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Our key material issues – Prosperity

Prosperity

Material
issue
  Why it's
important
  What we did
about it in 2019
  How it
links
to risk
  How it links to
other aspects of
our business
Cost containment and capital allocation   Ongoing investment and cost containment are strategic pillars of competitive advantage  
  • Acquired Matane Mill in Quebec, Canada, with capacity of 270,000 tpa of aspen and maple high-yield pulp to deliver the following benefits:
    • Increased levels of pulp integration by supplying pulp to our US and European packaging operations
    • Secure supply of a raw material critical to product quality
    • Reduced input pricing and volatility in profitability
    • Avoid higher capital cost of internal high-yield pulp capacity.
  • Completed a rebuild of PM8 at Lanaken Mill in Belgium. The PM can now produce coated woodfree paper in addition to lightweight coated paper, enhancing our ability to meet market demand.
  • Took downtime at certain mills and began an asset review in Europe and North America, in line with reduced demand in key markets.
 

 Risk

#2 Cyclical macro-economic context

#4 Highly competitive industry

#6 Project implementation

 

Achieve cost advantages

Maintain a healthy balance sheet

Product and
process
innovation
  We view innovation not as an end in itself, but as an integral aspect of our business that provides sustainable, competitive advantages which make a significant difference  
  • Piloted a new generation manufacturing execution system to leverage data analytics; make our processes more efficient and productive; and enable tracking of information on quality, raw materials and environmental aspects.
  • Continued to promote internal innovation through the Technical Innovation Awards. In 2019, Sappi Europe was named the 2018 winner for designing a completely new 'three layers in one headbox' for paperboard packaging that combines good printability with high bulk and good creasability. This step-change technology was successfully applied to the rebuild of PM6, making Maastricht Mill the only producer world-wide to use this novel concept for its packaging product range.
  • Collaborated closely with a specialist packaging converter and a global fast-moving consumer goods (FMCG) company to develop breakthrough proprietary barrier technology and support the launch of a new confectionery snack bar wrapped in recyclable paper (see box below).
  • Invested US$42 million in R&D initiatives.
 

 Risk

#3 Evolving technologies and
consumer preferences

Industry 4.0

Integration of sustainability

 

Achieve cost advantages

Operating context –
Increasing consumer and brand owner concerns about sustainability-related issues



CASE STUDY

An innovative solution for the circular economy

Packaging for the food industry that meets stringent health and safety standards and is also recyclable is a long-standing challenge. Sappi has been working with leading consumer brand owners to develop and supply renewable paper-based packaging solutions by understanding and supporting the goals of making their packaging recyclable without compromising on food protection and shelf life.

One example of this is the new Sappi Guard range of products. These innovative papers for flexible packaging come with integrated barriers against oxygen, water vapour, grease, aroma and mineral oil. Thanks to the integrated barriers, there is no need to apply special coatings or laminations. The work was enabled by Sappi's 2017 acquisition of barrier film technology company Rockwell Solutions.

Sappi used this technology when it worked with a global FMCG company and a specialist flexible packaging converter to develop the wrapper for a new confectionery snack bar. The launch of the new snack bar highlights the benefits of collaboration across the value chain in a focused effort to increase the use of recyclable packaging made from renewable woodfibre.

 

Material
issue
  Why it's
important
  What we did
about it in 2019
  How it
links
to risk
  How it links to
other aspects of
our business
Circular economy and adjacent markets  

Producing more with less has become a global focus in light of a burgeoning global population and subsequent pressure on resources. In keeping with the approach outlined above, our aim is to extract more value from each tree and, in doing so, move into adjacent markets to strengthen our core business model.

 
  • In August 2019, we commissioned the pre-hydrolysis liquor (PHL) evaporator at Ngodwana Mill, moving into the second phase of our sugar extraction project. This is to demonstrate industrial-scale operability of the technology to concentrate hemicellulose sugar streams, extracted from the wood, to levels required for downstream technologies. The work enables derisking full-scale implementation of the sugar concentration technology which opens up new revenue generation opportunities in the xylitol and furan chemistry value chains.
  • We progressed the design of a furfural pilot plant to be established at Saiccor Mill. The plant will illustrate the technology, produce commercial samples and provide greater clarity on process economics. We anticipate beneficial operation in 2021.
  • Construction of the 25 MW Ngodwana Energy biomass power plant at Ngodwana Mill, in which we have a 30% stake, began in July. The plant will use biomass from surrounding plantations to generate power that will feed into the national grid.
  • We are building on our well-established position in lignin markets to expand into high-value markets, including substitution for phenol which is widely used in household products and as intermediates for industrial synthesis; as well as replacement for petrochemicals in foams. We are also diversifying into lignin as a replacement for starch in the manufacture of recycled paper, as a fuel pellet binder and in animal health and nutrition.
  • We began testing fuel rods in one of the boilers at Tugela Mill. The rods, manufactured at Ngodwana Mill, comprise a mixture of waste coal slurry (from discarded thermal-grade coal fines), biomass and lignosulphonates. If positive results are achieved, the demonstration facility at the latter mill will be upgraded.
  • We are advancing our Valida fibrillated cellulose technology and continue to conduct third-party development work with prominent global brand owners and technology institutions to develop a variety of applications where Valida's functionality can enhance everyday products responsibly and sustainably. The product is also being used to develop new advanced paper grades with greater strength and unique barriers.
  • In terms of biocomposites, we continue to develop markets for Sappi Symbio which brings the haptics of nature and reduced environmental footprint to plastic composite materials. Sappi Symbio is a specially prepared and easy-to-use cellulose fibre ready to be easily dispersed into plastic compounds. Symbio compounds can be injection moulded and blow moulded into components for various sectors, including automotive, furniture, utensils, appliances and consumer electronics. Weight reduction, warm touch and high stiffness are just some of the product's many benefits.
 

 Risk

#3 Evolving technologies and consumer preferences

#4 Highly competitive industry

#5 Natural resource constraints

 

Accelerate growth in higher margin products

Operating context – Increasing consumer and brand owner concerns about sustainability-related issues

Digitalisation   Digital solutions offer a new platform for innovation and efficiency as well as enhanced connection with customers and employees  
  • Launched digital group-wide learning initiatives
  • In Sappi Europe:
    • Appointed a head of digital transformation
    • Launched Octoboost, an internal technology start-up whose core mission is to develop innovative digital solutions for the print industry
    • Signed a global strategic alliance with PerfectPattern to roll out AI-driven dynamic print planning and ganging technology to print businesses world-wide.
 

 Risk

Industry 4.0

Integration of sustainability

 

Achieve cost advantages

Operating context – Generation Z

Long-term demand growth for cellulosic-based fibres   Increasing our capacity in the dissolving wood pulp (DWP) market aligns with our strategy of refocusing operations away from graphics paper to the higher-margin DWP sector, together with specialised packaging products and the biotech sectors  
  • Completed a US$25 million capital investment at Cloquet Mill to debottleneck areas of the pulp manufacturing process and add 30,000 tpa of DWP production capacity.
  • The expansion of Saiccor Mill to add 110,000 tpa of DWP capacity was approximately 40% complete at year-end and is on track for completion in the last quarter of 2020.
  • The uncertainty in textile markets as a result of US/China trade tensions – China is the world's largest exporter of apparel to the US – and an oversupplied viscose staple fibre market are challenges for value creation in the short term, but we believe the fundamentals of the DWP market are sound. Accordingly, we expect sales volumes to stay healthy and anticipate that our expanded DWP production will be fully used to meet customer demand.
  • We continue to engage with customers to develop products and solutions for the market.
 

 Risk

#3 Evolving technologies and consumer preferences

Integration of sustainability

Cyclical macro-economics

 

Accelerate growth in higher margin products

Operating context – Increasing consumer and brand owner concerns about sustainability-related issues