SCA Interim Report Q3 2017

JANUARY 1 – SEPTEMBER 30, 2017 (compared with the year-earlier period, continuing operations)
•Net sales increased 9% to SEK 12,422m (11,434)
•Adjusted EBITDA improved 10% to SEK 2,683m (2,443)
•The adjusted EBITDA margin was 21.6% (21.4)
•Adjusted operating profit was SEK 1,838m (1,616)
•Operating profit totaled SEK 1,725m (1,739)
•Net profit for the period totaled SEK 1,278m (1,358)
•Earnings per share amounted to SEK 1.82 (1.93)
•Operating cash flow was SEK 1,431m (1,347)

The third quarter of 2017 was also SCA’s first full quarter, since the split, as an independently listed company. The market trend was favorable in all of SCA’s segments and earnings improved compared with the preceding quarter as well as the same quarter last year.

Second-quarter earnings were impacted by non-recurring effects such as planned maintenance stops, while underlying earnings were stable and rising. This trend has continued into the third quarter.

Market conditions are good in all of SCA’s segments, with favorable demand and continued price increases. Production remained stable.

Demand for wood products is high, with stable demand and balanced markets in Europe, China and the US. Due to these strong market conditions, prices were increased during the year and price increases continued in the third quarter.

Demand for kraftliner has shown a strong growth trend for several years. The key drivers of this trend are e-commerce and demand for high-quality packaging, which has thereby strengthened demand for virgin fiber-based packaging material (kraftliner). In 2017, three price increases were announced for unbleached kraftliner, totaling EUR 150 per tonne, and these are being successively implemented. The price level of white kraftliner has also increased. Demand for publication paper, continued to show a negative trend.

The timber market remained stable in SCA’s operating area, in terms of both price and supply.

The pulp market has continued to be strong. Deliveries to China increased again after the summer and demand was also favorable in other markets. Several ongoing capacity extensions were delayed and production problems in other mills also restricted supply. In September, the price of softwood kraft pulp was raised in USD and further increases have been announced as of October.

The long-term demand for softwood pulp has increased by 1.5-2% per year, which is the background to SCA’s investment in the Östrand pulp mill. The project will double SCA’s capacity and make Östrand one of the most cost-efficient production facilities in the world for softwood kraft pulp. SCA provides more detailed information about the investment amount and cost position of this project on page 6 of this report. The project is on track in terms of both time and budget.
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