Svenska Cellulosa AB, Europe’s largest private forest owner, will create two divisions, one for forest products and another for consumer products, in a move that could foreshadow a breakup of the company.
The Swedish company’s swathes of woodlands will be combined with paper, pulp and sawn-timber operations to better highlight the value of the operation, while tissue and personal-care products will form a separate entity, the Stockholm-based company said in a statement on Friday. SCA shares climbed as much as 6.2 percent.
“This announcement splits SCA clearly into two parts,” Exane BNP Paribas analyst James Wyatt said in a note. “Could part of the motivation here be to ready the company for a split? The answer is unclear, but will certainly be something for the bulls to latch onto today.”
The Swedish company generates 85 percent of sales from tissue and personal-care products like incontinence pads and diapers. Asked whether the measures are a prelude to exiting forest operations, Chief Executive Officer Magnus Groth said on a call that the company hasn’t made any further decisions.
The separation will take until the end of next year, partly due to the legal work required to make the forest-products division a subsidiary, according to Groth, five months into his role after replacing Jan Johansson, who was ousted following controversies about alleged misuse of corporate jets.
“This is a journey that we have started now, to make this separation of the assets,” the CEO said.
SCA has earmarked 7.8 billion kronor ($922 million) in investment to double production capacity of pulp over the next three years at a mill in Sweden.
The stock traded 10.30 kronor higher at 244.2 kronor as of 9:53 a.m., an advance of 4.4 percent.