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"There is growing demand for PEFC certified products, both sawn timber and fiber-based products. Obtaining PEFC certification for the management of our forest holdings allows us to satisfy the demand from an increasing number of customers specifying PEFC," said Mats Sandgren, President of SCA Skog.

PEFC certification was conducted simultaneously with this year's FSC audit by SP Technical Research Institute of Sweden. The certification is valid for all SCA Skog's five forest districts.

PEFC's sustainable forest management criteria are large parts aligned with FSC's criteria. In some areas, however, they require greater commitment than before, SCA reported. SCA must, among other things, require contractors involved in harvesting, silviculture and planning to obtain PEFC contractor certification to continue to receive work assignments from SCA.

"We congratulate SCA for achieving PEFC certification and for raising the bar for its sustainable forest management activities even further," commented Ben Gunneberg, Secretary General of PEFC International.

PEFC, the Programme for the Endorsement of Forest Certification, is an international not-for-profit, non-governmental organization dedicated to promoting sustainable forest management through independent third party certification.

SCA Skog is responsible for forestry management of SCA's extensive forest holding and wood procurement to SCA's Swedish forest industry operations. SCA´s forest holding comprise 2.6 million hectares in northern Sweden, of which 2 million hectares is managed for timber production.

SCA Skog is part of SCA's Forest Products business area, which produces publication papers for newspapers, magazines and catalogues, as well as pulp, solid-wood products and renewable energy, in addition to offering cost-efficient transport solutions to SCA's units.

SCA has now completed the previously announced transaction of creating a joint venture in Australasia.

The joint venture is formed through the sale of 50% of the SCA operations in Australasia to the Australian-based Pacific Equity Partners (PEP). The finalisation of the transaction follows approval by the relevant authorities.

The first press release regarding the transaction was published on 4 November 2011

SCA is a global hygiene and paper company that develops and produces personal care products, tissue, packaging solutions, publication papers and solid-wood products. Sales are conducted in some 100 countries. SCA has many well-known brands, including the global brands TENA and Tork. Sales in 2010 amounted to SEK 107 billion (EUR 11.3 billion). SCA has approximately 45,000 employees. More information at www.sca.com

SCA will invest a total of SEK 540m to strengthen kraftliner production in Munksund, Piteå, Sweden. The intention is to upgrade the paper machine and refurbish the soda-recovery boiler.

The main aim of the investment is to increase production of the share of value-added products, such as White-Top Kraftliner, which, for example, is used for packaging of fast-moving consumer goods with high-quality print.

As a result of the SEK 540m investment, Munksund will be able to increase its total annual kraftliner capacity to 415,000 tonnes from the current level of 360,000 tonnes. The bulk of the investment, SEK 400m, will be used to upgrade the paper machine. The remaining SEK 140m will finance the replacement of the pressure vessel in the soda-recovery boiler, which will enhance heat recovery and enable increased future output.

The upgraded equipment is expected to be fully operational during 2013.

“The investment facilitates increased production of White-Top Kraftliner, a strong speciality paper for the corrugated-board industry which is experiencing a high growth rate. The investment is in line with the company’s strategy; which is to increase production and sales of products and services with a higher degree of refinement that add value for our customers,” says Jan Johansson, SCA’s President and CEO.

SCA reorganizes hygiene operations for increased efficiency, market presence and growth

To support its long-term strategy and strengthen competitiveness, SCA is reorganizing its global hygiene operations. The new organization will contribute to increased efficiency, market presence and growth.

SCA’s European hygiene operations will be organized in three business units: AFH Professional Hygiene Europe, which will be headed by Sune Lundin, currently President for SCA Americas; Consumer Goods Europe, which will be led by Magnus Groth, currently President for SCA Tissue Europe; Incontinence Care Europe, which will be headed by Margareta Lehmann, currently Regional Director NorthWest Europe AFH, SCA Tissue Europe.

There will be a new business unit for Middle East, India, Africa (MEIA), which will be led by Thomas Wulkan, currently President for SCA Personal Care Europe; a new Global Hygiene Supply Unit, which will be headed by William Ledger, currently Vice President Supply Chain, SCA Tissue Europe; and a new Global Business and Service Support Unit, which will be led by Robert Sjöström, in addition to his present position as Senior Vice President, Strategy and Business Development.

The business unit for SCA Americas will be headed by Don Lewis, currently President for SCA AFH Tissue North America. Christoph Michalski will continue as President for the Global Hygiene Category Unit, and Ulf Söderström will continue as President for the business unit SCA Asia Pacific (APAC).

The new hygiene organization will be effective as of 1 January 2012. The Presidents for the above new units will be members of SCA’s Corporate Senior Management Team.

“The new organization will enable us to further leverage on our global scale, making us more efficient. It will also empower us to act as an even closer local partner to customers. By strengthening our global market presence, it will facilitate our capitalizing on demographic, economic and consumer-lifestyle changes, especially in emerging markets,” says Jan Johansson, SCA’s CEO and President.

SCA’s external financial-reporting structure is not affected by the organizational change.

SCA has delivered a binding offer to acquire Georgia-Pacific´s European tissue operations, with sales in 2010 amounting to EUR 1.25bn (SEK 11.9bn). The offered price is EUR 1.32bn (SEK 12.6bn). Georgia-Pacific´s acceptance of this offer is subject to consultations with works councils where appropriate.

“The deal is a strategic fit and will strengthen our product offering and geographic reach in Europe. It also leads to substantial synergies”, says Jan Johansson, President and CEO of SCA.

Georgia-Pacific’s European tissue operations have EBIT margins that are on a similar level as for SCA´s tissue business. The annual synergies are estimated at EUR 125m, with full effect in three years after closing. Related costs are estimated at EUR 130m. Already in year one the transaction is estimated to contribute to an increase of earnings per share and cash flow. With fully realized synergies earnings per share are expected to increase with approximately SEK 1.70.

SCA has received long-term committed credit facilities. The financing is within the Group´s target for debt/equity ratio.

Georgia-Pacific has a well-established presence in Europe in both away-from-home and consumer tissue products. Their products in both segments are in particular marketed with the well-known Lotus brand.

Consumer tissue accounts for some 60% of total sales and away-from-home tissue accounts for approximately 30% of sales. Personal care products such as cotton pads and facial cleansing wipes account for some 5%. In the consumer tissue business, close to 70% of sales are branded products and the remainder are private label products.

Georgia-Pacific’s European tissue operations have approximately 5,000 employees and 15 production sites in seven countries.
The transaction will be subject to customary consultation with employee representatives and will also be subject to approval by relevant competition authorities.

SCA has decided to form a joint venture partnership for its existing operations in Australasia with the Australian company Pacific Equity Partners (PEP). SCA and PEP Fund IV will each hold 50% of the company.

Working with local partners and in joint ventures in selected markets is a strategy that works well for SCA. This deal in Australasia enables a more efficient financing as well as it increases the speed of development of the operations.

SCA’s operations in Australia, New Zealand and Fiji employ about 1,500 people. In 2010, this business had net sales of SEK 4,400m, with some 70% related to tissue and some 30% related to personal care products. In the region, SCA manufactures and markets a number of leading brands including TENA, Tork, Sorbent, Purex, Libra, Treasures, Deeko and Handee Ultra.

The transaction involves a deconsolidation of the business, which will be financially reported as a joint venture according to the equity-share method.

In connection with the refinancing of the business and the divestment of 50% of the equity, SCA will receive SEK 3,200m. Also, there will be a SEK 700m write-down of the tangible book value, which will impact the result in Q4 2011.

“This deal strengthens our operations in Australia and New Zealand, and it secures our access to local competence and the local capital market. This enables a faster development of the operations”, says Jan Johansson, President and CEO of SCA.

The deal will be subject to approval from relevant authorities. Closing is expected to happen within two to three months.

SCA hosted the Capital Markets Day in Stockholm on the 19th September. The strategy of recent years of focusing on costs, cash flow, capital efficiency and innovation remains firmly in place. Increased growth was added to the Group’s strategic agenda in 2010.

“SCA has implemented key efficiency-enhancement measures and boosted the pace of its new product launches. We have managed to grow both in mature and emerging markets. Our global TENA and Tork brands, which each generate more than EUR 1 billion in annual sales, have strengthened their market shares. To capitalise on the growth opportunities in the hygiene operation, we have conducted acquisitions and investments in a number of growth markets, including Brazil, Russia, Turkey, Mexico and Argentina,” said Jan Johansson.

Jan Johansson pointed out that the completed action programmes have reduced the cost base and made SCA a stronger company than it previously was. Focusing on cash flow has led to lower net debt and improved the debt payment capacity, giving SCA better means to grow.

SCA will grow by reinforcing existing and establishing new market-leading positions. The aim is to reduce the number of local brands and increase the number of global brands.

“SCA is currently the world’s third largest hygiene company and hygiene products now account for 60% of the Group’s sales. The aim is to continue to grow by capitalising on the growth opportunities created by the global population increase, improved prosperity, an aging population and greater market penetration. We can also see a rising consumer interest in convenience and sustainability,” said Jan Johansson.

In the short term, it is difficult to assess the impact of the global economic situation. Today, no changes can be seen among our customers. Demand is strong in all business areas.

SCA’s Group-wide financial target of a return on capital employed of 13% over the course of an economic cycle remains in place.

Attached documents

• CMD on efficiency enhancements and growth (PDF, 18 kB)
• Read SCA capital market day 2011 agenda (pdf)
• Watch SCA capital market day 2011 webcast (flash) (Flash)
• Watch SCA capital market day 2011 webcast (wm) (Flash)
• Download SCA capital market day 2011 press images (flickr) (Photos)

SCA is investing SEK 350 m in Ortviken paper mill in Sundsvall. The investment will increase the mill’s capacity to produce improved newsprint qualities and strengthens SCA’s profile as a leader in the environmental field.

Ortviken’s PM5 paper machine is being rebuilt to produce higher quality paper and the capacity to produce high-bright pulp is being increased. Additional investments are being made in Ortviken’s wastewater treatment plant.

“We are making these investments to expand the flexibility of our product mix thus enabling ourselves to better meet customers’ requirements for products with higher levels of brightness,” says Kristina Enander, Mill Manager of SCA Ortviken.

Ortviken only utilises fresh wood fibre as raw material, which provides a stronger grade of paper with a higher level of brightness than recycled fibre.

“These investments enable us to enhance utilisation of our raw material,” says Kristina Enander. “Spruce pulpwood from North Central Sweden is the best raw material in the world for producing publication paper based on mechanical pulp. In addition, we can also draw greater benefit from the investments we have made in new technology for mechanical pulp production.”

The investments will also strengthen SCA’s profile as a leader in the environmental field. SCA was among the first to offer totally chlorine-free products and was one of the world’s first paper-manufacturers to offer substantial volumes of FSC certified publication paper. In later years, the use of renewable biomass for energy production has contributed to products from SCA Ortviken having a uniquely low carbon footprint.

SCA is acquiring the Brazilian hygiene products company Pro Descart. Consideration for the deal amounts to SEK 450m on a debt-free basis. The company has annual sales of SEK 360m.

Brazil is the most highly populated country in South America, with 190 million inhabitants and a favourable economic growth. The market for hygiene products has a good growth potential, this applies especially for incontinence care products, having shown double digit growth.

“I am very happy that we are now establishing ourselves in Brazil, which is also of strategic significance,” comments Jan Johansson, President and CEO of SCA. “We have for some time worked on finding the right solution for entering this important emerging market. With this acquisition of Pro Descart, we now have a presence throughout Latin America.”

Pro Descart is a family-owned company focused on incontinence care products, but also sells baby diapers and wet wipes. The company, with approximately 400 employees, has manufacturing in the Sao Paulo area.

“Pro Descart has a number two position in Brazil’s incontinence care market. In view of the fact that SCA is the world leader within incontinence protection with its TENA brand, we have good opportunities to develop our new Brazilian operation,” adds Jan Johansson.

SCA will invest SEK 460m in a tissue machine upgrade in the US. A decision has also been made to rebuild a paper machine in Ortviken for the manufacture of improved newsprint, an investment totalling SEK 350m.

To meet demand for premium products in the US market, SCA has decided to invest in an upgrade of an existing tissue machine. The machine today has a capacity of 70,000 annual tons, which will remain unchanged. Production is estimated to commence during late 2012 or early 2013.

A newsprint paper machine in Ortviken, Sundsvall, will be rebuilt to allow production of improved newsprint. The machine’s capacity is currently 245,000 annual tons, which will increase marginally since it is possible to produce higher density paper at the same speed. At the same time, capacity for pulp bleaching and water treatment will increase.

It is estimated that the rebuilt machine in Ortviken will commence operation during the third quarter of 2013.