Holmen

Quarterly Report • Oct 20, 2022

Holmen Interim Report January-September 2022

	Quarter			Jan-Sep	Full year
SEKm	3-22	2-22	3-21	2022	2021	2021
Net sales	5 784	6 173	4 877	17 707	14 709	19 479
Operating profit excl. item affecting comparability	1 921	2 101	1 129	5 640	2 876	4 061
Operating profit	1 921	2 101	978	5 905	2 725	3 731
Profit after tax	1 482	1 642	763	4 606	2 136	3 004
Earnings per share, SEK	9.1	10.1	4.7	28.5	13.2	18.5
Operating margin, %*	33	34	23	32	20	21
Book value, forest assets, SEKm	47 602	47 396	43 693	47 602	43 693	47 080
Cash flow before investments and change in working capital	1 662	2 196	980	5 783	2 671	3 375
Debt/equity ratio, %	5	7	10	5	10	9
*Excl. the item affecting comparability; see page 15.

• Operating profit for January–September 2022 was SEK 5 905 million (January–September 2021: 2 725). Excluding the item affecting comparability, operating profit increased by SEK 2 764 million to SEK 5 640 due to higher selling prices, while cost inflation was limited by our high level of wood and energy self-sufficiency.

• Compared with the second quarter, operating profit for the third quarter decreased by SEK 180 million to SEK 1 921 million. A weaker wood products market had an adverse impact, but this was largely offset by higher earnings in other business areas.

• Profit after tax for January–September amounted to SEK 4 606 million (2 136), which corresponds to earnings per share of SEK 28.5 (13.2).

*Excl. items affecting comparability.

CEO comments

The energy crisis in Europe worsened in the quarter, with significant difficulties sourcing enough energy for households, transport and industry, while the central banks battle high inflation pressures. Thanks to our high level of wood and energy self-sufficiency we were able, however, to maintain very high profits of SEK 1 921 million over the quarter, despite the softening wood products market.

Competition for pulpwood and wood chips is high in the wood market, as the industry is going into overdrive at the same time as imports from Russia have stopped. The log market, on the other hand, has slowed down as a result of the uncertainty surrounding the construction market. Wood prices have gradually climbed in the last year, raising the underlying profit for the Forest business area to SEK 346 million in the third quarter. Our position in the wood market, where we have good control over raw materials and the entire value chain, is a real advantage in these uncertain times. It ensures the security of our raw material supplies and good conditions for the development of our production facilities.

Demand for paperboard for consumer packaging held up well and market prices settled at a higher level. Higher prices, combined with a very favourable energy situation at both Iggesund Mill and Workington, increased profits to SEK 400 million, despite the increase in raw material costs. Backed by an advantageous cost position, we will continue to develop our business with customers with the highest demands for quality.

The price of paper stayed high, driven by the shortage of both energy and fibre. Our strong cost position enabled us to keep our earnings at a record level of SEK 832 million. With well invested facilities and access to fossil-free electricity and local wood, we are developing our book and magazine paper business while also exploring new segments in the packaging area.

There is considerable interest in building in wood, but customers are postponing their orders given the uncertainty affecting the construction market. Prices decreased substantially in the quarter in Europe and also the US. The price decrease and low deliveries drove earnings down to SEK 177 million. With our strong position in the wood market, we nevertheless see good opportunities to steadily develop the wood products business in pace with the increasing demand for sustainable building materials.

During the year, we have increased our renewable electricity production by nearly 40 per cent and have strong potential to add more. Bottlenecks in the electricity grid are, however, resulting in large and unnecessary price differences within Sweden, which is creating an unpredictable playing field for electricity producers and consumers. Even though our power was mostly locked up in northern Sweden, earnings were relatively good, at SEK 214 million. This last year, the benefits of our plannable hydro power have become all the clearer, as it can be managed to ensure production at times when the energy need is highest, and can help to keep the electricity grid's frequency stable.

With our large forest holdings as a foundation, we grow houses. We make renewable packaging, magazines and books from what is left over, while at the same time harnessing the energy that blows through the treetops and flows in the rivers. This business model is a particularly good fit in a world that is short of raw materials and energy and where we strive for a sustainable society.

Key figures Q3 2022

Operating profit, SEKm Operating margin, % Debt/equity ratio, %

Forest

Holmen carries out active and sustainable forestry on over 1 million hectares of its own productive forest land. The annual harvest from own forest amounts to 2.8 million m3sub.

	Quarter				Jan-Sep
SEKm	3-22	2-22	3-21	2022	2021	2021
Net sales	1 755	1 810	1 444	5 373	4 819	6 509
Of which from own forests	352	427	310	1 109	1 040	1 376
Operating costs	-1 543	-1 530	-1 265	-4 673	-4 145	-5 400
Change in biological assets	156	88	164	361	365	464
EBITDA	368	368	342	1 061	1 039	1 573
Depreciation and amortisation according to plan	-22	-20	-20	-62	-57	-78
Operating profit	346	349	323	999	982	1 495
Book value, forest assets	47 602	47 396	43 693	47 602	43 693	47 080
Deliveries, own forests, '000 m³	627	820	637	2 120	2 167	2 833

Competition for pulpwood increased, whereas log demand slowed somewhat. Market prices rose slightly during the quarter.

Operating profit for January–September was SEK 999 million (982). The improved profits are due to the increased price of logs and pulpwood, but the effect was offset by higher costs and lower revenue from property sales.

Operating profit in the third quarter was in line with the second quarter, at SEK 346 million.

Paperboard

Holmen supplies paperboard to the premium consumer packaging segment. Production, which takes place at one Swedish and one UK mill, amounts to just over 0.5 million tonnes a year.

	Quarter				Jan-Sep
SEKm	3-22	2-22	3-21	2022	2021	2021
Net sales	1 824	1 692	1 555	5 095	4 757	6 261
Operating costs	-1 274	-1 269	-1 300	-3 717	-3 941	-5 023
EBITDA*	549	423	255	1 378	816	1 237
Depreciation and amortisation according to plan	-150	-149	-143	-448	-424	-565
Operating profit*	400	274	112	929	391	673
Investments	117	99	69	295	274	399
Capital employed	5 714	5 506	5 018	5 714	5 018	5 169
EBITDA margin, %*	30	25	16	27	17	20
Operating margin, %*	22	16	7	18	8	11
Return on capital employed, %*				23	10	13
Deliveries, '000 tonnes	131	129	135	386	417	544

*Excl. item affecting comparability; see page 15.

There was strong demand for paperboard during the third quarter, and market prices, which increased over the spring, settled at a higher level.

Operating profit for January–September was SEK 929 million (391), excluding the item affecting comparability. The improved profits are attributable to the price increases implemented and to the fact that the previous year's earnings were burdened by two maintenance shutdowns with a SEK 310 million impact. Chemical and pulpwood costs have risen significantly but have been offset by a favourable energy situation.

Compared with the second quarter, third-quarter earnings increased by SEK 126 million to SEK 400 million. Profits were positively affected by higher prices and seasonally low personnel and maintenance costs. Pulpwood and chemical costs increased, but were offset by higher revenue from sales of excess electricity.

In the fourth quarter, Iggesund Mill will have its annual maintenance shutdown, which is expected to negatively affect earnings by approximately SEK 180 million.

*Excl. items affecting comparability. **Excl. items affecting comparability and twelve-month rolling average.

Paper

Holmen produces paper that utilises the properties of fresh fibre to provide cost-effective alternatives to traditional paper products for advertising, magazines and books. Production amounts to 1 million tonnes a year at two Swedish mills.

	Quarter			Jan-Sep
SEKm	3-22	2-22	3-21	2022	2021	2021
Net sales	2 156	2 032	1 413	6 059	4 057	5 441
Operating costs	-1 245	-1 184	-1 220	-3 821	-3 698	-5 000
EBITDA	911	848	193	2 238	359	441
Depreciation and amortisation according to plan	-79	-81	-93	-240	-279	-371
Operating profit	832	767	100	1 998	79	70
Investments	31	50	20	109	86	129
Capital employed	2 075	2 000	1 893	2 075	1 893	1 637
EBITDA margin, %	42	42	14	37	9	8
Operating margin, %	39	38	7	33	2	1
Return on capital employed, %				138	5	4
Deliveries, '000 tonnes	250	244	260	747	780	1 029

Paper supply continued to be limited by the energy and fibre shortages in large parts of Europe. Prices increased to some extent in the third quarter after a significant increase at year-end.

Operating profit for January–September was SEK 1 998 million (79). The increase in earnings is attributable to sharply increased selling prices. Chemical and wood costs climbed considerably, but this was offset by the successful adjustment of production to an environment of volatile electricity prices combined with electricity price hedges.

Compared with the second quarter, third-quarter earnings increased by SEK 65 million to SEK 832 million, as a consequence of seasonally low personnel and maintenance costs.

^*Twelve-month rolling average.

Wood Products

Holmen produces wood products for joinery and construction purposes. Production takes place at five sawmills adjacent to own forest with an annual production of 1.5 million cubic metres.

	Quarter				Jan-Sep
SEKm	3-22	2-22	3-21	2022	2021	2021
Net sales	937	1 614	1 288	3 996	3 739	4 872
Operating costs	-709	-966	-659	-2 540	-2 279	-3 014
EBITDA	228	648	629	1 456	1 460	1 857
Depreciation and amortisation according to plan	-51	-50	-47	-152	-142	-189
Operating profit	177	598	582	1 304	1 318	1 668
Investments	21	39	57	87	160	242
Capital employed	2 233	2 383	2 090	2 233	2 090	2 278
EBITDA margin, %	24	40	49	36	39	38
Operating margin, %	19	37	45	33	35	34
Return on capital employed, %				75	89	82
Deliveries, '000 m³	277	374	281	1 032	1 060	1 373

Demand for wood products declined during the third quarter, due to uncertainty about the development of the construction market. Prices decreased from a high level.

Operating profit for January–September was SEK 1 304 million (1 318). Selling prices were somewhat higher than last year on average, but the effect was offset by increased log costs.

Compared with the second quarter, third-quarter earnings decreased by SEK 421 million to SEK 177 million. The fall in earnings was attributable to the decrease in selling prices and lower deliveries.

*Twelve-month rolling average.

Renewable Energy

In a normal year Holmen produces 1.7 TWh of renewable hydro and wind power.

Quarter				Jan-Sep
3-22	2-22	3-21	2022	2021	2021
290	188	99	661	340	488
-49	0	-31	-40	-85	-113
-27	-27	-7	-78	-20	-28
214	162	62	544	235	347
11	143	228	210	317	712
4 311	4 280	3 668	4 311	3 668	4 069
74	86	62	82	69	71
			17	9	10
385	376	258	1 163	924	1 230

*Incl. other operating income.

The energy crisis in Europe worsened over the quarter and prices in Sweden soared to record levels, with an average of nearly SEK 1 800/MWh in central Sweden (SE3). As a result of limitations in transmission capacity within the country the price in northern Sweden, where Holmen has most of its electricity production, was significantly lower, just under SEK 600/MWh.

Operating profit for January–September was SEK 544 million (235). The improvement was due to higher electricity prices, increased revenues from the contribution of hydro power to the stabilisation of the electricity grid (support services) and the expansion of wind power.

Compared with the second quarter, third-quarter earnings increased by SEK 52 million to SEK 214 million. The higher prices and higher contribution from wind power were the reasons behind the increase.

*Twelve-month rolling average.

Cash flow, financing and net financial items

Cash flow from operating activities for January– September totalled SEK 4 183 million (2 631) and cash flow from investing activities totalled SEK -918 million (-958).

For January–September, the Group's net financial debt decreased by SEK 1 102 million to SEK 2 999 million. Net debt was 5 per cent of equity.

At 30 September, the Group's non-current borrowing amounted to SEK 3.4 billion and current borrowing totalled SEK 0.5 billion. Cash and cash equivalents totalled SEK 1.1 billion. Contractual credit commitments amounted to SEK 5 billion, of which SEK 1 billion is available until 2025 and SEK 4 billion until 2027. All credit commitments are unused.

Standard & Poor's long-term credit rating for Holmen is BBB+ with a stable outlook.

Net financial items for January–September amounted to SEK -73 million (-30).

Tax

Recognised tax for January–September amounted to SEK -1 226 million (-559). Recognised tax as a proportion of profit before tax was 21 per cent (21).

Equity

In January–September, the Group's equity increased by SEK 7 584 million to SEK 54 576 million. Profit for the period totalled SEK 4 606 million (2 136). Other comprehensive income totalled SEK 4 834 million (190) and is mainly attributable to the increased fair value of hedge-accounted electricity derivatives. A dividend of SEK 1 862 million (1 741) was paid.

Hedging of exchange rates

The Group hedges parts of its future estimated net flows in foreign currencies. The operating profit for January–September includes a loss from currency hedging of SEK -219 million (106). For EUR/SEK, 2 years of expected net flows are hedged at an average exchange rate of 10.40. For other currencies, 4–10 months of flows are hedged.

Hedging of electricity prices

Electricity consumption in the Paper business area amounts to 3.2 TWh per year. To reduce the impact of changing electricity prices on Paper's earnings, consumption is partly hedged. For the remaining part of 2022 and the full-year 2023, 90 per cent of electricity consumption is hedged. For 2024 and 2025, 50 per cent and 25 per cent respectively is hedged.

The Group's production of wind power and hydro power amounts to 1.7 TWh in a normal year. Future production is largely unhedged.

Personnel

The average number of employees (FTEs) in the Group was 3 451 (3 475).

Stockholm, 20 October 2022 Holmen AB (publ)

Henrik Sjölund President and CEO

For further information please contact:

Henrik Sjölund, President and CEO, tel +46 8 666 21 05 Anders Jernhall, Executive Vice President and CFO, tel +46 8 666 21 22 Stina Sandell, Senior Vice President Sustainability and Communications, tel +46 73 986 51 12

Auditor's report

Introduction

We have reviewed the interim report for Holmen AB (publ) as per 30 September 2022 and the nine-month reporting period ending on that date. The Board of Directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, 20 October 2022 PricewaterhouseCoopers AB

Magnus Svensson Henryson Linda Corneliusson Authorised public accountant Authorised Public Accountant Auditor in Charge

	Quarter			Jan-Sep		Full year
Income statement, SEKm	3-22	2-22	3-21	2022	2021	2021
Net sales	5 784	6 173	4 877	17 707	14 709	19 479
Other operating income	506	556	283	1 903	932	1 690
Change in inventories	259	136	24	384	-176	1
Raw materials and consumables	-2 713	-2 600	-2 472	-8 086	-7 280	-10 110
Personnel costs	-677	-780	-630	-2 180	-2 063	-2 720
Other operating costs	-1 059	-1 139	-946	-3 190	-2 814	-3 814
Change in value of biological assets	156	88	164	361	365	464
Profit from investments in associates and joint ventures	1	0	-3	9	-4	0
Depreciation and amortisation according to plan	-336	-333	-318	-1 001	-945	-1 261
Operating profit	1 921	2 101	978	5 905	2 725	3 731
Finance income	1	0	3	3	7	9
Finance costs	-17	-19	-12	-76	-37	-48
Profit before tax	1 905	2 083	969	5 832	2 695	3 691
Tax	-424	-441	-206	-1 226	-559	-688
Profit for the period	1 482	1 642	763	4 606	2 136	3 004
Earnings per share, SEK
Basic	9.1	10.1	4.7	28.5	13.2	18.5
Diluted	9.1	10.1	4.7	28.5	13.2	18.5
Operating margin, %*	33	34	23	32	20	21
Return on capital employed, %*				14	8	9
Return on equity, %				12	7	7
*Excl. item affecting comparability.

	Quarter			Jan-Sep	Full year
Statement of comprehensive income, SEKm	3-22	2-22	3-21	2022	2021	2021
Profit for the period	1 482	1 642	763	4 606	2 136	3 004
Other comprehensive income
Revaluation of forest land	-	-	-	-	-	3 345
Revaluations of defined benefit pension plans	-8	-11	-4	-40	34	-12
Tax attributable to items that will not be reclassified to profit for the
period	2	17	1	23	-7	-683
Items that will not be reclassified to profit for the period	-6	6	-3	-17	27	2 650
Cash flow hedging	2 320	2 740	105	6 054	86	504
Translation difference on foreign operation	-19	57	4	37	120	180
Hedging of currency risk in foreign operation	17	-27	1	-1	-26	-39
Share in joint ventures' other comprehensive income	-	-	-6	-	-4	3
Tax attributable to items that will be reclassified to profit for the period	-481	-559	-22	-1 239	-12	-97
Items that will be reclassified to profit for the period	1 838	2 212	83	4 850	163	551
Total other comprehensive income after tax	1 832	2 218	80	4 834	190	3 201
Total comprehensive income	3 314	3 860	843	9 440	2 326	6 204

	Jan-Sep
Change in equity in summary, SEKm	2022	2021
Opening equity	46 992	42 516
Profit for the period	4 606	2 136
Other comprehensive income	4 834	190
Total comprehensive income	9 440	2 326
Share saving program	7	6
Dividend	-1 862	-1 741
Closing equity	54 576	43 108

	2022	2022	2021
Balance sheet, SEKm	30 Sep	30 Jun	31 Dec
Non-current assets
Forest assets
Biological assets	29 690	29 484	29 204
Forest land	17 912	17 913	17 876
Intangible non-current assets	524	527	539
Property, plant and equipment	9 904	10 010	9 711
Right-of-use assets	253	250	240
Investments in associates and joint ventures	1 681	1 679	1 756
Other shares and participating interests	2	2	2
Non-current financial receivables	102	106	268
Deferred tax assets	2	2	3
Total non-current assets	60 069	59 973	59 598
Current assets
Inventories	4 734	4 308	3 818
Trade receivables	3 341	3 149	2 393
Current tax receivable	2	11	70
Other operating receivables*	9 488	6 532	1 676
Current financial receivables	17	10	39
Cash and cash equivalents	1 140	464	507
Total current assets	18 723	14 473	8 503
Total assets	78 792	74 446	68 101
Equity	54 576	51 256	46 992
Non-current liabilities
Non-current financial liabilities	3 407	3 402	3 911
Non-current liabilities relating to right-of-use assets	170	166	173
Pension obligations	50	47	24
Non-current provisions	414	402	409
Deferred tax liabilities	13 155	12 560	11 610
Total non-current liabilities	17 197	16 577	16 127
Current liabilities
Current financial liabilities	543	655	736
Current liabilities relating to right-of-use assets	88	89	71
Trade payables	3 514	3 177	2 836
Current tax liability	136	284	80
Other operating liabilities	2 739	2 407	1 259
Total current liabilities	7 020	6 613	4 982
Total liabilities	24 216	23 190	21 109
Total equity and liabilities	78 792	74 446	68 101
Debt/equity ratio, %	5	7	9
Equity/assets ratio, %	69	69	69
Capital employed	57 575	55 036	51 093
Net financial debt	2 999	3 780	4 101

*The fair value of electricity derivatives is included at SEK 8 113 (30 June 2022: 5 411, 31 Dec 2021: 850) million.

	Quarter			Jan-Sep
Cash flow statement, SEKm	3-22	2-22	3-21	2022	2021	2021
Operating activities
Profit before tax	1 905	2 083	969	5 832	2 695	3 691
Adjustments for non-cash items
Depreciation and amortisation according to plan	336	333	318	1 001	945	1 261
Change in value of biological assets	-156	-88	-164	-361	-365	-464
Other*	24	51	-9	59	-62	-451
Paid income taxes	-448	-182	-135	-749	-542	-662
Cash flow from operating activities
before changes in working capital	1 662	2 196	980	5 783	2 671	3 375
Cash flow from changes in working capital
Change in inventories	-535	-279	-196	-868	-47	-236
Change in trade receivables and other operating receivables	-437	-280	168	-1 518	-333	-156
Change in trade payables and other operating liabilities	352	122	55	786	340	247
Cash flow from operating activities	1 042	1 759	1 008	4 183	2 631	3 229
Investing activities
Acquisition of non-current assets	-265	-463	-503	-936	-1 069	-1 775
Disposal of non-current assets	8	4	8	15	96	443
Change in non-current financial receivables	-	-	-	3	16	25
Cash flow from investing activities	-258	-459	-496	-918	-958	-1 307
Financing activities
Amortization of liabilities associated with to right-of-use assets	-24	-21	-27	-66	-80	-110
Change in financial liabilities and current financial receivables	-84	-1 198	-735	-708	194	86
Dividends paid to the shareholders of the parent company	-	-1 862	-	-1 862	-1 741	-1 741
Cash flow from financing activities	-108	-3 081	-762	-2 636	-1 627	-1 764
Cash flow for the period	676	-1 781	-250	630	46	158
Opening cash and cash equivalents	464	2 243	643	507	346	346
Exchange difference in cash and cash equivalents	1	2	1	3	2	2
Closing cash and cash equivalents	1 140	464	394	1 140	394	507

	Quarter		Jan-Sep		Full year
Change in net financial debt, SEKm	3-22	2-22	3-21	2022	2021	2021
Opening net financial debt	-3 780	-3 184	-4 788	-4 101	-4 181	-4 181
Cash flow from operating activities	1 042	1 759	1 008	4 183	2 631	3 229
Cash flow from investing activities
(excl financial receivables and acquisition)	-258	-459	-496	-919	-974	-1 332
Acquisition	-3	-	-	-270	-	-
Dividends paid	-	-1 862	-	-1 862	-1 741	-1 741
Liabilities arising from new right-of-use agreements	-27	-14	-4	-80	-18	-67
Revaluations of defined benefit pension plans	-7	-10	-3	-34	31	17
Foreign exchange effects and changes in fair value	34	-10	11	84	-20	-27
Closing net financial debt	-2 999	-3 780	-4 271	-2 999	-4 271	-4 101

*The adjustments consist primarily of change in provisions, interests in earnings of associated companies, currency effects and revaluations of financial instruments as well as capital gains/losses on sale of fixed assets.

Parent company

		Quarter	Jan-Sep			Full year
Income statement, SEKm	3-22	2-22	3-21	2022	2021	2021
Operating income	5 511	5 989	4 785	16 983	14 223	19 107
Operating costs	-4 201	-4 374	-4 271	-13 060	-12 899	-17 649
Operating profit	1 310	1 616	514	3 923	1 324	1 458
Net financial items	28	383	-6	408	327	316
Profit after net financial items	1 339	1 999	508	4 331	1 651	1 774
Appropriations	-116	-153	118	-384	417	768
Profit before tax	1 222	1 846	625	3 947	2 068	2 541
Tax	-251	-293	-131	-727	-353	-451
Profit for the period	972	1 553	495	3 220	1 715	2 090

	Quarter			Jan-Sep		Full year
Statement of comprehensive income, SEKm	3-22	2-22	3-21	2022	2021	2021
Profit for the period	972	1 553	495	3 220	1 715	2 090
Other comprehensive income
Cash flow hedging	2 387	2 910	106	6 312	84	505
Tax attributable to other comprehensive income	-492	-599	-22	-1 300	-17	-104
Items that will be reclassified to profit for the period	1 895	2 310	84	5 012	67	401
Total comprehensive income	2 867	3 863	578	8 233	1 781	2 491

	2022	2022	2021
Balance sheet, SEKm	30 Sep	30 Jun	31 Dec
Non-current assets	18 645	18 799	18 898
Current assets	17 024	12 867	7 025
Total assets	35 668	31 666	25 923
Restricted equity	5 915	5 915	5 915
Non-restricted equity	13 453	10 576	7 076
Untaxed reserves	3 756	3 439	2 852
Provisions	2 686	2 220	1 386
Liabilities	9 858	9 517	8 695
Total equity and liabilities	35 668	31 666	25 923

Sales to Group companies accounted for SEK 310 million (633) of operating income for January–September.

Balance sheet appropriations include net Group contributions totalling SEK 521 million (788).

The parent company's investments in property, plant and equipment and non-current intangible assets totalled SEK 51 million (48).

Notes

1. Accounting policies

This report was prepared in accordance with IAS 34, Interim Financial Reporting. Information in accordance with IAS 34:16A can be found in the financial statements and their accompanying notes, as well as in other parts of the interim report. The consolidated accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Swedish Annual Accounts Act. The parent company's accounts are prepared in accordance with RFR 2 Accounting for Legal Entities and the Swedish Annual Accounts Act. New or revised IFRS and interpretative statements from IFRIC have not had any material effect on the earnings or position of the Group or the parent company. The figures in tables are rounded off.

2. Forest assets

The Group's forest assets are recognised at fair value based on the transaction prices for forest properties in the areas where the Group has forest land. Forest assets are usually valued at year-end. The total value of the forest assets is allocated across growing trees and forest land. The value of the growing trees, which is recognised in accordance with IAS 41, Biological Assets, is determined by calculating the present value of the expected cash flows and is updated regularly during the year. Changes in value are recognised in the income statement. The value of forest land is recognised in accordance with IAS 16 and is updated when the annual value of the forest assets is calculated, and when there are acquisitions or disposals. Changes in the value of forest land are recognised in other comprehensive income.

The value of the biological assets at 30 September was SEK 29 690 million (31 Dec. 2021: 29 204). The change in value of biological assets, calculated as the net of the change as a result of harvesting and the unrealised change in fair value, totalled SEK 156 million for the period January–September and is recognised in the Group's operating profit. The recognised value of forest land at 30 September was SEK 17 912 million (31 Dec. 2021: 17 876).

3. External net sales by market

		Forest Paperboard	Paper	Wood	Renewable	Group
Jan-Sep 2022				Products	Energy
Scandinavia	1 896	186	475	1 771	658	4 987
Rest of Europe	3	3 599	4 932	1 242	-	9 776
Asia	-	1 000	370	292	-	1 662
Rest of the world	-	309	282	692	-	1 283
Total Net sales	1 900	5 095	6 059	3 996	658	17 707

		Forest Paperboard	Paper	Wood	Renewable	Group
Jan-Sep 2021				Products	Energy
Scandinavia	1 820	150	270	1 949	335	4 525
Rest of Europe	1	3 340	2 930	1 195	-	7 466
Asia	-	934	558	202	-	1 694
Rest of the world	-	333	298	393	-	1 024
Total Net sales	1 820	4 757	4 057	3 739	335	14 709

4. Composition of share capital

Share structure	Votes	No. of shares	No. of votes	Quotient value	SEKm
A share	10	45 246 468	452 464 680	26	1 180
B share	1	117 265 856	117 265 856	26	3 058
Total number of shares		162 512 324	569 730 536		4 238
Holding of own B shares bought back		-510 646	-510 646
Total number of shares issued		162 001 678	569 219 890

5. Financial instruments

	Book value		Fair value
	2022	2021	2022	2021
SEKm	30 Sep	31 Dec	30 Sep	31 Dec
Assets at fair value	8 288	1 097	8 288	1 097
Assets at amortised cost	4 510	3 183	4 510	3 183
Liabilities at fair value	1 459	151	1 459	151
Liabilities at amortised cost	7 452	7 454	7 452	7 454

Holmen measures financial instruments at fair value or acquisition cost in the balance sheet depending on their classification. In addition to items in net financial debt, with the exception of pension obligations and liabilities related to right-of-use assets, financial instruments include trade receivables and trade payables. Financial instruments measured at fair value in the balance sheet belong to measurement level 2 pursuant to IFRS 13 and mostly consist of electricity price, currency and interest rate hedging derivatives. Their net fair value at 30 September was SEK 6 772 million, which is SEK 6 054 million higher than at year-end, above all due to the increased value of the electricity derivatives.

6. Alternative performance measures

Holmen uses performance measures to supplement measures defined by IFRS or directly in the income statement and balance sheet in order to clarify the company's financial position and performance.

Earnings measures

Operating profit is the principal measure of earnings that is used to monitor financial performance. This includes all income and costs except for financial items and tax. Depreciation/amortisation of non-current assets is also included. EBITDA (earnings before interest, taxes, depreciation and amortisation) is used as a supplementary measure. To clarify how these earnings measures are affected by matters outside normal business operations, such as impairment, closure, major restructuring measures and breakdowns, as well as alterations to assumptions in the valuation of biological assets, the term 'items affecting comparability' is used. The purpose is also to increase comparability between different periods. The effects of maintenance and rebuilding shutdowns are not treated as an item affecting comparability. Operating profit for the first quarter of 2022 includes net SEK +266 million relating to the insurance compensation and costs and loss of revenue associated with the turbine breakdown at the paperboard mill in Workington. Operating profit for 2021 included SEK -330 million as an item affecting comparability related to the turbine breakdown. A description of the items that are recognised as affecting comparability in previous periods is provided on page 92 of Holmen's annual report for 2021.

		Quarter Jan-Sep				Full year
SEKm	3-22	2-22	3-21	2022	2021	2021
EBITDA	2 258	2 434	1 447	6 641	3 821	5 321
Depreciation and amortisation according to plan	-336	-333	-318	-1 001	-945	-1 261
Operating profit excl. items affecting comp.	1 921	2 101	1 129	5 640	2 876	4 061
Items affecting comparability	-	-	-151	266	-151	-330
Operating profit	1 921	2 101	978	5 905	2 725	3 731

Measure of margin, return and indebtedness

Operating profit, excluding items affecting comparability, as a proportion of sales is known as the operating margin. EBITDA as a proportion of sales is known as the EBITDA margin. The performance measure of return on capital employed is used to measure operating profit, excluding items affecting comparability, as a proportion of capital employed. Capital employed is calculated as fixed assets plus working capital less the net sum of deferred tax liabilities and deferred tax assets. This corresponds to equity plus net financial debt. Average capital employed is calculated based on quarterly data.

	2022	2022	2021
SEKm	30 Sep	30 Jun	31 Dec
Fixed assets*	59 965	59 864	59 328
Working capital**	10 763	7 729	3 372
Deferred tax assets	2	2	3
Deferred tax liabilities	-13 155	-12 560	-11 610
Capital employed	57 575	55 036	51 093

*Forest assets, non-current intangible assets, property, plant and equipment, right-of-use assets, investments in associates and joint ventures and other shares and participations.

**Inventories, trade receivables, current tax receivable, other current operating receivables, trade payables, current tax liability, provisions and other operating liabilities.

The debt/equity ratio is calculated as net financial debt divided by equity. The equity/assets ratio is calculated as equity divided by total assets. Net financial debt consists of the following components:

	2022	2022	2021
SEKm	30 Sep	30 Jun	31 Dec
Non-current financial liabilities	3 407	3 402	3 911
Non-current liabilities relating to right-of-use assets	170	166	173
Current financial liabilities	543	655	736
Current liabilities relating to right-of-use assets	88	89	71
Pension obligations	50	47	24
Non-current financial receivables	-102	-106	-268
Current financial receivables	-17	-10	-39
Cash and cash equivalents	-1 140	-464	-507
Net financial debt	2 999	3 780	4 101

7. Transaction with related parties

There were no transactions between Holmen and related parties that had a significant effect on the company's financial position and performance.

8. Material risks and uncertainties

The Group's and the parent company's material risks and uncertainties relate primarily to changes in demand and the prices of its products, the cost of key input goods, and changes in exchange rates. Russia's invasion of Ukraine has affected several markets. Holmen's sales to Russia were marginal in 2021 and ceased completely after the invasion. As a result of the war, Holmen's costs for chemicals have increased and transports to customers have become more expensive. At the same time, the risk of a shortage of critical input goods has increased. The war has reduced the supply of wood products in Europe since Russia is a major exporter, while also limiting the supply of paper, since some paper producers have found it difficult to cope with sharply increasing energy prices. For a more detailed description of material risks and uncertainties, see Holmen's annual report for 2021, pages 43–47 and Note 27.

									Full
		2022			2021			Jan-Sep		year
Quarterly figures, SEKm	Q3	Q2	Q1	Q4	Q3	Q2	Q1	2022	2021	2021
Income statement
Net sales	5 784	6 173	5 750	4 770	4 877	5 129	4 703		17 707 14 709	19 479
Operating costs	-3 684	-3 827	-3 925	-3 373	-3 591	-3 982		-3 676 -11 435 -11 249 -14 622
Change in value of forests	156	88	117	99	164	69	133	361	365	464
Profit from associates and JV	1	0	8	4	-3	-3	2	9	-4	0
EBITDA*	2 258	2 434	1 950	1 500	1 447	1 213	1 161	6 641	3 821	5 321
Depreciation and amortisation according to plan	-336	-333	-332	-315	-318	-315	-312	-1 001	-945	-1 261
Operating profit excl. items affecting comparability	1 921	2 101	1 617	1 185	1 129	898	849	5 640	2 876	4 061
Items affecting comparability	-	-	266	-179	-151	-	-	266	-151	-330
Operating profit	1 921	2 101	1 883	1 006	978	898	849	5 905	2 725	3 731
Net financial items	-16	-19	-38	-9	-9	-11	-10	-73	-30	-39
Profit before tax	1 905	2 083	1 844	996	969	887	839	5 832	2 695	3 691
Tax	-424	-441	-361	-129	-206	-189	-164	-1 226	-559	-688
Profit for the period	1 482	1 642	1 483	868	763	698	675	4 606	2 136	3 004
Earnings per share, SEK	9.1	10.1	9.2	5.4	4.7	4.3	4.2	28.5	13.2	18.5
Net sales
Forest	1 755	1 810	1 809	1 690	1 444	1 717	1 658	5 373	4 819	6 509
Paperboard	1 824	1 692	1 579	1 504	1 555	1 588	1 614	5 095	4 757	6 261
Paper	2 156	2 032	1 871	1 384	1 413	1 360	1 284	6 059	4 057	5 441
Wood Products	937	1 614	1 445	1 133	1 288	1 431	1 020	3 996	3 739	4 872
Renewable Energy	290	188	183	148	99	106	135	661	340	488
Elimination of intra-group net sales	-1 177	-1 163	-1 137	-1 090	-922	-1 072	-1 007	-3 477	-3 002	-4 092
Group	5 784	6 173	5 750	4 770	4 877	5 129	4 703		17 707 14 709	19 479
EBITDA by business area*
Forest	368	368	325	535	342	315	382	1 061	1 039	1 573
Paperboard	549	423	406	422	255	185	376	1 378	816	1 237
Paper	911	848	479	83	193	109	56	2 238	359	441
Wood Products	228	648	580	397	629	566	265	1 456	1 460	1 857
Renewable Energy	240	188	193	120	69	73	114	621	255	375
Group-wide	-39	-41	-32	-56	-41	-35	-31	-112	-108	-163
Group	2 258	2 434	1 950	1 500	1 447	1 213	1 161	6 641	3 821	5 321
Operating profit/loss by business area*
Forest	346	349	305	513	323	296	364	999	982	1 495
Paperboard	400	274	256	281	112	44	236	929	391	673
Paper	832	767	399	-9	100	16	-37	1 998	79	70
Wood Products	177	598	529	350	582	518	218	1 304	1 318	1 668
Renewable Energy Group-wide	214 -46	162 -48	168 -40	112 -63	62 -49	66 -42	107 -39	544 -134	235 -130	347 -193
Group	1 921	2 101	1 617	1 185	1 129	898	849	5 640	2 876	4 061
Operating margin, %*
Paperboard	22	16	16	19	7	3	15	18	8	11
Paper	39	38	21	-1	7	1	-3	33	2	1
Wood Products	19	37	37	31	45	36	21	33	35	34
Group	33	34	28	25	23	18	18	32	20	21
Return
Capital employed, %*								14	8	9
Equity, %								12	7	7
Deliveries
Own forests, '000 m³	627	820	674	666	637	877	653	2 120	2 167	2 833
Paperboard, '000 tonnes	131	129	126	127	135	138	145	386	417	544
Paper, '000 tonnes	250	244	253	249	260	263	257	747	780	1 029
Wood products, '000 m³	277	374	381	313	281	406	372	1 032	1 060	1 373
Hydro and wind power, GWh	385	376	402	306	258	297	369	1 163	924	1 230

*Excl. item affecting comparability.

Full year review, SEKm	2021	2020	2019	2018	2017	2016	2015	2014	2013	2012
Income statement
Net sales	19 479	16 327	16 959	16 055	16 133	15 513	16 014	15 994	16 231	17 852
Operating costs		-14 622 -13 250 -13 961 -12 984 -13 379 -12 626 -13 348 -13 270 -13 919 -15 224
Change in value of forests	464	579	487	425	415	315	267	282	264	350
Profit from associates and JV	0	-6	0	-9	-12	-22	7	-7	3	47
EBITDA*	5 321	3 651	3 486	3 488	3 157	3 179	2 940	2 999	2 579	3 026
Depreciation and amortisation according to plan	-1 261	-1 172	-1 141	-1 012	-991	-1 018	-1 240	-1 265	-1 370	-1 313
Operating profit excl. items affecting
comparability	4 061	2 479	2 345	2 476	2 166	2 162	1 700	1 734	1 209	1 713
Items affecting comparability	-330	-	8 770	-94	-	-232	-931	-450	-140	-193
Operating profit	3 731	2 479	11 115	2 382	2 166	1 930	769	1 284	1 069	1 520
Net financial items	-39	-42	-34	-25	-53	-71	-90	-147	-198	-227
Profit before tax	3 691	2 437	11 081	2 356	2 113	1 859	679	1 137	871	1 294
Tax	-688	-458	-2 351	-89	-445	-436	-120	-230	-160	559
Profit for the year	3 004	1 979	8 731	2 268	1 668	1 424	559	907	711	1 853
Diluted earnings per share, SEK	18.5	12.2	52.6	13.5	9.9	8.5	3.4	5.4	4.3	11.1
EBITDA by business area*
Forest	1 573	1 422	1 217	1 216	1 099	1 030	935	845	958	964
Paperboard	1 237	1 366	996	1 196	1 257	1 382	1 346	1 161	878	959
Paper	441	454	891	665	627	669	514	725	429	862
Wood Products	1 857	309	159	337	165	80	86	160	45	-10
Renewable Energy	375	242	362	205	159	143	198	233	391	374
Group-wide	-163	-143	-140	-132	-149	-124	-138	-126	-121	-123
Group	5 321	3 651	3 486	3 488	3 157	3 179	2 940	2 999	2 579	3 026
Operating profit by business area*
Forest	1 495	1 367	1 172	1 185	1 069	1 001	905	817	924	931
Paperboard	673	812	435	689	764	903	847	674	433	596
Paper	70	73	509	329	288	289	-74	141	-309	94
Wood Products	1 668	185	62	246	80	-3	9	37	-75	-130
Renewable Energy	347	215	336	181	135	120	176	212	371	355
Group-wide	-193	-174	-168	-154	-170	-148	-163	-146	-136	-132
Group	4 061	2 479	2 345	2 476	2 166	2 162	1 700	1 734	1 209	1 713
Deliveries
Own forests, '000 m³	2 833	2 841	2 699	2 816	2 883	2 945	3 132	3 207	3 361	3 085
Paperboard, '000 tonnes	544	544	538	525	526	497	499	493	469	485
Paper, '000 tonnes	1 029	883	996	1 036	1 117	1 134	1 325	1 305	1 574	1 651
Wood products, '000 m³	1 373	1 052	879	828	852	776	730	725	686	660
Hydro and wind power, GWh	1 230	1 352	1 109	1 145	1 169	1 080	1 441	1 113	1 041	1 353
Balance sheet
Forest assets	47 080	43 202	41 345	18 701	17 971	17 595	17 340	17 032	16 654	16 344
Other non-current assets	12 251	11 784	10 781	10 586	10 780	11 106	12 184	13 189	13 998	14 320
Current assets	7 956	6 878	6 264	6 845	5 710	5 852	5 607	5 964	5 774	6 005
Financial receivables	814	679	950	781	430	338	325	249	327	377
Total assets	68 101	62 543	59 340	36 912	34 891	34 891	35 456	36 434	36 753	37 046
Equity	46 992	42 516	40 111	23 453	22 035	21 243	20 853	20 969	20 854	20 813
Deferred tax liability	11 610	10 570	10 299	5 839	5 650	5 613	5 508	5 480	5 804	5 504
Financial liabilities and interest-bearing provisions	4 915	4 860	4 732	3 587	3 366	4 283	5 124	6 156	6 443	6 967
Operating liabilities	4 584	4 597	4 196	4 033	3 840	3 752	3 971	3 829	3 653	3 762
Total equity and liabilities	68 101	62 543	59 340	36 912	34 891	34 891	35 456	36 434	36 753	37 046
Cash flow
Operating activities	3 229	2 457	2 884	2 286	2 509	1 961	2 526	2 176	2 011	2 254
Investing activities **	-1 332	-1 924	-1 050	-1 005	-644	-123	-824	-815	-872	-1 957
Cash flow after investments	1 897	533	1 834	1 281	1 865	1 838	1 702	1 361	1 139	297
Return on capital employed, %*	9	6	9	10	9	9	6	6	4	7
Return on equity, %	7	5	35	10	8	7	3	4	3	9
Debt/equity ratio, %	9	10	9	12	13	19	23	28	29	32
Ordinary dividend, SEK	7.5	7.25	3.5	6.75	6.5	6	5.25	5	4.5	4.5
Extra dividend, SEK	4	3.5	-	-	-	-	-	-	-	-
Average number of employees	3 474	2 974	2 915	2 955	2 976	2 989	3 315	3 359	3 718	3 945

*Excl. items affecting comparability.

**Net after disposals and before changes in non-current financial receivables.

Holmen in brief

Holmen's extensive forest holdings are the foundation of our business. Using our own production facilities, the growing trees are refined into everything from wood for climate-smart building to renewable packaging, magazines and books, while at the same time we generate hydro and wind power on our own land. A business that not only creates value for shareholders and customers, but also contributes to a better climate and thriving rural communities.

Press and analyst conference

On the publication of the interim report, a webcast press and analyst conference will be held at 09.00 CEST on Thursday 20th of October. Holmen President and CEO Henrik Sjölund, together with Executive Vice President and CFO Anders Jernhall, will present and comment on the report. The presentation will be held in English.

The press and analyst conference will be webcast and may be followed via: www.holmen.com/reports

You may also participate in the conference by telephone, by calling no later than 08.55 CEST on:

Within Sweden:	+46 8 505 100 31
From the rest of Europe:	+44 207 107 06 13
From the US:	+1 631 570 56 13

Financial report

31 January 2023 Year-end report 2022 28 April 2023 Interim report January-March 2023 17 August 2023 Interim report January-June 2023 25 October 2023 Interim report January-September 2023

This information such that Holmen AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07.30 CEST on Thursday, 20 October 2022.

This is a translation of the Swedish interim report of Holmen Aktiebolag (publ.). In the event of inconsistency between the English and the Swedish versions, the Swedish version shall prevail.