Slide 1: Q3 FY23 financial results
Steve Binnie Chief Executive Officer, Sappi Limited 03 August 2023 Q3 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 Q3 FY23
Summary Q3 FY23 Excluding special items* Net debt to EBITDA* EPS* EBITDA 5 US cents US$106m Profit for the quarter: US$40m 1.2x • Challenging global economy • Ongoing weakness in paper and pulp markets • Paper businesses experienced longer than expected destocking • Profitability impacted by product
Slide 4: Product contribution split
Product contribution split EBITDA* excluding special items Sales volumes** 100% 100% 90% 90% 80% 80% 70% 70% Pulp 60% 60% 50% 50% Packaging and speciality papers 40% 40% 30% Graphic papers 30% 20% 20% 10% 10% 0% 0% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 LTM - FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Slide 5: EBITDA reconciliation Q2 FY23 to Q3 FY23
EBITDA* reconciliation Q2 FY23 to Q3 FY23 200 Pulp – US$4m Packaging and speciality papers – (US$2m) 160 Graphic papers – (US$82m) US$ million 120 80 40 0 167 (14) (80) 21 11 6 106 Q2 FY23 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Exchange rate Q3 FY23 EBITDA costs 1. All varia
Slide 6: Net debt/EBITDA development
Net debt/EBITDA* development 2,200 7.0 Unfavourable YTD currency 6.0 2,070 2,000 effect on debt 2,056 2,055 translation 1,977 1,957 1,946 5.0 1,917 1,916 US$105m 1,879 1,800 2.2 1.2 1,793 US$ 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 1,241 1.0 1,225
Slide 7: Debt maturity profile
Debt maturity profile* Fiscal years Liquidity Debt maturity 1,400 2028 EUR400m bond 500 462 1,200 Includes 2026 EUR240m bond 1,000 400 2032 US$ million 668 US$221m bond 288 800 300 600 257 200 221 2025 ZAR1.3bn convertible bond** 400 504 80 100 200 26 26 16 64 62 20 91 0 0 Jun-23 2023 2024 2025 2026
Slide 8: Cash flow and capex
Cash flow and capex Cash flow Capital expenditure 1,400 600 1,267 1,200 500 1,000 800 761 400 709 673 600 506 533 462 472 416 444 300 400 323 256 166 200 134 200 1 29 0 100 -200 -254 -257 -400 0 2018 2019 2020 2021 2022 Jun-23 2017 2018 2019 2020 2021 2022 2023E* Cash generated from operations Free
Slide 9: Disciplined capital allocation
Disciplined capital allocation Category Strategic priority FY23 Targets / Achievements High Regulatory & External regulatory & Mandatory license to operate US$60 million for sustainability environmental environmental requirements Mandatory to meet ESG goals Jun-23 YTD free cash flow US$444 million A
Slide 10: Cost inflation developments
Cost inflation developments Major variable input cost/ton impact on the group since Q1 FY20 2.5 • Curtailment impacted operational efficiencies 2.0 • Input costs across all variable cost 1.5 categories reduced q-o-q* 1.0 • Total variable cost -6% q-o-q* 0.5 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 11: Segmental overview
Segmental overview 11
Slide 12: Pulp: Summary Q3 FY23
Summary Q3 FY23 Sales tons +46% Price per ton -5% EBITDA* margin year-on-year** year-on-year** 13.4% 400 40% 350 35% 300 30% 250 25% Tons (‘000) 200 20% 150 15% 100 10% 50 5% 0 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22
Slide 13: Packaging and speciality papers
Summary Q3 FY23 Packaging and speciality Sales tons -26% year-on-year** Price per ton +2% year-on-year** EBITDA* margin 10.4% papers 450 400 350 24% 20% 300 16% Tons (‘000) 250 12% 200 150 8% 100 4% 50 - 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4
Slide 14: Graphic papers: Summary Q3 FY23
Summary Q3 FY23 Sales tons -45% Price per ton +5% EBITDA* margin year-on-year** year-on-year** 3.0% 1,000 23% 18% 800 13% Tons (‘000) 600 8% 3% 400 -2% 200 -7% 0 -12% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q
Slide 15: Regional segments
Regional segments Summary Q3 FY23 Sappi Europe Sappi North America Sappi Southern Africa Sales tons -44% Sales tons -30% Sales tons*** +40% year-on-year** year-on-year** year-on-year** Price per ton (EUR) Price per ton (US$) Price per ton (ZAR) +3% year-on-year** Flat year-on-year** +19% year-on-yea
Slide 16: Regional segments continued
Regional segments continued Summary Q3 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 17: Our business strategy
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 18: 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 19: 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 Validated Sappi Forests Science-Based 100% FSC- and GHG reduction 2022 Group PEFC-certified target Sustainability
Slide 20: Outlook
Outlook 20
Slide 21: Outlook
Outlook Focus Demand • Weak global macroeconomic • Despite challenging market conditions continue to weigh on conditions, liquidity remains healthy general consumer sentiment and we will continue to diligently manage working capital through • DP demand remains strong but production curtailment and a
Slide 22: Outlook continued
Outlook continued Strategy Capital Overall impact expenditure on Q4 FY23 • On 06 July 2023, it was announced • Capital expenditure in FY23 is • Despite the slow recovery of paper that a consultation process has estimated to be US$410 million; demand and notwithstanding been initiated at the Stocksta
Slide 23: Thank you
Thank you 23
Slide 24: Supplementary information
Supplementary information 24
Slide 25: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 450 400 391 318 350 371 300 337 300 259 290 225 250 US$ million 240 200 224 161 211 148 142 197 128 187 185 150 177 117 172 109 167 105 101 145 155 92 139 85 131 100 118 64 112 62 106 52 98 48 41 82 31 50 16 26 0 -5 -50 -52 -100 Q1 FY18 Q2 FY18 Q3
Slide 26: EBITDA reconciliation Q3 FY22 to Q3 FY23
EBITDA* reconciliation Q3 FY22 to Q3 FY23 400 Pulp – US$56m Packaging and speciality papers – (US$45m) 320 Graphic papers – (US$191m) Wood – (US$92m) US$ million 240 Energy, chemicals, purchased pulp and other – US$8m Delivery cost – US$37 160 80 0 371 (180) (40) (47) (4) (19) 25 106 Q3 FY22 EBITDA*
Slide 27: Packaging and speciality papers Production facilities
Packaging and speciality papers Production facilities Alfeld Mill (Germany) Gratkorn Mill (Austria) Rockwell Solutions (Scotland) Flexible packaging, label paper, Label paper Functional papers and flexible paperboard, silicone base paper, packaging, coated barrier film functional paper Carmignano Mi
Slide 28: Product portfolio
Product portfolio • Paperboard • Label & self-adhesive • Coated woodfree • Dissolving pulp • Biochemicals • Flexible packaging • Casting & release • Coated mechanical • High-yield pulp • Biocomposites • Containerboard • Dye sublimation • Newsprint • Kraft pulp • Fibrillated cellulose • Tissue • Offi
Slide 29: Paperboard segments North America
Paperboard segments North America Premium Premium Spectro (commercial print, (92 brightness) premium folding carton) 215,000 tons (10%) Performance (88 brightness) 2.0 million tons Performance (45%) Proto and Proto Litho Food service (folding carton and litho & cup stock lamination applications) (88
Slide 30: Sappi Europe
Sappi Europe Q3 FY23 Q2 FY23 Q3 FY22 Tons sold (‘000) 434 438 780 - Packaging and speciality papers 107 110 163 - Graphic papers 327 328 617 Sales (EURm) 543 592 943 Price/Ton (EUR) 1,251 1,352 1,209 Cost/Ton* (EUR) 1,288 1,352 987 Operating profit excluding special items** (EURm) (16) - 173 EBITDA
Slide 31: Coated paper Deliveries and prices Western Europe
Coated paper Deliveries and prices Western Europe* 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 CWF demand MCR demand CWF 100 gsm sheets LWC 60 gsm offset reels * Western Europe shipments
Slide 32: Sappi North America
Sappi North America Q3 FY23 Q2 FY23 Q3 FY22 Tons sold (‘000) 305 330 437 - Pulp* 119 108 116 - Packaging and speciality papers 83 91 132 - Graphic papers 103 131 189 Sales (US$m) 395 458 566 Price/Ton (US$) 1,295 1,388 1,295 Cost/Ton** (US$) 1,282 1,258 1,073 Operating profit excluding special items
Slide 33: 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 34: Sappi Southern Africa
Sappi Southern Africa Q3 FY23 Q2 FY23 Q3 FY22 Tons sold* (‘000) 399 399 286 - Pulp 259 260 143 - Packaging and speciality papers 106 98 104 - Graphic papers 34 41 37 Sales* (ZARm) 6,389 6,231 3,858 Price/Ton* (ZAR) 16,013 15,617 13,490 Cost/Ton** (ZAR) 13,652 13,213 12,741 Operating profit excluding
Slide 35: Paper pulp Prices
US$/ton 1,000 1,200 1,400 1,600 400 600 800 2-Jan-18 2-Mar-18 2-May-18 Source: FOEX, CCF group, RISI. 2-Jul-18 2-Sep-18 2-Nov-18 Paper pulp Prices 2-Jan-19 2-Mar-19 2-May-19 2-Jul-19 NBSK Europe (US$) 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 36: Dissolving pulp Prices
US$/ton 1,000 1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400 600 650 700 750 800 850 900 950 Oct 2017 Source: CCF Group. Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Dissolving pulp Prices Apr 2019 Imp SW DP Jul 2019 Oct 2019 Jan 2020 Apr 2020 Jul 2020 Imp HW DP Oct 2020 Jan 2021 Apr 2021 Jul 2021
Slide 37: Textile fibre Prices
US$\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 38: Cash flow
Cash flow US$m Q3 FY23 Q2 FY23 Q3 FY22 Cash generated from operations 91 148 351 Movement in working capital 89 99 (71) Finance costs paid (33) (26) (14) Finance income received 7 8 2 Taxation (paid) refund (14) (11) (7) Dividend paid - (85) - Cash generated from operating activities 140 133 261 Cas
Slide 39: EBITDA and operating profit reconciliation to reported operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q3 FY23 Q2 FY23 Q3 FY22 EBITDA excluding special items* 106 167 371 Depreciation and amortisation (65) (66) (71) Operating profit excluding special items* 41 101 300 Special items* – gains (losses)
Slide 40: 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 • Class 10 engineering completed • Equipment orders Q2 FY23 • Start up H2 FY25 • Aligned with Thrive25 strateg
Slide 41: Our Thrive25 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 42: 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 43: 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 44: 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 45: Innovative R&D focus
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 Dissolving pulp Emulsion stabiliser Textiles Pharmaceuticals Foodstuff
Slide 46: Thank you
Thank you 46