Q3 FY18 financial results delivering on strategy 13 August 2018 - PowerPoint PPT Presentation

Q3 FY18 financial results delivering on strategy 13 August 2018 2018 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

Summary 3

Highlights Q3 FY18  EBITDA ex-special items: US$155m (Q3 FY17: US$155m)  Profit for the period: US$51m (Q3 FY17: US$58m)  EPS ex-special items: 10 US cents (Q3 FY17: 11 US cents)  Net debt: US$1,603m (Q3 FY17: US$1,318) 4

From paper to woodfibre  Transition from global paper company to global woodfibre business 3 phases since 2010  Balance 2010-2013: reduce balance sheet risk while investing in DWP and speciality packaging   Debt reduction 2014-2016: reduce leverage from 4.6X to below 2X Net debt:EBITDA Growth : 2017-2020: Strong positions in DWP and packaging give rise to growth opportunities   Global trends shifting in Sappi’s favour Sustainability driving textile and packaging industries  Growth in paper based packaging, rising pulp costs and recycled paper trade flows encourage graphic paper  conversions and closures Bio-chemicals and biomaterials offer interesting new growth opportunities while supporting existing businesses  5

Transformation – from paper to woodfibre EBITDA* by Segment Segment analysis: EBITDA* margin 100% 90% 40 34 80% 35 30 30 70% 30 60% 25 50% % 20 13 40% 15 10 9 8 10 7 30% 4 5 20% 0 10% 2010 2014 Q3 2018 LTM 0% Specialised cellulose Specialities and packaging papers 2010 2014 Q3 2018 LTM Printing and writing papers Specialised cellulose Specialities and packaging papers Printing and writing papers EPS excluding special items 70 60 60 50 US CENTS 40 30 22 22 20 10 0 * EBITDA excluding special items  2010 2014 Q3 2018 LTM 6

Sappi specialities and packaging papers Global production sites with the ability to switch between graphics and packaging at various sites* Stockstadt Mill* (Germany) Carmignano Mill (Italy) Flexible packaging Flexible packaging and functional papers and functional papers Condino Mill (Italy) Maastricht Mill* (The Netherlands) Flexible packaging Paperboard and functional packaging Ehingen Mill* (Germany) Cloquet Mill* (USA) Containerboard Label papers Ngodwana Mill (South Africa) Somerset Mill* (USA) Containerboard Label paper and flexible packaging paper Tugela Mill (South Africa) Westbrook Mill (USA) Containerboard Silicone base papers Alfeld Mill (Germany) Containerboard, flex-pack, label, paperboard, silicone base papers 7

Trends in our market Specialities and Packaging Papers Technology and Regulations Demographic Change Economic Concerns Innovations o Cost reduction (TCO) o Traceable packaging o Food safety – Mineral oil o Easy opening o Light weighting and o Customized packaging barriers o More functionality and down gauging o Smart/active packaging o Plastic bans and waste convenience directive o Smaller pack sizes 8

Trends in our market Specialities and Packaging Papers Regulations o Food safety – Mineral oil barriers o Plastic bans and waste directive 9

Viscose-grade DWP demand growth Dissolving wood pulp market Europe Americas China Other Products Applications Market size 2017 CAGR 2010-17% Demand DWP grade (examples) (examples) Mtpa geography • Textiles (viscose) • Non-wovens Rayon Viscose 6.1 7.5 • Cellophane Grade • Sausage skins • Cigarette filters Cellulose • Paints and coatings acetate 0.6 1.9 • Films tow • Plastics • Construction High- Cellulose • Food additives alpha/ ethers and 0.6 3.7 • Medicine fillers Speciality MCC • Cosmetics • Explosives Nitro- • Inks cellulose 0.2 1.7 • Lacquers and other • Nail polish Total 7.5 ~6-7 Source: Sappi; Hawkins Wright; RISI. 10

Cellulosic fibre properties helping drive that growth Key strength Qualifies Issue Nonwovens/Technical textiles Home textiles Apparel Fibre properties and applications Cellulosic fibres Cotton Polyester 7 21 28 27 52 Applications 17 62 66 20 • On a pure property basis,    Durability cellulosic fibres are superior to    Absorbency cotton and Function and differentiated    feel Breathability on sustainability.    Softness    • Drape Polyester is differentiated    Dyeability on strength/ Appearance durability    Brightness/Lustre versus cotton  and cellulosic   Renewable and biodegradeable fibres. Sustainability    Resource efficiency • • • Natural and attractive, Natural, functional and Cheap, durable and Overall value proposition ‘greener’ alternative to cotton well established versatile Source: IHS Global, RISI, Hawkins Wright. 11

Update on conversions and debottlenecking Q3 FY18  Specialities and Packaging Papers  Specialised Cellulose  Maastricht:  Ngodwana: On time, within budget, legacy products After late start up and commissioning,   qualified at lower costs focus is on September evaporator upgrade to get to the planned 250ktpa New product trials are testing well, larger  volumes across all basis weights in time for  Saiccor: September roll-out Head-box and sheet former issues are   Ehingen: behind us, now operating at full capacity (780ktpa) On time, within budget   Carouseling stage set  Somerset: Delayed and overrun  Legacy products qualified at lower costs  Currently optimizing new products  12