UBS Global Paper & Forest Products Conference September 2015 Graeme Wild Group Head Investor Relations and Sustainability Sappi Limited
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 www.sappi.com. 2
Agenda Overview Products Strategy Divisions Sappi Europe Sappi North America Sappi Southern Africa Conclusions 3
Sappi Limited Overview #2 Global producer of coated paper (59% of sales) Forecast: Capacity and demand down 1.5% through 2019* #1 Global producer of dissolving wood pulp (17% of sales) Forecast: Demand up 6% and capacity up 3.3% through 2016** 4 * EMGE March 2015 ** RISI April 2015
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 5 * Data reflects results from FYTD 2015
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% 6 *Source: RISI
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 7 *Source: Hawkins Wright
Product contribution split - LTM EBITDA excluding special items* Operating profit excluding special items Specialised cellulose 43% Paper 57% Specialised cellulose 62% Paper 38% 8 * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our Q3 2015 results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.
Agenda Overview Products Strategy Divisions Sappi Europe Sappi North America Sappi Southern Africa Conclusions 9
Coated Woodfree demand leveling-off 35 000 30 000 Forecast* 25 000 20 000 15 000 10 000 5 000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 North America Europe Far East Latin America Africa/Middle East Oceania 10 * Source: RISI World Graphic Paper Report
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% 11
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% 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 0% 70% 94% 70% 112% 85% 49% 39% 26% 27% 32% 20% 11% -5% -10% -14% -18% 2010 2020 2030 2040 2050 Textile fibres consumption Million metric tons 65.8 72.5 86.8 100.7 Textile fibres 113.3 Food 2005 2010 2015 2020 2025 2030 123.5 12
Agenda Overview Products Strategy Divisions Sappi Europe Sappi North America Sappi Southern Africa Conclusions 13
14 Strategic focus
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 H2 2015 15
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 16
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 17
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 18
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 19
Agenda Overview Products Strategy Divisions Sappi Europe Sappi North America Sappi Southern Africa Conclusions 20
Divisional overview Sappi Europe Leading European coated paper producer FY14 Net sales: US$3.1b FY14 EBITDA: US$249m 3.5m tons per annum of paper capacity 1.2m tons per annum of pulp capacity (integrated) Well-invested assets in the heart of the European market 21
Sappi Europe Demand development** 100 80 EBITDA* EBITDA Margin* 12% 10% 0% -1% -2% 2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015 US$ million 60 40 8% 6% 4% -3% -4% -5% -6% 20 0 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 2% 0% -7% -8% -9% CWF CM Forecast Alfeld Speciality Paper conversion progressing well Gratkorn PM rebuild Kirkniemi power plant rebuild completed Nano-cellulose Pilot Plant Netherlands 2016 22 * EBITDA and EBITDA margin shown excluding special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items. ** Source: RISI World Graphic Paper Forecast July 2015 and Sappi estimates
Divisional overview Sappi North America Leading North American coated freesheet paper producer FY14 Net sales: US$1.5b FY14 EBITDA: US$92m 1.1m tons per annum of coated paper capacity 700,000 tons per annum of integrated paper pulp capacity 23
Sappi North America Demand development** 50 40 EBITDA* EBITDA Margin* 14% 12% 2% 1% 2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015 10% 0% US$ million 30 20 8% 6% -1% -2% 10 4% 2% -3% -4% CWF 0 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 0% -5% Forecast Cloquet DWP conversion Somerset Mill conversion to natural gas Westbrook coater modernization Cloquet lime-kiln shell rebuild Industry consolidation in coated woodfree papers 24 * EBITDA and EBITDA margin shown excluding special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items. ** Source: RISI World Graphic Paper Forecast July 2015 and Sappi estimates
Divisional overview Sappi Southern Africa Leading South African graphic and packaging paper producer FY14 Net sales: US$1.4b FY14 EBITDA: US$312m 1m tons per annum of dissolving wood pulp (DWP) capacity 950,000 tons per annum of graphic and packaging paper production 750,000 tons per annum of pulp production (integrated) 25
Sappi Southern Africa Staple grade dissolving pulp (US$/ton)** US$ million 100 80 60 40 20 EBITDA* EBITDA Margin* 30% 25% 20% 15% 10% 5% 850 840 830 820 810 800 790 780 0 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 0% 770 04 Jan 2015 16 Jan 2015 30 Jan 2015 13 Feb 2015 06 Mar 2015 20 Mar 2015 03 Apr 2015 17 Apr 2015 30 Apr 2015 15 May 2015 29 May 2015 12 Jun 2015 26 Jun 2015 10 Jul 2015 24 Jul 2015 Ngodwana pulp mill conversion to DWP Tugela and Ngodwana pulp mill upgrades Sale of Cape kraft Mill and Enstra recycled fibre packaging business On-going Land Sales 26 * EBITDA and EBITDA margin shown excluding special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items. ** Source: CCF
Agenda Overview Products Strategy Divisions Sappi Europe Sappi North America Sappi Southern Africa Conclusions 27
Conclusions We are making real progress Reduction in capital spending and refinanced debt Costs remain a chief priority 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 28
29 Thank you