SCA to Expand Into Global Brands, Review Unit Margins

Svenska Cellulosa AB (SCAB), Europe's biggest tissue maker, may curtail some operations as the Swedish company expands its personal care and tissue products into global brands.

``Besides expanding and acquiring things, it's also important to stop doing things that we can see have no future in the business,'' Chief Executive Officer Jan Johansson said today at the company's annual general meeting in Stockholm. He reiterated plans announced last month to review the company's divisions and said one focus would be improving profitability in the tissue business.

Johansson is increasing production of personal care products, where demand is outpacing supply, he said. The company is surveying consumers in markets including Russia, Mexico and China to find out how they use products differently, it said today in a Cision newswire release. It aims to take on rival Kimberly-Clark Corp. (KMB), which sells more of its products in emerging markets.

``We have activities that need to grow where sales and profitability are concerned, while others need to grow where dividends and cash flow are concerned, so we need to be able to put our foot on the accelerator and the brake at the same time,'' Johansson said.

Rising Costs

Rising pulp and energy prices have put pressure on profit margins at the company's businesses, which also include corrugated board and publication paper.

``When disposable income rises in growth markets, one of the first things people want to do is buy personal care products,'' Johansson said. The aging population is also in the company's favor as its Tena incontinence products are growing 11 percent a year, he said.

Tena and Tork tissue are currently the company's top global brands with revenues of more than 1 billion euros annually, Johansson said. Libero diapers and Libresse women's hygiene products are among the other top candidates for globalization either as uniform brands or as localized versions of a basic product, the company has said.

``We've now got the possibility to work with trademark platforms globally,'' Johansson said. Svenska Cellulosa, or SCA, is building up its stable of own-label brands to regain pricing power with supermarket retailers and institutional customers.

SCA last year bought Procter & Gamble Co.'s European tissue business, adding brands including Bounty paper towels and Charmin toilet paper, as well as Tempo pocket handkerchiefs which are also sold in Hong Kong.

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

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

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