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07 August 2015
Chief Executive Officer
Steve Binnie
Sappi Limited
3Q 2015 financial results
2
Forward-looking statementsCertain statements in this release that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited tostatements 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 trendsand which do not relate to historical matters, and may be used to identify forward-looking statements. You should not rely on forward-looking statements because theyinvolve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results, performance orachievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and frompast 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 a global economic downturn; 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 restructuring and other strategic initiatives andachieving 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 circumstancesor otherwise.
Regulation G disclosureCertain non-GAAP financial information is contained in this presentation that management believe may be useful in comparing the company’s operating results fromperiod 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 therelevant period. These booklets are located in the ‘Investors | Financial information’ section of www.sappi.com.
Forward-looking statements and Regulation G
Summary
3
4
Highlights
EPS excluding special items 2 US cents(3Q 2014 2 US cents)
Profit for the period US$4m(3Q 2014 US$17m)
EBITDA excluding special items US$109m(3Q 2014 US$140m)
Net debt US$1,917m(3Q 2014 US$2,286)
3Q 2015
5
EBITDA and operating profit15
9
126
88
155
147
171
140
200
145
170
109
70
38
5
67
60
95
67
124
74
104
43
0
50
100
150
200
250
1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015
US
$ m
illio
n
EBITDA Operating profit ex-items
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
Excluding special items*
0
20
40
60
80
100
120
140
160
180
140 (16) 33 (25) (13) 4 (14) 109
3Q 2014 EBITDA Sales volume Price and mix Variable anddelivery costs
Fixed costs Other Exchange rate 3Q 2015 EBITDA
6
EBITDA*
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
Sales revenue
All variances were calculated excluding Sappi Forests EBITDA excludes special items 'Exchange rate' reflects the impact of changes in the average rates of translation of
foreign currency results
3Q 2014 vs 3Q 2015
7
Product contribution split - LTM
Specialised cellulose
43%
Paper57%
EBITDA excluding special items*
Specialised cellulose
62%
Paper38%
Operating profit excluding special items
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.
8
Net debt/EBITDA development19
4
217
150
211
159
126
88
155
147
171
140
200
145
170
109
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
50
100
150
200
250
1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015
US
$ m
illio
n
EBITDA* Net debt/LTM EBITDA**
* EBITDA shown is excluding special items** The covenant net debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above
351
65
20
513
350
503
221
62
41
94 11
2
305
0
100
200
300
400
500
600
2015 2016 2017 2018 2019 2020 2021 2022 2032
US
$ m
illio
n
Cash Short-term SPH term debt SSA RCF Securitisation
9
Maturity profileFiscal years
Includes US$400m bond
US$350m bond US$221m bond
EUR450m bond
10
Capex development
0
100
200
300
400
500
600
2012 2013 2014 2015 Estimate
US
$ m
illio
n
Maintenance Efficiency
11
Divisional overviews
12
Global paper market trends
Supply and demand Strong Dollar causes shifts in trade flows CWF apparent consumption weak in the US in 3Q
Costs and prices CWF sales prices under pressure in US, moving upward in Europe Softwood pulp prices stable, hardwood prices increasing Wood prices yet to normalise in US
Strategy Implement price increases when/where market allows Reducing fixed and variable costs Reduce capacity in line with demand declines
13
Global specialised cellulose market trends
Supply and demand Deceleration of capacity expansion Some capacity has switched back to pre-conversion products Underlying demand trends still moving up
Costs and prices Commodity grade DWP prices still low Recent oil price declines may impact textile prices Input costs declining for producers with non-US$ cost base
Strategy Manage capacity Continue working with customers supporting common growth Investigate adjacent end-uses
14
Sappi Europe
0%
2%
4%
6%
8%
10%
12%
0
20
40
60
80
100
1Q2013
2Q2013
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
US
$ m
illio
n
EBITDA* EBITDA Margin*
* EBITDA and EBITDA margin shown excluding special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.** Source: RISI World Graphic Paper Forecast July 2015 and Sappi estimates
Graphic paper volumes down 5% from last quarter, stable versus last year; overall up 1% due to speciality sales tonnage
Gratkorn Mill boiler upgrade once-off impact of EUR10m during the quarter Average prices realised flat from last quarter, up 3% from last year due to increased
exports Speciality business continues to grow – volumes increased versus both periods; pursing
further growth opportunities at our Maastricht and Ehingen Mills
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015
CWF CM Forecast
Demand development**
15
Sappi North America
0%
2%
4%
6%
8%
10%
12%
14%
0
10
20
30
40
50
1Q2013
2Q2013
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
US
$ m
illio
n
EBITDA* EBITDA Margin*
* EBITDA and EBITDA margin shown excluding special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.** Source: RISI World Graphic Paper Forecast July 2015 and Sappi estimates
Graphic paper markets negatively impacted from strong US Dollar – surge in imports from Asia and weaker export markets
DWP sales volumes lower as we maximised own-make fibre production at Cloquet Mill Release business affected by weaker sales to China and weaker Euro negatively
impacted pricing for sales to Europe Lower variable costs – lower chemical and energy prices more than offset higher wood
costs
Demand development**
-5%
-4%
-3%
-2%
-1%
0%
1%
2%2012 vs 2011 2013 vs 2012 2014 vs 2013 2015 vs 2014 2016 vs 2015
CWF
Forecast
16
Sappi Southern Africa
0%
5%
10%
15%
20%
25%
30%
0
20
40
60
80
100
1Q2013
2Q2013
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
US
$ m
illio
n
EBITDA* EBITDA Margin*
* EBITDA and EBITDA margin shown excluding special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.** Source: CCF
Higher volumes and prices compared to both prior quarter and year-on-year Operating profit impact of ZAR204m from planned shuts at Saiccor and Ngodwana Mills DWP pricing supported by weaker Rand/Dollar exchange rate as well as higher US$
prices in China Post quarter end, sold Enstra Mill’s recycled packaging business and Cape Kraft Mill; in
line with strategic focus on virgin fibre packaging paper grades
Staple grade dissolving pulp (US$/ton)**
770
780
790
800
810
820
830
840
850
04 J
an 2
015
16 J
an 2
015
30 J
an 2
015
13 F
eb 2
015
06 M
ar 2
015
20 M
ar 2
015
03 A
pr 2
015
17 A
pr 2
015
30 A
pr 2
015
15 M
ay 2
015
29 M
ay 2
015
12 J
un 2
015
26 J
un 2
015
10 J
ul 2
015
24 J
ul 2
015
17
Strategic focus
We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages Cloquet Mill’s kraft campaigns Somerset Mill’s natural gas conversion Gratkorn Mill’s paper machine and pulp
mill upgrade Kirkniemi Mill’s power plant Group procurement initiatives
18
Focus areasAchieve cost advantages
Recognising the decreasing demand for graphic paper, we manage our capacity to strengthen our leadership position in these markets, realising their strategic importance to the group and maximising their significant cash flow generation Cessation of coated paper production in
South Africa Husum volumes to be transferred to our
assets in 2H 2015
19
Focus areasRationalise and optimise declining businesses
We will make smaller investments in existing areas with strong potential growth, including pulp, speciality grades and packaging papers Investment in lightweight recycled
packaging paper at Enstra Mill Upgrades to Tugela and Ngodwana pulp
mills Nano-cellulose pilot plant in The
Netherlands
20
Focus areasGrow through moderate investments
Continue to pursue the sale of Twello Sale of Enstra and Cape Kraft Mills
announced Refinancing and debt reduction has lead
to lower finance cost
21
Focus areasGenerate cash to strengthen the balance sheet
Over the next two years we will continue our focus on having a cleaner, stronger balance sheet so that we can then accelerate our growth in adjacent businesses Speciality packaging New business – lignins, sugars Longer term DWP capacity expansion
22
Focus areasAccelerate growth in adjacent businesses from a strong base
Outlook
23
24
Outlook
Graphic paper markets remain difficult with currency movements impacting trade flows and input costs
Dissolving wood pulp prices in China have risen over the past four months, and a weaker Rand will further support the profitability of this business in South Africa
Capital expenditure in the last quarter is expected to be approximately US$80m (US$245m for the full year)
We expect a further reduction in net debt levels during the fourth quarter; any proceeds received from the sale of Cape Kraft and EnstraMills and/or the Twello forestry assets before year-end would accelerate the decline in net debt
EPS excluding special items for the full year are expected to be substantially better than that of the prior year, mainly as a result of lower interest costs
3Q 2015
Questions and answers
25
Supplementary information
26
27
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1Q
200
8
2Q
200
8
3Q
200
8
4Q
200
8
1Q
200
9
2Q
200
9
3Q
200
9
4Q
200
9
1Q
201
0
2Q
201
0
3Q 2
010
4Q 2
010
1Q
201
1
2Q
201
1
3Q 2
011
4Q 2
011
1Q
201
2
2Q
201
2
3Q 2
012
4Q 2
012
1Q
201
3
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
1Q 2
008=
1
CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices
Western Europe shipments including export.Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008
Western Europe
Coated paper deliveries and prices
28
Sappi Europe
3Q 2015 3Q 2014 YTD 2015 YTD 2014Tons sold (‘000) 792 783 2,395 2,492Sales (EURm) 567 543 1,704 1,727
Price/Ton (EUR) 716 693 711 693Cost/Ton* (EUR) 710 678 694 681
Operating profit excluding special items** (EURm) 5 12 41 29
* Sales less operating profit excluding special items divided by tons sold.** Refer to the supplementary information in this presentation for a reconciliation to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
29
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1Q
200
8
2Q
200
8
3Q
200
8
4Q
200
8
1Q
200
9
2Q
200
9
3Q
200
9
4Q
200
9
1Q
201
0
2Q
201
0
3Q 2
010
4Q 2
010
1Q
201
1
2Q
201
1
3Q 2
011
4Q 2
011
1Q
201
2
2Q
201
2
3Q 2
012
4Q 2
012
1Q
201
3
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
1Q 2
008=
1
Domestic CFS shipments Total US CFS consumption CFS #3 60lb rolls prices
* US industry shipments and total US consumptionSource: AF&PA and RISI indexed to calendar 1Q 2008
United States
Coated paper prices and shipments
30
Sappi North America
3Q 2015 3Q 2014 YTD 2015 YTD 2014Tons sold (‘000) 294 362 948 1,079Sales (US$m) 313 380 1,008 1,127
Price/Ton (US$) 1,065 1,050 1,063 1,044Cost/Ton* (US$) 1,088 1,075 1,068 1,051
Operating profit excluding special items** (US$m) (7) (9) (4) (7)
* Sales less operating profit excluding special items divided by tons sold.** Refer to the supplementary information in this presentation for a reconciliation to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
31
* Source: Average weekly FOEX delivered European prices
Pulp prices*
400
500
600
700
800
900
1,000
1,100
Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15
US
$/to
n
NBSK Europe (USD) BHKP Europe (USD)
32
Textile fibre prices
0.50
0.70
0.90
1.10
1.30
1.50
1.70
1.90
2.10
2.30
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15
US
$/kg
Imported DP (CCF Group) VSF 1.5D (CCF Group) Cotlook A (Cotlook) PSF 1.4D (PCI Fibres)
33
Sappi Southern Africa
3Q 2015 3Q 2014 YTD 2015 YTD 2014Tons sold (‘000) 436 423 1,286 1,253Sales (ZARm) 3,798 3,592 11,095 10,654
Price/Ton (ZAR) 8,711 8,492 8,628 8,503Cost/Ton* (ZAR) 7,477 6,948 7,060 6,918
Operating profit excluding special items** (ZARm) 538 653 2,016 1,986
* Sales less operating profit excluding special items divided by tons sold.** Refer to the supplementary information in this presentation for a reconciliation to reported operating profit and page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
Excluding Sappi Forests
34
Cash flow
US$m 3Q 2015 3Q 2014 YTD 2015 YTD 2014Cash generated from operations 90 118 363 406Movement in working capital 16 (29) (97) (119)Net finance costs paid (21) (50) (111) (136)Taxation paid (12) (4) (16) (1)
Cash generated from operating activities 73 35 139 150
Cash utilised in investing activities (48) (79) (153) (195)Capital expenditure (49) (57) (163) (190)Net proceeds on disposal of assets and businesses - (22) - (10)
Other movements 1 - 10 5Net cash (utilised) generated 25 (44) (14) (45)
35
EBITDA and operating profit
US$m 3Q 2015 3Q 2014 YTD 2015 YTD 2014
EBITDA excluding special items* 109 140 424 458Depreciation and amortisation (66) (73) (203) (236)
Operating profit excluding special items* 43 67 221 222Special items* - gains (losses) (8) 2 55 16Plantation price fair value adjustment - 5 19 18Net restructuring provisions and loss on disposal of assets and business (1) 4 (4) 3
Asset impairment reversals - - - 3Employee benefit liability settlement (1) - 56 -BEE charge - (1) (1) (2)Fire, flood, storm and other events (6) (6) (15) (6)
Segment operating profit 35 69 276 238
* Refer to page 21 in our 3Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
Excluding special items reconciliation to reported operating profit
36
Thank you