State of play and future of the paper & pulp industry in Europe

1. State of play and future of the paper & pulp industry in Europe Berry Wiersum – CEO of Sappi Fine Paper Europe Brussels, 7 March 2013

2. The pulp and paper industry in Europe European pulp & paper industry: • Turnover (Bn euro) 81 • Added value (Bn euro) 18 • Pulp production (million tonnes) 39 • Paper production (million tonnes) 95 • Employment (thousand jobs) 222 • 60% of direct & indirect jobs in rural areas European paper value chain: • Added value (Bn euro) 100 • Employment (thousand jobs) 1,600 Page 2

3. CEPI Paper & Board Production by Grade 1991 - 2011 Page 3

4. Evolution of the main paper products grades Source: Eurostat, Nov 2012 Page 4

5. The paper industry as part of the manufacturing sector Source: Eurostat, Nov 2012 Page 5

6. The industry as global player – trade flow Page 6

7. Paper Demand in Europe through 2020: packaging and tissue being ahead Graphic paper demand in Europe is expected to decline by 1 million tons during the current decade, while demand for tissue paper and packaging grades will continue to grow. Packaging Tissue Graphic Source: Poyry, March 2011 Page 7

8. Long-Term Demand Growth in Western Europe through 2020 Demand for paper in Western Europe is expected to decline by 0.5%/a through 2020, calculated from the high 2008 level. The demand for graphic papers is relatively weak. Tissue Containerboards Cartonboards Sack paper Other grades Average -0.5 %/a Uncoated woodfree Coated woodfree Uncoated mechanical Newsprint Coated mechanical Source: Poyry, March 2011 Page 8

9. Long-Term Demand Growth in Eastern Europe through 2020 The rapid growth of the Eastern European markets is forecast to continue well into the future. Demand for coated woodfrees will increase relatively fast. Tissue Containerboards Average 3.1 %/a Coated woodfree Cartonboards Coated mechanical Uncoated woodfree Uncoated mechanical Other grades Newsprint Sack paper Source: Poyry, March 2011 Page 9

10. Graphic paper outlook Dynamics of Commercial Print versus Publishing Page 10

11. Graphic paper outlook Will advertising recover? Adspend as % of GDP Source: EMGE Yes, itwill, but willnotrecoverfully The winners on thispartial recovery willnotbe paper … but all the new media channels Page 11

12. Graphic paper outlook Print versus Digital revenues trends Page 12

13. Graphic paper outlook GDP Growthtodecouplefrom WFC/MCR Growth in Europe – increasing impact digital media Page 13

14. Enhancing the European Economy Paper forPackaging 75% of European goods travel in corrugated 42.1billionsquare meters 686 plants across Europe Source: FEFCO Page 14

15. Potential drivers for growth Source: FEFCO • Growth of grocery retail market • Corrugated packaging is a powerful sales agent at the point of sale • It can be ‘tailor-made’ to meet specific needs and so increases efficiencies: • Handling in-store • Distribution and transport efficiencies Page 15

16. Potential drivers for growth Source: FEFCO • Consumer attitudes • Desire for information at point-of-sale • Sustainability • Corrugated packaging is 100% renewable, 100% recyclable and 100% biodegradable • Around 80% of consumers prefer paper based packaging (Gfk Germany 2009) Page 16

17. RegionalConsumption of Tissue, 1994-2021 Expansion concentrating on emerging markets (MillionTonnes) Page 17 Source: RISI

18. GrowthRate of World Tissue Consumption, 2004-2021 The next few yearsexpectedto show goodglobaldemandgrowth Page 18 Source: RISI

19. ExpectedRelative Tissue ConsumptionGrowthbyRegion, 2010-2021 Emerging markets showing high growthrates Page 19 Source: RISI

20. Roadmap 2050 Page 20

21. Roadmap 2050 Page 21

22. Manufacturing: Europe and the World Total manufacturing industry production, seasonally adjusted Source: OECD, Dec 2012 Page 22

23. Enabling conditions for a competitive paper industry • Energy prices are « life threatening », even for the oil-based sector Electricity (EUR/MWh; US data excl. tax) Natural gas (EUR/MW) Page 23

24. Comparisonpricesnatural gas EU-US Consumption natural gas SFPE = 6.000 GWhp.a Competitive disadvantage SFPE = € 105 million p.a Page 24

25. Enabling conditions for a competitive paper industry Our researchsuggeststhatregulation and compliance continues to be the biggestoverallrisk. In fact, four out of the sevensectorswesurveyedrankedthis as number one. Across all sectors, bothcostcutting and pricing pressure rose significantly up the ranking, althoughmanyrespondentsindicatedstepstaken to mitigatetheserisks have been reasonably effective. Page 25

26. The next generationtechnologyrequires new skills Chemical and Engineering toimproveanddevelop clean technologies Flexibility andmultiskilling– abilityto move between zones Flexible time management to handle volatiledemand Collaborative skills internallyandbetweenentities Self starter DNA as hierarchiesevolvetoaccommodate the individualcontributor Information Technology Page 26

27. Summary The Pulp and Paper Industry is viableandsustainable It creates a lot of indirect employment As graphicsdeclines, packagingandhygienegrow Europe needs access tocompetitive energy and feed stocks Europe needsto kick the habit of costincreasingregulatoryoverload The Roadmap 2050 is a major opportunity torevitalize the industry Page 27

28. Thank you! CEPI aisbl / Confederation of European paper Industries 250 Avenue Louise, Box 80, B-1050 Brussels Tel: +32 2 627 49 11 / Fax: +32 2 624 81 37 mail@cepi.org www.cepi.org / www.paperonline.org / www.paperforrecycling.eu Follow us on Twitter: @EuropeanPaper Page 28