Sappi Limited · JSE:SAP
Sappi — Q1 FY16 Earnings Presentation
38 slides from Sappi's earnings presentation, Feb 10, 2016
Slide 1: Q1 FY16 financial results
Q1 FY16 financial results 10 February 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 Q1 FY16 Profit for the period US$75m (Q1 FY15 US$24m) EPS ex-special items 13 US cents (Q1 FY15 5 US cents) EBITDA ex-special items US$175m (Q1 FY15 US$145m) Net debt US$1,734m, down US$306m year-on-year 4
Slide 5: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 200 201 200 175 171 170 136 150 US$ million 124 147 145 140 112 104 95 109 100 74 67 60 43 50 0 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 EBITDA Operating profit ex-items 5 * Refer to the supplementary information
Slide 6: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 200 Key ratios: (%) 180 Q1 Q1 Q1 175 160 FY14 FY15 FY16 140 147 145 Net Debt/ 112 120 4.6 3.1 2.6 LTM EBITDA US$ million 100 Interest Cover 3.0 3.8 5.1 74 80 EBITDA % 9.8 10.5 13.6 60 60 40 ROCE % 7.0 9.7 16.2 20 0 Q1 FY14 Q1 FY15 Q1 FY16 EBITDA O
Slide 7: EBITDA Bridge
EBITDA Bridge* Q1 FY15 to Q1 FY16 280 240 Sales revenue 200 160 120 80 40 0 145 6 58 10 (7) (7) (30) 175 Q1 FY15 EBITDA Sales volume Price & mix Variable & Fixed costs Other Exchange rate Q1 FY16 EBITDA delivery costs All variances were calculated excluding Sappi Forests EBITDA shown above exclu
Slide 8: Product contribution split - LTM
Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Specialised Paper cellulose 56% 60% Specialised cellulose Paper 44% 40% 8 * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profi
Slide 9: Net debt/EBITDA development
Net debt/EBITDA development 250 5.0 4.5 200 4.0 201 200 3.5 175 171 170 159 150 3.0 US$ million 155 147 145 140 2.5 126 109 100 2.0 88 1.5 50 1.0 0.5 0 0.0 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 EBITDA* Net debt/LTM EBITDA** 9 * EBITDA
Slide 10: Maturity profile
Maturity profile Fiscal years 600 511 494 Includes 500 US$400m bond EUR450m bond 383 400 350 339 US$221m bond US$ million US$350m bond 300 221 200 75 100 49 33 64 0 2016 2017 2018 2019 2020 2021 2022 2032 Cash Short-term SPH term debt SSA RCF Securitisation 10
Slide 11: Capex development
Capex development 600 500 400 US$ 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 Currency shift (leaves/makes) US exports uncompetitive Coated paper capacity shuts/conversions continue in Europe and NA Mechanical paper under pressure Selling prices and input costs CWF and CM sales prices moving up in Europe Fuel oil, ene
Slide 14: Sappi Europe
Sappi Europe Select Paper Prices: Germany €/ton** 100 12% 750 EBITDA* EBITDA Margin* 725 10% 80 700 8% CWF-S 100g CWF-R 100g 60 675 US$ million LWC-OSR 60g 6% 650 40 4% 625 20 600 2% 575 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15 FY15 FY15 FY16 Pr
Slide 15: Sappi North America
Sappi North America Tons ‘000 TOTAL CWF Imports TOTAL CWF Exports 60 16% 250 EBITDA* EBITDA Margin* 14% 50 200 12% 40 10% US$ million 150 30 8% 6% 100 20 4% 10 50 2% 0 0% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY15 FY15 FY15 FY15 FY16 Q1 14 Q2 14 Q3 14 Q4 14
Slide 16: Global specialised cellulose market trends
Global specialised cellulose market trends Supply and demand Outlook for BEK will impact swing capacity Underlying demand trends for commodity grades still positive Selling prices and input costs Spot prices for commodity grade DWP declining in line with textile prices Input costs declin
Slide 17: Sappi Southern Africa
Sappi Southern Africa Spot price - Staple Grade DWP (US$/ton)** 100 30% 920 EBITDA* EBITDA Margin* 25% 900 80 880 20% 60 US$ million 860 15% 840 40 10% 820 20 5% 800 0 0% 780 Nov-14 Dec-14 Jan-15 May-15 Nov-15 Dec-15 Jun-15 Jan-16 Oct-14 Sep-14 Feb-15 Mar-15 Oct-15 Apr-15 Jul-15 Aug-15 Sep-15 Q1 Q2
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 Ongoing continuous imp
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 Ce
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 Nano-cellulose pilot plant in the Netherlands Electricity opportun
Slide 22: 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 completed Refinancing and debt reduction will lead 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 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 24: Outlook
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Slide 25: Outlook
Outlook Specialised Cellulose business is benefiting from higher average USD prices and a weaker ZAR/US Dollar exchange rate. Spot prices have been under pressure, but demand remains strong. In North America variable costs are down and market share is growing Paper price increases in Europe, c
Slide 26: Outlook (cont'd)
Outlook (cont’d) We expect Q2 EBITDA to be in-line with the Q1, slightly ahead year-on-year despite US$12m of additional maintenance impact. Based on current market conditions, and assuming current exchange rates, we expect EBITDA ex-items in FY16 to be higher than FY15. We expect strong growt
Slide 27: Thank you
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Slide 28: Supplementary information
Supplementary information 28
Slide 29: Coated paper deliveries and prices
Coated paper deliveries and prices Western Europe CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices 1.2 1.1 Q1 2008 = 1 1.0 0.9 0.8 0.7 0.6 Q1 08 Q2 Q3 Q4 Q1 09 Q2 Q3 Q4 Q1 10 Q2 Q3 Q4 Q1 11 Q2 Q3 Q4 Q1 12 Q2 Q3 Q4 Q1 13 Q2 Q3 Q4 Q1 14 Q2 Q3 Q4 Q1 15 Q2 Q3 Q4 29 Western Europe shipments
Slide 30: Sappi Europe
Sappi Europe Q1 FY16 Q4 FY15 Q1 FY15 Tons sold (‘000) 836 847 775 Sales (EURm) 601 609 547 Price/Ton (EUR) 719 719 706 Cost/Ton* (EUR) 684 692 690 Operating profit excluding special 29 23 12 items** (EURm) 30 * Sales less operating profit excluding special items divided by tons sold. ** Refer to the
Slide 31: Coated paper prices and shipments
Coated paper prices and shipments United States Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices 1.2 1.1 Q1 FY08 = 1 1.0 0.9 0.8 0.7 0.6 0.5 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q1 FY08 Q1 FY09 Q1 FY10 Q1 FY11 Q1 FY12 Q1 FY13 Q1 FY14 Q1 FY15
Slide 32: Sappi North America
Sappi North America Q1 FY16 Q4 FY15 Q1 FY15 Tons sold (‘000) 330 357 333 Sales (US$m) 343 369 353 Price/Ton (US$) 1,039 1,034 1,060 Cost/Ton* (US$) 1,000 947 1,072 Operating profit excluding special 13 31 (4) items** (US$m) 32 * Sales less operating profit excluding special items divided by tons sol
Slide 33: Pulp prices
Pulp prices* 1 100 1 000 900 800 US$/ton 700 600 500 400 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 NBSK Europe (USD) BHKP Europe (USD) 33 * Source: Average weekly FOEX delivered European prices
Slide 34: Textile Fibre Prices
34 US$/t 800 1 200 1 600 2 000 2 400 2 800 3 200 Jan-14 Feb-14 Mar-14 Apr-14 May-14 VSF 1.2D Jun-14 Jul-14 Aug-14 Sep-14 VSF 1.5D Oct-14 Nov-14 Textile Fibre Prices Dec-14 Jan-15 PSF 1.4D3 Feb-15 Mar-15 Apr-15 May-15 Cotton 328 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Cotton "A" Index Nov-15 Dec-15 Jan-16
Slide 35: Sappi Southern Africa
Sappi Southern Africa Excluding Sappi Forests Q1 FY16 Q4 FY15 Q1 FY15 Tons sold (‘000) 386 482 426 Sales (ZARm) 3,794 4,375 3,644 Price/Ton (ZAR) 9,829 9,077 8,554 Cost/Ton* (ZAR) 7,370 6,905 6,897 Operating profit excluding special 949 1,047 706 items** (ZARm) 35 * Sales less operating profit exclu
Slide 36: Cash flow
Cash flow US$m Q1 FY16 Q4 FY15 Q1 FY15 Cash generated from operations 171 181 137 Movement in working capital (100) 86 (136) Net finance costs paid (36) (24) (52) Taxation paid (18) - (3) Cash generated from operating activities 17 243 (54) Cash utilised in investing activities 2 (84) (67) Capital e
Slide 37: EBITDA and operating profit
EBITDA and operating profit Excluding special items reconciliation to reported operating profit US$m Q1 FY16 Q4 FY15 Q1 FY15 EBITDA excluding special items* 175 201 145 Depreciation and amortisation (63) (65) (71) Operating profit excluding special items* 112 136 74 Special items* - gains (losses) 1
Slide 38: Thank you
Thank you sappi Inspired by life