Evolution in the natural world is a slow process. But in the hyperconnected world in which we live and work, it’s
fast – and becoming faster all the time. As an example, twenty years ago, very few people had ever heard of the ‘Internet of Things’. Ten years ago, the term ‘Industry 4.0’ had not yet been coined. At the start of 2020, few people had paid attention to terms such as coronavirus, social distancing, lockdowns or infection waves. Yet today, these terms are part of our everyday vocabulary, showing just how fast the world around us is changing.

In response to our rapidly changing landscape, five years ago, we embarked on a strategy of intentional evolution, which involved diversifying our product portfolio in higher margin segments. By 2020, despite market challenges, we had essentially met and in many ways, exceeded this ambition.

Evolution is based on a series of events, processes and responses. Around the world, people are responding to natural resources constraints by seeking responsible alternatives to non-renewables and solutions that are truly sustainable from seed to final product.

We are responding to these needs by building on our success in intentional evolution to accelerate an enhanced journey of evolution aligned with our Thrive25 strategy. We are doing so from a foundation based on a coalition of diverse perspectives and expertise; as well as a history of seeking out and investing in breakthroughs that enable lasting outcomes for our partners and a lighter footprint on the world. We are building on these to ensure that every solution we create supports our goal of making everyday products more sustainable and that we accelerate meaningful change.


Stars form when celestial clouds collapse, feeding a rotating disc of gas and dust into a dense, hot central core. Amongst other things, pulsating stars give off carbon, a key ingredient for life as we know it. From chaos, something beautiful – and essential – is created.

We can view this as a metaphor for the coronavirus pandemic that infected and affected people regardless of nationality, class or wealth, leaving intense disruption in its wake. However, it also ushered in a global drive to reimagine our way of being on the planet. A new agenda for change is emerging, gaining traction and raising questions that will not go away.

Questions like: How do we reimagine a collective future where changed behaviours will allow us to live more in balance with nature than before? How do we

maintain and even intensify the sense of connection, caring and community that was one of the unexpected, but welcome, impacts of the pandemic? How do we deal with the uncertainty on the horizon when future surges of Covid-19 occur?

At Sappi we are taking bold, decisive action to respond to these challenges by extracting the full potential of trees and woodfibre to develop practical innovations for everyday impact and innovate what we should, not just what we can. We’re also establishing and maintaining proactive dialogue with all our stakeholders as well as working with and supporting local communities.

In doing so, we can not only create a more sustainable future, but also unlock significant long-term value for all our stakeholders.


Rocks are the ultimate symbol of resilience. They are fused together over time from solid crystals of different minerals. These natural processes bind them all together, imparting strength and resilience. But even rocks are shaped and reshaped over time by natural forces like water, wind and sun.

They’re a reminder that none of us are impervious to the global forces shaping our world. Forces like climate change, urbanisation, social inequality and of course, the new reality brought about by the coronavirus pandemic and Covid-19.

We’ve proven our resilience to succeed in the ‘new normal’ and we will continue to do so as we work to accelerate our decarbonisation journey, meet the changing needs of rapidly urbanising populations while managing our environmental footprint and promoting a diverse, inclusive workforce.

At Sappi we operate across different geographies, meeting the needs of customers from New Zealand to New Mexico, but our common purpose makes us stronger and more resilient: Sappi exists to build a thriving world by unlocking the power of renewable resources to benefit people, communities, and the planet. This is our inspiration and our call to create a brighter future for the world and for our business.


Collectively, the world is drawing a deep breath as we slowly emerge from the coronavirus pandemic and impact of Covid-19.

During the crisis, the safety of our people was our top priority. After which, like many enterprises across the world, our underlying goal was economic survival. To achieve this, we focused on the preservation of liquidity, lowering costs by deferring non-critical capex projects and postponing some annual maintenance shuts. We also took commercial downtime across all segments as required, in order to match supply to demand and prevent the build-up of inventory.

The verb ‘emerge’ is derived from the classical Latin ēmergere, meaning ‘to rise out or up’. We are proud

to say that we are rising from the impact of Covid-19 with strong growth in sales and profitability for the packaging and speciality papers segment, quickly recovering dissolving pulp market and steady month-on-month improvement for graphic papers.

As OneSappi we are steely in our determination to emerge from survival mode back onto a growth curve. A curve based on our strategy of diversifying our product portfolio into higher margin and growing segments – a strategy fully justified during the events of the past year.

Doing so is challenging, but we believe we can realise our vision of a thriving world by collaborating with all our stakeholders to create solutions for our collective needs and emerge stronger than ever before.


Linear momentum is defined as the product of a system’s mass multiplied by its velocity. The greater an object’s mass or the greater its velocity, the greater its momentum. In other words, momentum is about both magnitude and direction.

It can be difficult to maintain momentum in times of profound change or crisis, but it’s important to do so. That’s because action creates movement which in turn can create unanticipated opportunities.

Recognising this, at Sappi we responded to the coronavirus pandemic and Covid-19 in order to keep our forward momentum. We swiftly implemented a comprehensive Covid-19 action plan that ensured the health and safety of our employees and enabled us to operate in a safe, uninterrupted manner where demand permitted. Working closely with our

customers and suppliers we systematically increased activity and output in response to improved market demand. Our support for local communities helped mitigate the impact of the pandemic and the ensuing socio-economic consequences on them.

Looking ahead, we are confident that we can accelerate our momentum to navigate forward: We have the mass in the form of wide-ranging expertise, extensive infrastructure, strong foundation of research and development, together with our range of sustainable solutions produced from renewable woodfibre. And we have the velocity in the form of our ambitious but achievable Thrive25 strategy, which allows us to take advantage of the changing dynamics between the environment, consumers and the products they require. Above all, our passionate, committed people provide the impetus to power us forward.

Letter to the stakeholders

from the Chairman and Chief Executive Officer (CEO)

In the short term,
management’s focus
turned to the
preservation of
liquidity, lowering
costs and re-prioritising
various strategic actions.”


Steve Binnie


Sir Nigel Rudd

Operating review

The group’s performance was severely impacted by the Covid-19 pandemic, related lockdowns and the economic aftereffect. Demand for graphic paper and dissolving pulp (DP) was particularly hard hit. Sales volumes for these products decreased by 20% and 18% respectively. The market conditions forced us to take more than 1.1 million tons of commercial downtime, which had repercussions for operating efficiency, fixed cost absorption and profitability. Lower DP volumes exacerbated an already tough operating environment for the segment, as historic low pricing levels persisted throughout the year. The positive highlight for the year was strong growth in sales and profitability for the packaging and specialities segment. A ramp up in volumes from Somerset and stable packaging demand throughout the Covid-19 crisis contributed to this success. The group’s EBITDA excluding special items was US$378 million, compared to US$687 million in the prior year.

In the short term, management’s focus turned to the preservation of liquidity, lowering costs and re-prioritising various strategic actions. Commercial downtime was taken across all segments as required, to match supply to demand and prevent the build-up of inventory. Additionally, non-critical projects were deferred, and some annual maintenance shuts were postponed for a short period.

We made good progress in our efforts to improve safety across the group in the past year. All three regions improved their safety metrics, with Sappi North America following up an already impressive performance in 2019 to achieve an all-time low LTIFR in 2020. This improvement is as a result of an unwavering commitment to Project Zero. We do not accept injuries and accidents are inevitable and safety programmes in each region aimed at personal behaviour, the making of safe choices and leadership engagement. Regrettably we must report a contractor fatality in South Africa during the year. Our target is zero injuries, and we believe we can achieve this with enhanced procedures, training and most importantly, behaviour.

Our board places great emphasis on maintaining Sappi’s reputation as an ethical corporate citizen, laying ethical behaviour as the foundation of our business. Values and ethics are not only critical to maintain a licence to operate, but also for developing and maintaining stakeholder trust and to drive performance. The expected behaviour is encapsulated in our Code of Ethics, which guides our directors, employees, suppliers and customers in their day-to-day interactions and transactions.

In local currencies, each of the regions increased the profitability of their packaging and specialities segments compared to the prior year, despite the many challenges posed by lockdowns in various industries across the globe. The ramp-up of Somerset PM1, the acquisition and integration of the Matane Mill, the delayed maintenance shut at Ngodwana Mill as well as generally lower input costs all contributed positively to the performance. EBITDA in this segment increased from US$126 million to US$179 million. The business has proven to be resilient in difficult economic circumstances and supports our strategy to diversify the product portfolio into higher margin and growing segments.

DP prices started the year at historically low levels and, albeit with periods of relative stability, ended the year even lower. This, in conjunction with the rapid slowdown in customer demand in the third quarter as a result of the lockdown measures implemented by various governments, resulted in EBITDA for this segment dropping from US$304 million to US$63 million. Demand and pricing began to recover in the fourth quarter; however, our sales volumes lagged this market recovery as a result of commercial and operational decisions taken to preserve profitability and liquidity in the group. The project to expand the Saiccor Mill capacity was put on hold through the initial months of the Covid-19 outbreak and is now expected to be completed in the Q3 FY21.

In the first half of the year, graphic paper markets were characterised by weaker orders, offset by lower input costs which resulted in a constant year-on-year performance compared to FY2019. The outbreak of Covid-19 in the second half of the year led to a significant decline in graphic paper usage across the globe in line with the slowdown in economic activity. EBITDA in this segment declined from US$251 million to US$131 million. The poor demand, which is unlikely to return to pre-Covid-19 levels, accelerated the decision to close a paper machine at each of Stockstadt and Westbrook Mills during the year. This action, along with closures by other industry participants should result in industry operating rates returning to more profitable levels in the coming year. From a low point in June, we have experienced a gradual improvement in sales each month.

Strategic review (2015 – 2020)

Calendar 2020 was the final year of our strategic 2020Vision. The weak pricing environment for DP at the start of the year, and then the unprecedented effects of Covid-19 and the related lockdowns and economic aftereffects meant that while we remained steadfastly committed to our strategy, we had to adjust to the short and medium-term impacts of the pandemic on our markets, operations and people. During the year we finalised the strategy for the next five-year period, ending 2025, and have named this Thrive25. The revised strategy does not meaningfully change our focus or chosen path; however, it embeds sustainability and innovation at the core of our focus and reflects the changing markets and economic conditions we are experiencing at the start of the new decade. We describe our new Thrive25 strategy elsewhere in this report.

Our 2020 strategy encompassed the following four main objectives:

These strategic objectives were supported by our value statement: As OneSappi, we do business safely, with integrity and courage, making smart decisions that we execute with speed. Our values are underpinned by an unrelenting focus on and commitment to safety.

Initiatives and actions undertaken to support our strategic objectives are outlined below.

We made
good progress
in our efforts
to improve
safety across
the group in the
past year.”

 Achieve cost advantages (2015 – 2020)

Reducing both variable and fixed costs throughout the business is integral both to maintaining or improving margins and to the sustainability of our operations. This is especially true in commodity businesses where we faced declining demand, such as graphic papers. In the past year we set ourselves a target of a US$54 million (subsequently revised to US$64 million) reduction in third-party expenditure compared to 2019 through efficiency and raw material usage improvements as well as delivering savings through various procurement initiatives. We are pleased to report that savings of US$108 million were realised, which helped offset the significant decline in graphic paper and DP volumes. An additional US$104 million in fixed cost savings was realised in the second half of the year to mitigate as far as possible the impacts of the severe downturn in demand in the graphics and segments. In 2021 we are targeting a further US$70 million in variable cost savings.

During 2020 we proceeded with the Saiccor Mill 110,000 ton expansion. This project, originally due to be completed towards the end of 2020, will improve our energy and chemical recovery, lowering variable costs. As a result of the Covid-19 lockdown in South Africa we had to stop construction on the project for a period and we now estimate completion of the project will occur in the third fiscal quarter of 2021. During the period that construction was halted we revised the project somewhat, with a focus in lowering future variable costs further. As a result, the higher cost calcium line at Saiccor Mill will now be converted to a magnesium process, with additional savings in energy costs and chemical recovery.

In 2021 we will be undertaking some small pulp mill debottlenecking projects in Europe, which will help improve the paper pulp integration of our specialities and packaging business, lowering our cost base and reducing the volatility of earnings through the pulp cycle.

 Rationalise declining businesses (2015 – 2020)

Graphic paper demand in Europe and North America continues to be in long-term structural decline, and this was exacerbated in 2020 by the economic consequences of the Covid-19 pandemic and associated lockdowns. Maintaining operating rates and lowering costs are key to our strategy to maximise cash generation in these markets. We had to take 970,000 tons of production downtime in this segment during the year, which negatively impacted the profitability of the graphic paper business.

In 2018 we converted PM1 at the Somerset Mill. The capacity of the machine was expanded, and it now has the flexibility to produce both coated graphics paper and paperboard products used in the folding carton and food service markets. During 2020, we ramped up production of the paperboard grades on this machine as we qualified the various products with a range of customers. In 2021, we expect to continue to increase paperboard volumes, thus gradually filling the machine as graphic paper sales volumes decline. In July 2020 we announced the planned closure of PM9 at our Westbrook Mill to lower costs. This machine made the base paper for the speciality casting and release paper produced at that mill. We will now supply this paper from our Cloquet and Somerset Mill facilities, lowering costs and effectively reducing our coated paper capacity in North America by approximately 20,000 tons.

In Europe we focused on cost reduction and our go-to-market strategy – Sappi&You – which has enabled us to be a preferred supplier in the coated woodfree (CWF) grades and has seen us increase both direct sales and market share in a declining market. In 2018 we converted the Maastricht Mill to focus predominantly on paperboard packaging grades in support of our existing packaging and speciality papers business in Europe. In 2019 we furthermore undertook the conversion of PM8 at Lanaken Mill to enable the machine to make either CWF or coated mechanical paper (CM), allowing the transition from CM to CWF production on that machine, bringing our CM capacity in line with that of the expected decline in that market. We also made investments at Ehingen Mill to enhance their specialities and packaging offering. In July 2020 we announced the closure of PM2 at our Stockstadt Mill which was completed at the end of September 2020. The combination of the above projects and closures has led to a 440,000 ton reduction in our European graphic paper capacity over the past two years and a 200,000 ton increase in packaging and speciality papers capacity.

In South Africa our exposure to declining markets is limited to newsprint, where we are the last remaining local producer, and office paper. During 2020 we successfully started producing sack grades on the newsprint machine, taking advantage of the desire of retailers and consumers to reduce their use of plastic bags. This will help keep the machine more fully utilised.

 Maintain a healthy balance sheet (2015 – 2020)

The decline in profitability of the business in 2020 as a result of the factors mentioned above, along with a largely committed capital expenditure pipeline during the year, resulted in the net debt:EBITDA leverage ratio increasing from 2.2 to 5.2 over the course of the year, well away from our target leverage ratio of two times. The maintenance of adequate liquidity became the major focus of management in the second half of the year as the full impacts of Covid-19 became apparent. Several steps were taken during the year, these included variable and fixed cost containment initiatives, a reduction in capital expenditure, delays to major annual maintenance shuts, furloughing of staff where possible and a focus on optimising working capital.

With the completion of the Saiccor Mill expansion project and aforementioned delays in shuts, capital expenditure levels in 2021 will remain elevated, however we have not committed to any further major capital expenditure projects order to preserve liquidity and with the aim of managing debt and leverage levels.

During 2019 we refinanced the 2022 Euro bonds with a new seven-year Euro bond at a rate of 3.125%, Sappi’s lowest ever rate. We have no significant maturities due before 2023 and we are comfortable with the maturity profile of our debt. Net finance costs may rise slightly to US$100-110 million as the net debt remains elevated in the coming year. We proactively negotiated the suspension of the measurement of our revolving credit facility (RCF) linked financial covenants through to September 2021 (with the first measurement due in December 2021) to see us through the worst of the Covid-19 impact on our business and financial metrics. Post year-end we announced a ZAR1,8 billion convertible bond issue to fund the completion of the Saiccor Mill expansion project.

 Accelerate growth in higher margin products (2015 – 2020)

Following the debottlenecking of the Saiccor and Ngodwana DP Mills in 2018, in the second half of 2019 we completed the upgrades to the Cloquet Mill, adding a further 30,000 tons of DP production capacity. As mentioned above, we initiated the 110,000 ton expansion project at Saiccor Mill during 2019, which, along with additional sales volumes, will decrease production costs for the entire mill, introduce new technology, reduce the environmental footprint and future-proof manufacturing systems. Current market conditions, with low DP prices, viscose customers under significant pressure and excess DP and viscose capacity make a further significant expansion difficult to justify in the medium term.

The packaging and speciality papers segment volumes grew by 7% in 2020, despite the negative impact of Covid-19 on some of our product segments. With higher sales volumes on the converted machines and the related improvement in sales mix and production efficiencies, profitability of the segment improved, aided by lower purchased paper pulp prices and the increased pulp integration as a result of the acquisition of the Matane Mill. The pressure on fast-moving consumer goods (FMCG) companies to embrace alternative packaging solutions that are more renewable, recyclable and reusable is encouraging joint R&D efforts to provide such solutions. Many of our packaging products are ideally placed to take advantage of this accelerating demand and we made good progress in the last year in launching new products and solutions for our customers. The technology acquired from Rockwell Solutions in 2017 is now ready to be rolled out to additional machines within the group, allowing us to capture more of this market.

Sappi Biotech made further progress in developing new and innovative products, ideally suited to a world looking for more sustainable chemical and material solutions. We continued to grow our lignin business and have taken important steps to enter higher value lignin markets in the near term. The demonstration plant adjacent to our Ngodwana Mill has allowed us to test and optimise the xylose sugars extraction technology on industrial scale for markets such as xylitol. Pending successful commercial arrangements, this may result in final product technology scale-up and ultimate construction of commercial xylose plants at our mills in the United States or South Africa. We will also invest in a pilot plant at our Saiccor Mill in 2022 to test technologies appropriate for the production of furfural. Our cellulose nanofibrils and cellulose microfibrils development is ongoing, with exciting co-development and product acceptance progress made in our paper business as well as with firms in the coatings and cosmetics industries. We have been successful in developing our fibre composite product with automotive producers, with the first commercial applications occurring in 2020.


The events of the past year have highlighted the importance of managing a business in a sustainable manner, balancing the the facets of the 3Ps, making trade-offs where required to deliver the best long-term outcome. While the economic pressures resulting from the Covid-19 outbreak impacted our operations and people, as well as the communities we operate in, the importance of addressing climate change and biodiversity loss have not diminished. Governments, society and brand owners exert ever more pressure on companies to do more in this regard. Sappi has always focused on the sustainable management of our operations, on increasing efficiency and maximising value from our sustainable natural resources. Our new Thrive25 strategy recognises that we need to be more proactive in our dealings with various stakeholder groups and that we must become a trusted partner to these groups to pursue growth opportunities while minimising risk in a complex operating environment. In the past year we made great strides in assessing our risk related to climate change, utilising the recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD), have committed to set a science-based target for our emissions and placed increasing focus on managing risk in our supply chains via our Supplier Code of Conduct.

The initiative and
resourcefulness of
our people enabled
us to continue to
deliver our products
to our customers
and make it possible
to look forward to an
improvement in
our underlying
in 2021.”

Looking forward

Underlying demand for most packaging and speciality paper products remains robust, driven by consumer preference and the shift from plastic to paper. First quarter sales volumes will be impacted in both Europe and South Africa by usual seasonal weakness and exacerbated by both the Ngodwana Mill annual maintenance shut which was delayed from the third quarter of FY2020 and the scheduled Somerset Mill annual maintenance shut. These shuts will have an estimated US$30 million impact on profitability, predominantly linked to the packaging segment. Some products remain affected by weaker economic activity in certain regions or end-use markets impacted by Covid-19.

Market conditions for DP have improved and pricing has recovered somewhat during October. At the end of November, the Chinese market price had improved to US$710/ton, driven by an acceleration in DP demand, tighter market balance and higher viscose staple fibre (VSF) prices. However, in the short term, the combination of the mill maintenance shut at Ngodwana Mill, constrained production on the calcium line at Saiccor Mill due to the closure of the Lignotech joint venture and DP pricing which still favours own consumption paper pulp production at Cloquet Mill, will mean that DP sales volumes in the first quarter will be only marginally higher than in the preceding quarter. We are evaluating opportunities to recover some of the lost DP production prior to the completion of the Saiccor Mill expansion project.

Graphic paper demand continues to improve from the impact of Covid-19, and a series of paper machine and mill closures or conversions in the industry recently completed or imminent should improve operating rates in the coming quarter and year. However, a second wave of Covid-19 infections in the US and Europe is leading to stricter lockdown conditions and a slowing of the recovery in many countries. Pricing is largely expected to move in line with variable cost movements. Due to the improved supply/demand balance in coated graphics paper in North America, a price increase on SNA-produced web brands has been announced effective in January 2021, matching similar announcements by competitors.

Current liquidity headroom in the group remains good, with cash deposits at the end of the quarter of US$279 million and committed RCFs of approximately US$582 million. We negotiated an extension of our credit facility covenant waiver suspension period until September 2021. The first measurement of these covenants will now take place at the end of December 2021.

Capital expenditure in FY2021 is estimated to be US$370 million and includes approximately US$100 million related to the decision to delay the Saiccor Mill expansion project and the postponement of major shuts at Saiccor and Ngodwana Mills which reduced capital expenditure in FY2020.

In the first quarter the recovery of the business will continue, driven by improving DP and graphic paper markets. However, this will be offset by the impact on the packaging and speciality segment of the delayed shut at Ngodwana Mill and the scheduled annual maintenance shut at Somerset Mill. As a result, EBITDA in Q1 FY2021 will be below that of Q4 FY2020. We remain encouraged by the resilience of our business and the opportunities offered by our strategic focus on the transition of the business towards higher growth segments.


The Covid-19 pandemic impacted our employees, communities, suppliers, customers, funders and shareholders. Without their support and willingness to collectively seek solutions, the impact of the pandemic on our business would have been even more severe. In these difficult times, close relationships, transparency and trust are most vital. We thank you for the faith you have shown in us.

Our various stakeholder groups contribute in many ways to our performance and sustainability as a group. Our interactions with these stakeholders, their ideas, suggestions and support guide us and we thank them for their contribution.

To our customers who have placed enormous trust on us and our ability to meet their changing and growing requirements through innovation and investments, we thank you. We undertake to continue to work closely with you to ensure we meet both your and our needs for value.

Our employees continue to support the strategic initiatives of the group, and in a year where Covid-19 had a profound impact on how we work, travel and on our day to day lives. They have embraced the values and ethics that are so important to good corporate citizenship. The initiative and resourcefulness of our people enabled us to continue to deliver our products to our customers and make it possible to look forward to an improvement in our underlying performance in 2021. We also thank them for their dedication and hard work.

Thanks to our board for their continued commitment to the group and sound corporate governance. Their valuable insights and encouragement, all while holding us to the highest ethical standards, enable us to execute our strategy with confidence.

In conclusion, we value the support which our shareholders have provided as we work to enhance sustainable long-term shareholder returns. We look forward to their participation at the Annual General Meeting (AGM) on 03 February 2021.