SCA - Year-end Report 2016

STOCKHOLM, Jan26, 2017 /PRNewswire/ --

JANUARY 1 - DECEMBER 31, 2016 (compared with same period a year ago)

• Net sales totaled SEK 117,314m (115,316)
• Organic sales, which exclude exchange rate effects, acquisitions and divestments, increased by 2%
• Operating profit rose 3% to SEK 11,279m (10,947)
• Adjusted operating profit, excluding items affecting comparability, rose 7% to SEK 13,989m (13,014)
• The adjusted operating margin was 11.9% (11.3%)
• Adjusted profit before tax rose 8% to SEK 13,070m (12,059)
• Items affecting comparability totaled SEK -2,710m (-2,067), of which SEK -1,907m (-874) affects cash flow
• Profit for the period was SEK 6,012m (7,452)
• Earnings per share were SEK 7.93 (9.97)
• The adjusted return on capital employed was 12.5% (12.0%)
• Cash flow from current operations was SEK 10,382m (9,890)
• The Board of Directors proposes an increased dividend by 4.3% to SEK 6.00 (5.75) per share
• Work initiated to propose to the 2017 Annual General Meeting to decide on a split of the SCA Group into two listed companies: hygiene and forest products
• Entered into an agreement to acquire the medical solutions company BSN medical. The purchase price for the shares is EUR 1,400m, and takeover of net debt amounts to approximately EUR 1,340m*

*Calculated as per December 31, 2016.

(Table included in attached pdf)

CEO'S COMMENTS

Organic sales for the full year 2016 increased by 2% and were affected by a somewhat challenging market situation for hygiene products and capacity reductions. Adjusted operating profit, excluding currency translation effects, acquisitions and divestments, increased by 8%, and the adjusted operating margin increased by 0.6 percentage points to 11.9%. The adjusted return on capital employed increased by 0.5 percentage points to 12.5%.

The Board of Directors proposes an increase in the dividend by 4.3% to SEK 6.00 per share.

In 2016 we initiated work to propose to the 2017 Annual General Meeting to decide on a split of the SCA Group into two listed companies: hygiene and forest products. During the year we have enhanced our strategy and vision. The acquisition of Wausau Paper, a leading North American Away-from-Home tissue company, was completed, and the company is being successfully integrated. We strengthened our collaboration with Vinda on building a leading Asian hygiene business. In addition, we entered into an agreement to acquire the medical solutions company BSN medical. The purchase price for the shares was EUR 1,400m, and takeover of net debt amounts to approximately EUR 1,340m*. The acquisition of BSN medical is an excellent strategic fit for SCA and supports our vision. BSN medical has leading market positions in several attractive medical product categories and provides a new growth platform with future industry consolidation opportunities. BSN medical shares similar positive market characteristics, customers and sales channels with our incontinence business, with the globally leading TENA brand, providing opportunities for accelerated growth through cross-selling. The transaction is subject to customary regulatory approvals and is expected to close during the second quarter of 2017.

We have further developed our customer and consumer offerings, and launched 23 innovations during the year. Innovations were launched in consumer tissue under the Lotus, Plenty, Regio, Tempo and Zewa brands, among others; in feminine care under the Bodyform, Libresse and Nosotras brands, among others; in baby diapers under the Drypers and Libero brands; and in AfH tissue and incontinence products under the two globally leading brands Tork and TENA, respectively. We continued to increase the efficiency of the value chain and address underperforming market positions. During the year we decided to implement restructuring measures in our tissue operations in France and Spain. These measures are aligned with the strategy to improve production efficiency in order to drive cost and capital efficiency and further increase value creation in the Tissue business area. We decided to discontinue our baby diaper business in Mexico and our hygiene business in India. After four years in the Indian market, we do not believe that profitability can be achieved within a reasonable time frame. We are prioritizing growth in selected emerging markets such as China, Southeast Asia, Latin America, Eastern Europe and Russia, where we already have strong market positions. During the year our hygiene business in Southeast Asia, Taiwan and South Korea were integrated with Vinda, in which we are the majority shareholder.

Consolidated net sales for the fourth quarter of 2016 increased by 6% compared with the same period a year ago. Organic sales increased by 2%. In emerging markets, which accounted for 33% of net sales, organic sales increased by 7%, while in mature markets they were level with the same period a year ago. For Personal Care, organic sales decreased by 1%. Growth was negatively affected by the baby diaper operations, where organic sales decreased by 4%, mainly related to lower sales in Russia, Mexico, the Middle East and Africa as a result of increased competition and the decision to close the baby diaper business in Mexico, among other things. For incontinence products, organic sales were level with the same period a year ago. In Europe, the retail sector showed continued high growth, while lower sales to the health care sector had a negative effect on growth. For Tissue, organic sales increased by 4%. Growth was positively affected by emerging markets, where organic sales increased by 11%. For Forest Products, organic sales increased by 4%, mainly owing to higher volumes of solid-wood products and pulp.

The Group's adjusted operating profit for the fourth quarter of 2016, excluding currency translation effects, acquisitions and divestments, rose 5% compared with the same period a year ago. The increase is mainly related to a better price/mix, higher volumes, cost savings and lower raw material costs. Investments were made in increased marketing activities. The British pound and Mexican peso have weakened against a number of trading currencies, which had a negative earnings effect. The Group's adjusted operating margin was level with the preceding year at 11.9%. Operating cash flow increased by 6%. The adjusted return on capital employed decreased by 0.3 percentage points to 12.8%.

*Calculated as per December 31, 2016.

For further information, please contact:

Fredrik Rystedt,
CFO and Executive Vice President,
Tel: [phone]

Johan Karlsson,
Vice President Investor Relations, Group Function Communications,
Tel: [phone]

Linda Nyberg,
Vice President Media and Online, Group Function Communications,
Tel: [phone]

Joséphine Edwall-Björklund,
Senior Vice President, Group Function Communications,
Tel: [phone]

NB

This information is such that SCA is obligated to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. This report has been prepared in both Swedish and English versions. In case of variations in the content between the two versions, the Swedish version shall govern. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 CET on January 26, 2017. This interim report has not been reviewed by the company's auditors.
Karl Stoltz, Media Relations Manager, [phone]

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