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SCA CEO discusses first half sales and investments

July 25, 2011

With emerging markets showing favorable growth, the company has recently completed multiple machinery investments.

On Thursday, July 21, Jan Johansson, chief executive officer for SCA, disclosed the Swedish company's 2011 Interim Report. SCA's net sales for the second quarter rose 5% and operating profit rose 2%, compared with the first quarter of 2011. In light of the recovery of the global economy, Johansson attributed the earnings improvement to higher volumes and prices.

"During the year we have raised our own prices, continued to carry out cost-cutting measures and stepped up the pace of new product launches," the CEO said. "Compared with the first half of 2010, raw material costs have risen by more than SEK 2bn. We have succeeded in compensating for this through own price increases and cost cutting. The strengthening of the Swedish krona has entailed a decrease in operating profit by SEK 600m. All business areas have been affected. During the first half of 2011, profit was not affected by restructuring costs."

With the global market for incontinence care products showing continued growth, Johannsson said demand for tissue was stable in Western Europe and North America during the first half of 2011, compared with a year ago. And he added that emerging markets are showing continued favorable growth, and the company has recently completed machinery investments.

"To capitalize on the favorable growth in the Russian market and further strengthen SCA's market-leading position, a decision was made to invest approximately SEK 1.2bn in a second tissue machine in Sovetsk, Russia. The new tissue machine has annual capacity of 60,000 tons, with production start planned for 2013," Johansson said, adding that the investment is part of the strategy to grow in emerging markets and to increase the share of sales of SCA's own brands.

He also discussed a tissue machinery addition in Germany. "A decision was also made to invest approximately SEK 1.1bn in a new tissue machine in Kostheim, Germany, to meet increased demand primarily for AFH tissue products. The new tissue machine will have annual capacity of 60,000 tons, with production start planned for 2013.

Personnel changes
Mats Berencreutz was announced as the new chief operating officer (COO) of SCA's global hygiene business and continues to be a member of the Corporate Senior Management Team. The
appointment strengthens the Group's resources and creates conditions to further co-ordinate and develop SCA's hygiene business, with the goal of improving profitability and increasing growth.

Magnus Groth, currently CEO of Studsvik AB, has been appointed as new President of SCA's tissue operations in Europe. He will take office on August 15 and will be a member of SCA's Corporate Senior Management Team.

Turkish acquisition
SCA recently acquired 50% of the Turkish hygiene products company Komili from Yıldız Holding, Turkey's largest food group. The purchase consideration amounted to SEK 308m on a debt-free basis. Komili is currently the fourth largest producer of baby diapers and feminine care products in Turkey and has operations in associated product areas, such as wet wipes, soaps and shampoos. Komili will operate as a joint venture between SCA and Yıldız Holding. The acquisition includes local production and access to a strong distribution network in the country. Komili's annual sales are approximately SEK 530m.

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