How do you future-proof How do you future-proof the European Paper Industry? Industry? Berry Wiersum CEO, Sappi Europe 1 | RISI March 2014 | B. Wiersum | 11 March 2014
… From the perspective of a Graphics Paper Producer F th ti f G hi P P d • COST, CUSTOMERS AND CASH • GROWTH AND CONVERSION • NEW REVENUE STREAMS 2 | RISI March 2014 | B. Wiersum | 11 March 2014
Our view on P+W grades 13 years ago Example WFC 0 tons ‘00 • Source: EURO-GRAPH /PPPC/SFPE 3 | RISI March 2014 | B. Wiersum | 11 March 2014
…. and today Example WFC 0 tons ‘00 • Source: EURO-GRAPH /PPPC/SFPE 4 | RISI March 2014 | B. Wiersum | 11 March 2014
Current status Paper industry facing strong economic challenges due to declining market conditions and rising costs: market conditions and rising costs: 5 | RISI March 2014 | B. Wiersum | 11 March 2014
Mid term outlook today Some stabilization in CWF during the last months in NA -> CWF NA: drop of 30% vs top year 2006 -> CWF EU: drop of 26% vs top year 2007 CWF EU: drop of 26% vs top year 2007 Source: PPPC, Market Intelligence 6 | RISI March 2014 | B. Wiersum | 11 March 2014
Mid term outlook today 7 | RISI March 2014 | B. Wiersum | 11 March 2014
Appetite for apps Appetite for apps Digital Digital keeps growing growing 25 million issues delivered in the last year and 120,000 every day day Source: Morgan Stanley 8 | RISI March 2014 | B. Wiersum | 11 March 2014
However…Papermaking cash cost rising? Comparison Q3, 2013 vs Q3, 2009 Source: Risi’s Cornerstone WF2s coated Note: Cash Cost: fiber, fuels, chemicals, labor, materials, electricity 9 | RISI March 2014 | B. Wiersum | 11 March 2014
and ….margin squeeze continues European Value Chain 10 | RISI March 2014 | B. Wiersum | 11 March 2014
From Last Year - what the Paper Industry needs to do Challenge the Status Quo: European Current Go-to-market routes are too Value Chain expensive D Duplication (logistics & supply chain, li ti (l i ti & l h i unnecessary stock) Waste (odd sizes, grain direction) ( , g ) Old-fashioned (Nobody does it like us…) G tti Getting paid for what you do or don’t do id f h t d d ’t d 11 | RISI March 2014 | B. Wiersum | 11 March 2014
Cost, Customers and Cash: conclusions Reducing volumes and prices -> increased bankruptcies Publishers and Printers force industry into lowest cost to serve Indent Stock Distance becomes discriminator Industry closes highest cost mills and reduces cost to serve -> p p further pressure on price 2013 -> market decline faster than industry adjustment 2014 -> industry catches up Go to market route under threat Go to market route under threat 12 | RISI March 2014 | B. Wiersum | 11 March 2014
13 | RISI March 2014 | B. Wiersum | 11 March 2014
American Express 14 | RISI March 2014 | B. Wiersum | 11 March 2014
Shell in 1833 15 | RISI March 2014 | B. Wiersum | 11 March 2014
Nokia & RIM Source: Board of Innovation 16 | RISI March 2014 | B. Wiersum | 11 March 2014
Nokia & RIM Source: Board of Innovation 17 | RISI March 2014 | B. Wiersum | 11 March 2014
Nokia & RIM Source: Board of Innovation 18 | RISI March 2014 | B. Wiersum | 11 March 2014
Samsung in 1938 19 | RISI March 2014 | B. Wiersum | 11 March 2014
Definition „Speciality“ Papers Paper or board that is manufactured, or subsequently converted, for a specific use. These grades usually cannot be p g y used for anything other than their intended special purpose. Paper that is often suitable for special purposes because it Paper that is often suitable for special purposes, because it possesses unique characteristics and properties, and is not considered to be one of the standards by the paper industry. Speciality Papers ≠ Commodity Speciality Papers ≠ Commodity 20 | RISI March 2014 | B. Wiersum | 11 March 2014
Market Development Speciality Papers have in recent years trended with GDP Speciality Papers have in recent years trended with GDP Outlook 2013 – 2015 With GDP ranging from 1.15% to 2,50% this would result in a growth of 3,5 and 7% That equals a volume growth between 878 – 1.938 ktons Source AWA Asia-Pacific represents the strongest growth (+12%) Europe and North America represent with 60% the biggest share of the global demand 21 | RISI March 2014 | B. Wiersum | 11 March 2014
Influencing Factors Increasing wealth in emerging markets g g g Demographic development in mature markets Increase in single households I i i l h h ld Increasing awareness of sustainability issues Smaller packaging sizes (convenience food) Technical requirements (e.g. stiffness) q ( g ) 22 | RISI March 2014 | B. Wiersum | 11 March 2014
Speciality Papers Trends and Outlook New applications for speciality papers for packaging will develop The packaging industry has now started intensive research efforts in order to develop improved and new functional properties for paper based substrates. – Functional barriers and nanotechnologies -> increased usage of paper for primary packaging of food products (freshness, longer shelf life, reduce use of plastic films). k i f f d d t (f h l h lf lif d f l ti fil ) – Development of chemicals and fibres -> allow new packaging design with paper (e.g. moulded packs, thermo formed packs,…) – Active and intelligent packaging -> incorporation of active substances like oxygen scavengers, antimicrobial systems, time temperature indicators, freshness indicators,.. Evolving market requirement: Packaging papers and boards will move from print carrier + and mechanical protection print carrier + and mechanical protection (multi-) functional materials fulfil food packaging requirements and enable replacement of mineral oil based packaging materials il b d k i t i l 23 | RISI March 2014 | B. Wiersum | 11 March 2014
Definition „Speciality“ Papers Out of more than 400 million tons paper production only 5- 7% can be called specialties. Source AWA 24 | RISI March 2014 | B. Wiersum | 11 March 2014
Trends in Packaging 25 | RISI March 2014 | B. Wiersum | 11 March 2014
A trend in packaging which needs to be stopped … 26 | RISI March 2014 | B. Wiersum | 11 March 2014
Growth and Conversion conclusion Conversion doubles Sappi’s presence in Specialities 43000 Alfeld PM 1 135000 135000 Alfeld PM 2 MG Alfeld (D) 36000 Alfeld PM 3 MG Volumes Volumes Sappi Alfeld Alfeld PM 4 MG 46000 300 ktons Alfeld PM 5 MG 35000 Portfolio: SBS Cartonboard Coated White Premium Topliner Coated and uncoated Flexpack Coated siliconizing base paper Coated siliconizing base paper Coated label 27 | RISI March 2014 | B. Wiersum | 11 March 2014
New revenue streams Current status • Pulp and paper products are fabricated from sustainably managed forests t i bl d f t • Paper/pulp is made from a renewable resource is biodegradable and easily resource , is biodegradable and easily recycled, is largely circular (on fibre) , is largely circular (on fibre) • A large portion of the energy used in the gy g p manufacture of pulp and paper is renewable • Pulp mills basically have always been p y y biorefineries, already for centuries. • Yet Yet biomass is more and more used for large Yet Yet biomass is more and more used for large biomass is more and more used for large biomass is more and more used for large scale energy production under favoured scale energy production under favoured conditions, driving up costs for more conditions, driving up costs for more sustainable applications sustainable applications sustainable applications sustainable applications 28 | RISI March 2014 | B. Wiersum | 11 March 2014
Why a circular bio-based economy? Clear targets - 80% reduction in CO2 emission - 50 % added value in products Only a circular biobased economy will enable us to reach this! Source: Cepi 29 | RISI March 2014 | B. Wiersum | 11 March 2014
From tree to molecule Used by P&P industry to manufacture to manufacture products Lignin 23% Cellulose 45% % Hemicellulose 30% Used by P&P industry to generate heat Source: Royal Society of Chemistry 30 | RISI March 2014 | B. Wiersum | 11 March 2014
Why a circular bio-based economy: We must reverse the downward trend in an industry that: sources domestic renewable raw materials d ti bl t i l has the infra-structure and the know-how to collect and process biomass into valuable materials creates jobs in a broad range of sectors in Europe, triggering rural j g p , gg g growth across regions places sustainability smart and efficient use of resources at the heart places sustainability, smart and efficient use of resources at the heart of industrial, business and social activities By creating a higher value through the current P&P-operations, Thus leading to sustainability in both economic AND ecologic terms. 31 | RISI March 2014 | B. Wiersum | 11 March 2014
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