Vigourexplore our theme

Lizards are estimated to have been around for 240 million years. Little wonder, given that they make use of a variety of antipredator adaptations, including venom, camouflage, reflex bleeding and the ability to sacrifice and regrow their tails. What’s more, as with other reptiles, the skin of lizards is covered in overlapping scales made of keratin, providing protection from the environment and reducing water loss through evaporation. This characteristic enables them to thrive in some of the driest deserts on earth.

Vigour, strength and adaptability have ensured lizards’ ability to thrive over the course of time.

So, too, at Sappi, our commitment to growing our business and maintaining a healthy balance sheet, has sustained us for almost 90 years. We are vigorous in our commitment to deliver on our Thrive strategy, including by reducing exposure to graphic paper markets while investing for growth in our target markets and capitalising on our leadership position in pulp supply to the lyocell market.

Evolveexplore our theme

Very little in nature is static – everything is constantly changing and evolving. One miraculous example of this is the metamorphosis of the egg, the caterpillar (larva) and the chrysalis (pupa) into the adult butterfly. This process embodies fresh ideas, renewal and unexpected outcomes.

The caterpillar’s new form as a butterfly opens new horizons, but also new risks, particularly in the form of climate change. Butterflies are particularly sensitive to environmental changes like climatic shifts. That is because they are strictly adapted to certain environmental conditions and their development depends on certain larval food plants and specific microhabitat structures.

In Sappi’s case, climate change presents both risks and opportunities. We are addressing short- and long-term physical and transitional climate risks identified through processes outlined by the Task Force on Climate-related Financial Disclosures (TCFD) to build resilience. In addition, we are determined, as a socially responsible business, to play our part in ensuring a just transition in South Africa as the country faces the reality of reducing its dependence on coal.

We are also determined to accelerate our science-based decarbonisation trajectory which we see as an opportunity to future-proof our business. So too, are the opportunities presented by evolving customer needs and legislation – notably growing demand for sustainable packaging, based on low-carbon impact, together with demand for more sustainable textile fibres.

We cannot achieve our vision of a thriving world without an evolving response to climate change. By collaborating with a broad range of stakeholders we are working to achieve energy security and climate resilience and transform our vision into reality.

Postureexplore our theme

Beauty and confidence. Pride and upright posture. These attributes have meant that many cultures over the ages have associated peacocks with royalty and power.

This image is appropriate to Sappi because we too, can stand tall with pride when we consider our past achievements and drive to create not just enterprise value, but value for our people and for communities.

We have achieved enterprise value through our ability to be nimble and optimise profitability in ever-changing markets, reshaping our products and processes to create value and growth for our own business and our customers. We continue to offer our customers a broad range of solutions based on the power of renewable resources that enable them to achieve their sustainability goals and contribute to the low-carbon, circular economy. In doing so, we have continued to focus on treading more lightly on the Planet.

Creating value for our people and communities is underpinned by the structures and programmes we have established which facilitate open, authentic communication, by our ongoing investment in training, development and transformative community programmes, as well as by our collaborative partnerships focused on workable solutions to industry challenges.

Our commitment to delivering sustainable value to our stakeholders is based on our focus on living our values at all times: At Sappi we do business safely with integrity and courage, making smart decisions which we execute with speed.

Diving deeper into our,
performance and prospects

Fortifyexplore our theme

Hermit crabs are shapeshifters, moulting as they grow, continually shedding their exoskeletons and growing new ones. As their exoskeletons are fragile, they need shells for protection. Rather than produce their own shell, as they grow, they use shells abandoned by other marine creatures. This process is not a one-off, but continues throughout their lifespan, depending on water temperature, habitat and species.

Many species will enhance their chances of survival by encouraging anemones to attach to their shell, as the latter’s stinging tentacles may deter predators. The crabs even transfer the anemones from shell to shell when they move house.

We can draw parallels with Sappi, fortified as we are by our iterative Thrive strategy and by our agility in responding to changes in our operating context to emerge stronger and better positioned for growth. This process is underpinned by ongoing engagement with our stakeholders, whose input helps us shape our response to our environment as we collaborate to build a thriving world.

Balanceexplore our theme

Bubbles are things of fragility, wonder – and balance. That’s because the inward surface tension forces of the water film are exactly balanced by the outward-pushing pressure of the air inside.

Blowing more air in to make a bigger bubble means more air pressure inside and also means the bubble must get thinner in the process, because there is only so much water to go around. Should one keep blowing more air in, the film eventually won’t have enough reserve water to spread out into a bigger surface, and the ultimate catastrophe occurs: the bubble bursts.

The success of Sappi’s business is also based on balance. This includes continuous capital prioritisation as we look to reduce costs and grow the business while sustaining a healthy balance sheet. It involves reshaping our product portfolio to meet changing market needs and taking advantage of growth opportunities while being mindful of the risks. It means balancing the needs of people and communities with our responsibility to our shareholders.

As we move forward into the future, we know we can rely on the expertise and passion of our people and the ongoing cooperation of our stakeholders to maintain this balance and drive sustainable value creation.

Connectexplore our theme

Some mushrooms are bioluminescent, due to luciferins, the same compounds that make fireflies light up at night. This ability is used to attract insects which then spread the mushroom spores elsewhere in the forest, allowing the fungi to reproduce.

But that’s not where connection ends. Beneath every forest and wood lies a complex network of roots and fungi that connects trees and plants to one another. This network – sometimes called the Wood Wide Web – is almost 500 million years old and is vital for most plants on earth. Trees and plants obtain nutrients that the fungi acquire from the soil, such as nitrogen and phosphorus by means of enzymes that the trees do not possess. In return, the fungi receive carbon-rich sugar from the roots of the trees.

This symbiotic relationship enables all connected organisms to thrive.

Similarly, at Sappi our connection with our stakeholders shapes our work to build a thriving world. This connection enables us to meet the changing needs of every employee at Sappi and to offer our partners the renewable innovation they need to be successful. By understanding and connecting with community needs, we drive positive social impact, playing a role beyond making and selling.

Like mushrooms, our business is a living organism – growing, adapting and evolving in a continually shifting context. As we shape our response to this context, we prioritise value creation for all stakeholders.


Q&A with the CEO

“Our graphic papers markets faced significant challenges in 2023 due in part to an extended destocking cycle. In hindsight, the extraordinary surge in demand we experienced in 2022, which nearly reached pre-Covid-19 levels, included a significant element of forward buying by our customers.”

Steve Binnie



Graphic paper demand was extremely weak in 2023 necessitating widespread production curtailments across the industry. What is Sappi’s view of demand in 2024 and how will you address overcapacity?

Our graphic paper markets faced significant challenges in 2023 due in part to an extended destocking cycle. In hindsight, the extraordinary surge in demand we experienced in 2022, which nearly reached pre-Covid-19 levels, included a significant element of forward buying by our customers. The rebound in economic activity in 2022, coupled with severely constrained supply chains created a worldwide paper shortage. Against this backdrop of volatile and uncertain global logistics, customers increased their orders well beyond underlying demand levels. However, as macroeconomic conditions deteriorated and supply chains normalised late in 2022 our customers experienced a substantial increase in inventory. The subsequent destocking combined with weak global macroeconomics led to a material decline in demand for graphic paper which persisted throughout FY2023.

The historical rate of decline for graphic paper was approximately 6% per annum. Taking this trajectory into account and considering the demand rebound in 2022 to almost 2019 levels, demand in 2023 should have been approximately 25% below that of 2022. However, sales volumes for our graphic papers segment in FY2023 declined by 38% year-on-year, which necessitated widespread production curtailments in our European and North American operations. While the extent of the demand weakness can be partially attributed to the destocking cycle, graphic paper markets continue to remain subdued, particularly in Europe. This suggests that there has been an accelerated decline and a permanent erosion of demand that is unlikely to return. Order activity has improved slightly in recent months, indicating a modest recovery, but our fundamental assumption is that demand for graphic paper in FY2024 will be 30% below FY2022 levels.

With this anticipated level of demand, we continue to be faced with significant overcapacity necessitating extended periods of costly commercial downtime. Recognising these low operating rates are unsustainable and aligned with our strategy to reduce exposure to graphic paper markets, we will proactively manage overcapacity. In the short term, we will rationalise our graphic paper capacity in Europe through closure of the Stockstadt Mill and potential closure of the Lanaken Mill. This will remove approximately 750,000 tpa (~30%) of our European graphic paper capacity in FY2024, which will significantly improve the utilisation of our remaining graphic paper assets and improve the fixed cost position of the business in the second half of the year. We are confident that we can shift the current sales volumes to our other assets. Over the medium term, our conversion and expansion of Somerset PM2 to solid bleached sulphate paperboard will remove 235,000 tpa (~ 30%) of our North American graphic paper capacity in 2025. Furthermore, the project at our Gratkorn Mill in Europe to expand our label paper capability will displace a further 200,000 tpa of graphic paper. Through these actions, we will proactively reduce our graphic paper capacity to match declining demand and in so doing ensure that our assets are fully utilised generating cash. We continue to evaluate further opportunities to reduce our exposure to graphic paper through sale of assets or for potential conversion opportunities to packaging and speciality paper grades. Our strategic objective is to reduce graphic paper to less than 30% of our sales volumes by 2027.


Has the demand weakness in packaging and speciality papers segment in FY2023 altered your long-term view on growth projections? Is there any impact on the investment case and timing of the Somerset conversion and expansion project?

The packaging and speciality papers segment faced weak trading conditions related to high levels of downstream inventory and muted consumer demand in FY2023. The destocking process is taking longer than anticipated but all indicators point to normalisation of inventories within our value chains early in FY2024. The macroeconomic landscape, however, remains unpredictable, which is likely to continue to weigh on consumer sentiment in the short term as some of our packaging and speciality papers are linked to discretionary consumer goods. Nevertheless, our long-term favourable outlook for our sustainably produced packaging and speciality paper products remains unchanged. Paper-based packaging offers a myriad of environmental sustainability and functionality benefits. Our low-carbon, renewable and circular packaging products, derived from responsibly managed forests and deforestation-free supply chains, offer consumers a more environmentally friendly choice compared to non-renewable alternatives. As industries and consumers increasingly prioritise sustainability, the benefits of paper-based packaging align with these values, making it a compelling and responsible choice for packaging solutions.

The short-term macroeconomic pressures on consumer sentiment have not altered our investment case for the conversion and expansion of our Somerset PM2 machine to solid bleached sulphate paperboard and we remain on track for commissioning in mid-2025. Our folding carton paperboard products are particularly versatile and allow for exceptional print quality that enhances creative design and brand visibility for luxury beverages, cosmetics and perfumes, health and beauty care and consumer electronics. Furthermore, demand for food service board grades for disposable cups, plates and fast food packaging continues to grow as the industry responds to consumer and legislative pressures to switch from fossil-based products. Our conservative market growth assumption of 2% per annum remains unchanged and excludes the potential growth opportunities based on substitution of fossil-based packaging.

There have been a number of capacity closures in the North American paperboard market during 2023, which we estimate reduces solid bleached sulphate paperboard capacity by approximately 7%. While some of the capacity exiting the market is in areas such as liquid packaging where we do not currently compete, we believe the overall impact is positive and tightens the market ahead of our Somerset expansion. In addition, one of our peers has reported that they will not make a decision on the conversion of a graphic paper asset to paperboard by the end of 2023 as previously announced, which further extends the timeline for additional capacity entering the North American market. The Somerset PM2 project will add 470,000 tpa of SBS capacity in 2025, which will double our market share. Sappi is well positioned to benefit from the demand growth for paperboard in North America and our anticipated returns on the investment are expected to exceed a 20% internal rate of return (IRR).


Sappi’s capital expenditure is expected to increase over the next two years as you expand the packaging capacity at Somerset Mill. Should investors be concerned about debt levels in 2024?

Despite 2023 being one of the most challenging downcycles experienced in the pulp and paper industry, with demand for our paper products falling below that of the Covid-19 pandemic years, we continued to generate significant cash which enabled a further reduction of net debt at year-end to US$1,085 million, the lowest level in 30 years. This was after taking into account a negative currency translation effect on our Euro-denominated debt being converted at a higher rate, which increased net debt by US$76 million for the year, and the US$107 million returned to shareholders through the dividend and share buyback programmes. Our strategic focus on sustaining our financial health through disciplined capital allocation and a strong emphasis on cash generation has materially repositioned our balance sheet over the last two years.

The significantly lower debt profile and healthy cash reserves provide us with flexibility to navigate the headwinds of cyclical downturns and have allowed us to begin the next phase of investments for growth in our target markets with the conversion and expansion of Somerset PM2 to solid bleached sulphate paperboard. In line with our disciplined approach to capital allocation, we will proactively manage cash flows by phasing the US$418 million capital expenditure for the Somerset PM2 project over three years (US$100 million FY2023, US$154 million FY2024 and US$164 million FY2025). Maintaining our existing operations and improving our environmental footprint is also a high-level priority and is a strategic investment in our existing assets to ensure future safe, efficient and sustainable operations. We anticipate capital expenditure will be in the region of US$500 million for the next two years, which includes the expansionary capex as outlined above together with maintenance and sustainability capex of approximately US$350 million per annum. We have no other large capital projects planned during this period. We have committed to returning value to our shareholders and declared a dividend of 15 US cents for FY2023, which will result in a cash outflow of approximately US$85 million in the second quarter of FY2024. We will also potentially incur closure and restructuring costs of approximately US$159 million for the closure of the Lanaken Mill. The fixed costs benefit of the restructuring will be partially realised in FY2024 and therefore we anticipate a net cash outflow for FY2024. In the short term, we anticipate our net debt will rise slightly from the FY2023 level but our commitment to our target of US$1 billion remains intact and we are confident that our strategic actions to reduce our graphic paper exposure and grow our packaging business will enhance our future cash generation and improve profitability of our business.


New sustainability and environmental, social and governance (ESG) regulations have been legislated in Europe and globally ESG reporting expectations are rapidly expanding. How is Sappi responding?

ESG reporting is crucial in today’s business landscape as it serves as a fundamental tool for companies to communicate their commitment to sustainable and responsible business practices. By disclosing information on environmental impact, social responsibility and governance structures, we not only enhance transparency but also build trust among stakeholders, including investors, customers, employees and the broader community. The ESG reporting landscape has undergone a rapid and transformative evolution over the last few years, reflecting a paradigm shift in corporate consciousness and stakeholder expectations. In recent times, the landscape has witnessed a remarkable mainstreaming of ESG considerations. Governments, regulatory bodies and stock exchanges around the world have increasingly recognised the importance of ESG disclosure, establishing guidelines and frameworks to standardise reporting practices. Simultaneously, investors have recognised the material impact of ESG factors on financial performance and risk management, driving a surge in demand for comprehensive and comparable ESG data. As a result, ESG reporting has transitioned from a voluntary initiative to a critical component of corporate governance, risk management and strategic decision-making, illustrating a broader recognition of the connection between sustainability and long-term business success.

As a company committed to environmental stewardship, social responsibility and sound governance practices, transparency serves as a cornerstone of our Thrive strategy. Transparent reporting on key ESG metrics not only aligns with Sappi’s values but also allows our stakeholders to make informed decisions. Ultimately, for Sappi, transparency is not just a compliance requirement but a strategic imperative that enhances our reputation, fosters long-term relationships and contributes to the company’s sustainable growth. We have for many years used the GRI framework for our ESG disclosures and more recently aligned our climate reporting with the Task Force on Climate-related Financial Disclosures (TCFD) framework. In addition, our CDP (formerly the Carbon Disclosure Project) responses to climate, forests and water are publicly available for stakeholder review. The new European Union’s Corporate Sustainability Reporting Directive (CSRD) went into force in January 2023. With our large European footprint, we will be classified as a company headquartered outside the EU operating in the region subject to the CSDR and therefore plan to align with the European Sustainability Reporting Standards (ESRS) for our FY2025 annual reporting period. Based on the high level of interoperability between GRI and ESRS and our comprehensive CDP disclosures, we are well placed to adopt these new standards.