Sappi Limited · JSE:SAP
Sappi — Investor Presentation (February 2012)
94 slides from Sappi's investor presentation, Feb 9, 2012
Slide 1: Investor Presentation
Investor Presentation 9 February 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: Agenda
• Group Overview & Results • Divisional Overviews • Chemical Cellulose • North America • Europe • South Africa • Conclusion | Investor Presentation | 9 February 2012
Slide 4: Sappi at a glance
Sappi at a glance 2011 sales - $7.3bn 14,900 Employees Sappi Fine Paper Sappi Southern Africa Sappi Trading (75% ’11 sales) (25% ’11 sales) Jiangxi Chenming (China JV) Sappi Fine Paper Forests Europe Saiccor Sappi Fine Paper (Chemical Cellulose) Uncoated fine paper North America 8% Paper & Paper 7%
Slide 5: Geographic diversification
Geographic diversification Global presence enables Sappi to take advantage of opportunities where markets are strong 8 Paper Mills 3 Paper Mills 1 Fine Paper Mill (JV) 13 Sales offices on 6 5 Paper Mills continents 1 Chemical Cellulose Mill 567,000ha Forests 13% 54% Europe 25% 46% 19%
Slide 6: Strategy
Strategy | Investor Presentation | 9 February 2012
Slide 7: The Past Year
The Past Year • Good start to 2011 – weaker in the 2nd half • European uncertainty and CWF export declines • Excellent SA Chemical Cellulose performance • Continued underperformance of SA paper operations incl. strikes • North America performed well • Successful refinance • A year of major intervent
Slide 8: Strategic Overview
Strategic Overview • Refined strategy with emphasis on value creation • Focus • Increasing importance of growth - Not at the expense of the balance sheet • Internal actions to improve EU and SA • Benefits in Europe have started • Benefits in South Africa to start in 2H 2012 | Investor Presentation|
Slide 9: Strategy
Strategy Four key elements • Improving Europe and South Africa, starting to see results • Maintain performance in NA and Chemical Cellulose, focus on volumes • Invest in high growth & margin businesses with leading positions • Chemical cellulose – focus on contracting volumes • Release – pattern dev
Slide 10: 1st Quarter 2012 Results
1st Quarter 2012 Results | Investor Presentation | 9 February 2012
Slide 11: Q1 2012 Summary
11 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 w
Slide 12: Q1 2012 Summary
12 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 affec
Slide 13: Operating Profit excluding special items
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 profit
Slide 14: EBITDA Trend
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 it
Slide 15: Divisional Operating Margins
Divisional Operating Margins* European actions driving recovery Q1 2012 25% Margins: 20% Southern 15% Africa 15.8% 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 15 in our
Slide 16: Net Debt Development
Net Debt Development Debt reduction remains a focus Rights Offer to finance European Acquisition Repaid $140m US$ m European Acquisition completed South African debt 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 * Cash proceeds
Slide 17: 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 18: Agenda
• Group Overview & Results • Divisional Overviews • Chemical Cellulose • North America • Europe • South Africa • Conclusion | Investor Presentation | 9 February 2012
Slide 19: What is chemical cellulose?
What is chemical cellulose? | Investor Presentation | 9 February 2012
Slide 20: Chemical Cellulose
Chemical Cellulose • Cellulose is a natural organic polymer chain found in all plant materials • The plant material (wood from certified forests or plantations) is processed and purified by applying specialised chemistry to extract the cellulose chains within the wood • The purified natural wood cel
Slide 21: Chemical Cellulose vs. market pulp
Chemical Cellulose vs. market pulp | Investor Presentation | 9 February 2012
Slide 22: Chemical Cellulose specialisation
Chemical Cellulose specialisation Market Pulp Industry Chemical Cellulose Industry Total : 55 Million Tons Total : 5 Million Tons Chemical VSF Cellulose Lyocell Fluff Acetate MCC Market Pulp Ethers Others Increasing specialisation 1M Cotton Linters | Investor Presentation | 9 February 2012
Slide 23: Furnish
Specialised knowledge and customised quality VSF Cooking Bleaching Final Pulp Cellophane End Uses Furnish Lyocell MCC Ethers Acetate Chemical cellulose performance is determined by both the wood and the manufacturing process | Investor Presentation | 9 February 2012
Slide 24: Process & Product Complexity
Process & Product Complexity • Many factors have an influence on the performance & application of CC • Wood source (softwood/hardwood/ species; age, season, soil, climate) • Process (cooking / digesting and bleaching) • Sheet structure • Every CC pulp will have unique performance characteristics bas
Slide 25: What is Chemical Cellulose used for?
What is Chemical Cellulose used for ? Wear Beautify Eat & Drink Wrap Wash & Wipe R&R Communicate Heal & Hygiene Mend Filter ellulose hemical | Investor Presentation | 9 February 2012
Slide 26: Demand Drivers
Demand Drivers | Investor Presentation | 9 February 2012
Slide 27: Global Chemical Cellulose Demand – 2011
Global Chemical Cellulose Demand – 2011 Others Cellophane 14% 1% VSF Ethers/CMC 58% 9% Acetate 13% MCC 2% Lyocell 3% Total = 5m tons Sappi = 0.8 m tons = 15% Source: Sappi/Various | Investor Presentation | 9 February 2012
Slide 28: Viscose stable fibre segment
Viscose stable fibre segment Used for making clothes, home‐furnishings, non‐wovens (wipes, feminine hygiene products ) | Investor Presentation | 9 February 2012
Slide 29: 2010 Textile Fibres Consumption Split
2010 Textile Fibres Consumption Split Wool 1.1m tons Polypropylene 4.4m tons 1% 6% Cotton 24.7m tons 33% Polyester 35.4m tons 48% Cellulosic 2,9m tons ** 4% Acrylic 1.9m tons Synthetics =–61% Synthetics 62 % of Blen 3% Nylon 3.7m tons 5% = 74m Total Market Demand ± 74mtons tons ** Excludes Acetate,
Slide 30: Key demand drivers for textiles
Key demand drivers for textiles • Population growth‐ Global population from a current 6.9 billion to 8.3 billion by 2030 and per capita consumption • Increasing need for clothes and food • Increasing need for more comfortable clothing • Rising urbanization and standard of living in the Greater Asian
Slide 31: Growth drivers – cotton
Growth drivers – cotton • Total arable land loss • Better crop management,• Net effect of land > 10 m ha p.a. GMO’s - improving crop acreage loss vs.. • Last 60 yrs. cotton yields increase in cotton yield is that global crop area down 29m • Current yield ± 800kg / ha production is estimated to 36m h
Slide 32: Textile growth and cellulose gap
Textile growth and cellulose gap • Production of cotton is forecast to remain stagnant or shrink • Growth in total fibre consumption will be covered by man‐made fibres • However certain moisture management properties of cellulose fibres cannot be Cellulosic Gap substituted by oil based synthetic fib
Slide 33: Capacity and Growth
Capacity and Growth | Investor Presentation | 9 February 2012
Slide 34: Chemical Cellulose market leadership
Chemical Cellulose market leadership Global Top 5 Chemical Birla & Lenzing Cellulose Producers intergrated excl. Domsjo Domsjo 10% 4% Others 2011 (Est.) % Capacity Tembec incl. Tartas 21% 5% Borregaard 3% Sappi Birla RGE Rayonier Saiccor Tembec CLP China 14% 16% Weyco Rayonier PT Toba 2% Others 47%
Slide 35: Capacity additions
Capacity additions +‐ 3 Million tons of Capacity Announcements for 2012/4 Capacity Directed at China 2013 Cosm o China Bam boo, Sodra Morrum Cloquet Toba Bahia less Ow n Stora Enocell Thurso Sun Paper Chenm ing Jilin Paper Excellence Chenm ing Hubei Lee and Man Jilin Hunan Fujian Fujian Nanping Qing
Slide 36: Capacity drivers
Capacity drivers World Cotton Price (A-Grade) and CC grade Viscose Pulp Price : Delivered to China (US$/Ton) Competitive Investment Decisions by high cost producers? 4200 Viscose Cotton 3800 3400 3000 2600 2200 1800 1400 1000 600 Current 200 00 02 04 06 08 10 12 14 16 Source :RISI/Own | Investor Pre
Slide 37: Competitor cash costs
Competitor cash costs World Competitor CC Cash Costs into VSF includes 80% of supply volumes Below Average Cost Above Average Cost Sappi = 27% 45% Others = 28% + 25% Average Cash Cost ‐ 30% Source: RISI/sappi | Investor Presentation | 9 February 2012
Slide 38: Conclusion
Conclusion • Real CC demand growth forecast • Strong and mature customer relationships • Technical knowledge, market leadership and expertise in VSF • Competitive cost position | Investor Presentation | 9 February 2012
Slide 39: Agenda
• Group Overview & Results • Divisional Overviews • Chemical Cellulose • North America • Europe • South Africa • Conclusion | Investor Presentation | 9 February 2012
Slide 40: Leading North American producer of coated paper, pulp and specialties
Leading North American producer of coated paper, pulp and specialties F2011 Net Sales: $1,520M F2011 EBITDA: $203M Two integrated coated freesheet mills, specialty paper mill and dedicated sheeting center 1.2M metric tons of paper production capacity 1.0M metric tons of pulp production cap
Slide 41: Key advantages
Key advantages • Well invested, premier asset portfolio with fully integrated facilities • Established brands with strong market position • Exposure to most attractive end‐market segments • Unmatched reputation for product innovation and customer service • A low cost producer with strong free cash f
Slide 42: Premier asset portfolio
Premier asset portfolio Shared Services Facility Maine Somerset Mill Maine 795,000 tons Cloquet Mill coated fine paper 525,000 tons pulp Minnesota 330,000 tons coated fine paper Allentown Sheeting 455,000 tons pulp Facility Pennsylvania 100,000 tons sheeting Westbrook Mill capacity Maine 35,000 tons
Slide 43: Consistent operational performance and continuous improvement
Consistent operational performance and continuous improvement • Track record of year over year productivity improvement in both pulp and paper • Successful product redesign – commercialization of Flo sheets and web • Significant reduction in energy cost through capital investment and fuel management
Slide 44: SFPNA has driven improvements through selected investment and strategic actions
SFPNA has driven improvements through selected investment and strategic actions Approved Grade change Rebuild SPM1 Somerset Pulp Chemical Cellulose Shut Muskegon optimization Mill Upgrade and Somerset PM3 rebuild 2006 2007 2008 2009 2010 2011 Product and Significant Right sized fixed Emerged from Ac
Slide 45: Operating Income and RONOA
Financial performance 140 16% 120 14% 100 12% 10% 80 8% 60 $Million RONOA 6% 40 4% 20 2% ‐ 0% (20) ‐2% (40) ‐4% FY06 FY07 FY08 FY09 FY10 FY11 Operating Income RONOA | Investor Presentation | 9 February 2012
Slide 46: SFPNA strategy for growth
SFPNA strategy for growth Coated • Grow operating profit through improved product and customer mix • Implement e‐Business solutions to take time and cost out of the value chain • Invest in our paper machines to keep them modern and globally competitive Pulp • Invest $170M in Cloquet pulp mill to con
Slide 47: Business Overview - Coated
Business Overview - Coated | Investor Presentation | 9 February 2012
Slide 48: Our market segment – coated free sheet
Our market segment – coated free sheet Coated Free Sheet Image Susceptibility to quality, Coated Online Substitution heft/feel, Groundwood opacity and price Super-Calendered | Investor Presentation | 9 February 2012
Slide 49: Improvement in both coated EBITDA margin and market share
Improvement in both coated EBITDA margin and market share 12% 27% 10% 25% 8% 23% 6% 21% 4% 19% 2% 17% 0% 15% F06 F07 F08 F09 F10 F11 EBITDA Margin Market Share • EBITDA margin improvement driven by improved customer and product mix, more focused brand positioning and cost management • Market share r
Slide 50: Outlook for NA CFS demand
Outlook for NA CFS demand • While consumption will slowly decline with widespread adoption of e‐ devices, CFS less impacted than other grades due to flight to quality • CFS will remain a vibrant part of the media mix due to its unique value in establishing brand recall and trust • SFPNA further adva
Slide 51: Business Overview - Pulp
Agenda Business Overview ‐ Pulp • Overview of SFPNA • Business Overviews and Strategic Considerations – Coated – Pulp – Release | Investor Presentation | 9 February 2012
Slide 52: Pulp business – competitive advantages
Pulp business – competitive advantages • Sappi NA pulp mills are top tier and among the newest pulp mills in North America – Somerset 1976 525K MT – Cloquet 1999 455K MT • Located near: – Quality wood baskets – Customers • Flexible production – Softwood and differentiated co‐pulp at Somerset – Aspen
Slide 53: Chemical Cellulose conversion overview
Chemical Cellulose conversion overview • Convert Cloquet pulp production to 330K metric tons per year of chemical cellulose (CC) from kraft paper pulp (455K tons) • $170M of capital with strong returns • Target segment will be viscose staple fiber (VSF) – demand projected to grow by 8% per year – Po
Slide 54: Competitor cash costs
Competitor cash costs World Competitor CC Cash Costs into VSF includes 80% of supply volumes Below Average Cost Above Average Cost Sappi = 27% 45% Others = 28% + 25% Average Cash Cost ‐ 30% | Investor Presentation | 9 February 2012
Slide 55: Business Overview - Release
Business Overview ‐ Release We make texture…..texture makes the difference | Investor Presentation | 9 February 2012
Slide 56: Slide 56
Slide 57: Release market overview
Release market overview RELEASE CASTING LAMINATING TECHNOLOGY EXTENSIONS COATED ENGINEERING DECORATIVE IN‐PRODUCT TRANSPORTATION FABRICS FILMS LAMINATES APPLICATIONS • Brown Shoes • Automotive • Insulation • Laminate floors •Flexible Displays • Hand Bags • Trucks • Foams • Furniture •Printed Electro
Slide 58: The global release market – casting and laminates end-uses
The global release market – casting and laminates end-uses Ultracast 99% Ultracast Price Pattern Fidelity Share $7,000 ‐ $12,500 per 100% ton Ultracast 9,600 T Polypropylene Polypropylene Price Pattern Fidelity 75% Polypropylene $4,500 ‐ $10,000 – 90% per ton 11,900 T Classics Classics Price Pattern
Slide 59: Competitive advantages - release
Competitive advantages - release • Ultracast – Provides100% replication of any pattern • Superior to the competition (Classics at 50%, Polypropylene at 90%) – Maintains pattern fidelity over multiple reuses (10 – 20 passes) • Superior to competition which begins to degrade in 4 – 5 passes (polypropy
Slide 60: SFPNA key advantages
SFPNA key advantages • Well invested, premier asset portfolio with fully integrated facilities • Established brands with strong market position • Exposure to most attractive end‐market segments • Unmatched reputation for product innovation and customer service • A low cost producer with strong free
Slide 61: Agenda
• Group Overview & Results • Divisional Overviews • Chemical Cellulose • North America • Europe • South Africa • Conclusion | Investor Presentation | 9 February 2012
Slide 62: Sappi Fine Paper Europe
Sappi Fine Paper Europe • # 1 in Coated Woodfree paper with 25.8% capacity share • # 2 in Mechanical Coated Paper with 13.5% capacity share • # 1 in high quality Flexpack • Total paper capacity of 3.7m Tons • 2011 Sales: $3,965m • 2011 EBITDA: $300m | Investor Presentation | 9 February 2012
Slide 63: Strategy for healthy profit and cash generation
Strategy for healthy profit and cash generation Rightsizing capacity • ‐> Closure of Kangas 2010 (200KT MCR) • ‐> Closure of Biberist 2011 (435KT WFC) • ‐> M‐real closure of Äänekoski 2012 (180kt WFC, sold by Sappi) • ‐> We are full! Substantial cost reduction • ‐> Runrate for $100m cost reduction a
Slide 64: Key strengths
Key strengths • Well invested assets at the heart of the European market • Best service provider • Consistent strong cash generation • Decisive Management team with strong execution track record. • Becoming a low cost producer • Opportunities in highly profitable specialities market • Ability to cop
Slide 65: Living with digital media
Living with digital media ….. • …. HAS NOT MEANT THE END OF PAPER ! | Investor Presentation | 9 February 2012
Slide 66: Internet continues to catch up with print adspend
Internet continues to catch up with print adspend Total Advertising Expenditure • Global ad expenditure up 3.5% 160 000 from 2010 levels 140 000 120 000 • Europe to grow only 2% vs. 2011 100 000 MEDIA MIX and expected to keep growing 80 000 PRINT (2.8% ‘13 & 3.3% ’14) 60 000 40 000 • Share of print
Slide 67: But …
But … People still perceive printed material a more trustworthy and enjoyable medium: ‐ Reading magazines and books as leisure ‐ Print is effective ‐ Print is personal Print regarded as reliable and influential advertising medium Print will satisfy niche markets There are things you can only do
Slide 68: Paper speaks to the mind and the senses
Practical Rational Transfer of knowledge Paper speaks to the mind and the senses | Investor Presentation | 9 February 2012
Slide 69: Breakthrough and other projects successes so far
Breakthrough and other projects successes so far … • … now we ARE easy to do business with …. • Brand and Product Simplification Woodfree Coated Sheets 12 brands 4 brands Woodfree Uncoated 2 brands 1 brand Mechanical Coated Reels 3 Galerie brands for Publishing 3 Royal brands for Commercial Print |
Slide 70: Overall rating of Customer Service
Overall rating of Customer Service 472 # respondents Result Oct. 2011 Sappi Sappi 8,17 Competitor 7,97 180 165 160 142 140 139 8.2 Number of occurrences 123 120 100 79 81 80 Sappi 57 Competitor 60 38 40 2521 20 12 9 4 5 7 3 5 1 0 2 0 1 2 3 4 5 6 7 8 9 10 Performance CS | Investor Presentation | 9 Fe
Slide 71: Market development – CWF Western Europe
Market development • Differing ViewS – CWF Western Europe Growth Rates Western Europe CWF 15.0% 10.7% 10.0% 10.4% 8.1% 7.9% 2.0% 5.0% 1.0% 1.1% 1.1% 2.8% 0.8% 1.3% 0.0% -2.4% -0.8% -1.0% -5.0% -2.7% -6.7% -4.5% -10.0% -15.0% -17.1% -20.0% EMGE RISI SAPPI PPPC | Investor Presentation | 9 February 201
Slide 72: Market development – MC Western Europe
Market development • Differing Views – MC Western Europe | Investor Presentation | 9 February 2012
Slide 73: Input costs and paper prices
Input costs and paper prices Input Costs vs.. Paper Prices 160.00 22% 150.00 Softwood 5,7% 140.00 Hardwood 22,7% 130.00 Latex 120.00 CWF-S Germany (100g) -4,9 % 110.00 LWC Offset France (60g) -0,35% 100.00 90.00 80.00 70.00 Percentages comparing yearly effect: Jan '09 vs.. Dec '11 60.00 Jan-09 Mar-0
Slide 74: China Supply and Demand
China Supply and Demand • EMGE September 2011 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 ‐ 2010 2011 2012 2013 2014 2015 Local demand Export Capacity | Investor Presentation | 9 February 2012
Slide 75: Country Specific Imports CWF from China
Country Specific Imports CWF from China UK Italy Spain France Greece Jan-December 09 Jan-December 10 Jan-December 2011 tons 159,098 (+72% vs.08) 109,627 (-31% vs.09) 2,725 (-98% vs.10) 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 09- Apr July Oct 10- Apr Jul Oct 11- Apr Jul Oc
Slide 76: Country Specific Imports CWF from South Korea
Country Specific Imports CWF from South Korea UK Italy Spain France Greece Jan-December 09 Jan-December 10 Jan-December 2011 tons 49,301 39,905 (-19% vs.09) 80,180 (+ 101% vs.10) 12 000 10 000 8 000 6 000 4 000 2 000 0 09- Apr July Oct 10- Apr Jul Oct 11- Apr Jul Oct Jan Jan Jan | Investor Presentat
Slide 77: SFPE cost/ton
SFPE cost/ton • Sustainable improvement of $100million • Manpower reduction of 764 FTEs • Capacity reduction (Biberist +Äänekoski): 700Ktons • Index Variable Cost / ton: October 2010 = 100% • Index Quarterly Cash Fixed Cost: Q1‐2011 = 100% | Investor Presentation | 9 February 2012
Slide 78: Summary
Summary Cost reduction leads to sustainable improvement Sappi is competitive in service, quality and cost in Europe Capacity is right sized Cash generative and profitable Management with strong executive track record Highly attractive and growing specialities business | Investor Presenta
Slide 79: Agenda
• Group Overview & Results • Divisional Overviews • Chemical Cellulose • North America • Europe • South Africa • Conclusion | Investor Presentation | 9 February 2012
Slide 80: Sappi Southern Africa
Sappi Southern Africa • # 1 in Chemical Cellulose with 14% capacity share • Wide range of paper, tissue & packaging; • 567,000ha of forests in Southern Africa • Total paper capacity of 1.08m tons • Total pulp capacity of 2.02m tons • 2011 Sales: $1,801m • 2011 Op. Income: $199m | Investor Presentati
Slide 81: Strategy for Southern Africa
Strategy for Southern Africa Grow Chemical Cellulose • Saiccor expansion by 215k ton (Sep 2008) • Ngodwana expansion by 210k ton (Apr 2013) • Lowest quartile cost base • Market growth of >6% per annum Forestry resources / renewable energy • Low cost wood resources in SA and elsewhere • Renewable ene
Slide 82: Ngodwana Chemical Cellulose Project
Ngodwana Chemical Cellulose Project • Only 2 known lower cost producers • Timber • Logistics • Why are our costs so low • Cost of growing fibre • Proximity of forests to Ngodwana • Good logistics to main markets • Project time line • All major contracts concluded • Equipment delivery completed: Nov‐
Slide 83: South Africa a source of low-cost pulp
South Africa a source of low-cost pulp Hardwood Pulp ‐ Avg. Tree Age at Harvesting 60 50 60 40 Years 30 40 20 10 12 8 10 0 Brazil South Africa Southern Southern US Scandinavia Europe Softwood Pulp ‐ Avg. Tree Age at Harvesting 40 40 30 Years 20 18 18 20 10 n/a 0 South Africa Brazil Southern US South
Slide 84: South African wood costs are competitive
South African International wood Hardwood costs are competitive Markets Own growing costs far more so… 70% self sufficient ODMT’m $/ODMT 25 (QTR 3 - 2011) 250 W. avg. global price 20 $120.70 200 15 150 108 10 100 5 50 0 0 JAP-IMP GERM SPAIN AUS ESCA BRA FRA SA INDO CHILE US Size Price R7.16/$ Source
Slide 85: Competitor Cash Costs
Competitor Cash Costs World Competitor CC Cash Costs into VSF based on 80% of supply volumes Below Average Cost Above Average Cost Sappi = 27% 45% Others = 28% + 25% Average Cash Cost ‐ 30% | Investor Presentation | 9 February 2012 Source RISI and Sappi
Slide 86: Low cost wood resources – Eastern Cape project
Low cost wood resources – Eastern Cape project • 30 000 ha of tree plantations by 2020; • Supply ± 450k ton/annum; • Ownership with communities; • Sappi as Implementation Partner; • 12 600 ha in Project Pipeline; • 690 ha planted to date; • 500 direct and 1500 indirect jobs /10 000 ha; • Grant fundi
Slide 87: Renewable energy and energy levy
Renewable energy and energy levy • Selling electricity to Eskom from: • Ngodwana • Saiccor • Access to biomass resources to improve energy self sufficiency • Energy levy of 2.5c/kW on generated electricity; • Exeption for co‐generation & renewable energy • Gazetted 15 Dec 2011 | Investor Presentatio
Slide 88: Restructuring update
Restructuring update • Adamas • Fixed cost reduction of R77m • Profitable products carouselled • Site cleaned and being offered for sale • SG&A functions • Marketing, Sales & Supply Chain completed • Procurement, HR, Communications, Finance shared services • Other opportunities being investigated
Slide 89: Improving our operations and products
Improving our operations and products • Aligning capacity with demand • Closing highest cost lines • Address future environmental costs • Reduces cost by R250 million p.a. • Lowest cost producer • Simplified product range • Value for money products • Excellent, efficient service • Niche market oppor
Slide 90: Summary
Summary • Investing in Chemical Cellulose • Low cost producer • Fast growing market • Excellent customer relationships • Growing forestry assets • Improving paper business • Better use of timber • Improving cost position • Profitable with growth opportunities | Investor Presentation | 9 February 201
Slide 91: Agenda
• Group Overview & Results • Divisional Overviews • Chemical Cellulose • North America • Europe • South Africa • Conclusion | Investor Presentation | 9 February 2012
Slide 92: Strategic Overview
Strategic Overview • Growth plans progressing well – realistic expectations and confidence in our track record. No other major projects in the next few years • Fixing our EU and SA businesses an on-going process, minimise cash expenditure and take out costs • Optimisation of NA and Chemical Cellulos
Slide 93: Conclusion
Conclusion • We have a sound strategy • We believe in what we are doing • Traction on actions to date • World is uncertain • Totally committed to achieving more wins and accelerating value creation for shareholders through improved profit, strategic positioning and debt reduction | Investor Presenta
Slide 94: Inspired by life
Inspired by life | Investor Presentation | 9 February 2012