• EPS impact of closures: USD 0.05/share boost in FY 21e.
  • Cash impact of closures: USD 28m cash impact of closures
    (USD 0.05/share or 1.5% of net debt). Non-cash charges expected to total USD 17m.
  • Stockstadt mill (Europe): In line with expectations, Sappi confirmed today that it will be closing PM2 at its Stockstadt mill in Germany. The closure is expected to be concluded by 30 September 2020 and reduce SAP’s CWF footprint by 240ktpa. This represents 6.5% of their FY 19A European paper (graphic and SPP) capacity. This means that 240ktpa of CWF would be sold from its other machines in Europe. This will reduce SAP’s Europe workforce by 3% (170 employees, higher than previous estimate of 150). There will be a once-off restructuring cost incurred of c.EUR 27m (EUR 15m cash, lower than our estimate of USD 20-25m). SAP expects to save EUR 15m p.a, this is lower than our original estimate of EUR 25-28m.
  • Stockstadt mill background: Mill is comprised of PM1 (205ktpa: UWF) and PM2 (240ktpa: CWF). It also produces 145ktpa of pulp for own consumption and market pulp. The mill currently employs 760 employees.
  • Westbrook mill (US): Release paper will still be produced at the mill; however, with base paper supplied by SAP’s other US mills. PM9 and the majority of the energy complex (less energy required now) at its Westbrook mill are expected to be closed by CY 20e. This machine had capacity of 40ktpa base paper, but we estimate that it was producing c.20ktpa. We note that SAP still has 40ktpa of coated specialty paper capacity (we estimate sales of 16-20ktpa). This capacity adjustment will not impact revenue but effectively reduces the fixed cost base by USD 10m (USD 0.02/share) impacting 75 employees (3%) the of North American workforce (average cost: USD 133k p.a) and reduces US CFS capacity by 20ktpa (2%). SAP expects to incur a once-off cash restructuring charge of USD 11m.   

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