SCA Year-end Report
1 January–31 December 2005
Jan Åström
President and CEO
1
Highlights
ƒ Positive momentum remains
Š Price increases in main segments towards the end
of the year
Š Realized savings from efficiency programs
Š Successful product launches within Personal Care
2
Group – Quarterly Development*
Improvements in
H2 compared to H1
SEK M
18%
35,000
30,000
EBITDA (%)
15.0%
14.1%
13.7%
14.3%
14.3%
16%
14%
25,000
12%
20,000
10%
15,000
8%
10,000
23,128
22,518
23,986
24,740
25,141
6%
4%
5,000
2%
0
0%
Q4 2004
*
3
Q1 2005
Excluding items affecting comparability
Q2 2005
Q3 2005
Q4 2005
Sales
EBITDA
margin
Financial Summary
Excluding items affecting comparability*
Net sales, SEK M
Earnings after financial items, SEK M
Earnings per share, SEK
Dividend per share, SEK
*
4
Q4 2005
Change
Q4/Q3 (%)
FY 2005
Change
Y05/Y04 (%)
25,141
+2%
96,385
+7%
1,574
+2%
5,798
-19%
5:06
-6%
18:89
-15%
11:00*
+5%
Board proposal
Earnings in the third quarter 2005 were affected by items affecting comparability of SEK 4,940 M before
taxes and SEK 3,667 M after taxes. Earnings in FY 2005 were affected by items affecting comparability of SEK 5,365 M
before taxes and SEK 3,981 M after taxes. In FY 2004 earnings were affected by items affecting comparability of SEK
600 M before taxes and SEK 41 M after taxes
SCA Group Sales and EBIT*
Q4 compared with Q3 2005
Sales
SEK M
26,000
25,000
24,740
+110
+192
-79
+85
+93
25,141
Tissue
Packaging
Forest
Products
Other
Sales Q4
24,000
23,000
22,000
Sales Q3
Personal Care
EBIT*
SEK M
2,000
1,937
+64
-49
Personal Care
Tissue
-26
+37
+12
1,975
Packaging
Forest
Products
Other
EBIT Q4
1,800
1,600
1,400
1,200
1,000
EBIT Q3
*
5
Excluding items affecting comparability
SCA Group Sales and EBIT*
FY 2005 compared with FY 2004
Sales
SEK M
100,000
90,000
89,967
+1,588
Sales 2004
Personal
Care
+3,105
+858
+981
Tissue
Packaging
Forest
Products
-114
96,385
80,000
70,000
60,000
50,000
Sales 2005
EBIT*
SEK M
10,000
Other
8,439
+45
-449
8,000
-829
+109
-22
7,293
6,000
4,000
2,000
EBIT 2004
*
6
Personal
Care
Excluding items affecting comparability
Tissue
Packaging
Forest
Products
Other
EBIT 2005
Energy Costs
ƒ Significantly higher energy costs than expected in Q4
Š Energy cost increase of SEK 240 M in Q4 compared with Q3
Š Volatile gas and electricity markets in central Europe is the main
explanation
ƒ Updated energy cost estimates:
Š Cost 2005: SEK ~5 bn
Š Increase in Q1 2006 compared to Q4 2005: SEK 80-100 M
ƒ Distribution of energy costs: electricity ~50%, natural gas ~50%
ƒ Hedges in place for 2006:
Š Natural gas: ~35%, electricity: ~50%
7
Cash Flow Analysis
FY 2005 compared with FY 2004
ƒ Operating cash flow SEK 7.5 (8.8) bn
Š Lower operating cash surplus
Š Slightly increased current capex
Š Improved change in working capital
Š Increased cash outflow related to structural costs
ƒ Cash flow before dividend SEK +1.8 (-6.3) bn
Š Lower taxes paid
Š No major acquisitions
ƒ Debt equity ratio: 0.70 (0.63)
8
Personal Care – Quarterly Development
SEK M
6,000
19.1% EBITDA (%)
17.6%
16.8%
17.1%
20%
17.7%
18%
5,000
16%
14%
4,000
12%
3,000
2,000
10%
4,568
4,462
4,727
5,026
5,136
8%
6%
4%
1,000
2%
0
0%
Q4 2004
Q1 2005
Sales
9
Q2 2005
Q3 2005
EBITDA margin
Q4 2005
Q4/Q3 comments:
ƒ Cost savings
realized
ƒ Good volume
development
Personal Care
ƒ Incontinence products
Š Continued growth, especially within the retail segment
ƒ Baby diapers
Š Strong development of branded products
Š Improved position and growth within retailers’ brands
ƒ Feminine hygiene products
Š Launch of new “secure fit” products in the beginning of
2006
10
Tissue – Quarterly Development
SEK M
10,000
EBITDA (%)
12.4%
12.4%
11.8%
12.6%
14%
10%
ƒ Impact from
previous price
increases in North
America
8%
ƒ Increased volumes
11.6%
12%
8,000
6,000
4,000
7,336
7,144
7,531
7,917
8,109
6%
4%
2,000
2%
0%
0
Q4 2004
Q1 2005
Sales
11
Q2 2005
Q3 2005
EBITDA margin
Q4 2005
Q4/Q3 comments:
ƒ Price increases
(SEK 60 M) have
partly offset the
higher energy costs
(SEK 120M)
Tissue
ƒ Consumer tissue
Š Fair volume development in Western Europe. Strong
growth in Eastern Europe and Russia
Š Price increases in Europe under implementation,
further impact in Q1 2006
Š New tissue machine in Valls, Spain decided
ƒ AFH-tissue
Š Europe: stable demand and extensive product
launches in early 2006
Š North America: effects from increased prices in Q3
2005
12
Packaging – Quarterly Development
SEK M
EBITDA (%)
12,000
13.3%
14%
11.8%
11.4%
10.8%
10,000
10.2%
12%
10%
8,000
8%
6,000
6%
4,000
7,804
7,642
8,351
8,094
8,272
4%
2,000
2%
0
0%
Q4 2004
Q1 2005
Q2 2005
Sales
13
Q4/Q3 comments:
16%
14,000
Q3 2005
EBITDA margin
Q4 2005
ƒ Increased energy
costs (SEK 90 M),
partly offset by
lower costs
ƒ Rebuilding in the
testliner mill in
Aschaffenburg
Packaging
ƒ Corrugated board
Š Higher prices within containerboard supports increased
corrugated prices in H1 2006
Š European restructuring develops according to plan
Š Strong growth in China
ƒ Containerboard
Š Price increases under implementation, EUR 40/ton
realized in Q4, further increase of EUR 50/ton
announced for Q1
ƒ North America
Š Price increases and cost savings towards the end of the
year have resulted in improved earnings
14
Forest Products – Quarterly Development
SEK M
EBITDA (%)
5,000
22.4%
21.0%
19.6%
4,000
18.4%
21.4%
20%
15%
3,000
2,000
3,814
3,762
4,116
3,986
4,071
10%
1,000
5%
0
0%
Q4 2004
Q1 2005
Sales
15
25%
Q2 2005
Q3 2005
EBITDA margin
Q4 2005
Q4/Q3 comments:
ƒ Higher prices for
publication papers
ƒ High capacity
utilization in pulp,
timber and solid-wood
products
Forest Products
ƒ Improved performance within publication papers
Š Strong development of German advertising market
Š Increased mill efficiency
Š Fair volume development
ƒ Pulp, timber and solid-wood products
Š Stable market for softwood pulp
Š Increased prices on pine and high-quality spruce
16
Cash Flow Requirement for Value Creation
ƒ SCA’s ongoing efficiency enhancement programs and current
market conditions induce the need for a complementary cash flow
requirement
ƒ Based on SCA’s cash flow model the cash flow requirement is set
at the level where the required return and accordingly value to
shareholders is met. The EBITDA margin and return on book
values is derived from the new cash flow requirement
Cash flow requirement for value creation
2005
2006
Operating cash surplus
14.1
14.6
5.1
5.2
which implies:
Cash flow from current operations*
EBITDA-margin
ROCE
9%
ROE
8%
*Adjusted for cash outflow related to restructuring
17
15%
Summary
ƒ Positive momentum remains
ƒ Challenges in 2006
Š Leverage on our strategic strengths
ƒ Consumer and customer insights
ƒ Regional presence combined with global capabilities
ƒ Excellence in production and supply chain
Š Manage higher energy costs
Š Attain targeted savings
18
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