SCA – Annual General Meeting 2005 Jan Åström President and CEO
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SCA – Annual General Meeting 2005 Jan Åström President and CEO Agenda SCA – historical development The past year - 2004 Reduced costs and increased competitiveness Portfolio strategy SCA historical development Rebalancing toward packaging and hygiene products through acquisitions and divestments Increased presence in markets outside Europe Sales 2004: SEK 90 bn Market capitalization: SEK 62 bn* No. of employees: 53,000 * Market capitalization as of 4 April 2005 Acquisitions and divestments 1997 - 2004 CHH CHH Tissue Tissue Copamex Copamex Drypers Drypers Cenpak Cenpak GP GP Tissue Tissue Tuscarora Tuscarora SEK M 15 000 CartoInvest CartoInvest Stabernack Stabernack AM AM Paper Paper Panosa Panosa Nicollet Nicollet Danisco Danisco Danapak Danapak 10 000 Metsä Metsä Corrugated Corrugated Alloyd Alloyd PISA PISA Scaninge Scaninge 5 000 0 -5 000 Deconsolidation Deconsolidation of of fine fine paper paper operations operations Modo Modo Paper Paper -10 000 1997 1998 1999 2000 Divestments 2001 2002 Acquisitions 2003 2004 SCA historical development SCA – sales 1997 - 2004 2000 – 2004 Annual growth*: 8% SEK bn 1997 – 2004 Annual growth*: 6% 100 80 60 40 20 0 1997 1998 * Cumulative annual growth rate 1999 2000 2001 2002 2003 2004 SCA historical development Sales by business area 1996 Forest Products 34% Packaging 24% 2004 Hygiene Products 42% Forest Products 14% Packaging 35% Hygiene Products 51% SCA historical development Sales by region 1996 Other countries 4% North America 3% Sweden 9% 2004 Other countries 8% Europe (excl. Sweden) 84% North America 13% Sweden 8% Europe (excl. Sweden) 71% SCA Group Leading in main segments Hygiene Products SCA is Europe’s leading supplier of tissue and personal care products World leader in incontinence products Packaging SCA is Europe’s leading producer of corrugated packaging Leading position in protective and specialty packaging Forest Products Supplier of raw material for the Group One of Europe’s most efficient producers of publication papers SCA share: 1997 - 2005 Stable performance Total return* 350 SCA Europe index (MSCI) Europe pulp & paper (MSCI) Stockholm Stock Exchange (AFGX) 300 +165% 250 +150% 200 +104% +84% 150 100 50 jan-97 jan-98 jan-99 jan-00 jan-01 *Share price performance including reinvested dividends jan-02 jan-03 jan-04 jan-05 Agenda SCA – historical development The past year - 2004 Reduced costs and increased competitiveness Portfolio strategy 2004 – an eventful year Net sales amounted to SEK 89,967 M (85,338) and earnings per share to SEK 15.58 (21.84) The third year with weak business climate and falling prices within main segments Acquisition of hygiene products companies in Australasia, Malaysia and Mexico, and a packaging company in Italy Efficiency enhancement programs initiated in all business areas aimed at meeting increased competition SCA Group Gross margin* (EBITDA) (%) SEK bn 100 88.0 85.3 90.0 20% Continued weak market 16% Increased competition 80 17.3% 16.2% 15.2% 60 12% 40 8% 20 4% 0 0% 2002 2003 Sales Gross margin* *Adjusted for items affecting comparability 2004 Positive volume growth, but declining prices in main segments SCA Group Operating profit 2002 – 2004 (SEK M)* SEK M 11 000 10 000 Improvements: SEK 1.8 bn 9 000 8 000 7 000 6 000 5 000 2002 Price/ mix Volume Currency Raw material Energy Other direct Indirect Acquisitions Other costs costs * Operating profit before goodwill amortization, excluding items affecting comparability 2004 Hygiene Products Gross margin (EBITDA) (%) 20% SEK bn 50 45.2 43.0 45.4 16% 40 17.6% 16.9% 15.8% 30 12% 20 8% 10 4% 0 0% 2002 2003 Sales Gross margin (EDITDA) 2004 Consumer tissue Sales and gross margin Gross margin (EBITDA) (%) SEK bn 20 15.2 16.2 20% Favorable volume trend 16% Price pressure due to: 14.8 15 17.6% 16.2% 15.0% 10 12% Intense competition in retail trade 8% Overcapacity 4% Weak pulp market 5 0 0% 2002 2003 Sales 2004 Gross margin (EBITDA) Consumer tissue Operating profit 2002 – 2004 (SEK M)* SEK M 1 800 1 600 Improvements: SEK 750 M 1 400 1 200 1 000 800 600 400 2002 Price/ mix Volume Currency Raw material Energy Other direct Indirect Acquisitions costs costs * Operating profit before goodwill amortization, excluding items affecting comparability Other 2004 Tissue for bulk consumers (AFH) Sales and gross margin Gross margin (EBITDA) (%) SEK bn 16 14 22% 20% 12.3 12 10 15.4% 11.4 11.4 18% 16% 14% 14.6% 8 12% 12.9% 10% 6 8% 4 6% 4% 2 2% 0 0% 2002 Sales 2003 2004 Gross margin (EBITDA) Stable trend in Europe Price hikes in the US to offset earlier raw material price increases Personal care Sales and gross margin Gross margin (EBITDA) (%) SEK bn 20 17.7 18 16 19.2% 14 16.8 17.8 19.2% 18.3% 20% 16% 12 12% 10 8 8% 6 4 4% 2 0 0% 2002 Sales 2003 2004 Gross margin (EBITDA) Stable development with improved market shares Increased marketing costs related to new product launches Personal care Operating profit 2002 – 2004 (SEK M)* SEK M 2 700 2 500 2 300 2 100 Improvements: SEK 60 M 1 900 1 700 1 500 2002 Price/ mix Volume Currency Raw material Energy Other direct Indirect Acquisitions Other costs costs * Operating profit before goodwill amortization, excluding items affecting comparability 2004 Packaging Sales and gross margin Gross margin (EBITDA) (%) SEK bn 35 30.5 30.0 31.5 30 25 20% Price pressure due to: 16% Overcapacity 12% Weak demand trend 15.2% 13.7% 20 12.9% 15 8% 10 4% 5 0% 0 2002 Sales 2003 2004 Gross margin (EBITDA) Migration of production from Europe and North America to low-cost countries Packaging Europe Operating profit 2002 – 2004 (SEK M)* SEK M 3 000 2 800 2 600 Improvements: SEK 500 M 2 400 2 200 2 000 1800 1600 1400 1200 1000 2002 Price/ mix Volume Currency Raw material Energy Other direct costs * Operating profit before goodwill amortization, excluding items affecting comparability Indirect Acquisitions costs Other 2004 Forest Products Sales and gross margin Gross margin (EBITDA) (%) SEK bn 16 14 13.6 14.1 15.0 28% 24% 12 10 32% 22.2% 8 20% 19.5% 18.7% 16% 6 12% 4 8% 2 4% 0 0% 2002 Sales 2003 2004 Gross margin (EBITDA) Strong demand Weak price trend – certain price increases in 2005 Publication papers Operating profit 2002 – 2004 (SEK M)* SEK M 1 100 1 000 900 800 700 600 500 400 300 200 100 0 2002 Price/mix (currency 359) Volume Raw material Energy Other direct Indirect Acquisitions costs costs * Operating profit before goodwill amortization, excluding items affecting comparability Other 2004 European forestry– earnings before tax* Indexed, base year 2001 SCA’s main segments have shown strong competitiveness compared with pure paper & forest product companies Index 120 100 80 60 40 20 0 2001 SCA 2002 Holmen Norske Skog * Excluding items affecting comparability 2003 Stora Enso 2004 UPM SCA’s product-portfolio has shown strong resistance in the prolonged market recession Market outlook - 2005 Hygiene Products Consumer tissue: • Lower prices at start of 2005 compared with fourth quarter 2004 • Rising pulp prices Tissue for bulk consumers (AFH): • Price hikes being implemented Packaging Lower prices at start of 2005 compared with fourth quarter 2004 Continued weak volume growth and rising raw material prices Forest Products Limited price increases within publication papers Agenda SCA – historical development The past year - 2004 Reduced costs and increased competitiveness Portfolio strategy Savings program 2005 Annual savings of SEK 1.2 bn – full effect from 2006 Cost for program amounts to SEK 1.2 bn Examples of measures: Packaging - sharp reductions within entire organization Personal care – relocation of production Restructuring of operations in North America and Australasia Personnel reductions of about 2,000 persons At an unchanged market situation, additional savings programs will be launched Hygiene Products – growth and new products Product launches in 2005 New product platform and intensified marketing in feminine hygiene products Launch of new incontinence products in the US and Europe Continued strong growth in retail trade segment Strengthened competitiveness in baby diapers with launch of a new pant diaper Packaging Improved customer offering Development of complete packaging solutions for prioritized customer segments Strong growth in Eastern Europe and Asia Unique position to serve global customers through increased presence in Europe, North America and Asia Time-out for acquisitions Intense competition for possible acquisitions Increased competition from financial buyers Integration of acquisitions carried out during 2004 High priority to achieve established goals The current operations must achieve a satisfactory profitability before further acquisitions can occur Agenda SCA – historical development The past year - 2004 Reduced costs and increased competitiveness Portfolio strategy Three linked business areas (background) SCA decided early to develop its raw materials into hygiene- and packaging products Use existing raw material base to produce high-quality publication papers The 1990s were characterized by international expansion of hygiene products and packaging and optimization of the Group structure Maintained raw material integration enables control over the value chain, where the main part of the Group’s synergies are realized Three linked business areas (effects) Lower volatility in earnings compared to traditional paper and forest product companies Favorable coordination effects Critical mass to meet strong global competitors Excellent growth opportunities
