Slide 1: Q2 FY22 financial results
Steve Binnie Chief Executive Officer, Sappi Limited 12 May 2022 Q2 FY22 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 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 or i
Slide 3: Highlights Q2 FY22
Highlights Q2 FY22 Excluding special items* • Tight paper markets behind quarter’s success Performance substantially • Higher selling prices offset extraordinary cost inflation exceeded expectations • Russian-Ukrainian conflict intensified cost inflation across all regions and product segments • Pul
Slide 4: EBITDA contribution split
EBITDA* contribution split 400 350 300 250 200 US$ million 150 100 50 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -50 FY18 FY19 FY20 FY21 FY22 -100 Pulp Packaging and speciality papers Graphic papers * Refer to the supplementary information in this presentation for a reconciliation of EB
Slide 5: EBITDA reconciliation Q2 FY21 to Q2 FY22
EBITDA* reconciliation Q2 FY21 to Q2 FY22 Pulp – US$69m Packaging and speciality papers – US$125m Graphic papers – US$295m 680 Purchased pulp – (US$86m) 640 Energy, wood, chemicals – (US$134m) 600 Delivery cost – (US$32m) 560 520 480 440 400 US$ million 360 320 280 240 200 160 120 80 40 0 112 56 489
Slide 6: Cost inflation developments
Cost inflation developments Major variable input cost/ton impact on the Group since Q1 FY2020 2.5 • Energy +96% 2.0 - Largely due to the Russian-Ukrainian conflict 1.5 • Pulp +18% • Chemical +19% 1.0 • Delivery +30% - Global logistics challenges escalated as 0.5 economic recovery resumed • Total var
Slide 7: Product contribution split Last twelve months
Product contribution split Last twelve months EBITDA* excluding special items Sales volumes** 21% 33% 34% 54% 25% 33% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 26 in our Q2 FY22 financial results booklet (availa
Slide 8: Net debt/EBITDA development
Net debt/EBITDA* development 2,600 7.0 2,400 6.0 2.0 2,200 5.0 2,000 2,070 2,056 2,055 US$ million 4.0 1,977 1,957 1,946 1,917 1,916 1,800 1,879 1.7 1,793 3.0 1,728 1,600 1,680 1,632 1,603 1,568 1,557 2.0 1,501 1,400 1,349 1,338 1,329 1,322 1,318 1,200 1.0 1,000 0.0 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q
Slide 9: Maturity profile
Maturity profile* Fiscal years 600 Includes 2026 2028 EUR450m bond EUR400m bond 500 524 469 400 US$ million 2032 364 US$221m bond 300 2025 ZAR1.3bn convertible bond** 200 221 91 100 74 102 93 26 26 20 64 20 47 0 2022 2023 2024 2025 2026 2027 2028 2032 Short-term SPH term debt Securitisation SSA * Ex
Slide 10: Capex
Capex FY2022 Capex in line with expectations 600 500 400 US$ million 300 200 100 0 2017 2018 2019 2020 2021 2022E* * Capital expenditure in FY22 is estimated to be US$395 million and includes approximately US$30 million of Saiccor Mill expansion capex, US$80 million for cost optimisation and quality
Slide 11: Global ocean freight developments
Global ocean freight developments Schedule reliability as of March 2022 WCI* decreased by 1.3% to $7,768.18 per 40ft 90% 80% 70% Yantian congestion Shanghai Covid closure 60% Ningbo Covid Closure Ukrainian Invasion 50% 40% 30% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 2020 2021 2022
Slide 12: Paper pulp prices
US$/ton 1,000 1,100 1,200 1,300 1,400 400 500 600 700 800 900 2-Jan-18 2-Feb-18 2-Mar-18 2-Apr-18 2-May-18 Source: FOEX, CCF group, RISI. 2-Jun-18 2-Jul-18 2-Aug-18 2-Sep-18 2-Oct-18 Paper pulp Prices 2-Nov-18 2-Dec-18 2-Jan-19 2-Feb-19 2-Mar-19 NBSK Europe (US$) NBSK Europe (EUR) 2-Apr-19 2-May-19
Slide 13: Energy price volatility challenge
Energy price volatility challenge Natural gas market: the only thing certain is uncertainty Source: Screenshot of Dutch gas market price TTF on the 02 May 2022. Price in €/MWh. 13
Slide 14: Russian-Ukrainian conflict
Russian-Ukrainian conflict Impact on the Group • Triggered renewed volatility in global commodity markets • Further disrupted already constrained global supply chains Global impact • Intensified cost inflation across all regions and all product segments • Sales into Russia and Belarus suspended • Sa
Slide 15: Segmental overview
Segmental overview 15
Slide 16: Pulp Highlights Q2 FY22
Pulp Highlights Q2 FY22 Pulp 450 40% Sales tons +9% 400 35% 30% 350 25% year-on-year** Tons (‘000) 300 20% 250 15% 200 10% 150 5% 100 0% Price per ton 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 +27% year-on-year** Volume EBITDA margin
Slide 17: Packaging and speciality papers Highlights Q2 FY22
Packaging and speciality papers Highlights Q2 FY22 Packaging and speciality papers 450 20% Sales tons +13% 400 16% 350 Tons (‘000) year-on-year** 300 250 12% 8% 200 4% 150 100 0% Price per ton 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
Slide 18: Graphic papers Highlights Q2 FY22
Graphic papers Highlights Q2 FY22 Graphic papers Sales tons +12% 1,100 18% 1,000 13% 900 8% year-on-year** Tons (‘000) 800 3% 700 -2% 600 500 -7% 400 -12% Price per ton 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 +34% year-on-year** Vol
Slide 19: Sappi Europe Highlights Q2 FY22
Sappi Europe Highlights Q2 FY22 • Strong second quarter EBITDA €124 million Sales tons +20% year-on-year** • Natural gas and energy costs remain extremely volatile • Selling price increases and energy surcharges required to Price per ton (EUR) offset the significantly higher costs +45% year-on-year*
Slide 20: Sappi North America Highlights Q2 FY22
Sappi North America Highlights Q2 FY22 • Another excellent quarter with EBITDA of US$114 million Sales tons +4% year-on-year** • Tight markets and significantly higher y-o-y** selling prices across all product segments Price per ton (US$) • Graphic papers selling prices +27% y-o-y** +26% year-on-yea
Slide 21: Sappi Southern Africa Highlights Q2 FY22
Sappi Southern Africa Highlights Q2 FY22 • Impacted by significant cost increases Sales tons** +6% - Variable costs +23% y-o-y** year-on-year*** • Production challenges at Saiccor Mill; ±57, 000 tons shortfall in DP production volumes Price per ton (ZAR)** • Equipment related to the Saiccor Mill exp
Slide 22: Our business strategy Thrive25
Our business strategy Thrive25 What this means Short-term objectives Drive operational excellence • Achieve zero fatalities and LTIFR. • Strengthen our safety-first culture. • Maximise production outputs • Continuously improve our cost position. • Gain cost advantage through global footprint • Conti
Slide 23: Outlook
Outlook 23
Slide 24: Outlook
Outlook • DP market indicators remain positive • DP sales volumes will be lower q-o-q; annual maintenance Pulp shuts at Cloquet, Ngodwana and Saiccor mills (±US$50 million impact on profitability) • Demand in the packaging and speciality papers segment Packaging and remains robust speciality papers
Slide 25: Outlook Continued
Outlook Continued • Inflationary macroeconomic environment continues to exert pressures on our cost base across all regions Cost inflation • Delivery, chemicals and energy costs anticipated to increase further in the third quarter • No material damage to any of the plants and mill operations resumed
Slide 26: Thank you
Thank you 26
Slide 27: Supplementary information
Supplementary information 27
Slide 28: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 400 350 337 300 259 250 240 US$ million 200 224 161 211 148 142 197 187 185 128 177 150 172 117 109 105 145 155 139 92 131 85 100 118 112 64 62 98 52 48 82 50 31 16 26 0 -5 -50 -52 -100 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY
Slide 29: Packaging and speciality papers Production facilities
Packaging and speciality papers Production facilities Alfeld Mill (Germany) Lanaken Mill (Belgium) Rockwell Solutions (Scotland) Flexible packaging, label paper, Functional paper Functional papers and flexible paperboard, containerboard, silicone packaging base paper, functional paper Carmignano Mil
Slide 30: Packaging and speciality papers Product portfolio
Packaging and speciality papers Product portfolio Flexible packaging Functional papers Containerboard Paperboard Label papers Silicone base Digital imaging Casting and papers papers papers release papers Dye sublimation papers 30
Slide 31: Packaging and speciality papers Volume growth 2015 to 2022
Packaging and speciality papers Volume growth 2015 to 2022 1,800 1,600 1,464 1,400 1,209 1,200 1,129 1,009 1,000 884 887 854 800 600 400 200 - 2015 2016 2017 2018 2019 2020 2021 2022F Flexpack Label Paperboard Self-adhesives Self Adhesives Digital Imaging Digital imaging Functional papers Casting Co
Slide 32: Paperboard segments North America
Paperboard segments North America Quality Premium Premium Spectro (commercial print, (92 brightness) premium folding carton) 220,000 tons (10%) Performance (88 brightness) 2.1 million tons Performance (45%) Proto and Proto Litho Food service (folding carton and litho & cup stock lamination applicati
Slide 33: Sappi Europe
Sappi Europe Q2 FY22 Q1 FY22 Q2 FY21 Tons sold (‘000) 801 837 669 - Packaging and speciality papers 167 153 129 - Graphic papers 634 684 540 Sales (EURm) 839 740 483 Price/Ton (EUR) 1,047 884 722 Cost/Ton* (EUR) 925 871 734 Operating profit excluding special items** (EURm) 98 11 (8) * Sales less ope
Slide 34: Coated paper Deliveries and prices Western Europe
Coated paper Deliveries and prices Western Europe* 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 CWF demand MCR demand CWF 100 gsm sheets LWC 60 gsm offset reels * Western Europe shipments including exp
Slide 35: Sappi North America
Sappi North America Q2 FY22 Q1 FY22 Q2 FY21 Tons sold (‘000) 445 453 426 - Pulp 121 135 115 - Packaging and speciality papers 133 123 122 - Graphic papers 191 195 189 Sales (US$m) 536 512 408 Price/Ton (US$) 1,204 1,130 958 Cost/Ton* (US$) 1,007 991 932 Operating profit excluding special items** (US
Slide 36: Coated paper Deliveries and prices United States
Coated paper Deliveries and prices United States* 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60 lb rolls * US industry purchases defined as i
Slide 37: Sappi South Africa
Sappi South Africa Q2 FY22 Q1 FY22 Q2 FY21 Tons sold* (‘000) 439 406 414 - Pulp 275 253 247 - Packaging and speciality papers 122 110 122 - Graphic papers 42 43 45 Sales* (ZARm) 5,879 5,472 4,458 Price/Ton* (ZAR) 13,392 13,478 10,768 Cost/Ton** (ZAR) 11,317 10,251 9,710 Operating profit excluding sp
Slide 38: Dissolving pulp Prices
US$/ton 1,000 1,050 1,100 1,150 1,200 1,250 600 650 700 750 800 850 900 950 Oct 2017 Source: CCF Group. Jan 2018 Apr 2018 Jul 2018 Oct 2018 Dissolving pulp Prices Jan 2019 Imp SW DP Apr 2019 Jul 2019 Oct 2019 Jan 2020 Imp HW DP Apr 2020 Jul 2020 Oct 2020 Jan 2021 China origin DP Apr 2021 Jul 2021 Oc
Slide 39: Textile fibre Prices
US$\ton 1,000 1,500 2,000 2,500 3,000 3,500 4,000 0 500 Jan 2018 Source: CCF Group. Apr 2018 Jul 2018 Oct 2018 Textile fibre Prices Jan 2019 Cotton 328 Apr 2019 Jul 2019 Oct 2019 Cotton "A" Index Jan 2020 Apr 2020 PSF 1.4 D Jul 2020 Oct 2020 VSF 1.2 D Jan 2021 Apr 2021 VSF 1.5 D Jul 2021 Oct 2021 Ja
Slide 40: Dissolving pulp Market indicators
Dissolving pulp Market indicators Retail textile and apparel sales by region/country Dissolving pulp pricing vs Viscose staple fibre (VSF) Indexed 2017=100 Source: US Census, National Bureau of Statistics, Eurostat. Indexing by Hawkins Wright. Source: CCF Group. Estimates for the US are based on dat
Slide 41: Cash flow
Cash flow US$m Q2 FY22 Q1 FY22 Q2 FY21 Cash generated from operations 328 236 107 Movement in working capital (143) (134) (72) Finance costs paid (10) (28) (21) Finance income received 2 1 2 Taxation (paid) refund (4) (4) (3) Cash generated from operating activities 173 71 13 Cash utilised in invest
Slide 42: EBITDA and operating profit reconciliation to reported operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q2 FY22 Q1 FY22 Q2 FY21 EBITDA excluding special items* 337 240 112 Depreciation and amortisation (78) (79) (81) Operating profit excluding special items* 259 161 31 Special items* – gains (losses)
Slide 43: ESG - continuously rethinking what we do and how we do it
ESG - continuously rethinking what we do and how we do it Sustainability is embedded into Sappi’s business and work culture Sappi’s commitment to sustainable growth • Sappi Forests: 100% FSC certified, • Sappi Forests: 100% PEFC certified • Awarded Platinum Level in sustainability performance by ind
Slide 44: 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) 0 Safety (LTIFR) (own employees) 80% Decl
Slide 45: 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 Share of renewable baseline or higher and clean energy Baseline = 81.8% 5% Improvement in specific total energy (GJ/adt) 0
Slide 46: 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 proportion of renewable and clean energy 9% Improvement in specific total energy (GJ/adt) 0 Safety (LTIFR) (own employ
Slide 47: 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 Commercial print and publishing Product packaging Technical papers Chemicals from lignin Binding agent Dispersion agent Pulp Emulsion stabiliser Textiles Pharmaceuticals Foodstuffs Fibre com
Slide 48: Thank you
Thank you 48