A Letter from Sappi North America's CEO and President Mark Gardner
In 2016, Sappi North America achieved many important milestones as we continue to transform into a more diversified, sustainable business that meets the needs of our customers, communities, employees and shareholders. As part of the Sappi Limited group, our strong cash generation (EBITDA growth of 18 percent year over year), allowed us to reduce net debt by 20 percent year on year, and our robust balance sheet created a strong platform for growth and re-investment in 2017 and beyond.
In North America, we increased efficiencies and reduced waste across our operations, allowing us to be more nimble and consume fewer natural resources. We grew market share in our core coated paper business by focusing on service and reliability. We continued to diversify and strengthen our other businesses by introducing new technologies and products in our release business, launching new products in packaging, and meeting high standards for product consistency and performance for the dissolving wood pulp business.
I am proud of these accomplishments because they were the result of focus, planning, holding ourselves accountable and great execution by collaborative teams of employees. I know it is these same strengths that will provide the foundation for even greater success in the future as we continue to transform and diversify. Sappi has always risen to the challenge of change by being a forward-looking enterprise. Today our outlook for the future is positive. Our activities are driven by a spirit of cooperation and the energy and enthusiasm of resourceful people.
At Sappi, we are committed to the three P’s of sustainability—People, Planet, Prosperity—because we know that all three in balance create long-term business success and a workplace that attracts and retains the best employees.
Our focus on People starts with safety. Safety is not a choice, but is the responsibility of each and every employee; we can expect no less. We work hard every day to be sure that our leadership focus, our training programs, the maintenance and investment in the housekeeping and physical condition of our facilities all contributes to a strong culture of safety.
Our 2016 was a mixed year for safety performance. We have some work to do at Somerset and Westbrook, where Lost Time Incident Frequency Rates (LTIFR) rose. However, I am confident that our focus on working collaboratively with our unions coupled with an emphasis on incident reporting and early treatment of injuries will result in positive trends for 2017. Cloquet had an outstanding safety year with an LTIFR of 0.13. In fact, Cloquet employees surpassed One Million Work Hours Without a Lost Time Injury twice in the fiscal year, which is the kind of success that all of our sites are striving to achieve.
Sappi’s overall success reflects the knowledge, training and discipline of all our employees. In the coming years, many of our most experienced employees will be approaching retirement age, so it is more critical than ever that we continue to attract and develop the right employees to lead Sappi for another generation. To that end, training is paramount, and I’m pleased that we exceeded our employee training goal in 2016.
Our industry-leading commitments on energy and waste reduction have proven that environmental and economic responsibilities go hand in hand. With a long-standing concerted effort to reduce our reliance on fossil fuels, our carbon footprint is the lowest among our domestic competitors. Our ongoing efforts in material waste reduction and energy efficiency provide savings to the business while reducing our reliance on natural resources. We are well ahead of our five-year goals for both energy and waste reduction. We will continue to drive improvements in these areas, fully expecting to exceed our goals. We are proud of the fact that our achievements have been recognized by The American Forest and Paper Association (energy reductions at Somerset) and by Johnson & Johnson (overall sustainability performance and commitments).
We have had two consecutive years of improved financial performance and achieved a Return on Net Operating Assets (RONOA) of five percent. While not yet at our 12 percent RONOA goal, we have made enormous strides in improving the financial sustainability of our North American businesses, achievements of which all of our employees can be proud. In accordance with our strategy, we implemented various projects which lowered our cost position and enhanced our competitiveness in the graphic paper segment. Furthermore, our initiatives to accelerate growth in specialty packaging have boosted volumes and diversified our business. In addition, we are continuing to seek opportunities to shift production from graphic paper to specialty packaging grades.
In recognition of our continued support in driving Maine’s economy forward, Sappi received a Champion of Economic Development Award from the Maine Development Foundation.
View for the future
Above all, the most important factor to becoming a truly sustainable business is having a well-formulated strategy. Sappi’s 2020Vision sets forth our plans for the future to grow and become a more diversified wood fiber company, earning re-investable returns with growth in new businesses and markets. With that common vision and purpose, I have full confidence in our continuing success.
President and CEO
Sappi North America
Read more from Sappi North America's 2016 Sustainability Report here: http://bit.ly/SNA-2016SR