Good afternoon, ladies and gentlemen, and welcome to Sappi Limited Fourth Quarter and Full Year of 2019 Results Conference Call. All participants will be in a listen-only mode. There will be an opportunity to ask questions and prompted. [Operator Instructions] Please note that this conference today recorded. I'd now hand the conference over to Mr. Steve Binnie, please go ahead sir.

Thank you. Good day everybody and welcome to our results call for the year ending 2019 -- financial year ended 2019. As always, I'll go through the investor presentation, and as I go through each slide, I'll call out the page numbers. Starting on Page 3, the highlights for the year, it was a difficult year for us; however, EBITDA was down 10% to $687 million. That was as a consequence of lower dissolving pulp prices, which we saw dropped considerably during the year, almost $300 a ton and then we saw weak graphic paper market between -- down between 8% and 12% in the regions that we operate, which forced us to take 268,000 tons of downtime. We did have higher dissolving pulp sales following the successful completion of the debottlenecking projects last year, and we made nice progress on the packing and speciality and we saw -- in the quarter, we saw 12% higher volumes -- sorry that for the year 12%. We completed Matane acquisition which we announced earlier in the year. That transaction was completed earlier this month. Moving to Slide 4, which is the highlights for the quarter itself. EBITDA -- for the same regions, EBITDA down some $224 million to $185 million. As I said, we saw both dissolving pulp and graphic paper under pressure; however, we did have a nice increase in profitability from packaging and speciality. The downtime that we took in the quarter in graphic paper was 94,000 tons which had about a $25 million impact on EBITDA. The EBITDA margin overall for the group was down from 14.6 to 12.7 and our net debt leverage to EBITDA up to 2.2 times, obviously as a consequence of a lower profitability. Moving to Slide 5, the earnings bridge, last year versus this year; firstly, we did have little sales volume overall but our growth statement showed positive volumes that both in dissolving pulp and packaging and specialties which were up, both up 6%. However, graphic, obviously from the weaker markets, was down also by 6%. On the pricing front the lower dissolving pulp price is obviously having an impact on the average prices and there was a bit of a mix issues that in there. Positive impact from lower variable cost predominantly coming from -- paper pulp cost which did decline during the year and so we did get some relief from there. And that overall explains the main variances between the 224 and 185. Moving to Slide 6, the product contribution split. This is on an LTM basis, so obviously you do not see the full impact yet of the lower dissolving prices, but nevertheless for the year, it was 45% of the contribution up to EBITDA, clearly as dissolving pulp prices have declined that proportion will or has in the fourth quarter, and as we move into the new financial year, that proportion will decline naturally. I’m pleased with the progress that we're making on packaging and specialties which up to 19, and as we ramp up in the new financial year that will clearly take an increasing share. Moving to Slide 7 and this is for graphics segments, it’s the volumes and EBITDA margin; and clearly, you can see the impact of our strategy to reduce capacity in this segment over the last few years and also more recently obviously the production downtime that we've taken. Despite that because of obviously the lower pulp cost, our margins actually for the quarter did improve compared to the previous quarter. Moving to Slide 8, packaging and specialties, and we're very pleased with this progress, and you can see that over the last couple of years, we continue to increase volume and we had a nice margin for the quarter being just under the 14% level higher than it was a year ago and substantially from Q3. And as we ramp up forward and this something we talked about in previous results call, as business continues to grow the margins will obviously benefit from that. Moving to Slide 9, on dissolving pulp, obviously, the lower selling prices will not have an impact on margins this year. We did have the extra volumes, following the successful debottlenecking project that we completed. Turning to Slide 10, the maturity for all of our debt, A lot of good work done this year and we find out 2022 bonds to 2026. And obviously, at the same time we extended our securitization structure, and that's now through 2022. So over the next couple of years, we don't have any material maturities, and we feel that puts us in a good place. Moving to Slide 11, and just our CapEx, you can see that earlier this year, we were talking about substantially higher CapEx levels. We've pulled that bar to fair and postponed some of the CapEx and stop some of the discretionary CapEx, no impact on maintenance CapEx, which is really very important. But, across the two years, we will pull back $150 million of CapEx the '21. We haven't finalized numbers yet, but I would expect that to come down further. And we haven't committed any major projects beyond 2020. Turning to our segment; and firstly, on graphic paper, which is reflected on Slide 13. We have seen very weak market during the course of the year and of course, is the number earlier with declines of approximately 10%. Some of that is related to the weak economies that we've seen particularly in Europe and other areas of the world. At the same time, last year when selling prices rose substantially, there was a big industry goal and that started to work its way through the system as well, and obviously, global trade flows has also had an impact. As we move forward the capacity reductions that are being announced by some of our competitors, and also as we ramped up on packaging that will help improve operating rates over the next 12 months. Selling prices have held up reasonably okay, we've seen small decline, but in terms of protecting our margins against the production curtailment as we've had to take we have had the benefit of lower paper pulp prices. Going forward, we will continue to focus on cost to protect our margins, managing our capacity as the markets do develop. We continue to evaluate our portfolio of assets and recent acquisition of Matane includes our pulp integration and will lower our cost. Turning to packaging and speciality on Slide 14, we all know that this significant trend is happening across the globe with a push for paper-based packaging solutions, the big brand owners pushing for solutions and that's creating opportunities. On the other side, we do know that there's been a number of comparisons also in the containerboard market where we've seen conversion there as well. Selling prices have been stable. However, these selling prices do tend to get negotiated annually or semi annually and we're going through a process of negotiating prices for 2020. We're hopeful that we can keep them at stable levels. The paper pulp prices, the lower paper prices obviously helped us as well to preserve margins in this segment. The ramp up of volumes, I talked about it already is picking up momentum and will continue to grow as we move forward. And clearly, the whole innovation and looking for sustainable solutions in the packaging segment is creating opportunities for us. Next switch on to the regions and Slide 15 is Europe. The profitability of the region was impacted by the production downtime that we had to take in the quarter 57,000 tons and due to the lower graphic sales. Interesting coated woodfree and we gained substantial market share and a lot of good work being done there. And then however on coated mechanical that is a segment which we talked about in the past that has been under pressure. For us, obviously, we've made Maastricht Lanaken conversion, so that means that we've taken capacity either that segment and would have impacted our market share there. The packaging speciality, I've talked about and clearly we are benefiting there and we obviously had lower variable costs led by top. Turn to Slide 16, the North American region. Nice progress on packaging and speciality, volumes are now up 36%, margins are increasing, and the TM-1 machine at Somerset that we completed is now about a quarter on packaging grades and that will ramp up further in the year ahead. However, obviously profitability down because of the one lower dissolving pulp prices. And secondly, the very weak graphic paper markets and we did take downtime 57,000 tons in the region. Clearly, as we build up our strategy here is to build up the packaging volumes to offset the declines that we are seeing in the graphic. Region also benefiting from lower variable costs and fixed costs. Then Slide 17, we talk about the dissolving pulp market. It has been a very tough year, it's fair to say, there has been supply side issues and demand side issues. On the supply side, we have seen a capacity come on board and the weak paper pulp markets has made that swing producers and we're not getting relief from swing producers. And on the demand side, a lot of new viscose capacity coming on board, it's made the viscose prices are under pressure. And then we're also seeing weak global textile markets related to the economy, the trade wars that we've seen underway, so being hit from both sides. And at these price levels, we estimate about 40% of low cash negative, obviously almost at the low end of the cost curve. So, we think that we believe that was a good cost competitive situation albeit that we're facing the pressure on short-term lower selling prices. The prices dropped by close to $300 during, currently today at $658 a ton a year ago they were $930. So, it had a substantial impact and that’s the main reason why our profits are down and we have put our negative outlook statement on to next year. Going forward, the cycle of project is going well with 40% complete that will lay to 110,000 of capacity. And our big data initiate here is or with certification that puts us in a very strong competitive position. We have a strong green story to tell and that insure that we have close alignment with our key customers. Turning to South Africa, the business, the volumes were higher firstly because of the extra development effective that it has coming through and did data set from a weaker ramp but clearly the lower saving prices, the developing pump will have an impact. The packaging side of in South Africa -- the packaging market has been weaker late, it’s a done well for significant period of time, but we've seen recent weakness and that related to lower citrus export out of South Africa. Fixed costs were higher but that because as we staffed up because of the additional volumes coming through ahead of the additional volumes coming through at high cost and with prices there higher as well. So that put some pressure on cost. Moving to strategy and the four areas that we always focus on and specially on Slide 20, on cost it is in this period of uncertainty the focus on cost needs to beyond going and I’m pleased to say that we took further cost side of the business in 2019, 87 million which helps offset some of the pressure that we face and there are ongoing improvement initiatives and we will targeting further cost reduction in the year area. So pulp acquisition at Matane will improve cost integration adjusted will benefit profitability as we move forward. We had a benefit there is cycle project will also be to lower bearable cost. Slide 21, we talked about at the end of the last quarter but we're pleased to say that we successfully completed the acquisition of Matane very pleased with how things have progressed the, the integration is going well, we are very excited about the high quality people, the access that we acquired and the quality of the pulp and Matane is excellent. So very pleased and things are going well. Moving to Slide 22, just to remind you the reasons for the acquisition, it's very important that we secured a critical source of supply for our raw martial that supply both our European operations and our others well. So that has to be a key focus for us. At the same time that will as I said it will just improve pricing and volatility as we move forward. And it was a significantly lower cost alternative than adding capacity at Somerset most, that made a lot of sense for us. Moving to Slide 23 the declining businesses, we've obviously made these conversions away from graphics in recent time, in the quarter itself, we can also in the year itself, we completed his conversion at Lanaken and that will allow us to get out of lightweight proceed at the mill. And obviously, we talked earlier about that the real segment the cushy, mechanical segment of in Europe is the one that's been under the most pressure. So this helps us as well. We, at the end of the last quarter the results call. We talked about the fact that we were evaluating our machine in Europe that work is near completion. And we will hopefully be in a position to make an announcement very soon. The Slide 24 maintaining a healthy balance sheet. Very pleased with the good work that's been done on working capital. And as you saw earlier, we pulled back on the CapEx commitments. We generated cash of $173 million in the quarter. And as we move forward over the next year or so with the low dissolving pulp prices and uncertainty that creates a strong focus on the balance sheet, strong focus on cash generation. We renegotiated our leverage covenant no additional cost. So that gives us more flexibility. And yes, good workdone here. The one thing I should call out to you is that the new accounting statements IFRS 16 where you have to capitalize operating lease costs. When we report our next numbers it's going to add $90 million today on the balance sheet, and obviously that's why lots of businesses, it's important to call it that has no impact on any covenants. And that's an accounting adjustment but it doesn't impact there. Moving to Slide 25 the investment in terms of growth areas, freight please with how the conversions went at Saiccor, Ngodwana and Cloquet. Obviously, we've got the additional 110,000 suns coming soon. That project will be completed first quarter of calendar 2020. We continue to believe that we have packaging opportunities in South Africa in Ngodwana and Tugela. And similarly, on the bio product site, lignins, sugars, we as you know, we put in place pilot plants and we continue to make progress. The key here is ramping up as fastly as possible at Maastricht and Somerset following the completion. We also excited about the barrier coating opportunities that we are making. And we announced some nice work that we've been doing with Nestle. There was a press release early in October and making exciting progress was the big brand owners there, and we think in time there will be substantial opportunity. Turning to the outlook, markets are so tough, dissolving pulp prices are so low and we're making good progress with customer acceptance on the packaging side and that will ramp up further. Global gravitated markets are we however data pulp prices being lower that do provide some relief and the capacity that's likely to come up will help operating rates. But with prices where there at the moment for dissolving pulp we have to put out a negative statement for the first quarter the profits will be lower than a year ago. As a consequence of that, we made the decision to temporarily hold dividends until the market prices improved in those conditions approved which we feel is the prudent thing to do. And along with all the other good work that we're doing on the cash management side will help us get back down to the leverage levels that we've targeted long term. So, operator, that's we reached to the end, so I'm going to put it back to you now for questions.

[Operator Instructions] The first question comes from James Twyman of Prescient.

Thank you very much and A few questions for me. Firstly, on the downtime that you've taken into, could you just give us some idea of where you see that going in Q1? And Europe is probably tough, but hopefully you should be seeing some improvement in the U.S. from the Verso closure? And secondly, on the machine producer that you're planning, you must be pretty close to now it's been a while. Could you give us some idea of what the cost of it would be and what you would expect to say from that? And then finally, I'm sure there aren't any but are there any non-core assets you have, which you could sell just to help the desk along a little bit? Thanks.

Yes. And firstly on the downtime, things are a little bit better and we do estimate downtime for the quarter, about 17,000 ton for the quarter and predominantly in Europe, we October November would be relatively full, December where we were still looking to slow the machines, but our latest estimate is about 70,000 tons mainly in Europe. The impact machine closures, yes, you're right. We did announce it or we did talk about it at the end of the last quarter and you have to appreciate there's lot of work that needs to be done and discussions that need to be hired and we're very close. The impact depending on, we estimate depending on machine hopefully it will be able to take 20 million costs out of the business, if we close the machine. The variance terms of cost without, firstly we haven't decided, made a final decision. You just want to talk broadly about cost machine closers.

In terms of cash cost Steve, the cash cost paid over 1.2 to 1.5 years, you do have a balance sheet effective there at this point there, but [Indiscernible]

Sorry, I think you've broke up a little bit there, just repeat that.

Yes, in some terms of the cash cost and then the payback time need to be 1.2 or 1.5 years, there is also a balance sheet of write-off, but that of course doesn’t have a cash impact?

Yes, James, just remind me, what we -- look, I don’t think there is any at the moment, but clearly we continue to monitor the situation.

Thank you. Just on that and the one before, you are saying there is no cash impact from the closure so that….

No, no. What we say is, we estimate approximately 20 million of fixed cost out would come out. The cash cost of the closure would be about 1.5 time that.

The next question comes from Brian Morgan of RMB Morgan Stanley.

Are still filling DWP in the spot market?

Brian good question, yes, we're. We think strategically that makes sense. And as you know that’s the Chinese market and we believe we got some very important customers there and think it makes sense to stay in that market, yes.

And then obviously the next question is, how do view, how do look at the trade off that’s seen participants in this spot markets and/or maybe putting out in the spot market and let the price recover that?

We believe that maintaining relationship with our key customers in China is strategically important, Brian. Clearly, there are opportunities to reduce our production and swing a little bit to locate, we will look for those opportunities, but I would be very hesitant to lose our customers in China that maybe difficult to get them back.

Is there a price point where you would say, sorry, this is as far as we can go?

Look, we don’t think prices are going to drop further, but I guess we didn’t expect them to get to these levels. At these levels, we would still want to stay in the Chinese market. That’s what I can say, Brian.

The next question comes from Sean Ungerer of Arquaam Capital.

Just a follow-up from Brian's question, I mean, just a commentary on his introduced customers in China. Maybe you just elaborate a bit more in that in terms of your quality offering? And then just 2-3 more questions just specifically. I think if you look at your other expenses and then everything and just pretty much from the DWP process understandably and obviously into VSF. Maybe if you could just give us a very high level view? And how you see VSF playing off given the lot of capacity coming online? And then if you also look at the SA business in terms of cash fixed costs inflation this year is pretty high and you obviously attributed couple of reasons, maybe if you could just expand on that a bit more, as well as your sort of outlook for that variable? Thanks.

I'll start briefly and then I'm going to hand you to Mohammed to take up our dissolving pulp business on the question two. And then Alex, I'll come back to you for the last question as well on the fixed costs and.

Sure.

And before I hand to Mohammed first, we believe we've got a quality product. We've got a strong sustainability story to tell. And as I've emphasized with Brian earlier, we want to preserve our customers in China. On the VSF, so I'm going to hand you to Mohammed to elaborate a little bit further. And, Mohammed, you can just talk about the outlook for VSF.

The VSF market still continues to grow. So although there's been a lot of capacity that has come on stream, the underlying growth continues to remain positive. We're still seeing longer term trend growth rates of around 6%. And the market is just at a point where it just needs a little bit of time where the underlying demand catches up with the installed capacity. So the positive is that there is growth. The sustainability side of the business is the -- all the older trends that are moving in the direction of sustainability are also helping the underlying growth for fibers that are biodegradable and cellulose fibers are provide that benefit.

And just on that, I mean in terms of the catch up, I mean, when do you sort of reach an inflection point?

If I look at where the underlying demand is at the moment and the installed capacity, 6% growth is about 340,000 and 350,000 tons per annum. Typically, what we've seen is when the operating rates get to around four VSF, around 80% 85% things start turning out at the moment it's around the 78%. So middle of next year, end of next year, the underlying demand should get closer to the capacity to store capacity. The other one thing that I think everyone is in the market is expecting to help them the suppose demand growth probably even faster than the underlying long-term growth is all cost issue. One of the things that has prevented or I would say in the prevented around one of the things that has delayed the China government from buying large quantities of cotton, because the cotton stocks are very low in China. It's been this issue between the U.S. and China. And a big part of the Phase 1 agreement that people are expecting is including a large amount of agricultural products that China will buy from the U.S.A. and as part of the agricultural products cotton is expected to be one of those products. And if when this deal happens and is made public, I suspect the one positive outcome will be increased buying of cotton and that will be very positive I think for the fibers market in general.

Thanks.

Thanks, Mohamed. Alex, do you just want to talk about the fixed costs down at South Africa?

Yes, as the drivers full year were really -- as we get ready for as in 10,000 tons of additional dissolving pulp cycle, we taken an approach to employ a 100 odd people additional people. We do think it makes sense to actually train them early, you do get them hitting the road running then and we've seen very positive results at Ngodwana. Second issue, we had a bit of additional maintenance costs. We had some boiler and two fleets which we have to spend money on. And then finally, risk and project additional volume at Saiccor. During the shut, we do have to do some times and that does add a little bit too costs.

The next question comes from Ross Krige of JP Morgan.

Thanks, and just two follow-up on with regard to the DWP market and to follow up on Sean's question. So understand, how they're operating rate moves with the growth in demand, but there’s not still quite a lot of capacity coming on stream from Sateri. And then below that will DWP market it sounds like you covered a lot of production underwater from a cash perspective. And it sounds like a lot of that needs to close. Are you hearing any stories of capacity closing and related to that there's also a lot of capacity expected to be added to the DWP market, and is there any of that being delayed or how do you see that impacting the market?

Yes. Okay, firstly, on Sateri. You'll appreciate. We're not going to talk specifically about our competitor. However, obviously, there has been a lot of new capacity coming on board that the Company referred to as an integrated player. So, they're adding viscose capacity as well as dissolving pulp capacity. And it's clean that the excess capacity as outlined upfront is having an impact on pricing that's just the natural force that's underway. However, in addition to your second question that you know, we do it 40% of production is underwater and again we can't name them but there are we are hearing stories of certain producers, stopping production, we try to I don’t know. Mohammed, you maybe you want to elaborate further?

Yes, Steve. Thank you. Certainly, there's lots of public announcements about capacities, shutting down or stopping in Canada. There is announcements that came up also about production coming out in Brazil, and what we are picking up in China, although production of dissolving pulp is continuing its continuing to a much lesser extent in terms of volumes and some of the producers in China and what we are picking up to our own market intelligence, switching to making other drains of pulps and not shutting down the lines altogether or the sides, shifting our DB to one particular grade called unleash drop off because they need, the container box does need fiber and there's an issue with importing fiber from the U.S. So, there are lots of activities suggesting that output is being reduced.

And Ross, just to add to what was said. The other key factor and again that’s why I called it out, with 40% of capacity being swing capacity. When the paper pulp recover that is going to create opportunities for that 40% to swing production and again pulp prices are have been under Sevier pressure but if you look at recent data in China things do seem to be leveling off and another factor I would add to everything that we said is, in inventory levels. Both on paper pulp and dissolving pulp, they were at very high levels, like 2018 and into 2019. They are still at relatively high levels but they are coming down considerably and again you will appreciate individual companies but there are some large paper pulp producers in the last few days that are down substantial reduction and inventories and they re major players and that will help paper pulp prices and indirectly with 40% been swing that will we believe helped dissolving pump market.

Thank you. The next question comes from Wade Napier of Avior Capital Markets.

Could you just give us an indication of where you see graphic paper inventory levels? You sort of mention that through last year inventory levels are rising and sort of compounded to close the shop decline in the monitory seeing this year? And second question is, given the sort of state of the balance sheet, and is there sort of possibility to license the Rockwell technology with sort of paper producers and converts to really capitalize on the market that’s likely to sort of grow well ahead of where you are able to supply as over the next three to five years? And then third and final question considering you mentioning energy inflation in South Africa as a sort of headwind, what are the sort of opportunities to sort of scrap them sort of lignins [Indiscernible] production at Saiccor and sort of move towards the more energy production for internal use at the most? Thank you.

Okay I will talk briefly about each and then I’m going to hand you to Mike, our North America CEO to elaborate little bit further on inventory levels? When I get to the Rockwell question very often and then I will hand it to you. And then Alex, I will come back to you on energy trade off at Saiccor. The graphic paper inventory levels was less an issue in Europe than it was in U.S. We saw big inventory levels rise in the U.S. Europe was we believe was a combination of -- the economy in Europe which had significant impact on demand. And secondly, the price elasticity issues related to the selling pricing increase that we saw last year. So there is not any major shift in inventory levels in Europe. However, in the U.S., clearly the economy was less of affect, but we didn't see substantial rises in inventory levels. And, Mike, I'm going to come to you now, if you want to just expand a little bit further there?

Thanks, Steve. I've very little to add. We take curtailment in the fourth quarter to bring inventory levels into balance and where there at right now today is that our historical levels for our Q1. So we feel comfortable with where things are today. And I think that's what I have Steve.

Okay, thanks, Mike. And Rockwell, as you know, we're very excited and we've done some great work with Nestle. And we're very excited about the prospects. And clearly, we would want to see that IT enhance. And there is more development work that needs to be done; and again, maybe Berry, over to you, if you just want to expand further?

Very briefly, it is a combination of two unique things. It's the chemistry in the recipes and it's the coating technology itself. So it is not a question that you could go to another company and say what would you make this for us because the technology to do so they don't have. So it's very much a question of how quickly we can step up our capacity for that. And the second thing is that, there is a generation or there are several generations of business coming over the couple of years, so just one development in this part of a sort of development program, which we're going to see continuing generations coming on to the market to solve specific issues.

And wait just to add to what Berry saying and perhaps it was your bigger question. Clearly, we have pulled back on CapEx in 2020. We do believe dissolving pulp prices will recover in time for all the reasons that we outlined. So, we are going to be conservative, but clearly when the balance sheet does improve, this would be an area that would be very exciting for us. And there are -- there is work on R&D, further work to be done to as Berry has alluded to and to do to extend it and get further developments going. But that would be something in time, which will be extremely exciting percentage. The third question was on the trade-off between lignins and energy, Alex, and I'm going to hand it to you.

Yes, thank you. Obviously, what that will requires that we convert calcium line to magnesium. The cost saving for the container generation is probably similar to what we are getting from the putting in the surge recovery boiler, but that is going to take some CapEx. There are shorter term opportunities and we're actually busy implementing them where we can reduce our steam usage in our current production process. And that gives us additional steam to run our turbine generators fully. And we will probably in the course over the next three months or so start utilizing there. But certainly the converting calcium to magnesium is a project we're working on as well.

The next question comes from Roger Spitz of Bank of America.

Thank you. I've got two questions. First, on the Matane term loan, AU term loan, what was the principal amount, the interest rate? And is it secured?

This is Glenn. No, it's not secured. The term loan is some eight year term loan and the interest rate is between the two tranches between 1.5% to 2.5%.

Thank you. Yes, go ahead.

Here the rule the amount is close to 170 odd million dollars U.S.

170 million, close to 170, got it. And regarding the bank maintenance covenants, which you expanded between fiscal Q2 ‘20 and fiscal Q3 ’21 to 4.5% from 3.25%. Two questions here. One is when do you expect to hit your max leverage during that time period? Which quarter do you -- I know you're not going to match like is 4.5 because you want to maintain headroom for what do you think you max when you max?

It will be between quarters three fiscal, fiscal quarter three and four of 2020.

I just want to expand on what Glenn said. And the reason for that is obviously, our CapEx levels this year, are still higher, because we're completing the Saiccor expansion as we get into ’21 CapEx levels come down and that ratio starts declining after the period that Glenn has mentioned.

Got it and how was under your bank definitions for EBITDA and net leverage net debt. Is EBITDA as defined under the bank agreements similar to the EBITDA that you report or is there some differences and is there any nuances in net debt for instance, perhaps you can only take off so much cash, i.e.; 50 or 100, not total unrestricted cash.

There are some nuances but they have been immaterial. The only larger on going forward is as Steve indicated in his slide presentation that will be the IFRS 16 which weren’t applied.

It's a frozen gut post so any changes to get would not or rise rates would not have impact on the covenant.

Right, the operating leases won’t impact the debt. Got it. Thank you very much.

The next question comes from [Indiscernible] of Barclays.

Hi, just one question for me. You talked about around 40% of the market being underwater and dissolving wood pulp. What is your breakeven level in terms of prices?

You'll appreciate that's not a number that gives you, you could fairly customers are listening to the call.

Okay, thank you.

The next question comes from Julien Raffelsbauer of Millennium.

Yes, good afternoon. Regarding your covenant levels, you’re not 2.2, net debt to EBITDA and you are not fully comfortable with the old covenant level at 3.75 in the next six months to March 20. So you have back folded, you could -- you expecting a decrease in EBITDA by it could be 50% for the next six months, is the impact of DWP price decline so that your EBITDA what you need so much head room on your covenant so quickly?

It's not what we think we are going to reach the covenant level, we just wanted to get ourselves flexibility and have some headroom. We know that the profits will be less and none of us wanted to get close to covenant levels, so we're maintaining maximum flexibility and just o be clear we're not been and its going to be done 50% by getting to that.

And what's the headroom you like to have regarding your covenant level, is it 10%.

I’m not going to give you that number, my profit number.

Where as to why you get?

Again I think 3.75 the original covenant level, we just a little bit uncomfortable that with the lower profitability the set to you on dissolving pump, we just saw better uncomfortable and an order to maintain flexibility we increased at the 4.5.

And on the deforming wood pulp the price you are getting for this quarter is many the average of the previous quarter. Is that it?

Yes, broadly speaking, we spend some time talking about Chinese market and there is spot pricing impact as well. But broadly yes.

So you got a decent visibility for the EBITDA for the next six months, because we got already July to October pricing, so you got good visibility I guess though.

Yes, reasonable, certainly for Q1 and as we get closer to Q2, yes.

The next question comes from Jonathan Williamson of Sona Asset Management.

Thank you, just follow up to the last quarter's specialty. Can you sense what EBITDA market we should expect here in Q1 for [Indiscernible] pulp position?

Jonathan, we were struggling to hear you. Is it possible to…

So just a follow-up to the last quarter's question, I’m just looking for sense of what EBITDA margins we should expect during Q1 and Q2 possible for the dissolving with pulp division?

Without being too specific, I’m clearly the average pricing has declined further. So it will be lower margins then you seen in Q4, I can't be too specific without giving the exact number, but current pricing for dissolving pulp is $638 a ton, as to the previous callers question some of it is price on a previous quarter, I can't get too more specific than that.

Okay. I mean is it just to get a sense, is it possible that there's the around 20 times or the below, or that sort of area?

Yes. Again, I can't get too specific and it is lower. You should be able to work it out from the mass. Because, what the prices were in the last quarter, what current pricing is? And you can work backwards and what are our costs and what -- you should be able to do it from the data that's available.

Next question comes from [Indiscernible].

One of the questions I wanted to ask around [Indiscernible] one of them is in the working capital. You had a nice inflow this quarter. I was wondering, should we expect to now flowing the first half of next year in line with seasonality?

Yes, that's correct. It's Glenn here. So, our working capital gain can now to level of a net working capital of about $450 million, we would expect an outflow of at least about $40 million to $50 million on this in this quarter.

But that is seasonal, it happens every year. But on a on a relative basis, at the end of each quarter with all the good work that we're doing, we are hoping to prove relative to the prior year at the same time, but to Glenn's point there will be an outflow in Q1 seasonal.

The next question comes from Lizelle du Plessis of APG Asset Management.

Thank you for taking my question. And in terms of the global paper and graphic paper markets. What is your aims or expectation for the rate of decline into next year and thereafter ?

Yes, based on our outlook and where we are seeing markets, we think things will be better or less worse is the right term. And, we've come from a period of declines as I've talked about 8% to 12%. And we would expect that to be a late that implying. Europe is probably in a better place than the North America at the moment. So, we're estimating declines of 5% to 6%.

Ladies and gentlemen, unfortunately, that is the final question. Sir, do you have any closing comments?

No, I just want to thank everybody for joining us on the call and we look forward to discussing our results at the end of Q1. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Sappi, that completes today's conference. Thank you for joining us. You may now disconnect your lines.