Investor Presentation December 2013

Transcription

1 Investor Presentation December 2013

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 Agenda: Overview Strategy Results Forward

4 Who we are & What we do 4 #2 Global Producer of Coated Woodfree Paper -@ 65% of sales Forecast -demand down 1%, capacity down 2.6% through 2017 #1 Global Producer of Dissolving Wood Pulp -@ 15% of sales Forecast demand up 10%, capacity up 10% through 2014 ** Investor Presentation December 2013 *EMGE Sept 2013 **RISI April 2013

5 Global Demand Forecast for CWF Paper metric tons While demand falls in developed economies growth is forecast to continue in emerging markets. Investor Presentation December 2013 Source: EMGE Sept 2013

6 Paper Industry Conditions 6 Procurement of inputs Raw material cost pressure pulp and energy in particular Supply Globally overcapacity in all graphic grades Operating rate important to drive down costs Demand Macro-economic downturn Graphic paper competing with digital advertising Results Hyper-competitive market Low margins cash breakeven for many Responses Producers: Diversify product range away from graphic paper & capacity rationalization, repurposing of assets Merchants: Consolidation Publishers: Develop on-line and mobile apps, reduction in titles, pages, changes (up or down) in quality

7 Dissolving Wood Pulp 7 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 reformed for a host of applications

8 Dissolving Wood Pulp Segments 8

9 Dissolving Wood Pulp Competitors 9 Global DP Capacity 2013 (e) = 8m tons. Sappi Share of Capacity = 16%

10 Sappi s DWP Market Share/Forecast Expansion projects will consolidate Sappi s position as global leader 25% 20% '000 Tons % % 10% % Total Sappi Market Share estimates based on capacities and anticipated start up ramps of Cloquet and Ngodwana 0%

11 Why Dissolving Pulp? 11 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

12 Cellulose Gap Theory Dissolving Wood Pulp share of the textiles market is expected to grow further 12

13 Cloquet Conversion text-book start-up 13 First Break bulk vessel loading Star Gran Investor Presentation December 2013

14 Ngodwana Conversion DWP production 14 Fiber line #3 -DWP Dissolving wood pulp bales Investor Presentation December 2013

15 We are not alone 15 +/-3.5 Million tons of DWP Capacity Announcements for /-1.7 Million tons of VSF Capacity Announcements for Oji Paper Buckeye Svetlogorsk Phoenix P&P Jilin Tianzhu Altri Luzhou Yinge Nippon Paper Tembec Domsjo Fabrikker Sappi Shandong Yamei Jiangsu Xiangsheng Chengdu Liya Hunan Tuopo Anqing Huatai Schweighofer Stora Enso Sodra Double A Rayonier Lenzing Sun Paper AV Terrace Bay Fortress Specialty Jari Birla Paper Excellence TangShan Sanyou Sateri Fujian Jiujang Hengsheng Jiangxi Longda Lenzing Birla Recent spate of announcements regarding closures as well as delays and cancellations of DWP conversions

16 Chinese MOFCOM tariffs 16 Investigation begun Feb 13 prelim duties announced November 3 Countries: Canada 0% - 13%, all others 50.9% US 18.7% %, all others 29.8% Brazil 6.8%, all others 49.4%

17 Looking forward 17

18 Global Leadership Competitive Response Cost Base All 3 Sappi mills in lowest quartile Long Term Supply Contracts Target minimum 75% Wood Source Saiccor and Ngodwana integrated Cloquet well situated Proven Technical Competence Saiccor over 50 years supply into viscose market World class R&D facilities Research capability across value chain Supply & Technology Flexibility 3 mills on two continents Saiccor largest and modern expansion Ngodwana new Cloquet newest in USA Both Sulphite and PHK capability

19 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%

20 Agenda: Overview Strategy Results Forward

21 Strategic Focus 3 themes: 21 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

22 Focus Areas 22 Focused, low cost paper businesses North America paper business maintains firm market share Europe industry dynamics won t improve without intervention Significantly reduce graphic paper exposure with lower costs relevant investment announced today Increased speciality paper business Similar business to US More to be done South Africa cost pressure, and weak local markets paper business starting to perform

23 Focus Areas 23 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 evolved as expected in this transitional year Potential Usutu sale would further aid our liquidity position Covenants Renegotiated Further cash generation opportunities being pursued Managing balance

24 Looking forward 24 Within 2 years Sappi will be a well balanced and robust business, generating good returns and with 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 Maximizing value from our forestry operations in SA An emphasis on cash generation and debt reduction

25 Agenda: Overview Strategy Results Forward

26 EBITDA & Operating Profit ex-items* 26 USD million *Refer to page 17 in our Q results presentation booklet (available on for a definition of special items. ** Q included an extra accounting week

27 Net Debt Development USD million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Targeted Net Debt Level Investor Presentation December 2013

28 Maturity Profile (Fiscal) Sept Includes 2017 $400m Bond Includes m Bond 2019 $300m Bond 2021 $350m Bond 2032 $221m Bond Investor Presentation December 2013

29 Agenda: Overview Strategy Results Forward

30 FY 2013 An important, transitional year 30 Complete DWP expansion projects on time and on cost S. African Paper and European business performance has been unacceptable year-to-date Necessitates further action Tough market conditions expected to continue Maintain net debt levels in tight range despite DWP investments

31 FY 2014 Delivery 31 Full contribution of DWP expansion projects and EU speciality expansion Strong bottom-line earnings growth Significant reduction in capital expenditure leads to positive & higher free cash flows Gearing to be significantly lower

32 Conclusion We have a sound strategy We believe in what we are doing Traction on actions to-date Totally committed to accelerating value creation for shareholders through improved profit, strategic positioning and debt reduction 32

33 Thank You

34 Supplementary Information

35 W. Europe Coated Paper Deliveries & Prices Q = Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 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 Investor Presentation December 2013

36 Sappi Fine Paper Europe 36 Q4 12 Q4 13 F 2012 F 2013 Tons Sold ('000) ,507 3,367 Sales ($'m) ,350 3,155 Price / Ton ($) Price / Ton ( ) Cost / Ton* ( ) Operating profit ex items** ($'m) 45 (12) 133 (9) * Sales less operating profit excluding special items divided by tons sold. ** Operating profit excluding special items. Refer to our Q Results booklet (available on for a reconciliation to reported operating profit and for a definition of special items. Investor Presentation December 2013

37 US Coated Paper Prices and Shipments Q = Q1 Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices Q2 Q3 US Industry Shipments and total US consumption Source AF&PA and RISI indexed to Q Investor Presentation December 2013

38 Sappi Fine Paper North America 38 Q4 12 Q4 13 F 2012 F 2013 Tons Sold ('000) ,400 1,298 Sales ($'m) ,438 1,377 Price / Ton ($) 1,022 1,093 1,027 1,061 Cost / Ton* ($) 908 1, ,006 Operating Profit ex items** ($'m) * Sales less operating profit excluding special items divided by tons sold. ** Operating profit excluding special items. Refer to our Q Results booklet (available on for a reconciliation to reported operating profit and for a definition of special items. Investor Presentation December 2013

39 Pulp Prices* 39 US$/ton 1,100 1,000 NBSK (US$/ton) BHKP (US$/ton) 900 $880/ton 800 $770/ton Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 * Source: Average monthly FOEX delivered European prices Investor Presentation December 2013

40 Sappi Southern Africa 40 Q4 12 Q4 13 F 2012 F 2013 Tons Sold ('000) ,676 1,619 Sales ($'m) ,475 1,316 Price / Ton ($) Price / Ton (ZAR) 7,046 8,115 7,087 7,542 Cost / Ton* (ZAR) 6,402 6,930 6,232 6,837 Operating Profit ex items** ($'m) * Sales less operating profit excluding special items divided by tons sold. ** Operating profit excluding special items. Refer to our Q Results booklet (available on for a reconciliation to reported operating profit and for a definition of special items. Investor Presentation December 2013

41 Cash Flow 41 Cash generated from operations Q4 12 Q4 13 F 2012 F Movement in working capital (102) (20) - Net finance costs paid (38) (20) (195) (164) - Taxation paid (8) (2) (20) (17) Cash generated from operating activities Cash utilised in investing activities (48) (96) (284) (493) - Capital expenditure (112) (103) (358) (552) - Proceeds on disposal of non-current assets Other movements Net Cash (utilized) generated (247) Investor Presentation December 2013