SCA Capital Market Day 2011

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http://www.sca.com/ir September 19, 2011 SCA hosted the Capital Markets Day in Stockholm. The strategy of recent years of focusing on costs, cash flow, capital efficiency and innovation remains firmly in place. Increased growth was added to the Group’s strategic agenda in 2010.

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  • Revitalized TENA Lady assortment: Successfully blocked P&G Envive launch; back to growth despite significant negative impact from reimbursement changes
  • 99% with reduced inventory levels: 1/ Forecasting accuracy 2/Assortment discipline 3/Flexible and efficient Packaging lines
  • Dedicated org: Development org dedicated to RB in Olawa. Competitive product perfomance: Scores well in Consumer Panels and Lab-tests; Close to market leader; Ability to deliver regular updates
  • Active business partner: Priorities, targets, resources (HR), follow-up, etc
  • SCA Capital Market Day 2011

    1. 1. SCA Capital Market Day 2011 Jan Johansson, President and CEO1 CMD 2011
    2. 2. Macro and economic outlook Uncertainty rulesStandard & Poor’s decision to downgradesUS’s credit rating to AA+Market’s fear over the Euro Inflation in China wasMeasures to stabilize debt markets in the reported at 6.4 percentEurozone in June of 2011 2 CMD 2011
    3. 3. SCA GroupSales split 2010 Forest Products Sales split Personal Care 16% 24% 24% 36% Packaging Tissue3 CMD 2011
    4. 4. Increasing hygiene sales % of net sales 100% 80% 54% 40% 60% 40% 60% 20% 46% 0% 2000 2000 2010 2010 Packaging and Hygiene products Forest Products (Personal Care and Tissue)4 CMD 2011
    5. 5. Leading market positions Global and regionalNorth America EuropeAFH tissue: 3 Tissue: 1Incontinence care: 3 Corrugated board: 2 Baby diapers: 2 Incontinence care: 1Mexico Privately owned forests: 1Incontinence care: 1 Solid-wood products: 2Tissue: 2Feminine care: 1Baby diapers: 3 Global Incontinence care: 1 Colombia AFH tissue: 2 Australia Incontinence care: 1 Feminine care: 1 Feminine care: 1 Tissue: 1 Incontinence care: 1 Tissue: 2 5 CMD 2011
    6. 6. Packaging and Publication papersEuropean market Corrugated board Publication papers SCA SCA 10% 6% Other Smurfit Kappa Other UPM (incl. Myllykoski) 29% 56% 20% 32% 5% 6% 5% DS Smith Holmen 4% 10% Saica 17% Norske Skog Mondi Stora Enso6 CMD 2011
    7. 7. Incontinence careMarket shares North America Europe Other Med 6% SCA Other SCA 10% 20% 29% Covedien 11% 41% 26% 27% 4% Artzana KC 5% TZMO 8% FQP 13% Ontex Hartmann Latin America Global Other SCA 19% Other SCA 25% 32% 46% 20% Hypermarcas 9% KC 5% Panalex 7% 6% 18% 6% 7% FQP Biopapel KC Hartmann Unicharm CMD 20117 CMD 2011
    8. 8. Baby diapers and Feminine care Market shares Europe Baby diapers Feminine care Other SCA Other SCA Hyga 2% 9% 12% 15% 8% Ontex TZMO 10% 4% Ontex 6% KC 12% 55% 50% 17% P&G J&J P&G Latin America* Baby diapers* Feminine care* Other SCA CMPC Other P&G 12% 7% 2%3% J&J 5% 12% SCA TQ 6% 35%Hypermarcas 8% 62% KC 20% P&G 28% KC * Market share in SCAs markets 8 CMD 2011
    9. 9. Consumer tissue Market shares Europe SCA 25% Other 36% 12% Sofidel 8% 8% 11% Wepa GP KC Latin America* Global Other SCA SCA 14% 8% Manpa y Brika 18% 4% 17% KC Kruger Other 54% 10% 42% KC 11% CMPC 12% GP 8% 2% P&G Sofidel* Market share in SCAs markets 9 CMD 2011
    10. 10. AFH tissue Market shares North America Europe Other SCA Other 19% SCA 18% 20% 44% Cascades 4% 7% 15% KC Bay West 30% 21% GP 11% KC 4% 7% GP Duni Metsä Latin America* Global Other SCA SCA 16% 17% 18% Fapsa 4% Kruger 5% 45% Other 18% KC CMPC 9% 47% KC 16% 2% 3% GP Metsä* Market share in SCAs markets Bay West 10 CMD 2011
    11. 11. Strategic focus areas Cost reductions in all  Efficiency programs in  Personal Care  SCA Group 5%* business areas of close Packaging and Forest  Thin baby diaper  Personal Care 2%** to SEK 1bn*** Products  Tena Ultra thins  Emerging Markets 10%** Cash flow from current  Supply Chain  Strong Tena value  Tissue 2%** excellence and asset assortment operations SEK 7.4bn***  Emerging Markets 6%** utilization programs in  Tissue Tissue Europe  Packaging 20%*  Tork Xpressnap Café,  Restructuring program Tork Performance  Forest Products 3%** in baby diapers in  Tempo ice, Zoo Boxes Europe Acquisitions:  Packaging  New tissue plant in  Mexico- Copamex Mexico  Trueflo  ZeoCool  Turkey- 95% San Saglik  New personal care  Forest Products  Turkey- 50% Komili plant in Russia  Increased value  Brazil – Pro Descart  Further tissue added investments in Kostheim and Sovetsk  SCA and Fred.Olsen  Investment in Bollsta Renewables to construct wind farms sawmill* 2010 adjusted for exchange rate movements and divestments** 2010 adjusted for exchange rate movements*** 2010 11 CMD 2011
    12. 12. Strategic focus Yielding results Operating profit* 12000 10000 8000 6000 4000 2000 0 2008 2009 2010* Excluding extraordinary items 12 CMD 2011
    13. 13. Decreased net debtAnd improved debt payment capacity SEKm Net debt decreased SEK 10.4bn % 50 000 50 40 000 37% 40 35% 31% 30 000 30 26% 20 000 20 10 000 10 0 0 2008 2009 2010 H1 2011 Net debt Debt payment capacity13 CMD 2011
    14. 14. Innovation for profitable growth Meet changing demands and requirements Create long-term, profitable differentiation Strengthen market positions Build stronger brands Drive growth14 CMD 2011
    15. 15. GrowthSCA’s growth markets Latin America  Strong SCA positions South East Asia  Good market growth  Favourable socio-demographics Eastern Europe /Russia  Good market growth Middle East  Favourable socio-demographics China  Incontinence care products15 CMD 2011
    16. 16. GrowthHigh growth in Emerging marketsH1 2011Emerging markets hygiene sales growth: Personal Care: +9%* Tissue: +9%* % of Hygiene sales in 2010 Emerging markets 21% Mature markets * Adjusted for exchange rate movements16 CMD 2011
    17. 17. Sustainability as a business driver Reduced cost  ESAVE = SEK 600m in annual cost savings Improved competitive edge  Sustainability credentials generate good business  Great growth potential through customized offerings in D&E markets  Renewable energy, wind power, biofuels  World’s largest producer of FSC-certified products Attract investors  23% of investors in SCA shares make sustainability screening Reduced risk level Attract top talents Strengthen the brand17 CMD 2011
    18. 18. Financial targetsRemain unchanged ROCE* Sales growth**Personal Care 30% 5-7%Tissue 13% 3-4%Packaging 10%Forest Products 11%Group 13% * Return on capital employed, over a business cycle ** Annual organic sales growth18 CMD 2011
    19. 19. Strategic focus areas19 CMD 2011
    20. 20. SCA Packaging Michael Cronin, President20 CMD 2011
    21. 21. SCA Packaging Net sales of SEK 26.2bn Protective packaging 3% 170 production facilities, including 6 Industrial packaging 4% containerboard mills Service 4% Europe’s second largest corrugated packaging company with 10% market share Consumer packaging 13,750 employees 20% Full-service supplier of packaging solutions Main customers are the FMCG & manufacturing Conventional industries corrugated board 69% 21 CMD 2011
    22. 22. Integrated packaging company SCA Forest & Timber SCA ContainerboardSCA Recycling A complete ‘cradle to cradle’ loop, from forest to package and recycle to fibre again SCA Packaging Retailers Our Customers We lifecycle!22 CMD 2011
    23. 23. Strategic priorities Ongoing priorities  Focus capital on profitable segments  Increase value content  Managing the Cycle & Lowering cost base - Price management - Eliminate problem businesses - LEAN project  Integrate the business - One Company - Paper Supply Platform  Customer focus - Quality and Service - Innovation  People - Management of change - Leadership23 CMD 2011
    24. 24. Managing the cycle Corrugated Box Price Recovery 1.25 Achieved price increases of 21% since Q4 2009 1.20 1.20 1.17 1.15Base Index used Q4 2009 1.14 1.10 1.11 1.05 1.06 1.02 1.02 1.00 1.02 1.00 0.95 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 Price Corrugated Conventional 24 CMD 2011
    25. 25. Business integrationPaper supply platform25 CMD 2011
    26. 26. Customer FocusQuality & Service Quality Award26 CMD 2011
    27. 27. InnovationStrengthens customer offering27 CMD 2011
    28. 28. SCA Forest Products Ulf Larsson, President28 CMD 2011
    29. 29. SCA Forest Products Forest Publication papersEurope’s largest private forest owner No. 5 in Europe 2.6 million hectares Solid-wood products Distribution and logistics No. 2 in Europe R&D Sales: SEK 17.1bn Pulp Employees: 4,200 Energy 29 CMD 2011
    30. 30. Publication papersStrategic focus Strong Higher Strengthened Innovation mill concept product value market position products/Deliveries processes Maintenance  Strategy defined  Full capacity  New R&D agenda organization utilization Productivity and cost efficiencyPriorities Upstream  Less exposure to  Environmental  Long term product integration standard news positioning development per  Local presence and mill Productivity and cost efficiency good service  Supplementary  Further strengthen products core European customer base30 CMD 2011
    31. 31. Publication papersDeliveries of FSC-certified paper FSC deliveries increased 35% in 2010 tonnes 300,000 250,000 200,000 150,000 100,000 50,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201031 CMD 2011
    32. 32. Solid-wood products Strategic focusAsset optimization Industrial and Todayprogram distribution solutionsDeliveries Vilhelmina Munksund Bollsta 450,000  550,000 m³  GORM start-up Jämtlamell Holmsund Gällö Rundvik Tunadal 350,000  500,000 m³  BM Scandinavian Bollsta expansion (+60%) Tunadal Closure Stugun  China sales company TjärnvikPriorities Internal consolidation  BM France  BM UK 32 CMD 2011
    33. 33. Solid-wood productsIncreased share of value-added products Value-added products % 60 52% 50 40 38% 30 20 10 0 2004 2005 2006 2007 2008 2009 201033 CMD 2011
    34. 34. PulpStrategic focus Today PotentialPulp Tonnes/ 800,000Deliveries annum Increased productivity 475,000 Lime kiln 420,000 NBSK Maintenance organizationPriorities Östrand 475,000 tonnes 90,000 CTMP 90,000 90,00034 CMD 2011
    35. 35. ForestStrategic focusForest Million m³ standing volumeDeliveries 300 Forecast Growth Today 250 Increased productivity Purchase from private forest 200 owners >3 million m³ Measured 150Priorities 100 Decreased costs 50 Further increased purchase volume to cover industry expansion 0 1947 1953 1968 1976 1984 1996 2006 2016 2026 2036 2046 2056 Forest growth35 CMD 2011
    36. 36. ForestA valuable asset Europe’s largest private forest owner – FSC certified Annual net growth of 1% Raw material integration and potential for electricity generation Our forests absorb as much carbon dioxide as is discharged from SCA’s entire production If the worlds forests were managed the same way as SCA’s that would solve a big part of the climate change problem36 CMD 2011
    37. 37. EnergyStrategic focus Wind power Biofuel New energy products and Deliveries processes Statkraft investments, 2.6 TWh  Ongoing business  Organization Fred. Olsen Renewables, 2 TWh Organization Strategy Priorities SCA projects  >4 TWh biofuel,  Strategy potential 12-15 TWh Land lease  Pre-study torrefaction  Peat, prestudy Further investments Statkraft joint venture  Strategic partners37 CMD 2011
    38. 38. R&D and InnovationsStrategic focusR&DDeliveries R&D Transformation program - Reduce TMP energy consumption - Next generation publication papers - Bio-refinery mechanical pulp - Composites - Future packaging products - Micro fiber cellulose Innovation/business development - Process started for higher ambition levelPriorities  Innovation culture - 72 hour race to innovation  Production system for innovation/ business development38 CMD 2011
    39. 39. SCA Hygiene businessMats Berencreutz, COO Hygiene OperationsChristoph Michalski, President GHC39 CMD 2011
    40. 40. Strong global and regional brands Two global billion EUR brands Eastern Europe Europe North America Asia Pacific Latin America Sales of SEK 65bn, with sales in more than 100 countries40 CMD 2011
    41. 41. Leading market positions Global and regionalNorth AmericaAFH tissue: 3 EuropeIncontinence care: 3 Tissue: 1 Baby diapers: 2 Incontinence care: 1MexicoIncontinence care: 1Tissue: 2Feminine care: 1Baby diapers: 3 Global Incontinence care: 1 Colombia AFH tissue: 2 Australia Incontinence care: 1 Feminine care: 1 Feminine care: 1 Tissue: 1 Incontinence care: 1 Tissue: 2 41 CMD 2011
    42. 42. Strategic focus Strengthen positions and increase growth in main markets and emerging markets Increase the number of global brands Increase the pace of innovations Efficiency improvements42 CMD 2011
    43. 43. Growth potential for hygiene products  Global population growth  An aging population  Increased market penetration  Higher disposable income  Customers and consumers demand more comfort and sustainabilityGlobal market size for hygiene products: SEK 675bn 43 CMD 2011
    44. 44. Population growth 2010-2020Demographics People, millions 8 000 +12% 2010 2020 7 000 6 000 5 000 +11% 4 000 , 3 000 2 000 +7% 1 000 +2% +33% 0 World Children 0-4 Women 15-49 >65 yrs Other yrs yrs44 CMD 2011
    45. 45. Growth High potential in markets with low penetration Usage of hygiene products Units/capita/year Units/child/year Units/woman/year Kg/capita/yearPenetrationin maturemarketsaround 35% North America Western Europe Eastern Europe Latin America Asia 45 CMD 2011
    46. 46. Sustainability as a business driver Extensive customer and consumer demand for sustainable solutions and eco labelling Growing sustainability interest in emerging markets Great growth potential with customized offerings in D&E markets Sustainability drives innovation46 CMD 2011
    47. 47. Driving growth and efficiencies Drive Growth Drive Efficiencies Core Organization Extract cost to capabilities effectiveness reinvest for growth  Innovation  Faster, simplified  Leaner, more  Marketing and decision making agile organization brand  Clarified ways of  Shift resources management working where required to  Consumer and win customer insight47 CMD 2011
    48. 48. GrowthSCA’s growth markets Latin America  Strong SCA positions South East Asia  Good market growth  Favourable socio-demographics Eastern Europe /Russia  Good market growth Middle East  Favourable socio-demographics China  Incontinence care products48 CMD 2011
    49. 49. More Brand, Less Brands Harmonized positions to leverage:  Concepts  Technology  Best practice Huge opportunity to accelerate growth and further strengthen efficiencies through improved speed and scale49 CMD 2011
    50. 50. InnovationStrengthens market positions and profitability50 CMD 2011
    51. 51. InnovationStrengthens market positions and profitability51 CMD 2011
    52. 52. SCA Tissue Europe Magnus Groth, President52 CMD 2011
    53. 53. SCA Tissue Europe Sales split Net sales of SEK 26.8bn AFH tissue 25% 9,200 employees Consumer tissue 75% Consumer tissue AFH tissue  No. 1  No. 1  25% market share  20% market share53 CMD 2011
    54. 54. Strategic focus Continue to strengthen the Tork brand in AFH tissue and increase growth Strengthen consumer tissue brands through continued implementation of the brand platform Launches of innovative products based on customer and consumer insight Efficiency improvements Sustainability as a business driver Capture growth opportunities in Eastern Europe54 CMD 2011
    55. 55. Consumer tissue Finalized brand migration from P&G deal Strengthened brand positions Increasing share of branded business Improved price management Strong growth in Eastern Europe55 CMD 2011
    56. 56. AFH tissue  Increasing market share, especially in HoReCa* segment  Continued growth in highly profitable premium segments  Focus on strategic growth regions has paid off  Improved price management During 2011 market share has exceeded 20% (+1% compared to 2010)* Hotels, Restaurants and Catering 56 CMD 2011
    57. 57. Consumer tissue brand migrationStronger brands and more efficient A&P Complicated, region specific, Focused, differentiated & consumer inefficient brand portfolio relevant mega-brand portfolio DACH East Nordic NL From … … To57 CMD 2011
    58. 58. InnovationStrengthens market positions and profitability58 CMD 2011
    59. 59. Sustainability as a business driver Increased customer demand, both from consumer and B2B Increased demand for eco-labelling  90 Tork products received the EU Eco-label Several tenders secured thanks to green credentials, i.e. Wembley stadium59 CMD 2011
    60. 60. SCA Personal Care EuropeThomas Wulkan, President60 CMD 2011
    61. 61. Personal Care Europe Sales split  Net sales of SEK 16.9bn Feminine care 12%  5,300 employees Baby diapers 28% Incontinence care 60%Incontinence care Baby diapers Feminine care No. 1  No. 2  No. 3 41% market share  12% market share  8% market share 61 CMD 2011
    62. 62. Strategic priorities Grow TENA to >50% Grow Libero and Libresse strongholds Build Retailer brand partnerships with selected leading retailers Establish new strongholds in nearby D/E markets Cost, quality and service leadership62 CMD 2011
    63. 63. Grow TENA to >50% Drive and shape markets by enhanced innovation and speed-to-market Strengthen TENA brand Accelerate TENA premium growth  Growth momentum with TENA Pants  TENA Lady assortment  Modern Inco Care launch Profitable growth in value segment63 CMD 2011
    64. 64. Grow Libero and Libresse strongholds Libero Nordic  Introduce and grow adjacent products  Successful Thin Open diaper launch Profitable growth for Libero Russia Focus on prioritized feminine care markets  Market share gains in Scandinavia and France64 CMD 2011
    65. 65. Build Retailer brand partnershipswith selected leading retailers Clear strategy  Partnerships with selective non-competing retailers  Fast-follower in Open diapers; Leader in Pants Dedicated organization  Capability to follow the market leader quickly  Strong cost focus Early successes  Supplier of the year award with Kruidvat  Exceptional growth with Mercadona  Won new retailer business and several new Pant contracts65 CMD 2011
    66. 66. Establish and grow new strongholdsin nearby growth markets Capitalize on growth opportunities in Middle East and North Africa Expanded footprint in prioritized growth markets  Komili, Turkey  San Saglik, Turkey66 CMD 2011
    67. 67. InnovationStrengthens market positions and profitability67 CMD 2011
    68. 68. Sustainability as a business driver Increased customer demand, both from consumer and B2B Increased demand for eco-labelling Community-related activities for improved brand awareness68 CMD 2011
    69. 69. SCA Americas Sune Lundin, President69 CMD 2011
    70. 70. SCA Americas Sales split Net sales of SEK 16.1bn Baby 7,900 employees Feminine diapers 4% care 10% Incontinence care 21% Consumer North America Mexico and tissue 18% Central America South America AFH tissue 47%  Incontinence care  Incontinence care  Incontinence care  AFH tissue  Baby diapers  Baby diapers  Feminine care  Feminine care  Tissue  Tissue70 CMD 2011
    71. 71. North AmericaStrong SCA market positions> World’s largest market for incontinence care products (USD 2.7bn)and Away from Home tissue (USD 5bn)> 90% B2B focus for SCA> Strong market positions71 CMD 2011
    72. 72. Latin AmericaStrong market growth > Fast growing markets > 90% B2C focus for SCA > Strong brands > Unique strength in growing Traditional Trade channel72 CMD 2011
    73. 73. Sales & distributionCustomers73 CMD 2011
    74. 74. Strategic Focus Leading innovations strengthen market positions and profitability Geographic and category expansion Increased value added sales Sustainability as a business driver74 CMD 2011
    75. 75. Leading Innovations Strengthens market positions and profitability NosotrasTork Xpressnap TENA Stretch Doubles 75 CMD 2011
    76. 76. Geographic & category expansionLatin American acquisitions strengthens presence Algodonera Aconcagua  No. 3 in feminine care  Smaller positions in baby diapers and incontinence care products Copamex  No. 3 in baby diapers Pro Descart  No. 2 in incontinence care products  Smaller position in baby diapers76 CMD 2011
    77. 77. Increased value added salesDrives profitability for AFH tissue North America 100% 80% 60% 40% 29% 20% 9% 0% 2005 201077 CMD 2011
    78. 78. Sustainability as a business driver Growth potential in Latin America in low income segments  Smaller packs, local distribution and economy products  Cooperation with Wal-Mart’s Bodega Aurrera stores in Mexico Customers view SCA’s strong sustainability position as a competitive advantage SCA offers Ecologo and Green Seal certified Tork products made of 100% recycled fiber Unique “Go Green” partnership with Philadelphia Eagles, NFL’s greenest football team78 CMD 2011
    79. 79. SCA Asia Pacific Ulf Söderström, President79 CMD 2011
    80. 80. SCA Asia Pacific Sales split Net sales of SEK 6.9bn Feminine Consumer 3,200 employees Care 10% tissue 36% Incontinence Care 15% Baby diapers 23% Hygiene Central Hygiene Australasia Hygiene North Asia & South Asia AFH tissue 16% Incontinence care  Incontinence care  Incontinence care Baby diapers  Tissue  Baby diapers Feminine care  Feminine care Tissue80 CMD 2011
    81. 81. Strategic focus Geographic and category expansion Capture growth opportunities in prioritized emerging markets Innovation drives penetration, growth and profitability Sustainability creates a competitive advantage Capitalize on strong brand portfolio81 CMD 2011
    82. 82. Asia PacificIntimate Health and Elderly Care By 2030 60% of theglobal populationabove 65 will be in Asia Pacific TENA – Undisputed global leader in Inco Source: SMV, SCA, 201082 CMD 2011
    83. 83. InnovationStrengthens market positions and profitability83 CMD 2011
    84. 84. Sustainability as a business driver Growth potential in low income segments  Single packs, economy segment TENA launch and incontinence care training of 5,000 nurses in China TENA launch in the economy segment in Vietnam in 2011 Several tenders secured thanks to green credentials, i.e. Starbucks in China and Scott base in Antarctica84 CMD 2011
    85. 85. SCA Jan Johansson, President and CEO85 CMD 2011
    86. 86. SummaryShort-term No impact from debt crisis Good demand in all Business areas Raw material prices slightly down Price increasesLong-term Strengthen positions in main markets and increase growth in emerging markets Increased pace of innovations Fewer local brands and increased number of global brands Continued efficiency improvements86 CMD 2011
    87. 87. IR Contacts: Johan Karlsson, VP Investor Relations Jessica Ölvestad, Manager Investor Relations Tel: +46 8 788 51 30 Tel: +46 8 788 52 82 Email: ir@sca.com Website: www.sca.com87 CMD 2011

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