SCA head predicts tough year for packaging business

The Swedish packaging, paper and forest products firm reported an increase in group sales of 3% to SEK 56bn (£4.5bn) in the first six months of 2009. Pre-tax profit for the same period fell by 3%, but actually rose by 18% to SEK 2bn in the second quarter.

Packaging sales in the six months to 30 June stood at SEK 14.5bn (£1.2bn), down 16% compared to last year. Much of the reduction in sales is a result of selling the UK and Ireland to SAICA last year. Pre-tax profit fell by 91% to SEK 92m in the same period.

SCA president and chief executive Jan Johansson said the firm suffered weak demand and price pressures for corrugated board and testliner and that earnings could fall further over the year. “We will encounter continued difficult market conditions for the packaging operations during the second half of the year,” he said.

SCA has embarked on a cost reduction and restructuring programme for its packaging operation that it hopes will generate annual savings of more than SEK 1bn beginning in the second quarter of 2010.

The firm expects to cut around 2,200 jobs this year as it closes 11 corrugated board plants. In May, it closed the New Hythe testliner mill.

Packaging contributed 25% of net sales in the first half of the year, but only 2% of operating profits.

SCA PACKAGING RESULTS

Net sales SEK 14.5bn (-16% on the first half of 2008)
Operating profit SEK 92m (-91%)
Liner product deliveries 1.02m tonnes (-14%)
Corrugated board deliveries 1.5bn sqm (-25%; -14% adjusted for SAICA divestment)

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