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12 November 2015
Chief Executive Officer
Steve Binnie
Sappi Limited
Q4 and Full Year 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 ex-special items 16 US cents (Q4 FY14 12 US cents) EBITDA ex-special items US$201m (Q4 FY14 US$200m) Profit for the period $83m (Q4 FY14 US$68m)
Q4 FY15
FY 2015
EPS ex-special items 34 US cents (FY14 22 US cents) EBITDA ex-special items US$625m (FY14 US$658m) Profit for the period $167m (FY14 US$135m) Net Debt US$1,771m, down $175m year-on-year
5
EBITDA and operating profit15
9
126
88
155
147
171
140
200
145
170
109
201
70
38
5
67
60
95
67
124
74
104
43
136
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 4Q 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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.
Excluding special items*
6
EBITDA Bridge*
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 21 in our Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.
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
Q4 FY14 vs. Q4 FY15Sales revenue Variable & delivery Fixed costs
020406080
100120140160180200220240260280300320340
200 16 92 (236) (25) 147 (17) 56 (32) 201
Q4 FY14EBITDA
Sales volume Price & mix Exchange rate Variable &delivery costs
Exchange rate Fixed costs Exchange rate Other Q4 FY15EBITDA
7
Product contribution split - LTM
Specialised cellulose
45%
Paper55%
EBITDA excluding special items*
Specialised cellulose
65% Paper35%
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 Q4 FY15 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
201
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 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15
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
456
65
513
504
221
54
36
82
56
343
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
9
Maturity profileFiscal years
Includes US$400m bond
US$350m bondUS$221m bond
EUR450m bond
10
Capex development
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 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 Coated paper capacity shuts/conversions continue in Europe and NA Mechanical paper under significant pressure
Selling prices and input costs CWF and CM sales prices moving up in Europe Fuel oil and oil-based chemical prices low Wood prices still high in US, but declining
Strategy Implement price increases when/where market allows Reducing fixed and variable costs Reduce or convert capacity in line with demand declines
13
Global specialised cellulose market trends
Supply and demand Swing capacity leaves supply situation balanced for now Underlying demand trends still positive
Selling prices and input costs Commodity grade DWP prices rising Prices for VSF and cotton stable, oil-based polyester still low 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
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.** Source: Sappi estimates
Sappi’s graphic paper volumes up 5% vs last year, particular strength in CWF
Strong operating rates at all our mills
Average prices up 4% from last year due to weaker EUR/USD and price increase
Variable costs up 7% on paper pulp. Fixed costs down 2% year-on-year.
Speciality paper business continues to improve sales volumes and realised prices
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%2014 v 2013 15 v 14 16 v 15 17 v 16
CWF CM
Forecast
Demand development**
15
Sappi North America
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
10
20
30
40
50
60
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.** Source: Sappi estimates
Good recovery in seasonally strong quarter
Strong dollar impacting sales, and underlying market is weak
Coated paper volumes were flat year on year with realised price slightly lower.
Release business continued to experience weak demand from China, European pricing
Fixed and variable costs were lower than last year, wood prices starting to decline.
Demand development**
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%2014 v 2013 15 v 14 16 v 15 17 v 16
CWF
Forecast
16
Sappi Southern Africa
0%
5%
10%
15%
20%
25%
30%
0
20
40
60
80
100
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
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 Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.** Source: CCF
Higher volumes and prices compared to both periods – good demand for virgin packaging.
Demand remained strong for DWP – volumes/prices better year-on-year.
Variable costs flat, while fixed costs were down year-on-year.
Post quarter end, we received approval from the Competition Commission authorities for
the sale of the Enstra and Cape Kraft Mills. Transactions to be concluded by December
Staple grade dissolving pulp (US$/ton)**
780
800
820
840
860
880
900
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15
Feb-
15
Mar
-15
Apr
-15
May
-15
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
17
Strategic focus
We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages Saiccor and Tugela turbines 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 transferred to our assets
in H2 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 Upgrades to Tugela and Ngodwana pulp
mills – additional virgin packaging paper Nano-cellulose pilot plant in The
Netherlands
20
Focus areasGrow through moderate investments
Sale of both Enstra and Cape Kraft Mills nearing completion
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
Improved Q1 FY16 EBITDA and EPS ex-items expected compared to
prior year due to better operational performance and lower interest
costs.
However, the drought in SA may adversely impact production and
profitability should normal summer rainfall not be forthcoming.
Dissolving wood pulp demand expected to remain healthy
Graphic paper markets in Europe slightly better than anticipated,
though still expected to decline
In North America, the strong US Dollar will continue to negatively
impact trade flows for domestic producers.
25
Outlook (cont’d)
Based on current market conditions, and exchange rates, we expect
EBITDA ex-items in FY16 will be higher than FY15.
With lower interest costs, offset somewhat by increased cash taxes, we
expect strong growth in our EPS ex-items.
Capital expenditure is expected to be in line with 2015, focused largely
on energy and debottlenecking projects in South Africa.
Possibility of utilising some of our cash reserves to repay and refinance
a portion of our debt. Net debt expected to reduce further over the
course of the year reducing our financial leverage towards our target of
two times net debt to EBITDA.
Thank you –
26
Supplementary information
27
28
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
1.1
1.2
Q1
FY08 Q2
Q3
Q4
Q1
FY09 Q2
Q3
Q4
Q1
FY10 Q2
Q3
Q4
Q1
FY11 Q2
Q3
Q4
Q1
FY12 Q2
Q3
Q4
Q1
FY13 Q2
Q3
Q4
Q1
FY14 Q2
Q3
Q4
Q1
FY15 Q2
Q3
CWF MCR CWF 100gsm sheets LWC 60gsm offset reels
29
Sappi Europe
Q4 FY15 Q4 FY14 FY 2015 FY 2014Tons sold (‘000) 847 811 3,242 3,303Sales (EURm) 609 561 2,313 2,288
Price/Ton (EUR) 719 692 713 693Cost/Ton* (EUR) 692 660 694 676
Operating profit excluding special items** (EURm) 23 26 64 55
* 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 4Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
30
* 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
FY08 Q
2
Q3
Q4
Q1
FY09 Q
2
Q3
Q4
Q1
FY10 Q
2
Q3
Q4
Q1
FY11 Q
2
Q3
Q4
Q1
FY12 Q
2
Q3
Q4
Q1
FY13 Q
2
Q3
Q4
Q1
FY14 Q
2
Q3
Q4
Q1
FY15 Q
2
Q3
Domestic CFS shipments Total US CFS consumption CFS #3 60lb Rolls prices
Q1
FY08
= 1
31
Sappi North America
Q4 FY15 Q4 FY14 FY 2015 FY 2014Tons sold (‘000) 357 375 1,305 1,454Sales (US$m) 369 390 1,377 1,517
Price/Ton (US$) 1,034 1,040 1,055 1,043Cost/Ton* (US$) 947 973 1,034 1,031
Operating profit excluding special items** (US$m) 31 25 27 18
* 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 4Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
32
* Source: Average weekly FOEX delivered European prices
Pulp prices*
400
500
600
700
800
900
1 000
1 100
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15
US
$/to
n
NBSK Europe (USD) BHKP Europe (USD)
33
VSF Market Conditions
34
Textile Fibre Prices
800
1 200
1 600
2 000
2 400
2 800
3 200
VSF 1.2D VSF 1.5D PSF 1.4D3 Cotton 328 Cotton "A" IndexUS$/t
35
Sappi Southern Africa
Q4 FY15 Q4 FY14 FY 2015 FY 2014Tons sold (‘000) 482 453 1,768 1,706Sales (ZARm) 4,375 3,799 15,470 14,454
Price/Ton (ZAR) 9,077 8,386 8,750 8,472Cost/Ton* (ZAR) 6,905 6,987 7,017 6,936
Operating profit excluding special items** (ZARm) 1,047 634 3,063 2,620
* 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 4Q 2015 results booklet (available on www.sappi.com) for a definition of special items.
Excluding Sappi Forests
36
Cash flow
US$m Q4 FY15 Q4 FY14 FY 2015 FY 2014Cash generated from operations 181 160 544 566Movement in working capital 86 153 (11) 34Net finance costs paid (24) (26) (135) (162)Taxation paid - - (16) (1)
Cash generated from operating activities 243 287 382 437
Cash utilised in investing activities (84) 1 (237) (194)Capital expenditure (85) (105) (248) (295)Cash flows on disposal of assets and businesses 1 97 1 87
Other movements - 9 10 14Net cash (utilised) generated 159 288 145 243
37
EBITDA and operating profit
US$m Q4 FY15 Q4 FY14 FY 2015 FY 2014
EBITDA excluding special items* 201 200 625 658Depreciation and amortisation (65) (76) (268) (312)
Operating profit excluding special items* 136 124 357 346Special items* - gains (losses) (1) (48) 54 (32)Plantation price fair value adjustment 22 - 41 18
Net restructuring provisions and loss on disposal of assets and business (2) (26) (6) (23)
Impairment of goodwill - (1) - (1)
Asset impairments - (3) - -
Employee benefit liability settlement (1) - 55 -
BEE charge (1) - (2) (2)
Fire, flood, storm and other events (19) (18) (34) (24)
Segment operating profit 135 76 411 314
* Refer to page 21 in our Q4 FY15 results booklet (available on www.sappi.com) for a definition of special items.
Excluding special items reconciliation to reported operating profit
38
Thank you