Interim Report 1 January–31 March 2006

First quarter of 2006 compared with the fourth quarter of 2005 · Net sales amounted to SEK 25,400m (25,141). · Net profit for the period amounted to SEK 1,169m (1,197). · Earnings per share amounted to SEK 4.96 (5.06). · Profit before tax amounted to SEK 1,569m (1,574). · Debt/equity ratio improved to 0.65 (0.70). 2006 compared with 2005 · Net sales amounted to SEK 25,400m (22,518). · Net profit for the period amounted to SEK 1,169m (662). · Earnings per share amounted to SEK 4.96 (2.82). · Profit before tax amounted to SEK 1,569m (894). Adjusted for items affecting comparability, profit before tax amounted to SEK 1,319m in the previous year. EARNINGS TREND[1] SEKm 2006:1 2005:1 2005:4 Net sales 25,400 22,518 25,141 Operating expenses -21,879 -19,737 -21,552 Operating surplus 3,521 2,781 3,589 Depreciation and write- downs -1,571 -1,550 -1,622 Share of profits of associated companies 5 6 8 Operating profit 1,955 1,237 1,975 Financial items -386 -343 -401 Profit before tax 1,569 894 1,574 Tax -400 -232 -377 Net profit for the period 1,169 662 1,197 Earnings per share, SEK 4.96 2.82 5.06 Of which, operating profit per business area Personal Care 699 529 719 Tissue 300 379 379 Packaging 438 458 418 Forest Products 577 401 553 - Publication papers 205 121 222 - Pulp, timber and solid-wood products 372 280 331 Other -59 -530 -94 1,955 1,237 1,975 CEO’S MESSAGE The volume trend was generally favourable for the majority of the Group’s operations. The positive effects of this could not compensate, however, for the continued strong rise in energy costs, which increased by SEK 170m in the first quarter, which meant that earnings were at the same level as in the previous quarter. Despite the considerably higher energy and raw material costs, the Group’s earnings were significantly better then last year. Net sales increased by 13% compared with the first quarter of 2005 and amounted to SEK 25,400m (22,518). Volume growth was 8% while the price effect was zero. Exchange rate fluctuations accounted for 5% of the increase in net sales. Net sales amounted to SEK 25,400m (25,141) an increase of 1% compared with the previous quarter. The positive price effect between the quarters was 1% while volume growth was 1%. Exchange rate fluctuations had a negative impact of 1%. Profit before tax, excluding items affecting comparability, improved by 19% to SEK 1,569m (1,319) compared with the first quarter of the previous year. Of the improved earnings, 38 percentage points were due to increased volumes, 10 percentage points to positive exchange rate fluctuations, and 10 percentage points to the effects of the cost- savings programmes, etc. This in turn was offset by higher energy and raw material costs of 39 percentage points. Profit before tax in the first quarter amounted to SEK 1,569m compared with SEK 1,574m in the fourth quarter of 2005. Exchange rate fluctuations had a 1% negative impact on earnings. Sales for Personal Care increased by 20% compared with the first quarter of the previous year and by 4% compared with the strong fourth quarter. Our sales of incontinence products to the European healthcare sector reached record levels during the first quarter. It is also gratifying that SCA continued to grow within the retail sector in Europe, where the first quarter showed very good growth. The American operations also performed well. Compared with the previous quarter, our tissue operations were negatively affected by higher costs for energy and raw materials as well as by seasonally low volumes in the North American operations. Counterbalancing this there are positive price effects compared with the fourth quarter totalling approximately SEK 70m, where price increases in Europe account for the clearly dominant portion. SCA was able to continue to raise prices in major markets such as the UK, France, Germany and Spain. Competition within the retail trade shows no signs of abating, however, and despite relatively good growth our demands for price increases are therefore slow to have effect. The tissue market is suffering from some overcapacity which is keeping prices at an unsatisfactory level, still lower than in the first quarter of 2005. Our assessment is that a growing number of players are recognizing the need to raise prices in response to cost increases. In the US, the tissue market is well balanced. Compared with the same period last year, SCA’s North American tissue operations had a positive sales and earnings trend. The increasing demand for corrugated board during the previous quarter continued in the first quarter. Several major markets show a growth rate of more than 5%. Our European packaging operations had a good start to the year in terms of volume. An earnings recovery will depend on a price increase for corrugated board. The prospects of this are improving due to current strong demand for containerboard with resultant positive price movements. Our publication paper business continued to maintain high production efficiency and the sawmill operations had a strong first quarter with an improved price situation. The favourable trend in the advertising market supports good demand for publication papers. The key measures in our most recent efficiency enhancement programme are under implementation and proceeding according to plan. The cost-saving effects will be realized in stages during the rest of the year. In order to obtain compensation for energy and raw material cost increases and achieve improved margins, we are making intensive efforts to implement price increases within all our business areas. Successful product launches and the organization’s customer focus are building a sound foundation for further positive development. Jan Åström President and CEO GROUP CASH FLOW Net cash flow amounted to SEK -292m compared with SEK -686m in the first quarter of the previous year. Higher tied-up working capital was compensated by an improved operating cash surplus. Slightly higher current capital expenditures and restructuring costs were more than compensated by lower taxes paid and lower expansion investments. FINANCIAL ITEMS AND TAXES Financial items decreased to SEK -386m (-401) compared with the previous quarter. The decrease is primarily attributable to a lower net debt. The tax expense on current earnings is calculated based on the profit distribution that the Group currently has between countries. The average tax rate for the current year is expected to amount to 25% compared with 24% in the previous year. FINANCING AND SHAREHOLDERS’ EQUITY Net debt amounted to SEK 38,055m, a decrease of SEK 1,771m since the start of the year. A negative net cash flow of SEK 292m, mainly due to the seasonal increase in working capital, increased net debt. Currency effects, resulting from a strengthening of the Swedish krona, reduced the net debt by SEK 469m. Remeasurements according to IAS 19, for pensions, and IAS 39, for financial instruments, had a combined positive effect of SEK 1,594m, most of which is attributable to remeasurement of pensions. The Group’s net pension liabilities decreased by SEK 1,862m during the first quarter. The decrease is mainly due to higher discount rates and a good return on plan assets. Equity was positively affected by SEK 1,101 [2] after tax Consolidated shareholders’ equity increased during the period by SEK 1,648m to SEK 58,758m. Net profit for the period increased equity by SEK 1,169m. Currency effects, etc., had a negative effect on equity of SEK 706m. Effects of remeasurements according to IAS 19, for pensions, and IAS 39, for financial instruments, had a positive impact of SEK 1,185m after tax. The debt/equity ratio amounted to 0.65 (0.66) and amounted to 0.70 at year-end 2005. The interest coverage multiple amounted to 5.1 (3.6). PERSONNEL At the end of the first quarter, the average number of employees was approximately 50,500 compared with approximately 51,000 at the end of the fourth quarter of 2005 and 52,000 at the end of the first quarter of 2005. The decrease is an effect of the ongoing efficiency programme. EFFICIENCY ENHANCEMENT PROGRAMME The savings programme announced in August 2005 and which will provide annual savings of SEK 1,550m with full effect in 2008, is proceeding according to plan. Savings for the first quarter amounted to SEK 125m, of which SEK 45m in additional savings in the first quarter of 2006. This is in addition to the earlier programme completed as planned, which provided savings of SEK 1,200m on an annual basis. BUSINESS AREAS PERSONAL CARE Net sales amounted to SEK 5,348m, an increase of 4% compared with the previous quarter. Currency effects had a negative impact on net sales of 1%. The sales growth is mainly due to increased volumes, to the European retail sector, where a particularly strong increase was noted for baby diapers. Compared with the first quarter of 2005, net sales rose 20%, of which volume growth was 13 percentage points and currency effects 7 percentage points. Operating profit was SEK 699m, a decrease of 3% compared with the previous quarter. Improved volumes did not fully compensate for increased costs for super absorbents. Marketing costs also rose during the quarter due to extensive product launches. Compared with the first quarter of 2005, operating profit increased by 32%, mainly due to a favourable volume trend which accounted for 46%, and positive currency effects 9%. This was counteracted by higher production costs, 16%, and a negative price trend 7%. Incontinence products: The favourable sales trend from the fourth quarter continued during the first quarter of 2006. Despite this good volume development, prices are still somewhat under pressure. Against this background, SCA is pushing demands for price compensation in Europe for increased raw material costs. Sales to institutions and nursing homes in Europe developed well. Sales to the European retail sector also continued to develop well, primarily as a result of increased sales of heavy incontinence protection. In North America, sales to institutions and nursing homes continued to show strong development which is a result of consistent efforts to develop partnerships with the key distributors in the market. Sales to the retail trade developed favourably. Competition in the North American market remained intense, however. SCA’s incontinence operations in Central and South America performed well during the first quarter. Competition in the Australian market intensified, particularly within the grey zone between incontinence protection and feminine hygiene products. However, SCA retained its market shares. Baby diapers:The sales trend in Europe was good both for SCA’s Libero brand and SCA’s deliveries to retailers’ brands. During the quarter, Libero further strengthened its market leading position in the Nordic region and other key markets for SCA, such as Russia, Hungary and Greece, also developed well. Sales of baby diapers for retailers’ brands increased, largely due to new contracts with some of Europe’s leading retail chains and through increased growth at strategic customers. Competition and price pressure remain within this segment and SCA is pursuing demands for price increases to compensate for increased raw material costs, among other things. The positive sales trend in South America continued after the new product launches carried out in 2005. In Malaysia, SCA is driving growth within the baby diaper segment through the launch of Drypantz in 2005, and SCA is now the fastest-growing player within the segment. Volumes are still relatively small, while customer feedback is positive. Feminine hygiene products: In January and February, SCA launched a new generation of ultra-thin towels in Europe, Secure Fit. The launch, which was very well received by customers and consumers, was backed by powerful marketing campaigns. The result of sales in the first months were positive in all markets. A few more months are required, however, before the launch can be fully evaluated. Sales of feminine hygiene products for retailers’ brands developed well in the first quarter, mainly underpinned by strong growth for SCA’s key customers. New contracts were also signed with significant European retail chains. In Central America, sales and profitability improved compared with the previous year. The launch of the new generation Secure Fit enabled price increases and led to improved volumes. In South America, the launch of Secure Fit also contributed to a positive sales and earnings trend. Sales development in Australia and New Zealand was good with improved margins in the first quarter. TISSUE Net sales amounted to SEK 7,962m, a decrease of 2% compared with the previous quarter. Higher prices did not compensate for seasonally lower volumes in the North American operations as well as negative currency effects. Compared with the previous year, net sales rose by 11%, of which currency effects accounted for 7 percentage points. Operating profit was SEK 300m, a decrease of 21% compared with the previous quarter. Positive price effects of SEK 70m could not compensate for higher energy and raw material costs as well as seasonally lower volumes in the North American operations. Compared with the previous year, operating profit decreased by 21% due to substantially increased energy prices, 40%, and increased raw material costs, 15%. Volume growth had a positive impact on operating profit of 22% and the effects of the savings programme provided 7%. Currency effects had a positive impact on operating profit of 5%. Consumer tissue: Raw material and energy costs continued to rise during the first quarter and could not be compensated by the price increases totalling SEK 70m implemented by SCA, mostly in key European markets such as the UK, France, Germany and Spain. Demand for tissue in Europe was good during the first quarter and volume growth increased compared with the previous year. Competition among customers continues and can be seen, among other things, in a continued increase in retailers’ brands in relation to branded products. SCA’s strategy to develop retailers’ brand lies behind the favourable volume trend. A polarization is taking place within retailers’ brands towards premium quality on the one hand, and simpler specifications of lower quality on the other hand. SCA’s tissue operations in Mexico developed well in the first quarter compared with the same period last year. Operating profit improved, primarily due to increased prices and an improved product mix. Sales to retailers’ brands increased substantially. The tissue operations in South America also had a positive earnings trend, primarily driven by price increases in Colombia and Chile. Tissue for bulk consumers, AFH: Demand improved compared with the preceding year and SCA experienced favourable growth. Price pressure on simpler products and specifications remains while price increases could be implemented for premium products and concept solutions. The product mix therefore continued to be highly important for continued earnings development. SCA’s operations in the US noted seasonally lower volumes in the first quarter. The sales trend for complete hygiene systems was strong, however, which led to an improved product mix. Additional demand-driven price increases were accepted by customers as of April. Compared with the previous year, volume development was very good which, combined with an improved product and customer mix and high capacity utilization, contributed to a significant improvement in earnings compared with the first quarter of the previous year. In the Mexican operations, price increases contributed to the improved result. The launch of SCA’s global TORK brand was carried out in Mexico in March and is expected to have positive effects on sales. PACKAGING Net sales amounted to SEK 8,389m, an increase of 1% compared with the previous quarter. The increase is attributable to higher volumes, the effects of which were partly reduced by negative currency effects. Compared with the previous year, net sales increased by 10%, of which volume growth accounted for 6 percentage points with particularly strong growth within the Asian packaging operations which grew 28%. Exchange rate fluctuations had a positive effect on net sales of 5 percentage points. The price effect was negative, 1%. Operating profitwas SEK 438m, an increase of 5% compared with the previous quarter. Positive volume growth and the effects of efficiency programmes contributed to this increase which was partly counteracted by higher energy costs. Volumes in the Chinese operations were seasonally low due to the Chinese New Year, while the earnings trend was satisfactory. Compared with the previous year, operating profit decreased by 4%. Higher volumes did not compensate for increased energy costs and lower prices. Several of the European packaging companies announced capacity closures during the first quarter. This resulted in a new confidence in a better market balance and containerboard prices rose in the first quarter. SCA realized price increases during the first quarter totalling EUR 30 per tonne for testliner and kraftliner. These increases were insufficient, however, to meet the rising production costs which are a direct result of energy price development. SCA has announced testliner price increases of EUR 30 per tonne from 1 May and EUR 40 per tonne for kraftliner from 1 June. Demand for corrugated board was favourable in major markets such as Germany, while the French, Italian and Swedish markets also showed good growth. Price increases have been announced for corrugated board during the second quarter. Growth in the Russian and east European markets is now between 6 and 7%. In response to this, SCA has decided on investments in additional converting capacity in existing plants. These investments support SCA’s strategy to gradually move volumes from base products to more advanced packaging solutions. Efficiency enhancements in Europe are proceeding according to plan. The paper mill in Djursland, Denmark, was closed in March. In addition to plant closures, administrative functions at the head office in Brussels have also been reviewed. In the American packaging operations, the temperature-assurance packaging segment continued its positive development, partly as a result of the pharmaceutical industry’s development of new, protein-based, temperature-sensitive products. Earnings were slightly lower than in the first quarter of the previous year, since price increases failed to fully compensate for higher energy and raw material costs. The packaging market in China continues to show strong growth. SCA’s operations in China and South-East Asia had a very strong volume increase compared with the first quarter of the previous year, and underlying market growth was strengthened by an improved customer and product mix. Increased raw material costs could be counteracted by savings as well as lower production and purchasing costs. FORESTPRODUCTS Publication papers: Net salesamounted to SEK 2,145m, an increase of 4% compared with the previous quarter. The increase was attributable to price increases and, above all, favourable volume growth. Compared with the previous year, net sales increased by 11%, of which currency effects accounted for 3 percentage points. Operating profitwas SEK 205m, a decrease of 8% compared with the previous quarter. Higher energy costs were partly compensated by higher prices and volumes. Compared with the previous year, operating profit increased by 69%, despite the rising energy prices, due to higher prices, higher volumes and positive currency effects. Demand for publication papers in Europe was good in the first quarter and the advertising market developed in a positive direction. Prices for publication papers were raised during the first quarter, mainly driven by newsprint. SCA’s focus on developing and improving individual paper mills continues to yield results and production of publication papers reached record levels. Energy costs remained very high during the first quarter. Demand for LWC was lower than in the fourth quarter, partly due to seasonal variations. Prices remained unchanged. Demand for SC grades was good and despite increased supplies, a minor price increase was accepted. SCA’s production and sales were satisfactory during the quarter. Pulp, Timber and Solid-Wood Products: Net salesamounted to SEK 2,233m, an increase of 11% compared with the previous quarter. Increased volumes within the pulp business and an improved price situation for solid-wood products contributed to this increase. Compared with the previous year, net sales rose 22%, of which currency effects accounted for 2 percentage points. Operating profit was SEK 372m, an increase of 12% compared with the previous quarter. Improved prices within the sawmill operations were counteracted by increased energy costs, while strong volumes improved earnings within the pulp operations. Compared with the previous year, operating profit increased by 33% due to higher prices and volumes and positive currency effects. The pulp market is strong with rising prices. Significant price increases on the spot market indicate that additional list price increases can be expected. The Östrand pulp mill started the year with high and stable production while work on construction of the new recovery boiler is under way. The market for Nordic pine moved from excess supplies to shortages in the previous year. Successive price increases for Nordic pine, combined with high production, provided a very good result. The favourable demand is based on a high level of construction activity in all SCA’s main markets, except the UK, while cutbacks in the Finnish and Russian sawmill industries reduced supply due to shortages of raw material. The market scenario for Nordic spruce is more balanced. Prices are rising due to increased raw material costs in central Europe. SCA’s earlier cooperation with the sawn timber producer Jämtlamell is now being extended to include coordination of production at one of Jämtlamell’s sawmills. OTHER This interim report is prepared according to IAS 34 and the Swedish Financial Accounting Standards Council’s recommendation RR 31 and, with regard to the Parent Company, RR 32. Applied accounting principles are in accordance with the Annual Report for 2005. The Group’s Parent Company, Svenska Cellulosa Aktiebolaget SCA (publ), owns the forest land and other real property that are part of the forestry operations and grants felling rights for standing timber to its subsidiary SCA Skog AB. The Parent Company is in other respects a holding company whose key task is to own and manage shares in a number of business-group companies and exercise Group-wide management and administration. Operating income during the period January – March 2006 amounted to SEK 22m (42) and profit before appropriations and tax was SEK 0m (-263). The Parent Company made no investments in shares and participations during the period. Investments in properties and plant totalled SEK 5m (2). Cash and cash equivalents at the end of the period amounted to SEK 31m (18). SHARE DISTRIBUTION 31 March 2006 Class A Class B Total Registered number of shares 38,415,135 196,621,563 235,036,698 Of which treasury shares - (1,334,741) (1,334,741) During the period 30,400 Class A shares were converted to Class B shares. The proportion of Class A shares at the end of the quarter was 16.3%. Calculated according to IFRS recommendations, the effects of outstanding employee option programmes correspond to a maximum dilution of 0.06%, which is taken into account when calculating earnings per share for the period. FUTURE REPORTS In 2006, interim reports will be released on 25 July and 31 October. Stockholm, 27 April 2006 SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ) Jan Åström President and CEO This report has not been reviewed by the auditors. Press conference SCA invites media representatives, analysts and investors to a press conference at Spårvagnshallarna, Birger Jarlsgatan 57 A, Stockholm, at 11.00 CET on 27 April. The presentation will be held in English and web cast. For more information, visit www.sca.com/investors. The presentation can also be followed by telephone, Sweden 08- 505 202 66, UK +44 (0) 207 154 2638 or US +1(0)718 354 1226. Disclaimer This report has been prepared in both Swedish and English. In case of variation in the content of the two versions, the Swedish version shall prevail. For further information, please contact: Jan Åström, President and CEO. Telephone: +46 8 7885125. Bodil Eriksson, Senior Vice President, Communications and Investor Relations. Telephone: +46 8 7885234 or +46 70 6296634. IR: Andreas Koch. Telephone: +46 8 7885130 or +46 70 6660209. CONSOLIDATED INCOME STATEMENT 2006:1 2005:1 2005:4 SEKm Net sales 25,400 22,518 25,141 Other income 679 264 648 Change in fair value of biological assets 86 83 41 Change in inventories of finished goods and work in progress 185 71 -108 Work performed and capitalized 48 60 -23 Raw materials and consumables1 -9,213 -8,025 -8,974 Personnel costs1 -5,015 -5,194 -5,139 Other operating expenses1 -8,649 -6,996 -8,001 Depreciation -1,569 -1,519 -1,610 Write-downs 2 -2 -31 -8 Share of profits of associated companies 5 6 8 Operating profit 1,955 1,237 1,975 Financial items -386 -343 -401 Profit before tax 1,569 894 1,574 Tax3 -400 -232 -377 Net profit for the period 1,169 662 1,197 Earnings attributable to: Equity holders of the Parent Company 1,159 658 1,182 Minority interests 10 4 15 Earnings per share, SEK - before dilution effects 4.96 2.83 5.06 - after dilution effects 4.96 2.82 5.06 Return on equity 8% 5% 9% Return on capital employed 8% 5% 8% Margins(%) Gross margin 13.9 12.4 14.3 Operating margin 7.7 5.5 7.9 Net financial margin -1.5 -1.5 -1.6 Profit margin 6.2 4.0 6.3 Tax -1.6 -1.0 -1.5 Net margin 4.6 3.0 4.8 Calculation of earnings per share Earnings attributable to equity holders of the Parent Company 1,159.0 658.0 1,182.0 Average number of 233.5 233.4 shares before dilution, millions 233.4 Warrants 0.2 0.1 0.1 Average number of 233.7 233.5 shares after dilution 233.5 Specification of items affecting comparability 1Operating expenses - Costs related to efficiency programmes: Personnel costs - -394 - 2Write-downs - Write-downs in conjunction with efficiency programmes - -31 - 3Taxes - Effects of efficiency programmes - 111 - CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE SEKm January-March 2006 2005 Actuarial gains and losses related to pensions, incl. payroll tax 1,585 81 Available-for-sale financial assets: - Gains from fair value measurement taken to equity 84 -16 Cash flow hedges: - Gains from remeasurement of derivatives taken to equity 19 19 - Transfer to profit or loss for the period -15 - - Transfer to cost of hedged investments -1 - Translation difference in foreign operations -859 1,137 Gains from hedging of net investments in foreign operations 90 143 Tax on items taken to/ transferred from equity -487 -5 Total transactions taken to equity 416 1,359 Net profit for the period recognized in the income statement 1,169 662 Total income and expenses recognized for the period 1,585 2,021 Attributable to: - Equity holders of the Parent Company 1,580 2,000 - Minority interests 5 21 1,585 2,021 Other changes in equity - sale of treasury shares, etc. 59 2 - transition to IAS 32 and IAS 39 as of 1 January 2005 - 95 - remeasurement owned portion at successive acquisitions, within window period 4 - FIVE-YEAR SUMMARY IFRS Swedish accounting standards Full year 2005 2004 2003 2002 2001 Profit before tax, SEKm 433 6,585 6,967 8,078 8,090 Earnings per share, SEK 1.84 22.11 21.84 24.54 24.05 Earnings per share, before goodwill amortization, SEK 1.84 22,11 26,51 29,15 28,40 Debt/equity ratio, multiple 0.70 0.63 0.44 0.49 0.51 Return on capital employed, % 2 9 11 13 14 Return on equity, % 1 10 10 12 13 ¹ Adjusted historically to reflect new issues. CONSOLIDATED BALANCE SHEET 31 March 2006 31 December 2005 SEKm EURm¹ SEKm EURm¹ Assets Goodwill 19,380 2,062 19,823 2,104 Other intangible assets 2,608 277 2,431 258 Tangible assets 76,809 8,220 77,843 8,261 Shares and participations 572 12 573 61 Financial investments held as fixed assets² 2,668 284 2,035 216 Other long- term receivables 1,117 119 1,170 124 Total fixed assets3 103,154 10,974 103,875 11,024 Operating receivables and inventories 30,141 3,206 29,356 3,116 Short-term financial assets 386 41 237 25 Fixed assets held for sale 110 12 68 7 Liquid funds 1,156 123 1,684 179 Total current assets 31,793 3,382 31,345 3,327 Total assets 134,947 14,356 135,220 14,351 Shareholders’ equity Equity, equity holders of the Parent Company 57,986 6,169 56,343 5,980 Minority interests 772 82 767 81 Total shareholders’ equity 58,758 6,251 57,110 6,061 Liabilities Provisions for pensions 3,449 367 4,810 510 Other provisions 12,584 1,338 12,225 1,298 Long-term financial liabilities 24,888 2,648 18,638 1,978 Other long- term liabilities 214 23 208 22 Total long- term liabilities 41,135 4,376 35,881 3,808 Short-term financial liabilities 3 13,762 1,464 20,190 2,143 Operating liabilities 21,292 2,265 22,039 2,339 Other current liabilities 35,054 3,729 42,229 4,482 Total liabilities 76,189 8,105 78,110 8,290 Total equity and liabilities 134,947 14,356 135,220 14,351 Debt/equity ratio 0.65 0.70 Visible equity/assets ratio 44% 42% 1Closing day rate 9.40 (9.42) was applied in translation to EUR. 2Of which pension assets 971 103 470 50 3Contracted committed credit lines amount to SEK 26,090m. Capital employed 96,813 96,936 – of which working capital 10,901 9,573 Net debt 38,055 39,826 Shareholders’ equity 58,758 57,110 Of which provisions for restructuring costs Other provisions 833 834 Operating liabilities 1,440 1,776 OPERATING CASH FLOW ANALYSIS 1 January–31 March SEKm 2006 2005 Operating cash surplus 3,381 3,087 Change in working capital -1,561 -1,266 Current capital expenditures, net -934 -750 Restructuring costs, etc. -293 -156 Operating cash flow 593 915 Financial items -386 -343 Income taxes paid -333 -601 Other 1 3 Cash flow from current operations -125 -26 Acquisitions -9 -49 Strategic capital expenditures, fixed assets -208 -601 Strategic structural expenditures -9 -12 Divestments 0 0 Cash flow before dividend -351 -688 Sale of treasury shares 59 2 Net cash flow -292 -686 Net debt at the start of the period -39,826 -35,823 Net cash flow -292 -686 Remeasurement to equity 1,594 65 Currency effects 469 -1,154 Net debt at the end of the period -38,055 -37,598 Debt payment capacity 29% 20% Debt/equity ratio 0.65 0.66 OPERATING CASH FLOW ANALYSIS, QUARTERLY DATA 2006 2005 SEKm I IV III II I Cash operating surplus 3,381 3,446 3,425 3,155 3,087 Change in working capital -1,561 1,395 284 -175 -1,266 Current capital expenditures, net -934 -2,161 -785 -1,163 -750 Restructuring costs, etc -293 -332 -364 -169 -156 Operating cash flow 593 2,348 2,560 1,648 915 Financial items -386 -401 -393 -358 -343 Income taxes paid -333 -346 -478 -204 -601 Other 1 30 -16 -2 3 Cash flow from current operations -125 1,631 1,673 1,084 -26 Acquisitions -9 -76 -47 -256 -49 Strategic capital expenditures, fixed assets -208 -633 -379 -473 -601 Strategic structural expenditures -9 -26 -31 -12 -12 Divestments 0 0 1 0 0 Cash flow before dividend -351 896 1,217 343 -688 Dividend - -2 -21 -2,455 - Cash flow after dividend -351 894 1,196 -2,112 -688 Sale of treasury shares 59 7 3 1 2 Net cash flow -292 901 1,199 -2,111 -686 CASH FLOW STATEMENT 1 January–31 March SEKm 2006 2005 Operating activities Profit after financial items 1,569 894 Adjustment for non-cash items¹ 1,113 1,620 2,682 2,514 Paid tax -333 -601 Cash flow from operating activities before changes in working capital 2,349 1,913 Cash flow from changes in working capital Change in inventories -343 -460 Change in operating receivables -851 368 Change in operating liabilities -367 -1,174 Cash flow from operating activities 788 647 Investing activities Acquisition of subsidiaries -9 -49 Sold units 0 0 Acquisition of tangible and intangible fixed assets -1,225 -1,345 Sale of equipment 83 11 Repayment of loans from external parties -1,040 -307 Cash flow from investing activities -2,191 -1,690 Financing activities Sale of own shares 59 2 Borrowings 832 - Amortization of debt 0 -572 Cash flow from financing activities 891 -570 Cash flow for the period -507 -1,613 Cash and cash equivalents at the beginning of the year 1,684 3,498 Exchange differences in cash and cash equivalents -21 56 Cash and cash equivalents at the end of the period 1,156 1,941 Reconciliation with operating cash flow analysis Cash flow for the period -507 -1,613 Deducted items: Repayment of loans from external parties 1,040 307 Borrowings -832 - Amortization of debt - 572 Added items: Accrued interest 12 65 Investments through finance leases - -17 Net cash flow according to operating cash flow analysis -292 -686 ¹ Depreciation and write-downs, fixed assets 1,571 1,550 Fair value valuation of forest assets -86 -83 Unpaid related to efficiency programmes - 236 Payments related to efficiency programmes previously recognized as liabilities -315 - Other -57 -83 Total 1,113 1,620 EARNINGS TREND, supplementary disclosures 2006:1 2005:1 2005:4 EURm3 EURm2 EURm1 Net sales 2,717 2,483 2,661 Operating expenses -2,340 -2,176 -2,279 Operating surplus 377 307 382 Depreciation and write-downs -168 -171 -170 Share of profits of associated companies 1 1 1 Operating profit 210 137 213 Financial items -41 -38 -42 Profit before tax 169 99 171 Tax -43 -26 -41 Net profit for the 130 period 126 73 1Isolated quarterly amounts have been calculated as the difference between two accumulated results. 2Average exchange rate of 9.07 was applied in translation to EUR. 3Average exchange rate of 9.35 was applied in translation to EUR. Quarterly data EARNINGS TREND SEKm I IV III II I Net sales 25,400 25,141 24,740 23,986 22,518 Operating expenses1,2 -21,879 -21,552 -23,809 -20,711 -19,737 Operating surplus 3,521 3,589 931 3,275 2,781 Depreciation and write- downs3 -1,571 -1,622 -3,937 -1,564 -1,550 Share of profits of associated companies 5 8 3 8 6 Operating profit 1,955 1,975 -3,003 1,719 1,237 Financial items -386 -401 -393 -358 -343 Profit/loss before tax 1,569 1,574 -3,396 1,361 894 Tax4 -400 -377 985 -355 -232 Net profit/ loss for the period 1,169 1,197 -2,411 1,006 662 Earnings per share, SEK - before dilution effects 4.96 5.06 -10.32 4.27 2.83 - after dilution effects 4.96 5.06 -10.31 4.27 2.82 Margins(%) Gross margin 13.9 14.3 3.8 13.7 12.4 Operating margin 7.7 7.9 -12.1 7.2 5.5 Net financial margin -1.5 -1.6 -1.6 -1.5 -1.5 Profit margin 6.2 6.3 -13.7 5.7 4.0 Tax and minority -1.6 -1.5 4.0 -1.5 -1.0 Net margin 4.6 4.8 -9.7 4.2 3.0 1 Incl. change in the fair value of biological assets 86 41 82 81 82 Specification of items affecting comparability 2Operating expenses - Costs related to efficiency programmes - - -2,619 - -394 3Depreciation and write- downs - Write-downs in conjunction with efficiency programmes - - -2,321 - -31 4Income taxes - Effects of efficiency programmes - - 1,273 - 111 PERSONAL CARE SEKm 2006:1 2005:1 2005:4 Net sales 5,348 4,462 5,136 Operating surplus 950 748 983 Operating profit 699 529 719 Gross margin, % 17.8 16.8 19.1 Operating margin, % 13.1 11.9 14.0 Volume growth, % 2.8¹ 13.3² -2.7¹ 0.2¹ 1Compared with immediately preceding quarter. 2Compared with the same period in the previous year. TISSUE SEKm 2006:1 2005:1 2005:4 Net sales 7,962 7,144 8,109 Operating surplus 850 888 941 Operating profit 300 379 379 Gross margin, % 10.7 12.4 11.6 Operating margin, % 3.8 5.3 4.7 Volume growth, % -1.4¹ 5.7² -2.1¹ 0.2¹ 1Compared with immediately preceding quarter. 2Compared with the same period in the previous year. PACKAGING SEKm 2006:1 2005:1 2005:4 Net sales 8,389 7,642 8,272 Operating 841 surplus 854 898 Operating 418 profit 438 458 Gross 10.2 margin, %¹ 10.2 11.8 Operating 5.1 margin, %¹ 5.2 6.0 Production Liner products, kt 644 666 606 Deliveries Liner products, kt 648 651 588 Corrugated board, million m² 1,096² 1,052² 1,076² ¹ Adjusted for external trading with liner, margins increased by approximately 2 percentage points. ² Volumes do not include volumes from protective packaging and other high-value segments. FOREST PRODUCTS SEKm 2006:1 2005:1 2005:4 Net sales 4,378 3,762 4,071 Publication papers 2,145 1,932 2,067 Pulp, timber and solid-wood products 2,233 1,830 2,004 Operating surplus 919 738 910 Publications papers 426 334 456 Pulp, timber and solid-wood products 493 404 454 Operating profit 577 401 553 Publication papers 205 121 222 Pulp, timber and solid-wood products 372 280 331 Gross margin, % 21.0 19.6 22.4 Publication papers 19.9 17.3 22.1 Pulp, timber and solid-wood products 22.1 22.1 22.7 Operating margin, % 13.2 10.7 13.6 Publication papers 9.6 6.3 10.7 Pulp, timber and solid-wood products 16.7 15.3 16.5 Production Publication papers, kt 390 367 381 Solid-wood products, km³ 399 372 419 Deliveries Publication papers, kt 376 366 370 Solid-wood products, km³ 381 369 380 Quarterly data – Business areas 2006 2005 SEKm I IV III II I NET SALES Personal Care 5,348 5,136 5,026 4,727 4,462 Tissue 7,962 8,109 7,917 7,531 7,144 Packaging 8,389 8,272 8,351 8,094 7,642 ForestProducts 4,378 4,071 3,986 4,116 3,762 Publication papers 2,145 2,067 2,034 1,965 1,932 Pulp, timber and solid-wood products 2,233 2,004 1,952 2,151 1,830 Other 233 301 247 288 232 Intra-group deliveries -910 -748 -787 -770 -724 Total net sales 25,400 25,141 24,740 23,986 22,518 OPERATING SURPLUS Personal Care 950 983 889 809 748 Tissue 850 941 999 892 888 Packaging 854 841 900 919 898 ForestProducts 919 910 853 758 738 Publication papers 426 456 420 330 334 Pulp, timber and solid-wood products 493 454 433 428 404 Other -52 -86 -2,710 -103 -491 Total operating surplus 3,521 3,589 931 3,275 2,781 OPERATING PROFIT Personal Care 699 719 655 571 529 Tissue 300 379 428 391 379 Packaging 438 418 444 455 458 ForestProducts 577 553 516 416 401 Publication papers 205 222 206 113 121 Pulp, timber and solid-wood products 372 331 310 303 280 Other -59 -94 -5,046 -114 -530 Total operating profit 1,955 1,975 -3,003 1,719 1,237 % GROSS MARGINS Personal Care 17.8 19.1 17.7 17.1 16.8 Tissue 10.7 11.6 12.6 11.8 12.4 Packaging 10.2 10.2 10.8 11.4 11.8 ForestProducts 21.0 22.4 21.4 18.4 19.6 Publication papers 19.9 22.1 20.6 16.8 17.3 Pulp, timber and solid-wood products 22.1 22.7 22.2 19.9 22.1 OPERATING MARGINS Personal Care 13.1 14.0 13.0 12.1 11.9 Tissue 3.8 4.7 5.4 5.2 5.3 Packaging 5.2 5.1 5.3 5.6 6.0 ForestProducts 13.2 13.6 12.9 10.1 10.7 Publication papers 9.6 10.7 10.1 5.8 6.3 Pulp, timber and solid-wood products 16.7 16.5 15.9 14.1 15.3 ------------------------------------------------------------------------ [1]First quarter of 2005 includes items affecting comparability, operating expenses SEK -394m, write-downs SEK -31m and tax effects SEK 111m. 1) Actuarial gains and losses from pension calculations are recognized directly in equity.