2021 Q3 Interim report Download

Third quarter

2021

January-September 2021 compared with January-September 2020

• Net sales amounted to SEK 14,059m (13,818). The increase was primarily attributable to higher selling prices in all product areas. The discontinued publication paper operations (see page 5) and the divestment of Wood Supply UK (see page 7) had a negative impact on sales. Excluding these effects, net sales increased by 26%.
• EBITDA increased 106% to SEK 6,303m (3,0631). The increase was mainly attributable to higher selling prices in all product areas and a stable, low cost level. EBITDA margin increased with 23 percentage points (of which 8 resulted from the discontinuation of publication paper operations and the divestment of Wood Supply UK) and was 44.8% (22.11).
• Operating profit increased to SEK 5,226m (1,8531)
• Operating cash flow amounted to SEK 3,453m (1,731)
• Earnings per share increased to SEK 5.85 (2.021)

July-September 2021 compared with July-September 2020

• Net sales amounted to SEK 5,077m (4,338). The increase was mainly attributable to higher selling prices, which was offset by the discontinuation of publication paper operations and the divestment of Wood Supply UK.
• EBITDA amounted to SEK 2,684m (1,0321) and EBITDA margin increased to 52.9% (23.81).

July-September 2021 compared with April-June 2021

• Net sales increased by 6% to SEK 5,077m (4,810). The change was mainly attributable to higher selling prices, which was offset by lower delivery volumes.
• EBITDA amounted to SEK 2,684m (2,260) and EBITDA margin increased to 52.9% (47.0)

KEY FIGURES

		Quarter					Jan-Sep
SEKm	2021:3	2020:31	% 2021:2	%		2021		20201	%
Net sales	5,077	4,338	17	4,810	6		14,059		13,818	2
EBITDA	2,684	1,032	160	2,260	19		6,303		3,063	106
EBITDA margin (%)	52.9	23.8		47.0			44.8		22.1
Operating profit	2,298	624	268	1,881	22		5,226		1,853	182
Net Profit	1,821	475	283	1,483	23		4,106		1,417	190
Earnings per share SEK	2.59	0.68		2.11			5.85		2.02
Operating cash flow	1,872	1,118		1,106			3,453		1,731
Net Debt / EBITDA (LTM)	1.0x	2.0x		1.4x			1.0x		2.0x

1 Excluding the effect of one-off items related to the discontinuation of publication paper operations which were reported in Q3 2020. For further details and comparison including effects of those one-off items, see note 9.

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 1

2

SUMMARY OF THE THIRD QUARTER OF 2021

Earnings for the third quarter of 2021 improved compared with the preceding quarter and the year-earlier quarter, despite significant planned maintenance stops carried out during the period. Higher selling prices in all product areas had a positive impact on earnings.

The supply of wood to SCA's industries was stable during the quarter. The price of pulpwood remained stable compared with the preceding period while the price of timber increased slightly in northern Sweden due to high demand.

Demand has been strong for solid-wood products for some time in most geographies, which has resulted in low inventory levels across the value chain and in turn led to a sicnificant increase in market prices compared with the preceding quarter.

Delivery volumes in the Pulp segment decreased compared with the preceding quarter, due primarily to inventory build-up prior to the planned maintenance stop that began at the end of the period. Selling prices increased mainly due to continued healthy demand in Europe.

Demand for kraftliner was strong during the quarter, driven by higher global demand for packaging. Market prices increased compared with the preceding quarter. Two planned maintenance stops took place during the period, which limited production and delivery volumes slightly. The expansion project at Obbola is progressing in line with schedule and budget. A successful start-up of the upgraded fiber line and recovery boiler took place during the period.

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 1

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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

2020:3	2020:4	2021:1	2021:2	2021:3
​EBITDA & margin	%
SEKm
3,000				60
2,500				50
2,000				40
1,500				30
1,000				20
500				10
0				0
2020:3	2020:4	2021:1	2021:2	2021:3

Note: EBITDA 2020:3 and 2020:4 shown excluding the effects of discontinuation of publication paper

Change in net sales (%)

2109 2021:3 2021:3

vs vs vs 2009 2020:3 2021:2

GROUP

SALES AND OPERATING PROFIT

January-September 2021 compared with January-September 2020

Net sales amounted to SEK 14,059m (13,818), an increase of 2%, of which price/mix accounted for 26%, discontinuations -14%, divestments -10%, volume 4% and currency-4%. Excluding the negative effects from the discontinuation of publication paper operations and the divestment of Wood Supply UK in the fourth quarter of 2020, net sales increased by 26%. Higher selling prices in all product areas and higher delivery volumes had a positive effect on sales, partly offset by negative exchange rate effects.

EBITDA increased to SEK 6,303m (3,0631), corresponding to an EBITDA margin of 44.8% (22.11). The change was mainly attributable to higher selling prices in all product areas, which was partly offset by negative exchange rate effects. The cost of planned maintenance stops amounted to SEK 171m (130).

Operating profit amounted to SEK 5,226m (1,8531).

July-September 2021 compared with July-September 2020

Net sales increased 17% to SEK 5,077m (4,338), of which price/mix accounted for 44%, discontinuations -16%, divestments -11%, volume 3% and currency -3%. The increase was attributable to higher selling prices in all product areas and higher delivery volumes. The discontinued publication paper operations, divestment of Wood Supply UK in the fourth quarter of 2020 and exchange rate effects all had a negative impact on sales.

EBITDA amounted to SEK 2,684m (1,0321), corresponding to an EBITDA margin of 52.9% (23.81). The increase mainly relates to higher selling prices in all product areas, which were offset by negative exchange rate effects and higher costs for planned maintenance stops of SEK 171m (62).

	Total	2	17	6	Operating profit amounted to SEK 2,298m (6241).
	Price/mix	26	44	19
	Volume	4	3	-11	July-September 2021 compared with April-June 2021
	Currency	-4	-3	0	Net sales increased 6% to SEK 5,077m (4,810), of which price/mix accounted for 19%, volume
	Divestment	-10	-11	0	-11%, discontinuations -2% and currency 0%. The increase was mainly attributable to higher
	Discontinuation	-14	-16	-2	selling prices in all product areas, which were offset by lower delivery volumes.

Operating cash flow

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

800

600

400

200

0

2020:3 2020:4 2021:1 2021:2 2021:3

EBITDA amounted to SEK 2,684m (2,260), corresponding to an EBITDA margin of 52.9% (47.0). The change was mainly attributable to higher selling prices in all product areas. Earnings were negatively impacted by lower delivery volumes and a seasonally lower share of harvesting from SCA-owned forest. The cost of planned maintenance stops amounted to SEK 171m (0).

Operating profit amounted to SEK 2,998m (1,881).

CASH FLOW

January-September 2021 compared with January-September 2020

The operating cash surplus amounted to SEK 5,164m (2,168). The cash flow effect from changes in working capital was SEK -630m (523). Expenditures related to the discontinuation of publication paper operations amounted to SEK -336m (0). Net current capital expenditures totaled SEK -804m(-926). Operating cash flow was SEK 3,453m (1,731) (see Note 9).

Strategic capital expenditures totaled SEK -2,239m(-1,157) (see page 5). Cash flow after dividend for the period was SEK -156m (1,863) (see page 15).

FINANCING

At September 30, 2021, net debt totaled SEK 7,631m, a decrease during the quarter of

SEK 605m. Net debt in relation to EBITDA amounted to 1.0x compared with 1.4x in the preceding quarter.

At September 30, 2021, gross debt amounted to SEK 10,546m, with an average maturity of 4.7 years (including the lease liability). The loan structure consists of bonds and bilateral bank loans.

1 Excluding the effect of one-off items related to the discontinuation of publication paper operation, which were reported in the third quarter of 2020. For more information and comparisons including the effect of these one-off items, see Note 9.

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 1

4

Unutilized credit facilities amounted to approximately SEK 8.9bn at September 30, 2021, of which the largest portion falls due in 2026. In the third quarter of 2021, financial items totaled

SEK -24m compared with SEK -28m in the same period last year.

SCA signed a loan agreement in October with EIB in an amount of EUR 300m. The agreement is based on the sustainability value of the ongoing investment in production capacity increases in the kraftliner mill in Obbola. The loan agreement is a committed credit facility available for long term financing during the coming 2.5 years.

TAX

January-September 2021 compared with January-September 2020

The Group's tax expense amounted to SEK -1,041m (6), corresponding to a tax rate of 20.2%. In the third quarter last year tax income was recognized due to one-off items related to the discontinuation of publication paper operations.

EQUITY

January-September 2021

Total consolidated equity increased by SEK 3,989m during the period, to SEK 76,152m at September 30, 2021. Equity increased due to comprehensive income for the period of SEK 5,369m and other items of SEK 25m, and decreased due to the dividend of SEK 1,405m.

CURRENCY EXPOSURE AND CURRENCY HEDGING

Due to a high proportion of exports, SCA's operations are sensitive to currency fluctuations. 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 70 of SCA's Annual and Sustainability Report for 2020.

The company has hedged about 60% of the expected EUR net exposure from sales minus purchases up until the end of the first quarter of 2022, as well as approximately 40% for the second quarter of 2022 and 20% for the third quarter of 2022, at the average EUR/SEK exchange rate of 10.28.

The company has hedged about 70% of the expected USD net exposure from sales minus purchases up until the end of the first quarter of 2022, as well as approximately 50% for the second quarter of 2022 and 25% for the third quarter of 2022, at the average USD/SEK exchange rate of 8.56.

The company has hedged about 50% of the expected GBP net exposure from sales minus purchases up until the end of the first quarter of 2022, as well as approximately 30% for the second quarter of 2022 and 15% for the third quarter of 2022, at the average GBP/SEK exchange rate of 11.90.

PLANNED MAINTENANCE STOPS

In the third quarter of 2021, planned maintenance stops were carried out at the kraftliner mills in Munksund and Obbola (Containerboard). One planned maintenance stop at the pulp mill in Östrand (Pulp) began at the end of the quarter.

The estimated effect of the planned maintenance stops on earnings, calculated as the sum 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
SEKm	2020:1	2020:2		2020:3	2020:4	Total
Pulp	0	0		20	130	150
Containerboard	0	68		42	0	110
Total	0	68		62	130	260
		Actual		Forecast
SEKm	2021:1	2021:2		2021:3	2021:4	Total
Pulp	0	0		20	130	150
Containerboard	0	0		151	0	151
Total	0	0		171	130	301

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 1

5

SIGNIFICANT EVENTS

Changes at the Ortviken site

SCA decided to exit publication paper in 2020. From the first quarter of 2021, the Paper segment consists only of kraftliner and has changed name to the Containerboard segment. The sale of the remaining inventory of publication paper following the discontinuation was recognized in Other as of January 1, 2021. Costs related to the maintenance of the Ortviken site between the discontinuation of the publication paper production and the start of CTMP production (see below) are expected to be about SEK 20-30m per quarter and are recognized in Other.

STRATEGIC CAPITAL EXPENDITURES

SCA invests in the Obbola kraftliner mill

In 2019, SCA decided to build a new paper machine for the production of kraftliner at the Obbola paper mill in Umeå. Production in Obbola will increase from the current 450,000 tonnes of kraftliner to 725,000 tonnes per year to meet an expected increase in demand for renewable packaging.

The total investment will be approximately SEK 7.5bn over a five-year period. The investment includes environmental investments of approximately SEK 1bn, which include a reduction in oil consumption by 8,000 cubic meters per year and an improved water treatment capacity. The project is progressing on time and on budget. Production is expected to start on the new machine at the beginning of 2023.

SCA invests in increased CTMP production capacity

In 2020, SCA decided to invest SEK 1.45bn to reach an annual production volume of 300,000 tonnes of chemically pre-treated mechanical pulp (CTMP) at the Ortviken site, where some existing infrastructure and mechanical equipment will be utilized. The project is progressing on time and on budget. Production is expected to start at the new facility at the beginning of 2023.

SCA and St1 enter joint venture to produce and develop biofuels

SCA and St1 announced in September that a joint venture has been formed to produce and sell liquid biofuels. The joint biorefinery will have access to SCA's tall oil, which is a residual product from the production of kraft pulp. SCA's part of the investment is approximately 0.6 bn SEK. The new biorefinery is expected to begin operations in the second quarter of 2023 (see page 10).

SCA invests in forest land in the Baltic region

SCA has an ongoing investment program to acquire 100,000 hectares of forest land in the region. At the end of the third quarter of 2021, SCA had a land area of about 44,000 hectares of forest land in Estonia and Latvia. The acquisitions will strengthen SCA's long-term opportunities to source timber in the region.

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