4 +16% vs LQ 6 7.3 +37% vs LY 3 • Current +14% vs Q2 0 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 6-May- 03 US$ / EUR Exchange Rate1 1.2 • Q2 EUR strength: 1.14 0.9 0.98 1.00 1.07 +7% vs LQ 0.92 0.6 0.88 +22%
Slide 24: Markets
Markets sappl The word for fine paper
Slide 25: Industry CWF Shipments - Index
25 Markets Industry CWF Shipments1 - Index (Jan’00=100) 120 Europe March qtr + 5.5% vs LY US March qtr - 2.4% vs LY 110 100 90 Europe 80 US 70 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 1 Source: Cepifine, AFPA Total shipments by manufacturers based in Europe and based in the US
Slide 26: Industry CWF Apparent Consumption - Index
26 Markets Industry CWF Apparent Consumption1 - Index (Jan’00=100) 120 Europe March qtr + 1.5% vs LY US March qtr + 8.3% vs LY 110 100 90 Europe 80 US 70 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 1 Source: Cepifine, AFPA Shipments by manufacturers plus imports less exports
Slide 27: US CWF Imports
27 Markets US CWF Imports (% of total purchases) 35% Imports (gross) 30% Imports (net of exports) 25% 20% 15% 10% 5% 0% Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Source: AFPA
Slide 28: Germany CWF Price Development
28 Markets Germany CWF Price Development 1,600 1,400 1,200 1,000 800 600 Germany 90gsm Sheets (€) Germany 90gsm Sheets ($US) 400 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Source: PPI This Week
Slide 29: US CWF Price Development
29 Markets US CWF Price Development (#3 60lb rolls, US$/ton) 1,400 1,200 1,000 800 600 400 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Source: Pulp & Paper Week, RISI
Slide 30: US Magazine Ad Pages
30 Markets US Magazine Ad Pages Year on Year % Change (left axis) 30% Ad Pages - 12 month moving average (right axis) 30,000 25,000 20% 20,000 10% 15,000 0% 10,000 -10% 5,000 -20% 0 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Source: PIB
Slide 31: Outlook
Outlook sappl The word for fine paper
Slide 32: Outlook
32 Outlook • Market conditions remain uncertain • Pulp prices • Business confidence • Energy costs • Paper price pressure • Currency • Earnings for 3Q will not match those of 2Q • Challenge to meet our earlier forecast that we expect earnings to exceed those of the previous year
Slide 33: www.sappi.com
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