SAPPI LIMITED - Results for the fourth quarter and year ended September 2026 and changes to board committees

Evidence from the filing

• Q4 FY2026 Adjusted EBITDA of US$99 million was substantially above the prior quarter and in line with guidance, driven by cost savings, improved North American packaging profitability and Somerset Mill PM2 momentum.

  “Sappi delivered Adjusted EBITDA of US$99 million for the fourth quarter, substantially above the prior quarter and in line with guidance. The sequential improvement was driven by steady progress against targeted operational and cost savings initiatives, improving profitability in the North American packaging business as the commercial ramp-up of Somerset Mill PM2 continued to gain momentum and reduced scheduled maintenance compared to the third quarter.”

• Graphic papers cost reductions and operational efficiencies maintained segment margins in line with FY2025 despite a 7% decline in sales volumes.

  “The graphic papers segment continued to face significant structural decline, driven by ongoing digital substitution. Although sales volumes declined by 7% compared to the prior year, disciplined fixed-cost reduction initiatives and ongoing operational efficiency improvements enabled the segment to maintain overall margins in line with FY2025.”

• Sappi retained US$707 million of liquidity, including US$542 million of committed undrawn revolving credit facilities extended to 2031.

  “Net debt increased to US$2,050 million (FY2025: US$1,920 million) at financial year-end as a result of cash utilised by operations. Liquidity remained satisfactory at US$707 million comprising cash on hand of US$165 million and US$542 million of committed, undrawn revolving credit facilities (RCF) in South Africa and Europe, which have been extended to 2031.”

• Sappi and UPM submitted remedy proposals for the proposed European graphic papers joint venture, which the companies believe offers long-term value-creation potential.

  “We continue to engage with the European Commission as part of the regulatory review process for the proposed European graphic papers joint venture with UPM. Sappi and UPM formally submitted remedy proposals to the European Commission on 04 November 2026. The European Commission will now assess the proposed remedies as part of its ongoing review process and we expect a decision early in January 2027. While the outcome and timing remain subject to the regulatory process, we remain confident in the strategic rationale and long-term value creation potential of the transaction.”

• FY2026 Adjusted EBITDA fell 41% to US$294 million, while EBITDA excluding special items fell 95% to US$25 million.

  “ Adjusted EBITDA 99 111 -11% 294 501 -41%”

• Sappi recorded a FY2026 net loss of US$747 million as US$405 million of special items and higher net finance costs weighed on earnings.

  “Special items reduced earnings by US$405 million for the year, comprising primarily impairments of US$319 million, together with US$26 million of costs associated with strategic projects. Net finance costs for the year increased to US$114 million due to hi gher debt levels. As a result of these special items, the increase in finance costs and the negative forestry fair value price adjustment of US$269 million, the group recorded a net loss of US$747 million.”

• Weak earnings and elevated leverage led lenders to suspend covenant testing until June 2027 and agree revised leverage thresholds through December 2027.

  “In response to the weaker earnings environment and elevated leverage, Sappi engaged proactively with its lending group during the fourth quarter to ensure continued financial flexibility and alignment with the group’s strategic priorities. The suspension of covenant testing under the group’s international revolving credit facility and bank term debt, which was due to expire in March 2027, was extended to June 2027. Sappi and its lenders have also agreed revised leverage covenant thresholds for the period thereafter, which gradually decrease over time and will provide the group with sufficient flexibility and headroom through to December 2027. We will continue to engage proactively with our lenders regarding covenant arrangements beyond December 2027.”

• Management expects Q1 FY2027 Adjusted EBITDA to be below Q4 FY2026’s US$99 million.

  “Taking into account current market conditions for our products, the scheduled maintenance shuts and the impact of elevated oil prices on our raw materials and logistics costs, we anticipate that the Adjusted EBITDA for the first quarter of FY2027 will be below that of the fourth quarter of FY2026.”

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