Sappi Limited

Steve Binnie - CEO Glen Pearce - CFO Berry Wiersum - CEO, Europe Alex Thiel - CEO, South Africa

Roger Spitz - Bank of America Nishal Ramloutan - UBS Lars Kjellberg - Credit Suisse Brian Morgan - RMB Morgan Stanley Sean Ungerer - Avior Research Bill Hoffman - RBC Capital Wade Napier - Avior Capital

Thank you and good afternoon to everybody. Today on the call I am joined by a number of collogues including Glen Pearce, the CFO; Berry Wiersum, the CEO of Europe; Alex Thiel, CEO of South Africa.

Mark Gardner, CEO of North America is unfortunately travelling at the moment and unable to join us on this. I am going to talk through the deck that we -- is on our website, and I’ll call out the page number as we proceed through the deck.

Moving to slide 4, the highlights for the period, firstly on the quarter, earnings per share excluding special items were $0.16, up from $0.12 last year. EBITDA $201 million compared to $200 million last year.

Importantly, profit for the year was $83 million that was a 22% rise from the $68 million that we achieved last year. And in terms of the full year, earning per share $0.34 compared to $0.22 last year.

EBITDA was $625 million compared to $658 million last year, that shortfall entirely related to the translation of our European results into dollars because of the weaker euro currency. Profit for the period was up 24% to $167 million from $135 million last year.

And our net debt continues to be -- to come down, we were able to bring it down further, $175 million this year and end the year at $1,771 million. Moving to Slide 5, you can see the evolution of our EBITDA and operating profit over the last few years and as it’s consistent with prior years, Q4 is our strongest quarter; it was once again this year.

We were up on last year. The momentum was good in the quarter.

And as we move into the new financial year, momentum is good in the business. Then on Slide 6, the EBITDA bridge comparing 2014 Q4 with 2015, as you would imagine, the exchange rates have had a significant impact.

This is a dollar bridge. So, as we translate our South African rand number and our euro numbers into dollars, that has an impact on the Group results.

Firstly, on sales revenue, it would clearly have an adverse impact but then on costs, we would benefit from that currency shift. In terms of sales volume, pretty good for the quarter.

Volumes have been solid, both in Europe and in North America, and overall a good quarter. We were able to do some price increases in Europe.

And in dissolving pulp, our pricings have increased further as the year has progressed. Good work done on costs, also helped by an overall earning year for the quarter $201 million of EBITDA.

In terms of product contribution split, it’s reflected on page seven. This is the last 12 months.

And you can see that form an EBITDA perspective, paper contributes 55% and specialized cellulose 45%. This is obviously reflective of the cash generation in the respective businesses and demonstrates the paper continues to be very important for us, beside the fact that it may make lower margins than specialized cellulose.

Operating profit, specialized cellulose had a very strong year and contributed 65% of the overall operating profit. Moving to Slide 8, the evolution of our net debt.

And you can see that both the acquisitions that we made in dissolving pulp in late 2013, early 2014 are at peak, and we’ve seen it come down consistently since then. We ended the year at 2.8 times net debt to EBITDA, and as we look forward to the new financial year, we expect that to come down significantly further towards our over time target of 2 times.

Then on Slide 9, we have the maturity profile of our debt. And you can see that we don’t have any material debt maturing in 2016.

In 2017, we have the 2017 dollar bonds for $400 million maturing. And obviously over the course of the next 12 to 18 months, we would look potentially refinance that at a lower cost.

Then on Slide 10, the CapEx, ended the year around the $250 million mark, predominately maintenance CapEx, also some of the efficiency projects that undertook at Gratkorn, Somerset and Kirkniemi, and those projects we would look to get payback from as we move forward. In 2016, we are projecting a similar level of CapEx, again maintenance at the similar levels.

The efficiency projects that we are undertaking this year are predominately in South Africa and the main one being an investment in the boiler at Ngodwana which is approximately $50 million. Turning to the divisions, and I’ll start on the paper side of the business and move to Slide 12.

Firstly, in terms of global market trends on the supply and demand, it’s fair to say that the strong dollar has caused significant shifts in the trade flows. You’ve seen substantial increase in imports coming into the U.S.

Our European business had benefited from the weaker euro and we were able to export more from the European region. Coated paper capacity continues to come out, both in Europe and in North America but with regards to Sappi, we haven’t had to do that.

And those have been pretty full as we end the year, our mills [ph] are cash positive and the order book is full. Coated wood free has generally been in line with expectations.

However, mechanical paper has been under significant pressure. In terms of selling prices, we have seen recent increases in Europe for coated wood free and mechanical paper.

And we have recently announced the further price increase to be effective from January, and obviously time will tell how successful we will be implementing that. Oil prices have come down and that has lowered chemical related prices and fuel related prices.

However, pulp prices for our European business have been very high, and that’s been exacerbated by the fact that the euro has been weaker. Wood prices in U.S.

were high throughout the year but we have seen declines in recent weeks, so hopefully that reduces the pressure, as we move forward. So overall from a strategy perspective, we will continue to look for opportunities to take price increases when we can but clearly we can’t rely on that.

There is a strong focus on reducing fixed and variable costs across all the regions. And I think they’ve all done a very good job at being able to do that.

And we will continue to look for opportunities to convert capacity to other grades where we believe that there is growth and higher margins. Then coming to specialized cellulose on Slide 13.

As you know, there are numbers of swing mills out there that do make pulp for the paper industry and dissolving pulp. Quite a significant proportion of those have stayed in hardwood pulp for the paper industry as those prices have remained high, and that has benefited us.

But at the same time the underlying demand for dissolving pulp continues to be positive, and the long-term outlook is still good. Selling prices have stably risen throughout 2015.

We saw further increases in Q4. And I am sure you guys watched the spot market post the year-end, they have increased further.

VSF prices have been rising. And cotton price are relatively stable; they did go down, then they substantially started rising a little bit; in recent come back little bit, but generally stable.

However, with oil being down, polyester prices are under pressure. Input costs for the producers who have a non-U.S.

dollar cost base have come down and obviously certainly with the South African mills have benefited from that. In terms of our strategy, we will continue to manage capacity in the South African environment.

There could be opportunities to debottleneck and slowly increase our tonnage. And then we continue to work with our key customers to support their growth strategies.

We will continue to investigate other end-uses and adjacent uses for the dissolving pulp. Then turning to the regions, and I’ll move on to Slide 14, and we start with Europe.

Overall, I think the Europeans have had a good year. The volume declines have slowed somewhat during the last year or so.

Coated wood free has been in line with expectations. We’ve talked on previous calls about 2% decline and that has been the case throughout 2015.

Unfortunately mechanical paper is in a tougher place. And for Sappi, just as a reminder, about one-third of the deduction in the European environment is related to mechanical, two-thirds coated wood free.

The good news is that operating rates at our mill are high; the order book is; and we were able to pursue some price increases. And as I said earlier, we have announced further price increases for January.

Unfortunately, the pulp prices have risen considerably and that has put pressure on variable costs. Fixed costs are being well managed and are down year-on-year.

I think one of the big highlights for the period has been the improvement in profitability for our specialty business, and we saw a substantial rise in earnings in that sector of our business. Turning to North America, we know that Q2 and Q3 were tough, and Q4 was better.

And our order books did fill up, and we were in a better position; at the same time, we were able to take further cost out of the business. And I am pleased to report that the profitability was higher this quarter than the same quarter last year.

And nevertheless, the market is still tough because of the weaker dollar [ph] and volume -- or demand is expected to decline by at least 3% as we move forward. South Africa on Slide 16, we had a very strong year in South Africa, firstly on developing pulp.

We benefited from the fact that the order book was strong. The developing pulp price, spot were rising throughout the year, and that boosted profitability, and obviously the weaker rand further improved margins.

Good work was done on costs with the fixed costs down and variable costs under control despite the fact that we are in a higher inflationary environment. On the packaging side, demand for virgin linerboard was strong and we generated good margins, and that business continues to increase profitability.

At the end of the quarter we -- as we got close to the end of the quarter, we announced the sales of the Enstra and Cape Kraft Mills. Those are mills that were in the recycled fiber segment.

Those are proceeding and we expect to conclude both of them during this month. Turning our attention to the strategy and moving to Slide 17, we talked about this one on previous calls.

We have the five pillars of our strategy aiming towards our 2020 version. And I have a slide on each, just highlighting some of the initiatives in the respective areas.

Firstly, on Slide 18, cost advantages. We have been making investments across all our regions to improve efficiencies, some of the examples are listed there.

The natural gas conversion project at Somerset, the Kirkniemi power plant investment, the Gratkorn investments on the paper machine, all of those will help us as we move forward. AT the same time, we look for other opportunities to reduce costs.

As part of our CapEx for this year, we’re looking to invest in turbines at Saiccor and Tugela Mills in South Africa. We’re excited about the procurement project that’s a global initiative, leveraging from the global business, and we think there’s a sizable opportunity there to take further costs out of the business.

Turning to Slide 19, the rationalizing declining businesses. Obviously we have to anticipate decline in demand for our traditional graphic paper and we’ve been doing that over a number of years.

And some recent examples in South Africa, we have stopped production of coated paper, and we have streamlined the product offering within the South African environment. Going forward, we recently announced that the Husum volumes in terms of an arrangement we had with Metsa, those volumes will no longer be manufactured at that Husum Mill.

They will now come back to our European business, and those will boost the profitability of the mill in the mechanical paper space. Then on Slide 20, as we have been managing our cash flow and cash generation, we’ve been making smaller and moderate investments to grow the top line, mainly in the South African environment.

We did make investments in the specialty packaging in Europe at the Alfeld Mill. More recent examples is upgrade to Tugela and Ngodwana pulp mills, and we will continue to look for opportunities to grow virgin packaging in South Africa because it generates very good margins for us.

During the 2015 financial year, we announced the investment in the nano-cellulose pilot plant in the Netherlands, and we look forward to that progressing as we move into 2016. On page 21, we continue to focus on strengthening the balance sheet.

We’ve made significant strides towards reducing the debt. It ended the year at $1,771 million, as I mentioned earlier.

I think this will be opportunity during this year to reduce that substantially further. We have announced the sales of the Enstra and Cape Kraft which I touched on earlier.

And as the balance sheet get stronger, that will enable us to refinance the remaining expense of debt that we have. And we still look 2017 bonds and the 2021 bonds, and we will look in time to refinance them at a lower cost.

On Slide 22, as we look beyond the next year or two, we need to start tuning our attention to how we can grow the business. And we look for opportunities to expand our specialty packaging offering.

We are already doing some work at a number of our mills within the group the Ehingen Mill and the Maastricht Mill in Europe, we are looking to change some of that production towards packaging, and similarly at Somerset in the U.S. So that is a segment which is a growing segment and can generate good EBITDA margins for us.

At the same time, we continue to look for opportunities on the bio-product side and in areas such as lignins and sugars. And then longer term obviously, as dissolving wood pulp continues to be strong, we would look to debottleneck the South African business and look for further growth opportunities.

Then turning to our outlook, and I’ll move now to Slide 24. We started the year well and with forecasting that for Q1 the EBITDA and earnings per share will be better compared to the prior year, both from an operational performance perspective and the fact that we’ve got substantially lower interest rate, or interest cost.

At the moment we have a headache because of the drought situation in South Africa. It is impacting on production a little bit, mainly at our Saiccor mill in the KwaZulu-Natal area.

We have had to slow production a little bit. We’ve assessed the situation and our best estimate, as we currently stand is that its impact on EBITDA for the quarter will be somewhere between $5 million and $10 million.

Nevertheless, despite that we are still confident that the earnings growth will be higher than last year. The dissolving wood pulp demand is strong and prices, as I said earlier, are higher than last year, and obviously the rand is weaker which helps us further.

Graphic paper market, I’ve touch on already, it’s fair to say they’re probably in a better place than we previous had anticipated. We are realistic, we do still expect them to decline but our order book is full and the mills are cash positive.

In North America, the strong U.S. dollar will impact on trade flows.

However, again our order book is relatively full at the moment, and we have taken cost out of the business; wood prices are coming down. So, based on the market conditions and the exchange rates at the moment, we expect that the EBITDA for the full year 2016 will be higher than ‘15.

And with the lower interest costs coming through as well, we would expect strong growth in earnings per share for the full 2016 financial year. CapEx is expected to be in line with 2015, and I’ve talked about that on an area slide.

And also again, I talked about it, but we will continue to utilize our cash reserves to hopefully refinance that remaining higher cost base that we have out there. So that’s the slides I wanted to talk to.

So operator, I am going to put it back to you for questions.

Regarding the fiscal 2016 EBITDA guidance up year-over-year, could you say what the main drivers will be, which businesses or which geographies you expect that to mainly occur in?

The largest growth will come from the South African region. Dissolving pulp prices are higher.

The rand is obviously weaker, and we will benefit from that. Our packaging business in South Africa, the demand is strong.

And that’s another business that does benefit from the currency as well because it does go in to packaging for food exports. And within Europe with the higher prices that we were able to achieve earlier this year, we are hopeful that we can continue to grow on the success that we had last year.

And then in North America, remember during this financial year, we did take significant curtailment in production last year. And as we look forward to the new financial year, we view that as an opportunity, if we can keep the mills full.

You mentioned on the introductory remarks that you would look to address certain U.S. bonds over the next 12 to 18 months, and maybe you said it and I just missed it.

But were you -- I know you want to address both, but were you saying over the next 12 to 18 months you want to address first the six and five eighths first liens of ‘21?

We haven’t got any specific plans at this stage or we wanted to highlight as with the reduction in our net debt, the opportunity would be there for us to look at that. Glen, may be you want to expand further?

Our 2021 bonds have a call window that becomes available in April next year of 2016. And depending on market conditions, we’ll be looking to refinance those.

And lastly from me, do any of your dissolving wood pulp contracts come up with your two main customers in the near-term? And if they do, do you have any expectations of any material changes, either in volumes or pricing, when they do roll?

With our major customers, we have standard contracts. They do come up periodically.

We are confident that we will be able to extend the ones that are maturing and we don’t anticipate any major changes to the key terms or the volumes.

I think firstly, well done on a good set of numbers I think in a very difficult market. So just a couple of questions from my side, if I may.

I think the first one is just you give an indication of the weaker euro, how that affected profitability, but can you give an indication of how much the weaker rand actually helped year-on-year profit improvement? The second one is just on North America.

So, you’ve done a bit of work in terms of reducing costs there. Do you think that’s turned the corner?

Q4 obviously was seasonally stronger but Q1 where it’s seem to be weaker, do you see that being still profitable or does that go back to being loss making? And I think attached to that, can you maybe give us an indication of the level of imports being seen in North American coated wood free market; has that increased and what are you doing there to mitigate that?

I think the third thing is just, in Europe, can you just talk about what you’re seeing there; I think more in light in terms of you increasing your volumes in a declining market? And I think just lastly, at Cloquet, what’s going to be the trigger for you to go back to making full dissolving pulp?

I think you indicated that that you’re looking at that but do you need a 10% increase in prices for instance on dissolving pulp to make that worthwhile?

There is a number of questions. I will take some of them.

I’m going to give the European one to Berry just now. So, I’ll start on the currency and the U.S.

questions, and then I’ll hand over to Berry on the European question. In terms of the weaker euro, yes, you’re right.

We did disclose the numbers. And on the rand, it is fair to say, it’s had a substantial impact.

It’s not as easy to measure because obviously within the South African business, you measure the profits in rand and then you translate them back to dollars. It was a substantial contribution.

And the average rate for the year Glen, was 11.90?

90, yes.

So, the average rate for the year was 11.90, which was, substantially higher than the previous year. We do think as we move forward into the new financial year with levels at -- well it’s around 14 mark.

And that can generate significant amounts of increased EBITDA for us. Then in terms of the U.S.

market, it’s still tough and it’s still in a tough space. And obviously Q4 was better.

It is seasonally stronger quarter. We’re realistic about where that market is and we’re pragmatic.

And at the moment, our order book is pretty full and we’re okay at the moment. But the underlying pressures with the higher input coming into the country is still there.

In terms of the business as a whole, as I said, we’ve taken out substantial costs and at the same time we did take, I think it was about 60,000 tons of curtailments during the year. So, I want to stress that is an opportunity as we move forward.

You’ve asked about the Cloquet dissolving pulp. Look Nishal, we’re getting close to that breakeven point; we’re very-very close.

One of the things I would say is that it is something that we are using to mitigate against the risks for the drought at Saiccor. And we potentially would look to up the production a little bit to help through that situation.

And over time, I’ve talked about it before; over time, we would want to hopefully maximize the dissolving wood pulp reduction at that mill. At the moment, it’s about two-thirds; one-thirds.

And then I am going to hand you to Berry, jus to talk about generally about the European environment and then volumes that he did see.

Yes, thank you, Steve. As far as European business is concerned, there are really three separate issues.

The first one is the export market, this was strong for European producers on the whole during the year and in the last quarter for us was particularly stronger for both for wood free coated and for mechanical coated products. So, that’s one explanation.

The second one of course is that we grew specialty business quite strongly during the year with the full deployment of Alfeld PM 2 into the specialty area. Last year -- the year before rather, we had to make quite a lot of graphic paper on that machine that we stopped doing during the year.

And the final point is the carousel of Houston products which during the last quarter stops to move into our own mills and those three have really make up the reasons for the growth.

Okay, thank you.

Nishal, I think that we’ve covered all your questions.

Yes, that’s fine. Thanks guys.

Coming back to just asking about the rand, it is very weak; you know what you have, you don’t know what you’re going to get. You’ve not really shaped or formed in the past hedged the transaction exposure; is that something you’re not contemplating to lock in this very good profitability?

It’s an interesting question. Obviously with the likelihood of higher interest rates in the U.S.

and potentially that weakening the rand further, it’s something we have to be very careful of doing. We’ve been very conservative.

I and -- we certainly wouldn’t want to overhead the situation. For the Q1 period, we have locked in approximately 40% of the dissolving pulp volumes at taking out foreign currency contracts.

But we would be very happy to do more than that.

When you’re looking at the pricing, obviously, European business has suffered from high paper pulp prices. At the same time, softwood prices have been under pressure for most part of the year and coming down, ballpark, it needs the contract business to pitch in $100 per ton.

How do you -- what do you purchase mainly in Europe? Is that mainly hardwoods and that’s why you’re suffering and you haven’t had the offset from softwood?

And given the size that you have as a purchaser in Europe, what are you now seeing in terms of trends, as China seems to be weakening and at least there are some talks about some pressure coming back into the pulp market, downward pressures that is; how do you view that?

I’ll take that one, Stephen. In terms of what we buy, we buy both soft and hardwoods, rather more hardwood than softwood.

So, on the whole, we have seen a significant price increase because hardwood has increased in dollars as well as the dollar strengthened against the euro. And so that has significantly reduced margins.

Price increases on paper tend to lag behind, as you know. So, I doubt whether we will be able to bridge that gap completely until the January quarter when we do see a price rise coming in.

As far as pulp trends are concerned, I believe this is forecasting that is much like forecasting the results of witchcraft. And I think it’s for us quite impossible to do but.

I do believe that there is -- when the differentials in hard and softwood is as close as it is now, then of course it’s possible to change from hardwood to softwood and that brand base and more balance into the market. But it’s -- at the moment, we are finding it very difficult to predict where those prices are going.

Coming into the dissolving market, just to talk about China a bit again, of course most things, pretty much anything that goes into China, at this moment, seems to be rather weak. And you’ve seen a very strong price recovery in dissolving wood pulp.

And you mentioned polyester of course coming down. How should we view this?

Is this a sustainable price change? And let’s assume that hardwood prices were to come down a bit, is there a meaningful swing capacity that could take off that momentum that you had in dissolving prices since March?

And then the second component, I wasn’t quite clear what you said Steve when you said you don’t expect any meaningful changes to the contract structures. I’m sure you -- that doesn’t talk about price as well, given the fact that you’ve seen spot prices coming up so much.

Just to clarify, do you not expect contract prices to go up; is that what you said?

No, it’s in terms of the same contract. It’s obviously linked to spot prices in the Chinese market, the CTS prices.

What I am saying is that formula will continue to be applicable. Obviously, as prices rise or drop, our prices to our customers will follow that.

Does that make sense?

No, that’s perfect. Yes.

And then in terms of the -- you talked about the factors influencing the pricing for dissolving pulp, and clearly the possibility of hardwood pulp manufacturers swinging back to dissolving pulp is always a risk and it is always there. And obviously, we would do that at Cloquet as well, as I talked about earlier.

And what I would stretch is at the moment the viscose staple fiber prices have been good. And those have pushed the margins of the VSF manufacturers, and that’s allowed dissolving pulp prices to rise.

And could the price be under pressure as we move forward, the risk is always there. However, the underlying demand for dissolving pulp is still positive.

And prices in the spot market are now $100 higher than they were in December. So, yes, maybe, could it come back a little bit?

Possibly. But the underlying demand is good at the moment.

Pricing pressure is moving in the right direction. And obviously with the weaker rand that strengthens our position.

So, we’re positive relative to where we come out of 2015.

And a final question. Mark, isn’t there but maybe Steve, you can help me anyways.

On the U.S. side of the equation, obviously you saw some pricing pressure around the mid-point of the year.

You’ve just come out of a strong season with very typical seasonally stronger demand. And imports keep on coming and the dollar again has really strengthened I guess.

Could we see a scenario now where the U.S. prices take another leg down?

And the utilization rates are well down on what they were a year ago, of course from the combination of lower demand domestically and a surge in imports. So, are you seeing any incremental pressure in the U.S.

pricing at this moment?

Bear in mind, remember, there was two prices increasing that went through in the U.S. And then demand started to come under significant pressure.

We saw the dollar strengthen; we saw more imports coming in. And interestingly, although prices have come back a little bit and they’re still higher than they were a year ago and your question.

Could pricing come under further pressure? I suppose with demand being weak the way it is and the threat of imports coming into the country, there could be a risk of lower prices.

What we have seen over the last few weeks is things have stabilized a little bit. And as I said, the order book has been relatively full.

We have been able to gain market share amongst the domestic producers and which has enabled us to keep mills full. And all of that combined with the fact that we’ve been taking costs out of the business, we have to pay back from the Somerset investment that we made and the fact that in our base we have 60,000 tons of curtailment.

All of that combined gives me reason to believe that we can have a better year this year.

Just to be clear, you haven’t seen any pricing pressure that’s really what you said?

No, as I said, it has come back a little bit, but it’s still higher than it was a year ago.

Perfectly clear. Thank you.

And the reason I say that because we put through two price increases, remember. We put through one in July of last year and then one in January of this year.

Then, it came back a little bit.

Could you chat a little bit about the release liner business in the U.S.? I understand that it historically was a fairly large earnings contributor to the U.S.

business, and it’s turned down in the last couple of months. Can you chat a bit about how that’s progressed, and where we were a year ago versus where we are today?

That business has been under pressure, it is exposed to China; it’s not a large business, it’s not a large contributor. But on a relative basis, compared to 18 months, two years ago, it’s probably making about $8 million to $10 million less EBITDA than it did then.

That’s annualized. Right?

Sorry.

That’s annualized?

That’s an annualized figure. Bear in mind, it’s relative to the other larger businesses; it is relatively small but its impact year-on-year was about $8 million to $10 million.

And then, can you just chat about your accelerated outlook? You talk about looking at two mills in Europe and looking at packaging.

I just want to -- if you could just share your thought process with us, there’s a lot of printing and writing capacity in Europe that’s converting to packaging grades right now. Are you not concerned that you are just following that trend and potentially driving down margins in that grade?

Firstly, let me just stress that we’re not talking about committing large amounts of capital to these projects. These are opportunistic and they allow us to reallocate some of our production to the higher margin segment.

What I will do is I am going to hand it to Berry to talk about some of the specifics on that front. Berry, over to you.

We’re talking two mills in particular. One is Maastricht where we have developed a folding box board grade which we have done with minimal capital costs to the machine.

And it’s really a question of looking at markets which are very close or adjacent to markets we are already serving; we already serve the perfume box for with our SBB grades. This is right beside it.

So, we know the customers; we know the kinds of needs they have. And therefore, we are able to make the product to fit that.

And we do it on a relatively small scale. We build slowly.

It’s not that we’re replacing the whole of that capacity with this new grade in short-term. And we’ve done a rather similar thing in Ehingen where we’re making a white top liner which goes into laminating and boxes which require extremely good printing and a very smooth surface.

There again, it’s a product we had already developed in Alfeld. We were already in the market.

And we are just growing it. And we’re talking 10,000 or 20,000 tons here, you’re not talking about enormous amount.

But it gets us into the market and slowly allows us to grow and take some of the pressure off the -- for searching for volumes in graphics out of those mills.

And then, just finally on Saiccor with the drought, has the drought already started to impact production levels at Saiccor, or is it something that you’re flagging as potential?

There has been some impact already. I am going to hand over to Alex now just to go into a little bit more detail.

We had some impact on production but the estimate that I’ve given you is our conservative based estimate. Alex, maybe you just want to expand further?

The months we were actually shutdown one of the lines for maintenance, and we’ve just delayed bringing that back up, so it’s been a little bit slow. Our estimate is that there will be as Steve said about $5 million to $10 impact.

We’re running at two thirds capacity and we have really good range forecast for the short-term. So we are fairly confident that we’ll get back up to full production in the next couple of weeks.

We also do have a benefit that in Ngodwana we are able to improve capacity just based on -- or production just based on efficiencies and how well the mill is running and that is compensating some.

Just a couple of questions, in terms of the outlook for grade declines in coated wood free and coated mechanical. Obviously a surprise to the upside this year.

We’ve been talking a lot about downside risk in terms of pricing. Perhaps you could comment a little bit about upside risk in terms of volume outlook for the next two years, just for mechanical and coated wood free.

And then just on that the grade decline I think in FY17 is quite big relative to the last two years. Does that sort of imply that you’d be considering a closure or change in strategy on further production, maybe in FY18?

And then just linked to that, I mean obviously the degearing profile is quite nice. Where are you guys thinking about dividends?

I know that was mentioned a couple of quarters ago, just how that ties into that? And then, could you comment a little bit on the contribution from specialty packaging in Europe?

You obviously said that the volume growth and pricing has been quite favorable, just so we could get a bit of a feel on that.

That’s a few questions, let me take each one and turn. In terms of upside to coated wood free, yes, that has happened over the last year.

And I’ve already talked about the fact that our mills are fairly full. What that means is that our mills are all cash positive; they are full, as I indicated.

And we are not anticipating any closures from those in the foreseeable future. And obviously, we watch that on an ongoing basis.

But with demand where it is at the moment, there will be no need to take capacity out. On a pricing front, Berry, talked about it already and I’ve mentioned that we are hopeful that we can get that through in January.

And if it does, then, obviously that helps offset the higher pulp cost that we’ve talked about. On the degearing, look, I don’t recall talking about it a couple of quarters back, what we consistently said is that we want to bring the gearing down to two times EBITDA.

We should, based on our outlook for 2016, we should take a big step towards that during this financial. And we don’t anticipate paying a dividend during the 2016 financial year.

In terms of specialty packaging in Europe, there has been a good turnaround. We don’t disclose that as a separate segment but the increase relative to the prior has been $15 million.

Just two quick ones. One, you talked about the 60,000 tons of downtime in Somerset but also potential projects for specialty papers there.

Can you just give us a little more detail on the thoughts on that and timing?

Again, it’s similar to what Berry talked about. We’re not talking large volumes, but again, it enables you to fill the machines.

And we already make certain grades of packaging it, but no -- but relative to the overall size of Somerset, it is relatively small. And so, we’re not anticipating a major investment in the short-term.

And then, with regard to Cloquet, you also mentioned that potentially using production there to supplement some of the outages down in terms of South Africa. What do you think the cost impact of that be, because you said that it’s currently -- you’re not quite at a profitable price yet?

As I said to you, the breakeven point now is very close. So, it’s a marginal impact.

And in fact it’s part of the $5 million to $10 million that I talked about that is part of that number.

And then, just the last question, these two mills that you indicated for sale, what are the proceeds from that and what do you expect to use it for?

That was 600 million rand -- what’s that? It’s about $50 million getting let by the minute, maybe 45 [ph] but we would expect to reduce debt further with those proceeds.

Just three questions from me. This year, you’ve decreased your CapEx guidance from about just below $300 million to now $250 million.

What would you guide, net debt reduction to be going into 2016? Previously, I recall you were talking about $150 million per annum.

So, does that remain unchanged or that increase now? Second question would be, with antidumping duties in the United States for uncoated wood free paper, is there a potential to maybe turn off a coater in one of your North American mills and target the uncoated market as opposed to coated market?

And my third question would be around the $50 million Saiccor recovery boiler investment you mentioned; what is the timing of that coming online and what is the return on that project?

I’m going to take each question in turn. The CapEx, as I indicated, we estimate 250 for this year.

And our estimate for net debt reduction over this course of this year is at least $150 million. So, we start the year at 1,771, you minus the 150 we’re getting to close 1600.

In terms of the coaters in the U.S., I would stress that we continue to be open-minded about our U.S. operations.

But as things currently stand, our order book is full and we would expect to continue on the coated front. On the boiler, it’s not Saiccor, it’s Ngodwana.

And it is not a new boiler, it’s fixing up the old one, which is due it’s reached the end of its life. And it’s something that we have to do to go forward.

It’s timing, it’s during the course of this financial year. And as I indicated, it’s about just over 500 million rand investment.

I just want to thank everybody for joining us. And we look forward to chatting at the end of Q1.

Thank you.