50
15 Nov. 2018 Chief Executive Officer Steve Binnie Sappi Limited Q4 FY18 financial results delivering on strategy 2018 Vision 2020 intentional evolution next phase growth 1
15 Nov. 2018
Chief Executive Officer
Steve Binnie
Sappi Limited
Q4 FY18 financial results delivering on
strategy
2018
Vision2020
intentionalevolution
next phase
growth
1
Forward-looking statements and Regulation G
2
Forward-looking statementsCertain 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 ofor 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, thisdocument 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. Youshould 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 actualresults, 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 rawmaterial, 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 disclosureCertain 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 ofcertain 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.
3
Summary
Highlights – Q4 2018
4
o Good sales quarter, impacted somewhat by low starting inventorieso Higher paper pulp prices offset cost pressureso DWP prices impacted by hedging translation losseso European graphics paper markets weakening
Up 1% Up 5% Flat
EBITDA ex special items US$224m
Profit for the period US$107m
EPS ex-special itemsUS$0.19
Highlights – FY 2018
5
Up 10%
Net sales US$5.8bn
Up 18%
Up 13%
Up 72%
Up 19%
Spec. and Pack. Volumes
1,009,000t
Dividend per shareUS$0.17/share
Expansion capexUS$374m
Net DebtUS$1,568m
o 3 major projects concluded during the year – Saiccor, Ngodwana and Somerseto Acquisition of Cham Paper - returns ahead of expectationso Growing dividend in line with policyo Increase in net debt in line with leverage ceiling
EBITDA and operating profitExcluding special items*
6
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.
209 22
1
224
145 15
2
148
0
50
100
150
200
250
Q4 FY16 Q4 FY17 Q4 FY18
US$
milli
on
EBITDA Operating profit
Key ratios Q4 FY16 Q4 FY17 Q4 FY18
Net debt/LTM EBITDA 1.9 1.7 2.1
Interest cover 7.3 9.1 11.0
EBITDA % 15.6 15.7 14.6
ROCE % 20.9 20.2 17.0
140
180
220
260
300
340
221 6 125 (89) (40) (4) 5 224
Q4 FY17 EBITDA Sales volume Price & mix Variable & deliverycosts
Fixed costs Other Exchange rate Q4 FY18 EBITDA
EBITDA* bridgeQ4 FY17 to Q4 FY18
7
* EBITDA = EBITDA excluding special items
Sales revenue
US$
milli
on
Notes:
1. All variances were calculated excluding Sappi Forestry.
2. “Exchange rate” reflects translation and transactional effect on consolidation. 2018 2017Exchange rates:Average rate for the Quarter: US$1 = ZAR 14.0615 13.1761Average rate for the Quarter: €1 = US$ 1.1626 1.1756
Sept
Product contribution split – LTM
8
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items. Data above excludes treasury operations and insurance captive.
40%
18%
42%
SpecialisedCellulose
Specialities &PackagingPapersPrinting Papers
52%
16%
32%
EBITDA excluding special items Operating profit excluding special items
Maturity profileFiscal years
9
363
8429 47 46
544
548
70
0
221
376
81
0
100
200
300
400
500
600
2019 2020 2021 2022 2023 2024 2025 2032
US$
milli
on
Cash Short-term SPH term debt Securitisation SSA
EUR450m bond
EUR350m bond
US$221m bond
Cash flow
10
6673
81
167374
123
Cash generated by operating activities
US$630 m
Net finance costs paid
Taxation paid
Maintenance Capex
Expansion Capex
Dividend paid
Acquisition of subsidiary and other
Cash utilisedUS$254 million
86217
374 407
Expansion Capex
FY16 FY17 FY18 FY19E
11
1517
Dividend per share
FY16 FY17 FY18
Capex development
11
0
100
200
300
400
500
600
700
2013 2014 2015 2016 2017 2018 2019E
US$
milli
on
Maintenance Efficiency and expansion
Q4 FY18
Specialities and Packaging Papers Maastricht completed:
New product trials are testing well, ramp-up to full volumes by 2021
Ehingen completed: WTL upgrade, on time, within budget
Somerset completed: Legacy products qualified at lower costs Currently optimizing new products New product trials showing excellent quality Ramp-up delayed due to late startup
12
Update on projects
Specialised Cellulose Ngodwana:
Mill now running at planned 250ktpa Saiccor:
production issues are behind us, now operating at full capacity (780ktpa)
EIA approval given – construction started
Graphics Lanaken:
PM8 project to impact Q3 2019 Allows carousel from Maastricht
Gratkorn: PM9 upgrade Impact in Q1 and Q2
13
Divisional overview
Global P&W paper market trends
14
Supply and demand Demand softening globally Capacity closures/conversions keep operating rates largely in balance – mostly to
containerboard or testliner Substitution and conversions benefitted coated mechanical grades
Selling prices and input costs Paper prices rising, tracking pulp prices with a lag EU and NA increases announced for October – price elasticity needs to be carefully managed
Strategy Focus on costs to maintain margins Manage operating rates through conversions, market share, flexibility of machines Increase pulp integration
Global speciality & packaging paper market trends
15
Supply and demand Demand for our product range continues to grow between 3% to 6%, some recent weakness Environmental concerns spurring legislation incentivising the use of more paper-based
packaging, particularly in EU.
Selling prices and input costs Sales prices expected to increase upon contract renewals, may not fully recover cost inflation Softwood and hardwood fiber costs continue to rise
Strategy More M&A in the industry Ramp-up volumes from conversions, penetrate new markets Maximise opportunities in paper-for-plastics shift Commercialize new products
Global DWP market trends
16
Supply and demand Record year for growth in VSF capacity Most DWP capacity growth coming from integrated VSF producers
Selling prices and input costs DWP prices likely to be range-bound between BEK and VSF Weakening RMB places further pressure on US$ input costs of VSF producers
Strategy Grow in-step with the market (debottlenecked volumes 2018/19, future plans for Saiccor) Evaluate external opportunities which will enable a substantial increase in volumes Align growth with leading VSF customers – environmental and social performance key
Good result from higher paper selling prices, demand for coated paper was soft Specialties and packaging volumes up 9% excluding Cham; price increases lagging cost inflation Cham integration exceeds expectations Variable costs up 11% year on year, pulp, latex and energy
17
Sappi Europe
0%
2%
4%
6%
8%
10%
12%
14%
0
20
40
60
80
Q4 FY15 Q4 FY16 Q4 FY17 Q4 FY18
Eurm
illion
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 26 in our Q4 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-1
7
Jul-1
7
Oct
-17
Jan-
18
Apr-1
8
Jul-1
8
Oct
-18
BHKP Europe (EUR) CWF-S 100g, Germany
Profitability improved following PM1 conversion Very tight market conditions, prices up 13% year on year. CWF volumes down due to conversion DWP volumes and prices higher Packaging business nearly doubled sales volume
18
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 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.** Source: RISI
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
20
40
60
Q4 FY15 Q4 FY16 Q4 FY17 Q4 FY18
US$
milli
on
EBITDA* EBITDA Margin*
800
850
900
950
1000
1050
1100
Jan-
17
Apr-1
7
Jul-1
7
Oct
-17
Jan-
18
Apr-1
8
Jul-1
8
Oct
-18
No 3 Coated freesheet - 60 lb (90g) rolls US$/ton - US East**
Similar performance as last year, selling prices offset input costs Unfavorable currency hedges lowered realised prices for DWP volumes DWP volumes were flat due to low inventory levels coming out of Q3 Environmental approval for the expansion of the Saiccor mill was granted
19
Sappi Southern Africa
* EBITDA and EBITDA margin shown exclude special items. Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.** Source: CCF
0%
5%
10%
15%
20%
25%
30%
35%
40%
200
400
600
800
1000
1200
1400
1600
Q4 FY15 Q4 FY16 Q4 FY17 Q4 FY18
ZAR
milli
on
EBITDA* EBITDA Margin*
800
825
850
875
900
925
950
975
1000
Jan-
17
Apr-1
7
Jul-1
7
Oct
-17
Jan-
18
Apr-1
8
Jul-1
8
Oct
-18
China market price – Hardwood DWP (US$/ton)**
From paper to woodfibre
20
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
21
Transformation – from paper to woodfibre
* EBITDA excluding special items
22 22
60
0
10
20
30
40
50
60
70
2010 2014 2018
US
CEN
TSEPS excluding special items
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2014 2018
EBITDA* by Segment
Specialised cellulose Specialities and packaging papers Printing and writing papers
3430 29
74
1310
8 9
05
10152025303540
2010 2014 2018
%
Segment analysis: EBITDA* margin
Specialised cellulose Specialities and packaging papers
Printing and writing papers
Specialities and Packaging Papers
22
Trends in our market
o Easy opening
o More functionality and
convenience
o Smaller pack sizes
Demographic ChangeRegulations
o Food safety – Mineral oil
barriers
o Plastic bans and waste
directive
Technology and Innovations
o Traceable packaging
o Customized packaging
o Smart/active packaging
Economic Concerns
o Cost reduction (TCO)o Light weighting and
down gauging
Sappi specialities and packaging papers
23
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 packagingand 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
24
Umbrella brand for Sappi’s dissolving wood pulp products
Emphasising Sappi’s commitment to producing a natural fibre sourced from sustainably managed forests
Verve - fibre for a thriving world
Supports our long-standing reputation for:
- Quality
- Consistency
- Reliability
- Sustainability (people, planet, prosperity)
- Collaboration with customers
- Innovation
Maintaina healthybalancesheet
Rationalisedeclining
businesses
Accelerate growth in
higher margin growth
segments
Achievecost
advantages
Improveoperational
and machineefficiencies
Maximiseprocurement
benefits Optimisebusiness
processes
Continuouslybalance
paper supplyand demandin all regions
Wherepossible
convert papermachines tohigher marginbusinesses
Optimiseworkingcapital
Strongcash
generationSmart
financing
Expandpaper
packaginggrades
Enhancespecialised celluloseportfolio
Extractvalue from our
biorefinerystream
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.
Achievecost
advantages
Improveoperational
and machine efficiencies
Maximiseprocurement
benefitsOptimisebusiness
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 2019. Ongoing continuous improvement across all mills. Debottleneck pulp capacity in Europe Saiccor expansion will lead to lower variable costs €30m upgrade to Gratkorn PM9
Rationalisedeclining
businesses
Continuouslybalance
paper supplyand demand in all regions
Wherepossible
convert paper machines tohigher 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.
Maintaina healthybalancesheet
Optimiseworkingcapital
Strongcash
generationSmart
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
Will monitor bond markets for opportunities to refinance at lower cost
Accelerategrowth in
higher margingrowth
segments
Extractvalue from our
biorefinerystream
Enhancespecialisedcelluloseportfolio
Expandpaper
packaginggrades
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
30
Outlook
DWP sales volumes to improve post debottlenecking – prices likely to be rangebound
Demand growth for specialities and packaging papers and increased sales volumes as our
conversion projects ramp-up production
Conversions and capacity closures should keep graphic grades balanced, though markets are
slowing - margin maintenance through cost management
2019 capex expected to be approximately $590m – majority at Saiccor; Lanaken and Gratkorn
Q1 will be comfortably higher than last year due to increased sales volumes of DWP and
packaging grades.
31
Outlook
Thank you
32
33
Supplementary information
Excluding special items*
34
EBITDA and operating profit
* Refer to the supplementary information in this presentation for a reconciliation of EBITDA to reported operating profit and page 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.
175
195
160
209
201 20
8
155
221
172
211
155
224
112
133
97
145
136 14
5
93
152
105
142
85
148
0
50
100
150
200
250
US$
milli
on
EBITDA Operating profit ex special items
35
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.
2,38
0
2,24
8
2,28
6
1,94
6 2,04
0
1,91
6
1,91
7
1,77
1
1,73
4
1,65
2
1583
1408
1338
1329
1318
1322 1349
1632
1603
1568
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 Q4 18
US$
milli
on
Net debt Net debt/LTM EBITDA**
2.1
4.6
Accelerategrowth in
higher margingrowth
segments
Extractvalue from our
biorefinerystream
Enhancespecialisedcelluloseportfolio
Expandpaper
packaginggrades
Speciality and packaging papers expansion plans
36
Europe Maastricht: construction done, ramp-up by 2021
-160k CWF, +150k specialities (FBB) Ehingen: 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)
Accelerategrowth in
higher margingrowth
segments
Extractvalue from our
biorefinerystream
Enhancespecialisedcelluloseportfolio
Expandpaper
packaginggrades
DWP expansion plans
37
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
Western Europe
38
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.
39
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 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.
Q4 FY18 Q4 FY17 FY 2018 FY 2017Tons sold (‘000) 864 842 3,366 3,343Sales (EURm) 671 583 2,495 2,319
Price/Ton (EUR) 777 692 741 694Cost/Ton* (EUR) 733 651 701 656
Operating profit excluding special items** (EURm) 38 35 137 127
40
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 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.
Q4 FY18 Q4 FY17 FY 2018 FY 2017Tons sold (‘000) 363 361 1,371 1,359Sales (USDm) 388 357 1,432 1,360
Price/Ton (USD) 1,069 989 1,044 1,001Cost/Ton* (USD) 983 914 1,009 966
Operating profit excluding special items** (USDm) 31 27 49 47
41
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 26 in our Q4 FY18 financial results booklet (available on www.sappi.com) for a definition of special items.
Q4 FY18 Q4 FY17 FY 2018 FY 2017Tons sold (‘000) 441 447 1,620 1,606Sales (ZARm) 4,824 4,641 17,333 17,489
Price/Ton (ZAR) 10,939 10,383 10,699 10,890Cost/Ton* (ZAR) 8,488 7,908 8,524 8,082
Operating profit excluding special items** (ZARm) 1,081 1,106 3,524 4,510
Excluding Sappi Forests
Cash flow
42
US$m Q4 FY18 Q4 FY17 FY 2018 FY 2017Cash generated from operations 212 204 709 748Movement in working capital 6 103 (79) (27)
Net finance costs paid (24) (20) (66) (81)
Taxation (paid) (23) (38) (73) (100)
Dividend paid - - (81) (59)
Cash generated from operating activities 171 249 410 481Cash utilised in investing activities (145) (208) (664) (373)Capital expenditure (146) (197) (541) (357)
Proceeds on disposal of assets - 1 11 4
Acquisition of subsidiary - (11) (132) (11)
Other movements 1 (1) (2) (9)
Net cash generated (utilised) 26 41 (254) 108
Excluding special items reconciliation to reported operating profit
43
EBITDA and operating profit
* Refer to page 26 in our Q4 FY18 results booklet (available on www.sappi.com) for a definition of special items.
US$m Q4 FY18 Q4 FY17 FY 2018 FY 2017
EBITDA excluding special items* 224 221 762 785Depreciation and amortisation (76) (69) (282) (259)
Operating profit excluding special items* 148 152 480 526
Special items* - gains (losses) (13) (1) 9 -
Plantation price fair value adjustment (3) 7 27 21
Acquisition cost - - (2) -
Net restructuring provisions (3) - (1) (1)
Profit on disposal and written off assets (4) (2) 4 (2)
Asset impairment reversal - (6) 3 (6)
BBBEE charge - - (1) (1)
Fire, flood, storm and other events (3) - (21) (11)
Segment operating profit 135 151 489 526
United States of America
44
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 rollsUS industry purchases defined as industry shipments, plus imports, less exports.Source: AF&PA and RISI indexed to calendar Q1 FY08.
45
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
46
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
Fibre properties and applications
47
Cellulosic fibre properties helping drive that growth
Source: IHS Global, RISI, Hawkins Wright.
Key strength Qualifies Issue
ApparelHome textilesNonwovens/Technical textiles
Overall value proposition
Applications
Function and feel
Appearance
Sustainability
1762
21
6627
7
5220
28
Cellulosic fibres Cotton Polyester
• On a pure property basis, cellulosic fibres are superior to cotton and differentiated on sustainability.
• Polyester is differentiated on 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
Dissolving wood pulp market
48
Viscose-grade DWP demand growth
Source: Sappi; Hawkins Wright; RISI.
OtherEurope 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 ~6-7Total
Rayon Grade
High-alpha/Speciality
DWP gradeDemand 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
49
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% 0 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%
Thank you
50
