Sappi Limited · JSE:SAP
Sappi — Q2 2015 Earnings Presentation
34 slides from Sappi's earnings presentation, May 14, 2015
Slide 1: 2nd Quarter 2015 Financial Results Presentation
2nd Quarter 2015 Financial Results Presentation 14 May 2015
Slide 2: Forward-looking statements
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 earnings, savings, synergies, events, trends,
Slide 3: Summary
Summary | Q2 2015 Results | 14 May 2015
Slide 4: Q2 2015 Summary
4 Q2 2015 Summary • Profit for the period US$56m (Q2 2014 US$32m) • EPS excluding special items 11 US cents (Q2 2014 5 US cents) • EBITDA excluding special items US$170m (Q2 2014 US$171m) • Net Debt US$1,916m (Q2 2014 US$2,248) • Successful refinancing of 2018 and 2019 bonds | Q2 2015 Results |14 Ma
Slide 5: EBITDA & Operating Profit ex-items
5 EBITDA & Operating Profit ex-items* USD million *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Profit and page 19 in our Q2 2015 Results booklet (available on www.sappi.com) for a definition of special items. **2013 figures restate
Slide 6: EBITDA Q2 2014 v Q2 2015
6 EBITDA* Q2 2014 v Q2 2015 USD million Sales Revenue 200 180 160 140 120 100 80 60 40 20 0 171 (32) 26 (13) 31 4 (17) 170 Q2 2014 EBITDA Sales volume Price & mix Variable & Fixed costs Other Exchange rate Q2 2015 EBITDA delivery costs Notes: “Exchange rate” reflects the impact of changes in the ave
Slide 7: Q2 2015 Product Contribution Split
7 Q2 2015 Product Contribution Split EBITDA excluding special items* Operating Profit excluding special items* *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Profit and page 19 in our Q2 2015 Results booklet (available on www.sappi.c
Slide 8: Net Debt / EBITDA development
8 Net Debt / EBITDA development USD million * EBITDA shown is excluding special items ** The covenant Net Debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above | Q2 2015 Results |14 May 2015
Slide 9: Maturity Profile – Fiscal Years
9 Maturity Profile – Fiscal Years €450m Bond Includes US$221m US$400m Bond Bond US$350m Bond | Q2 2015 Results |14 May 2015
Slide 10: Capex Development
10 Capex Development Maint Expansion 600 500 400 US$m 300 200 100 0 2012 2013 2014 2015 EST | Q2 2015 Results |14 May 2015
Slide 11: Divisional Overviews
Divisional Overviews | Q2 2015 Results | 14 May 2015
Slide 12: Global Paper Market Trends
12 Global Paper Market Trends Supply & Demand Weaker Euro has had muted impact on imports into US CWF demand decline in line with expectations CM declines more worrisome Costs & Prices CWF sales prices have moved up in NA – announced for Europe Softwood pulp prices falling, hardwood prices increasin
Slide 13: Global Specialised Cellulose Market Trends
13 Global Specialised Cellulose Market Trends Supply & Demand Deceleration of capacity expansion Some capacity has switched back to pre-conversion products Underlying demand trends still moving up Costs & Prices Commodity grade DWP prices still low Stability in textile fibre prices Input costs decli
Slide 14: Sappi Europe
14 Sappi Europe Demand Development** EBITDA* EBITDA Margin* US$ m 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 100 12% CWF -2.5% -5.3% -2.2% -2.8% -2.4% CM0% -6.5% -6.9% -2.7% -3.0% -2.6% 10% -1% 80 8% -2% 60 -3% 6% 40 -4% 4% -5% 20 Forecast 2% -6% -7% 0 0% Q1 Q2 Q
Slide 15: Sappi North America
15 Sappi North America CWF Demand Development** EBITDA* EBITDA Margin* 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 US$ m 1% 50 14% 12% 40 0% 10% 30 8% -1% 20 6% -2% 4% Forecast 10 2% -3% 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -4% 2013 2014 2015 -5% • Paper sales prices increased, better mix and lower variab
Slide 16: Sappi South Africa
16 Sappi South Africa EBITDA* EBITDA Margin* US$ m Global DWP demand development** 100 30% 12% 80 25% 10% 20% 8% 60 Forecast 15% 6% 40 10% 4% 20 2% 5% 0% 0 0% 12 v 11 13 v 12 14 v 13 15 v 14 16 v 15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 • Continued strong earnings – exchange rate gains on exp
Slide 17: Strategic Focus
Strategic Focus | Q2 2015 Results | 14 May 2015
Slide 18: Strategic Focus
18 Strategic Focus Achieve cost Rationalise declining Grow through advantages businesses moderate investments • Continuously improving • Continuously balance • Growing paper operational performance graphic paper supply and packaging grades • Optimising energy usage demand in all regions • Growing sp
Slide 19: Focus Areas: Achieve cost advantages
19 Focus Areas Achieve cost advantages We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages. • Cloquet’s kraft campaigns • Somerset natural gas conversion • Gratkorn paper machine and pulp mill upgrade • Kirkniemi power plant • Group procurement initia
Slide 20: Focus Areas: Growth through moderate investment
20 Focus Areas Growth through moderate investment 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 • Upgrades to Tugela and Ngodwana pulp mills • Nan
Slide 21: Outlook
Outlook | Q2 2015 Results | 14 May 2015
Slide 22: Outlook
22 Outlook • Graphic paper markets, especially CM, remain difficult and continued cost pressure from higher paper pulp and wood prices are putting margins under pressure. Lower oil and energy are providing relief. • Textile prices stabilizing over the last few months – DWP prices have followed this
Slide 23: Q&A
Q&A | Q2 2015 Results | 14 May 2015
Slide 24: Supplementary Information
Supplementary Information | Q2 2015 Results | 14 May 2015
Slide 25: W. Europe Coated Paper Deliveries & Prices
25 W. Europe Coated Paper Deliveries & Prices 1.20 1.10 1.00 0.90 0.80 0.70 0.60 CWF demand MCR demand CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe Shipments Incl. Export – Source Cepifine, Cepiprint and RISI indexed to Calendar Q1 2008 | Q2 2015 Results |14 May 2015
Slide 26: Sappi Europe
26 Sappi Europe Q2 15 Q2 14 1H 15 1H 14 Tons Sold ('000) 828 873 1,603 1,709 Sales (€'m) 590 603 1,137 1,184 Price / Ton (€) 713 691 709 693 Cost / Ton* (€) 684 675 687 683 Operating profit ex items** ( €'m) 24 14 36 17 * Sales less operating profit excluding special items divided by tons sold. ** R
Slide 27: US Coated Paper Prices and Shipments
27 US Coated Paper Prices and Shipments 1.2 1.1 1.0 0.9 Q1 2008 = 1 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 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices US Industry Ship
Slide 28: Sappi North America
28 Sappi North America Q2 15 Q2 14 1H 15 1H 14 Tons Sold ('000) 321 369 654 717 Sales ($'m) 342 382 695 747 Price / Ton ($) 1,065 1,035 1,063 1,042 Cost / Ton* ($) 1,044 1,022 1,058 1,039 Operating profit ex items** ($'m) 7 5 3 2 * Sales less operating profit excluding special items divided by tons
Slide 29: Pulp Prices
29 Pulp Prices* US$/ton NBSK Europe (USD) BHKP Europe (USD) 1,100 1,000 900 $857/ton 800 $765/ton 700 600 500 400 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 * Source: Average weekly FOEX delivered European prices | Q2 2015 Results |14 May 2015
Slide 30: Textile fibre prices
30 Textile fibre prices 3.50 3.00 2.50 US$ / kg 2.00 1.50 1.00 0.50 Imported DP (CCF Group) VSF 1.5D (CCF Group) Cotton 328 (CCF Group) Cotlook A (Cotlook) PSF 1.4D (PCI Fibres) | Q2 2015 Results |14 May 2015
Slide 31: Sappi Southern Africa ex Forestry
31 Sappi Southern Africa ex Forestry Q2 15 Q2 14 1H 15 1H 14 Tons Sold ('000) 424 427 850 830 Sales (ZAR'm) 3,653 3,746 7,297 7,062 Price / Ton (ZAR) 8,616 8,773 8,585 8,509 Cost / Ton* (ZAR) 6,795 6,981 6,846 6,903 Operating profit ex items** (ZAR'm) 772 765 1,478 1,333 * Sales less operating profi
Slide 32: Cash Flow - US$m
32 Cash Flow - US$m Q2 15 Q2 14 1H 15 1H 14 Cash generated from operations 136 152 273 288 - Movement in working capital 23 59 (113) (90) - Net finance costs paid (38) (30) (90) (86) - Taxation paid (1) 4 (4) 3 Cash generated from operating activities 120 185 66 115 Cash utilised in investing activi
Slide 33: EBITDA & operating profit excluding special items reconciliation
33 EBITDA & operating profit excluding special items recon to reported operating profit Q2 15 Q2 14 1H 15 1H 14 EBITDA ex-items* 170 171 315 318 Depreciation and Amortisation (66) (76) (137) (163) Operating Profit ex-items* 104 95 178 155 Special Items* - gains (losses) 68 4 63 14 Plantation price f
Slide 34: Thank You
o/ hy / | Thank You: |