Roadbook February 2014

Transcription

1 Roadbook February 2014

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 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, which do not relate to historical matters, 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 the 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 or strategic initiatives (including our announced dissolving wood pulp conversion projects), 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 Investor Info section of

3 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

4 Sappi at a Glance Sappi Ltd 2013 sales = $5.9bn ; 13,700 employees 4 Sappi Trading Sappi EU 53% 2013 sales Sappi NA 23% 2013 sales Sappi SA 24% 2013 Sales Graphic Paper Graphic Paper Paper and Paper Packaging Speciality Paper Specialised Cellulose Specialised Cellulose Release Paper Forests *Sales by Product Group for the period ended September2013

5 5 Geographic Diversification Global presence enables Sappi to take advantage of opportunities where markets are strong 3 Paper and Specialised Cellulose Mills 8 Paper Mills 13 Sales offices on 6 continents 6 Specialised Cellulose and Paper Mills 567,000ha Forests

6 Sales Analysis 6 53% 24% Europe North America Southern Africa 46% 12% 19% 23% Asia & other 23% Sales By Source 1 (US$) Sales By Destination 1 (US$) 7% Uncoated Paper 64% Coated Paper 8% 6% Specialty Paper Commodity Paper 12% 1% 2% Other Dissolving Wood Pulp Paper Pulp

7 Major Sensitivities 7 Some of the more important factors which impact the group s operating profit excluding special items, based on anticipated revenue and cost levels, are summarized in the table below. Sensitivities Change SFPE SFPNA SA Group Euro'm US$'m ZAR'm US$'m Net Selling Prices 1% Variable Costs 1% Sales Volume 1% Fixed Costs 1% Oil Price US$ Pulp Prices US$ 10 (6) Wood Prices 1% ZAR/US$ 10c Euro/US$ 10c - 3-3

8 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

9 FIBER QUALITY Printing & Writing Paper Grade Structure 9 100% chemical pulp fiber furnish Coated Fine Paper (CWF) Uncoated Woodfree (UWF) Increasing mechanical/recovered fiber content Coated Mechanical (CGW/LWC) Supercalendered (SC-A) Supercalendered (SC-B) Machine Finished Specialities (MFS) Improved Newsprint Newsprint PAPER QUALITY

10 Industry Consolidation 10 Capacity share of top 5 Coated Woodfree Paper producers 100% 80% Europe North America Rest of World Global 80% 99% 60% 40% 20% 33% 60% 27% 49% 25% 40% 0% Source: EMGE WGPR Sept 2013

11 million metric tons Global Demand Forecast for CWF Paper 11 While demand falls in developed economies growth is forecast to continue in emerging markets. Roadbook February 2014 Source: EMGE WGPR Sept 2013

12 '000 Tons % Sappi s DWP Market Share/Forecast Expansion projects will consolidate Sappi s position as global leader 25% 20% % % % Total Sappi Market Share estimates based on capacities and anticipated start up ramps of Cloquet and Ngodwana 0%

13 Why Dissolving Pulp? 13 Capitalizing on MEGA TRENDS: Population growth- Global population from a current 6.9bn to 8.3bn by 2030 Increasing need for clothes and food Increasing need for more comfortable clothing Rising urbanization and standard of living in the Greater Asian Region Asian middle class population is likely to grow to 2.7bn by 2030 from the current 1.9bn people Asian consumers are likely to spend $32 trillion/year by 2030, accounting for 43% of total global consumption Textile Fibres Consumption Million Metric Tons

14 Cellulose Gap Theory Dissolving Wood Pulp share of the textiles market is expected to grow further 14

15 Sappi s Expansion projects 15 NGODWANA - Mpumalanga Located near Nelspruit, South Africa DP capacity of 215 ktpa from FQ Eucalyptus wood in close proximity CLOQUET Located in Minnesota on the St. Louis River Cloquet is NA s newest & most modern pulp mill CC capacity of 330ktpa from FQ Maple and Aspen wood source in close proximity

16 We are not alone 16 +/- 3.5 Million tons of DWP Capacity Announcements for /- 1.7 Million tons of VSF Capacity Announcements for Altri Svetlogorsk Jilin Tianzhu Anqing Huatai Schweighofer Oji Paper Phoenix P&P Stora Enso Sodra Double A Rayonier Luzhou Yinge Nippon Paper Tembec Buckeye Lenzing Sun Paper Sappi Birla AV Terrace Bay Fortress Specialty Jari Domsjo Fabrikker Paper Excellence Shandong Yamei Jiangsu Xiangsheng TangShan Sanyou Sateri Fujian Jiujang Hengsheng Chengdu Liya Jiangxi Longda Hunan Tuopo Lenzing Birla Recent spate of announcements regarding closures as well as delays and cancellations of DWP conversions Source: RISI

17 Global Cost Curve % Below Average Cost Sappi = 27% Others = 28% World Competitor CC Cash Costs into VSF includes 80% of supply volumes Above Average Cost 45% Average Cash Cost - 30%

18 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

19 Strategic Focus 3 themes: 19 Focused, low cost paper businesses with reasonable margins and strong cash flows Growth in profitable specialised cellulose based solutions and other high margin businesses Healthy balance sheet Accelerate our drive toward increased profitability, earnings growth, and a stronger financial position

20 Focus Areas 20 Focused, low cost paper businesses North America paper business maintains firm market share Europe industry dynamics won t improve without intervention Continue gradual improvement Significantly reduce graphic paper exposure with lower cost investments at Kirkniemi and Gratkorn announced previously Increased speciality paper business Similar business to US More to be done South Africa cost pressure, and variable local markets paper business starting to perform

21 Focus Areas 21 Growth in Specialised Cellulose and higher margin businesses Demand for commodity DWP remains very strong Saiccor performing well, Ngodwana and Cloquet ramping up Alfeld conversion completed On track Healthy Balance Sheet Net debt level has peaked, target US$2bn net debt for year end Potential Usutu sale would further aid our liquidity position Covenants renegotiated Further cash generation opportunities being pursued Debt reduction

22 Looking forward 22 Within 2 years we expect that Sappi will be a well balanced and robust business, generating good returns and will have a strong balance sheet. We will achieve this by: Maintaining and growing our world leadership position as a low cost dissolving wood pulp producer Growing high margin speciality paper business in all regions Smaller and simpler low cost graphic paper business Maximising value from our forestry operations in SA An emphasis on cash generation and debt reduction

23 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

24 EBITDA & Operating Profit ex-items* 24 USD million *Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported Operating Profit and page 16 in our Roadbook booklet (available on for a definition of special items. **2013 figures restated per adoption of IAS 19 (Revised) Employee Benefits

25 Q1 Product Contribution Split 25 EBITDA ex. Special Items Operating Profit ex. Special Items Roadbook February 2014

26 USD million Net Debt Development 26 $510m Specialised Cellulose capex - Targeted Net Debt Level Roadbook February 2014

27 Maturity profile Fiscal years 27 Includes 2017 $400m Bond Includes m Bond 2019 $300m Bond 2021 $350m Bond 2032 $221m Bond Roadbook February 2014

28 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

29 Sappi Fine Paper North America 29 Leading North American coated paper producer 2013 Net Sales: $1.3B 2013 EBITDA*: $135M 1.1M tons of paper capacity 855k tons of pulp capacity (505kt integrated) SFPNA Saleable Capacity ( 000tpy) US Coated Freesheet Capacity Shares** Other, 16% SFPNA, 29% Verso, 12% NewPage, 42% Roadbook February 2014 *2013 figures restated per adoption of IAS 19 (Revised) Employee Benefits ** Source: RISI

30 Project Athena 30 $170M investment to convert 455ktpa of hardwood pulp to make 330ktpa of dissolving wood pulp. Began Jan 12, finished June 13 New debarking unit 2 additional digesters Pulp Mill Modifications Bleach plant Evaporators Market pulp machine Previously integrated paper machines modified to run dry fiber

31 Casting/Release Paper 31

32 Q1 08 Q2 Q3 Q4 Q1 09 Q2 Q3 Q4 Q1 10 Q2 Q3 Q4 Q1 11 Q2 Q3 Q4 Q1 12 Q2 Q3 Q4 Q113 Q2 Q3 Q4 Q = 1 US Coated Paper Prices and Shipments 32 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 Q Roadbook February 2014

33 Summary SFP North America 33 Paper Business We are a low-cost 1m tons in a 4m ton market We have well invested, premier assets with established brands with strong market positions. Defined and focused opportunities for driving further profitable growth: Specialized Cellulose Casting/Release Paper

34 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

35 Sappi Fine Paper Europe 35 Leading European coated paper producer 2013 Net Sales: $3.4B 2013 EBITDA*: $183M 3.7M tons of paper capacity 1.2m tons of pulp capacity (integrated) Well-invested assets in the heart of the European market SFPE Saleable Capacity ( 000tpy) EU CWF & CM Capacity Shares** *2013 figures restated per adoption of IAS 19 (Revised) Employee Benefits ** Source: RISI *21 Producers *12 Producers

36 Q = 1 W. Europe Coated Paper Deliveries & Prices Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices Western Europe Shipments Incl. Export Source Cepifine, Cepiprint and RISI indexed to Calendar Q Roadbook February 2014

37 Alfeld Conversion Speciality packaging paper 37 Yankee cylinder being transported to the mill Construction of crane foundation - required for installation Roadbook February 2014

38 Summary SFP Europe 38 Highly competitive in service, quality & cost in Europe Strong cash flows Highly attractive and growing specialities business Alfeld conversion December 2013 Recent cost reduction efforts haven t been enough, more work must be done Market is in decline, capacity needs to be right-sized

39 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

40 Sappi Southern Africa 40 Leading South African graphic & packaging paper producer 2013 Net Sales: $1.3B 2013 EBITDA*: $204M 1M tons of Dissolving Wood Pulp capacity 950k tons of graphic and packaging paper 750k tons of pulp production (integrated) SSA Saleable Capacity ( 000tpy) Global DWP Shipments** ( 000t) up 13% YTD Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Roadbook February 2014 *2013 figures restated per adoption of IAS 19 (Revised) Employee Benefits ** Source: PPPC

41 Strategy for Southern Africa 41 Grow Specialized Cellulose Business Saiccor expansion by 225k ton (Sep 08) Ngodwana expansion by 210k ton (Q3 13) Lowest quartile cost base Market growth of >6% per annum Forestry resources / renewable energy Low cost wood resources in SA and elsewhere Renewable energy projects at our operations Match our assets to our resources and the market Closure of Adamas Jul 2011 (40k ton) Closure of fibre lines Mar 2012 (300k ton) Reduction of kraft paper capacity Mar 2012 (50k ton) Address future environmental issues Substantial cost reduction

42 $/ODMT Wood Resources 42 Sappi owns and manages 554,000ha s of timber plantations Supplies 70% of wood requirements all own plantations are FSC certified and 82% of fibre used is certified Global wood prices being driven by increasing demand Paper & paper products Bio energy/fuel 120 Seeking to expand in: South Africa Southern Africa South Africa US South Brazil Int Avg

43 Pulp Prices* 43 US$/ton $910/ton $769/ton * Source: Average monthly FOEX delivered European prices Roadbook February 2014

44 Low cost wood Eastern Cape Project ha of tree plantations by 2020 Supply ± 450k ton/annum Ownership with communities Sappi as Implementation Partner ha in Project Pipeline 690 ha planted to date 500 direct and 1500 indirect jobs / ha Grant funding. Supplemented by Sappi and IDC

45 Renewable energy 45 Selling electricity to Eskom from: Ngodwana Saiccor Access to biomass resources to improve energy self sufficiency

46 Improving operations & products 46 Aligning capacity with demand Closing highest cost lines Address future environmental costs Reduces cost by R250 million p.a. Lowest cost producer Simplified product range Value for money products Excellent, efficient service Niche market opportunities

47 Summary Sappi Southern Africa Investing in Specialized Cellulose Low cost producer Fast growing market Excellent customer relationships 47 Growing forestry assets Improving paper business Better use of timber Improving cost position Profitable with growth opportunities

48 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

49 Sustainability and the Paper Industry

50 Material Issues Employees Employee engagement in times of change Minimising the impact of closures Employment equity and BEE Safety letting all employees go home safely every day Communities Bulk of CSI in SA Education and literacy Fibre Sourced from sustainably managed plantations or forests Approximately 72% certified globally, balance from known and controlled sources

51 Material Issues Energy 51.5% derived from renewable fuel in 2013 Increasing energy self sufficiency Specific purchased energy consumption reduced by 20.3% since 2009

52 Material Issues Water Approximately 92% of water drawn is returned All effluent is treated to highest environmental standards Waste Waste to landfill reduced by 33.4% over 5 years

53 Group Overview Products Strategy Results Divisional Overviews North America Europe South Africa Sustainability Conclusions

54 Conclusion We believe in what we are doing because our strategy is working Traction on actions to-date More work must be done Totally committed to accelerating value creation for shareholders through improved profit, strategic positioning and debt reduction