Slide 1: Q1 FY20 financial results delivering on strategy
Q1 FY20 financial results delivering on strategy 5 Feb 2020 2020 Vision 2020 next phase growth intentional evolution Steve Binnie Chief Executive Officer Sappi Limited 1
Slide 2: Forward-looking statements and Regulation G
Forward-looking statements and Regulation G 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
Slide 3: Highlights – Q1 FY20
Highlights – Q1 FY20 Excluding special items* o Historically low DWP prices significantly impacting EBITDA* $139m profitability o Packaging and speciality segment margins higher as pricing and mix improve – SA containerboard Profit for the period experiencing depressed demand US$24 million o Market
Slide 4: EBITDA reconciliation Q1 FY20 to Q1 FY19
EBITDA* reconciliation Q1 FY20 to Q1 FY19 200 180 160 US$ million 140 120 100 80 Sales revenue 60 197 (6) (82) 44 (7) (6) (1) - 139 Q1 FY19 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Inventory movement Other Exchange rate Q1 FY20 EBITDA costs Dec Notes: 2020 2019 1. All variance
Slide 5: Product contribution split – LTM
Product contribution split – LTM EBITDA excluding special items Operating profit excluding special items Dissolving Wood 29% Pulp 40% 39% Packaging & 54% Speciality Papers Graphic Papers 17% 21% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported
Slide 6: Segment volume & EBITDA margin
Segment volume & EBITDA* margin 1,200 12% 350 20% 1,100 10% 300 15% 1,000 8% 250 900 6% 10% 200 800 4% 150 5% 700 2% 600 0% 100 0% Graphics volume Graphics margin Pack/Spec volume Pack/Spec margin 400 50% 350 40% 300 30% 250 20% 200 150 10% 100 0% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 1
Slide 7: Maturity profile
Maturity profile* Fiscal years 600 503 500 437 EUR450m bond EUR350m bond 400 364 US$ million 300 270 US$221m bond 221 200 113 107 100 65 82 78 43 46 23 26 0 2020 2021 2022 2023 2024 2025 2026 2027 2032 Cash Short-term SPH term debt Securitisation SSA *Graph excludes US$92.4 million in IFRS16 leases
Slide 8: Capex
Capex 600 500 400 US$ million 300 200 100 0 2013 2014 2015 2016 2017 2018 2019 2020E Maintenance Efficiency and expansion 8
Slide 9: Market and Segmental overview
Market and Segmental overview 9
Slide 10: Sappi Europe
Sappi Europe o Market share gains in CWF offsetting weak market Sales Tons -2% demand year-on-year o 28kt CM downtime required, US$6.5m impact – ramp up of Lanaken on CWF will assist going forward Sales -4% year-on-year o Packaging and specialities volumes growing in all major product categories EBI
Slide 11: Sappi North America
Sappi North America o Good growth in packaging volumes, with improved Sales Tons +17%* product mix aids pricing and machine efficiency year-on-year o Profits impacted by weak DWP pricing Sales +5% year-on-year o Graphics demand down 16%, 20kt downtime taken US$6m EBITDA impact. Realised prices were
Slide 12: Sappi South Africa
Sappi South Africa Sales Tons -15% o Historically low DWP prices have significant impact year-on-year on profitability - US$272/t lower y-o-y. o SA containerboard sales impacted by elevated Sales -25% converter inventory and drought impact. 18kt year-on-year downtime - US$5m impact EBITDA* -57% o We
Slide 13: Global graphic paper market trends
Global graphic paper market trends Supply and demand Demand declines continue to exceed trend Capacity reductions positively impacting operating rates over next 12 months Selling prices and input costs Small declines in paper prices Paper pulp, chemicals and energy prices lower, supporti
Slide 14: Global packaging and speciality paper market trends
Global packaging and speciality paper market trends Supply and demand Brand owners pushing for paper-based packaging solutions, demand remains firm Need for innovation in paper packaging – barrier technology key Selling prices and input costs Stable selling prices Paper pulp, chemicals a
Slide 15: Focus on packaging & specialities
Focus on packaging & specialities o Looking forward we see the following opportunities in this segment o On the back of the investments at Maastricht and Somerset we plan to further ramp-up paperboard in the US and EU o Complete small containerboard expansions in South Africa and investigate larger
Slide 16: Global DWP market trends
Global DWP market trends Supply and demand Demand trend continues to be strong, growing by ~6% per annum Coronavirus impacting demand in China currently VSF remains oversupplied in a weak pricing environment Some swing producers switching to paper pulp as outlook started to improve Selli
Slide 17: Our group strategy
Our group strategy Achieve Maintain Improve operational cost Optimise a healthy and machine advantages working balance efficiencies capital sheet Expand paper Enhance packaging Strong specialised grades Maximise Continuously procurement cash Smart cellulose Optimise balance benefits paper supply gen
Slide 18: Our group strategy
Our group strategy We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages. Achieve Improve operational cost Group efficiency and procurement initiatives US$64m and machine advantages target in 2020 efficiencies Ongoing continuous improvement across
Slide 19: Our group strategy
Our group strategy Recognising the decreasing demand for Continuously balance paper supply graphic paper, we manage our capacity to and demand in all regions strengthen our leadership position in these Where markets, realising their strategic importance to possible convert paper Rationalise the gr
Slide 20: Our group strategy
Our group strategy Targeted max sustained leverage - 2x Net debt:EBITDA No new major capex commitments Maintain a healthy Optimise Capex in 2021: US$250 - $350m depending on DWP working balance capital sheet market development in 2020 Strong cash generation Smart financing Leverage covenant
Slide 21: Our group strategy
Our group strategy Expand We will make investments in existing and paper Enhance packaging adjacent areas with strong potential growth. grades specialised cellulose Debottlenecking of Saiccor, Ngodwana and Cloquet portfolio DWP complete Accelerate Expansion of Saiccor by 110kt/annum 55% comple
Slide 22: Outlook
Outlook DWP prices remain under pressure – low VSF prices make recovery unlikely in short term – market fundamentals still support strategy Machine efficiency, product mix and price realization improving as Somerset PM1 and Maastricht conversions ramp up. Strong innovative position, particular
Slide 23: Thank you
Thank you 23
Slide 24: Supplementary information
Supplementary information 24
Slide 25: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 EBITDA Operating profit ex special items 224 221 200 211 208 201 197 187 185 152 148 145 172 142 US$ million 136 150 128 155 155 117 139 109 105 118 93 100 85 62 48 50 0 * Refer to the supplementary information in this presentation for a recon
Slide 26: Net debt/EBITDA development
Net debt/EBITDA development 4.6 2,600 5.0 4.5 2,400 3.0 2,380 4.0 2,286 2,200 2,248 3.5 2,000 2,040 3.0 US$ million 1,946 1,917 1,916 1916 1,800 2.5 1,771 1,734 1728 2.0 1680 1,600 1,652 1632 1603 1583 1568 1557 1.5 1501 1,400 1408 1.0 1349 1338 1329 1322 1318 1,200 0.5 1,000 0.0 Q1 14 Q2 14 Q3 14 Q
Slide 27: Global packaging and speciality production sites
Global packaging and speciality production sites Sappi Alfeld (Germany) Sappi Stockstadt (Germany) Sappi Condino (Italy) Sappi Somerset (USA) Sappi Tugela (South Africa) Flexible Packaging, Label, Paperboard, Label Papers, Flexible Packaging, Flexible Packaging, Silicone Base Papers, Label Papers, P
Slide 28: Packaging and Speciality papers expansion plans
Packaging and Speciality papers expansion plans Expand Europe paper Maastricht: complete, ramp-up by 2021 Enhance packaging specialised grades -160k CWF, +150k specialities (FBB) cellulose portfolio Ehingen: complete -75k CWF, +60k specialities (WTL) Accelerate Extract growth in Alfeld:
Slide 29: Product Groups and Products
Product Groups and ProductsEU Packaging and Specialities 29
Slide 30: Sappi North America packaging offering
Sappi North America packaging offering Paperboard (SBS) C1S Paper Bristols Folding Litho Food service Label Paper Bag Paper Spectro Carton Lamination Board LusterCote LusterPrint (C1S & C2S) Proto C1S, Proto Litho LusterFSB Spectro C1S LusterPlate 30
Slide 31: Packaging & specialities volume growth 2015 to 2020
Packaging & specialities volume growth 2015 to 2020 1,400 1,200 1,110 1,000 947 786 800 733 Tons'000 672 600 400 200 - 2015 2016 2017 2018 2019 2020 F Flexpack Label Paperboard Self Adhesives Digital Imaging Functional papers Casting Containerboard Tissue 31
Slide 32: EU consumer and brand owner sustainability focus
EU consumer and brand owner sustainability focus Desired outcome Prevent or reduce the impact of packaging waste on the environment by avoiding and recycling packaging waste; preference for Monomaterials Consequences Product design requires a “designed for recycling” approach Recycling systems t
Slide 33: NA paperboard segments
NA paperboard segments Quality Premium Spectro (commercial print, Premium (92 brightness) premium folding carton) 400K tons (10%) Performance (88 Brightness) Performance 1.89M tons (47%) Proto and Proto Litho – folding carton and litho lamination applications Food service & cup stock (88 brightness)
Slide 34: Sappi Europe
Sappi Europe Q1 FY20 Q4 FY19 Q1 FY19 Tons sold (‘000) 795 801 809 Sales (EURm) 619 633 642 Price/Ton (EUR) 779 790 794 Cost/Ton* (EUR) 737 764 756 Operating profit excluding 33 21 30 special items** (EURm) * Sales less operating profit excluding special items divided by tons sold. ** Refer to the su
Slide 35: 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 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 CWF Demand MCR Demand CWF 100gsm Sheets LWC 60gsm offset reels Western Europe shipments including export. Source: Cepifine, Cepiprint and RISI i
Slide 36: Sappi North America
Sappi North America Q1 FY20 Q4 FY19 Q1 FY19 Tons sold (‘000) 377 388 321 Sales (USDm) 370 394 351 Price/Ton (USD) 981 1,015 1,093 Cost/Ton* (USD) 979 972 1,065 Operating profit excluding 1 17 9 special items** (USDm) * Sales less operating profit excluding special items divided by tons sold. ** Refe
Slide 37: Coated paper deliveries and prices – USA
Coated paper deliveries and prices United States of America 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60lb rolls US industry purchases defined as industry shipments, plus impor
Slide 38: Sappi South Africa
Sappi South Africa Q1 FY20 Q4 FY19 Q1 FY19 Tons sold (‘000) 338 450 396 Sales (ZARm) 3,549 5,145 4,709 Price/Ton (ZAR) 10,500 11,433 11,891 Cost/Ton* (ZAR) 9,541 9,216 8,818 Operating profit excluding 324 998 1,217 special items** (ZARm) * Sales less operating profit excluding special items divided
Slide 39: Paper pulp prices
Paper pulp prices* 1,300 1,100 1,200 1,000 1,100 900 1,000 900 800 EUR/ton 800 700 700 600 600 500 500 400 400 NBSK Europe (USD) BHKP Europe (USD) Net BHKP China (USD) NBSK Europe (EUR) BHKP Europe (EUR) * Source: FOEX, CCF group. 45
Slide 40: Dissolving pulp prices
Dissolving pulp prices* 1,100 1,050 1,000 950 900 US$/ton 850 800 750 700 650 600 Imp SW DWP Imp HW DWP China origin DWP * Source: CCF group 46
Slide 41: Textile fibre prices
Textile fibre prices* 2,800 2,400 US$/ton 2,000 1,600 1,200 800 Cotton 328 Cotton "A" Index PSF 1.4 D VSF 1.2 D VSF 1.5 D * Source: CCF group 47
Slide 42: Cash flow
Cash flow US$m Q1 FY20 Q4 FY19 Q1 FY19 Cash generated from operations 136 176 197 Movement in working capital (76) 132 (87) Net finance costs paid (35) (5) (8) Finance income received 2 3 3 Taxation (paid) refund (32) - (3) Cash generated from operating activities (5) 306 102 Cash utilised in invest
Slide 43: EBITDA and operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q1 FY20 Q4 FY19 Q1 FY19 EBITDA excluding special items* 139 185 197 Depreciation and amortisation (77) (76) (69) Operating profit excluding special items* 62 109 128 Special items* - gains (losses)
Slide 44: Cellulosic fibre properties helping drive that growth
Cellulosic fibre properties helping drive that growth Key strength Qualifies Issue Nonwovens/Technical textiles Home textiles Apparel Fibre properties and applications Cellulosic fibres Cotton Polyester 7 21 28 27 Applications 52 62 17 66 20 • On a pure property basis, Durability cellulosic f
Slide 45: Headroom to increase cellulosic fibre blending
There is still significant headroom to increase the level of cellulosic fibre blending in most sub-categories POLYESTER COTTON CELLULOSIC Today Future Gap Today Future Gap Today Future Gap Apparel Denim 5% 5% 0 95% 95% 0% 0% 0% 0% Shirts 35% 40% +14% 50% 40% -20% 15% 20% +33% T-shirts 30% 50% +67% 7
Slide 46: Thank you
Thank you 52