SCA Interim Report Q3 2019

Financial News
Typography

JANUARY 1 – SEPTEMBER 30, 2019
(compared with January 1 – September 30, 2018)

  • Net sales increased 10% to SEK 15,279m (13,829), mainly related to higher delivery volumes due to the continued ramp-up of the expanded Östrand pulp mill
  • EBITDA increased 13% to SEK 4,264m (3,758). The improvement was mainly related to higher delivery volumes from the expanded Östrand pulp mill and positive exchange rate effects, which was offset by lower selling prices.
  • EBITDA margin was 27.9% (27.2)
  • Operating cash flow increased to SEK 2,339m (2,007)
  • Earnings per share amounted to SEK 3.37 (3.99). Adjusted for a non-recurring item related to deferred tax in 2018, earnings per share increased 5%. 

JULY 1 – SEPTEMBER 30, 2019 (compared with April 1 – June 30, 2019)

  • Net sales decreased 5% to SEK 4,975m (5,228), mainly related to lower selling prices in Pulp, Paper and Wood
  • EBITDA amounted to SEK 1,364m (1,340). Adjusted for a positive non-recurring item of SEK 78m (0) from the sale of the terminal in Rotterdam, earnings declined 4%. The decrease was mainly explained by lower selling prices.
  • Operating cash flow increased 77% to SEK 1,094m (619) and net debt declined SEK 1,566m to SEK 8,169m.
  • SCA invests in a new paper machine for the production of kraftliner at its Obbola paper mill in Umeå. Production in Obbola will increase from todays 450,000 tonnes to 725,000 tonnes per year.
  • SCA plans at year-end to change the accounting method for valuing the company’s forest holdings so that it is based on the market value calculated on the basis of transactions in areas where SCA owns forest. Currently available transaction prices and estimated standing volume indicate a market value of SEK 63-67 billion, compared with the current book value of SEK 34 billion.
      

COMMENTS ON THE FINANVIAL STATEMENTS 

Operating profit for the third quarter of 2019 improved compared with the preceding quarter. Compared to the same quarter last year earnings declined.  

Demand for SCA’s products in the quarter was generally weaker than in the preceding quarter and market prices declined in all product areas. SCA has a continued strong focus on cost control and cash flow. For the first nine months of 2019, operating cash flow rose 17% while net debt declined 16% during the quarter. 

SCA’s wood consumption continued to increase due to the continued ramp-up of the Östrand pulp mill. Prices for pulpwood and timber remained stable during the quarter. 

Wood reported stable consumption, although a high level of supply led to a further fall in selling prices. 

Within Pulp, work continues to trim the mill toward full capacity. The average price was lower compared with the preceding quarter. Demand for long-fiber pulp improved slightly during the quarter and inventory levels declined. However, inventory levels for short fiber pulp remains high. 

After a period of falling prices, kraftliner prices have remained stable during the third quarter, although lower than the second quarter. Demand for publication paper declined during the quarter and prices fell.  

In light of the price level of forest land in a number of large and recently completed forest land transactions, SCA has reviewed the method and assumptions for valuation of the company’s forest land in its balance sheet. The review shows that a large number of forest transactions take place in areas where SCA owns land, and that the value of larger forest transactions is generally in line with the values of smaller and mid-sized forest transactions.  

SCA plans at year-end to change the accounting method for valuing the company’s forest holdings so that it is based on the market value calculated on the basis of transactions in areas where SCA owns forest. Currently available transaction prices and estimated standing volume indicate a market value of SEK 63-67 billion, compared with the current book value of SEK 34 billion. 

SCA announced in September 2019 that the company is building a new paper machine for the production of kraftliner at its Obbola paper mill in Umeå. Production in Obbola will increase from the current 450,000 tonnes of kraftliner to 725,000 tonnes per year to meet an expected increase in demand for renewable packaging. The total investment totals approximately SEK 7.5bn over a five-year period.


Source: SCA

 

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