SCA Interim Report Q4 2020

JANUARY 1 – DECEMBER 31, 2020
(compared with January 1 – December 31, 2019)
- Net sales declined 6% to SEK 18,410m (19,591). The fall in sales was mainly related to lower selling prices, which was partly offset by higher delivery volumes.
- EBITDA amounted to SEK 3,393m (21,361). The difference was mainly related to two material one-off items, a negative earnings impact from the discontinuation of publication paper operations in 2020 of SEK -1,047m and a positive earnings impact of approximately SEK 16bn from the changed accounting method for valuation of forest assets in 2019.
- Adjusted EBITDA was SEK 4,440m (5,319), corresponding to an EBITDA margin of 24.1% (27.2). The decrease was mainly due to lower selling prices.
- Operating profit amounted to SEK 1,145m (19,665). The difference was mainly due to one-off items from the discontinuation of publication paper operations in 2020 of SEK -1,694m and the changed accounting method for forest assets of approximately SEK 16bn in 2019.
- Operating cash flow amounted to SEK 2,688m (2,916).
- Earnings per share was SEK 1.09 (22.10). Adjusted earnings per share amounted to SEK 3.19 (4.05).
- The Board of Directors proposes a dividend of SEK 2.00 (0.00) per share.

COMMENTS ON THE FINANCIAL STATEMENTS
2020 was a year marked to a large extent by COVID-19 and its impact on people, society and the market. Health and safety have always been a top priority and SCA has taken a number of measures to protect risk groups, reduce the spread of the virus and to ensure that production, sales and distribution have been maintained with continued focus on pursuing profitable growth.

During the year, SCA decided to discontinue the publication paper operations consisting of three paper machines at the Ortviken industrial site. These will be shut down sequentially during the first quarter of 2021 and when the closure is completed, SCA will only have operations in expanding product categories with healthy future prospects. SCA has also decided to invest SEK 1.45bn in an annual production of 300,000 tonnes of CTMP (chemically pre-treated thermomechanical pulp) at the Ortviken industrial site, where part of the existing infrastructure will be used. The kraftliner expansion project at Obbola is progressing on plan and on budget.

Following a period with a weaker market, falling prices and rising inventory levels during the first half of 2020, the market has gradually improved for all product categories except publication paper, which continued to weaken. SCA’s focus has been to decrease working capital in an uncertain environment. This has resulted in a strong operating cash flow in the third and fourth quarters of 2020 which has contributed to a reduced net debt at the end of the year.

Based on the forest survey conducted in 2019, a new harvesting plan has been made during the year which shows that SCA can gradually increase planned annual harvesting from the previous level of 4.3 million m3fo to 5.4 million m3fo in 2025, an increase of 25%. During the year, SCA continued to acquire forest in the Baltic states.

The year and the fourth quarter were impacted by material one-off items related to the discontinuation of publication paper operations. Adjusted earnings in the fourth quarter improved compared with the preceding quarter and the year-earlier quarter. A higher share of harvesting from SCA-owned forest and higher earnings from the revaluation of biological assets due to the new forest survey and harvesting plan had a positive impact on earnings.

The supply of wood to SCA’s industries was stable during the quarter. The price of sawlogs remained stable while the price of pulpwood fell slightly.

The market for solid-wood products remained strong during the quarter, driven by high demand in the building materials trade in the US, Scandinavia, UK and the rest of Northern Europe. Market prices increased compared with the preceding period.

Delivery volumes in the Pulp segment increased compared with the preceding quarter. A planned maintenance stop took place during the quarter. Following the restart, production has been stable and at planned level.

The average selling price for kraftliner was lower than in the preceding quarter. Demand increased during the fourth quarter and inventory levels decreased. In connection with the discontinuation of publication paper operations, focus in this product area has been to bring forward publication paper production ahead of the closure and to minimize costs.

Higher transaction prices for forest assets in northern Sweden
SCA bases its valuation of forest assets in Sweden on forest transactions in the areas where SCA owns forest. The market value of the forest has increased during 2020. The average market price used in the valuation of SCA’s forest assets was SEK 291/m3fo at December 31, 2020, corresponding to a carrying amount of SEK 74.9bn.