Q3 2026 Sappi Ltd Earnings Call

August 6, 2026

Operator: Thank you for standing by. Welcome to the Sappi Q3 2026 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, CEO Steve Binnie. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone; you will then hear an automated message advising your hand is raised.

Speaker #1: Please be advised that today's conference is being recorded. Would now like to hand the conference over to your speaker today, CEO Steve Binney. Please go ahead.

Speaker #2: Thank you, operator. Good day to everyone. Thanks for joining. As always, move through the investor presentation calling out page numbers as we move through.

Steve Binnie: Thank you, operator. Good day to everyone. Thanks for joining. As always, move through the investor presentation, calling out page numbers as we move through. Just quickly starting on page two, I just draw your attention to the comments on forward-looking statements. Moving to page three, which is really just a high-level summary of the quarter. It's fair to say that we still have challenging market conditions with volatile economic macro factors taking place, which has had an impact on a number of our costs, which has obviously impacted on the margins, and also selling prices for our products. On top of that, we continue to feel the impact of the strong rand against the US dollar. On the positive side, I'm pleased with the progress that we're making in North America as we increase our sales volumes on the packaging side, on the SBS side specifically.

Speaker #2: And just quickly starting on page two, I just draw your attention to the comments on forward-looking statements. Moving to page three, which is really just a high-level summary of the quarter, it's fair to say that we still have challenging market conditions.

Speaker #2: With volatile economic macro factors, taking place, which has had an impact on a number of our costs, which is obviously impacting on the margins, and also selling prices for our products.

Speaker #2: On top of that, we continue to feel the impact of the strong rand against the US dollar. On the positive side, we are pleased with the progress that we're making in North America, as we increase our sales volumes in on the packaging side, on the SBS side specifically.

Speaker #2: Just as a reminder that the quarter did contain the Inguidwana shot, the annual maintenance shot, which had an impact of 22 million dollars. So all in all, a tough quarter, but we are beginning to see some green shoots and positive momentum on selling prices.

Steve Binnie: Just as a reminder that the quarter did contain the Ngodwana shut, the annual maintenance shut, which had an impact of ZAR 22 million. All in all, a tough quarter, but we are beginning to see some green shoots and positive momentum on selling prices, and I'll talk a little bit more about that. Overall, an EBITDA of ZAR 53 million, which was in line with the revised guidance that we put out a couple of weeks ago. Slide four. Just two of the major drivers of performance. It's a slide we've shared before. The DWP price and the rand/dollar exchange rate do have a significant impact. As I've said previously, normally they move in opposite directions, unfortunately, both working against us at the same time.

Speaker #2: And I'll talk a little bit more about that, but overall, an EBITDA of 53 million, which was in line with the guidance that we put out a couple of weeks ago.

Speaker #2: The revised guidance that we put out a couple of weeks ago. Slide four, just two of the major drivers of performance is a slide of we've shared before.

Speaker #2: But the DWP price and the rand dollar exchange rate do have a significant impact. And as I've said previously, normally they move in opposite directions.

Speaker #2: Unfortunately, both working against us at the same time. And just to highlight the sensitivity there, when you're selling 1.2 million tons plus of DWP a year, a 1% change can have a vast impact.

Steve Binnie: Just to highlight the sensitivity there, when you're selling 1.2 million tons plus of DWP a year, 1% change can have a vast impact. On the rand/dollar exchange rate, it's $4 million for every $0.10. Just a reminder, I know everybody knows this, but two, three years ago, it was above ZAR 18 to the dollar, now closer to ZAR 16. Vast impact on the South African business and obviously good profitability. Moving to slide five, just to the more recent movements in dissolving pulp. It was down year-on-year, but we have seen positive momentum coming through in the quarter. The overall DWP price has risen by 53%. A lot of that's not been felt yet in the numbers that we report because there is a little bit of a lag impact.

Speaker #2: And then on the rand-dollar exchange rate, it's $4 million for every 10 cents. And yeah, just a reminder—I know everybody knows this—but two, three years ago, it was above 18 rand to the dollar.

Speaker #2: Now, closer to 16. So vast impact on the South African business and obviously proof profitability. Moving to slide five, just to the more recent movements in dissolving pulp, it was down year on year, but we have seen positive momentum coming through in the quarter.

Speaker #2: The overall DWP price has risen by 53. A lot of that's not been felt yet in the numbers that we report because there is a little bit of a lag impact.

Speaker #2: So much of that benefit will be felt in the Q4 numbers the current quarter that we're in. What is driving those higher prices for dissolving pulp?

Steve Binnie: Much of that benefit will be felt in the Q4 numbers, the current quarter that we're in. What is driving those higher prices for dissolving pulp? Firstly, on the fiber side, we have seen an increase in various prices of fiber. That supports a price increase for the raw material dissolving pulp. We're also seeing costs going up, specifically on the fiber pricing. The polyester fiber, as you would imagine, is closely linked to petrochemical costs. That's supporting higher prices. VSF operating rates continue to be good and inventories continue to be low. All of those things helped. On the negative side, obviously, paper pulp prices continue to be relatively low and the uncertainty caused by the war going on in the Middle East. Slide six. One very pleasing aspect of our results has been the increased volumes coming through from our North American business.

Speaker #2: Well, firstly, on the fibre side, we have seen an increase in various prices of fibre. So that supports a price increase for the raw material, dissolving pulp.

Speaker #2: We've also seen costs going up. Specifically on the fibre pricing, the polyester fibre as you would imagine is closely linked to petrochemical costs. That's supporting higher prices.

Speaker #2: VSF operating rates continue to be good and inventories continue to be low. So all of those things helped. On the negative side, obviously, we paper pulp prices continue to be relatively low.

Speaker #2: And the uncertainty caused by the war going on in the Middle East. Then slide six, one very pleasing aspect of our results has been the increased volumes coming through from our North American business.

Steve Binnie: As you know, we made that investment. We were confident in that market. We believed that we could grow the volumes, and we're doing that. We're delivering that. We're gaining market share and we've recorded record volumes in the quarter, and there's more to come. We continue to build our customer base. The new machine, Somerset PM2, as you would imagine, as you ramp up, the efficiencies of the machine get better. There's still more to come, and we're pleased with the progress. Also pleased that there has been price increases now coming through. The first round of price increases has now substantially been reflected in the industry data. I think there'll be more to come. As many would be aware, there's been a second round of price increases announced very recently. The benefits of these price increases are not in the numbers yet.

Speaker #2: As you know, we made that investment. We were confident in that market. We believed that we could grow the volumes. And we're doing that.

Speaker #2: We're delivering that. We're gaining market share. And we've recorded record volumes in the quarter. And there's more to come. We continue to build our customer base.

Speaker #2: The machine, the new machine, Somerset PM2, as you would imagine, as you ramp up the efficiencies of the machine get better. There's still more to come.

Speaker #2: And we're pleased with the progress. Also, pleased that there has been price increases now coming through. The first one the first line of price increases is now substantially been reflected in the industry data.

Speaker #2: I think there'll be more to come. And then, as many would be aware, there's been a second round of price increases announced very recently.

Speaker #2: The benefits of these price increases are not in the numbers yet. Some of it will be felt in Q4, and some of that into Q1 of next year.

Steve Binnie: Some of it will be felt in Q4, and some of that into Q1 of next year. All in all, feeling good about the progress. Volumes rising, selling prices rising, gaining market share. Turning to slide seven, the graphic paper market. It's our traditional business. On the last call 3 months ago, we did spend some time talking about the increases that we had announced. The US, that market is tighter following our conversion, and we were able to implement a price increase there. In Europe, we announced two. The first one was successful, the second one less so. We felt that we needed to push for it because of the higher cost, but it was more difficult to execute on the second one. The graphs that you see only really reflect the first one.

Speaker #2: So all in all, I'm feeling good about the progress. Volumes rising, selling prices rising, gaining market share. Then turning to slide seven, the graphic paper, market.

Speaker #2: It's our traditional business. On the last call, three months ago, we did spend some time talking about the increases that we had announced. The US that market is tighter following our conversion.

Speaker #2: And we were able to implement a price increase there. In Europe, we announced two. The first one was successful. The second one less so.

Speaker #2: It became we felt that we needed to push for it because of the higher costs. But it was more difficult to execute on the second one.

Speaker #2: And so the graphs that you see only really reflect the first one. Europe is more difficult. Because there is excess capacity, as you know.

Steve Binnie: Europe is more difficult, because there is excess capacity, as you know, we've talked about that many times. The earnings bridge on page eight, I'm not going to go into detail, but the big story here is that we're seeing the lower selling prices coming through. Bear in mind, this is a year-on-year comparison. Year-on-year, across many of our product categories, they are less. They are improving quarter-on-quarter, but year-on-year, we're less. The currency conversion having a significant impact. Offsetting some of that is a lot of great work that we're doing on costs. I'll talk a little bit more about that in a future slide. Just page nine, on costs, generally, we have seen headwinds, right. The wood costs in Europe and North America have been going up, not in South Africa, but certainly in those regions.

Speaker #2: And we've talked about that many times. The earnings bridge on eight, page eight, I'm not going to go into detail, but the big story here is that we are we're seeing the lowest selling prices coming through.

Speaker #2: And bear in mind, this is a year-on-year comparison. So year-on-year across many of our product categories, they are less. They are improving quarter on quarter.

Speaker #2: But year-on-year were less. And then the currency conversion having a significant impact. Offsetting some of that is a lot of great work that we're doing on costs.

Speaker #2: And I'll talk a little bit more about that in a future slide. Just page nine, on costs generally, we have seen headwinds, right? The wood costs in Europe, North America being going up, not in South Africa.

Speaker #2: But certainly in those regions. But the big drivers of higher costs have been chemicals and delivery costs. And a lot of that's linked to the war in the Middle East.

Steve Binnie: The big drivers of higher costs have been chemicals and delivery costs, and a lot of that's linked to the war in the Middle East. We specifically, at the bottom of this slide, we quote some of the specific raw materials that have gone up, and we do have a slide specifically on sulfur, which is the biggest one. Other costs, like pulp, relatively stable, which have helped. The proactive work that we're doing on taking costs out of our business have been able to mitigate some of this impact. Slide 10, we thought it would be useful to share with you. This is the sulfur price, and you can see a commodity that was below ZAR 200 a ton. It's jumped all the way up to close to ZAR 1,200. Just to put it in context for you, we quantify this impact.

Speaker #2: And we specifically at the bottom of this slide, we quote some of the specific raw materials that have gone up. And we do have a slide specifically on sulfur, which is the biggest one.

Speaker #2: Other costs, like pulp, relatively stable, which have helped. And they're proactive work that we're doing on taking costs out of our business have been able to mitigate some of this impact.

Speaker #2: So slide 10, we thought it would be useful to share with you. This is the sulfur price. And you can see a commodity that was below $200 a tonne.

Speaker #2: It's jumped all the way up to close to $1,200. Just to put it in context for you, we quantified its impact. This is a year-on-year impact.

Steve Binnie: This is a year-on-year impact for the 2026 financial year, ZAR 350 million, just on that one raw material. You can see it's a vast impact and, hopefully, when the markets normalize, there will be a potential reduction in these costs. Having said that, we are not resting on that, and we are looking at alternatives to mitigate much of this impact or some of this impact. Similarly, on page 11, the logistics costs. The war has caused higher shipping costs, higher diesel costs. Specifically on delivery itself, we estimate this year will be ZAR 106 million, but that's only on the direct delivery cost of the South African business. It doesn't include the forestry, the logistics. It doesn't include the other regions, but I know there's been a lot of focus specific on South Africa, and we thought it would be useful to share that information.

Speaker #2: For the 26 financial year, $350 million just on that one raw material. So you can see it's a vast impact. And hopefully, when the markets normalize, there will be a potential reduction in these costs.

Speaker #2: Having said that, we are not resting on that. And we are looking at alternatives to mitigate much of this impact or some of this impact.

Speaker #2: Similarly, on page 11, the logistics costs the war has caused higher shipping costs, higher diesel costs. The specifically on delivery itself, we estimate this year will be $106 million.

Speaker #2: But that's only on the direct delivery costs of of the South African business. It doesn't include the forestry, the logistics. It doesn't include the other regions.

Speaker #2: But just I know there's been a lot of focus on specific on South Africa. And we thought it would be useful to share that information.

Steve Binnie: Slide 12 has our net debt to EBITDA, obviously on the back of lower profitability, it's meant that the leverage ratio has increased. On the debt side, interestingly, you can see we've kept it relatively flat, and I think that's a great effort on the back of the lower profitability. It shows you that the actions that we're taking are reaping rewards. You see the benefits flowing through there. Specifically on the leverage covenant, as you know and we announced last quarter, that's suspended until March 2027. We continue to have strong relationships with our banks, and they support the business, they understand the headwinds that we've been facing, and I'm confident they will continue to be supportive into next year as well. On page 13, the debt maturity profile.

Speaker #2: Slide 12 has our net debt to EBITDA, and obviously, on the back of lower profitability, it’s meant that the leverage ratio has increased. On the debt side, interestingly, you can see we’ve kept it relatively flat.

Speaker #2: And I think that's a great effort. On the back of the lower profitability. So it shows you that the actions that we're taking are reaping rewards.

Speaker #2: And you see the benefits flowing through there. Specifically on the leverage covenant, as you know, and we announced last quarter, that's suspended until March 27.

Speaker #2: We continue to have strong relationships with our banks. And they support the business. They understand the headwinds that we've been facing. And I'm confident they will continue to be supportive.

Speaker #2: Into next year as well. Then on page 13, the debt maturity profile. I think the first important point to highlight is that we have substantial liquidity and reserves on hand and facilities on hand.

Steve Binnie: I think the first important point to highlight is that we have substantial liquidity and reserves on hand and facilities on hand. That's on the left-hand side of the graph. On the right-hand side, the first big material debt refinancing is the 2028 euro bonds and that's something we will monitor as we get closer to that maturity period. Otherwise, liquidity looks good despite the lower profitability. On slide 14, just again highlighting the same points that I've already raised, a disciplined approach to capital allocation. Despite the lower profits, only a small outflow of cash. As part of that, the CapEx, we're estimating ZAR 240 this year. As I've mentioned previously, we've pulled back on any expansionary CapEx. This is focused on maintenance and essential CapEx. We're not putting our assets at risk.

Speaker #2: That's on the left-hand side of the graph. On the right-hand side, the first big material debt refinancing is the 2028 Eurobonds. And that's something we will monitor as we get closer to that maturity period.

Speaker #2: But otherwise, liquidity looks good despite the lower profitability. Then on slide 14, just again, highlighting the same points that I've already raised. A disciplined approach to capital allocation.

Speaker #2: Despite the lower profits, only a small outflow of cash. And then as part of that, the capex. We're estimating $240 this year. As I've mentioned previously, we've pulled back on any expansionary capex.

Speaker #2: This is focused on maintenance and essential capex. We're not putting in our assets at risk. This is what we believe that we can reduce it to and maintain the quality of our assets.

Steve Binnie: This is what we believe that we can reduce it to and maintain the quality of our assets. Slide 15 is our Thrive strategy. I don't intend going into detail. It is a schedule we've seen many times. The emphasis shifts, at the moment, with the back to basics focus, our priorities have to be on driving operational excellence, lowering our cost base, improving production, and ultimately sustaining our financial health with the number one priority to reduce debt. Slide 16 takes us to another level. We call them our self-help pillars. I don't intend going through all these bullets, just to highlight a few. In terms of optimizing our portfolio, Somerset progressing very nicely. We are excited about the prospects ahead.

Speaker #2: Slide 15 is our thrive strategy. I don't intend going into detail. Is this schedule we've seen many times? The emphasis shifts and at the moment with the back-to-basics focus, our priorities have to be on driving operational excellence, lowering our cost base, improving production, and then ultimately sustaining our financial health with the number one priority to reduce debt.

Speaker #2: Slide 16 takes us to another level. And we call them our self-help pillars. And I don't intend going through all these bullets. But just to highlight a few, in terms of optimizing our portfolio, Somerset progressing very nicely.

Speaker #2: And we're excited about the prospects ahead. The work that we've done on the joint venture—and I've got a slide on that—but we're confident that this joint venture will bring substantial synergies, and we were thrilled that the shareholders supported the transaction in the recent vote.

Steve Binnie: The work that we've done on the joint venture. I've got a slide on that. We are confident that that joint venture will bring substantial synergies. We were thrilled that the shareholders supported the transaction in the recent vote. We got 98.5% vote. We were pleased with that. We believe that this is the right course of action for our European business. We've been putting through selling price increases across all our key segments. It takes time. Yes, some of it is to offset higher costs. Market conditions in some of the segments are better, are getting better. I specifically call out the US SBS market. The disciplined allocation of capital guides our principles. A number of these points I've already talked about.

Speaker #2: We got 98.5% vote. And we were pleased with that. And we believe that this is the right course of action for our European business.

Speaker #2: We've been putting through selling price increases across all our key segments. It takes time. And yes, some of it is to offset higher costs.

Speaker #2: But market conditions in some of the segments are better, are getting better. And I specifically call out the US SBS market. The disciplined allocation of capital guides our principles.

Speaker #2: A number of these points I've already talked about. The one that we are excited about and we're we have been proactive. We've been able to take 120 million of costs out of our business.

Steve Binnie: The one that we are excited about. We have been proactive. We've been able to take ZAR 120 million of costs out of our business. I know that doesn't show up in the overall profits because of the other headwinds. These are real actions that we have taken to mitigate much of that impact of those headwinds. The savings are across the regions and include fixed costs and variable costs. Specifically on Europe. By the way, the ZAR 29 is in the ZAR 129. Specifically in Europe, we've done a lot of great work to reduce our fixed cost base. Deleveraging. I've said it once, I've said it twice, I've said it many times. Our number one priority is to reduce debt. It's going to take some time, because we need to get the profits back to normalized levels.

Speaker #2: And I know that doesn't show up in the overall profits because of the other headwinds. But these are real actions that we have taken to mitigate much of that impact of those headwinds.

Speaker #2: The savings are across the regions. And include fixed costs and variable costs. Specifically on Europe. And by the way, the 29 is in the 129.

Speaker #2: Specifically in Europe, we've done a lot of great work to reduce our fixed cost base. And then deleveraging. I've said it once. I've said it twice.

Speaker #2: I've said it many times. Our number one priority is to reduce debt. It's going to take some time. Because we need to get the profits back to normalized levels.

Speaker #2: But with the discipline around capital allocation, and the improved profitability that we anticipate in the quarter and the year ahead, we will begin on that path.

Steve Binnie: With the discipline around capital allocation and the improved profitability that we anticipate in the quarter and the year ahead, we will begin on that path and we will remain committed to getting our debt back to a manageable or more reasonable levels. On slide 17, again there is quite a bit of detail and I do not intend going through everything, just on the packaging side, we have got a strong business and a strong platform in North America. Great assets, and you can see the evidence of our ability to grow the portfolio. In dissolving pulp leadership position with a strong influence on our profitability. A non-integrated supplier with long-term relationships, and well established for increased profitability that we envisage will come in the future. Graphics. We know that graphics demand is in structural decline.

Speaker #2: And we will remain committed to getting our debt back to a manageable or a more reasonable levels. Then on slide 17, again, it's quite a bit of detail.

Speaker #2: And I don't intend going through everything. But just on the packaging side, we've got a strong business or a strong platform in North America.

Speaker #2: Great assets. And you can see the evidence of our ability to grow the portfolio. In dissolving pulp, leadership position, with a strong influence on our profitability, a non-integrated supplier, with long-term relationships and well-established four increased profitability that we envisage will come in the future.

Speaker #2: And then graphics, we know that graphics demand is in structural decline. We've been proactive by proposing this joint venture with UPM. We think it will deliver substantial synergies and ultimately preserve flexibility for future upsides divestments.

Steve Binnie: We have been proactive proposing this joint venture with UPM, we think it will deliver substantial synergies, and ultimately preserve flexibility for future upsides divestments. On the joint venture, page 18, we have already achieved a number of milestones. The big one, and we have talked about it previously, the big one is to get approval from the competition authorities and the big one there is Europe. That process is progressing, and we are still feeling good about fulfilling the conditions by the end of 2026. Turning to the segments. Firstly, pulp. Underlying demand is good. I have mentioned it a couple of times. We have been impacted by the lower selling prices year on year and the rand dollar exchange rate. Other shorter-term dynamics have meant that we have seen an increase in price in the quarter.

Speaker #2: And then on the joint venture, page 18, we've already achieved a number of milestones. The big one, and we've talked about it previously, the big one is to get approval from the competition authorities and the big one there is Europe.

Speaker #2: That process is progressing. And we still feeling good about fulfilling the conditions by the end of 2026. Turning to the segments, firstly, pulp. Underlying demand is good.

Speaker #2: I've mentioned it a couple of times. We have been impacted by the lower selling prices year on year and the rand dollar exchange rate.

Speaker #2: But other shorter-term dynamics have meant that we have seen an increase in price in the quarter. Just important to point out, the Inguidwana shut was in this quarter as well.

Steve Binnie: Just important to point out the Ngodwana shut was in this quarter as well, so that did have an impact on this segment. The next segment is on page 21, the packaging. We have gone through a tough period. The markets here globally have been tough. Excess capacity in Europe. We have had the project that we undertook at Somerset. More specifically in this quarter, the South African business was impacted by the shut at Ngodwana. Looking forward, underlying demand for containerboard in South Africa is good. We were starting to see global containerboard, well, certainly in North America and a little bit in Europe now starting to come through. Hopefully, that will all be beneficial for pricing in the South African environment. We anticipate higher volumes coming through in the North American business. In graphics, we have got the structural decline.

Speaker #2: So that did have an impact on this segment. And then the next segment is on page 21—the packaging. We've gone through a tough period.

Speaker #2: The markets here globally have been tough. Excess capacity in Europe. We've had the project that we undertook at Somerset. And then more specifically in this quarter, the South African business was impacted by the shut at Inguidwana.

Speaker #2: Looking forward, underlying demand for container board in South Africa is good. And we're starting to see global container board. Well, certainly in North America and a little bit in Europe now starting to come through.

Speaker #2: Hopefully, that will all be beneficial for pricing in the South African environment. And then we anticipate higher volumes coming through in the North American business.

Speaker #2: In graphics, we've got the structural decline. We did take costs out. Particularly on the fixed costs, but they're rising input costs that I talked about earlier have impacted on margins.

Steve Binnie: We did take costs out, particularly on the fixed costs, the rising input costs that I talked about earlier have impacted on margins. The US market is in a more resilient, or a more in balance position following our conversion, and that will boost profitability. Also seasonally, Q3 is a lower quarter for graphics and normally Q4 is our bigger quarter. Slide 23 has the regions, I do not intend going through that. The big themes coming through here is lower selling prices year on year, starting to rise quarterly. That is the overriding story with regards to the margins and a great ramp-up on volumes in North America. On the outlook. Firstly, demand, I talked a few times obviously about dissolving pulp being healthy, and packaging ramping up as I referred to. Prices moving slowly in the right direction, which will support profits going forward.

Speaker #2: The US market is in a more resilient or a more in balance position following our conversion. And that will boost profitability. And also, seasonally, Q3 is a lower quarter for graphics.

Speaker #2: And normally, Q4 is our bigger quarter. Slides 23 has the regions I don't intend going through that. The big themes coming through here is lower selling prices year on year, but starting to rise quarterly.

Speaker #2: And that's the overriding story with regards to the margins. And a great ramp-up on volumes in North America. Then on the outlook, firstly, demand I've talked a few times obviously about dissolving pulp being healthy.

Speaker #2: And packaging is ramping up, as I referred to. Prices are moving slowly in the right direction, which will support profits going forward. But importantly, we're not just sitting back and doing nothing on the cost front.

Steve Binnie: Importantly, we're not just sitting back and doing nothing on the cost front. We've been proactive at taking costs out, and we'll continue to look at opportunities across all our regions. If you move to slide 26, we are targeting further operational efficiency improvement and fixed cost reductions. Excuse me. We've got to finish the joint venture which I talked, or the proposed joint venture as I referred to earlier. Taking that all into account, we do have a smaller shut in the quarter at Somerset, but it is smaller. Taking everything into account and the improved conditions, the fact that we don't have a major shut, a higher dissolving pulp price coming through, based on all of that, our guidance for the quarter is that Q4 will be materially above the Q3 numbers. Operator, that's me gone through the presentation.

Speaker #2: And we've been proactive at taking costs out. And we'll continue to look at opportunities. Across all our regions. And if you move to slide 26, we are targeting further operational efficiency improvement.

Speaker #2: And fixed cost reductions. Excuse me. We've got to finish the joint venture, which I talked or the proposed joint venture, as I referred to earlier.

Speaker #2: So taking that all into account, we do have a smaller shut in the quarter. At Somerset, but it is smaller. But taking everything into account and the improved conditions, the fact that we don't have a major shut, a higher dissolving pulp price coming through.

Speaker #2: Based on all of that, our guidance for the quarter is that Q4 will be materially above the Q3 numbers. So operator, that's me going through the presentation.

Steve Binnie: I'm now going to hand it back to you for questions.

Speaker #2: I'm now going to hand it back to you for questions.

Speaker #1: Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Sean Unger of Chronux Research. Please go ahead. Your line is open.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Sean Ungerer of Chronux Research. Please go ahead. Your line is open.

Speaker #1: To withdraw your question, please press star one and one again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Sean Ungerer of Kronux Research.

Speaker #1: Please go ahead, your line is open.

Sean Unger: Afternoon, Steve. Can you hear me?

Sean Ungerer: Afternoon, Steve. Can you hear me?

Speaker #2: Welcome to the news, Steve. Can you hear me?

Steve Binnie: Yes. Hey, Sean.

Speaker #3: Yes. Hey, Sean.

Sean Unger: Great. Thanks for the update, Steve. Just to turn to the Q4 guidance, in terms of being materially up quarter-on-quarter, that's great news. What is your sort of threshold on significant materiality? I guess there was no specific reference to Q4 last year, where I think the print was about $111 million.

Sean Ungerer: Great. Thanks for the update, Steve. Just to turn to the Q4 guidance, in terms of being materially up quarter-on-quarter, that's great news. What is your sort of threshold on significant materiality? I guess there was no specific reference to Q4 last year, where I think the print was about $111 million.

Speaker #2: Great. Thanks for that update, Steve. Just turning to the fourth quarter guidance in terms of being materially up quarter and quarter, that's great news.

Speaker #2: What is your sort of threshold on significant materiality? And I guess there was no specific reference to Q4 last year where I think the print was about 111 million dollars.

Speaker #3: Yeah, sure. Look, the market conditions a year ago were very different. So we didn't think it was appropriate to reference it against that. Yeah, I'm not going to give you a specific number, but what I would highlight to you if you use the current quarter as a starting point, you don't have the Inguidwana shut.

Steve Binnie: Yeah, sure. Look, the market conditions a year ago were very different, so we didn't think it was appropriate to reference it against that. I'm not going to give you a specific number, but what I would highlight to you, if you use the current quarter as a starting point, you don't have the Ngodwana shut. You've got a higher DP average price and improved volumes coming through in North America. When you combine all of that together, that should give you a rough feel of the kind of territory that we're talking. I can't get more specific than that, but it will be materially higher than Q3.

Speaker #3: You've got a higher DP average price. And improved volumes coming through in North America. So when you combine all of that together, that should give you a rough feel of the kind of territory that we're talking about.

Speaker #3: I can't get more specific than that. But it will be materially higher than Q3.

Sean Unger: Okay. I appreciate that. Thanks, Steve. Just in terms of your commentary around normalized profits to sort of bring net debt down, I guess the million-dollar question is, when do you anticipate normalized profits again?

Sean Ungerer: Okay. I appreciate that. Thanks, Steve. Just in terms of your commentary around normalized profits to sort of bring net debt down, I guess the million-dollar question is, when do you anticipate normalized profits again?

Speaker #2: Okay. I appreciate that. Thanks, Steve. And then just in terms of your commentary around normalized profits to sort of bring net debt down, I guess the million dollar question is when do you anticipate normalized profits again?

Speaker #3: Yeah, look, it's too early to call next financial year, but if you do the maths and you work backwards, you've got a maintenance capex number of around 250 and an interest bill and a tax bill.

Steve Binnie: Yeah, look, it's too early to call next financial year. If you do the maths and you work backwards, you've got a maintenance CapEx number of around ZAR 250 and an interest bill and a tax bill. It's clear that to begin paying down debt, you have to get close to ZAR 500 million of EBITDA, right? That needs to be the immediate target. I'm not giving guidance. I'm purely giving you maths on debt reduction. That's our initial target, and I think that market conditions are improving, but it's not clear as we sit here today when we can get to that number.

Speaker #3: It's clear that to begin paying down debt, you have to get close to 500 million dollars of EBITDA, right? So that needs to be the immediate target.

Speaker #3: I'm not giving guidance. I'm purely giving you the maths on debt reduction. So that's our initial target. And I think that market conditions are improving.

Speaker #3: But it's not clear as we sit here today when we can get to that number.

Sean Unger: Okay, perfect. Thanks, Steve. Just moving to North America on the SBS price increases. Just to confirm, in the current quarter, there was no benefit from higher pricing, is that correct? Perhaps if you could just, I know you did mention the further benefit in Q4 and Q1, but are you able to give us any sort of weighting towards those quarters?

Sean Ungerer: Okay, perfect. Thanks, Steve. Just moving to North America on the SBS price increases. Just to confirm, in the current quarter, there was no benefit from higher pricing, is that correct? Perhaps if you could just, I know you did mention the further benefit in Q4 and Q1, but are you able to give us any sort of weighting towards those quarters?

Speaker #2: Okay. Perfect. Thanks, Steve. And then just moving to North America on the SBS price increases. So just to confirm, in the current quarter, there was no benefit from higher pricing.

Speaker #2: Is that correct? And then perhaps if you could just I know you did mention the further benefit in Q4 and Q1, but are you able to sort of give us any sort of weighting towards those quarters?

Speaker #3: Look, there's no benefit in the Q3 numbers. None. The first announcement was $60 a ton. It's not all come through yet on the RECI numbers.

Steve Binnie: Look, there's no benefit in the Q3 numbers, none. The first announcement was ZAR 60 a ton. It's not all come through yet on the recent numbers. I think it's fair to say that a proportion of that will be realized in Q4 and then the balance in Q1. Some of the contracts are linked and some of them are based on spot pricing. It takes time to realize. There's typically a two or three-month lag.

Speaker #3: I think it's fair to say that a proportion of that will be realized in Q4. And then the balance in Q1. So some of the contracts are linked and some of them are based on spot pricing.

Speaker #3: So it takes time to realize. So there's typically a two or three month leg.

Sean Unger: Okay, got it. Steve, just in terms of the cost base, appreciate a couple of the slides to explain the sort of cost pressures you have been experiencing across the business. I think the numbers quoted are sort of for the full year impact, right? Just to confirm, I think most of these sort of pressures only started filtering through in Q3 and obviously are going to be then Q4 with H1 fairly clean, or is that an incorrect assumption?

Sean Ungerer: Okay, got it. Steve, just in terms of the cost base, appreciate a couple of the slides to explain the sort of cost pressures you have been experiencing across the business. I think the numbers quoted are sort of for the full year impact, right? Just to confirm, I think most of these sort of pressures only started filtering through in Q3 and obviously are going to be then Q4 with H1 fairly clean, or is that an incorrect assumption?

Speaker #2: Okay. Got it. And then, Steve, just in terms of the cost base, appreciate a couple of the slides to explain just sort of the cost pressures you have been experiencing across the business.

Speaker #2: I think the numbers quoted are sort of for the full year impact, right? But just to confirm, I think most of these sort of pressures only started faulting through in the third quarter and obviously are going to be then Q4 with H1 fairly clean.

Speaker #2: Or was that an incorrect assumption?

Speaker #3: Yeah, at a high level, and you'll recall our last results announcement, we had a substantial increase in costs in the Q3. And there is incremental increases in Q4 as well.

Steve Binnie: At a high level, you'll recall our last results announcement, we had a substantial increase in costs in the Q3. There is incremental increases in Q4 as well. The jump is not of the same magnitude that we experienced from Q2 to Q3. There is further cost, and that's part of our outlook guidance. That's been taken into account.

Speaker #3: The jump is not of the same magnitude as what we experienced from Q2 to Q3. But there is further cost, and that's part of our outlook guidance.

Speaker #3: That's been taken into account.

Speaker #2: Okay. Perfect.

Sean Unger: Okay, perfect.

Sean Ungerer: Okay, perfect.

Steve Binnie: To answer you more clearly, most of that cost increase has been in the H2.

Speaker #3: So to answer you more clearly, most of that cost increase has been in the second half of the year.

Steve Binnie: To answer you more clearly, most of that cost increase has been in the H2.

Speaker #2: Yes. Okay. Perfect. And then just in terms of shuts for next year, I know you don't want to provide any guidance, but sort of at least on my numbers, the impact on EBITDA is likely to be similar-ish compared to FY26 where it's obviously 26 was a lot lower than last year.

Sean Unger: Okay, perfect. Just in terms of shuts for next year, I know you don't want to provide any guidance, but sort of at least on my numbers, the impact on EBITDA is likely to be similar-ish compared to FY2026, whereas obviously 2026 was a lot lower than last year. Is that a reasonable assumption at this stage?

Sean Ungerer: Okay, perfect. Just in terms of shuts for next year, I know you don't want to provide any guidance, but sort of at least on my numbers, the impact on EBITDA is likely to be similar-ish compared to FY2026, whereas obviously 2026 was a lot lower than last year. Is that a reasonable assumption at this stage?

Speaker #2: Is that a reasonable assumption at this stage? If you could just.

Steve Binnie: Yeah, broadly, that's right. Our North American mills are on an 18-month shut, so you rotate the quarters for those two and then in South Africa, broadly in line, right?

Speaker #3: Yeah, broadly, that's right. Our North American mills are on an 18-month shut, so you rotate the quarters for those two. And then in South Africa, broadly in line, right?

Dale: US and not Ngodwana.

[Company Representative] (Sappi): US and not Ngodwana.

Speaker #3: Oh, yeah. Sorry. The team are just reminding me that the Inguidwana shut for next year will only occur in October, Graham. So there will not be an Inguidwana shut in financial year 27.

Steve Binnie: Oh, yeah. Sorry. The team are just reminding me that the Ngodwana shut for next year will only occur in October, Graeme.

Sean Unger: Yeah.

Sean Ungerer: Yeah.

Steve Binnie: There will not be an Ngodwana shut in financial year 2027.

Sean Unger: Yeah. Okay, perfect. That's great. Just last one, perhaps just for Glenn. Just in terms of the net working capital for Q4, normally we see quite a sizable inflow. How should we be thinking about that for this quarter? Is that sort of in line with last year, or perhaps you can share some insight?

Sean Ungerer: Yeah. Okay, perfect. That's great. Just last one, perhaps just for Glenn. Just in terms of the net working capital for Q4, normally we see quite a sizable inflow. How should we be thinking about that for this quarter? Is that sort of in line with last year, or perhaps you can share some insight?

Speaker #2: Yeah, yeah. Okay. Perfect. That's great. And then just last one, perhaps since we're getting just in terms of the network and capital for the fourth quarter, normally we see quite a sizable inflow.

Speaker #2: How should we be thinking about that for this quarter? Is that sort of in line with last year or perhaps you can share some insight?

Speaker #3: Yeah, Sean, it's Glenn here. So you're right. We do usually see a net inflow. We're re anticipating a slight outflow this quarter. This year.

Glen Pearce: Yeah, Sean, it's Glenn here. You're right, we do usually see a net inflow. We're anticipating a slight outflow this quarter, this year, and that's really because of the ramp-up that you're seeing in our operations, increases in prices, and we're building a bit of an into next year for a shut in Cloquet.

Speaker #3: And that's really because of the ramp-up that you're seeing in our operations, the increases in prices. And we're building a bit of into next year.

Speaker #3: For a shut in Kokay.

Sean Unger: Okay, perfect. Thanks, guys. Thank you for the questions.

Sean Ungerer: Okay, perfect. Thanks, guys. Thank you for the questions.

Speaker #2: Okay. Perfect. Thanks, guys. Thanks for the questions.

Speaker #1: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Brian Morgan of RMB Morgan Stanley.

Operator: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Brian Morgan of RMB Morgan Stanley. Please go ahead. Your line is open.

Speaker #1: Please go ahead. Your line is open.

Speaker #4: Hi guys. Good afternoon. Thanks for the time. Can I just ask on the 2028 bonds? When does that window open? And just chat us maybe a little bit about your strategy in that regard.

Brian Morgan: Hi, guys. Good afternoon. Thanks for the time. Can I just ask on the 2028 bonds, when does that window open? Just chat to us maybe a little bit about your strategy in that regard. Would you be looking to refi those with bonds? Could you do term debts? Just what are you thinking in that regard?

Speaker #4: Would you be looking to refire those with bonds? Could you do term debt? So just what are you thinking in that regard?

Steve Binnie: Dale, do you want to take that?

Speaker #3: Glenn, do you want to take that?

Speaker #2: Yeah. In terms of the refinancing,

Dale: Yeah. In terms of the refinancing, we constantly monitoring the market. We will want to refinance that at least a year before the time. It's in April 2028 that it matures. The window is a 2-year window prior to that. We're looking at it, Brian.

[Company Representative] (Sappi): Yeah. In terms of the refinancing, we constantly monitoring the market. We will want to refinance that at least a year before the time. It's in April 2028 that it matures. The window is a two year window prior to that. We're looking at it, Brian.

Speaker #3: we constantly monitoring the market. We will want to refinance it at least a year before the time. So it's in April 2028 that it matures.

Speaker #3: The window is a two-year window prior to that. So we're looking at it, Brian.

Speaker #2: Yeah.

Speaker #4: I'm for at least April 2027.

Brian Morgan: So at least-

Glen Pearce: Sorry, Brian.

Brian Morgan: April 2027.

Glen Pearce: That's right. Early 2027.

Speaker #3: That's right. Early 2027. And Brian, to your other part of your question, are primary we have to get to that refinancing, but our goal would be to refinance it with bonds, yes.

Brian Morgan: Yeah.

Steve Binnie: Brian, to your other part of your question, we have to get to that refinancing, but our goal would be to refinance it with bonds. Yes.

Speaker #4: With bonds. Okay. That's fine. Can you give us a little bit of color on the SBS market as you see it? And you guys are adding quite a lot of capacity into that market.

Brian Morgan: With bonds. Okay.

Steve Binnie: Yeah.

Brian Morgan: That's fine. Can you give us a little bit of color on the SBS market as you see it? You guys are adding quite a lot of capacity into that market. There's not a lot of capacity coming out of that market. The industry's been able to pass through price increases into a lower operating rate environment. Is demand just that strong? How should we interpret this ability to put through price increases?

Speaker #4: There's not a lot of capacity coming out of that market. The industry is being able to pass through price increases. Into a lower operating rates environment.

Speaker #4: Is it demand just that strong? How should we interpret this ability to put through price increases?

Steve Binnie: Yeah. I'll briefly answer them, and then I'll let Mike elaborate further. Just, Brian, there has been capacity come out. I don't like naming other competitors, but two competitors have taken capacity out this year. In terms of the demand side, we have seen a pickup, but Mike, maybe you want to just go in to elaborate further.

Speaker #3: Yeah. I'll briefly answer them, and then I'll let Mike elaborate further. Just, Brian, there has been capacity come up. And I don't like naming other competitors, but two competitors have taken capacity out this year.

Speaker #3: In terms of the demand side, we have seen a pickup, but Mike, maybe you want to just go into elaborate further.

Mike: No, Steve, I think you are correct. Two competitors have taken assets out of the SBS market in North America. We continue to expect, and we continue to see a growth of the 1% to 2%. In addition to that, there's been another mill that's been down on the West Coast due to failure. I think all that has had an impact on the market. Our market orders, specifically, have been continuing to grow, and the machine's running well. Now we're working to speed up as we planned. Right now, we've kept all our assets full on SBS.

[Company Representative] (Sappi): No, Steve, I think you are correct. Two competitors have taken assets out of the SBS market in North America. We continue to expect, and we continue to see a growth of the 1% to 2%. In addition to that, there's been another mill that's been down on the West Coast due to failure. I think all that has had an impact on the market. Our market orders, specifically, have been continuing to grow, and the machine's running well. Now we're working to speed up as we planned. Right now, we've kept all our assets full on SBS.

Speaker #5: Oh, Steve, I think you are correct. So two competitors have taken assets out of the SBS market in North America. We continue to expect, and we continue to see a growth of the 1 to 2 percent.

Speaker #5: And in addition to that, there's been another mill that's been down on the West Coast due to failure. And I think all that has had an impact on the market.

Speaker #5: Our market orders

Speaker #1: Specifically have been continuing to grow and . And the machines running well . And now we're working to speed up , you know , as we planned .

Speaker #1: And right now, we've kept all our assets full on SBS.

Speaker #2: Okay , cool . Thank you . And just to confirm , you've , you've received all your customer approvals . Now

Brian Morgan: Okay, cool. Thank you. Just to confirm, you've received all your customer approvals now?

Mike: I'm not sure of the question. Qualification for all of our products?

[Company Representative] (Sappi): I'm not sure of the question. Qualification for all of our products?

Speaker #1: I'm not sure of the qualification for all of our products' qualifications. Yeah, yeah. All our base products are going very well.

Brian Morgan: Qualifications, yeah.

Mike: Yeah. All our base products are going very well, and we've introduced several other products to the market, such as an oil and grease resistant and those types of things which are still in the process of being qualified. Those are new products to the market as opposed to the standard products.

[Company Representative] (Sappi): Yeah. All our base products are going very well, and we've introduced several other products to the market, such as an oil and grease resistant and those types of things which are still in the process of being qualified. Those are new products to the market as opposed to the standard products.

Speaker #1: And we've introduced several other products to the market . , , such as , , an oil and grease resistant and those types of things , which are still in the process of being qualified .

Speaker #1: But those are , , you know , new products to the market as opposed to the standard products

Speaker #2: Okay. Last question. Sorry.

Brian Morgan: Okay.

Steve Binnie: Brian-

Brian Morgan: Last question. Sorry.

Speaker #3: Sorry , Brian . Just one other comment . I mean , typically in the industry , as , as you gain new customers , they do want to trial the product on , on , on , on the machine and , , so you may be making it for another customer , but they do go through , trials .

Steve Binnie: Sorry, Brian, just one other comment. Typically in the industry, as you gain new customers, they do want to trial the product on the machine. You may be making it for another customer, but they do go through trials. That happens all the time.

Speaker #3: So that that happens on all the time .

Speaker #1: Yeah . The better put Steve . You know , we do have to qualify with brand new customers , but the majority of that has been accomplished at this stage

Mike: Yeah. Better put, Steve. We do have to qualify with brand-new customers, but the majority of that has been accomplished at this stage.

[Company Representative] (Sappi): Yeah. Better put, Steve. We do have to qualify with brand-new customers, but the majority of that has been accomplished at this stage.

Speaker #2: That's cool . Thanks . Thanks very much , guys . And just on DWP , we've seen we've seen net net paper pulp prices drop in the last couple of weeks by around $20 .

Brian Morgan: That's cool. No, thanks very much, guys. Just on DWP, we've seen net paper pulp prices drop in the last couple of weeks by around ZAR 20. Does this sort of cap the upside to DWP in the short run?

Speaker #2: , does this sort of cap the upside to DWP in the short run

Speaker #4: Yeah . Look it's an interesting question .

Steve Binnie: Yeah, look, it's an interesting question, Brian, and I'll let Mohamed jump in after I do. Look, there are numerous positives, and I highlighted them earlier. The one negative has been these lower paper pulp prices. Just to reemphasize once again that there are only a limited number of players who can use paper pulp in their viscose manufacturing process. That kind of puts a cap on it. Similarly, swing capacity on the DWP producer side, there's only so many machines that can do that swing capacity. A lot of that's already been directed to DWP. It is a negative factor, but it is somewhat limited in terms of its influence. Mohamed, maybe you can talk more broadly.

Speaker #3: , Brian and I'll let Mohammed , jump in after after I do , the look , there are a number of numerous positives .

Speaker #3: , , and I highlighted them earlier , , on the one negative has been these lower paper pulp prices . , but you know , just to re-emphasize , once again that there are only a limited number of players who can use , , paper pulp in their , their viscose manufacturing process and , that , , you know , that kind of puts a cap on it .

Speaker #3: , and similarly swing capacity on the DWP producer , the , there's only so many machines that can do that swing capacity . And a lot of that's already , , been directed to DWP .

Speaker #3: So it is a negative factor , but , , it is somewhat limited in terms of its influence , but Mohammed , maybe you can talk more broadly

Speaker #1: Yeah . Steve , I would I would just add to what you're saying is that , you know , the Vsf , , industry in China , in fact , outside of China , also the operating rates have continued to remain very , very high .

Mohamed Mansoor: Yeah, Steve, I would just add to what you're saying is that the VSF industry in China, in fact, outside of China also, the operating rates have continued to remain very high, low inventory levels. The value of those very high operating rates, even though we are now in a seasonally slow time, means that from a quality perspective, dissolving wood pulp makes it easier for the guys to run harder. With demand being good for fiber, I think the need for running, let's say, higher quality raw material is also much higher. That also, I think, continues to create a positive situation for dissolving pulp and also limits the usage of BEK to just the guys that have the technology to actually use BEK.

Speaker #1: , low inventory levels and , you know , the value of those very high operating rates , even though we are now in a seasonally slow time , means that from a quality perspective , , you know , dissolving wood pulp makes it easier for the guys to run harder .

Speaker #1: , so with demand being good for fiber , , I think , , the , , the need for running , let's say higher quality , raw material , , is also much higher .

Speaker #1: So that also , I think continues to create a positive situation for , for dissolving pulp and also limit the , , the , usage of Bec to just the , the , , the guys that have the technology to actually use

Speaker #2: That's excellent . Thanks , guys . Appreciate the time .

Brian Morgan: That's excellent. Thanks, guys. Appreciate the time.

Speaker #5: Thanks , Lauren

Steve Binnie: Thanks, Brian.

Speaker #6: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of James Twyman of Prescient.

Operator: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of James Twyman of Prescient. Please go ahead. Your line is open.

Speaker #6: Please go ahead . Your line is open

James Twyman: Thank you very much, and thank you for the presentation. The first question is, Steve, the covenants with the banks are until March. Could you give us some idea of when the timing is for extending that and how long you would plan to extend that by? Related to that, how much of your debt would you say is subject to those covenants?

Speaker #1: , thank you very much . And thank you for the for the presentation . , the first question is , , Steve , , the covenants , , with the banks are until March .

Speaker #1: Could you give us some idea of , , sort of when the timing is for extending that and how long you would plan to extend that by .

Speaker #1: and related to that , how much of your debt would you say is subject to those covenants

Steve Binnie: Okay. On the first one, look, we're in constant contact with our banks. We have great relationships with them. We share our estimates with them, and they continue to be very supportive. In terms of what would happen in 2027 after the covenants come back, we would be proactive. We've always been proactive, and we will ensure that we have sufficient flexibility in next year when we come out of that suspension period. That's work that is an ongoing process, and we're doing that already. In terms of the covenant itself, Glenn, it's specifically, it's the RCF, right?

Speaker #3: , okay . On the first one , , look , we're in constant contact with our banks . We , we have great relationships with them .

Speaker #3: We , we , we , we share our estimates with them . And , , they continue to be very supportive . So in terms of , , what would happen in 27 after the covenants come back , , we would , we would be proactive , we have always been proactive and we will ensure that we have sufficient flexibility , , in , in next year , , when , when we come out of that suspension period .

Speaker #3: And , and that's what that , you know , is ongoing process . , you know , and we're doing that already , , in terms of the , covenants , self , , Glenn , it's specifically , it's the c s , right ?

Speaker #3: Yeah . It's linked to the RCF and , and , and the B yes . So it's the RCF facility and that all e B loan

Glen Pearce: Yeah. It's linked to the RCF.

Steve Binnie: And then-

Glen Pearce: The OEKB loan

Steve Binnie: The OEKB. Yes. It's the RCF facility and that OEKB loan.

Speaker #1: Okay , great . Thank you very much . Would you expect us to have an idea of the extension . this year or this financial year .

James Twyman: Okay, great. Thank you very much. Would you expect us to have an idea of the extension this year or this financial year? What are your thoughts on that?

Speaker #1: what are your thoughts on that .

Steve Binnie: Look, it's an ongoing process, James. I didn't say extension. You said extension. What I was saying is that we will have flexibility based on the outlook for our profitability next year. We are going through a process to put that in place. It's difficult to give an exact date, but it will be hopefully very soon.

Speaker #3: , look , it's an ongoing process . James . , I didn't say extension . You said extension . , the , , what I , what I was saying is that we will have , , flexibility , , based on the outlook for our profitability next year .

Speaker #3: , and we , we , we , we are going through a process , , to , to put that in place . , it's difficult to give an exact date , but it will , it will be hopefully very soon .

Speaker #1: Okay . Thank you . And then , , in the US , obviously , as you mentioned , you know , you're expecting a much stronger fourth quarter .

James Twyman: Okay, thank you. Then in the US, obviously, as you mentioned, you're expecting a much stronger Q4 as PM2 ramps up and prices are picking up. There is always this big seasonality element as well, and I just wondered if you could talk about that impact, because sometimes we get a huge seasonal impact and sometimes we get a really small one, and it sort of depends on where your inventory levels and other factors. Is that an additional factor that you would see helping in the US?

Speaker #1: , as Pmm2 ramps up and prices are picking up , there is always this big seasonality element . , as well . And I just wondered , if you could talk about that impact because sometimes , , we get a huge seasonal impact and sometimes we get a really small one and it sort of depends on where your inventory levels and other factors .

Speaker #1: So , you know , is that an additional factor that you would see helping , , in the US ?

Speaker #3: , thanks , you , Mike , do you want to take that seasonality question ,

Steve Binnie: Thanks, James. Mike, do you want to take that seasonality question?

Speaker #7: So , , there is a bit of seasonality , but , , with the move , it was , it was , , more driven by graphics .

Mike: There is a bit of seasonality, but with the move, it was more driven by graphics historically. I think we're going to see less of an overall seasonality impact with the balance between our pulp business, our SBS business, and our graphics business than what we've seen in the past. Although there always seems to be a bit of seasonality around the holidays in the US.

[Company Representative] (Sappi): There is a bit of seasonality, but with the move, it was more driven by graphics historically. I think we're going to see less of an overall seasonality impact with the balance between our pulp business, our SBS business, and our graphics business than what we've seen in the past. Although there always seems to be a bit of seasonality around the holidays in the US.

Speaker #7: Historically . , so I think we're going to see less of an overall seasonality impact with the balance between , , our pulp business , our SBS business and our , , graphics business than what we've seen in the past , although , , you know , they're , there always seems to be a bit of , seasonality around the holidays , , in the US

Speaker #1: Okay . Thank you . , if I could just ask one more , , , you , you know , over the years , you've always talked about cost cutting as a general part of what you do .

James Twyman: Okay, thank you. If I could just ask one more. Over the years, you've always talked about cost cutting as a general part of what you do, and you often talk about ZAR 50 million or EUR 50 million of cost cutting each year being something that seems to keep happening. You're talking about ZAR 120 million this time, and you've said that without a lot of fanfare. It's a huge number. Could you talk about whether that's all in the base? I think in the presentation you talk about that being a year to date number. I'm sure it's annual year to date or something, is there more to come there and could you give us a bit more detail on that? Around the EUR 29 million of savings in Europe from restructuring, this ZAR 120 million is a very big number to be happening.

Speaker #1: And , you know , you often talk about $50 million or euros of cost cutting each year being something that seems to keep happening .

Speaker #1: , there's , you're talking about 120 this time and you've said that without a lot of fanfare . It's a , it's a huge number .

Speaker #1: , could you talk about really about whether that's all in the base ? , because I think in the presentation , you talk about that being a year to date number , I'm sure it's annual year to date or something , but , , is there more to come there ?

Speaker #1: And could you give us a bit more detail on that ? Because around the 29 million of savings in Europe from , you know , restructuring , but this 120 is , is , is a very big number to , to , to be happening .

Speaker #5: Yeah .

Steve Binnie: Yeah, indeed. Roughly, it's about half fixed cost, variable cost. The fixed cost, a big chunk, as we've indicated, is in Europe, there are fixed cost savings in the US and in South Africa as well. On the variable cost side, a significant proportion of that relates to usage and other cost-saving initiatives on raw materials. Once again, it's across the regions, Europe is probably the largest of the three regions that make up the variable cost. I think going forward, to the broader question, we can't relax. We've got these headwinds. We've got to continue to look for opportunities, more specifically, in South Africa, with the stronger rand, it's put pressure on us. Graeme, I'll come to you now.

Speaker #3: Indeed . , roughly , , roughly , it's about half , half fixed cost , variable costs . the fixed cost , a big chunk , as we've indicated is in Europe , but there are fixed cost savings in the US and , and , and in South Africa as well on the variable cost side , a significant proportion of that , relates to usage and , you know , other cost saving initiatives on , on raw materials , , you know , once again , , you know , it's , it's across the regions , but , , Europe is probably the largest of the , of the three regions that make up the variable costs .

Speaker #3: I think going forward to the broader question , , you know , we , we can't , we can't relax . , we've got , we've got these headwinds .

Speaker #3: We've got to continue to look for opportunities . , and , and more specifically , , in South Africa , because , , with the stronger end , it's put pressure on us and , , and Graham , I'll come to you now , , but , you know , we , , we , we , we are being proactive at looking at , , , usage and alternate raw materials , which can , , build a more resilient , , , South African business with the headwinds that we're facing .

Steve Binnie: We are being proactive at looking at usage and alternate raw materials, which can build a more resilient South African business with the headwinds that we're facing. Graeme, obviously, we can't give specific numbers, broadly, the areas that we're looking at the moment.

Speaker #3: So , you know , Graham , you know , obviously we can't give specific numbers , but , but broadly , the , , the areas that we're looking at at the moment .

Speaker #8: Yeah , certainly . , and obviously the start , the best starting point is , is the highest expenditure areas or there's areas where we've seen the highest growth in costs over time .

Graeme Wild: Yeah, certainly. Obviously, the best starting point is the highest expenditure areas or those areas where we've seen the highest growth in costs over time. Timber, I think although obviously market price has declined, you can see it in our fair value accounting. We need to adjust our own forestry costs in line with what we see from a market price point of view. Certainly savings on timber, ongoing in the timber side. Then our highest raw material costs, focusing both on usage and, as Steve has said, can we use potentially a lower quality, lower priced version of that material, and understanding the pros and cons on our production process. Then benchmarking ourselves against our own best performances, also sort of best in class and saying, How do we drive ourselves?

Speaker #8: , so timber , you know , I think although obviously market price has declined and you can see it in our fair value accounting .

Speaker #8: , you know , we need to adjust our forestry costs in line . Our own forestry costs in line with what we see from a market price point of view .

Speaker #8: So , , certainly savings on timber , and ongoing timber side . And then our highest raw material costs , , focusing both on , on usage .

Speaker #8: And as Steve has said , can we use potentially a lower quality , , lower priced version of that material . , and understanding the pros and cons from , on our production processes .

Speaker #8: So , you know , and then benchmarking ourselves against , , our own best performances , but also sort of best in class and saying , how do we drive our ourselves ?

Speaker #8: What do we need to change from an operational point of view to get there ? , so we're looking for long term , long term sustainable changes to our , to our cost base in South Africa .

Graeme Wild: What do we need to change from an operational point of view to get there? We're looking for long-term sustainable changes to our cost base in South Africa. Try and get our US dollar costs down to where they were five or six years ago, I guess.

Speaker #8: , you know , try and get our dollar costs down to where they were , you know , 5 or 6 years ago , I guess .

Speaker #3: So . So coming back to your question , I think when we go into 27 , this is going to be a big area of focus for for the business

Steve Binnie: Coming back to your question, I think when we go into 2027, this is going to be a big area of a focus for the business.

Speaker #1: Yeah . , okay . Impressive . , so , but the 120 you've talked about is an annual number . And would you say that that part of the cost cutting is , is in the base for last quarter ?

James Twyman: Yeah. Okay, impressive. The 120 you've talked about is an annual number, and would you say that that part of the cost-cutting is in the base for last quarter?

Speaker #3: , yeah . Yes , yes , it is .

Steve Binnie: Yes. Yes, it is.

Speaker #1: Okay . , and then , and then just related to that , you mentioned usage a few times . Could you just say what you mean by usage ?

James Twyman: Then just related to that, you mentioned usage a few times. Could you just say what you mean by usage? Is it less wastage or sort of operational factors? What do you mean by that? Because that's clearly something where you've made quite a bit of headway.

Speaker #1: Is it , you know , less wastage or sort of operational factors . What , what do you mean by that ? Because that's clearly something where you've made quite a bit of headway .

Speaker #8: Yeah . So typically for us , for example , at a cycle , how much sulfur use per per tonne of pulp produced .

Graeme Wild: Yeah. Typically for us, for example, at a Saiccor mill, how much sulfur do we use per ton of pulp produced? Back to basics approach, what should you be using relative to what you are using? Where is there waste? Or where are you overusing and can compensate somewhere else to reduce that use? It is the physical use per ton of any raw material, I guess, in the production process.

Speaker #8: And , you know what . Back to basics approach . What should you be using relative to what you are using ? , where is there , where is there waste ?

Speaker #8: , or where are you overusing it ? Can compensate somewhere else to , to reduce that use . So it is the physical , , use per tonne of , of any raw material , I guess in the production process .

Speaker #1: Okay . , and if I may just , just , just one more . , , in of dissolving pulp , obviously there is weakness ongoing in paper pulp because of capacity and various other things .

James Twyman: If I may, just one more. In terms of dissolving pulp, obviously there is weakness ongoing in paper pulp because of capacity and various other things. Did you envisage that the market in DWP is tight enough to actually get the premium picking up significantly to offset any weakness that we're seeing?

Speaker #1: Did you envisage , , that the market in DWP is tight enough to actually get the premium , you know , picking up significantly to offset any weakness that we're seeing .

Speaker #3: Yeah . Look , it's a good question . , we obviously saw the rise . , and more recently , it's kind of stabilized , you know , just around 900 , just below 900 , I think it is a seasonally slower time .

Steve Binnie: Yeah, look, it's a good question. We obviously saw the rise, more recently it's kind of stabilized just around 900, just below 900. I think it is a seasonally slower time. We're not anticipating any increases in the next short period of time. We've got to get through this quiet period, then assess the market conditions beyond that. Mohamed, I don't know if there's anything else you want to add there.

Speaker #3: , so I , I , we're not anticipating any increases . , in , in the next , , short period of time .

Speaker #3: , we've got to get through this quiet period . And then assess the market conditions beyond that . Mohamed . , I don't know if there's anything else you want to add there .

Speaker #5: Yeah . No , Steve , just to again , reemphasize that , , it is a seasonal feature that , that we are seeing in the , in the BP and viscose market .

Mohamed Mansoor: Steve, just to reemphasize that it is a seasonal feature that we are seeing in the DP and viscose market. Just to point out that even though we are in a seasonally slow time, operating rates remain at historically high levels. Even going through the seasonally slow time, the fiber inventory levels across the value chain also remain very, very low. As we come out of the seasonally slow time as we get towards the end of August into September, again, historically, what we've seen is that the DP prices start to move up again. That's what the history tells us. The supporting factors that I've just mentioned would tend to indicate that we have a good chance of history repeating itself as we get towards the end of September.

Speaker #5: But just to point out that even though we are in a seasonally slow time , operating rates remain at , , I was going to say historically high levels , , even going through the season is low time .

Speaker #5: The fiber inventory levels across the value chain . , also remains very , very low . And , , and as we come out of the season , we slow time as we get towards the end of August into September , you know , again , historically , what we've seen is that the prices start to move up .

Speaker #5: , again . So that is the , , that's what the history tells us . And , , you know , the supporting factors that , that I've just mentioned , , tend to , , indicate that , , you know , we have a good chance of history repeating itself , , as we get towards the end of September

Speaker #1: Okay. Thank you very much indeed for all of that.

James Twyman: Okay. Thank you very much indeed for all of that.

Speaker #9: Thanks .

Steve Binnie: Thanks.

Speaker #6: Thank you . We will now take our next question . Please stand by our next question comes from the line of Detlef Winkelmann of J.P.

Operator: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Detlef Winckelmann of JP Morgan. Please go ahead. Your line is open.

Operator: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Detlef Winckelmann of JPMorgan. Please go ahead. Your line is open.

Speaker #6: Morgan . Please go ahead . Your line is open .

Speaker #10: Hi , guys . , maybe my first one would just be regarding , , Somerset PM to ramp up . Are you able to share roughly kind of where you are at right now in terms of operating rates , you know , relatively close , not , not at all relative EBITDA break even any kind of color you can share .

Detlef Winckelmann: Hi, guys. Maybe my first one would just be regarding Somerset PM2 ramp-up. Are you able to share roughly where you are at right now in terms of operating rates, relatively close, not close at all, relative to EBITDA breakeven? Any kind of color you can share? Even within that, expectations as to when we should expect the EBITDA breakeven?

Speaker #10: And then even within that kind of expectations as to when we should expect EBITDA break even

Speaker #3: , look , there's a couple of questions there , Detlef , I think firstly , in terms of the , , the operating rates , we are in the quarter that we've just been in , we're at about 75% and we're anticipating closer to 85 by , , in the fourth quarter .

Steve Binnie: Look, there's a couple of questions there, Detlef. I think firstly, in terms of the operating rates, in the quarter that we've just been in, we are at about 75%, and we're anticipating closer to 85% in Q4. We're ramping up nicely. In terms of breakeven, we don't give the specific numbers, but the North American packaging business was positive.

Speaker #3: , the , , so we're ramping up nicely . , in terms of break even . , you know , we don't give the specific numbers , but , , the North American packaging business was positive .

Speaker #10: Okay . Thank you . And then , , maybe one other one just on this whole , you know , SBS tightness at the moment that we're seeing , , you know , if I recall back to Q1 calendar year , Q1 , , you know , peer results , everyone was telling us that CLB was relatively tight .

Detlef Winckelmann: Okay. Thank you. Maybe one other one just on this whole SBS tightness at the moment that we're seeing. If I recall back to calendar year Q1 peer results, everyone was telling us that CRB was relatively tight, SBS was quite loose, but the SBS price relative to CRB was relatively compressed, so we might see some substitution by customers. It looks as if we've seen that. Obviously, commentary is now that SBS is looking a bit better. At the same time, a lot of the peers are saying CRB is looking a bit worse. I'm just curious in terms of, is this a temporary shift? Is this something that could reverse if SBS price increases go too far? Just curious how to think about this going forward. Thanks very much.

Speaker #10: SBS was quite loose . , but the SBS price relative CRB was relatively compressed , so we might see some substitution . , by customers .

Speaker #10: It looks as if we've seen that . I mean , obviously commentary is now that SBS is looking a bit better . , but at the same time , a lot of the peers are saying CRB is looking a bit worse .

Speaker #10: , so I'm just curious in terms of , you know , is this a temporary shift ? Is this something that could reverse , you know , if SBS price increases go too far ?

Speaker #10: , just curious how to think about this going forward . Thanks very much .

Speaker #11: Yeah .

Steve Binnie: Yeah. Once again, I'll come over to Mike just now. Just from our side, it's not had a material impact on our results, the switch to CRB. There's been a tiny amount, but our focus has been on existing SBS customers, and that's where we've taken market share. Mike, I don't know if

Speaker #3: Okay . Once again , I'll go . I'll come over to Mike just now . , just from our side . It's not had a material impact on our results .

Speaker #3: The switch to CRB , , there's been a tiny amount , but , but our focus has been on , , existing SBS customers and that's where we've taken market share .

Speaker #3: So, Mike, I don't know if—

Speaker #7: I think that's accurate for us . , you know , I , I think if you think about it , , in this way , , there's a small portion of customers , , if you want to call them price sensitive , that might move , back and forth based on , on their advantage .

Mike: I think that's accurate for us. I think if you think about it in this way, there's a small portion of customers, if you want to call them price sensitive, that might move back and forth based on their advantage. CRB announced a price increase within the last week. Not something that we're selling directly into, but so clearly that business maybe is improving also. For North America, that hasn't really been our target. There might have been a little bit, but I'm not sure that that's a huge influence on Sappi.

[Company Representative] (Sappi): I think that's accurate for us. I think if you think about it in this way, there's a small portion of customers, if you want to call them price sensitive, that might move back and forth based on their advantage. CRB announced a price increase within the last week. Not something that we're selling directly into, but so clearly that business maybe is improving also. For North America, that hasn't really been our target. There might have been a little bit, but I'm not sure that that's a huge influence on Sappi.

Speaker #7: , and , , you know , CRB , , announced the price increase , , within the last week . , certainly doesn't , doesn't , , you know , not , not something that we're selling directly into , but so clearly that business , , maybe is improving also , , but for North America , you know , that hasn't really been our target .

Speaker #7: , there might have been a little bit , but , , you know , I'm not , I'm not sure that that that's a huge influence on , on Sappi

Speaker #10: Okay . Thank you

Detlef Winckelmann: Okay. Thank you.

Speaker #6: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Cole Hawthorne of Jefferies.

Operator: Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Cole Hathorn of Jefferies. Please go ahead. Your line is open.

Speaker #6: Please go ahead . Your line is open .

Speaker #12: Good afternoon . Thanks for taking my question . I've got a couple of my side . , I'll take them one by one .

Cole Hathorn: Good afternoon. Thanks for taking my question. I've got a couple on my side. I'll take them one by one. Firstly is just on dissolving pulp. I'm just wondering, have any of the changes and restructurings at Lenzing impacting your business? Just like your thoughts of how it might or might not impact Sappi. Second is one probably for Graham. I'd just like to follow up on how you're going to improve the South African wood sourcing and business overall. If I look at LATAM and I look at globally, the cost of wood's gone up, the cost of diesel's gone up. It has been an inflationary environment for wood, but I'm just wondering what action Sappi is taking to be more efficient in the forestry operations and try and kind of lower the wood cost delivered to the mill. Then I'll come up with a third too.

Speaker #12: Firstly is just on dissolving pulp . I'm just wondering , have any of the changes and restructurings at Lenzing , impacting your business ?

Speaker #12: I just like your thoughts of , of how it might or might not impact Sappi then second is one probably Graham . I'd just like to follow up on , you know , how you're going to improve , you know , the South African wood sourcing and , , business overall .

Speaker #12: I mean, if I look at LatAm and I look at it globally, the cost of wood has gone up, you know, the cost of diesel has gone up.

Speaker #12: , it has been an inflationary environment for wood . But I'm just wondering what , what actions Sappi is taking to be more efficient and efficient in their forestry operations operations and try and kind of lower the would cost delivered to the mill .

Speaker #12: , and I'll come up with a third two really to many thanks .

Cole Hathorn: That's already too many. Thanks.

Speaker #3: , on the first question , , Lenzing closures , , you know , it's only just been announced and , and we need to , we need to have dialogue with them , but , , you know , net net , we're not worried about it .

Steve Binnie: On the first question, Lenzing's closures, it is only just been announced, we need to have dialogue with them. Net-net, we are not worried about it. If there is lower volumes, I don't think it is that material, but if there is lower volumes, we are confident that we can place that in the Chinese market at a better price for Sappi. Mohamed.

Speaker #3: , we think we can , if there is lower volumes . , I don't think it's that material , but if there is lower volumes , we are confident that we can place that in , , in the Chinese market at a better price for Sappi and Mohamed , I don't know if

Speaker #5: Yeah . Steve , I would , , I would , I would I would agree with that . And also , you know , we have the , , the , , the , the flexibility of also making , more paper pulp .

Mohamed Mansoor: Yeah, Steve, I would agree with that. Also, we have the flexibility of also making more paper pulp if we choose to do that.

Speaker #5: If we choose to do that.

Speaker #9: Yeah , yeah . That's true . , Graham .

Steve Binnie: Yeah. That is true. Graeme, on additional wood sourcing.

Speaker #3: ...on, on, on additional wood sourcing.

Speaker #8: Yeah . I think there's a number of elements , some have been a long time in coming . , obviously as we've changed our South African business , over the last ten or so years , , the mix of mills and the mix of products , , we've steadily converting softwood plantations to hardwood .

Graeme Wild: Yeah, I think there is a number of elements. Some have been a long time in coming. Obviously, as we have changed our South African business over the last 10 or so years, the mix of mills and the mix of products, we have been steadily converting softwood plantations to hardwood. That is meant that over time, our self-sufficiency, the proportion of hardwood that we source from our own plantations, has increased. Typically, that comes at a lower cost than purchasing from external suppliers. Current market conditions globally, you are absolutely right. Generally, timber prices have trended upwards globally over a long time. Right now, with what is going on in China and pressure on market pulp prices, we have seen a weakening in timber wood chip prices in, I guess, call it the Asia Pacific region. That is allowing us to renegotiate and longer-term contracts where we were purchasing from external parties.

Speaker #8: , and that's meant that over time , our self-sufficiency , you know , the proportion of hardwood that we sourced from our own plantations has increased .

Speaker #8: And typically that comes at a lower cost than , than purchasing from external suppliers . , current market conditions globally , you know , you absolutely right .

Speaker #8: Generally timber prices have trended upwards . , globally over a long time . But , but right now there's a , , you know , with what's going on in China and pressure on market pulp prices , we have seen a weakening in , in timber , wood chip prices in , I guess , call it the Asia Pacific region .

Speaker #8: Region . , and that's allowing us to , , you know , renegotiate and longer term contracts that , , where we were purchasing from external parties and then , you know , in the short term , you know , prior to these diesel increases , we'd already started looking at , , electric trucks .

Graeme Wild: In the very short term, prior to these diesel increases, we had already started looking at electric trucks. They were offering good savings even prior to the diesel price increases that we have seen. The opportunity to convert more of our fleet or more of our logistics, we do not own the trucks ourselves, to electric-powered trucks is looking very attractive right now. Yeah, there is the usual efficiency through our own forestry operations. There is a number of things, as I say, that have been going on over a long duration, but also actions that we are taking in the shorter term to reduce timber costs.

Speaker #8: , and , and they were offering good savings , even prior to the diesel price increases that we've seen . So the opportunity to convert more of our fleet or more of our logistics , we don't own the trucks ourselves .

Speaker #8: , to electric powered trucks is looking very attractive right now . So , , and then , yeah , there's the usual efficiency through our own forestry operations , but there's a number of things , as I say , that are been going on over a long duration , but also actions that we're taking in the shorter term to , to reduce , , timber costs

Speaker #12: Thank you . And then , you know , I always find it interesting when , when someone puts in a chart on , on sulfur , when none of your , your competitors have have put it out .

Cole Hathorn: Thank you. I always find it interesting when someone puts in a chart on sulfur when none of your competitors have put it out. I always think about caustic soda, but wrongly, you do not quite think about sulfur for the white and black liquors. I am just wondering, does dissolving pulp use more sulfur in the mix than other traditional pulp, and that is why you are highlighting it? Or is there something to be aware of on particularly calling out the sulfurs, just as an aside? The other question is on North America, which is on the demand side and coated papers. Is there any potential boost ahead of the midterm marketing, things that we should be aware of that is ultimately going to allow the utilization rates of the full mill system to be a bit better in North America? Thank you.

Speaker #12: I mean , I always think about caustic soda , but you know , wrongly , you don't quite think about , , sulfur for the , the white and black liquors .

Speaker #12: I'm just wondering, does dissolving pulp use more sulfur in the mix than other traditional pulp? And is that why you're highlighting it?

Speaker #12: Or , is there something to be aware of on particularly calling out the sulfur just as an aside , but the other question is on , on North America , which is on the demand side and coated papers , is there any potential boost ahead of the midterm marketing things that we should be aware of that is ultimately going to allow the utilization rates of the full mill system to be a bit better in North America .

Speaker #12: Thank you .

Speaker #9: Yeah . , yeah .

Steve Binnie: Yeah. Graeme will talk about the sulfur usage, and Mike, I will come back to you on the midterm elections.

Speaker #3: Graham , will talk about the sulfur usage and and Mike , I'll come back to you on the , the midterm elections .

Speaker #8: Yeah . I think obviously the key thing for us is that , , cycle is a sulfite pulp mill . , so inherently they do use , , sulfur , , whereas a typical Kraft pulp mill wouldn't , , you do get other sulfites mills across the world , but there may be set up to use SO2 gas and not sulfur and terraform .

Graeme Wild: Yeah, I think obviously the key thing for us is that Saiccor is a sulfite pulp mill. Inherently, they do use sulfur, whereas a typical kraft pulp mill would not. You do get other sulfite mills across the world, but they may be set up to use SO2 gas and not sulfur in pure form. That is the key differentiator that applies particularly to us.

Speaker #8: So that's a key differentiator . , that applies particularly to us

Speaker #3: And then Mike , , on the , the midterm , .

Steve Binnie: Mike, on the midterms.

Mike: I'd say that we haven't seen a huge impact in midterms, the truth is, our graphic machines are running full. We don't have any underutilization. I'm not sure where you're getting that thought from. Our graphics have been running full and I think the business is still very steady.

[Company Representative] (Sappi): I'd say that we haven't seen a huge impact in midterms, the truth is, our graphic machines are running full. We don't have any underutilization. I'm not sure where you're getting that thought from. Our graphics have been running full and I think the business is still very steady.

Speaker #7: You know , I , I'd say that , , we haven't seen a huge impact in midterms , but , the truth is , is our graphic machines are running full .

Speaker #7: , we haven't , , , we don't have any underutilization . , so , so I'm not sure where you're , , where you're getting that thought from , but our graphics have been running full and , You , I , you know , I think the business is still , still very steady .

Speaker #12: It was just more of a comment just to make sure order books are good . And , you know , if you get more orders , it's always helpful , even if you have to put people on extended lead times .

Cole Hathorn: It was just more of a comment just to make sure order books are good and if you get more orders, it's always helpful, even if you have to put people on extended lead times. Thank you for all the color.

Speaker #12: But thank you for all the color .

Mike: That's absolutely true. Yeah.

[Company Representative] (Sappi): That's absolutely true. Yeah.

Speaker #7: Absolutely true . But , , yeah . I , I think I might , you know , as we get closer to elections , you might see a boost , , more on the sheet side of the business .

Steve Binnie: Mike

Mike: As we get closer to elections, you might see a boost more on the sheet side of the business.

[Company Representative] (Sappi): As we get closer to elections, you might see a boost more on the sheet side of the business.

Speaker #12: Thank you

Cole Hathorn: Thank you.

Speaker #6: Thank you . We have reached the end of time allocated for the call . And I will now pass back to Steve Binnie for closing remarks .

Operator: Thank you. We have reached the end of time allocated for the call, and I will now pass back to Steve Binnie for closing remarks.

Speaker #3: , thanks . Operator . , once again , let me just thank everybody for joining us on the call today . And we look forward to discussing our year end results with everyone in three months time .

Steve Binnie: Thanks, operator. Once again, let me just thank everybody for joining us on the call today, and we look forward to discussing our year-end results with everyone in three months' time. Thank you very much.

Speaker #3: Thank you very much

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.