Swedish forestry firm SCA beats Q1 profit forecasts

·2-min read

By Greta Rosen Fondahn

(Reuters) - Swedish forestry company SCA reported a smaller-than-expected fall in first-quarter core earnings on Friday, sending its shares 5% higher, as renewable energy growth and forest operations softened a hit from lower prices.

SCA's earnings before interest, taxes, depreciation and amortization (EBITDA) fell 21% to 2.06 billion Swedish crowns ($199.95 million) in the quarter, above analysts' estimate of 1.73 billion crowns, according to Refinitiv Eikon data.

Quarterly net sales declined 4% to 4.81 billion crowns, slightly below analysts' forecast.

The Swedish forestry firm attributed the sales decline to lower selling prices for solid-wood products and container board, while growth in renewable energy and strong earnings in forest operations had a positive impact on earnings.

DNB analyst Johannes Grunselius pointed out that thanks to a high share of forest ownership and favourable placement of industry operations, SCA has low costs, allowing for profits in a tough market with suppressed pricing.

Weaker-than-expected recovery in China and falling global demand for pulp and container board has hit the Nordic forestry sector in the recent months. On Tuesday, Finland's Stora Enso reported a 53% slump in first-quarter profit and UPM booked a smaller-than-expected rise in earnings.

SCA said demand in the pulp segment remained weak during the quarter, resulting in lower selling prices than in the previous quarter.

"This was partly offset by positive mix effects with a high share of sales to SCA's core markets," the company said in an earnings statement.

In a call with analysts CEO Ulf Larsson added he expects "high single-digit" percentage price increases in the second quarter for the wood segment, while he expects pulp prices to continue to fall.

"Coming into the second quarter we still see slow demand, not least in China," he said on pulp, but added that China trade will start again after prices establish a floor.

($1 = 10.3026 Swedish crowns)

(Reporting by Greta Rosen Fondahn in Gdansk; Additional reporting by Agata Rybska; Editing by Milla Nissi and Sharon Singleton)