SCA Forest Products at a glance

SCA is Europe’s largest private forest owner, encompassing some 2.6 million hectares of forest land and produces forest products with a strong  environmental profile. Operations are based on in-depth customer insight, high innovative ability and a sustainability perspective at all levels. SCA offers  publication papers, kraftliner (packaging papers), pulp, solid-wood products and renewable energy.

Efficiency

At the end of 2013, SCA conducted manufacturing activities at 18 sites. Having its own logistics is part of the company’s integration  strategy, with loading and unloading terminals in Sweden and on the continent and freight transportation on vessels.

SCA’s forest assets and industries are concentrated to northern Sweden,  where the Group has built up an efficient supply system for its own mills and sawmills. The company’s forest holdings are managed on a very long-term basis. Integration of SCA’s own wood raw material is a key aspect of the company’s strategy that contributes to stable cash flow and reliable supplies, and facilitates improved quality and cost control. SCA’s forest holdings are a unique resource and comprise a renewable raw materials base for products, materials and energy that will grow in importance. Productive and cost-effective production facilities are two necessary components for favorable profitability. SCA thus applies what is referred to as the strong-mill concept, which focuses resources on a number of large, high-tech paper and pulp mills and sawmills located in Sweden.

In 2012, SCA introduced a program to enhance the efficiency of the forest  products operation. The program will result in an annual earnings improvement of approximately SEK 1.3bn with full effect in 2015. The program includes a structured plan to reduce fixed and variable costs, achieve improved income through increased production and efficiency enhancement, and implement a changed product and market mix. The efficiency program delivered according to plan in 2013. Measures included the closure of two smaller sawmills which, combined with other rationalization actions, led to a workforce reduction of about 200 employees. In 2013, the program generated an earnings improvement of SEK 550m.

Innovations and launches

Innovation is an integral part of the business area’s strategy to move its operations toward increasingly advanced products in high-value segments and toward more attractive customer offerings. The focus is on profitable growth through further processing and customization in segments with favorable price trends. In doing this, SCA differentiates itself from the rest of the industry, while also meeting requirements of business partners and customers.

A clearer structure was created for innovation activities at Forest Products during 2013. A new position was established with the task of driving innovation and an innovation portfolio was defined for all divisions in Forest Products. The business area’s management continues to assign high priority to the development of the innovation portfolio.

During the year, a new product area was launched, Sustainable Packaging, for fresh fiber-based packaging paper designed for use as flexible packaging, the surface layer in various packaging products and as corrugated board. The products combine excellent printability and efficient resource utilization with highly attractive properties in terms of the environment and product safety. The target is to produce 75,000 tons of the new products at the Ortviken paper mill within two years.

In solid-wood products, SCA develops and processes purpose-designed products for either industrial further processing in efficient supply chains or for the building materials trade. The share of wood products sold via traditional distribution channels is constantly declining. In 2013, sales to the building materials trade in the UK doubled and now about 30% of SCA Timber’s entire operations comprise sales to this segment, with their rigorous demands on distribution, service, warehousing and integration with suppliers’ business systems.

Development programs are not solely focused on products, but also on the creation of business models, service and distribution solutions in close collaboration with SCA’s customers.

Growth

Continuing the work on enhancing efficiency and customer-driven innovation is essential for strengthening positions and creating growth. Efforts to develop and streamline the supply chain, make it more sustainable, and develop new product areas are also significant in terms of strengthening competitiveness.

Timber continues to strengthen its long-term position as a construction material and its favorable environmental and climate properties have resulted in incentives in several countries to encourage increased wood utilization. Timber also comes from a source of raw materials that is completely renewable, namely, the forest.

Activities continued in the SCA Energy business unit, which is tasked with managing and developing SCA’s renewable energy business.

 

SCA has set itself a target to increase wind power generation on the Group’s forest land to 5 TWh by 2020. SCA’s wind-power initiative has three components:
• development of partnership projects
• development of proprietary projects
• leasing of land

In 2007, SCA and Statkraft formed a jointly owned company, the purpose of which is to establish six wind farms with an annual output of about 3 TWh. Stamåsen, the first of these six wind farms, was inaugurated in 2013.  Stamåsen wind farm encompasses 26 wind turbines that will generate an annual output of about 200 GWh. An investment decision has been taken on a total of 186 wind turbines with a combined annual production output of 1.6 TWh. The turbines are expected to be operational by 2015.

Work continued on the projects SCA is carrying out together with Fred.Olsen Renewables and E.ON, both of which have the potential to generate about 2 TWh of wind power electricity per year. SCA also continued its work on developing proprietary projects.