Annette Luchene, VP and CFO, Explains Sappi North America's Holistic Approach to Its People and the Planet
At Sappi, we take a holistic view of value creation. As we shared in this year’s annual integrated report, value for Sappi is not only about delivering returns to our shareholders, it is about maximizing the value of every resource along the value chain to ensure those returns are sustainable. We recognize that our sphere of influence and impact extends beyond our mill gates. Accordingly, we strive to increase our positive impacts on people and planet as well as minimize our negative impacts, while securing prosperity through sustainable profit margins.
2019 financial performance
Our group EBITDA margin in 2019 was 12% compared to our group target of 15%, with SNA’s EBITDA margin standing at 7.5%. At the group level, total EBITDA was $687 million, with performance challenged by slower economic growth in many geographies and the impact of lower dissolving wood pulp prices. Lower DWP pricing was caused primarily by a softening of textile demand, excess capacity of viscose staple fiber producers (consumers of DWP), and lower kraft pulp pricing, which caused swing producers to produce DWP instead of kraft. At the regional level, SNA posted EBITDA of $110 million with results impacted by a prolonged weak graphic paper market, which declined by approximately 10% in North America. We are committed to optimizing our graphics business— growing with customers who highly value print. Of course, these structural changes in graphics reinforce the wisdom of our strategic decisions to expand our packaging business and to increase the flexibility of our assets. These decisions allow us to swing between DWP and kraft pulp at Cloquet, as well as between packaging and graphics grades at Somerset. Of particular note, packaging volume growth increased 72% year over year following the successful commercialization of all of our new paperboard grades. Additionally, through a very successful debottlenecking project at Cloquet, we created 30,000 tons per annum of additional DWP capacity at the mill. For a complete report of financial performance for the group and for SNA, please refer to the 2019 Annual Integrated Report at sappi-reports.co.za/reports/sappi-air-2019/index.php
Looking ahead to 2020
Looking ahead to 2020, we are poised to take advantage of the transformative investments made over the last several years. We are committed to identifying further opportunities in our new markets for packaging and specialty papers, dissolving wood pulp, and biomaterials. We will continue to promote our strong graphics brands and to develop innovative service offerings to support our graphics business. As we embrace these new market perspectives, our prospects for sustainable growth have never looked better.
“Our transformation to a more diversified and sustainable business is on track. Sappi’s recent Matane acquisition, the optimization of PM1 at Somerset, and the expansion of our dissolving wood pulp capacity at Cloquet continue our track record of strategic reinvestment to position ourselves for the future. Our goal is always to create longterm value for all our stakeholders, and these investments reflect Sappi’s ongoing commitment to our people, our operations, our communities, and our customers.”
Vice President and Chief Financial Officer,
Sappi North America
Read more from Sappi North America's 2019 Sustainability Report here.