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August 2019
Sappi Limited
Jefferies Global Industrials delivering on
strategy
2019
Vision 2020
intentional
evolution
next phase
growth
1
Forward-looking statements and Regulation G
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 and which do not relate to historical matters, identify forward-looking statements. In addition, this
document includes forward-looking statements relating to our potential exposure to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity price risk. 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 adverse changes in global economic conditions
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 restructurings or 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.
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 available on our website:
https://www.sappi.com/quarterly-reports.
Agenda
o Overview
o Products o Coated paper
o Dissolving wood pulp
o Packaging and Specialities
o Strategy
o Conclusions
4
Sappi at a glance
Printing and Writing Papers Packaging and Speciality Papers Dissolving Wood Pulp
Turnover US$5.8 billion in 2018
5.7 million tons paper
3.7 million tons pulp
12,645 employees
Global network in 150 countries
Market leader in three business divisions:
9 Mills
Sales analysis
51%
25%
24%
Sales by source* (US$)
Europe North America
Southern Africa Asia and other 46%
23%
10%
21%
Sales by destination* (US$)
51%
19%
16%
6%
6%
1% 1%
Coated paper
Dissolving wood pulp
Speciality paper
Commodity paper
Uncoated paper
Other
Paper pulp
Sales by product*
* Data reflects FYTD 2019
FYTD 2019
Agenda
o Overview
o Products o Coated paper
o Dissolving wood pulp
o Packaging and Specialities
o Strategy
o Conclusions
FYTD 2019
Sales analysis
Coated paper
o #2 Global producer of coated paper
o EBITDA margins ~8%
o Forecast** demand down 3%pa
o Forecast** capacity down 3%pa
* FYTD 2018
** RISI WGPF May 2019
51%
19%
16%
6% 6%
1%
1%
Coated paper Dissolving wood pulp
Speciality paper Commodity paper
Uncoated paper Other
Paper pulp
Global coated woodfree demand
* Source: RISI May 2019
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
North America Europe Far East Latin America Africa, ME, ROW
Forecast*
Agenda
o Overview
o Products o Coated paper
o Dissolving wood pulp
o Packaging and Specialities
o Strategy
o Conclusions
FYTD 2019
Sales analysis
Dissolving wood pulp
o #1 Global Producer
o EBITDA margins ~30%
o Demand forecast**+7%pa
o Capacity forecast** +5%pa
* Data reflects results from FYTD 2019
** Hawkins Wright March 2019
51%
19%
16%
6% 6%
1%
1%
Coated paper Dissolving wood pulp
Speciality paper Commodity paper
Uncoated paper Other
Paper pulp
Dissolving Wood Pulp (DWP)
o DWP is the most abundant natural organic polymer on earth and is found in all plant materials
o 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
o The purified natural wood cellulose fibres are further dissolved by our customers and regenerated
or reformed for a host of applications
Cellulose 45%
Hemi-cellulose 30%
Lignin 23%
Resins 1%
Inorganics 1%
Cellulose Gap theory
Dissolving wood pulp share of the textiles market is expected to grow further
o Production of cotton is forecast to remain
stagnant or shrink
o Growth in total fibre consumption will be
covered by man-made fibres
o However, certain moisture management
properties of cellulose fibres cannot be
substituted by oil-based synthetic fibres,
enhancing opportunity for cellulosics
0
20
40
60
80
100
120
140
1900 1920 1940 1960 1980 2000 2005 2010 2015 2020 2025 2030
Million Metric Tons
Fibre Production
Wool
Cotton
Man-made Cellulosic Fibres
Synthetic Fibres
Forecast
“Cellulose Gap” Source: Lenzing
Competition Top 10 producers by grade*
*Source: HW, March 2019
Agenda
o Overview
o Products o Coated paper
o Dissolving wood pulp
o Packaging and Specialities
o Strategy
o Conclusions
FYTD 2019
Sales analysis
* Data reflects results from FYTD 2019
Speciality paper
EBITDA margins ~14%
Demand +1% to +6%
51%
19%
16%
6% 6%
1% 1%
Coated paper Dissolving wood pulp
Speciality paper Commodity paper
Uncoated paper Other
Paper pulp
FYTD 2019
Sales analysis
Commodity paper
EBITDA margins ~20%
Demand up 3%
* Data reflects results from FYTD 2019
51%
19%
16%
6% 6%
1% 1%
Coated paper Dissolving wood pulp
Speciality paper Commodity paper
Uncoated paper Other
Paper pulp
Global market sizes
17
Speciality papers
Packaging boards 48%
Printing and writing 27%
Speciality papers
7%
Tissue 8%
[CATEGORY NAME]
[PERCENTAGE]
25mtpa
Portfolio
18
Our Packaging and Speciality Paper segment
European competitive landscape
19
Packaging and specialities
2008-2017
20
Global capacity development by major grade
*Source: Fisher International Inc.
Packaging and Speciality Papers
21
Trends in our markets
o Cost reduction
(TCO)
o Light weighting and
down gauging
o Recycling costs
packaging
Economic
Concerns
o Eco-designed
packaging
o Process-optimized
papers (specialities)
o Smart/active
packaging
o Traceable packaging
Technology and
Innovations
o Food safety
o Plastic bans and
waste directive
o Circular economy
o Recycling/waste
directive
Regulations
o Packaging as part of
product experience
o Easy opening
o More functionality
and convenience
o Smaller pack sizes
Demographic
Change
Packaging and Speciality Papers
22
Trends in our markets
o Cost reduction
(TCO)
o Light weighting and
down gauging
o Recycling costs
packaging
Economic
Concerns
Packaging typically regarded as a
low-cost/high risk
Lighter-weight paper based cartons replacing
jars and cans to reduce heft/transport costs
Packaging should be recyclable, sustainable,
have an increasing paper ratio
Incentives for easy-to-recycle packaging
expected
Packaging and Speciality Papers
23
Trends in our markets
o Eco-designed
packaging
o Process-optimized
papers (specialities)
o Smart/active
packaging
o Traceable packaging
Technology and
Innovations
Eco-designed approach: end-of-life view,
recycling included
More tracking, security, safety and anti-
counterfeit
Adhesive bonds rather than screw-fittings for
mobile phones and tablets. Used in electronic
circuits, fuel cell development in batteries
Packaging and Speciality Papers
24
Trends in our markets
o Food safety
o Circular economy
o Recycling/waste
directive
Regulations
Packaging and Speciality Papers
25
Trends in our markets
o Packaging as part of
product experience
o Easy opening
o More functionality
and convenience
o Smaller pack sizes
Demographic
Change
Global population is growing and people are
living longer
Packaging considerations must keep in mind a
growing and aging population that are visually
impaired, and arthritic
Smaller pack sizes for on-the-go lifestyles
Portion control for the more health-conscious
Changing buying behavior of Millennials
Acquisition completed on February 28 in 2018
26
Cham speciality paper acquisition
Carmignano mill produces 100ktpa
Flexible Packaging, Label Papers, Dye Sublimation Papers and Inkjet Papers
Condino mill produces 60ktpa
Flexible Packaging, Glassine Paper, Dye Sublimation Paper
Integration proceeding
according to plan
Synergies of €10M
expected within
2 years
Will add €30M of
EBITDA at 15% margin
post-synergies
Matane acquisition rationale
Supports strategy and 2020 vision through the achievement of cost advantages and
growth in higher margin packaging and speciality paper.
Increase the pulp integration by supplying high yield pulp to our US and European
packaging operations, thereby enabling Sappi to:
Secure supply of a raw material critical to product quality
Reduce input pricing and volatility in profitability
Avoid higher capital cost of internal high yield pulp capacity – Estimated at $210m for 200kt
27
Asset Overview
Capacity of 270,000t per annum of aspen
and maple high yield pulp
Mill located in Matane, Quebec
129 employees
Port access within 5km
Well maintained assets
Matane Mill Somerset Mill
Packaging and Speciality Papers
29
Innovation
Sealable paper for
confectionary bars
Coated and uncoated Dye -sublimation
papers for high-productional applications
Functional Papers as renewable
resource replacing plastics and
providing Barriers
Medical paper for sterilizable
laminated pouches
Multilayer Headbox for
Paperboard Manufacturing
Glassine paper for carbon fiber
production
Innovative high bulky board
grades
Disruptive change in packaging due to change from disposal to circular economy
Demand for easy-to-recycle packaging is increasing
Demand for both the specialities and packaging & board papers is growing
Sappi is actively converting capacity from our printing and writing papers into the
packaging and speciality sectors where we have a cost advantage
Profitability for Sappi is typically greater when manufacturing packaging and
speciality papers than it is for printing and writing papers
Producers who can innovate alongside the evolving demands of customers,
consumers and legislators will be the long-term winners
30
Packaging & Specialities review
Agenda
o Overview
o Products o Coated paper
o Dissolving wood pulp
o Packaging and Specialities
o Strategy
o Conclusions
Maintain
a healthy
balance
sheet
Rationalise
declining
businesses
Accelerate
growth in
higher margin
growth
segments
Achieve
cost
advantages
Improve
operational
and machine
efficiencies
Maximise
procurement
benefits Optimise
business
processes
Continuously
balance
paper supply
and demand
in all regions
Where
possible
convert paper
machines to
higher margin
businesses
Optimise
working
capital
Strong
cash
generation Smart
financing
Expand
paper
packaging
grades Enhance
specialised
cellulose
portfolio
Extract
value from our
biorefinery
stream
Our group strategy
32
At Sappi we do business with integrity and courage; making smart decisions which we execute with speed.
Our values are underpinned by an unrelenting focus on and commitment to safety.
Achieve
cost
advantages
Improve
operational
and machine
efficiencies
Maximise
procurement
benefits Optimise
business
processes
Our group strategy
33
We work to lower fixed and variable costs,
increase cost efficiencies and invest for cost
advantages.
Group efficiency and procurement initiatives
+US$60m target for 2019
Ongoing continuous improvement across all mills.
Investigate pulp integration opportunities in US and
EU – Matane acquisition
Saiccor expansion will lead to lower variable costs
Evaluating P&W capacity in Europe
Rationalise
declining
businesses
Continuously
balance
paper supply
and demand
in all regions
Where
possible
convert paper
machines to
higher margin
businesses
Our group strategy
34
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.
Downtime taken at mills to lower inventories
Progressive transition of Lanaken Mill out of LWC
Reduced CWF exposure at Maastricht Mill, Ehingen
Mill and Somerset Mill PM1
Maintain
a healthy
balance
sheet
Optimise
working
capital
Strong
cash
generation
Smart
financing
Our group strategy
35
Maintain leverage below 2x Net debt:EBITDA
No new major capex commitments
Finance costs US$60-70m/annum going
forward
7 yr €450m bond raised @3.125% - used to
repay €450m 2022 bond
Accelerate growth in
higher margin growth
segments
Extract
value from our
biorefinery
stream
Enhance
specialised
cellulose
portfolio
Expand
paper
packaging
grades
Our group strategy
36
We will make investments in existing and
adjacent areas with strong potential growth. Debottlenecking of Saiccor, Ngodwana and Cloquet
DWP complete
Expansion of Saiccor by 110kt/annum has started
Additional packaging at Ngodwana and Tugela Mills
Securing additional HW and SW timber supply
Biomaterials, bio-chemicals – lignins, sugars
Ramp-up of board grades at Maastricht and Somerset
Agenda
o Overview
o Products o Coated paper
o Dissolving wood pulp
o Packaging and Specialities
o Strategy
o Conclusions
Conclusions
o Through intentional evolution, we are growing Sappi into a profitable and cash-
generative diversified woodfibre group
o Selective capital spending in adjacent, growing, and more profitable businesses
o Costs remain a chief concern
o Cash-generative paper business will fund growth in:
o Cellulose-based solutions
o Packaging and speciality papers
o Complementary products
o Committed to accelerating value for shareholders through:
o Debt reduction
o Improved profit
o Strategic positioning
Thank you
39
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