Roadbook Feb 2016 - Sappi · Sales Ltd. Sales Analysis * Data reflects results from FY 2015 49% 26% 25% Sales by ... RISI World Graphic Paper Report Forecast* 14 Industry Consolidation

February 2016

Sappi Limited

Roadbook

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 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, and may be used to identify forward-looking statements. 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 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 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.

Forward-looking statements and Regulation G

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 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 located in the ‘Investors | Financial information’ section of www.sappi.com.

3

Agenda

� Overview� Products

� Strategy

� Results

� Divisions

� Sappi Europe

� Sappi North America

� Sappi Southern Africa

� Sustainability

� Conclusions

4

Sappi Limited

� #2 Global producer of coated woodfree paper (59% of sales)

Forecast: Capacity and demand down 1-2% through 2019*

Overview

� #1 Global producer of dissolving wood pulp (17% of sales)

Forecast: Demand up 5% and capacity up 6% through 2019**

* EMGE September 2015 ** Hawkins Wright September 2015

5

Sappi at a glance

Sappi Limited

2015 Sales = US$5.39 billion with @13k employees

Sappi Europe

49% 2015 sales

Graphic paper

Speciality paper

Sappi North America

26% 2015 sales

Graphic paper

Specialised cellulose

Release paper

Sappi Southern Africa

25% 2015 sales

Paper and paper packaging


Forests

Sappi Trading

6

Geographic diversificationOur global presence allows us take advantage of opportunities where markets are strong

Three paper and specialised cellulose mills

Four paper and specialised cellulose mills567,000ha of forests

Seven paper mills

13 sales offices on six continents

7

Sales Ltd. Sales Analysis

* Data reflects results from FY 2015

49%

26%

25%

Sales by source* (US$)

EuropeNorth AmericaSouthern AfricaAsia and other

41%

24%

11%

24%

Sales by destination* (US$)

59%17%

10%

7%

5%

1% 1%

Coated Paper

Dissolving Pulp

Speciality Paper

Commodity Paper

Uncoated Paper

Paper Pulp

Other

8

Sappi Ltd. Sales Analysis

59%17%

10%

7%5%

1% 1%

Coated Paper Dissolving Pulp

Speciality Paper Commodity Paper

Uncoated Paper Paper Pulp

Other

FYTD 2015 Coated Paper

• #2 Global Producer of Coated Paper• EBITDA Margins ~7%• Forecast* demand down 1% to 2% pa • Forecast* capacity down 1% to 2% pa

*Source: EMGE

9

Sappi Ltd. Sales Analysis

59%17%

10%

7%5%

1% 1%

Coated Paper Dissolving Pulp

Speciality Paper Commodity Paper

Uncoated Paper Paper Pulp

Other

FYTD 2015

• #1 Global Producer of Dissolving Pulp

• EBITDA Margins ~30%• Demand forecast* up 5% pa. • Capacity forecast* up 6%

• Speciality Paper• EBITDA Margins ~12%• Demand up 4%

• Commodity Paper • EBITDA Margins ~17%• Demand up 6%

*Source: Hawkins Wright

10

Major Sensitivities

∆ EU NA SA Translation Group

€m US$m ZARm US$m US$m

Net Selling Price 1% 24 14 163 - 53

DWP Price 1% - 2 93 - 9

Sales Volumes 1% 8 6 69 - 19

Variable Cost 1% 15 7 83 - 29

Fixed Cost 1% 6 4 39 - 14

Wood Price 1% 2 2 34 - 8

Paper Pulp Price US$10 6 2 8 - 9

ZAR/US$ 10c - - 75 -2 4

EUR/US$ 10c - 3 - 21 24

11

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

12

Printing and writing paper grade structure

Coated fine paper (CWF)

Uncoated woodfree (UWF)

Coated mechanical (CGW/LWC)

Supercalendered (SC-A)

Supercalendered (SC-B)

Machine finished specialities (MFS)

Improved newsprint

Newsprint

Fib

re q

ua

lity

100% Chemical pulp fiber furnish

Increasing mechanical/recovered

fiber content

Image quality

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

North America Europe Far East Latin America Africa/Middle East Oceania

13

Coated Woodfree Demand

* Source: RISI World Graphic Paper Report

Forecast*

14

Industry ConsolidationCapacity share of top five coated woodfree paper producers

33%

78%

60%

100%

27%

51%

25%

41%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 2015 1990 2015 1990 2015 1990 2015

Europe North America Rest of world Global

Source: EMGE

15

Dissolving Wood Pulp (DWP)

� DWP is the most abundant natural organic polymer on earth and is found in all plant materials

� The plant material (wood from certified forests or plantations) is processed and purified by applying specialised chemistry to extract the cellulose polymers from the wood

� The purified natural wood cellulose fibres are further dissolved by our customers and re-generated or re-formed for a host of applications

Cellulose45%

Hemi-cellulose

30%

Lignin23%

Resins1%

Inorganics1%

16

Dissolving Wood Pulp (DWP)End uses

VSF60%

Lyocell3%

Acetate12%

MCC2%

Ethers/CMC9%

Cellophane1%

Filament5%

Nitrocellulose3%

Others4%

Tyre cord1%

SpongesMoulding powderPaper, etc

Sappi16%

Cosmo2%

PT Toba2%

Bahia6%

Neucell3%

Buckeye3%

Rayonier6%

CLP China11%

Borregaard2%

Tembec incl Tartas4%

Birla & Lenzing Integrated

14%

Others15% Fortress

3%Bamboo China

3%

Hunan Juntai3% Sun Paper

2%

Other China DWP4%

Sodra2%

Stora1%

17

Dissolving Wood Pulp (DWP)Competitors

18

Why Dissolving Wood Pulp (DWP)Capitalising on MEGA-TRENDS

� Global population growth from a current 6.9bn to 8.3bn by 2030

� Increasing need for food and clothes

� Increasing need for more comfortable clothing

� Rising urbanisation and standard of living in the greater Asian region� Asian middle class population is likely to

grow from current 1.9bn to 2.7bn people by 2030

� Asian consumers are likely to spend US$32 trillion/year by 2030, accounting for 43% of total global consumption

39%

70%

94%

112%

26%

49%

70%85%

0%11%

20%27% 32%

-5% -10% -14% -18%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

2010 2020 2030 2040 2050

Textile fibres Food

65.8

72.5

86.8

100.7

113.3

123.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2005 2010 2015 2020 2025 2030

Textile fibres consumptionMillion metric tons

Source: Lenzing

19

Cellulose Gap TheoryDissolving wood pulp share of the textiles market is expected to grow further

� Production of cotton is forecast to remain stagnant or shrink

� Growth in total fibre consumption will be covered by man-made fibres

� However, certain moisture management properties of cellulose fibres cannot be substituted by oil-based synthetic fibres, enhancing opportunity for cellulosics

20

Textile Fibre Prices

800

1 200

1 600

2 000

2 400

2 800

3 200

Ja

n-1

4

Fe

b-1

4

Ma

r-14

Apr-

14

Ma

y-1

4

Ju

n-1

4

Ju

l-1

4

Aug

-14

Sep

-14

Oct-

14

No

v-1

4

De

c-1

4

Ja

n-1

5

Fe

b-1

5

Ma

r-15

Apr-

15

Ma

y-1

5

Ju

n-1

5

Ju

l-1

5

Aug

-15

Sep

-15

Oct-

15

No

v-1

5

De

c-1

5

Ja

n-1

6

VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" IndexUS$/t

21

Global Cost CurveC

om

p 1

Co

mp

2

Co

mp

3

SA

PP

I

SA

PP

I

Co

mp

4

Co

mp

5

Co

mp

6

Co

mp

7

Co

mp

8

Co

mp

9

Co

mp

10

Co

mp

11

Co

mp

12

Co

mp

13

Co

mp

14

Co

mp

15

SA

PP

I

Co

mp

16

Co

mp

17

Co

mp

18

Co

mp

19

Co

mp

20

Co

mp

21

Co

mp

22

Co

mp

23

Co

mp

24

Co

mp

25

Co

mp

26

Co

mp

27

Co

mp

28

Co

mp

29

Co

mp

30

Co

mp

31

Co

mp

32

Co

mp

33

Co

mp

34

Co

mp

35

Co

mp

36

Co

mp

37

Delivered Cash Cost USD/ADMT

AverageCost

Source: RISI

22

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

23

Strategic focus

� We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages

� Saiccor and Tugela turbines – FY2016/17

� Ngodwana boiler upgrade for future debottlecking – Q2 FY2016

� Group procurement initiatives

� Ongoing continuous improvement across all mills

� Cloquet Mill’s kraft campaigns

24

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 in 2015

� Husum volumes transferred to our assets in H2 2015

� Growth in niche speciality grades on our CWF machines in US and EU ongoing

25

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

� Additional packaging at Ngodwana and Tugela

� Nano-cellulose pilot plant in the Netherlands

� Electricity opportunities in South Africa

� Debottlenecking of Saiccor and Ngodwana DWP

� Securing additional HW timber supply in SA

26

Focus areasGrow through moderate investments

� Sale of both Enstra and Cape Kraft Mills completed

� Refinancing and debt reduction will lead to lower finance cost

27

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

28

Focus areasAccelerate growth in adjacent businesses from a strong base

29

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

30

Highlights

� Profit for the period US$75m (Q1 FY15 US$24m)

� EPS ex-special items 13 US cents (Q1 FY15 5 US cents)

� EBITDA ex-special items US$175m (Q1 FY15 US$145m)

� Net debt US$1,734m, down US$306m year-on-year

Q1 FY16

31

EBITDA and operating profit

147

145

175

60

74

112

0

20

40

60

80

100

120

140

160

180

200

Q1 FY14 Q1 FY15 Q1 FY16

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 18 in our Q1 FY16 results booklet (available on www.sappi.com) for a definition of special items.

Excluding special items*

Q1 FY14

Q1 FY15

Q1 FY16

Net Debt/ LTM EBITDA

4.6 3.1 2.6

Interest Cover 3.0 3.8 5.1

EBITDA % 9.8 10.5 13.6

ROCE % 7.0 9.7 16.2

Key ratios: (%)

32

Highlights

33

Highlights

34

Product contribution split - LTM


44%

Paper56%

EBITDA excluding special items*


60%

Paper40%

Operating profit excluding special items

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 18 in our Q1 FY16 results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.

35

Net debt/EBITDA development

159

126

88

155

147

171

140

200

145

170

109

201

175

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

Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16

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

383

64

511

494

221

49

33

75

339

0

100

200

300

400

500

600

2016 2017 2018 2019 2020 2021 2022 2032

US

$ m

illio

n

Cash Short-term SPH term debt SSA RCF Securitisation

36

Maturity profileFiscal years

Includes US$400m bond

US$350m bond

US$221m bond

EUR450m bond

350

37

Capex development

0

100

200

300

400

500

600

2012 2013 2014 2015 2016 Estimate

US

$ m

illio

n

Maintenance Efficiency

38

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

� Leading European coated paper producer� FY15 Net sales: US$2.6b

� FY15 EBITDA: US$209m

� 3.5m tons per annum of paper capacity

� 1.2m tons per annum of pulp capacity (integrated)

� Well-invested assets in the heart of the European market

Divisional overviewSappi Europe

39

40

Divisional overviewSappi Europe

Coated woodfree

paper1 990

Uncoated woodfree

paper245

Coated mechanical

paper1 060

Speciality paper245

Sappi Europe saleable capacity (‘000tpa)

* 18 Producers * 10 Producers

European CWF and CM capacity shares**

** Source: RISI

Sappi

UPM

Lecta

Stora Enso

Burgo

Others*

0%

20%

40%

60%

80%

100%

CWF

UPM

Sappi

Burgo

Stora Enso

Others*

0%

20%

40%

60%

80%

100%

CM

41

Western Europe shipments including export.Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008

Western Europe

Coated paper deliveries and prices

0.6

0.7

0.8

0.9

1.0

1.1

1.2

Q1 0

8

Q2

Q3

Q4

Q1 0

9

Q2

Q3

Q4

Q1 1

0

Q2

Q3

Q4

Q1 1

1

Q2

Q3

Q4

Q1 1

2

Q2

Q3

Q4

Q1 1

3

Q2

Q3

Q4

Q1 1

4

Q2

Q3

Q4

Q1 1

5

Q2

Q3

Q4

Q1

20

08

= 1

CWF MCR CWF 100gsm sheets prices LWC 60gsm offset reels prices

42

ProjectsSappi Europe

Alfeld Mill� Speciality conversion (December 2013)

Gratkorn Mill� Pulp mill and paper machine upgrades

Kirkniemi Mill� Power plant rebuild

Nanocellulose pilot plant (The Netherlands)

SummarySappi Europe

� Highly competitive in service, quality and cost in Europe

� Strong cash flows

� Highly attractive and growing specialities business

� Alfeld Mill conversion (December 2013)

� Investment in Kirkniemi Mill power plant

� Investment in Gratkorn Mill paper machines and recovery boiler

� Market is in decline, capacity needs to be right-sized; Nijmegen Mill sold and repurposed (June 2014)

43

44

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

� Leading North American coated freesheet paper producer� FY15 Net sales: US$1.4b


� 1.1m tons per annum of coated paper capacity

� 700,000 tons per annum of integrated paper pulp capacity

Divisional overviewSappi North America

45

Verso51%

Sappi32%

Catalyst2%

Appleton8%

WestLinn7%

46

Divisional overviewSappi North America

Coated woodfree

paper1 160

Dissolving wood pulp

330

Speciality paper

40

NBHK30

Sappi North America saleable capacity (‘000tpa) US Coated freesheet capacity shares*

* Source: RISI

ProjectsSappi North America

47

Cloquet Mill� Pulp mill dissolving wood pulp conversion

Westbrook Mill� Coater modernisation

Somerset Mill� Natural gas conversion

Cloquet Mill� Lime kiln shell rebuild

48

* US industry shipments and total US consumptionSource: AF&PA and RISI indexed to calendar Q1 FY08

United States

Coated paper prices and shipments

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

Q1 F

Y08

Q2

Q3

Q4

Q1 F

Y09

Q2

Q3

Q4

Q1 F

Y10

Q2

Q3

Q4

Q1 F

Y11

Q2

Q3

Q4

Q1 F

Y12

Q2

Q3

Q4

Q1 F

Y13

Q2

Q3

Q4

Q1 F

Y14

Q2

Q3

Q4

Q1 F

Y15

Q2

Q3

Q4

Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices

Q1 F

Y08 =

1

49

Sappi’s release paper businessBy end-user segment

Sappi Other

FashionAutomotive and

commercial upholstery

Decorative laminates

Engineering films and other

Sappi Sappi Sappi

Sappi

50

SummarySappi North America

� Well-invested, premier asset portfolio

� Established brands with strong market position� Exposure to most attractive end-market segment

� Unmatched reputation for product innovation and customer service

� A low-cost producer with strong free cash flow profile

� Defined and focused opportunities for driving further profitable growth

51

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

� Leading South African graphic and packaging paper producer� FY15 Net sales: US$1.3b


� 1m tons per annum of dissolving wood pulp (DWP) capacity

� 690,000 tons per annum of graphic and packaging paper production

� 750,000 tons per annum of pulp production (integrated)

52

Divisional overviewSappi Southern Africa

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

53

Divisional overviewSappi Southern Africa

Forestry1 100

Dissolving wood pulp

1 010

Paper and paper

packaging675

Sappi Southern Africa saleable capacity (‘000tpa) Global Dissolving Wood Pulp Demand (‘000k M Tons)*

* Source: Hawkins Wright

Forecast

54

ProjectsSappi Southern Africa

Ngodwana Mill� Dissolving wood pulp (DWP) conversion

Tugela and Ngodwana Mills� Pulp mill upgrades

Sale of Cape Kraft and Enstra Mills’ recycled packaging business

� Land sales

Our DWP Competitive AdvantageSappi Southern Africa

� Low-cost and fast-growing woodfibre from state-of-the-art plantations

� Large-scale, modern and well-invested assets

� Favourable currency trend

� Well-positioned in dynamic market

55

56

SummarySappi South Africa

� Investing in specialised cellulose

� Low-cost producer

� Fast-growing market

� Excellent customer relationships

� 'Growing' our forestry assets

� Improving paper business

� Better use of timber

� Improving cost position

� Product optimisation - Packaging

� Profitable with growth opportunities

57

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

58

Sustainability

59

Sustainability

60

Agenda


� Strategy

� Results

� Divisions

� Sappi Europe



� Sustainability

� Conclusions

61

Conclusions

� We are making real progress

� Reduction in capital spending and refinanced debt

� Costs remain a chief concern

� Cash generative paper business will fund growth in:

� Cellulose-based solutions

� Speciality packaging papers

� Complementary products

� Committed to accelerating value for shareholders through:� Debt reduction

� Improved profit

� Strategic positioning

62

Thank you

Documents

Roadbook Feb 2016 - Sappi · Sales Ltd. Sales Analysis * Data reflects results from FY 2015 49% 26% 25% Sales by ... RISI World Graphic Paper Report Forecast* 14 Industry Consolidation