Q1 FY19 financial results delivering on strategy 6 February 2019 2019 Vision 2020 next phase growth intentional evolution Steve Binnie Chief Executive Officer Sappi Limited 1
Forward-looking statements and Regulation G 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 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, identify forward-looking statements. In addition, this document includes forward-looking statements relating to our potential exposure to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity price risk. 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 adverse changes in global economic conditions 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 restructurings or 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. 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 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 available on our website: https://www.sappi.com/quarterly-reports . 2
Highlights – Q1 2019 Excluding special items* • Improved performance in difficult operating EBITDA* +15% climate year-on-year • Strong growth in packaging volumes Net Profit +29% • Net debt increased due to Cham acquisition year-on-year and higher capital expenditure Key ratios Q1 FY17 Q1 FY18 Q1 FY19 EPS* +14% Net debt/LTM EBITDA 1.7 1.8 2.0 year-on-year Interest cover 7.7 9.9 10.9 EBITDA % 15.4 12.9 13.9 Net debt +15% ROCE % 19.5 14.1 14.7 year-on-year * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 3
EBITDA* reconciliation Q1 FY18 to Q1 FY19 Sales revenue 300 260 US$ million 220 180 140 100 172 (7) 131 (84) (11) (5) 1 197 Q1 FY18 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Other Exchange rate Q1 FY19 EBITDA costs Dec Notes: 2018 2017 Exchange rates: 1. All variances were calculated excluding Sappi Forestry. Average rate for the Quarter: US$1 = ZAR 14.3127 13.6220 2. “Currency conversion” reflects translation and transactional effect on consolidation. Average rate for the Quarter: €1 = US$ 1.1409 1.1778 * EBITDA = EBITDA excluding special items 4
Product contribution split – LTM EBITDA excluding special items Operating profit excluding special items Specialised 32% Cellulose 41% 41% Packaging & 53% Speciality Papers Printing Papers 15% 18% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive. 5
Maturity profile Fiscal years 600 536 500 442 EUR450m bond EUR350m bond 376 400 350 US$ million 300 221 US$221m bond 200 80 79 69 100 47 45 27 0 0 2019 2020 2021 2022 2023 2024 2025 2032 Cash Short-term SPH term debt Securitisation SSA 6
Capex development 700 600 500 US$ million 400 300 200 100 0 2013 2014 2015 2016 2017 2018 2019E Maintenance Efficiency and expansion 7
Divisional overview 8
Global P&W paper market trends Supply and demand Demand softening globally Capacity reductions expected in US and Europe Selling prices and input costs Pulp prices falling from historical highs on weak Chinese demand – declines differ by geography Paper prices stable Strategy Focus on costs to maintain margins Manage operating rates through conversions, market share, flexibility of machines Increase pulp integration over time 9
Global speciality & packaging paper market trends Supply and demand More capacity entering the space – mostly containerboard Brand owners pushing for paper based packaging solutions Short term pressure on demand in consumer packaging and self-adhesives Selling prices and input costs Most sales prices rose into 2019, though insufficient to counter cost inflation Pulp prices have begun to decline from their historical highs Strategy More M&A in the industry Ramp-up volumes from conversions, grow into new markets Maximise opportunities in paper-for-plastics shift 10
Global DWP market trends Supply and demand Continued DWP and VSF capacity growth – both integrated and market 80% of swing capacity moved to DWP as paper pulp demand in China dried up Selling prices and input costs DWP selling prices are down as VSF prices decline on excess capacity. Weak RMB places further pressure on US$ input costs of VSF producers Strategy Grow in-step with the market (debottlenecked volumes 2018/19, future plans for Saiccor) Evaluate external opportunities which will enable a substantial increase in volumes Align growth with leading VSF customers – environmental and social performance key 11
Sappi Europe Excluding special items* o Printing and Writing volumes down 7%, while Sales Tons -1.6% specialities and packaging volumes up 50% year-on-year (4% like-for-like) from last year Sales +9% o Packaging and specialities average net selling prices were 17% (10% like-for-like) year-on-year higher as a result of mix and price increases EBITDA* -2.9% o Fixed costs 12% higher due to increased year-on-year headcount from Cham o Variable costs 17% higher primarily due to purchased paper pulp * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 12
Sappi North America Excluding special items* o Higher prices for most products and higher Sales Tons -6% DWP volumes lifted profitability year-on-year o Coated paper markets weakened during the Sales +3% quarter, however we increased volumes from European mills year-on-year o Packaging and specialities volumes up 68%, EBITDA* +61% paperboard volumes and prices set to year-on-year improve o Variable costs were higher due to purchased paper pulps and optimization of PM1 * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 13
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