Slide 1: Q2 FY21 financial results
Steve Binnie Chief Executive Officer of Sappi Limited 6 May 2021 Q2 FY21 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 FY21
Highlights Q2 FY21 Excluding special items* • Steady recovery from COVID-related challenges continues Strong performance for • Strong performance for packaging and specialities packaging and specialities combined with solid results from dissolving pulp (DP) and DP • Continued rapid recovery in DP ma
Slide 4: EBITDA reconciliation Q2 FY21 to Q2 FY20
EBITDA* reconciliation Q2 FY21 to Q2 FY20 Dissolving pulp – US$21m Packaging and specialities – (US$11m) Graphics – (US$10m) 120 US$ million 80 Sales revenue – US$44m Variable, delivery & fixed costs – (US$42m) 40 0 131 (28) - (9) 10 6 2 112 Q2 FY20 EBITDA Sales volume Price & mix Variable & deliver
Slide 5: Product contribution split Last twelve months
Product contribution split Last twelve months EBITDA* excluding special items Sales volumes** 14% 24% 28% Dissolving pulp Packaging and 51% speciality papers Graphic papers 25% 58% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating prof
Slide 6: Segment volume & EBITDA margin
Segment volume & EBITDA* margin Graphic papers Packaging and speciality papers 1,100 400 20% 1,000 8% 350 16% 900 Tons (‘000) Tons (‘000) 300 3% 12% 800 250 700 -2% 8% 200 600 -7% 150 4% 500 400 -12% 100 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q1 18 Q2
Slide 7: Net debt/EBITDA development
Net debt/EBITDA* development 2,600 7.0 6.5 2,400 6.0 2,200 5.0 2070 2,000 2,056 US$ million 1,977 4.0 1,957 1,916 1,879 1,800 3.0 1,728 1,680 1,600 1.7 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 Q1 FY18 Q2 FY18 Q3 FY18 Q4
Slide 8: Maturity profile
Maturity profile* Fiscal years 600 Includes 2026 EUR450m bond 558 500 2028 472 EUR400m bond 400 US$ million 2032 US$221m bond 300 297 2025 ZAR1.8bn convertible bond** 200 221 100 120 100 98 27 27 24 20 72 70 69 59 54 49 0 2021 2022 2023 2024 2025 2026 2027 2028 2032 Short-term SPH term debt Securiti
Slide 9: Capex
Capex 600 500 400 US$ million 300 200 100 0 2017 2018 2019 2020 2021E* * Capital expenditure in FY21 is estimated to be US$400 million. 9
Slide 10: Segmental overview
Segmental overview 10
Slide 11: Sappi Europe
Sappi Europe • The recovery slowed due to renewed COVID lockdowns; Sales tons -16% 115,000 tons commercial downtime in graphics year-on-year • Export markets improved but reduced sales due to logistical issues • Paper selling prices were under pressure due to historically Price per ton (EUR) low pul
Slide 12: Sappi North America
Sappi North America • Improved business performance relative to the prior quarter Sales tons +2% and y-o-y year-on-year • Packaging and specialities volumes +56% y-o-y and +18% versus the prior quarter; ramp-up of paperboard grades and strong demand in label paper Price per ton (US$) • Higher DP and
Slide 13: Sappi Southern Africa
Sappi Southern Africa • EBITDA +13% y-o-y; higher sales volumes in packaging Sales tons** +6% and improved DP selling prices year-on-year • Logistics issues remain a challenge with volumes spilling over from one quarter to the next • DP production curtailment of 23,000 tons due to oxygen Price per t
Slide 14: Dissolving pulp markets
Markets Dissolving pulp • Continued rapid recovery of DP markets • CCF market price surged by US$340 per ton during the quarter to US$1,066 per ton and is currently at the highest level since May 2012 • DP market indicators remain positive and demand from our customers currently exceed our capacity;
Slide 15: Packaging and speciality papers markets
Markets Packaging and speciality papers • Further ramp-up of paperboard products in North America and strong containerboard demand in South Africa • Many categories positively affected to date; food- and hygiene-related products • In Europe, lower selling prices linked to depressed pulp prices affec
Slide 16: Graphic papers markets
Markets Graphic papers • Slow recovery of demand continued through to March; volumes were approximately 17% lower than last year; 1% higher than prior quarter • European CWF and CM markets down approximately 17% y-o-y and US CWF market down approximately 24% y-o-y • Graphic paper markets remain chal
Slide 17: Cash management
Cash management Financing • Successful refinancing of €350 million 4% 2023 bond with a new €400 million 2028 bond at 3.625% • Negotiated covenant suspension period until September 2021; first measurement December 2021 • Reinstatement of leverage covenants provides a comfortable level of headroom whe
Slide 18: Road to recovery
Road to recovery 18
Slide 19: Road to recovery: Dissolving pulp
Road to recovery Dissolving pulp Change in retail clothing sales in United States (% y-o-y) Viscose staple fibre (VSF) vs Dissolving pulp pricing Source: Internal & US Treasury. Source: CCF Group. 19
Slide 20: Quarterly EBITDA and dissolving pulp price evolution
Road to recovery continued Quarterly EBITDA and dissolving pulp price evolution • Dissolving pulp prices above US$1,000 per ton; levels not seen since 2012 • Pricing of Sappi’s DP contracts is fixed one quarter in arrears; Sappi will realise the benefits of the current DP price from Q3 FY21 500 1,20
Slide 21: Coated woodfree paper
Road to recovery continued Coated woodfree paper United States CFS consumption (y-o-y)* Europe CWF change in volumes (y-o-y)** * US consumption is Total US shipments plus US imports less US exports. ** Volumes sold by European producers. Source: Sappi estimate, PPPC, AF&PA and Eurograph. 21
Slide 22: Global ocean developments
Global ocean developments Source: CargoSmart BigSchedules, 2021 plus TIM CONSULT Market Intelligence. 22
Slide 23: Our business strategy Thrive25
Our business strategy Thrive25 Drive sales growth Committing to core business segments while investing in innovation, growth opportunities and ongoing customer relationships Grow • Ramp up of paperboard grades at Somerset and Maastricht Mills • Transfer barrier coating and technology to Alfeld Mill;
Slide 24: Thrive25: two phases of strategic development
Our business strategy Thrive25 Two phases Phase 1 Strengthen balance sheet (2021 – 2022) Phase 2 Invest for profit growth (2022+) of strategic Objective Strategy Objective Strategy development— deleveraging Reduce debt and • Complete approved projects Invest in new opportunities. • Deliver smaller g
Slide 25: Sustainability is at the core of our business
Sustainability is at the core of our business 25
Slide 26: Sustainability is embedded into Sappi's business and work culture
ESG - continuously rethinking what we do and how we do it Sustainability is embedded into Sappi’s business and work culture Sappi’s 2025 sustainability targets aligned with United Nations Sappi’s commitment to sustainable growth Sustainable Development Goals • Sappi Forests: 100% FSC certified, • Sa
Slide 27: Outlook
Outlook 27
Slide 28: Outlook
Outlook • DP market indicators remain positive and demand from our customers currently exceeds our capacity Dissolving pulp • Material recovery of DP prices in Q2 will be realised in subsequent quarters due to the lag in contractual pricing • Underlying demand in North America and South Africa Packa
Slide 29: Outlook continued
Outlook Continued • Uncertainty in Europe regarding the continuing lockdowns due to COVID, and the sluggish economic activity in this COVID region is expected to impact demand for non-essential consumer products • Ongoing worldwide logistical challenges of container shortages, port congestion and av
Slide 30: Thank you
Thank you 30
Slide 31: Supplementary information
Supplementary information 31
Slide 32: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 224 221 200 211 208 201 197 152 148 187 185 145 142 136 172 128 150 155 155 117 109 105 139 US$ million 131 93 118 85 100 112 98 62 52 82 48 50 31 16 26 0 -5 -50 -52 -100 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19
Slide 33: Net debt/EBITDA development
Net debt/EBITDA* development Quarterly results are improving, but leverage is increasing. Why? Leverage is shown on a last-four-quarter basis. As weaker quarters 2,600 6.5 7.0 impacted by COVID-19 replace stronger quarters in the calculation, so the2,400 last-four-quarter EBITDA reduces and the rati
Slide 34: 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 35: Packaging and speciality papers Sappi Europe
Packaging and speciality papers Sappi Europe Flexible packaging Functional papers Label papers Containerboard Paperboard Silicone base Dye sublimation Digital imaging papers papers papers papers 35
Slide 36: Packaging and speciality papers Sappi North America
Packaging and speciality papers Sappi North America Casting and Functional papers Label papers Paperboard Paperboard Paperboard Paperboard release papers Bristols Folding carton Litho lamination Food service board 36
Slide 37: Packaging and speciality papers Sappi Southern Africa
Packaging and speciality papers Sappi Southern Africa Paperboard Containerboard Containerboard Containerboard Topliner Tobacco liner Fluting 37
Slide 38: Packaging and speciality papers volume growth 2017 to 2021
Packaging and speciality papers Volume growth 2017 to 2021 1,600 1,400 1,209 1,200 1,129 1,009 1,000 854 800 600 400 200 - 2017 2018 2019 2020 2021F Flexpack Label Paperboard Self Adhesives Digital Imaging Functional papers Casting Containerboard Tissue Other 38
Slide 39: Paperboard segments North America
Paperboard segments North America Quality Premium Premium Spectro (commercial print, (92 brightness) 300,000 tons (10%) premium folding carton) Performance (88 brightness) 2 million tons Performance (45%) Proto and Proto Litho Food service (folding carton and litho & cup stock lamination application
Slide 40: Sappi Europe
Sappi Europe Q2 FY21 Q1 FY21 Q2 FY20 Tons sold (‘000) 669 658 793 Sales (EURm) 483 482 606 Price/Ton (EUR) 722 733 764 Cost/Ton* (EUR) 734 733 733 Operating profit excluding special items** (EURm) (8) - 25 * Sales less operating profit excluding special items divided by tons sold. ** Refer to the su
Slide 41: Coated paper deliveries and prices Western Europe
Coated paper Deliveries and prices Western Europe* 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 CWF demand MCR demand CWF 100 gsm sheets LWC 60 gsm offset reels Source: Cepifine, Cepiprint and RISI indexed to 1Q 2008. *
Slide 42: Sappi North America
Sappi North America Q2 FY21 Q1 FY21 Q2 FY20 Tons sold (‘000) 426 421 416 Sales (US$m) 408 384 387 Price/Ton (US$) 958 912 930 Cost/Ton* (US$) 932 917 921 Operating profit excluding special items** (US$m) 11 (2) 4 * Sales less operating profit excluding special items divided by tons sold. ** Refer to
Slide 43: Coated paper deliveries and prices United States
Coated paper Deliveries and prices United States* 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 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60 lb rolls Source: AF&PA and RISI indexed to Q1 2008. * US
Slide 44: Sappi Southern Africa
Sappi Southern Africa Q2 FY21 Q1 FY21 Q2 FY20 Tons sold* (‘000) 414 296 389 Sales* (ZARm) 4,458 3,222 3,977 Price/Ton* (ZAR) 10,768 10,885 10,224 Cost/Ton** (ZAR) 9,710 9,983 9,398 Operating profit excluding special items*** (ZARm) 438 267 321 * Tons sold, sales and price per ton excludes forestry o
Slide 45: Paper pulp prices
Paper pulp Prices 1,300 1,100 1,200 1,000 1,100 900 1,000 900 800 US$/ton 800 700 700 600 600 500 500 400 400 2-Oct 2-Oct 2-Oct 2-Nov 2-Dec 2-Nov 2-Dec 2-Nov 2-Dec 2-Aug 2-Sep 2-Aug 2-Sep 2-Aug 2-Sep 2-Feb 2-Feb 2-Feb 2-Feb 2-Jan 2-Apr 2-Jun 2-Jan 2-Apr 2-Jun 2-Jan 2-Apr 2-Jun 2-Jan 2-Apr 2-May 2-Ma
Slide 46: Dissolving pulp prices
Dissolving pulp Prices 1,200 1,150 1,100 1,050 1,000 950 US$/ton 900 850 800 750 700 650 600 Jan 2018 Apr 2018 Jan 2019 Jan 2020 Jan 2021 Jul 2018 Apr 2019 Jul 2019 Apr 2020 Jul 2020 Oct 2017 Oct 2018 Oct 2019 Oct 2020 Imp SW DP Imp HW DP China origin DP Source: CCF Group. Sappi Limited: Building a
Slide 47: Textile fibre prices
Textile fibre Prices 3,000 2,500 2,000 US$\ton 1,500 1,000 500 0 Jan 2018 Apr 2018 Jan 2019 Jan 2021 Jul 2018 Apr 2019 Jan 2020 Jul 2019 Apr 2020 Jul 2020 Apr 2021 Oct 2018 Oct 2019 Oct 2020 Cotton 328 Cotton "A" Index PSF 1.4 D VSF 1.2 D VSF 1.5 D Source: CCF Group. 47
Slide 48: Cash flow
Cash flow US$m Q2 FY21 Q1 FY21 Q2 FY20 Cash generated from operations 107 98 116 Movement in working capital (72) 11 (14) Finance costs paid (21) (34) (18) Finance income received 2 3 1 Taxation (paid) refund (3) 11 (11) Cash generated from operating activities 13 89 74 Cash utilised in investing ac
Slide 49: EBITDA and operating profit reconciliation
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q2 FY21 Q1 FY21 Q2 FY20 EBITDA excluding special items* 112 98 131 Depreciation and amortisation (81) (82) (79) Operating profit excluding special items* 31 16 52 Special items* – gains (losses) (12
Slide 50: 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 Product packaging Technical papers Chemicals from lignin Binding agent Dispersion agent Dissolving wood pulp Emulsion stabiliser Textiles Pharmaceuticals Cellophane Fibre co
Slide 51: Thank you
Thank you 51