Bloomberg News

SCA Fourth-Quarter Profit Falls on Costs, Demand Drop

January 29, 2009

Svenska Cellulosa AB (SCAB), Europe’s biggest tissue maker, reported lower fourth-quarter profit as price rises failed to make up for cost increases and lower demand.

Net income declined to 1.42 billion kronor ($176 million), or 2.02 kronor a share, from 2.13 billion kronor, or 3.03 kronor, a year earlier, the Stockholm-based company said today in a statement. Sales advanced 1.3 percent to 28.2 billion kronor. Analysts surveyed by Bloomberg predicted a profit of 1.11 billion kronor on sales of 27.1 billion kronor.

The company, known as SCA, is reducing its investments and may leave geographic markets where it doesn’t see enough near-term potential, Chief Executive Jan Johansson said in December. Sales of personal care and tissue products rose 10 percent during the quarter while packaging and forest products sales declined as the worldwide recession curbed incomes. Pulp and energy costs rose.

“Their biggest issue is input costs which have gone up even if they’ve gotten synergies from acquired brands,” said Johnson Imode, an equity analyst at Standard & Poor’s in London with a “hold” rating on SCA. “All of last year, packaging has been suffering from overcapacity and they also took out some capacity in the fourth quarter, which lowered earnings.”

SCA closed down 4.25 kronor, or 6.1 percent, at 65 kronor in the Swedish capital.

“Our overriding priorities in 2009 will be to improve cash flow in part by cutting back on capital expenditures and in part by cutting costs and increasing working capital,” Johansson said in the statement.

The company lowered its proposed dividend to 3.50 kronor per share from 4.40 kronor last year, citing “major uncertainty about the economy.”

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

To contact the editor responsible for this story: Andrew Noel at anoel@bloomberg.net


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