q4 and full year 2015 financial results · 2016-09-27 · sappi limited q4 and full year 2015...

12 November 2015

Chief Executive Officer

Steve Binnie

Sappi Limited

Q4 and Full Year 2015 financial results

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

Summary

3

4

Highlights

EPS ex-special items 16 US cents (Q4 FY14 12 US cents) EBITDA ex-special items US$201m (Q4 FY14 US$200m) Profit for the period $83m (Q4 FY14 US$68m)

Q4 FY15

FY 2015

EPS ex-special items 34 US cents (FY14 22 US cents) EBITDA ex-special items US$625m (FY14 US$658m) Profit for the period $167m (FY14 US$135m) Net Debt US$1,771m, down $175m year-on-year

5

EBITDA and operating profit15

9

126

88

155

147

171

140

200

145

170

109

201

70

38

5

67

60

95

67

124

74

104

43

136

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 4Q 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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.

Excluding special items*

6

EBITDA Bridge*

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.

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

Q4 FY14 vs. Q4 FY15Sales revenue Variable & delivery Fixed costs

020406080

100120140160180200220240260280300320340

200 16 92 (236) (25) 147 (17) 56 (32) 201

Q4 FY14EBITDA

Sales volume Price & mix Exchange rate Variable &delivery costs

Exchange rate Fixed costs Exchange rate Other Q4 FY15EBITDA

7

Product contribution split - LTM

Specialised cellulose

45%

Paper55%

EBITDA excluding special items*

Specialised cellulose

65% Paper35%

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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.

8

Net debt/EBITDA development19

4

217

150

211

159

126

88

155

147

171

140

200

145

170

109

201

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 Q4 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

456

65

513

504

221

54

36

82

56

343

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

9

Maturity profileFiscal years

Includes US$400m bond

US$350m bondUS$221m bond

EUR450m bond

10

Capex development

0

100

200

300

400

500

600

2012 2013 2014 2015 2016 Estimate

US

$ m

illio

n

Maintenance Efficiency

11

Divisional overviews

12

Global paper market trends

Supply and demand Strong Dollar causes shifts in trade flows Coated paper capacity shuts/conversions continue in Europe and NA Mechanical paper under significant pressure

Selling prices and input costs CWF and CM sales prices moving up in Europe Fuel oil and oil-based chemical prices low Wood prices still high in US, but declining

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

13

Global specialised cellulose market trends

Supply and demand Swing capacity leaves supply situation balanced for now Underlying demand trends still positive

Selling prices and input costs Commodity grade DWP prices rising Prices for VSF and cotton stable, oil-based polyester still low Input costs declining for producers with non-US$ cost base

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

14

Sappi Europe

0%

2%

4%

6%

8%

10%

12%

0

20

40

60

80

100

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.** Source: Sappi estimates

Sappi’s graphic paper volumes up 5% vs last year, particular strength in CWF

Strong operating rates at all our mills

Average prices up 4% from last year due to weaker EUR/USD and price increase

Variable costs up 7% on paper pulp. Fixed costs down 2% year-on-year.

Speciality paper business continues to improve sales volumes and realised prices

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%2014 v 2013 15 v 14 16 v 15 17 v 16

CWF CM

Forecast

Demand development**

15

Sappi North America

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

10

20

30

40

50

60

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

US

$ m

illio

n


* 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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.** Source: Sappi estimates

Good recovery in seasonally strong quarter

Strong dollar impacting sales, and underlying market is weak

Coated paper volumes were flat year on year with realised price slightly lower.

Release business continued to experience weak demand from China, European pricing

Fixed and variable costs were lower than last year, wood prices starting to decline.

Demand development**

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%2014 v 2013 15 v 14 16 v 15 17 v 16

CWF

Forecast

16

Sappi Southern Africa

0%

5%

10%

15%

20%

25%

30%

0

20

40

60

80

100

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

US

$ m

illio

n


* 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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.** Source: CCF

Higher volumes and prices compared to both periods – good demand for virgin packaging.

Demand remained strong for DWP – volumes/prices better year-on-year.

Variable costs flat, while fixed costs were down year-on-year.

Post quarter end, we received approval from the Competition Commission authorities for

the sale of the Enstra and Cape Kraft Mills. Transactions to be concluded by December

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

780

800

820

840

860

880

900

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

17

Strategic focus

We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages Saiccor and Tugela turbines 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

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 transferred to our assets

in H2 2015

19

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 Upgrades to Tugela and Ngodwana pulp

mills – additional virgin packaging paper Nano-cellulose pilot plant in The

Netherlands

20

Focus areasGrow through moderate investments

Sale of both Enstra and Cape Kraft Mills nearing completion

Refinancing and debt reduction has lead to lower finance cost

21

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

22

Focus areasAccelerate growth in adjacent businesses from a strong base

Outlook

23

24

Outlook

Improved Q1 FY16 EBITDA and EPS ex-items expected compared to

prior year due to better operational performance and lower interest

costs.

However, the drought in SA may adversely impact production and

profitability should normal summer rainfall not be forthcoming.

Dissolving wood pulp demand expected to remain healthy

Graphic paper markets in Europe slightly better than anticipated,

though still expected to decline

In North America, the strong US Dollar will continue to negatively

impact trade flows for domestic producers.

25

Outlook (cont’d)

Based on current market conditions, and exchange rates, we expect

EBITDA ex-items in FY16 will be higher than FY15.

With lower interest costs, offset somewhat by increased cash taxes, we

expect strong growth in our EPS ex-items.

Capital expenditure is expected to be in line with 2015, focused largely

on energy and debottlenecking projects in South Africa.

Possibility of utilising some of our cash reserves to repay and refinance

a portion of our debt. Net debt expected to reduce further over the

course of the year reducing our financial leverage towards our target of

two times net debt to EBITDA.

Thank you –

26

Supplementary information

27

28

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

1.1

1.2

Q1

FY08 Q2

Q3

Q4

Q1

FY09 Q2

Q3

Q4

Q1

FY10 Q2

Q3

Q4

Q1

FY11 Q2

Q3

Q4

Q1

FY12 Q2

Q3

Q4

Q1

FY13 Q2

Q3

Q4

Q1

FY14 Q2

Q3

Q4

Q1

FY15 Q2

Q3

CWF MCR CWF 100gsm sheets LWC 60gsm offset reels

29

Sappi Europe

Q4 FY15 Q4 FY14 FY 2015 FY 2014Tons sold (‘000) 847 811 3,242 3,303Sales (EURm) 609 561 2,313 2,288

Price/Ton (EUR) 719 692 713 693Cost/Ton* (EUR) 692 660 694 676

Operating profit excluding special items** (EURm) 23 26 64 55

* 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 4Q 2015 results booklet (available on www.sappi.com) for a definition of special items.

30

* 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

FY08 Q

2

Q3

Q4

Q1

FY09 Q

2

Q3

Q4

Q1

FY10 Q

2

Q3

Q4

Q1

FY11 Q

2

Q3

Q4

Q1

FY12 Q

2

Q3

Q4

Q1

FY13 Q

2

Q3

Q4

Q1

FY14 Q

2

Q3

Q4

Q1

FY15 Q

2

Q3

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

Q1

FY08

= 1

31

Sappi North America

Q4 FY15 Q4 FY14 FY 2015 FY 2014Tons sold (‘000) 357 375 1,305 1,454Sales (US$m) 369 390 1,377 1,517

Price/Ton (US$) 1,034 1,040 1,055 1,043Cost/Ton* (US$) 947 973 1,034 1,031

Operating profit excluding special items** (US$m) 31 25 27 18


32

* Source: Average weekly FOEX delivered European prices

Pulp prices*

400

500

600

700

800

900

1 000

1 100

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

US

$/to

n

NBSK Europe (USD) BHKP Europe (USD)

33

VSF Market Conditions

34

Textile Fibre Prices

800

1 200

1 600

2 000

2 400

2 800

3 200

VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" IndexUS$/t

35

Sappi Southern Africa

Q4 FY15 Q4 FY14 FY 2015 FY 2014Tons sold (‘000) 482 453 1,768 1,706Sales (ZARm) 4,375 3,799 15,470 14,454

Price/Ton (ZAR) 9,077 8,386 8,750 8,472Cost/Ton* (ZAR) 6,905 6,987 7,017 6,936

Operating profit excluding special items** (ZARm) 1,047 634 3,063 2,620


Excluding Sappi Forests

36

Cash flow

US$m Q4 FY15 Q4 FY14 FY 2015 FY 2014Cash generated from operations 181 160 544 566Movement in working capital 86 153 (11) 34Net finance costs paid (24) (26) (135) (162)Taxation paid - - (16) (1)

Cash generated from operating activities 243 287 382 437

Cash utilised in investing activities (84) 1 (237) (194)Capital expenditure (85) (105) (248) (295)Cash flows on disposal of assets and businesses 1 97 1 87

Other movements - 9 10 14Net cash (utilised) generated 159 288 145 243

37

EBITDA and operating profit

US$m Q4 FY15 Q4 FY14 FY 2015 FY 2014

EBITDA excluding special items* 201 200 625 658Depreciation and amortisation (65) (76) (268) (312)

Operating profit excluding special items* 136 124 357 346Special items* - gains (losses) (1) (48) 54 (32)Plantation price fair value adjustment 22 - 41 18

Net restructuring provisions and loss on disposal of assets and business (2) (26) (6) (23)

Impairment of goodwill - (1) - (1)

Asset impairments - (3) - -

Employee benefit liability settlement (1) - 55 -

BEE charge (1) - (2) (2)

Fire, flood, storm and other events (19) (18) (34) (24)

Segment operating profit 135 76 411 314

* Refer to page 21 in our Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.

Excluding special items reconciliation to reported operating profit

38

Thank you

q4 and full year 2015 financial results · 2016-09-27 · sappi limited q4 and full year 2015...

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