Sappi Limited · JSE:SAP
Sappi — Q3 2015 Earnings Presentation
36 slides from Sappi's earnings presentation, Aug 7, 2015
Slide 1: 3Q 2015 financial results
3Q 2015 financial results 07 August 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 sappli Inspired by life
Slide 4: Highlights
Highlights 3Q 2015 EPS excluding special items 2 US cents (3Q 2014 2 US cents) Profit for the period US$4m (3Q 2014 US$17m) EBITDA excluding special items US$109m (3Q 2014 US$140m) Net debt US$1,917m (3Q 2014 US$2,286) 4
Slide 5: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 200 200 171 170 159 150 US$ 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 EBITDA Operating profit ex-items 5 * Refer to the
Slide 6: EBITDA 3Q 2014 vs 3Q 2015
EBITDA* 3Q 2014 vs 3Q 2015 Sales revenue 180 160 140 120 100 80 60 40 20 0 140 (16) 33 (25) (13) 4 (14) 109 3Q 2014 EBITDA Sales volume Price and mix Variable and Fixed costs Other Exchange rate 3Q 2015 EBITDA delivery costs All variances were calculated excluding Sappi Forests EBITDA excludes s
Slide 7: Product contribution split - LTM
Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Paper 57% Specialised Paper Specialised cellulose 38% cellulose 62% 43% 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 4.0 200 194 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 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 EBITDA* Net debt
Slide 9: Maturity profile
Maturity profile Fiscal years 600 513 503 Includes 500 EUR450m bond US$400m bond 400 351 350 US$350m bond US$221m bond US$ million 305 300 221 200 112 94 100 62 41 20 65 0 2015 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 Estimate Maintenance Efficiency 10
Slide 11: Divisional overviews
Divisional overviews Intentional
Slide 12: Global paper market trends
Global paper market trends Supply and demand Strong Dollar causes shifts in trade flows CWF apparent consumption weak in the US in 3Q Costs and prices CWF sales prices under pressure in US, moving upward in Europe Softwood pulp prices stable, hardwood prices increasing Wood prices yet
Slide 13: Global specialised cellulose market trends
Global specialised cellulose market trends Supply and demand Deceleration of capacity expansion Some capacity has switched back to pre-conversion products Underlying demand trends still moving up Costs and prices Commodity grade DWP prices still low Recent oil price declines may impact
Slide 14: Sappi Europe
Sappi Europe Demand development** 2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015 100 12% 0% EBITDA* EBITDA Margin* -1% 10% 80 -2% 8% -3% 60 US$ million -4% 6% -5% 40 4% -6% 20 -7% 2% -8% CWF CM Forecast 0 0% -9% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2013 2013 2013 2014 2014 2014 20
Slide 15: Sappi North America
Sappi North America Demand development** 2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015 50 14% 2% EBITDA* EBITDA Margin* 12% 1% 40 10% 0% 30 US$ million 8% -1% 6% -2% 20 4% -3% 10 CWF 2% -4% Forecast 0 0% -5% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2013 2013 2013 2014 2014 2014 2014
Slide 16: Sappi Southern Africa
Sappi Southern Africa Staple grade dissolving pulp (US$/ton)** 100 30% 850 EBITDA* EBITDA Margin* 840 25% 80 830 20% 60 820 US$ million 15% 810 40 800 10% 790 20 5% 780 0 0% 770 13 Feb 2015 06 Mar 2015 20 Mar 2015 03 Apr 2015 17 Apr 2015 30 Apr 2015 15 May 2015 29 May 2015 10 Jul 2015 24 Jul 2015 04
Slide 17: Strategic focus
Strategic focus Achieve cost advantages Generate cash to strengthen balance sheet Rationalise declining businesses Accelerate growth in adjacent ] businesses from a strong base Grow through moderate investments Intentional 4 evolution ) 4 Achieve Rationalise Grow ii Generate Hz Accelerate | sappl
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 Cloquet Mill’s kraft campaigns Somerset Mill’s natural gas conversion Gratkorn Mill’s paper machine and pulp mill upgrade Kirkniemi Mill’s power plant
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 Investment in lightweight recycled packaging paper at Enstra Mill Upgrades to Tugela and Ngodwana pulp mills N
Slide 21: Focus areas: Generate cash to strengthen the balance sheet
Focus areas Generate cash to strengthen the balance sheet Continue to pursue the sale of Twello Sale of Enstra and Cape Kraft Mills announced 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
Outlook sappi Inspired by life | ii”
Slide 24: Outlook
Outlook 3Q 2015 Graphic paper markets remain difficult with currency movements impacting trade flows and input costs Dissolving wood pulp prices in China have risen over the past four months, and a weaker Rand will further support the profitability of this business in South Africa Capital expe
Slide 25: Questions and answers
Questions and answers Inspired by life
Slide 26: Supplementary information
Supplementary information 26
Slide 27: Coated paper deliveries and prices
Coated paper deliveries and prices Western Europe 1.20 1.10 1.00 1Q 2008=1 0.90 0.80 0.70 0.60 CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 201
Slide 28: Sappi Europe
Sappi Europe 3Q 2015 3Q 2014 YTD 2015 YTD 2014 Tons sold (‘000) 792 783 2,395 2,492 Sales (EURm) 567 543 1,704 1,727 Price/Ton (EUR) 716 693 711 693 Cost/Ton* (EUR) 710 678 694 681 Operating profit excluding special 5 12 41 29 items** (EURm) 28 * Sales less operating profit excluding special items d
Slide 29: Coated paper prices and shipments
Coated paper prices and shipments United States 1.2 1.1 1.0 1Q 2008=1 0.9 0.8 0.7 0.6 0.5 Domestic CFS shipments Total US CFS consumption CFS #3 60lb rolls prices 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2
Slide 30: Sappi North America
Sappi North America 3Q 2015 3Q 2014 YTD 2015 YTD 2014 Tons sold (‘000) 294 362 948 1,079 Sales (US$m) 313 380 1,008 1,127 Price/Ton (US$) 1,065 1,050 1,063 1,044 Cost/Ton* (US$) 1,088 1,075 1,068 1,051 Operating profit excluding special (7) (9) (4) (7) items** (US$m) 30 * Sales less operating profit
Slide 31: Pulp prices
Pulp prices* 1,100 1,000 900 800 US$/ton 700 600 500 400 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 NBSK Europe (USD) BHKP Europe (USD) 31 * Source: Average weekly FOEX delivered European prices
Slide 32: Textile fibre prices
Textile fibre prices 2.30 2.10 1.90 1.70 1.50 US$/kg 1.30 1.10 0.90 0.70 0.50 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Imported DP (CCF Group) VSF 1.5D (CCF Group) Cotlook A (Cotlook) PSF 1.4D (PCI Fibres) 32
Slide 33: Sappi Southern Africa
Sappi Southern Africa Excluding Sappi Forests 3Q 2015 3Q 2014 YTD 2015 YTD 2014 Tons sold (‘000) 436 423 1,286 1,253 Sales (ZARm) 3,798 3,592 11,095 10,654 Price/Ton (ZAR) 8,711 8,492 8,628 8,503 Cost/Ton* (ZAR) 7,477 6,948 7,060 6,918 Operating profit excluding special 538 653 2,016 1,986 items** (
Slide 34: Cash flow
Cash flow US$m 3Q 2015 3Q 2014 YTD 2015 YTD 2014 Cash generated from operations 90 118 363 406 Movement in working capital 16 (29) (97) (119) Net finance costs paid (21) (50) (111) (136) Taxation paid (12) (4) (16) (1) Cash generated from operating 73 35 139 150 activities Cash utilised in investing
Slide 35: EBITDA and operating profit
EBITDA and operating profit Excluding special items reconciliation to reported operating profit US$m 3Q 2015 3Q 2014 YTD 2015 YTD 2014 EBITDA excluding special items* 109 140 424 458 Depreciation and amortisation (66) (73) (203) (236) Operating profit excluding special items* 43 67 221 222 Special i
Slide 36: Thank you
Thank you sappi Inspired by life