Sappi Limited · JSE:SAP
Sappi — Q1 FY2017 Earnings Presentation
43 slides from Sappi's earnings presentation, Feb 8, 2017
Slide 1: Q1 FY17 financial results
Q1 FY17 financial results 8 February 2017 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 3
Slide 4: Highlights
Highlights Q1 FY17 EBITDA ex-special items US$201m (Q1 FY16 US$175m) Profit for the period US$90m (Q1 FY16 US$75m) EPS ex-special items 16 US cents (Q1 FY16 13 US cents) Net debt US$1,338m, down US$396m year-on-year 4
Slide 5: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 Key ratios Q1 Q1 Q1 200 FY15 FY16 FY17 201 175 Net Debt/ 3.1 2.6 1.7 136 150 LTM EBITDA 145 US$ million 112 Interest Cover 3.8 5.1 7.7 100 EBITDA % 10.5 13.6 15.4 74 50 ROCE % 9.7 16.2 19.5 0 Q1 FY15 Q1 FY16 Q1 FY17 EBITDA Operating profit 5 *
Slide 6: EBITDA Bridge
EBITDA Bridge* Q1 FY16 to Q1 FY17 220 210 3 -9 21 200 Sales revenue 190 7 USD million 180 10 170 201 160 175 150 140 EBITDA Sales Volume Price & Mix Variable & Delivery Exchange Rate Fixed Costs EBITDA Q1 FY16 Costs Q1 FY17 o All variances calculated excluding Sappi Forestry. o “Exchange rate” refle
Slide 7: Product contribution split - LTM
Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Specialised Paper cellulose 53% 62% Specialised cellulose Paper 47% 38% 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 2 600 4.6 5.0 4.5 2 400 2 380 4.0 2 286 2 200 2 248 3.5 2 000 2 040 3.0 US$ million 1 946 1.7 1 917 1 916 1 800 2.5 1 771 1 734 2.0 1 600 1 652 1583 1.5 1 400 1408 1.0 1338 1 200 0.5 1 000 0.0 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16
Slide 9: Maturity profile
Maturity profile Fiscal years US$m 800 700 681 EURO 350m bond 600 Includes USD EURO 450m bond 500 486 400m bond 473 USD 221m bond 400 368 307 300 221 200 100 62 83 36 0 2017 2018 2019 2020 2021 2022 2023 2032 Cash Short-Term SPH Term Debt Securitisation SSA 9
Slide 10: Capex development
Capex development 600 500 400 US$m 300 200 100 0 2013 2014 2015 2016 2017F 2018E 2019E Maintenance Efficiency & Expansion 10
Slide 11: Divisional overviews
Divisional overviews 11
Slide 12: Global paper market trends
Global paper market trends Supply and demand Advertising spend continues to move away from printed media Industry closures/conversions required – CM & SC closures announced Speciality packaging paper demand continues to grow 1%-5% Selling prices and input costs Selling prices have stabil
Slide 13: Sappi Europe
Sappi Europe Speciality Packaging Volumes Flexible Packaging 100 14% and Label Papers EBITDA* EBITDA Margin* 80 12% 80 10% 70 ‘000 tons 60 US$ million 8% 60 6% 40 4% 50 20 2% 40 0 0% Q1 FY14 Q1 FY15 Q1 FY16 Q1 FY17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Improved performance from volumes, cost savings, and
Slide 14: Sappi North America
Sappi North America N&S BHK** Comm DWP*** 40 10% EBITDA* EBITDA Margin* 9% 1000 8% 975 30 7% 950 6% 925 US$ million 20 5% 900 4% 875 3% 850 10 2% 825 1% 800 0 0% 775 Jan-16 Jan-17 Oct-15 Oct-16 Jul-15 Apr-16 Jul-16 Q1 FY14 Q1 FY15 Q1 FY16 Q1 FY17 Weaker year-on-year performance due to lower coated
Slide 15: Global DWP market trends
Global DWP market trends Supply and demand Continued strong demand from new viscose capacity Constrained Cotton Linter Pulp supply – tightening DWP market New DWP capacity has been delayed Selling prices and input costs Spot pricing peaked in October, declining through to January Recen
Slide 16: Sappi Southern Africa
Sappi Southern Africa Market price - Staple Grade DWP (US$/ton)** 120 40% 1000 EBITDA* EBITDA Margin* 35% 975 100 30% 950 80 25% 925 US$ million 60 20% 900 875 15% 40 850 10% 20 825 5% 800 0 0% Q1 FY14 Q1 FY15 Q1 FY16 Q1 FY17 775 Jan-15 Jul-15 Jan-16 July-16 Jan-17 Oct-15 Oct-16 Apr-15 Apr-16 Enha
Slide 17: Strategic focus
Strategic focus advanlages Generate cash lo strengthen balance sheet Rationalise Accelerate growth in Intentional if = - — - = ¥ = \ fi i] a oc: evolution gE Achieve Rationalise Grow a Generate 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 Saiccor and Tugela turbines – FY2016/17 Group procurement initiatives >$100m annually by 2020 – US$63m by end 2017 Ongoing continuous improvement across al
Slide 19: Focus areas: Rationalise 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 Pr
Slide 20: Focus areas: Grow through moderate investments
Focus areas Grow through moderate investments We will make investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers Debottlenecking of Saiccor and Ngodwana DWP Investments in Somerset, Maastricht, Alfeld and Ehingen Additional packagi
Slide 21: Growth through moderate investments
Growth through moderate investments • Moderate investments in cost efficiency and energy generation projects have delivered good returns to date • We are now moving into the next phase of our strategy via investments for growth ROCE % 25% 20% 15% 10% 5% 0% 2013* 2014* 2015 2016 Q1 FY17 * Sappi begin
Slide 22: Growth through moderate investments
Growth through moderate investments Investing in speciality packaging businesses in Europe and North America • $140m at Maastricht, Ehingen, Alfeld and Lanaken • Maastricht, Ehingen and Alfeld to expand offering • Investments to be made over a 3-year period • Additional 200kt/annum of SBB,FBB and WT
Slide 23: Paperboard Market
Paperboard Market Containerboard Boxboard Corrugated Linerboard Solid Folding Solid White Lined Board incl. WTL Bleached Boxboard Unbleached Chipboard Sulfate Board WLC in FBB SBB in SUB in Europe, Europe, SBS Europe, SUS Coated in NA in NA Recycled Board (CRB) in NA 23
Slide 24: Mill Summary – Sappi Europe
Mill Summary – Sappi Europe Today Alfeld Ehingen Gratkorn Kirkniemi Lanaken PM7 Lanaken PM8 Maastricht Stockstadt HW Packaging LW Packaging HW Graphics MW Graphics LW Graphics UCWF Mechanical Graphics By 2020 Alfeld Ehingen Gratkorn Kirkniemi Lanaken PM7 Lanaken PM8 Maastricht Stockstadt Specialitie
Slide 25: Focus areas: Generate cash to strengthen balance sheet
Focus areas Generate cash to strengthen the balance sheet US$400m 2017 bonds callable in April Refinancing and debt reduction leads to lower finance cost and EPS growth 25
Slide 26: Focus areas: Accelerate growth in adjacent businesses
Focus areas Accelerate growth in adjacent businesses from a strong base 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 paper Biomaterials, biochemicals – lignins, sugars Expanded DWP
Slide 27: Outlook
Outlook sappl Inspired by life
Slide 28: Outlook
Outlook DWP demand remains favourable; pricing recovering in 2nd quarter. Demand for graphic paper remains weak, prices have stabilised – further gains from efficiency and procurement programs. FY17 capex circa US$350m aimed at speciality packaging projects in EU & NA as well as debottleneckin
Slide 29: Thank you
Thank you — Inspired by life |
Slide 30: Supplementary information
Supplementary information 30
Slide 31: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 EBITDA Operating profit ex-items 200 209 201 201 195 145 175 136 136 170 133 US$ million 150 160 112 145 104 97 100 109 74 43 50 0 31 * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported oper
Slide 32: Coated paper deliveries and prices
Coated paper deliveries and prices Western Europe CWF Demand MCR Demand CWF 100gsm Sheets LWC 60gsm offset reels 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 32 Western Europe shipments including export. Source: Cepifine, Cepiprint and RISI indexed to calendar
Slide 33: Sappi Europe
Sappi Europe Q1 FY17 Q4 FY16 Q1 FY16 Tons sold (‘000) 867 822 836 Sales (EURm) 602 579 601 Price/Ton (EUR) 694 704 719 Cost/Ton* (EUR) 648 667 684 Operating profit excluding special 40 31 29 items** (EURm) 33 * Sales less operating profit excluding special items divided by tons sold. ** Refer to the
Slide 34: Sappi Packaging and Speciality Papers
Sappi Packaging and Speciality Papers Global production sites Sappi Alfeld (Germany) Sappi Maastricht (Netherlands) Sappi Ehingen (Germany) Sappi Cloquet (USA) Flexible Packaging, Label, SBB Label Paper – LusterCote® Folding Box Board - atelier™ Topliner - Fusion® Board, Topliner and Release Liner S
Slide 35: Markets and Growth rates
Markets and Growth rates Global Market size – Speciality packaging Flexible Packaging Release Liner Rigid Packaging Containerboard Functional Papers and Label Papers o C1S papers o CCK graphic arts o SBS printing and o Coated White o Barrier and grease o 1.2 mtons o 300 ktons converting Topliner res
Slide 36: Coated paper prices and shipments
Coated paper prices and shipments United States Domestic CWF Shipments Doemstic CWF Purchases RISI Price CFS #3 60 lb rolls 1.2 1.1 1 Q1 FY08 = 1 0.9 0.8 0.7 0.6 0.5 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 36 • US industry purchases defined as industry shipments, plus imports, less exp
Slide 37: Sappi North America
Sappi North America Q1 FY17 Q4 FY16 Q1 FY16 Tons sold (‘000) 353 363 330 Sales (US$m) 354 360 343 Price/Ton (US$) 1,003 992 1,039 Cost/Ton* (US$) 980 923 1,000 Operating profit excluding special 8 25 13 items** (US$m) 37 * Sales less operating profit excluding special items divided by tons sold. **
Slide 38: Pulp prices
Pulp prices* 1 000 900 US$/ton 800 700 600 NBSK Europe BHKP Europe Commodity DWP 38 • Source: FOEX, CCF group
Slide 39: Textile Fibre Prices
Textile Fibre Prices VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" Index US$/t 2 800 2 400 2 000 1 600 1 200 800 Feb-16 May-16 Jul-16 Nov-16 Dec-16 Jan-16 Mar-16 Apr-16 Jun-16 Oct-16 Aug-16 Sep-16 Jan-17 39
Slide 40: Sappi South Africa
Sappi South Africa Excluding Sappi Forests Q1 FY17 Q4 FY16 Q1 FY16 Tons sold (‘000) 364 429 386 Sales (ZARm) 4,022 4,532 3,794 Price/Ton (ZAR) 11,049 10,564 9,829 Cost/Ton* (ZAR) 7,838 7,636 7,370 Operating profit excluding special 1,169 1,256 949 items** (ZARm) 40 * Sales less operating profit excl
Slide 41: Cash flow
Cash flow US$m Q1 FY17 Q4 FY16 Q1 FY16 Cash generated from operations 202 191 171 Movement in working capital (97) 70 (100) Net finance costs paid (17) (4) (36) Taxation paid (34) (2) (18) Cash generated from operating activities 54 255 17 Cash utilised in investing activities (37) (87) 2 Capital ex
Slide 42: EBITDA and Operating Profit
EBITDA and Operating Profit Excluding special items reconciliation to reported operating profit US$m Q1 FY17 Q4 FY16 Q1 FY16 EBITDA excluding special items* 201 209 175 Depreciation and amortisation (65) (64) (63) Operating profit excluding special items* 136 145 112 Special Items* - gains (losses)
Slide 43: Thank you
Thank you sappl Inspired by life