How do you future-proof the European Paper Industry? Berry Wiersum CEO, Sappi Europe 1
From the perspective of a Graphics Paper Producer COST, CUSTOMERS AND CASH GROWTH AND CONVERSION NEW REVENUE STREAMS 2
Our view on P+W grades 13 years ago Example WFC 000 tons Source: EURO-GRAPH /PPPC/SFPE 3
. and today Example WFC 000 tons Source: EURO-GRAPH /PPPC/SFPE 4
Current status Paper industry facing strong economic challenges due to declining market conditions and rising costs: 5
Mid term outlook today Some stabilization in CWF during the last months in NA -> CWF NA: drop of 30% vs top year 2006 -> CWF EU: drop of 26% vs top year 2007 Source: PPPC, Market Intelligence 6
Mid term outlook today 7
Appetite for apps Digital keeps growing 25 million issues delivered in the last year and 120,000 every day Source: Morgan Stanley 8
However Papermaking cash cost rising? Comparison Q3, 2013 vs Q3, 2009 Source: Risi s Cornerstone WF2s coated Note: Cash Cost: fiber, fuels, chemicals, labor, materials, electricity 9
and.margin squeeze continues European Value Chain 10
From Last Year - what the Paper Industry needs to do European Value Chain Challenge the Status Quo: Current Go-to-market routes are too expensive Duplication (logistics & supply chain, unnecessary stock) Waste (odd sizes, grain direction) Old-fashioned (Nobody does it like us ) Getting paid for what you do or don t do 11
Cost, Customers and Cash: conclusions Reducing volumes and prices -> increased bankruptcies Publishers and Printers force industry into lowest cost to serve Indent Stock Distance becomes discriminator Industry closes highest cost mills and reduces cost to serve -> further pressure on price 2013 -> market decline faster than industry adjustment 2014 -> industry catches up Go to market route under threat 12
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American Express 14
Shell in 1833 15
Nokia & RIM Source: Board of Innovation 16
Nokia & RIM Source: Board of Innovation 17
Nokia & RIM Source: Board of Innovation 18
Samsung in 1938 19
Definition Speciality Papers Paper or board that is manufactured, or subsequently converted, for a specific use. These grades usually cannot be used for anything other than their intended special purpose. Paper that is often suitable for special purposes, because it possesses unique characteristics and properties, and is not considered to be one of the standards by the paper industry. Speciality Papers Commodity 20
Market Development Speciality Papers have in recent years trended with GDP Outlook 2013 2015 With GDP ranging from 1.15% to 2,50% this would result in a growth of 3,5 and 7% That equals a volume growth between 878 1.938 ktons Source AWA Asia-Pacific represents the strongest growth (+12%) Europe and North America represent with 60% the biggest share of the global demand 21
Influencing Factors Increasing wealth in emerging g markets Demographic development in mature markets Increase in single householdsh Increasing awareness of sustainability issues Smaller packaging sizes (convenience food) Technical requirements (e.g. stiffness) 22
Speciality Papers Trends and Outlook New applications for speciality papers for packaging will develop The packaging industry has now started intensive research efforts in order to develop improved and new functional properties for paper based substrates. Functional barriers and nanotechnologies -> increased usage of paper for primary packaging of food products (freshness, longer shelf life, reduce use of plastic films). Development of chemicals and fibres -> allow new packaging design with paper (e.g. moulded packs, thermo formed packs, ) Active and intelligent packaging -> incorporation of active substances like oxygen scavengers, antimicrobial systems, time temperature indicators, freshness indicators,.. Evolving market requirement: Packaging papers and boards will move from print carrier + and mechanical protection (multi-) functional materials fulfil food packaging requirements and enable replacement of mineral oil based packaging materials 23
Definition Speciality Papers Out of more than 400 million tons paper production only 5-7% can be called specialties. Source AWA 24
Trends in Packaging 25
A trend in packaging which needs to be stopped 26
Growth and Conversion conclusion Conversion doubles Sappi s presence in Specialities Alfeld PM 1 43000 Alfeld (D) Alfeld PM 2 MG 135000 Alfeld PM 3 MG Alfeld PM 4 MG 36000 46000 Volumes Sappi Alfeld Alfeld PM 5 MG 35000 300 ktons Portfolio: SBS Cartonboard Coated White Premium Topliner Coated and uncoated Flexpack Coated siliconizing base paper Coated label 27
New revenue streams Current status Pulp and paper products are fabricated from sustainably managed forests Paper/pulp is made from a renewable resource, is biodegradable and easily recycled, is largely circular (on fibre) A large portion of the energy used in the manufacture of pulp and paper is renewable Pulp mills basically have always been biorefineries, already for centuries. Yet biomass is more and more used for large scale energy production under favoured conditions, driving up costs for more sustainable applications 28
Why a circular bio-based economy? Clear targets - 80% reduction in CO2 emission - 50 % added value in products Only a circular biobased economy will enable us to reach this! Source: Cepi 29
From tree to molecule Used by P&P industry to manufacture products Lignin 23% Cellulose 45% Hemicellulose 30% Used by P&P industry to generate heat Source: Royal Society of Chemistry 30
Why a circular bio-based economy: We must reverse the downward trend in an industry that: sources domestic renewable raw materials has the infra-structure and the know-how to collect and process biomass into valuable materials creates jobs in a broad range of sectors in Europe, triggering g rural growth across regions places sustainability, smart and efficient use of resources at the heart of industrial, business and social activities By creating a higher value through the current P&P-operations, Thus leading to sustainability in both economic AND ecologic terms. 31
Which translates into. Redesigning the current P&P- industry into a sector that produces food, feed, fuel, materials and products made from biomass and waste. In a circular process Source: BioBased Industries Consortium 32
A stunning breakthrough Source: Cepi 33
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THANK YOU 35