Svenska Cellulosa AB, Europe’s largest paper-tissue maker, dropped the most in more than three weeks in Stockholm trading after DNB ASA cut its rating and lowered its earnings estimates on a strenghtening krona.
The shares fell as much as 2.2 percent to 164.9 kronor, the biggest intraday drop since March 12. The stock traded 2 percent lower at 165.2 kronor at 12:45 p.m. local time, giving the company a market value of 116 billion kronor ($17.9 billion.)
SCA, based in the Swedish capital, has transformed itself into a personal care business from a traditional paper company after it finalized the sale of its packaging unit last year. That has helped its share price gain 20 percent this year alone, prompting DNB to lower its rating to hold from buy, Oslo-based DNB analyst Haakon Aschehoug said in a note to clients today.
“Due to the recent share price appreciation we have downgraded our recommendation to hold,” Aschehoug wrote in the note. DNB has also reduced its 2013 estimate for earnings before interest and tax by 5 percent because of “a stronger Swedish krona and rising tissue prices,” the analyst said.
The Swedish krona has strengthened 2.6 percent against the euro so far this year, and has also appreciated against most other major currencies, including the U.S. dollar, Swiss franc, Norwegian krone and British pound.
SCA is in the process of raising prices for consumer tissue in Europe and has the ambition to increase prices by as much as 2 percentage points annually. While 50 percent of the earnings estimate reduction stems from SCA’s Forest Product unit, DNB also cut its Ebit estimate for hygiene products by 3 percent.