Slide 1: Q4 FY23 financial results
Steve Binnie Chief Executive Officer, Sappi Limited 09 November 2023 Q4 FY23 financial results 1
Slide 2: Forward-looking statements and Regulation G disclosure
Forward-looking statements and Regulation G disclosure 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 indicat
Slide 3: Summary FY23
Summary FY23 Net debt to EBITDA* EPS* EBITDA 52 US cents US$731m Profit for the year: US$259m 1.5x • Challenging macroeconomic environment • Despite the challenges, the South African business delivered record EBITDA (in ZAR) and North America the second-highest- ever EBITDA • Paper segments faced we
Slide 4: Summary Q4 FY23
Summary Q4 FY23 Net debt to EBITDA* EPS* EBITDA 6 US cents US$168m Loss for the quarter: US$40m 1.5x • Operating performance ahead of expectations, however, challenging trading conditions • Small recovery in graphic paper sales volumes - Production curtailments taken across our graphic paper assets
Slide 5: Product contribution split
Product contribution split EBITDA* excluding special items Sales volumes** 100% 100% 90% 90% 80% 80% 70% 70% Pulp 60% 60% 50% Packaging and 50% speciality papers 40% 40% Graphic papers 30% 30% 20% 20% 10% 10% 0% 0% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Slide 6: EBITDA reconciliation Q3 FY23 to Q4 FY23
EBITDA* reconciliation Q3 FY23 to Q4 FY23 Pulp – (US$15m) 200 Packaging and speciality papers – (US$27m) Graphic papers – (US$40m) 160 US$ million 120 80 40 0 106 52 (82) 76 14 168 Q3 FY23 EBITDA Sales volume Price & mix Variable & delivery costs Fixed costs Q4 FY23 EBITDA 1. All variances were calc
Slide 7: Cost inflation developments
Cost inflation developments Major variable input cost/ton impact on the group since Q1 FY20 2.5 • Curtailment impacted operational efficiencies 2.0 • Input costs across all variable cost 1.5 categories reduced q-o-q* 1.0 • Total variable cost -10% q-o-q* 0.5 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 8: Net debt/EBITDA development
Net debt/EBITDA* development 2,200 7.0 Unfavourable YTD currency effect on debt 6.0 2,070 2,000 2,056 2,055 translation 1,977 1,957 1,946 US$76m 5.0 1,917 1,916 1,879 1,800 2.2 1.5 1,793 US$ million 4.0 1,728 1,680 1,600 1,632 1,603 3.0 1,568 1,557 1,530 1,501 1,400 2.0 1,349 1,200 1,085 1,241 1.0 1
Slide 9: Debt maturity profile
Debt maturity profile* Fiscal years Liquidity Debt maturity 1,400 2028 includes 500 EUR400m bond 448 1,200 Includes 2026 1,000 400 2032 EUR240m bond US$221m bond 650 US$ million 800 279 300 221 280 600 200 2025 ZAR1.3bn convertible bond** 400 119 601 100 88 200 25 25 62 62 0 0 Sep-23 2024 2025 2026
Slide 10: Cash flow and capex
Cash flow and capex Cash flow Capital expenditure 1,400 600 1,267 1,200 500 1,000 800 761 400 709 673 659 643 600 506 462 472 416 300 400 323 256 210 200 166 200 1 29 0 100 -200 -254 -257 -400 0 2018 2019 2020 2021 2022 2023 2017 2018 2019 2020 2021 2022 2023 2024E* Cash generated from operations Fr
Slide 11: Disciplined capital allocation
Disciplined capital allocation Category Strategic priority FY23 Achievements High Regulatory & External regulatory & Mandatory license to operate ~ US$30 million for sustainability environmental environmental requirements Mandatory to meet ESG goals FY23 free cash flow US$643 million A healthy balan
Slide 12: Segmental overview
Segmental overview 12
Slide 13: Pulp: Summary Q4 FY23
Summary Q4 FY23 Sales tons +10% Selling price per ton EBITDA* margin year-on-year** -15% year-on-year** 19.8% 450 40% 400 35% 350 30% 25% Tons (‘000) 300 20% 250 15% 200 10% 150 5% 100 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 2
Slide 14: Packaging and speciality papers
Summary Q4 FY23 Packaging and speciality Sales tons -18% year-on-year** Selling price per ton -7% year-on-year** EBITDA* margin 8.7% papers 450 400 350 24% 20% 300 16% Tons (‘000) 250 12% 200 150 8% 100 4% 50 - 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3
Slide 15: Graphic papers: Summary Q4 FY23
Summary Q4 FY23 Sales tons -36% Selling price per ton EBITDA* margin year-on-year** -5% year-on-year** 9.7% 1,000 23% 18% 800 13% Tons (‘000) 600 8% 3% 400 -2% 200 -7% 0 -12% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23
Slide 16: Regional segments Summary Q4 FY23
Regional segments Summary Q4 FY23 Sappi Europe Sappi North America Sappi Southern Africa Sales tons -38% Sales tons -15% Sales tons*** +7% year-on-year** year-on-year** year-on-year** Selling price per ton (EUR) Selling price per ton (US$) Selling price per ton (ZAR) -12% year-on-year** -14% year-on
Slide 17: Regional segments continued
Regional segments continued Summary Q4 FY23 Sappi Europe Sappi North America Sappi Southern Africa 900 500 25% 500 35% 23% 800 30% 700 18% 400 20% 400 25% 600 13% 15% 300 300 20% 500 8% 10% 15% 400 3% 200 200 10% 300 5% -2% 5% 200 100 100 -7% 0% 100 0% 0 -12% 0 -5% 0 -5% Q1 18 Q3 18 Q1 19 Q3 19 Q1 2
Slide 18: Our business strategy Thrive25
Our business strategy Thrive25 What this means Strategic objectives Drive operational excellence • Achieve zero fatalities and at least a 10% reduction in LTIFR pa • Maximise production outputs • Strengthen our safety-first culture • Gain cost advantage through a global footprint • Continuously impr
Slide 19: Our business strategy: FY23 achievements
Our business strategy Thrive25 What we have achieved in FY23 Drive operational excellence • Zero fatalities • Cloquet Mill PM12 (CWF) reel upgrade completed • Lowest ever LTIFR (combined employees and contractors) • Gratkorn Mill PM11 (CWF) modernisation project completed • Ngodwana Mill PM1 (kraft
Slide 20: Growing our business: Somerset Mill PM2 conversion and expansion
Growing our business Somerset Mill PM2 conversion and expansion • Project progressing well – within budget, and schedule on track • Environmental permitting completed with receipt of air license • Construction management continues to effectively manage the ~100 contractors on site daily 20
Slide 21: Growing our business: Somerset Mill PM2 conversion and expansion
Growing our business Somerset Mill PM2 conversion and expansion 21
Slide 22: Sustainability targets FY23 People & Prosperity
Sustainability targets FY23 People & Prosperity Safety - LTIFR* target achieved in all regions - Strong safety focus Specific for Sappi Southern Africa Gender diversity - Target for women in senior positions achieved - SEU needs further improvement Sustainable procurement - Target achieved; 79% of o
Slide 23: Sustainability targets FY23 Planet
Sustainability targets FY23 Planet Specific process water usage* - Target not achieved Energy efficiency - Negative impact of production curtailment Share of renewable energy - Below FY23 target but improvement from FY22 Specific landfilled solid waste - Negative impact of production curtailment and
Slide 24: Our approved science-based targets
Our approved science-based targets Our commitment Our FY23 performance • Reduce Scope 1 and Scope 2 • Target: 0.73 tons CO2/adt GHG emissions by 41.5% per ton of product by 2030 from a 2019 • Actual: 0.94 tons CO2/adt base year.* • Production curtailments significantly • 44% of our suppliers by spen
Slide 25: Outlook
Outlook 25
Slide 26: Outlook
Outlook Demand Strategy • Persistent global macroeconomic • We remain committed to our stated challenges and generally subdued strategy to reduce exposure to consumer sentiment continue to graphic paper markets impact demand for many of our • Conversion and expansion of products Somerset Mill PM2 gr
Slide 27: Outlook continued
Outlook continued Shuts Capital Overall impact expenditure on Q1 FY24 • Scheduled maintenance shuts at • Capital expenditure for FY24 is • Notwithstanding the gradual Saiccor, Ngodwana and Cloquet estimated to be in the region of recovery in pulp and paper markets Mills US$500 million including ~US$
Slide 28: Thank you
Thank you 28
Slide 29: Supplementary information
Supplementary information 29
Slide 30: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 450 400 391 318 350 371 300 337 300 259 290 225 250 US$ million 240 200 224 161 211 148 142 197 128 187 185 150 177 117 172 109 168 167 105 101 145 155 92 139 85 131 100 118 65 64 112 62 106 52 98 48 41 82 31 50 16 26 0 -5 -50 -52 -100 Q1 FY18 Q2
Slide 31: EBITDA reconciliation Q4 FY22 to Q4 FY23
EBITDA* reconciliation Q4 FY22 to Q4 FY23 400 Pulp – US$21m Packaging and speciality papers – (US$28m) 320 Graphic papers – (US$150m) Pulp – (US$49m) US$ million 240 Packaging and speciality papers – US$59m Graphic papers – (US$183m) 160 80 0 391 (157) (173) 81 10 6 10 168 Q4 FY22 EBITDA* Sales volu
Slide 32: Cost inflation developments: Major variable input cost
Cost inflation developments Major variable input cost FY19 FY23 Delivery Delivery 12% Wood 13% 18% Wood 23% Energy 12% Pulp and other 24% Pulp and other 35% Energy 16% Chemicals 23% Chemicals 24% 32
Slide 33: Planned maintenance shut schedule FY24
Planned maintenance shut schedule FY24 Unit Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Gratkorn Mill X X X X Cloquet Mill X Somerset Mill X X X Ngodwana Mill X Saiccor Mill X X Tugela Mill X • Q1 FY23 shut cost impact is estimated to be US$40 million • Gratkorn Mill shuts for Q1, Q2 & Q4 are project-related •
Slide 34: Packaging and speciality papers Production facilities
Packaging and speciality papers Production facilities Alfeld Mill (Germany) Gratkorn Mill (Austria) Rockwell Solutions (Scotland) Flexible packaging, label paper, Label paper Functional papers and flexible paperboard, silicone base paper, packaging, coated barrier film functional paper Carmignano Mi
Slide 35: Product portfolio
Product portfolio • Paperboard • Label & self-adhesive • Coated woodfree • Dissolving pulp • Biochemicals • Flexible packaging • Casting & release • Coated mechanical • High-yield pulp • Fibrillated cellulose • Containerboard • Dye sublimation • Newsprint • Kraft pulp • Lignin • Tissue • Office 35
Slide 36: Sappi Europe
Sappi Europe Q4 FY23 Q3 FY23 Q4 FY22 Tons sold (‘000) 469 434 757 - Packaging and speciality papers 111 107 153 - Graphic papers 358 327 604 Sales (EURm) 537 543 982 Price/Ton (EUR) 1,145 1,251 1,297 Cost/Ton* (EUR) 1,252 1,288 1,162 Operating profit excluding special items** (EURm) (50) (16) 102 EB
Slide 37: Coated paper Deliveries and prices Western Europe
Coated paper Deliveries and prices Western Europe* 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 CWF demand MCR demand CWF 100 gsm sheets LWC 60 gsm offset reels * Western Europe shipm
Slide 38: Sappi North America
Sappi North America Q4 FY23 Q3 FY23 Q4 FY22 Tons sold (‘000) 360 305 423 - Pulp* 142 119 111 - Packaging and speciality papers 90 83 135 - Graphic papers 128 103 177 Sales (US$m) 431 395 586 Price/Ton (US$) 1,197 1,295 1,385 Cost/Ton** (US$) 1,094 1,282 1,099 Operating profit excluding special items
Slide 39: Coated paper Deliveries and prices United States
Coated paper Deliveries and prices United States* 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60 lb rolls * US industry purchase
Slide 40: Sappi Southern Africa
Sappi Southern Africa Q4 FY23 Q3 FY23 Q4 FY22 Tons sold* (‘000) 431 399 404 - Pulp 272 259 267 - Packaging and speciality papers 123 106 105 - Graphic papers 36 34 32 Sales* (ZARm) 6,817 6,389 5,924 Price/Ton* (ZAR) 15,817 16,013 14,663 Cost/Ton** (ZAR) 12,508 13,652 10,923 Operating profit excludin
Slide 41: Paper pulp Prices
US$/ton 1,000 1,200 1,400 1,600 400 600 800 2-Jan-18 2-Mar-18 2-May-18 Source: FOEX, CCF group, RISI. 2-Jul-18 2-Sep-18 2-Nov-18 2-Jan-19 Paper pulp Prices 2-Mar-19 2-May-19 2-Jul-19 NBSK Europe (US$) NBSK Europe (EUR) 2-Sep-19 2-Nov-19 2-Jan-20 2-Mar-20 2-May-20 2-Jul-20 2-Sep-20 2-Nov-20 2-Jan-21
Slide 42: Dissolving pulp Prices
US$/ton 1,000 1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400 600 650 700 750 800 850 900 950 Oct 2017 Source: CCF Group. Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Dissolving pulp Prices Apr 2019 Jul 2019 Imp SW DP Oct 2019 Jan 2020 Apr 2020 Jul 2020 Oct 2020 Imp HW DP Jan 2021 Apr 2021 Jul 2021
Slide 43: Textile fibre Prices
US$\ton 1,000 1,500 2,000 2,500 3,000 3,500 4,000 0 500 Jan 2018 Source: CCF Group. Apr 2018 Jul 2018 Oct 2018 Jan 2019 Textile fibre Prices Apr 2019 Cotton 328 Jul 2019 Oct 2019 Jan 2020 Apr 2020 Cotton "A" Index Jul 2020 Oct 2020 Jan 2021 PSF 1.4 D Apr 2021 Jul 2021 Oct 2021 VSF 1.2 D Jan 2022 Apr
Slide 44: Cash flow
Cash flow US$m Q4 FY23 Q3 FY23 Q4 FY22 Cash generated from operations 126 91 352 Movement in working capital 164 89 78 Finance costs paid (23) (33) (50) Finance income received 8 7 5 Taxation (paid) refund (28) (14) (8) Dividend paid - - - Cash generated from operating activities 247 140 377 Cash ut
Slide 45: EBITDA and operating profit reconciliation to reported operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q4 FY23 Q3 FY23 Q4 FY22 EBITDA excluding special items* 168 106 391 Depreciation and amortisation (103) (65) (73) Operating profit excluding special items* 65 41 318 Special items* – gains (losses)
Slide 46: Conversion and expansion of Somerset Mill PM2
Conversion and expansion of Somerset Mill PM2 • Conversion and expansion of Somerset Mill PM2 from 235,000 tons per annum CWF to 470,000 tons SBS • Approved by the board on 09 November 2022 • Progressing well • Start-up H2 FY25 • Aligned with Thrive25 strategy to reduce exposure to declining graphic
Slide 47: Sustainability is at the core of our business and work culture
Who we are Sustainability is at the core of our business and work culture. Every solution we create supports our goal to make everyday products more sustainable. We know that the long-term sustainability of our business will only be ensured by delivering sustained value for our stakeholders. We will
Slide 48: ESG - Continuously rethinking what we do and how we do it
ESG - Continuously rethinking what we do and how we do it Our commitment to sustainable growth Awarded Platinum Level in sustainability performance by independent rating agency EcoVadis Sappi Forests 100% FSC- and 2022 Group PEFC-certified Sustainability Report Rated ‘Prime’ by Validated Oekom Resea
Slide 49: Our Thrive 25 sustainability commitments
Our Thrive 25 sustainability commitments Creating positive social impact Sappi commits to: • Reducing Scope 1 and Scope 2 emission intensity by 41.5% per ton of product by 2030 (from a 2019 base year), and • That 44% of its suppliers (by spend) will have science-based targets by 2026 RESPONSIBLE AFF
Slide 50: 2025 Sustainability targets: Sappi Europe
2025 Sustainability targets are aligned with United Nation´s Sustainable Development Goals (SDGs) What we need to achieve in Sappi Europe between 2021–2025*: 11% Pts increase share of renewable and clean energy 5% Improvement in specific total energy (GJ/adt) 10% 80% 5.8% year-on-year improvement De
Slide 51: 2025 Sustainability targets: Sappi North America
2025 Sustainability targets are aligned with United Nation´s Sustainable Development Goals (SDGs) What we need to achieve in Sappi North America between 2021–2025*: Within 5% of 5% Share of renewable and clean Improvement in specific total baseline or energy energy (GJ/adt) higher Baseline = 79.1% 1
Slide 52: 2025 Sustainability targets: Sappi Southern Africa
2025 Sustainability targets are aligned with United Nation´s Sustainable Development Goals (SDGs) What we need to achieve in Sappi Southern Africa between 2021–2025*: 7% Pts increase share of renewable and clean energy 9% Improvement in specific total energy (GJ/adt) 10% 80% 3.1% year-on-year improv
Slide 53: Innovative R&D focus: Unlocking the full potential of each tree
Innovative R&D focus Unlocking the full potential of each tree Graphic papers Packaging and speciality papers Chemicals from lignin Commercial print and publishing Binding agent Product packaging Dispersion agent Technical papers Emulsion stabiliser Dissolving pulp Textiles Pharmaceuticals Foodstuff
Slide 54: Thank you
Thank you 54