Acquisitions, investments and divestments

Acquisition of North American tissue operation

In 2015, SCA decided to make a public bid for Wausau Paper Corp. for a total consideration of USD 513m in cash. Wausau Paper is one of the largest Away-from-Home tissue companies in North America. The company manufactures and markets Away-from-Home towel and tissue products, and markets soap and dispensing systems. The combined operations will provide customers access to a comprehensive portfolio of food service offerings, premium tissue and washroom products. Wausau Paper’s reported sales for the first half of 2015 amounted to USD 175m (SEK 1.5bn) with EBITDA of USD 32m (SEK 268m) and operating profit of USD 11m (SEK 94m). Wausau Paper’s reported sales for full year 2014 amounted to USD 352m (SEK 2.4bn) with EBITDA of USD 38m (SEK 263m) and an operating profit of USD –3m (SEK –19m). On a pro forma basis, giving effect to the acquisition, SCA’s sales for the full year 2014 would have increased from SEK 104.1bn to SEK 106.5bn. Pro forma operating profit for the full year 2014, excluding items affecting comparability, would have been on a similar level and amounted to approximately SEK 11.8bn. The acquisition is expected to generate annual synergies of approximately USD 40m, with full effect three years after closing. Synergies are expected in sourcing, production, logistics, reduced imports, increased volumes of premium products and reduced sales, general and administration costs. The restructuring costs are expected to amount to approximately USD 50m. The transaction was completed on January 21, 2016.

Acquisition and divestment in South Africa

In 2015, SCA acquired the remaining 50% of the jointly owned South African subsidiary Sancella S.A. from the South African company Nampak. At the same time, Sancella S.A.’s baby diaper operations was divested to another South African company. Sancella S.A. generated approximately SEK 330m in net sales in 2014, of which the baby diaper operations accounted for about SEK 250m. Going forward, in South Africa SCA will focus on feminine care and incontinence products under the Lifestyle and TENA brands, which accounted for approximately SEK 80m of Sancella S.A.’s net sales in 2014.

Investment in new production facility for incontinence products in Brazil

In 2015, SCA decided to invest approximately SEK 650m in a new production facility in Brazil for the manufacture of incontinence products. Production is scheduled to commence in 2016.

Investment in increased capacity for pulp production in Sweden

In 2015, SCA decided to invest in increased capacity for pulp production at Östrand pulp mill in Timrå, Sweden in order to satisfy the long-term growth in demand for pulp. The annual production capacity for bleached sulphate pulp will increase from the current level of approximately 430,000 tons to about 900,000 tons. The investment will amount to about SEK 7.8bn over a three-year period. Production is expected to commence in 2018.

Divestment of business jet operation

In 2015, SCA announced that the Company, together with the other part-owners, was divesting Bromma Business Jet. The transaction gave rise to costs of approximately SEK 95m and was recognized as an item affecting comparability in 2015.

Strengthened cooperation with Vinda

In 2015, SCA decided to divest its business in Southeast Asia, Taiwan and South Korea for integration with Vinda International Holdings Limited (“Vinda”). SCA is the majority shareholder in Vinda, one of China’s largest hygiene companies. As part of the transaction, SCA and Vinda have signed an agreement regarding the exclusive license to market and sell the SCA brands: TENA (incontinence products), Tork (AfH tissue), Tempo (consumer tissue), Libero (baby diapers), and Libresse (feminine care) in Southeast Asia, Taiwan and South Korea. With this agreement, Vinda will hold the rights to these product brands in these Asian markets. Vinda will acquire the brands Drypers, Dr.P, Sealer, Prokids, EQ Dry and Control Plus in these markets. SCA’s hygiene business in Southeast Asia, Taiwan and South Korea had net sales of approximately SEK 2.2 billion in 2014. The purchase consideration amounted to HKD 2.8bn on a debt-free basis. Vinda is listed on the Hong Kong Stock Exchange. As a consequence of this transaction, SCA’s Shanghai office will stop to have operations. This led to approximately SEK 90m in restructuring costs, which were recognized as an item affecting comparability in 2015.

Divestment of holding in Industrivärden

In 2015, SCA sold its entire holding of 12,108,723 Class A shares in AB Industrivärden, corresponding to 4.3% of the votes and 2.8% of the capital in the company. The shares were sold to Swedish institutions and investors for a price of SEK 169 per Class A share. Following the transaction SCA does not own shares in AB Industrivärden.

Closure of newsprint machine in Ortviken

In 2015, SCA decided to close down a newsprint machine at the Ortviken paper mill in Sweden and recognized an impairment loss for the mill. Efficiency improvement measures are being implemented at the kraftliner mills in Obbola and Munksund. The closure, impairment loss and efficiency improvement measures entail total costs of approximately SEK 1.4bn and will result in annual cost savings of about SEK 180m, of which approximately SEK 120m is attributable to lower depreciation, with full impact in 2017. The impairment loss amounted to approximately SEK 1.3bn and was recognized as an item affecting comparability in 2015. The transaction gave rise to restructuring costs of approximately SEK 90m, which were recognized as an item affecting comparability in 2015.