Interim Report Q3 2020

• The publication paper market has been structurally declining for a long time and SCA decided in September to discontinue publication paper operations at the Ortviken industrial site. The production will be phased out during the first quarter of 2021. The discontinuation resulted in one-off items with a negative effect on EBITDA of SEK -1,120m.
• The company is investing in an increased production of chemical thermomechanical pulp (CTMP). Production will increase from the current 100,000 tonnes to 300,000 tonnes per year and will be moved from Östrand to Ortviken

JANUARY 1 – SEPTEMBER 30, 2020
(compared with January 1 – September 30, 2019)

• Net sales declined 10% to SEK 13,818m (15,279). The decrease was mainly related to lower selling prices.
• EBITDA amounted to SEK 1,943m (4,264), primarily related to the negative earnings impact from the discontinuation of publication paper operations of SEK -1,120m
• EBITDA, excluding the effect of one-off items related to the discontinuation of publication paper operations, amounted to SEK 3,063m (4,264), corresponding to an EBITDA margin of 22.1% (27.9). The decrease was mainly due to lower selling prices.
• Operating profit was SEK 61m (3,066). The decrease was primarily related to the negative earnings impact from the discontinuation of publication paper operations of SEK -1,792m.
• Operating cash flow amounted to SEK 1,731m (2,339)
• Earnings per share was SEK -0.02. Excluding the effect of one-off items related to the discontinuation of publication paper operations, earnings per share was SEK 2.02 (3.37).

JULY 1 – SEPTEMBER 30, 2020
(compared with April 1 – June 30, 2020)

• Net sales declined 7% to SEK 4,338m (4,687), mainly related to lower delivery volumes
• EBITDA, excluding the effect of one-off items related to the discontinuation of publication paper operations, amounted to SEK 1,032m (1,001), corresponding to an EBITDA margin of 23.8% (21.3)
• Operating cash flow increased to SEK 1,118m (273)
   

COMMENTS ON THE FINANCIAL STATEMENTS

In line with the Group’s strategy, SCA decided during the quarter to phase out its exposure to the structurally declining publication paper market. The company will therefore close down Ortviken’s three publication paper machines during the first quarter of 2021. Demand for publication paper in Western Europe has declined by approximately 5% per year since 2008, and by 30–40% during the current pandemic.

SCA has decided to invest SEK 1.45bn in annual production of 300,000 tonnes of CTMP pulp at Ortviken, where parts of the existing infrastructure will be used. SCA has also signed an agreement with the textile recycling company Renewcell, which is planning to establish textile recycling at Ortviken. SCA will be Renewcell’s landlord for its operations at the site and a supplier of services.

During the third quarter, SCA entered into an agreement to acquire forest in Latvia. The acquisition comprises a land area of approximately 19,150 hectares, of which approximately 13,100 hectares of forest land. The acquisition strengthens SCA’s opportunities to source timber in the region in the long term.

In response to COVID-19, SCA has taken a number of measures to protect risk groups, reduce the spread of the virus and ensure that production and operations are maintained. During the quarter, a focus on cost control resulted in strong cash flow and a continued solid financial position and liquidity.

Excluding the effect of one-off items related to the discontinuation of publication paper operations, profit for the third quarter of 2020 improved slightly compared with the preceding quarter, but declined year on year due to lower selling prices across all segments, an unplanned production stop at Östrand and a positive one-off item previous year from the sale of the terminal in Rotterdam.

The supply of wood to SCA’s industries was stable during the quarter. The price of sawlogs and pulpwood remained stable.

The market for solid-wood products remained strong during the quarter, driven by high demand in the building materials trade in the US, Scandinavia and the rest of Northern Europe. Market prices increased compared with the preceding period.

Delivery volumes in the Pulp segment decreased compared with the preceding quarter, due primarily to an unscheduled production stop in July that limited production volume. Following the restart, production has been stable and at a good level.

The average selling price for kraftliner was lower than the preceding quarter as a result of a price reduction during the quarter. A planned maintenance stop was carried out at Munksund during the period. The expansion project at Obbola is progressing in line with the schedule and budget.

Climate change is one of the greatest challenges of our time. SCA’s operations are climate-positive and contribute to a fossil-free and circular society. SCA strives to increase its contribution, and has established a long-term Group target to increase the company’s positive climate benefit from 10 to 15 million tonnes of CO2 per year by 2030.
 

INVITATION TO PRESS CONFERENCE ON THE INTERIM REPORT FOR THE THIRD QUARTER OF 2020

Members of the media and analysts are hereby invited to attend a press conference where this interim report will be presented by the President and CEO, Ulf Larsson, and CFO, Toby Lawton.

Time: Friday, October 30, 2020 at 10:00 a.m.

Venue: Kreugersalen, Tändstickspalatset, Västra Trädgårdsgatan 15 in Stockholm, Sweden.

The press conference will be webcast live at www.sca.com. It is also possible to participate by telephone by calling:

Sweden: +46 (0)8 5069 2180
UK: +44 (0)2071 928000
US: +1 631 510 7495

Specify “SCA” or the conference ID: 1789554.

For further information, please contact
Toby Lawton, CFO, +46 (0)60 19 31 09
Josefine Bonnevier, Investor Relations Director, +46 (0)60 19 33 90
Björn Lyngfelt; SVP Communications. +46 (0)60 19 34 98

 
Please note:
This is information that SCA is obliged to make public pursuant to the EU Market Abuse Regulation and 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. The information was submitted for publication, through the agency of the contact person set out below, on October 30, 2020 at 08:00 a.m. CEST. The report has been reviewed by the company’s auditors.

Björn Lyngfelt, SVP Communications, +46 (0)60 19 34 98
 

The core of SCA’s business is the forest, Europe’s largest private forest holding. Around this unique resource, we have built a well-developed value chain based on renewable raw material from our own and others’ forests.
We offer paper for packaging and print, pulp, wood products, renewable energy, services for forest owners and efficient transport solutions.
2019 the forest products company SCA had approximately 4,000 employees and sales amounted to approximately SEK 19.6 bn. SCA was founded in 1929 and has its headquarters in Sundsvall, Sweden. More information at www.sca.com.