Q3 FY19 financial results delivering on strategy 1 August 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 – Q3 2019 Excluding special items* o Challenging quarter for our major products o Commercial downtime of ~89,000t graphic paper EBITDA* $118m • US$19m EBITDA impact estimated o Lower DWP pricing as VSF operating rates and Profit for the period pricing declined US$8 million Key ratios Q3 FY17 Q3 FY18 Q3 FY19 EPS* 4 US cents Net debt/LTM EBITDA 1.7 2.1 2.4 Interest cover 8.4 11.0 9.6 Acquisition of Matane EBITDA % 12.3 10.7 8.6 ROCE % 12.8 9.7 5.2 Mill * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 3
EBITDA* reconciliation Q3 FY18 to Q3 FY19 200 Sales revenue 175 150 US$ million 125 100 75 50 155 (18) 29 (40) (10) (6) 8 118 Q3 FY18 EBITDA Sales volume Price & mix Variable & delivery Fixed costs Other Exchange rate Q3 FY19 EBITDA costs Jun 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$1 = ZAR 14.3772 12.6312 Average rate for the Quarter: €1 = US$ 1.1236 1.1920 3. EBITDA = EBITDA excluding special tems 4
Product contribution split – LTM EBITDA excluding special items Operating profit excluding special items Dissolving Wood 31% Pulp 39% 44% Packaging & Speciality Papers 59% Printing & Writing 10% Papers 17% * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 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 600 512 EUR450m bond 500 393 EUR350m bond 367 400 US$221m bond US$ million 300 226 221 200 107 81 68 67 100 44 44 21 21 0 2019 2020 2021 2022 2023 2024 2025 2026 2032 Cash Short-term SPH term debt Securitisation SSA 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 remains very weak Capacity reductions expected in US and Europe over next 18 months Selling prices and input costs Paper prices beginning to decline – driven by lower demand and lower costs Pulp prices falling, led by China, partially offset by weaker Euro and Rand Strategy Focus on costs to maintain margins Manage operating rates through downtime, market share, flexibility of machines Reduce or convert capacity in line with demand declines 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 falling, led by China, partially offset by weaker Euro and Rand Strategy Ramp-up volumes from conversions, grow into new markets We aim to be an innovative and sustainable supplier Improve pulp integration – Matane acquisition announced 10
Sappi Europe o Weak domestic and export demand - downtime of Sales Tons -5% 30k tons ~US$8m EBITDA impact year-on-year o Realised prices for graphics were 5% higher and Sales flat our packaging and specialities were 4% higher than last year year-on-year o Variable costs 3% higher than last year, fixed EBITDA* -24% costs flat year-on-year o Lanaken conversion complete * Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY19 financial results booklet (available on www.sappi.com) for a definition of special items. 11
Sappi North America Sales Tons +1% o Commercial downtime of 59kt ~ $11m EBITDA impact year-on-year o Cloquet debottlenecking complete Sales +1% o Packaging and paperboard volumes continue to grow year-on-year o Variable costs were 5% higher; fixed costs 7% lower EBITDA* -45% (last year included the extended shut of PM1) 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 Q3 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 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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