Dec. 19 (Bloomberg) -- Svenska Cellulosa AB, Europe’s largest paper-tissue maker, rose to its highest level in at least 22 years in Stockholm trading after reducing its forest-product operations and cutting costs to boost earnings.
SCA rose as much as 3.4 kronor, or 2.5 percent, to 139.8 kronor and was trading up 2.3 percent at 139.5 kronor as at 11:56 a.m., its highest price level since at least April 17, 1990. The volume traded was 78 percent of the the three-month daily average. The shares have gained 37 percent this year, valuing the paper maker at 98.3 billion kronor ($15 billion).
The company will cut expenses and increase efficiency at its forest-product operations to boost earnings by 1.3 billion kronor annually from 2015, including closing sawmills in Vilhelmina and Holmsund in Sweden and spending cuts at the Ortviken paper mill. SCA also said it’s selling its publication paper mill in Laakirchen in Austria to Heinzel Group.
“This is exactly what we wanted to hear” as “they’ve raised the bar pretty significantly when it comes to results improvements,” Karri Rinta, an analyst at Svenska Handelsbanken AB in Stockholm, said by phone today. “It cuts uncertainty associated with forest products, which is more cyclical and has bigger structural question marks” than the company’s core hygiene products business. Rinta has an accumulate recommendation on the stock.
SCA, also Europe’s biggest private forest owner, has increased its focus on consumer-hygiene products to skirt most of the decline that has gripped the Nordic paper industry in the past few years. The manufacturer hasn’t escaped effects of the region’s sovereign-debt crisis entirely, and it announced last month a plan to cut 1,500 jobs at the hygiene unit, becoming the latest Swedish exporter to reduce their workforces as the strengthening krona and falling demand hurt exporters’ profits.
The forest-products reorganization is starting “against the backdrop of the prevailing economic and currency situation,” the company said. “The program includes a structured plan to reduce fixed and variable costs, income improvements by way of increased production and streamlining activities, and a changed product and market mix.”
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