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MarketScreener Homepage  >  Equities  >  NASDAQ OMX STOCKHOLM  >  Svenska Cellulosa    SCA B   SE0000112724

SVENSKA CELLULOSA

(SCA B)
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Svenska Cellulosa : 2020 Q3 Interim Report

10/30/2020 | 05:30am EST

Q32020

  • 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 (see page 5).
  • 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-September 2020 compared with January-September 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 (see page 5)
  • 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 (see page 5).
  • 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-September 2020 compared with April-June 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)

Quarter

Jan-Sep

SEKm

2020:3

2020:31

2019:3

%2

2020:2

%2

2020

20201

2019

%2

Net sales

4,338

4,338

4,975

-13

4,687

-7

13,818

13,818

15,279

-10

EBITDA

-88

1,032

1,364

-24

1,001

3

1,943

3,063

4,264

-28

EBITDA margin (%)

-2.0

23.8

27.4

21.3

14.1

22.1

27.9

Operating profit

-1,168

624

955

-35

600

4

61

1,853

3,066

-40

Net Profit

-958

475

757

-37

459

3

-16

1,417

2,369

-40

Earnings per share SEK

-1.36

0.68

1.08

0.65

-0.02

2.02

3.37

Operating cash flow

1,118

1,118

1,094

273

1,731

1,731

2,339

Net Debt / EBITDA (LTM)

2.0x

1.4x

2.1x

2.0x

1.4x

  1. Excluding the effect of one-off items related to the discontinuation of publication paper operations in Q3 2020 (see page 5)
  2. Comparison to earnings excluding the effect of one-off items related to discontinuation of publication paper operations in Q3 2020

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

2

SUMMARY OF THE THIRD QUARTER OF 2020

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 (see page 5).

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 (see page 6). 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 (see page 6).

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 (see page 6).

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 (see page 4).

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 in the 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 (see page 6).

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

Change in net sales (%)
2009 2020:3
vs vs 1909 2019:3
Note: EBITDA 2020:3 excluding the discontinuation of publication paper operations and 2019:4 excluding the impact of the changed accounting method for the valuation of forest assets

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

3

Net sales

SEKm

5,500

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2019:3 2019:4 2020:1 2020:2 2020:3

GROUP

SALES AND OPERATING PROFIT

January-September 2020 compared with January-September 2019

Net sales amounted to SEK 13,818m (15,279), a decrease of 10%, of which price/mix accounted for -9%, volume for -2%, currency for 2% and acquisitions/divestments for -1%. The decrease was mainly related to lower selling prices in all segments and lower delivery volumes in publication paper, which were offset by favorable exchange rate effects. The merger with Groupe ISB during the first quarter of 2019, within Wood, had a negative effect on net sales, since the merged company is not consolidated in SCA.

EBITDA & margin

SEKm

1,400

1,200

1,000

800

600

400

200

0

2019:3

2019:4

2020:1

2020:2

2020:3

  • EBITDA decreased to SEK 1,943m (4,264), primarily related to the negative earnings impact from the discontinuation of publication paper operations of SEK -1,120m (see page 5).

35

30

EBITDA, excluding the effect of one-off items related to the discontinuation of publication paper

25

operations, decreased 28% to SEK 3,063m (4,264), corresponding to an EBITDA margin of 22.1%

20

(27.9). The decrease was primarily attributable to lower selling prices in all segments and higher

15 costs for planned maintenance stops of SEK 130m (63), which were offset by lower raw material

10 costs and positive exchange rate effects. The decline was also attributable to one-off items in SCA

5 Wood France totaling SEK 0m (90), which increased earnings during the first quarter of 2019 and a

0 positive one-off item of SEK 0m (78) from the sale of the terminal in Rotterdam during the third quarter of 2019.

Total

-10

-13

Price/mix

-9

-4

Volume

-2

-10

Currency

2

1

Acquistion and

xxdivestment

-1

0

Operating profit, excluding the effect of one-off items related to the discontinuation of publication paper operations, amounted to SEK 1,853m (3,066).

July-September 2020 compared with July-September 2019

Net sales decreased 13%, of which price/mix accounted for -4%, volume for -10%, currency for 2020:3 1% and acquisitions/divestments for 0%, and amounted to SEK 4,338m (4,975). The decline 2020:2vs was mainly attributable to lower delivery volumes in publication paper and lower selling prices

-7 for pulp and paper.

-1 EBITDA decreased to SEK -88m (1,364), primarily related to the negative earnings impact from -5 the discontinuation of publication paper operations of SEK -1,120m (see page 5).

-1

EBITDA, excluding the effect of one-off items related to the discontinuation of publication paper

0 operations, amounted to SEK 1,032m (1,364), corresponding to an EBITDA margin of 23.8% (27.4). The decrease was primarily attributable to lower selling prices, lower delivery volumes in publication paper, higher costs for planned maintenance stops of SEK 62m (0) and a positive non-recurring effect of SEK 0m (78) from the divestment of the terminal in Rotterdam in the preceding year. Earnings were positively impacted by lower raw material costs.

Operating profit, excluding the effect of one-off items related to the discontinuation of publication paper operations, amounted to SEK 624m (955).

July-September 2020 compared with April-June 2020

Net sales decreased 7%, of which price/mix accounted for -1%, volume for -5%, currency for

-1% and acquisitions/divestments for 0%, and amounted to SEK 4,338m (4,687). The decrease was mainly attributable to lower sales volumes in wood and pulp.

EBITDA decreased to SEK -88m (1,001), primarily related to the negative earnings impact from the discontinuation of publication paper operations of SEK -1,120m (see page 5).

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). Higher prices for solid-wood products and seasonally lower personnel costs due to the vacation period had a positive impact on earnings. An unplanned production stop at Östrand in July had a negative impact on earnings. The cost of planned maintenance stops amounted to SEK 62m (68).

Operating profit, excluding the effect of one-off items related to the discontinuation of publication paper operations, amounted to SEK 624m (600).

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

4

Operating cash flow

SEKm 1,200

1,000

800

600

400

200

0

2019:3 2019:4 2020:1 2020:2 2020:3

CASH FLOW

January-September 2020 compared with January-September 2019

The operating cash surplus excluding the effect of discontinuation of publication paper operations in Q3 amounted to SEK 2,168m (3,650). The cash flow effect of changes in working capital was SEK 523m (-326). Current capital expenditures, net, totaled SEK -926m(-762). Operating cash flow was SEK 1,731m (2,339) (see page 22).

Strategic capital expenditures during the year mainly relate to the expansion of Obbola and amounted to SEK -1,157m(-362).The cash flow effect of acquisitions amounted to SEK 0m (-857) and of divestments to SEK 0m (370). Cash flow for the period was SEK 1,863m (-157) (see page 16).

FINANCING

At September 30, 2020, net debt totaled SEK 8,294m, a decrease during the quarter of SEK 1,102m. The decrease in net debt was mainly related to the strong cash flow during the quarter. Net debt in relation to EBITDA, adjusted for one-off items (see page 5), amounted to 2.0x compared with 1.4x in the year-earlier period.

At September 30, 2020, gross debt amounted to SEK 11,317m, with an average maturity of approximately five years (including the lease liability). The loan structure consists of short-term commercial paper as well as bonds and bilateral bank loans. The lease liability amounted to SEK 792m, a decrease by SEK 19m compared with the preceding quarter. Unutilized credit facilities amounted to SEK 7,398m, of which SEK 1,600m with maturity in 2021, SEK 5,000m with maturity in 2024 and SEK 798m with maturity in 2023-2031. Cash and cash equivalents amounted to SEK 2,306m at the end of the period, an increase by SEK 2,071m during the quarter. In the January-September 2020 period, financial items totaled SEK -83m compared with SEK -101m in the year-earlier period.

TAX

January-September 2020 compared with January-September 2019

The Group's tax amounted to SEK 6m (-596).One-off items related to the discontinuation of publication paper operations resulted in deferred tax of SEK 359m in the third quarter.

EQUITY

January-September 2020

Total consolidated equity increased by SEK 460m during the period, to SEK 68,970m at September 30, 2020. Equity increased due to comprehensive income for the period of SEK 449m and other items of SEK 11m.

CURRENCY EXPOSURE AND CURRENCY HEDGING

SCA has a large proportion of exports, and about 85% of sales are priced in currencies other than SEK, primarily EUR, USD and GBP. Most purchasing is conducted in SEK. SCA's currency exposure and currency management are described on page 68 in the 2019 Annual Report.

The company has hedged about 70% of the expected EUR net exposure from sales minus purchases until the end of the first quarter of 2021, as well as approximately 50% for the second quarter of 2021 and 25% for the third quarter of 2021, at the average EUR/SEK exchange rate of

  1. The company has hedged about 75% of the expected USD net exposure from sales minus purchases until the end of the first quarter of 2021, as well as approximately 50% for the second quarter of 2021 and 25% for the third quarter of 2021, at the average USD/SEK exchange rate of

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

5

PLANNED MAINTENANCE STOPS

In the third quarter of 2020, a planned maintenance stop was carried out at the kraftliner mill

in Munksund (Paper). A planned maintenance stop at the pulp mill in Östrand began at the end of the quarter.

The estimated effect of the planned maintenance stops on earnings in 2020, calculated as the total of the direct cost of the maintenance and the effect from lower fixed cost coverage from reduced production during the stops, is shown in the table below.

Actual 2019

SEKm

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Total

Pulp

0

0

0

138

138

Paper

0

63

0

47

110

Total

0

63

0

185

248

Actual

Forecast

SEKm

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Total

Pulp

0

0

20

125

145

Paper

0

68

42

0

110

Total

0

68

62

125

255

COVID-19

Health and safety are always a top priority at SCA, which is also the case during this challenging time. So far, there has been limited impact on production and deliveries of SCA's products, which include the delivery of important input goods to hygiene products and packaging for food and medicines. The company is actively working to monitor inventory levels, secure the delivery and distribution chain and to secure cash flow. The main negative impact from COVID-19 was felt in the publication paper product category.

There remains significant uncertainty which may impact SCA's future earnings.

KEY EVENTS

SCA discontinues publication paper manufacturing

SCA resolved in September to discontinue the publication paper operations consisting of three paper machines at Ortviken with annual sales of approximately SEK 4bn. Demand for publication paper in Western Europe has shrunk by approximately 5% per year since 2008. Since the outbreak of COVID-19 demand for SCA's grades has declined 30-40% and is not expected to come back. Production levels at Ortviken have been adapted to the reduced order intake. The lower demand combined with a weak price trend has meant that operations have reported negative profitability during the past two quarters, with an operating loss of approximately SEK -40-50m for each quarter.

About 800 employees are affected, primarily at the Ortviken paper mill but also in other parts of SCA's operations. The paper machines are expected to close sequentially during the first quarter of 2021.

A summary of the one-off items related to the discontinuation of publication paper operations is shown in the table below. The earnings impact is recognized in the segment Other.

SEKm

Provisions due to restructuring costs1,2 Impairment of working capital

Effect on EBITDA

Impairment of fixed assets

Effect on operating profit

Deferred taxes

Effect on net profit for the period

  1. With impact on future cash flows
  2. See note 4, Other provisions

2020:3

-870-250

-1,120

-671

-1,792

359

-1,433

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

6

SCA invests in increased pulp capacity

SCA will invest SEK 1.45bn in the production of chemically pre-treated thermomechanical pulp (CTMP) to achieve an annual production volume of 300,000 tonnes of CTMP pulp at Ortviken, where the plan is to use existing infrastructure. The investment will begin in 2021 and production is expected to start in the new facility at the beginning of 2023. Currently, SCA has a capacity of 100,000 tonnes of CTMP pulp at the Östrand pulp mill. This production will be phased out when the new facility begins operation.

Renewcell establishes textile recycling operations at Ortviken

SCA has 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 its supplier of steam, water treatment and other services.

SCA acquires forest in the Baltic states

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. The transaction was completed in the fourth quarter of 2020. The purchase price was approximately SEK 450m.

Increase climate benefit from 10 to 15 million tonnes of CO2 per year by 2030

Climate change is one of the greatest challenges of our time. Sustainability forms an integral part of SCA's operations, which are climate positive. SCA strives to increase its contribution to a fossil- free world, 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. SCA contributes to a fossil- free and circular society by increased net growth in the company's forests that capture and bind CO2 and increase access to renewable products, through innovation, production of renewable energy and low emissions in our value chain. One part of this target is to halve fossil emissions across the value chain by 2030, which is in line with science-based targets to limit global warming to 1.5°C.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

7

Share of net sales

Jan-Sep 2020*

26%

* before elimination of Intra-Group sales

Share of EBITDA

Jan-Sep 2020**

45%

FOREST

SCA owns 2.6 million hectares of forest land in Northern Sweden and the Baltic region, an area corresponding to 6% of Sweden's land area. SCA's unique forest holding is a growing resource that provides access to high-quality forest raw materials while absorbing a net of more than 10% of Sweden's fossil CO2 emissions.

Quarter

Jan-Sep

SEKm

2020:3

2019:3

%

2020:2

%

2020

2019

%

Net sales

1,500

1,865

-20

1,494

0

4,827

5,262

-8

EBITDA

515

388

33

499

3

1,466

1,133

29

Depreciation

-61

-53

15

-53

15

-168

-154

9

Operating profit

454

335

36

445

2

1,298

979

33

EBITDA margin, %

34.3

20.8

33.4

30.4

21.5

Operating margin, %

30.3

18.0

29.8

26.9

18.6

Return on capital employed, %

4.2

4.6

4.2

3.5

4.8

Harvesting of own forest, thousand m3 sub

1,147

927

24

1,291

-11

3,189

3,189

0

Revaluation of biological assets

308

208

48

238

29

879

494

78

  • share calculated of total EBITDA excluding central costs

Net sales

SEKm 2,000 1,800 1,600 1,400 1,200 1,000

800

600

400

200

0

2019:3 2019:4 2020:1 2020:2 2020:3

Management of SCA-owned forest

The Forest segment includes net sales from timber sourced from SCA's own forests, and from timber purchased from other forest owners, which is sold internally to SCA's forest industry operations. The pricing is set based on an average of Forest's externally sourced timber prices.

During the first nine months of the year, the volume of timber harvested from SCA-owned forest was 3.2 million m³ sub. The current planned rate of timber harvested in SCA-owned forest is expected to gradually increase from approximately 4.3 m3 sub in 2020 to approximately 5.4 million m3 sub in 2025.

Revaluation of biological assets

SCA changed the method for the valuation of forest assets on December 31, 2019 (see page 18, Note 3). According to the new method, the valuation is determined by the annual increase in standing volume (net growth) and the market price of forest land.

EBITDA & margin

SEKm

650

600

550

500

450

400

350

300

250

200

150

100

50

0

2019:3

2019:4

2020:1

2020:2

2020:3

January-September 2020 compared with January-September 2019

Net sales declined 8% to SEK 4,827m (5,262), mainly related to lower delivery volumes to SCA's

%

industries and lower selling prices.

65

60

EBITDA improved 29% to SEK 1,466m (1,133). The increase is mainly explained by higher

55

50

earnings from the revaluation of biological assets due to the increased net growth according to the

45

40

new forest survey and the changed accounting method for the valuation of forest assets.

35

30

  1. EBITDA margin increased to 30.4% (21.5), mainly related to higher earnings from the revaluation
  1. of biological assets.15

10

5

July-September 2020 compared with July-September 2019

0

Net sales decreased 20% to SEK 1,500m (1,865). The decrease was mainly related to lower delivery volumes and lower selling prices.

EBITDA amounted to SEK 515m (388), an increase of 33%. Increased harvesting from SCA- owned forest and higher earnings from the revaluation of biological assets had a positive impact on earnings.

July-September 2020 compared with April-June 2020

Net sales were in line with the preceding quarter and amounted to SEK 1,500m (1,494).

EBITDA amounted to SEK 515m (499), an increase of 3%. Higher earnings from the revaluation of biological assets had a positive impact on earnings, which was offset by seasonally lower harvesting from SCA-owned forest.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

8

Share of net sales

Jan-Sep 2020*

25%

* before elimination of Intra-Group sales

Share of EBITDA

Jan-Sep 2020**

13%

WOOD

SCA is one of Europe's leading suppliers of wood-based products for the wood industry and building materials trade, with an annual production capacity of 2.2 m3 of solid-wood products. SCA has five cost-efficient sawmills located close to its forest holdings in Northern Sweden, as well as wood processing and distribution to the building materials trade in Scandinavia, the UK and France.

Quarter

Jan-Sep

SEKm

2020:3

2019:3

%

2020:2

%

2020

2019

%

Net sales

1,592

1,545

3

1,770

-10

4,798

4,949

-3

EBITDA

192

180

7

143

34

429

664

-35

Depreciation

-62

-68

-9

-64

-3

-190

-202

-6

Operating profit

130

111

17

78

67

239

462

-48

EBITDA margin, %

12.1

11.6

8.1

8.9

13.4

Operating margin, %

8.2

7.2

4.5

5.0

9.3

Return on capital employed, %

17.0

12.3

9.9

8.2

18.4

Deliveries, wood products, thousand m3

624

623

0

709

-12

1,944

1,928

1

  • share calculated of total EBITDA excluding central costs

Net sales

SEKm 2,000 1,800 1,600 1,400 1,200 1,000

800

600

400

200

0

2019:3 2019:4 2020:1 2020:2 2020:3

EBITDA & margin

SEKm

%

18

300

250

15

200

12

150

9

100

6

50

3

0

0

2019:3

2019:4

2020:1

2020:2

2020:3

January-September 2020 compared with January-September 2019

Net sales declined 3% to SEK 4,798m (4,949). The decrease is mainly related to lower selling prices and the merger with Groupe ISB during the first quarter of 2019, which had a negative effect on net sales, since the merged company is not consolidated in SCA. Higher sales volumes had a positive effect on net sales.

EBITDA decreased to SEK 429m (664), which was mainly attributable to lower selling prices and one-off items in SCA Wood France totaling SEK 0m (90), which increased earnings during the first quarter of 2019.

July-September 2020 compared with July-September 2019

Net sales increased 3% to SEK 1,592m (1,545). This increase was primarily related to stronger sales for wood products to the building materials industry.

EBITDA amounted to SEK 192m (180), an increase of 7%. This increase was primarily related to stronger earnings for wood products to the building materials industry.

July-September 2020 compared with April-June 2020

Net sales decreased 10% to SEK 1,592m (1,770). The decrease was primarily attributable to lower delivery volumes and negative exchange rate effects, which was somewhat offset by higher selling prices.

EBITDA amounted to SEK 192m (143), an increase of 34%. This increase was primarily related to higher selling prices, stronger earnings for wood products to the building materials industry, and seasonally lower personnel costs.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

9

Share of net sales

Jan-Sep 2020*

17%

* before elimination of Intra-Group sales

Share of EBITDA

Jan-Sep 2020**

16%

PULP

SCA produces market pulp at Östrand pulp mill. Östrand is one of the largest and most cost-efficient production lines for softwood kraft pulp in the world. Together with thermomechanical pulp production, Östrand's annual capacity amounts to 1 million tonnes. SCA's pulp has high-strength properties, suitable for tissue and specialty paper.

Quarter

Jan-Sep

SEKm

2020:3

2019:3

%

2020:2

%

2020

2019

%

Net sales

986

1,129

-13

1,091

-10

3,265

3,477

-6

EBITDA

137

268

-49

182

-25

505

963

-48

Depreciation

-135

-141

-4

-135

0

-401

-402

0

Operating profit

2

128

-98

47

96

104

562

-81

EBITDA margin, %

13.9

23.8

16.7

15.5

27.7

Operating margin, %

0.2

11.3

4.3

3.2

16.2

Return on capital employed, %

0.2

5.4

3.2

-0.1

8.8

Deliveries, pulp, thousand tonnes

189

205

-8

201

-6

616

574

7

  • share calculated of total EBITDA excluding central costs

Net sales

SEKm 1,400

1,200

1,000

800

600

400

200

0

2019:3 2019:4 2020:1 2020:2 2020:3

EBITDA & margin

SEKm

%

30

300

200

20

100

10

0

0

2019:3

2019:4

2020:1

2020:2

2020:3

January-September 2020 compared with January-September 2019

Net sales declined 6% to SEK 3,265m (3,477). The decrease was mainly related to lower selling prices, which was offset by higher delivery volumes due to the ramp-up of the expanded pulp mill.

EBITDA declined 48% to SEK 505m (963), which was mainly attributable to lower selling prices. Favorable exchange rate effects and lower raw material costs had a positive earnings effect. The cost of planned maintenance stops was SEK 20m (0).

July-September 2020 compared with July-September 2019

Net sales decreased 13% to SEK 986m (1,129). The decrease was primarily attributable to lower selling prices and lower delivery volumes. Production volume during the third quarter was limited by an unscheduled production stoppage in July, which resulted in a loss of production. Following the restart, production has been stable and at a good level.

EBITDA decreased to SEK 137m (268). The decrease was mainly explained by the cost of the unscheduled production stoppage in July, lower selling prices and lower revenue from energy due to lower electricity prices. Lower raw material costs and favorable exchange rate effects had a positive earnings effect. The cost of planned maintenance stops at the end of the quarter was SEK 20m (0).

July-September 2020 compared with April-June 2020

Net sales decreased 10% to SEK 986m (1,091). The decrease was primarily attributable to lower delivery volumes due to the unscheduled production stoppage that resulted in a loss of production.

EBITDA decreased to SEK 137m (182). The decrease was mainly explained by lower selling prices, lower sales volumes and higher costs arising from the unscheduled production stop. The cost of planned maintenance stops at the end of the quarter was SEK 20m (0).

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 0

Share of net sales

Jan-Sep 2020*

32%

* before elimination of Intra-Group sales

Share of EBITDA

Jan-Sep 2020**

26%

  • share calculated of total EBITDA excluding central costs

Net sales

SEKm

2,600

2,400

2,200

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

2019:3 2019:4 2020:1 2020:2 2020:3

EBITDA & margin

SEKm

%

600

30

500

25

400

20

300

15

200

10

100

5

0

0

2019:3

2019:4

2020:1

2020:2

2020:3

PAPER

SCA produces kraftliner - paper for corrugated transport packaging - and publication paper for magazines, catalogs and commercial print. SCA is Europe's largest independent producer of kraftliner, with a total capacity of 865,000 tonnes per year. Kraftliner is produced at the paper mills in Munksund, Piteå, and in Obbola, Umeå. Publication paper is produced at the Ortviken paper mill in Sundsvall, with a capacity of 775,000 tonnes per year.

Quarter

Jan-Sep

SEKm

2020:3

2019:3

%

2020:2

%

2020

2019

%

Net sales

1,817

2,380

-24

1,876

-3

5,935

7,121

-17

EBITDA

240

577

-58

229

5

848

1,682

-50

Depreciation

-142

-140

1

-139

2

-425

-417

2

Operating profit

99

436

-77

89

11

424

1,265

-66

EBITDA margin, %

13.2

24.2

12.2

14.3

23.6

Operating margin, %

5.4

18.3

4.7

7.1

17.8

Return on capital employed, %

6.3

24.7

5.3

10.1

24.3

Deliveries, kraftliner, thousand tonnes

197

221

-11

194

2

611

626

-2

Deliveries, publication paper, thousand

tonnes

136

181

-25

129

5

440

525

-16

January-September 2020 compared with January-September 2019

Net sales declined 17% to SEK 5,935m (7,121). The decrease was primarily related to lower selling prices for kraftliner and publication paper and lower delivery volumes for publication paper.

EBITDA declined 50% to SEK 848m (1,682). The decrease was primarily attributable to lower selling prices for kraftliner and publication paper and lower delivery volumes for publication paper. Lower raw material costs and favorable exchange rate effects had a positive earnings effect. The cost of planned maintenance stops amounted to SEK 110m (63).

July-September 2020 compared with July-September 2019

Net sales declined 24% to SEK 1,817m (2,380). The decrease was primarily attributable to lower selling prices for publication paper and kraftliner and lower delivery volumes for publication paper.

EBITDA amounted to SEK 240m (577), a decrease of 58%. The decrease was primarily attributable to lower selling prices and a 25% drop in delivery volumes for publication paper, which resulted in lower fixed cost coverage. The cost of planned maintenance stops was SEK 42m (0).

July-September 2020 compared with April-June 2020

Net sales declined 3% to SEK 1,817m (1,876). The decrease was primarily attributable to lower selling prices for kraftliner and publication paper and negative exchange rate effects, which was somewhat offset by slightly higher delivery volumes.

EBITDA amounted to SEK 240m (229), an increase of 5%. The increase was primarily attributable to lower raw material costs and lower costs for maintenance stops of SEK 42m (68), which were offset by lower selling prices.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 1

RENEWABLE ENERGY

SCA's forest assets and industrial operations provide the company with significant potential to develop new business opportunities in the field of renewable energy. Greater value creation from by-products from the forest and industry create conditions for profitable and sustainable growth.

SCA is now one of Europe's largest producers of forest-based bioenergy, with a total production of about

11.9 TWh per year. In Sweden, SCA has three pellets factories that have an annual production capacity of 300,000 tonnes.

The expanded pulp mill in Östrand will produce 1.2 TWh of green electricity, corresponding to almost 1% of Sweden's total electricity production. The mill is self-sufficient in electricity and the surplus of 0.5 TWh is sold on the electricity market.

SCA leases out land for wind power production. At the end of the third quarter of 2020, 538 wind turbines were operating on SCA's land with an annual production capacity of 5.1 TWh, equivalent to about 20% of Sweden's total wind power production. Together with previously agreed but not yet completed projects, production on SCA's land is expected to increase to 8.0 TWh by 2022.

SCA also develops products for the next-generation of biofuels and green chemicals.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 2

SHARE DISTRIBUTION

September 30, 2020

Class A

Class B

Total

Registered number of shares

64,587,672

637,754,817

702,342,489

At the end of the period, the proportion of Class A shares was 9.2%. No change was made to Class A and Class B shares during the first three quarters. The total number of votes in the company amounts to 1,283,631,537.

FUTURE REPORTS

  • The year-end report will be published on January 29, 2021.

CAPITAL MARKETS DAY

SCA is holding a capital market day in Galtström in Sundsvall, Sweden, on December 3, 2020. The presentations will be webcast at www.sca.com from 08:30 to approximately 12:00 CET.

INVITATION TO PRESS CONFERENCE ON 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

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 8:00 a.m. CET. The report has not been reviewed by the company's auditors.

Björn Lyngfelt, Vice President, Communications, +46 (0)70 626 82 23

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 3

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Quarter

Jan-Sep

SEKm

2020:3

2019:3

%

2020:2

%

2020

2019

%

Net sales

4,338

4,975

-13

4,687

-7

13,818

15,279

-10

Other income

385

570

-32

363

6

1,259

1,593

-21

Change in inventories

-293

-54

-42

-591

190

Change in value in biological assets

308

208

48

238

29

879

494

78

Raw materials and consumables

-1,614

-1,905

-15

-1,777

-9

-5,117

-5,799

-12

Personnel costs

-1,167

-685

70

-804

45

-2,758

-2,259

22

Other external costs

-2,052

-1,746

18

-1,661

24

-5,556

-5,237

6

Share of profits of associates

7

1

-3

9

2

EBITDA

-88

1,364

-106

1,001

-109

1,943

4,264

-54

Depreciation and impairment

-1,079

-409

164

-401

169

-1,882

-1,198

57

Operating profit

-1,167

955

-222

600

-295

61

3,066

-98

Financial items

-28

-26

-31

-83

-101

Profit before tax

-1,195

929

-229

569

-310

-22

2,965

-101

Tax

237

-172

-110

6

-596

Net Profit for the period

-958

757

-227

459

-309

-16

2,369

-101

Earnings per share SEK 1

-1.36

1.08

0.65

-0.02

3.37

Earnings attributable to:

Owners of the parent

-958

757

459

-16

2,369

Average no. of shares, millions

702.3

702.3

702.3

702.3

702.3

Margins (%)

EBITDA margin

-2.0

27.4

21.3

14.1

27.9

Operating margin

-26.9

19.2

12.8

0.4

20.1

Net margin

-22.1

15.2

9.8

-0.1

15.5

1 There are no dilution effects.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 4

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarter

Jan-Sep

SEKm

2020:3

2019:3

2020:2

2020

2019

Profit for the period

-958

757

459

-16

2,369

Other comprehensive income for the period:

Items that may not be reclassified to the income statement

Change of value land assets

181

-

533

714

-

Result from Equity investments recognized at fair value

-

-

-

-

-2

Revaluation of defined benefit pension plans

394

55

70

-108

91

Income tax attributable to components of other comprehensive income

-118

-13

-125

-125

-18

Total

457

42

478

481

71

Items that have been or may be reclassified subsequently to the

income statement

Cash flow hedges

99

-51

295

-51

-256

Hedge cost

1

-

33

27

-

Translation differences in foreign operations

6

16

-75

3

35

Income tax attributable to components of other comprehensive income

-21

11

-67

5

53

Total

85

-24

186

-16

-168

Other comprehensive income for the period, net of tax

542

18

664

465

-97

Total comprehensive income for the period

-416

775

1,123

449

2,272

Total comprehensive income attributable to:

Owners of the parent

-416

775

1,123

449

2,272

Non-controlling interests

-

0

-

-

0

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Jan-Sep

SEKm

2020

2019

Attributable to owners of the parent

Value, January 1

68,510

39,062

Total comprehensive income for the period

449

2,272

Cash flow hedge transferred at cost of hedged investments

15

-21

Tax on cash flow hedge transferred at cost of hedged investments

-3

4

Cash dividend

-

-1,229

Acquisition of non-controlling interests

0

0

Remeasurement effect upon acquisition of non-controlling interests

-1

-1

Value, September 30

68,970

40,087

Non-controlling interests

Value, January 1

0

-

Total comprehensive income for the period

0

-

Acquisition of non-controlling interests

0

0

Value, September 30

-

0

Total equity, value September 30

68,970

40,087

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

CONDENSED CONSOLIDATED BALANCE SHEET

SEKm

ASSETS

Non-current assets

Goodwill and other intangible assets

Buildings, land, machinery and equipment

Forest assets

whereof land assets whereof biological assets

Right-of-use assets

Other non-current assets

Total non-current assets

Current assets

Inventories

Trade receivables

Other current receivables

Cash and cash equivalents

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity

Owners of the Parent

Share capital

Share premium

Reserves

Retained earnings

Non-controlling interests

Total equity

Non-current liabilities

Non-current financial liabilities

Provisions for pensions

Deferred tax liabilities

Other non-current liabilities

Total non-current liabilities

Current liabilities

Current financial liabilities

Trade payables

Other current liabilities

Total current liabilities

Total liabilities

Total liabilities and equity

1 5

Sep 30, 2020

Dec 31, 2019

316211

18,346 18,184

71,537 69,682

20,92620,170

50,61149,512

771841

1,1171,468

92,087 90,386

5,014

4,326

2,313

2,425

898

828

454

2,306

8,679

9,885

99,065

101,972

2,3502,350

6,8306,830

15,255 14,693

44,535 44,637

  • 0
    68,970 68,510

8,4785,888

308522

15,791 15,780

161161

24,738 22,351

2,5313,730

3,5143,336

2,2191,138

8,264 8,204

33,002 30,555

101,972 99,065

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

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1 6

CONSOLIDATED CASH FLOW STATEMENT

SEKm

Operating activities

Profit before tax

Adjustment for non-cash items1

Paid tax

Cash flow from operating activities before changes in working capital Cash flow from changes in working capital

Change in inventories

Change in operating receivables

Change in operating liabilities

Cash flow from operating activities

Investing activities

Acquisitions

Divestments

Current capital expenditures in non-current assets, net

Strategic capital expenditures in non-current assets

Acquisition of financial asset

Cash flow from investing activities

Financing activities

Loans raised

Amortization of loans

Amortization of loans, leasing

Dividend

Cash flow from financing activities

Net cash flow for the period

Cash and cash equivalents at the beginning of the period Translation differences in cash and cash equivalents

Cash and cash equivalents at the end of the period

Cash flow from operating activities per share SEK

1 Depreciation/amortization and impairment of non-current assets Fair-value measurement of biological assets

Gains/loss on assets sales and swaps of assets

Unpaid costs related to due to discontinuation of publication paper operations Other

Total

Jan-Sep

2020 2019

-22 2,965

1,761 362

-86-464

1,653 2,863

677 -386

-102-98

282 159

2,510 2,538

  1. -857
  1. 370

-853-704

-1,157-362

-11-26

-2,021-1,579

3,915 1,181

-2,392-1,068

-149-

  • -1,229
    1,374 -1,116

1,863 -157

454 648

-1116

2,306 507

3.57 3.61

1,881 1,199

-879-494

-3-26

803-

-41-317

1,761 362

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 7

INCOME STATEMENT PARENT COMPANY

SEKm

Other operating income Other operating expenses Personnel costs

EBITDA

Depreciation

Operating profit

Financial items

Profit before tax

Appropriations and tax

Profit for the period

Jan-Sep

20202019

192194

-127-138

-81-66

-16-10

-65-65

-81-75

2168

-60-7

  1. 1,259
  1. 1,252

Other operating income was mainly related to remuneration for the granting of felling rights for the Parent Company's forest land.

BALANCE SHEET PARENT COMPANY

SEKm

Sep 30, 2020

Dec 31, 2019

Tangible non-current assets

8,708

8,641

Financial non-current assets

9,668

9,681

Total non-current assets

18,376

18,322

Current assets

14,609

12,563

Total assets

32,985

30,885

Restricted equity

11,373

11,373

Non-restricted equity

8,843

8,551

Total equity

20,216

19,924

Provisions

1,590

1,594

Non-current liabilities

7,862

5,236

Current liabilities

3,317

4,131

Total equity, provisions and liabilities

32,985

30,885

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

1 8

NOTES

1. ACCOUNTING PRINCIPLES

This interim report has been prepared in accordance with IAS 34 and recommendation RFR 1 of the Swedish Financial Reporting Board, and with regards to the Parent Company, RFR 2. The accounting principles are described in detail in SCA's 2019 Annual Report.

The definition of business acquisitions in IFRS 3 Business acquisitions has been changed. The criteria for classifying an acquisition as a business acquisition is that it must contain at least an input and a substantive process that together obviously make a significant contribution to the ability to create output. The change in IFRS 3 had no impact on the Group's interim report, but may affect future periods if the Group makes acquisitions.

Several amendments and interpretations apply for the first time from 2020, but they are not judged to have any material impact on the Group's interim report.

2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Jan-Sep

SEKm

2020

2019

Sweden

2,053

1,914

EU excluding Sweden

7,860

9,154

Rest of Europe

1,010

1,037

Rest of world

2,895

3,174

Total Group

13,818

15,279

3. FOREST VALUATION

Accounting principles

The accounting principles for forest assets are described in detail on page 105, Note D3, of SCA's 2019 Annual Report.

Key assessments and assumptions

SCA has based its valuation of forest assets in Sweden on forest transactions in the areas where SCA owns forest assets. The calculated market prices comprise a weighted average based on forest transactions over the most recent three-year period. On September 30, the market price was SEK 281/m3fo. The market price for 2019 was SEK 276/m3fo.

SCA carried out a new forest survey in Sweden in 2019. As part of the new survey, a new estimate was drawn up and established for the forest portfolio's timber volume.

At December 31, 2020, the expected total timber volume is estimated at approximately 256 million m3fo, of which about 3 million m3fo in the Baltic states. The change in value as a result of changes in market prices and estimated annual volume growth is accrued over the course of the year.

The new forest survey also resulted in a new harvesting calculation. Higher growth gives greater long-term harvesting potential. Annual harvesting will gradually increase from about 4.3 million m3sub in 2020 to 5.4 million m3sub in 2025.

Forest assets

SEKm

Sep 30, 2020

Dec 31, 2019

Forest assets in Sweden1

70,498

68,723

Forest assets in the Baltics2

1,039

959

Totalt value of forest assets3

71,537

69,682

Deferred tax on forest assets

14,366

13,977

  1. The fair value of SCA's forest assets in Sweden is based on a timber volume of 253 million m3fo at the end of the year, multiplied by the market price of SEK 281/m3fo. At September 30 approximately 75% of the expected annual change in value is reported.
  2. The fair value of forest assets acquired in the Baltics has been assessed to correspond to the acquisition price.
  3. The total change in value at September 30, 2020 amounted to SEK 1,855m whereof SEK 879m constitutes the change in value of biological xassets.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

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1 9

The change in value of biological assets was based on market statistics and discounted cash flows. When establishing the change in value of biological assets, the same valuation model was used as in the past with a required return of 3.5% (3.6) after tax. The change in value of biological assets was SEK 879m at September 30, 2020.

The value of land assets constitutes the residual amount between the total value in accordance with market price based on forest transactions and the value of the biological assets. At September 30, 2020, the change in value pertaining to land amounted to SEK 714m and is recognized as other comprehensive income and does not impact profit for the year.

4. OTHER CURRENT LIABILITIES AND PROVISIONS

Accounting principles

Provisions are recognized in the consolidated balance sheet when there is a legal or informal obligation arising from events that have occurred and it is probable that payments will be required to settle the obligation. It must also be possible to reliably estimate the amount to be paid. The provision is valued at the present value of the anticipated future expenditure to settle the obligation.

A provision for restructuring measures is recognized when the Group has established a detailed plan and either implementation has begun or the main features of the measures have been communicated to the parties involved. Restructuring costs include, for example, costs for plant closures, impairment of production machinery or costs for personnel reductions.

Other provisions

Effencieny

SEKm

programs

Environment

Discontinuation

Other

Total

Value, January 1

4

55

-

56

115

Provisions

-

28

870

2

900

Utilization

-1

-28

-

-29

-58

Value, September 30

3

55

870

29

957

SCA resolved in September to discontinue the publication paper operations in Ortviken. Approximately 800 employees are affected, primarily at the Ortviken paper mill but also in other parts of SCA's operations. The paper machines are expected to close sequentially during the first quarter of 2021.

The discontinuation entails provisions arising from non-recurrent costs of SEK 870m, of which just over half pertain to personnel costs and almost 20% demolition costs at the Ortviken paper mill. The provisions are recognized in the segment Other.

5. RISKS AND UNCERTAINTIES

SCA's risk exposure and risk management are described on pages 64-68 of SCA's 2019 Annual Report.

Health and safety are always a top priority at SCA, which is also the case during this challenging time with the coronavirus pandemic. So far, there has been limited impact on production and deliveries of SCA's products. The company is actively working to monitor inventory levels, secure the delivery and distribution chain and to ensure cash flow. The main negative impact of the pandemic was felt in the publication paper product category.

There remains significant uncertainty and the pandemic may impact SCA's future earnings (see page 5).

6. RELATED PARTY TRANSACTIONS

No transactions took place between SCA and related parties with any material impact on the company's financial position or results.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

2 0

7. FINANCIAL INSTRUMENTS BY CATEGORY

Measure-

SEKm

ment level

Sep 30, 2020

Dec 31, 2019

Financial assets measured at fair value in the

income statement

Derivatives - Current financial assets

2

2

3

Derivatives - Other current receivables

2

50

23

Total

52

26

Financial liabilities measured at fair value in the

income statement

Derivatives - Current financial liabilities

2

1

1

Derivatives - Other current financial liabilities

2

52

15

Total

53

16

Financial assets measured at fair value through

other comprehensive income

Equity instruments

3

14

14

Total

14

14

Financial liabilities measured at amortized cost

Non-current financial liabilities excluding leasing

-

7,817

5,190

Non-current financial liabilities, leasing

-

638

698

Current financial liabilities excluding leasing

-

3,572

3,574

Current financial liabilities, leasing

-

154

156

Total

12,181

9,618

Derivatives used for hedge accounting

Non-current financial assets

2

-

0

Other non-current assets

1.2

2

2

Other current receivables

1.2

106

78

Total

108

80

Derivatives used for hedge accounting

Non-current financial liabilities

2

24

-

Other non-current liabilities

2

40

54

Other current liabilities

2

79

52

Total

143

106

The fair value of trade receivables, other current and non-current receivables, cash and cash equivalents, and the fair value of trade payables is estimated to be equal to their carrying amount. The total fair value of current and non-current financial liabilities was SEK 10,216m (8,749). The value of electricity derivatives is based on published prices in an active market. Other financial instruments are market to market, based on prevailing currency and interest rates on the balance sheet date. The fair value of debt instruments is determined using valuation models, such as discounting future cash flows at quoted market rates for the respective maturity.

8. CONTINGENT LIABILITIES, PLEDGED ASSETS AND COMMITTMENTS

SEKm

Parent

Contingent liabilities

Sep 30, 2020

Dec 31, 2019

Guarantees for

subsidiaries

750

750

associates

-

-

customers and others

-

-

Other contingent liabilities

328

285

Total

1,078

1,035

Pledged assets

Sep 30, 2020

Dec 31, 2019

Chattel mortgages

-

20

Total

-

20

Group

Sep 30, 2020

Dec 31, 2019

-

-

5

5

28

31

16

18

49

54

Sep 30, 2020

Dec 31, 2019

-

20

-

20

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

2 1

Commitments

SCA has a decided investment in Obbola totaling SEK 7.5bn over a five-year period. As of September 30, 2020, SEK 5.7bn remained, of which SEK 2.3bn was a contracted commitment. The commitment in its entirety refers to fixed assets.

9. ALTERNATIVE PERFORMANCE MEASURES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Including and excluding the effect one-off items related to the discontinuation of publication paper operations

Quarter

SEKm

2020:3

2020:31

2019:3 %2 2020:2 %2

Net sales Other income Change in inventories

Change in value in biological assets Raw materials and consumables Personnel costs

Other external costs

Share of profits of associates

EBITDA

Depreciation and impairment

Operating profit

Financial items

Profit before tax

Tax

Net Profit for the period

Earnings per share SEK 1

Earnings attributable to:

Owners of the parent

Average no. of shares, millions

Margins (%)

EBITDA margin

Operating margin

Net margin

4,338

4,975

-13

4,687

-7

4,338

385

570

-32

363

6

385

-293

-54

93

-42

148

-104

308

208

48

238

29

308

-1,614

-1,595

-1,905

-16

-1,777

-10

-1,167

-688

-685

0

-804

-14

-2,052

-1,619

-1,746

-7

-1,661

-3

7

7

1

-3

-88

1,032

1,364

-24

1,001

3

-1,079

-408

-409

0

-401

2

-1,167

624

955

-35

600

4

-28

-28

-26

-31

-1,195

596

929

-36

569

5

237

-121

-172

-110

-958

475

757

-37

459

3

-1.36

0.68

1.08

0.65

-958

475

757

459

702.3

702.3

702.3

702.3

-2.0

23.8

27.4

21.3

-26.9

14.4

19.2

12.8

-22.1

10.9

15.2

9.8

  1. Excluding the effect of discontinuation publication paper operations in Q3 2020
  2. Comparison of earnings excluding the effect of one-off items related to discontinuation of publication paper in Q3 2020

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

2 2

For definitions of alternative performance measures, refer to SCA's 2019 Annual Report, pages 89-92.

OPERATING CASH FLOW

Quarter

SEKm

2020:31

2019:3

2020:2

EBITDA

1,032

1,364

1,001

Changes in value biological assets and other non cash

flow items

-322

-312

-233

Operating cash surplus

710

1,052

768

Change in working capital

821

325

-151

Current capital expenditures, net 2

-413

-246

-338

Other operating cash flow

0

-37

-6

Operating cash flow

1,118

1,094

273

Jan-Sep

2020 2019

3,063 4,264

-895-614

2,168 3,650

523-326

-926

-762

-34

-223

1,731

2,339

  1. Excluding the effect of discontinuation of publication paper operations in Q3 2020
  2. Including SEK 27m in 2020:3 (17 in 2019:3, 29 in 2020:2, 73 in January-September 2020 and 59 in January-September 2019) of new leasing contracts

CAPITAL STRUCTURE

SEKm

Sep 30, 2020

Dec 31, 2019

Forest assets

71,537

69,682

Working capital

2,852

3,748

Deferred tax relating to forest assets

-14,366

-13,977

Other capital employed, net

17,241

17,654

Total capital employed

77,264

77,107

Return on capital employed (%) 1

23.2

36.7

Return on capital employed excluding new method for valuation of forest assets (%) 1

3.5

6.9

Industrial return on capital employed (%) 1,2

4.2

11.9

Net debt, SEKm

8,294

8,597

Net debt/EBITDA (LTM) 3

2.0x

1.6x

Equity, SEKm

68,970

68,510

Net debt/Equity (%)

12.0

12.5

  1. Rolling 12 months
  2. Excluding constructions in progress
  3. Excluding the effect of one-off items related to discontinuation publication paper operations in 2020:3 and the effect of changed accounting method for valuation of forest assets in 2019:4.

WORKING CAPITAL

SEKm

Sep 30, 2020

Dec 31, 2019

Inventories

4,326

5,014

Accounts receivable

2,425

2,313

Other current receivables

737

790

Accounts payable

-3,514

-3,336

Other current liabilities

-1,272

-1,044

Adjustments 1

150

11

Working capital

2,852

3,748

Working capital in % of net sales 2

19.9

20.2

1 Adjustments:

Other current receivables, green certificates

-1

-6

Accounts payable, strategic capital expenditures

256

62

Other current provisions

-174

-55

Other current liabilities, emission rights

69

10

Sum adjustments

150

11

2 Calculated as an average of working capital for 13 months as a percentage of 12-month rolling net sales

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A I n t e r i m r e p o r t - J a n u a r y 1 - S e p t e m b e r 3 0 , 2 0 2 0

2 3

NET DEBT

SEKm

Sep 30, 2020

Dec 31, 2019

Surplus in funded pension plans

632

1,019

Non-current financial assets

83

67

Current financial assets

2

3

Cash and cash equivalents

2,306

454

Financial receivables

3,023

1,543

Non-current financial liabilities

8,478

5,888

Provisions for pensions

308

522

Current financial liabilities

2,531

3,730

Financial liabilities

11,317

10,140

Net debt

-8,294

-8,597

10. QUARTERLY DATA BY SEGMENT

NET SALES

Quarter

SEKm

2020:3

2020:2

2020:1

2019:4

2019:3

2019:2

2019:1

2018:4

2018:3

Forest

1,500

1,494

1,833

1,694

1,865

1,746

1,651

1,540

1,455

Wood

1,592

1,770

1,436

1,376

1,545

1,727

1,678

1,558

1,712

Pulp

986

1,091

1,188

900

1,129

1,214

1,134

1,049

743

Paper

1,817

1,876

2,242

2,108

2,380

2,375

2,366

2,421

2,413

Intra-group deliveries

-1,557

-1,544-1,906

-1,766

-1,944-1,834-1,753-1,642

-1,564

Total net sales

4,338

4,687

4,793

4,312

4,975

5,228

5,076

4,926

4,759

EBITDA

Quarter

SEKm

2020:3

2020:2

2020:1

2019:4

2019:3

2019:2

2019:1

2018:4

2018:3

Forest

515

499

452

607

388

414

331

427

292

Wood

192

143

95

125

180

188

297

226

276

Pulp

137

182

186

20

268

344

351

370

273

Paper

240

229

379

382

577

489

616

536

728

Other

-52

-52

-82

-79

-49

-95

-35

-65

-20

Total EBITDA1,2

1,032

1,001

1,030

1,055

1,364

1,340

1,560

1,494

1,549

  1. Including the effect of discontinuation of publication paper operations EBITDA amounted to -1 172 SEKm in Other and -88 SEKm for the Group in 2020:3.
  2. Including the effect of changed accounting method of forests assets, EBITDA amounted to SEK 16,649m for Forest and SEK 17,097m and for the Group in 2019:4.

EBITDA MARGIN

Quarter

%

2020:3

2020:2

2020:1

2019:4

2019:3

2019:2

2019:1

2018:4

2018:3

Forest

34.3

33.4

24.6

35.8

20.8

23.7

20.0

27.7

20.1

Wood

12.1

8.1

6.6

9.1

11.6

10.8

17.7

14.5

16.1

Pulp

13.9

16.7

15.6

2.2

23.8

28.4

31.0

35.3

36.7

Paper

13.2

12.2

16.9

18.1

24.2

20.6

26.0

22.2

30.2

EBITDA margin1,2

23.8

21.3

21.5

24.5

27.4

25.6

30.7

30.3

32.5

  1. Including the effect of discontinuation publication paper operations EBITDA margin was -2,0% for the Group in 2020:3.
  2. Including effect of changed accounting method for valuation of forest assets, the EBITDA margin was 82,8% for Forest and 396,5% for the Group in 2019:4

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

Disclaimer

SCA - Svenska Cellulosa AB published this content on 30 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2020 10:29:05 UTC


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Financials
Sales 2020 18 240 M 2 203 M 2 203 M
Net income 2020 707 M 85,4 M 85,4 M
Net Debt 2020 8 751 M 1 057 M 1 057 M
P/E ratio 2020 130x
Yield 2020 1,07%
Capitalization 103 B 12 384 M 12 397 M
EV / Sales 2020 6,11x
EV / Sales 2021 6,66x
Nbr of Employees 3 641
Free-Float 93,5%
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Mean consensus UNDERPERFORM
Number of Analysts 9
Average target price 128,13 SEK
Last Close Price 146,00 SEK
Spread / Highest target 9,59%
Spread / Average Target -12,2%
Spread / Lowest Target -28,1%
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Managers and Directors
NameTitle
Ulf Örjan Larsson President, Chief Executive Officer & Director
Pär Boman Chairman
Toby James Lawton Chief Financial Officer
Barbara Rose Milian Thoralfsson Independent Director
Bert Åke Stefan Nordberg Independent Director
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