Interim report
Page 1
for the period ended March 2025 Second Quarter Results
Page 2
“Sappi uses renewable resources to make woodfibre-based products. We are a diversified, innovative and trusted leader focused on sustainable processes and products.” Our packaging papers, graphic papers, pulp and biomaterials are manufactured from woodfibre sourced from sustainably managed forests, in production facilities which, in many cases use internally generated bio-energy. Many of our operations are self-sufficient. T ogether with our partners, Sappi works to build a thriving world by acting boldly to support the planet, people and prosperity. Quarter ended Half-year ended Mar 2025 Mar 2024 Dec 2024 Mar 2025 Mar 2024 Key figures (US$ million) Revenue 1,347 1,352 1,363 2,710 2,624 Operating profit (loss) excluding special items(1) 19 116 132 151 202 Special items – loss (gain)(2) 17 46 11 28 225 Adjusted EBITDA(3) (4) 107 180 203 310 310 EBITDA excluding special items(1) 90 183 202 292 339 Profit (Loss) for the period (20) 29 70 50 (97) Basic earnings per share (US cents) (3) 5 12 8 (17) Adjusted EPS (US cents)(3) (4) 1 12 14 15 17 Net debt(3) 1,670 1,366 1,406 1,670 1,366 Key ratios (%) Operating profit (loss) excluding special items to revenue 1.4 8.6 9.7 5.6 7.7 Operating profit (loss) excluding special items to capital employed (ROCE)(3) (4) 1.9 13.0 13.4 7.4 11.2 Adjusted EBITDA to revenue(3) 7.9 13.3 14.9 11.4 11.8 EBITDA excluding special items to revenue 6.7 13.5 14.8 10.8 12.9 Net debt to EBITDA excluding special items 2.6 2.2 1.9 2.6 2.2 Covenant leverage ratio(3) 2.4 2.3 1.8 2.4 2.3 Interest cover(3) 9.4 9.9 10.8 9.4 9.9 Net asset value per share (US cents)(3) 407 387 407 407 387 (1) Refer to note 2 to the group results for the reconciliation of Adjusted EBITDA, EBITDA excluding special items and operating profit excluding special items to operating profit by segment 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. (4) The Adjusted EBITDA definition was introduced in September 2024 and comparatives have been included for March 2024.
Page 3
Sales by source* (%) ● North America 33 ● Europe 41 ● South Africa 26 Sales by destination* (%) ● North America 31 ● Europe 37 ● South Africa 9 ● Asia and other 23 Sales by product* (%) ● Coated paper 40 ● Uncoated paper 5 ● Speciality papers 27 ● Containerboard 5 ● Dissolving pulp 21 ● ● Paper pulp 1 Other 1 Highlights for the quarter Adjusted EBITDA(1) US$107 million (Q2 FY2024: US$180 million) Loss for the period US$20 million (Q2 FY2024: profit of US$29 million) Net debt of US$1,670 million (Q2 FY2024: US$1,366 million) Adjusted EPS(2) 1 US cent (Q2 FY2024: 12 US cents) * For the period ended March 2025. ** As at March 2025. (1) Adjusted EBITDA is EBITDA excluding special items and plantation fair value price adjustment. (2) Adjusted EPS is EPS excluding special items and plantation fair value price adjustment. Net operating assets** (ex corporate) (%) ● North America 35 ● Europe 27 ● South Africa 38 2025 Second Quarter Results 1
Page 4
Commentary on the quarter(3) Operating performance for the second quarter fell short of expectations, with the group delivering Adjusted EBITDA of US$107 million. Challenging market conditions prevailed across all segments, driven by heightened uncertainty from potential global trade tensions and a broader economic slowdown, which placed downward pressure on selling prices. Despite these headwinds, year-on-year sales volumes remained stable, with a modest recovery in packaging and speciality papers volumes, underscoring the long-term potential of these markets. While market conditions for graphic papers remained soft, targeted efforts to grow market share delivered positive year-on-year gains. The forestry fair value price adjustment for the quarter was a loss of US$17 million. Amid these macroeconomic challenges, the group remained focused on optimising asset utilisation and advancing cost-saving initiatives to support future performance. Chinese New Y ear was not observed as textile and apparel markets slowed on the back of increasing geopolitical trade tensions and macroeconomic uncertainties. Viscose staple fibre (VSF) pricing consequently came under pressure catalysing a US$70 per ton decline in the hardwood DWP market price(4), which ended the quarter at US$900 per ton. The profitability of the pulp segment was negatively impacted by the lower production at the Saiccor and Ngodwana Mills during the quarter. Although market prices dropped during the quarter, the net average selling price for the segment was above the equivalent period last year. However, this positive year-on-year sales price momentum was offset by lower sales volumes and increased costs resulting from the extended maintenance shuts. (3) “year-on-year” or “prior/previous year” is a comparison between Q2 FY2025 versus Q2 FY2024; “Quarter-on-quarter” or “prior/previous quarter” is a comparison between Q2 FY2025 and Q1 FY2025. (4) Market price for imported hardwood dissolving wood pulp into China issued daily by the CCF Group. The quarter was negatively impacted by issues that arose during the scheduled maintenance shuts in South Africa, which required additional repairs and extended the shutdowns beyond the planned timeline thereby reducing production for the period. This resulted in an additional financial impact of US$13 million over and above the US$45 million guidance. These issues were resolved and both Saiccor and Ngodwana Mills are running well post start-up. The quarter was also affected by the extended shut for the conversion and expansion of Somerset Mill PM2 in North America, which was US$20 million as per guidance. Demand for dissolving wood pulp (DWP) remained steady during the quarter, but the typical seasonal boost in demand post 2 2025 Second Quarter Results
Page 5
Graphic papers sales volumes remained relatively stable year-on-year, despite the ongoing structural decline in market demand, reflecting positive market share gains for Sappi. The segment continued to operate in an oversupplied environment, with pricing largely influenced by cost dynamics rather than demand fundamentals. In this context, lower raw material costs compared to last year, particularly for paper pulp, exerted some downward pressure on selling prices, which negatively impacted profitability of the segment. Sales volumes in the packaging and speciality papers segment increased by 9% year-on-year, reflecting a normalisation of inventory levels and modest recovery in demand in North America and South Africa. However, overall global demand remained subdued due to persistent macroeconomic headwinds and weak consumer sentiment. Intense competition across all product categories, driven in part by ongoing market oversupply, coupled with deliberate product-mix adjustments undertaken in North America to seed the market ahead of the Somerset Mill PM2 commissioning, contributed to a 4% year-on-year decline in average selling price. Profitability was impacted by the extended maintenance shut at the Ngodwana Mill. Adjusted earnings per share for the quarter was 1 US cent, which was below the 12 US cents in the prior year due to the challenging market conditions and the adverse impacts of the once-off operational challenges experienced during the quarter. Special items reflected a net expense of US$17 million due primarily to US$12 million related to fire and other extraordinary events at our sites together with the final closure costs for the Lanaken Mill of US$4 million. Cash flow and debt Net cash utilised for the quarter of US$207 million was principally due to elevated capital expenditure of US$182 million associated with the scheduled maintenance shuts and the Somerset Mill PM2 conversion and expansion project and a dividend payment of US$85 million. On 19 March 2025, Sappi successfully completed a €300 million bond issuance of 4.500% sustainability-linked senior notes due in 2032. The net proceeds from the offering were used to redeem all of Sappi’s outstanding senior notes due in 2026, with an aggregate principal amount of €240 million, with the remaining funds to be used for general corporate purposes. Net debt of US$1,670 million was US$264 million above last quarter. This was due to the net cash utilised as discussed above, and a negative currency translation effect of US$52 million due to a weaker US Dollar on our Euro-denominated debt. Liquidity comprised cash on hand of US$156 million and US$612 million from the committed unutilised revolving credit facilities (RCF) in South Africa and Europe. 2025 Second Quarter Results 3
Page 6
The European business remained under pressure due to persistent macroeconomic weakness and the significant oversupply in paper markets. While sales volumes were relatively stable year-on-year, margins were adversely affected by lower selling prices. The region continued to benefit from a focus on operational efficiency with variable cost savings contributing positively to profitability. Graphic papers sales volumes remained steady year-on-year, a strong result within the context of structurally declining market demand and a clear indication of market share gains. However, the segment faced pricing pressure, with average prices declining by 3% compared to the prior year. This was driven by strong competition due to industry oversupply, Asian imports and downstream expectations of improved cost pass-through as input costs, particularly paper pulp, reduced. These dynamics continue to weigh on overall profitability despite stable volumes. The packaging and speciality papers segment continued to face headwinds due to subdued downstream demand, which remained well below historical norms. Sales volumes of wet-strength label paper showed continued growth, but this was offset by notably weak demand in paperboard and flexible packaging papers. Overall sales volumes remained stable, and pricing increased compared to the prior year, which contributed to improved profitability of the segment. Variable costs were 1% below last year driven by lower purchased pulp and wood costs. Fixed costs were 3% above the prior year due to personnel cost inflation. Operating review for the quarter Quarter ended € million Mar 2025 Dec 2024 Sept 2024 Jun 2024 Mar 2024 Volumes sold – tons (000’s) 491 465 488 492 495 Revenue 523 517 541 538 534 Operating profit (loss) excluding special items 4 13 14 4 10 Operating profit (loss) excluding special items to revenue (%) 0.8 2.5 2.6 0.7 1.9 Adjusted EBITDA 25 35 36 25 32 Adjusted EBITDA to revenue (%) 4.8 6.8 6.7 4.6 6.0 RONOA pa (%) 1.4 4.6 5.1 1.5 4.2 EUROPE 4 2025 Second Quarter Results
Page 7
NORTH AMERICA Quarter ended US$ million Mar 2025 Dec 2024 Sept 2024 Jun 2024 Mar 2024 Volumes sold – tons (000’s) 362 371 389 340 361 Revenue 440 458 474 421 439 Operating profit (loss) excluding special items 5 47 47 11 29 Operating profit (loss) excluding special items to revenue (%) 1.1 10.3 9.9 2.6 6.6 Adjusted EBITDA 29 71 71 33 51 Adjusted EBITDA to revenue (%) 6.6 15.5 15.0 7.8 11.6 RONOA pa (%) 1.2 12.3 13.1 3.2 8.4 Profitability of the North American business was adversely affected by higher costs related to the planned shut for the conversion and expansion of Somerset Mill PM2 combined with general production challenges early in the quarter. Although these factors weighed on margins for the period, the underlying fundamentals of the business remained sound with stable sales volumes compared to last year. The average net selling price was broadly in line with the prior year with resilient graphic papers prices offsetting downward pressure in the packaging papers and high yield pulp segments. Graphic papers sales volumes increased slightly compared to the prior year supported by inventory build ahead of the Somerset Mill PM2 conversion and positive market share gains. Higher year-on-year selling prices were offset by increased variable costs, which reduced margins for the segment. Capacity utilisation improved for the quarter as we realised our strategic objective to reduce exposure to graphic papers markets with PM2 exiting coated woodfree paper production. Demand for packaging and speciality papers strengthened compared to the prior year, with sales volumes increasing by 13%. However, pricing came under pressure declining 9% year-on-year due to a highly competitive market environment and a proactive shift in product mix as we increased volumes of food service board ahead of the Somerset Mill PM2 start-up. These pricing pressures, coupled with higher input costs, resulted in reduced profitability for the segment. Although demand in the pulp segment was steady, sales volumes declined compared to last year as we integrated more of our production at the Cloquet and Matane Mills into our own operations. Higher year-on-year DWP selling prices offset lower high yield pulp(5) pricing and higher costs leading to improved profitability of the segment. Variable costs were 5% above last year primarily due to higher energy and raw material usage costs associated with operational disruptions during the quarter and higher purchased pulp costs, which were partially offset by lower wood costs. Fixed costs were 2% above the prior year primarily due to higher maintenance and personnel costs. (5) High yield pulp = bleached chemi-thermomechanical pulp (BCTMP). 2025 Second Quarter Results 5
Page 8
SOUTH AFRICA Quarter ended ZAR million Mar 2025 Dec 2024 Sept 2024 Jun 2024 Mar 2024 Volumes sold – tons (000’s) 690 665 707 678 611 Revenue 6,598 6,312 7,165 6,860 6,285 Operating profit (loss) excluding special items 148 1,234 963 1,226 1,358 Operating profit (loss) excluding special items to revenue (%) 2.2 19.6 13.4 17.9 21.6 Adjusted EBITDA 883 1,663 2,033 1,561 1,678 Adjusted EBITDA to revenue (%) 13.4 26.3 28.4 22.8 26.7 RONOA pa (%) 1.8 15.3 12.0 14.9 16.4 The South African business experienced a challenging quarter as the planned maintenance shuts at the Ngodwana and Saiccor Mills adversely impacted profitability. The shuts and subsequent start-up took longer than scheduled and we experienced other production challenges during the period. As a result, production in the quarter was lower than expected. Despite the shuts, sales volumes were steady year-on-year, and the average net selling price was higher. The forestry fair value price adjustment for the quarter was a loss of ZAR307 million. Demand for DWP was stable with sales volumes 2% below last year and constrained by production. Higher year-on-year US Dollar selling prices were partially offset by a stronger ZAR exchange rate compared to the prior year. Higher costs due to the shuts and associated operational inefficiencies reduced margins in the pulp segment. Containerboard sales volumes rose by 16% from the depressed levels of the comparable quarter of last year. Demand improved towards the end of the period, supported by optimistic market forecasts for the 2025 citrus season. The sales volume gains versus the prior year were offset by the adverse impact of the Ngodwana Mill shut which increased costs and reduced profitability in the packaging and speciality papers segment. Demand for office paper and newsprint was subdued, weighed down by a sluggish domestic economy and intensified competition from imports. Higher year-on-year selling prices were insufficient to offset lower sales volumes. Variable costs were 11% above the prior year primarily due to higher raw material usage, specifically energy, due to operational inefficiencies associated with the scheduled shuts. Fixed costs were 27% above last year due to higher personnel costs and increased maintenance costs during the quarter. Operating review for the quarter continued 6 2025 Second Quarter Results
Page 9
OUTLOOK The escalating tariff trade tensions initiated by the United States against key trading partners introduces a high level of uncertainty into the global macroeconomic outlook which poses risks to our financial performance. We expect the direct impact of the currently proposed United States trade tariffs on our business to be relatively limited. At present, less than 7% of the group’s sales volumes involve cross-border trade with the United States, limiting our direct revenue exposure to tariff-related risks. Importantly, we maintain a strong domestic presence in the United States, and the paper markets in which we operate are net importers. As a result, tariffs could present a strategic opportunity as downstream participants in the value chain may increasingly shift toward domestic supply. However, the disruption of trade flows related to tariff actions could contribute to global inflationary pressures which may materially weaken consumer demand across all of our key markets. We continue to monitor these developments closely and remain focused on maintaining operational flexibility and cost discipline in the face of these external challenges. The Somerset Mill PM2 conversion and expansion project was successfully completed in early May 2025 and machine commissioning is in progress. Our strategic focus for the packaging and speciality papers segments is to execute the commercial ramp-up of the PM2 machine, optimise our product portfolio mix and capture long-term growth opportunities as market conditions improve. The textile and apparel market, with its long and complex supply chain, is particularly vulnerable to ongoing trade tensions and inflationary pressures. Moreover, inflation driven constraints on consumer spending are likely to dampen demand for discretionary items such as clothing. Demand for VSF and DWP in China has slowed in recent weeks as the value chain assesses the implications of these newly imposed tariffs. This has exerted downward pressure on pricing causing the hardwood DWP market price(6) to drop to US$847 per ton in early May. Despite current headwinds, our DWP business remains well positioned for sustained long-term growth. Demand for graphic papers continues to decline. Our strategic focus in this segment is to proactively manage capacity utilisation and cash generation from our assets. Our efforts to maximise our market share is yielding positive results, with year-on-year gains reinforcing our competitive positioning. (6) Market price for imported hardwood dissolving wood pulp into China issued daily by the CCF Group. 2025 Second Quarter Results 7
Page 10
Despite current raw material costs being relatively low, potential global inflationary impacts associated with trade tensions pose a risk for our input costs. Maintenance shuts are scheduled for the Cloquet(7) and Saiccor Mills in the third quarter, which will have a negative impact on earnings of approximately US$20 million. We further anticipate that the forestry fair value price adjustment will be negative due to lower wood market prices in South Africa. Our capital expenditure forecast for FY2025 has risen to US$550 million due to the delay in the start-up and substantially increased labour costs associated with the Somerset Mill PM2 project. We anticipate that net debt will peak in the third quarter as the capital expenditure for the project is completed. We remain committed to disciplined capital allocation and reducing net debt is our priority for FY2026 and FY2027. Given the uncertainty in our markets due to ongoing global trade tensions and their broader indirect effects on macroeconomic conditions, particularly the tariffs imposed by the US on textile and apparel manufacturers in China which is impacting demand and pricing for DWP , we are adopting a cautious outlook and estimate that Adjusted EBITDA for the third quarter of FY2025 will be at a similar level to that of the second quarter. On behalf of the board SR Binnie Director GT Pearce Director 07 May 2025 (7) The Cloquet Mill has 18-month intervals between shuts and the last shut was in Q1 FY2024. 8 2025 Second Quarter Results
Page 11
Forward-looking statements Certain 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 of or 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, this document 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. You should 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 actual results, 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 raw material, 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; • 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. 2025 Second Quarter Results 9
Page 12
Condensed group income statement Quarter ended Reviewed Half-year ended US$ million Note Mar 2025 Mar 2024 Mar 2025 Mar 2024 Revenue 1,347 1,352 2,710 2,624 Cost of sales 1,231 1,143 2,361 2,227 Gross profit 116 209 349 397 Selling, general and administrative expenses 101 101 202 201 Other operating (income) expenses 13 37 24 216 Share of (profit) loss from equity-accounted investees – 1 – 3 Operating profit (loss) 3 2 70 123 (23) Net finance costs 20 17 39 31 Finance costs 26 25 52 51 Finance income (4) (6) (9) (16) Net foreign exchange gain (2) (2) (4) (4) Profit (Loss) before taxation (18) 53 84 (54) T axation 2 24 34 43 Profit (Loss) for the period (20) 29 50 (97) Basic earnings per share (US cents) 4 (3) 5 8 (17) Weighted average number of shares in issue (millions) 604.6 571.6 603.2 565.5 Diluted earnings per share (US cents) 4 (3) 5 8 (17) Weighted average number of shares on fully diluted basis (millions) 606.9 580.9 605.7 574.8 10 2025 Second Quarter Results
Page 13
Condensed group statement of other comprehensive income Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Profit (Loss) for the period (20) 29 50 (97) Other comprehensive income, net of tax Items that will not be reclassified subsequently to profit or loss (2) – (2) – Actuarial gains (losses) on post-employment benefit funds (2) – (2) – T ax effect – – – – Items that may be reclassified subsequently to profit or loss 20 (31) (84) (6) Exchange differences on translation of foreign operations 8 (23) (72) (7) Movements in hedging reserves 14 (9) (15) 1 T ax effect (2) 1 3 – T otal comprehensive income for the period (2) (2) (36) (103) 2025 Second Quarter Results 11
Page 14
Reviewed US$ million Note Mar 2025 Sept 2024 ASSETS Non-current assets 4,209 4,208 Property, plant and equipment 3,299 3,241 Right-of-use assets 82 79 Plantations 517 562 Deferred tax assets 74 76 Goodwill and intangible assets 93 95 Equity-accounted investees 13 11 Other non-current assets 131 144 Current assets 1,689 1,998 Inventories 8 857 836 T rade and other receivables 8 667 771 Derivative financial assets 5 5 18 T axation receivable 2 6 Cash and cash equivalents 7 156 317 Assets held for sale 9 2 50 T otal assets 5,898 6,206 EQUITY AND LIABILITIES Shareholders’ equity Ordinary shareholders’ interest 2,461 2,578 Non-current liabilities 2,213 2,299 Interest-bearing borrowings 7 1,479 1,537 Lease liabilities 7 75 74 Deferred tax liabilities 411 433 Defined benefit and other liabilities 248 255 Current liabilities 1,224 1,329 Interest-bearing borrowings 7 249 107 Lease liabilities 7 23 21 T rade and other payables 8 919 1 110 Provisions 2 8 Derivative financial liabilities 5 14 17 T axation payable 17 66 T otal equity and liabilities 5,898 6,206 Number of shares in issue at balance sheet date (millions) 604.6 599.4 Condensed group balance sheet 12 2025 Second Quarter Results
Page 15
Condensed group statement of cash flows Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Profit (Loss) for the period (20) 29 50 (97) Adjustment for: Depreciation, fellings and amortisation 85 86 174 173 T axation 2 24 34 43 Net finance costs 20 17 39 31 Defined post-employment benefits paid (6) (10) (10) (14) Plantation fair value adjustments (4) (31) (24) (79) Asset impairments – 3 1 5 Write down of held-for-sale assets – – 4 – Net restructuring charge (1) 5 (1) 141 (Profit) Loss on disposal and written-off assets 1 – (1) (1) Other non-cash items(1) 1 5 18 47 Cash generated from operations 78 128 284 249 (Increase) Decrease in working capital 4 (45) (126) (88) Closure and restructuring costs paid (2) (133) (4) (176) Finance costs paid (2) (25) (36) (38) Finance income received 4 7 9 16 T axation (paid) refund (21) (17) (70) (27) Dividend paid (85) (84) (85) (84) Cash (utilised by) generated from operating activities (24) (169) (28) (148) Cash utilised in investing activities (183) (65) (241) (155) Capital expenditure (182) (65) (283) (140) Proceeds on disposal of assets – 1 4 2 Proceeds on held-for-sale assets – – 43 – Movements to non-current and intangible asset (1) (1) (5) (17) (1) Other non-cash items for the period ended March 2025 include accruals for closure costs at Lanaken of US$Nil million (2024: US$33 million) (€28 million), non-cash movements in the defined benefit liabilities and plan assets of US$14 million (2024: US$12 million) and share-based charges of US$4 million (2024: US$3 million). 2025 Second Quarter Results 13
Page 16
Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Net cash (utilised) generated (207) (234) (269) (303) Cash effects of financing activities 78 95 121 94 Proceeds from interest-bearing borrowings 372 175 456 215 Repayment of interest-bearing borrowings (287) (74) (322) (109) Share repurchases – – – – Capital lease repayments (7) (6) (13) (12) Net movement in cash and cash equivalents (129) (139) (148) (209) Cash and cash equivalents at beginning of period 283 533 317 601 T ranslation effects 2 (2) (13) – Cash and cash equivalents at end of period 156 392 156 392 Condensed group statement of cash flows continued 14 2025 Second Quarter Results
Page 17
Condensed group statement of changes in equity Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Balance – beginning of period 2,578 2,445 Profit (Loss) for the period 50 (97) Other comprehensive income for the period (86) (6) Issue of shares – 58 Dividend – 14 US cents (2024: 15 US cents) (85) (84) Share-based payment reserve 4 3 Balance – end of period 2,461 2,319 Comprising Ordinary share capital and premium 758 739 Non-distributable reserves 124 114 Foreign currency translation reserves (229) (247) Hedging reserves (52) (55) Retained earnings 1,860 1,768 T otal equity 2,461 2,319 2025 Second Quarter Results 15
Page 18
Notes to the condensed group results 1. Basis of preparation The condensed group interim financial statements for the quarter and half-year ended March 2025 have been prepared in accordance with and containing the information required by IAS 34 Interim Financial Reporting, the Financial Pronouncements as issued by the Financial Reporting Standards Council and SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements and the South African Companies Act. The accounting policies applied in the preparation of the condensed group financial statements are consistent with those applied in the previous annual financial statements. The group amended its fiscal year from using a 52/53 week year to using calendar month ends. The preparation of these condensed group financial statements was supervised by the Chief Financial Officer, GT Pearce, CA(SA) and were authorised for issue on 07 May 2025. The condensed group interim financial statements for the half-year ended March 2025 which includes condensed group balance sheet, condensed group income statement, condensed group statements of other comprehensive income, changes in equity and cash flows and notes to the condensed group financial statements have been reviewed by KPMG Inc., who expressed an unmodified review conclusion. The auditor’s report should therefore be read in conjunction with these condensed group financial statements. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office. 2. Segment information Quarter ended Half-year ended Metric tons (000’s) Mar 2025 Mar 2024 Mar 2025 Mar 2024 Volumes sold North America 362 361 733 681 Europe 491 495 956 989 South Africa – Pulp and paper 386 384 757 741 Forestry 304 227 598 462 T otal 1,543 1,467 3,044 2,873 Which consists of: Pulp 354 377 700 712 Packaging and speciality papers 355 327 680 612 Graphic papers 530 536 1 066 1 087 Forestry 304 227 598 462 16 2025 Second Quarter Results
Page 19
2. Segment information continued Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Revenue(1) North America 440 439 898 828 Europe 550 580 1 102 1 148 South Africa – Pulp and paper 340 319 674 620 Forestry 17 14 36 28 T otal 1,347 1,352 2,710 2,624 Which consists of: Pulp 298 295 591 550 Packaging and speciality papers 434 416 854 782 Graphic papers 598 627 1 229 1 264 Forestry 17 14 36 28 Operating profit (loss) excluding special items North America 5 29 52 52 Europe 4 11 18 13 South Africa 7 72 76 132 Unallocated and eliminations(2) 3 4 5 5 T otal 19 116 151 202 Which consists of: Pulp 14 52 80 87 Packaging and speciality papers (18) 18 (12) 29 Graphic papers 20 42 78 81 Unallocated and eliminations(2) 3 4 5 5 (1) Segment revenue is presented net of delivery costs. Prior periods have been adjusted. (2) Includes the group’s treasury operations and insurance captive. 2025 Second Quarter Results 17
Page 20
Notes to the condensed group results continued 2. Segment information continued Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Special items – (gains) losses North America 1 2 2 2 Europe 6 31 8 207 South Africa 3 5 3 8 Unallocated and eliminations(2) 7 8 15 8 T otal 17 46 28 225 Operating profit (loss) by segment North America 4 27 50 50 Europe (2) (20) 10 (194) South Africa 4 67 73 124 Unallocated and eliminations(2) (4) (4) (10) (3) T otal 2 70 123 (23) Adjusted EBITDA(3) North America 29 51 100 97 Europe 27 35 64 63 South Africa 47 89 140 144 Unallocated and eliminations(2) 4 5 6 6 T otal 107 180 310 310 Which consists of: Pulp 50 70 135 114 Packaging and speciality papers 8 37 42 57 Graphic papers 45 68 127 133 Unallocated and eliminations(2) 4 5 6 6 (2) Includes the group’s treasury operations and insurance captive. (3) The Adjusted EBITDA definition was introduced in September 2024 and comparatives have been included for March 2024. 18 2025 Second Quarter Results
Page 21
2. Segment information continued Reconciliation of Adjusted EBITDA to profit for the period and operating profit excluding special items to operating profit Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Adjusted EBITDA(3) 107 180 310 310 Plantation fair value price adjustment (17) 3 (18) 29 EBITDA excluding special items 90 183 292 339 Depreciation and amortisation (71) (67) (141) (137) Operating profit excluding special items 19 116 151 202 Special items – gains (losses) (17) (46) (28) (225) Net restructuring release (charge) 1 (5) 1 (141) Profit (Loss) on disposal and written off assets (1) – 1 1 Asset (impairments) impairment reversal – (3) (1) (5) Write down of held-for-sale assets – – (4) – Insurance – (2) – 2 Fire, flood, storm and other events (17) (36) (25) (82) Operating profit (loss) 2 70 123 (23) Net finance costs (20) (17) (39) (31) Profit (Loss) before taxation (18) 53 84 (54) T axation (2) (24) (34) (43) Profit (Loss) for the period (20) 29 50 (97) (3) The Adjusted EBITDA definition was introduced in September 2024 and comparatives have been included for March 2024. 2025 Second Quarter Results 19
Page 22
Notes to the condensed group results continued 2. Segment information continued Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Net operating assets North America 1,658 1,395 Europe 1,293 1,094 South Africa 1,774 1,760 Unallocated and eliminations(2) (9) 2 T otal 4,716 4,251 Reconciliation of net operating assets to total assets Segment assets 4,716 4,251 Deferred tax assets 74 84 Cash and cash equivalents 156 392 T rade and other payables 919 939 Provisions 2 73 Derivative financial instruments 14 4 T axation payable 17 51 T otal assets 5,898 5,794 (2) Includes the group’s treasury operations and insurance captive. 20 2025 Second Quarter Results
Page 23
3. Operating profit (loss) Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Included in operating profit are the following items: Depreciation and amortisation 71 67 141 137 Fair value adjustment on plantations (included in cost of sales) Fellings 14 19 33 36 Growth (21) (28) (42) (50) Price 17 (3) 18 (29) 10 (12) 9 (43) Net restructuring charge (release) (1) 5 (1) 141 (Profit) Loss on disposal and written-off assets 1 – (1) (1) Asset impairments (impairment reversal) – 3 1 5 Write down of held-for-sale assets – – 4 – Insurance – 2 – (2) 2025 Second Quarter Results 21
Page 24
Notes to the condensed group results continued 4. Earnings per share Quarter ended Reviewed Half-year ended US$ million Mar 2025 Mar 2024 Mar 2025 Mar 2024 Basic earnings per share (US cents) (3) 5 8 (17) Headline earnings per share (US cents) (3) 5 9 (16) Adjusted EPS (US cents) 1 12 15 17 Weighted average number of shares in issue (millions) 604.6 571.6 603.2 565.5 Diluted earnings per share (US cents) (3) 5 8 (17) Diluted headline earnings per share (US cents) (3) 5 9 (16) Weighted average number of shares on fully diluted basis (millions) 606.9 580.9 605.7 574.8 Calculation of headline earnings Profit (Loss) for the period (20) 29 50 (97) (Profit) Loss on disposal and write off of property, plant and equipment 1 – (1) (1) Asset impairments (impairment reversal) – 3 1 5 Write down of held-for-sale assets – – 4 – T ax effect of above items – – 1 – Headline earnings (19) 32 55 (93) Calculation of adjusted earnings Profit (Loss) for the period (20) 29 50 (97) Special items and plantation fair value price adjustment after tax 28 39 40 197 Gross amount 34 43 46 196 T ax effect (6) (4) (6) 1 T ax special items – (1) – (6) Adjusted earnings(1) 8 67 90 94 (1) The Adjusted EBITDA definition was introduced in September 2024 and comparatives have been included for March 2024. 22 2025 Second Quarter Results
Page 25
5. Financial instruments The group’s financial instruments that are measured at fair value on a recurring basis consist of derivative financial instruments and investment funds. These have been categorised in terms of the fair value measurement hierarchy as established by IFRS 13 Fair Value Measurement per the table below. Fair value(1) Reviewed US$ million Classification Fair value hierarchy Mar 2025 Sept 2024 Investment funds(2) FV through OCI Level 1 5 5 Derivative financial assets FV through PL Level 2 5 18 Derivative financial liabilities FV through PL Level 2 14 17 (1) The fair value of the financial instruments are equal to their carrying value. (2) Included in other non-current assets. There have been no transfers of financial assets or financial liabilities between the categories of the fair value hierarchy. The fair value of all external over-the-counter derivatives is calculated based on the discount rate adjustment technique. The discount rate used is derived from observable rates of return for comparable assets or liabilities traded in the market. The credit risk of the external counterparty is incorporated into the calculation of fair values of financial assets and own credit risk is incorporated in the measurement of financial liabilities. The change in fair value is therefore impacted by the following inputs, the movement of the interest rate curves, by the volatility of the applied credit spreads, and by any changes to the credit profile of the involved parties. There are no financial assets and liabilities that have been remeasured to fair value on a non-recurring basis. The carrying amounts of other financial instruments which include cash and cash equivalents, trade and other receivables, certain investments, trade and other payables and current interest-bearing borrowings approximate their fair values. 6. Capital commitments Reviewed US$ million Mar 2025 Sept 2024 Contracted 150 254 150 254 2025 Second Quarter Results 23
Page 26
Notes to the condensed group results continued 7. Interest-bearing borrowings, lease liabilities and cash and cash equivalents Reviewed US$ million Mar 2025 Sept 2024 Non-current and current interest-bearing borrowings 1,728 1,644 Non-current and current lease liabilities 98 95 Less: Cash and cash equivalents (156) (317) Net debt 1,670 1,422 As at March 2025 the group was in compliance with its debt covenants: Covenant leverage ratio 2.4 2.0 Interest cover 9.4 10.9 8. Material balance sheet movements Since the 2024 financial year-end, the Euro and the ZAR have weakened by approximately 3.0% and 7.6% respectively against the US Dollar, the group’s presentation currency. This has resulted in a decrease of the group’s European and South African assets and liabilities, which are held in the aforementioned functional currency, on translation to the presentation currency at period-end. Inventories, trade and other receivables and trade and other payables The increase in inventories and decrease in trade and other receivables and trade and other payables is largely attributable to seasonal working capital movements. Interest-bearing borrowings In March 2025, the group raised €300 million 4.5% sustainability-linked senior notes due 2032 of which the proceeds were used to redeem all the outstanding senior notes due 2026 in an aggregate principal amount of €240 million. 9. Assets held for sale During the six months the group sold items of property, plant and equipment classified as held for sale related to the closure of our Lanaken Mill within our European segment for US$43 million (€40 million) for US$Nil profit. The remaining held-for-sale assets were written down by US$4 million (€4 million) to their fair value less costs to sell and sold for US$1 million (€1 million) for US$Nil profit. In March 2025, the group transferred US$2 million into held-for-sale assets relating to its Lomati Mill within its South African segment. 10. Related parties There has been no material change, by nature or amount, in transactions with related parties since the 2024 financial year-end. 11. Events after balance sheet date There have been no reportable events that occurred between the balance sheet date and the date of authorisation for issue of these financial statements. 12. Accounting standards, interpretations and amendments to existing standards that are not yet effective There has been no significant change to management’s estimates in respect of new accounting standards, amendments and interpretations to existing standards that have been published which are not yet effective and which have not yet been adopted by the group. 24 2025 Second Quarter Results
Page 27
Supplemental information (this information has not been audited or reviewed) Headline earnings – as defined in circular 1/2023, as issued by the South African Institute of Chartered Accountants, separates from earnings all separately identifiable remeasurements. It is not necessarily a measure of sustainable earnings. It is a Listings Requirement of the JSE Limited to disclose headline earnings per share Interest cover – last 12 months’ EBITDA excluding special items to net interest adjusted for refinancing costs NBSK – Northern Bleached Softwood Kraft pulp. One of the main varieties of market pulp, produced from coniferous trees (ie spruce, pine) in Scandinavia, Canada and northern USA. The price of NBSK is a benchmark widely used in the pulp and paper industry for comparative purposes Net assets – total assets less total liabilities Net asset value per share – net assets divided by the number of shares in issue at balance sheet date Net debt – current and non-current interest-bearing borrowings and lease liabilities, bank overdrafts less cash and cash equivalents General definitions Adjusted EBITDA – EBITDA excluding special items and the plantation fair value price adjustment Average – averages are calculated as the sum of the opening and closing balances for the relevant period divided by two Capital employed – shareholders’ equity plus net debt Covenant leverage ratio – net debt divided by last 12 months’ EBITDA excluding special items as defined by our bank covenants EBITDA excluding special items – earnings before interest (net finance costs), taxation, depreciation, amortisation and special items Adjusted EPS – earnings per share excluding special items, the plantation fair value price adjustment, special finance costs and special tax items Fellings – the amount charged against the income statement representing the standing value of the plantations harvested 2025 Second Quarter Results 25
Page 28
Supplemental information continued (this information has not been audited or reviewed) ROCE – annualised return on average capital employed. Operating profit excluding special items divided by average capital employed RONOA – return on average net operating assets. Operating profit excluding special items divided by average net operating assets Special items – special items cover those items which management believe are material by nature or amount to the operating results and require separate disclosure. Such items would generally include profit or loss on disposal of property, investments and businesses, asset impairments, restructuring charges, non-recurring integration costs related to acquisitions, financial impacts of natural disasters and settlement gains or losses on defined benefit obligations The above financial measures are presented to assist our shareholders and the investment community in interpreting our financial results. These financial measures are regularly used and compared between companies in our industry Net debt to EBITDA excluding special items – net debt divided by the last 12 months’ EBITDA excluding special items Net operating assets – total assets (excluding deferred tax assets and cash) less current liabilities (excluding interest- bearing borrowings, lease liabilities and overdraft) Operating profit – profit from business operations before deduction of net finance costs and taxes Non-GAAP measures – the group believes that it is useful to report certain non-GAAP measures for the following reasons: • these measures are used by the group for internal performance analysis • the presentation by the group’s reported business segments of these measures facilitates comparability with other companies in our industry, although the group’s measures may not be comparable with similarly titled profit measurements reported by other companies • it is useful in connection with discussion with the investment analyst community and debt rating agencies These non-GAAP measures should not be considered in isolation or construed as a substitute for GAAP measures in accordance with IFRS 26 2025 Second Quarter Results
Page 29
Summary Rand convenience translation Quarter ended Half-year ended Mar 2025 Mar 2024 Mar 2025 Mar 2024 Key figures (ZAR million) Revenue 24,920 25,523 49,278 49,338 Operating profit excluding special items(1) 352 2,190 2,746 3,798 Special items – (gains) losses(1) 315 868 509 4,231 EBITDA excluding special items(1) 1,665 3,455 5,310 6,374 Profit for the period (370) 547 909 (1,824) Basic earnings per share (SA cents) (61) 96 151 (323) Net debt(1) 30,763 25,775 30,763 25,775 Key ratios (%) Operating profit excluding special items to revenue 1.4 8.6 5.6 7.7 Operating profit excluding special items to capital employed (ROCE)(1) 1.9 13.2 7.6 11.1 EBITDA excluding special items to revenue 6.7 13.5 10.8 12.9 (1) Refer to supplemental information for the definition of the term. The above financial results have been translated into Rand from US Dollar as follows: • assets and liabilities at rates of exchange ruling at period-end; and • income, expenditure and cash flow items at average exchange rates. 2025 Second Quarter Results 27
Page 30
Exchange rates Mar 2025 Dec 2024 Sept 2024 Jun 2024 Mar 2024 Exchange rates: Period-end rate: US$1 = ZAR 18.4211 18.7964 17.1162 18.1925 18.8688 Average rate for the quarter: US$1 = ZAR 18.5004 17.8818 17.9763 18.5706 18.8776 Average rate for the year to date: US$1 = ZAR 18.1837 17.8818 18.5357 18.7254 18.8027 Period-end rate: €1 = US$ 1.0828 1.0408 1.1164 1.0715 1.0795 Average rate for the quarter: €1 = US$ 1.0518 1.0678 1.0986 1.0765 1.0860 Average rate for the year to date: €1 = US$ 1.0600 1.0678 1.0843 1.0796 1.0811 Sappi share price – March 2023 to March 2025 March 2023 70 60 50 40 30 20 10 0 June 2023 September 2023 March 2024 December 2023 June 2024 September 2024 December 2024 March 2025 Supplemental information continued (this information has not been audited or reviewed) 28 2025 Second Quarter Results
Page 31
Our purpose Sappi exists to build a thriving world by unlocking the power of renewable resources to benefit people, communities and the planet. Sappi has a primary listing on the JSE Limited and a Level 1 ADR programme that trades in the over-the-counter market in the United States JSE Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited) This report is available on the Sappi website: www.sappi.com Registration number: 1936/008963/06 JSE code: SAP ISIN code: ZAE000006284 Issuer code: SAVVI South Africa Computershare Investor Services (Pty) Ltd Rosebank T owers 15 Biermann Avenue Rosebank 2196 South Africa Private Bag X9000 Saxonwold, 2132 South Africa www.computershare.com United States ADR Depositary The Bank of New Y ork Mellon Investor Relations PO Box 11258 Church Street Station New Y ork, NY10286-1258 T el +1 610 382 7836
Page 32
www.sappi.com