Svenska Cellulosa : Profitable Growth in Pulp, Exit Publication Paper Presentation

Ulf Larsson, CEO August 26, 2020

1. Intention to invest in 300kt CTMP at Ortviken
2. Intention to exit publication paper
   • Negotiations initiated for closure of all three paper machines

2

Increased value from each tree

Growing

forest asset

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

3

Value



 2023

•  2021

Exit publication

paper



Östrand - further capacity increase



Biofuel



Acquisition of

forest land



Biorefinery optionality

• Research and development
• Pilot plant



 2023

Grow CTMP pulp

 Additional 70k ha

forest land in the



 2022

Kraftliner expansion

 Opportunity to

 Joint venture with

St1 signed

Baltics



 2018

8.0 TWh wind

power on SCA land

further increase

NBSK pulp

 100 000 m3

biofuels

Östrand

expansion

• Production started in June 2018
• Financed by operating cash flow

 Wind power on SCA

land is expected to

increase to 8.0 TWh

in 2022

 New long-term

target of 11 TWh

• New 725kt kraftliner machine at Obbola
• Increase share of WT Kraftliner at Munksund

• 300kt CTMP at Ortviken and close CTMP Östrand

 Closure of all

publication paper

machines

capacity at

Östrand

• Decided or completed projects (or Exit)

• Potential projects

Time

4



LWC volume1

1,000

Exit structurally declining publication paper market

• Low and decreasing profitability - now cash flow negative

900

800

700

 Invest in increased CTMP pulp production

600

•

Attractive CTMP offering

500

Month / Rolling LTM

• Low CAPEX per tonne

•

Leading cost position

400

300



200

Creates opportunity for further NBSK expansion

100

CAGR

Accelerated

-5%

0

Dec-17

Dec-18

Dec-19

Dec-06

Jun-07

Dec-07Jun-08Dec-08Jun-09

Dec-09Jun-10Dec-10Jun-11

Dec-11

Jun-12Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Dec-16

Jun-17

Jun-18

Jun-19

Jun-20

1Deliveries from Western Europe (kt/month)

5

Overview

Ortviken only remaining publication paper site in SCA

Closure of all three paper machines expected within six months

Subject to negotiations initiated with employee representatives

Annual production capacity 775k tonnes

• 500k tonnes LWC
• 275k tonnes uncoated

6

Product

properties	 Strength	 Absorption capacity
	 Bending rigidity	 Wet strength

	 Lower production cost		 Higher absorption
Customer	at same stiffness
value

Certified wood raw material

 Porosity			Bulk properties
 Stiffness			Opacity

 Increased shape		 Same product
	thickness with less
stability
	pulp

Unique competence in birch CTMP

8

Profitable growth

Expanding product offering

• Increase capacity from 100kt to 300kt
• High share of growth with existing customers

Sales to structurally growing product segments

• Increased share of sales to tissue and packaging
• CTMP improves customer product properties at a lower cost

End use segments

Printing &

Packaging Writing

Special

300kt

Tissue

9

Investment rationale

Low CAPEX per tonne

• CAPEX SEK 1.45bn
• CAPEX SEK 5k per tonne
• Utilize existing modern TMP asset

Scale up profitable business

• ~15% lower cash cost per tonne
• Top quartile in cost position

Source: Pöyry

Cost curve SW CTMP producers

		CTMP today
CTMP tomorrow
	Östrand
Ortviken

10

Net sales (SEKbn)	One-off closure costs, up to (SEKbn)
-4.0	~0.9

People affected	Write-downs (SEKbn)
~800	~1.1

of which

Fixed assets Working capital

~750

~350

12

Investment '20-'23 (SEKbn) CTMP capacity (kt)

+1.45bn		+200kt
1.45		300
	100
Investment	Base	Investment

Note: Assuming CTMP trend price of 528 USD/t

1. To be reported in segment Other

EBITDA (SEKbn)

	+0.3bn
Base	Investment

Financial summary

Capex of SEK ~1.45bn

Profitable growth

• +SEK 0.3bn EBITDA
• Secure current business

Expected start-up beginning 2023

• CTMP production to stop at Östrand when new line up and running
• Costs for maintaining Ortviken site SEK ~20m per quarter1

Creates opportunity for further NBSK expansion at Östrand

13

Growing Forest asset

Harvesting own forest (k m3)

	+1,100k m3
		5,400
4,300	4,300
2010	2020	2025

Wood			+2-3%
Capacity (m m3)
	+200k m3
2,100	2,200	2,300
From 11 to 5
	sawmills
2010	2020		2025

Publication Paper -5-10%		Pulp	+2-3%		Kraftliner	+2-3%
Capacity (kt)	Capacity (kt)			Capacity (kt)

	-1,810kt			+880kt			+340kt
1,810					1,400			1,140
					200	Further
					potential
						865
				1,000		800
	775		520		1,200
		0
2010	2020	2025	2010	2020	2025	2010	2020	2025
+[]% = Annual market growth / decline				15

NBSK		CTMP

Raw material

SCA capacity

• Produced by cooking wood chips in white liquor
• Gives pulp with long, strong fibers
• Possible to bleach to full brightness with no yellowing effect
• Provides high strength and brightness to paper products
• Higher consumption of wood per ton pulp
• Creates a energy surplus

Pine and spruce (softwood)

900k tonnes at Östrand

• Produced by grinding wood chips in a refiner
• Gives shorter, stiffer fibers that provide absorption capacity, bulk and stiffness to paper products
• Not possible to bleach to full brightness
• Lower consumption of wood per ton pulp
• No energy surplus

Both softwood and hardwood

100k tonnes today at Östrand (to be closed)

300k tonnes tomorrow at Ortviken

17

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.