Sappi Limited · JSE:SAP
Sappi — Q1 2006 Earnings Presentation
17 slides from Sappi's earnings presentation, Feb 3, 2006
Slide 1: Results Q1 2006
sappi Results Q1 2006 3 February 2006 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 earning
Slide 2: Q1 Highlights & Financial Summary
sappi Q1 Highlights & Financial Summary First Quarter Highlights • Headline EPS 1 US cent • Prices stable; higher input costs • Improved supply/demand balance • Pension restructuring gains • IFRS reporting adopted 4
Slide 3: Earnings Summary
Earnings Summary Quarterly Sales (US$ million) 1400 1388* 1300 1256 1200 1235 1230 1185 1188 1175 1100 1123 1120 1144 1095 1062 1000 1019 900 800 700 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 *Q4 2005 included an additional accounting week 5 Earnings Summary Quarterly Headline
Slide 4: Earnings Summary and Balance Sheet Summary
Earnings Summary Headline EPS Development Versus Prior Quarter (US cents per share) Q4 05 Headline EPS (4) Less: Provision Release (3) Less: Plantation Revaluation Credit (9) Q4 Add: US Commercial Downtime 12 2005 Add: US Restructuring Charge 9 Q4 05 Adjusted Total 5 5 Q1 06 Headline EPS 1 Less: Pen
Slide 5: Markets: Global Advertising Spend vs Demand
sappi Markets Markets Global Advertising Spend vs Coated Fine Paper Demand 450 30 Ad-spend (lhs) 400 Coated Fine Paper Demand (rhs) 25 '000 Metric Tons 350 $bn 300 Continued coated fine paper 20 demand growth after 2001 ad-spend recession 250 15 200 150 10 1990 1992 1994 1996 1998 2000 2002 2004 Sou
Slide 6: Global Demand vs Capacity; Supply/Demand Outlook
Markets Global Coated Fine Paper Demand vs Capacity (million metric tons) 30 Global Coated Fine Paper Demand Global Coated Fine Paper Capacity 25 Million Metric Tons 20 Unprecedented level of excess capacity led to falling prices 15 10 1990 1992 1994 1996 1998 2000 2002 2004 Source: EMGE ‘World Grap
Slide 7: Divisional Detail: Input Cost Escalation
sappi Divisional Detail Input Cost Escalation Raw Material Cost Escalation* (US$ million) FY 05 Q106 Wood 23 4 Chemicals 74 2 Energy 39 23 136 29 * Price impact vs equivalent period last year 14
Slide 8: Divisional Margins; Sappi Fine Paper Europe
Divisonal Margins Operating Profit to Sales Per Division 40% 30% 20% Forest Products* 10% Fine Paper Europe 0% Fine Paper North America** Fine Paper South Africa -10% -20% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2002 2003 2004 2005 2006 * Q1 2005 Forest Products data excludes US$41m Usutu
Slide 9: Sappi Fine Paper North America and South Africa
Divisional Detail Sappi Fine Paper North America Q1 05 Q4 05 Q1 06 Sales (US$ million) 357 424 345 Price / Ton (US$) 1,020 991 1,003 Cost / Ton* (US$) 1,057 1,103 1,000 Op. Income (US$ million) (13) (48) 1 Op. income before impairment & restructuring charge (24) • Slow ramp-up of reconfigured mill s
Slide 10: Sappi Forest Products
Divisional Detail Sappi Forest Products Q1 05 Q4 05 Q1 06 Sales (US$ million) 242 269 232 Price / Ton (US$) 313 285 317 Price / Ton (ZAR) 1,901 1,862 2,056 - Pulp & Paper 3,443 3,797 3,869 Cost / Ton* (ZAR) 1,956 1,620 1,728 Op. Income (US$ million) (7) 35 37 • Volume drop vs LY due to lower waste &
Slide 11: Outlook
Outlook • Price increases effective mid-quarter • Further input cost escalation • Q2 underlying earnings could deteriorate • Tighter supply/demand -Capacity closures -Ad spend improvement -Stronger demand in major markets 21 sappi Q&A
Slide 12: Supplementary Information: Cash Flow Summary
sappi Supplementary Information Cash Flow Summary Cash Generated by Operations* (US$ million) 250 200 195 178 184 172 150 154 157 162 149 142 122 122 100 106 93 50 0 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 *2005 restated as per IFRS 24
Slide 13: Cash Flow Summary; Plantation Valuation Impact
Cash Flow Summary Q1 05 Q4 05 Q1 06 Cash Generated by 142 162 122 Operations Increase (Decrease) in - 103 (80) 80 Working Capital - Cash Finance Costs 39 27 45 - Taxation Paid 27 3 7 - Capital Expenditure* 78 93 72 (105) 119 (82) * Q4 2005 capital expenditure of US$124 million includes US$31 million
Slide 14: Markets: Western Europe Consumption and Germany Prices
Markets Western European Coated Fine Paper Apparent Consumption* (yoy % change) 20% 15% 10% 5% 0% -5% -10% -15% -20% Sep-01 Dec-01 Jun-02 Sep-02 Dec-02 Jun-03 Sep-03 Dec-03 Jun-04 Sep-04 Dec-04 Jun-05 Sep-05 Dec-05 Mar-02 Mar-03 Mar-04 Mar-05 Source: Cepifine * Total shipments by European manufactur
Slide 15: Markets: US Consumption and Price Development
Markets US Coated Fine Paper Apparent Consumption (yoy % change) 30% 25% Apparent Consumption 20% Shipments 15% 10% 5% 0% -5% -10% -15% -20% Jun-01 Sep-01 Dec-01 Jun-02 Sep-02 Dec-02 Jun-03 Sep-03 Dec-03 Jun-04 Sep-04 Dec-04 Jun-05 Sep-05 Dec-05 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Source: AF & PA 29
Slide 16: Markets: US Net Imports and Imports by Region
Markets US Coated Fine Paper Net Imports (‘000 metric tons) 100 90 80 70 60 50 40 30 20 10 0 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Source: AF & PA 31 Markets US Coated Fine Paper Imports by region (‘000 short tons) 80 Asia Europe Canada Other 70 60 50 40 30 20 10 0 Au
Slide 17: Markets: US Imports From Asia; Europe NBSK Pulp Price
Markets US Coated Fine Paper Imports From Asia (‘000 metric tons) 50 South Korea China Japan Other 45 40 35 30 25 20 15 10 5 0 Aug-01 Nov-01 Feb-02 Aug-02 Nov-02 Feb-03 Aug-03 Nov-03 Feb-04 Aug-04 Nov-04 Feb-05 Aug-05 Nov-05 May-02 May-03 May-04 May-05 Source: AF & PA 33 Markets Europe NBSK Pulp Pri