The year 2011 was an eventful twelve months. The acquisition of Georgia-Pacific’s European tissue operations was announced at the end of the year, while the divestment of SCA’s packaging operations was announced at the beginning of 2012. These transactions strengthen SCA and lead to greater synergies in the European business, reduced sensitivity to fluctuations in the economy, higher growth and a gradual increase in earnings per share. During the year, SCA also carried out vital efficiency-enhancement measures, raised the launch rate for new products and successfully grew in all business areas in both mature and emerging markets.

The year was marked by devastating natural disasters and political unrest, weak government finances in several countries and continued high raw material prices and currency fluctuations. Through enhanced efficiency and innovation, we generated growth and further strengthened our long-term competitiveness. Sales rose by 4%, in local currencies, compared with the preceding year. Operating profit, excluding items affecting comparability and exchange rate effects, was level with 2010. Higher volumes combined with priceincreases and cost savings offset the SEK 3.2bn in increased raw material costs. I can see that our strategy has proven to be a successful one, and we are a stronger SCA today than a year ago.

Major structural transactions

In November, SCA reached agreement on the acquisition of Georgia-Pacific’s European tissue operations, with annual sales of about SEK 12bn. The acquisition is an excellent strategic match for SCA and helps to strengthen the product offering and broaden our geographic presence in Europe. Annual synergies are estimated to amount to approximately SEK 1.1bn, with full effect to be achieved three years after completion of the transaction, at which time earnings per share are forecast to rise by SEK 1.70.

In January 2012, we announced the sale of SCA’spackaging operations, excluding the two kraftliner mills in Sweden, for approximately SEK 15.3bn. In 2011, the packaging operations, excluding the two kraftliner mills, reported net sales of about SEK 24.4bn and an operating profit excluding restructuring costs of some SEK 1.5bn. As a consequence of the divestment, earnings per share will decline by SEK 0.73.

The acquisition of Georgia-Pacific’s European tissue operations and the sale of the packaging operations are expected to be fully finalised during the second quarter of 2012. Both transactions strengthen SCA, contribute to improving synergies and a gradual rise in earnings per share, and reduce the debt/equity ratio to about 0.5.
SCA is currently the third-largest hygiene company in its product categories and the sale of the packaging operations enables a sustained increase in growth in the hygiene business. Sensitivity to economic fluctuations is reduced as hygiene products grow to account for a higher share of the Group’s sales, enabling long-term stable profitability, growth and value creation.

Strategy for sustainable growth

SCA’s business strategy stands firm, with an intense focus on costs, cash flow, capital efficiency, innovation and growth. Restructuring programmes and savings measures implemented throughout the Group have reduced costs. Improved productivity and efficiency in large parts of the Group have led to enhanced capital efficiency. As a rule, more efficient production also yields positive environmental effects. One example of this is the some 1,700 small-scale energy improvements carried out in the Group in recent years resulting in a reduction in carbon dioxide emissions and annual savings of approximately SEK 700m.

Our focus on efficiency has enabled us to accelerate the pace of growth and, aside from the agreement to purchase Georgia-Pacific’s European tissue operations, we made acquisitions in the hygiene operation in Turkey and Brazil, two strategically important emerging markets. Our global brands TENA (incontinence products) and Tork (AFH tissue), each with annual sales of more than SEK 10bn, strengthened their market positions in 2011 and we have successfully grown in all business areas in both mature and emerging markets.

To enable increased growth, a reorganisation of the hygiene business was initiated during the year. The new organisation, which came into effect on 1 January 2012, will contribute to enhanced efficiency and market presence.

The decision was also taken to invest in existing operations, for example, in the tissue units in Russia and Germany.

Read more in the annual report for 2011.