Bloomberg News

SCA Second-Quarter Net Rises 19% on Prices, Packaging

July 24, 2007

Svenska Cellulosa AB (SCAB), Europe's largest tissue maker, boosted second-quarter profit 19 percent as it raised prices and sales of diapers and wood products increased. The stock advanced the most in 14 months.

Net income advanced to 1.57 billion kronor ($236 million), or 2.23 kronor a share, from 1.31 billion kronor, or 1.87 kronor, a year earlier, Stockholm SCA, said today in a statement. Analysts had estimated profit of 1.47 billion kronor.

SCA raised prices for most of its products as the cost of wood gained 21 percent in the first half. Chief Executive Officer Jan Aastroem said price pressure will increase as the company faces higher log tariffs from Russia and energy producers seek more wood for biofuel.

``Raw materials have given us better arguments for raising prices and created upward pricing pressure,'' Aastroem said on a conference call. Magazine papers were the only products that didn't command higher prices in the first half, he said.

Shares of SCA rose 4.5 kronor, or 3.9 percent, to 121.5 kronor, the most since May 23, 2006. The stock has gained 2 percent this year, giving the company a market value of 86 billion kronor.

Sales rose 3 percent to 26.1 billion kronor, compared with analyst estimates of 25.5 billion kronor. Operating profit from pulp and lumber climbed 55 percent. Diapers and personal-care products had a 9 percent increase and tissue gained 3 percent.

`Back on Track'

``SCA clearly did better than expected in sawn-wood products, and personal care is now back on track after a weak first quarter,'' said Helsinki-based analyst Teemu Salonen of Evli Bank. ``Those things explain much of the gain.'' Salonen is considering raising his ``accumulate'' rating on the stock.

SCA agreed to buy Procter & Gamble's European tissue business in March, boosting its market share on the continent to 26 percent and increasing pricing power. Competition with rivals such as Kimberly-Clark Corp. has made it difficult in the past to increase retail tissue prices.

The Swedish company must pay an extra 67 million euros for the purchase of shares of German unit PWA Papierwerke Waldhof- Aschaffenburg AG in 1995, it said separately.

The stock had been valued according to a 1997 agreement that was disputed by shareholders. The sum, decided by the final court of appeal in Munich yesterday, includes an additional purchase price, dividends and interest, SCA said. It may have to pay a further 56 million euros to settle with minority investors.

To contact the reporter on this story: Diana ben-Aaron in Helsinki dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Chris Jasper at cjasper@bloomberg.net


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