SCA to Raise Paper, Tissue Prices as Demand Improves, CEO Says

Svenska Cellulosa AB (SCAB), Europe’s biggest tissue maker, will raise prices for magazine paper and soft tissue in the second half as demand for most of its products improves, Chief Executive Officer Jan Johansson said.

“Volumes are returning,” Johansson told reporters today at the company’s Stockholm headquarters.

Demand for paper and packaging products has been better in the second quarter than the company expected, he said. Continued high costs for pulp and recycled paper, which SCA uses to make its products, are the only problem for the company now, he said.

SCA is rebounding from the economic downturn, which took a toll on the European paper industry by depressing prices and demand. SCA fared better than most of its rivals after increasing its focus on selling hygiene-related products, which are more resilient in an economic slump, he said.

Current pulp prices are likely to fall this year since China has reduced its pulp imports, Johansson said. Chile’s production, hurt by the 8.8-magnitude earthquake that hit the country on Feb. 27, is now back at nearly full operation, he said.

Still, SCA, which buys about 60 percent of the pulp it uses, is considering expanding capacity at its pulp plant in Ostrand, Sweden, Johansson, 56, said.

Tempo Tissues

The company, whose brands include Tempo tissues and Libero nursing pads, plans to start selling diapers and other baby products in China this year, Johansson said.

“It’s a big test for us,” he said. “China is a huge but difficult market.”

Last year the company introduced the Tena incontinence brand, the global leader, in China. The effort, which includes educating between 6,000 and 10,000 hospital nurses, is going “better than expected,” Johansson said.

Other markets that SCA aims to focus more on include the Middle East, Brazil and India, he said.

The European newsprint industry needs to consolidate and close about 15 plants to address the approximately 2 million-ton annual overcapacity that is depressing earnings in that area, he said. SCA is not planning to participate in such as consolidation as it has yet to see a proposal “that is better for our shareholders than the situation we have today,” Johansson said.

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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