Annual Report 1998

Annual Report 

1998 

Qualitative growth 

and international expansion 

for Hygiene Products and 

Packaging

Contents 

President’s letter 2 

Business concept 5 

Business control and financial goals 6 

SCA share 8 

Organization, products 

and markets 10 

Operations in brief 1998 11 

BUSINESS AREAS: 

Hygiene Products 12 

Packaging 18 

Graphic Paper 24 

RAW MATERIALS SUPPLY: 28 

Forest and Timber 29 

Raw Materials and Logistics 30 

Human resources 31 

Research and development 32 

Information Technology – IT 34 

Environment 36 

Financial risk management 41 

FINANCIAL REVIEW: 

Board of Directors’ report 44 

Cash flow statement 46 

Statement of earnings 48 

Balance sheet 50 

Parent Company 52 

Accounting principles 53 

Notes to the financial statements 55 

Proposed disposition of earnings 68 

Auditor’s report 69 

Quarterly data 70 

Group by country 71 

Ten-year comparison 72 

Definitions and key ratios 73 

Glossary 74 

Production capacities 75 

Board of Directors and Auditor 76 

Senior management 78 

SCA in the world 80 

Annual General Meeting and 

Nominating committee 81 

Financial information 

report dates in 1999 81 

SCA in brief 

SCA is an integrated paper company that produces absorbent hygiene 

products, corrugated packaging and graphic papers. Based on cus- 

tomer needs, value-added products are developed for private con- 

sumers, institutions, industry and trade. 

Western Europe is SCA’s main market, concurrent with selective ex- 

pansion in Central and Eastern Europe as well as Asia and America. 

SCA owns 1.8 million hectares of productive forest land and con- 

ducts sawmill operations. Wood fiber, which is harvested from the 

Swedish forest holdings, is an important raw material for the Group 

and contributes to SCA’s high degree of integration. SCA is also 

Europe’s largest collector and user of recovered paper. SCA uses equal 

quantities of recycled and fresh wood fibers in its production. 

At the beginning of 1999, the number of employees amounted to 

slightly more than 32,000 in some 30 countries. 

The SCA share is listed on the stock exchanges in Stockholm and 

London, and is available in the form of ADRs (American Depositary 

Receipts) in the US. 

Packaging 

Hygiene Products 

Graphic Paper


SCA’s cash flow from operations remained strong, 

totaling SEK 4,275 M. Accordingly, cash flow goals were 

achieved for the year. 

• 

Hygiene operations continues expansion, with strengthened 

positions in Europe and South America. 

• 

SCA Packaging increased profitability of European 

operations and acquired packaging companies in Great Britain, 

Denmark and the Czech Republic. 

• 

Higher demand for all paper grades improved operating profit 

for Graphic Paper by 109%. 

KEY RATIOS 

1998 1997 

Net sales, SEK M 61,273 58,595 

Earnings after financial items, SEK M 5,169 4,457 

Earnings per share after tax, SEK 17.07 13.98 

Cash flow from current operations, per share, SEK 21.57 24.54 

Dividend, SEK 6.50 1 5.75 

Strategic investments, incl. acquisitions, SEK M 5,041 4,414 

Shareholders’ equity, SEK M 28,404 24,653 

Return on shareholders’ equity, % 13 12 

Debt/equity ratio, multiple 0.72 0.73 

Average number of employees 32,082 33,399 

1 Board proposal 

See page 73 for definitions. 

30 

25 

20 

15 

10 

5 

0 

SEK 

Earnings, dividend and 

cash flow per share 

Net sales 

by business area 1998 

(excluding intra-Group deliveries) 

Other operations 

SEK 1,252 M 

2% 

Forest and 

Timber 

SEK 2,347 M 

4% 

Graphic 

Paper 

SEK 17,172 M 

28% 

Forest and Timber 

SEK 722 M 

11% 

Graphic 

Paper 

SEK 1,851 M 

29% 

94 

95 

96 

Earnings Dividend 

97 

Cash flow from current operations 

The Group’s earnings capacity remains stable. 

1 Proposed dividend. 

98 1 


SEK 25,742 M 

42% 

Packaging 

SEK 14,760 M 

24% 

The Hygiene Products, Packaging and Graphic Paper 

business areas, jointly account for 94% of the Group’s 

net sales. 

Operating profit 



SEK 2,404 M 

37% 

Packaging 

SEK 1,480 M 

23% 

Combined, the Hygiene Products, Packaging and 

Graphic Paper business areas account for 89% of the 

Group’s operating profit. 

1

2 

President’s letter 

INCREASED PROFITABILITY AND EXPANSION 

For SCA, 1998 was a year of both consolidation and expanded operations. 

The merger during the year of the Group’s hygiene products 

operations in a single business area and the measures taken to 

improve profitability in the corrugated board business were 

significant steps toward greater competitiveness. We also experienced 

a high rate of expansion in the Hygiene Products and 

Packaging business areas both through acquisitions and direct 

investments. Meanwhile, the rationalization of the Graphic 

Paper and industrial forestry operations continued. Product 

development has been assigned an increasingly prominent role 

in all sectors of operations, which has helped to strengthen the 

Group’s market positions. 

International growth was dampened by the financial crises. 

But the impact on SCA’s operations has been limited up to now. 

Our product portfolio provides effective protection against the 

fluctuations that have occurred, primarily in the raw materials 

market. 

The Group’s net sales in 1998 amounted to SEK 61,273 M 

and income after financial items was SEK 5,169 M. The trend 

of earnings was distinctly positive in Packaging and Graphic 

Paper – notably in the case of publication papers. Hygiene 

Products met its yield targets despite pressure on prices in 

European markets. 

The growth in volume for the Group as a whole amounted 

to 8 percent. Growth in the Hygiene Products sector amounted 

to a full 11 percent. The Group’s operating surplus increased 

by 10 percent, exceeding the target figure of a 16-percent margin. 

The cash flow from operations amounted to SEK 4,275 M, 

clearly exceeding the long-term goal of SEK 3,200 M. Expansion 

investments amounted to SEK 5,041 M. 

SCA share 

The SCA share performed much better than the Stockholm 

Stock Exchange’s Forest Index in 1998. 

The long-term trend is shown in the chart on page 4, where 

the annual effective return on an investment in the SCA share 

since 1980 (based on the average share prices for the year) is 

shown for each year. As the chart shows, the return between 

1997 and 1998 was 15 percent. The average return for the entire 

period was 15 percent and the return for the most recent 

five-year period 17 percent. Thus, SCA has created value for its 

shareholders well within the range anticipated in our objectives. 

Increased profitability and expansion 

Our strategy for the Hygiene Products and Packaging business 

areas is to increase the profitability of existing operations and 

to expand through acquisitions. Accordingly, active participa- 

tion in the on-going consolidation of our industry in Europe, 

and expansion in such new markets as Central and Eastern 

Europe, Asia and Latin America have the highest priority. 

A new, integrated operation was created in the hygiene sector 

through the merger of SCA Hygiene Paper and SCA Mölnlycke. 

The new organization gives us better opportunities to 

deal with the competition in Europe since we are better able to 

utilize the effects of synergies in production, distribution, 

product development and marketing. The network of strategic 

facilities that is being built up in the production field in Europe, 

in which each mill is concentrating its production on 

specific products – thereby making it possible to significantly 

improve efficiency – constitutes an important project. In 

Mannheim, we began installation during the year of a completely 

new production line for high-grade tissue to be sold in 

retail outlets under private labels. Production is scheduled to 

start during the summer of 1999. 

The incontinence-care business continues to show strong 

growth in volume. Among other developments, SCA’s positions 

in France and Finland were strengthened through acquisitions. 

Pant diapers for use in incontinence-care were launched in 

Europe. Products for light incontinence were introduced in the 

Italian and Spanish markets. We also began to sell incontinence 

products under our Tena brand in Mexico and a number of 

other Latin American countries. 

The Svetogorsk tissue mill in Russia was acquired and SCA’s 

holding in Productos Familia, the Colombian tissue company, 

was increased to 50 percent. The financial problems that have 

affected these regions are slowing the pace of SCA’s operations 

in the short-term perspective but few observers question the 

strong potential growth in consumption over a somewhat 

longer term. Our operations in these regions are still limited. 

2 percent of our total sales and 4 percent of our capital are in 

Russian, Asian and Latin American markets. 

SCA’s packaging sector has been actively engaged in a program 

to boost profitability in its present business. Briefly 

stated, the program is based on efforts throughout the business 

area to maximize sales margins by focusing on market segments 

with more sophisticated customer requirements, rather 

than by attempting to maximize volumes. In Germany, which 

is SCA’s largest market for packaging, the action program is 

being carried out at the same time that costs are being reduced 

sharply, in part through cutbacks in personnel. 

Meanwhile, SCA Packaging strengthened its positions in 

both Western and Central Europe through acquisitions that increased 

the business area’s sales by SEK 900 M (or 6 percent). 

Just before the end of the year an agreement was reached with

Rexam Plc covering the acquisition of the latter’s packaging 

operations in the corrugated board field. This will strengthen 

SCA’s already leading position in the Great Britain, increasing 

its share of that market from 13 to 21 percent, at the same time 

that attractive new segments are being opened up. The acquisition 

is in line with the strategy of participating actively in consolidation 

of the industry and increasing the Group’s present 

total share of the market in Europe to at least 20 percent. 

The work in SCA’s forest products sector, which includes the 

Graphic Paper and Forest and Timber units, was focused on 

continuing fine-tuning measures. With very limited capital expenditures, 

SCA is implementing improvement and rationalization 

programs that have resulted in a substantial increase in 

earnings in the fine-paper segment, in recapturing the Group’s 

position as the leading producer of SC paper, in continuing 

fine-tuning of LWC paper production, and in sharp improvements 

in operations of our sawmills in Munksund, Tunadal 

and Lugnvik. 

Importance of raw materials 

The proximity to high-grade raw materials – our own forest 

holdings – is a critical factor in all of SCA’s operations. The 

Hygiene Products, Packaging and Graphic Paper business 

areas are extremely dependent on cost-effective production of 

both pulp and paper products. The nearby forest raw material 

is an important element in our cost situation and our emphasis 

on quality. The chart on the next page shows that income 

generated in the Swedish forest products sector is of major 

importance in determining the level of Group earnings. The 

consistent level of earnings in forest products operations are 

striking, while earnings in the paper and pulp operations vary 

sharply from year to year. However, the semifinished products 

from the latter operations are processed in the hygiene and 

packaging business areas. 

SCA’s employees – key to success 

SCA’s strategic focus imposes heavy demands on skilled and involved 

employees in all Group operations. Growth in value in 

the company is ultimately being created by all the employees, 

who should be able to share that growth. In 1998 all employees 

in ten countries were offered an opportunity to subscribe 

for convertible debentures and attached warrants as a way of 

becoming part-owners of SCA. Fortytwo percent of the employees 

– 12,000 persons – subscribed. I consider this to be a 

high percentage in a company like SCA which, as a result of acquisitions, 

is continuously acquiring a large number of employees 

who initially do not often know the company so well. 

Sverker Martin-Löf, 

President and Chief Executive Officer 

A new incentive system that is linked to SCA’s cash-flow requirements 

and growth in value was offered to approximately 

60 executives. The system is based on long-term growth in 

value of SCA shares relative to those of comparable companies, 

and on SCA’s internal cash-flow objectives (see Note 

28). We plan to develop this type of value-based bonus system 

to include all employees at all levels, which I believe will 

stimulate all of us in our daily work. 

SCA – a part of Europe 

Sweden and Swedish industry and commerce need a Swedish 

connection with the European Monetary Union. This is an 

important prerequisite for our continuing investments at 

home. 

The greater part of SCA’s operations and employees are in 

“EMU countries.” For a company whose operations cover 

nearly all of Europe, but which is based in Sweden, Swedish 

membership in the EMU is highly desirable to facilitate trading 

in our shares and to create equal conditions for investors in different 

countries. 

Environment 

The environmental program is a priority, fully integrated part 

of SCA’s operations. This is because our business concept 

places strong emphasis on the closed-cycle principle, which is 

natural since more than 90 percent of the company’s products 

consist of renewable and recyclable materials. Environmental 

considerations are always involved at an early stage of decisions 

pertaining to development of new products or production 

processes. 

SCA is working actively to obtain environmental certification 

of Group operations. Forestry operations were certified 

via the Forest Stewardship Council and ISO 14001. Before the 

end of the year 2000, all of the pulp and paper mills will be environmentally 

certified in accordance with the European and 

international ISO 14001 and EMAS standards. 

Year 2000 problem 

Ensuring that our data processing systems will function in the 

year 2000 has been a priority concern for some time. Our production 

facilities are highly modern and thus contain, in addition 

to EDP systems, a number of computer systems that control 

processes. Using systematic methods and checking programs, 

as well as independent audits, all systems are being 

aligned with the aim of ensuring that they will function during 

the shift to the new millennium. 

3

4 

Cash flow and dividend growth 

Our operations are always keyed to the objective of giving our 

shareholders a competitive return on their investment. The 

strategy for creating growth in value is based on being able to 

use the cash flow from operations for dividends and for profitable 

strategic investments. These investments in turn create a 

growing cash flow that strengthens the base for consistent 

growth in dividends. 

In conjunction with the Board’s strategy review of the 

Group, the Board concluded that the current Group structure 

and earnings capacity supports a somewhat higher dividend 

level in 1998 in relation to reported shareholders’ equity. The 

Board has proposed an increase in the dividend for 1998 of 

13 percent. 

Since the company was listed on the Stockholm Stock Exchange 

in 1950, SCA’s dividend has been raised continuously 

or kept unchanged. Growth in the dividend during the most 

recent five-year period, including the dividend proposed for 

1998, has amounted to 14 percent. The dividend today is equal 

to approximately 4.9 percent of the shareholders’ equity’s 

book value. 

Outlook for 1999 

Development in 1999 is difficult to assess, but the relative 

stability of economic growth in Europe and the US provides 

some cause for optimism. 

Volume growth for SCA products in 1998 was strong while 

price pressure in virtually all areas occurred. Competitive 

pricing was also noted for both raw materials and finished 

products. Raw materials, however, were also affected by surplus 

supply caused by the financial crises in Asia and Latin 

America, while price pressure on finished products was caused 

by low inflation and competition in Europe. 

Prices for hygiene products at year-end 1998 were 1–3 percent 

lower than average prices for the year. Pulp prices also declined, 

which compensated for most effects of lower prices for 

3,000 

2,500 

2,000 

1,500 

1,000 

Importance of forest raw material 

to SCA’s competitiveness (Sweden) 

500 

0 

Operating profit, SEK M 

–500 

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 

Forest raw materials SCA’s production industry 

in Sweden 

The forest operations are of major importance for SCA’s cost situation and quality orientation. 

The stable earnings level of the forest operations over time also offset the more varying earnings of the 

Swedish industry, primarily within Packaging and Graphic Paper. 

finished products during the fourth quarter. Internal programs 

to improve productivity will be intensified in 1999 and are expected 

to gradually improve margins by 2 percentage points 

over the next two years. Demand is expected to remain strong, 

and determined efforts will be made to restore higher prices. 

In the Packaging business area, the prices for corrugated 

board were relatively stable toward year-end but at the beginning 

of 1999 volumes were weaker and prices were under pressure. 

Prices at the beginning of 1999 were 2 percent lower than 

the average in 1998. Prices for both kraftliner and testliner declined 

toward year-end and, in the beginning of 1999, were 

about 5 percent below average prices in 1998. An increase of 

15 percent in the price of kraftliner has been announced by 

North American producers. Conditions for a price increase in 

Europe during the second quarter are considered good. 

Within the Graphic Paper business area, price uncertainty 

prevails. The price situation for SC paper is projected to remain 

stable, while newsprint and LWC are facing price pressure. 

The price of LWC paper in the beginning of 1999 was 

about 3 percent below the average price in 1998. Demand for 

coated fine papers in sheets is strong, but prices in the beginning 

of 1999 were about 5 percent below average prices in 

1998. Pulp prices appear to have hit bottom. 

A number of strategic acquisitions and expansion investments 

were carried out in 1998. These investments will 

generate increased cash flow. Accordingly, the cash flow goal 

for 1999 was adjusted upward to SEK 7.0 billion (operating 

cash flow) and SEK 3.8 billion (cash flow from current operations). 

This is also described in “Business control and financial 

goals” on page 6. 

Stockholm, 19 February 1999 

Sverker Martin-Löf 

President and Chief Executive Officer 

30 

25 

20 

15 

10 

5 

Effective return on the SCA share 

based on time held and average share prices 

% 

0 

1980 

1985 

Average 15 % 

1990 

Average 17 % 

DATE OF ACQUISITION 

1995 

The diagram illustrates the annual effective return, through 1998, based on the date of acquisition of 

the SCA share. For example, if the SCA share was purchased in 1996, the effective return through 

1998 amounted to 25%. Effective return is defined as the share’s appreciation in value and the annual 

dividend being continually reinvested in SCA shares. 

The horizontal lines show that the average over the entire period is 15% and 17% for the past five 

years.

Business concept 

SCA’s business concept is to offer the market high-quality 

hygiene products, corrugated packaging and graphic papers. 

SCA’s customers are private consumers (sales through retail 

outlets), institutions, industry and the retail trade. Based on 

SCA’s knowledge about customer needs and the properties of 

paper materials, products are developed and adapted to meet 

needs in terms of moisture absorption (hygiene products), 

strength (packaging) and quality printing surfaces (graphic 

paper and packaging). 

SCA’s products and services shall provide institutions and 

companies with enhanced product quality, reliability, productivity 

and profitability, while also enhancing the quality of life 

for end-users. 

The business concept is focused strongly on minimizing the 

consumption of natural resources. More than 90% of the company’s 

products consists of renewable and recyclable materials. 

SCA uses equal quantities of recycled fibers and fresh wood 

fibers in production. 

Objectives 

SCA shall further secure its leading position on the European 

market and maximize profitability based on the integrated industrial 

operations and structure. The company will continue 

to expand operations in Eastern and Central Europe and develop 

market positions in Asia and America in such rapid- 

The SCA closed loop 

The illustration is a schematic 

presentation of the focus of SCA’s 

operations on value-added 

products and their role in a 

closed-loop society. 

R 

A 

W 

M 

ATERIALS 

Recycled fiber 

Forest 

Carbon dioxide 

V 

A L 

U 

E 

A 

D 

D 

E 

D 

Recovered paper 

growth areas as tissue, incontinence and feminine hygiene 

products and packaging. 

Strategy 

SCA’s strategy is to pursue active product development , which 

is aligned with customer needs, to increase its range of high 

value-added products to secure a leading market position, particularly 

within the hygiene products and packaging operations. 

This strategy lays the foundation for satisfactory and 

sustained profitability. Demands on SCA’s profitability (also 

see “Business control and financial objectives,” page 6), combined 

with its business concept, form the base of the Group’s 

business strategy. 

A key element in this strategy is SCA’s integrated industrial 

structure which creates competitive advantages such as high 

product quality and low production costs. The structure provides 

valuable synergies, for example, optimal utilization of 

such raw materials as fresh wood fiber and recycled fiber, coordinated 

purchasing of raw materials and energy, joint transport 

solutions and sales channels, the concentration of resources 

in R&D and a holistic view with regard to the environment 

and other issues. 

Hygiene products 

Packaging 

Graphic papers 

Sawn timber products 

Energy recovery 

Trade 

Health care/Institutions 

Trade 

Industries 

Media 

Printers 

Joinery 

Construction industry 

The lower arrow, energy recovery, 

depicts incineration of used wood and paper 

products which generates carbon dioxide that is 

subsequently used in the tree’s photosynthesis 

process, that is, the regrowth of the forest. 

5

6 

Business control and financial goals * 

The Group objective is to provide SCA’s shareholders with good growth in value and a high level of dividends. 

To meet this objective, SCA has developed calculation methods based on cash flows, by means of which the 

earnings capacity and long-term profitability of the business can be evaluated continuously. 

The objective is to give SCA’s shareholders a return on investment 

that is competitive within the forest products industry. 

Up to now, the return on market value of SCA’s shares has been 

set at between 13% and 15% per year over an economic cycle. 

This objective requires that the Company maintains a stable 

and increasing cash flow – high earning capacity – and that it 

be financially stable. The level for the capital return requirement 

varies, however, depending on the long-term trend of 

nominal risk-free interest rates and the Company’s risk profile. 

Nominal interest rates have dropped parallel with declining 

inflation. As a result, the stock market’s yield requirements 

have also been adjusted. To adapt more effectively to varying 

levels of nominal interest rates, the goal for a return on the 

market value of SCA’s shares is now expressed as the sum of 

the long-term risk-free interest rate (at year-end 1998 about 

4%) and a risk premium of 6%. The level of risk premium is 

adapted to the Company-specific risk, calculated in beta values 

(see SCA share data, page 9). If, over an extended period, SCA’s 

beta value deviates significantly from the market average (that 

is, if it deviates significantly from 1.0), the risk premium 

should be changed to a corresponding degree. 

During 1999, SCA will introduce an incentive program that 

reflects the Group’s ambition to provide a good return on SCA 

shares. The program will be fully activated only if the return on 

* See page 73 for definitions of key ratios. 

SCA’s shares exceeds the trend for comparable companies. (See 

Note 28). 

Business control 

SCA uses a method based on cash flow to control the Group’s 

business operations. In accordance with this method, Cash 

Value Added (CVA), each business unit is assigned an annual 

cash flow requirement based on the present value of strategic 

investments, the economic life and the return that each unit 

should generate. Comparable requirements are imposed on 

new strategic investments in acquisitions of companies and 

property, plant and equipment. Under this method, for example, 

a specific investment will not be made if it does not 

meet the requirements. To achieve value-added growth for the 

shareholders, SCA is channeling the expansion of its business 

toward areas that are believed to offer the greatest surplus, 

Cash Value Added. 

In practice this means that SCA is making increased resources 

available to the Hygiene Products and Packaging business 

areas to enable them to expand and make acquisitions. 

Growth in demand for these products in Europe and other 

parts of the world is expected to be favorable during the years 

ahead. 

Key ratios and financial goals 

Key ratios are reported excluding nonrecurring items through 1995. 

The cash flow measurement is reported from the date of the PWA acquisition (1995). 

Average 

Result result Goal/Req. 

1994 1995 1996 1997 1998 5 yrs 1998 1999 

Cash flow 

Operating cash flow (SEK billion) 6.6 5.8 6.5 7.0 6.51 Cash flow from current operations 

6.4 7.0 

(SEK billion) 4.9 4.2 4.9 4.3 4.61 Rates of return 

3.2 3.8 

Capital employed (%) 10 15 11 12 14 12 132 122 Shareholders’ equity (%) 7 16 10 12 13 12 122 112 Financial measurements 3 

Debt/equity ratio (multiple) 0.6 0.8 0.8 0.9 0.8 0.8 0.7 0.7 

Market-adjusted debt/equity 

ratio (multiple) 0.5 0.8 0.7 0.6 0.7 0.7 – – 

Debt payment capacity (%) 32 31 30 33 32 32 35 35 

1 Average value pertains to 1995–98. 

2 Requirement adjusted to current interest and inflation levels. 

3 Net debt includes pension liabilities.

SCA’s Graphic Paper and Forest and Timber business areas 

are ”well invested” today and occupy adequately advanced 

positions in Europe. Accordingly, the cash surpluses from these 

sectors of the Group will for a time be used for strategic investments 

to expand the hygiene products and packaging operations. 

Cash flow and dividend 

Prior to 1999, SCA raised its target for long-term operating 

cash flow from SEK 6.4 billion to SEK 7.0 billion. Of the increase 

amounting to SEK 660 M, SEK 575 M is attributable to 

strategic investments made in 1998 that are designed to increase 

the operating cash flow. The remaining SEK 85 M consists 

of compensation for anticipated inflation. After deduction 

for financial items and tax expenses, the goal for cash flow 

from current operations is SEK 3.8 billion. 

The cash flow from current operations can be used for dividends 

and strategic investments. If, over the long term, the cash 

flow from current operations exceeds the amount that can be 

applied to make profitable strategic investments, the dividend 

portion will be increased. SCA’s long-term ambition for its cash 

flow is to have nominal growth of slightly less than 10% per 

year. 

Risk profile 

The risk profile consists of operating risk and financial risk. 

Operating risk, which consists of variations in SCA’s earning 

capacity, is being reduced through the ongoing rebalancing 

toward a higher percentage of operations that are less sensitive 

to fluctuations in the economy. Financial risk may be expressed 

as the ratio between net debt and the value of shareholders’ 

SCA’s plan for rebalancing the Group 

6 

5 

4 

3 

2 

1 

0 

Cash flow from current operations (SEK billion) 


and Packaging 


equity, for example. The level of net debt is established taking 

into account that SCA’s total risk profile should provide financial 

freedom of action and a favorable negotiating position for 

purposes of borrowing. 

SCA’s net debt, including pension obligations, should 

amount to approximately 0.7 times reported shareholders’ 

equity. However, the market value of shareholders’ equity 

(capitalization value) is higher than book value, which from a 

shareholder’s perspective, results in a lower debt/equity ratio. 

As part of SCA’s focus on cash flow, the interest-coverage 

ratio will no longer be used as a supplementary measurement 

of financial risk. Instead, debt payment capacity (cash earnings 

relative to net debt) will be used to express SCA’s ability to repay 

loans. The objective is that cash earnings should amount to 

at least 35% of net debt. This would mean that it should be 

possible to amortize net debt over a period of three years (assuming 

that no investments are made.) 

Both of these objectives are measured over an economic 

cycle and should be permitted to vary somewhat – in connection 

with major acquisitions, for example. The variation 

should be in the range of 0.7 to 1.0 times the debt/equity ratio 

and should amount to between 30% and 35% of the Group’s 

ability to repay debt. 

Yield requirements 

With the target debt/equity ratio and present levels of interest 

rates and taxes, the calculated yield requirement for 1998 on 

shareholders’ equity amounts to at least 12%, with a corresponding 

requirement of a 13% return on capital employed. 

The requirement for 1999 is 11% on equity and 12% on 

capital employed. SCA intends to exceed these levels. 

Strategic investments within Hygiene Products and Packaging are expected to generate increased cash 

flow in the future. The goal is from 1998 when SCA’s five-year plan for cash flow from current operations 

was determined. 

72% 

28% 

83% 

17% 

Graphic Paper and 


As a result of the strategic investments within Hygiene Products and Packaging, these business areas grow faster than Graphic Paper and Forest and 

Timber in the years ahead. In addition to future cash flows for the Group, the strategic investments result in a distinct rebalancing toward a greater share of 

hygiene products and packaging operations within the SCA Group. 

7

8 

SCA share 

The effective return on the SCA share during 1998 amounted to 2%. Comparing the average prices in 1997 with 

1998, the SCA share price rose 15%. 

Public trading in SCA shares 

Trading in SCA shares is concentrated on the exchanges in 

Stockholm (A and B shares) and London (B shares). In addition, 

there is a Level 1 ADR (American Depositary Receipt) 

program in the US, which was established in 1995. In addition 

to the indexes directly linked to the Stockholm and London exchanges, 

SCA is included in other indexes, such as the Dow Jones 

Global Indexes, FTSE Eurotop 300 and Morgan Stanley 

Company Index Europe (MSCI-Europe). 

In 1998, volume traded in SCA shares on the Stockholm 

Stock exchange was about 76 million shares (69), corresponding 

to a value of SEK 15 billion. The number of shares traded 

corresponded to 39% (35) of the total number of shares at 

year-end. The trading volume on the SEAQ International in 

London was 36 million shares (36) based on available statistics. 

The number of shares traded corresponded to about 18% 

(18) of the total number of shares outstanding at year-end. 

Share trend in 1998 

The price of the SCA B share fell 1% in 1998, which was better 

than the Affärsvärlden Forest Index for the Stockholm Stock 

Exchange (–16%) but lower than the Affärsvärlden General 

Index, which rose by 11%. The FTSE-100 London stock exchange 

index rose by 15%. The last-paid price at year-end 

1998 on the Stockholm Stock Exchange was SEK 177, corresponding 

to a market capitalization of about SEK 35 billion 

virtually unchanged since 1997. 

The SCA share rose sharply during the first four months 

and then fell in conjunction with general decline on stock exchanges 

worldwide. The price recovered somewhat during 

December. 

The lowest price for the B share was SEK 145 on 10 August 

1998, and the highest price was recorded on 17 April at SEK 

237, corresponding to a market capitalization of about SEK 

47 billion. Historically, this was an all-time high for the SCA 

share. 

Net export of SCA shares amounted to SEK 1,114 M, compared 

with net exports of SEK 202 M in 1997 (pertains to 

Jan.–Nov. in both years). Foreign ownership represented 24% 

of shareholders’ equity, an increase of 4 percentage points 

compared with 1997. Foreign ownership interests in SCA have 

more than doubled over the past five years. 

International stock market review 

Change in 1998, % 

Market Index 

Stockholm Affärsvärlden +11 

Helsinki HEX-Index +68 

London FTSE-100 +15 

New York S&P 500 Composite +27 

Paper/Forest index 

Change in 1998, % 

Affärsvärlden Index –16 

HEX-Forest Index +17 

FT Packaging Paper –31 

S&P Paper Forest 0 

ADR program in the US 

In order to make the SCA share more readily available to 

American investors, SCA established a Level 1 ADR Program 

in the US in December, 1995. This means that B shares are 

available as depositary receipts in the US without any formal 

stock exchange registration. These receipts, which are listed in 

US dollars, are regarded as US securities. One ADR corresponds 

to one share. The custody bank is the Bank of New York 

(symbol SVCBY). 

20 

15 

10 

5 

0 

400 

380 

360 

340 

320 

300 

280 

260 

240 

220 

200 

180 

160 

140 

120 

100 

80 

60 

Million shares 

Share trading 

1997 1998 

Stockholm London Source: Stockholm Stock Exchange and London FTSE 

The average turnover in 1998 was 9 million shares per month. 

Price trend 

1992 1993 1994 1995 1996 1997 1998 

Class B share Affärsvärldens 

General Index 

Affärsvärldens 

Forestry Index 

SCA’s B declined 1% during 1998. On 17 April, SCA’s B share was quoted to 

SEK 237, the all-time-high for the share. 

© SIX AB

Data per share 

All earnings figures include nonrecurring items. 

SEK per share unless otherwise noted 

Earnings per share after full tax: 

1998 1997 1996 1995 1994 

After full conversion 17.07 13.98 10.71 17.55 2.94 

Before full conversion 

Quotation for Class B shares: 

17.12 13.98 10.71 17.55 2.86 

Average quotation 190.00 169.20 127.70 125.20 123.80 

Year-end quotation 177.00 178.50 138.50 103.00 116.50 

Cash flow from current operations 1 21.57 24.54 21.30 25.02 5.94 

Dividend 6.502 5.75 5.25 4.75 3.75 

Dividend growth rate, % 3 14 13 11 9 6 

Direct return, % 3.7 3.2 3.8 4.6 3.2 

P/E ratio 4 10 13 13 6 40 

Price/EBIT 5 9 10 11 6 19 

Beta value 6 0.94 0.93 0.95 1.19 1.15 

Pay-out ratio before dilution, % 382 41 49 27 131 

Shareholders’ equity 144 125 116 112 101 

Net worth 

Shareholders’ equity after full conversion 

204 181 165 153 135 

and new subscription 

Net worth after full conversion 

143 125 116 111 99 

and new subscription 

Number of registered shares, 

204 181 165 153 134 

31 December (in million) 

Number of shares after full conversion 

197.4 197.4 197.4 197.4 194.0 

(in million) 198.9 197.6 197.6 197.6 197.7 

1) See definitions of key financial ratios on page 73. 

2) Board proposal. 

3) Five-year rolling total. 

4) Year-end quotation divided by earnings per share after full tax and full conversion. 

5) Market value plus net debt and minority interest divided by operating profit 

(EBIT = earnings before interest and taxes). 

6) Change in share price compared with overall market (based on 48-month rolling total). 

Ten largest shareholders Ownership structure 

According to the Värdepapperscentralen VPC AB (Swedish Securities 

Register Center) official share register for directly-registered and trusteeregistered 

shareholders, as of 30 November 1998, the following companies, 

foundations and mutual funds were the ten largest registered 

shareholders based on voting rights. Approximately 65% (69) of the 

share capital was owned by Swedish institutions and about 24% (20) by 

foreign nominees. 

No. of Interest No. of Interest 

votes % shares % 

AB Industrivärden 182,457,000 24.1 18,369,000 9.3 

AB Custos 152,035,910 20.1 15,203,591 7.7 

SHB* 74,889,600 9.9 10,172,400 5.2 

Fjärde AP-Fonden 44,902,478 5.9 14,480,084 7.3 

SEB 37,657,040 5.0 7,811,447 4.0 

Femte AP-Fonden 29,050,000 3.8 2,950,000 1.5 

Nordbanken 17,012,940 2.2 8,592,108 4.4 

Skandia 15,521,035 2.1 4,825,525 2.4 

SPP 10,802,496 1.4 7,433,238 3.8 

AMF 10,012,980 1.3 8,232,357 4.2 

* Handelsbankens Pensionsstiftelse, Oktogonen, Handelsbankens 

Personalstiftelse, Handelsbankens Fonder. 

Source: VPC AB 

No. of 

No. of share- No. of 

Shareholding shares % holders % votes % 

1–500 6,627,587 3.4 38,030 75.1 18,713,597 2.5 

501–1,000 4,869,740 2.5 6,408 12.7 13,611,548 1.8 

1,001–2,000 4,835,429 2.4 3,305 6.5 14,598,827 1.9 

2,001–5,000 5,660,781 2.9 1,780 3.5 16,312,029 2.2 

5,001–10,000 3,414,044 1.7 467 0.9 8,343,299 1.1 

10,001–20,000 3,314,914 1.7 230 0.5 7,083,844 0.9 

20,001–50,000 4,768,519 2.4 149 0.3 11,711,902 1.5 

50,001–100,000 5,704,820 2.9 83 0.2 10,556,945 1.4 

100,001– 158,204,101 80.1 165 0.3 655,780,864 86.7 

Total 197,399,935 50,617 756,712,855 

Source: VPC AB 

% 

30 

25 

20 

15 

10 

5 

0 

1980 

Effective return on the SCA share 

based on time held 

and average share prices 

1985 

Average 15 % 

1990 

Average 17 % 

DATE OF ACQUISITION 

1995 

The diagram illustrates the annual effective return, through 1998, 

based on the date of acquisition of the SCA share. For example, if the 

SCA share was purchased in 1996, the effective return through 1998 

amounted to 25%. Effective return is defined as the share’s appreciation 

in value and the annual dividend being continually reinvested in 

SCA shares. 

The horizontal lines show that the average over the entire period is 

15% and 17% for the past five years. 

Percent of foreign ownership 

1994 1995 1996 1997 1998 

11% 12% 16% 20% 24% 

During the past five years, foreign ownership in SCA more than doubled. 

9

10 

STRATEGY 

Profitable 

expansion 

Profit maximizing 

in present structure 

Raw material 

supply and sawmill 

operations 

Organization, products and markets 

Germany 

Great Britain 

France 

Sweden 

The Netherlands 

Italy 

Belgium 

US 

Austria 

Denmark 

Spain 

Norway 

Group’s 12 largest markets Net sales by product group 1998 

Net sales 1998, SEK M 

+1% 

+12% 

-6% 

+5% 

+62% 

-20% 

SCA Forest and Timber 

Forest management 

Sawn timber products 

Forest fuel 

SCA’s business concept, strategy and organization are based on vertical integration to capitalize on synergies, from raw materials to end-products, thereby maximizing 

SCA’s earnings in each area of operations and for the Group as a whole. 

-4% 

+8% 

+1% 

+9% 

+4% 

+5% 

0 2,000 4,000 6,000 8,000 10,000 12,000 

SCA’s 12 largest markets in 1998 accounted for 86% of the 

Group’s net sales. 

(Percentage indicates change compared with 1997) 

HYGIENE PRODUCTS PACKAGING 

SCA Hygiene Products 

Tissue products 

Incontinence products 

Feminine hygiene products 

Baby diapers 

GRAPHIC PAPER 

SCA Graphic Paper 

Newsprint, LWC paper, SC paper and pulp 

SCA Fine Paper 

Coated and uncoated fine paper 

SCA Paper Trade 

Merchant operations 


6% 

Fine paper, 

merchanting 

18% 

Woodcontaining 

publication 

papers 

12% 

Liner products, 

external 

deliveries 

5% 

SCA Packaging 

Corrugated board packaging 

Containerboard 

Forest and Timber Raw Materials and Logistics 

SCA Raw Materials and Logistics 

Coordinated purchasing of raw materials, energy and 

transport services 

Recovered paper 

Distribution 

SCA’s hygiene products account for 41% of the 

Group’s net sales. 

Fluff products 

20% 

Tissue 

products 

21% 

Corrugated 

packaging, incl. 

raw materials 

18%

Operations in brief 1998 

Group total 1 

SEK 61,273 M SEK 6,428 M SEK 47,401 M SEK 6,970 M 32,082 

Net sales Operating profit Average capital 

employed 

Operating 

cash flow 

Average number 

of employees 

HYGIENE PRODUCTS Pages 12–17 

Share of 

Group total 

Share of 

Group total 

Share of 

Group total 

Share of 

Group total 

Net sales 

PACKAGING Pages 18–23 

Net sales 

GRAPHIC PAPER Pages 24–27 

Net sales 

Forest and Timber Pages 28–29 

Net sales 

SEK 26,164 M 

43% 

SEK 15,035 M 

25% 

SEK 18,902 M 

31% 

SEK 3,985 M 

7% 





SEK 2.404 M 

37% 

SEK 1,480 M 

23% 

SEK 1,851 M 

29% 

SEK 722 M 

11% 

Capital employed 




Raw Materials and Logistics Page 30 

Coordinated Group purchasing of recycled paper and other raw materials, energy and transport services. 

1 Consolidated net sales does not include intra-Group deliveries. Net sales reported for the business areas include 

intra-Group deliveries, however. The Group totals also cover other operations not included in the business areas. 

SEK 11,625 M 

25% 

SEK 11,499 M 

24% 

SEK 14,705 M 

31% 

SEK 4,984 M 

11% 

Operating cash flow 




SEK 2,407 M 

35% 

SEK 1,778 M 

26% 

SEK 2,119 M 

30% 

SEK 672 M 

10% 


of employees 


of employees 


of employees 


of employees 

13,826 

43% 

9,895 

31% 

5,905 

18% 

1,118 

3% 

11

12 


GLOBAL EXPANSION 

SCA is strengthening its positions in Europe and South America. 

The financial uneasiness throughout the world 

has created opportunities for acquisitions 

with favorable long-term potential. 

Key ratios 1998 

Group 

share % 1997 

Net sales (SEK M) 26,164 43 24,018 

Operating profit (SEK M) 2,404 37 2,567 

Operating margin (%) 

Operating cash 

9 11 

flow (SEK M) 


2,407 35 2,722 

excl. goodwill (SEK M) 11,625 25 11,317 

Return (%) 

Capital expenditures 

(SEK M) 

21 23 

– strategic 1,617 72 352 

– current 604 29 684 

Average no. of employees 13,826 43 14,942 

Production capacities shown on page 75. 

Net No. of 

Net sales and sales, SEK M employees 

number of employees 1998 1997 31 Dec. 1998 

Tissue 

Consumer products 

AFH products 

7,683 

4,472 

6,949 

4,125 } 6,741 

Incontinence products 6,155 

Baby diapers 3,801 

Feminine hygiene products 2,760 

5,679 

3,595 

2,910 } 

2,219 

3,618 

Other 1,293 760 1,503 

Total 26,164 24,018 14,081 

Change 

Deliveries, tons 1998 1997 % 

Tissue 

Consumer products 565,400 485,800 16 

AFH products 251,900 228,200 10 

PRODUCTION FACILITIES 

Tissue 

Production of tissue paper for consumer and institutional 

applications in Austria, Belgium, France, Germany, Great 

Britain, the Netherlands, Philippines, Russia, Spain, 

Sweden and US as well as joint-venture companies in 

Colombia and Ecuador. 


Production of incontinence products for adults in Canada, 

Finland, France, Great Britain, the Netherlands, Sweden 

and US, as well as joint-venture companies in Australia, 

Colombia, Japan and Taiwan. 

Baby diapers and feminine hygiene 

products 

Production of baby diapers and feminine hygiene products 

(sanitary pads, panty liners and tampons) in Finland, 

France, Greece, the Netherlands, Norway, Poland, 

Slovakia and Sweden, as well as joint-venture companies 

in Australia, Colombia, Mexico, South Africa and Tunisia.

The Hygiene Products business area is one of Europe’s leading 

manufacturers of tissue and fluff products for personal 

hygiene and other applications. The tissue products include 

kitchen towels and toilet paper, handkerchiefs and napkins. 

The range also includes tissue for personal hygiene and for 

wiping and cleaning applications in industry, commercial companies, 

hotels, restaurants and institutions – known as the 

Away From Home (AFH) market. The fluff products comprise 

incontinence products, feminine hygiene products and baby 

diapers. The business area’s customer groups consist of the retail 

trade (sales to private consumers), the AFH market and the 

market for incontinence products. 

SCA is continuously launching new products as a means of 

strengthening its competitiveness. To meet market demand, 

SCA sells products under its own brands as well as under 

private labels – retailers’ brands. 

Net sales and operating profit 

Net sales, SEK M 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

94 

95 

96 

Operating profit, SEK M 

3,000 

97 

98 

Operating profit declined to SEK 2,404 M. 

2,500 

2,000 

1,500 

1,000 

500 

0 

SEK M 

3,000 

2,500 

2,000 

1,500 

1,000 

500 

0 

94 

95 

Tork is a complete system of various products for good 

hygiene in public rest rooms and commercial kitchens, 

at work and in public facilities. 


96 

The business area has sales in more than 40 countries, with 

Europe being its principal market. SCA is a world leader in incontinence 

products and is Europe’s second-largest supplier of 

tissue. 

Operating profit for the year declined somewhat to SEK 

2,404 M due to declining product prices, increased costs for 

product launches and research and development. However, net 

sales rose 9%. Operating cash flow amounted to SEK 2.407 M. 

MARKET 

The world market for absorbent hygiene products amounts to 

nearly SEK 400 billion in the production chain, of which 

Europe accounts for one third. 

Sales of tissue and fluff products in Europe amount to approximately 

SEK 65 billion and SEK 55 billion, respectively. 

The growth for tissue products amounts to approximately 3% 

97 

98 

After the acquisition of PWA in 1995, cash 

flow has reached a stable level. 

SEK M 

2,500 

2,000 

1,500 

1,000 

500 

0 


94 95 96 97 98 

Current Strategic 

Depreciation according to plan 

Strategic capital expenditures within the 

prioritized business area Hygiene Products 

have risen sharply. 

13

14 

annually. Among the fluff products, there is a strong 10% 

growth in incontinence products. Sales of baby diapers are 

rising sharply in Central and Eastern Europe, while demand is 

increasing only slightly in Western Europe. The same situation 

applies in the case of feminine hygiene products. 

Such American producers of hygiene products as Procter & 

Gamble and Kimberly-Clark market their products mainly under 

their own brands. Fort James, like SCA, sells its products 

under its own brands and under retailers’ private labels. (See 

diagram on page 17). New, higher-quality products are being 

introduced continuously and constitute an increasingly important 

competitive weapon. 

Up to now the financial uneasiness throughout the world 

has had a limited impact on sales of hygiene products. Demand 

in Russia has declined, however, while markets in Asia and 

South America are relatively unaffected. The growth in sales of 

hygiene products in these less developed markets is expected to 

be substantial in the future. 

Retail trade 

Sales to consumers in Europe of such hygiene products as tissue 

and feminine hygiene items, as well as baby diapers, are 

made to a large extent via retailers. Equal amounts of tissue 

products are sold under the manufacturers’ brands and the 

brands (private labels) of retailers. Private labels account for 

20% of the sales of baby diapers and feminine hygiene products. 

The total retail market is valued at SEK 90 billion. 

Growth is relatively slow, approximately 2% per year. 

A concentration and internationalization is taking place 

among the retail chains. The chains have a growing interest in 

selling high-quality hygiene products under private labels. 

The retail trade outside Europe and the United States is 

more fragmented. Brand name products are showing strong 

growth in these areas. 

Procter & Gamble 

Tissue and fluff products 

Competitors – Europe 

SCA 

Kimberly-Clark 

Fort James 

Johnson & Johnson 

0 5 10 15 20 25 30 

Sales, SEK bn 

Fluff Tissue 

There are a limited number of players in the European fluff and 

tissue industry. 


SCA’s market shares – Europe 

% 

50 

40 

30 

20 

10 

0 

Tissue 

Baby diapers 

AFH market 

The principal items sold in the AFH market are tissue products 

used in industrial and commercial companies, hotels and 

restaurants, health-care institutions and other public establishments. 

These products are distributed via wholesalers and 

service companies or directly to individual customers. The 

market in Europe is valued at approximately SEK 25 billion. 

The growth amounts to approximately 3% per year. 

Hand wiping products, along with toilet paper, are the 

dominant products. The tissue products for hand wiping are 

taking market shares from other drying systems such as those 

employing hot air and textile hand towels. 

Important competitive advantages include offering customers 

a complete concept of installation-ready paper products 

(paper and holder, etc.) along with good service and rapid 

deliveries. 

Market for incontinence products 

Incontinence products used in health care and nursing facilities 

are distributed directly to hospitals and nursing homes, as well 

as via pharmacies or the retail trade, depending on the health 

insurance system in the individual country. The products provide 

protection for light and heavy incontinence. 

Sales in the markets in Western Europe and North America 

amount to approximately SEK 10 billion in each region. The 

growth, on average, amounts to between 8% and 10% per 

year. Growth in regions of Southeast Asia and South America 

is higher. In Western Europe, sales of products for light incontinence 

are being made through more and more channels 

and the annual growth amounts to 20%. The total potential 

throughout the world is substantial, since only 20% of all persons 

who need help are using, or have access to, incontinence 

products. 



SCA strengthened its market position 

within several product areas in Europe. 


Market shares – the world 

Other SCA 

35% 

24% 

Hartmann 

6% 

Kendall 

11% 

SCA has strengthened its position as the 

world’s leading supplier of incontinence 

products. 

Procter & 

Gamble 

12% 


12%

SCA’s STRATEGY AND MARKET POSITION 

Through organic growth and acquisitions, SCA will strengthen 

its position as one of Europe’s leading manufacturers of 

hygiene products. Expansion will take place in such markets as 

Southern Europe, Central and Eastern Europe, as well as in 

Latin America and Southeast Asia, when favorable opportunities 

arise for acquisitions and joint ventures. The goal is to increase 

both sales and cash flow by 12% per year. 

Comprehensive and continuous product development, low 

production costs and the ability to offer the market both SCA 

brands and private labels are key elements in the Group’s 

strategy. The market for AFH and incontinence products is a 

priority customer segment. 

SCA’s average share of the market for hygiene products in 

Europe in 1998 amounted to approximately 20%. SCA has its 

strongest positions in northern and central areas of Western 

Europe. 

Up to now, SCA’s sales in Asia and Latin America have not 

been affected to any larger extent by the financial uneasiness 

throughout the world. Export sales to Russia have declined. 

However, SCA is still in the build-up phase of operations in 

these regions and sales there amount to 4% of total turnover. 

The rationalization of existing mills is continuing and production 

is being concentrated to certain strategic mills. 

A new tissue machine was built during the year in Mannheim 

and will be completed during the summer of 1999. Kitchen 

towel rolls and handkerchiefs will be produced with new 

converting facilities. Production of tissue was also increased in 

Poland, where a converting plant was installed. 

Production capacity was expanded in the Netherlands to 

meet rising demand for SCA’s pant diaper, a product area in 

which the company is a clear market leader. 

5% 


Sales by customer segment 

– Europe 

Other customers* 

– Direct sales 

Other 

customers* 

– Via 

distributors 

14% 

Healthcare 

(incl. via pharmacies) 

20% 

Retail trade 

– Brand names 

37% 

Retail trade 

– Private label 

24% 

* Industry, hotel and restaurant, service companies, public sector. 

Retail trade is the dominant customer segment for 

SCA’s hygiene products in Europe. 

35 

30 

25 

20 

15 

10 

5 

0 

Tissue 

kg/capita 

A large number of new data systems have been developed to 

support daily operations. For example, customers can order 

products directly from SCA via a data connection. SCA has 

also developed a new data system for following up and evaluating 

sales campaigns. 

Annual per capita consumption of hygiene products 


unit/capita 

Sweden 

US 

Western Europe 

Central/Eastern Europe 

Latin America 

Zewa’s Softis is Europe’s 

next highest selling paper 

handkerchief. The tissue is 

extremely soft and the 

packaging can be resealed. 

2,000 

1,500 

1,000 

500 

0 

Baby diapers 

unit/child 0–30 mos. 

Feminine 

hygiene products 

unit/woman 

13–49 yrs. 

Sweden 

US 


Central/Eastern Europe 

Latin America 

Less developed countries consume feminine hygiene products and tissue products first. As living standards rise, 

consumption of baby diapers and incontinence products begin. 

15

16 

Acquisitions 

A number of acquisitions were made during the year in line 

with SCA’s growth strategy for hygiene products. The financial 

uneasiness in the regions where SCA is expanding has created 

favorable opportunities for acquisitions although there is some 

uncertainty about profitability in the immediate future. Viewing 

the situation in a longer perspective, SCA still believes that 

future growth will be strong. 

In Russia, SCA acquired all the shares of Svetogorsk Tissue 

from Tetra-Laval. Svetogorsk Tissue, which is located in the St. 

Petersburg region, has the most modern tissue machine in 

Russia, built in 1989. Its production amounts to approximately 

20,000 tons per year, equal to about 20% of the 

Russian market. The acquisition offers possibilities to produce 

diapers and feminine hygiene products locally. 

In Colombia, SCA increased to 50% its stake in the Productos 

Familia tissue company, which in turn owns the Tecnopapel 

tissue company in Ecuador. Negotiations regarding the 

acquisition of 50% of the Brazilian tissue company Melhoramentos 

Papeis, which was announced in 1998, are as yet not 

completed. 

SCA has also increased its involvement in Asia with the acquisition 

of Holland Pacific Paper, a Philippine tissue company. 

The company currently has the capacity to produce 22,000 

tons of tissue per year, plus capacity for 8,000 tons of specialty 

paper that can be converted to tissue production. The market 

share in the Philippines amounts to 22%. 

In Western Europe, SCA acquired three distributors of 

incontinence products in France whose total sales amount to 

SEK 140 M. SCA is thereby becoming the market leader in 

incontinence products in that country. Operations in the incontinence-product 

field were acquired in Finland. 

Tissue 

Germany 

UK 

France 

Italy 

Spain 

Russia 0% 


Nordic region 

41% 

46% 

46% 

70% 

66% 

63% 

63% 

0 10 20 30 40 50 60 70 80 

Private labels, market shares 

Baby diapers 

Germany 

27% 

UK 

12% 

France 

15% 

Italy 5% 

Spain 10% 

Russia 0% 


30% 

Nordic region 6% 

Retail trade 

With a complete line of toilet and household papers, feminine 

hygiene products, baby diapers, etc., SCA is one of the largest 

suppliers of hygiene products to the European retail trade. 

Based on joint-venture companies, SCA also has favorable 

positions – notably for feminine hygiene products – in more 

than 20 markets in Latin America, Australia and Africa. 

Approximately 60% of SCA’s total sales of hygiene products 

are made via retailers. The products are marketed under 

SCA’s brands and, to a large extent, under retailers’ private 

labels, a segment in which SCA is the largest supplier in 

Europe. 

During the year SCA’s “Zewa” and “Edet” tissue brands 

were coordinated with a common packaging design and 

quality. Toilet paper with two to four layers of tissue with different 

properties were introduced. A new household roll, 

“Wipe and Clean,” was launched in Great Britain. Improvements 

were also made in the quality of tissue products sold 

under private labels. SCA’s share of the market increased considerably 

during the year. 

SCA’s share of the market for baby diapers also increased as 

a result of a number of product introductions. The product 

launches included an improved version of SCA’s Libero brand 

diaper, as well as a new and thinner product sold under private 

labels. 

The feminine hygiene products that are sold under the 

Libresse, Nana and Nuvenia brands were also enhanced with 

a new fitting form and design during the year. 

AFH market 

SCA and Kimberly-Clark are Europe’s largest suppliers of tissue 

products for the AFH market. SCA’s sales comprise toilet 

0 10 20 30 40 50 60 70 80 

Germany 


30% 

UK 

20% 

France 

16% 

Italy 4% 

Spain 

32% 

Russia 0% 


36% 

Nordic region 

26% 

The percentage of private label is increasing throughout Europe for all products. Currently, the share of private label is largest in tissue products. 

0 10 20 30 40 50 60 70 80

paper, paper hand towels, soap with supplementary systems 

for holders, as well as facial tissues and napkins, wash cloths 

and special wiping products for industrial applications. Special 

efforts are being made in the hotel and restaurant segments, as 

well as health care, which are showing strong growth. 

SCA’s full-coverage line of products has been coordinated 

under the Tork brand, resulting in more cost-effective and improved 

penetration of the market. 

New products with improved absorbing properties were 

introduced under the Tork brand during the year. 


SCA is the world’s leading supplier of incontinence products, 

which it markets under the Tena brand. The product line comprises 

all types of products for protection against both light 

and heavy incontinence. The latter products are sold primarily 

for use in institutional and home-care programs, while products 

offering protection against light incontinence are sold 

through pharmacies and the retail trade. 

SCA’s objective is to exceed growth in the market as a whole 

through an increased presence in important markets throughout 

the world and leadership in product development. Tena 

was launched in a number of Latin American countries in the 

retail trade segment during the year and in some European 

countries, including Finland, Belgium, Great Britain, Switzerland 

and Spain. 

In cooperation with Uni-Charm, a Japanese hygiene-products 

company, SCA introduced the concept of using pant 

diapers for incontinence products, which was received very 

favorably by the market. Products providing odor control were 

introduced for light incontinence problems, a segment that is 

growing very rapidly. 

High 

Product 

quality 

Low 

Branded 

products 

100% 

Branded products or private labels 

Hygiene products – Europe 

Procter & Gamble 


SCA 

Fort James 

Others 

Private 

labels 

100% 

SCA’s products sold through retailers are marketed under SCA’s brand and private 

labels. This strategy provides good coverage across the entire retail market. 

SCA is the world’s leading supplier of incontinence products, 

sold under the name Tena. The range includes all types of 

protection, for both light and heavy incontinence . 

17

18 

Packaging 

ACQUISITIONS AND INCREASED PROFITABILITY IN EUROPE 

SCA increased profitability in its European operations 

and acquired packaging companies in Great 

Britain, Denmark and the Czech Republic. 


Group 

share % 1997 

Net sales (SEK M) 15,035 25 14,282 

of which, intra-Group 275 254 

Operating profit (SEK M) 1,480 23 1,196 



10 8 

flow (SEK M) 


1,778 26 1,502 


Return (%) 


(SEK M) 

13 11 

– strategic 512 23 191 

– current 510 25 668 



Net No. of 



Corrugated board 11,614 10,421 8,066 

Containerboard 6,227 6,005 1,815 

Other, incl. intra-Group 

deliveries –2,806 –2,144* 185 

Total 15,035 14,282 10,066 

* Includes Cochis, SEK 743 M. 

Production and deliveries 

Change 

Produced volumes 1998 1997 % 

Corrugated board (m 2) 2,820,500 2,726,700 3 

Kraftliner (tons) 666,000 702,000 –5 

Testliner (tons) 1,502,000 1,539,000 –2 

Change 

Deliveries 1998 1997 % 

Corrugated board (m 2) 2,859,000 2,783,800 3 

Kraftliner (tons) 670,000 689,000 –3 

Testliner/fluting (tons) 1,493,000 1,476,000 1 

of which, intra-Group* 1,448,000 1,461,000 –1 

* pertains to kraftliner/testliner 


Corrugated board 

Production of corrugated board packaging in Belgium, 

Denmark, France, Germany, Great Britain, Hungary, 

Ireland, Italy, the Netherlands, Poland, Sweden and 

Switzerland. Minority holdings in plants in the Czech 

Republic, Portugal, Singapore, Spain and Turkey. 


Production of testliner and kraftliner in Sweden (Obbola 

and Munksund). Production of testliner/fluting in 

Germany (Aschaffenburg and Witzenhausen), Great 

Britain (New Hythe), Italy (Lucca and Castelfranco), the 

Netherlands (De Hoop), Switzerland (Oftringen) and 

minority holdings in plants in Turkey (Izmir).

Industrial packaging, for example for Mercedes Benz, 

is one of the fastest growing packaging segments. 

The Packaging business area is one of Europe’s leading 

manufacturers of corrugated board packaging, with a 14% 

market share. SCA’s 143 production mills and plants in 18 

countries produce 35 million packaging units daily. Europe is 

the main market. 

SCA offers customized packaging solutions, featuring ITbased 

design technology and high printability on the packaging 

as well as local service, close to the customer’s facilities. 

Customers are predominantly food processing companies and 

producers of industrial products and consumer goods. 

SCA Packaging also produces containerboard, in the form 

of kraftliner, testliner and fluting. Containerboard is based on 

fresh wood fiber from the Group’s own forest resources in 

Sweden as well as on recycled fiber from SCA’s recovered paper 

collection organization in Europe. 

Operating profit for the year rose 20% to SEK 1,480 M, attributable 

mainly to price hikes, lower raw material costs and 

productivity improvements. Operating cash flow amounted to 

SEK 1,778 M. 


Net sales, SEK M Operating profit, SEK M 

20,000 

4,000 

15,000 

10,000 

5,000 

0 

94 

95 

96 

97 

98 

Operating profit rose to SEK 1,480 M. 

3,000 

2,000 

1,000 

0 

SEK M 

2,500 

2,000 

1,500 

1,000 

500 

0 


94 

95 

96 

CORRUGATED BOARD 

Market 

The total market for transport packaging is increasing in 

Europe and is valued at SEK 200 billion. Demand principally 

follows economic growth. 

Corrugated board is the predominant packaging material, 

with 60% of the market. Among the various packaging material 

alternatives, corrugated board is gaining ground over 

wooden crates while losing some market share to plastic. 

The Western European market is increasingly influenced by 

major buyers of packaging. The producers of foodstuffs and 

consumer products are also becoming more global, with increasing 

presence in Central and Eastern Europe as well as 

Asia. These customers demand fast and reliable deliveries 

which requires that packaging be produced regionally, near the 

customer’s own facilities. Based on their size, these major buyers 

can all exert pressure on prices. Consequently, low production 

costs are decisive for the profitability of the packaging 

supplier. 

97 

98 

Operating cash flow has risen steadily in 

recent years. 

SEK M 

1,200 

1,000 

800 

600 

400 

200 

0 


94 95 96 97 98 



Strategic capital expenditures in the 

prioritized Packaging business area rose 

sharply. 

19

20 

Buyers demand customized packaging solutions with high 

printability for good graphics presentation on the packaging. 

Among other factors, this is a result of an increasing number of 

goods being displayed for sale in the actual packaging to minimize 

handling. Accordingly, corrugated board with a white 

surface is an important competitive tool. 

The packaging industry in Europe comprises more than 400 

companies. The ten largest producers account for a relatively 

small market share compared with other segments in the paper 

industry. Currently, the industry is undergoing a restructuring 

and consolidation to increase profitability and keep pace with 

the customer trend. 

A number of mergers and acquisitions were carried out 

during the year, including the Jefferson Smurfit’s purchase of 

Stone. International Paper acquired Union Camp and KNP 

BT’s corrugated board operations were taken over by financial 

investors under the name KAPPA. The Swedish company Stora 

merged with Enso of Finland. Although some of these companies 

operate mainly in America, the acquisitions contribute 

Index 

200 

150 

100 

50 


price trend 

93 94 95 96 


Liner/Fluting 

97 

98 

Prices for corrugated board were stable during most 

of the year, despite falling raw material prices. 

to increased consolidation of the European market. SCA 

Packaging also consolidated and expanded operations and is 

one of the few companies that have achieved nearly total pan- 

European coverage. 

As a result of sustained industrial production in Western 

Europe, demand for corrugated board increased during the 

first six months of the year in most European markets. Demand 

weakened slightly during the second half of the year. 

Despite the successive slumps in large parts of Asia and 

Russia, the Central European market was not affected to any 

great extent during the year. Sales of transport packagings continued 

to grow, though at a slower pace. This also applied to 

China which, to date, has not been hit by the financial crisis 

that so many anticipated. 

Prices for corrugated board developed differently in European 

markets in 1998. In total, prices rose in Europe, with the 

exception of Great Britain, where prices were under pressure 

during most of the year. 

Index 

200 

150 

100 

50 


price trend 

93 94 95 

Kraftliner 

Testliner 

96 

97 

98 

The price for kraftliner fell sharply in October 1998. 

The packaging market for beverages and food 

products is less cyclically sensitive than other 

market segments.

SCA’s strategy and market position 

SCA Packaging’s strategy for higher profitability and growth 

focuses mainly on good customer service, lower production 

costs and improved margins. Acquisitions are implemented 

based on a requirement of rapidly obtaining sustainable profitability 

and increased market coverage. 

Among Europe’s large packaging producers, SCA is one of 

the leading companies in the use of advanced IT systems in 

production and customer service. SCA’s customer service was 

enhanced in 1998 with the introduction of a new sales and design 

tool: Midas, which was developed in-house. The system 

integrates an extensive bank of materials, shapes and resistance 

data. It is used by SCA sales personnel in contacts with the customer 

to analyze and reassess all potential types of corrugated 

board packaging. The solutions obtained are then optimized 

by the design team to produce customized packaging intended 

to reduce the customer’s total cost in goods handling. 

A key element in SCA’s customer service is to follow the expansion 

of its large pan-European customers into Central 

Europe and Asia. Efforts to offer more flexible and rapid deliveries, 

for small as well as large orders, include developing 

new routines in close cooperation with customers. Activities in 

this area brought SCA in the UK, for the second consecutive 

year, the double award of “best corrugated supplier” and “best 

packaging supplier” (all types of packaging) in 1998. SCA was 

also recognized in Germany, with two Goldene Welle awards 

for creative packaging design. 

In recent years, SCA has undertaken a number of measures 

to increase profitability in Europe. The productivity of each 

machine is analyzed and measured against comparable units. 

The evaluation was carried out in cooperation with Weyerhaeuser, 

the American forest-industry products company. The 

performance of SCA’s plants was compared with Weyerhaeuser’s 

best in a number of respects. This work has resulted 

in significant productivity gains and higher profitability. This 

Transport packaging 

(types of material) in Europe 

Other 

12% 

Plastic & 

Wood 

24% 

Solid board 

1% 

Corrugated board is the predominant 

packaging material. 


63% 

Total deliveries of 

corrugated board in Europe 

Billion m2 40 

30 

20 

10 

0 

94 

95 

96 

cooperation will also include the Japanese packaging company 

Rengo, beginning in 1999. 


Western Europe is SCA Packaging’s home market. The primarily 

goal is to increase the current market share in Western 

Europe from about 12% to at least 20%. SCA continuously 

monitors possible acquisitions. Existing facilities with low 

profitability will be divested. 

In Great Britain, SCA acquired the corrugated board operations 

of the British company Rexam on 1 January 1999 for 

SEK 2.6 billion. As a result, SCA increased its market share for 

corrugated board in Great Britain from 13% to 21% and in 

Europe from 13% to 14%. Rexam Corrugated has annual 

sales of about SEK 2.7 billion with 29 plants in Great Britain, 

Spain, France and Belgium. The acquisition complements 

SCA’s operations geographically and in terms of market segments. 

Rexam specializes on industrial packaging, high-quality 

printing and microfluting containers as well as heavy-duty 

applications. 

Danapak Papemballage, the third-largest Danish corrugated 

board company, was acquired in January 1999 for 

SEK 636 M. Danapak holds a market share of 17% of one of 

the most consolidated markets in Europe. The company produces 

about 100 million m 2 of corrugated board annually, with 

sales of about SEK 650 M. Danapak’s production is focused on 

high-quality products, including packaging coated to become 

water- and oil-resistant and packaging with good printing surfaces. 

Today, SCA’s has a virtually complete network of plants in 

Western Europe. The earlier acquisitions, in Switzerland 

(Widmer-Walty), Italy (Cochis) and Spain (Lantero), have been 

integrated into SCA’s organization, including common reporting 

and IT systems. 

97 

98 

Deliveries of corrugated board increased by approximately 

5 billion m 2 in the 1994-1998 period. 

Other 

14% 

Sales of corrugated board 

by end-user in Europe 

Industrial 

products 

19% 

Durable 

goods 

19% 

Other nondurable 

goods 

5% 

Food products, 

processed 

17% 

Beverages 

9% 

Fresh food 

products 

17% 

Food packaging in various forms represents almost 

half the end-uses of corrugated board packaging. 

21

22 

Central and Eastern Europe 

SCA’s Polish and Hungarian packaging units, which started 

production in 1997, developed favorably according to plan. In 

order to complete the network of plants covering this region, a 

33% interest in the Obalex packaging company was acquired 

during 1998. Obalex produces corrugated board in the Czech 

Republic and Slovakia. Since privatization in 1993, Obalex has 

steadily grown and presently consists of two integrated box 

plants and six converting plants. Obalex reported sales in 

1997 of SEK 240 M. Annual production of 80 million m 2 of 

corrugated board account for 20% of the market in the Czech 

Republic. The Obalex acquisition complements SCA’s production 

in Austria, Poland and Hungary which, combined, represent 

a key element in SCA’s ability to deliver transport packaging 

products to pan-European customers in the region. 

SCA Packaging is continuing to study other potential acquisitions 

in Central and Eastern Europe in order to further 

complete its network of plants. 

The economic and financial crisis in Russia has not had any 

significant impact to date on SCA’s packaging operations in 

Central and Eastern Europe. 

Asia 

The establishment of operations in China, which SCA began in 

1996 in a joint-venture with Weyerhaeuser, is progressing. 

SCA’s first packaging plant in China was inaugurated in May 

1998. The 35 employees at the plant were trained in Europe 

and the US. Customers include Carlsberg, Akzo-Nobel, Coca- 

Cola and Budweiser. Due to floods in the Wuhan region, construction 

of a second packaging plant has been delayed, but 

work has resumed and is now continuing according to plan for 

opening in 1999. 

At the beginning of 1999, SCA acquired an 11% holding in 

the Singapore-based packaging company Central Package 

Group, with annual sales of about USD 50 M. SCA has the 

possibility to increase ownership to 51% within five years. The 

company produces about 50 million m 2 of corrugated board 

m2 /capita 

150 

120 

90 

60 

30 

0 

Annual per capita 

consumption 


Eastern Europe 

China 

Brazil 

US 

The prosperity and GDP of a country is closely 

linked to the consumption of corrugated board. 

each year, with production in China, Singapore, Malaysia, 

Thailand and Indonesia. Accordingly, it represents an important 

complement to SCA’s existing operations in the region 

with American Weyerhaeuser. 

CONTAINERBOARD 

Market 

The number of containerboard producers is somewhat less 

than corrugated board. The five largest companies hold a relatively 

dominant position on the European market. 

Most companies deliver containerboard to their own packaging 

production but also sell to external corrugated board 

producers. 

White top liners, which provide for a better printing quality 

on the finished packaging, is in increasing demand and is an 

important competitive tool. 

The market for containerboard in Europe and North 

America was affected by the Asian crisis. Demand in Asia declined 

during the year, but was offset by stronger demand in 

Europe. Demand was favorable for kraftliner and testliner 

during the first nine months of the year resulting in rising 

prices. Demand declined somewhat toward year-end concurrent 

with a surplus of containerboard in the U.S. creating price 

pressure on mainly kraftliner in Europe. Demand for testliner 

was stable during the entire period. 


SCA Packaging is one of the market leaders in containerboard 

in Europe, with two kraftliner mills in Sweden and seven testliner 

mills in Europe. Total capacity is 2.4 million tons annually, 

with a market share of 12% in 1998. SCA sells containerboard 

to external customers as well as internally to SCA Packaging’s 

plants. Internal sales are at market prices. 

SCA delivers corrugated packaging 

to Yves Rocher’s sales of 

beauty products which are to 

some extent sold by mail order.

SCA produced 2,168,000 tons of liner in 1998, of which 

1,448,000 tons were used internally. External sales rose during 

the year as a result of the restructuring of SCA’s range of kraftliner 

and testliner grades, combined with improved dissemination 

of information to the customer about the product’s technical 

properties. 

During the year, a number of investments were made in 

SCA’s mills. 

Production at the Widmer-Walty paper mill in Switzerland 

was re-organized to cut costs at the mill. The product range 

was reduced which increased productivity. The new product 

line will include white-top liner “Euroliner White.” SCA will 

also invest in production of white-top liner based on recovered 

paper. 

Jefferson Smurfit 

SCA 

AssiDomän 

KAPPA 

International Paper 

Saica 

David S Smith 

Rossman 

Otor 

Danisco 

SCA produces a full assortment of white and 

brown grades of containerboard. Printability is 

exceptionally good. As a result, bar codes can 

be printed directly on the paper. 



0 1 2 3 4 5 

Billion m 2 

The production line at the New Hythe mill (Aylesford) in 

southern England was rebuilt and the biological water treatment 

process is being rebuilt to enhance environmental performance. 

Paper machines in Sweden (Obbola) and Germany (Witzenhausen) 

were also rebuilt and modernized to increase productivity 

and product quality. 

The Paper Manufacturing System (PMS) computer system 

was incorporated in all European paper mills and sales offices. 

PMS increases service levels by creating conditions for guaranteed 

delivery times and a substantial reduction in lead-times. 

It permits the customer to reduce inventories and working 

capital. 




SCA 

AssiDomän 

KAPPA 

Saica 

David S Smith 

Stora Enso 

Metsä-Serla 

Emin Leydier 

Danisco 

0 500 1,000 1,500 2,000 2,500 3,000 

Thousand metric tons 

Acquisitions and mergers have changed the competitive situation in Europe. Through acquisitions and rationalization, 

SCA has strong and increasingly profitable operations on the European market. 

23

24 

Graphic Paper 

STRONG IMPROVEMENT IN EARNINGS 

Firm demand for all grades of paper increased 

operating profit for the year by 109%. 

Production levels were high. 


Group 

share % 1997 

Net sales (SEK M) 18,902 31 16,562 

of which, intra-Group 1,114 909 

Operating profit (SEK M) 1,851 29 884 



10 5 

flow (SEK M) 


2,119 30 1,109 


Return (%) 


(SEK M) 

13 6 

– strategic – – 69 

– current 768 37 667 

Average no. of employees* 5,905 18 6,051 

* Excluding Transforest. 


Net No. of 



SCA Graphic Paper 10,242 8,838 2,445 

of which, intra-Group 1,278 1,350 

SCA Fine Paper 5,934 5,426 2,118 


SCA Paper Trade 5,272 4,862 1,171 

Other – – 24 

Total 18,902 16,562 5,758 


Produced volumes, Change 

tons 1998 1997 % 

Newsprint* 524,000 499,000 5 

SC paper 320,000 294,000 9 

LWC paper 356,000 334,000 7 

Fine paper 735,500 804,000 –9 

* Including SCA’s share from Aylesford Newsprint Ltd (50%). 

Change 

Deliveries, tons 1998 1997 % 

Newsprint1 530,000 498,000 6 

SC paper 318,000 295,000 8 

LWC paper 351,000 342,000 3 

Fine paper2 813,600 808,000 1 

1 Including SCA’s share from Aylesford Newsprint Ltd (50%). 

2 Including Tatra. 



Production of LWC and SC papers, newsprint and pulp at 

four plants in Sweden, Great Britain and Austria. 


Production of coated and uncoated fine papers and pulp 

at three plants in Sweden, Germany and Austria. 

SCA Paper Trade 

Merchanting of fine papers in Europe.

The Graphic Paper business area is a full-range supplier 

of high-grade, customized publication papers and fine papers, 

primarily to the European market. 

The range of publication papers comprises newsprint, SC 

and LWC papers. The primary applications areas are daily 

newspapers, popular and trade journals, catalogues and advertising 

materials. The production of fine papers comprises 

coated and uncoated grades, mainly in folio for use in magazines, 

other printed matter and advertising materials that require 

high printing quality. The line also includes uncoated fine 

paper for office applications. 

In addition, SCA manufactures pulp that is used mainly to 

produce publication papers and fine papers and which is also 

supplied to the Group’s other business areas for the production 


Net sales, SEK M Operating profit, SEK M 

20,000 

4,000 

15,000 

10,000 

5,000 

0 

94 

95 

96 

97 

98 

Operating profit rose sharply due to improved 

profitability of SCA Graphic Paper 

3,000 

2,000 

1,000 

0 

SCA Graphic Paper focuses on production of 

high-quality publication paper grades and 

prioritizes customers with high demands. 

of tissue and fluff products, as well as corrugated board. 

Operating profit for the year were significantly better than a 

year earlier, rising a full 109% to SEK 1,851 M. The earnings 

improvement is nearly entirely due to increased delivers of 

wood containing publication papers, lower raw material costs 

and improved productivity. Operating cash flow rose to SEK 

2,119 M. 

MARKET 

The market for publication papers in Europe is valued at a 

total of SEK 100 billion. Demand depends on the amount of 

print advertising and the quantity of books and other printed 

materials produced by publishers. 

SEK M 

2,500 

2,000 

1,500 

1,000 

500 

0 


94 

95 

96 

97 

98 

Operating cash flow rose sharply to SEK 

2,119 M. 

25

26 

Demand for publication papers was strong and stable 

during the year. But demand for LWC paper was slightly 

weaker than in 1997. 

A new LWC machine and a newsprint machine – which are 

expected to be in operation in the year 2000 – were announced 

in Europe during the year. The merger of Stora and Enso is 

creating the world’s largest producer of publication papers. 

Although the trend is toward globalization of ownership of 

newsprint producers in particular, the market for publication 

papers is to a large extent regional, with a number of substantial 

producers in each region. 

The market for fine paper in Western Europe amounts to 

SEK 80 billion annually in the production chain. Demand for 

coated fine paper – in both sheets and reels – was firm. Demand 

for uncoated fine paper was largely unchanged from the 

preceding year, while there was a moderate increase in demand 

for A4-size paper. 

No new capacity was announced in the fine-paper field. 

However, earlier investments in new capacity by Enso and 

Sappi reached full capacity during the year, causing pressure on 

prices for fine paper during the second half of 1998. 

SCA’S STRATEGY AND AND MARKET POSITION 


SCA Graphic Paper is focusing production on high grades of 

publication papers and is giving priority to customers with high 

demands. Based on this orientation, and with cost-effective production 

facilities, the business area’s objective is to be one of 

Europe’s three most profitable producers of publication papers. 

Development of new products in cooperation with customers 

has a high priority. A very light LWC paper was developed 

jointly by the Ortviken paper mill in Sweden and 

Time, Inc., the American magazine publisher. Another example 

is the development of the GraphoGrande SC paper – featuring 

exceptionally high brightness, for use in more exclusive magazines 

and catalogues – at the Laakirchen paper mill in Austria. 

SEK M 

2,000 

1,500 

1,000 

500 

0 


94 95 96 97 98 



Current capital expenditures within 

Graphic Paper amounted to SEK 768 M. 

Price trends for newsprint, 

LWC and SC paper 

Index 

220 

180 

140 

100 

60 

93 94 95 96 97 98 

LWC paper 

SC paper 

Newsprint 

Prices were stable for all paper grades in 1998, but 

LWC faced certain price pressure toward year-end. 

SCA’s large nearby forest holdings give the Group control 

over the entire production chain; they have made it possible to 

develop the program involving high-grade LWC paper at the 

Ortviken paper mill, which requires raw material that is no 

more than three weeks old. Improved logistics and fresher 

wood have also created conditions for improving the quality of 

pulp and have facilitated the changeover to totally chlorinefree 

pulp production. Östrand’s pulp has been developed to 

conform with the product mix and product development in the 

Group’s paper mills. 

SCA, together with the Swedish Government and other parties, 

will build a new development center for industrial forestry 

research and training in Sundsvall, Sweden, where SCA will 

also transfer its research activities. The links between research, 

product development and production will thereby be 

strengthened, which will be of major importance for SCA’s 

continuing programs involving high-grade paper products. 

The production of all grades of publication papers in SCA’s 

paper mills in Sweden, Austria and Great Britain set new records. 

Production at the Östrand pulp mill, Sweden, was also 

high. Pulp prices varied during the year but were generally low, 

resulting in unsatisfactory profitability for all producers. 


SCA Fine Paper has centrally located facilities close to the large 

markets in Western and Central Europe. With a substantial 

merchant operation that markets fine papers and specialty 

papers throughout the Continent, SCA Fine Paper occupies a 

strong position in Western and Central Europe. 

A new coated, extra-bulky grade of paper that is being marketed 

to the publishing industry was developed during 1998. 

Another new paper grade was developed for use in printing 

digitally stored images. 

SCA Fine Paper’s shares of the market for coated sheets and 

office papers increased during the year as a result of improved 

product quality and service to customers and large investments 

in marketing and sales. 

Index 

220 

180 

140 

100 

60 

Price trends for 

fine paper and pulp 

93 94 95 96 97 98 

Coated fine paper 

Uncoated fine paper 

Pulp 

Pulp prices fell to the lowest level since mid-1994.

The customer-oriented rationalization and improvement 

program that was begun in 1996 was completed during 1998. 

The annual improvement in earnings has amounted, as planned, 

to approximately DEM 100 M. An independent analysis 

conducted by the ÅF-IPK consulting company showed that the 

mill in Stockstadt, Germany was Europe’s most cost-effective 

producer of coated fine papers in folio format. 

Another efficiency-improvement program, designed to 

maintain the business area’s leading position in commercial 

print papers, was started during the year. When fully implemented, 

the program will increase earnings by another DEM 

50 M annually. The program extends through 1999. 

Stora Enso 

UPM-Kymmene 

Norske Skog 

Haindl 

Metsä-Serla 

SCA 

MoDo 

Burgo 

Sappi 

Bridgewater 

Coated and uncoated fine papers are used for highly 

illustrative books requiring high print quality to display 

the photographs and text in the best possible manner. 

Publication papers 


0 1,000 2,000 3,000 4,000 5,000 6,000 

Thousand tons 

SCA is a full-range supplier of publication papers on 

the European market and prioritizes customers with 

high demands. 

Merchant operations – SCA Paper Trade 

SCA’s merchant operations for printing, office and specialty 

grades of paper were coordinated with the SCA Fine Paper organization 

during the year. SCA Paper Trade is one of Europe’s 

largest paper merchant groups, with annual sales in 1998 of 

560,000 tons. Following the integration with SCA Fine Paper, 

the Paper Trade group members succeeded in strengthening 

their market positions considerably in 15 European countries. 

During 1998, two merchants in Denmark, a Romanian 

paper merchant and a new paper merchant in Turkey became 

members of the group. New operations established earlier in 

Central Europe developed favorably and sales of wood-free 

coated sheets increased from 5,000 to 20,000 tons in two 

years. In view of the anticipated market growth, the goal is to 

double this volume within the next three years. 

Stora Enso 

UPM-Kymmene 

Sappi 

Metsä-Serla 

MoDo 

Burgo 

SCA 

AWA 

International Paper 


Fine papers 


0 500 1,000 1,500 2,000 2,500 3,000 

Thousand tons 

SCA is one of the ten largest fine paper producers in 

Europe, with a focus on high-quality products and increased 

profitability 

27

28 

Raw materials supply 

Strong cash flow for Forest and Timber. 

Major savings within Raw Material and Logistics. 

FOREST AND TIMBER RAW MATERIALS 

AND LOGISTICS 


Group 

share % 1997 

Net sales (SEK M) 3,985 7 4,158 


Operating profit (SEK M) 

of which, capital gains 

722 11 812 

on sales of forest land 32 8 



18 20 

flow (SEK M) 


672 10 791 


Return (%) 


(SEK M) 

15 17 

– strategic 119 5 – 

– current 162 8 118 



Net No. of 



Forestry operations 3,559 3,647 391 


Sawmill operations 1,414 1,583 472 


Other –988 –1,072 73 

Total 3,985 4,158 936 


Change 

Sawn timber 1998 1997 % 

Produced volume, m 3 653,000 750,300 –13 

Deliveries, m 3 672,000 704,300 –5 

Wood consumption, million m 3 fub 1998 1997 

SCA’s Swedish forest products mills 5.75 5.83 

Fellings, million m 3 fub 1998 1997 

On own forest land 3.94 3.78 

As a % of wood consumption 69 65 

Forest value 

(2,3 million hectares, of which 1.8 million 

hectares are productive forest land) 1998 1997 

Book value (SEK M) 4.582 4.570 

Forest land tax assessment 

value (SEK M) 6.779 10.209 

Estimated market value 

after tax (SEK M)* 16.000 15.100 

after tax, per hectare (SEK) 9.100 8.600 

* This value is calculated on the basis of average earnings for 

forest operations (excl. capital gains) in the period 1995–1998 

and an assessment for 1999, capitalized at a real rate of interest 

of 4%. See Note 24, page 61. 


Forestry operations 

Six forest districts, two wood procurement units, a plant 

nursery and forest-fuel service unit. 

Sawmill operations 

Sawmills at Tunadal (Sundsvall), Lugnvik (Kramfors), 

Holmsund (Umeå) and Munksund (Piteå). Marketing 

companies in the Netherlands and Great Britain, as well 

as a partly owned market company in France. 

Price trend for sawn whitewood 

(spruce) and redwood (pine) 

Index 

150 

125 

100 

75 

50 

94 95 96 

Whitewood 

Redwood 

97 

98 

Excess supplies of redwood depressed 

prices during 1998. 

SCA Recycling 

(includes SCA Transport UK) 

Sales: SEK 1,333 M (1,250) of which intra-Group 

SEK 923 M (822). 

Number of employees: 607 at 31 December 1998. 

SCA Transforest 

Sales: SEK 1,358 M (1,206). 


SCA Transport UK 

Sales: SEK 329 M (311). 


Index 

500 

400 

300 

200 

100 

0 

Price trend for 

recovered paper 

94 95 96 97 98 

Old Corrugated Container (OCC) 

News and PAMS 

Stability in recovered paper prices was 

maintained during 1998.

FOREST AND TIMBER 

Forest and Timber generated a continued strong cash flow, mostly based on the holdings of own forest land. 

The sawmill operations were rationalized and the forestry activities were certified in accordance with the FSC 

(Forest Stewardship Council). 

Forest and Timber manages and develops the Group’s 

forest resources, conducts extensive sawmill operations and is 

Europe’s largest supplier of forest fuel. SCA’s plants in Sweden 

are supplied with fresh wood fiber for production of paper, 

packaging and hygiene products. Supplies of fresh wood fiber 

are essential for SCA’s development and production of highquality 

paper products. 

Production by the sawmills is based mainly on timber from 

SCA’s own forests. About 50% of the requirement for the less 

expensive pulpwood and sawmill chips is purchased on the 

open market. 

The business group’s operating profit were 11% lower than 

in 1997, amounting to SEK 722 M, due to sharp price declines 

for sawn timber products. Despite this, operating cash flow 

amounted to SEK 672 M. 

Market 

The market in Western Europe for sawn timber products 

amounts to about SEK 90 billion, or 75 million m 3 annually. 

Volume growth in 1998 was 2%. Major customer groups are 

building products wholesalers and building supplies centers 

(DIY centers) as well as industry and joineries which demand 

increased adaptation and product specialization. 

Competition is intense from alternative construction materials, 

such as plastic. However, wood is gaining favor in the 

construction industry at the expense of steel and concrete. 

The price for sawn timber products fell sharply during the 

year. Saw log prices rose while pulpwood prices fell at the end 

of the year. 


Forest and Timber is a cost-efficient producer in forestry and is 

continuously rationalizing the sawmill operations. Customer 

orientation is important and sawn timber products are increasingly 

being adapted to customer specifications, so-called 

Developed Timber, with regard to such processing as kilning, 

sorting and length dimensioning for the joinery industry or 

Forest and Timber adapts sawn timber products 

to the customer’s needs and end-use. 

processing into consumer products sold by distributors. 

Increased sales and profitability will be achieved through 

further development and adaptation of products as well as 

marketing efforts in selected customer segments with high 

quality demands. 

Scandinavia and the rest of Western Europe are SCA’s main 

markets for sawn timber products. Supplementary markets include 

Greece, North Africa and Japan. Deliveries of Developed 

Timber have increased in Europe and Japan in recent years. 

Planed and cut-to-size components were introduced in the 

Norwegian window industry during 1998. Customer-wrapped 

interior panels were also supplied to building products centers 

in Europe. This type of value-added product was not affected 

by the price decline during the year to the same extent as standard 

wood products. 

The sawmills in Tunadal and Lugnvik were heavily rationalized 

during the year, which will gain full effect in 1999. The investments 

under way at the Munksund sawmill will increase 

efficiency and also feature technical solutions aligned with the 

market’s demand for Developed Timber. 

Currently, SCA has a strong raw material base with a large 

harvest potential from its own forests. This raw material base 

is used mainly to supply SCA’s plants in Sweden. 

Harvesting of own forests is maintained at a high level, but 

within the sustainable growth potential and with consideration 

for the environment and biodiversity. This was confirmed 

through SCA’s forestry operations being certified during 1998 

in accordance with the ISO 14001 and FSC standards in the 

beginning of 1999. The forest fuel operations were also ISO 

14001 certified. 

Efficiency enhancement measures in forestry operations 

continued during the year. These included a new forest administration 

organization which is more aligned with efficient logistics. 

Combined, these efficiency measures and other rationalization 

activities reduced costs in the business group by about 

SEK 35 M. 

29

30 

RAW MATERIALS AND LOGISTICS 

Synergistic effects of joint purchasing have reduced costs by approximately SEK 600 million. 

Raw Materials and Logistics is responsible for exploiting 

and developing synergies between the Hygiene Products, Packaging 

and Graphic Paper business areas. 

Since its inception in 1997, the goal of the Raw Materials 

and Logistics organization has been to reduce costs by SEK 1.2 

billion during a four-year period. After the first two years, cost 

savings total approximately SEK 600 M, of which SEK 500 M 

pertains to 1998. 

Raw Materials and Logistics supervises several project 

groups from different business areas which cooperate via coordinated 

internal networks. These groups exploit synergies resulting 

from purchasing cooperation and reduce the costs of 

purchasing materials, services and equipment. Awareness of 

materials used by the Group increases, which helps ensure that 

products and services purchased are of the proper quality. 

A key aspect of the organization’s strategy is to develop 

close cooperation or partnerships with selected suppliers. By 

working with a limited number of suppliers, SCA will develop 

and improve products and services purchased by the Group. 

In addition to lower costs, coordinated shipments yield 

positive environmental effects through reducing the total number 

of transports. 

Raw materials 

SCA’s annual purchases of pulp, recovered paper, chemicals and 

other materials are valued at approximately SEK 15 billion. 

SCA is one of Europe’s largest consumers of recycled fiber 

and also uses a large proportion of fresh wood fiber in its production. 

It is also the largest player in the European market for 

recovered paper. In addition, SCA’s net purchases of pulp on 

the open market are in the range of 600,000 tons annually. During 

the year, SCA reduced the number of pulp suppliers it deals 

with, which lowered overall costs. 

SCA Recycling supplies the Group with recycled fiber via 

wholly owned collection operations and direct purchases. As 

recycled-fiber supplier to the Group’s various operations, SCA 

Recycling is one of the few companies that recovers a very 

broad range of recovered paper for production of hygiene 

products, packaging and printing paper. 

The company is represented in eight European countries. In 

Total wood Felling Degree of selfconsumption 

own forest sufficiency 

8.3 million m3 3.9 million m3 Of which, Sweden 

47% 

1: 

5.8 million m3 3.9 million m3 68% 

SCA’s degree of self-sufficiency 

Total recycled Own Degree of selffiber 

consumption collection sufficiency 

2.9 million tons2 2.3 million tons2 80% 2 

1998, it handled 3.1 million tons of paper for recycling, corresponding 

to 9% of the European recovered-paper market. As a 

result of its strong market position, SCA can trade within and 

between different markets, which is a great advantage. SCA 

Recycling also plays an important role in the Group’s closedloop 

philosophy, a cornerstone of the SCA business concept 

and the marketing of its products. 

Energy 

SCA is a major purchaser of energy in the European market, 

consuming 15 TWh annually. That amount is equivalent to the 

electricity produced by two nuclear reactors and the total 

natural-gas consumption in Sweden in one year. By means of 

co-generation and other techniques, SCA also produces 

enough energy of its own to meet 50% of its total requirement 

(see further under “Environment,” page 40). 

SCA takes advantage of the deregulation of the European 

electricity and natural-gas market. SCA’s agreements regarding 

energy delivery are being renegotiated in several European 

countries. Nearly all purchasing of electricity for SCA plants in 

Sweden has been renegotiated and the prices indexed to a 

Nordic electricity exchange. In 1999, SCA’s overall energy 

costs are expected to decrease by an additional SEK 150 M 

compared with 1998. 

Transports 

SCA’s land and sea freight operations transport 15 million tons 

of products annually. SCA Transforest is mainly responsible 

for handling these extensive transports between Scandinavia 

and Europe. 

Coordination of transport requirements have reduced costs 

considerably while improving punctuality and service. Earlier 

agreements with suppliers have been renegotiated and better 

planning has reduced the number of transports with less than a 

full load. 

These measures have succeeded in reducing the environmental 

impact of the company’s transports. As of 1998, SCA 

also uses oil with low sulfur content in all ships. Measurements 

of the environmental impact of the transports show that sulfur 

dioxide emissions declined by slightly less than 70%. 

1 Net consumption, less own sawmill chips. 2 Incl. Aylesford. 3 Excl. sales of market pulp. 

Integration of pulp (million tons) 

Total Short-fiber Long-fiber 

Consumption 1.4 0.6 0.8 

Production 0.9 0.3 0.6 

Net3 0.5 0.3 0.2

Human resources 

PERSONNEL PROGRAM FOR VALUE CREATION 

SCA’s employees create the conditions to enhance SCA’s profitability and are given the possibility to benefit from 

the Group’s value appreciation. 

SCA’ s personnel policy 

SCA’s personnel policy is being integrated as a key component 

of SCA strategies. The main objective is to satisfy the Group’s 

need for increased employee know-how, expertise and involvement. 

A significant factor in these efforts is to create incentives 

and understanding for SCA’s profitability requirements, so that 

all employees can support and contribute to SCA’s growth in 

value. 

Part-ownership program and bonus system 

SCA’s financial objectives require the Group to have a stable 

and increasing cash flow, that is, a high earnings capacity. This 

controls the direction of operations and decisions on strategic 

investments. The aim is to enhance SCA’s growth in value. 

Value creation is generated ultimately by SCA’s employees, 

who should also benefit from increased profitability. Accordingly, 

all employees in ten countries were given the opportunity 

during 1998 to invest in combined convertibles/warrants 

programs, thus becoming limited-risk part-owners of SCA. Of 

those who received the offer, 42%, or 12,000 employees, subscribed. 

In countries like Sweden and Germany participation 

exceeded 50%. In total, convertibles/warrants were subscribed 

for approximately SEK 296 M. 

A new incentive system linked to SCA’s cash flow requirement 

and value growth was also introduced for some 60 senior 

executives at Group and business area levels. The system is 

based on the development of the effective return on the SCA 

share within different time periods in relation to competing 

companies and SCA’s internal cash flow objectives. If a bonus 

is awarded, it is paid in shares and cash (see Note 28). SCA 

plans to develop value-based incentive systems for employees 

on all levels. 

Increased know-how and information 

Achieving increased value growth means that employees must 

be well-informed and possess the know-how required to make 

decisions contributing to the fulfillment of SCA’s financial 

objectives. Consequently, SCA has produced a simulation 

model which shows, in a logical and educational manner, how 

FINANCIAL CAPITAL 

HUMAN CAPITAL 

various measures and decisions influence the profitability of 

individual operations and of the Group as a whole. The aim is 

that this model will be used as an educational business game 

throughout SCA’s organization, including SCA’s European and 

national works councils. 

An important element of personnel policy is also to stimulate 

and develop methods for transferring good ideas, experience 

and know-how between SCA’s various operations. The goal is 

to develop an organization in which “learning from one 

another” is the natural way of increasing satisfaction, expertise 

and efficiency at work. To facilitate this process, the internal 

networks within the Group are to be improved and modern information 

technology is to be used to a greater degree to enhance 

capitalization on the synergies existing within the 

Group. 

During the year, the internal information system has also 

been developed, with new in-house newsletters for all business 

areas. The newsletters, which are published in several European 

languages, are yet another component in the effort to improve 

the transfer of know-how and increase the sense of belonging 

within the Group. 

Organization development 

SCA has a high level of ambition with regard to providing 

career development opportunities for its employees. Accordingly, 

SCA develops programs which link individual motivation 

to personal development and SCA’s growing need for increased 

expertise and knowledge. 

All business groups conduct trainee programs to integrate 

new employees into the Group as effectively as possible. Currently, 

nearly 100 persons are participating in various programs. 

SCA’s executive development programs are divided into two 

categories; those intended to support the development of 

younger managers and programs aimed at general leadership 

skills. Certain programs are designed specifically for dealing 

with processes of change related to customer orientation, strategic 

management and group cooperation. See Note 26 for additional 

information about SCA’s personnel. 

STRATEGY 

VALUE 

CREATION 

Well-informed personnel with the proper training and knowledge are one of the most important conditions for SCA’s value-creating strategy. 

31

32 

Research and development 

CUSTOMER-ORIENTED RESEARCH 

SCA continually develops new products to meet customers’ demands. The company’s development work also 

focuses on reducing production costs and minimizing environmental impact. 

SCA’s research concentrates on creating added value by offering 

the customer a better product, increasing recovery of 

materials and energy in production, and increasing the proportion 

of recyclable material in SCA’s products. This focus is a logical 

consequence of SCA’s business concept, which focuses on 

long-term favorable profitability and a closed-loop philosophy. 

To maintain a high degree of recycling, natural by-products 

of pulp manufacturing are collected and incinerated, which in 

turn generates energy that is redirected back into production. 

Moreover, production processes are continually adjusted to increase 

the proportion of renewable resources such as recycled 

paper. 

SCA’s research is customer-oriented. Through market research 

and direct contact with customers, SCA develops new 

improved products that increase the company’s competitiveness. 

This work is often conducted by project groups working 

close to the customer to identity preferences and requirements 

or communicate SCA’s own improvement suggestions. The 

ideas are then evaluated in a technical and commercial perspective 

to assess their feasibility. 

These aims and procedures depend on efficient, marketoriented 

research. For this reason, the organization is projectoriented 

and based on delegation, assigning responsibility to 

carry out development work to all Group functions. The operations 

are spread over four research centers: Sundsvall and 

Diapers are often constructed using so-called super-absorbents 

to increase their absorption capacity. In sanitary pads, however, 

the possibilities for using these substances are limited. 

The development project began when it was discovered that 

a type of pulp manufactured at the Östrand pulp plant in 

Sweden could absorb blood unusually well. Consequently, in 

1993, Östrand – a unit of SCA Graphic Paper – and SCA 

Hygiene Products launched a joint project to develop a new 

absorbent material based on paper pulp. 

Two years of intensive effort, where the material was developed 

further to meet all absorption, comfort and softness 

Gothenburg in Sweden, Aylesford in southern England and 

Mannheim in Germany. SCA employs about 700 persons in research 

and development operations. 

SCA’s research and development operations in Sundsvall 

will be reinforced substantially by the planned new university 

for research in the forest industry, to which SCA will relocate 

its research center. This will create close links between primary 

research, applied research, product development and production. 

New products 

SCA maintains a high level of innovation to continually 

strengthen the company’s competitiveness. On average, SCA 

applies for 60 to 80 patents a year for a new product or production 

process – that is, more than one patent application a 

week. Apart from such applications, SCA launches several 

product innovations. In the pulp and paper field it is more 

common that new production techniques are developed which 

provide for improved products or lower production costs. A 

good example of this is the new low-energy TMP technology. 

Number of patent applications 

1994 1995 1996 1997 1998 

85 67 66 75 77 

The new Efficapt sanitary pad – a joint project of SCA business areas 

standards, as well as environmental requirements, etc., placed 

on sanitary pads, resulted in a prototype of the Libresse Invisible 

pad with Efficapt, as the unique new absorbent material 

was called. The new product was based entirely on renewable 

raw materials. The key in the development process was to 

find just the right fiber distribution that would cause fluids to 

be properly distributed in the pad. 

Following a final phase of investments in new machinery 

for serial production of the sanitary pad, the new product was 

ready to be launched in spring 1997.

Each year, the Hygiene Products business area launches 

several new tissue products, incontinence products, feminine 

hygiene products and baby diapers. The new TAD technique 

has been used in the production of a fuller, softer tissue with 

enhanced absorption capacity. During the year, a new tissue 

machine based on TAD technology was constructed in Mannheim, 

Germany, and it will be ready in summer 1999. 

The packaging operations base essentially their entire operations 

on the total adaptation of every packaging type to customer 

requirements. In containerboard production, the paper 

machine at the mill in Obbola, Sweden, has been rebuilt to produce 

a new, lighter paper with layered coating which features 

the same strength as in previous grades. 

Tissue produced on a TAD machine (fluff drying with hot air) gains a more 

open structure, resulting in improved absorption and softness, compared 

with conventional tissue. 

The Libresse panty line with Efficapt features a distribution of fibers which spreads 

the fluid effectively. The product is based entirely on recyclable materials. 

Graphic Paper often conducts development projects together 

with larger customers. An LWC paper with very low 

surface weight was developed jointly by the Ortviken paper 

mill in Sweden and the American magazine publisher Time, 

Inc. Another example is the development of the SC paper, 

GraphoGrande, at the Laakirchen paper mill in Austria, with 

extra brightness, for exclusive magazines and catalogues. 

There is also considerable innovation in the forest operations, 

where sawn timber products are uniquely processed 

within the Developed Timber concept, and several new techniques 

and procedures are used in forest management and 

nature conservation. 

Tissue produced conventionally has a relatively compressed and thin structure. 

(The illustrations are magnified five times.) 

g/g 

8 

7 

6 

5 

4 

3 

2 

1 

0 

Absorption 

capacity 

Pulp 

Efficapt 

The compressed fiber material Efficapt expands sharply in contact 

with liquids while the fibers simultaneously distribute the liquid in the 

material. This gives Efficapt exceptional absorption capacity. 

33

34 

Information Technology – IT 

CUSTOMER ORIENTATION AND Y2K FOCUS 

SCA is developing new IT solutions that will improve service to both Group customers and the capital market. 

An extensive program will ensure that SCA’s systems will be Y2K compliant. 

Share trading via the SCA website 

The SCA website (www.sca.se) contains information on Group 

operations including links to most business areas. The Group’s 

financial reports are available here, provided by an extensive 

Investor Relations service for shareholders and other elements 

of the capital market. Interim reports and other financial data 

can be obtained in electronic or printed form. Student graduate 

projects as well as vacant positions, are also posted on the SCA 

website. More than three million “hits” were recorded on the 

website during 1998. 

Trading in the SCA share via the Internet and the SCA website 

was launched in 1998. The trading is administrated by asset 

manager Nordnet, for a commission of only 0.08 percent, 

or minimum of SEK 60. The trading setup via the SCA website 

is probably the first of its kind in the world. 

IT security 

The Internet and the SCA intranet are becoming increasingly 

integrated in the Group’s operations. An enormous amount of 

information is exchanged daily, externally and internally. 

Therefore, SCA prioritizes high IT security. During the year, IT 

security at hundreds of Group units has been inspected and 

SCA Packaging’s new IT -based sales and design 

program, Midas, was developed internally within 

SCA. This system makes it possible to develop a 

packaging that is totally adapted to the customer’s 

needs and specifications. 

personnel have been trained. A new and more detailed security 

policy was established, with a focus on security in the SCA 

computer network. The Group has also joined the European 

Security Forum, which develops new and better methods to enhance 

IT security. 

Customer service by IT 

Recently, SCA has invested increasingly more resources in improving 

its marketing and customer service by means of 

modern IT systems. 

SCA has developed systems that improve the Company’s 

cooperation with distributors and customers: Efficient Consumer 

Response systems. These systems enhance the efficiency 

of both goods distribution and handling of the company’s own 

product range. It also allows SCA to follow up and evaluate 

product launches and other marketing activities. 

Moreover, IT and multimedia (Midas, see page 21) systems 

are used in the design of corrugated cardboard packaging, to 

enable SCA and the customer to jointly design the final product 

directly on screen and reduce the cost of the customer’s 

goods handling.

THE YEAR 2000 

The Group’s operations are being protected against Y2K problems 

through a systematic approach and follow-up routines. 

SCA computer systems are considered to be adapted and protected 

in preparation for the new millennium. 

An external audit, focusing on embedded systems, was conducted 

with the help of the authorized company, SIS SAQ. 

Y2K issues have been analyzed within SCA and work is 

being carried out in project groups within each business area. 

Their work is monitored by a follow-up team at the Groupstaff 

level. 

The Y2K program in 1998 

The SCA Y2K program follows a method involving surveying, 

analysis, prioritizing and an action program. Measures have 

been subdivided into actions involving IT systems, imbedded 

systems in production processes and supplier relationships. 

The first systems to be analyzed within the projects were the 

administrative IT systems, such as PC and mainframe software, 

and the accounts systems, and the Y2K programs are 

now either completed or almost complete. During the latter 

part of the year, efforts were concentrated on imbedded systems 

in SCA’s production plants. 

Most of the program items will be completed before mid- 

1999. 

Just as SCA prepares its own systems and product deliveries 

to its customers, it demands corresponding behavior from its 

suppliers. 

Risks associated with the new millennium 

Since SCA’s products do not contain any date-related information, 

they will not create any problems linked to the millennium 

shift. However, despite extensive checks and action programs, 

disturbances could occur in production, which could 

only result in minor effects, possibly delivery delays. 

Consequently, prior to the year 2000, SCA will temporarily 

increase its stores of both finished products and raw materials. 

Deliveries may also be dispatched from alternative SCA production 

units. Extra personnel and consultants will be on hand 

to provide support in case of an operations disruption. 

35

36 

Environment 

CERTIFIED ENVIRONMENTAL ACTIVITIES 

SCA’s forest management is certified through FSC. Prior to the end of the year 2000, all pulp and paper mills 

will be certified in accordance with the European and international standards ISO 14001 and EMAS. 

SCA applies the closed-loop philosophy to its operations and is 

one of the world’s leading users of recycled fibers. However, 

the production of large volumes of products results in emissions 

and consumes energy. For SCA, it is important to reduce 

the emission of substances which may affect the environment 

and to reduce energy consumption as much as possible. 

SCA’s total emissions to water and the air and in the form of 

solid waste are shown in the table below. 

SCA considers it a crucial task to satisfy the demands which 

customers and the international community have with respect 

to the effects on the environment linked to the Group’s production 

processes and products. SCA plays an active role in the 

technical development of more environmentally friendly products 

and processes in various segments of its operations. 

An important aspect of environmental commitment is providing 

open and comprehensive information regarding the 

Group’s operations and measures to reduce impact on the environment. 

This environmental section of the annual report is 

supplemented by a separate environmental report for the 

Group, which is scheduled to be published before summer 

1999. 

Discharges from SCA’s plants 

1,000 tons 

Discharges to air 


NOX as NO2 ................................................................................. 6.3 

SO2 .............................................................................................. 3.9 

CO2 fossil ..................................................................................... 2,520 

CO2 biogenous ............................................................................. 

Discharges to water 

2,899 

COD ............................................................................................. 57.2 

AOX ............................................................................................. 

Landfill 

0.019 

Solid waste ................................................................................... 501 

Byproducts from various energy forms not included. Vehicle transports excluded. 

Environmental policy and strategy 

SCA’s environmental policy: 

• SCA shall assume responsibility for the environment. 

• All decisions must include environmental considerations. 

• Environmental responsibility shall be a natural aspect 

of all operations. 

• Information about SCA’s environmental efforts shall 

be open and freely available. 

• SCA’s environmental initiatives shall be characterized 

by continuous improvement and review. 

• SCA shall meet customer expectations of environmentally 

sound products and actively disseminate 

information aimed at stimulating demand for these 

products. 

SCA’s environmental policy and closed-loop concept 

play a central role in SCA’s environmental strategy. The 

aim is to reduce the utilization of nonrenewable and 

nonrecoverable resources in SCA’s production and distribution, 

both in terms of material and energy. 

The amount of SCA environmental information on the 

Internet increased dramatically during the year. In 1998, nearly 

500 environmental questions were answered via the environmental 

section of SCA’s website. Moreover, news covering 

SCA’s environmental work is presented on the Internet. In addition, 

SCA receives a large number of visitors every year, who 

are shown the environmental aspects of forestry management 

first hand and the inside of SCA’s plants. 

Every year, SCA makes comprehensive investments to protect 

the environment and to reduce energy consumption. 

During the last five years, SCA has invested a total of SEK 

2,500 M to reduce the Group’s emissions into the water and 

the air. Examples of this type of investment are SEK 50 M for a 

biological waste treatment plant at the mill in Obbola, Sweden 

and SEK 95 M for measures to increase process and wastewater 

treatment at the Hallein paper mill in Austria. 

SCA PRODUCTS 

Renewable materials such as wood, wood fiber and recyclable 

fiber comprise 93% of SCA products. The remainder consists 

of oil-based and inorganic material. 

SCA Graphic Paper and SCA Fine Paper use a small percentage 

of inorganic material in the form of clay and marble as 

filler material and coating pigments to satisfy customer demands 

for high paper product quality. The oil-based materials 

are mainly used in high-absorption fluff products to enhance 

quality and functionality. The use of these materials reduces 

product weight and volume, thereby facilitating smaller packaging 

sizes and more efficient transport. 

CERTIFICATION OF OPERATIONS 

SCA’s environmental efforts are a fundamental criteria for customers 

choosing the Group’s products. It is therefore important 

that SCA’s environmental endeavors are verified by a 

third, independent and credible party, which is also able to indicate 

areas where improvements can be made. 

For these reasons, SCA has environmentally certified all 

In 1998, SCA’s environmental efforts were based on 

the following strategic objectives: 

• To increase recovery activities within SCA and thus 

further strengthen its position as a closed-loop company. 

• To maintain the biological diversity of the Group’s 

forests. 

• To consolidate the credibility of the Group’s environmental 

policy by continued implementation of certified 

environmental management systems. 

• To strengthen SCA’s environmental organization and 

to increase environmental information.

forestry operations via ISO 14001 (international standard for 

environmental management systems) and management of its 

own forest holdings via FSC (Forest Stewardship Council) and 

production processes via ISO 14001 or EMAS (the European 

Union’s system for eco-management and environmental audits). 

Having operations certified according to these standards means 

that they are well-documented and that policies, guidelines and 

instructions are applied to practical work consistently. 

There are currently nine SCA plants certified in accordance 

with ISO 14001 and seven in accordance with EMAS. SCA will 

continue the introduction of certified environmental management 

systems at all its pulp and paper mills. A further ten units 

will be certified during 1999. 

FORESTRY 

SCA owns 2.3 million hectares of forest land, of which 1.8 million 

hectares are managed. The forests are situated in northern 

Sweden. These are vital for the supply of wood raw materials 

to SCA operations and guarantee a stable supply of wood raw 

materials with unique qualities. 

Harvesting in the Group’s own forests corresponds to twothirds 

of the wood consumption in SCA’s Swedish industries, 

representing a high degree of self-sufficiency. The forests have 

developed favorably and the total inventory of standing timber 

continues to increase. 

Certification 

SCA’s forestry operations were certified in accordance with 

ISO 14001 and FSC. The FSC certificate was received in 

January 1999. ISO takes into account all aspects of environmental 

work, stipulating the need for continuous improvements. 

Important factors are nature conservation, long-term 

sustainable forestry production and the usage and choice of 

fuel and lubricants in felling operations and transportation. 

FSC has produced international principles and criteria for 

sustainable forest management which take into account ecological, 

social and economic aspects. Sweden is the first country 

in the world to set a national standard through a unique agreement 

between the forest industry, environmental organizations, 

trade unions and the Sami people. The FSC standard 

states that specific objectives should be fulfilled before opera- 

Evaluation of 1998 objectives 

Objective: To develop RMS (Resource Management 

System) into a common management tool for the 

Group’s environmental work. 

Result: A Group-wide reporting system is now in use 

within SCA. 

Objective: To increase knowledge of SCA’s environmental 

efforts through improved communications with 

various interests in society. 

Result: SCA has decided to publish a separate environmental 

report for the Group. During 1998, nearly 

500 questions on environmental issues were answered 

via the environmental section on SCA’s Internet website. 

In addition, various news is presented on the Internet 

covering SCA’s environmental endeavors. 

Objective: Further develop SCA’s monitoring system 

for the control of chemicals. 

Result: Today, chemical management is supervised 

through an electronic network, the SCA product safety 

network. 

tions may be certified. SCA has decided to work in accordance 

with the Swedish FSC standard and to monitor its application 

using ISO 14001. This method has proved successful, since it 

was possible to implement FSC certification without the need 

to make any significant changes in SCA’s environmental efforts. 

Of the total area of FSC-certified forests in the world, 

SCA accounts for 15%. 

Both ISO and FSC certification were carried out by independent 

organizations. 

A felled area of today is far from clear. Border zones towards peatbogs and lakes 

are left and roughly one tree of twenty is left standing, to the benefit of insects and 

woodpeckers. 

New objectives for 1999 

• All of SCA’s pulp and paper mills will be certified in 

accordance with ISO 14001 and/or EMAS before the 

end of the year 2000. During 1999, at least ten units 

will implement certified environmental management 

systems. 

• Increase reuse of waste materials from SCA’s plants. 

• Further develop communications channels to increase 

awareness about SCA’s environmental commitment. 

37

38 

Nature conservation 

SCA’s nature conservation program focuses equally on longterm, 

sustainable forest production and preservation of biological 

diversity. The management of forests is extremely longterm 

and is evaluated in repeated inventories. These inventories 

are used to calculate the future level of harvesting for a 

period of more than 100 years. Within the framework of this 

plan, decisions are made concerning felling for the next ten 

years, which in turn are broken down into annual and quarterly 

plans. 

SCA carries out Ecological Landscape Plans (ELP) for large 

areas of connected land to ensure biodiversity is sustained. 

Forest inventories are supplemented by surveys of areas with 

high levels of nature values. Areas that today have high nature 

values and those which may develop these qualities in the future 

are entirely excepted from harvesting. In the remainder of the 

forest areas, SCA pursues comprehensive nature conservation 

in its forestry operations. SCA invests SEK 75–80 M in nature 

conservation measures within forestry operations each year. 

Information technology (IT) system is becoming increasingly 

important for detailed nature conservation work in forestry. 

Maps of ELP areas are now stored in the GIS (Geographic Information 

System) computer system, designed specially for 

fixed information. Alternatives for felling operations and 

nature conservation measures can thus be analyzed to produce 

a functional and cost-effective balance between production 

and nature conservation. 

In 1999, GIS will be linked to portable field computers 

which will be used for the joint planning of felling operations, 

nature conservation and future silviculture measures in each 

area earmarked for harvesting. Measures for nature conservation 

are marked by the planners during the working process on 

a map that has been loaded into the field computers. Everything 

is done to a high level of precision with the help of the 

field computer’s link to the GPS system – a satellite-based system 

which provides position information. During the summer 

months in 1998, the field computer equipment was tested in all 

forest management districts with positive results. 

250 

200 

150 

100 

50 

Million m 3 

Measured 

Standing timber volume 

Today 

Forecast 

0 

1947 1953 1968 1976 1984 1996 2005 2015 2025 2035 2045 

Standing timber volume in SCA’s forests have increased by 40% during the 

past 50 years. Based on the current forest management strategies and in spite 

of large forest areas being exempted from felling due to nature conservation, 

the increase in standing timber volume is expected to continue. 

PAPER RECYCLING 

SCA is active in efforts to reduce the amount of waste in 

Europe and to recycle valuable materials. For example, corrugated 

containers are used for the production of new packaging 

material; newspapers and magazines are collected and recycled 

into newsprint and magazine paper; and paper from offices 

and printers are to a large extent recycled into new hygiene 

products. 

SCA is Europe’s largest user of recovered fibers. SCA 

Hygiene Products uses recovered paper in the production of 

tissue at plants in Sweden, the Netherlands, Germany, Austria 

and Great Britain. Recovered paper is also used in the SCA 

Graphic Paper business area at the Austrian mill in Laakirchen 

and at Aylesford Newsprint in Great Britain. SCA Packaging’s 

containerboard comprises 79% recycled fiber. 

SCA Raw Materials and Logistics is responsible for the collection 

and sorting of used paper products. In 1998, the consumption 

of recovered fibers within SCA was 3 million tons. 

Through collection operations, the Group fulfills its responsibility 

as a producer and SCA continues to work actively to 

achieve a sustainable closed-loop society. 

The system for the collection of used newspapers, corrugated 

board packaging and other paper products varies 

greatly between the different countries in Europe. 

In the area of packaging, the EU issued a directive in 1994 

to minimize the adverse environmental impact of packaging, 

increase recovery of packaging and to reduce trade barriers. 

The packaging directive was adopted by all member countries, 

but the development of common rules and laws for the member 

countries is progressing slowly and the national directives 

still vary. 

SCA’s packaging operations, which to a very large extent are 

based on recovered paper, exceed the various national objectives 

for recycling. In addition, SCA has one of Europe’s largest 

operations for the recovery of corrugated board packaging. 

Nature consideration 

Lodgepole pine 

Deciduous trees 

Spruce 

Pine 

Environmental consideration in 

final felling operations, 1998 

Tree groups 15% 

Rocky 

ground 9% 

Steep hillsides/ 

ravines 11% 

Waterlogged 

woodlands 16% 

Single trees 11% 

Young stands 3% 

Historical sites 1% 

Other 4% 

Border zones, 

streams/lakes 15% 

Border zones, 

bog 15% 

Within the felled areas, 4.2% (4.0 in 1997) of the timber volume is 

left for nature conservation purposes. Samples show that 72% of 

the fellings during 1997 (88% in 1996) were graded as good or 

excellent. In the most recent survey the demand for nature consideration 

was increased. As a result the data from 1997 and 

1996 are not comparable.

TRANSPORT 

Each year, large quantities of raw materials are transported to 

SCA’s production plants, just as finished products are delivered 

to SCA’s customers. Raw materials are transported over relatively 

short distances, while the delivery of finished products 

are often shipped over longer distances. The majority of SCA 

transportation is procured from external suppliers. 

In selecting a mode of transportation, an assessment is carried 

out to determine which form of transport is best from an 

environmental viewpoint. Important factors include the transport 

distance, type of fuel, the management of loading and unloading 

of the products and the possibility of taking on a return 

load. SCA has carried out a survey of the effects of transport 

on the environment using its internal system for resource 

management, RMS (Resource Management System). 

SCA Raw Materials and Logistics has overall responsibility 

for improving the efficiency of the Group’s transport operations, 

which has led to a series of measures to improve environmental 

care. Among other improvements, the number of empty 

journeys by trucks has declined. SCA is the first paper company 

to decide to equip all its vessels with catalytic converters 

for treatment of exhaust emissions. This measure results in a 

reduction of nitrous-oxide emissions by 90%, corresponding 

to 1,400 tons annually. SCA’s vessels also use low sulfur oil 

which means that sulfur dioxide emissions have declined by 

70% or 1,100 tons annually. 

Distribution of SCA’s transports (tonkm) 

Raw materials and products 

Ship Truck Rail 

70% 22% 8% 

Shipments by sea account for most of SCA’s transports. 

SCA’s ENVIRONMENTAL COUNCIL 

SCA’s environmental policy and strategy are based partly on all 

managers in the Group having an established total view of the 

environment. Employees must feel a sense of responsibility to 

detect and correct adverse effects on the environment and to 

eliminate environmental risks. 

SCA’s Environmental Council, which manages and coordinates 

environmental issues throughout SCA, consists of all the 

Group’s business area managers, or another management representative, 

information officers and technical experts. SCA’s 

Executive Vice President, Corporate Research and Technology, 

is Chairman of the Council. Each business area has its own 

Environmental Council which manages the daily work. Collectively, 

these organizations form a well-functioning network for 

the Group’s environmental endeavors. 

FUTURE COSTS FOR ENVIRONMENTAL DAMAGE 

SCA has inventoried its major industrial operations to determine 

if there is a need for clean-up measures at sites where the 

company has disproved of waste products in the past. The 

inventory disclosed that there is currently no reason to calculate 

on anything more than limited future costs. SCA also 

conducts comprehensive studies focused on the environmental 

impact related to acquired property, plant and equipment. 

39

40 

ENERGY 

The closed-loop concept is also a hallmark of SCA’s energy 

utilization. Production based on timber and wood fiber yields 

various natural byproducts which are increasingly used as biofuel, 

instead of being transported to waste disposal. This has 

led to a reduction in the need for fossil fuel and less transport 

to landfills, which means a reduction in carbon dioxide and 

acidifying exhaust emissions. 

The accompanying energy diagram shows that SCA is a 

large consumer of electricity and fuel. However, in relation to 

volume of production, energy consumption has declined in recent 

years. 

Biofuels account for 42% of the fuels used by SCA. These 

only contain carbon which once was absorbed by plants from 

the carbon dioxide in the air and, accordingly, do not make a 

net contribution to the greenhouse effect. 

Of the total amount of electricity utilized by SCA, 59% is 

procured from the national grid. The balance is generated internally 

and has a high level of efficiency compared with procured 

electrical power. 

Distribution of SCA’s 

consumption of fuel 

(incl. fuel for co-generation) 

Total 73,000 TJ 

Natural gas 

42% 

Oil 

8% 

Coal 

6% 

kWh/ton 

2,500 

2,000 

1,500 

1,000 

500 

Mean value of electricity and fuel consumption 

in various production processes 

Electricity 

Biofuel 

42% 

Electric boilers 

2% 

Priority is given to locally produced and grid-based energy, 

such as biomass, natural gas and electrical power. This reduces 

the amount of transport of oil and coal, which reduces the environment 

load. 

The combined power and heating capacity is well-developed 

at SCA’s pulp and paper mills. A review of the further 

development of efficient co-generation power is being carried 

out, as is a review of the possibilities of increasing the combustion 

capacity of biofuel. SCA works jointly on this kind of project 

with power supply and municipal district heating companies. 

The advantage is that the plants can be built at a lower 

cost and that power production becomes more efficient and 

thus more environmentally-friendly. Production at these large 

plants does, however, exceed SCA’s needs. 

In joint operations with the municipal district heating network 

and the national electric network, SCA delivers 24,000 

m 3 of oil-equivalent heat supplies annually and electrical power 

equivalent to 450 GWh. Heat is recycled from the mills’ 

water systems at a rate of 82%. 

Purchased 

GJ/ton 

20 

0 

0 

95 96 97 98 

95 96 97 98 

1 Excluding fuel for production of electricity 

in co-generation plants. 

Production process: 

Mechanical pulp (including the Laakirchen and Ortviken mills) 

Chemical pulp (including the Mannheim, Stockstadt, Hallein, Östrand and Wifsta mills) 

Recovered fibers (including the Edet, Tilburg, Ortmann, Kostheim, Prudhoe, Aylesford, Aschaffenburg, Widmer- 

Walty, Witzenhausen, New Hythe, De Hoop, Lucca and Castelfranco mills) 

59% 

Distribution of SCA’s 

consumption of electricity 

Total 6.7 TWh 

15 

10 

5 

Fuel 1 

Co-generation 

40% 

Internal 

hydro-power 

1%

Financial risk management 

SCA is exposed to financial risk through its international, competitive and capital-intensive operations. 

The term financial risk is used to denote variations in SCA’s cash flows due to unexpected changes in foreign 

exchange rates and interest rate levels, refinancing and counterparty risks. 

ORGANIZATION AND ACTIVITIES 

SCA’s financial activities are coordinated centrally within the 

subsidiary AB SCA Finans. The activities are centralized to 

capitalize on economies of scale and synergy effects in the 

financial sector. External financial transactions are conducted 

by AB SCA Finans, which also functions as the Group’s inhouse 

bank for financial transactions in foreign currency, 

interest rates and raw materials markets. 

The Group’s financial policy constitutes a framework of 

guidelines and regulations for the management of financial 

risks and financial activities in general. Every business area has 

also formulated its own financial policy in compliance with the 

SCA Group’s general principles. 

CURRENCY RISKS 

Transaction exposure 

Transaction exposure, defined as the commercial currency 

flow, after net calculations of counterflows in the same currencies, 

amounts to SEK 8,517 M annually. The most important 

individual currency relations are SEK against EUR and GBP 

(see table below). 

SCA applies a decentralized approach to management of the 

Group’s transaction exposure, whereby each business area 

selects the most appropriate strategy for its subsidiaries within 

a centrally stipulated framework. A minimum requirement 

calls for the hedging of booked accounts receivable and accounts 

payable. Centrally, there is a mandate to deviate from 

the subsidiaries’ positions within established risk limits. 

During 1998, hedging of a maximum of 7.4 months and a 

minimum of 2.2 months were hedged against SEK. At year-end 

1998, flows representing 7.1 months were hedged, corresponding 

to a volume of SEK 5,100 M. 

Currency exposure 

Transaction Capital Net 

flows employed debt 

Currency SEK M SEK M SEK M 

EUR 1,745 25,626 11,930 

GBP 2,871 7,624 4,610 

USD 677 1,974 1,024 

Others 3,224 1,802 1,051 

SEK –8,517 14,134 2,755 

Total 0 51,160 21,370 

Capital employed, 

geographical distribution 

Region 

Capital 

employed 

SEK M % 

Western Europe 47,743 93 

North America 817 2 

Total 48,560 95 

Central Europe + Russia 1,071 2 

Asia 416 1 

South America 847 2 

Other 266 0 

Total 2,600 5 

Total capital employed 51,160 100 

Foreign assets 

Capital employed in foreign currencies at year-end 1998 

amounted to SEK 37,026 M. The distribution between different 

currencies is shown in the table below. 

In accordance with SCA’s policy for financing foreign assets, 

capital employed should be matched by borrowings and forward 

contracts so that the booked debt/equity ratio is unaffected 

by foreign exchange rate fluctuations. Based on the Group’s 

present currency distribution and debt/equity ratio, about 50% 

of capital employed in foreign assets should be matched. 

On December 31, 1998, foreign assets were financed in 

foreign currencies corresponding to SEK 18,615 M, equivalent 

to a matching ratio of 52%. 

In line with SCA’s growth strategy for the Hygiene Products 

and Packaging business areas, a number of acquisitions and 

investments have been made in regions outside Western Europe 

and North America. Certain countries in these regions are 

characterized by high inflation or other economic instability 

(see “Accounting principles” page 53). Capital employed in 

these markets at year-end 1998 amounted to SEK 2,526 M, 

corresponding to 5% of the Group’s total capital employed. 

The geographic distribution of capital employed is shown in 

the table below. 

Long-term currency sensitivity 

The distribution of SCA’s net sales and operating costs among 

different currencies shows the Group’s long-term currency sensitivity 

(see table below). With the exception of SEK, SCA 

maintains a balance between revenues and expenses in all 

major currencies. 

SCA Group earnings are affected indirectly by foreign 

exchange rate trends for USD, CAD and EUR, since forest 

Net sales and operating expenses 

per currency 

Net Operating 

sales expenses 

DEM 20% 21% 

GBP 17% 14% 

FRF 11% 8% 

SEK 9% 20% 

NLG 7% 7% 

ITL 7% 5% 

USD 6% 5% 

BEF 4% 4% 

ATS 3% 9% 

Others 16% 7% 

Total 100% 100% 

41

42 

industry companies in North America and Finland are major 

exporters. 

Group euro cash-pool structure 

During the first quarter of 1999, a comprehensive cash-pool 

structure will be introduced for Group euro-currency transactions. 

This will reduce the number of international payments, 

thus minimizing float periods and transaction costs. Cash 

management will also be more efficient, since euro liquidity on 

a day-to-day basis will be concentrated in a single account. 

INTEREST-RATE RISKS 

Interest-rate fluctuations have a direct impact on SCA’s consolidated 

earnings due to changes in net interest, but there is 

also an indirect effect as a result of the impact of interest levels 

on the economy as a whole. SCA’s policy is to maintain a short 

fixed interest term, since the company considers that this results 

in lower borrowing costs and a more stable earnings trend 

in the long run. 

Management of the Group’s interest-rate exposure is a centralized 

function. SCA Finans is responsible for identifying and 

managing this exposure. During 1998, the average fixed-interest 

term was approximately seven months. At year-end the 

fixed-interest term was slightly less than six months. 

REFINANCING RISKS AND LIQUIDITY 

At 31 December 1998, gross debt amounted to SEK 25,806 M. 

After deduction for liquid funds, interest-bearing receivables 

and capital investment shares, net debt was SEK 21,370 M. 

Liquidity risk is defined as the risk of being unable to meet 

payment obligations as a result of inadequate liquidity or difficulties 

in obtaining credit from external sources. 

SCA applies a centralized approach to management of 

Group financing. SCA Finans is responsible for external borrowing 

and external investment. 

The aim is that liquid funds and committed credit facilities 

should amount to at least 10% of forecast annual sales for the 

Redemption structure for 

interest-bearing debt 

Year SEK M 

1999 6,629 

2000 1,128 

2001 3,987 

2002 6,803 

2003 6,580 

2004– 679 

Total 25,806 

The average maturity period at year-end was 3 years. 

Group, and that the average maturity for the Group’s gross 

debt should be in excess of three years. 

At year-end, the average maturity was three years. Liquid 

funds and unutilized committed credit facilities amounted to 

SEK 9,403 M at year-end, which corresponded to 15% of 

Group sales in 1998. 

During 1998, the existing SEK 4,000 M in committed credit 

facilities was refinanced by means of a number of bilateral 

transactions. In this connection, the total amount was increased 

to SEK 6,000 M, and the average maturity period was 

prolonged. The counterparties for these credit facilities are 

eight international banks of high repute. 

During the year, framework for SCA Finans’ Swedish commercial 

paper program was increased from SEK 4,000 M to 

SEK 8,000 M. 

In order to reduce the costs of finance for working capital in 

SCA’s Polish operations, a Polish commercial paper program 

was arranged, with a framework totaling PLN 100 M (SEK 

220 M). 

A Swedish Medium Term Note (MTN) program was 

established during 1998 in order to diversify the Group’s 

medium and long-term credit facilities. The MTN program, 

which has a framework total of SEK 2,000 M, permits issues 

with maturities ranging from 1-15 years. During 1998, 

medium-term notes totaling SEK 400 M were issued under 

the MTN program. 

SCA has a long-term rating of A3/A- and a short-term 

rating of P2/A2 from Moody’s and Standard & Poor’s, and a 

short-term Standard & Poor’s K1 rating in Sweden. 

CREDIT RISKS 

Financial risk management exposes SCA to credit risks. This 

exposure arises from lending within the framework of liquidity 

management, and from claims on banks through derivative instruments. 

Special counterparty rules stipulate the maximum 

credit risks allowed against various counterparties. 

Credit exposure in derivative instruments is defined as the 

market value plus an additional amount based on credit risk 

factors which reflect the risk of increased exposure due to foreign 

currency and interest-rate fluctuations. 

SCA employs ISDA Master Agreement which permit net 

calculation of receivables and liabilities in countries where this 

is possible. 

At 31 December 1998, credit exposure in derivative instruments 

amounted to SEK 1,370 M. 

RISK MANAGEMENT AND INSURANCE 

SCA’s Risk Management function (RM) is responsible for financing 

insurable risks in the Group. This is achieved by 

means of Group-wide insurance programs and the use of SCA’s 

own insurance companies, so-called captives. This approach 

provides integration gains and optimization of deductibles, etc. 

at Group level. In addition, the RM function endeavors to ensure 

that risks are eliminated or reduced as a result of continuous 

improvements in the level of loss prevention.

Financial 

review 

Board of Directors’ report 44 

Cash flow statement 46 

Statement of earnings 48 

Balance sheet 50 

Parent Company 52 

Accounting principles 53 

Notes to the financial 

statements 55 

Proposed disposition 

of earnings 68 

Auditor’s report 69 

43

44 

Board of Directors’ report * 

CHANGE IN SCA GROUP STRUCTURE 

In 1997 it was decided to establish a so-called Control Agreement 

between SCA and PWA, to be effective in 1998. The 

Control Agreement creates conditions for implementing 

desired structural changes and facilitates the continuing integration 

of PWA and SCA. The integration measures that continued 

in 1998 included establishment of a common legal organization 

for hygiene-products operations. The packaging 

operations in PWA were also transferred to SCA Packaging. 

During the autumn the name of PWA AG was changed to SCA 

Hygiene Products AG. 

CAPITAL EXPENDITURES AND ACQUISITIONS 

In addition to current capital expenditures of SEK 2,058 M, 

strategic capital expenditures amounting to SEK 2,248 M were 

made during the year, with Hygiene Products accounting for 

SEK 1,617 M and Packaging for SEK 512 M. Projects within 

Hygiene Products include a new tissue machine and converting 

capacity for tissue in Mannheim, Germany, new capacity in the 

incontinence segment and establishment of new production 

technologies for baby diapers. The capital expenditure in 

Mannheim is estimated at SEK 1,400 M and is being carried 

out during the period 1998–2000, with most activity in 1999. 

In the Packaging field, capital expenditures include rebuilding 

and new construction in Obbola, Sweden, and Witzenhausen, 

Germany, as well as new converting technology for corrugated 

board at several production plants. 

SCA’s acquisitions during 1998 and certain acquisition at 

the beginning of 1999 are presented below in the business area 

sections. In total, acquisitions in 1998 amounted to SEK 

2,793 M, including the additional purchase of PWA shares. 

As of 31 December 1998, SCA held 96% of PWA’s shares. 


Early in 1998 the Hygiene Products business area acquired 

Marpo, a Spanish tissue company with annual sales of approximately 

SEK 550 M. The purchase price was approximately 

six times Marpo’s 1997 operating profit. 

In Russia, SCA acquired all the shares of Svetogorsk Tissue 

for approximately SEK 200 M. Svetogorsk Tissue, which is 

located in the St. Petersburg region, has Russia’s most modern 

tissue machine, built in 1989. 

During 1998 the business area increased its holding in 

Productos Familia, a Colombian tissue company, to 50%, 

which in turn acquired all the shares of the Tecnopapel tissue 

company in Ecuador. 

Previously announced plans to acquire a shareholding in the 

Melhoramentos tissue company in Brazil have not yet been 

completed as a result of the financial uncertainty prevailing in 

the country. 

The business area also acquired three retailers of incontinence 

products in France with total annual sales of SEK 

140 M. 

Involvement in Asia was increased through acquisition of 

a Philippine tissue company. The purchase price was SEK 

130 M. 

Packaging 

In the beginning of 1998 the Packaging business area acquired 

a minority interest in the corrugated board operations of the 

Spanish company Lantero. SCA paid SEK 196 M for 25% of 

the share capital and has an option to increase its holding to 

49%. 

The business area will acquire a 49% interest in OBALEX, 

a Czech packaging company with annual sales of SEK 260 M. 

The acquisition is being made in two stages; 33% of the shares 

were acquired in 1998 and the remaining shares, up to 49% of 

the total, are being acquired in 1999. SCA has an option to buy 

the remaining shares. 

In the beginning of 1999 the corrugated board division of 

Rexam Plc was acquired. The purchase price was approximately 

SEK 2,600 M, equal to about 6.5 times the operating 

surplus and about 9 times the operating profit, based on estimated 

results for 1998. The business has sales of approximately 

SEK 2,700 M. The acquisition increases SCA’s share of the 

market for corrugated board in Great Britain from 13% to 

21%, and from 13% to 14% in Europe. 

Danapak Papemballage, the third largest packaging company 

in Denmark, was acquired in January 1999 for SEK 

636 M. The purchase price corresponds to eight times operating 

profit for 1998. Annually, the company produces about 

100 million m 2 of corrugated board and has sales of SEK 

650 M. 

During 1998 the business area acquired all shares outstanding 

in the Widmer-Walty Group in Switzerland. 

In early 1999, SCA acquired an 11% interest in a Singapore-based 

packaging company for SEK 36 M. SCA has the 

possibility of increasing ownership to 51% within five years. 

The company produces about 50 million m 2 of corrugated 

board annually. 

Graphic Paper 

During 1998, Graphic Paper acquired additional shares in 

Laarkirchen AG for SEK 44 M. Currently, compulsory redemption 

is under way of the remaining shares. The remaining 

purchase amount, SEK 54 M, will be paid during the first quarter 

of 1999. 

DIVESTMENTS 

SCA divested the Clinical Products business unit (surgical and 

wound-care products) in the beginning of 1998. The sale 

amounted to approximately SEK 1,500 M, resulting in a 

capital gain of SEK 400 M, which was reported during the first 

quarter of 1998. 

RESTRUCTURING 

The integration of the Group’s tissue and fluff operations is 

continuing. SCA’s plants in the hygiene sector in France are 

* In addition to these pages, the Board of Directors’ report includes the discussions and analyses accompanying the cash flow statement, statement of earnings and balance 

sheet (pages 46, 48 and 50).

now being consolidated. The plan involves closing two plants – 

one producing fluff products (Pontchâteau, with 220 employees) 

and one producing tissue products (Croisset, with 175 

employees). 

The restructuring program announced earlier in the Packaging 

sector is continuing. 

CONVERTIBLE DEBENTURES ISSUED TO EMPLOYEES 

During the year SCA raised a debenture loan through an issue 

to employees of convertible debentures with detachable warrants. 

The program extends over a period of five years. The conversion 

price and subscription price were set at SEK 271. At 

the close of the subscription period 42% of the approximately 

29,000 eligible employees had subscribed for an average of 

about 2.5 lots. Each lot comprises 36 convertible debentures 

and 54 options. The issue of convertibles to employees yielded 

SEK 296 M. 

PENSION LIABILITIES 

Effective in 1999, SCA will report pension liabilities in accordance 

with applicable international accounting recommendations 

(IAS 19, Employee Benefits). This means that SCA’s 

pension liability is calculated taking into account estimated 

future salary increases and inflation. SCA has completed a full 

review and calculations of all pension schemes in the Group. 

Since the reported pension liability covers the calculated 

liability, an adjustment against shareholders’ equity is not necessary. 

Nearly SEK 6 billion of the Group’s total pension liability of 

slightly less than SEK 9 billion is held in pension foundations 

independent of SCA. 

SCA has also decided, effective in 1999, to form a pension 

foundation whose main purpose is to secure the retirement 

pensions of Swedish salaried employees in accordance with the 

ITP plan. 

EFFECTS OF, AND PREPARATIONS FOR, INTRODUCTION OF 

THE EURO 

SCA is being affected directly by the introduction of the euro 

since a relatively large percentage of its business is conducted 

within the EMU area. Some 56% of SCA’s sales take place 

within the EMU area, 17% in Great Britain and 9% in Sweden 

and the Group capital employed is distributed as follows: 50% 

in the EMU region, 28% in Sweden and 15% in Great Britain. 

The analyses show that one of the more important effects 

will be the impact on the price picture that price-setting in a 

single currency will involve. In SCA’s case, this will affect primarily 

its consumer-related products. It is likely that there will be 

a leveling-out of prices between markets. However, the levels 

of taxes on merchandise in different countries and trading margins 

will continue to result in different levels of prices to the 

end consumer for similar products. Prices of the traditional 

forest products are already relatively equal in various markets; 

accordingly, no major effect is anticipated as a result of intro- 

duction of the euro. 

The analyses also show that there will be a harmonizing of 

the product line, which will help to reduce marketing and production 

costs. 

Another important consequence of the EMU pertains to the 

large liquid capital market for the euro that is being created. 

The market for corporate bonds is expected to be much larger 

than it is today. The greater part of SCA’s external financing 

today is in the form of borrowing from the banking sector. 

Accordingly, in the future the Group will be able to finance its 

operations to a greater degree through bond issues. Such issues 

require that companies have favorable long credit ratings, 

which SCA has held for many years. 

SCA will gradually change over to the euro as the reporting 

currency for all subsidiaries within the EMU area. For the time 

being, SCA shares will be listed in kronor on the Stockholm 

Stock Exchange and on the London Stock Exchange. 

In preparation for the changeover to the euro, the consolidated 

statement of earnings and the balance sheets for 

1997 and 1998 have been translated to ECU. The year-end rate 

of 9.47 (8.70) was used in the balance sheet and the average 

rate of 8.93 (8.62) in the statement of earnings. 

YEAR 2000 

The Group’s operations are being protected against Y2K problems 

through a systematic approach and follow-up routines. 

SCA computer systems are considered to be adapted and protected 

in preparation for the new millennium. 

An external audit, focusing on embedded systems was conducted 

with the help of the authorized company, SIS SAQ. 

Year 2000 issues have been analyzed within SCA and work 

is being carried out in project groups within each business 

area. Their work is monitored by a follow-up team at Group 

level. 

OTHER 

The tax authority in Gothenburg has decided not to permit 

SCA to deduct for a capital loss incurred in connection with 

the restructuring of Group operations in France. The decision 

involves a demand for taxes due amounting to approximately 

SEK 370 M, plus additional taxes and other charges totaling 

SEK 100 M. In SCA’s opinion, the decision of the tax authority 

has no legal grounds and it was appealed. Against this background, 

SCA has not made any provision for the tax 

authority’s claim in the 1998 accounts. 

DIVIDEND 

Payment of a dividend of SEK 6.50 (5.75) per share to the 

shareholders, amounting to a total of SEK 1,283 M, is proposed. 

Dividend growth during the most recent five-year 

period, including the dividend proposed for 1998, has 

amounted to 14% per year. 

See also "Proposed disposition of earnings" on page 68. 

45

46 

Cash flow statement 

CONSOLIDATED 

SEK M 1998 1997 

OPERATIONS 

Net sales 61,273 58,595 

Operating expenses –50,953 –49,251 

Operating surplus 10,320 9,344 

Changes in 

– Current receivables –596 –535 

– Inventories 5 –125 

– Operating liabilities –341 127 

Change in working capital –932 –533 

Current capital expenditures –2,058 –2,207 

Change in pension provisions 70 85 

Restructuring expenses –357 –123 

Other operating cash flow changes –73 –53 

OPERATING CASH FLOW 6,970 6,513 

Financial items –1,259 –1,111 

Income taxes paid –1,279 –731 

Other –157 179 

CASH FLOW FROM CURRENT OPERATIONS 4,275 4,850 

STRATEGIC INVESTMENTS 

AND DIVESTMENTS 

Plants –2,248 –983 

Company acquisitions –2,793 –3,431 

Total strategic investments –5,041 –4,414 

Divestments 

Cash flow from strategic investments 

1,111 46 

and divestments –3,930 –4,368 

CASH FLOW BEFORE DIVIDEND 345 482 

Dividend to shareholders –1,145 –1,092 

NET CASH FLOW –800 –610 

NET DEBT 

SEK M 1998 1997 1996 1995 1994 

Net debt, 1 January –19,018 –17,462 –17,566 –10,573 –10,814 

Net cash flow 

New issue of shares through 

–800 –610 87 –8,163 –75 

bond conversions – – – 342 – 

Net debt in acquired operations –325 – – – – 

Currency effects –1,227 –946 17 828 316 

Net debt, 31 December –21,370 –19,018 –17,462 –17,566 –10,573

DISCUSSION AND ANALYSIS, CASH FLOW STATEMENT 

• Operating cash flow amounted to 

SEK 4,275 M. Accordingly, cash flow 

goals for the year were fulfilled. 

• The Group’s strategic investments 

amounted to SEK 5,041 M, of which 

SEK 3,154 M is attributable to 

Hygiene Products and SEK 1,393 M 

to Packaging. 


Operating cash flow amounted to SEK 

6,970 M (6,513). An increase in working 

capital reduced cash flow by SEK 

932 M (533). The increase was due 

mainly to strong volume growth. Current 

capital expenditures amounted to 

SEK 2,058 M (2,207). 


Cash flow from current operations, defined 

as cash flow before strategic investments 

and dividends, amounted to SEK 

4,275 M (4,850), or SEK 21.57 (24.54) 

per share. Cash flow for the year exceeded 

the Group’s long-term goal of 

6,000 

4,000 

2,000 

0 

–2,000 

–4,000 

–6,000 

–8,000 

–10,000 

–12,000 

–14,000 

SEK M 

94 

95 


Divestments 

Cash flow 

96 

Strategic capital expenditures, plants 

Strategic investments, company acquisitions 

97 

98 

Cash flow before dividend 

As a result of a stable cash flow from current operations, cash 

flow before dividends was positive, despite extensive strategic 

investments. 

SEK 3,200 M by a broad margin. The 

short-term objective for the year, which 

totaled SEK 4,900 M, excluding increases 

in working capital, was also 

surpassed. 

Cash flow from strategic investments 

and divestments 

Strategic investments, that is, expansion 

investments and acquisitions, amounted 

to SEK 5,041 M (4,414). Acquisitions 

totaled SEK 2,793 M (3,431), including 

the purchase of additional shares in 

PWA (96% at year-end), redemption of 

minority interests in Laarkirchen, the 

acquisition of the Spanish tissue company 

Marpo and a minority holding 

(25%) in Lantero, a Spanish packaging 

company, the acquisition of a tissue 

company in the Philippines and the Russian 

tissue company Svetogorsk Tissue, 

an increase in SCA’s ownership share in 

Productos Familia of Colombia to 50%, 

the acquisition of 33% of the shares in 

the Czech packaging company Obalex 

and all shares outstanding in Widmer- 

SEK M 

5,000 

4,000 

3,000 

2,000 

1,000 

0 


plants 

94 95 96 97 98 



Capital expenditures in plants, particularly strategic 

investments, rose in 1998. 

Walty Group, a Swiss packaging company. 

Strategic capital expenditures in plant 

and machinery totaled SEK 2,248 M, 

with Hygiene Products accounting for 

SEK 1,617 M and Packaging for SEK 

512 M. Projects within Hygiene Products 

include a new tissue machine and 

converting capacity for tissue in Mannheim, 

Germany, new capacity in the incontinence 

segment and establishment of 

new production technologies for baby 

diapers. Ongoing projects in the Packaging 

business area include rebuilding 

and new construction in Obbola and 

Witzenhausen and a new conversion 

technology for corrugated board at 

several production plants. 

Divestments, which amounted to SEK 

1,111 M (46), consisted mainly of the 

sale of the Clinical Products Division. 

Net debt 

Net debt increased during 1998 and 

amounted at year-end to SEK 21,370 M, 

which is SEK 2,352 M higher than at 

1 January 1998. Of the increase, SEK 

1,227 M is attributed to effects of the 

weaker Swedish krona. 

Analysis of value development 


Net sales 61,273 58,595 

Operating surplus 10,320 9,344 

% of net sales 17 16 

Current capital expenditures –2,058 –2,207 

% of net sales 3 4 

Change in working capital 

Other operating cash flow 

–932 –533 

changes –360 –91 

Operating cash flow 6,970 6,513 

Income taxes paid, etc 1 –1,694 –1,064 

Free cash flow 5,276 5,449 

per share, SEK 26.61 27.57 

Interest paid after taxes 

Cash flow from current 

–1,001 –599 

operations 4,275 4,850 

per share, SEK 

Strategic investments 

21.57 24.54 

and divestments –3,930 –4,368 

per share, SEK –19.82 –22.10 

Cash flow before dividend 345 482 

per share, SEK 1.74 2.44 

1 Tax attributable to operating profit. 

47

48 

Statement of earnings 

CONSOLIDATED 


SEK M ECU M SEK M ECU M 

Net sales 61,273 6,858 58,595 6,794 

Change in inventories 470 53 334 39 

Work performed and capitalized 103 12 65 8 

Other operating revenues 350 39 430 50 

62,196 6,962 59,424 6,891 

Operating expenses Note 1 

Raw materials and consumables –23,354 –2,614 –24,606 –2,853 

Other external costs –13,196 –1,477 –11,729 –1,360 

Personnel costs 

Depreciation of tangible and 

–12,479 –1,397 –12,371 –1,435 

intangible assets Note 2 –4,013 –449 –3,843 –446 

Other operating expenses –2,847 –319 –1,374 –159 

Total operating expenses –55,889 –6,256 –53,923 –6,253 

Share in earnings of associated companies Note 3 121 13 67 8 

OPERATING PROFIT 6,428 719 5,568 646 

Financial items Note 4 

Income from shares and participations 69 8 70 8 

Interest income and similar profit/loss items 211 24 210 24 

Interest expense and similar profit/loss items –1,539 –173 –1,391 –161 

Total financial items –1,259 –141 –1,111 –129 

EARNINGS AFTER FINANCIAL ITEMS 5,169 578 4,457 517 

Taxes on profit for the year Note 5 –1,680 –188 –1,337 –155 

Minority interests Note 6 –110 –12 –361 –42 

NET EARNINGS FOR THE YEAR 3,379 378 2,759 320 

BY BUSINESS AREA 

Net sales Operating profit 

SEK M 1998 1997 1998 1997 

Hygiene Products 26,164 24,018 2,404 2,567 

Packaging 15,035 14,282 1,480 1,196 

Graphic Paper 18,902 16,562 1,851 884 

– Wood-containing publications papers 7,478 6,390 1,334 458 

– Fine papers, paper merchanting, market pulp 11,424 10,172 517 426 

Forest and Timber 3,985 4,158 722 812 

Other operations 1,647 1,862 285 384 

Divested units 144 1,804 3 29 

Intra-Group deliveries –4,604 –4,091 – – 

Goodwill amortization – – –317 –304 

TOTAL 61,273 58,595 6,428 5,568

DISCUSSION AND ANALYSIS, STATEMENT OF EARNINGS 

• Earnings after financial items 

amounted to SEK 5,169 M (4,457), 

up 16% compared with 1997. Excluding 

nonrecurring items, which 

amounted to SEK 400 M (425), earnings 

after financial items improved 

18%. 

• Earnings per share after taxes rose 

22% compared with 1997. 

Net sales 

The Group’s net sales amounted to SEK 

61,273 M (58,595), an increase of 5% 

compared with 1997. Adjusted for divestments, 

the increase was 8%. The improvement 

is attributable to favorable 

effects of higher prices, 1%, a net 

volume increase of 4% and positive 

currency effects of 3%. The value of deliveries 

to customers outside Sweden 

amounted to 91% (90) of net sales. 


Group operating profit improved 15% 

to SEK 6,428 M (5,568). The reported 

operating profit includes capital gains of 

SEK 400 M (425).The 6% decline in 

Hygiene Products was caused by lower 

product prices, increased expenses for 

new product launches and higher research 

and development expenditures. 

Net sales 


(excluding intra-Group deliveries) 

Other operations 

SEK 1,252 M 

2% 

Forest and 

Timber 

SEK 2,347 M 

4% 

Graphic 

Paper 

SEK 17,172 M 

28% 


SEK 25,742 M 

42% 

Packaging 

SEK 14,760 M 

24% 

The Hygiene Products, Packaging and Graphic Paper 

business areas, jointly account for 94% of the Group’s 

net sales. 

Operating profit benefited from the 

strong volume growth, however. Currency 

movements had no effect on operating 

profit. The 24% earnings increase 

in Packaging was based on higher 

prices, lower raw material costs and productivity 

improvements. The earnings 

improvement in wood-containing publication 

papers was based mainly on 

higher prices, but increased volume deliveries, 

lower raw material costs, favorable 

currency movements and productivity 

improvements also contributed to 

the increase. The improvement in earnings 

from fine papers and pulp was attributable 

to higher prices and productivity 

improvements. Deliveries of fine papers 

were unchanged compared with the 

preceding year. Sawmill operations reported 

a sharp decline in earnings compared 

with 1997, due mainly to lower 

prices and higher raw material costs. 

Other operations includes capital 

gains of SEK 400 M on divestment of the 

Clinical Products Division. In 1997, capital 

gains of SEK 425 M were included. 

Earnings after financial items 

Group earnings after financial items rose 

16% to SEK 5,169 M (4,457) compared 

with a year earlier. Excluding nonrecur- 


SEK 722 M 

11% 

Graphic 

Paper 

SEK 1,851 M 

29% 




SEK 2,404 M 

37% 

Packaging 

SEK 1,480 M 

23% 

Combined, the Hygiene Products, Packaging and 

Graphic Paper business areas account for 89% of the 

Group’s operating profit. 

ring items, which amounted to SEK 400 

M (425), the increase was 18%. Foreign 

exchange movements, attributable to 

Graphic Paper’s revenues on exports 

from Sweden, affected earnings positively 

by approximately SEK 270 M. Financial 

items amounted to an expense of 

SEK 1,259 M (1,111). The change is attributable 

mainly to higher net debt. 

Net earnings and income tax 

Net earnings amounted to SEK 3,379 M 

(2,759). Minority interests amounted to 

SEK 110 M (361). Total income taxes 

amounted to SEK 1,680 M (1,337), of 

which current taxes were SEK 920 M 

(688), changes in deferred taxes SEK 

726 M (619) and taxes attributable to 

share in earnings of associated companies 

SEK 34 M (30). The tax rate was 

33% (30). 

Key ratios 

Return on capital employed before taxes 

was 14% (12). Return on shareholders’ 

equity after taxes was 13% (12). Earnings 

per share after full tax and full dilution 

was SEK 17.07 (13.98).The interest 

coverage ratio was 5.1 (5.0). 

Definitions of key ratios, see page 73. 

Return on capital employed 

and shareholders’ equity 

% 

25 

20 

15 

10 

5 

0 

94 95 96 97 98 

Capital employed before tax 

Shareholders’ equity after tax 

Return on capital employed before taxes rose to 14% 

and return on shareholders’ equity after taxes to 13%. 

49

50 

Balance sheet 

CONSOLIDATED 

ASSETS 

31 Dec. 1998 31 Dec. 1997 

SEK M ECU M SEK M ECU M 

FIXED ASSETS 

Intangible assets Note 7 

Goodwill 6,134 648 5,083 584 

Patents, trademarks and similar rights 1,021 108 1,095 126 

7,155 756 6,178 710 

Tangible assets Note 8 

Buildings and land 18,838 1,989 17,693 2,034 

Machinery and equipment 26,427 2,791 24,916 2,864 

Construction in progress 1,547 163 569 65 

46,812 4,943 43,178 4,963 

Financial assets 

Shares and participations Note 9, 10 1,022 108 870 100 

Other long-term receivables 158 17 125 14 

Capital investment shares Note 9, 11 1,112 117 1,112 128 

Interest-bearing receivables 373 39 258 29 

2,665 281 2,365 271 

Total fixed assets 56,632 5,980 51,721 5,944 

CURRENT ASSETS 

Inventories Note 12 6,157 650 5,780 664 

Accounts receivable 10,043 1,061 9,006 1,035 

Other current receivables Note 13 2,590 273 1,940 223 

Short-term investments 1,132 120 676 78 

Cash and bank balances 1,819 192 1,582 182 

Total current assets 21,741 2,296 18,984 2,182 

TOTAL ASSETS 78,373 8,276 70,705 8,126 

EQUITY, PROVISIONS AND LIABILITIES 

SHAREHOLDERS’ EQUITY 

Nondistributable equity 

Note 15 

Share capital 1,974 208 1,974 227 

Restricted reserves 11,787 1,245 11,426 1,313 

Distributable equity 

13,761 1,453 13,400 1,540 

Retained earnings 11,264 1,168 8,494 973 

Net earnings for the year 3,379 378 2,759 320 

14,643 1,546 11,253 1,293 

Total shareholders’ equity 28,404 2,999 24,653 2,833 

MINORITY INTEREST 1,386 146 1,496 172 

PROVISIONS 

Provisions for pensions Note 16 3,386 358 3,237 372 

Provisions for taxes Note 17 6,353 671 5,450 626 

Other provisions Note 18 1,167 123 1,765 203 

Total provisions 10,906 1,152 10,452 1,201 

LIABILITIES 

Interest-bearing debt Note 19 25,806 2,725 22,647 2,603 

Accounts payable 6,330 669 5,884 676 

Other interest-free liabilities Note 20 5,541 585 5,573 641 

Total liabilities 37,677 3,978 34,104 3,920 

TOTAL EQUITY, PROVISIONS 

AND LIABILITIES 78,373 8,276 70,705 8,126 

CONTINGENT LIABILITIES Note 21 460 484 

ASSETS PLEDGED Note 22 1,454 1,291

DISCUSSION AND ANALYSIS, BALANCE SHEET 

Assets and capital employed 

The Group’s assets increased by about 

SEK 7,700 M during 1998. The increase 

is due largely to acquisitions, that operations 

tied-up more working capital and 

exchange rate differences due to the 

weakening of the Swedish krona. 

Capital expenditures in properties 

and plants amounted to SEK 4,306 M 

(3,190). These included SEK 2,248 M 

(983) in strategic capital expenditures 

that is, major expansions and transition 

to new technologies. The balance, SEK 

2,058 M (2,207) is attributable to current 

capital expenditures. 

The value in SEK of the Group’s 

foreign net assets amounted at year-end 

to SEK 27,456 M (22,439). Capital 

employed rose SEK 5,993 M to SEK 

51,160 M. SCA’s assets in countries with 

high inflation or other economic instability 

are reported in local currencies 

for monetary assets and liabilities and in 

the region’s functional currency (USD or 

EUR) for nonmonetary assets. Monetary 

assets are financed to the greatest possible 

degree with loans in local currencies 

while other assets are financed with 

loans in USD or EUR or with shareholders’ 

equity. In this manner, these 

assets are, for accounting purposes, 

multiple 

1.0 

0.8 

0.6 

0.4 

0.2 

0.0 

Debt/equity ratio 

94 

95 

96 

97 

98 

In principle, debt/equity ratio was unchanged 

compared with a year earlier. 

SEK M 

3,000 

2,500 

2,000 

1,500 

1,000 

500 

unaffected by exchange rate movements 

in accordance with the principles applied 

for other foreign assets in the Group (see 

“Accounting principles” on page 53). 

The distribution by currency is shown 

below. 

Capital employed by currency 

SEK M 31 Dec. 1998 % 31 Dec. 1997 % 

SEK 14,134 28 13,578 30 

DEM 8,913 17 7,312 16 

GBP 7,624 15 7,661 17 

NLG 5,049 10 4,306 10 

ATS 4,583 9 4,112 9 

ITL 2,880 6 2,259 5 

FRF 2,011 4 1,900 4 

USD 1,974 4 856 2 

BEF 1,080 2 1,191 3 

ESP 1,009 2 110 0 

CHF 612 1 82 0 

Others 1,291 2 1,800 4 

Total 51,160 100 45,167 100 

Financing 

SCA’s gross debt amounted to SEK 

25,806 M (22,647) at 31 December, 

1998. The average term of SCA’s gross 

debt was 3 years. Liquid funds and unutilized 

committed credits amounted at 

31 December 1998 to SEK 9,403 M, 

which corresponds to 15% of net sales. 

Net debt amounted to SEK 21,370 M 

at 31 December 1998, up SEK 2,352 M. 


by business area 

94 

95 

96 

97 

Hygiene Products Graphic Paper 

Packaging Forest and Timber 

The even operating cash flow in the forestry operations provides a stable platform 

for the more fluctuating cash flows from hygiene products and packaging 

as well as Graphic Paper. 

98 

Currency effects accounted for SEK 

1,227 M of the increase. Minority interests 

amounted at 31 December 1998 to 

SEK 1,386 M (1,496). The decline is attributable 

to the additional acquisition 

of shares in PWA. 

Shareholders’ equity 

Shareholders’ equity increased during 

1998 by SEK 3,751 M, totaling SEK 

28,404 M at 31 December 1998. The 

increase was attributable to the following 

factors: 

SEK M 

Net earnings for the year 3,379 

Dividend –1,145 

Other changes 1,517 

Total 3,751 

Other changes are due mainly to translation 

effect of foreign subsidiaries, 

which were not fully currency hedged 

during the year. 

Key ratios 

Net worth per share amounted to SEK 

204 (181). Debt/equity multiple was 

0.72 (0.73). The debt/equity multiple including 

surplus values was 0.51 (0.51). 

Debt payment capacity 

% 

40 

30 

20 

10 

0 

94 

95 

96 

97 

98 

Debt payment capacity declined slightly in 

1998. 

51

52 

Parent Company 

STATEMENT OF EARNINGS CASH FLOW STATEMENT 


Revenues 

Operating expenses 

61 76 

Other external costs –148 –90 

Personnel costs –111 –120 

Depreciation of tangible assets Note 2 –35 –34 

Other operating expenses, net –4 38 

Total operating expenses –298 –206 

OPERATING PROFIT –237 –130 

Financial items 

Income from shares and participations, 

Note 4 

Group companies 

Income from shares and participations, 

1,201 1,522 

other companies – 1 

Interest income and similar profit/loss items 123 231 

Interest expense and similar profit/loss items –448 –490 

Total financial items 876 1,264 

EARNINGS AFTER FINANCIAL ITEMS 639 1,134 

Group contribution 97 95 

Appropriations 161 163 

Taxes on profit for the year 0 1 

NET EARNINGS FOR THE YEAR 897 1,393 

BALANCE SHEET 

31 Dec. 31 Dec. 

SEK M 

ASSETS 


FIXED ASSETS 

Tangible assets Note 8 

Buildings and land 3,878 3,870 

Machinery and equipment 5 2 

Financial assets 

3,883 3,872 

Shares and participations Note 9, 10 24,573 21,805 

Interest-bearing receivables 69 10 

24,642 21,815 

Total fixed assets 28,525 25,687 

CURRENT ASSETS 

Receivables from subsidiaries 2,411 2,021 

Other current receivables Note 13 39 31 

Short-term investments 251 1 

Cash and bank balances 12 12 

Total current assets 2,713 2,065 

TOTAL ASSETS 31,238 27,752 


Operating surplus –202 –96 

Other cash flow from operations 2,521 2,256 

Company acquisitions and divestments –2,773 –1,230 

Group contribution 95 –81 

Dividend to shareholders –1,135 – 1,036 

Net cash flow –1,494 –187 

31 Dec. 31 Dec. 

SEK M 

EQUITY, PROVISIONS AND 

LIABILITIES 


SHAREHOLDERS’ EQUITY Note 15 18,964 19,156 

UNTAXED RESERVES Note 14 434 595 

PROVISIONS Note 16 135 165 

LIABILITIES 

Interest-bearing debt Note 19 1,727 1,441 

Liabilities to subsidiaries 9,909 6,270 

Accounts payable 14 14 

Other interest-free liabilities Note 20 55 111 

Total liabilities 

TOTAL EQUITY, PROVISIONS 

11,705 7,836 

AND LIABILITIES 31,238 27,752 

CONTINGENT LIABILITIES Note 21 18,977 14,818 

ASSETS PLEDGED Note 22 527 482

Accounting principles 

The SCA Group financial statements are 

prepared in accordance with the Swedish 

Financial Accounting Standards Council’s 

recommendations. 

CONSOLIDATED ACCOUNTS 

Group composition 

The consolidated financial statements 

include the accounts of the Parent Company 

and all subsidiaries, in accordance 

with the definitions in the Swedish Annual 

Accounts Act. In addition, SCA’s 

share in joint-venture companies is included 

(see below). 

Purchase method 

The consolidated accounts have been 

prepared in accordance with the purchase 

method. The shareholders’ equity 

in acquired subsidiaries is determined on 

the basis of a market valuation of assets 

and liabilities at the time of acquisition 

(a so-called purchase analysis). In those 

instances in which the market valuation 

of assets and liabilities results in significantly 

different values than the acquired 

company’s book values, these values 

constitute the Group’s acquisition cost. 

The difference between the acquisition 

cost of shares in the subsidiaries and the 

value of the shareholders’ equity according 

to the purchase analysis is reported 

as goodwill or negative goodwill in consolidation. 

If necessary, an allocation to a provision 

for future costs of reorganization 

and staff reductions in the acquired 

operations may be made at the time of 

the purchase analysis. 

Divested subsidiaries are included in 

the consolidated balance sheet up to and 

including the date of divestment. 

Translation of foreign subsidiary 

accounts 

The balance sheets and statement of 

earnings of foreign subsidiaries are 

translated in accordance with the current 

method. The assets and liabilities in 

foreign subsidiaries are translated at the 

year-end exchange rates. All items in the 

statement of earnings are translated at 

the average exchange rate for the year. 

Translation differences are not reported 

in the statements of earnings but are 

charged directly to consolidated shareholders’ 

equity. 

The financial statements of companies 

in highly inflationary countries or 

countries with other economic instability 

are translated first to the region’s 

functional currency (normally USD or 

EUR) according to the monetary 

method. Any exchange rate differences 

which arise are reported in the statement 

of earnings. Thereafter, the translation is 

carried out to the reporting currency applying 

the current method. 

The acquisition value of nonmonetary 

assets are reported in the functional 

currency in the region (USD or EUR) at 

the currency rate prevailing at the time 

of acquisition. 

Minority interests 

Minority interests in the consolidated 

statement of earnings is reported as a 

share in net earnings. 

Minority interests in shareholders’ 

equity in the subsidiaries is reported as a 

separate item in the balance sheet. This 

item also includes minority interests in 

the shareholders’ equity portion of untaxed 

reserves in subsidiaries. 

Taxes 

Deferred tax is calculated and reported 

in accordance with the principles in IAS 

12. However, deferred tax liabilities or 

receivables attributable to temporary 

differences between the reported value 

of the asset and the tax value of longterm 

nondepreciable assets is not reported, 

to the extent that it is not probable 

that the assets will be realized in the 

foreseeable future. In the balance sheet, 

the estimated liability to the tax authorities 

is reported as current. Deferred tax 

liabilities are reported as a provision. 

The tax expenses reported for the 

year include changes in deferred taxes 

and the tax on the share in earnings of 

associated companies. 

Associated companies 

An associated company is a long-term 

shareholding representing at least 20% 

of the voting rights of the shares outstanding. 

Accounting for associated 

companies is according to the equity 

method. 

In the consolidated statement of earnings, 

SCA’s share in earnings of associated 

companies is reported on two levels. 

• The Group’s share in earnings after 

financial items is included in consolidated 

operating profit. 

• The share in income tax expenses at 

associated companies, in accordance 

with the full-tax method, is included 

in the consolidated income tax expense. 

The Group’s share in earnings of an associated 

company is computed on the 

basis of SCA’s equity portion in that particular 

associated company. 

In the consolidated balance sheet, 

shares in associated companies are reported 

separately under Shares and participations. 

The book value of the shareholdings 

changes to reflect SCA’s share 

in net earnings of the respective companies, 

reduced by dividends received. 

Nondistributed earnings of associated 

companies are included under 

nondistributable equity. 

Joint-venture companies 

Joint-venture companies are defined as 

companies in which the shareholding 

amounts to 50% and in which SCA is 

liable for its share of the financial risk. 

Joint-venture companies are reported in 

accordance with the proportional consolidation 

method. 

In applying the proportional consolidation 

method, 50% of all statement 

of earnings and balance sheet items are 

included in the SCA Group’s statement 

of earnings and balance sheet. 

53

54 

PRINCIPLES OF VALUATION 

Receivables and liabilities in foreign 

currencies 

In the consolidated financial statements, 

receivables and liabilities in foreign currencies 

are valued using year-end exchange 

rates. Gains and losses on current 

receivables and operating liabilities 

are netted and included in operating 

profit. To the extent that forward contracts 

are used to hedge operating receivables 

and liabilities, the contract rate 

is used for valuation of the corresponding 

receivables and liabilities. Gains 

and losses on financial receivables and 

liabilities are reported as other financial 

items. 

SCA hedges its investments in foreign 

net assets, including goodwill. Hedging 

is implemented through loans in foreign 

currencies and forward exchange contracts. 

These are valued at the exchange 

rate prevailing at year-end. Exchange 

rate differences on hedging operations, 

after tax, as well as differences that arise 

when foreign net assets are translated, 

are carried directly to shareholders’ 

equity in the balance sheet. 

Inventories and accounts receivable 

Inventories consist of finished and semifinished 

goods, raw materials, fuels, 

warehouse supplies and felling rights. 

These are valued at the lower of cost or 

market value in accordance with the 

first-in, first-out principle. The acquisition 

costs of inventories of finished and 

semi-finished goods, raw materials and 

fuels are based on the average production 

or acquisition costs for the year. 

Interest is not included in the inventory 

values. 

Felling rights are calculated at contract 

prices which, on average, do not 

exceed market value. 

Doubtful accounts receivable are reported 

in the amount which, after a careful 

assessment, is deemed likely to be 

paid. 

Tangible assets 

Tangible assets are reported at acquisition 

cost after deducting accumulated 

depreciation according to plan. 

Unlike acquisition values for other 

capital expenditures, acquisition costs 

for property and plant related to major 

projects shall also include funds appropriated 

for start-up and commissioning 

work and for interest expenses during 

the construction and assembly period. 

Depreciation according to plan is 

based on the historical cost and estimated 

useful lives of the assets. 

The following depreciation rates are 

used on property and plant: 

% 

Forest industry machines 5–10 

Converting machinery 7–14 

Mobile and other light equipment 20 

Buildings 2–6 

Land improvements 5 

Intangible assets 

Goodwill is amortized according to 

plan. The economic life is normally 20 

years. SCA selected this time frame since 

the company acquisitions represent a 

long-term strategic value. Other intangible 

assets (primarily patents and 

trademarks) are amortized 10–20% per 

year.

Notes to the financial statements 

PARENT COMPANY 

The Parent Company’s statement of earnings, balance sheet and cash 

flow statement are shown in condensed form on page 52. The following 

notes pertain to the financial statements of the Parent Company 

and the SCA Group. 

STATEMENT OF EARNINGS 

Note 1 Operating expenses 

Operating expenses include capital gains from divestments amounting 

to SEK 400 M (425). 

Operating expenses include R&D expenses amounting to SEK 784 

M (751) for the Group. 

Note 2 Depreciation of tangible and intangible assets 

Group Parent Company 


Buildings 515 519 2 2 

Land 52 65 32 31 

Machinery and equipment 2,912 2,788 1 1 

Subtotal 3,479 3,372 35 34 

Goodwill 

Patents, trademarks and 

407 372 – – 

similar rights 127 99 – – 

Total 4,013 3,843 35 34 

Depreciation according to plan is based on the historical cost and 

estimated economic lifetimes of the assets concerned, as specified in 

the accounting principles on page 53. 

Note 3 Share in earnings of associated companies 

SCA’s interest in associated companies’ earnings and shareholders’ 

equity is reported applying the equity method. See accounting principles 

on page 53. Shares in pre-tax earnings are included in consolidated 

operating profit and amount to SEK 121 M (67). 

Dividends amounting to SEK 6 M (4) were received from associated 

companies. 

Note 4 Financial items 


SEK M 

Income from shares and 

1998 1997 1998 1997 

participations in Group companies 

Dividends from subsidiaries 

Income from shares and 

participations in other companies 

– – 1,201 1,522 

Dividends from other companies 

Interest income and similar 

profit/loss items 

69 70 – 1 

Interest income, external 182 210 0 0 

Interest income, subsidiaries – – 94 81 

Other financial income, external 

Other financial income, 

29 – – – 

subsidiaries 

Interest expense and similar 

profit/loss items 

– – 29 150 

Interest expense, external –1,502 –1,362 –135 –100 

Interest expense, subsidiaries 

Other financial expenses, 

– – –282 –217 

external 

Other financial expenses, 

–37 –29 –31 –173 

subsidiaries – – – 0 

Total –1,259 –1,111 876 1,264 

Note 5 Taxes on profit for the year 

Group, SEK M 1998 1997 

Current taxes – consolidated companies –920 –688 

Deferred taxes – consolidated companies 

Taxes attributable to shares in earnings of 

–726 –619 

associated companies –34 –30 

Total –1,680 –1,337 

Note 6 Minority interests 

Interest, % 31 Dec. 1998 31 Dec. 1997 

SCA Laakirchen AG, Austria 22 24 

Uni-Charm/Mölnlycke B.V. 60 60 

Thai Klinipro Co. Ltd – 51 

SCA Hygiene Products AG* 4 6 

Sodipel SARL 12 12 

SCA Graphic Paper Polska SP.Z.O.O. 45 – 

* Formerly Papierwerke Waldhof Aschaffenburg AG (PWA) 

Minority interests in net earnings is reported in the statement of earnings 

in an amount of SEK 110 M (361), specified as follows 

SEK M 

Minority interests in: 


– earnings after financial items 152 565 

– income taxes –42 –204 

Minority interests 110 361 

55

56 

BALANCE SHEET 

Note 7 Intangible assets 

Goodwill 

Patents, 

trademarks 

and similar rights 

Group, SEK M 1998 1997 1998 1997 

Acquisition value, 1 Jan. 7,141 6,378 1,790 1,879 

Capital expenditures 779 552 115 41 

Sales and disposals – –9 –65 –197 

Reclassifications – 4 39 12 

Translation differences 786 216 49 55 

Accumulated acquisition value, 31 Dec. 8,706 7,141 1,928 1,790 

Amortization, 1 Jan. –2,058 –1,700 –695 –669 

Sales and disposals – 46 11 78 

Reclassifications – –5 – –4 

Amortization during the year –407 –372 –127 –99 

Translation differences –107 –27 –96 –1 

Accumulated amortization, 31 Dec. –2,572 –2,058 –907 –695 

Residual value according to plan, 31 Dec. 6,134 5,083 1,021 1,095 

Note 8 Tangible assets 

Machinery and Construction 

Buildings Land equipment in progress 

Group, SEK M 1998 1997 1998 1997 1998 1997 1998 1997 

Acquisition value, 1 Jan. 12,566 12,442 5,861 5,446 42,404 39,410 569 306 

Capital expenditures 824 173 382 469 3,682 3,558 1,412 392 

Sales and disposals –178 –400 –323 –220 –1,411 –991 0 –78 

Reclassifications 20 22 66 32 369 24 –455 –51 

Translation differences 754 329 304 134 2,212 403 21 – 

Accumulated acquisition value, 31 Dec. 13,986 12,566 6,290 5,861 47,256 42,404 1,547 569 

Depreciation, 1 Jan. –3,299 –2,889 –535 –474 –17,488 –15,416 – – 

Sales and disposals 96 94 17 4 569 883 – – 

Reclassifications –7 61 – – 7 –65 – – 

Depreciation during the year –515 –519 –52 –65 –2,912 –2,788 – – 

Translation differences –184 –46 –20 – –905 –102 – – 

Accumulated depreciation, 31 Dec. –3,909 –3,299 –590 –535 –20,729 –17,488 – – 

Write-ups, 1 Jan. – – 3,100 3,100 – – – – 

Accumulated write-ups, 31 Dec. – – 3,100 3,100 – – – – 

Writedowns for the year –39 – – – –100 – – – 

Accumulated writedowns, 31 Dec. –39 – – – –100 – – – 

Residual value according to plan, 31 Dec. 10,038 9,267 8,800 8,426 26,427 24,916 1,547 569

Note 8 Tangible assets, cont. 

Buildings Land 

Machinery and 

equipment 

Parent Company, SEK M 1998 1997 1998 1997 1998 1997 

Acquisition value, 1 Jan. 58 57 1,043 999 7 7 

Capital expenditures 2 1 45 46 4 0 

Sales and disposals –1 – –5 –2 0 – 

Accumulated acquisition value, 31 Dec. 59 58 1,083 1,043 11 7 

Depreciation, 1 Jan. –29 –27 –302 –271 –5 –4 

Sales and disposals 1 – – – – – 

Depreciation during the year –2 –2 –32 –31 –1 –1 

Accumulated depreciation, 31 Dec. –30 –29 –334 –302 –6 –5 

Write-ups, 1 Jan. – – 3,100 3,100 – – 

Accumulated write-ups, 31 Dec. – – 3,100 3,100 – – 

Residual value according to plan, 31 Dec. 29 29 3,849 3,841 5 2 

Note 9 Financial assets 

Shares and participations Capital investment shares 

Group Parent Company Group Parent Company 

SEK M 1998 1997 1998 1997 1998 1997 1998 1997 

Acquisition value, 1 Jan. 870 604 22,907 19,960 1,084 838 – 589 

Investments 481 336 2,770 2,947 – 1,084 – 102 

Sales 

Net increase in associated companies 

–48 –26 –2 – – –838 – –691 

during the year 30 34 – – – – – – 

Reclassification to joint-venture or subsidiary –336 – – – – – – – 

Other reclassifications –39 –68 – – – – – – 

Translation differences 64 –10 – – – – – – 

Accumulated acquisition value, 31 Dec. 1,022 870 25,675 22,907 1,084 1,084 – 0 

Write-ups, 1 Jan. – – 140 140 29 29 – 29 

Sales – – – – – – – –29 

Accumulated write-ups, net, 31 Dec. – – 140 140 29 29 – 0 

Write-downs, 1 Jan. – – –1,242 –142 –1 –1 – –1 

Sales – – – – – – – 1 

Write-downs during the year – – – –1,100 – – – – 

Accumulated write-downs, 31 Dec. – – –1,242 –1,242 –1 –1 – 0 

Residual value according to plan, 31 Dec. 1,022 870 24,573 21,805 1,112 1,112 – 0 

Note 10 Shares and participations 

Group and Parent Company holdings of shares and participations 

were as follows: 



Subsidiaries – – 24,497 21,789 

Associated companies 773 741 – – 

Other companies 249 129 76 16 

Total 1,022 870 24,573 21,805 

For specification, see page 65. 

Major changes during 1998 in the Parent Company’s and Group’s 

holdings were as follows: 

Subsidiaries 

The increase is attributable to a new issue in SCA Group Holding BV 

subscribed by the Parent Company through a non-cash transfer of 

internally acquired subsidiary shares. 

Associated companies 

Among others, the Lantero, Obalex and Welpa packaging companies 

were acquired during the year. 

57

58 

Note 11 Capital investment shares 

Group, SEK M Number Book value 

AB Industrivärden 14,393,656 1,112 

Total 14,393,656 1,112 

Of the holding in AB Industrivärden, 7,320,000 shares are available 

for future possible redemption in accordance with the so-called exchangeable 

bonds issued during spring 1997. The market value of 

shares in AB Industrivärden exceeds the consolidated book value by 

SEK 457 M. 

Note 12 Inventories 


Raw materials and consumables 1,493 1,603 

Work in progress 379 476 

Finished goods 3,224 2,912 

Spare parts and warehouse supplies 897 519 

Felling rights 164 270 

Total 6,157 5,780 

Note 15 Shareholders’ equity 

Note 13 Other current receivables 



Bills receivable 

Prepaid expenses and 

831 403 – – 

accrued income 660 634 32 23 

Other receivables 1,099 903 7 8 

Total 2,590 1,940 39 31 

Note 14 Untaxed reserves in Parent Company 

Untaxed reserves in the Parent Company include an SEK 316 M (475) 

allocation to tax equalization reserve and SEK 118 M (120) in accumulated 

depreciation in excess of plan. 

Equity Other 

Share Share premium Legal proportion restricted Translation Distributable 

Group, SEK M capital reserve reserve reserve reserves differences equity Total 

Balance, 1 Jan. 1,974 1,870 737 1,345 8,758 –1,284 11,253 24,653 

Translation differences 

Exchange rate differences 

– – – – – 1,566 765 2,331 

on hedging instruments 

Transfer between distributable 

and nondistributable 

– – – – – –860 – –860 

shareholders’ equity – – – – –421 – 421 0 

Equity in associated companies 

Calculated premium on 

– – – 30 – – –30 0 

personnel convertibles – – 46 – – – – 46 

Dividend paid – – – – – – –1,145 –1,145 

Net earnings for the year – – – – – – 3,379 3,379 

Balance, 31 Dec. 1,974 1,870 783 1,375 8,337 –578 14,643 28,404 

The Share premium reserve, Legal reserve, Equity proportion reserve, Translation differences and Other restricted reserves amount in total to 

SEK 11,787 M (11,426) and are reported as Restricted reserves. Distributable equity includes a positive translation difference of SEK 542 M 

(negative: 223). 

Share Share premium Legal Write-up Distributable 

Parent Company, SEK M capital reserve reserve reserve equity Total 

Balance, 1 Jan. 

Calculated premium on 

1,974 1,870 395 806 14,111 19,156 

personnel convertibles – – 46 – – 46 

Dividend paid – – – – –1,135 –1,135 

Net earnings for the year – – – – 897 897 

Balance, 31 Dec. 1,974 1,870 441 806 13,873 18,964

Note 15 Shareholders’ equity, cont. 

SCA’s share capital consists of 197,399,935 shares with a par value of SEK 10 each. The issues, etc., for the period 1990–1998 are presented 

below. For additional information on the SCA share, see page 8. 

Issues, etc. 1990–1998 

Since 1990, the share capital and number of shares, has increased through stock dividends and new issues, conversions and splits as follows: 

Increase in Cash 

SEK M (except no. of shares) No. of shares share capital payment 

1990 Conversion of debentures and new subscription through Series 1 warrants 1,008,284 10.1 5.9 

1991 Conversion of debentures and new subscription through Series 1 warrants 371,118 3.7 10.5 

1992 Conversion of debentures and new subscription through Series 1 warrants 777,453 7.8 19.6 

1993 Conversion of debentures and new subscription through Series 1 warrants 4,030,286 40.3 119.1 

New issue 1:10 17,633,412 176.3 1,410.7 

1994 Conversion of debentures 16,285 0.2 – 

1995 Conversion of debentures 3,416,113 34.2 – 

1996 – – – – 

1997 – – – – 

1998 – – – – 

SCA’s share capital, 31 December 1998 

No. of Nominal 

votes No. of shares amount SEK M 

A shares 10 62,145,880 621.5 

B shares 1 135,254,055 1,352.5 

Total 197,399,935 1,974.0 

At full conversion of convertible debentures outstanding at 31 December 

1998, excluding debentures issued by SCA Group Holding B.V. 

and warrants outstanding, the number of B shares would increase by a 

maximum of 138,710,850. 

Note 16 Provisions for pensions 



PRI pensions 1,044 1,036 30 29 

Other pensions 2,342 2,201 105 136 

Total 3,386 3,237 135 165 

The calculated interest on the amount allocated to pensions is reported 

as an operating expense. The interest rate for PRI pensions was 4.9% 

(3.7). 

Provisions were made in accordance with the regulations in each 

country. 

Effective in 1999, SCA will report pension liabilities in accordance 

with applicable international accounting recommendations (IAS 19, 

Employee Benefits). This means that SCA’s pension liability is calcula- 

ted taking into account estimated future salary increases and inflation. 

SCA has completed a full review and calculations of all pension 

schemes in the Group. 

Since the reported pension liability covers the calculated liability, an 

adjustment against shareholders’ equity is not necessary. 

Nearly SEK 6 billion of the Group’s total pension liability of slightly 

less than SEK 9 billion is held in pension foundations independent 

of SCA. 

SCA has also decided, effective in 1999, to form a pension foundation 

whose main purpose is to secure the retirement pensions of Swedish 

salaried employees in accordance with the ITP plan. 

Note 17 Provisions for taxes 


Balance, 1 Jan. 5,450 4,710 

Deferred tax charges 726 619 

Other changes 177 121 

Total 6,353 5,450 

Note 18 Other provisions 

This includes restructuring reserves of SEK 892 M (1,582). Provisions 

were withdrawn during the year for the ongoing integration and restructuring 

program, primarily within the Hygiene Products and Packaging 

business areas, in accordance with decisions in prior years. 

Other allocations are mainly provisions for undertakings in conjunction 

with divestments of operations. 

59

60 

Note 19 Interest-bearing debt 



Amortization within one year 986 376 2 3 

Loans maturing within one year 

Total short-term 

5,643 3,791 – – 

interest-bearing debt 6,629 4,167 2 3 

Bond loans 1,338 846 15 15 

Convertible loans 292 38 290 36 

Other long-term loans 

Total long-term 

17,547 17,596 1,420 1,387 

interest-bearing debt 19,177 18,480 1,725 1,438 

Total interest-bearing debt 25,806 22,647 1,727 1,441 

A total of SEK 300 M (300) in short-term debt has been netted against 

fund secured for the corresponding loans. 

An SEK 400 M MTN program was issued in 1998 (See “Financial 

risk managment” on page 41). 

Other long-term loans are raised in foreign currencies mainly for 

financing of the Group’s foreign assets. 

Assets have been pledged as security for SEK 1,208 M (1,145) of 

these long- and short-term loans. 

Redemption structure for interest-bearing debt 

Year SEK M 

1999 6,629 

2000 1,128 

2001 3,987 

2002 6,803 

2003 6,580 

2004 and later 679 

Total 25,806 

Gross debt by currency 

Taking into account currency swaps and other derivatives for hedging 

of foreign assets, SCA’s gross debt is distributed among the following 

currencies: 

Gross debt, SEK M 

Currency 1998 1997 

DEM 5,222 2,661 

GBP 5,247 4,546 

NLG 2,401 2,515 

ATS 1,058 1,597 

FRF 1,041 831 

BEF 45 445 

ITL 2,708 2,480 

USD 1,102 556 

ESP 852 59 

SEK 4,740 6,846 

Other 1,390 111 

Total 25,806 22,647 

Convertible loans 


1990 GBP 10,516,384 at 10% 

Subordinated bond loan convertible to SCA Class B 

shares between 1 October 1990 and 31 July 2000. 

The loan may be called at any time during term, 

in which case repayment will be made in the nominal 

amount, plus accrued interest. The conversion price at 

31 December 1998 was SEK 159.10. 

35 36 

1998 SEK 296,933,616 at 0% 

Subordinated debenture loan (personnel convertibles) 

which may be converted to SCA Class B shares on 

30 September 2003. Application to convert must be 

made not earlier than 2 June 2003 and not later than 

25 August 2003. Conversion price is SEK 271.00. 

255 

Total loans issued by Parent Company 

Bond loan issued by SCA Group Holding B.V. 

290 36 

1989 ECU 101 M at 4.25% 

Subordinated bond loan convertible to SCA Class B 

shares between 25 April 1989 and 10 January 2004. 

The conversion price at 31 December 1998 was 

SEK 130.00. 

2 2 

Total loans issued by Group 292 38 

Conversion of the 1990 GBP loan means that a maximum of 217,455 

Class B shares will be issued. The amount of the loan decreased in 

1998 through a repayment that did not involve conversion of debentures 

into shares. 

Conversion of the 1998 convertible debenture loan means that a 

maximum of 1,095,696 Class B shares will be issued. In addition, 1.5 

warrants were issued for each convertible, which means that another 

1,643,544 Class B shares could be issued. The estimated premium, 

SEK 46 M, is reported in restricted shareholders’ equity as a reserve. 

Note 20 Other interest-free liabilities 


SEK M 

Accrued expenses and 

1998 1997 1998 1997 

prepaid income 3,058 3,072 40 92 

Tax liabilities 204 447 – 4 

Other operating liabilities 

Total interest-free current 

1,873 1,681 3 3 

liabilities 5,135 5,200 43 99 

Long-term interest-free liabilities 406 373 12 12 

Total 5,541 5,573 55 111 

Accrued expenses and prepaid income 



Accrued social costs 586 446 6 5 

Accrued vacation pay liability 451 447 6 5 

Accrued financial expenses 289 236 16 16 

Other items 1,732 1,943 12 66 

Total 3,058 3,072 40 92

Note 21 Contingent liabilities 



Discounted bills 

Guarantees for 

109 143 – – 

– employees 15 48 3 3 

– associated companies 10 64 – – 

– customers and others 146 95 – – 

– subsidiaries – – 18,966 14,806 

Other contingent liabilities 180 134 8 9 

Total 460 484 18,977 14,818 

As stated in the 1997 Annual Report, a so-called Control Agreement 

was established during 1997 between SCA, through its German holding 

company SCA Group Holding (Deutschland) GmbH, and PWA 

(name changed to SCA Hygiene Products AG), effective 1 January 

1998. The agreement is valid until further notice with a mutual cancellation 

notice period of six months. The offer to the remaining shareholders 

to purchase their shares for DEM 281 per share still applies 

pending legal consideration of the underlying valuation. The Control 

Agreement entails a liability for the German holding company to carry 

any losses which arise in SCA Hygiene Products AG during the period 

of the agreement. SCA has provided a surety for this commitment and 

to pay an annual dividend of DEM 17.15 per share to the remaining 

shareholders in SCA Hygiene Products AG. 

The former owners of 20% of the shares in SCA Laakirchen 

Holding AG which, as a result of an organization change, was replaced 

by a holding in a newly formed company, are entitled during 

the year 2000 to sell their share to SCA for a price of approximately 

SEK 480 M. 

As reported in the 1997 Annual Report, SCA entered into leaseout/lease-in 

transactions during 1996 with American banks as 

counterparties pertaining to the two LWC plants in Ortviken, Sweden. 

The terms of the contracts are 32 and 36 years. However, SCA has the 

opportunity to cancel the transactions after about 18 years without incurring 

any financial consequences. At the time the transactions were 

effected, the net present value of the leasing amount which SCA has 

undertaken to pay amounts to about SEK 4 billion. This amount, in 

accordance with the agreements, is partly deposited in accounts in 

banks with at least AA rating, and partly in U.S. securities with a AAA 

rating. SCA carries the credit risk against the depositary banks, but 

this is considered, as a result of the structure of the agreements, to be 

insignificant. Should the rating of a depositary bank decline in the 

future, SCA has the possibility to transfer the deposit to another bank 

with a better rating. Moreover, SCA is liable to take such action if the 

depositary bank’s rating falls below A. The counterparties have accepted 

that the deposited funds are applied for the leasing undertakings. 

The advance payments and deposits were netted during 1996 

in the balance sheet. Should SCA as the result of extraordinary events 

(of a force majeure nature) elect not to fulfill, or cannot fulfill the 

leasing contracts, SCA is liable to compensate the counterparties for 

economic losses which may be incurred as a result. Compensation 

varies during the lifetime and can amount to a maximum of about 

20% of the leasing amounts paid in advance. The agreements were 

composed and examined by legal experts in Sweden and the U.S. and 

are considered to follow the standard practice for lease-out/lease-in 

transactions. 

The three ships which are included in SCA’s distribution system are 

owned and financed by three bank-controlled companies. The vessels 

are operated by Gorthon Lines AB under three bare-boat charters and 

are placed at the disposal SCA Transforest by Gorthon Lines AB under 

three time charters. In the event that Gorthon Lines AB does not fulfill 

its obligations to the owners, SCA Transforest is committed to assume 

the bare-boat charters on behalf of Gorthon Lines AB or acquire the 

vessels. 

In raising certain credits, at the request of the lender, companies in 

the Group provided letters of comfort and other, similar support letters. 

To the extent that similar documents are not reported as contingent 

liabilities, the assessment was made that said documents cannot 

serve as a basis for payment obligations. In addition, a negative 

clause was included in some loan agreements, with the consequence 

that the borrower cannot, without the approval of the lender, pledge 

collateral for other commitments during the credit period. 

In the sale of companies and operations SCA provided the customary 

seller guarantees. 

Note 22 Assets pledged 



Real estate mortgages 1,176 1,156 481 481 

Chattel mortgages 7 9 – – 

Other mortgages 271 126 46 1 

Total 1,454 1,291 527 482 

The above assets have been pledged as security for debt amounting to 

SEK 1,208 M (1,145) at year-end. 

Note 23 Tax assessment values 

Tax assessment values relate to assets in Sweden, as follows: 



Buildings 4,363 4,407 12 13 

Land and other property 7,329 10,457 6,576 9,466 

Total 11,692 14,864 6,588 9,479 

The decline in tax value for land and other property is attributable 

mostly to forest land. The lower tax assessment level is due to a new 

national tax rule which the authorities are applying as of the 1998 

general property taxation. In accordance with the new rules, large 

forest holdings are valued lower while smaller holdings (< SEK 5 M) 

are assessed higher value. 

Note 24 Value of forest land 

SEK M 1998 1997 1996 1995 1994 

Book value 4,582 4,570 4,187 4,156 4,125 

Taxed forestry value 

Estimated market value 

6,779 10,209 9,588 7,140 7,193 

– after tax* 16,000 15,100 13,500 12,000 10,600 

– after tax, per hectare, SEK 9,100 8,600 7,600 6,800 5,900 

* The value is calculated based on the average earnings for forestry operations 

(excluding capital gains) 1995-1998 and an estimate for 1999, capitalized at an 

interest rate of 4%. 

61

62 

Note 25 Number of employees and wages, salaries 

and remuneration 


Average number of employees 

SCA Group total 32,082 33,399 

of whom, women 21% 22% 

Sweden 7,209 7,493 


of which, Parent Company 59 49 


Number of municipalities 26 26 

Abroad 24,873 25,906 


Number of countries 27 22 

Distribution by country is presented in “Group by country” on page 71. 

SEK M 

Wages, salaries and remunerations 



Board of Directors1, President and VPs 18 16 

of which, variable salary 3 2 

Other employees 30 27 

Total, Parent Company 

Subsidiaries 

48 43 

Boards of Directors, Presidents and VPs 144 163 


Other employees 9,314 8,905 

Total, subsidiaries 9,458 9,068 

Group total 9,506 9,111 

of which, Boards of Directors, Presidents and VPs 162 179 


SEK M 

Statutory and contractual payroll expenses 


Parent Company 47 59 

of which, pension costs 312 29 

Subsidiaries 2,961 2,718 


Group total 3,008 2,777 


1 Includes SEK 2.0 M (1.6) Board fees approved by the Annual General Meeting. 

2 SEK 15 M (25) of Parent Company pension costs pertain to the Board, President 

and VPs. Former Presidents, VPs and their survivors are included. The company’s 

outstanding pension commitments to them amount to SEK 67 M (100). For the 

commitment to the Board Chairman, who retired in 1997, the company purchased 

insurance, which is pledged to the Board Chairman. 

3 SEK 49 M (49) of pension costs pertain to the Boards, Presidents and VPs. Former 

Presidents, VPs and their survivors are included. The company’s outstanding 

pension commitments to them amount to SEK 228 M (237). 

Salaries and other remunerations distributed by country 

and between Board members, others and employees 


Board, Other Board, Other 

Presidents, VPs employees Presidents, VPs employees 

SEK M (of which, bonus) (of which, bonus) 


Sweden 18 30 16 27 

Subsidiaries 

(3) (2) 

Sweden 24 1,955 29 1,931 

(2) (2) 

Germany 31 2,164 25 2,101 

(8) (5) 

Great Britain 22 1,327 11 1,259 

(4) (1) 

France 6 732 13 649 

(1) (2) 

The Netherlands 12 688 14 856 

(1) (1) 

Belgium 22 416 36 376 

(1) (0) 

Italy 2 348 9 241 

(0) (1) 

Austria 11 845 9 773 

(2) (1) 

US 1 157 10 183 

(0) (3) 

Norway 1 143 1 146 

(0) (–) 

Switzerland 0 128 – 22 

(0) (–) 

Spain 1 82 – 45 

(0) (–) 

Finland 1 47 2 75 

(0) (1) 

Denmark 1 58 0 59 

(0) (0) 

Other countries1 9 224 4 189 

(1) (0) 

Total, subsidiaries 144 9,314 163 8,905 

(20) (17) 

Group total 162 9,344 179 8,932 

(23) (19) 

1 Canada, the Czech Republic, Greece, Hungary, Ireland, Kazakstan, Lithuania, the 

Philippines, Poland, Portugal, Rumania, Russia, Slovakia, Thailand and Ukraine.

Note 26 SCA’s employees 

The distribution of wage earners/salaried employees in SCA is about 

60/40. The borders between different categories of employees are successively 

being erased over time in pace with production processes becoming 

increasingly advanced and organizational structures change. 

The employees have a high level of competence due to internal advanced 

training and other skills-enhancing measures financed by the 

Group. SCA’s invested a total of SEK 100 M, or nearly SEK 3,000 per 

employee, in skills-enhancing measures during 1998. 

About 6–7% of the employees in the Group hold academic degrees. 

Personnel turnover is relatively low, about 8–10%, particularly 

considering the many changes in the Group’s structure and organization 

which, among other actions, the acquisition of PWA and the merger 

of SCA Hygiene Paper and SCA Mölnlycke caused. 

Note 27 Executive management conditions of employment 

The Chairman of the Board of Directors, who previously held the 

position of Chief Executive Officer (CEO), received contractual pension 

payments during 1998 and as Board Chairman of SCA he received 

a Board fee of SEK 750,000 (600,000). He also received a 

Board fee from PWA of SEK 14,770 (35,448) and, as a member of the 

Board of PWA, a bonus of SEK 266,525, of which SEK 186,900 pertain 

to 1997 (189,000) and SEK 79,625 to 1998. 

During 1998, the CEO received SEK 5,613,647 (5,234,475), car 

benefits (fuel excluded) and housing benefits as well as a Board fee 

from PWA of SEK 79,821 (35,448). As a member of the Board of 

PWA, he also received a bonus of SEK 266,525, of which SEK 

186,900 pertains to 1997 (189,000) and SEK 79,625 to 1998. In the 

case of the CEO, as well as other senior executives in the Group, there 

is one bonus agreement which is linked to the Group’s return on 

capital employed and one related to the development of the SCA 

share. The first, including any bonus awarded from PWA, can result in 

a maximum bonus amounting to 30% of base salary, which for the 

CEO in 1997 resulted in a bonus corresponding to 30% (23.5) of base 

1 Measured as the number of persons who left SCA divided by the number of 

employees at year-end. 

salary. The latter bonus agreement is related to the development of the 

SCA share during 1997, 1998 and 1999 and can, after 1999, result in 

a maximum bonus corresponding to 10% of base salary for each of 

the three years. The CEO, as well as other senior executives in the 

Group, are involved in a new incentive system as of 1999, which is 

described in more detail in Note 28. 

The pension agreement for the CEO is formulated so that old age 

pension (including general pension benefits) is paid from the age of 65 

at 70% of salary at retirement. This is contingent upon employment 

being sustained during at least 20 years from the date he reached 40 

years of age. At termination at the request of the Company, the pension 

age may be reduced to not lower than 55. Upon termination of 

employment at own request between the ages of 55 and 60, a paid-up 

policy is received for pension payments from age 60. In the case of the 

CEO, the company also paid out SEK 104,908 (104,735) in 1998 pertaining 

to supplementary pension commitments. 

Moreover, the agreement with the CEO stipulates that, in the event 

of termination of employment after age 55, he is entitled to be transferred 

to a position as expert advisor. Pension benefits are not paid 

while serving in the position of expert advisor. 

The agreement with the CEO stipulates a period of notice of termination 

of five years if such notice is given prior to age 60. This 

notice period, which is mutual and accordingly also applies upon termination 

at the request of the employee, is reduced to two years after 

age 60. The agreement does not contain any stipulations with regard 

to severance pay. 

In the case of other senior executives in the Group there is a pension 

plan which, in the normal case, grants the executive the right at age 65 

to receive a pension (including general pension benefits) at up to 70% 

of the salary. Normally, full pension requires the executive having been 

employed in the Group for 20 years. Upon termination of employment 

prior to reaching retirement age, a paid-up policy is received for pension 

payments from age 65, under the condition that the executive, 

after reaching the age of 40, has been employed in the Group for at 

least three years. 

63

64 

Note 28 New executive incentive system 

As of 1 January 1999 a new incentive system for SCA’s senior executives 

is being implemented. With the new system, a strong link is established 

between the individual’s possibility for a bonus and the value 

appreciation for the SCA share which accrues to the shareholders. The 

program involves some 60 executives at Group and business area level 

and replaces previous incentive programs which are being phased out 

during a transition period. The new incentive system involves two 

parts: a long-term component (3 years) and a short-term component 

(1 year). 

The long-term element is based on a rolling earnings period of three 

years. Outcome depends on how the value (so-called effective return) 

on the SCA Class B share develops during a three-year period in 

relation to the value development of SCA’s competitors and on the 

stock exchange as a whole. For the CEO and the presidents of the 

Hygiene Products, Packaging and Graphic Paper business areas, after 

a three-year period, the bonus can amount to 45% of base salary, 

which is paid in its entirety in SCA shares. For the other executives included 

in the program, the maximum outcome can be 35% of the base 

salary, paid in SCA shares, and 5% in cash. A general condition for 

payment of a bonus is that the dividend on the SCA Class B share is 

not reduced in relation to the preceding year. 

In order to phase out the former prevailing three-year (rolling) 

share-related incentive system (which was introduced in 1997 and 

covers the period 1997, 1998 and 1999 and can yield a maximum of 

10% of the base salary in bonus in each of the stated years), the following 

will apply during a transition period for the years 1999 and 

2000. In 1999, the same applies as previously, that is, a maximum result 

of 10% of the base salary. In 2000, the maximum result will be 

20% for the CEO and the three mentioned presidents of business areas 

and 15% for the other executives covered by the system. The basis for 

the 20% and 15% shall be the same as for the new system’s long-term 

element, that is, comparison of the value development of the SCA 

Class B share and value development of SCA’s competitors as well as 

the stock exchange as a whole. Bonus in 1999 and 2000 will be paid in 

the form of SCA shares. In 2001, the new system will be implemented 

in its entirety with the possibility of a maximum bonus of 45% of the 

base salary for the CEO and the three business area presidents and 

35% of the base salary for the other executives covered by the system. 

The short-term component is based on an earnings period of one 

year. The bonus amount, which cannot exceed a maximum of 15% of 

the base salary, is related to whether or not targets established for 

operating cash flow are achieved during the year. The bonus payments 

deriving from the short term component are paid in cash. The targets 

for the short-term component for the CEO and the three presidents of 

the business areas are established each year by the salary committee of 

the Board of Directors. The targets for the other executives are set by 

the CEO. 

In order to phase out the former incentive system, the component 

which is based on return on capital employed (and can result in a 

maximum bonus of 30% of base salary) the following will apply 

during a transition period for the years 1999 and 2000. In 1999, the 

bonus will not be based solely on return on capital employed, but 50% 

will be related to the established cash flow target. In 2000, the bonus 

will be based totally on the established cash flow target. In 2001, the 

new, totally cash-flow based system will be established with reduced 

maximum bonus amounting to 15% of base salary.

Specification to Note 10 

Parent Company shareholdings in subsidiaries 

No. of Book value, 

Company name 

Swedish subsidiaries: 

Org. no. Registered office shares Capital % SEK M 

SCA Research AB 556146-6300 Gothenburg 1,000 100 0.1 

AB SCA Finans 556108-5688 Stockholm 420,750 100 50.1 

SCA Holding AB 556313-1621 Stockholm 10,374,430 100 341.4 

SCA Hedging AB 556237-4867 Stockholm 50,000 100 72.0 

SCA Kraftfastigheter AB 556449-7237 Stockholm 1,000 100 0.1 

Fastighets- och Bostadsaktiebolaget FOBOF 556047-8520 Stockholm 1,000 100 0.1 

SCA Försäkrings AB 516401-8540 Stockholm 140,000 100 14.0 

SCA Recovered Papers Holding AB 556537-5739 Stockholm 1,000 100 0.1 

SCA Konsult AB 

Foreign subsidiaries: 

556351-6029 Stockholm 1,000 100 0.1 

SCA Group Holding B.V. 181970 Amsterdam 246,347 100 24,018.8 

Parent Company shareholdings in subsidiaries 24,496.8 

Group holdings of share and participations in associated companies 

No. of shares/ Book value, 

Company name Org. no. Registered office participations Capital % SEK M 

Staper Ltd 1130403 Aylesford 100,000 50 6.4 

Centrale Eerbeek Eerbeek 50 28.0 

Kaplamin Ambalaj Sanayi ve Ticaret AS Izmir 8,750,000 29 35.9 

SCA Packaging Ambalaj ve Ticaret AS Altinova 2,064,600 34 30.9 

Ova SCA Packaging Ambalais Ticaret AS 

Selkasan Kagit ve Paketleme Malzemeleri 

Tarsus 3,783,000 29 28.6 

Imalati Sanayi ve Ticaret AS Manisa 9,277,800 16 39.5 

Nordliner IL Returpapper Stockholm 14,000 15 2.7 

SCA Weyerhauser Packaging Holding Co Asia Ltd Hong Kong 158,720 50 98.7 

Rank SCA Packaging India Ltd India 7,731,882 50 32.3 

Les Bois de la Baltique SA Rochefort 75,000 38 14.4 

AB Släden 556094-8001 Östersund 66,000 33 7.6 

GAE Smith 1075198 Leicester 44,300 50 39.6 

Atkasan Izmir 44,625 35 3.5 

Paredes SA B955 509 609 Genas 24,272 23 56.5 

Obalex SRO Jilove u Decina 66,000 33 42.5 

Allesta AG FN 108934 Altbüron 300 50 5.1 

Wellpappenfabrik Ges.m.b.H Wien 48 33.5 

Lantero Carton Madrid 10,000 25 230.3 

Other associated companies 36.7 

Group holdings of shares and participations in associated companies 772.7 

The difference between the book value in the Group and the Group’s share in the associated company’s shareholders’ equity amounts to SEK 93 M. 

65

66 

Specification to Note 10, cont. 

Group holdings of shares and participations in other major companies 

Company name Org. no. Registered office Capital % 

SCA GROUP HOLDING B.V. 181970 Amsterdam 100 

SCA Forest Holding AB 556479-1100 Stockholm 100 

SCA Forest & Timber AB 556379-3594 Sundsvall 100 

Svanö AB 556056-7694 Kramfors 100 

SCA Graphic Holding AB 556479-2058 Stockholm 100 

SCA Graphic Paper AB 556379-3586 Sundsvall 100 

SCA Graphic Sundsvall AB 556093-6733 Sundsvall 100 

SCA Transforest AB 556431-6965 Sundsvall 100 

SCA Graphic Laakirchen AG Laakirchen 98 

Aylesford Newsprint Holdings Ltd Aylesford 50 

SCA Hygiene Products Holding BV 305322 Amsterdam 100 

SCA Hygiene Holding AB 556479-2181 Stockholm 100 

SCA Hygiene Products AB 556007-2356 Härryda 100 

– SCA Hygiene Products KS AB 556412-1035 Härryda 100 

– SCA Hygiene Products IS AB 556239-3719 Härryda 100 

– SCA Hygiene Products AFH AB 556239-3693 Gothenburg 100 

– SCA Hygiene Products Inc. 421987 Ontario 100 

– SCA Hygiene Products A/S 30877 Alleröd 100 

– SCA Hygiene Products GmbH HRB934 Hilden 100 

– SCA Mölnlycke Kft 13-09-063186 Nagykata 100 

– SCA Mölnlycke Ltd 47636 Dunmanway 100 

– SCA Mölnlycke Holding B.V. 185911 Ar Zeist 100 

– SCA Hygiene Products A/S 915620019 Tönsberg 100 

– SCA Mölnlycke Lda PT 503237612 Linda-a-Velha 100 

– SCA Mölnlycke o.o.o. 67714 Moscow 100 

– SCA Hygiene Products spol.s.r.o. 31723837 Gemerská-Hôrka 100 

– SCA Hygiene Products S.A. A-28451383 Madrid 100 

– SCA Mölnlycke Holdings Inc 58-2011277 Philadelphia 100 

– SCA Hygiene Products Ltd. 577116 Dunstable 100 

– SCA Hygiene Products s.r.o. 48536466 Prag 100 

– SCA Mölnlycke AE MAE 13446/01AT7B/86/190 Nea Ionia 100 

– SCA Mölnlycke Sp.z.o.o. Depart. B. 2367 Warsaw 100 

– OY SCA Hygiene Products AB FI01650275 Helsinki 100 

– Productos Sanitarios Sancela S.A. 890937981-1 Medellin 49 

– Uni-Charm Mölnlycke KK 660779 Tokyo 50 

– Comercializadora Sancela SA de CV CSA-880531-EX3 Mexico City 49 

– Uni-Charm Mölnlycke BV 330631 Hoogezand 40 

– Taiwan Sancella Enterprise Co., Ltd 16093200 Taipei 50 

– Sancella SA 950464 Charguia 49 

SCA Group Holding Deutschland GmbH HRB4014 Mettman 100 

SCA Hygiene Products AG HRB42709 Munich 96 

– SCA Hygiene Products GmbH HRB3248 Mannheim 100 

– SCA Hygiene Products GmbH HRB5301 Wiesbaden 100 

– SCA UK Holdings Ltd 697345 Aylesford 100 

– SCA Hygiene Products SL 30550 folio 17, hoja B-173937 Barcelona 100 

– SCA Hygiene Products Corp. 18818 Manila 100 

– SCA Hygiene Paper Poland Wroclaw Abt. B 7243 Wroclaw 99 

– ooo Svetogorsk P-11430.17 Svetogorsk 100 

– SCA Fine Paper GmbH HRB3098 Raubling 100 

Tatra Papiervertriebs GmbH HRB94274 Raubling 90 

Chemische Werke Zell-Wildshausen GmbH HRB344 Düsseldorf 100 

Wertstoff GmbH HRB1887 Raubling 100 

SCA Paper Trade GmbH HRB10326 Raubling 100 

SCA Fine Paper Hallein GmbH FN31749 Hallein 100 

James McNaughton Paper Group Ltd 1131445 Erith 93 

Buhomij BV 10020018 Andelst 100 

SCA Packaging Deutschland Holding GmbH HRB61506 Berlin 100 

– PWA Packaging Beteiligungen GmbH HRB5220 Mannheim 100 

SCA Packaging Deutschland AG & Co KG HRA3009 Mannheim 100 

– SCA Packaging Industriepapier GmbH HRB3097 Raubling 100

Specification to Note 10, cont. 

Group holdings of shares and participations in other major companies 

Company name Org. no. Registered office Capital % 

SCA Packaging Holding BV 196416 Amsterdam 100 

SCA Packaging International BV Amsterdam 100 

SCA Packaging Obbola AB 556147-1003 Umeå 100 

SCA Packaging Munksund AB 556237-4859 Piteå 100 

SCA Packaging Belgium NV Gent 100 

SCA Packaging Italia Spa Arcore 100 

SCA Packaging Sweden AB 556036-8507 Värnamo 100 

SCA Packaging France SA Eragny 100 

SCA Corporate UK Ltd 2263948 Aylesford 100 

SCA Finance BV Eerbeek 100 

SCA Packaging Benelux BV Eerbeek 100 

SCA Packaging De Hoop BV Eerbeek 100 

SCA Recycling Holding AB 556513-8590 Stockholm 100 

SCA Recycling Holding BV Amsterdam 100 

SCA Recycling Belgium NV 608601 St Stevens Woluwe 100 

SCA Recycling France SA B404148439 Courbevoie 100 

SCA RML Europe NV 593097 Zaventem 100 

SCA Recycling UK Ltd 214967 Aylesford 100 

Italmaceri Srl Torino 50 

SCA Coordination Center NV 547534 Brussels 100 

SCA Reinsurance Ltd 168575 Dublin 100 

PWA Holding AB 556204-5434 Stockholm 100 

The complete statutory specifications are included in the Annual report submitted to the National Swedish Patent and Registration Office. 

This specification is available from SCA, Corporate Communications, Box 7827, SE-103 97 Stockholm. 

67

68 

Proposed disposition of earnings 

As shown in the consolidated balance sheet, distributable shareholders’ equity 

amount to SEK 14,643 M. 

Distributable shareholders’ equity at the Parent Company: 

retained earnings 12,975,511,621 

net earnings for the year 897,200,952 

Total 13,872,712,573 

The Board of Directors and the President recommend: 

to the shareholders, a dividend of SEK 6.50 per share 1,283,099,578 

retained earnings to be carried forward 12,589,612,995 

Total 13,872,712,573 

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Auditor’s report 

TO THE GENERAL MEETING OF THE SHAREHOLDERS OF SVENSKA CELLULOSA 

AKTIEBOLAGET SCA (publ) 

Reg.No: 556012-6293 

We have audited the Parent Company and the consolidated financial statements, the 

accounts and the administration of the Board of Directors and the President of 

Svenska Cellulosa Aktiebolaget SCA (publ) for 1998. These accounts and the administration 

of the Company are the responsibility of the Board of Directors and the 

President. Our responsibility is to express an opinion on the financial statements 

and the administration based on our audit. 

We conducted our audit in accordance with Generally Accepted Auditing 

Standards in Sweden. Those Standards require that we plan and perform the audit 

to obtain reasonable assurance that the financial statements are free of material 

misstatement. An audit includes examining, on a test basis, evidence supporting the 

amounts and disclosures in the financial statements. An audit also includes assessing 

the accounting principles used and their application by the Board of Directors and 

the President, as well as evaluating the overall presentation of information in the 

financial statements. We examined significant decisions, actions taken and circumstances 

of the Company in order to be able to determine the possible liability to the 

Company of any Board member or the President or whether they have in some other 

way acted in contravention of the Companies Act, the Annual Accounts Act or the 

Articles of Association. We believe that our audit provides a reasonable basis for our 

opinion set out below. 

In our opinion, the Parent Company and the consolidated financial statements 

have been prepared in accordance with the Annual Accounts Act and give a true and 

fair view of the Group’s results and financial position. 

We recommend 

that the income statements and the balance sheets of the Parent Company and the 

Group be adopted, and 

that the profit of the Parent Company be dealt with in accordance with the proposal 

in the Board of Directors’ Report. 

that the members of the Board of Directors and the President be discharged from 

liability for the financial year. 


Öhrlings Coopers & Lybrand AB 

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Authorized Public Accountant 

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Quarterly data 

GROUP 


SEK M IV III II I IV III II I 

Net sales 15,918 15,234 14,857 15,264 15,003 14,262 15,114 14,216 

Operating surplus 2,476 2,506 2,427 2,911 2,381 2,244 2,645 2,074 

Depreciation according to plan –1,043 –1,006 –966 –998 –924 –958 –1,009 –952 

Share in earnings of associated companies 27 32 41 21 45 8 7 7 

Operating profit 1,460 1,532 1,502 1,934 1,502 1,294 1,643 1,129 

Financial items –343 –338 –298 –280 –307 –285 –284 –235 

Earnings after financial items 1,117 1,194 1,204 1,654 1,195 1,009 1,359 894 

– of which, nonrecurring items – – – 400 – – 300 125 

Income taxes –356 –426 –376 –522 –391 –351 –300 –295 

Minority interests –30 –19 –29 –32 –120 –88 –71 –82 

Net earnings 731 749 799 1,100 684 570 988 517 

Earnings per share 3.68 3.77 4.05 5.57 3.47 2.89 5.00 2.62 

BUSINESS AREAS 

Net sales 



Hygiene Products 6,951 6,490 6,395 6,328 6,090 5,922 6,015 5,991 

Packaging 3,832 3,725 3,650 3,828 3,519 3,465 3,975 3,323 

Graphic Paper 4,959 4,779 4,491 4,673 4,341 4,108 4,174 3,939 

Wood-containing publication papers 1,979 1,900 1,761 1,838 1,856 1,540 1,655 1,339 

Fine papers, paper merchanting, market pulp 2,980 2,879 2,730 2,835 2,485 2,568 2,519 2,600 

Forest and Timber 998 901 1,033 1,053 1,118 903 1,081 1,056 

Other operations 365 467 404 411 463 427 511 461 

Divested units 3 1 –1 141 466 427 466 445 

Intra-Group deliveries –1,190 –1,129 –1,115 –1,170 –994 –990 –1,108 –999 

Total 15,918 15,234 14,857 15,264 15,003 14,262 15,114 14,216 

Earnings 



Hygiene Products 583 600 605 616 595 645 647 680 

Packaging 316 396 395 373 336 291 376 193 

Graphic Paper 469 492 425 465 436 210 173 65 

Wood-containing publication papers 380 358 317 279 193 102 128 35 

Fine papers, paper merchanting, market pulp 89 134 108 186 243 108 45 30 

Forest and Timber 206 140 188 188 221 208 230 153 

Other operations –30 –16 –34 365 –13 7 283 107 

Divested units –1 –1 – 5 3 9 11 6 

Goodwill amortization –83 –79 –77 –78 –76 –76 –77 –75 

Operating profit 1,460 1,532 1,502 1,934 1,502 1,294 1,643 1,129 

Financial items –343 –338 –298 –280 –307 –285 –284 –235 

Earnings after financial items 1,117 1,194 1,204 1,654 1,195 1,009 1,359 894 

– of which, nonrecurring items 

Earnings after financial items excl. 

– – – 400 – – 300 125 

nonrecurring items 1,117 1,194 1,204 1,254 1,195 1,009 1,059 769 

Margins 


Business areas, % IV III II I IV III II I 

Hygiene Products 8 9 9 10 10 11 11 11 

Packaging 8 11 11 10 10 8 9 6 

Graphic Paper 9 10 9 10 10 5 4 2 

Wood-containing publication papers 19 19 18 15 10 7 8 3 

Fine papers, paper merchanting, market pulp 3 5 4 7 10 4 2 1 

Forest and Timber 21 16 18 18 20 23 21 14 

Group, % 

Operating margin 9.2 10.1 10.1 12.7 10.0 9.1 10.9 7.9 

Financial net margin –2.2 –2.2 –2.0 –1.8 –2.0 –2.0 –1.9 –1.7 

Profit margin 7.0 7.9 8.1 10.9 8.0 7.1 9.0 6.2

Group by country 

Net sales Average no. of employees Salaries 

SEK M % SEK M % of whom, women of whom, women SEK M SEK M 

1998 1998 1997 1997 1998 % 1997 % 1998 1997 

Sweden 5,353 9 5,569 10 7,209 21 7,493 23 2,027 2,003 

EU excl. Sweden 

Germany 11,239 18 10,846 18 6,281 16 6,486 15 2,195 2,126 

Great Britain 10,401 17 9,935 17 4,453 16 4,628 17 1,349 1,270 

France 6,880 11 6,321 10 2,969 28 3,009 26 738 662 

The Netherlands 4,582 8 4,237 7 2,701 13 3,129 13 700 870 

Italy 4,119 7 4,097 7 1,404 24 1,039 17 350 250 

Belgium 2,394 4 2,365 4 872 30 1,270 27 437 412 

Austria 1,635 3 1,734 3 2,368 13 2,501 14 856 782 

Denmark 1,605 3 1,530 3 139 50 136 46 60 59 

Spain 1,470 2 908 2 360 25 186 32 83 45 

Finland 735 1 738 1 176 53 290 62 48 77 

Ireland 671 1 709 1 19 16 146 79 5 19 

Greece 555 1 522 1 238 42 267 49 46 39 

Portugal 282 0 270 1 29 31 41 29 23 7 

Luxembourg 72 0 65 0 – – – – – – 

Total EU, excl. Sweden 46,640 76 44,277 75 22,009 20 23,128 19 6,890 6,618 

Rest of Europe 

Norway 1,226 2 1,527 3 461 37 494 40 144 147 

Poland 983 2 746 1 501 42 379 46 36 24 

Switzerland 757 1 661 1 400 23 50 46 128 22 

Hungary 498 1 410 1 240 45 271 51 18 21 

Czech Republic 213 0 156 0 90 54 81 47 8 6 

Turkey 127 0 125 0 – – – – – – 

Slovakia 85 0 96 0 305 33 409 41 11 12 

Other 421 1 359 1 – – – – – – 

Total rest of Europe 4,310 7 4,080 7 1,997 36 1,684 44 345 232 

Rest of the world 

US 1,838 3 1,635 3 414 40 497 39 158 193 

Canada 492 1 447 1 216 40 170 24 65 50 

Japan 86 0 148 0 – – – – – – 

Other 2,554 4 2,439 4 237 45 427 92 21 15 

Total rest of the world 4,970 8 4,669 8 867 41 1,094 57 244 258 

SCA GROUP 61,273 100 58,595 100 32,082 21 33,399 22 9,506 9,111 


SEK 4,970 M 

8% 


SEK 4,310 M 

7% 

Net sales 

by region 1998 

Sweden 

SEK 5,353 M 

9% 

EU excl. 

Sweden 

SEK 46,640 M 

76% 

Countries outside Sweden, accounted for 

slightly more than 91% of total net sales. 


867 

3% 


1,997 

6% 

Employees 

by region 1998 

Average number of employees totaled, 

32,082. The percentage of employees outside 

Sweden was 78%. 

Sweden 

7,209 

22% 

EU excl. 

Sweden 

22,009 

69% 

71

72 

Ten-year comparison 

SEK M 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 

Statement of earnings 

Net sales 61,273 58,595 55,405 65,317 33,676 33,420 32,137 32,760 31,122 24,853 

Operating profit 1 6,428 5,568 4,581 7,350 1,810 2,172 8,608 2,605 3,338 3,137 

Hygiene Products 2,404 2,567 2,277 1,254 676 1,012 781 662 533 686 

Packaging 1,480 1,196 939 2,370 910 680 462 607 626 573 

Graphic Paper 1,851 884 510 2,345 495 35 -313 186 507 806 

Forest and Timber 722 812 607 877 869 515 375 468 481 495 

Other operations 285 384 436 299 193 -11 197 224 191 145 

Divested units 3 29 100 210 175 204 777 776 837 420 

Goodwill amortization –317 –304 –288 –301 –288 –287 –248 –200 –105 – 

Nonrecurring items 2 – – – 296 –1,220 25 6,577 –118 268 12 

Financial income 280 280 319 296 252 217 319 320 469 426 

Financial expenses –1,539 –1,391 –1,327 –1,915 –1,002 –1,179 –1,899 –1,740 –1,404 –839 

Earnings after financial items 5,169 4,457 3,573 5,731 1,060 1,210 7,028 1,185 2,403 2,724 

Income taxes –1,680 –1,337 –1,144 –1,915 –423 –79 –796 –150 –838 –934 

Minority interests –110 –361 –312 –352 –82 –60 –32 –134 –59 –56 

Net earnings for the year 3 3,379 2,759 2,117 3,464 555 1,071 6,200 901 1,506 1,734 

Balance sheet 

Fixed assets (excl. financial receivables) 55,147 50,351 48,599 46,822 31,336 30,983 30,613 30,820 32,903 17,951 

Receivables and inventories 18,790 16,726 15,461 16,435 10,606 10,409 10,775 11,022 12,252 9,398 

Financial receivables 1,485 1,370 1,072 1,128 131 175 212 247 – – 

Short term investments 1,132 676 1,469 1,692 1,873 1,296 3,435 672 2,216 3,133 

Cash and bank balances 1,819 1,582 1,393 2,053 982 1,388 1,064 806 1,058 606 

Total assets 78,373 70,705 67,994 68,130 44,928 44,251 46,099 43,567 48,429 31,088 

Shareholders’ equity 28,404 24,653 22,906 22,024 19,590 19,963 18,284 11,144 11,350 10,533 

Minority interests 1,386 1,496 3,331 3,493 853 916 807 688 586 567 

Provisions 4 10,906 10,452 9,441 

Interest-bearing debt 25,806 22,647 21,396 22,439 13,559 13,673 15,510 19,281 21,818 9,249 

Operating- and other interest-free liabilities 11,871 11,457 10,920 20,174 10,926 9,699 11,498 12,454 14,675 10,739 

Total shareholders’ equity and liabilities 78,373 70,705 67,994 68,130 44,928 44,251 46,099 43,567 48,429 31,088 

Capital employed 5 51,160 44,840 43,311 47,408 31,780 31,459 29,581 30,918 24,217 14,585 

Net debt 21,370 19,018 17,462 17,566 10,573 10,814 10,799 17,556 18,407 5,475 

Cash flow analysis 

Operating cash flow 6,970 6,513 5,829 6,586 2,422 2,689 2,930 2,329 

Cash flow from current operations 4,275 4,850 4,210 4,943 1,174 1,313 1,388 633 

Cash flow before dividend 345 482 2,006 –3,673 504 2,285 5,278 1,738 

Current capital expenditures 2,058 2,207 2,489 2,927 1,377 1,479 1,461 1,495 2,518 2,021 

Strategic capital expenditures 2,248 983 1,126 1,849 1,599 74 316 462 2,108 694 

Acquisitions 2,793 3,431 1,558 7,698 821 520 383 1,928 6,899 934 

Key ratios 6 

Equity/assets, % 38 37 39 37 46 47 41 28 25 36 

Equity/assets including surplus values, % 46 46 46 44 52 53 45 46 43 57 

Interest coverage, multiple 5.1 5.0 4.5 4.5 2.4 2.3 5.5 1.8 3.6 7.6 

Debt payment capacity, % 37 39 34 35 37 

Debt/equity ratio, multiple 0.72 0.73 0.67 0.69 0.52 0.52 0.57 1.44 1.54 0.49 

Return on capital employed, % 14 12 11 16 6 7 29 8 14 22 

Return on shareholders’ equity, % 13 12 10 17 3 6 47 8 14 19 

Operating margin, % 11 10 8 11 5 6 27 8 11 13 

Net margin, % 6 5 4 5 2 3 19 3 5 7 

Capital turnover rate, multiple 1.29 1.31 1.28 1.38 1.06 1.06 1.09 1.06 1.29 1.70 

Earnings per share, SEK 17.07 13.98 10.71 17.55 2.94 5.82 33.23 4.97 8.12 9.27 

Dividend, SEK per share 6.50 7 5.75 5.25 4.75 3.75 3.40 3.10 3.10 3.10 2.81 

1 Operating profit has been distributed (pro forma) for 1989. 

2 Not reported separately in 1996–1998. 

3 Earnings in Sweden have been charged with 28% deferred tax in 1994–1998 and 30% in 1989–1993. 

4 The provisions are included in operating- and other interest-free liabilities in 1989–1995. 

5 Calculation of average return on capital employed and shareholders’ equity is based on five measurements 

during 1993–1998, four measurements in 1991 and 1992 and two measurements in earlier years. 

6 Key ratios are defined on page 73. 

7 Board proposal.

Definitions and key ratios 

Calculation of key ratios are based mainly on the recommendations issued by the Swedish Society of Financial 

Analysts. Averages are calculated based on five measuring points. 

CAPITAL DEFINITIONS 


The Group’s and business areas’ capital employed is calculated 

as an average of assets according to the balance sheet, excluding 

interest-bearing assets reduced by current operating 

and tax liabilities, pension provisions and other noninterestbearing 

liabilities. 

Undistributable goodwill attributable to the Reedpack 

acquisition (in 1990) is included in the Group’s capital employed 

as a Groupwide asset. Other goodwill is included in 

capital employed of the business areas. 

Shareholders’ equity 

The shareholders’ equity reported in the consolidated balance 

sheet consists of taxed shareholders’ equity increased by the 

equity portion of the Group’s untaxed reserves. 

Deferred tax liability in untaxed reserves has been calculated 

at a 28-percent rate for Swedish companies and at the 

applicable tax rate for foreign companies in each country outside 

Sweden. 

Surplus value in forest lands and listed shares 

The surplus value in forest lands and listed shares represents 

the difference between the market value and the book value of 

the Group’s holdings. Surplus value is charged with deferred 

taxes. 

Net worth 

Net worth is the sum of consolidated shareholders’ equity and 

the surplus value in forest lands and listed shares. 

Net debt 

Net debt is the sum of consolidated interest-bearing debt, less 

liquid funds and interest-bearing short-term and long-term 

receivables and capital investment shares. 

FINANCIAL MEASUREMENTS 

Equity/assets ratio 

The equity/assets ratio corresponds to shareholders’ equity 

plus minority interests expressed as a percentage of total assets. 

Equity/assets ratio is also calculated with shareholders’ equity, 

including surplus value in forest lands and listed shares. 

Debt/equity ratio 

The debt/equity ratio is expressed as net debt in relation to 

shareholders’ equity, including minority interests. 

Interest coverage 

Interest coverage is calculated in conformity with the net 

method according to which operating profit is divided by 

financial items. 

Cash earnings 

Cash earnings are calculated as earnings before tax, with a reversal 

of depreciation of tangible and intangible assets, share in 

earnings of associated companies, nonrecurring items, reduced 

by tax payments. 

Debt payment capacity 

Debt payment capacity expressed as cash earnings in relation 

to net debt. 


Operating cash flow includes the total of operating surplus, 

change in operating capital and pension liabilities, with deduction 

for current capital expenditures in property and plant and 

restructuring costs. 


Cash flow from current operations comprises operating cash 

flow less net financial items and tax payments and taking into 

account other financial cash flow. 

Strategic investments 

Strategic investments are designed to increase the Company 

future cash flow through acquisitions of companies, capital 

expenditures to expand facilities, or in new technologies that 

boost SCA’s competitiveness. 

Current capital expenditures 

Current capital expenditures are investments to maintain competitiveness, 

such as maintenance, rationalization and replacement 

measures or investments of an environmental nature. 

MARGINS, ETC. 

Operating margin 

Operating profit as a percentage of net sales. 

Net margin 

Net earnings as a percentage of net sales. 

Capital turnover 

Net sales divided by average capital employed. 

RATES OF RETURN 

Return on capital employed 

Return on capital employed is calculated for the Group and 

business areas as operating profit as a percentage of average 

capital employed. 

Return on shareholders’ equity 

Return on shareholders’ equity is calculated for the Group as 

net earnings as a percentage of average shareholders’ equity. 

OTHER MEASUREMENTS 

Net worth per share 

Net worth per share is calculated based both on the total number 

of shares outstanding and the number of shares after full 

dilution. 

Earnings per share in SEK 

Earnings per share is calculated after tax and full dilution as 

shown below: 


Net earnings for year 

Reversal of interest expense, after tax, 

3,379 2,759 

on option and convertible loans 6 3 

Total 

Average number of shares after 

3,385 2,762 

full dilution, millions 

Earnings per share after taxes and 

198.2 197.6 

full dilution, SEK 17.07 13.98 

73

74 

Glossary 


Fluff – Pulp based on wood fiber, used 

to absorb fluid. Used in incontinence 

and feminine hygiene products, diapers, 

etc. 

Tissue – Créped soft paper which is the 

basis for hygiene products such as napkins, 

toilet paper and towels, and toweling 

products for institutions, hotels, etc., 

Packaging 

Sheet plant – See Converting plant. 

Fluting – The rippled middle layer in 

corrugated board, produced from semichemical 

pulp or recycled fiber. 

Integrated packaging plant – Produces 

corrugated board and converts it into 

finished packaging (boxes and trays) 

with color-printed text and graphics. 

Converting plant – Produces finished 

packaging from corrugated board sheets 

supplied by a corrugated board plant 

(see below) or an integrated packaging 

plant. 

Liner – The surface layer of corrugated 

board. Available in various grades, such 

as kraftliner (based on fresh wood fiber) 

and testliner (based on recycled fiber). 

Corrugated board – Two outer layers of 

paper with an intermediate layer of fluting/folded 

paper (see liner and fluting). 

Corrugated board plant (also called 

sheet feeder) – Only produces corrugated 

board in sheet form which is then 

converted into finished packaging at 

another plant. 

Containerboard – Paper specially manufactured 

for the production of corrugated 

board. 

Graphic Paper 

Coating – A surface treatment applied to 

paper or corrugated board packaging. 

Provides a smooth surface with good 

printing properties. 

Coated fine paper – Paper based on 

chemical pulp, with a surface which enhances 

the printing quality. 

Commercial print – independent printing 

houses which mainly produce advertising 

materials. 

Uncoated fine paper – Paper normally 

used for copying and typing paper in A4 

cut-sheet format. The paper is based on 

chemical pulp. 

Chemical pulp – Wood fibers processed 

chemically, normally by cooking. 

Chlorine-free pulp – Pulp that is 

bleached without using chlorine in any 

form. 

LWC paper – Light Weight Coated paper 

is a coated supercalendered (SC) paper 

with a high mechanical pulp content. 

Used for periodicals and advertising 

materials with demanding color-printing 

requirements. 

Mechanical pulp – Debarked wood 

which is ground or chipped for mechanical 

refining to separate the fibers to form 

pulp. 

SC – Super Calendered printing paper 

with a high gloss surface and with a high 

content of mechanical and/or de-inked 

pulp. Mainly used for periodicals and 

advertising materials. 

Newsprint – Paper for newspapers produced 

from mechanical pulp based on 

virgin wood fiber or recycled fiber. 

SCA Forest and Timber 

Cross-cut blanks – Sawn goods used as 

semifinished goods in the furniture and 

door industries, for example. 

Pulpwood – The part of the tree used for 

the production of pulp. 

Sawn timber – Wood sawn into various 

dimensions/sizes: planks, joists, etc. 

Saw logs – The part of the tree delivered 

to a sawmill. Normally the best part of 

the tree. 

m 3 fub – Cubic meters under bark. The 

actual volume of wood in a tree, less the 

bark, expressed in cubic meters 

SCA Raw Materials and Logistics 

Recycled fiber – Fiber based on recovered 

paper. 

Recycled paper – Paper based on recycled 

fiber; recovered paper. 

Wood fiber – Wood fiber from felled 

trees (virgin wood fiber) or from used 

paper or corrugated board products 

(recycled fiber). 

Environmental management 

EMAS – EU’s system for environmental 

management and auditing of forestry. 

GWh – Gigawatt hours: unit of energy 

measurement (electricity and heat). 

1 GWh= 1 million kWh. 

Liner – See under Packaging headline. 

m 3sk – Forest cubic meter. Trunk wood 

and bark from root line to treetop. Used 

in connection with forest inventories. 

MW – Megawatt. Unit used to measure 

power. 

Oil equivalent – Amount of fuel equal to 

a cubic meter of oil. 

Productive forest land – Land with a 

productive capacity that exceeds one cubic 

meter of forest per hectare annually. 

RMS – SCA ’s reource-management system. 

TJ – Terajoule. Unit used to measure 

energy (fuel). One TJ is equal to approximately 

25 cubic meters of oil. 

TWh – Terawatt hour: a unit used to 

measure energy (electricity). One TWh is 

equal to one billion kWh.

Production capacities 

(excluding fluff products) 

Capacities are shown in 1,000 metric tons 

unless specified otherwise. 

Corrugated board4) Tissue 

Kraftliner 

Testliner 

Market pulp 6) 

Coated fine paper 

Uncoated fine paper 

Total pulp & paper 

Sawn timber m 3 

Mill Country 

Lilla Edet SE 77 77 

Nättraby SE 30 30 

Tilburg NL 31 31 

Friesland * ** NL 25 25 

Croisset 1) FR 30 30 

Stembert BE 60 60 

Hygiene Products Sept FR 88 88 

Svetogorsk RU 23 23 

Mannheim 2) ** DE 324 324 

Mainz-Kostheim ** DE 103 103 

Ortmann ** AT 112 112 

Prudhoe GB 82 82 

Marpo ES 23 23 

Total 1,008 1,008 

SE 90 90 

DK 61 61 

GB 431 431 

FR 134 134 

BE 224 224 

IT 437 437 

TR 31 31 

DE 315 315 

HU 7 7 

PL 5 5 

CH 36 36 

ES 152 152 

Packaging CN 30 30 

CN 1 1 

CZ 43 43 

Munksund SE 350 350 

Obbola * SE 300 100 400 

Lucca IT 240 85 325 

Castelfranco IT 70 70 

New Hythe (Aylesford) GB 140 100 240 

De Hoop * NL 175 145 320 

Izmir TR 55 55 

Aschaffenburg DE 290 290 

Witzenhausen DE 240 85 325 

Oftringen * CH 60 40 100 

Total 1,9975) 650 1,010 815 4,472 

Ortviken SE 340 400 740 

Wifsta SE 150 150 

Östrand SE 320 70 390 

Graphic Paper Aylesford * GB 380 380 

Laakirchen * ** AT 317 317 

Stockstadt DE 175 195 50 420 

Hallein AT 265 45 310 

Total 720 317 400 325 460 415 70 2,707 

Tunadal SE 300 


Lugnvik SE 150 

3) 

Holmsund SE 70 

Munksund SE 265 

Total 785 

AT 329 

FR 63 

DE 773 

SCA Recycling 

IT 

SE 

579 

538 

BE 597 

TR 69 

GB 865 

Total 3,813 

TOTAL 

** Certified in accordance with ISO 14001. 

1,008 1,997 650 1,010 815 720 317 400 325 460 415 70 8,187 785 3,813 

** EMAS certified (EU system for environmental management and auditing). 

1) Includes non-woven. 

2) Includes 50,000 tons of packaging paper and greaseproof paper. 

3) The forestry operations are certified in accordance with FSC as of January 1999. 

4) The conversion factor (from tons to m2) has changed since last year. 

5) The total of 1,997 tons corresponds to 3.5 billion m2. 6) Defined as dry capacity. 

7) Controlled and traded. 

Fluting 

Newsprint 

SC paper 

LWC paper 

CTMP pulp 

75 

Recovered paper 7)

76 

Board of Directors and Auditor 

BOARD OF DIRECTORS 

Elected by Annual General Meeting 

Bo Rydin (1932). Chairman, SCA Board member 

since 1972. Deputy member 1970–1972. 

Other board memberships in listed Swedish companies: 

Chairman of AB Industrivärden, Skanska 

AB, Graningeverken and SAS Council, vice chairman 

of Svenska Handelsbanken. 

SCA shares held: 61,196. 

Sverker Martin-Löf (1943). President and CEO, 

SCA. SCA Board member since 1986. 


AGAAktiebolag and Telefonaktiebolaget 

LM Ericsson 

SCA shares held: 7,057. Convertibles: 1,800. 

Options: 32,700. 

Clas Reuterskiöld (1939). CEO and President, 

AB Industrivärden. SCA Board member since 

1994. 

Other board memberships in listed Swedish 

companies: AGAAktiebolag, Telefonaktiebolaget 

LM Ericsson, Sandvik AB, Skanska AB and 

Svenska Handelsbanken. 


Tom Hedelius (1939). Chairman, Svenska 

Handelsbanken. SCA Board member since 1985. 


Bergman & Beving AB (chairman), AGA 

Aktiebolag (vice chairman), Telefonaktiebolaget 

LM Ericsson (vice chairman), AB Industrivärden 

(vice chairman), SAS Council, and AB Volvo. 


Christer Gardell (1960). President, AB Custos. 

SCA Board member since 1997. 


companies: ASG AB (chairman), Perstorp AB and 

Svedala Industri AB. SCA shares held: 1,356. 

Lars Ramqvist (1938). Chairman of Telefonaktiebolaget 

LM Ericsson. SCA Board member 

since 1994. Other board memberships in listed 

Swedish companies: Skandia (vice chairman), 

AB Volvo (vice chairman) and Astra AB. 

Sören Gyll (1940). Chairman, Pharmacia & 

Upjohn Inc. SCA Board member since 1997. 


companies: AB Volvo, AB SKF, Skanska AB and 

Bilia AB. Board membership in foreign company: 

Oresa Ventures S.A. 

SCA shares held: 119.

Appointed by employees Deputy members 

Gerhard Gustavsson (1939). Process Engineer, 

SCA Hygiene Products AB, Edet Mill. SCA Board 

member since 1989. 

Represents salaried employees. 

Convertibles: 36. Options: 54. 

Tjell-Åke Hägglund (1944). President, SCA 

Recreation and Pension Foundations. SCA Board 

member since 1985. Represents salaried employees. 

SCA shares held: 75. Convertibles: 72. 

Options: 108. 

Alf Söderlund (1943). Instrument Maker, SCA 

Graphic Sundsvall AB, Ortviken Papermill. SCA 

Board member since 1985. Represents wageearner 

employees. SCA shares held: 62. 


Jörgen Andersson (1964). Electrician, SCA 

Hygiene Products AB, Edet Mill. SCA Board 

member since 1997. Represents wage-earner 

employees. SCA shares held: 126. 


Per Ågren (1941). Repairman, SCA Packaging 

Järfälla AB. SCA Board member since 1998. 

Represents wage-earner employees. 


Bruno Lundgren (1941). Supervisor, SCA 

Packaging Munksund AB. SCA Board member 

since 1989. Represents salaried employees. 

SCA shares held: 62. Convertibles: 720. 


Board Secretary 

Michael Bertorp (1949). Executive Vice President 

and General Counsel, responsible for Secretariat 

and Legal Affairs. 

SCA shares held: 1,917. Convertibles: 1,800. 


AUDITOR 

Öhrlings Coopers & Lybrand AB. 

Senior responsible auditor: Authorized Public 

Accountant Bertil Edlund 

Figures within parentheses indicate year of birth. 

Information as of 31 December 1998. 

BOARD OF DIRECTORS AND ITS 

WORK PROCEDURES 

SCA’s Board of Directors comprise seven 

members elected at the Annual General 

Meeting and three members, with three 

deputy members, elected by employees. 

The Board members elected at the Annual 

General Meeting include persons closely 

associated with SCA’s principal owners, 

AB Industrivärden and AB Custos and 

persons independent of these owners. The 

president is also a member of the 

Board of Directors. Other staff members 

in the Company participate in Board 

meetings to make presentations or in an 

administrative capacity. 

During the 1998 fiscal year, the Board 

held 9 (7) meetings. The work of the 

Board of Directors follows an annual 

report plan, designed to ensure that the 

Board’s need to be informed is met, and is 

affected in other respects by the specific 

work assignments established by the 

Board regarding a division of work 

between the Board and the President. 

Since the spring of 1994, the Board 

has appointed a special committee of its 

members whose task is to prepare a proposal 

regarding the composition of SCA’s 

Board of Directors. For the period preceding 

the 1999 Annual General Meeting, 

this nominating committee comprises Bo 

Rydin, Chairman, Tom Hedelius, Clas 

Reuterskiöld and Christer Gardell. 

There is also salary committee which 

deals with matters related to employment 

and pension terms of senior executives 

and other employees. During the period 

preceding the 1999 Annual General 

Meeting, this committee comprises Bo 

Rydin, Chairman, Clas Reuterskiöld and 

Sören Gyll. The Board of Directors has 

addressed the issue of appointing a special 

auditing committee, but decided that 

control matters brought to the attention 

of Board should be dealt with by the entire 

Board. In order to ensure that the 

Board’s information requirements in this 

respect are met, the Company’s senior 

auditor reports personally to the Board 

each year regarding his observations based 

on examination of the accounts and 

his assessment of the Company’s internal 

controls. 

77

78 

Senior management 

Sverker Martin-Löf (1943) 

President and CEO, SCA. 

Doctor of Technology. 

SCA employee since 1977. 

Earlier: Senior Vice President, 

Technology, MoDo. 


Convertibles: 1,800. 


Alfred H. Heinzel (1947). 

President, SCA Hygiene 

Products. B. Sc. Eng. and 

MBA. 


Earlier: President, 

Laakirchen AG. 

SCA shares held: 0. 

Convertibles: 900. 


Colin J. Williams (1942). 

President, SCA Packaging. 

Master of Physical 

Chemistry. MBA. 


Earlier: Employed by 

Johnson & Johnson. 




Kenneth Eriksson (1944). 

President, SCA Graphic 

Paper. Mechanical Engineer. 


Earlier: President, Sunds 

Defibrator AB. 




Jan Åström (1956). 

President, SCA Fine Paper. 

M. Sc. Eng. 


Earlier: Employed by MoDo. 


Convertibles: 360. 


Jerker Karlsson (1944). 

President, SCA Forest and 

Timber. Licentiate of Forestry. 


Earlier: President, SCA 

Skog AB. 




Ulf Frölander (1939). 

President, SCA Raw Materials 

and Logistics. Ph. D. 


Earlier: Executive Vice 

President, Boliden AB. 




See Note 27, page 63, for terms of employment of senior managers. Information as of 31 December 1998.

Michael Bertorp (1949). 

Executive Vice President and 

General Counsel, Secretariat 

and Legal Affairs. Bachelor of 

Law. SCA employee since 

1984. Earlier: Judge in Swedish 

court system and positions 

in the Ministry of Justice. 




Alf de Ruvo (1938). Executive 

Vice President, Corporate 

Research and Technology. 

M. Sc. and M. Sc. Eng. 


Earlier: Vice President, 

Research and Development, 

Sunds Defibrator AB. 




Åke Rietz (1945). Executive 

Vice President and Chief 

Financial Officer. MBA. 


Earlier: CFO, Duni AB. 




Lennart Persson (1947). 

Senior Vice President, 

Accounting and Financial 

Control. Business economist. 

SCA employee since 

1987. Earlier: Executive Vice 

President AB SCA Finans. 




Sten Lindholm (1941). 

Senior Vice President, 

Corporate Communications. 

BA. SCA employee since 

1990. Earlier: Senior Vice 

President, Corporate 

Communications, AGA 

Aktiebolag. 




Francis Van Sevendonck 

(1946). Senior Vice President, 

Human Resources. Bachelor 

of Law. SCA employee since 

1990. Earlier: Director of 

Human Resources, Westinghouse 

Electric Corporation. 




Carl-Axel Olson (1948). 

President, AB SCA Finans. 

MBA. 


Earlier: Vice President AB 

SCA Finans. 




Ralf Helsing (1942). Senior 

Vice President, Business 

and IT Control. Business 

economist. SCA employee 

since 1986. 

Earlier: Group Controller 

in SCA. 




79

80 

SCA in the world 

Headquarter 

SVENSKA CELLULOSA 


Box 7827 

SE-103 97 STOCKHOLM 

Sweden 

Stureplan 3 

Tel +46-8 788 51 00 

Fax +46-8 660 74 30 

www.sca.se 


President and CEO 


SCA HYGIENE PRODUCTS AG 

Postfach 1429 

DE-85732 MÜNCHEN- 

ISMANING 

Germany 

Oskar-Messter-Strasse 25 

Tel +49-8035 800-0 

Fax +49-8035 805 98 

Alfred H. Heinzel, President 

Packaging 

SCA PACKAGING 

Excelsiorlaan 81 

BE-1930 ZAVENTEM 

Belgium 

Tel +32-2 718 3711 

Fax +32-2 725 5953 

Colin J. Williams, President 

Graphic Paper 

SCA GRAPHIC PAPER AB 

Box 846 

SE-851 23 SUNDSVALL 

Sweden 

Tel +46-60 19 40 00 

Fax +46-60 15 24 50 

Kenneth Eriksson, President 

SCA FINE PAPER GmbH 

Postfach 1100 

DE-83060 RAUBLING 

Germany 

Rosenheimer Strasse 33 

Tel +49-8035 8012 

Fax +49-8035 80322 

Jan Åström, President 


SCA FOREST AND TIMBER AB 

SE-851 88 SUNDSVALL 

Sweden 

Skepparplatsen 1 

Tel +46-60 19 30 00 

Fax +46-60 19 33 29 

Jerker Karlsson, President 

Raw Materials and 

Logistics 

SCA RAW MATERIALS AND 

LOGISTICS EUROPE N.V. 

Excelsiorlaan 79-81 

BE-1930 ZAVENTEM 

Belgium 

Tel +32-2 715 4811 

Fax +32-2 720 6192 

Ulf Frölander, President 


Packaging 

Graphic Paper 


Raw Materials and Logistics 

Other companies 

AB SCA FINANS 

Box 7827 


Sweden 

Stureplan 3 

Tel +46-8 788 51 00 

Fax +46-8 679 86 60 

Carl-Axel Olson 

SCA RESEARCH AB 

SE-405 03 GÖTEBORG 

Sweden 

Bäckstensgatan 5, Mölndal 

Tel +46-31 746 00 00 

Fax +46-31 746 19 00 

Ulf Carlsson 

SCA FÖRSÄKRINGS- 

AKTIEBOLAG 

Box 7827 


Sweden 

Stureplan 3 

Tel +46-8 788 52 43 

Fax +46-8 611 99 32 

Per Larsson

The Annual General Meeting of shareholders 

is being held on Wednesday, 

24 March 1999 at 1:00 p.m. in Vinterträdgården, 

Grand Hôtel, Stockholm, 

Sweden. Doors open for registration at 

12:00 noon. Refreshments will be served 

after the meeting. 

Right to participate in the meeting 

To participate in the meeting, shareholders 

must be on the SCA list of shareholders 

not later than Friday, 12 March 

1999 

and notify SCA of their intention to 

participate, not later than 4:00 

p.m. on Friday, 19 March 1999. 

Registration on shareholders’ list 

The SCA list of shareholders is maintained 

by the Swedish Central Securities 

Depository (CSD). Stock may be registe- 

Annual General Meeting and 

Nominating Committee 

red either in the shareholder’s name or in 

the name of a trustee. 

To participate in the meeting, shareholders 

whose stock has been registered 

in the names of trustees must arrange for 

their shares to be re-registered in their 

own names at CSD not later than Friday, 

12 March 1999. 

Trustees will help with the registration, 

usually for a modest fee. 

Notice of intention to participate 

Notice can be given 

• by telephone: +46-8 788 51 39, 

• by telefax: +46-8 678 23 24, 

• by mail to: 

Svenska Cellulosa Aktiebolaget SCA 

Legal Affairs 

Box 7827, SE-103 97 Stockholm, 

Sweden. 

• or on SCA’s website: www.sca.se 

In providing such notice, a shareholder 

should state: 

• name 

• social security/organization number 

• address and telephone number 

Payment of dividend 

Monday, 29 March 1999 is proposed as 

the record date for entitlement to dividends. 

Payment is expected to be made 

through CSD on Wednesday, 7 April 

1999. 

Nominating Committee for SCA’s Board 

of Directors 

The Committee presents proposals on 

the composition of SCA’s Board of 

Directors. Committee members: 

Bo Rydin (Chairman), Christer Gardell, 

Tom Hedelius and Clas Reuterskiöld. 

Address: SCA, Box 7827, 

SE-103 97 Stockholm, Sweden. 

Financial information report dates in 1999 

Year-end and interim reports are published in the SCA Investor Report magazine, among other publications, 

and on SCA’s home page on the Internet: www.sca.se 

SCA Investor Report and the Annual Report are sent automatically to shareholders 

who have given notice that they wish to receive this information. 

28 April 1999 Interim report for three months ended 31 March 1999. 

29 July 1999 Interim report for six months ended 30 June 1999. 

28 October 1999 Interim report for nine months ended 30 September 1999. 

31 January 2000 Year-end report on 1999 operations. 

March 2000 Annual Report for 1999. 

These reports, which are available in Swedish and English, may be ordered directly from 

Svenska Cellulosa Aktiebolaget SCA 

Corporate Communications 

Box 7827, SE 103 97 Stockholm, Sweden 

Telephone: +46-8 788 51 00 / Telefax: +46-8 678 81 30 

or from SCA's Internet website: www.sca.se 

Investor Relations 

Sten Lindholm, Senior Vice President-Corporate Communications 

Telephone: +46-8 788 51 62 / e-mail: sten.lindholm@hq.sca.se 

Peter Nyquist, Business Analyst 

Telephone: +46-8 788 51 75 / e-mail: peter.nyquist@hq.sca.se 

This Annual Report is produced by SCA in cooperation with n3prenör. 

Printed on EURO Art matt, 250 g, and EURO WEB matt, 130 g, manufactured by SCA Fine Paper. 

Photography: Dan Coleman and other. Printed by Tryckcentra, Västerås, 1999. 

81

SVENSKA CELLULOSA 


Box 7827, SE-103 97 Stockholm 

Sweden 

Tel +46-8-788 51 00, fax +46-8-660 74 30 

www.sca.se 

SCA supports 

Amnesty International’s 

human rights efforts

Annual Report 1998

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