Sappi Limited · JSE:SAP
Sappi — Q4 2014 Earnings Presentation
42 slides from Sappi's earnings presentation, Nov 10, 2014
Slide 1: 4th Quarter and Full-Year 2014 Financial Results Presentation
4th Quarter and Full‐Year 2014 Financial Results Presentation 10 November 2014
Slide 2: Forward-looking statements
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 indicate future earnings, savings, synergies, events, trends,
Slide 3: Summary
Summary | Q4 2014 Results | 10 November 2014
Slide 4: Q4 2014 and FY 2014 Summary
4 Q4 2014 Summary • EBITDA excluding special items US$200m (up 29% year-on-year) • EPS excluding special items 12 US cents (restated Q4 2013 1 US cent) • US$288m cash generation in the quarter (restated Q4 2013 US$111m) FY 2014 Summary • Strategy delivers strong earnings growth • EBITDA excluding sp
Slide 5: EBITDA & Operating Profit ex-items
5 EBITDA & Operating Profit ex-items* USD million *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Profit and page 20 in our Q4 2014 Results booklet (available on www.sappi.com) for a definition of special items. **2013 figures restate
Slide 6: FY2014 Product Contribution Split
6 FY2014 Product Contribution Split EBITDA excluding special items* Operating Profit excluding special items* Paper Specialised 29% Paper Cellulose 54% 46% Specialised Cellulose 71% *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Prof
Slide 7: Net Debt Target Reached
7 Net Debt Target Reached $510m Specialised Cellulose Capex projects US$m Net Debt Target *F2013 and Q1 14 figures restated per adoption of IFRS 10 ‐ Consolidated Financial Statements | Q4 2014 Results |10 November 2014
Slide 8: Net Debt/EBITDA Development
8 Net Debt/EBITDA Development * EBITDA ex special items ** The covenant Net Debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above | Q4 2014 Results |10 November 2014
Slide 9: Capex Development
9 Capex Development Maint Expansion 600 500 400 US$m 300 200 100 0 2012 2013 2014 2015 EST | Q4 2014 Results |10 November 2014
Slide 10: Maturity profile – Fiscal years
10 Maturity profile – Fiscal years Includes US$400m Bond Includes €250m Bond US$350m Bond US$222m US$300m Bond Bond 45 | Q4 2014 Results |10 November 2014
Slide 11: Divisional Overviews
Divisional Overviews | Q4 2014 Results | 10 November 2014
Slide 12: Regional EBITDA Margin development
12 Regional EBITDA Margin development North America: 11.0% Europe: 10.3% EBITDA* EBITDA* Margin EBITDA* EBITDA* Margin 50 14 100 12 12 10 40 80 10 8 US$m US$m 30 8 60 6 % 6 % 20 40 4 4 10 20 2 2 0 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2013 2014 South Africa: 20.8% EBITDA* E
Slide 13: Sappi Europe
13 Sappi Europe • Encouraging improvements in margins in seasonally better quarter – 10% EBITDA ex-items margins – first time since 2012. • CWF demand for the quarter was flat year-on-year. CM paper demand continued to decline. Weaker Euro relative to the US$ led to improved pricing on export volume
Slide 14: Sappi North America
14 Sappi North America • Competitive market conditions throughout the year put significant downward pressure on selling prices. During this seasonally stronger quarter, we implemented a price increase on our web products which helped return the business to an operating profit. • Lower DWP sales pric
Slide 15: Sappi Southern Africa
15 Sappi Southern Africa • Overall, a good year for the South African business, with the expanded Specialised Cellulose business and the restructured paper business consistently delivering enhanced margins. Better quarterly performance year-on-year driven by higher volumes of DWP, as well as higher
Slide 16: Specialised Cellulose
16 Specialised Cellulose • Dissolving wood pulp prices declining on weaker viscose staple fibre prices, and excess DWP capacity • Demand growth for DWP expected to normalize due to falling prices for competing fibers • All three mills running full, potential to optimise margins with kraft pulp runs
Slide 17: Global Paper Market Trends
17 Global Paper Market Trends Supply & Demand Volumes continue to be stronger than expected Coated paper capacity closures in Europe & NA Costs & Prices Fixed costs well controlled, commodity prices lower Price increases in the US on web products Price increases announced on coated paper in Europe –
Slide 18: Global Specialised Cellulose Market Trends
18 Global Specialised Cellulose Market Trends Supply & Demand Supply (+16%) growing faster than demand (+5%) YTD ‘14 v ‘13 Demand growth impacted by lower textile fibre prices Costs & Prices DP prices expected to remain under pressure in the medium‐term Our entire capacity is among the world’s lowes
Slide 19: Strategic Focus
Strategic Focus | Q4 2014 Results | 10 November 2014
Slide 20: Strategic Focus
20 Strategic Focus Achieve cost Rationalise declining Grow through advantages businesses moderate investments Accelerate growth in Generate cash to strengthen adjacent businesses from a balance sheet strong base | Q4 2014 Results | 10 November 2014
Slide 21: Focus Areas: Achieve cost advantages
21 Focus Areas Achieve cost advantages We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages. North America • Workforce reduction • Gas conversion of Somerset boiler and lime kiln Europe • Investment in Kirkniemi power plant • Variable and fixed cost sa
Slide 22: Focus Areas: Optimise and rationalise declining businesses
22 Focus Areas Optimise and rationalise declining businesses Recognising the decreasing demand for graphic paper, we manage our capacity to strengthen our leadership position in these markets, realising their strategic importance to the group and maximising their significant cash flow generation. Eu
Slide 23: Focus Areas: Growth through moderate investment
23 Focus Areas Growth through moderate investment We will make smaller investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers. Europe • Opportunity to take advantage of under-utilised capacity on paper machines for opportunities in speciali
Slide 24: Focus Areas: Strengthen the balance sheet
24 Focus Areas Strengthen the balance sheet Over the next two years, we will continue our focus on having a cleaner, stronger balance sheet so that we can then accelerate our growth in adjacent businesses. South Africa • Potential Mpumalanga forestry assets - ~ R700m Group • Working capital optimisa
Slide 25: Outlook
Outlook | Q4 2014 Results | 10 November 2014
Slide 26: Outlook
26 Outlook • We made significant strides in our strategy this past year: • reduced debt below our target level • improved performance from our EU and SA paper business • delivery of substantially increased DWP volumes into a growing and high- margin market. • divestiture of Nijmegen • Usutu forests
Slide 27: Outlook (cont'd)
27 Outlook (cont’d) • DWP demand remains strong, dollar prices have however weakened due to pressure on our customers from lower viscose and cotton prices. • Cloquet will likely take advantage of its built-in ability to swing pulp production between NBHK and DWP to optimise margins for the US busine
Slide 28: Outlook (cont'd)
28 Outlook (cont’d) • Currency movements affect margins in both our European and South African business. • Capital expenditure in F2015 ~US$300m and contained largely to the investments at our Gratkorn and Kirkniemi mills. • 1st quarter result will be negatively impacted by a 3-week shut at Gratkorn
Slide 29: Outlook (cont'd)
29 Outlook (cont’d) • Based on current market conditions, we believe that EBITDA excluding special items in the 2015 financial year will be broadly similar to that of 2014 due to the once off impact of various projects as well as lower DWP prices offsetting improved performance in paper businesses.
Slide 30: Q&A
Q&A | Q4 2014 Results | 10 November 2014
Slide 31: Supplementary Information
Supplementary Information | Q4 2014 Results | 10 November 2014
Slide 32: W. Europe Coated Paper Deliveries & Prices
32 W. Europe Coated Paper Deliveries & Prices 1.2 1.1 1.0 0.9 Q1 2008 = 1 0.8 0.7 0.6 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe Shipments Incl. Expo
Slide 33: Sappi Fine Paper Europe
33 Sappi Fine Paper Europe Q4 14 Q4 13 YTD 14 YTD 13 Tons Sold ('000) 811 840 3,303 3,367 Sales (€) 561 591 2,288 2,405 Price / Ton (€) 692 704 693 714 Cost / Ton* (€) 660 714 676 716 Operating profit ex items (€m) ** 26 (9) 55 (6) * Sales less operating profit excluding special items divided by ton
Slide 34: US Coated Paper Prices and Shipments
34 US Coated Paper Prices and Shipments Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices 1.2 1.1 1.0 Q1 2008 = 1 0.9 0.8 0.7 0.6 0.5 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 US Industry Shipments and t
Slide 35: Sappi Fine Paper North America
35 Sappi Fine Paper North America Q4 14 Q4 13 YTD 14 YTD 13 Tons Sold ('000) 375 335 1,454 1,298 Sales ($'m) 390 366 1,517 1,377 Price / Ton ($) 1,040 1,093 1,043 1,061 Cost / Ton* ($) 973 1,012 1,031 1,017 Operating profit ex items** ($'m) 25 27 18 57 * Sales less operating profit excluding special
Slide 36: Pulp Prices - spread widening
36 Pulp Prices* - spread widening US$/ton $930/ton $724/ton * Source: Average weekly FOEX delivered European prices | Q4 2014 Results |10 November 2014
Slide 37: Sappi Southern Africa ex Forestry
37 Sappi Southern Africa ex Forestry Q4 14 Q4 13 YTD 14 YTD 13 Tons Sold ('000) 453 447 1,706 1,619 Sales (ZAR'm) 3,799 3,598 14,454 12,210 Price / Ton (ZAR) 8,386 8,049 8,472 7,542 Cost / Ton* (ZAR) 6,987 6,911 6,936 6,825 Operating profit ex items** (ZAR'm) 634 509 2,620 1,160 * Sales less operati
Slide 38: Cash Flow - US$m
38 Cash Flow - US$m Q4 14 Q4 13 YTD 14 YTD 13 Cash generated from operations 160 121 566 447 - Movement in working capital 153 108 34 (20) - Net finance costs paid (26) (20) (162) (164) - Taxation paid - (2) (1) (17) Cash generated from operating activities 287 207 437 246 Cash utilised in investing
Slide 39: EBITDA recon to reported operating profit
39 EBITDA recon to reported operating profit* Q4 14 Q4 13 YTD 14 YTD 13 EBITDA ex-items 200 155 658 528 Depreciation and Amortisation (76) (88) (312) (348) Operating Profit ex-items 124 67 346 180 Special Items - gains (losses) (48) (177) (32) (161) Plantation price fair value adj. - (6) 18 87 Net r
Slide 40: YTD Global Demand for DWP
40 YTD Global Demand for DWP +5% v 2013 +25% v 2012 ‘000 tonnes Source: PPPC | Q4 2014 Results |10 November 2014
Slide 41: Further weakness in cotton prices could undermine demand for viscose
41 Further weakness in cotton prices could undermine demand for viscose US$ per ton Source: RISI | Q4 2014 Results |10 November 2014
Slide 42: Thank You
, | Thank You,