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“This year’s standout achievement was the successful completion of our Somerset Mill PM2 conversion and expansion project – an investment that advances our strategic growth ambitions. With this milestone, we now operate two of the most competitive, state-of-the-art paperboard machines in the United States, positioning us strongly for the future.”

Nkululeko Sowazi, Chairman

FY2025 operating review

The group delivered Adjusted EBITDA of US$501 million for FY2025. Following a strong start to the financial year, market conditions deteriorated substantially from the second quarter, driven by heightened uncertainty stemming from persistent global trade tensions which precipitated a broad-based economic slowdown and weakening of consumer confidence. The deteriorating macroeconomic environment placed downward pressure on selling prices across all our market segments. In addition, a significant weakening of the US Dollar negatively impacted earnings in South Africa and translation of our Euro-denominated debt. Global paper markets remained heavily oversupplied, creating headwinds for our paper businesses. Despite these challenges, dissolving wood pulp (DWP) and packaging and speciality papers sales volumes increased year-on-year, and market share gains were achieved in the graphic papers segment.

A key highlight for the year was the completion of the Somerset Mill PM2 conversion and expansion project in North America. Although the start-up was delayed, the technical ramp-up is exceeding expectations with excellent initial market feedback of product quality. Our two state-of-the-art paperboard machines at the Somerset Mill position the business competitively in the North American paperboard market. Operationally, the group faced a challenging year. Scheduled maintenance shuts in South Africa extended beyond planned timelines in the second quarter, and the Somerset Mill PM2 shut and subsequent start-up disrupted production and impacted efficiencies in North America. In Europe, we made further progress towards our strategic rationalisation objectives, announcing consultation processes across four sites to improve capacity utilisation. Amid these operational and macroeconomic headwinds, the group remained committed to optimising asset utilisation, advancing cost-efficiency initiatives, and upholding financial discipline.

The principles of our Thrive strategy remained a priority with our focus on sustaining our financial health, enhancing trust and driving operational excellence. In addition, we achieved our objective of growing the business with the successful conversion and expansion of Somerset Mill PM2 from graphic papers to paperboard, with the project starting up in May 2025.

Safety

Safety remains fundamental to Sappi's purpose and values, underpinning our commitment to protecting the lives and wellbeing of our employees, contractors, and communities. Safety performance during the year was challenging and remains an area of critical focus for the group. Tragically, two fatalities occurred in South Africa; one involving a contractor and one an employee. On behalf of the entire company, we extend our deepest condolences to the families, friends, and colleagues. The loss of life deeply impacts our organisation; nothing is more important than the safety and wellbeing of our people. The board has taken a direct role in overseeing the implementation of rigorous reviews of our safety measures and improvement initiatives. Our ambition of zero injuries remains firm, supported by ongoing investment in behavioural safety, leadership accountability, and continuous improvement, ensuring that everyone returns home safely each day.

"FY2025 marks the conclusion of our current five-year Thrive strategic cycle. Through structural transformation we have repositioned Sappi for resilience by shifting toward growth segments, enhanced operational excellence, and deepened stakeholder trust – setting the stage for the next phase of our journey."

Steve Binnie, CEO

Markets

Market conditions for DWP were challenging as uncertainty in the textile and apparel sector, driven by ongoing US-China trade tensions and tariff fluctuations, disrupted global supply chains. A narrowing price gap between DWP and bleached hardwood kraft (BHK) pulp prompted Chinese swing mills to increase output beyond typical levels, while some nonintegrated viscose-staple fibre (VSF) producers substituted DWP with BHK pulp. This combination of weaker textile fibre prices and low paper pulp prices drove a substantial decline in the hardwood DWP market price.

As trade concerns eased and VSF operating rates improved in the latter half of the year, demand stabilised, allowing for a modest price recovery. Despite these headwinds, demand for Sappi's DWP remained firm, with sales volumes rising by 2% on the back of stronger production in South Africa. However, higher costs and unfavourable exchange rate movements weighed on segment profitability.

Global demand for packaging and speciality papers remained muted, constrained by persistent macroeconomic uncertainty and restrained consumer spending. Intense competition across product categories, compounded by market oversupply, continued to exert significant downward pressure on prices. In Europe, demand remained particularly weak, with several product categories still lagging behind pre-Covid-19 levels. In North America, performance reflected intentional product mix adjustments aimed at positioning the business for future growth ahead of the Somerset Mill PM2 start-up, alongside discounted sales linked to initial start-up volumes. In South Africa, containerboard demand strengthened in the second half of the year, supported by a strong citrus season, though sales were limited by low inventory levels following an extended maintenance shutdown at Ngodwana Mill earlier in the year. Overall, segment sales volumes grew by 8% year-on-year, driven by improved containerboard demand in South Africa and additional paperboard output from Somerset Mill PM2, but lower pricing and higher costs resulted in a decline in segment margins.

The graphic papers segment continued to face structural decline, with persistent global oversupply intensifying competitive pricing pressures. Ongoing uncertainty around US tariff policies further complicated trade dynamics and added to market volatility. In North America, the delayed start-up of Somerset Mill PM2 resulted in operational challenges, reduced production, and higher costs for the remaining graphic papers operations. Despite softening demand, regional paper prices held steady, supported by tighter local supply following the PM2 conversion and higher tariffs on imported grades. In contrast, Europe experienced pronounced pricing pressure due to oversupply and increased Asian imports redirected by shifting trade flows. In South Africa, demand for newsprint and office paper remained subdued, with import competition weighing heavily on profitability. Despite these headwinds, Sappi's graphic papers sales volumes exceeded broader market trends, demonstrating the effectiveness of ongoing strategic actions to protect and selectively grow market share.

Strategic review

FY2025 marks the conclusion of our current five-year Thrive strategic cycle. The Thrive strategy has guided us in embedding sustainability, innovation and transparency across our business, positioning Sappi as a trusted partner in shaping a circular, biobased economy. It has also underlined our responsibility to manage resources wisely, nurture the wellbeing of our people and communities, and pursue long-term growth with purpose. This five-year cycle has been defined by profound global turbulence including supply chain and logistics upheavals, geopolitical conflict, energy shocks, trade tensions, inflationary pressures and shifts in consumer behaviour. At the same time, the growing urgency of the climate crisis has underscored the importance of resilience and adaptability. Through structural transformation and a steadfast commitment to long-term growth, responsible resource management and the wellbeing of our people and communities, we have not only weathered these challenges but built a stronger foundation for the future. Over the period, we have successfully repositioned Sappi for long-term resilience by shifting our portfolio toward growth segments, enhanced operational excellence and deepened the trust of our stakeholders. As we bring this cycle to a close, we reflect on the progress achieved and look ahead with confidence to the next phase of our journey, where we will continue to build on these foundations.

Our Thrive strategy is built on four main objectives:

	Grow our business – We are committed to our core business segments, investing in innovation and growth opportunities, and fostering strong customer relationships.
	Sustain our financial health – We are focused on reducing debt, growing EBITDA, maximising product value, optimising global processes, and selectively divesting non-core assets.
	Drive operational excellence – We are focused on enhancing our safety-first culture, reducing resource use, improving efficiency, and making smart digital investments.
	Enhance trust – By building stronger relationships with clients and communities, driving sustainable solutions, and meeting the evolving needs of our workforce, we aim to earn and maintain the trust of all our stakeholders.

A summary of the strategic actions and outcomes for the five-year strategic period 2021 to 2025 is outlined below.

Grow our business

Growing the business is essential to Sappi's long-term success and resilience. By expanding in our growth segments and investing in new opportunities, we not only strengthen our competitive edge but also enhance our ability to adapt to changing market demands. This growth fuels innovation, supports job creation, and provides a solid foundation for further advancements in sustainable operational practices and product development. Ultimately, a focus on growth ensures Sappi can continue delivering value to its customers, employees, and communities, while driving positive environmental and social impact in line with our Thrive mission statement. Over the course of the five-year Thrive strategic cycle, this has meant reshaping our portfolio towards growth markets while steadily reducing our exposure to declining graphic papers grades. Guided by our commitments to grow in dissolving wood pulp and packaging and speciality papers, we have consistently invested in projects that enhance our competitiveness, broaden our product offering, and open new opportunities in sustainable biomaterials.

In 2022, we successfully completed the Saiccor Mill dissolving wood pulp expansion and environmental upgrade, reinforcing our global leadership position. 2023 saw targeted investments in our packaging and specialities portfolio. At Ngodwana Mill, we upgraded our containerboard machine PM1 to improve quality and extend grade capabilities, strengthening our ability to serve growing South African containerboard demand. In Europe, we invested in Alfeld Mill to expand our capabilities in barrier papers, directly addressing customer needs for more sustainable woodfibre-based packaging alternatives.

In 2024, we built further momentum in Europe with the completion of the Gratkorn Mill PM9 upgrade to expand into label papers and add wet strength capability, enabling us to compete in a premium, growing market segment. At the same time, we made tough but necessary decisions to reshape our European footprint, closing graphic papers capacity at Stockstadt and Lanaken Mills, to focus resources on our most competitive and efficient operations and supporting stronger asset utilisation across the region.

The highlight of 2025 was the successful completion of the Somerset Mill PM2 conversion and expansion project in May 2025, a landmark investment that establishes Sappi as a leader in the solid bleached paperboard market. Alongside this milestone, we continued to strengthen our European competitiveness through further rationalisation in 2025, including consultation processes for capacity reductions at Alfeld and Kirkniemi Mills which were finalised shortly after year-end, building on the earlier closures in 2024, and fixed cost reductions at Ehingen and Gratkorn Mills which will strengthen our competitive position and maximise efficiency in the region.

Together, these actions demonstrate the consistent delivery of our Thrive (2025) growth agenda. As a result, our portfolio today is more resilient, more innovative, and better positioned to serve customers in a circular, biobased economy.

Sustain our financial health

Through the period 2021 to 2023, we remained steadfast in our focus on strengthening the balance sheet and reducing debt. This disciplined approach, underpinned by improved cash generation and tight capital management, enabled us to reduce debt to a 30-year low by the end of FY2023. With our financial position restored, we entered an investment phase aimed at driving long-term growth, most notably through the US$500 million conversion and expansion of Somerset Mill PM2 in North America. During this period, we also resumed dividend payments and executed a small share buyback.

While this investment phase marked an important step in repositioning our business for future growth, it coincided with several external and operational headwinds. Closure costs associated with the restructuring of our European mills, a cyclical downturn in market conditions, and adverse currency movements placed pressure on cash generation. As a result, net debt at the end of FY2025 increased to US$1,920 million (FY2024: US$1,422 million), reflecting higher cash utilisation by operations, elevated capital expenditure for the Somerset Mill PM2 project, and a notional increase of US$73 million due to the stronger Euro. Liquidity, however, remained healthy, with cash on hand of US$219 million and US$602 million available through unutilised committed revolving credit facilities (RCFs) in South Africa and Europe.

The increase in net debt, combined with lower earnings over the past three quarters of FY2025, has resulted in leverage temporarily rising close to our debt covenant of 4x. Our banking group unanimously supported a temporary increase in covenant headroom for the next 12 months, reflecting continued confidence in Sappi's financial management and recovery outlook. Looking ahead, our primary focus in FY2026 will be on deleveraging and strengthening our balance sheet. We have committed to reduce capital expenditure to below US$300 million per year for the next two years with no expansionary projects planned. To preserve cash, the board made the decision to suspend the dividend.

We remain fully committed to reducing debt levels to our target of <US$1 billion. Our recent strategic investments in packaging and speciality papers, along with our leadership position in DWP, have strengthened our portfolio and positioned us well to benefit from an eventual market recovery. The challenge ahead lies in balancing the ongoing structural decline in graphic papers with sustainable, profitable growth; all while maintaining a healthy balance sheet and the financial flexibility necessary to support our long-term ambitions.

Drive operational excellence

Operational excellence continues to be a cornerstone of our competitive advantage, driving efficiency, quality, and sustainability across our global operations. It enables us to consistently deliver fit-for-purpose products to our customers, enhance reliability, and maintain resilience in a dynamic market environment. Between 2020 and 2025, we made a series of strategic investments to strengthen productivity, reduce costs, and support our transition to a lower-carbon future.

Key among these was the expansion and environmental upgrade for the Saiccor Mill which included the conversion of calcium bisulphite digesters to a closed-loop magnesium process. This led to a significant improvement in chemical recovery efficiency, an increase in renewable energy usage that reduced our carbon footprint, and a decrease in effluent discharge. In Europe, our advanced automation and process control investment at Gratkorn Mill has improved productivity, energy efficiency, and product quality monitoring, reinforcing its role as one of the most advanced coated woodfree paper mills globally. In South Africa, the Ngodwana Mill PM1 upgrade enhanced reliability, operating efficiency, and product flexibility, while contributing to improved energy performance.

We also advanced our decarbonisation agenda through a series of targeted projects designed to reduce our carbon footprint and improve energy security. These included fuel-switching initiatives to biomass and gas, boiler efficiency upgrades, and increased investment in renewable energy across multiple sites. Collectively, these operational excellence and sustainability investments have strengthened our cost competitiveness, reduced environmental impact, and ensured that Sappi is well-positioned to deliver long-term value in a rapidly changing global landscape.

We also have several information technology (IT) initiatives underway that are critical to harnessing the opportunities and managing the risks associated with Industry 4.0. A key component of this journey is the implementation of a new manufacturing execution system (MES), which will enhance operational excellence by improving real-time visibility, data accuracy, and decision-making across our manufacturing sites. The first implementation took place at our Ehingen Mill in 2025, marking an important milestone in our digital transformation, with rollout at Ngodwana Mill scheduled for 2026. This system will also serve as a foundation for our advanced analytics projects, enabling further improvements in efficiency, quality, and sustainability performance across the group.

As supply chain challenges persist, our agility in seeking alternative suppliers and chemicals is vital for maintaining procurement flexibility, which is a cornerstone of our operational excellence strategy. Reducing both variable and fixed costs throughout the business is integral both to maintaining or improving margins and to the sustainability of our operations. We set ourselves a target of a US$56 million reduction in third-party expenditure through efficiency and raw material usage improvements as well as delivering savings through various procurement initiatives. We are pleased to report that savings of US$114 million were realised. In 2026 we are targeting approximately US$70 million in variable cost savings.

Together, these initiatives position Sappi not only to navigate current market challenges but also to thrive long term. By investing in best available technology, fostering flexibility across our product lines, and embracing sustainability-driven innovation, Sappi is well-equipped to adapt to industry shifts, maximise asset utilisation, and sustain a strong, competitive position across the pulp, graphic and packaging papers sectors. As we reduce capex, bed down recent projects, and begin to realise the benefits of our investments, the operational excellence pillar of our Thrive strategy will become our primary focus over the next two years.

Enhance trust

Building and maintaining trust remains central to Sappi's strategy and culture. Over the past five years, we have deepened our commitment to ethical conduct, inclusive engagement, and social impact thereby ensuring that our operations reflect our values and create shared benefit for all stakeholders. Upholding the highest standards of integrity is fundamental to how we do business. Our Code of Ethics, supported by ongoing training and refreshed governance policies, including updates to the whistle-blowing and anti-retaliation policies, reinforces transparency, accountability, and protection for those who speak up. Oversight by the Social, Ethics, Transformation and Sustainability (SETS) Committee ensures consistent ethical performance across all regions.

Our people remain at the core of our success. Following the 2023 employee engagement survey, we made strong progress in addressing identified issues, achieving close-out rates of 93% in Sappi Southern Africa, 95% in Sappi North America, 94% in Sappi Europe, and 100% in Sappi Trading. Our 2025 engagement survey, conducted between February and April 2025, achieved an exceptional 95% participation rate, exceeding the target of 85%, with 10,708 employees sharing their views. Results showed notable improvements across South Africa and Europe, reflecting the progress we are making in strengthening engagement and fostering a supportive workplace culture. While results in North America were less positive, they provided valuable insights to guide focused actions for improvement. We also met our 2025 gender diversity targets across all regions, maintained a Level 1 BBBEE rating in Southern Africa, and were again recognised by Forbes Magazine as one of the World's Best Employers and Top Companies for Women. These achievements reflect our focus on inclusion, transformation, and empowerment, supported by training and initiatives that foster belonging and respect.

Trust also extends beyond our operations. In South Africa, our social impact programmes build long-term partnerships that promote education, enterprise development, and environmental sustainability. Initiatives such as Khulisa Ulwazi, our artisan development programme, and investments in youth and early childhood education create lasting opportunities and livelihoods. Through global volunteering and local partnerships, our employees actively contribute to community wellbeing, strengthening trust and social cohesion.

Our commitment to ethical and sustainable sourcing further enhances stakeholder confidence. Guided by our Supplier Code of Conduct, we exceeded supplier engagement goals in 2025 with 82% of eligible spend aligned with the code. In addition, 60% of global spend was with suppliers rated by EcoVadis, and 23% with those committing to sciencebased emissions reduction targets. These partnerships promote transparency, reduce environmental impact, and advance shared sustainability objectives.

Together, these strategic actions underscore that for Sappi, trust is not a standalone initiative, but a defining principle embedded in every aspect of how we build a thriving and sustainable future for our people, communities, and stakeholders.

Sustainability

We remain steadfast in our commitment to sustainability as the foundation of long-term success and responsible growth. We are acutely aware of the impact our operations have on both the environment and the communities in which we operate. By placing sustainability at the forefront of our strategy, we continue to reduce our environmental footprint, manage resources responsibly, and uphold the highest ethical standards. Collaboration remains key to our progress: as co-chair of the World Business Council for Sustainable Development (WBCSD) Forest Solutions Group (FSG) for 2025 to 2026, we are helping to shape a shared industry agenda that advances action on climate, nature, and equity. Our sustainability performance is measured not only against internal targets but also in alignment with the United Nations Sustainable Development Goals (UN SDGs), ensuring our efforts contribute meaningfully to global priorities.

As 2025 marks the conclusion of our current five-year strategic period, we reflect on the meaningful progress made and the lessons that will shape the next phase of Sappi's sustainability strategy to 2030. At a group level, we achieved strong results across several priority areas, particularly in sustainable forestry, where our plantations are now dual certified under the Forest Stewardship Council™ (FSC™) and the Programme for the Endorsement of Forest Certification (PEFC). We also exceeded our 10% biodiversity improvement target, achieving a 25% cumulative improvement from the 2020 baseline within our own forest operations. Our global share of certified woodfibre reached 78%, surpassing our target of 75%, reaffirming our commitment to responsible forest management and SDG 15: Life on land.

While global targets for specific total energy and GHG emissions were not met, we continued to advance our decarbonisation journey. The FY2025 Scope 1 and 2 emission intensity was above our Science Based Targets initiative (SBTi) trajectory; however, we achieved a 5% reduction compared with the previous year and a 15% reduction from the 2019 baseline. This progress reflects the positive impact of key abatement projects across our global operations, including major boiler conversions from coal to natural gas/ biomass and the installation of new energy-efficient systems. Collectively, these investments have driven substantial emission reductions and improved energy performance, supporting our long-term climate goals and SDG 13: Climate action. We also achieved our renewable and clean energy target, driven by fuel-switching initiatives and renewable energy procurement, and exceeded our waste-to-landfill reduction goal, demonstrating continued progress toward SDG 7: Affordable and clean energy and SDG 12: Responsible consumption and Production. Looking ahead, we remain confident that Sappi has the right strategy to address the risks and opportunities of climate change. We will continue to enhance our scenario modelling to ensure the resilience of our transition plan, while balancing abatement investments with capital availability and social considerations to enable a just and sustainable transition.

Operational excellence, innovation, and partnership will remain at the heart of our approach as we continue to decarbonise our value chain, promote circular solutions, and build a more resilient and sustainable future for our people, communities, and planet.

Looking forward

Challenging global macroeconomic conditions and persistent geopolitical tensions continue to disrupt market stability, creating ongoing supply and demand imbalances across our industry. In addition, heightened trade tensions and the resulting realignment of supply chains are introducing additional costs and uncertainty. While these conditions have created a more complex operating environment, we remain confident in the underlying strength of our business and the resilience of our operations. Sappi's immediate focus remains on internal levers within the company's control. Our 'Back to Basics' focus is to reduce debt and strengthening the balance sheet through targeted cost savings initiatives and operational efficiency improvements.

To support our commitment to reducing debt, we have adjusted our capital expenditure downward to below US$300 million per annum for the next two years, with no expansionary capex anticipated during this period and FY2026 capex expected to be in the region of US$290 million. In addition, the board of directors made the decision in FQ3 to suspend the dividend for fiscal 2025 to preserve cash.

We anticipate that DWP market conditions will remain stable through the first quarter of FY2026, supported by high VSF operating rates and relatively low inventory levels across the value chain. Demand for Sappi's DWP is expected to remain robust but the significant differential between DWP and paper pulp prices, together with subdued textile fibre pricing, could slow the recovery of DWP prices. Additionally, the continued weakness of the US Dollar against the South African Rand could negatively impact profitability in South Africa.

Our long-term outlook for our sustainably produced packaging and speciality papers products remains positive. Sales volumes in this segment are expected to increase steadily through FY2026 as the Somerset Mill PM2 ramp-up progresses in North America. However, underlying margins are likely to remain below historical levels as global markets continue to face subdued demand driven by macroeconomic challenges and persistent oversupply. We maintain a strong competitive position in both South Africa and North America and continue to actively manage capacity utilisation in Europe. In South Africa, containerboard demand typically softens in the first quarter due to seasonal factors, but strong agricultural forecasts for 2026 are expected to support demand through the year. Nonetheless, the continued weakness in global packaging markets presents a risk to pricing dynamics in the South African region. In the short term, our North American strategy focuses on balancing trade-offs between price and volume as PM2 production ramps up. We will leverage the swing capability of the Somerset Mill PM1 and favourable graphic papers pricing to optimise the product mix and maximise profitability in the region.

We expect global graphic papers demand to continue declining by approximately 6% to 8% per annum. Our strategic focus in this segment remains to proactively manage capacity utilisation. Following the successful conversion of Somerset Mill PM2 in North America and the anticipated capacity reductions at the Kirkniemi and Ehingen Mills in Europe, we are well positioned to meet our customers' needs while fully utilising our assets to maximise cash generation. The conclusion of restructuring initiatives in Europe is anticipated to occur in the second quarter.

Prices for certain of our key raw materials remain relatively low at present, and we will actively pursue opportunities for further cost savings. However, ongoing trade tensions continue to pose a risk due to their potential impact on global inflation.

Sappi is a well-capitalised business with a proven ability to adapt and respond to market cycles. Our recent strategic growth investments in packaging and speciality papers and DWP have strengthened our portfolio and position us well to benefit from a market recovery. We remain committed to navigating the current operating environment with discipline and transparency, prioritising cash generation to reinforce our balance sheet and further enhance our financial resilience.

Appreciation

We extend our sincere appreciation to all our stakeholders for their continued trust and partnership throughout the Thrive journey. Your support, whether as customers, employees, shareholders, suppliers, or community partners, has been vital in helping us navigate a rapidly changing world and achieve the progress we can now look back on with pride. Together we have faced global challenges and embraced opportunities, and it is this spirit of collaboration that strengthens our resolve to continue building a more sustainable, inclusive, and prosperous future.

We thank our board of directors for their stewardship and guidance, and our shareholders for their ongoing confidence in Sappi's long-term strategy; we warmly invite you to join us at our annual general meeting, to be held on 04 February 2026, where we will reflect on our Thrive progress and share our vision for the next strategic cycle.