23 November 2021

SAPPI REPORTS STRONG RECOVERY

Sappi Reports Strong Recovery for Its Fiscal Fourth Quarter and Full Year 2021

Commenting on the group's results, Sappi's CEO, Steve Binnie, said the company made a strong recovery after dealing with the effects of COVID-19 the previous year.

"I am very pleased with Sappi's strong recovery and our return to profitability for the year. I wish to recognise the dedication and resilience of the Sappi team in turning a loss of US$135 million in 2020 into a profit of US$13 million for 2021, with EBITDA increasing by 40% over the prior year. The team overcame significant challenges posed by Covid-19. The cooperation, cross-regional support and continued focus on our Thrive25 strategy was exemplary.

"Highlights for the year included the recovery in the profitability of the dissolving pulp (DP) segment driven by buoyant demand and significantly better market prices as well as the North American region delivering its highest financial year EBITDA in over a decade. Our strategy of making investments in packaging and speciality papers reaped rewards as the segment achieved record profitability and sales volumes increased by 21%."

"Throughout this unprecedented time the health and safety of our employees remained paramount. A comprehensive Covid-19 action plan enabled us to operate in a safe and uninterrupted manner where demand permitted. Working closely with our customers and suppliers we systematically increased activity and output in response to improved market demand and our support for local communities helped mitigate the impact of the pandemic and the ensuing socio-economic consequences on them.

"As Covid-19 lockdowns eased and economic activity resumed, global trade rebounded much faster than initially anticipated. The requirement for shipping surged which triggered vessel and container shortages, severe port congestion and significant freight rate increases. The logistical disruptions described above severely constrained our export sales in all regions. By year-end, this resulted in a backlog of deliveries of 100,000 tons of DP. The impact on earnings from this backlog amounted to approximately US$30 million. Furthermore, high demand for raw materials and commodities, coupled with long lead times and an inability to restock inventories, fuelled worldwide inflationary pressures. Consequently, escalating delivery and raw material costs, particularly purchased pulp, chemicals and energy, negatively impacted margins in all product segments. To mitigate the impact of these rising costs we implemented a series of price increases in our paper businesses.