Slide 1: Q2 FY20 financial results delivering on strategy
Q2 FY20 financial results delivering on strategy 7 May 2020 2020 Vision 2020 next phase growth intentional evolution Steve Binnie Chief Executive Officer Sappi Limited 1
Slide 2: Forward-looking statements and Regulation G
Forward-looking statements and Regulation G 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
Slide 3: Highlights – Q2 FY20
Highlights – Q2 FY20 Excluding special items* o Historically low DP prices and reduced volumes EBITDA* $131m significantly impacting profitability Down 30% Y-o-Y o Packaging and specialities segment continued to grow volumes and profitability o Significant market share gains in graphics paper Net de
Slide 4: EBITDA reconciliation Q2 FY20 to Q2 FY19
EBITDA* reconciliation Q2 FY20 to Q2 FY19 200 160 120 US$ million 80 40 0 187 (4) (156) 91 17 (9) 5 131 Q2 FY19 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Other Exchange rate Q2 FY20 EBITDA costs Sales revenue Notes: 1. All variances were calculated excluding Sappi Forestry. 2.
Slide 5: Product contribution split – LTM
Product contribution split – LTM EBITDA excluding special items Operating profit excluding special items 29% Dissolving Pulp 35% 38% 44% Packaging and Specialities Graphics 27% 27% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating prof
Slide 6: Segment volume & EBITDA margin
Segment volume & EBITDA* margin 1,200 12.0% 350 20.0% 1,100 10.0% 300 15.0% 1,000 8.0% 250 900 6.0% 10.0% 200 800 4.0% 150 5.0% 700 2.0% 600 0.0% 100 0.0% Graphics volume Graphics margin Pack/Spec volume Pack/Spec margin 400 40% 350 30% 300 250 20% 200 10% 150 100 0% DP volume EBITDA margin EBITDA*
Slide 7: Maturity profile
Maturity profile* Fiscal years 600 526 500 455 EUR450m bond EUR350m bond 400 347 US$ million 300 268 246 US$221m bond 200 87 113 85 100 65 43 45 23 25 25 0 2020 2021 2022 2023 2024 2025 2026 2027 2032 Cash Short-term SPH term debt Securitisation SSA *Graph excludes US$97 million in IFRS16 leases – A
Slide 8: Capex
Capex 600 500 400 US$ million 300 200 100 0 2016 2017 2018 2019 2020E Maintenance Efficiency and expansion 8
Slide 9: Segmental overview
Segmental overview 9
Slide 10: Sappi Europe
Sappi Europe o Market share gains in CWF offsetting weak market Sales Tons -6% demand – Kirkniemi strike impacted CM volumes year-on-year o 20kt commercial downtime required, US$5.6m EBITDA impact Sales -13% year-on-year o Packaging and specialities volumes continue to grow EBITDA* +5% o Variable co
Slide 11: Sappi North America
Sappi North America o Good growth in packaging volumes, with improved Sales Tons +19%* product mix and machine efficiency aiding pricing and year-on-year lowering costs Sales +2% o Profits impacted by weak DP pricing year-on-year o 10% volume growth in graphics due to market share gains. Prices on a
Slide 12: Sappi South Africa
Sappi South Africa Sales Tons -7% o Historically low DP prices and reduced volumes have year-on-year significant impact on profitability – Sales price US$245/t lower y-o-y. Sales -26% o SA containerboard sales volumes recovered from the year-on-year previous quarter but were 4% below last year. EBIT
Slide 13: Covid-19 update
Covid-19 update 15 reported cases of Covid-19 in the Operations continuity, through Group – 12,800 employees Change in shift systems, rotational teams Health protocols Pandemic procedures implemented Change management globally Unions and Community engagements Protocols introduced and
Slide 14: Covid-19 update - cash management
Covid-19 update - cash management Financing activities Negotiated covenant waiver for 12 months (to March 2021) – minimum liquidity requirement Repaid SA bonds with bridging finance Reviewed capital expenditure commitments – US$80m reduction in H2 Force majeure on Saiccor expansion project
Slide 15: Covid-19 update - cash management
Covid-19 update - cash management Working capital management Restricting stock build Resisting delays in receivables – Overdues remain constant with prior quarters Applying for government assistance where criteria is met Differs by region, mostly from May onwards Short-interval control
Slide 16: Covid-19 update - markets
Covid-19 update - markets Graphic paper Lower advertising spend and lockdowns resulting in significant retail slowdown causing significant reduction in graphic paper demand globally. Similar impact to 2009 so far, where demand reduced some 30% Declining input costs supporting margins Price
Slide 17: Covid-19 update - markets
Covid-19 update - markets Dissolving Pulp Retail lockdowns in many geographies have impacted entire textile supply chain Growth in E-commerce/online sales not enough to offset impact on brick and mortar stores Initial signs in China point to a slow recovery post lock-down DP demand down ap
Slide 18: US retail sales March 2020 - 8.7% MoM by category
US retail sales March 2020 - 8.7% MoM by category The coronavirus pandemic triggered steep drops in several areas of March retail sales 30% 26.9% Retail sales % +(-) change in March , month over month 15% 3.1% 4.3% 1.3% 0% Average retail sales -8.7% -15% -15.1% -19.7% -30% -23.3% -27.1% -26.8% -26.5
Slide 19: Covid-19 impact on Textile orders
Covid-19 impact on Textile orders International Textiles Manufacturers Federation (Swiss based) 19
Slide 20: Our group strategy
Our group strategy Achieve Maintain Improve operational cost Optimise a healthy and machine advantages working balance efficiencies capital sheet Expand paper Enhance packaging Strong specialised grades Maximise Continuously procurement cash Smart cellulose Optimise balance benefits paper supply gen
Slide 21: Group Strategy - update
Group Strategy - update Achieve Cost advantages Group efficiency and procurement saving initiatives in FY20: US$105m – an increase of US$41m Saiccor expansion delay due to Force Majeure: startup in FY21- will improve efficiency and lower costs once complete Rationalise declining businesses
Slide 22: Outlook
Outlook DP and Graphic paper demand expected to be significantly impacted Focus on liquidity and cash flow – various cost savings measures implemented, excess production curtailed, non-essential capital expenditure delayed and optimisation of working capital. Packaging and specialities segment
Slide 23: Thank you
Thank you 23
Slide 24: Supplementary information
Supplementary information 24
Slide 25: EBITDA and operating profit
EBITDA and operating profit Excluding special items* 250 EBITDA Operating profit ex special items 224 221 200 211 208 201 197 187 185 152 148 145 172 142 US$ million 136 150 128 155 155 117 139 109 105 131 118 93 100 85 62 52 48 50 0 * Refer to the supplementary information in this presentation for
Slide 26: Net debt/EBITDA development
Net debt/EBITDA development 3.3 2,600 3.5 2,400 2.6 3.0 2,200 2.5 2,000 US$ million 2.0 1916 1879 1,800 1.5 1,734 1728 1680 1,600 1,652 1632 1603 1583 1568 1557 1.0 1501 1,400 1408 1349 1338 1329 1322 1318 0.5 1,200 1,000 0.0 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1
Slide 27: Global packaging and speciality production sites
Global packaging and speciality production sites Sappi Alfeld (Germany) Sappi Stockstadt (Germany) Sappi Condino (Italy) Sappi Somerset (USA) Sappi Tugela (South Africa) Flexible Packaging, Label, Paperboard, Label Papers, Flexible Packaging, Flexible Packaging, Silicone Base Papers, Label Papers, P
Slide 28: Packaging and Speciality papers expansion plans
Packaging and Speciality papers expansion plans Expand Europe paper Maastricht: complete, ramp-up by 2021 Enhance packaging specialised grades -160k CWF, +150k specialities (FBB) cellulose portfolio Ehingen: complete -75k CWF, +60k specialities (WTL) Accelerate Extract growth in Alfeld:
Slide 29: Product Groups and Products
Product Groups and ProductsEU Packaging and Specialities 29
Slide 30: Sappi North America packaging offering
Sappi North America packaging offering Paperboard (SBS) C1S Paper Bristols Folding Litho Food service Label Paper Bag Paper Spectro Carton Lamination Board LusterCote LusterPrint (C1S & C2S) Proto C1S, Proto Litho LusterFSB Spectro C1S LusterPlate 30
Slide 31: Packaging & specialities volume growth 2015 to 2020
Packaging & specialities volume growth 2015 to 2020 1,400 1,200 1,129 1,009 1,000 884 887 854 800 600 400 200 - 2015 2016 2017 2018 2019 2020F Flexpack Label Paperboard Self Adhesives Digital Imaging Functional papers Casting Containerboard Tissue Other Note: The 2020 forecast has not been updated f
Slide 32: EU consumer and brand owner sustainability focus
EU consumer and brand owner sustainability focus Desired outcome Prevent or reduce the impact of packaging waste on the environment by avoiding and recycling packaging waste; preference for Monomaterials Consequences Product design requires a “designed for recycling” approach Recycling systems t
Slide 33: NA paperboard segments
NA paperboard segments Quality Premium Spectro (commercial print, Premium (92 brightness) premium folding carton) 400K tons (10%) Performance (88 Brightness) Performance 2.0M tons (45%) Proto and Proto Litho – folding carton and litho lamination applications Food service & cup stock (88 brightness)
Slide 34: Sappi Europe
Sappi Europe Q2 FY20 Q1 FY20 Q2 FY19 Tons sold (‘000) 793 795 842 Sales (EURm) 606 619 675 Price/Ton (EUR) 764 779 802 Cost/Ton* (EUR) 733 737 773 Operating profit excluding special items** 25 33 24 (EURm) * Sales less operating profit excluding special items divided by tons sold. ** Refer to the su
Slide 35: Coated paper deliveries and prices
Coated paper deliveries and prices Western Europe 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 CWF Demand MCR Demand CWF 100gsm Sheets LWC 60gsm offset reels Western Europe shipments including export. Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008. 41
Slide 36: Sappi North America
Sappi North America Q2 FY20 Q1 FY20 Q2 FY19 Tons sold (‘000) 416 377 350 Sales (USDm) 387 370 378 Price/Ton (USD) 930 981 1,080 Cost/Ton* (USD) 921 979 1,051 Operating profit excluding special items** 4 1 10 (USDm) * Sales less operating profit excluding special items divided by tons sold. ** Refer
Slide 37: Coated paper deliveries and prices
Coated paper deliveries and prices United States of America 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60lb rolls US industry purchases defined as industry shipments, plus imports, less exports. Source: AF&PA and RISI indexed to calendar Q1 FY08
Slide 38: Sappi South Africa
Sappi South Africa Q2 FY20 Q1 FY19 Q2 FY19 Tons sold (‘000) 389 338 418 Sales (ZARm) 3,979 3,549 4,982 Price/Ton (ZAR) 10,229 10,500 11,919 Cost/Ton* (ZAR) 9,404 9,541 9,237 Operating profit excluding special items** 321 324 1,121 (ZARm) * Sales less operating profit excluding special items divided
Slide 39: Paper pulp prices
Paper pulp prices* 1,300 1,100 1,200 1,000 1,100 900 1,000 900 800 EUR/ton USD/ton 800 700 700 600 600 500 500 400 400 NBSK Europe (USD) BHKP Europe (USD) Net BHKP China (USD) NBSK Europe (EUR) BHKP Europe (EUR) BCTMP, HW, Imports China (USD) * Source: FOEX, CCF group, RISI. 45
Slide 40: Dissolving pulp prices
Dissolving pulp prices* 1,100 1,050 1,000 950 900 US$/ton 850 800 750 700 650 600 Imp SW DWP Imp HW DWP China origin DWP * Source: CCF group 46
Slide 41: Textile fibre prices
Textile fibre prices* 3,000 2,500 2,000 US$/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 47
Slide 42: Cash flow
Cash flow US$m Q2 FY20 Q1 FY20 Q2 FY19 Cash generated from operations 116 136 182 Movement in working capital (14) (76) (80) Net finance costs paid (18) (35) (21) Finance income received 1 2 1 Taxation (paid) refund (11) (32) (43) Dividend paid - - (92) Cash generated from operating activities 74 (5
Slide 43: EBITDA and operating profit
EBITDA and operating profit Excluding special items* reconciliation to reported operating profit US$m Q2 FY20 Q1 FY20 Q2 FY19 EBITDA excluding special items* 131 139 187 Depreciation and amortisation (79) (77) (70) Operating profit excluding special items* 52 62 117 Special items* - gains (losses) (
Slide 44: Thank you
Thank you 50