Sappi Limited · JSE:SAP
Sappi — Q1 2004 Earnings Presentation
14 slides from Sappi's earnings presentation, Feb 2, 2004
Slide 1: Results for the quarter ended December 2003
Results for the quarter ended December 2003 2 February 2004 1 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
Slide 2: First Quarter Highlights
First Quarter Highlights • Net loss after previously announced charges • Headline EPS loss 9 US cents 10 US cents restructuring charges 5 US cents additional expense from 5-yearly maintenance shuts • Weak US market • Strong demand in Europe • SA businesses profitable despite stronger Rand 3 Earnings
Slide 3: Earnings Summary
Earnings Summary Items included in Q1 results • Westbrook PM 14 closure costs $15 million pre-tax 5 US cents per share • Headcount reduction - US & Europe $14 million pre-tax 5 US cents per share • 5-yearly US maintenance shuts $15 million additional impact vs last year 5 US cents per share 5 Earnin
Slide 4: Earnings Summary
Earnings Summary Sales (US$ million) 1200 1123 1120 900 1019 • Sales: +10% vs LY 600 • Fine paper +5% vs LY 300 • Forest Products +37% vs LY 0 Q1 03 Q4 03 Q1 04 Total Cost per Ton* (US$/ton) 800 600 609 660 • Europe and SA local currency 577 400 costs down 200 • US costs after restructuring and shut
Slide 5: Earnings Summary; Cash Flow Summary
Earnings Summary Operating Profit to Sales Per Division 40% 30% 20% Forest Products 10% Fine Paper South Africa Fine Paper Europe 0% -10% Fine Paper North America -20% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2000 2001 2002 2003 9 Cash Flow Summary Cash Generated by Operations* (US$ millio
Slide 6: Capital Expenditure; Balance Sheet Summary
Capital Expenditure Capex vs Depreciation* (US$ million) Capex Depreciation % (Right-hand scale) 400 100% 335 300 310 352 75% 293 300 311 296 247 320 234 200 221 50% 180 100 25% 100 83 0 0% 1998 1999 2000 2001 2002 2003 Q1 04 *Capex on property, plant and equipment; depreciation excludes amortisatio
Slide 7: Exchange Rates; Divisional Detail
Exchange Rates Rand / US$ Exchange Rate* 10 9.7 8 • Q1 Rand strength: 8.4 7.6 7.4 +42% vs LY 6 6.9 7.1 +8% vs LQ 4 • Current -3% vs Q1 1Q03 2Q03 3Q03 4Q03 1Q04 30-Jan- 04 US$ / EUR Exchange Rate* 1.4 1.2 • Q1 EUR strength: 1.24 1.0 1.12 1.13 1.19 +19% vs LY 1.07 0.8 1.00 +5% vs LQ 0.6 • Current +4%
Slide 8: Divisional Detail
Divisional Detail Sappi Fine Paper Europe Q1 03 Q4 03 Q1 04 Sales (US$ million) 434 485 518 Tons Sold ('000) 525 570 588 Price / Ton (US$) 827 851 881 Price / Ton (EUR) 827 751 741 Cost / Ton* (EUR) 753 720 720 EBITDA (US$ million) 82 66 63 Op. Income (US$ million) 39 20 15 * Sales less operating in
Slide 9: Divisional Detail
Divisional Detail Sappi Fine Paper South Africa Q1 03 Q4 03 Q1 04 Sales (US$ million) 59 74 71 Tons Sold ('000) 74 79 72 Price / Ton (US$) 797 937 986 Price / Ton (ZAR) 7,755 6,919 6,762 Cost / Ton* (ZAR) 6,572 6,358 6,285 EBITDA (US$ million) 11 9 8 Op. Income (US$ million) 9 6 5 * Sales less opera
Slide 10: Divisional Detail; Markets
Divisional Detail Impact of application of AC 137 / IFRS 41 (US$ million) Impact on Q1 2004 Inc (Dec) Cost of Sales (6) SG&A (7) Net Finance Costs 3 Net Profit 7 • Shift from cost to fair value • Change in fair value of plantations reflected in income statement • Q1 improved operating efficiency res
Slide 11: Markets: European Coated Fine Paper
Markets European Coated Fine Paper Consumption yoy % change vs OECD Composite Leading Indicator* Europe CWF Consumption - 6MMA (left-hand scale) 40 20 OECD Composite Leading Indicator* - Europe (right-hand scale) 30 15 20 10 10 5 0 0 -10 -5 -20 -10 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 De
Slide 12: Markets: NBSK Pulp and US Consumption
Markets Europe NBSK Pulp Price Development 1,000 NBSK (€/ton) NBSK ($US/ton) 900 800 700 600 500 400 300 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Source: RISI, Pulp & Paper This Week 23 Markets USA Coated Fine Paper Consumption yoy % change vs OECD Composit
Slide 13: Markets: US Coated Fine Paper
Markets Why is US coated fine paper consumption lagging wider economic recovery? • European demand picking up • End-user inventory cycle • Advertising data potentially misleading • Labour cost savings major factor in improved corporate profitability 25 Markets US Coated Fine Paper Price Development
Slide 14: Outlook
Outlook • Improved macroeconomic conditions • Improved European demand • US turnaround opportunity • Good South African demand • Currency volatility • Q2 earnings similar to Q1 before impact of restructuring charges & additional maintenance costs 27