Sappi Limited · JSE:SAP
Sappi — Q1 2009 Earnings Presentation
26 slides from Sappi's earnings presentation, Feb 2, 2009
Slide 1: First quarter ended December 2008 results
First quarter ended December 2008 results 2 February 2009 Forward looking statements Certain statements in this presentation that are neither reported financial results nor other historical information, are forward- looking statements, including but not limited to statements that are predictions of
Slide 2: Summary
Summary 3 1Q 2009 Summary • European Acquisition* completed on 31 December (post quarter end) • Declining global demand leads to weak operating profit ¾ Operating profit excluding special items US$25 million (Q408: US$89m; Q108:US$92m) • Significant production curtailment in December • Coated paper
Slide 3: Group Financial Summary
Group Financial Summary Q1 08 Q4 08 Q1 09 YoY Key figures: (US$ million) Sales 1,377 1,519 1,187 EBITDA ex special items* 188 180 106 Operating Profit 91 25 57 Operating Profit ex special items* 92 89 25 Basic EPS (US cents)** 12 (9) 6 Key ratios: (% ) EBITDA ex special items* to sales 13.7 11.8 8.9
Slide 4: Operating Profit excluding special items
Operating Profit excluding special items * US$ million 2006: $91m 2007: $313m 2008: $366m 100 96 97 92 80 88 89 81 73 60 62 63 40 20 25 12 16 1 0 -20 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 * Refer to the supplementary information in this presentation for a reconciliation to
Slide 5: Divisional Operating Margins
Divisional Operating Margins * 25% 20% 15% 1Q09 margins: 10% Forest Products 9.0% 5% South Africa: 2.7% Europe: 2.3% 0% North America: -1.9% -5% -10% -15% -20% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2004 2005 2006 2007 2008 * The divisional operating margins exclude special i
Slide 6: Cash Generated from Operations and Net Debt
Cash Generated from Operations 200 $396 million* $585 million $623 million 175 176 150 157 161 155 156 142 125 137 136 US$ million 125 100 116 101 95 75 50 42 25 0 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 * 2006 Cash generated from operations was restated for the re-classific
Slide 7: Short term debt and debt maturity profile
Short term debt US$ million Q1 08 Q4 08 Q1 09 Current interest-bearing borrowings 966 821 1,058 Debtors securitisation (370) (361) (354) Current interest-bearing borrowings 596 460 704 after securitisation Cash and cash equivalents available* 418 274 409 • Securitised trade debtors: ¾ Debtors outsid
Slide 8: Raw material price increases
Raw material price increases Group operating income impact * of higher wood, chemical and energy input prices: 1Q 09 vs. 1Q 08 = US$30 million 4Q 08 vs. 4Q 07 = US$78 million 40 30 US$ million 20 37 10 22 20 19 4 6 0 Wood Chemicals Energy * Impact of cost increases in wood, chemicals and energy excl
Slide 9: Markets: Global Coated Fine Paper Market Balance
Markets 17 Global Coated Fine Paper Market Balance million metric tons 35 • Difficult to forecast extent of demand or Demand Capacity supply changes in current market 30 • Demand declined 94% rapidly towards end of 2008 25 • Demand expected to be 84% weak in 2009 • Industry curtailing production in
Slide 10: Global Coated Mechanical Paper Balance and Currency
Global Coated Mechanical Paper Balance million metric tons 25 Demand Capacity 20 92% • Difficult to forecast extent of demand or 87% supply changes in 15 current market • Capacity declined 2% during 2008 • Demand declined 5% 10 during 2008 • Demand expected to remain weak in 2009 5 • Full impact of
Slide 11: Divisional Overview Europe
Divisional Overview 21 Europe 22
Slide 12: European Coated Paper Consumption and Prices
W European Coated Fine Paper Apparent Consumption* ‘000 metric tons 650 600 550 500 2005 2006 2007 2008 450 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Cepifine *Apparent consumption = shipments from domestic manufacturers plus imports less exports 23 European Coated Paper Prices Germany
Slide 13: Sappi Fine Paper Europe
Sappi Fine Paper Europe Q1 08 Q4 08 Q1 09 YoY Tons Sold ('000) 624 628 556 Sales ($'m) 638 680 561 Price / Ton ($) 1,022 1,083 1,009 Price / Ton (€) 702 711 749 Cost / Ton* (€) 684 699 732 Operating profit ex items** ($'m) 17 12 13 • Market conditions deteriorated during quarter • Significant produc
Slide 14: US Coated Fine Paper Shipments and Prices
US Coated Fine Paper Shipments* ‘000 short tons 500 480 2005 2006 2007 2008 460 440 420 400 380 360 340 320 300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: AF&PA * Shipments from domestic manufacturers 27 US Coated Paper Prices (US$/ton) 1,100 CWF #3 60lb Rolls $1,060/ton CGW #4 50lb Rol
Slide 15: Sappi Fine Paper North America
Sappi Fine Paper North America Q1 08 Q4 08 Q1 09 YoY Tons Sold ('000) 373 389 330 Sales ($'m) 384 433 363 Price / Ton ($) 1,029 1,113 1,100 Cost / Ton* ($) 995 1,033 1,121 Operating Profit ex items** ($'m) 13 31 (7) • Industry shipments for quarter declined 18% year-on-year • Significant production
Slide 16: Sappi Fine Paper South Africa
Sappi Fine Paper South Africa Q1 08 Q4 08 Q1 09 YoY Tons Sold ('000) 76 93 77 Sales ($'m) 87 109 74 Price / Ton ($) 1,145 1,172 961 Price / Ton (ZAR) 7,726 9,160 9,474 Cost / Ton* (ZAR) 7,637 9,075 9,218 Operating Profit ($'m) 1 1 2 • Local prices were well above last year • Input costs remained hig
Slide 17: NBSK Pulp Price and Sappi Forest Products
NBSK Pulp Price Average NBSK price: Q1 09 $739/ton vs. Q4 08 $885/ton 1,000 NBSK (US$/ton) NBSK (EUR/ton) 900 800 700 $608/ton 600 500 €475/ton 400 Oct-08 Jan-08 Feb-08 Apr-08 Jun-08 Jul-08 Aug-08 Sep-08 Nov-08 Dec-08 Jan-09 Mar-08 May-08 Source: FOEX delivered European NBSK prices 33 Sappi Forest P
Slide 18: Share price and European Acquisition integration progress
Share price – Rights Offer impact Sappi share price: JSE 125 100 75 17 November 2008: Listing and trading of rights on JSE 50 25 Pre Rights Offer price Post Rights Offer price (Notes below) 0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 • Historical share prices adjusted by an adjustment factor
Slide 19: Outlook & Action Plan
Outlook & Action Plan • Difficult global economic conditions expected to continue • Coated paper & pulp demand weak in short term ¾ Manage output to match demand in paper & pulp ¾ Europe to benefit from low pulp prices; S. Africa & N. America to be negatively impacted • Weak European demand partly o
Slide 20: Q&A Supplementary Information
Q&A 39 Supplementary Information 40
Slide 21: Rights Offer and Operating Profit - Sappi Group
Rights Offer* In November and December 2008, Sappi conducted a renounceable rights offer of 286,886,270 new ordinary shares of ZAR1.00 each to qualifying Sappi shareholders recorded in the shareholders register at the close of business on Friday 21 November 2008, at a subscription price of ZAR20.27
Slide 22: Operating Profit reconciliation - Fine Paper Europe and North America
Operating Profit - Fine Paper Europe Reconciliation of reported operating profit to operating profit excluding special items * US$ million Q1 08 Q4 08 Q1 09 Operating profit as reported 19 (111) 13 Profit on the sale of assets (1) - - Asset impairment (reversal) - 78 - Restructuring provision releas
Slide 23: Operating Profit - Forest Products; Quarterly Basic EPS
Operating Profit - Forest Products Reconciliation of reported operating profit to operating profit excluding special items * US$ million Q1 08 Q4 08 Q1 09 Operating profit as reported 55 106 49 Plantation price fair value (gain) loss 1 (108) (34) Profit on the sale of assets - - (1) Asset impairment
Slide 24: Cash Flow and NBSK long term trend
Cash Flow US$ million Q1 08 Q4 08 Q1 09 Cash generated from operations 155 136 95 - Movement in working capital (133) 135 (96) - Net finance costs paid (59) 24 (44) - Taxation paid (7) (14) 1 - Dividends paid - - (37) - Cash utilised in investing activities (89) (143) (40) Cash flow after investing
Slide 25: US Coated Paper Imports
US Coated Paper Imports Net CWF imports Net CWF imports + Chinese Coated Mechanical imports 140 120 100 ‘000 metric tons 80 60 40 20 0 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Source: AF&PA 49 US Coated Fine Paper Imports by region ‘000 short tons 90 Asia Europe Canada 80 70 60
Slide 26: US Coated Fine Paper Imports from Asia
US Coated Fine Paper Imports from Asia (including Coated Mechanical from China) ‘000 short tons 60 South Korea China - CWF Japan Other 50 China - CM* 40 30 20 10 0 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 May-04 May-05 May-06 May-07 May-08 Source: AF&PA; * CM = Coated mechanical paper 51 End