SCA is Europe’s largest private forest owner, encompassing some 2.6 million hectares of forest land, and one of the region’s most profitable producers of 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.
At the end of 2012, SCA conducted manufacturing activities at 20 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 becoming increasingly important as competition for timber raw material in northern Europe intensifies and demand for biomass from the energy sector grows.
Productive, cost-effective production plants – and not necessarily a high market share – are essential 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 light of the prevailing economic and currency situation, SCA launched a program in 2012 to enhance the efficiency of the forest operation. The program will yield an earnings improvement of approximately SEK 1.3bn with full effect from 2015. Measures include the closure of two smaller sawmills which, combined with other announced rationalization actions, will affect about 200 positions. The program also includes a structured plan to reduce fixed and variable costs, improve earnings by increasing production and efficiency, and change the product and market mix.
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. Efforts in this respect permit Forest Products to move up the value chain and produce products and solutions with higher value and margins. In doing this, SCA differentiates itself from the rest of the industry, while also meeting requirements of business partners and customers.
Publication and packaging papers are continuously developed to satisfy the needs and requirements of customers in relation to profile and message.
In 2012, for example, SCA launched GraphoInvent, a lower-weight publication paper that is perceived to be as thick, bright and bulky as more expensive alternatives. This translates into reduced costs for customers as well as a paper with a lower environmental footprint. GraphoInvent is ideal for advertising matter, catalogs and magazines. The kraftliner mill in Munksund increased its production capacity of white-top kraftliner for use in packaging with high-quality print requirements.
In solid-wood products, SCA develops and further processes purpose-designed products for interiors, carpentry and the building trade. To an ever-increasing degree, products are customized for the next stage in the processing chain and are supported by services and warehousing integrated into the customer’s distribution and sales network.
In 2012, SCA BioNorr complemented its production of fuel pellets with pellets for stall bedding and horsekeeping. The pellets are manufactured from pure sawdust and form an effective bedding product that saves both time and space and improves the finances of horse owners. The bedding product has also demonstrated highly positive results for horses previously suffering from pressure sores.
Development programs are not solely focused on products, but also on the development of business models, service and distribution solutions in close collaboration with SCA’s customers.
Continuing the work on enhancing efficiency and customer-driven innovation is essential for strengthening positions and creating growth. The primary focus is on increasing the share of customized high-value products. Efforts to develop and streamline the supply chain, make it more sustainable, and develop new product areas are also important in terms of strengthening competitiveness.
Timber continues to strengthen its long-term position as a material and its favorable environmental and climate-neutral properties have resulted in incentives in several countries to encourage increased wood utilization.
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 2012, SCA signed a joint-venture agreement with E.ON. The joint venture includes approximately 270 wind power stations and total energy production of more than 2 TWh. Future investment decisions can be expected in 2014–2015 at the earliest. The project is expected to be operational by 2016–2017 at the earliest.
In 2012, SCA formed a jointly venture with Fred.Olsen Renewables aimed at establishing two wind farms with annual output corresponding to 2 TWh.