Q4 and full year 2017 results

Sappi is a global diversified woodfibre company focused on providing dissolving wood pulp, packaging and speciality papers, graphic/printing papers as well as products in adjacent fields including nanocellulose and lignosulphonate to our direct and indirect customer base across more than 150 countries.

Q4 FY17
Financial results
conference call

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Our dissolving wood pulp (specialised cellulose) products are used worldwide by converters to create viscose fibre for fashionable clothing and textiles, pharmaceutical products as well as a wide range of consumer and household products. Quality packaging and speciality papers are used in the manufacture of such products as soup sachets, luxury carry bags, cosmetic and confectionery packaging, boxes for agricultural products for export, tissue wadding for household tissue products and casting release papers used by suppliers to the fashion, textiles, automobile and household industries. Our market-leading range of graphic paper products are used by printers in the production of books, brochures, magazines, catalogues, direct mail and many other print applications.

The wood and pulp needed for our products is either produced within Sappi or bought from accredited suppliers. Across the group, Sappi is close to ‘pulp neutral’, meaning that we sell almost as much pulp as we buy.

Sales by source*

Sales by product*

Sales by destination*

Net operating assets**

* For the period ended September 2017.
** As at September 2017.



Highlights for the year

  • EBITDA excluding special items US$785 million (FY16 US$739 million)
  • Profit for the period US$338 million (FY16 US$319 million)
  • EPS excluding special items 64 US cents (FY16 57 US cents)
  • Net debt US$1,322 million, down US$86 million year-on-year
  • Dividend of 15 US cents declared (FY16 11 US cents)

Highlights for the quarter

  • EBITDA excluding special items US$221 million (Q4 FY16 US$209 million)
  • Profit for the period US$102 million (Q4 FY16 US$112 million)
  • EPS excluding special items 19 US cents (Q4 FY16 18 US cents)

Financial highlights

      Quarter ended   Year ended  
      Sept 2017   Sept 2016   Jun 2017   Sept 2017   Sept 2016  
Key figures: (US$ million)                        
Sales     1,411   1,340   1,260   5,296   5,141  
Operating profit excluding special items(1)     152   145   93   526   487  
Special items – (gains) losses(2)     1   (25)   3     (57)  
EBITDA excluding special items(1)     221   209   155   785   739  
Profit for the period     102   112   58   338   319  
Basic earnings per share (US cents)     19   21   11   63   60  
EPS excluding special items (US cents)(3)     19   18   11   64   57  
Net debt(3)     1,322   1,408   1,318   1,322   1,408  
Key ratios:                        
Operating profit excluding special items to sales     10.8   10.8   7.4   9.9   9.5  
Operating profit excluding special items to capital employed (ROCE)(3)     20.2   20.9   12.8   18.0   17.5  
EBITDA excluding special items to sales     15.7   15.6   12.3   14.8   14.4  
Net debt to EBITDA excluding special items     1.7   1.9   1.7   1.7   1.9  
Interest cover(3)     9.1   7.3   8.4   9.1   7.3  
Net asset value per share (US cents)(3)     327   260   304   327   260  
(1) Refer to note 2 to the group results for the reconciliation of EBITDA excluding special items and operating profit excluding special items to segment operating profit, and profit for the period.
(2) Refer to note 2 to the group results for details on special items.
(3) Refer to supplemental information for the definition of the term.

Commentary

The group delivered a further increase in EBITDA as the growth of the dissolving wood pulp (DWP) and speciality packaging businesses gained momentum. Higher paper pulp prices, a key input cost, and the negative impact of a stronger Rand/Dollar exchange rate created significant challenges but ongoing initiatives to reduce variable costs and lower interest charges contributed to the success.

Following the achievement of our targeted leverage of less than two times net debt to EBITDA in the prior year, we increased investments into growth projects. Principally, these related to conversions of paper machines in Europe and the United States into speciality packaging grades and DWP debottlenecking projects in South Africa.

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