Roadbook. September Graeme Wild Group Head Investor Relations and Sustainability Sappi Limited

Transcription

1 Roadbook September 2015 Graeme Wild Group Head Investor Relations and Sustainability Sappi Limited

2 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 earnings, savings, synergies, events, trends, plans or objectives. The words believe, anticipate, expect, intend, estimate, plan, assume, positioned, will, may, should, risk and other similar expressions, which are predictions of or indicate future events and future trends and which do not relate to historical matters, and may be used to identify forward-looking statements. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and from past results, performance or achievements). Certain factors that may cause such differences include but are not limited to: the highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production, input costs including raw material, energy and employee costs, and pricing); the impact on our business of a global economic downturn; unanticipated production disruptions (including as a result of planned or unexpected power outages); changes in environmental, tax and other laws and regulations; adverse changes in the markets for our products; the emergence of new technologies and changes in consumer trends including increased preferences for digital media; consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital when needed; adverse changes in the political situation and economy in the countries in which we operate or the effect of governmental efforts to address present or future economic or social problems; the impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including related financing), any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions or implementing restructuring and other strategic initiatives and achieving expected savings and synergies; and currency fluctuations. We undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise. Regulation G disclosure Certain non-gaap financial information is contained in this presentation that management believe may be useful in comparing the company s operating results from period to period. Reconciliation's of certain of the non-gaap measures to the corresponding GAAP measures can be found in the quarterly results booklet for the relevant period. These booklets are located in the Investors Financial information -section of 2

3 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 3

4 Sappi Limited Overview #2 Global producer of coated woodfree paper (60% of sales) Forecast: Capacity and demand down 1.5% through 2019* #1 Global producer of dissolving wood pulp (15% of sales) Forecast: Demand up 6% and capacity up 3.3% through 2016** 4 * EMGE March 2015 ** RISI April 2015

5 Sappi at a glance Sappi Limited 2014 Sales = US$6 billion with 13,064 employees Sappi Trading Sappi Europe 51% 2014 sales Sappi North America 25% 2014 sales Sappi Southern Africa 24% 2014 sales Graphic paper Graphic paper Paper and paper packaging Speciality paper Specialised cellulose Specialised cellulose Release paper Forests 5

6 Geographic diversification Our global presence allows us take advantage of opportunities where markets are strong Three paper and specialised cellulose mills Seven paper mills 13 sales offices on six continents Six paper and specialised cellulose mills 567,000ha of forests 6

7 Sales Ltd. Sales Analysis Sales by source* (US$) 25% 50% 25% Europe North America Southern Africa Asia and other Sales by product* (US$) 1% 1% Sales by destination* (US$) 12% 23% 23% 42% 7% 17% 10% 5% 59% Coated paper Uncoated paper Speciality paper Commodity paper Dissolving wood pulp Paper pulp Other 7 * Data reflects results from FYTD 2015

8 Sappi Ltd. Sales Analysis FYTD 2015 Coated Paper 10% 1% 1% 5% 7% 17% 59% Coated Paper Speciality Paper Uncoated Paper Other Dissolving Pulp Commodity Paper Paper Pulp #2 Global Producer of Coated Paper EBITDA Margins ~7% Forecast* demand down 2% to 4% pa. Forecast* capacity down 2% 8 *Source: RISI

9 Sappi Ltd. Sales Analysis FYTD 2015 Commodity Paper EBITDA Margins ~17% Demand up 6% Speciality Paper EBITDA Margins ~12% Demand up 4% 10% 5% 7% 17% 1% 1% 59% #1 Global Producer of Dissolving Pulp EBITDA Margins ~30% Demand forecast* up 5% pa. Capacity forecast* up 2% Coated Paper Speciality Paper Uncoated Paper Other Dissolving Pulp Commodity Paper Paper Pulp 9 *Source: Hawkins Wright

10 Major Sensitivities EU NA SA Translation Group m US$m ZARm US$m US$m Net Selling Price 1% DWP Price 1% Sales Volumes 1% Variable Cost 1% Fixed Cost 1% Wood Price 1% Paper Pulp Price US$ ZAR/US$ 10c EUR/US$ 10c

11 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 11

12 Printing and writing paper grade structure 100% Chemical pulp fiber furnish Coated fine paper (CWF) Uncoated woodfree (UWF) Fibre quality Increasing mechanical/recovered fiber content Coated mechanical (CGW/LWC) Supercalendered (SC-A) Supercalendered (SC-B) Machine finished specialities (MFS) Newsprint Improved newsprint Image quality 12

13 Coated Woodfree demand leveling-off Forecast* North America Europe Far East Latin America Africa/Middle East Oceania 13 * Source: RISI World Graphic Paper Report

14 Industry Consolidation Capacity share of top five coated woodfree paper producers 100% 90% Europe North America Rest of world Global 100% 80% 70% 79% 60% 50% 40% 60% 50% 41% 30% 20% 33% 27% 25% 10% 0%

15 Dissolving Wood Pulp (DWP) DWP is the most abundant natural organic polymer on earth and is found in all plant materials The plant material (wood from certified forests or plantations) is processed and purified by applying specialised chemistry to extract the cellulose polymers from the wood The purified natural wood cellulose fibres are further dissolved by our customers and re-generated or re-formed for a host of applications Resins 1% Inorganics 1% Lignin 23% Cellulose 45% Hemicellulose 30% 15

16 Dissolving Wood Pulp (DWP) End uses Lyocell 3% Acetate 12% MCC 2% Ethers/CMC 9% Cellophane 1% Filament 5% Nitrocellulose 3% Others 4% Tyre cord 1% Sponges Moulding powder Paper, etc VSF 60% 16

17 Dissolving Wood Pulp (DWP) Competitors Tembec incl Tartas 4% Birla & Lenzing Integrated 14% Others 15% Fortress 3% Bamboo China 3% Hunan Juntai 3% Sun Paper 2% Other China DWP 4% Borregaard 2% Stora 1% Sodra 2% CLP China 11% Rayonier 6% Buckeye 3% Neucell 3% Bahia 6% PT Toba 2% Cosmo 2% Sappi 16% 17

18 Why Dissolving Wood Pulp (DWP) Capitalising on MEGA-TRENDS Global population growth from a current 6.9bn to 8.3bn by 2030 Increasing need for food and clothes Increasing need for more comfortable clothing Rising urbanisation and standard of living in the greater Asian region Asian middle class population is likely to grow from current 1.9bn to 2.7bn people by 2030 Asian consumers are likely to spend US$32 trillion/year by 2030, accounting for 43% of total global consumption 120% 100% 80% 60% 40% 20% 0% -20% -40% % 70% 94% 70% 112% 85% 49% 39% 26% 27% 32% 20% 11% -5% -10% -14% -18% Textile fibres consumption Million metric tons Textile fibres Food

19 Cellulose Gap Theory Dissolving wood pulp share of the textiles market is expected to grow further Production of cotton is forecast to remain stagnant or shrink Growth in total fibre consumption will be covered by man-made fibres However, certain moisture management properties of cellulose fibres cannot be substituted by oil-based synthetic fibres, enhancing opportunity for cellulosics 19

20 Textile fibre pricing US$/kg Imported DP (CCF Group) VSF 1.5D (CCF Group) Cotton 328 (CCF Group) Cotlook A (Cotlook) PSF 1.4D (PCI Fibres) 20

21 21 Global Cost Curve Delivered Cash Cost USD/ADMT Average Cost Comp 1 Comp 2 Comp 3 SAPPI SAPPI Comp 4 Comp 5 Comp 6 Comp 7 Comp 8 Comp 9 Comp 10 Comp 11 Comp 12 Comp 13 Comp 14 Comp 15 SAPPI Comp 16 Comp 17 Comp 18 Comp 19 Comp 20 Comp 21 Comp 22 Comp 23 Comp 24 Comp 25 Comp 26 Comp 27 Comp 28 Comp 29 Comp 30 Comp 31 Comp 32 Comp 33 Comp 34 Comp 35 Comp 36 Comp 37 Source: RISI

22 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 22

23 23 Strategic focus

24 Focus areas Achieve cost advantages We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages Cloquet Mill s kraft campaigns Somerset Mill s natural gas conversion Gratkorn Mill s paper machine and pulp mill upgrade Kirkniemi Mill s power plant Group procurement initiatives 24

25 Focus areas Rationalise and optimise declining businesses Recognising the decreasing demand for graphic paper, we manage our capacity to strengthen our leadership position in these markets, realising their strategic importance to the group and maximising their significant cash flow generation Cessation of coated paper production in South Africa Husum volumes to be transferred to our assets in H

26 Focus areas Grow through moderate investments We will make smaller investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers Investment in lightweight recycled packaging paper at Enstra Mill Upgrades to Tugela and Ngodwana pulp mills Nanocellulose pilot plant in The Netherlands 26

27 Focus areas Generate cash to strengthen the balance sheet Continue to pursue the sale of Twello Sale of Enstra and Cape Kraft Mills announced Refinancing and debt reduction has led to lower finance cost 27

28 Focus areas Accelerate growth in adjacent businesses from a strong base Over the next two years we will continue our focus on having a cleaner, stronger balance sheet so that we can then accelerate our growth in adjacent businesses Speciality packaging New business lignins, sugars Longer term DWP capacity expansion 28

29 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 29

30 Highlights Q3 FY15 EPS excluding special items 2 US cents (Q3 FY14 2 US cents) Profit for the period US$4m (Q3 FY14 US$17m) EBITDA excluding special items US$109m (Q3 FY14 US$140m) Net debt US$1,917m (Q3 FY14 US$2,286) 30

31 Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Specialised cellulose 43% Paper 57% Specialised cellulose 62% Paper 38% 31 * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our Q results booklet (available on for a definition of special items. Data above excludes treasury operations and insurance captive.

32 Net Debt/EBITDA Development US$ million Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY EBITDA* Net debt/ltm EBITDA** 32 * EBITDA shown is excluding special items. ** The covenant net debt/ltm EBITDA calculation has adjustments and therefore differs from that shown above.

33 Maturity Profile Fiscal years Includes US$400m bond EUR450m bond 503 US$ million US$350m bond US$221m bond FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY32 Cash Short-term SPH term debt SSA RCF Securitisation 33

34 Capex Development US$ million FY12 FY13 FY14 Estimate FY15 Maintenance Efficiency 34

35 Financial Results Five-year review Restated US$ million Income statement Sales 6, ,347 7,286 6,572 Variable manufacturing and delivery costs 3,887 3,768 3,919 4,559 4,008 Fixed costs 1,837 1,943 1,986 2,296 2,157 Sundry expenses (9) Operating profit excluding special items Special items losses (gains) (18) 318 (2) Operating profit Net finance costs Profit (loss) before taxation 137 (167) 121 (241) 66 Taxation charge Profit (loss) for the year 135 (182) 93 (250) 48 EBITDA excluding special items

36 Financial Results Five-year review Restated US$ million Balance sheet Total assets 5,465 5,727 6,168 6,308 7,184 Non-current assets 3,505 3,787 4,031 4,127 4,701 Current assets 1,960 1,940 2,137 2,181 2,483 Current liabilities 1,223 1,212 1,315 1,652 2,039 Shareholders equity 1,044 1,144 1,525 1,478 1,896 Net debt 1,946 2,247 2,020 2,142 2,269 Gross interest-bearing debt 2,474 2,599 2,624 2,739 3,013 Cash (528) (352) (604) (597) (744) Capital employed 2,990 3,391 3, ,165 36

37 Financial results Five-year review Restated US$ million Cash flow Cash generated from operations Decrease (increase) in working capital 34 (20) (102) (98) (5) Finance costs paid (170) (171) (206) (266) (206) Finance revenue received Taxation paid (1) (17) (20) (38) (9) Cash generated from operating activities Net cash generated (utilised) 243 (247) Cash effects of financing activities (36) (8) (103) (296) (256) Capital expenditure (gross) To maintain operations To expand operations

38 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 38

39 Divisional overview Sappi Europe Leading European coated paper producer FY14 Net sales: US$3.1b FY14 EBITDA: US$249m 3.5m tons per annum of paper capacity 1.2m tons per annum of pulp capacity (integrated) Well-invested assets in the heart of the European market 39

40 Divisional overview Sappi Europe Sappi Europe saleable capacity ( 000tpa) European CWF and CM capacity shares** Speciality paper 300 Coated mechanical Uncoated woodfree paper 220 Coated woodfree paper * 20 Producers * 11 Producers 40 ** Source: RISI

41 Q1 2008=1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Coated Paper Deliveries & Prices Western Europe CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe shipments including export. Source: Cepifine, Cepiprint and RISI indexed to calendar Q1 2008

42 Projects Sappi Europe Alfeld Mill Speciality conversion (December 2013) Gratkorn Mill Pulp mill and paper machine upgrades Kirkniemi Mill Power plant rebuild Nanocellulose pilot plant (The Netherlands) 42

43 Summary Sappi Europe Highly competitive in service, quality and cost in Europe Strong cash flows Highly attractive and growing specialities business Alfeld Mill conversion (December 2013) Investment in Kirkniemi Mill power plant Investment in Gratkorn Mill paper machines and recovery boiler Market is in decline, capacity needs to be right-sized; Nijmegen Mill sold and repurposed (June 2014) 43

44 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 44

45 Divisional overview Sappi North America Leading North American coated freesheet paper producer FY14 Net sales: US$1.5b FY14 EBITDA: US$92m 1.1m tons per annum of coated paper capacity 700,000 tons per annum of integrated paper pulp capacity 45

46 Divisional overview Sappi North America Sappi North America saleable capacity ( 000tpa) Speciality paper 30 Dissolving wood pulp 330 NBHK 30 US Coated freesheet capacity shares* Catalyst 6% Appleton 6% WestLinn 6% Coated woodfree paper Sappi 30% Verso 52% 46 * Source: RISI

47 Projects Sappi North America Cloquet Mill Pulp mill dissolving wood pulp conversion Westbrook Mill Coater modernisation Somerset Mill Natural gas conversion Cloquet Mill Lime kiln shell rebuild 47

48 Q Q1 2008=1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Coated Paper Shipments & Prices United States of America Domestic CFS shipments Total US CFS consumption CFS #3 60lb rolls prices * US industry shipments and total US consumption. Source: AF&PA and RISI indexed to calendar Q1 2008

49 Sappi s release paper business By end-user segment Fashion Automotive and commercial upholstery Decorative laminates Engineering films and other Sappi Sappi Sappi Sappi Sappi Other 49

50 Summary Sappi North America Well-invested, premier asset portfolio Established brands with strong market position Exposure to most attractive end-market segment Unmatched reputation for product innovation and customer service A low-cost producer with strong free cash flow profile Defined and focused opportunities for driving further profitable growth 50

51 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 51

52 Divisional overview Sappi Southern Africa Leading South African graphic and packaging paper producer FY14 Net sales: US$1.4b FY14 EBITDA: US$312m 1m tons per annum of dissolving wood pulp (DWP) capacity 950,000 tons per annum of graphic and packaging paper production 750,000 tons per annum of pulp production (integrated) 52

53 Divisional overview Sappi Southern Africa Sappi Southern Africa saleable capacity ( 000tpa) Global dissolving wood pulp demand* Paper and paper packaging 950 Forestry Dissolving wood pulp Tons million * Source: RISI

54 Projects Sappi Southern Africa Ngodwana Mill Dissolving wood pulp (DWP) conversion Tugela and Ngodwana Mills Pulp mill upgrades Sale of Cape Kraft and Enstra Mills recycled packaging business Land sales 54

55 Our DWP Competitive Advantage Sappi Southern Africa Low-cost and fast-growing woodfibre from state-of-the-art plantations Large-scale, modern and well-invested assets Favourable currency trend Well-positioned in dynamic market 55

56 Summary Sappi Southern Africa Investing in specialised cellulose Low-cost producer Fast-growing market Excellent customer relationships 'Growing' our forestry assets Improving paper business Better use of timber Improving cost position Product optimisation - Packaging Profitable with growth opportunities 56

57 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 57

58 Sustainability 3Ps - Inputs 58

59 Sustainability 3Ps - Outputs 59

60 Agenda Overview Products Strategy Results Divisions Sappi Europe Sappi North America Sappi Southern Africa Sustainability Conclusions 60

61 Conclusions We are making real progress Reduction in capital spending and refinanced debt Costs remain a chief concern Cash generative paper business to fund growth in: Cellulose-based solutions Speciality packaging papers Complementary products Committed to accelerating value for shareholders through: Improved profit Strategic positioning Debt reduction 61

62 62 Thank you