Roadbook September 2015 FINAL - Sappi · September 2015 Group Head Investor Relations and...
Transcript of Roadbook September 2015 FINAL - Sappi · September 2015 Group Head Investor Relations and...
September 2015
Group Head Investor Relations and Sustainability
Graeme Wild
Sappi Limited
Roadbook
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 tostatements 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 trendsand 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 theyinvolve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results, performance orachievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and frompast 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 futureeconomic or social problems;
� the impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including related financing), any delays, unexpected costs orother problems experienced in connection with dispositions or with integrating acquisitions or implementing restructuring and other strategic initiatives andachieving 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 circumstancesor 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 fromperiod 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 therelevant period. These booklets are located in the ‘Investors | Financial information’-section of www.sappi.com.
Forward-looking statements and Regulation G
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
4
Sappi Limited
� #2 Global producer of coated woodfree paper (60% of sales)
Forecast: Capacity and demand down 1.5% through 2019*
Overview
� #1 Global producer of dissolving wood pulp (15% of sales)
Forecast: Demand up 6% and capacity up 3.3% through 2016**
* EMGE March 2015 ** RISI April 2015
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Sappi at a glance
Sappi Limited
2014 Sales = US$6 billion with 13,064 employees
Sappi Europe
51% 2014 sales
Graphic paper
Speciality paper
Sappi North America
25% 2014 sales
Graphic paper
Specialised cellulose
Release paper
Sappi Southern Africa
24% 2014 sales
Paper and paper packaging
Specialised cellulose
Forests
Sappi Trading
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Geographic diversificationOur global presence allows us take advantage of opportunities where markets are strong
Three paper and specialised cellulose mills
Six paper and specialised cellulose mills567,000ha of forests
Seven paper mills
13 sales offices on six continents
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Sales Ltd. Sales Analysis
* Data reflects results from FYTD 2015
50%
25%
25%
Sales by source* (US$)
EuropeNorth AmericaSouthern AfricaAsia and other
42%
23%
12%
23%
Sales by destination* (US$)
59%
5%
10%
7%
17%
1% 1%
Sales by product* (US$)
Coated paperUncoated paperSpeciality paperCommodity paperDissolving wood pulpPaper pulpOther
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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 2% to 4% pa. • Forecast* capacity down 2%
*Source: RISI
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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 2%
• 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% 23 15 158 - 60
DWP Price 1% - 2 82 - 10
Sales Volumes 1% 8 5 62 - 21
Variable Cost 1% 13 8 85 - 34
Fixed Cost 1% 8 5 46 - 19
Wood Price 1% 2 2 7 - 5
Paper Pulp Price US$10 5 2 17 - 10
ZAR/US$ 10c - - 76 -2 5
EUR/US$ 10c - 3 - 7 10
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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
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
13
Coated Woodfree demand leveling-off
* Source: RISI World Graphic Paper Report
Forecast*
14
Industry ConsolidationCapacity share of top five coated woodfree paper producers
33%
79%
60%
100%
27%
50%
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
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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
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
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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 pricing
0.50
1.00
1.50
2.00
2.50
3.00
3.50
US
$/k
g
Imported DP (CCF Group) VSF 1.5D (CCF Group) Cotton 328 (CCF Group) Cotlook A (Cotlook) PSF 1.4D (PCI Fibres)
21
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
� 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
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Focus areasAchieve cost advantages
� 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
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Focus areasRationalise and optimise declining businesses
� 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
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Focus areasGrow through moderate investments
� 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
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Focus areasGenerate cash to strengthen the balance sheet
� 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
� 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)
Q3 FY15
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Product contribution split - LTM
Specialised cellulose
43%Paper57%
EBITDA excluding special items*
Specialised cellulose
62%
Paper38%
Operating profit 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 Q3 2015 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
194
217
150
211
159
126
88
155
147
171
140
200
145
170
109
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 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 FY15
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.
351
65
20
513
350
503
221
62
41
94
112
305
0
100
200
300
400
500
600
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY32
US
$ m
illio
n
Cash Short-term SPH term debt SSA RCF Securitisation
33
Maturity ProfileFiscal years
Includes US$400m bond
US$350m bond US$221m bond
EUR450m bond
34
Capex Development
0
100
200
300
400
500
600
FY12 FY13 FY14 Estimate FY15
US
$ m
illio
n
Maintenance Efficiency
35
Financial ResultsFive-year review
US$ million 2014 2013 2012 2011 2010
Income statement
Sales 6,061 5.925 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) 34 33 27 67
Operating profit excluding special items 346 180 409 404 340
Special items – losses (gains) 32 161 (18) 318 (2)
Operating profit 314 19 427 86 342
Net finance costs 177 186 306 327 276
Profit (loss) before taxation 137 (167) 121 (241) 66
Taxation charge 2 15 28 9 18
Profit (loss) for the year 135 (182) 93 (250) 48
EBITDA excluding special items 658 528 778 821 753
Restated
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Financial ResultsFive-year review
US$ million 2014 2013 2012 2011 2010
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 3,545 3.620 4,165
Restated
37
Financial resultsFive-year review
US$ million 2014 2013 2012 2011 2010
Cash flow
Cash generated from operations 566 447 728 798 737
Decrease (increase) in working capital 34 (20) (102) (98) (5)
Finance costs paid (170) (171) (206) (266) (206)
Finance revenue received 8 7 11 10 12
Taxation paid (1) (17) (20) (38) (9)
Cash generated from operating activities 437 246 411 406 529
Net cash generated (utilised) 243 (247) 127 163 341
Cash effects of financing activities (36) (8) (103) (296) (256)
Capital expenditure (gross) 295 552 358 262 211
To maintain operations 148 116 177 213 173
To expand operations 147 436 181 49 38
Restated
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Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
� 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
Divisional overviewSappi Europe
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40
Divisional overviewSappi Europe
Coated woodfree
paper2 015
Uncoated woodfree
paper220
Coated mechanical
1 205
Speciality paper300
Sappi Europe saleable capacity (‘000tpa)
* 20 Producers * 11 Producers
European CWF and CM capacity shares**
** Source: RISI
41
0.60
0.70
0.80
0.90
1.00
1.10
1.20
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
08
Q1
20
09
Q2
20
09
Q3
20
09
Q4
20
09
Q1
20
10
Q2
20
10
Q3
201
0
Q4
201
0
Q1
20
11
Q2
20
11
Q3
201
1
Q4
201
1
Q1
20
12
Q2
20
12
Q3
201
2
Q4
201
2
Q1
20
13
Q2
20
13
Q3
20
13
Q4
20
13
Q1
20
14
Q2
20
14
Q3
20
14
Q4
20
14
Q1
20
15
Q2
20
15
Q1 2
008=
1
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
Western Europe
Coated Paper Deliveries & Prices
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)
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
44
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
� 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
Divisional overviewSappi North America
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Verso52%
Sappi30%
Catalyst6%
Appleton6%
WestLinn6%
46
Divisional overviewSappi North America
Coated woodfree
paper1 160
Dissolving wood pulp
330
Speciality paper
30
NBHK30
Sappi North America saleable capacity (‘000tpa) US Coated freesheet capacity shares*
* Source: RISI
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
48
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
08
Q1
20
09
Q2
20
09
Q3
20
09
Q4
20
09
Q1
20
10
Q2
20
10
Q3
201
0
Q4
201
0
Q1
20
11
Q2
20
11
Q3
201
1
Q4
201
1
Q1
20
12
Q2
20
12
Q3
201
2
Q4
201
2
Q1
20
13
Q2
20
13
Q3
20
13
Q4
20
13
Q1
20
14
Q2
20
14
Q3
20
14
Q4
20
14
Q1
20
15
Q2
20
15
Q1 2
008=
1
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
United States of America
Coated Paper Shipments & Prices
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
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
51
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
� 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)
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Divisional overviewSappi Southern Africa
53
Divisional overviewSappi Southern Africa
Forestry1 100
Dissolving wood pulp
1 010
Paper and paper
packaging950
Sappi Southern Africa saleable capacity (‘000tpa) Global dissolving wood pulp demand*
* Source: RISI
0
1
2
3
4
5
6
7
8
9
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Tons m
illio
n
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
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
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SummarySappi 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
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57
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
58
Sustainability3Ps - Inputs
59
Sustainability3Ps - Outputs
60
Agenda
� Overview� Products
� Strategy
� Results
� Divisions
� Sappi Europe
� Sappi North America
� Sappi Southern Africa
� Sustainability
� Conclusions
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
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Thank you