Slide 1: Q4 FY21 financial results
Steve Binnie Chief Executive Officer of Sappi Limited 11 November 2021 Q4 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 FY2021
Highlights FY2021 Excluding special items* • Packaging and speciality papers segment achieved record Group returned to overall profitability profitability • Buoyant dissolving pulp (DP) demand and significantly better market prices • Graphic papers market recovery in Europe lagged that in EBITDA* US
Slide 4: Highlights Q4 FY21
Highlights Q4 FY21 Excluding special items* • Strong growth in DP EBITDA facilitated by higher DP Excellent performance by selling prices our North American • Packaging and speciality papers EBITDA +21% y-o-y**; business encouraging sales growth and margin improvement in North America EBITDA* US$177
Slide 5: EBITDA reconciliation Q4 FY20 to Q4 FY21
EBITDA* reconciliation Q4 FY20 to Q4 FY21 Dissolving pulp – US$85m Packaging and speciality papers – US$38m Graphic papers – US$70m Purchased pulp – (US$107m) Delivery cost – (US$17m) 320 Energy, wood, chemicals – US$4m 280 240 US$ million 200 160 120 80 Dissolving pulp – (US$13m) Packaging and spec
Slide 6: Product contribution split
Product contribution split FY16 FY21 23% 37% EBITDA* excluding special items 43% 46% 11% 40% 18% 21% Sales volumes** 14% 54% 68% 25% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 30 in our Q4 FY21 financial results
Slide 7: Segment volume & EBITDA margin
Segment volume & EBITDA* margin Graphic papers Packaging and speciality papers 1,100 450 20% 1,000 8% 400 16% 900 350 Tons (‘000) Tons (‘000) 3% 12% 800 300 700 -2% 250 8% 600 200 -7% 4% 500 150 400 -12% 100 0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21
Slide 8: Net debt/EBITDA development
Net debt/EBITDA* development 2,600 3.7 7.0 2,400 6.0 2,200 5.0 2,000 2,070 2,056 2,055 US$ million 4.0 1,977 1,957 1,946 1,916 1,800 1,879 3.0 1,728 1,600 1,680 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 FY20*** Q2 FY20*** Q3 FY20*** Q4 FY20*** Q
Slide 9: Maturity profile
Maturity profile* Fiscal years 600 Includes 2026 2028 EUR450m bond EUR400m bond 554 500 496 400 US$ million 2032 US$221m bond 337 300 2025 ZAR1.8bn convertible bond** 200 221 89 100 72 119 100 27 27 20 68 48 48 0 2022 2023 2024 2025 2026 2027 2028 2032 Short-term SPH term debt Securitisation SSA * E
Slide 10: Capex
Capex 600 500 400 US$ 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 expansion capex, US$80 million for cost optimisation and quality improvement projects and US$75 million for
Slide 11: Global ocean freight schedule reliability
Global ocean freight schedule reliability Schedule reliability still very poor 90% 80% 70% 60% 50% 40% 30% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 2020 2021 Source: Sea-Intelligence, GLP Issue 122. 11
Slide 12: Paper pulp prices
US$/ton 1,000 1,100 1,200 1,300 1,400 400 500 600 700 800 900 2-Jan 2-Feb 2-Mar 2-Apr Source: FOEX, CCF group, RISI. 2-May 2-Jun 2-Jul 2-Aug 2-Sep Paper pulp Prices 2-Oct 2-Nov 2-Dec 2-Jan NBSK Europe (US$) NBSK Europe (EUR) 2-Feb 2-Mar 2-Apr 2-May 2-Jun 2-Jul 2-Aug 2-Sep 2-Oct 2-Nov 2-Dec 2-Jan BHK
Slide 13: Energy price volatility challenge
Energy price volatility challenge Natural gas market has broken multiple price records Source: Screenshot of Dutch forward gas market price TTF on the 11 November 2021. Price in €/MWh. 13
Slide 14: Segmental overview
sappi .. Segmental overview
Slide 15: Dissolving pulp Highlights Q4 FY21
Dissolving pulp Highlights Q4 FY21 • Hardwood DP market price remained above the US$1,000 per ton Sales tons -23% during the quarter; US$940 per ton in October • DP volumes, excluding BCTMP and market pulp, 18% lower than prior year-on-year** quarter; supply chain challenges ±100,000 tons of spill o
Slide 16: 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 17: Packaging and speciality papers Highlights Q4 FY21
Packaging and speciality papers Highlights Q4 FY21 • Record profitability and 21% volume growth for the financial year Sales tons +10% • EBITDA 21% up relative to the equivalent quarter in the prior year • North American business experienced encouraging sales growth year-on-year** and margin improve
Slide 18: North American paperboard market
North American paperboard market SBS production, shipments and prices 1.20 • US calendar Q3 SBS industry production +10% versus last year and shipments +5% y-o-y 1.15 • Operating rate 96% in Q3, up from the 85% last year 1.10 and 95% in Q2 • Folding carton production +8% while domestic-sold 1.05 foo
Slide 19: Graphic papers Highlights Q4 FY21
Graphic papers Highlights Q4 FY21 • Demand continued to recover; relative to Q4 FY19 European CWF Sales tons +27% market approximately 88% and US CWF market approximately 83% • Industry capacity closures, ensured market balance in Europe and North year-on-year** America restored to healthy levels; -
Slide 20: Coated woodfree paper road to recovery
Coated woodfree paper Road to recovery United States CFS consumption (y-o-y)* Europe CWF change in volumes (y-o-y)** May-20 May-21 Mar-20 Mar-21 Nov-20 Aug-20 Aug-21 Dec-20 Sep-20 Sep-21 Feb-20 Feb-21 May-21 May-20 Apr-20 Apr-21 Oct-20 Jun-20 Jun-21 Mar-21 Jan-20 Jan-21 Nov-20 Aug-21 Aug-20 Dec-20 F
Slide 21: Sappi Europe Highlights Q4 FY21
Sappi Europe Highlights Q4 FY21 • Despite positive gains in selling prices profitability under Sales tons +33% significant pressure due to rapid cost inflation year-on-year** • Graphics sales volumes +37% y-o-y** • 43,000 tons commercial downtime in graphic papers • CWF and CM volumes 99% and 80% of
Slide 22: Sappi North America Highlights Q4 FY21
Sappi North America Highlights Q4 FY21 • Excellent performance; highest quarterly EBITDA in Sales tons flat ≥ 20 years of US$90 million year-on-year** • Focussed on implementing higher selling prices to offset rising costs and product mix optimisation • Packaging and speciality papers volumes +20% a
Slide 23: Sappi South Africa Highlights Q4 FY21
Sappi South Africa Highlights Q4 FY21 • EBITDA +71% y-o-y**; improvement in DP pricing Sales tons** -14% • Good performance of paper business year-on-year*** • Most significant headwinds; supply chain challenges related to inefficiencies in the rail network and at the Durban port • ±82,000 tons DP v
Slide 24: Cash management
Cash management Financing • Reinstatement of leverage covenants provides a comfortable level of headroom when covenant measurement commences again from December 2021 • Liquidity comprised cash on hand of US$366 million and US$732 million from the committed revolving credit facilities in South Africa
Slide 25: 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 • Explore other opportunities to reallocate graphic papers capacity to packaging and speciality papers • Transfer barrier
Slide 26: Our business strategy Thrive25: two phases
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 growth • Further expand and invest
Slide 27: Our commitment to sustainability
Update on targets for FY21 Thrive25 Our commitment to sustainability is based on being a trusted, transparent, and innovative partner in building a biobased circular economy. “We have made good progress on our Thrive25 sustainability journey and remain fully committed to achieving our targets.” - St
Slide 28: Global People & Prosperity Targets FY21
Global People & Prosperity Targets FY21 Safety - LTIFR* target for the year not achieved Specific for Sappi Southern Africa - SSA recorded best-ever performance - SEU performance requires improvement Gender diversity - Target for women in senior positions achieved Sustainable procurement - Target ac
Slide 29: Global Planet Targets FY21
Global Planet Targets FY21 Specific process water usage* - Target not achieved - Water usage in KwaZulu-Natal mills impacted by civil unrest requiring stop-start and Saiccor Mill Project Vulindlela cold-commissioning Energy efficiency - Target achieved Share of renewable energy - Slightly below targ
Slide 30: Outlook
Outlook 30
Slide 31: Outlook
Outlook • Overall market conditions for DP continue to be strong Dissolving pulp • Volumes are not expected to be impacted by the weaker Chinese DP demand • Underlying demand in North America and South Africa Packaging and remains robust speciality papers • Opportunities for further growth in sales
Slide 32: Outlook continued
Outlook Continued • Recent spikes in global energy prices anticipated to have adverse impact on our Q1 FY22 results, principally in Europe Cost inflation • Selling price increases announced across all paper grades and energy-specific surcharges have been implemented for all European shipments from 2
Slide 33: Thank you
Thank you 33
Slide 34: Supplementary information
Supplementary information 34
Slide 35: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 224 221 200 211 208 201 197 152 148 187 185 145 142 177 136 172 150 128 155 155 117 109 145 105 139 US$ million 131 93 92 118 100 85 112 98 64 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
Slide 36: 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 37: 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 37
Slide 38: 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 39: Paperboard segments North America
Paperboard segments North America Quality Premium Premium Spectro (commercial print, (92 brightness) premium folding carton) 250,000 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 40: Sappi Europe
Sappi Europe Q4 FY21 Q3 FY21 Q4 FY20 Tons sold (‘000) 757 733 570 Sales (EURm) 589 536 422 Price/Ton (EUR) 778 731 740 Cost/Ton* (EUR) 806 752 774 Operating profit excluding special items** (EURm) (21) (15) (19) * Sales less operating profit excluding special items divided by tons sold. ** Refer to
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 * Western Europe shipments including export. Source: Cepif
Slide 42: Sappi North America
Sappi North America Q4 FY21 Q3 FY21 Q4 FY20 Tons sold (‘000) 418 420 416 Sales (US$m) 458 438 361 Price/Ton (US$) 1,096 1,043 868 Cost/Ton* (US$) 940 969 868 Operating profit excluding special items** (US$m) 65 31 - * Sales less operating profit excluding special items divided by tons sold. ** Refer
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 * US industry purchases defined as industry ship
Slide 44: Sappi Southern Africa
Sappi Southern Africa Q4 FY21 Q3 FY21 Q4 FY20 Tons sold* (‘000) 316 372 369 Sales* (ZARm) 3,969 4,434 3,915 Price/Ton* (ZAR) 12,560 11,919 10,610 Cost/Ton** (ZAR) 10,051 9,919 9,780 Operating profit excluding special items*** (ZARm) 793 744 306 * Tons sold, sales and price per ton excludes forestry
Slide 45: Dissolving pulp prices
US$/ton 1,000 1,050 1,100 1,150 1,200 1,250 600 650 700 750 800 850 900 950 Oct 2017 Source: CCF Group. Jan 2018 Apr 2018 Jul 2018 Dissolving pulp Prices Oct 2018 Imp SW DP Jan 2019 Apr 2019 Jul 2019 Oct 2019 Imp HW DP Jan 2020 Apr 2020 Jul 2020 Oct 2020 China origin DP Jan 2021 Apr 2021 Jul 2021 Oc
Slide 46: Textile fibre prices
US$\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 Textile fibre Prices Oct 2018 Cotton 328 Jan 2019 Apr 2019 Jul 2019 Cotton "A" Index Oct 2019 Jan 2020 PSF 1.4 D Apr 2020 Jul 2020 VSF 1.2 D Oct 2020 Jan 2021 VSF 1.5 D Apr 2021 Jul 2021 Oct 2021 46
Slide 47: Cash flow
Cash flow US$m Q4 FY21 Q3 FY21 Q4 FY20 Cash generated from operations 141 126 46 Movement in working capital 63 37 135 Finance costs paid (24) (31) (7) Finance income received 1 2 2 Taxation (paid) refund (5) (5) 4 Cash generated from operating activities 176 129 180 Cash utilised in investing activ
Slide 48: EBITDA and operating profit reconciliation to reported operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q4 FY21 Q3 FY21 Q4 FY20 EBITDA excluding special items* 177 145 82 Depreciation and amortisation (85) (81) (87) Operating profit excluding special items* 92 64 (5) Special items* – gains (losses) (3
Slide 49: Innovative R&D focus
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 pulp Emulsion stabiliser Textiles Pharmaceuticals Cellophane Fibre composi
Slide 50: Thank you
Thank you 50