Svenska Cellulosa : 2020 Q3 Presentation EN Ladda ner

Interim Report Presentation

Q3 2020

October 30, 2020

Ulf Larsson, CEO

Summary Q3 2020

Exit publication paper

• Sequential closing of publication paper Q1 2021

Grow pulp

• Invest in increased CTMP pulp production located at Ortviken

Sales declined 13% vs Q3 2019

• Price/mix -4%, volume -10%, currency 1%

EBITDA1 down 24% vs Q3 2019

• Impact of decision to exit publication paper
• Unplanned production stop at Östrand
• Lower selling prices

+ Lower raw material costs

Acquisition of forest in Latvia - 20,000 ha land

New climate target for 2030

Note: 1) Excluding effect of one-off items related to discontinuation of publication paper.

3

SCA's performance Q3 2020

EBITDA (SEKm)	Industrial ROCE 1)	EBITDA development (SEKm)
1,032	4%
1,549	1,494	1,560			-24%
			1,340	1,364

EBITDA margin	Net debt/EBITDA
24%	2.0x

33%			1,055	1,030	1,001	1,032
30%	31%
	27%
		26%
		24%			24%
			21%	21%

Q3 '18

Q4 '18

Q1 '19

Q2 '19

Q3 '19

Q4 '19

Q1 '20

Q2 '20

Q3 '20

Note: Excluding effect of one-off items related to discontinuation of publication paper.	4
1) ROCE for the industrial segments; Wood, Pulp and Paper. ROCE calculated as LTM.

Forest Q3 2020 vs. Q3 2019

Net sales (SEKm)	EBITDA (SEKm)	EBITDA margin
	-20%				+33%			34.3%
1,865				515
1,500
388			20.8%

Q3 2019

Q3 2020

Q3 2019

Q3 2020

Q3 2019

Q3 2020

Price development - Pulpwood and Sawlogs

130

120

110

100

90

80

Q3 '18	Q4 '18	Q1 '19	Q2 '19	Q3 '19	Q4 '19	Q1 '20	Q2 '20	Q3 '20
				Pulpwood		Sawlogs

Stable wood supply to industries

Sales down 20%

• Lower volumes to Ortviken and Östrand
• Lower pulpwood price

EBITDA up 33%

• Higher harvesting from own forest
• Higher earnings from revaluation of biological assets - Lower pulpwood price

5

Wood Q3 2020 vs. Q3 2019

Net sales (SEKm)	EBITDA (SEKm)	EBITDA margin
		+3%				+7%			12.1%
		1,592			192
1,545			11.6%
180

Q3 2019

Q3 2020

Q3 2019

Q3 2020

Q3 2019

Q3 2020

Price development - Solid Wood Products

110

100

90

80

70

Q3 '18	Q4 '18	Q1 '19	Q2 '19	Q3 '19	Q4 '19	Q1 '20	Q2 '20	Q3 '20
					Price index SEK

High demand, leading to increasing prices

Sales up 3%

• Better sales from building and supply solutions

EBITDA up 7%

• Better margins on building and supply solutions

6

Pulp Q3 2020 vs. Q3 2019

Net sales (SEKm)	EBITDA (SEKm)	EBITDA margin
	-13%			-49%		23.8%
1,129		268
986
						13.9%
			137

Q3 2019

Q3 2020

Q3 2019

Q3 2020

Q3 2019

Q3 2020

Price development - NBSK Pulp

110

100

90

80

70

60

50

Q3 '18	Q4 '18	Q1 '19	Q2 '19	Q3 '19	Q4 '19	Q1 '20	Q2 '20	Q3 '20
					Price index SEK

Unplanned production stop in July impacted volumes and costs, good production after restart

Sales down 13%

• Lower prices
• Volume loss due to unplanned production stop

EBITDA down 49%

• Unplanned production stop in July
• Lower prices
• Lower energy prices
• Planned maintenance stop

• Lower raw material costs and positive currency effects

7

Pulp market development

Softwood pulp price (USD/t) vs deliveries (Mt)

1,400
1,200
1,000
800
600
400	NBSK PIX Price Europe
200
Global Softwood Kraft deliveries (RHS)
0

Hardwood pulp inventories (days of supply)

25.0	80
24.5	70
24.0	60	Average
23.5	50
23.0	40
22.5	30
22.0	20

Softwood pulp inventories (days of supply)

50
45
40	Average
35
30
25
20

Source: PIX, PPPC.

Limited supply due to maintenance downtime

• Maintenance stops moved to autumn
• Majority of producers having 5-30 days stops

Positive price signals

• Positive signals from China
• 40 USD price increase announced from Oct 1, negotiations ongoing

8

Paper Q3 2020 vs. Q3 2019

Net sales (SEKm)	EBITDA (SEKm)	EBITDA margin
	-24%			-58%		24.2%
2,380		577
1,817
						13.2%
			240

Q3 2019 Q3 2020 Q3 2019 Q3 2020 Q3 2019 Q3 2020

Price development -

Price development -

Kraftliner

Publication paper (LWC)

120

120

100

100

80

80

60

60

Q3

Q3

Q3

Q3

Q3

Q3

'18

'19

'20

'18

'19

'20

Price index SEK

Low publication paper demand

Low capacity utilization, impacted by exit decision Sales down 24%

• Lower kraftliner and publication paper prices
• Lower publication paper volumes

EBITDA down 58%

• Lower kraftliner and publication paper prices
• Lower publication paper capacity utilization
• Planned maintenance stop in Munksund

9

Containerboard market development

Price (EUR/t) vs Kraftliner deliveries (Mt)

850
800
750
700
650
600	Unbleached kraftliner price Euwid (LHS)

550 Kraftliner deliveries Europe (RHS)

500

European Box demand (index)

5.5	110
108
5.4	106
5.3	104
102
5.2
100
5.1	98

Kraftliner inventories (days of supply)

40

35

Average

30

25

20

Source: Euwid, Numera.

Recovery after large demand drop in Q2

• Long term growth of European deliveries
• Inventories days rose in Q2 driven by postponed maintenance now back to average in late Q3

Price decreased in Q3, price increases announced in Q4

10

Transformation of Ortviken

Exit publication paper

• Sequential closing of the three paper machines during Q1 2021

Investment in increased pulp production

• 300,000 tonnes CTMP at Ortviken
• Low CAPEX and cash cost per tonne
• CAPEX starts early 2021
• Start-upbeginning of 2023

Renewcell to establish textile recycling at Ortviken

• SCA to rent out space and supply utilities

Profitable growth strategy

		Invest in integrated value chain:
Increased		•	Grow Pulp
value from		•	Grow Kraftliner
each tree		•	Renewable energy new segment
	• Reduce exposure to Publication Paper
Growing		Increase forest holdings:
forest asset		•	Increase growth and harvesting level
		•	Acquire forest land
		•	Optimize nature conservation

SCA's climate benefit - new group target

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

Binds

net

5.4

Mt CO2

1

Growing forests bind CO2 - active forest management increases growth

Fertilization

Contorta

pine

Active

silviculture

Replaces

6.0

Mt CO2

Operations

3

Investments and innovation reduce carbon emissions

2

Higher growth enables more substitution -

renewable alternatives replace fossil

based products

SCA's renewable Non-renewable

products products

Bioenergy Fossil fuels

PaperPlastic

Solid-wood

products Concrete

	Low
Improved	Emissions
seedlings	0.9	SCA's climate benefits amount to
	Mt CO2	10.5 million tonnes of CO2 per annum,
		which corresponds to emissions from all

passenger cars in Sweden

12

Toby Lawton, CFO

Income statement

- impact from exit publication paper

Effects of one-off items related to exit publication paper in Q3:

Reported in segment Other

Impact on EBITDA of SEK -1,120m

• Provision for restructuring costs of SEK -870m
• Working capital write-downs of SEK -250m Impact on EBIT of SEK -1,792m
• Fixed assets write-downs of SEK -671m Deferred tax impact of SEK 359m

Publication paper EBIT loss SEK 40-50m per quarter (Q2 and Q3)

	Quarter		Jan-Sept
SEKm	Q3 2020													Q3 20201)		2020			20201)
Net sales	4,338	4,338		13,818			13,818
EBITDA	-88				1,032		1,943			3,063
EBITDA margin	-2.0%	23.8%		14.1%			22.2%
Depreciation	-1,079			-408		-1,881			-1,210
EBIT	-1,167			624		61			1,853
EBIT margin	-26.9%			14.4%		0.4%			13.4%
Financial items	-28			-28		-83			-83
Profit before tax	-1,195				596		-22			1,770
Tax	237			-121		6			-353
Profit for the period	-958			475		-16			1,417
Earnings per share, SEK	-1.36	0.68		-0.02			2.02

1) Excluding effect of one-off items related to discontinuation of publication paper.

14

Income statement

				Quarter
SEKm	Q3 2020		Q3 2019		Change
Net sales	4,338	4,975	-13%
EBITDA	1,032	1,364	-24%
EBITDA margin	23.8%		27.4%		-3.6 p.p.
EBIT	624	955	-35%
EBIT margin	14.4%		19.2%		-4.8 p.p.
Financial items	-28	-26
Profit before tax	596		929		-36%
Tax	-121		-172
Profit for the period	475		757		-37%
Earnings per share, SEK	0.68		1.08

Note: Excluding effect of one-off items related to discontinuation of publication paper.

15

Contribution by segment and quarter

Forest

Wood

Pulp

Paper

Net sales (SEKm)

2,421

2,366

2,375

2,380

2,108

2,242

1,876

1,817

1,540

1,651

1,746

1,865

1,694

1,833

1,494

1,500

1,558

1,678

1,727

1,545

1,376

1,436

1,770

1,592

1,049

1,134

1,214

1,129

900

1,188

1,091

986

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

'18

'19

'19

'19

'19

'20

'20

'20

'18

'19

'19

'19

'19

'20

'20

'20

'18

'19

'19

'19

'19

'20

'20

'20

'18

'19

'19

'19

'19

'20

'20

'20

EBITDA (SEKm) and EBITDA margin

				607			515																	536	616		577
						499																		489
					452
427		414
	388																								382	379
													370		344
	331	36%		33%	34%		297							351	268
					226							35%													229	240
28%
20% 24% 21%		25%				188	180			143	192	31% 28% 24%		186	182	137	22% 26%	21% 24%
			15%	18%	125	95		20	18% 17%	12%	13%
									11%	12%	9%	7%	8%	12%					16% 17%	14%
															2%
Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
'18	'19	'19	'19	'19	'20	'20	'20	'18	'19	'19	'19	'19	'20	'20	'20	'18	'19	'19	'19	'19	'20	'20	'20	'18	'19	'19	'19	'19	'20	'20	'20
																															16

Net sales Q3 2020 vs. Q3 2019

	Negative for all	Lower paper
	segments
			volumes
SEK
4,975m	-4%		-10%					SEK
					1%		0%	4,338m

- 13%

Net sales	Price/Mix	Volume	Currency	Acquisitions/	Net sales
Q3 2019				divestments	Q3 2020

17

EBITDA Q3 2020 vs. Q3 2019

	Lower prices for				Unplanned production
	all segments		Lower costs for		stop at Östrand and
SEK		Lower paper	wood raw		Rotterdam sale in 2019
	materials
1,364m	-291	volumes
		+275	-84	+45	-167	SEK

-110	1,032m

- 25%

EBITDA margin

EBITDA margin

27.4%

23.8%

EBITDA

Price/Mix

Volume

Raw material

Energy

Currency

Other

EBITDA

Q3 2019

Q3 2020

Note: Excluding effect of one-off items related to discontinuation of publication paper.

18

Cash flow

		Quarter			Jan-sept
SEKm		Q3 2020			Q3 2019		2020			2019
EBITDA	1,032			1,364		3,063			4,264
Revaluation of biological assets and other non cash flow items		-322			-312		-895			-614
Operating cash surplus		710			1,052		2,168			3,650
Change in working capital	821			325		523			-326
Current capital expenditures	-413			-246		-926			-762
Other operating cash flow		0			-37		-34			-223
Operating cash flow		1,118			1,094		1,731			2,339

Strategic capital expenditures	-314	-63	-1,157	-362

Note: Excluding effect of one-off items related to discontinuation of publication paper.

19

Net debt Q3 2020 vs. Q2 2020

SEK

SEK

9,396m

-1,118m

SEK

SEK

SEK

SEK

SEK

Lease

811

+314m

0m

+58m

-356m

8,294m

Strong focus on

Kraftliner expansion

Revaluation of pension

792

Lease

cost control

assets and Other

	Net debt / EBITDA						Net debt / EBITDA1
	2.1x						2.0x
	Net debt	Operating	Strategic capex	Acquisitions	Paid tax	Other	Net debt
	Q2 2020	cash flow					Q3 2020
Note: 1) Excluding effect of one-off items related to discontinuation of publication paper.				20

	Balance sheet
SEKm		Sept 31, 2020
Forest assets		71,537
Working capital		2,852
Working capital/Net sales 1		20%
Deferred tax relating to forest assets		-14,366
Other capital employed		17,241
Total capital employed		77,264
Net debt		8,294
Net debt/EBITDA 2,3		2.0x
Equity		68,970
Net debt/Equity		12%
Market price forest assets (SEK/m3fo)		2814

Note: 1) Average working capital for 13 months as a percentage of 12-month rolling net sales. 2) Excluding effect of one-off items related to discontinuation of publication paper.

1. 12-monthsEBITDA, up to end of each period.
2. Applied to expected volume at 31 Dec 2020.

Dec 31, 2019

69,682

3,748

20%

-13,977

17,654

77,107

8,597

1.6x

68,510

13%

276

21

Summary

Ulf Larsson, CEO

Summary Q3 2020

Exit publication paper

• Sequential closing of publication paper Q1 2021

Grow pulp

• Invest in increased CTMP pulp production located at Ortviken

Sales declined 13% vs Q3 2019

• Price/mix -4%, volume -10%, currency 1%

EBITDA1 down 24% vs Q3 2019

• Impact of decision to exit publication paper
• Unplanned production stop at Östrand
• Lower selling prices

+ Lower raw material costs

Acquisition of forest in Latvia - 20,000 ha land

New climate target for 2030

Note: 1) Excluding effect of one-off items related to discontinuation of publication paper.

23

Q&A

Appendix

Contribution by segment

Forest				Wood				Pulp		Paper
Net sales (SEKm)									8,226 8,548 7,744 8,434	9,643	9,229	8,043
			6,956 6,521		6,618
5,187 5,108 4,978	5,070 5,455	5,114 5,315 5,441 5,994	6,325	6,174
				4,377 4,165
								2,518 2,760 2,492 2,542 2,866
2014 2015 2016	2017	2018	2019 LTM	2014 2015 2016 2017 2018 2019	LTM	2014 2015 2016 2017 2018 2019	LTM	2014 2015	2016 2017	2018	2019	LTM

EBITDA (SEKm) and EBITDA margin 1)

																															2,468
						2,073											35%												2,064
					1,740
			1,363 1,394															31%	25%					1,243 1,295 1,245	1,479	26%
1,232	1,213 1,238															21%						1,230
		32%												23%					22%
																		18%
			27%											904					970	19%	983	13%				16%
24%	24%	25%	26%	25%								670	789				15%	15%				15%
				603	478	531		555		768	709
											14%			530	482		525
										12%	9%	10%	11%	12%		9%
2014	2015	2016	2017	2018	2019		LTM	2014 2015 2016 2017 2018 2019	LTM	2014 2015 2016 2017 2018 2019	LTM	2014 2015 2016 2017 2018 2019	LTM

Note: 2014 and 2015 EBITDA refer to adjusted figures. 2016 and forward refer to unadjusted	26
figures. For details please see the quarterly report.

Europe's largest private

forest owner

This presentation may contain forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read SCA's most recent annual report for a better understanding of these risks and uncertainties.