Sappi Limited · JSE:SAP
Sappi — Q1 2003 Earnings Presentation
32 slides from Sappi's earnings presentation, February 2003
Slide 1: Financial results for the first quarter 2003
1 Financial results for the first quarter 2003
Slide 2: Forward looking statements
2 Forward looking statements Certain statements in this report 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, trend
Slide 3: First quarter highlights
3 First quarter highlights • Headline EPS 23 US cents up 64% on Q1 02 Low base last year - September 11 - Maintenance shuts • Sales up 22% on Q1 02 (10% pro-forma) • Sluggish markets, particularly in Europe • US price increases • Pulp markets pass trough • Currency translation
Slide 4: Financial summary: US$ millions
4 Financial summary Quarter ended US$ millions Dec-01 Sep-02 Dec-02 Sales Vol (t 000's) 1,369 1,639 1,602 Sales 832 1,052 1,019 EBITDA 148 219 190 Operating Profit 65 122 92
Slide 5: Financial summary: US cents
5 Financial summary Quarter ended US cents Dec-01 Sep-02 Dec-02 Headline EPS 14 32 23 Basic EPS 10 32 23 Net Debt (US$m) 1,156 1,419 1,525 Net Debt / Tot Cap 35.2% 37.0% 36.7%
Slide 6: Financial summary: Percent
6 Financial summary Quarter ended Percent Dec-01 Sep-02 Dec-02 Margin - EBITDA 17.8 20.8 18.6 - Operating 7.8 11.6 9.0 RONA 8.8 13.0 9.6 ROE 6.3 18.6 12.5
Slide 7: Strategy
Strategy sappl The word for fine paper
Slide 8: The Sappi strategy
8 The Sappi strategy • Global • Focused and pulp integrated • Low cost • Efficient use of capital • Intolerance of non-performing assets • Re-invest in high return assets • Share re-purchase & debt repayment
Slide 9: Financial objectives
9 Financial objectives • ROE: after tax return to exceed US risk-free rate by at least 5% (current target > 11%) • Operating Margin: target range 12-15% • RONA: 5% above LIBOR (or equivalent) in the currencies in which we are invested (current target > 12%) • NOPAT Return on Net Assets: to exceed WA
Slide 10: Geographic diversity: Sales by Region
10 Geographic diversity Sales by Region (US$)* Where product is Where product is manufactured sold 39% 40% 38% 41% 21% 8% 13% North America Europe Southern Africa Far East & Other * For the quarter ended December 2002
Slide 11: Financial performance
Financial performance sappl The word for fine paper
Slide 12: Headline EPS, US cents per share
US cents per share 0 10 20 30 40 50 98 Av e Q 19 9 Q Earnings 29 9 Q 39 9 Q 49 9 Q 10 0 Q 20 0 Q 30 0 Q 40 0 Q 10 1 Q 20 1 Q 30 1 Q 40 1 Q 10 2 Q 20 2 Q 30 2 Q 40 2 Q 10 3 Headline EPS (US$) 12
Slide 13: Return on equity (after tax)
13 Return on equity ROE (after tax) 35 ROE Objective** 30 25 20 % 15 10 5 0 * * 96 97 98 99 0 0 0 0 1 1 1 1 2 2 2 2 3 10 20 30 40 10 20 30 40 10 20 30 40 10 19 19 19 19 Q Q Q Q Q Q Q Q Q Q Q Q Q * Before Mobile closure costs ** After tax return in US$ earnings that on average exceed the American ris
Slide 14: Finance costs
14 Finance costs* 300 250 200 US$ MM 150 100 50 0 1998 1999 2000 2001 2002 2003* * Annualised Q1 03 net finance costs before capitalised interest and excluding once-off items
Slide 15: Capex control: Capex vs depreciation
15 Capex control Capex vs depreciation* 400 Capex Depreciation FY03 plan 350 300 US$ MM - 250 200 150 100 50 0 1998 1999 2000 2001 2002 Q103 * Depreciation excludes fellings, Capex excludes plantation & timberlands
Slide 16: Divisional performance: Sappi Fine Paper
16 Divisional performance Sappi Fine Paper
Slide 17: Market conditions: Coated fine paper
17 Market conditions Coated fine paper • US ad pages up • US demand improves • US price increases being implemented • European demand flat
Slide 18: Market conditions: Coated free sheet prices
18 Market conditions Coated free sheet prices 1,300 1,300 1,200 1,200 1,100 1,100 US$/Short ton 1,000 1,000 EUR/Ton 900 900 800 800 700 700 600 600 500 500 Apr Apr Apr Apr Apr Apr Apr Apr Oct Oct Oct Oct Oct Oct Oct Oct Jul Jul Jul Jul Jul Jul Jul Jul Jan Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Ja
Slide 19: Market conditions: US magazine ad pages
Year on year % change -30% -20% -10% 0% 10% 20% 30% Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Market conditions Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Magazine Ad Pages yoy % change SOURCE: Publishers Information Bureau Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 US Magazine ad pages
Slide 20: Market conditions: US + Europe CWF purchases
20 Market conditions US + Europe CWF Purchases 1,200,000 1,100,000 1,000,000 metric tons 900,000 800,000 700,000 600,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1998 1999 2000 2001 2002 SOURCE: Cepifine, AFPA December 2002 = Sappi estimate
Slide 21: Year-on-year growth in CWF purchases
-20% -15% -10% -5% 0% 5% 10% 15% 20% Jan-97 Apr-97 Jul-97 Oct-97 Jan-98 Europe Apr-98 Jul-98 Market conditions Oct-98 Jan-99 Apr-99 Jul-99 US Oct-99 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 SOURCE: Cepifine, AFPA Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Year-on-year growth in CWF purchases
Slide 22: Operating performance Sappi Fine Paper
22 Operating performance Sappi Fine Paper Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) 697 905 862 Cost per ton (US$ Index)* 100 n/a 104 EBITDA Margin (%) 14.5 17.2 15.4 RONOA (%) 5.9 10.4 7.5 • Some improvement in ad spend in major markets • Demand higher than last year • Continued curtailment *
Slide 23: Operating performance Sappi Fine Paper Europe
23 Operating performance Sappi Fine Paper Europe Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) 410 459 403 Cost per ton (US$ Index)* 100 n/a 109 EBITDA Margin (%) 18.8 20.9 20.3 RONOA (%) 11.9 14.6 10.7 • Sales volumes down 5% on last year • Prices remain under pressure (down 1.5% on Q4 02) • Stro
Slide 24: Operating performance Sappi Fine Paper North America
Operating performance 24 Sappi Fine Paper North America Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) 239 388 400 Cost per ton (US$ Index)* 100 n/a 87/96** EBITDA Margin (%) 6.3 12.1 10.0 RONOA (%) (3.8) 4.2 2.4 • Return to a modest operating profit • Ad spend on print media grows • Sales volumes
Slide 25: Operating performance Sappi Fine Paper South Africa
Operating performance 25 Sappi Fine Paper South Africa Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) 48 58 59 Cost per ton (US$ Index) 100 n/a 124 EBITDA Margin (%) 18.8 22.4 18.6 RONOA (%) 31.1 46.0 36.0 • Strong demand in the quarter • Stronger rand increases competitor activity
Slide 26: Divisional performance: Sappi Forest Products
26 Divisional performance Sappi Forest Products
Slide 27: Market conditions: FOEX PIX vs PULPEX PIX
27 Market conditions FOEX PIX vs PULPEX 950 850 PIX price - 28 Jan 2003 NBSK = $446 $ per metric ton 750 Hardwood = $461 650 550 450 350 5/ 9 9 9 0 0 0 1 1 1 2 2 2 3 8 8 8 99 00 01 02 /9 /9 /9 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /9 /9 /9 1/ 1/ 1/ 1/ 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 1 /1 /1 /1
Slide 28: Operating performance Sappi Forest Products
28 Operating performance Sappi Forest Products Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) 135 147 157 Cost per ton (US$ Index) 100 n/a 106 EBITDA Margin (%) 29.6 38.8 35.7 RONOA (%) 11.9 21.3 16.9 • Local demand for Kraft firm • Passed through pulp price trough • Closure in US of DP capacity
Slide 29: Share price (ADR) indexed
60 70 80 90 100 110 120 130 140 15-Jan-02 150 30-Jan-02 13-Feb-02 28-Feb-02 S&P 500 14-Mar-02 28-Mar-02 12-Apr-02 Share price (ADR) 26-Apr-02 S&P FP 10-May-02 24-May-02 10-Jun-02 ADR 24-Jun-02 09-Jul-02 23-Jul-02 06-Aug-02 20-Aug-02 04-Sep-02 18-Sep-02 SOURCE: I-Net Bridge 02-Oct-02 16-Oct-02 30-Oct
Slide 30: Outlook
Outlook sappl The word for fine paper
Slide 31: Outlook
31 Outlook • Economic outlook uncertain • Pulp cycle has scope for turnaround in prices • North American business expected to continue improving • Currency volatility • Q2 slow - earnings similar to Q1 • Still expect reasonable growth for the year
Slide 32: View the full results at
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