Short facts about Holmen

* Board proposal * * Excl. items affecting comparability

The group’s operating profit

The operating profit excluding items affecting comparability was SEK 1 980 million in 2011, corresponding to a return on capital employed of 8.5 per cent. The improved profit was due to the higher prices of printing paper and paperboard. The costs of wood and recovered paper increased, having a negative impact on profit. In the fourth quarter,  Holmen revalued its forest holdings based on a new harvesting plan and new assumptions on future sales prices and costs. The revaluation impacted on profit after tax for the year by SEK 2 648 million. The year’s investments amounted to SEK 1 733 million and mainly comprised the new sawmill at Braviken, a new recovery boiler and turbine at Iggesund Mill and a new biofuel boiler at the mill in Workington. Net financial debt increased by SEK 487 million, to SEK 6 259 million. At year-end, the debt/equity ratio was 0.32. The Board proposes a dividend of SEK 8 per share.

The market

For printing paper and paperboard the market weakened somewhat during the autumn, contributing to production limitations. Prices were stable after increases made at the end of 2010 and the beginning of 2011. The market for sawn timber was consistently weak during the year, and profi tability was low throughout the industry. Demand for pulpwood and timber was stable at the beginning of the year but declined somewhat in the final quarter, which also meant price reductions. Electricity production was high due to a high level of infl ow into Holmen’s water reservoirs. At the same time, prices returned to more normal levels after being extremely high the previous year.

Outlook

The Group’s profi tability improved considerably during 2011 thanks to higher prices for printing paper and paperboard while raw material costs increased. The market for the Group’s products weakened during autumn 2011, and the economic slump is causing uncertainty about demand in 2012. Price negotiations regarding printing paper are under way but are not expected to lead to any major changes. The prices of paperboard and sawn timber are stable. The cost situation is expected to improve somewhat due to price reductions for recovered paper and wood, as well as ongoing streamlining measures. Increased harvesting in Holmen’s forests will have a positive impact on profit, although windthrown forest must be dealt with, which will mean a temporary increase in costs. The currency situation is important to the Group, and profit in 2011 benefi ted from favourable levels of currency hedging. These hedging measures will expire at the start of 2012, and this will have a signifi cantly negative effect on the earnings trend. Investments are expected to maintain a high level in 2012, mainly as a consequence of the two major ongoing invest-ments in the paperboard operation.