Q3 FY18 financial results delivering on strategy 13 August 2018 - - PowerPoint PPT Presentation

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Q3 FY18 financial results delivering on strategy 13 August 2018 - - PowerPoint PPT Presentation

Q3 FY18 financial results delivering on strategy 13 August 2018 2018 Vision 2020 next phase growth intentional evolution Steve Binnie Chief Executive Officer Sappi Limited 1 Forward-looking statements and Regulation G


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SLIDE 1

13 August 2018

Chief Executive Officer Steve Binnie Sappi Limited

Q3 FY18 financial results

delivering on

strategy

2018

Vision 2020

intentional

evolution

next phase

growth

1

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SLIDE 2

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

  • r 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.

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SLIDE 3

3

Summary

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SLIDE 4

Highlights

 EBITDA ex-special items: US$155m (Q3 FY17: US$155m)  Profit for the period:

US$51m (Q3 FY17: US$58m)

 EPS ex-special items:

10 US cents (Q3 FY17: 11 US cents)

 Net debt:

US$1,603m (Q3 FY17: US$1,318)

Q3 FY18

4

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SLIDE 5

From paper to woodfibre

5

 Transition from global paper company to global woodfibre business

3 phases since 2010

Balance 2010-2013: reduce balance sheet risk while investing in DWP and speciality packaging

Debt reduction 2014-2016: reduce leverage from 4.6X to below 2X Net debt:EBITDA

Growth : 2017-2020: Strong positions in DWP and packaging give rise to growth opportunities  Global trends shifting in Sappi’s favour

Sustainability driving textile and packaging industries

Growth in paper based packaging, rising pulp costs and recycled paper trade flows encourage graphic paper conversions and closures

Bio-chemicals and biomaterials offer interesting new growth opportunities while supporting existing businesses

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SLIDE 6

6

Transformation – from paper to woodfibre

* EBITDA excluding special items

22 22 60 10 20 30 40 50 60 70 2010 2014 Q3 2018 LTM US CENTS

EPS excluding special items

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2014 Q3 2018 LTM

EBITDA* by Segment

Specialised cellulose Specialities and packaging papers Printing and writing papers 34 30 30 7 4 13 10 8 9 5 10 15 20 25 30 35 40 2010 2014 Q3 2018 LTM %

Segment analysis: EBITDA* margin

Specialised cellulose Specialities and packaging papers Printing and writing papers

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SLIDE 7

Sappi specialities and packaging papers

7

Global production sites with the ability to switch between graphics and packaging at various sites*

Alfeld Mill (Germany) Containerboard, flex-pack, label, paperboard, silicone base papers Carmignano Mill (Italy) Flexible packaging and functional papers Condino Mill (Italy) Flexible packaging and functional packaging Cloquet Mill* (USA) Label papers Ehingen Mill* (Germany) Containerboard Maastricht Mill* (The Netherlands) Paperboard Ngodwana Mill (South Africa) Containerboard Somerset Mill* (USA) Label paper and flexible packaging paper Tugela Mill (South Africa) Containerboard Westbrook Mill (USA) Silicone base papers Stockstadt Mill* (Germany) Flexible packaging and functional papers

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SLIDE 8

Specialities and Packaging Papers

8

Trends in our market

  • Easy opening
  • More functionality and

convenience

  • Smaller pack sizes

Demographic Change Regulations

  • Food safety – Mineral oil

barriers

  • Plastic bans and waste

directive Technology and Innovations

  • Traceable packaging
  • Customized packaging
  • Smart/active packaging

Economic Concerns

  • Cost reduction (TCO)
  • Light weighting and

down gauging

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SLIDE 9

Specialities and Packaging Papers

9

Trends in our market

Regulations

  • Food safety – Mineral oil

barriers

  • Plastic bans and waste

directive

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SLIDE 10

Dissolving wood pulp market

10

Viscose-grade DWP demand growth

Source: Sappi; Hawkins Wright; RISI. Other Europe Americas China

0.2 6.1 0.6 0.6 1.7 3.7 1.9 7.5 Market size 2017 Mtpa CAGR 2010-17% Viscose Cellulose ethers and MCC Cellulose acetate tow Nitro- cellulose and other Products (examples) 7.5 ~6-7 Total Rayon Grade High- alpha/ Speciality DWP grade Demand geography Applications (examples)

  • Textiles (viscose)
  • Non-wovens
  • Cellophane
  • Sausage skins
  • Construction
  • Food additives
  • Medicine fillers
  • Cosmetics
  • Cigarette filters
  • Paints and coatings
  • Films
  • Plastics
  • Explosives
  • Inks
  • Lacquers
  • Nail polish
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SLIDE 11

Fibre properties and applications

11

Cellulosic fibre properties helping drive that growth

Source: IHS Global, RISI, Hawkins Wright.

Key strength Qualifies Issue Apparel Home textiles Nonwovens/Technical textiles

Overall value proposition Applications Function and feel Appearance Sustainability 17 62 21 66 27 7 52 20 28 Cellulosic fibres Cotton Polyester

  • On a pure

property basis, cellulosic fibres are superior to cotton and differentiated

  • n

sustainability.

  • Polyester is

differentiated

  • n strength/

durability versus cotton and cellulosic fibres.

  • Natural and attractive,

‘greener’ alternative to cotton

  • Natural, functional and

well established

  • Cheap, durable and

versatile Durability

 

Absorbency

 

Breathability

 

Softness

  

Drape

 

Dyeability

  

Brightness/Lustre

  

Renewable and biodegradeable

 

Resource efficiency



 

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SLIDE 12

Q3 FY18

 Specialities and Packaging Papers

 Maastricht:

On time, within budget, legacy products qualified at lower costs

New product trials are testing well, larger volumes across all basis weights in time for September roll-out

 Ehingen:

On time, within budget

Carouseling stage set

 Somerset:

Delayed and overrun

Legacy products qualified at lower costs

Currently optimizing new products

12

Update on conversions and debottlenecking

 Specialised Cellulose

 Ngodwana:

After late start up and commissioning, focus is on September evaporator upgrade to get to the planned 250ktpa

 Saiccor:

Head-box and sheet former issues are behind us, now operating at full capacity (780ktpa)

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SLIDE 13

EBITDA and operating profit

Excluding special items*

13

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items. 160 155 155 97 93 85 20 40 60 80 100 120 140 160 180 Q3 FY16 Q3 FY17 Q3 FY18 US$ million EBITDA Operating profit

Key ratios Q3 FY16 Q3 FY17 Q3 FY18 Net debt/LTM EBITDA 2.2 1.7 2.1 Interest cover 7.0 8.4 11.0 EBITDA % 13.1 12.3 10.7 ROCE % 14.0 12.8 9.7

  • US$8m impact of Somerset shut overrun
  • US$3m due to DWP startup issues South Africa
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SLIDE 14

155 (77) (28) (4) 2 155 13 94

50 100 150 200 250 300

EBITDA Q3 FY17 Sales Volume Price & Mix Variable & Delivery Costs Fixed Costs Other Exchange Rate EBITDA Q3 FY18

EBITDA* bridge

Q3 FY17 to Q3 FY18

14

* EBITDA = EBITDA excluding special items

Sales revenue

US$ million

Notes:

  • 1. All variances were calculated excluding Sappi Forestry.
  • 2. “Exchange rate” reflects transactional and translation effect on consolidation.

Jun Exchange rates: 2018 2017 Average rate for the quarter: US$1 = ZAR 12.6312 13.1875 Average rate for the quarter: €1 = US$ 1.1920 1.1011

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SLIDE 15

Product contribution split – LTM

15

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.

41% 18% 41% Specialised Cellulose Specialities & Packaging Papers Printing Papers 54% 17% 29% EBITDA excluding special items Operating profit excluding special items

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SLIDE 16

Maturity profile

Fiscal years

16

317 74 1 29 47 46 548 451 70 221 365 83

100 200 300 400 500 600 2018 2019 2020 2021 2022 2023 2024 2032 US$ million Cash Short-term SPH term debt Securitisation SSA EUR450m bond EUR350m bond US$221m bond

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SLIDE 17

Capex development

17

100 200 300 400 500 600 700 2013 2014 2015 2016 2017 2018F 2019E US$ million Maintenance Efficiency and expansion

Saiccor expansion capex subject to EIA approval

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SLIDE 18

18

Divisional overview

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SLIDE 19

Global P&W paper market trends

19

 Supply and demand

 Operating rates remain healthy – CM partially at expense of CWF in EU.  Capacity closures and conversions (many to recycled containerboard) in North America and

Europe

 Selling prices and input costs

 Paper prices rising globally, tracking pulp price increases  Lag effect between pulp and paper prices

 Strategy

 Capacity conversions into other markets (Somerset/Maastricht/Lanaken/Ehingen)  Flexibility post conversion at Somerset and Maastricht to take advantage of market dynamics  Investments at key mills/machines to lower costs  Procurement and efficiency programs to further reduce costs.

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SLIDE 20

Global speciality & packaging paper market trends

20

 Supply and demand

 Environmental concerns spurring legislation incentivising the use of more paper-based

packaging

 Negative public perception weighs on plastic packaging  Conversions into recycled grades driven by China ban on RCP

 Selling prices and input costs

 Price increases announced in April – lag due to contract term  Softwood and hardwood fiber costs continue to rise

 Strategy

 Acquisition of Cham speciality paper business  Increase capacity and product offering to a growing customer base  Procurement and efficiency programs to further reduce costs  Transfer of Rockwell technology to paper based products

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SLIDE 21

Global DWP market trends

21

 Supply and demand

 Continued strong demand from new viscose capacity – depressing VSF prices  New market DWP capacity likely in 2019 – limited capacity addition 2018.  Cotton tariffs causing uncertainty in textile markets

 Selling prices and input costs

 DWP market prices steady – range-bound between BEK and VSF  Weakening RMB places further pressure on US$ input costs of VSF producers

 Strategy

 Long-term global growth opportunities  Align growth with leading VSF customers – environmental and social performance key  Do not overpay for assets in heated paper pulp market

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SLIDE 22

 Strong performance despite cost pressures  CM demand good, aided by market dynamics in adjacent grades  Cham Paper exceeded expectations  Fixed costs higher due to maintenance/headcount increase  Lower latex and energy costs partially mitigated the impact of higher pulp prices

22

Sappi Europe

0% 2% 4% 6% 8% 10% 12% 20 40 60 80

Q3 FY15 Q3 FY16 Q3 FY17 Q3 FY18

Eur million

EBITDA* EBITDA Margin* * EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

600 650 700 750 800 850 900 950 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18

BHKP Europe (EUR) CWF-S 100g, Germany

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SLIDE 23

 Profitability improved marginally versus last year – US$8m impact from PM1 overrun  Average realised coated paper prices were up 12% y-o-y  12% increase in DWP volumes from Cloquet partially offset the rise in paper pulp prices  PM1 conversion completed, although was behind schedule and approximately US$35-50m over

budget

23

Sappi North America

* EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items. ** Source: RISI

0% 1% 2% 3% 4% 5% 6% 7% 5 10 15 20 25

Q3 FY15 Q3 FY16 Q3 FY17 Q3 FY18

US$ million

EBITDA* EBITDA Margin*

800 820 840 860 880 900 920 940 960 980

No 3 Coated freesheet - 60 lb (90g) rolls US$/ton - US East**

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SLIDE 24

 Weaker result due to currency and poor re-starts from scheduled shuts/upgrades  DWP sales volumes affected and inventories are low – prices stable  Results from paper business were strong due to higher volumes and prices  Increased variable and fixed costs, exacerbated by the extended downtime

24

Sappi Southern Africa

* EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items. ** Source: CCF

0% 5% 10% 15% 20% 25% 30% 35% 40% 200 400 600 800 1000 1200 1400 Q3 FY15 Q3 FY16 Q3 FY17 Q3 FY18 ZAR million

EBITDA* EBITDA Margin*

800 825 850 875 900 925 950 975 1000

China market price – Hardwood DWP (US$/ton)**

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SLIDE 25

Maintain a healthy balance sheet Rationalise declining businesses Accelerate growth in higher margin growth segments Achieve cost advantages

Improve

  • perational

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

25

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.

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SLIDE 26

Achieve cost advantages

Improve

  • perational

and machine efficiencies Maximise procurement benefits Optimise business processes

Our group strategy

26

 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 2018.

 Ongoing continuous improvement across all mills.  Debottleneck pulp capacity in Europe  Saiccor expansion will lead to lower variable costs  €30m upgrade to Gratkorn PM9

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SLIDE 27

Rationalise declining businesses

Continuously balance paper supply and demand in all regions Where possible convert paper machines to higher margin businesses

Our group strategy

27

 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.

 Progressive transition of Lanaken Mill out of LWC.  Reduced CWF exposure at Maastricht Mill, Ehingen

Mill and Somerset Mill PM1.

 Conversion of Somerset PM1 and Maastricht Mill

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SLIDE 28

Maintain a healthy balance sheet

Optimise working capital Strong cash generation Smart financing

Our group strategy

28

 Maintain leverage below 2x Net debt:EBITDA  Finance costs US$60-70m/annum going

forward.

 Renewal of RCF

 Lower spread (165bp), cost and commitment fee  Additional flexibility for acquisitions and disposals

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SLIDE 29

Accelerate growth in higher margin growth segments

Extract value from our biorefinery stream Enhance specialised cellulose portfolio Expand paper packaging grades

Our group strategy

29

 We will make investments in existing and

adjacent areas with strong potential growth.

 Debottlenecking of Saiccor, Cloquet and Ngodwana

DWP.

 Investments in Speciality packaging incl. Rockwell and

Cham Paper

 Additional packaging at Ngodwana and Tugela Mills.  Securing additional HW timber supply.  Biomaterials, bio-chemicals – lignins, sugars.  Xylitol and Furfural demo plant to be built at Ngodwana  Expansion of Saiccor by 110kt/annum

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SLIDE 30

Accelerate growth in high margin products

Extract value from our biorefinery stream Enhance specialised cellulose portfolio Expand paper packaging grades

Our group strategy

30

 Ngodwana Energy Biomass Facility

 ZAR1.8bn 25MW boiler approved by DoE  Construction begins Q3 FY18, expected completion

Q4 FY20

 Sappi share ZAR139m = 30% equity stake  ROI~19%  Significant BBBEE benefits

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SLIDE 31

Accelerate growth in higher margin growth segments

Extract value from our biorefinery stream Enhance specialised cellulose portfolio Expand paper packaging grades

Speciality and packaging papers expansion plans

31

 Europe

Maastricht: construction done, 2 year ramp-up

  • 160k CWF, +150k specialities (FBB)

Ehingen: to be completed Q3 FY18, 1.5 year ramp-up

  • 75k CWF, +60k specialities (WTL)

Alfeld: construction to start FY19, done Q4 FY20

+10k specialities (Various)

Lanaken: enable CWF on PM8, as market develops

 North America

Somerset: construction done, 3 year ramp up

  • 150k CWF, +350k specialities (SBS)
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SLIDE 32

Accelerate growth in higher margin growth segments

Extract value from our biorefinery stream Enhance specialised cellulose portfolio Expand paper packaging grades

DWP expansion plans

32

 Debottlenecking

Saiccor – 10kt complete April 2018

Ngodwana – 50kt complete September 2018

Cloquet – 30kt complete Q3 2019

additional 70kt swing capacity available  Expansion

Saiccor – 110kt ≈Q3 2020 subject to positive EIA

 External

Paper pulp prices impacting valuations and returns

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SLIDE 33

33

Outlook

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SLIDE 34

 DWP market is tightly supplied, limited new capacity in medium term  Operating rates in EU and NA remain healthy, average realised prices continue to rise  Good demand growth for specialities and packaging papers. Commercial sales from

conversions expected to start Q4 and ramp up in 2019

 Q4 capex expected to be approximately $180m – majority at Saiccor, Ngodwana and Somerset  We expect to reduce net debt further with positive cash generation during the quarter  Given current market conditions and exchange rates, we expect our Q4 operating performance

to be similar to that of last year despite lost production/lower inventories from Q3

34

Outlook

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SLIDE 35

Thank you

35

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SLIDE 36

36

Supplementary information

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SLIDE 37

Excluding special items*

37

EBITDA and operating profit

* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

175 195 160 209 201 208 155 221 172 211 155 112 133 97 145 136 145 93 152 105 142 85

50 100 150 200 250 US$ million

EBITDA Operating profit ex special items

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SLIDE 38

38

Net debt/EBITDA development

* EBITDA is excluding special items. ** The covenant Net debt/LTM EBITDA calculation has adjustments and therefore differs from that shown above. 2,380 2,248 2,286 1,946 2,040 1,916 1,917 1,771 1,734 1,652 1583 1408 1338 1329 1318 1322 1349 1632 1603 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 US$ million Net debt Net debt/LTM EBITDA**

2.1 4.6

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SLIDE 39

Western Europe

39

Coated paper deliveries and prices

0.5 0.6 0.7 0.8 0.9 1 1.1 1.2

Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18

CWF Demand MCR Demand CWF 100gsm Sheets LWC 60gsm offset reels Western Europe shipments including export. Source: Cepifine, Cepiprint and RISI indexed to calendar 1Q 2008.

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SLIDE 40

40

Sappi Europe

* Sales less operating profit excluding special items divided by tons sold. ** Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

Q3 FY18 Q3 FY17 YTD 18 YTD 17 Tons sold (‘000) 833 795 2,502 2,501 Sales (EURm) 636 554 1,823 1,737 Price/Ton (EUR) 764 697 729 694 Cost/Ton* (EUR) 726 668 689 658 Operating profit excluding special items** (EURm) 31 23 99 91

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SLIDE 41

United States of America

41

Coated paper prices and shipments

0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 Domestic CWF shipments Domestic CWF purchases RISI price CFS #3 60lb rolls US industry purchases defined as industry shipments, plus imports, less exports. Source: AF&PA and RISI indexed to calendar Q1 FY08.

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SLIDE 42

42

Sappi North America

* Sales less operating profit excluding special items divided by tons sold. ** Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

Q3 FY18 Q3 FY17 YTD 18 YTD 17 Tons sold (‘000) 318 316 1,008 998 Sales (USDm) 339 314 1,044 1,003 Price/Ton (USD) 1.066 994 1,036 1,005 Cost/Ton* (USD) 1,063 1,000 1,018 985 Operating profit excluding special items** (USDm) 1 (2) 18 20

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SLIDE 43

43

There is still significant headroom to increase the level of cellulosic fibre blending in most sub-categories

Source: Expert interviews.

POLYESTER

Future Today Gap Today Future Gap Today Future Gap

COTTON CELLULOSIC

Apparel Home textile Towels 5% 5% 0% 80% 75%

  • 6%

15% 20% +33% Bedding 45% 55% +22% 45% 40%

  • 11%

1% 2% +100% Denim 5% 5% 95% 95% 0% 0% 0% 0% Shirts 35% 40% +14% 50% 40%

  • 20%

15% 20% +33% T-shirts 30% 50% +67% 70% 50%

  • 29%

3% 5% 0% Dresses 10% 10% 0% 35% 25%

  • 29%

55% 65% +18% Suits 35% 40% +14% 25% 20%

  • 20%

~1% ~2% +100% Sportswear 85% 85% 0% 0% 0% 0% 15% 15% 0% Casual wear 45% 50% +11% 45% 35%

  • 22%

10% 15% +50%

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SLIDE 44

44

Pulp prices*

* Source: FOEX, CCF group. 600 700 800 900 1,000 1,100 1,200 1,300 US$/ton NBSK Europe BHKP Europe Commodity DWP Cotton linter pulp

slide-45
SLIDE 45

45

Textile fibre prices*

* Source: CCF group. 800 1,200 1,600 2,000 2,400 2,800 Cotton 328 Cotton "A" Index PSF 1.4 D VSF 1.2 D VSF 1.5 D

US$/ton

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SLIDE 46

46

Sappi Southern Africa

* Sales less operating profit excluding special items divided by tons sold. ** Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 22 in our Q3 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.

Q3 FY18 Q3 FY17 YTD 18 YTD 17 Tons sold (‘000) 383 387 1,179 1,159 Sales (ZARm) 4,105 4,207 12,509 12,848 Price/Ton (ZAR) 10,718 10,871 10,610 11,085 Cost/Ton* (ZAR) 9,274 8,499 8,538 8,149 Operating profit excluding special items** (ZARm) 553 918 2,443 3,404

Excluding Sappi Forests

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SLIDE 47

Cash flow

47

US$m Q3 FY18 Q3 FY17 YTD 18 YTD 17 Cash generated from operations 141 139 497 544

Movement in working capital 33 (7) (85) (130) Net finance costs paid (21) (20) (42) (61) Taxation refund (paid) (6) 4 (50) (62) Dividend paid

  • (81)

(59)

Cash generated from operating activities 147 116 239 232 Cash utilised in investing activities (188) (86) (519) (165)

Capital expenditure (188) (78) (395) (160) Proceeds on disposal of assets 1

  • 11

3 Acquisition of subsidiary

  • (132)
  • Other movements

(1) (8) (3) (8)

Net cash generated (utilised) (41) 30 (280) 67

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SLIDE 48

Excluding special items reconciliation to reported operating profit

48

EBITDA and operating profit

* Refer to page 22 in our Q3 FY18 results booklet (available on www.sappi.com) for a definition of special items.

US$m Q3 FY18 Q3 FY17 YTD 18 YTD 17

EBITDA excluding special items* 155 155 538 564

Depreciation and amortisation (70) (62) (206) (190)

Operating profit excluding special items* 85 93 332 374 Special items* - gains (losses)

(1) (3) 22 1 Plantation price fair value adjustment 8 2 30 14 Acquisition cost

  • (2)
  • Net restructuring provisions
  • (1)

2 (1) Profit on disposal and written off assets (1)

  • 8
  • Asset impairment reversal

3

  • 3
  • BBBEE charge
  • (1)

(1) Fire, flood, storm and other events (11) (4) (18) (11)

Segment operating profit 84 90 354 375

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SLIDE 49

Thank you

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