Svenska Cellulosa AB B SCA B
Q1 2013 Earnings Call Transcript

Transcript Call Date 04/29/2013

Josephine Edwall-Bjorklund - SVP, Corporate Communications: Hello, and welcome to SCA's First Quarter Result for 2013. My name is Josephine Edwall, Head of Communications for SCA. Today, as usual, our CEO and President, Jan Johansson will go through the highlights from the report and we will have a Q&A session together our CFO, Lennart Persson, in the end.

So with this, I hand over to Jan.

Jan Johansson - President and CEO: Thank you very much. To start with, some macro updates, and as I think everyone is well aware of now, we still continue to have weak development in Europe, and particularly if you look at the domestic consumption in different countries, and of course, the increased unemployment in Spain, et cetera, is putting a lot of pressure into the system.

We do see some stronger development in U.S. and particularly in our hardwood businesses. So, it seems like the construction and the building industry is picking up. Emerging market, still growth in a very good level from a market perspective, but also internally for SCA.

If we look at Tissue, we still see some growth in Europe, even we have the difficult situation and continued strong growth in emerging market. Personal Care, incontinence product has continued to grow. I will come back to that when I get into that business area. We see a stable demand, both when it comes to baby and feminine; and also emerging market has continued to grow quite well.

The challenge we have is mainly within our Forest operations where we saw prices coming down in Q1 and volumes coming down. Volume is down on European level on some 4% to 5%. Compared to Q4, it's actually down around 11%.

On Kraftliner, very good balance on the markets. On hardwood, the balance is improving.

So coming into the results; we had a sales growth of 20%. Of course, acquisition is driving that, but we also have an organic growth. So if we take away the acquisition, it stands for about 19% of the growth. We also have in the Forest, as I said, lower prices, which is impacting the sales and profitability.

The EBIT increase of 25%, of that some 18% is coming from acquisitions.

Cost saving program is coming in. I'll get back to that also in a moment. We also have lower raw material cost compared to Q1 last year.

Cash flow is continuing to improve.

If we look at the efficiency program, we've tried to explain it in the different programs that we have running now, the EUR300 million program we have achieved in Q1, SEK160 million, and annualized we are now up to EUR75 million.

If we look at Georgia-Pacific, we have SEK54 million in Q1 and annualized EUR25 million of the EUR125 million. As we have explained since bulk of the savings is in supply chain and in the production, it will be rather later than earlier in the process.

In Forest, of the SEK1.3 billion, we have achieved SEK35 million in the quarter and annualized SEK140 million.

Looking at the Q1 results, the Swedish currency continued to, of course, have a negative impact on the businesses mainly in terms of the translation except for Forest where you also have the negative impact of transaction, but from a translation and transaction point of view, we are negatively impacted by SEK900 million in sales Q1 to Q1 and some SEK205 million in EBIT’s currency impact.

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