investor presentation - sca › globalassets › sca › investerare › ... · 2018-07-25 ·...
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Investor Presentation Investor Relations
July 2018
A strong and integrated value chain
2
EBITDA margin 1)
22.6% Industrial ROCE 2)
13%
Forestland
2.6m ha
Net growth
3.0m m3fo
Sales (SEKm)
16,664 EBITDA 1) (SEKm)
3,761
Forest Wood
Pulp Paper
Note: 1) Adjusted EBITDA and EBITDA margin. 2) Adjusted ROCE for the industrial segments; Wood, Pulp
and Paper. ROCE adjusted for capex invested in the Östrand project.
Financial figures refer to 2017.
Renewable
energy
Europe’s largest private forest owner
Kraftliner mill
Paper mill
Pellet production
Pulp mill
Saw mill
Saw mill, partly-owned
6% of Sweden
Productive forestland
2.0m ha
Forestland
2.6m ha
Standing volume
232m m3fo
Munksund
Obbola
Rundvik
Gällö
Bollstabruk
Östrand
Ortviken
Tunadal
Härnösand
Stugun
3
Global trends favoring fiber based renewable materials
4
Growing
demand for
virgin fiber
E-commerce
Increased
demand for
renewable
materials
Eco-awareness
More packaged
goods
Cash flow funded growth opportunities
5
Time
ROCE Leverage Credit rating
Integrated
value chain
SEK 7.8bn investment
Production began in June
Further growth potential
Östrand expansion
20152018
Joint venture with St1 signed
Biofuel production
from crude tall oil
20192021
SEK 196m investment
+50kt white-top kraftliner
Increase share of
White-top Kraftliner
20182019
Pre-project to prepare for expansion at Obbola
Kraftliner expansion
20192021/22
Agreements signed for construction in 2018-2020
5.0 TWh wind
power on SCA land
2020
SEK 50m pilot plant
Environmental permit
Biorefinery
optionality
2025?
Valu
e
Profitable growth strategy
6
Renewable energy – the next value creator
Wood – moving forward in the value chain
Pulp – start-up of a SEK 7.8bn investment
Paper – Kraftliner expansion
Forest – the source for value creation 1
2
3
4
5
Growing
forest asset
Increased
value from
each tree
Forest – the source for value creation
The forest is our source for value creation
8
Growth Harvesting Land value
146
232
1950 2017
Profitable growth since 1950
9
Standing volume
million m3fo
+60%
Harvest plan
million m3sub
2.0
4.3
1950 2017
+120%
Land value 1)
SEK/m3fo (real value)
109
396
1950 2017
+260%
Note: 1) Average price Sweden, real price (2017 price level). Source Lantmäteriet.
Increasing
cash flow
Increasing
cash flow
Increasing
land value
Growing
asset base
Significant real growth of 3.5%
10 Note: 1) Corresponding to approximately 4.3m m3sub.
Gross growth of standing forest
Natural losses and pre-commercial thinning
Available growth of standing forest
Annual harvesting
Annual net increase of standing forest
9.5
-1.3
8.2
-5.2
3.0
Forest growth metrics (m m3fo)
(1) Current cash flow
New harvesting plan every 8-10 years
Harvesting increase to >7m m3fo in 2114
Future cash flow
Real growth rate of 3.5% (in relation to the standing
volume of 232m m3fo)
Forest – strategic direction
Increase sustainable harvesting level
Prevent further restrictions in ownership rights
Maximize growth
11
Secure biodiversity for future generations
Secure raw material supply
Paper – Kraftliner expansion
Kraftliner – strategic growth area
Munksund – grow the share of value-added
products: white-top, heavy duty and wet strength
Obbola – increase production capacity and
improve efficiency
Publication paper – maximize
cash flow
Positive cash-flow through operational excellence
and optimized product and market mix
13
Prepare for profitable growth in Kraftliner
14
1. Increase share of White-top in Munksund
SEK 196m investment
White-top Kraftliner capacity increased from 150k tonnes to 200k tonnes
Expected completion in May 2019
2. Transfer mid-grammage brown products from Munksund to Obbola
Investment enables contribution optimization of Obbola paper mill
Cost savings in addition to increased share of White-top at Munksund
3. Expand capacity and reduce costs of goods in Obbola
Environmental process initiated
Pre-project to prepare for Kraftliner expansion at Obbola initiated
Favorable long-term trends for Kraftliner
15
E-commerce – 20% growth CAGR
Increasing world trade
Shelf ready packaging
Substitution of plastics
Favorable long-term trends... ...driving demand for virgin fiber
Kraftliner demand Europe / Growth CAGR
k tonnes
Source: Numera.
Food safety 2012 2017 2022e 2026e
0
1,000
2,000
3,000
4,000
5,000
6,000
2.7% ~2%
~2%
White
Unbleached
86%
88%
90%
92%
94%
96%
98%
100%
2012 2013 2014 2015 2016 2017
Operating rates (shipment-to-capacity)
Increased capacity needed to meet demand
16
Kraftliner growth limited by shortage of supply
Source: Numera.
Virgin
Recycled
+800kt
capacity
needed by
2026
Not enough supply to
satisfy demand
Opportunity for increased capacity
Infrastructure
Chemical pulp
Technical requirements
New ~800 kt paper machine
Expansion of existing pulp line
• Virgin fiber
• Recycled fiber
Potential investment decision
based on outcome of pre-project
Obbola one of few brown field
opportunities in Europe Pre-project to prepare Kraftliner expansion at Obbola initiated
450
Total capacity Obbola (ktonnes/year)
Present New capacity
17
Access to fresh fiber
700-800
Leading non-integrated
supplier
Pulp – start-up of a SEK 7.8bn investment
World’s largest NBSK pulp line in operation
19
7.8 SEKbn
investment
Production began in June according to plan
• On budget and on time
Ramp-up period of 12-18 months
• 2018 – volumes in line with 2017
• 2020 – first full year at full capacity
Meeting long-term growth in
tissue and white packaging
World-class competitiveness
and cost position
1mt pulp mill with enhanced competitiveness
20
World-class competitiveness
• Doubled NBSK capacity
• Fixed cost reduction of SEK 350 per tonnes compared to pre project level
• Improved energy balance – from a net consumer of 0.1 TWh to a net producer of 0.5 TWh
• Wood supply secured, but with potentially higher transportation cost
• Leading pulp quality for tissue products
100,000 100,000
430,000
900,000 NBSK
Present
Post completion
Total capacity (tonnes/year)
CTMP
22
23
26
2007 2012 2017
…driving increased tissue demand
and shortage of virgin fiber Strong market growth…
26
34
0.1
24
Bleached Softwood Kraft Bleached Hardwood Kraft
Sulfite Unbleached Kraft
Mechanical pulp
Growing demand for pulp
21 Source: CEPI, RISI, PPPC, SCA.
Growing tissue demand,
shrinking supply of high
grade recycled fiber from
Printing & Writing
CAGR
+3.4%
Total: 66
Global market (m tonnes)
0.9%
CAGR Index (global market)
CAGR
-1.8%
Tissue production
Printing & Writing consumption
1.8%
70
80
90
100
110
120
130
140
150
2007 2009 2011 2013 2015 2017
BSK
BHK
Pulp – strategic direction
22
Ramp-up
Start-up
Quality
1
2
3
Renewable energy – the next value creator
Östrand investment enables biofuel potential
24
Doubled tall oil production Net energy producer 1) Energy and
production optimization
60,000
tonnes
Energy
surplus Synergies
Note: 1) Net energy producer at Östrand.
SCA and St1 to start a joint venture for the production of biofuels from tall oil
25
Reduction of CO2 by blending biofuels
• Sweden: 21% diesel and 4.2% gasoline by 2020
• EU: 7% renewable energy in transport
The HVO market is growing rapidly due to
its compatibility with fossil diesel
Joint venture with St1 for the production of liquid biofuels
• Moving forward in the value chain
• SEK ~0.5bn investment by JV
• Annual production of ~100k tonnes HVO or biojet
• SCA to supply ~60k tonnes CTO out of ~170k tonnes
• Additional products include LPG, Naphtha, Turpentine
and Pitch bioenergy
Development of HVO volume in Sweden
Source: SPBI.
Note: HVO = Hydrogenated Vegetable Oil.
0
20
40
60
80
100
120
140
160
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Mo
nth
ly H
VO
vo
lum
e (k
m3)
HVO drop in
13% share
in Swedish
transport sector HVO
Biorefinery potential enabled through the Östrand investment
Environmental permit application for two full scale
biorefinery lines initiated
Renewable energy – the next segment?
SEK 50m invested in a pilot plant in Obbola for the
production of liquid biofuels from black liquor
Energy surplus and byproducts from pulp
production create opportunities in biorefinery
Long-term
potential
2025?
Investments enable debottlenecking of the
recovery boiler
26
Doubled wind power production by 2020
27
2.3
2.7 Land available through leasing
Land with excellent wind conditions 5.0 TWh
Target of 5.0 TWh by 2020 will be exceeded
EBITDA contribution of SEK 60-70m by 2020
Construction scheduled
to start in 2018-2020
Current wind power
on SCA land
Wood – moving forward in the value chain
One of the largest and most efficient sawmill operations in Europe
29
From 11 to 5 highly automated and efficient sawmills
Average capacity/
mill: (m3/year) 160k 430k
1.8m m3
2.2m m3
2007 2017
11
sawmills
5
sawmills
SEK ~2.0bn invested since
2007
Rundvik
Munksund
Bollsta
Tunadal
Gällö
Jämtlamell
Rundvik
Munksund
Holmsund
Vilhelmina
Bollsta
Tunadal
Gällö
Tjärnvik
Boden
Graninge
2007 2017
Long-term profitable growth with focus on value added products
30
Wood sales (SEKbn)
1.1
4.7
6.0
1997 2007 2017
Wholesalers Wood Industry Building Materials Trade
+9% p.a.
Profitable growth
Higher and more stable
margins over a business
cycle
Customized products
based on customer
insights
31
Product innovation
Pine heartwood decking
Outdoor cladding with concealed fitting
Wood – strategic direction
32
Continued profitable growth through focus on:
• Building Materials Trade in Scandinavia, UK and France
• Industrial customers with high demand for customized products
Optimized production sites for world-class efficiency:
• Well invested large scale units
• Focus on automatization and optimization
Digitalization
• New tools and services for a growing e-commerce market
Q2 summary
724
1,049 1,078
1,175
1,034
17%
25%
25% 27%22%
Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18
SCA’s performance Q2 2018
EBITDA development (SEKm)
Note: 1) ROCE for the industrial segments; Wood, Pulp and Paper (* Industrial ROCE adjusted for capex
invested in the Östrand project). ROCE calculated as LTM.
EBITDA margin
22.1%
Industrial ROCE 1)
13% / 19%*
Net debt/EBITDA
1.7x
EBITDA (SEKm)
1,034 43%
34
Excluding Pulp
35
Contribution by segment and quarter Paper
Net sales (SEKm)
Pulp Forest Wood
295 338 325 364
316 358
304
371
23% 26% 25%
30% 25%
28% 23%
32%
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
1,2
61
1,2
96
1,3
12
1,2
10
1,2
61
1,2
87
1,2
98
1,1
62
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
1,8
59
1,9
98
2,0
46
2,0
72
2,0
96
2,2
20
2,3
83
2,4
26
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
1,3
20
1,3
61
1,3
64
1,6
37
1,5
67
1,4
26
1,5
03
1,8
46
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
668
668
641
585
644
672
589
485
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
143 161 145 154 187 184 172
230
11% 12% 11% 9% 12% 13% 11% 13%
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
160 102 104
71
158 149 178
-112
24%
15% 16% 12%
25% 22%
30%
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
293 271 268 291
439 481
586 618
16% 14% 13% 14%
21% 22% 25% 26%
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
EBITDA (SEKm) and EBITDA margin
36
Forest Q2 2018 vs. Q2 2017
1,210 1,162
Q2 2017 Q2 2018
364 371
Q2 2017 Q2 2018
30.1% 31.9%
Q2 2017 Q2 2018
-4% 2%
Net sales (SEKm) EBITDA (SEKm) EBITDA margin
Stable wood supply to industries
Continued price increases, especially for imported
wood
Inventory build-up to meet Östrand’s increasing
pulpwood demand
Sales down 4%
• Lower volumes due to the expansion stop at Östrand
EBITDA up 2%
• Higher prices
80
90
100
110
120
Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18
Pulpwood Sawlogs
Price development – Pulpwood and Sawlogs
37
Wood Q2 2018 vs. Q2 2017
95
100
105
110
115
120
125
Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18
Price index SEK
1,637 1,846
Q2 2017 Q2 2018
Net sales (SEKm) EBITDA (SEKm) EBITDA margin
154
230
Q2 2017 Q2 2018
9.4%
12.5%
Q2 2017 Q2 2018
Price development – Solid Wood Products
13% Continued strong demand with increasing prices
Low inventory levels
Sales up 13%
• Higher prices
EBITDA up 49%
• Higher prices
• Positive currency effects
• Increased raw material costs
49%
38
Pulp Q2 2018 vs. Q2 2017
585
485
Q2 2017 Q2 2018
71
-112
Q2 2017 Q2 2018
12.1%
-23.1%
Q2 2017 Q2 2018
Net sales (SEKm) EBITDA (SEKm) EBITDA margin
Price development – NBSK Pulp
Expanded Östrand pulp mill in operation • Expansion stop to complete the final
stage of the sequential start-up
• Limited production in the quarter
• Production began in June 2018 according to plan
• SEK 6.6bn invested up to Q2, out of SEK 7.8bn in total
Strong pulp market with further price increases
Sales down 17% • Lower deliveries due to the expansion stop
• Higher prices
Negative EBITDA • Planned costs related to the start-up
of the expanded pulp mill
95
105
115
125
135
145
Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18
Price index SEK
-17%
39
Paper Q2 2018 vs. Q2 2017
80
100
120
140
160
Q2'16
Q2'17
Q2'18
Price index SEK
2,072
2,426
Q2 2017 Q2 2018
291
618
Q2 2017 Q2 2018
14.1%
25.5%
Q2 2017 Q2 2018
80
100
120
140
160
Q2'16
Q2'17
Q2'18
Price development –
Kraftliner
Price development –
Publication paper
17% 112%
Net sales (SEKm) EBITDA (SEKm) EBITDA margin
Continued strong Kraftliner market
Improved market for Publication paper
Sales up 17%
• Higher Kraftliner prices
EBITDA up 112%
• Higher Kraftliner and Publication paper prices
• Positive currency effects
• Stable cost development
40
Balance sheet
SEKm Jun 30, 2018 Dec 31, 2017
Forest assets according to IAS 41 1) 31,693 31,386
Deferred tax relating to Forest assets -6,529 -6,905
Forest assets, net of deferred tax 25,164 24,481
Working capital 3,150 2,861
Working capital/Net sales 2) 17% 18%
Other capital employed 16,200 15,377
Total capital employed 44,514 42,719
Net debt 7,348 5,966
Net debt/EBITDA 3) 1.7x 1.6x
Equity 37,166 36,753
Net debt/Equity 20% 16%
Note: 1) Gross value before deferred taxes. 2) Calculated as an average of working capital for 13 months as
a percentage of 12-month rolling net sales. 3) 12-months EBITDA, up to end of each period.
Share information
1929 SCA founded
SCA’s transformation journey
42
1975-2006 Acquisitions :
• Mölnlycke, Sweden
• PWA, tissue, Germany
• Georgia-Pacific, AfH tissue, USA
Divestments:
Packaging business
Two publication paper mills
2007-2016 Acquisitions:
• Vinda, tissue, China
• P&G, tissue, EU
• Georgia-P., tissue, EU
2017 split
Forest Products
1929
Forest Products
and Packaging 2006
Hygiene
Forest Products
Hygiene
2016
2017
Forest Products
Divestments:
• Packaging
• Two publication paper mills
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
55
60
65
70
75
80
85
90
95
100
105
12/Jun 3/Jul 24/Jul 14/Aug 4/Sep 25/Sep 16/Oct 6/Nov 27/Nov 18/Dec 8/Jan 29/Jan 19/Feb 12/Mar 2/Apr 23/Apr 14/May 4/Jun 25/Jun 16/Jul
Vo
lum
e (th
ou
san
ds)
Sh
are
pri
ce
(S
EK
)
Volume (B-share Nasdaq Stockholm) SCA B OMX Stockholm 30 (rebased SCA B) Q-report
Share price development
43
June 12
Opening price
SCA B: 61.60
Closing price
SCA B: 62.60
Share price development since distribution of Essity
June 12
Opening price
SCA B: 61.60
Closing price
SCA B: 62.60
Q3
Current market cap
SEK 63billion
Source: FactSet.
Note: As of July 20, 2018.
+43%
-4%
Q4
Q2
Q1
Shareholder structure
44 Source: Monitor.
# Shareholder Capital Votes
1 Industrivärden 9.5% 29.7%
2 Norges Bank 7.2% 9.6%
3 Handelsbanken Pensionsstiftelse 1.4% 3.4%
4 AMF Försäkring & Fonder 4.7% 3.0%
5 Swedbank Robur Fonder 4.0% 2.2%
6 BlackRock 3.5% 1.9%
7 Livförsäkringsbolaget Skandia 0.5% 1.4%
8 Pensionskassan SHB Försäkringsförening 0.7% 1.3%
9 Schroders 2.3% 1.3%
10 Vanguard 2.2% 1.2%
Top 10 36.0% 55.1%
Others 64.0% 44.9%
Total 100.0% 100.0%
SCAs largest shareholders as of June 30, 2018
Number of shareholders
~96,000
Swedish ownership
~47%
Number of shares
~702m
Growing forest asset
Swedish forest transformation
47
Exploitative selective logging of the 1920’s 1) The forest landscape of today
Note: 1) Source SLU, Skogsbilder.
Silviculture
Fertilization
Improved seedlings
Introduction of lodgepole pine
Improved practices has increased growth
48
Growth plan at different taxations (standing volume / hectare)
2
3
4
1
Source: SCA measurements and estimates.
Note: Taxation = forest inventorisation. Lodgepole pine = Pinus contorta.
2014
+14 m3fo/ha
Tax IX vs
Tax VI
1984
+7 m3fo/ha
Tax VI vs
Tax II
m3fo/ha
2017 232m m3fo
2.0m ha
60
70
80
90
100
110
120
130
1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024
Tax II (1953-54) Tax VI (1983-84) Tax IX (2012-13)
Young forests and lodgepole pine drive biological growth
49
High share of young forests currently in a strong growth phase
Age classification Standing volume, %
Strong growth phase
33% of volume
61% of growth
0-20
Lodgepole pine
9% of volume
18% of growth
Tree species Standing volume, %
Spruce
Deciduous 1%
33%
18%
48%
15%
9%
40%
36%
Pine
21-50
51-80
80+
Source: Tax IX (2013).
Note: Lodgepole pine = Pinus contorta.
Planning, planning, planning
50
Planning key
to increase
growth
Fre
qu
en
cy
Calculation of sustainable yield – 100+ years
• Inventories, recalculations every 6-10 years
i
Ecological landscape plans – 100+ years • Set aside areas, areas for special management
ii
Stand selection for harvesting plans – 10 years
• Estimations of volumes and qualities
iii
Road construction – 5 years iv
Operational field planning for harvests – 1-3y
• Seasonal adaptions, consultations reindeer herding
v
Supply planning – month, week, day
• Balancing harvesting, wood transport and industry supply
vi
Improved seedlings
51
The world’s largest forest tree nursery with
capacity to produce 100 million seedlings per year
Selective breeding bring seed with higher quality,
survival rate and growth
On site R&D to improve growth and protection
Innovative seedling systems
>25% faster
growth potential
than natural
regeneration
Global climate change
52 Source: Skogsstyrelsen.
Note: Based on base case which includes a significant decrease in emissions. Areas
furthest from the equator will receive the largest changes.
Increased growth in northern Sweden
3-4˚C increase
in temperature
by 2100
Global warming will have a significant
impact on the climate in northern Sweden Increased risk
Significant longer growth period –
earlier in spring, later in autumn
25-30% increased growth
by the end of the century
Increased risk for storms, fire,
infestation and snow damage
Damage to soils and water due to
shorter period of ground frost
×
×
Increase in both standing volume and harvesting level
53
0
1
2
3
4
5
6
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Cutting plan Timber harvest
Harvesting from own forest (m m3sub) Standing timber volume (m m3fo)
Increasing cash flow
+165%
0
50
100
150
200
250
300
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Growing asset base
Based on
current
practices
Note: Historic growth based on Tax I-VIII. Current growth and forecast based on Tax IX (2013)
and current practices.
+75%
Nature conservation impacting current harvesting level
54
Age (y): <0 1-20 21-40 41-60 61-80 81-100 101-120 >120
0%
5%
10%
15%
20%
25%
30%
Forest holding by age class (by area – ha)
Harvestable age
Large share of the forest in harvestable age
is saved for nature conservation
High share of young forests currently in a
strong growth phase
• Harvesting will rise when the younger forests
reach harvestable age around 2035
Nature conservation
Responsible forest management
55
Voluntary set-asides
Nature considerations during harvesting
operations
Alternative forms of forest management
Sum (over the rotation
period of the forest)
5-8%
10-15%
3-5%
~20%
% of productive
forest land Nature conservation areas
21% currently
excluded from
harvesting
≥5%
~5-10%
–
~10-15%
FSC
requirement
Coaching and business development
4
Technological and organizational development drives productivity
0
10
20
30
40
50
60
70
55 65 75 85 95 05 15
Productivity development (m3sub/ day’s work)
Storm felling
56
Technical development
1
Instruction, training and feedback
Ownership structure
2
3
Technical revolution
Organizational development
Efficient wood sourcing organization secures wood supply
57
Wood sourcing
to industries
10m m3sub
Europe’s largest
private forest owner
2.6m ha
Control of
infrastructure
8 terminals
Murjek
Luleå
Piteå Storuman
Hoting
Lycksele
Umeå
Rundvik
Bollsta
Östavall
Bensjö
Krokom
Töva Sundsvall
Kiruna
Härnösand
Terminal
Industry (pulp wood)
Industry (saw logs)
Forest district
Wood supply unit
Plant nursery
Train/truck boarder
Railway
SCA’s forest holding
timber
50% self
sufficiency
Östersund
Attractive offering for local forest owners
58
Harvesting services – leading cost position
Silviculture and advisory services
Strong financial and industrial partner
SkogsvingeTM – a digital tool
i
ii
iii
iv
Relationship
with 14,000 forest owners
Paving the way for a renewable future
59
SCA’s growing forest binds ~4m tons CO2
annually and provide renewable materials
95% fossil free production
21% of the productive forest land is excluded
from harvesting to preserve biodiversity
Carbon dioxide emissions from fossil fuels
reduced by ~50% since 2010
Our forests will be as rich in timber,
biodiversity and nature experience
as today
Europe’s largest private forest owner
60
High productivity and efficient value chain
Securing timber and biodiversity for future generations
Stable and long-term increasing harvesting rate
Significant growth through young forest and active management
Sustainable forest management
Increased value from each tree
Capital allocation
62
Stable and
increasing
Supported
by strong
cash flow
Creating
Shareholder
Value Capital Structure
Investment
Grade Rating
Net Debt
to EBITDA
Integrated
value chain
High return
projects M&A
Real growth
of 3.5%
Strategic
Investments
Dividend
Forest Asset
Creating
Shareholder
Value
Value creation for the forest owner
63
Revenue
63% Volume
48% Price
~510 Revenue
37% Volume
52% Price
~280
Saw logs Pulp wood
Note: Price in SEK/m3sub.
Integrated value chain creates significant value add from one tree
EBITDA margin 2)
22.6%
Wood raw material 1) (m m3sub)
~9
Note: 1) Excluding chips from own sawmills. 2) Adjusted EBITDA margin. 3) Adjusted ROCE for the
industrial segments; Wood, Pulp and Paper (adjusted for capex invested in the Östrand project).
4) Net sales and other income. Financial figures refer to 2017.
+ Wood products
+ Pulp
+ Publication paper
+ Kraftliner
+ Chips
+ Pellets
+ Wind power
+ District heating
+ Green electricity
+ Combined logistics
SCA 2,000+
Industrial ROCE 3)
13%
Income / m3sub 4)
Saw logs ~510
Pulp wood ~280
Forest owner ~390
x5
64
Growing
forest asset
Increased
value from
each tree
65
Investment in value chain drives profitability
Time
Valu
e
20192021/22
SEK 7.8bn inv.
Production began in June
Östrand
expansion
20152018
Agreements signed for construction in 2018-2020
5.0 TWh wind
power on SCA land
2020
Joint venture with St1 signed
HVO production
from CTO
20192021
Pre-project to prepare for expansion at Obbola
Kraftliner
expansion
SEK 50m pilot plant
Environmental permit
Biorefinery
optionality
2025?
SEK 196m investment
+50kt white-top kraftliner
Increase share
of WT Kraftliner
20182019
Increase value from byproducts
Increase
value add
Utilization
of land
Growing
forest asset
Increased
value from
each tree
20192021/22
312295
338325
364
316
358
304
371
25%
23%
26%25%
30%
25%
28%
23%
32%
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
Forest seasonality
66
Net sales (SEKm)
1,2
34
1,2
61
1,2
96
1,3
12
1,2
10
1,2
61
1,2
87
1,2
98
1,1
62
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
EBITDA (SEKm) Harvesting of own forest (k m3sub)
1,3
22
898
1,3
68
664
1,3
53
964
1,4
68
695
1,4
14
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
High level of harvesting from own
forest in Q2 and Q4
Revaluation of forest – lower revaluation
when harvesting from own forest is high
<0 1-20 21-40 41-60 61-80 81-100 101-120 >120
0%
5%
10%
15%
20%
25%
30%
Thinning
Factors affecting relative profitability
67
Price to industry
• Market prices, externally sourced wood sold at cost
i
Harvesting efficiency
• Industry leading cost position
ii
Young forest currently in a strong growth phase
• Lower harvesting level
• Higher level of thinning and share of planted forest
iii
Gains from wood swaps
• Attributed to industry
iv
Capital gains on land swaps and land sale v
Nature conservation
Age (y):
Final harvesting
80+
Income / m3 Index
Price 100
Harvesting cost -25
Gross profit 75
~40 & ~60
Income / m3 Index
Price 80
Harvesting cost -40
Gross profit 40
Silviculture
Fertilization
~40 & ~70
Pre com. thinning
~10
Road construction
Inco
me
C
os
ts
Fo
res
t h
old
ing
by a
ge
Increased profitability as fast growing
young forest reaches harvestable age
Note: Forest holding by hectare.
Internal market prices
68
m m3sub
0
2
4
6
8
10
12
SCA wood sourcing SCA wood usage
Own forest
Chips from
own sawmills Pulp and
paper
Sawmills
Locally
purchased
Central
suppliers
0
2
4
6
8
10
12
SCA wood sourcing SCA wood usage
Wood sourcing 2017 Wood sourcing post Östrand
Own forest
Chips from
own sawmills
Pulp and
paper
Sawmills
Locally
purchased
Central
suppliers
Supplies industry segments with wood
Sold at market price
• Prices based on market prices in SCA’s
region
Price premium for certified forest
No EBITDA contribution from externally
sourced wood (sold at cost to industry)
• Östrand investment will increase Forest’s
sales but not EBITDA
Leading cost position
69
Economies of scale
• Europe’s largest private forest owner
• Relationship with 14,000 forest owners
Optimization and efficient
forest management
Industry leading cost position
0
20
40
60
80
100
120
140
160
180
200
220
85 90 95 00 05 10 15
Storm felling
SCA harvesting cost
Consumer price index
Harvesting cost (index)
1
2
3
Forest portfolio optimization through buying and selling land
70
SCA’s land purchases 2014 2015 2016 2017
Volume (thousand m3fo) 1,655 185 123 261
Price (SEK/m3fo) 264 273 263 259
Value (SEKm) 437 50 32 68
SCA’s land divestments 2014 2015 2016 2017
Volume (thousand m3fo) 1,405 270 176 385
Price (SEK/m3fo) 322 310 274 270
Value (SEKm) 452 84 48 104
1
2
3
Stable price at
~270 SEK/m3fo
Move forest closer to the industry
1
Improve forest consolidation
Swap of land for nature reserves
Legal restrictions
• Prevailing law in Sweden prohibits legal
entities from the net purchase of forest land
from private individuals
2
3
×
Improving forest consolidation
71
Forest land swaps Acquisition of land to create larger consolidated areas
Counterparty’s forest land
SCA’s forest land
SCA gains
SCA gives to counterpart
Forest ownership in Roggsjön 1955 Forest ownership in Roggsjön 2017
Wood swaps drive both financial and environmental gains
72
Wood swaps totaling 1-1.5m m3sub annually
Cost saving from lower transportation costs
Reduced emissions
Collaboration with several large forest owners
SEK 60m
annual saving
IAS 41 valuation
73
300
350
400
450
500
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0.0
2.0
4.0
6.0
8.0
Price assumption (nominal SEK/m3sub)
Harvest assumption (million m3sub/year)
Accounting valuation and regulations
Forest valuation is divided into two components • Actual land – IAS 16 Property, plant and equipment
− At acquisition cost (acquired long ago) and road investments
• Growing forest – IAS 41 Biological assets
IAS 41 principals • Calculation based on existing harvesting plans, growth
assessments and technology
• No global warming effects included
• Environmental restrictions taken into account
• Latest forest survey conducted in 2012-2013
• New assessment approximately every 8 years
Assumptions
• WACC 5.25%
• Price and cost based on 5 year averages
• 2% price and cost inflation
Harvesting plan
4.35.9 by 2114
CAGR
+2%
Price assumption 2017
432 SEK/m3sub
Book value
135 SEK/m3fo
+40%
74
Market valuation of forest assets
Assumptions
• WACC / required return
• Price
Forecast harvesting plan
• Growth and harvesting
• Improved seedlings
• Silviculture and fertilization
• Technical development
• Climate change
Land value
• Land value not included in IAS 41
135
259 270 276
Book value SCApurchases
SCAdivestments
LRF northernSweden
Value of forest land (2017, SEK/m3fo)
76
Clear focus on premium priced high quality products
Price
Quality
Wood containing
products
Wood free
products
Recycled based
products
Expanding high-
quality offering
– competing with
wood free products
Fast product renewal – 35% of current
products did not exist 5 years ago
Launch of SCA Frontier
• New paper category – Fine wood
containing paper
• Competing with wood free paper
• Cost effective paper
• Well received in the market
76
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.