Sappi Limited · JSE:SAP
Sappi — Q1 2012 Earnings Presentation
35 slides from Sappi's earnings presentation, Feb 8, 2012
Slide 1: Q1 2012 Results Presentation
Q1 2012 Results Presentation 8 Feb 2012
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 | Q1 2012 Results | 8 February 2012
Slide 4: Q1 2012 Summary
4 Q1 2012 Summary • Profit for the period US$45m; Q1 2011 US$37m • Clean results with few special items • EPS 9 US cents; Q1 2011 7 US cents • Sales down, margins up sequentially • Operating profit excluding special items US$100m; Q1 2011 US$137m • Net debt US$2,175m, up US$75 million on seasonal wo
Slide 5: Q1 2012 Summary
5 Q1 2012 Summary • European business performance benefits from restructuring and cost reduction actions – US$100m per annum cost reductions on track • South African chemical cellulose business performed strongly – achieved highest quarterly profit margin in 3 years • North America negatively affect
Slide 6: Operating Profit excluding special items
6 Operating Profit excluding special items* 2009: $33m 2010: $339m 2011: $404m 150 125 129 137 127 100 100 75 81 80 75 50 54 60 25 38 25 0 -13 -17 -25 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q** 2Q 3Q 4Q 1Q *Refer to the supplementary information in this presentation for a reconciliation to reported operating prof
Slide 7: EBITDA Trend
7 EBITDA* Trend 2009: $431m 2010: $752m 2011: $821m 250 200 150 227 246 228 100 193 194 150 156 176 164 183 50 106 93 82 0 Q1** Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q2 Q3 Q4 Q1 *EBITDA as shown above excludes special items. Refer to page 16 in our Q1 2012 results announcement booklet for a definition of special
Slide 8: Earnings Versus Prior Quarter
8 Earnings Versus Prior Quarter Q4 11 Basic EPS (24) Add: Restructuring Charges 11 Add: Asset Impairment 16 Q4 2011 Less: Other (1)) Q4 11 Adjusted EPS 2 Q1 12 Basic EPS 9 Less: Fair Value Pricing (1) Q1 Less: (Profit)/Loss on Sale of… (1) 2012 Q1 12 Adjusted EPS 7 -25 -20 -15 -10 -5 0 5 10 15 20 |
Slide 9: Divisional Overviews
Divisional Overviews | Q1 2012 Results | 8 February 2012
Slide 10: Divisional Operating Margins
10 Divisional Operating Margins* 25% Q1 2012 Margins: 20% Southern Africa 15.8% 15% 10% 5% Europe 3.5% North America 0% 2.8% -5% -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2011 *The divisional operating margins exclude special items. Refer to page 16 in our Q1 2012 results announcement bo
Slide 11: Sappi Fine Paper Europe
11 Sappi Fine Paper Europe Q1 2012 v Q1 2011 Volumes Prices Costs Op. Profit ex-items • Benefits of restructuring and cost reduction efforts exceeded expectations • Operating rates were reasonable given Biberist and Äänekoski shuts • Prices realised for CWF paper were 4% lower YoY • Prices realised
Slide 12: Sappi Fine Paper North America
12 Sappi Fine Paper North America Q1 2012 v Q1 2011 Volumes Prices Costs Op Profit ex-items • Coated paper business performed in line with expectations • realised prices for coated paper were 3% higher YoY • Lower market pulp prices and both planned and unplanned production interruptions negatively
Slide 13: Sappi Southern Africa
13 Sappi Southern Africa Q1 2012 v Q1 2011 Paper Chemical Cellulose Volumes Volumes Prices Prices Costs Costs Op. Profit ex-items Op. Profit ex-items • Chemical cellulose business earned almost all of the operating profit ex-special items for the quarter – timing of shipments led to YoY volume drop
Slide 14: Strategic Focus
Strategic Focus | Q1 2012 Results | 8 February 2012
Slide 15: Strategic Focus Key Elements
15 Strategic Focus 4 Key Elements • Optimizing better performing businesses • Fixing under performing businesses • Investing for future growth • Liquidity and balance sheet Sustainably be the most profitable company in pulp, paper and cellulose based solutions & create value for our shareholders | Q
Slide 16: Optimize Performance
16 Strategic Focus Optimize Performance • North America • Coated paper business performed well • Decline in pulp prices and some operational issues affected results • Weak quarter for release business but signs of a recovery • Chemical Cellulose • Continued strong order book • Strong customer relati
Slide 17: Fixing Underperforming Businesses
17 Strategic Focus Fixing Underperforming Businesses • Fine Paper Europe • Managing capacity – reasonable operating rates post Biberist and Äänekoski closures • Solid performance on costs - US$100 million per annum related to Biberist shut and other fixed and variable cost savings initiatives • Sout
Slide 18: Investing in Future Growth
18 Strategic Focus Investing in Future Growth • Chemical Cellulose Expansion • Ngodwana and Cloquet on track for 1H 2013 start-up • Strong customer commitments • Low cost base • Specialities • North America – Release Paper • Europe – Packaging • Forestry Resource • Focus on lowering average cost of
Slide 19: Balance Sheet and Liquidity
19 Strategic Focus Balance Sheet and Liquidity • Net Debt • Debt reduction remains a focus • Aim to reduce to below $2bn post completion of Ngodwana and Cloquet projects • Thereafter reduce gearing to new order of magnitude • Maturity profile • Much improved profile – no major debt pre July 2014 • R
Slide 20: Net Debt Development
20 Net Debt Development Rights Offer to finance European Acquisition Repaid $140m European Acquisition completed South African debt US$ m 3,000 Major Refinancing completed 2,500 2,000 1,500 1,000 Q111 Q109* Q211 Q311 Q411 Q112 Q110 Q209 Q309 Q409 Q210 Q310 Q410 * Cash proceeds of US$536m for Europea
Slide 21: Debt maturity profile
Debt maturity profile Strong liquidity and maturity profile Cash on hand: US$401 million RCF US$324 million – undrawn As at December 2012 Includes 2014 (September fiscal year end) USD million $300m and 1 000 €350m Bonds 900 2021 $350m Bond 800 703* Includes 2018 700 RCF Headroom; €250m Bond 600 Unut
Slide 22: Outlook
Outlook | Q1 2012 Results | 8 February 2012
Slide 23: Outlook
23 Outlook • Market conditions remain uncertain, but we are experiencing reasonable operating rates in our major markets • Focus is on delivering the benefits of our restructuring and cost reduction actions announced and implemented in fiscal 2011 • European business to continue to realise the benef
Slide 24: Outlook
24 Outlook • Demand for chemical cellulose remains relatively strong – expansion plans are on track • Committed to reducing debt to below $2B as soon as expansion projects have been completed • Net cash generation is expected to turn positive for the full year after capex & debt levels, given consta
Slide 25: Q&A
Q&A | Q1 2012 Results | 8 February 2012
Slide 26: Supplementary Information
Supplementary Information | Q1 2012 Results | 8 February 2012
Slide 27: W. Europe Coated Paper Deliveries & Prices
27 W. Europe Coated Paper Deliveries & Prices 1.20 1.10 1.00 0.90 Q1 2007 = 100 0.80 0.70 0.60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe Shipments Incl. Export – Source Cepifine,
Slide 28: Sappi Fine Paper Europe
28 Sappi Fine Paper Europe Q1 11 Q4 11 Q1 12 YoY Tons Sold ('000) 1,012 942 849 Sales ($'m) 1,027 942 846 Price / Ton ($) 1,015 1,000 996 Price / Ton (€) 751 708 739 Cost / Ton* (€) 726 704 714 Operating profit ex items** ($'m) 34 5 29 * Sales less operating profit excluding special items divided by
Slide 29: US Coated Paper Prices and Shipments
29 US Coated Paper Prices and Shipments 1.3 1.2 1.1 1.0 0.9 Q1 2007= 1 0.8 0.7 0.6 0.5 0.4 Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices US Industry Shipments and total US consumption – Source AF&PA and RISI indexed to Q1 2007 | Q1 2012 Results | 8 February 2012
Slide 30: Sappi Fine Paper North America
30 Sappi Fine Paper North America Q1 11 Q4 11 Q1 12 YoY Tons Sold ('000) 364 379 339 Sales ($'m) 382 395 352 Price / Ton ($) 1,049 1,042 1,038 Cost / Ton* ($) 986 953 1,009 Operating Profit ex items** ($'m) 23 34 10 * Sales less operating profit excluding special items divided by tons sold. ** Opera
Slide 31: NBSK Pulp Price
31 NBSK Pulp Price* 1,100 NBSK (US$/ton) NBSK (EUR/ton) 1,000 900 $831/ton 800 700 €644/ton 600 500 400 300 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-12 Jan-11 • Pulp prices stabilizing * Source: Average monthly FOEX delivered European prices | Q1 2012 Results | 8 February 2012
Slide 32: Sappi Southern Africa
32 Sappi Southern Africa Q1 11 Q4 11 Q1 12 YoY Tons Sold ('000) 452 428 400 Sales ($'m) 447 430 368 Price / Ton ($) 989 1,005 920 Price / Ton (ZAR) 6,870 7,138 7,444 Cost / Ton* (ZAR) 5,655 6,458 6,210 Operating Profit ex items** ($'m) 79 41 61 * Sales less operating profit excluding special items d
Slide 33: Cash Flow
33 Cash Flow Q1 11 Q4 11 Q1 12 Cash generated from operations 245 183 195 - Movement in working capital (335) 266 (166) - Net finance costs paid (63) (62) (64) - Taxation paid (2) (7) (5) - Cash utilised in investing activities (41) (101) (71) Cash flow after investing activities (196) 279 (111) | Q
Slide 34: Operating Profit - Sappi Group
34 Operating Profit - Sappi Group Reconciliation of reported operating profit to operating profit excluding special items * Q1 11 Q4 11 Q1 12 Operating profit as reported 121 (88) 107 Plantation price fair value adj. 11 - (3) Restructuring provision raised 3 67 - Profit (loss) on the sale of assets
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