- Europe’s
largest independent kraftliner producer saw Q1 20A EBITDA down 34% y/y driven
by price/mix: COVID-19 did
not materially impact results, but SCA expects continued uncertainty. Delivery
volumes to Scandinavia remained stable (slight weakness towards end of Q1). Asian
demand is recovering in Q2. Demand in southern Europe, the UK and France
decreased sharply due to the restrictions imposed.
- Demand
for kraftliner improved and European inventory levels continue to decline: Demand from e-commerce and food has
increased, while demand has declined for packaging to industrial products. SCA’s kraftliner
deliveries increased by 14% y/y (18% q/q), while European demand to March was
up 8.5% y/y (despite strikes and COVID), while inventories
were 30% lower y/y.
- SCA
confident that kraftliner prices are going to increase further: Supply/demand fundamentals are supportive. Kraft
price increase of
EUR 50/t announced (EUR 15/t through). Testliner prices have increased by EUR
30/t (OCC cost pressure), with a further EUR 50/t announced. - Obbola
(Sweden) project to increase kraftliner production by 275ktpa: SCA will spend c.EUR 690m (ER 1,533/t) increasing
capacity by 275kpta. The mill will be in full operation during the construction
period before switching over from the old machine to the new one ahead of its
start-up in FY 23e. Ramp-up is expected to take three years.
- Pulp markets improving: This was driven
by increased demand for tissue hygiene products (65-70% of their pulp sales) as
well as specialty paper. A price increase of USD 40/t was implemented towards the
end of Q1. Pulp inventories are now at normalised levels
(HW and SW lower).
- Net debt/EBITDA of 1.9x (Q4 19A: 1.6x): Final dividend cancelled
to support liquidity, while CapEx guidance remains unchanged.
- Visibility
of order books varies by grade: Pulp and kraftliner is very strong. There is greater uncertainty in
the publication paper market, where demand has fallen sharply (decline in direct
mail and advertising). In response, SCA has planned for potential temporary
stoppages
(c.4-5 weeks) in Q2 and Q3 at their Ortviken paper mill (756ktpa: uncoated and LWC).
Download Report
