SCA invests in incontinence and corrugated board segments
In line with the Group's growth strategy, SCA is carrying out two projects in
the incontinence area and three in packaging.
SCA is adopting a new technology for production of incontinence products
concurrent with the launch of so-called pants diapers in the mild incontinence
segment. The technology shift results in lower production costs, improved
productivity and the possibility for more rapid product changes. The measures
are aimed at SCA maintaining and reinforcing its market-leading position on
the strength of high development pace and low production costs.
The new pants diaper for mild incontinence will be launched in the fastest
growing segment as a complement to today's product offering. The project is
being carried out in cooperation with Unicharm in Japan and is based on the
latest technology that has yielded good results in Japan. The intention is
that the product will be introduced in Europe and in the US in the consumer
field. The launch in the US will be made through a new cooperation that SCA
established with Johnson & Johnson for incontinence products in the consumer
segment. The estimate is that the annual market growth will be about 20%.
Through implementing a technology shift and building up new capacity for pant
diapers, the conditions are created for being able to increase the rate of
growth within the entire incontinence business activities. Growth in the past
five years has been 15% annually. The program now being adopted, which will be
implemented successively, will involve investments during the next five years
amounting to about SEK 2,000 M.
Final negotiations are under way regarding acquisition of an integrated
corrugated board unit in southern Italy, which focuses on high added-value
products and a high service level. The unit is located in an area in which new
establishment of companies is currently high. Corrugated board consumption in
the region has increased 10% annually in recent years. The acquisition
complements SCA's current operations in Italy, which are mainly concentrated
in the northern parts of the country. SCA is currently market leader in Italy,
with 700 million m² and a market share of 17%. The new unit has a capacity of
about 50 million m², but to date has only used half this capacity. The
equipment is modern and technically in good condition. Profitability is
favorable and annual sales amount currently to about SEK 80 M. The acquisition
is being made at an earnings multiple based on average operating surplus
(EBITDA) reported during the past four years that is less than 6.0.
SCA is acquiring a converting and distribution company in the Munich area. The
company holds a market-leading position in the region, with its own converting
capacity for corrugated board and well developed wholesale operations with a
broader range of packaging products. Business focuses on small and midsize
customers that are offered a high service level. Profitability is favorable
and annual sales amount to approximately SEK 130 M.The purchase is being made
at an earnings multiple based on average operating surplus (EBITDA) reported
during the past four years that is less 6.0.
SCA's operations in Värnamo, Sweden today are conducted at two plant sites, an
old unit and a new one built in 1992. Now all operations will be transferred
to the new unit concurrent with the procurement of new equipment in the form
of a corrugator and converting equipment. As a result of these measures, the
number of personnel can be reduced by 42 while at the same time agreement has
been reached regarding increased flexibility in the work schedules for SCA's
units in Värnamo, Mariestad and Järfälla. The measures also result in a
capacity increase of about 25%. The investments amount to SEK 315 M and
profitability is favorable (CVA index of 1.7). Currently, SCA holds a market
share in Sweden of 30% and now gains strong potential to grow in pace with the
market's increased demand.
Stockholm, 1 September 2000
SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ)
For further information please contact:
Sverker Martin-Löf, President and CEO. Phone +46 8-788 51 51 or
Sten Lindholm, Senior Vice President, Corporate Communications. Phone +46 8-
788 51 62.
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