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SCA Shares Jump as Profitability Improves in Paper Tissue Unit

Oct. 18 (Bloomberg) -- Svenska Cellulosa AB, Europe’s largest paper-tissue maker, rose the most in a year in Stockholm after reporting earnings that beat analyst estimates as profitability at its tissue and forest units improved.

The shares added as much as 6.6 percent, their steepest intraday advance since Oct. 18, 2012. The stock gained 6.5 percent to 172.8 kronor at 11:19 a.m. local time, making it today’s biggest winner on the Nasdaq OMX Stockholm 30 Index and the Stoxx 600 Europe Index.

SCA said profit in the third quarter more than quadrupled to 1.45 billion kronor ($226.5 million), beating the 1.36 billion-krona average of 11 analyst estimates compiled by Bloomberg. Sales dropped 0.7 percent to 22 billion kronor while cost of goods sold declined 3.8 percent to 16.4 billion kronor.

Nomura today repeated a buy recommendation on the share and said SCA’s improved profitability “is highly supportive” of its estimate that the Stockholm-based company’s margin on earnings before taxes and interest will exceed 14 percent by 2016. The Ebit margin was 10.1 percent at the end of 2012.

SCA’s “strong margin performance reflects a combination of savings/synergies build-up, pricing in Western European tissue and more favorable FX and input costs sequentially,” Guillaume Delmas, an analyst at Nomura, said in a note.

Of the 22 analysts that cover SCA and share their ratings with Bloomberg, 12 advise clients to buy the shares while 6 have hold ratings and 4 advise investors to sell the stock. The average 12-month share price estimate is 179.43 kronor.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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