Financial results for the first quarter 2003

Transcription

1 Financial results for the first quarter

2 Forward looking statements 2 Certain statements in this report 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. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors, that could cause actual results and company plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results). Such risks, uncertainties and factors 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 and pricing), adverse changes in the markets for the group s products, consequences of substantial leverage, changing regulatory requirements, unanticipated production disruptions, economic and political conditions in international markets, the impact of investments, acquisitions and dispositions (including related financing), any delays, unexpected costs or other problems experienced with integrating acquisitions and achieving expected savings and synergies and currency fluctuations. The company undertakes 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.

3 First quarter highlights 3 Headline EPS 23 US cents up 64% on Q1 02 Low base last year - September 11 - Maintenance shuts Sales up 22% on Q1 02 (10% pro-forma) Sluggish markets, particularly in Europe US price increases Pulp markets pass trough Currency translation

4 Financial summary 4 US$ millions Quarter ended Dec-01 Sep-02 Dec-02 Sales Vol (t 000's) 1,369 1,639 1,602 Sales 832 1,052 1,019 EBITDA Operating Profit

5 Financial summary 5 US cents Quarter ended Dec-01 Sep-02 Dec-02 Headline EPS Basic EPS Net Debt (US$m) 1,156 1,419 1,525 Net Debt / Tot Cap 35.2% 37.0% 36.7%

6 Financial summary 6 Percent Quarter ended Dec-01 Sep-02 Dec-02 Margin - EBITDA Operating RONA ROE

7 Strategy 7

8 The Sappi strategy 8 Global Focused and pulp integrated Low cost Efficient use of capital Intolerance of non-performing assets Re-invest in high return assets Share re-purchase & debt repayment

9 Financial objectives 9 ROE: after tax return to exceed US risk-free rate by at least 5% (current target > 11%) Operating Margin: target range 12-15% RONA: 5% above LIBOR (or equivalent) in the currencies in which we are invested (current target > 12%) NOPAT Return on Net Assets: to exceed WACC (current target > 9%) Debt / Total Capitalisation: target range 25-50%

10 Geographic diversity Where product is manufactured Sales by Region (US$)* Where product is sold 10 39% 40% 38% 41% 21% 8% 13% North America Southern Africa Europe Far East & Other * For the quarter ended December 2002

11 11 Financial performance

12 Headline EPS (US$) Q301 Q401 Q102 Q202 Q302 Q402 Q103 Q201 Q101 Q400 Q300 Q200 Q100 Q499 Q399 Earnings US cents per share 98 Ave Q199 Q299

13 Return on equity 13 ROE (after tax) ROE Objective** % Q100 * Before Mobile closure costs Q200 Q300 Q400 Q101 Q201 Q301 ** After tax return in US$ earnings that on average exceed the American risk free rate by at least 5% * * Q401 Q102 Q202 Q302 Q402 Q103

14 Finance costs* US$ MM * * Annualised Q1 03 net finance costs before capitalised interest and excluding once-off items

15 Capex control 15 Capex vs depreciation* Capex Depreciation FY03 plan 300 US$ MM Q103 * Depreciation excludes fellings, Capex excludes plantation & timberlands

16 16 Divisional performance Sappi Fine Paper

17 Market conditions Coated fine paper 17 US ad pages up US demand improves US price increases being implemented European demand flat

18 Market conditions 18 Coated free sheet prices 1,300 1,300 1,200 1,200 1,100 1,100 1, , Jan-95 Apr Jul Oct Jan-96 Apr Jul Oct Jan-97 Apr Jul Oct Jan-98 Apr Jul Oct Jan-99 Apr Jul Oct Jan-00 Apr Jul Oct Jan-01 Apr Jul Oct Jan-02 Apr Jul Oct Jan EUR/Ton US$/Short ton Germany CFS 90gsm sheets US CFS No.3 60lb rolls SOURCE: PPI This Week and RISI

19 Market conditions 30% 19 US Magazine ad pages 20% 10% 0% -10% -20% -30% Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Year on year % change Magazine Ad Pages yoy % change SOURCE: Publishers Information Bureau

20 Market conditions 20 US + Europe CWF Purchases 1,200,000 1,100,000 metric tons 1,000, , , , ,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec SOURCE: Cepifine, AFPA December 2002 = Sappi estimate

21 21 Year-on-year growth in CWF purchases (3mma) Market conditions 20% 15% 10% 5% 0% -5% -10% -15% Europe US -20% Jan-97 Apr-97 Jul-97 Oct-97 Jan-98 Apr-98 Jul-98 Oct-98 Jan-99 Apr-99 Jul-99 Oct-99 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 SOURCE: Cepifine, AFPA

22 Operating performance 22 Sappi Fine Paper Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) Cost per ton (US$ Index)* 100 n/a 104 EBITDA Margin (%) RONOA (%) Some improvement in ad spend in major markets Demand higher than last year Continued curtailment * Excludes purchased pulp

23 Operating performance Sappi Fine Paper Europe 23 Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) Cost per ton (US$ Index)* 100 n/a 109 EBITDA Margin (%) RONOA (%) Sales volumes down 5% on last year Prices remain under pressure (down 1.5% on Q4 02) Stronger Euro had a positive impact * Excludes purchased pulp

24 Operating performance Sappi Fine Paper North America Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) Cost per ton (US$ Index)* 100 n/a 87/96** EBITDA Margin (%) RONOA (%) (3.8) Return to a modest operating profit Ad spend on print media grows Sales volumes boosted by Potlatch acquisition 24 * Excludes purchased pulp ** SFPNA excluding Cloquet

25 Operating performance Sappi Fine Paper South Africa Quarter ended Dec-01 Sep-02 Dec-02 Sales (US$m) Cost per ton (US$ Index) 100 n/a 124 EBITDA Margin (%) RONOA (%) Strong demand in the quarter Stronger rand increases competitor activity 25

26 26 Divisional performance Sappi Forest Products

27 Market conditions FOEX PIX vs PULPEX PIX price - 28 Jan 2003 NBSK = $446 Hardwood = $461 $ per metric ton /11/98 8/11/98 11/11/98 2/11/99 5/11/99 8/11/99 11/11/99 2/11/00 5/11/00 8/11/00 11/11/00 2/11/01 5/11/01 8/11/01 11/11/01 2/11/02 5/11/02 8/11/02 11/11/02 2/11/03 PULPEX 3 Month (moved 8 weeks forward) FOEX PIX NBSK FOEX PIX Hardwood SOURCE: FOEX & PULPEX

28 Operating performance 28 Sappi Forest Products Dec-01 Sep-02 Dec-02 Sales (US$m) Cost per ton (US$ Index) 100 n/a 106 EBITDA Margin (%) RONOA (%) Local demand for Kraft firm Passed through pulp price trough Closure in US of DP capacity Quarter ended

29 Share price (ADR) Indexed to 2 nd Jan 02 SOURCE: I-Net Bridge 15-Jan Jan Feb Feb Mar Mar Apr Apr May May Jun Jun Jul Jul Aug Aug Sep Sep Oct Oct Oct Nov Nov Dec Dec Jan-03 S&P 500 S&P FP ADR

30 Outlook 30

31 Outlook 31 Economic outlook uncertain Pulp cycle has scope for turnaround in prices North American business expected to continue improving Currency volatility Q2 slow - earnings similar to Q1 Still expect reasonable growth for the year

32 32 View the full results at