Q2 FY19 financial results delivering on strategy 9 May 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 – Q2 2019 Excluding special items* o Unexpectedly weak global market conditions for printing and writing papers EBITDA* -11% o Downtime of ~85,000t graphic paper year-on-year • US$23m EBITDA impact estimated • Our inventory levels have normalized Profit for the period US$72 million o Good DWP sales volumes post debottlenecking Key ratios Q2 FY17 Q2 FY18 Q2 FY19 EPS 13 US cents Net debt/LTM EBITDA 1.7 2.2 2.1 Interest cover 7.7 11.0 10.5 EBITDA % 15.8 14.1 12.4 Net debt +3% ROCE % 20.5 16.8 13.1 year-on-year * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q2 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 3
EBITDA* reconciliation Q2 FY18 to Q2 FY19 300 260 US$ million 220 180 140 211 1 79 (76) (44) 9 7 187 Q2 FY18 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Other Exchange rate Q2 FY19 EBITDA costs Mar Notes: 2019 2018 1. All variances were calculated excluding Sappi Forestry. Exchange rates: 2. “Currency conversion” reflects translation and transactional effect on consolidation. Average rate for the Quarter: US$1 = ZAR 14.0203 11.9577 Average rate for the Quarter: €1 = US$ 1.1360 1.2286 3. EBITDA = EBITDA excluding special tems 4
Product contribution split – LTM EBITDA excluding special items Operating profit excluding special items Dissolving Wood 30% Pulp 39% 44% Packaging & Speciality Papers 57% Printing & Writing 13% Papers 17% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q2 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 600 505 EUR450m bond 500 393 EUR350m bond 381 400 US$221m bond US$ million 300 221 215 200 98 88 79 100 43 43 43 20 0 2019 2020 2021 2022 2023 2024 2025 2026 2032 Cash Short-term SPH term debt Securitisation SSA *The maturity profile is adjusted for the repayment of the 2022 bond post quarter-end and the resulting reduction in cash. 6
Capex development 600 500 400 US$ million 300 200 100 0 2013 2014 2015 2016 2017 2018 2019E 2020F Maintenance Efficiency and expansion Forecast 7
Market and Segmental overview 8
Global P&W paper market trends Supply and demand Demand softening globally Capacity reductions expected in US and Europe over next 18 months Selling prices and input costs Paper prices stable in US and EU Pulp prices falling from historical highs on weak Chinese demand – declines differ by geography Strategy Focus on costs to maintain margins Manage operating rates through downtime, conversions, market share, flexibility of machines Increase pulp integration over time 9
Global packaging and speciality paper market trends Supply and demand Additional containerboard conversions entering the market Smaller speciality packaging producers exiting due to cost pressures Demand continues to grow, long-term prospects encouraging, driven by legislation and consumer preference Brand owners pushing for paper based packaging solutions Selling prices and input costs Realised prices rose, particularly for flexible packaging, labels, and silicone base papers Pulp prices declining slowly Strategy Ramp-up volumes from conversions, grow into new markets We aim to be an innovative and sustainable supplier Improve pulp integration 10
Sappi Europe o Market demand weaker than expected – Sales Tons +1% necessitating 46,000t of downtime year-on-year o Higher selling prices did not offset higher variable Sales +1.5% costs year-on-year o Pulp prices have reduced, but remain elevated EBITDA* -27% o Some packaging and speciality segments showed year-on-year renewed growth, self-adhesives remains weak * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q2 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 11
Sappi North America Sales Tons +1% o Weak domestic graphic paper demand exacerbated by year-on-year increased imports - 39,000t of downtime taken Sales +4% o Growth in legacy packaging and paperboard volumes year-on-year o Ramp-up of Somerset continues – product mix not yet optimal EBITDA* -16% year-on-year o Good DWP sales volumes – debottlenecking of Cloquet complete * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q2 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 12
Global DWP market trends Supply and demand VSF capacity growing faster than demand, operating rates declining Demand continues to be strong, growing by ~6% per annum Most swing capacity now on DWP New DWP capacity entering the market by year-end Selling prices and input costs DWP selling prices declining as VSF prices and margins fall Wood price increases, chemical costs declining Strategy Grow with the market (debottlenecked volumes 2018/19, 110kt expansion at Saiccor underway) Evaluate external opportunities for more substantial increase in volumes – ROCE critical Commitment to sustainability key 13
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