Capital Market Day
Stockholm
4 September 2006
1
Agenda
2
1
Introduction
2
Megatrends
3
Value creation and capital allocation
4
Opportunities in growth markets
5
Summary
SCA’s strategic focus is on products
Products with
with higher value content
high value
content facilitate
profitable growth
e
u
l
a
v
r
e
h
Regional
presence
with global
capabilities
g
production and
i
H Effective
raw material integration
Consumer and
customer focus
3
SCA – a global hygiene and paper company
Forest Products
Personal Care
15%
Packaging
33%
20%
32%
Sales: SEK 96 billion
4
Tissue
Main theme for the capital market day
ƒ Overall trends affecting markets
ƒ Value creation in SCA
ƒ Significant opportunities in prioritized
high growth markets
5
Agenda
6
1
Introduction
2
Megatrends
3
Value creation and capital allocation
4
Opportunities in growth markets
5
Summary
Globalization
Drivers of globalization
De-regulation and opening of markets
ƒ Increased mobility for goods, services,
capital and technology
Information technology and connectivity
ƒ Increased transparency
ƒ New business models
ƒ Geography no constraint
7
Globalization
Increased competition - manufacturing
moving to low-cost regions
Total cost per working hour
USD/hour
35
30
25
20
15
10
5
0
m
er
G
y
an
ed
Sw
en
re
G
a
ri t
tB
n
ai
A
US
pa
Ja
n
Sp
n
ai
h
ec
Cz
R
u
ep
ic
bl
n
to
Es
ia
Source: Svenskt Näringsliv, US Department of Labor, OECD and other National Statistics
8
M
ic
ex
o
i
ss
Ru
a
In
a
di
i
Ch
na
Globalization
Rapid economic growth in developing regions
World GDP 2005: USD 44,000 bn
World GDP growth 2005 – 2016
GDP Growth
(USD bn)
10,000
8,000
Other
OECD
6,000
4,000
2,000
0
OECD
Other
9
Demography
An ageing population
Western Europe 2005
Age (years)
Age (years)
100+
90-94
80-84
70-74
60-64
50-54
40-44
30-34
20-24
10-14
0-4
100+
90-94
80-84
70-74
60-64
50-54
40-44
Age (years)
30-34
20-24
10-14
0-4
Male
Female
Source: UN. World Population Prospects: The 2004 Revision
10
Western Europe 2030
Male
Female
Demography
Distribution of World population
Age (years)
2005
100+
2010
90-94
2015
80-84
2020
70-74
2025
60-64
2030
50-54
2035
40-44
2040
30-34
2045
20-24
2050
10-14
0-4
Male
Female
Source: UN. World Population Prospects: The 2004 Revision
11
Demography
Distribution of World population
Age (years)
2005
100+
2010
90-94
2015
80-84
2020
70-74
2025
60-64
2030
50-54
2035
40-44
2040
30-34
2045
20-24
2050
10-14
0-4
Male
Source: UN. World Population Prospects: The 2004 Revision
12
Female
Consumer landscape
The consumer landscape is changing
“Almost a billion new consumers will enter the global
marketplace in the next decade as economic growth in
emerging markets pushes them beyond the threshold level
of USD 5,000 in annual household income – a point where
people generally begin to spend on discretionary goods”
McKinsey
13
Consumer landscape
Russian consumer spending is growing fast
USD per capita
C
: 25
GR
A
C
R: 1
AG
5%
4,900
%
2,400
800
2000
Source: Planet Retail
14
2005
2010E
Consumer landscape
Modern retail trade growing in Russia
R
CAG
: 20%
209
183
158
134
106
84
2005
2006
2007
2008
2009
2010
Sales(1) (USD bn)
1Modern
grocery distribution, grocery sales (USD bn)
Source: Planet Retail
15
Consumer landscape
Low grocery trade concentration in CEE
Eastern Europe – top 5 retailers
Western Europe – top 5 retailers
Market share 2005
(%)
Market share 2005
(%)
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
Hungary
Czech
Republic
Source: Planet Retail
16
Poland
Russia
Germany
France
UK
Italy
Consumer landscape
The consumer landscape is changing
Volume
“old”
curve
Price
Polarization
17
Consumer landscape
Consumer prices in low-inflation
environment - Germany
Yearly change
(CAGR)
Index
140
+6.5%
130
120
110
+1.4%
100
-0.8%
90
-2.7%
80
2002
2003
2004
2005
Energy
Non-durable household goods
Consumer Price Index
Mobile telephony
2006
Price pressure backwards in the value chain –
all suppliers affected
Source: Datastream
18
Industry trends
Fair global demand for paper and hygiene
products
Slower growth in the ”old” World
Rapid expansion in developing markets
19
Industry trends
Slowing growth within OECD – huge
potential in the Rest of the World
Demand growth, % / year
2004
2015
6
Eastern
Europe
5
358mt
456mt
China
Asia (excl. China)
4
Latin
America
Africa
3
Average
2.2% / year
2
Oceania
Western Europe
1
North America
Japan
0
0
10
20
30
40
50
60
Share of consumption in 2004, %
Source: Pöyry
20
70
80
90
100
Industry trends
Over-supply throughout value chains
puts pressure on prices and margins
Manufacturing
Converting
Trade
21
Industry trends
Industry trends to restore margins
Cost cutting
22
Closures
Divest non-core
assets
Develop
business to
create “lasting”
value
The challenge
To create value
in maturing
markets
Increasing
competition
To capture
profitable growth
in developing
markets
How do we do it in SCA?
23
24