Transcript
Page 1: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

07 August 2015

Chief Executive Officer

Steve Binnie

Sappi Limited

3Q 2015 financial results

Page 2: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

2

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 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 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 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 disclosureCertain 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

Page 3: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

Summary

3

Page 4: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

4

Highlights

EPS excluding special items 2 US cents(3Q 2014 2 US cents)

Profit for the period US$4m(3Q 2014 US$17m)

EBITDA excluding special items US$109m(3Q 2014 US$140m)

Net debt US$1,917m(3Q 2014 US$2,286)

3Q 2015

Page 5: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

5

EBITDA and operating profit15

9

126

88

155

147

171

140

200

145

170

109

70

38

5

67

60

95

67

124

74

104

43

0

50

100

150

200

250

1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015

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 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.

Excluding special items*

Page 6: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

0

20

40

60

80

100

120

140

160

180

140 (16) 33 (25) (13) 4 (14) 109

3Q 2014 EBITDA Sales volume Price and mix Variable anddelivery costs

Fixed costs Other Exchange rate 3Q 2015 EBITDA

6

EBITDA*

* 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.

Sales revenue

All variances were calculated excluding Sappi Forests EBITDA excludes special items 'Exchange rate' reflects the impact of changes in the average rates of translation of

foreign currency results

3Q 2014 vs 3Q 2015

Page 7: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

7

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 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.

Page 8: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

8

Net debt/EBITDA development19

4

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

1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015

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

Page 9: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

351

65

20

513

350

503

221

62

41

94 11

2

305

0

100

200

300

400

500

600

2015 2016 2017 2018 2019 2020 2021 2022 2032

US

$ m

illio

n

Cash Short-term SPH term debt SSA RCF Securitisation

9

Maturity profileFiscal years

Includes US$400m bond

US$350m bond US$221m bond

EUR450m bond

Page 10: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

10

Capex development

0

100

200

300

400

500

600

2012 2013 2014 2015 Estimate

US

$ m

illio

n

Maintenance Efficiency

Page 11: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

11

Divisional overviews

Page 12: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

12

Global paper market trends

Supply and demand Strong Dollar causes shifts in trade flows CWF apparent consumption weak in the US in 3Q

Costs and prices CWF sales prices under pressure in US, moving upward in Europe Softwood pulp prices stable, hardwood prices increasing Wood prices yet to normalise in US

Strategy Implement price increases when/where market allows Reducing fixed and variable costs Reduce capacity in line with demand declines

Page 13: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

13

Global specialised cellulose market trends

Supply and demand Deceleration of capacity expansion Some capacity has switched back to pre-conversion products Underlying demand trends still moving up

Costs and prices Commodity grade DWP prices still low Recent oil price declines may impact textile prices Input costs declining for producers with non-US$ cost base

Strategy Manage capacity Continue working with customers supporting common growth Investigate adjacent end-uses

Page 14: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

14

Sappi Europe

0%

2%

4%

6%

8%

10%

12%

0

20

40

60

80

100

1Q2013

2Q2013

3Q2013

4Q2013

1Q2014

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

3Q2015

US

$ m

illio

n

EBITDA* EBITDA Margin*

* 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

Graphic paper volumes down 5% from last quarter, stable versus last year; overall up 1% due to speciality sales tonnage

Gratkorn Mill boiler upgrade once-off impact of EUR10m during the quarter Average prices realised flat from last quarter, up 3% from last year due to increased

exports Speciality business continues to grow – volumes increased versus both periods; pursing

further growth opportunities at our Maastricht and Ehingen Mills

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015

CWF CM Forecast

Demand development**

Page 15: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

15

Sappi North America

0%

2%

4%

6%

8%

10%

12%

14%

0

10

20

30

40

50

1Q2013

2Q2013

3Q2013

4Q2013

1Q2014

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

3Q2015

US

$ m

illio

n

EBITDA* EBITDA Margin*

* 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

Graphic paper markets negatively impacted from strong US Dollar – surge in imports from Asia and weaker export markets

DWP sales volumes lower as we maximised own-make fibre production at Cloquet Mill Release business affected by weaker sales to China and weaker Euro negatively

impacted pricing for sales to Europe Lower variable costs – lower chemical and energy prices more than offset higher wood

costs

Demand development**

-5%

-4%

-3%

-2%

-1%

0%

1%

2%2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015

CWF

Forecast

Page 16: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

16

Sappi Southern Africa

0%

5%

10%

15%

20%

25%

30%

0

20

40

60

80

100

1Q2013

2Q2013

3Q2013

4Q2013

1Q2014

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

3Q2015

US

$ m

illio

n

EBITDA* EBITDA Margin*

* 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

Higher volumes and prices compared to both prior quarter and year-on-year Operating profit impact of ZAR204m from planned shuts at Saiccor and Ngodwana Mills DWP pricing supported by weaker Rand/Dollar exchange rate as well as higher US$

prices in China Post quarter end, sold Enstra Mill’s recycled packaging business and Cape Kraft Mill; in

line with strategic focus on virgin fibre packaging paper grades

Staple grade dissolving pulp (US$/ton)**

770

780

790

800

810

820

830

840

850

04 J

an 2

015

16 J

an 2

015

30 J

an 2

015

13 F

eb 2

015

06 M

ar 2

015

20 M

ar 2

015

03 A

pr 2

015

17 A

pr 2

015

30 A

pr 2

015

15 M

ay 2

015

29 M

ay 2

015

12 J

un 2

015

26 J

un 2

015

10 J

ul 2

015

24 J

ul 2

015

Page 17: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

17

Strategic focus

Page 18: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

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

18

Focus areasAchieve cost advantages

Page 19: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

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 2H 2015

19

Focus areasRationalise and optimise declining businesses

Page 20: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

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 Nano-cellulose pilot plant in The

Netherlands

20

Focus areasGrow through moderate investments

Page 21: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

Continue to pursue the sale of Twello Sale of Enstra and Cape Kraft Mills

announced Refinancing and debt reduction has lead

to lower finance cost

21

Focus areasGenerate cash to strengthen the balance sheet

Page 22: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

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

22

Focus areasAccelerate growth in adjacent businesses from a strong base

Page 23: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

Outlook

23

Page 24: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

24

Outlook

Graphic paper markets remain difficult with currency movements impacting trade flows and input costs

Dissolving wood pulp prices in China have risen over the past four months, and a weaker Rand will further support the profitability of this business in South Africa

Capital expenditure in the last quarter is expected to be approximately US$80m (US$245m for the full year)

We expect a further reduction in net debt levels during the fourth quarter; any proceeds received from the sale of Cape Kraft and EnstraMills and/or the Twello forestry assets before year-end would accelerate the decline in net debt

EPS excluding special items for the full year are expected to be substantially better than that of the prior year, mainly as a result of lower interest costs

3Q 2015

Page 25: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

Questions and answers

25

Page 26: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

Supplementary information

26

Page 27: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

27

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1Q

200

8

2Q

200

8

3Q

200

8

4Q

200

8

1Q

200

9

2Q

200

9

3Q

200

9

4Q

200

9

1Q

201

0

2Q

201

0

3Q 2

010

4Q 2

010

1Q

201

1

2Q

201

1

3Q 2

011

4Q 2

011

1Q

201

2

2Q

201

2

3Q 2

012

4Q 2

012

1Q

201

3

2Q

201

3

3Q

201

3

4Q

201

3

1Q

201

4

2Q

201

4

3Q

201

4

4Q

201

4

1Q

201

5

2Q

201

5

1Q 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 1Q 2008

Western Europe

Coated paper deliveries and prices

Page 28: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

28

Sappi Europe

3Q 2015 3Q 2014 YTD 2015 YTD 2014Tons sold (‘000) 792 783 2,395 2,492Sales (EURm) 567 543 1,704 1,727

Price/Ton (EUR) 716 693 711 693Cost/Ton* (EUR) 710 678 694 681

Operating profit excluding special items** (EURm) 5 12 41 29

* Sales less operating profit excluding special items divided by tons sold.** Refer to the supplementary information in this presentation for a reconciliation to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.

Page 29: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

29

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1Q

200

8

2Q

200

8

3Q

200

8

4Q

200

8

1Q

200

9

2Q

200

9

3Q

200

9

4Q

200

9

1Q

201

0

2Q

201

0

3Q 2

010

4Q 2

010

1Q

201

1

2Q

201

1

3Q 2

011

4Q 2

011

1Q

201

2

2Q

201

2

3Q 2

012

4Q 2

012

1Q

201

3

2Q

201

3

3Q

201

3

4Q

201

3

1Q

201

4

2Q

201

4

3Q

201

4

4Q

201

4

1Q

201

5

2Q

201

5

1Q 2

008=

1

Domestic CFS shipments Total US CFS consumption CFS #3 60lb rolls prices

* US industry shipments and total US consumptionSource: AF&PA and RISI indexed to calendar 1Q 2008

United States

Coated paper prices and shipments

Page 30: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

30

Sappi North America

3Q 2015 3Q 2014 YTD 2015 YTD 2014Tons sold (‘000) 294 362 948 1,079Sales (US$m) 313 380 1,008 1,127

Price/Ton (US$) 1,065 1,050 1,063 1,044Cost/Ton* (US$) 1,088 1,075 1,068 1,051

Operating profit excluding special items** (US$m) (7) (9) (4) (7)

* Sales less operating profit excluding special items divided by tons sold.** Refer to the supplementary information in this presentation for a reconciliation to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.

Page 31: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

31

* Source: Average weekly FOEX delivered European prices

Pulp prices*

400

500

600

700

800

900

1,000

1,100

Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

US

$/to

n

NBSK Europe (USD) BHKP Europe (USD)

Page 32: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

32

Textile fibre prices

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

US

$/kg

Imported DP (CCF Group) VSF 1.5D (CCF Group) Cotlook A (Cotlook) PSF 1.4D (PCI Fibres)

Page 33: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

33

Sappi Southern Africa

3Q 2015 3Q 2014 YTD 2015 YTD 2014Tons sold (‘000) 436 423 1,286 1,253Sales (ZARm) 3,798 3,592 11,095 10,654

Price/Ton (ZAR) 8,711 8,492 8,628 8,503Cost/Ton* (ZAR) 7,477 6,948 7,060 6,918

Operating profit excluding special items** (ZARm) 538 653 2,016 1,986

* Sales less operating profit excluding special items divided by tons sold.** Refer to the supplementary information in this presentation for a reconciliation to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.

Excluding Sappi Forests

Page 34: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

34

Cash flow

US$m 3Q 2015 3Q 2014 YTD 2015 YTD 2014Cash generated from operations 90 118 363 406Movement in working capital 16 (29) (97) (119)Net finance costs paid (21) (50) (111) (136)Taxation paid (12) (4) (16) (1)

Cash generated from operating activities 73 35 139 150

Cash utilised in investing activities (48) (79) (153) (195)Capital expenditure (49) (57) (163) (190)Net proceeds on disposal of assets and businesses - (22) - (10)

Other movements 1 - 10 5Net cash (utilised) generated 25 (44) (14) (45)

Page 35: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

35

EBITDA and operating profit

US$m 3Q 2015 3Q 2014 YTD 2015 YTD 2014

EBITDA excluding special items* 109 140 424 458Depreciation and amortisation (66) (73) (203) (236)

Operating profit excluding special items* 43 67 221 222Special items* - gains (losses) (8) 2 55 16Plantation price fair value adjustment - 5 19 18Net restructuring provisions and loss on disposal of assets and business (1) 4 (4) 3

Asset impairment reversals - - - 3Employee benefit liability settlement (1) - 56 -BEE charge - (1) (1) (2)Fire, flood, storm and other events (6) (6) (15) (6)

Segment operating profit 35 69 276 238

* Refer to page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.

Excluding special items reconciliation to reported operating profit

Page 36: 3Q 2015 financial results - Sappi...3Q 2015 financial results 2 Forward-looking statements Certain statements in this release that are neither reported financial results nor other

36

Thank you


Top Related