35 slides from Svenska Cellulosa Ab Sca Class A's earnings presentation, Oct 30, 2019
Slide 1: October 30, 2019
October 30, 2019
Slide 2: Ulf Larsson, CEO
Slide 3: Sales growth of 5% vs Q3 2018, weaker market with lower prices
Sales growth of 5% vs Q3 2018 • Price/mix -15%, volume 20%, currency 2%, acq/div -2% Weaker market with lower prices EBITDA down 12% vs Q3 2018 - Lower selling prices + Higher pulp volumes + Positive currency effects Pulp volumes increased 2% vs Q2 2019 • Planned maintenance stop in Q4 – economizer
Slide 4: EBITDA, Industrial ROCE and EBITDA development
EBITDA (SEKm) Industrial ROCE 1) EBITDA development (SEKm) 1,364 16% 1,549 1,494 -12% 1,560 1,340 1,364 1,175 1,049 1,078 1,034 33% 30% 31% EBITDA margin Net debt/EBITDA 27% 27% 25% 25% 26% 27% 1.4x 22% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Note: 1) ROCE for the industrial s
Slide 5: Forest: prices stabilized on a high level
Net sales (SEKm) EBITDA (SEKm) EBITDA margin 28% 33% Prices have stabilized on a high level 1,865 388 20.1% 20.8% • Prices on new contracts are starting to come down 1,455 292 Increased wood sourcing to meet higher pulpwood demand Sales up 28% + Increased volumes to the expanded pulp mill Q3 2018 Q3
Slide 6: Wood: oversupply in continental Europe, declining prices
Net sales (SEKm) EBITDA (SEKm) EBITDA margin -10% -35% Over supply in continental Europe, 1,712 276 16.1% leading to declining prices 1,545 180 11.6% Sales down 10% - Lower prices - Deconsolidation in Wood France following merger with Groupe ISB Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 EBITDA
Slide 7: NBSK pulp production ramp-up
Average daily NBSK production (tonnes) Full capacity Full NBSK capacity of 900kt/year 2,500 18 months ramp-up Ramp-up period of ~18 months 2,000 Production/deliveries on track 1) Actual 1,500 • Q3 ’18 - 147kt / 105kt • Q4 ‘18 - 160kt / 145kt 1,000 • Q1 ’19 - 172kt / 168kt • Q2 ’19 - 210kt / 201kt 50
Slide 8: Pulp: planned maintenance stop Q4 – 120 MSEK
Net sales (SEKm) EBITDA (SEKm) EBITDA margin 52% -2% Lower prices 1,129 36.7% 273 268 NBSK inventories declined in Q3 743 23.8% Increased volumes due to the ramp-up of the expanded pulp-mill Sales up 52% + Increased volumes Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 - Lower prices Price develop
Slide 9: Paper: planned maintenance stop Obbola Q4 – 50 MSEK
Net sales (SEKm) EBITDA (SEKm) EBITDA margin -1% -21% Lower prices 728 2,413 2,380 30.2% Good kraftliner order inflow 577 24.2% Sales down 1% - Lower kraftliner prices + Higher prices for publication paper and positive currency effects Q3 2018 Q3 2019 Q3 2018 Q3 2019 Q3 2018 Q3 2019 EBITDA down 21%
Slide 10: Two new wind projects secured in Q3 '19
Initiate new wind projects and New target develop after market offering 11 TWh Two new wind projects secured in Q3 ‘19 2022 • 83 turbines / 1.3 TWh 8.0 TWh 8.0 TWh secured by 2022 2021 • EBIT of SEK ~120m 6.7 TWh New long-term target of 11.0 TWh Q3 2019 2.9 TWh 10
Slide 11: Toby Lawton, CFO
Slide 12: Quarter income statement, SEKm
Quarter SEKm Q3 2019 Q3 2018 Change Net sales 4,975 4,759 5% EBITDA 1,364 1,549 -12% EBITDA margin 27.4% 32.5% -5.1 p.p. EBIT 955 1,226 -22% EBIT margin 19.2% 25.8% -6.6 p.p. Financial items -26 -8 Profit before tax 929 1,218 -24% Tax -172 -227 Profit for the period 757 991 -24% Earnings per share,
Slide 13: Net sales and EBITDA by business area
Forest Wood Pulp Paper 2,383 2,426 2,413 2,421 2,366 2,375 2,380 2,220 Net sales (SEKm) 1,865 1,846 1,746 1,727 1,712 1,678 1,651 1,558 1,545 1,540 1,503 1,455 1,426 1,298 1,287 1,214 1,162 1,134 1,129 1,049 743 672 589 485 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 14: Net sales bridge Q3 2018 to Q3 2019
Deconsolidation in Wood Expanded pulp mill France following merger Negative for Pulp, Kraftliner, with Groupe ISB Wood. Positive for Publication Paper SEK SEK 20% 2% -2% 4,975m 4,759m -15% Positive EUR and USD + 5% Net sales Price/Mix Volume Currency Acquisitions/ Net sales Q3 2018 divestments Q3 20
Slide 15: EBITDA bridge Q3 2018 to Q3 2019
Lower prices for Pulp, Kraftliner and Wood. Higher prices for Publication Paper Higher costs for wood raw material offset by higher SEK income from byproducts EUR and USD positive 1,549m -739 Higher Pulp volumes SEK +95 +7 1,364m +60 +365 +27 Improved energy balance Pulp - 12% EBITDA margin EBITDA m
Slide 16: Cash flow, quarter and Jan-Sep
Quarter Jan-Sep SEKm Q3 2019 Q3 2018 2019 2018 EBITDA 1,364 1,549 4,264 3,758 Revaluation of biological assets and other non cash flow items -312 -220 -614 -541 Operating cash surplus 1,052 1,329 3,650 3,192 Change in working capital 325 -281 -326 -626 Current capital expenditures -246 -254 -762 -53
Slide 17: Net debt development
SEK SEK 9,735m -1,094m SEK SEK Lease 1,190 +63m -660m SEK SEK SEK +152m -27m 8,169m 857 Lease Sale of logistics terminal in Rotterdam Net debt / EBITDA Net debt / EBITDA 1.6x 1.4x Net debt Operating Strategic capex Divestments Paid tax Other Net debt Q2 2019 cash flow Q3 2019 17
Slide 18: Capital employed and net debt
SEKm Sep 30, 2019 Dec 31, 2018 Forest assets according to IAS 41 1) 33,267 32,065 Deferred tax relating to Forest assets -6,704 -6,605 Forest assets, net of deferred tax 26,563 25,460 Working capital 3,893 3,735 Working capital/Net sales 2) 20% 18% Other capital employed 17,800 16,887 Total capital
Slide 19: Revaluation
ion. ~Revaluat
Slide 20: Forest Total Return
Forest Total Return @SCA
Slide 21: Harvesting, net growth, land value
Harvesting Net growth Land value Positive climate effect 21
Slide 22: Standing volume, harvest and land value in Sweden
Standing volume Sweden Growing Harvest Sweden Increasing Increasing Land value Sweden 1) Increasing m3fo/ha asset base m3fo/ha cash cashflow flow SEK/m3fo (real value) land value +55% +115% +250% 4.2 139 435 89 2.0 4,700% nominal increase 124 1956 2019e 1956 2019e 1956 2019e Source: Riksskogstaxerin
Slide 23: Forest Total Return Index Sweden (1956-2019e)
Forest – Total Return Index Sweden (1956-2019e) 1 Increasing cash flow CAGR 50,100 • Harvesting provides raw materials to the 10% industries and generates cash flow 45,100 − Cash flow: ~3% CAGR CAGR 2004-2019 40,100 2 Growing asset base 7% 35,100 • Forest growth exceeds harvesting • Larger standing
Slide 24: Growing forests bind CO2
Positive climate effect of Swedish forestry industry vs. Sweden's total fossil emissions 1 Growing forests bind CO2 (million tonnes CO2 equivalents per year) Mt CO2 • Growing forests capture and bind CO2 – 100 2019 active forest management increases Swedish forestry sector’s +94 growth 90 positive c
Slide 25: Forest Revaluation
Forest Revaluation @SCA
Slide 26: SCA's forestland and industrial sites
Sawmill Forestland Pulp mill Kraftliner mill 6% 2.6 m ha of Sweden Publication Paper mill Pellet production SCA’s forest Productive forestland Munksund 2.0 m ha Obbola Rundvik Stugun Bollstabruk Standing volume 1) Gällö Härnösand Östrand 241 m m3fo Tunadal Ortviken Note: 1) Including forest holdings
Slide 27: Value of forest land: recent transactions vs book value
Value of forest land (2018, SEK/m3fo) Recent larger forest transactions show a large discrepancy between the market value of forest land and the book value 286 268 269 • Bergvik Öst / AMF – 333 SEK/m3fo − vs SCA estimated benchmark price ~370 SEK/m3fo 1) • Långvind / Holmen – 407 SEK/m3fo − vs SCA e
Slide 28: Plan to change accounting method for forest holdings
Forest book value (SEKbn) Plan to change the accounting method for valuing the forest holdings as of Dec 31, ‘19 63-67 • Market value on the basis of transactions in SCA’s area Land value Estimated market value of SEK 63-67bn Value to be split between Biological assets and Land value according to IF
Slide 29: Summary
Summary Ulf Larsson, CEO WSCA
Slide 30: Summary: sales growth of 5% vs Q3 2018
Sales growth of 5% vs Q3 2018 Weaker market with lower prices EBITDA down 12% vs Q3 2018 Pulp volumes increased 2% vs Q2 2019 SEK 7.5bn Kraftliner investment in Obbola Forest total return analysis Revaluation of forest asset to market value as of Dec 31, 209 30
Slide 31: SCA Frontier
Slide 32: Appendix
Appendix WSCA
Slide 33: Net sales and EBITDA by business area, 2014-LTM
Forest Wood Pulp Paper Net sales (SEKm) 9,643 9,542 8,226 8,548 8,434 7,744 6,802 6,618 6,508 5,994 5,187 5,108 4,978 5,070 5,455 5,114 5,315 5,441 4,526 2,518 2,760 2,492 2,542 2,866 2014 2015 2016 2017 2018 LTM 2014 2015 2016 2017 2018 LTM 2014 2015 2016 2017 2018 LTM 2014 2015 2016 2017 2018 LTM
Slide 34: Slide 34
Slide 35: Forward-looking statements
This presentation may contain forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read SCA’s most recent annual report for a better understanding of these risks and unce