Holmen

Quarterly Report • Aug 13, 2020

		Quarter		January–June	Full Year
SEKm	2-20	1-20	2-19	2020	2019	2019
Net sales	3 853	4 499	4 361	8 352	8 621	16 959
Operating profit excl. item affecting comparability	542	628	574	1 170	1 217	2 345
Operating profit	542	628	574	1 170	1 217	11 115
Profit after tax	411	491	451	902	954	8 731
Earnings per share, SEK	2.5	3.0	2.7	5.6	5.7	52.6
Operating margin, %*	14.1	14.0	13.2	14.0	14.1	13.8
Return on capital employed, %*	5.0	5.7	8.6	5.4	9.2	8.9
Return on equity, %	4.1	4.9	7.7	4.5	8.1	7.8
Cash flow before investments and change in working capital	693	615	884	1 307	1 539	2 727

Holmen Interim Report January–June 2020

*Excluding items affecting comparability 2019.

Operating profit for January–June was SEK 1 170 million (January–June 2019: 1 217). Price decreases and production curtailments in paper had a negative impact on profit, which was largely offset by higher profit from paperboard and forest.

Debt/equity ratio, % 7 9 14 7 14 9

• Compared with the first quarter, operating profit decreased by SEK 86 million to SEK 542 million as a result of lower demand for paper caused by COVID-19. Profit for paperboard and wood products increased.
• Profit after tax for January–June amounted to SEK 902 million (954), which corresponds to earnings per share of SEK 5.6 (5.7).
• The Board of Directors proposes a dividend of SEK 3.5 per share for decision at an Extraordinary General Meeting in September.
• In July, Holmen signed an agreement to acquire 100 per cent of the shares in Martinsons for SEK 1.0 billion. Martinsons is one of Sweden's leading players in sawn and processed wood products, with an annual timber consumption equivalent to Holmen's timber harvest in Northern Sweden. The acquisition is subject to approval by the relevant competition authority, which is expected in the fall.

CEO comments

COVID-19 influenced our work in the second quarter. We can conclude that the majority of our operations have managed well and that the Group's operating profit was relatively good at SEK 542 million, with a strong cash flow. We are pleased about the performance within paperboard and that it has been possible to raise the prices for wood products. Meanwhile, the market balance for paper has been challenging.

Demand for forest raw material in Sweden has been somewhat lower than usual because of production curtailments in parts of the industry. Prices were unchanged in the quarter but are under pressure. Second quarter operating profit for Forest, SEK 370 million, was higher than normal because of the sale of forest properties.

The paperboard market was stable in the second quarter and demand in Europe was at the same level as in 2019. Our paperboard sales developed well with a good product mix, at the same time we have increased pulp production and reduced consumption rates as a result of completed investments. Taken together, the result was a strong operating profit for the quarter, SEK 218 million.

Demand for paper dropped sharply in the second quarter as a result of COVID-19. Although our niche products performed slightly better than the market as a whole, we were forced to impose extensive production curtailments in the second quarter. The performance from Paper was therefore very weak, with an operating loss of SEK -60 million. However, profit before depreciation/amortisation was positive. The market situation continues to be challenging and we will continue to curtail production in the third quarter. At the same time we are intensifying our efforts to develop products that make the best use of fresh fibre.

Despite the COVID-19 pandemic, the wood products market was in balance in the second quarter due to good demand in certain countries at the same time that supply was lower than normal. Our operating profit from Wood Products improved somewhat to SEK 19 million as a result of price increases and a good product mix.

The electricity supply in the Nordic countries continued to be high in the second quarter and prices were low. Operating profit for Renewable Energy decreased to SEK 37 million as a result of seasonally lower production and low electricity prices.

In July we signed an agreement to acquire Martinsons, one of Sweden's leading players in sawn and processed wood products, as well as our largest timber customer. Martinsons consists of two well-invested sawmills in northern Sweden with extensive processing of wood products for Scandinavian wood construction, as well as a project business for construction of complete frames made of cross-laminated timber (CLT) and glulam beams for purposes such as offices, sports centres and apartment buildings.

Holmen's financial position is strong, even after the acquisition of Martinsons. We are a company that will pay dividends even in uncertain times, but no decision was made last spring because of the great uncertainty related to COVID-19. Now, a few months later, the uncertainty has declined, but there is still reason for caution. In a carefully considered assessment, the Board has therefore decided to propose a dividend of SEK 3.5 per share instead of the original proposal of SEK 7 per share.

Holmen's business is based on the forest. We refine our forest raw material 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. With the acquisition of Martinsons, we advance our position in sustainable wood construction, while increasing the integration between our own forest and industry.

Forest

Holmen carries out active and sustainable forestry on over a million hectares of its own productive forest land. The annual harvest is 3 million m3.

	Quarter				January-June
SEKm	2-20	1-20	2-19	2020	2019	Full year 2019
Net sales	1 432	1 690	1 647	3 121	3 289	6 286
of which from own forests	362	343	350	706	623	1 348
Operating costs	-1 171	-1 483	-1 482	-2 654	-2 929	-5 556
Change in value of forests	121	124	143	245	260	487
EBITDA	382	331	308	713	621	1 217
Depreciation and amortisation according to plan	-12	-9	-10	-22	-21	-45
Operating profit*	370	322	298	692	600	1 172
Book value, forest assets	41 613	41 475	18 970	41 613	18 970	41 345
Volume of own forests, '000 m³	771	761	688	1 531	1 239	2 714

* Excl. item affecting comparability 2019

Demand for logs and pulpwood was lower than normal in the second quarter because of production curtailments in the industry due to COVID-19. However, prices were largely unchanged.

Operating profit for January–June was SEK 692 million (600). A changed accounting policy for forest assets and the sale of forest properties had a positive impact on earnings, but the result was negatively impacted by 5 per cent lower selling prices.

Compared with the first quarter, operating profit increased by SEK 48 million to SEK 370 million as a result of the sale of forest properties.

*Excl. items affecting comparability

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				January-June
SEKm	2-20	1-20	2-19	2020	2019	2019
Net sales	1 537	1 706	1 573	3 243	3 152	6 229
Operating costs	-1 175	-1 403	-1 400	-2 579	-2 719	-5 233
EBITDA	361	302	174	664	433	996
Depreciation and amortisation according to plan	-143	-139	-138	-283	-285	-562
Operating profit	218	163	36	381	148	435
Investments	37	77	113	115	197	421
Capital employed	5 577	5 715	5 625	5 577	5 625	5 589
EBITDA margin, %	24	18	11	20	14	16
Operating margin, %	14	10	2	12	5	7
Return on capital employed, %	15	12	2	14	5	8
Production, paperboard, '000 tonnes	139	135	135	275	266	532
Deliveries, paperboard, '000 tonnes	135	147	138	282	274	538

Demand for paperboard was good in the second quarter despite the COVID-19 outbreak and prices were stable.

Operating profit for January–June was SEK 381 million (148). The increase in profit was due to lower production costs, higher deliveries and a better product mix. A maintenance shutdown had a negative impact of SEK 80 million on the first half of 2019.

Compared with the first quarter, profit improved by SEK 55 million to SEK 218 million as a result of a good product mix and somewhat lower costs.

A maintenance shutdown is expected to have a negative SEK 120 million impact on profit in the fourth quarter of 2020. In 2019 earnings were affected by SEK -210 million due to major maintenance shutdowns.

*Excl. items affecting comparability

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 at two Swedish mills amounts to a little over 1 million tonnes per year.

	Quarter				January-June
SEKm	2-20	1-20	2-19	2020	2019	2019
Net sales	1 107	1 445	1 470	2 552	2 815	5 757
Operating costs	-1 071	-1 264	-1 239	-2 336	-2 368	-4 866
EBITDA	36	180	230	216	447	891
Depreciation and amortisation according to plan	-96	-97	-97	-193	-194	-382
Operating profit	-60	83	133	23	253	509
Investments Capital employed	97 1 996	62 2 036	23 2 153	159 1 996	72 2 153	187 1 903
EBITDA margin, % Operating margin, %	3 -5	12 6	16 9	8 1	16 9	15 9
Return on capital employed, %	neg	17	24	2	23	24
Production, '000 tonnes	183	265	231	448	490	975
Deliveries, '000 tonnes	198	257	251	454	481	996

As a result of the COVID-19 pandemic, demand for paper decreased sharply in Europe in the second quarter and was over 30 per cent lower than in the corresponding period in 2019.

Operating profit for January–June was SEK 23 million (253). The decrease in earnings is attributable to lower sales prices and to curtailment of production in response to weak demand in the second quarter.

Compared with the first quarter, profit decreased by SEK 143 million to a loss of SEK -60 million due to over 20 per cent lower deliveries, extensive curtailment of production and SEK 30 million in costs related to a major maintenance shutdown.

Wood Products

Holmen produces wood products for joinery and construction at three sawmills where by-products are used at the Group's paper and paperboard mills. Annual production volume is almost 1 million m3.

		Quarter			January-June
SEKm	2-20	1-20	2-19	2020	2019	2019
Net sales	422	455	450	877	928	1 695
Operating costs	-379	-426	-397	-805	-796	-1 535
EBITDA	44	28	53	72	132	159
Depreciation and amortisation according to plan	-25	-25	-25	-50	-49	-97
Operating profit	19	4	29	22	83	62
Investments	26	37	26	64	68	162
Capital employed	1 007	1 020	1 004	1 007	1 004	1 000
EBITDA margin, %	10	6	12	8	14	9
Operating margin, %	4	1	6	3	9	4
Return on capital employed, %	7	1	12	4	17	6
Production, '000 m³	215	227	217	442	442	877
Deliveries, '000 m³	224	247	224	471	455	879

Despite the COVID-19 pandemic, the market balance for wood products was good in the second quarter because of robust consumption in certain countries, at the same time that production curtailments limited supply. Market prices increased slightly.

Operating profit for January–June was SEK 22 million (83). The decrease in profit is due to price drops in the fall of 2019, which were partly offset by lower wood costs.

Compared with the first quarter, profit increased by SEK 15 million to SEK 19 million as a result of somewhat higher prices and a good product mix.

Renewable Energy

In a normal year Holmen produces 1.2 TWh of renewable hydro power and wind power.

	Quarter				January-June
SEKm	2-20	1-20	2-19	2020	2019	2019
Net sales	75	124	78	200	192	378
Operating costs *	-32	-23	54	-55	42	-16
Depreciation and amortisation according to plan	-7	-7	-6	-13	-12	-26
Operating profit **	37	95	126	132	222	336
Investments Capital employed	37 3 120	14 3 026	2 2 991	51 3 120	4 2 991	203 3 058
Operating margin, % **	49	76	162	66	116	89
Return on capital employed, % **	5	12	17	9	15	11
Production hydro and wind power, GWh	318	374	262	692	582	1 109

* Includes earnings from the sale of a wind farm permit 2019

** Excl. item affecting comparability 2019

The market price for electricity in the Nordic region continued to be low in the second quarter due to high production of hydro power and lower consumption than normal.

Operating profit for January–June was SEK 132 million (222). 15 per cent higher production made a positive contribution to earnings, but this was offset by lower electricity prices. Profit for the previous year included SEK 80 million from the sale of a permit to build a wind farm on Holmen property.

Compared with the first quarter, profit decreased by SEK 58 million to SEK 37 million, as a result of lower electricity prices and seasonally lower production.

* Excl. items affecting comparability

Cash flow, financing and net financial items

Cash flow from operating activities for January–June totalled SEK 1 454 million (1 377) and capital expenditures totalled SEK 360 million (356).

The Group's net financial debt decreased by SEK 798 million to SEK 2 986 million in the first half of the year. Net debt was 7 per cent of equity.

Since the turn of the year the Group's financing has been strengthened by raising SEK 1.3 billion in new borrowing with maturities of 4.5 to 7 years, while contractual credit commitments increased by just over SEK 1.0 billion and durations were extended. At 30 June the Group's long-term borrowing amounted to SEK 3.7 billion and short-term borrowing was SEK 0.4 billion. Cash and cash equivalents were SEK 0.7 billion and non-current financial receivables were SEK 0.3 billion. Contractual credit commitments amounted to SEK 5.0 billion, of which SEK 1.0 billion is available until 2023 and SEK 4.0 billion until 2025. All credit commitments are unused.

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

Net financial items for January–June amounted to SEK -21 million (-17).

Tax

Recognised tax for January–June amounted to SEK -247 million (-246). Recognised tax as a proportion of profit before tax was 21 per cent.

Equity

In January–June, the Group's equity increased by SEK 642 million to SEK 40 753 million. Profit for the period totalled SEK 902 million (954). Other comprehensive income amounted to SEK -263 million (-119).

Hedging of exchange rates and electricity prices

The Group hedges parts of future estimated net flows in foreign currencies. Operating profit for January–June includes currency hedges of SEK -130 million (-240). For the next 2.5 years, expected flows in EUR/SEK are hedged at an average of 10.62. For other currencies, 4 months of flows are hedged.

Prices for the Group's estimated net consumption of electricity are 90 per cent hedged for the remainder of 2020 and 65 per cent hedged for 2021. For the period 2022–2023, prices for the Group's estimated net consumption are hedged at an average of 35 per cent.

Acquisition of Martinsons

On 16 July 2020 Holmen signed an agreement to acquire Martinsons, one of Sweden's leading players in sawn and processed wood products. The purchase price is SEK 1.0 billion for 100 per cent of the shares. The deal is subject to approval from the relevant competition authority, which is expected in the fall. Martinsons consists of two sawmills in northern Sweden with processing of wood products for Scandinavian wood construction, as well as a project

operation for construction of complete frames made of cross-laminated timber (CLT) and glulam beams for purposes such as offices, sports centres and apartment buildings. After current investments are completed, the larger sawmill, Bygdsiljum, will have the capacity to produce 500 000 m3 of wood products annually, while the annual production at Kroksjön is over 100 000 m3 . Bygdsiljum also produces CLT and glulam beams, while Kroksjön processes wood products through trimming, planing, painting, impregnation and finger jointing. Martinsons' annual timber consumption is 1 million m3 , which corresponds to Holmen's annual timber harvest in northern Sweden. The company has 470 employees, most of whom work in processing.

In 2019 Martinsons turnover was SEK 1.8 billion, where SEK 1.1 billion came from sales of sawn and processed wood products, SEK 0.3 billion from major wood construction projects and the remainder from sales of by-products and timber trading. Martinsons' underlying EBITDA totalled SEK 157 million in 2019 and operating profit amounted to SEK 99 million. The acquisition will be funded from existing credit facilities and is expected to positively contribute to earnings per share from the time of takeover, which is expected to occur during the fourth quarter.

AGM 2020

The Annual General Meeting was held on 4 June. The following resolutions were adopted:

• The Board of Directors' proposal to not pay a dividend for the 2019 financial year was adopted.
• The following Board members were re-elected: Fredrik Lundberg, Carl Bennet, Alice Kempe, Lars Josefsson, Lars G Josefsson, Louise Lindh, Ulf Lundahl, Henrik Sjölund and Henriette Zeuchner. Fredrik Lundberg was re-elected Chairman.
• KPMG AB was re-elected as the company's auditors.
• Cancellation of 7 000 000 class B treasury shares that had been repurchased by the company. After cancellation Holmen held 586 639 class B treasury shares.
• Mandate for the Board of Directors to make decisions in respect of acquisitions and transfer of up to 10 per cent of the company's treasury shares.
• New guidelines for remuneration to senior management were adopted.
• The performance condition for the share savings programme from 2019 was adjusted because of the change in recognition of the company's forest assets.

Extraordinary General Meeting

The Board has decided to convene an Extraordinary General Meeting in September to address payment of dividend. The Board proposes a dividend of SEK 3.5 per share.

The Board of Directors and the Chief Executive Officer hereby confirm that this interim report provides a true and fair view of the parent company's and Group's operations, position and performance, and describes material risks and uncertainties which affects the parent company and Group companies.

Stockholm, 13 August 2020 Holmen AB (publ)

Chairman Board member Board member

Fredrik Lundberg Carl Bennet Lars G Josefsson

Lars Josefsson Alice Kempe Louise Lindh

Board member Board member Board member

Ulf Lundahl Henriette Zeuchner Henrik Sjölund

Steewe Björklundh Kenneth Johansson Tommy Åsenbrygg Board member , Board member , Board member , employee representative employee representative employee representative

Board member Board member Board member and Cheif Executive Officer

The report has not been reviewed by the company's auditors.

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

Group

		Quarter		January-June		Full year
Income statement. SEKm	2-20	1-20	2-19	2020	2019	2019
Net sales	3 853	4 499	4 361	8 352	8 621	16 959
Other operating income	353	299	340	652	654	1 370
Change in inventories	-75	-97	-152	-172	-78	-220
Raw materials and consumables	-2 048	-2 471	-2 329	-4 519	-4 832	-9 398
Personnel costs	-604	-597	-609	-1 201	-1 190	-2 316
Other operating costs	-768	-845	-894	-1 613	-1 644	-3 597
Profit from investments in associates and joint ventures	1	0	-2	0	0	0
Depreciation and amortisation according to plan	-291	-285	-283	-575	-574	-1 141
Impairment losses	-	-	-	-	-	-109
Change in value of biological assets	121	124	143	245	260	9 566
Operating profit	542	628	574	1 170	1 217	11 115
Finance income	3	4	3	7	6	13
Finance costs	-15	-13	-12	-28	-23	-47
Profit before tax	531	618	565	1 149	1 200	11 081
Tax	-119	-127	-114	-247	-246	-2 351
Profit for the period	411	491	451	902	954	8 731
Earnings per share. SEK
basic	2.5	3.0	2.7	5.6	5.7	52.6
diluted	2.5	3.0	2.7	5.6	5.7	52.6
Operating margin, % *	14.0	14.0	13.2	14,0	14.1	13.8
Return on capital employed, % *	5.0	4.2	8.6	5.4	9.2	8.9
Return on equity, %	4.1	4.9	7.7	4.5	8.1	7.8
* Excl. Items affecting comparability.
Statement of comprehensive income. SEKm	2-20	Quarter		January-June 2020		Full year
Profit for the period		1-20	2-19		2019	2019
	411	491	451	902	954	8 731
Other comprehensive income
Revaluation of forest land	-	-	-	-	-	13 055
Revaluations of defined benefit pension plans	-60	-28	11	-89	30	14
Tax attributable to items that will not be reclassifed to profit for the period	11	6	-2	17	-6	-2 687
Items that will not be reclassifed to profit for the period	-49	-23	9	-72	25	10 382
Cash flow hedging	627	-738	-57	-110	-268	-37
Translation difference on foreign operation	-162	43	-47	-119	70	141
Hedging of currency risk in foreign operation	23	-5	2	18	-2	-2

	2-20	1-20	2-19	2020	2019	2019
Profit for the period	411	491	451	902	954	8 731
Other comprehensive income
Revaluation of forest land	-	-	-	-	-	13 055
Revaluations of defined benefit pension plans	-60	-28	11	-89	30	14
Tax attributable to items that will not be reclassifed to profit for the period	11	6	-2	17	-6	-2 687
Items that will not be reclassifed to profit for the period	-49	-23	9	-72	25	10 382
Cash flow hedging	627	-738	-57	-110	-268	-37
Translation difference on foreign operation	-162	43	-47	-119	70	141
Hedging of currency risk in foreign operation	23	-5	2	18	-2	-2
Share in joint ventures' other comprehensive income	-	-	-3	-	-1	-6
Tax attributable to items that will be reclassifed to profit for the period	-139	159	12	20	58	8
Items that will be reclassifed to profit for the period	349	-540	-93	-191	-143	105
Total other comprehensive income after tax	300	-563	-84	-263	-119	10 487
Total comprehensive income	711	-72	367	639	835	19 218

Change in equity, SEKm		January-June
		2019
Opening equity	40 111	23 453
Profit for the period	902	954
Other comprehensive income	-263	-119
Total comprehensive income	639	835
Share saving program	2	2
Dividend	-	-1134
Closing equity	40 753	23 156

Group

	2020	2020	2019
Balance sheet, SEKm	30 June	31 March	31 December
Non-current assets
Forest assets
Biological assets	28 253	28 109	27 979
Forest land	13 360	13 367	13 366
Intangible non-current assets	68	68	70
Property, plant and equipment	8 669	8 837	8 906
Right-of-use assets	238	251	183
Investments in associates and joint ventures	1 695	1 620	1 620
Other shares and participating interests	2	2	1
Non-current financial receivables	310	492	452
Deferred tax assets	1	1	1
Total non-current assets	52 596	52 747	52 579
Current assets
Inventories	3 244	3 439	3 460
Trade receivables	2 117	2 368	2 005
Current tax receivable	2	3	0
Other operating receivables	656	542	799
Current financial receivables	59	19	14
Cash and cash equivalents	718	1 415	483
Total current assets	6 796	7 787	6 761
Total assets	59 391	60 534	59 340
Equity	40 753	40 040	40 111
Non-current liabilities
Non-current financial liabilities	3 321	2 320	2 018
Non-current liabilities relating to right-of-use assets	233	242	171
Pension provisions	122	70	46
Other provisions	800	623	637
Deferred tax liabilities	10 167	10 112	10 299
Total non-current liabilities	14 643	13 367	13 171
Current liabilities
Current financial liabilities	391	2 788	2 485
Current liabilities relating to right-of-use assets	8	11	13
Trade payables	2 319	2 332	2 259
Current tax liability	82	77	112
Provisions	144	153	158
Other operating liabilities	1 053	1 765	1 030
Total current liabilities	3 996	7 127	6 058
Total liabilities	18 638	20 493	19 228
Total equity and liabilities	59 391	60 534	59 340
Debt/equity ratio, %	7	9	9
Equity/assets ratio, %	69	66	68
Capital employed	43 739	43 549	43 895
Net financial debt	2 986	3 509	3 784

Group

	Quarter				January-June
Cash flow statement, SEKm	2-20	1-20	2-19	2020	2019	Full year 2019
Operating activities
Profit before tax	531	618	565	1 149	1 200	11 081
Adjustments for non-cash items	-	-	-	-	-	-
Depreciation and amortisation according to plan	291	285	283	575	574	1 141
Impairment losses	0	-	-	0	-	109
Change in value of biological assets	-121	-124	-143	-245	-260	-9 566
Other *	-34	11	-6	4	-44	108
Paid income taxes	27	-202	183	-175	69	-147
Cash flow from operating activities
before changes in working capital	693	615	884	1 307	1 539	2 727
Cash flow from changes in working capital
Change in inventories	91	80	87	171	-36	210
Change in trade receivables and other operating receivables	101	-256	-27	-155	-520	-135
Change in trade payables and other operating liabilities	-42	173	170	131	394	83
Cash flow from operating activities	843	611	1 113	1 454	1 377	2 884
Investing activities
Acquisition of non-current assets	-333	-218	-193	-551	-385	-1 071
Disposal of non-current assets	54	2	10	56	11	21
Change in non-current financial receivables	135	-	18	135	18	36
Cash flow from investing activities	-144	-217	-165	-360	-356	-1 015
Financing activities
Change in financial liabilities and current financial receivables	-1 391	534	-254	-857	54	898
Buy-back of own shares	-	-	-	-	-	-1 430
Dividends paid to the shareholders of the parent company	-	-	-1 134	-	-1 134	-1 134
Cash flow from financing activities	-1 391	534	-1 388	-857	-1 080	-1 665
Cash flow for the period	-692	928	-439	236	-59	204
Opening cash and cash equivalents	1 415	483	659	483	278	278
Exchange difference in cash and cash equivalents	-5	4	0	-1	2	1
Closing cash and cash equivalents	718	1 415	220	718	220	483

	Quarter				January-June
Change in net financial debt, SEKm	2-20	1-20	2-19	2020	2019	Full year 2019
Opening net financial debt	-3 509	-3 784	-2 932	-3 784	-2 807	-2 807
New accounting principles IFRS 16 Leases	-	-	-	-	-205	-205
Cash flow from operating activities	843	611	1 113	1 454	1 377	2 884
Cash flow from investing activities (excl financial receivables)	-279	-217	-183	-496	-374	-1 050
Buy-back of own shares	-	-	-	-	-	-1 430
Dividends paid	-	-	-1 134	-	-1 134	-1 134
Liabilities arising from new right-of-use agreements	-15	-89	-32	-104	-45	-76
Revaluations of defined benefit pension plans	-63	-25	10	-87	28	12
Foreign exchange effects and changes in fair value	36	-5	26	31	29	21
Closing net financial debt	-2 986	-3 509	-3 131	-2 986	-3 131	-3 784

* 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			January-June		Full year
Income statement, SEKm	2-20	1-20	2-19	2020	2019	2019
Operating income	3 556	4 128	4 006	7 684	7 884	15 620
Operating costs	-3 569	-3 971	-3 927	-7 540	-7 556	-15 238
Operating profit	- 13	157	80	144	328	382
Net financial items	220	-13	86	207	80	22
Profit after net financial items	208	144	166	351	408	404
Appropriations	737	416	647	1 153	991	1 936
Profit before tax	945	560	813	1 504	1 399	2 340
Tax	-161	-121	-141	-282	-267	-493
Profit for the period	784	439	672	1 223	1 132	1 847
	Quarter		January-June		Full year
Statement of comprehensive income, SEKm	2-20	1-20	2-19	2020	2019	2019
Profit for the period	784	439	672	1 223	1 132	1 847
Other comprehensive income
Cash flow hedging	630	-740	-55	-110	-266	-34
Tax attributable to other comprehensive income	-135	158	12	24	57	7
Items that will be reclassifed to profit for the period	495	-582	-43	-86	-209	-27
Total comprehensive income	1 279	-143	629	1 136	924	1 820

	2020	2019	2019
Balance sheet, SEKm	30 June	31 March	31 December
Non-current assets	16 449	16 345	16 203
Current assets	5 645	6 552	5 648
Total assets	22 095	22 897	21 852
Restricted equity	5 915	5 915	5 915
Non-restricted equity	5 879	4 600	4 741
Untaxed reserves	1 759	1 826	1 646
Provisions	1 576	1 281	1 454
Liabilities	6 965	9 276	8 096
Total equity and liabilities	22 095	22 897	21 852

Sales to Group companies accounted for SEK 45 million (60) of operating income in January–June.

The parent company's investments in property, plant and equipment and non-current intangible assets totalled SEK 35 million (43).

Balance sheet appropriations include group contributions totalling SEK 1 266 million (1 309).

Notes

1. Accounting policies

This report has been prepared in accordance with the Swedish Annual Accounts Act and Securities Market Act, and, for the Group, in accordance with IAS 34 Interim Financial Reporting. The parent company and the Group's accounting policies are unchanged from the latest published annual report. The figures in tables are rounded off.

2. External sales by market

January-June	Forest	Paperboard	Paper	Wood Products	Renewable Energy	Group
2020 Scandinavia	1 481	101	302	338	200	2 217
Rest of Europe	-	2 439	1 821	291	-	4 552
Asia	-	644	299	82	-	1 025
Rest of the world	-	59	130	166	-	558
Total Net sales	1 481	3 243	2 552	877	200	8 352

January-June	Forest	Paperboard	Paper	Wood	Renewable	Group
2019				Products	Energy
Scandinavia	1 534	81	234	357	192	2 201
Rest of Europe	-	2 454	2 143	338	-	4 934
Asia	-	496	323	93	-	912
Rest of the world	-	122	115	141	-	573
Total Net sales	1 534	3 152	2 815	928	192	8 621

3. 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	1 179.9
B share	1	117 265 856	117 265 856	26	3 057.9
Total number of shares		162 512 324	569 730 536		4 237.8
Holding of own B shares bought back		-586 639	-586 639
Total number of shares issued		161 925 685	569 143 897

In accordance with the resolution at the Annual General Meeting on June 4, 2020, Holmen AB has cancelled 7 000 000 repurchased treasury shares of series B. After the cancellation Holmen AB holds 586 639 treasury shares of series B.

4. Financial instruments

	Carrying amount			Fair value
Financial instruments, SEKm	2020	2019	2020	2019
	30 June	31 December	30 June	31 December
Assets at fair value	251	326	251	326
Assets at acquisition cost	3 158	2 928	3 158	2 928
Liabilities at fair value	169	179	169	179
Liabilities at acquisition cost	5 990	6 730	5 990	6 730

Holmen measures financial instruments at fair value or acquisition cost in the balance sheet depending on classification. In addition to items in net financial debt, with the exception of the pension liability, financial instruments cover trade receivables and trade payables. Financial instruments measured at fair value in the balance sheet belong to measurement level 2 pursuant to IFRS 13.

5. Use of 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, disposal, closure, major restructuring measures and 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. On page 86 of Holmen's 2019 annual report a description is given of the items that are reported as affecting comparability in previous periods.

	Quarter				January-June
SEKm	2-20	1-20	2-19	2020	2019	2019
EBITDA	833	912	857	1 745	1 791	3 486
Depreciation and amortisation according to plan	-291	-285	-283	-575	-574	-1 141
Operating profit excl. items affecting comp.	542	628	574	1 170	1 217	2 345
Items affecting comparability	-	-	-	-	-	8 770
Operating profit	542	628	574	1 170	1 217	11 115

	Quarter				January-June
SEKm	2-20	1-20	2-19	2020	2019	2019
Profit after tax	411	491	451	902	954	8 731
Items affecting comparability	-	-	-	-	-	-6 943
Profit after tax excl. items affecting comp.	411	491	451	902	954	1 789

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.

SEKm	2020 30 June	2020 31 March	2019 31 December
Fixed capital*	52 284	52 254	52 125
Working capital**	1 621	1 403	2 067
Deferred tax assets	1	1	1
Deferred tax liabilities	-10 167	-10 112	-10 299
Capital employed	43 739	43 549	43 895

*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 asset, other current operating receivables, trade payables, current tax liability, provisions, other provisions and 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:

SEKm	2020 30 June	2020 31 March	2019 31 December
Non-current financial liabilities	3 321	2 320	2 018
Non-current liabilities relating to right-of-use assets	233	242	171
Current financial liabilities	391	2 788	2 485
Current liabilities relating to right-of-use assets	8	11	13
Pension provisions	122	70	46
Non-current financial receivables	-310	-492	-452
Current financial receivables	-59	-19	-14
Cash and cash equivalents	-718	-1 415	-483
Net financial debt	2 986	3 509	3 784

6. Transactions 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.

7. 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. For a more detailed description of material risks and uncertainties see Holmen's annual report for 2019, pages 40–43 and note 26. The COVID-19 outbreak has had a negative impact on profitability within the paper business area in the second quarter, while impact on other business areas has been limited. Holmen has not furloughed personnel. For the third quarter, we expect orders to continue to be weaker than normal within paper because of the COVID-19 pandemic. The Group is working continually to take action to minimise the impact of the coronavirus outbreak, while putting the health and safety of our employees first.

Group

		2020 2019			Full year		Full year
Quarterly figures, SEKm	Q2	Q1	Q4	Q3	Q2	Q1	2020	2019	2019
Income statement
Net sales	3 853 -3 142	4 499	4 194	4 144	4 361	4 260	8 352 -6 852	8 621	16 959
Operating costs Change in value of forests	121	-3 710 124	-3 403 80	-3 468 147	-3 644 143	-3 446 118	245	-7 090 260	-23 039 9 566
Profit from investments in associates and joint ventures	1	0	0	1	-2	2	0	0	0
EBITDA	833	912	871	824	857	934	1 745	1 791	3 486
Depreciation and amortisation according to plan	-291	-285	-283	-283	-283	-291	-575	-574	-1 141
Operating profit excl. items affecting comparability	542	628	587	541	574	643	1 170	1 217	2 345
Items affecting comparability *	-	-	8 770	-	-	-	-	-	8 770
Operating profit	542	628	9 357	541	574	643	1 170	1 217	11 115
Net financial items	-11	-10	-9	-8	-9	-8	-21	-17	-34
Profit before tax	531	618	9 348	533	565	635	1 149	1 200	11 081
Tax	-119	-127	-1 980	-124	-114	-132	-247	-246	-2 351
Profit for the period	411	491	7 368	409	451	503	902	954	8 731
Earnings per share, SEK	2.5	3.0	45.5	2.5	2.7	3.0	5.6	5.7	52.6
Net sales**
Forest	1 432	1 690	1 578	1 418	1 647	1 642	3 121	3 289	6 286
Paperboard	1 537	1 706	1 490	1 588	1 573	1 578	3 243	3 152	6 229
Paper	1 107	1 445	1 455	1 486	1 470	1 345	2 552	2 815	5 757
Wood Products	422	455	385	381	450	478	877	928	1 695
Renewable Energy	75 -720	124	113	73	78	114	200 -1 641	192	378
Elimination of intra-group net sales		-920 4 499	-828 4 194	-801 4 144	-858 4 361	-898 4 260		-1 756 8 621	-3 385 16 959
Group	3 853						8 352
EBITDA by business area **
Forest	382	331	288	308	308	313	713	621	1 217
Paperboard	361 36	302	325	238	174	259	664 216	433	996
Paper Wood Products	44	180 28	202 17	243 10	230 53	216 79	72	447 132	891 159
Renewable Energy	43	102	80	48	132	102	145	234	362
Group-wide	-33	-32	-41	-24	-40	-35	-65	-75	-140
Group	833	912	871	824	857	934	1 745	1 791	3 486
Operating profit/loss by business area ** Forest	370	322	274	298	298	302	692	600	1 172
Paperboard	218	163	187	99	36	112	381	148	435
Paper	-60	83	110	147	133	119	23	253	509
Wood Products	19	4	-7	-14	29	54	22	83	62
Renewable Energy	37	95	72	42	126	96	132	222	336
Group-wide	-41	-39	-49	-30	-47	-42	-80	-89	-168
Group	542	628	587	541	574	643	1 170	1 217	2 345
Operating margin, % **
Paperboard	14.2	9.6	12.6	6.3	2.3	7.1	11.8	4.7	7.0
Paper	-5.4	5.8	7.5	9.9	9.1	8.9	0.9	9.0	8.8
Wood Products	4.4	0.8	-1.9	-3.7	6.4	11.4	2.6	9.0	3.7
Group	14.1	14.0	14.0	13.0	13.2	15.1	14.0	14.1	13.8
Return on capital employed, % **
Forest	4.5	3.9	7.3	7.9	7.9	8.1	4.2	8.0	7.8
Paperboard Paper	15.4 neg	11.6 16.9	13.4 21.9	7.1 27.6	2.5 23.9	8.1 21.8	13.5 2.3	5.3 22.8	7.8 23.8
Wood Products	7.4	1.4	neg	neg	11.6	22.7	4.4	17.1	6.3
Renewable Energy	4.8	12.5	9.6	5.6	16.9	12.7	8.6	14.8	11.2
Group	5.0	5.7	9.0	8.3	8.6	9.7	5.4	9.2	8.9
Key indicators
Return on equity, % **	4.1	4.9	7.6	7.2	7.7	8.5	4.5	8.1	7.8
Deliveries
Volume of own forests, '000 m³	771	761	821	654	688	551	1 531	1 239	2 714
Paperboard, '000 tonnes Paper, '000 tonnes	135 198	147 257	125 259	139 256	138 251	136 230	282 454	274 481	538 996
Wood products, '000 m³	224	247	214	209	224	232	471	455	879
Own production of hydro and windpower, GWh	318	374	280	247	263	319	692	582	1 109
Personal
Average number of employees (FTE)							2 792	2 885	2 915

Group

Full year review, SEKm	2019	2018	2017	2016	2015	2014	2013	2012	2011	2010
Income statement
Net sales	16 959	16 055	16 133	15 513	16 014	15 994	16 231	17 852	18 656	17 581
Operating costs Change in value of forests	-13 961 487	-12 984 425	-13 379 415	-12 626 315	-13 348 267	-13 270 282	-13 919 264	-15 224 350	-15 501 -	-15 077 52
Profit from investments in associates and joint ventures	0	-9	-12	-22	7	-7	3	47	84	28
EBITDA	3 486	3 488	3 157	3 179	2 940	2 999	2 579	3 026	3 239	2 583
Depreciation and amortisation according to plan	-1 141	-1 012	-991	-1 018	-1 240	-1 265	-1 370	-1 313	-1 260	-1 251
Operating profit excl. items affecting comparability	2 345	2 476	2 166	2 162	1 700	1 734	1 209	1 713	1 980	1 332
Items affecting comparability	8 770	-94	-	-232	-931	-450	-140	-193	3 593	264
Operating profit	11 115	2 382	2 166	1 930	769	1 284	1 069	1 520	5 573	1 596
Net financial items	-34	-25	-53	-71	-90	-147	-198	-227	-244	-208
Profit before tax	11 081	2 356	2 113	1 859	679	1 137	871	1 294	5 328	1 388
Tax	-2 351	-89	-445	-436	-120	-230	-160	559	-1 374	-684
Profit for the year	8 731	2 268	1 668	1 424	559	907	711	1 853	3 955	704
Diluted earnings per share, SEK	52.6	13.5	9.9	8.5	3.4	5.4	4.3	11.1	23.6	4.2
EBITDA by business area*
Forest	1 217	1 216	1 099	1 030	935	845	958	964	769	846
Paperboard	996	1 196	1 257	1 382	1 346	1 161	878	959	1 186	1 141
Paper	891	665	627	669	514	725	429	862	1 002	229
Wood Products	159	337	165	80	86	160	45	-10	-26	49
Renewable Energy	362	205	159	143	198	233	391	374	425	516
Group-wide	-140	-132	-149	-124	-138	-126	-121	-123	-116	-198
Group	3 486	3 488	3 157	3 179	2 940	2 999	2 579	3 026	3 239	2 583
Operating profit by business area*
Forest	1 172	1 185	1 069	1 001	905	817	924	931	739	818
Paperboard	435	689	764	903	847	674	433	596	863	817
Paper	509	329	288	289	-74	141	-309	94	228	-618
Wood Products	62	246	80	-3	9	37	-75	-130	-136	20
Renewable Energy	336	181	135	120	176	212	371	355	406	495
Group-wide	-168	-154	-170	-148	-163	-146	-136	-132	-120	-200
Group	2 345	2 476	2 166	2 162	1 700	1 734	1 209	1 713	1 980	1 332
Deliveries
Volume of own forests, '000 m³	2 714	2 831	2 904	2 986	3 213	3 297	3 465	3 211	2 988	2 999
Paperboard, '000 tonnes Paper, '000 tonnes	538 996	525 1 036	526 1 117	497 1 134	499 1 325	493 1 305	469 1 574	485 1 651	474 1 668	464 1 732
Wood products, '000 m³	879	828	852	776	730	725	686	660	487	285
Own production of hydro and wind power, GWh	1 109	1 145	1 169	1 080	1 441	1 113	1 041	1 353	1 235	1 149
Balance sheet
Forest assets	41 345	18 701	17 971	17 595	17 340	17 032	16 654	16 344	15 871	12 261
Other non-current assets	10 781	10 586	10 780	11 106	12 184	13 189	13 998	14 320	14 463	13 767
Current assets	6 264	6 845	5 710	5 852	5 607	5 964	5 774	6 005	6 642	6 950
Financial receivables	950	781	430	338	325	249	327	377	240	454
Total assets	59 340	36 912	34 891	34 891	35 456	36 434	36 753	37 046	37 217	33 432
Equity	40 111	23 453	22 035	21 243	20 853	20 969	20 854	20 813	19 773	16 913
Deferred tax liability	10 299	5 839	5 650	5 613	5 508	5 480	5 804	5 504	6 630	5 910
Financial liabilities and interest-bearing provisions	4 732	3 587	3 366	4 283	5 124	6 156	6 443	6 967	6 499	6 227
Operating liabilities	4 196	4 033	3 840	3 752	3 971	3 829	3 653	3 762	4 313	4 382
Total equity and liabilities	59 340	36 912	34 891	34 891	35 456	36 434	36 753	37 046	37 217	33 432
Cash flow
Operating activities	2 884	2 286	2 509	1 961	2 526	2 176	2 011	2 254	2 101	1 523
Investing activities **	-1 050	-1 005	-644	-123	-824	-815	-872	-1 957	-1 791	-1 585
Cash flow after investments	1 834	1 281	1 865	1 838	1 702	1 361	1 139	297	310	-62
Key indicators Return on capital employed, %*	9	10	9	9	6	6	4	7	9	6
Return on equity, %*	8	10	8	8	7	6	4	6	8	4
Debt/equity ratio, %	9	12	13	19	23	28	29	32	32	34
Dividend
Dividend, SEK	-	6.75	6.5	6	5.25	5	4.5	4.5	4	3.5

*Excl. items affecting comparability.

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

Holmen in brief

Holmen's business concept is to own and add value to the forest. The forest holdings form the basis of the business – an ecocycle in which the raw material grows and is refined into everything from wood for climatesmart building to renewable packaging, magazines and books. The forest is managed to provide a good annual return and stable value growth while our production operations are run with a focus on profitability and greater value added.

Press and analyst conference

On the publication of the interim report, a webcast press and analyst conference will be held at 14.30 CET on Thursday 13 August. 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 14.25 CET on:

+46 8 505 583 52 (within Sweden) +44 3 333 009 274 (from the rest of Europe) +1 833 526 83 97 (from the US)

Financial reports

21 October 2020	Interim report January–September 2020
5 February 2021	Year-end report 2020
29 April 2021	Interim report January–March 2021
19 August 2021	Interim report January–June 2021
21 October 2021	Interim report January–September 2021

This information such that Holmen AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act (2007:528). The information was submitted for publication, through the agency of the contact person set out above, at 12.30 CEST on Thursday, 13 August 2020.

_________________________________________________________________________________________

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.