Net sales were $1.72 billion, down 1.0 percent. Sales were up 1.0 percent ex. currency. On an organic basis, sales grew 0.3 percent. Reported operating margin increased 120 basis points to 11.6 percent. Adjusted operating margin increased 90 basis points to 11.8 percent. Reported net income was $1.60 per share, compared to a loss of $1.74 per share in the prior year first quarter. Prior year reported results included a $3.13 per share negative impact from pension settlement charges, net of tax. Adjusted net income was $1.66 per share, up 12 percent, above the company’s expectations, reflecting lower-than-planned raw material and employee-related costs. Free cash flow was negative $35.3 million reflecting seasonality (free cash flow in the first quarter of the year is typically negative, driven primarily by the timing of employee incentive and customer rebate payments), as well as lower cash collections related to customer shutdowns late in the quarter.
SCA has decided to discontinue its hygiene business in India. Four years after entering the Indian market, our conclusion is that profitability cannot be achieved within a reasonable timeframe. SCA prioritizes growth in selected emerging markets such as China, Southeast Asia, Latin America, Eastern Europe and Russia, where the company already holds strong market positions. Emerging markets accounted for 32% of SCA’s net sales in 2015.
The total cost of the discontinuation of operations are expected to amount to approximately SEK 350m and will be recognized as an item affecting comparability in the fourth quarter of 2016. Approximately SEK 50m of these costs are expected to impact cash flow.
The hygiene business in India reported total net sales of approximately SEK 110m in 2015, the majority of which related to baby diapers.
The hygiene business in India will be discontinued in the first quarter of 2017.