Slide 1: Q1 FY21 financial results
Steve Binnie Chief Executive Officer, Sappi Limited 03 February 2021 QiFY21 financial results
Slide 2: 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, plans or objectives. The w
Slide 3: Q1 FY21 highlights
• • • • • • Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q1 FY21 financial results booklet (available on www.sappi.com) for a definition of special items.
Slide 4: EBITDA bridge Q1 FY20 to Q1 FY21
160 120 US$ million 80 40 0 139 (45) (53) 37 16 (2) 6 98 Q1 FY20 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Other Exchange rate Q1 FY21 EBITDA costs 1. All variances were calculated excluding Sappi Forestry. 2. ‘Currency conversion’ reflects translation and transactional effect
Slide 5: EBITDA and sales volumes by segment
EBITDA excluding special items Sales volumes 26% 21% Dissolving pulp 24% 35% 38% Packaging and specialities 53% Graphics 23% 53% 27% • Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q1 FY21 financial results
Slide 6: Volumes and margins by segment
1,100 400 20.0% 1,000 8.0% 350 900 15.0% 3.0% 300 800 250 10.0% 700 -2.0% 600 200 -7.0% 5.0% 500 150 400 -12.0% 100 0.0% Graphics volume Graphics margin Packaging and specialities volume Packaging and specialities margin 400 40% 350 30% 300 250 20% 200 10% 150 100 0% Dissolving pulp volume EBITDA ma
Slide 7: Net debt and leverage
Q3/20 Q4/20 Q1/21 Quarterly results are improving, but leverage is increasing. Why? Leverage is Q3/19 121 Q4/19 185 Q1/20 139 shown on a last-four-quarter basis. As weaker quarters impacted by Covid-19 Q4/19 185 Q1/20 139 Q2/20 131 replace stronger quarters in the calculation, so the last-four-quart
Slide 8: Debt maturity profile and liquidity
700 Includes 2026 EUR450m bond 600 577 Includes 2023 499 EUR350m bond 2025 ZAR1800m 500 convertible bond*** 410 400 US$ million Includes 2032 US$221m bond 300 267 221 200 122 123 101 103 100 71 69 74 49 25 27 27 27 0 2021 2022 2023 2024 2025 2026 2027 2028 2032 Cash Short-term SPH term debt Securiti
Slide 9: Capital expenditure
600 500 400 US$ million 300 200 100 0 2017 2018 2019 2020 2021E* Total Capex * Capital expenditure in FY2021 is estimated to be US$400 million. The value has increased from previous guidance of US$370 million as a result of a stronger ZAR and Euro relative to the US$. 9
Slide 10: Segmental Overview
Segmental Overview 10
Slide 11: Segment overview
• • • • • * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q1 FY21 financial results booklet (available on www.sappi.com) for a definition of special items. 11
Slide 12: Segment overview
• • • • * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q1 FY21 financial results booklet (available on www.sappi.com) for a definition of special items. 12
Slide 13: Segment overview
• • • • • • Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q1 FY21 financial results booklet (available on www.sappi.com) for a definition of special items. ** Sales tons and price per ton excludes Forestry.
Slide 14: Cash management
Cash management sappi * Financing activities — Negotiated covenant suspension period until September 2021 - first measurement Dec 2021 * US$11m reduction in working capital in the quarter * Capital expenditure commitments — Saiccor Mill expansion project —scheduled start-up Q4 FY2021 * Procurement s
Slide 15: Markets
Markets sappi * Graphic papers — Demand continued the slow recovery through to December; volumes 19% lower than last year — European CWF and CM markets down approximately 21% and US CWF market down approximately 20% — Newsprint and Office paper continue to be impacted by Covid-19 in SA — Therapid an
Slide 16: Markets cont.
Markets cont. sappi * Dissolving pulp — Pronounced recovery of pricing and demand in DP markets — Market prices rallied by US$106/ton through the quarter; DP capacity curtailment, resurgent VSF demand and prices, higher paper pulp prices and weaker US$/Renminbi exchange rate; Chinese market price cu
Slide 17: Retail clothing sales and VSF vs dissolving pulp pricing
Retail Clothing Sales in USA – Y-O-Y % Change VSF vs Dissolving Pulp pricing 17
Slide 18: US consumption and European producer volumes
* US consumption is Total US shipments plus US imports less US exports * Volumes sold by European producers 18
Slide 19: Our business strategy
Our business strategy sappi How we'll get there Through collaboration and in tion we will grow profitably, using our stre as a sustainable and diversified global woodfibre group, focused on dissolving pulp, graphic, pack sand speciality papers, and biomaterials. Ce i
Slide 20: Sappi's 2025 strategy: Four key fundamentals
sappi Sappi's 2025 strategy Four key fundamentals
Slide 21: Four key fundamentals
Our Strategy Four key fundamentals Grow our business Committing to core business segments while investing in innovation, growth opportunities, and ongoing customer relationships Drive operational excellence Sustain financial Strengthening our safety-first culture and reducing resource use while enha
Slide 22: Strengthen balance sheet (2021-2023)
Phase 1 Strengthen balance sheet (2021-2023) Objective Strategy Reduce debt and * Complete approved projects on maximise cash time and within budget generation * Drive further margin improvement opportunities + Investigate new growth opportunities for next phase sappi
Slide 23: Invest for profit growth (2023+)
Phase 2 Invest for profit growth (2023+) Objective Strategy Invest in new * Deliver smaller growth opportunities opportunities * Make decision on expansions and conversions * Commercialise new products at scale * Execute sustainability strategy * Invest in R&D
Slide 24: Group strategy update
Group strategy Update * Grow our business — Ramp up of board grades at Somerset and Maastricht Mills — Transfer barrier coating and technology to Alfeld: pursue opportunities for growth — Complete Saiccor expansion * Sustain our financial health — Covenant suspension through to September 2021 — Conv
Slide 25: Outlook
Outlook sappi * Global resurgence of Covid infections, associated lockdowns and restrictions on economic activity expected to stall the graphic paper market recovery, particularly in Europe * Full benefit of rising DP pricing will be phased through future quarters; mentioned challenges may constrain
Slide 26: Thank you
sappi Thank you
Slide 27: Supplementary information
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Slide 28: EBITDA and operating profit excluding special items
250 224 200 221 211 208 152 201 148 197 145 142 136 187 185 128 150 172 117 109 105 155 155 139 93 131 85 100 118 62 US$ million 98 52 48 82 50 16 26 0 -5 -50 -52 -100 EBITDA Operating profit excluding special items * Refer to the supplementary information in this presentation for a reconciliation o
Slide 29: Net debt and liquidity
Sep-19 US#039;000 Mar-20 US#039;000 Sep-20 US#039;000 Dec-20 US#039;000 Long-Term Debt 1,465 Long-Term Debt 1,616 Long-Term Debt 1,649 Long-Term Debt 1,770 Securisation 366 Securisation 347 Securisation 256 Securisation 267 Short-Term Debt 87 Short-Term Debt 225 Short-Term Debt 308 Short-Term Debt 64 IFRS16 Lea
Slide 30: Packaging and speciality papers mills
Alfeld Mill (Germany) Stockstadt Mill (Germany) Condino Mill (Italy) Somerset Mill (USA) Tugela Mill (South Africa) Flexible packaging, label paper, Label paper, flexible packaging, Flexible packaging, silicone base paper, Label paper, paperboard, Containerboard paperboard, containerboard, silicone
Slide 31: Packaging and speciality papers: Sappi Europe
Packaging and speciality papers sappi Sappi Europe
Slide 32: Paperboard and C1S paper products
Paperboard C1S Paper (SBS) Food service Label paper Bag paper Bristols Folding carton Litho lamination board Spectro Proto C1S LusterFSB LusterCote LusterPrint Proto Litho (C1S & C2S) Spectro C1S LusterPlate 32
Slide 33: Packaging and speciality volumes by product
1,600 1,444 1,400 1,209 1,200 1,129 1,009 1,000 854 800 600 400 200 - 2017 2018 2019 2020 2021F Flexpack Label Paperboard Self Adhesives Digital Imaging Functional papers Casting Containerboard Tissue Other 33
Slide 34: Packaging waste and recycling trends
• - Prevent or reduce the impact of packaging waste on the environment by avoiding and recycling packaging waste; preference for Monomaterials • - Product design requires a ‘designed for recycling’ approach - Recycling systems to be established and/or heavily expanded - Rewards easy to recycle packa
Slide 35: Paperboard market segments
Premium Premium Spectro (commercial print, (92 brightness) premium folding carton) 350k tons (10%) Performance (88 Brightness) Performance 2.0m tons (45%) Proto and Proto Litho (folding carton and litho Food service lamination applications) & cup stock (88 brightness) 1.7m tons (45%) Food service Lu
Slide 36: Sappi Europe key results
Q1 FY21 Q4 FY20 Q1 FY20 Tons sold (‘000) 658 570 795 Sales (EURm) 482 422 619 Price/Ton (EUR) 733 740 779 Cost/Ton* (EUR) 733 774 737 Operating profit excluding special items** (EURm) - (19) 33 * Sales less operating profit excluding special items divided by tons sold. ** Refer to the supplementary
Slide 37: Western Europe CWF and MCR demand
1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 CWF demand MCR demand CWF 100 gsm sheets LWC 60 gsm offset reels Western Europe shipments including export. Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008. 37
Slide 38: Sappi North America key results
Q1 FY21 Q4 FY20 Q1 FY20 Tons sold (‘000) 421 416 377 Sales (US$m) 384 361 370 Price/Ton (US$) 912 868 981 Cost/Ton* (US$) 917 868 979 Operating profit excluding special items** (US$m) (2) - 1 * Sales less operating profit excluding special items divided by tons sold. ** Refer to the supplementary in
Slide 39: US domestic CWF shipments and purchases
1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 Domestic CWF shipments Domestic CWF purchases US industry purchases defined as industry shipments, plus imports, less exports. Source: AF&PA and RISI indexed to calendar Q1 FY08. 39
Slide 40: Sappi Southern Africa key results
Q1 FY21 Q4 FY20 Q1 FY20 Tons sold*** (‘000) 296 369 338 Sales*** (ZARm) 3,222 3,914 3,549 Price/Ton*** (ZAR) 10,885 10,607 10,500 Cost/Ton* (ZAR) 9,983 9,778 9,541 Operating profit excluding special items** (ZARm) 267 306 324 * Sales less operating profit excluding special items divided by tons sold
Slide 41: Pulp prices
1,300 1,100 1,200 1,000 1,100 900 1,000 800 US$/ton 900 800 700 700 600 600 500 500 400 400 2-Aug 2-Sep 2-Aug 2-Sep 2-Aug 2-Sep 2-Apr 2-Nov 2-Apr 2-Nov 2-Apr 2-Nov 2-Mar 2-Mar 2-Jan 2-Feb 2-Dec 2-Feb 2-Dec 2-Mar 2-Feb 2-Dec 2-May 2-Oct 2-Jan 2-May 2-Oct 2-Jan 2-May 2-Oct 2-Jan 2-Jun 2-Jul 2-Jun 2-Ju
Slide 42: Dissolving pulp prices
1,100 1,050 1,000 950 900 US$/ton 850 800 750 700 650 600 Imp SW DP Imp HW DP China origin DP Source: CCF group. 42
Slide 43: Cotton and viscose staple fibre prices
3,000 2,500 2,000 US$\ton 1,500 1,000 500 0 Cotton 328 Cotton "A" Index PSF 1.4 D VSF 1.2 D VSF 1.5 D Source: CCF group. 43
Slide 44: Cash flow summary
US$m Q1 FY21 Q4 FY20 Q1 FY20 Cash generated from operations 98 46 136 Movement in working capital 11 135 (76) Finance costs paid (34) (7) (35) Finance income received 3 2 2 Taxation (paid) refund 11 4 (32) Cash generated from operating activities 89 180 (5) Cash utilised in investing activities (89)
Slide 45: EBITDA to operating profit reconciliation
US$m Q1 FY21 Q4 FY20 Q1 FY20 EBITDA excluding special items* 98 82 139 Depreciation and amortisation (82) (87) (77) Operating profit excluding special items* 16 (5) 62 Special items* - gains (losses) - (39) (7) Plantation price fair value adjustment 4 6 6 Acquisition cost - (1) (5) Net restructuring
Slide 46: Thank you
sappi Thank you