Interim Report Q3 2015

JANUARY 1 – SEPTEMBER 30, 2015 (compared with same period a year ago)

• Net sales rose 13% (5% excluding exchange rate effects) to SEK 86,276m (76,657)
• Organic sales growth, which excludes exchange rate effects, acquisitions and divestments, was 5%
• Operating profit, excluding items affecting comparability, rose 11% to SEK 9,560m (8,599)
• The operating margin, excluding items affecting comparability, was 11.1% (11.2%)
• Profit before tax, excluding items affecting comparability, rose 13% to SEK 8,864m (7,847)
• Items affecting comparability totaled SEK -2,764m (-513) of which SEK -710m (-470) affect cash flow
• Earnings per share were SEK 5.94 (7.35)
• Return on capital employed, excluding items affecting comparability, was 11.7% (11.5%)
• Cash flow from current operations was SEK 6,944m (5,373)

(Table included in attached pdf)

CEO’S COMMENTS
The third quarter of 2015 showed good organic sales growth, a higher operating profit and a higher operating cash flow compared with the same period a year ago.

The past few months have been eventful, during which we made a number of important, strategic decisions. To further intensify the focus on the Group’s two operations, SCA has decided to initiate a dividing of the Group into two divisions: a Hygiene division and a Forest Products division. As of January 1, 2017, the Forest Products division will expand its quarterly financial reporting. In Forest Products, we have decided to invest in increased capacity for pulp production at the Östrand pulp mill in Sweden. Over time, the investment in Östrand will increase sales and competitiveness and create a world-class cost position and higher margins.

To accelerate growth and the pace of innovation as well as to further strengthen the competitiveness of SCA’s hygiene operations, we have also decided to implement an enhancement of our hygiene organization, effective January 1, 2016. In October we announced that SCA is acquiring Wausau Paper Corp., a North American Away-from-Home tissue company. Wausau Paper’s product portfolio complements SCA’s offerings in North America and gives us access to premium tissue in the region. We expect the acquisition to generate benefits for SCA and our customers. The transaction is subject to Wausau Paper shareholder and regulatory approvals, and is expected to close during the first quarter of 2016.

In Asia, which is an important growth market with a large population and low penetration of hygiene products, we strengthen the collaboration with Vinda by divesting our business in South East Asia, Taiwan and South Korea for integration with Vinda. The transaction enables us to further leverage on our strengths to build a leading Asian hygiene business.

We have continued to address areas for improvement. Against the backdrop of declining global demand for publication papers over several years and weak profitability at the Ortviken paper mill, we intend to close one newsprint machine at Ortviken paper mill in Sundsvall, Sweden. We will also recognize an impairment loss for the mill. We are divesting our baby diaper operation in South Africa, which has had unsatisfactory profitability. In addition, we have addressed our brand valuation in relation to our baby diaper operation in Mexico and the Everbeauty acquisition in Asia, which has entailed impairment losses. We are divesting our ownership in Bromma Business Jet and have recognized costs for this during the third quarter. The sale is in line with SCA’s previous announcement that the Group will not own business jets.

As part of SCA’s ongoing cost-savings program related to the acquisition of Georgia-Pacific’s European tissue operations, in October we closed our tissue production plant in Saint-Cyr-en-Val, France. The closure gave rise to restructuring costs during the third quarter 2015.

Also during the quarter, SCA was included in Dow Jones Sustainability Indices, one of the world’s most prestigious sustainability rankings. SCA was named industry leader in the Household Products sector.

Consolidated net sales for the third quarter of 2015 increased by 9% compared with the same period a year ago. Organic sales growth was 5% as a result of favorable growth for both Personal Care and Tissue. In emerging markets, which accounted for 32% of sales, organic sales growth was 12%, and in mature markets organic sales growth was 3%. During the quarter we introduced eight innovations and product launches under the Drypers, Libero, Tempo, TENA and Tork brands.

Consolidated operating profit for the third quarter of 2015, excluding items affecting comparability and currency translation effects, rose 10% compared with the same period a year ago. The increase is mainly attributable to a better price/mix, higher volumes and cost savings. Raw material costs increased by SEK 758m, mainly due to the stronger U.S. dollar. The operating margin, excluding items affecting comparability, increased by 0.5 percentage points to 11.9%. Operating cash flow increased by 7%. Return on capital employed, excluding items affecting comparability, grew by 1.4 percentage points to 12.8%.

Both Personal Care and Tissue showed a higher operating profit for the third quarter of 2015 compared with the same period a year ago. Operating profit was favorably affected by a better price/mix, higher volumes and cost savings. Higher raw material costs had a negative impact on earnings mainly owing to the stronger U.S. dollar. Operating profit for Forest Products rose mainly as a result of higher prices (including exchange rate effects), cost savings and lower raw material and energy costs.

For further information, please contact:
Fredrik Rystedt, CFO and Executive Vice President, +46 8 788 51 31
Johan Karlsson, Vice President Investor Relations, Group Function Communications, +46 8 788 51 30
Linda Nyberg, Vice President Media Relations and Online Communications, Group Function Communications, +46 8 788 51 58
Joséphine Edwall-Björklund, Senior Vice President, Group Function Communications, +46 8 788 52 34

 
NB
SCA discloses the information provided herein pursuant to the Securities Markets Act. This report has been prepared in both Swedish and English versions. In case of variations in the content between the two versions, the Swedish version shall govern. Submitted for publication at 08:00 CET on October 29, 2015. This report has not been reviewed by the company’s auditors.