Sappi (OTCPK:SPPJ.Y) Earnings Call Presentation

Proposed Joint Venture - Sappi and UPM have signed a non-binding letter of intent to form a joint venture in the European graphic paper sector, with both companies owning a 50% share[6] - The proposed JV aims to create a more efficient, adaptable, and sustainable graphic paper business in Europe[5] - The JV is expected to achieve cost synergies greater than €100 million per annum[6] Strategic Rationale - The European graphic paper industry faces structural challenges including digital substitution, excess capacity, and tightening sustainability standards[11] - Since 2007, graphic paper demand in Europe has decreased by over 60%, newsprint by close to 80%, and magazines and catalogues by some 70%[12] - The proposed JV is a necessary step towards securing the long-term viability, competitiveness, and resilience of the European graphic paper industry[13] Financial Implications for Sappi - Sappi's share of the equity accounted income from the JV is anticipated to exceed the EBITDA of the standalone European graphic paper business[10, 16] - Post transaction, Sappi group graphic paper sales volumes will be less than 20%[10, 16] - Sappi will receive cash consideration of €139 million from the transaction, which will be used to reduce debt[16, 22] Transaction Details - Sappi's assets in scope have an enterprise value of €320 million[18, 21] - Pension and other liabilities transferred amount to €53 million[18] - The transaction is classified as category 1 by the JSE and requires approval of shareholders[21]