OUR STRATEGY
AND PERFORMANCE

Our strategy

Through intentional evolution we will continue to grow Sappi into a profitable and cash generative, diversified woodfibre group – focused on dissolving wood pulp, paper and products in adjacent fields.

Achieve cost advantages
   
Rationalise declining businesses
   
Maintain
a healthy
balance sheet
   
Accelerate growth in higher margin growth segments
                   
What this means     What this means     What this means     What this means
  • Continuously improve cost position
  • Continue to maximise global benefits
  • Best-in-class production efficiencies
   
  • Maximise production at low-cost mills
  • Continuously balance paper supply and demand in all regions
  • Continue to transition graphic papers capacity to higher margin and growing packaging and speciality papers
   
  • Maintain net debt/EBITDA ~2x
  • Continuously improve working capital
  • Continue to monitor bond market for opportunities
   
  • Grow dissolving wood pulp (DWP) capacity, matching market demand
  • Continue to expand and grow packaging and speciality papers in all regions, targeting 25% of group EBITDA by 2020
  • Commence commercialisation of biotech opportunities
                   
How we performed     How we performed     How we performed     How we performed
  • Continuous improvements in all regions to reduce cost per ton
  • Maximised the benefits of One Sappi to achieve further savings
  • US$88 million savings achieved
   
  • Carouselled production to the lowest cost mills
  • Balanced supply and demand on graphic paper with good capacity management and growing market share in coated woodfree paper (CWF)
  • Ramped up production significantly on packaging and speciality papers
   
  • Net debt/EBITDA at 2.2x
  • Effective working capital management, resulting in improved cash flow
  • Refinanced the 2022 bond by raising EUR450 million at 3.125% maturing in 2026
   
  • Invested to grow DWP capacity at Saiccor, Cloquet and Ngodwana Mills
  • Speciality conversions in Europe and North America completed and strongly ramping up to target, currently 18.3%
  • Growth in lignin sales and advancing other biotech opportunities to commercialisation
                   
2020 objectives     2020 objectives     2020 objectives     2020 objectives
  • Advance with continuous improvement projects in all regions – US$54 million target
  • Maximise operating rates on all machines
  • Integrate Matane pulp mill into Sappi and achieve cost advantages
   
  • Balance graphic paper supply and demand
  • Continue to transition from graphic paper capacity to packaging and speciality papers
  • Investigate paper machine options in Europe
   
  • Optimise capex and working capital
  • Manage net debt to contain leverage ratio
   
  • Further advance packaging and speciality papers to target 25% of group EBITDA
  • Conclude Saiccor Mill DWP expansion in 2020
  • Commercialise biotech opportunities

Measuring our progress

Guided by our strategy, we measure our progress holistically against our mission, collaborating and partnering with stakeholders as we strive to be a trusted and sustainable organisation with an exciting future in woodfibre.

Key strategic objectives

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

Key:

  Satisfactory     Unsatisfactory performance     Progress to be made/ongoing

 

Our strategic
performance indicators
  Why is this
important?
  Self-assessment
of 2019 performance
  Link to strategic
objectives
 

Return on average capital employed, or ROCE, is an important measure that assesses long-term profitability by comparing how effectively assets are performing with how these assets are financed

Linked to executive remuneration.

 
  • 2020
    objectives

    Complete Saiccor Mill expansion on time and on budget

  • Link to
    3Ps


 

EBITDA measures how we performed operationally by excluding the impact of financing, accounting treatments or tax implications

Linked to executive remuneration.

 
  • 2020
    objectives

    Focus on maximising cash generation through efficient capex and working capital management

  • Link to
    3Ps


 

EBITDA margin is an important and comparable measure of our profitability (excluding the impact of financing, accounting treatments or tax implications) against our revenue

 
  • 2020
    objectives

    Focus on reducing fixed and variable costs

  • Link to
    3Ps


 

While not the only determinant of financial success, sales is a key measure of demand, customer loyalty and a critical contributor to profit

 
  • 2020
    objectives

    Continue to grow packaging and speciality papers post conversions

  • Link to
    3Ps


 

Given the capital-intensive nature of our operations, we need to raise debt to complete significant projects that enable our long-term success. Net debt comprises current and non-current interest-bearing borrowings and bank overdrafts (net of cash, cash equivalents and short-term deposits)

 
  • 2020
    objectives

    While net debt is expected to increase in 2020, due to the finalisation of strategic capital projects, we will continue to carefully manage debt levels

  • Link to
    3Ps


 

The net debt to EBITDA ratio measures our ability to pay off our debt should net debt and EBITDA remain consistent. EBITDA focuses on the operating decisions of a business, as it looks at profitability from core operations before the impact of capital structure

Linked to executive remuneration.

 
  • 2020
    objectives

    Manage leverage ratio well within covenants

  • Link to
    3Ps


 

LTIFR is an important measure of our business's safety. We target zero harm and aim to improve LTIFR by at least 10% year-on-year

Linked to executive remuneration.

Identified sustainability goal1.

 
  • 2020
    objectives

    Reduce LTIFR and zero fatalities

  • Link to
    3Ps


 

We rely on a productive and engaged workforce. Employee engagement has been linked to higher safety performance, lower staff turnover, improve productivity and efficiency. We aim to maintain or improve from our 2015 base of 74%

Identified sustainability goal2.

 
  • 2020
    objectives

    Sustain and/or improve engagement

  • Link to
    3Ps


 

We rely on a productive and engaged workforce. Employee engagement has been linked to higher safety performance, lower staff turnover, improve productivity and efficiency. We aim to maintain or improve from our 2015 base of 74%

Identified sustainability goal1.

 
  • 2020
    objectives

    Reduce LTIFR and zero fatalities

  • Link to
    3Ps


 

Energy intensity is a measure of how efficiently we are operating. By continually improving this metric, we manage costs and lower our impact

Identified sustainability goal1.

 
  • 2020
    objectives

    5% improvement from 2014 base year

  • Link to
    3Ps


 

We are committed to sourcing woodfibre from forests and timber plantations in a manner that promotes their health and supports community wellbeing

Identified sustainability goal1.

 
  • 2020
    objectives

    Maintain or improve percentage certified fibre

  • Link to
    3Ps


1 For this indicator, we have clear targets for 2020 that we are working towards. See our Group Sustainability Report for more information.
2 Not measured; survey takes place every second year.