SCA report for Q4

January 28, 2010 by timbercommunity

SCA's report received a negative reception in the stock market. B shares had, dropped by 6.3 percent to SEK 96:50 at the end of the day.

                                         Q4, 2009                    Q4, 2008
Turnover                            27.507                      28.159
Operating profit                 1.936                         1.838
Profit before tax                 1.648                         1.150
Profit after tax                    1.254                          1.426
Earnings per share             1.72 SEK                     2.02 SEK
Dividend per share              3.70 SEK                     3.50 SEK

Figures SCA in millions SEK unless otherwise stated. *

Net sales up slightly, totalling SEK 110,857m (110,449)
· Profit before tax, excluding restructuring costs, was SEK 8,004m (6,237)
· Restructuring costs in Packaging amounted to SEK 1,458m (0)
· Profit for the year, excluding restructuring costs, was SEK 5,906m (5,598)
· Earnings per share were SEK 6.78 (7.94)
· Cash flow from current operations was SEK 11,490m (3,810)
· The Board of Directors proposes a 5.7% increase of the dividend, to SEK 3.70
per share (3.50)

The result could be compared with the profit of 1.150 million SEK corresponding period in 2008. Analysts had on average expected a profit of 2.058 billion kronor, according to Reuters. Turnover amounted to 27.507 billion kronor, compared to 28.159 billion kronor a year earlier.  The Board proposes that the dividend be raised to 3.70 per share.

SCA CEO'S COMMENTS

The favourable trend for the SCA Group as a whole continued during the fourth quarter. Operating profit excluding restructuring
costs improved by 13% for the full year compared with a year ago and by 40% for the fourth quarter compared with a year ago.
Profit before tax rose 28% to SEK 8,004m, and by 98% for the fourth quarter, to SEK 2,280m.
 

All parts of the Group were involved in improving cash flow in 2009, which was further strengthened during the fourth quarter.
Working capital continued to decrease through ongoing reductions of inventories. This, together with a higher operating surplus and a lower level of current capital expenditures, helped strengthen cash flow from current operations, which for the full year amounted to SEK 11,490m, compared with SEK 3,810m a year ago. To strengthen organic growth, expansion investments totalling SEK 3,031m have been made in Russia and Mexico, among other areas. SCA's net debt has decreased to SEK 40,430m (47,002).

Demand for hygiene products
remained stable during the fourth quarter, and operating profit strengthened by 56% for Tissue and by 27% for Personal Care compared with the same period a year ago. While the large European tissue operations for the most part managed to offset higher raw material costs in recent months by a larger volume of deliveries and a better product mix, prices of recycled fibre rose sharply during the final month of the year in the USA and put pressure on margins there. In the Personal Care business area, operating profit and the margin improved during the fourth quarter due to favourable performance
for the Tena business (incontinence care products) in both North America and Europe.

As per the end of December, the action programme in Packaging had delivered savings of slightly more than SEK 300m, and all11 of the announced plant closures have been carried out. The decline in demand has ceased, and a recovery of liner prices has begun. The operating result for Packaging was positive in the seasonally weak fourth quarter.

Despite a weak market for publication papers, operating profit for Forest Products improved by 13% compared with a year ago and by 28% for the fourth quarter compared with a year ago.
 
Outlook 2010 SCA

The outlook for SCA in 2010 is cautiously optimistic. Demand for packaging is expected to strengthen, and in Europe there are indications of market growth of 2%-3%. However, several factors point to a relatively weak start to 2010. On the forest products side, we have noted a weak market with lower prices for publication papers, but a cautious recovery in the construction sector, where the market balance for solid-wood products has now improved. The market outlook for SCA's hygiene categories appears stable for the most part, with continued favourable growth potential in Russia, Latin America and Southeast Asia, among other
markets.

SCA GROUP

MARKET/EXTERNAL ENVIRONMENT

The retail market in Europe for incontinence care products continues to grow. In the USA, the
financial crisis has given rise to greater price sensitivity among consumers, and private label
products, representing one-third of the market, had the largest growth. This trend can also be
seen in Europe, where the economy segment is growing for the baby diapers and tissue
categories. In the healthcare sector, rising cost consciousness has been noted in step with
the weakening of public sector finances in several countries. The away-from-home (AFH)
market declined as a whole in 2009 due to a downturn for the hotel, restaurant and travel
industries in Europe and the USA.

Weak demand in the packaging industry levelled out during the fourth quarter, and demand
for the full year was down approximately 6% from a year ago. Prices for liner continued to
rise also during the final month of the year, but failed to fully compensate for previous price
declines in 2009. Producer inventories are in balance in the wake of production cuts
corresponding to approximately 15% of total capacity.

Demand for publication papers remains weak in Europe. In 2009, demand for LWC and SC
paper was 22% and 9% lower, respectively, than a year ago, while demand for newsprint
was down 14%. Prices for newsprint were kept stable in 2009, but overcapacity in the
industry is giving rise to strong price pressure in 2010.

The market balance for solid-wood products is relatively favourable as a result of production
limitations and closures of sawmills carried out by the industry. Prices are expected to
stabilise at the current level during the first half of 2010.

SALES AND EARNINGS SCA

Net sales in SCA were up slightly compared with a year ago and amounted to SEK 110,857m
(110,449). Price changes had a negative impact on sales, by 1%. The total change in volume
was negative and reduced sales by 6%, above all due to the downturn for the packaging
operations, of which the effect of the divestment of the packaging operations in the UK and
Ireland as well as the closure of the New Hythe testliner mill was 2 percentage points.
Exchange rate movements had a favourable effect on net sales, by 7%.

Operating profit in SCA, excluding restructuring costs of SEK -1,458m, increased by SEK 1,094m to
SEK 9,648m (8,554). Lower costs for raw materials and energy increased earnings, while
lower volumes and higher other manufacturing costs reduced earnings. Costs for sales and
administration rose as a result of a high level of campaign activity and greater marketing
initiatives.
 
Exchange rate movements increased sales and administrative costs by approximately SEK 1,000m. Total exchange rate movements had a favourable impact on operating profit, by 6%. Financial items amounted to SEK -1,644m (-2,317).
Profit before tax, excluding restructuring costs, increased by 28% to SEK 8,004m (6,237).
Exchange rate movements had a favourable impact on pre-tax profit, by 5%. The tax
expense excluding restructuring costs was SEK -2,098m (-639).
Profit for the year, excluding restructuring costs of SEK -1,076m after tax, was SEK 5,906m
(5,598), and earnings per share were SEK 6.78 (7.94).

Fourth quarter SCA 2009 compared with fourth quarter 2008
Net sales decreased by 2% to SEK 27,507m (28,159). Lower prices, particularly for
Packaging, reduced sales by 2%. Exchange rate movements had a marginally favourable
impact on sales.

Operating profit excluding restructuring costs of SEK -632m rose 40%. Lower raw material
and energy costs had a favourable impact on earnings, while lower prices hurt earnings.
Synergy effects from the acquisition of the European tissue operations and the ongoing
restructuring programmes in the packaging operations had a favourable effect on earnings.
Exchange rate movements had a favourable impact on operating profit, by 3%.
Profit before tax, excluding restructuring costs, improved by 98% to SEK 2,280m (1,150).
The tax expense excluding restructuring costs was SEK -553m (276).