Roadbook Feb 2016 - Sappi · Sales Ltd. Sales Analysis * Data reflects results from FY 2015 49% 26%...
Transcript of Roadbook Feb 2016 - Sappi · Sales Ltd. Sales Analysis * Data reflects results from FY 2015 49% 26%...
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February 2016
Sappi Limited
Roadbook
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Forward-looking statementsCertain 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.
Forward-looking statements and Regulation G
Regulation G disclosureCertain 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.
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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Sappi Limited
� #2 Global producer of coated woodfree paper (59% of sales)
Forecast: Capacity and demand down 1-2% through 2019*
Overview
� #1 Global producer of dissolving wood pulp (17% of sales)
Forecast: Demand up 5% and capacity up 6% through 2019**
* EMGE September 2015 ** Hawkins Wright September 2015
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Sappi at a glance
Sappi Limited
2015 Sales = US$5.39 billion with @13k employees
Sappi Europe
49% 2015 sales
Graphic paper
Speciality paper
Sappi North America
26% 2015 sales
Graphic paper
Specialised cellulose
Release paper
Sappi Southern Africa
25% 2015 sales
Paper and paper packaging
Specialised cellulose
Forests
Sappi Trading
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Geographic diversificationOur global presence allows us take advantage of opportunities where markets are strong
Three paper and specialised cellulose mills
Four paper and specialised cellulose mills567,000ha of forests
Seven paper mills
13 sales offices on six continents
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Sales Ltd. Sales Analysis
* Data reflects results from FY 2015
49%
26%
25%
Sales by source* (US$)
EuropeNorth AmericaSouthern AfricaAsia and other
41%
24%
11%
24%
Sales by destination* (US$)
59%17%
10%
7%
5%
1% 1%
Coated Paper
Dissolving Pulp
Speciality Paper
Commodity Paper
Uncoated Paper
Paper Pulp
Other
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Sappi Ltd. Sales Analysis
59%17%
10%
7%5%
1% 1%
Coated Paper Dissolving Pulp
Speciality Paper Commodity Paper
Uncoated Paper Paper Pulp
Other
FYTD 2015 Coated Paper
• #2 Global Producer of Coated Paper• EBITDA Margins ~7%• Forecast* demand down 1% to 2% pa • Forecast* capacity down 1% to 2% pa
*Source: EMGE
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Sappi Ltd. Sales Analysis
59%17%
10%
7%5%
1% 1%
Coated Paper Dissolving Pulp
Speciality Paper Commodity Paper
Uncoated Paper Paper Pulp
Other
FYTD 2015
• #1 Global Producer of Dissolving Pulp
• EBITDA Margins ~30%• Demand forecast* up 5% pa. • Capacity forecast* up 6%
• Speciality Paper• EBITDA Margins ~12%• Demand up 4%
• Commodity Paper • EBITDA Margins ~17%• Demand up 6%
*Source: Hawkins Wright
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Major Sensitivities
∆ EU NA SA Translation Group
€m US$m ZARm US$m US$m
Net Selling Price 1% 24 14 163 - 53
DWP Price 1% - 2 93 - 9
Sales Volumes 1% 8 6 69 - 19
Variable Cost 1% 15 7 83 - 29
Fixed Cost 1% 6 4 39 - 14
Wood Price 1% 2 2 34 - 8
Paper Pulp Price US$10 6 2 8 - 9
ZAR/US$ 10c - - 75 -2 4
EUR/US$ 10c - 3 - 21 24
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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Printing and writing paper grade structure
Coated fine paper (CWF)
Uncoated woodfree (UWF)
Coated mechanical (CGW/LWC)
Supercalendered (SC-A)
Supercalendered (SC-B)
Machine finished specialities (MFS)
Improved newsprint
Newsprint
Fib
re q
ua
lity
100% Chemical pulp fiber furnish
Increasing mechanical/recovered
fiber content
Image quality
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0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
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
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Coated Woodfree Demand
* Source: RISI World Graphic Paper Report
Forecast*
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Industry ConsolidationCapacity share of top five coated woodfree paper producers
33%
78%
60%
100%
27%
51%
25%
41%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 2015 1990 2015 1990 2015 1990 2015
Europe North America Rest of world Global
Source: EMGE
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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
Cellulose45%
Hemi-cellulose
30%
Lignin23%
Resins1%
Inorganics1%
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Dissolving Wood Pulp (DWP)End uses
VSF60%
Lyocell3%
Acetate12%
MCC2%
Ethers/CMC9%
Cellophane1%
Filament5%
Nitrocellulose3%
Others4%
Tyre cord1%
SpongesMoulding powderPaper, etc
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Sappi16%
Cosmo2%
PT Toba2%
Bahia6%
Neucell3%
Buckeye3%
Rayonier6%
CLP China11%
Borregaard2%
Tembec incl Tartas4%
Birla & Lenzing Integrated
14%
Others15% Fortress
3%Bamboo China
3%
Hunan Juntai3% Sun Paper
2%
Other China DWP4%
Sodra2%
Stora1%
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Dissolving Wood Pulp (DWP)Competitors
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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$32 trillion/year by 2030, accounting for 43% of total global consumption
39%
70%
94%
112%
26%
49%
70%85%
0%11%
20%27% 32%
-5% -10% -14% -18%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
2010 2020 2030 2040 2050
Textile fibres Food
65.8
72.5
86.8
100.7
113.3
123.5
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2005 2010 2015 2020 2025 2030
Textile fibres consumptionMillion metric tons
Source: Lenzing
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Cellulose Gap TheoryDissolving wood pulp share of the textiles market is expected to grow further
� Production of cotton is forecast to remain stagnant or shrink
� Growth in total fibre consumption will be covered by man-made fibres
� However, certain moisture management properties of cellulose fibres cannot be substituted by oil-based synthetic fibres, enhancing opportunity for cellulosics
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Textile Fibre Prices
800
1 200
1 600
2 000
2 400
2 800
3 200
Ja
n-1
4
Fe
b-1
4
Ma
r-14
Apr-
14
Ma
y-1
4
Ju
n-1
4
Ju
l-1
4
Aug
-14
Sep
-14
Oct-
14
No
v-1
4
De
c-1
4
Ja
n-1
5
Fe
b-1
5
Ma
r-15
Apr-
15
Ma
y-1
5
Ju
n-1
5
Ju
l-1
5
Aug
-15
Sep
-15
Oct-
15
No
v-1
5
De
c-1
5
Ja
n-1
6
VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" IndexUS$/t
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Global Cost CurveC
om
p 1
Co
mp
2
Co
mp
3
SA
PP
I
SA
PP
I
Co
mp
4
Co
mp
5
Co
mp
6
Co
mp
7
Co
mp
8
Co
mp
9
Co
mp
10
Co
mp
11
Co
mp
12
Co
mp
13
Co
mp
14
Co
mp
15
SA
PP
I
Co
mp
16
Co
mp
17
Co
mp
18
Co
mp
19
Co
mp
20
Co
mp
21
Co
mp
22
Co
mp
23
Co
mp
24
Co
mp
25
Co
mp
26
Co
mp
27
Co
mp
28
Co
mp
29
Co
mp
30
Co
mp
31
Co
mp
32
Co
mp
33
Co
mp
34
Co
mp
35
Co
mp
36
Co
mp
37
Delivered Cash Cost USD/ADMT
AverageCost
Source: RISI
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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Strategic focus
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� We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages
� Saiccor and Tugela turbines – FY2016/17
� Ngodwana boiler upgrade for future debottlecking – Q2 FY2016
� Group procurement initiatives
� Ongoing continuous improvement across all mills
� Cloquet Mill’s kraft campaigns
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Focus areasAchieve cost advantages
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� 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 in 2015
� Husum volumes transferred to our assets in H2 2015
� Growth in niche speciality grades on our CWF machines in US and EU ongoing
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Focus areasRationalise and optimise declining businesses
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� We will make smaller investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers
� Additional packaging at Ngodwana and Tugela
� Nano-cellulose pilot plant in the Netherlands
� Electricity opportunities in South Africa
� Debottlenecking of Saiccor and Ngodwana DWP
� Securing additional HW timber supply in SA
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Focus areasGrow through moderate investments
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� Sale of both Enstra and Cape Kraft Mills completed
� Refinancing and debt reduction will lead to lower finance cost
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Focus areasGenerate cash to strengthen the balance sheet
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� 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
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Focus areasAccelerate growth in adjacent businesses from a strong base
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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Highlights
� Profit for the period US$75m (Q1 FY15 US$24m)
� EPS ex-special items 13 US cents (Q1 FY15 5 US cents)
� EBITDA ex-special items US$175m (Q1 FY15 US$145m)
� Net debt US$1,734m, down US$306m year-on-year
Q1 FY16
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EBITDA and operating profit
147
145
175
60
74
112
0
20
40
60
80
100
120
140
160
180
200
Q1 FY14 Q1 FY15 Q1 FY16
US
$ m
illio
n
EBITDA
Operating profit ex-items
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY16 results booklet (available on www.sappi.com) for a definition of special items.
Excluding special items*
Q1 FY14
Q1 FY15
Q1 FY16
Net Debt/ LTM EBITDA
4.6 3.1 2.6
Interest Cover 3.0 3.8 5.1
EBITDA % 9.8 10.5 13.6
ROCE % 7.0 9.7 16.2
Key ratios: (%)
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Highlights
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Highlights
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Product contribution split - LTM
Specialised cellulose
44%
Paper56%
EBITDA excluding special items*
Specialised cellulose
60%
Paper40%
Operating profit excluding special items
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY16 results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.
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Net debt/EBITDA development
159
126
88
155
147
171
140
200
145
170
109
201
175
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
50
100
150
200
250
Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16
US
$ m
illio
n
EBITDA* Net debt/LTM EBITDA**
* EBITDA shown is excluding special items** The covenant net debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above
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383
64
511
494
221
49
33
75
339
0
100
200
300
400
500
600
2016 2017 2018 2019 2020 2021 2022 2032
US
$ m
illio
n
Cash Short-term SPH term debt SSA RCF Securitisation
36
Maturity profileFiscal years
Includes US$400m bond
US$350m bond
US$221m bond
EUR450m bond
350
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37
Capex development
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 Estimate
US
$ m
illio
n
Maintenance Efficiency
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38
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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� Leading European coated paper producer� FY15 Net sales: US$2.6b
� FY15 EBITDA: US$209m
� 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
Divisional overviewSappi Europe
39
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40
Divisional overviewSappi Europe
Coated woodfree
paper1 990
Uncoated woodfree
paper245
Coated mechanical
paper1 060
Speciality paper245
Sappi Europe saleable capacity (‘000tpa)
* 18 Producers * 10 Producers
European CWF and CM capacity shares**
** Source: RISI
Sappi
UPM
Lecta
Stora Enso
Burgo
Others*
0%
20%
40%
60%
80%
100%
CWF
UPM
Sappi
Burgo
Stora Enso
Others*
0%
20%
40%
60%
80%
100%
CM
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41
Western Europe shipments including export.Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008
Western Europe
Coated paper deliveries and prices
0.6
0.7
0.8
0.9
1.0
1.1
1.2
Q1 0
8
Q2
Q3
Q4
Q1 0
9
Q2
Q3
Q4
Q1 1
0
Q2
Q3
Q4
Q1 1
1
Q2
Q3
Q4
Q1 1
2
Q2
Q3
Q4
Q1 1
3
Q2
Q3
Q4
Q1 1
4
Q2
Q3
Q4
Q1 1
5
Q2
Q3
Q4
Q1
20
08
= 1
CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices
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42
ProjectsSappi 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)
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SummarySappi 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
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44
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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� Leading North American coated freesheet paper producer� FY15 Net sales: US$1.4b
� FY15 EBITDA: US$102m
� 1.1m tons per annum of coated paper capacity
� 700,000 tons per annum of integrated paper pulp capacity
Divisional overviewSappi North America
45
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Verso51%
Sappi32%
Catalyst2%
Appleton8%
WestLinn7%
46
Divisional overviewSappi North America
Coated woodfree
paper1 160
Dissolving wood pulp
330
Speciality paper
40
NBHK30
Sappi North America saleable capacity (‘000tpa) US Coated freesheet capacity shares*
* Source: RISI
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ProjectsSappi North America
47
Cloquet Mill� Pulp mill dissolving wood pulp conversion
Westbrook Mill� Coater modernisation
Somerset Mill� Natural gas conversion
Cloquet Mill� Lime kiln shell rebuild
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48
* US industry shipments and total US consumptionSource: AF&PA and RISI indexed to calendar Q1 FY08
United States
Coated paper prices and shipments
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
Q1 F
Y08
Q2
Q3
Q4
Q1 F
Y09
Q2
Q3
Q4
Q1 F
Y10
Q2
Q3
Q4
Q1 F
Y11
Q2
Q3
Q4
Q1 F
Y12
Q2
Q3
Q4
Q1 F
Y13
Q2
Q3
Q4
Q1 F
Y14
Q2
Q3
Q4
Q1 F
Y15
Q2
Q3
Q4
Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices
Q1 F
Y08 =
1
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49
Sappi’s release paper businessBy end-user segment
Sappi Other
FashionAutomotive and
commercial upholstery
Decorative laminates
Engineering films and other
Sappi Sappi Sappi
Sappi
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50
SummarySappi 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
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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� Leading South African graphic and packaging paper producer� FY15 Net sales: US$1.3b
� FY15 EBITDA: US$313m
� 1m tons per annum of dissolving wood pulp (DWP) capacity
� 690,000 tons per annum of graphic and packaging paper production
� 750,000 tons per annum of pulp production (integrated)
52
Divisional overviewSappi Southern Africa
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0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
53
Divisional overviewSappi Southern Africa
Forestry1 100
Dissolving wood pulp
1 010
Paper and paper
packaging675
Sappi Southern Africa saleable capacity (‘000tpa) Global Dissolving Wood Pulp Demand (‘000k M Tons)*
* Source: Hawkins Wright
Forecast
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54
ProjectsSappi 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
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Our DWP Competitive AdvantageSappi 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
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56
SummarySappi South 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
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57
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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58
Sustainability
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59
Sustainability
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60
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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61
Conclusions
� We are making real progress
� Reduction in capital spending and refinanced debt
� Costs remain a chief concern
� Cash generative paper business will fund growth in:
� Cellulose-based solutions
� Speciality packaging papers
� Complementary products
� Committed to accelerating value for shareholders through:� Debt reduction
� Improved profit
� Strategic positioning
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62
Thank you