Interim report 1 January - 31 March 2001
01:1 00:1 00:4
Earnings per share, SEK 5.72 4.79 6.00
Cash flow from current operations per share, 6.19 3.79 9.32
Net sales, SEK M 18,522 15,992 18,030
Earnings after financial items, SEK M 1,963 1,670 2,048
Net earnings after tax 1,323 1,109 1,389
· Earnings per share improved by 19%.
· Higher earnings in all business areas: Packaging 29%, Hygiene
Products 27% and Forest Products 25%.
· Unchanged operating profit and margins in all business areas,
compared with the fourth quarter 2000.
· Continued stable demand for the Group's products despite an
increasingly pronounced economic slowdown.
NET SALES AND EARNINGS
Earnings per share, after dilution, increased 19% to SEK 5.72 (4.79).
Net earnings after tax amounted to SEK M 1,323 (1,109).
Sales and earnings from the North American operations acquired in the
beginning of 2001 have not been included in the first quarter results.
Nor has interest paid on the purchase price been charged against
earnings. The transactions were finalized in March and preliminary
acquisition balances are included in the consolidated balance sheet. As
announced previously, the operations will be included in SCA's financial
results as of the second quarter. Consolidation of sales and earnings
was postponed due to ongoing efforts to establish definitive acquisition
balance sheets and an alignment of the accounting principles in these
companies. Financial results by the acquired units since the takeover
have corresponded with evaluations made in conjunction with the
Consolidated net sales amounted to SEK 18,522 M (15,992), an increase of
16% compared with the year-earlier period. Higher product prices and a
better product mix resulted in a sales increase of 7% while expansion
through acquisitions and organic growth increased sales 4%. Currency
movements generated a favorable effect on the Group's net sales of about
Group operating profit amounted to SEK 2,213 M (1,951), an increase of
13% compared with the first quarter 2000. Excluding the Group's share in
earnings of Modo Paper, which amounted to SEK 218 M in the first quarter
of 2000, the increase was 28%. All business areas reported higher
earnings. The operating profit for Hygiene Products amounted to SEK 858
M (673), an increase of 27%. Packaging reported earnings of SEK 858 M
(665), an increase of 29%, and earnings in Forest Products amounted to
SEK 760 M (607), an increase of 25%. Currency movements increased the
Group's operating profit by 4%.
Financial items amounted to an expense of SEK 250 M (expense: 281).
Higher interest rates during the period were more than offset by a lower
average level of net debt.
Group earnings after financial items amounted to SEK 1,963 M (1,670), an
improvement of 18% compared with the year-earlier period.
Return on shareholders' equity, excluding non-recurring items, was 14%
(13), and return on capital employed was 15% (12).
Comparisons with fourth quarter of 2000
Group earnings were marginally lower than earnings in Q4 2000. All
business areas, however, reported virtually unchanged earnings, and the
lower consolidated earnings is due to a gain of SEK 140 M from a leasing
transaction that was included the fourth quarter. Currency movements
increased the Group's operating profit during the period by about SEK 80
The operating cash surplus amounted to SEK 3,436 M (2,837), equal to 19%
(18) of net sales. The seasonal increase in working capital amounted to
SEK 769 M (1,105), while net investments in current operations totaled
SEK 498 M (402). The operating cash flow, accordingly, amounted to SEK
2,095 M (1,319).
Cash flow from current operations, defined as cash flow before strategic
investments and dividends, amounted to SEK 1,435 M (880), equal to SEK
6.19 (3.79) per share.
Company acquisitions during the period amounted to SEK 11,238 M and
related to the acquisitions of the American tissue operations of Georgia-
Pacific and the American packaging company Tuscarora. This amount
corresponds to the total purchase price of the acquisitions, which, on a
debt-free basis, amounted to USD 850 M for the tissue company and USD
284 M for the packaging company. Strategic capital investments in plant
and machinery, as well as restructuring costs, totaled SEK 177 M.
Comparisons with fourth quarter of 2000
The operating cash surplus amounted to SEK 3,436 M (3,572), while the
seasonal increase in working capital resulted in a cash flow from
current operations of SEK 1,435 M, which was SEK 724 M lower than
corresponding cash flow in the preceding quarter.
SEK M 01:1 00:1 00:4
Net sales 18,522 15,992 18,030
Operating cash surplus 3,436 2,837 3,572
% of net sales 19 18 20
Current capital expenditures, net -498 -402 -818
% of net sales 3 3 5
Changes in working capital -769 -1,105 304
Other operating cash flow changes -74 -11 -29
Operating cash flow 2,095 1,319 3,029
Tax payment etc1 -272 -246 -591
Free cash flow 1,823 1,073 2,438
Per share, SEK 7.86 4.63 10.52
Interest payment after taxes -388 -193 -279
Cash flow from current operations 1,435 880 2,159
Per share, SEK 6.19 3.79 9.32
Strategic investments and divestments -11,415 -635 -20
Cash flow before dividend -9,980 245 2,139
1 Tax attributable to operating profit.
Net debt amounted to SEK 27,630 M, which was SEK 11,750 M higher than
year-end 2000. The change was attributed to the American acquisitions,
which created an outflow for acquisitions and strategic investments
totaling SEK 11,415 M, the net of cash flow from current operations, SEK
1,435 M, and negative currency effects of SEK 1,770 M due to the
weakening of the Swedish krona.
The debt/equity ratio amounted to 0.64 (0.66). The interest coverage
multiple was 8.9 (7.0).
HYGIENE PRODUCTS BUSINESS AREA
SEK M 01:1 00:1 00:4
Net sales 8,586 7,402 8,291
Operating surplus 1,270 1,036 1,283
Operating profit 858 673 865
Operating surplus margin, % 15 14 15
Operating margin, % 10 9 10
Volume growth, %
Consumer products -0.5¹ 3.32 4.3¹ 1.0¹
AFH and Incontinence products -0.6¹ 5.62 1.6¹ 2.7¹
¹ Compared with the immediately preceding quarter.
2 Compared with corresponding period previous year.
See also additional information on page 17-19.
Net sales amounted to SEK 8,586 M (7,402), an increase of 16% compared
with the year-earlier period. Acquired companies and organic growth
accounted for 4% of the increase. Higher sales prices and a better
product mix accounted for 6% of the increase, while currency movements
generated favorable effects amounting to 6% of the increase in sales.
Operating profit rose 27% to SEK 858 M (673). The improvement was
attributable primarily to increased sales prices and volume growth, some
of which was offset mainly by higher costs for pulp and other raw
Compared with the fourth quarter 2000, the business area's profit and
operating margin were unchanged. Higher costs for energy and, compared
with the preceding quarter, higher but more normal costs for advertising
and marketing were offset by a better product and market mix together
with lower raw material costs for tissue operations. Raw material costs
for fluff products though remained largely unchanged during the quarter.
Earnings from consumer products increased 50% to SEK 467 M (311). The
improvement was attributable primarily to price increases introduced
last year for tissue products, which increased margins despite higher
pulp prices. Results for other consumer products were largely unchanged.
Compared with the fourth quarter 2000, earnings during the first quarter
rose 3%, from SEK 455 M to SEK 467 M as a result of lower raw material
costs, an effect that was reduced by lower volumes and rising energy
costs, however. The operating margin remained unchanged at 9%.
AFH and incontinence products
Earnings attributable to AFH and incontinence products amounted to SEK
391 M (362), an increase of 8% compared with the first quarter of 2000.
Better sales prices and higher volumes contributed to the increase.
Operating profit compared with the fourth quarter 2000 was down
slightly, amounting to SEK 391 (410). The lower earnings was attributed
mainly to a marginal decline in volumes, the result from a strict
pricing policy, while the effects of lower raw material costs offset
rising energy and transport costs, among other items. The decline in
operating margin from 12% to 11% was due in part to increased sales in
North America following the acquisition of Serenity, which initially
were at a lower margin.
PACKAGING BUSINESS AREA
SEK M 01:1 00:1 00:4
Net sales 6,887 5,776 6,752
Operating surplus 1,212 1,002 1,197
Operating profit 858 665 854
Operating surplus margin, %
18 17 18
Operating margin, % 13 12 13
Liner products, kton 648 647 612
Liner products, kton 645 647 601
Corrugated board, Mm2 1,017 920 992
Net sales for the period amounted to SEK 6,887 M (5,776), an increase of
19%. The increase was attributable to acquired companies, 9%, effects of
higher sales prices introduced last year for both corrugated board and
containerboard and changes in the product mix, 5%, as well as currency
Operating profit amounted to SEK 858 M (665), an improvement of 29%. The
increase was attributable primarily to higher sales prices and, to a
certain extent, acquired companies. Higher energy and raw material costs
created negative effects on the earnings improvement, however. Currency
movements increased earnings by 5%.
Compared with the fourth quarter of 2000, earnings and margins were
unchanged. Demand has been clearly weaker in the beginning of year 2001,
however, particularly in markets such as the UK and the Nordic
countries, and a sharp decline has been noted in certain industrial
packaging segments, e.g. the heavy-duty segment of the market. The
weaker demand, combined with changes in the product mix, resulted in
volumes increasing only marginally, despite a higher number of public
holidays during the fourth quarter. Higher wood prices and rising energy
costs, as well as the earlier described product mix and market changes,
totally offset the positive effects of falling raw material prices and
slightly higher volumes.
Corrugated board packaging
Market growth during the first quarter is estimated at about 2%,
compared with the corresponding period last year. Demand for corrugated
board is declining in the UK, and volumes in general have been weak in
the early part of 2001, considering the number of working days. Volume
growth for SCA's corrugated board activities has been lower than market
growth due to the Group's strict pricing policy.
Downtime was implemented during the second half of 2000 to balance
inventories. Production levels of kraftliner and testliner were also
reduced during the first quarter to avoid inventory build-ups. A variety
of time-limited discounts for testliner are now being offered in Europe,
while some decline has been noted in kraftliner prices as a result of a
modest increase in imports to Europe.
FOREST PRODUCTS BUSINESS AREA
SEK M 01:1 00:1 00:4
Net sales 3,382 3,095 3,376
Operating surplus 1,033 869 997
Operating profit 760 607 734
Operating surplus margin, % 31 28 30
Operating margin, % 22 20 22
Publication paper, kton 316 319 325
Solid wood products, km3 154 170 147
Publication paper, kton 297 311 343
Solid wood products, km3 171 184 160
See also additional information on page 17-19.
Despite a decline of 5% in deliveries of publication papers, net sales
by the business area rose 9% to SEK 3,382 M (3,095), mainly on the
strength of higher prices. Currency effects increased sales by 1%.
Operating profit amounted to SEK 760 M (607), an increase of 25%.
Improved earnings were reported for both publication paper and pulp and
Compared with the fourth quarter of 2000, operating profit was up 4%.
The increase was attributable primarily to higher earnings from forestry
operations, which were offset by lower earnings from pulp operations,
Operating profit from publication paper operations amounted to SEK 380 M
(338), an increase of 12%. Higher sales prices for all paper grades were
introduced during the quarter. The effects of increased prices on
earnings were limited, however, due to significantly higher costs for
chemicals and energy as well as pulp and wood. Deliveries were down
slightly, compared with the year-earlier period, due mainly to reduced
demand for LWC paper and subsequent downtime.
The improvement in earnings, compared with the fourth quarter 2000, was
only marginal despite increased prices and favorable currency effects as
a result of a sharp decline in deliveries, particularly for LWC paper,
and higher costs for wood raw materials and chemicals.
Market conditions are stable for both newsprint and SC paper, whilst the
LWC market weakened toward the end of the first quarter 2001.
Pulp, timber and solid wood products
The operating profit amounted to SEK 380 (269), an increase of 41%
compared with the year-earlier period. Earnings from forestry operations
improved, partly as a result of higher timber prices. Earnings from pulp
operations were also sharply higher, compared with the year-earlier
period, since average sales prices during the quarter were higher than
average prices in the first quarter of 2000, despite the ongoing
downward trend in market conditions. Earnings from sawmill operations
improved mainly as a result of rationalization measures.
Compared with the fourth quarter of 2000, the operating profit was up
6%. A substantial improvement in earnings from forestry operations,
attributable mainly to higher timber prices, more than compensated for
the effects of lower earnings in pulp operations caused by lower prices
and higher raw material costs.
The number of SCA Group employees at the close of the period was 38,639
(33,518), including personnel from Georgia-Pacific and Tuscarora.
Demand for the Group's products remains stable, despite an increasingly
pronounced economic slowdown. However, volume growth in the hygiene and
corrugated board areas are clearly weaker than during the preceding
year. In addition, pulp prices have declined in the early part of the
year, and a continued decline in prices is expected during the second
quarter. Kraftliner prices have also fallen in Europe, but not as
sharply as the decline in North America. The market for newsprint and SC
paper is stable, but weaker trends were noted in the market for LWC
paper toward the close of the period. Prices for recycled paper have
stabilized. SCA will continue to pursue its strict price policy in all
product areas and adjust production levels to prevent inventory build-
ups. The Group's ongoing efficiency enhancement and integration measures
will be intensified to further offset the effects of the economic
The SCA Group's interim report was prepared in accordance with the
recommendations of the Swedish Financial Accounting Standards Council.
In addition to the Group adapting accounting to the Financial Accounting
Standards Council's new recommendation, RR9, regarding income taxes, the
accounting principles are unchanged. Deferred tax on previously written-
up forest and land values is reported gross, which resulted in an
increase of SEK 1.4 billion in the Group's provisions for deferred taxes
and a corresponding increase in tangible fixed assets.
Since year-end, 12,001,133 A shares were converted to B shares.
Consequently, at the end of the quarter, the proportion of A shares
declined from 26.7% to 21.5%. The conversion of shares occurred at the
request of the affected shareholders and pursuant to the conversion
clause added to the Articles of Association in 1999.
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