UBS Paper and Packaging Conference Cape Town 27 September 2012

Transcription

1 UBS Paper and Packaging Conference Cape Town 27 September 2012

2 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, which do not relate to historical matters, identify forwardlooking 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 the 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 or 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 located in the Investor Info section of

3 Strategy Update 3 Two years of decisive intervention in our business A simple clear strategy four components Well focused paper business significantly improved profitability and competitiveness Maintain and improve performance of US and Saiccor operations Invest in growing higher margin business Reduce both quantum and cost of debt Real progress: - major once-off costs behind us - continued trend of improving earnings - reduced debt

4 Focused Paper Business Europe 4 Lower cost base, improved margins and strong cash generation Cost reduction in excess of $100m/annum - Closure of Biberist Simplified product range Top class service Planned conversion of Alfeld PM2 to speciality grades only Sappi South Africa Paper and Paper Packaging Lower cost base, more focused product range and business Closure of pulp mills at Enstra and Tugela Closure of Adamas mill Closure of PM at Tugela Cost savings of US$30m/annum

5 Improving performance in US and Saiccor 5 North America Challenging first quarter maintenance shut and some technical issues Continued strong coated paper performance gaining market share good margins Pulp pricing and weak global markets lower overall performance Chemical Cellulose EBITDA margins Jan-June 2012 of 30% Production efficiency continues to improve Maximum contract volumes

6 Investing for growth AND debt reduction 6 Investment in Chemical cellulose Both Ngodwana and Cloquet conversion projects on time and on budget Debt Significant refinancing over the past two years Net debt down more than $550m from 2009 peak, further $200m by end of FY2013 Non-essential asset sales to help reduce debt more than US$100m will have been raised No significant debt maturities for 5 years strong liquidity position Net finance costs expected to nearly halve FY2011 to FY2013

7 Looking forward 7 FY2013 An important year Complete CC expansion projects on time and on cost Focus on improved SA performance post restructuring Further improvement in European performance General tough market conditions expected to continue Deliver improved bottom line performance/earnings Maintain net debt levels in tight range despite CC investments

8 Looking forward 8 FY2014 onwards Delivery Full contribution of CC expansion projects and EU speciality expansion Significant reduction in capex Earnings growth expected to continue Gearing to be significantly lower

9 In Conclusion 9 Sappi is a well focused business, with clear goals Financially much stronger Further improvement underway Good prospects and potential for upside Much improved earnings and returns over the next 2-3 years

10 Sappi Chemical Cellulose 27th September 2012

11 Sappi and Chemical Cellulose Sappi is the Global leader in chemical cellulose High Growth and high margin business Success (both past and future) based on 3 key elements Low cost manufacturing and distribution Long term contractual commitments Specialised knowledge and customer support

12 What is Chemical Cellulose? Cellulose is a natural organic polymer chain 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 chains within the wood The purified natural wood cellulose fibres are further dissolved by our customers and re-generated or reformed for a host of applications one being a direct natural substitute for cotton

13 Saiccor Chemical Cellulose Mill CC capacity of 800,000 tpa largest single site globally Falls within the bottom quartile of the competitor cost curve Cost of growing fibre / growth rates Proximity of forests to Saiccor Good logistics to main markets Multi line operational flexibility Ligno plant and future Biomass options Integrated Management Systems ISO 9001, ISO 14001, ISO and OHSAS FSC (Forest Stewardship Council) Chain of Custody

14 Chemical Cellulose Expansion Projects NGODWANA - Mpumalanga Located near Nelspruit CC capacity of 215 ktpa from April 2013 Within the bottom quartile of the competitor cost curve Eucalyptus wood in close proximity CLOQUET Located in the state of Minnesota on the St. Louis River Cloquet is NA s newest and most modern pulp mill Within the bottom quartile of the competitor cost curve Produces 450,000 tons per year of paper pulp CC capacity of 330ktpa from 01 June 2013 Maple and Aspen wood source in close proximity

15 Process & Product Complexity Many factors have an influence on the performance & application of CC Wood source (softwood/hardwood/ species; age, season, soil, climate) Process type (cooking / digesting and bleaching) Sheet structure (physical and chemical impacts) Every CC pulp will have unique performance characteristics based on the manufacturing history some are and will be a lot better quality than others Blend Engineering! Saiccor- 800K Cloquet-330K Ngodwana-215K

16 Sappi CC Centre of Excellence and Delivery Model Saiccor Cloquet CC Technology Centre COE Ngodwana Forestry TC Pretoria TC Strong Technical Partnerships with our customers Customer driven R&D and innovative solutions World Class Know how on cellulose applications Supplier to Viscose Sector for over 50 years Specialised pulp testing methods and equipment End use process & product testing Pilot plant product manufacture in all segments

17 Global Chemical Cellulose Demand 2012 Forecast to grow at 6% p.a. Total = 5.4 M

18

19 Estimated 2012 Textile Fibres Consumption Split Total Market Demand = ± 74m 80.2m tons tons Source: PCI Fibres/Sappi/Gherzi

20 Key Demand Drivers for Textiles Population growth Global population from a current 6.9 billion to 8.3 billion by 2030 and per capita consumption Increasing need for clothes and food Increasing need for more comfortable clothing Rising urbanization and standard of living in the Greater Asian Region Asian middle class population is likely to grow to 2.7 billion by 2030 from the current 1.9 billion people Asian consumers are likely to spend $32 trillion per year by 2030, accounting for 43% of total global consumption Forecast Source : USDA / ICAC / GHERZI I /Lenzing / Asian Development Bank

21 Global Chemical Cellulose Capacity 2012 Saiccor share of global demand = 15% based on operating rates Total capacity including Cotton Linter Pulp is +_ 7.2m

22

23 VSF growth M China 53% Other 8% Birla/Lenzing 39% Source: Sappi Includes Lyocell M China 53% Other 5% Birla/Lenzing 42% Source: CCF

24 Competitor Cost Comparison + 25% Below Average Cost Sappi = 27% Others = 28% World Competitor CC Cash Costs into VSF based on 80% of supply volumes- delivered Shanghai Above Average Cost 45% Average Cash Cost 30%

25 VSF Margin Squeeze

26 VSF Pricing vs Cotton - Premium Source PCI Fibres Monaco 3 July 12

27 Chinese VSF Price and Inventories past 18 months Source : CCF Goup

28 Conclusion Real CC demand growth is forecast Sappi s CC strengths are: Secure and sustainable wood baskets Very competitive cost positions Business model anchored on long term contracts with leading customers and minimal spot business Strong and mature customer relationships Supply Flexibility Technical knowledge in all our target segments Market leadership position in VSF Exciting, profitable, growth business

29 Inspired by life Thank You