Annual Report • Mar 9, 2010
Annual Report
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Annual report 2009
CEO's message _____________ 1 The year in brief______________ 2 Holmen in brief ______________ 4 Business concept, strategy and goals ___________ 6 Holmen Paper ______________ 12 Iggesund Paperboard_______ 16 Holmen Timber _____________20 Holmen Skog _______________22 Holmen Energi______________24 Production and raw materials _______________26 The share and shareholders 28 Corporate governance report _____________________3 1 Board of directors __________36 Group management ________38 Quarterly figures ____________39
Ten-year review ____________40
| Administration report ______44 |
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| Income statement ____52 |
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| Statement of comprehensive income ____52 |
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| Balance sheet __53 | |
| Changes in equity ____54 |
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| Cash flow statement ______55 |
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| Parent company______56 | |
| Notes ____58 | |
| Proposed treatment of | |
| unappropriated earnings ____84 |
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| Audit report_____85 | |
| Annual General Meeting ____86 |
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|---|---|
| Information _____87 |
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| Definitions and glossary _____88 |
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| Addresses | |
Holmen in 90 seconds
The year 2009 is certain to go down in history. The unprecedented slump in the global economy had a tangible impact on Holmen's business areas for printing paper and consumer paperboard. A drop of more than 10 per cent in demand entailed considerable production cutbacks, which put pressure on profits. However, higher prices, lower fibre costs and more favourable exchange rates helped to increase profits from printing paper and paperboard. Earnings per share were SEK 12.0, and although we are not satisfied with this figure, it is an improvement on the earnings per share of SEK 7.6 achieved in 2008. Return on equity totalled 6 per cent.
Despite the improved profit, the Board proposes lowering the dividend from SEK 9 to SEK 7 per share. The reason for this proposal is that we are facing less certainty with regards to profitability; printing paper prices are under intense pressure at the same time as we are implementing major investments, such as the new sawmill at Braviken. The Board is also adjusting the dividend target to better reflect our situation. The dividend is to be based on an appraisal of the Group's profitability, future investment plans and the goal of having a strong financial position.
Newsprint deliveries to Europe fell by 14 per cent in 2009, corresponding to a decline of nearly 20 per cent in the past two years. We believe that printing paper – mainly newsprint – is entering a phase in which structurally intensified competition from new media will
adversely affect growth. This means that Holmen Paper and the entire industry will need to modify their production structure. Holmen Paper is pursuing its plan to improve quality, realign operations to focus on more specialised niche products, shut down unprofitable production, improve efficiency and cut costs. A comment about each mill can illustrate this. At Hallsta Paper Mill, a paper machine and a recovered paper line ceased production in 2008. A major workforce reduction was implemented, and production was reorganised to increase
| n Facts | 2009 | 2008 |
|---|---|---|
| Net sales, SEKm | 18 071 | 19 334 |
| Operating profit, SEKm | 1 620 | 1 051 |
| Operating profit excl. items affecting comparability, SEKm |
1 620 | 1 412 |
| Profit for the year, SEKm | 1 006 | 642 |
| Earnings per share, SEK | 12.0 | 7.6 |
| Dividend per share, SEK | 7 * | 9 |
| Return on capital employed, %** | 7.2 | 6.1 |
| Return on equity, % | 6.4 | 3.9 |
| Debt/equity ratio, times | 0.34 | 0.48 |
| Investments, SEKm | 818 | 1 124 |
| Average number of employees | 4 577 | 4 829 |
| Proposal of the Board. *Excl. items affecting comparability. |
book paper manufacturing. In the stagnating market, Holmen has successfully increased volumes in the MF Special niche, where several new products have been very well received by customers. At Braviken Paper Mill, efficiency continues to improve through measures such as staff cuts affecting about 100 people. The new pulp line, launched in 2008, has resulted in dramatic energy savings per tonne. Holmen Paper Madrid is investing in a new combined gas and steam plant to lower electricity and steam costs – two major cost items. In Madrid, the smaller paper machine is also being adapted to produce coated magazine paper (LWC) rather than newsprint. Wargön Mill was closed in 2008; the shutdown proceeded as planned, and the paper machine was sold at the end of the year.
The market for virgin fibre board was also weak in the first part of 2009 but improved during the autumn. At year-end, Iggesund Paperboard had a strong order book.
We have continued to refine our products. At Iggesund Mill, Invercote products were further enhanced for various applications. Efficiency improvements are also underway with the aim of lowering costs. Fossil carbon dioxide emissions were reduced by 65 per cent during the year, and more than 90 per cent of the mill's internally generated electricity supply comes from biofuels. A new large-scale efficient treatment plant with the latest technology is now operational.
Holmen shut down the oldest board machine at Workington Mill in December 2009 and
upgraded the capacity of the remaining machine at the same time. These measures add to our competitive strength and move us towards a higher quality segment in the market. As a result of the restructuring process, the mill has an annual production capacity of 200 000 tonnes compared to its previous 250 000 tonnes. The workforce cutbacks affect about 100 people.
The recession also made its mark on the consumption of sawn timber. However, a shortage of raw materials, low stock levels and production cutbacks among many European suppliers resulted in a relatively favourable market and enabled Holmen Timber to increase its deliveries compared to 2008. Thanks to the market situation, price rises were implemented during the second half of the year.
Production in the new sawmill at Braviken will start at the turn of 2010/2011, and we hope to see slightly stronger demand ahead.
Demand was relatively low at the start of 2009 but rose later in the year, as did wood prices. The threat of a substantial rise in Russian export duties subsided during the year, but the lower import levels appear to be a lasting development.
Holmen Skog plays a key role in obtaining wood for our mills. During 2009, the organisation was reinforced to meet the need for saw logs for the new sawmill, and market activities will be stepped up even more during 2010.
The ground-breaking ceremony for the new sawmill next to Braviken Paper Mill on 11 August attracted a great deal of media attention and invited guests.
Holmen Energi achieved very strong operating profit, mainly thanks to good prices. Activity levels are high at Holmen Energi. A new hydro power station in the Iggesundsån river replaced three old ones during the year. The first peat deliveries left Holmen's new extraction sites during the autumn. Several wind power initiatives are also in progress. Our aim is to generate wind power corresponding to 1 TWh on our own forestland. The wind is being measured in several locations, and it is increasingly clear that we have many sites that may be suitable for the construction of wind farms. We are also one of the owners of the company VindIn AB, which inaugurated its first wind farm in autumn 2009.
The Holmen Biorefinery Development Centre is a new area of activity that will develop new products from forest raw material as well as from residual and bi-products from Holmen's other operations.
Holmen has joined forces with four companies in electricity-intensive industries to form Industrikraft i Sverige AB, which signed an agreement with Vattenfall in the autumn to proceed with projects to secure fossil-free baseload power for the future.
It appears that 2010 will be another tough year for Holmen Paper. There are as yet no signs of an upturn in demand, and ongoing price negotiations are expected to lead to lower prices for printing paper in Europe. Meanwhile, prices for recovered paper, a key raw material for us, have
Trumpet Corps and the Mounted Royal Guards gave a concert on the Holmen-torget square in Norrköping.
begun increasing. The market looks brighter for Iggesund Paperboard and Holmen Timber. Demand for timber is substantial and prices have climbed, which raises costs for Holmen Timber but creates potential for some improvement in Holmen Skog's earnings from wood. For Holmen Energi 2010 may be another good year, because prices are largely hedged at favourable levels.
The largest currency exposure, to the euro, is hedged for 2010 and 2011, and the exchange rates will be slightly more favourable than the hedging contracts that applied for 2009.
The new sawmill at Braviken is one reason why investments are estimated to exceed SEK 1 500 million. An ongoing survey of additional energy-related investments may keep the level of investment high.
We have entered a period during which we must recast part of our Group, by which I am referring to the printing paper operations at Holmen Paper. In our 400-year history, we have undergone major change on numerous occasions. This is in itself a strength in times of transformation, but the realignment and development work is not possible without the contribution of all employees. I would like to thank you and say that together we will successfully tackle the challenges that await us.
Stockholm, 19 February 2010
Magnus Hall President and CEO
Holmen has a total capacity to manufacture about 2.5 million tonnes of printing paper and paperboard each year. The company is Europe's fifth largest manufacturer of printing paper, with production capacity of 1 940 000 tonnes per year. With annual capacity for 530 000 tonnes of virgin fibre-based board, Holmen is the third largest producer in Europe. The company's production capacity for sawn timber is 340 000 cubic metres a year.
Holmen is a forest industry group that manufactures printing paper, paperboard and sawn timber and runs forestry and energy production operations. The company's extensive forest holdings and its high proportion of energy production are strategically important resources for its future growth.
PRODUCTS. Holmen focuses on printing paper, paperboard, sawn timber, forestry and energy. Holmen Paper and Iggesund Paperboard together account for 80 per cent of Holmen's net sales.
OWN FOREST PROVIDES majority of wood raw materials. Holmen's manufacturing operations are based on renewable raw materials from sustainably managed forests. The Group owns around 1.3 million hectares of land, of which 1 million are used for forestry. The company is about 60 per cent self-sufficient for its wood needs.
HYDRO POWER AND BIOENERGY. Holmen's electricity needs are met through the Group's wholly and partly owned hydro power and back pressure power as well as through purchased electricity. The company's electricity self-sufficiency is some 30 per cent. Biofuels cover a significant part of Holmen's thermal energy needs.
MANUFACTURING IN THREE COUNTRIES. Holmen has four production facilities in Sweden and one each in the UK and Spain; some finishing takes place in the Netherlands and France. The Group runs its own sales companies in several European countries and around 90 per cent of items produced are sold in Europe. Holmen has a subsidiary for wood purchasing in Estonia.
HOLMEN'S TWO CLASSES OF SHARES are listed on the Nasdaq OMX Nordic, Large Cap.
Operations: Responsible for managing Holmen's forests, for wood supply to the Group's Swedish units and for trade in wood.
Land holding: 1 264 000 hectares, of which 1 032 000 hectares comprise productive forestland.
Volume of wood: 119 million forest cubic metres.
Operations: Responsible for the Group's hydro power stations, coordination of its energy matters, and electricity supply to its Swedish units.
Number of wholly and partly owned hydro power stations: 21. Number of partly owned wind farms: 1. Production capacity/year (hydro power): 1 100 GWh.
Products: White and coloured newsprint as well as paper for directories, books and magazines. Customers: Daily newspapers, retailers, book and magazine publishers, directory and manual publishers and printers.
Mills: Hallsta Paper Mill, Braviken Paper Mill and Holmen Paper Madrid.
Production capacity/year: 1 940 000 tonnes. Number of paper machines: 8.
Products: Solid
bleached board and folding boxboard for consumer packaging and graphic design purposes. Customers: Converters of paperboard for packaging as well as printers and wholesalers. Mills: Iggesund Mill and Workington Mill. Production capacity/year: 530 000 tonnes.
* After the shutdown of BM1 at Workington Mill in December 2009.
Products: Pine sawn timber.
Customers:Joinery and furniture industries, manufacturers of solid flooring, planing mills and builders' merchants. Sawmill:
Iggesund Sawmill.
Production capacity/year:
340 000 cubic metres. Holmen plans to start production at Braviken Sawmill, with an initial capacity of 550 000 cubic metres, at year-end 2010/2011.
The paper is used for newspapers, magazines, directories, direct advertising and books. Main market: Europe.
The board is used in packaging for consumer products and for graphics applications. Main market: Europe.
Sawn timber is used to make products such as window frames, flooring, doors and furniture. Main market: Scandinavia, the UK, North Africa and the Middle East.
The raw-material-oriented business areas Holmen Skog and Holmen Energi provide the product-oriented business areas Holmen Paper, Iggesund Paperboard and Holmen Timber with wood and electricity respectively. The overview shows how the products are made and how consumers come into contact with them.
Holmen's business concept is to develop and run profitable business within three product-oriented business areas for printing paper, paperboard and sawn timber as well as two raw-material-oriented business areas for forest and energy. Europe is the key market.
HOLMEN PAPER manufactures printing paper for daily newspapers, magazines, directories, manuals, direct advertising and books at two mills in Sweden and one in Spain. With its production capacity of 1 940 000 tonnes of printing paper per year, Holmen Paper is the fifth largest producer in Europe. UPM and Stora Enso are the largest, with some 7 and 6 million tonnes respectively. In printing paper, Holmen Paper has a strong position amongst European daily newspaper publishers, who account for around two-thirds of its sales. Retailers, printers and book and directory/manual publishers are other key customer segments. Holmen Paper has a market share in Europe of just under 10 per cent in standard newsprint, while its share of the market for improved newsprint, directory paper and book paper is above 30 per cent. Holmen Paper's sales organisation is in Sweden and in sales companies on geographically important markets.
IGGESUND PAPERBOARD produces virgin-fibrebased solid bleached board and folding boxboard for consumer packaging and graphics applications at one Swedish and one UK mill. With its capacity of 530 000 tonnes per year, Iggesund is the third largest manufacturer in this segment in Europe. Its main competitors are Stora Enso and M-real, with around 1 million and 700 000 tonnes of virgin fibre board respectively. Iggesund's largest customer group comprises converters who make consumer packaging, but wholesalers and printers who buy board for graphic design products are also key customers. Iggesund has a leading market position, mainly in solid bleached board in Europe. It is also a significant operator in folding boxboard. Iggesund has around 20 per cent of the market in Europe for virgin fibre board. Euro-pean sales are coordinated via a central sales office in the Netherlands, with sales and technical personnel in a number of European countries. Iggesund also has its own sales companies in Hong Kong, Singapore and the USA.
HOLMEN TIMBER is the Group's third product-oriented business area and it manufactures sawn timber at its Swedish sawmill. Holmen Timber is a relatively small operator in Europe and has a market share of less than one per cent for sawn timber. Holmen Timber mainly sells its products to customers in Scandinavia, the UK, North Africa and the Middle East. Sawn timber is sold directly to customers via Holmen Timber's own sales companies in Sweden and the UK and via a jointly owned marketing company. Production at Holmen Timber's new Braviken Sawmill is scheduled to start at the turn of 2010/2011. The new sawmill will produce construction timber for the construction industry. Scandinavia, the UK and the USA will be important markets.
HOLMEN SKOG has responsibility for the Group's forest assets. Holmen has forest holdings of one million hectares of productive forestland in Sweden and the volume of wood amounts to 119 million forest cubic metres. Holmen is Sweden's fourth largest forest owner, with around 4.5 per cent of the country's productive forestland. The volume of wood grows by 3.0 million cubic metres per year, and normally annual harvesting totals 2.5 million cubic metres. Half of the wood is sold as timber to
A few customer products made from Holmen's paper, board and wood.
sawmills, around 40 per cent as pulpwood to the pulp and paper industry and about 10 per cent as biofuel for energy production. Holmen Skog is also responsible for supplying wood to the Group's industrial operations in Sweden.
Holmen runs its own R&D activities, as well as participating in external R&D at industry-wide level and in association with universities and colleges. The main focus is on product development and enhancing process efficiency, although forest growth and improving the efficiency of forestry are also important focuses. External R&D is carried out with various partners, such as Swedish Innventia, MoRe Research, SweTree Technologies, the Royal Institute of Technology, Umeå University, Mid Sweden University, Karlstad University, the Swedish University of Agricultural Sciences, Skogforsk in Sweden, the University of Manchester in the UK, and the Complutense University of Madrid, Spain.
Self-sufficiency raw materials, %
HOLMEN ENERGI has responsibility for the Group's hydro power assets as well as for developing the Group's energy operations. Hydro power production during a normal year amounts to 1.1 TWh, making Holmen the sixth largest electricity producer in Sweden. Holmen Energi is also responsible for supplying the Group's Swedish industrial operations with electricity.
Holmen operates on large, well-established markets, namely its product markets for paper, paperboard and sawn timber, and its raw materials markets for wood and energy. The Group's goal is to expand and to remain a strong supplier with efficient production. Most of the growth is organic and takes place by improving products and increasing production volumes in existing product areas. Acquisitions have accounted for a smaller proportion of the company's growth. The latest major acquisition was Holmen Paper Madrid in 2000. Development also entails reorganisation and the closure of unprofitable production – measures that have characterised Holmen Paper in recent financial years. Holmen has focused on developing more advanced grades of paper to reduce the production of standard newsprint. Iggesund Paperboard is adapting production to prioritise topquality paperboard. Sawn timber is continually enhanced in close cooperation with customers and specialised subcontractors. When completed, Braviken Sawmill will be an efficient and
technologically advanced sawmill for construction timber.
Holmen's own wood and energy production will also be developed and grow. The silviculture measures taken are expected to result in gradual increases in annual wood production (harvesting) to achieve a rise of 20 per cent in 40 years' time. Good potential is also expected for increasing the growth rate in the Group's forests by roughly 25 per cent in 30 years' time by adopting new and improved silviculture methods, which will lead to higher harvesting levels in future. In energy operations, the company believes that there is real potential for developing new, profitable production of wind power and biofuel. The aim is to produce 1 TWh of electricity each year from wind power on Holmen's land. In 2009, Holmen Energi opened a development centre in Iggesund focusing on biorefining and biofuels.
Holmen must satisfy its customers' high demands for the efficient printing, converting and sawing of products to make suitable end products with customer appeal. Holmen engages in decentralised R&D in each business area to support business demands for product development and efficient processes.
The overall objective of the Group's operations is to offer customers attractive products of high quality and good service in a cost effective way to maintain Holmen's position as a competitive
This highly simplified diagram illustrates the production process in a paper and board machine. In reality, the machines differ quite significantly. The raw materials consist mainly of wood and/or recovered paper, electricity and chemicals. The pulp, produced by chemical or mechanical means, passes along a web in the machine – firstly through a wet section, then a press section and finally the paper/ board is dried on the web, which at that stage runs between numerous cylinders. It is finally rolled on reels and cut to the reel or sheet sizes that the customers have ordered.
supplier. Large-scale, efficient production facilities and skilled employees yield high productivity and efficient use of input goods and capital. Effective interaction between marketing, product development and production increases is essential to achieve successful long-term investments, economies of scale and development. Basic volumes of certain products are combined with selective ventures involving improved or more advanced products for both existing and new categories of customers.
Alongside efficient production processes, the cost of raw materials and transport has an important impact on competitiveness. The main raw materials in the processes for producing printing paper, paperboard and sawn timber are fibre, in the form of wood, recovered paper and pulp as well as energy in the form of electricity and heat. Holmen produces more than 90 per cent of the pulp and thermal energy that it requires at its own mills using a highly integrated production process. The procurement of other raw materials is underpinned through backward integration along the production chain by owning forests, hydro power plants and recovered paper procurement units. The Group's Swedish facilities are around 65 per cent self-sufficient in wood, while for the whole Group (including the UK mill) selfsufficiency is around 60 per cent. The Group produces more than 30 per cent of the electricity that it requires, while more than 70 per cent of thermal energy production is based on residual products from the Group's production processes. Moreover, the prices of around 55 per cent of the electricity supplies are hedged through long-term supply contracts. Significant volumes of recovered paper are purchased via wholly and partly owned paper collection companies.
PROFITABILITY. Holmen's profitability target is a return that is consistently higher than the market cost of capital, and this target is used to govern the business. At Group level, the key ratio used to calculate profitability is Value Added; this is defined as operating profit/loss less the cost of capital and tax. It provides a simple and sufficiently fair yardstick that is continuously followed up for the Group, business areas and production units. The Group's profitability has exceeded the cost of capital over a long period of time, although not in 2008.
Holmen's business is capital intensive and much expansion is the result of investing in additional capacity and improved production. Investments are often combined with cost rationalisation measures. To assess the profitability of investments, a model is used to calculate the present value of cash flows; that is, estimated future cash flows are discounted by the weighted cost of capital.
Computing the cost of capital involves weighting the cost of borrowed capital and equity and multiplying the result by the capital invested in the business. The cost of equity is computed as interest plus a premium based on the level of risk for the operation, with capital invested in industrial operations being assigned a higher risk premium (5 per cent) than capital invested in forest and power assets (2 per cent).
The Group's weighted cost of capital for its operating activities is computed on the basis of short-term market interest rates and was near to 8 per cent (before tax) for industrial operations in 2009. The cost of capital used for evaluating investment projects is based on longterm market interest rates and was about 11 per cent (before tax) for industrial operations in 2009.
CAPITAL STRUCTURE. Holmen is to have a strong financial position that provides financial stability and enables the company to make correct, long-term business decisions that are not solely dependent on the state of the economy and external financing possibilities. The target for the debt/equity ratio is the interval 0.3–0.8, and adjustment to this target is one aspect of Holmen's strategic planning.
Dividend. Decisions on ordinary dividends are based on a total appraisal of the Group's profitability, future investment plans and financial position.
The Board has proposed that the 2010 Annual General Meeting (AGM) resolves in favour of lowering the dividend to SEK 7 per share, corresponding to 4 per cent of equity. During the past decade, the ordinary dividend has averaged 5 per cent of equity. As a result, around 60 per cent of earnings per share have been paid out in ordinary dividends each year. In addition to ordinary dividends, Holmen paid extra dividends for the 1998, 2000 and 2003 financial years.
In recent years, the AGM has authorised the
describes Holmen's activities towards sustainable development. The sustainability report aims to provide clear answers to questions asked by the Group's stakeholders about environmental and social responsibility and financial development. The 2009 edition will be published in English and Swedish in March 2010 and can be ordered on the website. The Spanish version is expected to be ready in May.
In 2009, as in previous years, Holmen was included in several corporate indices for sustainable development and social responsibility. Inclusion in such indices signifies that the company is deemed to act responsibly in financial, environmental and social responsibility issues. Holmen is, for instance, listed among Swedbank Robur's Ethica and Banco fund families, the FTSE-4Good Index Series, Nasdaq OMX/GES Nordic Sustainability Index, OMX GES Sustainability Sweden Index, Storebrand's SRI Index and SIX STARS Sustainability Index.
tive (GRI) issues globally accepted guidelines (G3) for sustainability reporting. Holmen has adhered to these guidelines for several years, and the sustainability report for 2009 satisfies the highest reporting standard, Level A. This has also been verified by the audit firm KPMG.
Board to buy back up to 10 per cent of all the shares in the company. During 2008, Holmen bought back 760 000 class B shares, corresponding to around 0.9 per cent of the total number of shares on issue and around 0.3 per cent of the total number of votes. These share buy-backs were linked to the Group's incentive scheme. There is no specific target for share buy-backs. Holmen has used them as a complement to dividends as a means of adjusting the capital structure when conditions were deemed favourable. Share buy-backs took place in 2000 and 2008.
Holmen's development is to be based on a sustainable approach to profitability and use of resources. The raw materials – wood and recovered paper – and the products are recyclable and adapted to the ecocycle.
Holmen is taking measures to make efficient use of electricity and heat, to reduce emissions of fossil carbon dioxide and to increase energy selfsufficiency.
The Group is a participant in the UN's Global Compact and thus supports international guidelines relating to human rights, social conditions, the environment and labour rights.
Holmen's measures to promote sustainable development are described in detail in the separate sustainability report Holmen and its World. The report satisfies the conditions for Level A, the highest of the Global Reporting Initiative's reporting levels.
FINANCIAL DEVELOPMENT. Healthy profitability and a strong financial position create good conditions for development that is sustainable in the long term. Holmen has a distinct role to play in a sustainable society by being a successful and profitable company that manufactures products from natural raw materials.
This creates employment opportunities and makes it possible to buy input goods, pay taxes and pay a return to Holmen's owners and financiers. Profitability is also a prerequisite for investments that allow the company to develop in line with gradual changes in market conditions. In this way, Holmen's financial targets support long-term and sustainable financial development.
SOCIAL RESPONSIBILITY. Holmen's HR activities are governed by guidelines, laws and agree-
Employees at Braviken Paper Mill.
ments. The main emphasis is on skills supply, leadership and organisation. Holmen has set a number of targets for human capital, leadership, performance reviews, the number of industrial accidents and the proportion of female managers. Our sustainability report Holmen and its World details these targets.
The results are followed up via key indicators and Holmen Inblick, the employee survey. Employee surveys are carried out every other year and, as of 2009, at all of Holmen's units. The results provide a foundation for strategic HR activities and local action plans.
Holmen takes systematic action to identify and develop employees with the potential to advance to more qualified tasks. Holmen's target is to fill at least 75 per cent of all management vacancies in the Group through internal recruitment. Management training programmes have been expanded, in that all new managers now have a local mentor and undergo an induction course.
Each year significant resources are earmarked for skills development. All the business areas conduct numerous training programmes. The average Holmen employee receives around 40 hours of training each year.
Holmen is taking long-term measures to create a stable basis for future recruitment, including close cooperation with universities and colleges and offering summer jobs to young people.
Holmen endeavours to help employees affected by company restructuring by offering relocation, early retirement and financial support for training.
Holmen takes joint action with the union organisations on issues concerning health, safety, equal opportunities, competence development and reductions in the workforce. All policies are developed together with or have the support of union organisations.
ENVIRONMENTAL responsibility. Environmental aspects of Holmen's business are regulated by laws and permits in each country. The organisation and management of the Group's environmental activities are based on the Group's environmental policy. The policy clarifies the importance of energy and climate issues to the business. The environmental impact of production is within the limits laid down by environmental authorities.
The Group's forests are managed with the long-term goal of increasing wood production, while also providing a habitat for the many species living there. A new silviculture programme has been developed which is expected to be able to further boost growth in Holmen's forests and create suitable conditions for naturally occurring plants and animals to flourish in the forest habitat in the long term. The Group also has the goal of increasing its extraction of biofuels from the forests in response to the growing demand from biofuel-based energy production.
Holmen's industrial and forestry operations are certified in accordance with ISO 14001. The forestry operations are also certified in accordance with the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification schemes (PEFC).
Holmen takes a pro-active approach to measures that contribute to sustainable development and help to reduce the impact on climate. Holmen is affected by the rules in the Kyoto Protocol regarding trading in emission rights, because the Group's facilities have been included in the system since 2005. Holmen supports improvement of energy efficiency and expansion of carbon neutral energy sources, such as hydro power, wind power and nuclear power.
In Sweden and the UK, Holmen participates in voluntary energy-efficiency improvement programmes that offer energy-intensive industries an alternative to energy taxes. This focuses internal attention on energy issues and is expected to increase energy efficiency and reduce climate change. The energy management systems in place at the Group's Swedish sites and at Workington Mill were introduced at Holmen Paper Madrid in 2009.
Holmen actively identifies and implements energy saving measures. The Group's energy and climate targets, described in more detail in the sustainability report Holmen and its World 2009, are to make energy use more efficient and reduce the use of fossil fuels.
For each tree that Holmen harvests, the company plants three new ones.
Holmen Paper is the fifth largest printing paper manufacturer in Europe. Its share of the European market is 10 per cent for standard newsprint and more than 30 per cent for MF Magazine, book and directory paper.
Global demand for printing paper was down during the year, and European demand for printing paper fell by about 15 per cent. Deliveries of newsprint to Europe declined by 14 per cent compared to 2008. Combined with weak demand outside Europe, this resulted in low
capacity utilisation at European producers. Despite this, little capacity was permanently shut down in the market, which put supply and demand out of balance. Demand for MF Magazine in Europe was 20 per cent less in 2009 than in 2008. SC paper declined by 9 per cent and coated grades by 22 per cent.
| n Facts | 2009 | 2008 |
|---|---|---|
| Net sales, SEKm | 9 303 | 10 443 |
| Operating profit/loss, SEKm | 340 | -81 |
| Operating profit excl. items affecting comparability, SEKm |
340 | 280 |
| Investments, SEKm | 287 | 679 |
| Operating capital, SEKm | 8 789 | 10 237 |
| Average number of employees | 2 301 | 2 584 |
| Share of sales in Europe, % | 84 | 88 |
| Deliveries, '000 tonnes | 1 745 | 2 044 |
Holmen Paper's operations during the year concentrated on an extensive quality drive and product development, in parallel with cost cuts and efficiency improvements. At Hallsta Paper Mill, the workforce was reduced by about 30 per cent after the closure of PM 2 and the pulp line for recovered paper in 2008. The workforce at Braviken Paper Mill will be reduced by about 100 people when a new organisation is introduced in spring 2010. At the paper mill in Madrid, work continues aimed at improving the efficiency of processes as well as cutting costs.
Operating profit for 2009 was SEK 340 million, compared to SEK 280 million for 2008 (excluding items affecting comparability). The improvement was attributable to higher sales prices, but the weak market entailed extensive production cutbacks and increased sales outside Europe. Lower costs of wood and recovered paper made a positive impact on profit, while energy costs rose.
Holmen Paper's market strategy focuses on Europe and is to develop competitive products and business concepts in wood-containing printing paper for specific customer segments: daily newspaper publishers, retailers, printers, and book and directory/manual publishers. Holmen Paper's share of the market for standard newsprint is around 10 per cent in Europe. For newsprint-related niche products, such as MF Magazine, book and directory paper, Holmen Paper's overall share of the European market is more than 30 per cent. The European market for wood-containing printing paper totalled more than 21 million tonnes in 2009, which is 4 million tonnes – or about 15 per cent – less than in 2008.
NEWSPRINT. About 9 million tonnes of the European market for wood-containing printing paper consisted of newsprint. Paid-for daily newspapers account for the majority of consumption. Free newspapers, which proved more susceptible to changes in the economy due to heavy dependence on advertising revenue, fell in 2009, to account for about 5 per cent of consumption.
Newsprint demand is increasingly affected by the widening range of electronic media and changing media habits of consumers and advertisers. Investments in radio, television and the internet are noticeable among traditional newspaper publishers.
Global demand for newsprint was down by 15 per cent during the year. The largest declines occurred in North America and Europe, by around 26 and 14 per cent respectively. Growth was mainly evident in Asia. Holmen Paper's newsprint deliveries decreased by 16 per cent, somewhat more than the average, due to the closure of capacity, reorganisation to focus on other products, and falling demand.
Following price cuts in 2008, newsprint prices were increased in 2009. For 2010, the prices are falling again.
The market was weak throughout the year. Rising exports outside Europe partially offset weak European demand, although capacity utilisation for west-European suppliers ended at 84 per cent.
Braviken's new line for thermo-mechanical pulp (TMP) production was brought into operation in the latter part of 2008, following investments of about SEK 500 million. One year on, the effects are clear. The energy savings, along with lower consumption of chemicals, correspond to more than SEK 90 million per year. Thanks to improved steam recycling, oil consumption has fallen dramatically, from 25 000 to 14 000 cubic metres per year.
The pulp produced is also stronger and has enhanced optical properties. Braviken has therefore been able to produce Holmen XLNT with a grammage of as low as 36 grams, and has won market shares from SC paper with a grammage of 45 grams.
The pulp production is continually studied and further developed, and there is potential for additional improvements to energy consumption, productivity and pulp properties.
Price
LWC/MWC (Coated paper) 6 million tonnes
SC paper 4 million tonnes
MF Special 2 million tonnes
Standard newsprint 9 million tonnes
Weekly magazines Product catalogues Advertising print
Journals Weekly magazines Product catalogues Advertising print
Advertising print Supplements Books Telephone directories
Daily newspapers Advertising print Supplements
Substantial marketrelated production stoppages were implemented at all of Holmen Paper's mills in 2009.
MF Special. This product area contains the product groups MF Magazine, book paper and telephone directory paper. Holmen Paper's strength lies in the product group MF Magazine, comprising products between standard newsprint and magazine paper (SC and LWC paper) on the quality scale. Holmen aims to offer alternatives to, in particular, SC paper that are cost effective and have potential for further development. Holmen Paper's deliveries of MF Magazine increased by 5 per cent, or 20 000 tonnes, to 400 000
tonnes. The general market trend for MF Magazine in Europe in 2009 was a 20 per cent drop in demand.
Book paper is a niche product that has become more important to Holmen Paper and is an area in which the company achieved positive results of product development during the year. Holmen's deliveries rose by 23 per cent in 2009. The European market for wood-containing book paper totals about 500 000 tonnes per year.
The market for telephone directory paper is dominated by a small number of strong buyers in each country. Demand was down by around 20 per cent in 2009, as were Holmen Paper's deliveries, and the long-term market trend is negative. Holmen Paper has a market share of about 35 per cent.
MAGAZINE PAPER. 2009 was also a gloomy year for magazine paper, that is, SC and coated paper. The European market fell by 17 per cent to 10 million tonnes. Magazine publishers, retailers and printers are the largest customer categories. Despite the drastic reduction in 2009, there are real hopes of some recovery propelled by investments in advertising. Increases in addressed direct mail and new
magazine titles are two positive driving forces. Holmen Paper has relatively small volumes in SC and coated paper, and deliveries of both fell by about 5 per cent in 2009 – without taking account of the closure of Wargön Mill.
Newsprint will continue to form the foundation of Holmen Paper in future, but action has been taken for several years now to reduce exposure to this area and increase the focus on more advanced and selected products in the MF Special product area. Holmen Paper enjoys a strong position here with products such as Holmen Book and Holmen XLNT.
Focused further development is ongoing and largely concentrates on projects for enhancement of MF Special.
Holmen Paper constantly cuts costs and improves efficiency to adapt to the changing market.
A new organisation with 30 per cent fewer employees was introduced at Hallsta Paper Mill in 2009. In September, Holmen announced staff cuts affecting about 100 people at Braviken Paper Mill; this will also entail a new organisation and noticeable profit impact in 2010.
Variable costs are continually reviewed. As part of this, Holmen constantly improves the efficiency of its machinery and its consumption of input goods and energy.
An in-house project to boost the quality of product characteristics, technical support and delivery precision was stepped up in 2009 and is making rapid progress.
Holmen Paper's marketing department and technical customer service identify what the market demands from printing paper. These are key channels for obtaining information about customers' needs and requirements for product development. Customer surveys are also used for this purpose.
Holmen Paper's product portfolio must follow the strategy set by the business area. Holmen Paper's strategy is to reduce exposure to standard newsprint, which accounts for more than half of production volume, and increase exposure to products with higher value added, such as MF Special.
Holmen Paper's product council identifies possible product development based on the business area's strategic goals and identified market needs deemed to have good future potential. Holmen Paper has a high percentage of
MF Special in its product portfolio. MF Special is one of Holmen Paper's strategic strengths that are important to safeguard. SC paper, which Holmen Paper only manufactures on a small scale, is also a significant product for certain end users. SC paper is a more advanced product than MF Special. Holmen Paper therefore saw the potential of developing MF Special, bringing it into a higher product class that is close to SC paper in terms of quality. The key question was: Is it possible to create a type of MF Special paper with the properties of SC paper?
Profitability analyses and technical prerequisites form the basis of decisions.
The preliminary study showed that the project had good prospects for success. The market clearly signalled that the concept was interesting, so Holmen decided to continue the project.
After testing, the new product is ready for its market launch.
Close cooperation with reference customers led to a breakthrough, which has made Holmen Paper the market leader in this type of paper. The market is very positive about this MF Special product, which has been named Holmen XLNT.
A preliminary study is initiated to identify technical possibilities and limitations as well as required investments. Estimates are made to calculate the costs of the projects.
SC paper has a higher gloss than MF Special products. The preliminary study investigated how to increase the gloss of MF Special paper. The paper pulp, filler and calendering process were important parameters in the study. Discussions took place with various parties, including machinery manufacturers and chemicals suppliers.
After a go-ahead decision, a project is started to develop the new product. Pilot testing is carried out. Qualification testing on key customers' equipment is an important step prior to product launch.
Full-scale tests were performed to test the mixture of paper pulp and filler when combined with various calendering processes used to press the paper. Holmen carried out test printing on key customers' equipment and then made
certain requisite adjustments. Gradual development work led to
Iggesund Paperboard is the third largest manufacturer of virgin fibre board in Europe, with a market share of about 20 per cent. Iggesund Paperboard has a leading market position in solid bleached board in Europe, but is also a significant operator in folding boxboard.
The virgin fibre board market was weak, particularly in the first half of 2009. The deterioration in market conditions was caused by the economic slowdown initiated by global financial unease with a slump in demand and subsequent destocking. Overall, the European market for virgin-fibre-based board declined by 9 per cent. Deliveries from Europe to non-European markets declined by 14 per cent.
| n Facts | 2009 | 2008 |
|---|---|---|
| Net sales, SEKm | 5 023 | 4 860 |
| Operating profit, SEKm | 419 | 320 |
| Investments, SEKm | 260 | 327 |
| Operating capital, SEKm | 4 114 | 4 254 |
| Average number of employees | 1 669 | 1 670 |
| Share of sales in Europe, % | 85 | 89 |
| Deliveries, '000 tonnes | 477 | 494 |
Capacity shutdowns prevented capacity utilisation among European producers from falling to the same extent as demand. Prices were increased during the year for both solid bleached board and folding boxboard. Iggesund Paperboard increased prices for folding boxboard in the UK market in the autumn and announced price rises in the rest of Europe for 2010.
In the autumn, a decision was made to permanently shut down the oldest board machine at Workington Mill and to upgrade the remaining board machine to obtain higher capacity and improved quality. The new annual capacity of the mill is 200 000 tonnes – a volume that is more appropriate for the market. The change entails personnel cutbacks affecting about 100 people.
Operating profit for 2009 was SEK 419 million (320). The improvement was thanks to higher prices largely due to currency movements with a weaker pound (sterling) and Swedish krona but also from the price rises implemented in the second half of 2008. However, production cutbacks and increased manufacturing costs had a negative effect on earnings. Provisions and impairment losses resulting from the shutdown of the board machine had a negative impact of SEK 75 million on profit during the year.
Global consumption of paperboard amounts to roughly 32 million tonnes per year. The European market for the grades produced by Iggesund – virgin-fibre-based solid bleached board and folding boxboard – is approximately
2.6 million tonnes. For a few years, the annual market growth rate was higher than usual, around 5 per cent, but it declined in 2008 and 2009, owing to the economic slowdown and financial unease. The largest European markets for solid bleached board and folding boxboard are Germany and the UK, with 23 per cent and 14 per cent of consumption respectively. Several European markets are decreasing, with eastern Europe showing a somewhat more marked decline. In recent years Asia has overtaken North America as the largest market for virgin fibre board. Iggesund Paperboard's share of the European virgin fibre board market is about 20 per cent, and the company is the clear market leader in Europe in the solid bleached board segment.
Iggesund Paperboard concentrates its sales on two product segments: packaging board – including tobacco board as an important subsegment – and paperboard for graphics applications. The main customer categories are converters, who make packaging, and wholesalers and printers, who buy paperboard for use in graphics printing.
Iggesund Paperboard's Invercote and Incada brands lead the European paperboard market. Invercote solid bleached board (produced at Iggesund Mill) is the number-one brand, and Incada folding boxboard (produced at Workington Mill) is ranked second.
PACKAGING BOARD.The type of virgin-fibrebased board manufactured by Iggesund Paperboard has a variety of uses, including packaging for confectionery, pharmaceuticals, cosmetics and perfume. The trend in private consump-
Long-term environmental work has been conducted for decades at Iggesund Mill. The aim is to become self-sufficient in electricity and independent of fossil fuels. The energy supply is based on heat from the mill's own processes, and electricity, of which nearly half is produced at the mill.
In 2009, carbon dioxide emissions from fossil fuels at Iggesund Mill fell by 65 per cent, through energy savings and investments of about SEK 100 million in greater capacity for use of biofuels. The decrease corresponds to emissions from 17 500 cars each driven 15 000 km per year.
Even before these measures were taken, nearly 90 per cent of the mill's internally generated electricity supply came from biofuel; this proportion is now rising to 95 per cent and means that manufacture of Invercote produces virtually no fossil carbon dioxide emissions.
Iggesund Mill has a surplus of thermal energy that runs the mill's production process, dries sawn timber in Holmen Timber's sawmill and heats more than 1 000 homes nearby.
European paperboard market 2009
FBB 2 000 000 tonnes
SBB 550 000 tonnes
SUB 450 000 tonnes and LPB 1 900 000 tonnes
SBB: Solid bleached board
Price
Prestigious products Graphics products Confectionery Cigarettes
Confectionery Pharmaceuticals Cigarettes Frozen goods Skin care and sanitary articles
SUB, LPB Beverages Dairy products Dried goods
WLC Dried goods Household products tion, which declined in 2009 from a global perspective, is one factor that has a major impact on demand for packaging; as a result, demand for board used for this purpose fell during the year. Manufacturing operations in Europe continue to migrate eastwards, partly due to rising private consumption there and partly because eastern Europe has been transformed, from being a net importer of quality packaging, to a net exporter. The largest customer segment for packaging board comprises converters. The demands
made on packag-
ing, and thus also on packaging materials, are constantly growing. Convenience, quality requirements and the need for brand-name profiling are giving rise to customised functions in packaging solutions. The appearance of packages in stores is becoming an increasingly important factor that affects the choice of material and design. In the chocolate and confectionery segment, Iggesund Paperboard benefits from the stringent demands for packaging to be neutral in terms of odour and taste.
Tobacco packaging is the largest subsegment in packaging board. The market for tobacco packaging is stable and is characterised by a small number of large international customers who demand outstanding quality and service. Customers' search for new design solutions and the need to minimise initial costs in product launches have benefitted Iggesund Paperboard as a supplier. Invercote was formerly the main brand supplied to the tobacco industry, but Incada is now also used to package tobacco products. With its two grades of paperboard, teamed with the finishing options created by the company's lamination facilities in Strömsbruk, Iggesund Paperboard offers the market's broadest product portfolio suited to the needs of the tobacco industry. Geographically, the printing and conversion of cigarette packaging are still migrating eastwards.
GRAPHICs BOARD. The graphics market uses paperboard for covers of publications, cards and advertising materials. The large number of end customers in the market for graphics board means that the greater part of volume is sold through a wide network of wholesalers. The latter have been under intense financial pressure for several years, which has led to a gradual increase in consolidation of these players.
High and uniform quality fuels wholesalers' interest in Invercote and Incada. The properties of these paperboards make them very versatile. They are particularly in demand for graphics applications thanks to their good colour reproduction.
The graphics printing market, with its dependence on marketing activity, is the area that has been most adversely affected by the weak global economy.
Productivity at Iggesund Paperboard's facilities has increased. Marketing has intensified and the product mix has gradually been modified to match trends in market demand. Improvements have been achieved through several major rebuilding projects and a series of smaller investments to enhance efficiency, as well as an extensive product development programme.
The new version of Invercote is a result of rebuilding board machine 2 at Iggesund Mill in the autumn of 2007, which was successfully brought on-line in autumn 2008. The new technology platform is the starting point for additional development towards better and more consistent quality. Intensive development is in progress to further refine the printing surface and improve mechanical properties. This aims to increase scope for new and more advanced designs for customers' packaging, using less material, yet maintaining the same protective properties.
Iggesund Paperboard has a tradition of continously developing Invercote and Incada. As of 2008, Invercote is available in a coated version with a biologically degradable surface which is compostable. This makes it suitable for food packaging and beverage cartons, and sales of the paperboard picked up in 2009.
In recent years, product support with related service has developed into an increasingly important part of Iggesund Paperboard's offering. This is designed to meet customers' demands for shorter lead times and to enable customers to improve their return through the assistance of Iggesund Paperboard's organisation for market-based technical service.
Iggesund Paperboard's sales team and market technicians identify what the market demands from paperboard. This information often has a bearing on product properties and the customer's production economics and is conveyed to the mills by teams of market representatives and product managers.
Iggesund Paperboard aims to offer performance products which justify a higher market price than bulk goods. This is why Iggesund Paperboard must be at the forefront of the technical development of paperboard.
Iggesund Paperboard's product council identifies potential for product development based on strategic goals, market requirements and technical possibilities. To create opportunities for further develop-
ment of Invercote, Iggesund Paperboard saw a need to catapult production technology 20 years
into the future. This innovation was considered possible by creating a type of paperboard made of three layers instead of the existing five – without lowering performance. It was also important that the new product's properties were at least as good as those of the older established grade of Invercote board.
A preliminary study is initiated to identify technical possibilities and limitations as well as required investments. The study includes quantification of market trends and estimated shifts in demand. Estimates are pre-
pared to calculate the costs of the projects. The core of the study was to be able to recreate all of Invercote's properties, despite the fundamental structural change, while leaving scope for future development. Customers' requests were key factors in the study. The development work took place at the Paperboard Development Centre in Iggesund. The experience and knowhow built up over a long time enabled us to examine the results of various pulp mixtures and recipes for coatings and pigments.
The preliminary study led to a project plan, which included rebuilding work on one of the two board machines at Iggesund Mill. Holmen decided to invest SEK 400 million in the rebuilding of board machine 2.
The new Invercote is not simply as good as the previous generation of the product. The new version is whiter, more uniform in structure and has better colour reproduction properties. In conjunction with the launch, new customer
materials and a new website for paperboard users were introduced. The company also organised major customer events, attracting participants from all over the world, to provide information about the new product.
After completion of the rebuilding project, work starts on developing the new product and pilot tests are carried out. Test printing on key customers' equipment and evaluation with these customers are important steps prior to product launch.
Firstly, the old Invercote was recreated, but with a new structure. In parallel a new version of Invercote was developed with modified properties and new whiteness. Some of the tests were performed on Iggesund's own pilot coating equipment. To verify the quality of the properties, the new Invercote was tested extensively among customers and end users.
Holmen Timber produces pine sawn timber at Iggesund Sawmill. The new Braviken Sawmill for spruce construction timber is being built, and production is scheduled to start at the turn of 2010/2011.
The market for sawn timber was weak in the early part of 2009 but gradually grew stronger due to short supply. The prices of sawn timber rose as of spring 2009, following the sharp drop from peak prices in mid-2007. Holmen Timber's deliveries rose by 18 per
cent, to 313 000 cubic metres, as a result of higher production at the sawmill in Iggesund.
Building of Holmen Timber's new sawmill at Braviken Paper Mill near Norrköping started in August. The majority of the equipment and construction contract have been procured, and ground work has started.
| n Facts | 2009 | 2008 | SEKm | Operating profit Operating profit % |
Net sales and operating margin |
|
|---|---|---|---|---|---|---|
| Net sales, SEKm | 553 | 499 | 200 SEKm |
80 % |
SEKm | % |
| Operating profit, SEKm | 21 | 13 | 200 | 80 | 800 | 40 |
| Investments, SEKm | 110 | 19 | 150 150 |
60 60 |
600 | 30 |
| Operating capital, SEKm | 396 | 366 | 100 | 40 | 553 | |
| Average number of employees | 114 | 110 | 100 | 40 | 400 | 20 |
| Share of sales in Europe, % | 57 | 59 | 50 50 |
20 21 20 |
200 | 10 |
| Deliveries, '000 m3 | 313 | 266 | 0 04 0 04 |
6.2 21 0 6.2 05 06 07 08 09 0 Operating profit 05 06 07 08 09 |
0 | 3.8 0 04 05 06 07 08 09 |
| Return on operating capital Operating profit Excl. items affecting comparability Return on operating capital Excl. items affecting comparability |
Net sales Operating margin Excl. items affecting comparability |
Recruitment of personnel began during the year; the total number of employees is estimated at about 110.
Operating profit amounted to SEK 21 million (13). Higher deliveries and lower raw materials costs had a positive impact, although the average price level was lower.
The consumption of sawn timber in Europe in 2009 amounted to just over 80 million cubic metres, a decline from the preceding year. Supply was down more than demand, as a result of high prices for and a shortage of raw materials, sawmills' difficulties in finding customers for wood chips, and capacity cuts. As a result, export prices – which fell in 2008 and early 2009 – rose during the second half of 2009.
The Swedish sawmill industry was not hit as hard by the recession as its counterparts were in other parts of Europe, such as Finland and the Baltic countries. Although global consumption decreased, export volumes from Sweden rose in 2009, as a result of a better competitive position thanks to the weaker Swedish krona and the good supply of wood raw materials.
At present the European market is characterised by low consumption and low stocks at producers, importers and end customers. In the longer term, consumption growth is expected to continue as the economy recovers.
Holmen Timber's share of the sawn timber market in Europe is less than one per cent, and the market is fragmented with numerous small operators. Iggesund Sawmill saws pine, and its customers are primarily in the joinery industry, including manufacturers of window frames, solid wooden floors and edge-glued panels, as well as planing mills. The main markets are Scandinavia, the UK, North Africa and the Middle East. North Africa and the Middle East were formerly supplementary markets but have grown to be significant. Sales to these markets take place via the sales company Uni4 Marketing, which is partly owned by Holmen Timber.
BRAVIKEN SAWMILL. The plan is that the new sawmill, which will be the largest in Scandinavia, will have capacity to produce 550 000 cubic metres of spruce construction timber a year. By investing in greater drying
capacity, production can be increased to 750 000 cubic metres in future. Production is scheduled to start at the turn of 2010/2011, and the customer base will consist of builders' suppliers, planing mills and manufacturers of buildings and roof trusses. Construction using wood on a large scale is increasing in Europe and worldwide. The main markets for products from Braviken Sawmill will be Scandinavia and the UK, although products will also be sold elsewhere in Europe and in the USA.
The combination of Holmen Paper's existing paper mill at Braviken and the new sawmill will result in significant synergies, not only through wood sourcing but also because the sawmill can utilise the infrastructure already in place at the site. It will also open the door to efficient energy solutions, as the Group will gain access to substantial supplies of biofuels from the sawmill and forest fuels in connection with harvesting. Excess heat from the paper mill can also be used in drying the sawn spruce.
IGGESUND SAWMILL. Since 2002, production at Iggesund Sawmill has risen by more than 50 per cent, to 291 000 cubic metres in 2009. This growth is thanks to optimal utilisation of drying capacity and various investments, mainly in a new grading unit and a new log infeed.
VALUE-ADDED PRODUCTS. Holmen Timber is working on technical sales and product renewal to increase sales of value-added products. These products are classed as industrial wood and account for around a third of total volume. The product area for finger joint window components continued to advance during the year. The new production facilities at Braviken will make Holmen Timber a one-stop supplier of construction and joinery timber, reinforcing the business area and providing synergies in logistics and sales.
Capacity target: 750 000 cubic metres. Product: Construction timber. Raw material required: 1.5 million cubic metres of spruce saw timber. Main market: Europe. Employees: About 110 people. Area: 40 hectares. Start of production: Year-end 2010/2011.
In recent years, two thirds of Sweden's 290 municipalities have started major construction projects using wood for everything from blocks of flats and public buildings, such as sports halls, to entire town districts. Nearly 120 wooden bridges are built each year, mainly for pedestrians and cyclists but also some for motor vehicles. However, the biggest increase is in use of wood for extensions and additions, where extra storeys are built onto residential properties. Modern wood construction is climate smart and competes with conventional techniques with its rational methods, short delivery times and better energy and climate solutions.
Holmen Skog manages the Group's forests, which cover more than one million hectares of productive forestland in Sweden. The wood volume amounts to 119 million forest cubic metres, making Holmen Sweden's fourth largest forest owner.
%
12
0
3
6
9
The Swedish forest industry's demand for wood fell dramatically at the end of 2008, and the ongoing very low demand defined the first quarter of 2009. Later in the spring, the situation improved for the sawmills with a renewed increase in the need for saw timber. This led to a
timber shortage during the autumn, because the supply of wood did not rise at the same rate.
The situation for pulp and paper manufacturers gradually improved during the second half of 2009, and demand for pulpwood returned to normal levels. Stocks were relatively low at year-end.
| n Facts | 2009 | 2008 | Operating profit |
|---|---|---|---|
| Operating profit, SEKm | 605 | 632 | SEKm 800 |
| Investments, SEKm | 69 | 21 | 605 |
| Operating capital, SEKm | 11 384 | 11 415 | 600 |
| Average number of employees | 446 | 413 | 400 5.3 |
| Harvesting in company forests, million m3 |
2.9 | 2.6 | 200 |
| Productive forestland, '000 hectares |
1 032 | 1 033 | 0 04 05 06 07 08 09 |
| Wood volume, million m3 | 119 | 118 | Operating profit Return on operating capital Excl. items affecting comparability |
The access to forest fuel – mainly branches, treetops and bark – generally remained good throughout Sweden. Buyers were well supplied in the second half of the year.
The prices of pulpwood and timber fell at the start of the year. Pulpwood prices then remained virtually unchanged, while timber prices rose during the second half of the year as a result of strong demand.
The prices of imported wood have varied over time in the same way as prices in Sweden. Exports of roundwood from Sweden were marginal.
Holmen Skog's operating profit reached SEK 605 million (632). The deterioration was due to lower wood prices.
The Swedish forest industry consumes about 75 million cubic metres (m3 sub – solid volume under bark) of wood per year. Most of the wood comes from forests in Sweden. Of the wood harvested in Sweden, saw timber accounts for about 50 per cent, pulpwood about 40 per cent and forest fuels roughly 10 per cent.
Competition for Swedish wood as a raw material is increasing, partly because of rising demand for biofuels used at thermal power stations.
The Holmen Group's Swedish facilities consumed 4.1 million cubic metres of wood in 2009 (4.4 million in 2008).
Holmen Skog obtained 9.9 million (10.4) cubic metres of wood, of which 5.6 million (5.7) was sold to external customers.
The Group harvested 2.9 million cubic metres (2.6) in its own forests.
Most of Holmen's forests are located in northern Sweden where the Group does not have any industrial sites. Formerly, wood from these forests was largely sold to local buyers. Through logistical and swap arrangements, Holmen is using more of this wood than previously in its own facilities, making it possible to reduce the proportion of expensive imported wood.
Braviken Sawmill, currently under construction, will use around 1.5 million cubic metres of spruce saw timber once it has reached full capacity. In preparation for this, Holmen Skog
has widened the area from which it obtains wood for the Norrköping region and reinforced its organisation.
INCREASED HARVESTING OPTIONS. A significant proportion of the growth in Holmen's forests takes place in young forests that are not ready for harvesting, so Holmen only harvests slightly more than 80 per cent of annual growth. As these young forests age, the extraction of wood can be increased to the same level as growth.
The effects of the new silviculture programme, first introduced in 2006, are also notable. It is estimated that the programme has the potential to raise the growth rate in the Group's forests by about 25 per cent in 30 years' time. This also means that Holmen will be able to increase harvesting by the same amount in future.
The most important measures in the programme are greater use of lodgepole pine, forestland fertilisation, better seedlings and use of spruce and pine seeds from seed orchards where seed has been selected from trees with exceptionally good properties.
NATURE CONSERVATION METHODS. Holmen is working with researchers at the Swedish University of Agricultural Sciences to develop methods of nature conservation in forests. Various ways of helping to increase the biological values of forestland are being tested as part of this collaboration.
expects to be able to reduce its energy consumption in harvesting and transport of wood by approximately 15 per cent in the next few years. This is to be achieved through various measures, including investment in harwarders – a combined machine that uses less fuel than traditional forwarders and harvesters. To reduce the number of transports, a project is being run in which trucks are being modified to accommodate an extra stack of timber on the trailer.
MORE FOREST FUEL. Holmen Skog is helping to develop technology for harvesting forest fuel in response to the growing demand for this fuel. Holmen has also reinforced its own organisation for extraction of and obtaining energy assortment.
Normal yearly hydro power production amounts to about 1 100 GWh of electricity and contributes to Holmen being one-third self-sufficient in electricity.
Holmen Energi's hydro power production amounted to 1 090 GWh (1 128) during the year, which was 2 per cent lower than during a normal year. Operating profit amounted to SEK 414 million (327), and the improvement
mainly stemmed from higher prices. During the year, construction of the new hydro power station on the Iggesundsån river was completed. The new power station replaces three old ones and has been in operation since November 2009.
| n Facts | 2009 | 2008 | Operating profit | Production |
|---|---|---|---|---|
| Operating profit, SEKm | 414 | 327 | % SEKm 16 500 |
GWh 1 600 |
| Investments, SEKm | 88 | 76 | 414 | |
| Operating capital, SEKm | 3 207 | 3 006 | 13.3 12 375 |
1 200 1 090 |
| Average number of employees | 10 | 10 | 250 8 |
800 |
| Company-generated hydro power, GWh |
1 090 | 1 128 | 125 4 |
400 |
| 0 0 04 05 06 07 08 09 |
0 04 05 06 07 08 09 |
|||
| Operating profit Return on operating capital |
Company-generated hydro power |
A total of 134 TWh of electricity was generated in Sweden during the year, 66 TWh of which came from hydro power. The hydrological balance, that is, the quantity of water stored in the Nordic countryside, was somewhat lower at year-end 2009 than at year-end 2008. The spot price fluctuated during the year, from SEK 350/MWh in May, to SEK 500/MWh in December. The average spot price in Sweden for 2009 was SEK 393/MWh.
Holmen Energi is in charge of supplying Holmen's Swedish mills with electricity. The Group's total consumption amounted to 4 680 GWh in 2009 (5 156) – mostly used by its Swedish paper mills. Holmen's own production, at its 21 wholly and partly owned hydro power stations and back pressure power production at the company's large mills, corresponds to more than 30 per cent of the Group's electricity consumption in Sweden; the remainder is purchased.
The Group's exposure to fluctuations in electricity prices is limited through long-term, fixed-price supply agreements, complemented with financial price hedges (see page 64). The company's own electricity production is priced at market prices and reduces the Group's need to buy electricity externally.
New sources of energy. Holmen Energi also has responsibility for energy development in a broader sense. As part of this mandate, in 2009 Holmen set up a unit for competence and development in biorefining and biofuels for vehicles and other applications: the Holmen Biorefinery Development Centre. It has three employees and is located in Iggesund.
Wind power and peat harvesting are other key development areas, as is investigation of possible pellets production. The aim is to produce 1 TWh of electricity from wind power in future. Unlike existing wind power stations, which are often located in coastal or mountainous areas, the sites that Holmen Energi is exploring are situated in forested areas on Holmen's own land. Forestry operations within wind farms will continue more or less as normal.
In 2009, wind power studies were conduct-
ed on Holmen's land in the area around Örnsköldsvik and near the mill in Hallstavik. The measuring activities are expected to be completed in the spring of 2010. With the help of a partner, preliminary wind power studies were conducted on Holmen's land in the province of Östergötland.
ENERGY COOPERATION. In association with a number of electricity-intensive companies, Holmen runs a company called BasEl i Sverige AB, whose purpose is to improve basic industries' access to electricity at competitive prices. In 2006 some of these companies, including Holmen, set up VindIn AB, a company that aims to develop, construct and operate wind power stations in Scandinavia. VindIn's goal is to generate 1 TWh of electricity from wind power stations each year. The first wind farm is located at Skutskär and has been in use since October 2009. Further investments via VindIn are being investigated.
In collaboration with four other BasEl companies, Holmen has founded a company called Industrikraft i Sverige AB to enable construction of its own nuclear power facilities. To this end, a letter of intent was signed with the power utility Vattenfall during the autumn to proceed with projects to secure future baseload power that does not use fossil fuels.
Peat harvesting. During the autumn, the first deliveries of peat were made from Holmen's site at Stormyran, north of Örnsköldsvik. Peat consists of plant material that, owing to a lack of oxygen, has only partly decomposed into moss and marsh. The incomplete breakdown means that much of the energy content of the biological material is retained, enabling peat to be used as fuel. Peat harvesting provides a way of utilising several of the value-creating resources that the Group has at its disposal. Stormyran's annual future production is estimated at 70 GWh.
ENERGY SAVINGS. Responsibility for improving energy efficiency is decentralised to the mills but coordinated centrally. The new thermomechanical pulp (TMP) line at Braviken, launched at the end of 2008, has already led to significant energy savings. At Iggesund Mill, investments have considerably reduced oil consumption, and bioenergy now accounts for 95 per cent of the mill's internally generated electricity supply.
Hydro power stations
Holmen manufactures its printing paper, paperboard and sawn timber products in Sweden, the UK and Spain. The Group's forest holdings and wholly and partly owned hydro power stations are located in Sweden. The figures shown here relate to 2009.
About 60 per cent of the wood required annually by the Group is harvested in the company's forests.
The Group's self-sufficiency in electricity is just over 30 per cent, including the power generated at the major mills. More than 70 per cent of the thermal energy used in applications such as the drying processes when making
paper and paperboard as well as sawn wood is based on residual products from the company's production processes. At Hallsta Paper Mill, virgin fibre is the only raw material used in production, while Braviken Mill uses both virgin fibre and recovered paper. Production at Holmen Paper Madrid is based solely on recovered paper.
The paperboard mills only use virgin fibre.
Holmen Paper Raw material: Sprucewood. Process: TMP and groundwood pulp. Products: Newsprint, MF Magazine, SC paper and book paper. Production capacity: 680 000 tonnes/year. Average No. of employees: 783.
Holmen Paper Raw material: Sprucewood, recovered paper. Process: TMP and DIP. Products: Newsprint, coloured newsprint, directory paper and MF Magazine. Production capacity: 790 000 tonnes/year. Average No. of employees: 652.
Holmen Paper Raw material: Recovered paper. Process: DIP. Products: Newsprint, MF Magazine and LWC Recycled. Production capacity: 470 000 tonnes/year. Average No. of employees: 38.
| Holmen | ||
|---|---|---|
| Group | nergi | |
| 1 406 | 1 406 | - |
| 1 491 | 1 491 | - |
| 1 090 | - | 1 090 |
| Holmen Skog E |
| Production, '000 tonnes G | roup | Hallsta B | raviken M | adrid | Wargön M | Iggesund | ill Workington | Iggesund Sawmill |
|---|---|---|---|---|---|---|---|---|
| Newsprint, standard | 823 | 62 | 479 | 282 | - | - | - | - |
| MF Special | 679 | 433 | 229 | 17 | - | - | - | - |
| SC paper | 137 | 137 | - | - | - | - | - | - |
| Coated printing paper | 75 | - | - | 75 | - | - | - | - |
| Paperboard | 471 | - | - | - | - | 254 | 217 | - |
| Market pulp | 48 | - | - | - | - | 48 | - | - |
| Sawn timber, '000 m3 | 291 | - | - | - | - | - | - | 291 |
| Wood, '000 m3 sub | 4 480 | 1 265 | 1 024 | - | - | 1 378 | 400 | 656 |
|---|---|---|---|---|---|---|---|---|
| Recycled fibre, '000 tonnes | 813 | - | 340 | 473 | - | - | - | - |
| Market pulp, '000 tonnes | 128 | 41 | 2 | - | - | - | 85 | - |
| Chemicals, fillers and | ||||||||
| pigment, '000 tonnes | 320 | 92 | 57 | 50 | - | 72 | 49 | 0 |
| Electric energy, GWh | 4 296 | 1 849 | 1 589 | 246 | 11 | 256 | 326 | 19 |
| Thermal energy, GWh | 884 | - | - | 360 | 13 | - | 511 | - |
* Purchased from outside the production unit. Energy calculated in Madrid's case takes account of 50 per cent interest in the Cogeneración unit for the production of electricity and thermal energy. The Group's consumption of wood is computed net, taking account of internal deliveries of chips from Iggesund Sawmill to Iggesund Mill.
| Energy balance, GWh | |
|---|---|
| Electric energy | |
| Consumption at mills | -4 680 |
| Production at mills* | 384 |
| Company-generated hydro power | 1 090 |
| Net | -3 206 |
| Thermal energy | |
| Consumption at mills | -5 634 |
| Production at mills from | |
| recovered liquors, bark and wood residues | 2 916 |
| purchased fossil fuels* | 1 097 |
| recovered in the TMP process | 1 093 |
| External deliveries | 115 |
| Net | -413 |
| Fibre balance | |
|---|---|
| Wood, '000 m3 sub | |
| Consumption in Sweden | -4 080 |
| Consumption in the UK | -400 |
| Harvesting in company forests | 2 897 |
| Net | -1 583 |
| Recovered paper, '000 tonnes | |
| Consumption in Sweden | -340 |
| Consumption in Spain | -473 |
| Pulp, '000 tonnes | |
| Consumption at mills | -2 134 |
| Production at mills | 2 006 |
| External deliveries | 48 |
| Net | -80 |
Iggesund Paperboard Raw material: Softwood and hardwood pulpwood. Process: Sulphate pulp. Products: Solid bleached board, plastic coated.
paperboard and sulphate pulp.
Production capacity: 330 000 tonnes/year (Paperboard). Average No. of employees: 935.
Iggesund Paperboard Raw material: Sprucewood and purchased sulphate pulp. Process: RMP. Product: Folding boxboard. Production capacity: 200 000 tonnes/year. Average No. of employees: 483.
Holmen Timber Raw material: Pine saw logs. Process: Sawmilling. Products: Redwood sawn timber. Production capacity: 340 000 m3 /year. Average No. of employees: 99.
Wood, recovered paper, energy and chemicals account for Holmen's principal production costs.
Cost trends are mainly determined by trends in the prices of input goods and how well the Group increases production efficiency.
A one percentage point change in raw materials costs is estimated to have the following impact on consolidated operating profit:
| SEKm | |
|---|---|
| Raw material costs |
Impact on the result |
| Wood, net | 9 |
| Recovered paper | 8 |
| Pulp | 1 |
| Electric energy, net | 11 |
| Other energy | 4 |
| Chemicals | 14 |
A one percentage point reduction in the cost of wood would thus raise operating profit by roughly SEK 9 million, after taking account of the company's own wood production.
This estimate does not consider existing electricity price hedges.
For a more detailed sensitivity analysis, see the administration report on page 47.
Holmen was listed on the Stockholm Stock Exchange in 1936, but was called Mo och Domsjö AB at that time. The class A and B shares are listed on Nasdaq OMX Nordic, Large Cap, Stockholm.
Holmen's two series of shares are listed on Nasdaq OMX Nordic, Large Cap. During the year, the price of Holmen's class B shares fell by SEK 10.5 (5 per cent), to SEK 183. During the same period the Stockholm stock exchange rose by 50 per cent. Holmen's market capitalisation of SEK 15 billion (16) represents some 0.4 per cent of the Stockholm stock exchange's total value. Holmen's class B shares reached their highest closing price for the year, SEK 205.5, on 28 August and the lowest closing price, SEK 135, was recorded on 1 April. The daily average number of class B shares traded was 361 000, which corresponds to a value of
SEK 65 million. The daily average number of class A shares traded was 400. Some 90 per cent of the trade took place on Nasdaq OMX Nordic. For the past year or two, the Holmen share has also been traded on other trading platforms besides the Nasdaq OMX Nordic exchange, such as BATS, Burgundy, Chi-X and Turquoise.
During the past decade, the Holmen share has yielded a total return, including reinvested dividends, of around 3 per cent per year. During that same period, the Affärsvärlden General Index returned 2 per cent per year.
Total return of Holmen class B and General index Incl. reinvested dividends, no tax taken into account
Diluted earnings per share equalled SEK 12.0 (7.6). Holmen's diluted earnings per share averaged SEK 13.9 over the past five years.
The Board proposes that the AGM, to be held on 24 March 2010, resolves to lower the dividend to SEK 7 (9) per share. The proposed dividend corresponds to 4 per cent of equity. The proposal to reduce the dividend is due to the lower profitability in the industry, chiefly for paper products. The Group is also implementing investments, such as building a new sawmill. Decisions on dividends are based on an appraisal of the Group's profitability, future investment plans and financial position.
Holmen has 83 996 162 shares outstanding, of which 22 623 234 are class A shares and 61 372 928 are class B shares. Each class A share carries ten votes, and each B share one vote. In other respects, the shares carry the same rights.
| Share structure | N | o. of N | o. of | Quota | |
|---|---|---|---|---|---|
| Share | Votes | shares | votes | value | SEKm |
| A | 10 | 22 623 234 | 226 232 340 | 50 | 1 131.2 |
| B | 1 | 62 132 928 | 62 132 928 | 50 | 3 106.6 |
| Total number of shares | 84 756 162 | 288 365 268 | 4 237.8 | ||
| Holding of own B shares bought back | -760 000 | -760 000 | |||
| Total number of shares outstanding | 83 996 162 | 287 605 268 | |||
| Issued call options B shares | 758 300 |
| Changes in share capital 2000–2009 |
Change in no. of shares |
of shares | Total no. Change in share capital, SEKm |
Total share capital, SEKm |
|---|---|---|---|---|
| 2001 Withdrawal of shares bought back | -8 885 827 | 79 972 451 | -444.3 | 3 998.6 |
| 2004 Conversion and subscription | 4 783 711 | 84 756 162 | 239.2 | 4 237.8 |
| Shareholder structure at 31 December 2009 | % of capital | % of votes |
|---|---|---|
| L E Lundbergföretagen | 28.0 | 52.0 |
| Kempe Foundations | 7.0 | 16.9 |
| Handelsbanken incl. pension fund | 3.1 | 9.1 |
| Silchester International Investors | 10.9 | 3.2 |
| Alecta | 3.2 | 0.9 |
| Swedbank Robur funds | 1.7 | 0.5 |
| Second Swedish National Pension fund | 1.2 | 0.4 |
| SHB funds | 1.1 | 0.3 |
| Lannebo funds | 1.1 | 0.3 |
| SEB funds | 1.1 | 0.3 |
| Other | 41.6 | 16.1 |
| Total* | 100.0 | 100.0 |
| * of which non-Swedish shareholders | 26.8 | 8.0 |
The ten identified shareholders with the largest holdings ranked by the number of votes they control. Some large shareholders may have their holdings registered under nominee names, in which case they are included among "Other".
Holmen had a total of 30 425 shareholders at year-end 2009. In absolute numbers, Swedish private individuals made up the largest category of owners: 27 497 shareholders. This corresponds to 90 per cent of the total number of
About 350 shareholders, representing 87 per cent of the votes, attended Holmen's 2009 AGM.
shareholders. L E Lundbergföretagen AB is the largest shareholder, with 52 per cent of the votes. Shareholders registered in Sweden own 73 per cent (72) of the share capital. Among foreign shareholders, the largest proportion of shares are held in the UK and the USA, accounting for 14 per cent and 6 per cent of the capital, respectively.
The 2009 Annual General Meeting renewed the Board's mandate to acquire up to 10 per cent of
the company's shares. Shares were bought back in 2008 to secure the company's commitments under the terms of the incentive scheme (see below). In total, 760 000 of the company's class B shares were repurchased, corresponding to some 0.9 per cent of the total number of shares on issue and to some 0.3 per cent of the total number of votes. The Board proposes that the 2010 AGM also authorises the Board to buy back and transfer up to 10 per cent of all shares in the company.
In 2008, the Group's employees were invited to acquire call options on class B shares in Holmen at market price. As a result, 1 492 of the Group's approximately 4 800 employees bought a total of 758 300 call options at a price of SEK 20 per option; their exercise price is SEK 224.50 per share. Each option entitles the holder to purchase one share during the exercise period in May/June 2013. Holmen has secured its commitments in the scheme by buying back shares.
Analysts at 15 brokerage firms and banks monitor Holmen's development. This means that they publish reports containing analyses of Holmen on an ongoing basis. A list of these analysts is available on Holmen's website.
| Data per share | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 |
|---|---|---|---|---|---|---|---|---|---|---|
| Diluted earnings per share, SEK 1) | 12.0 | 7.6 | 17.8 | 17.2 | 14.8 | 15.1 | 17.5 | 23.6 | 26.4 | 44.7 |
| Dividend, ordinary, SEK | 7 5) | 9 | 12 | 12 | 11 | 10 | 10 | 11 | 10 | 9 |
| Dividend, extra, SEK | - | - | - | - | - | - | 30 | - | - | 60 |
| Ordinary dividend as % of: | ||||||||||
| Equity | 4 | 5 | 6 | 6 | 6 | 6 | 5 | 6 | 6 | 4 |
| Closing listed price | 4 | 5 | 5 | 4 | 4 | 4 | 4 | 5 | 4 | 3 |
| Profit for the year | 58 | 118 | 67 | 70 | 74 | 66 | 55 | 45 | 37 | 20 |
| Return, equity, % 1) | 6 | 4 | 9 | 9 | 8 | 8 | 10 | 14 | 16 | 24 |
| Return, capital employed, % 6) | 7 | 6 | 10 | 10 | 9 | 10 | 12 | 16 | 18 | 15 |
| Equity per share, SEK | 196 | 186 | 200 | 196 | 189 | 184 | 192 | 188 | 176 | 213 |
| Closing listed price, B, SEK | 183 | 193.5 | 240 | 298 | 262.5 | 230 | 255.5 | 211.5 | 238.5 | 280 |
| Average listed price, B, SEK | 180 | 203 | 277 | 302 | 227 | 228 | 230 | 231 | 226 | 241 |
| Highest listed price, B, SEK | 205.5 | 242 | 316 | 335.5 | 266 | 264 | 271 | 266.5 | 297.5 | 320 |
| Lowest listed price, B, SEK | 135 | 169.5 | 228 | 255 | 190 | 210 | 187.5 | 192 | 171 | 191.5 |
| Total closing market capitalisation, SEK '000 million | 15.4 | 16.2 | 20.6 | 25.3 | 22.6 | 19.5 | 20.4 | 16.9 | 19 | 22.7 |
| P/E-ratio 2) | 15 | 25 | 13 | 17 | 18 | 15 | 14 | 9 | 9 | 6 |
| EV/EBIT 3) 6) | 13 | 17 | 12 | 14 | 15 | 12 | 10 | 8 | 7 | 10 |
| Closing beta value (48 months), B 4) | 0.7 | 0.5 | 0.9 | 1.0 | 0.7 | 0.6 | 0.7 | 0.6 | 0.7 | 0.8 |
| Number of shareholders at year-end | 30 425 | 29 745 | 30 499 | 32 189 | 33 320 | 36 899 | 30 902 | 28 544 | 27 279 | 26 355 |
1) See page 88: Definitions and glossary. 2) Closing listed price divided by earnings per share. 3) Closing market capitalisation plus financial net debt (EV) divided by operating profit (EBIT). 4) Measures the sensitivity of the yield on the B share in relation to the yield on the Affärsvärlden General Index over a period of 48 months. 5) Proposal of the Board. 6) Excl. items affecting comparability and divested activities.
Holmen AB is a Swedish public limited company, listed on the Stockholm Stock Exchange (Nasdaq OMX Nordic) since 1936. The stock exchange incorporated the Swedish Code of Corporate Governance (the Code) into its rules for listed companies in 2005. This corporate governance report complies with the rules of the Code and the directions for its application. The corporate governance report has not been examined by the company's auditor.
The Code's rules from 2005 were revised in 2008 and cover general meetings of shareholders, appointment of the Board and auditors, other aspects of the Board, company management and information on corporate governance.
The Code is part of self-regulation in Swedish business and is based on the "comply or explain" principle. This means that a company complying with the Code may deviate from individual rules but must report the reasons for each deviation.
First, Holmen AB is obliged to comply with the Swedish Companies Act, the rules accompanying its listing on Nasdaq OMX Nordic, Stockholm, and good stock market practice. The Code is an integral part of the stock exchange's regulations. Holmen shall also comply with the company's articles of association.
At year-end, Holmen AB had 30 425 shareholders. See pages 28–30 for information on the share, ownership structure and other details.
The notice convening the Annual General Meeting (AGM) is sent no earlier than six and no later than four weeks before the meeting. The notice contains information about registering intention to attend and entitlement to participate in and vote at the meeting, a numbered agenda of the items to be addressed, information on the proposed dividend and the basic content of other proposals. Shareholders or proxies are entitled to vote for the full number of shares owned or represented and can notify the company of their intention to attend the AGM via the company's website and other means.
Notices convening an Extraordinary General Meeting (EGM) called to deal with the company's articles of association shall be sent no earlier than six and no later than four weeks before the meeting. Notices convening other EGMs shall be sent no earlier than six and no later than two weeks before the meeting.
Proposals for submission to the meeting should be addressed to the Board and submitted in good time before the notice is distributed. Information about the rights of shareholders to have matters discussed at the meeting is provided on the website.
The 2009 AGM was held in Swedish, and the material presented was in Swedish. The notice
| Before AGM : |
Independent of the: | |||||
|---|---|---|---|---|---|---|
| Name | Representing | 2009 | 2010 | company | major shareholders |
|
| Per Welin | L E Lundbergföretagen* | x (Chairman) | Yes | No | ||
| Mats Guldbrand | L E Lundbergföretagen* | x (Chairman) | Yes | No | ||
| Alice Kempe | Kempe Foundations* | x | x | Yes | Yes | |
| Fredrik Lundberg | L E Lundbergföretagen* (Board Chaiman) |
x | x | No | No | |
| Håkan Sandberg | Handelsbanken incl. pension fund* |
x | x | Yes | Yes |
* At 31 August 2009, L E Lundbergföretagen controlled 52.0 per cent of the votes, the Kempe Foundations controlled 16.9 per cent and Handelsbanken including the pension fund controlled 9.1 per cent.
convening the meeting, the agenda, the CEO's speech and the minutes are available on the website. The entire Board, the Group management and the company's auditor were present. At the meeting, shareholders had the opportunity to ask and receive answers to questions on issues such as Holmen's environmental work, the proposed dividend, the plans to take part in possible future nuclear power expansion, market trends in 2009, Holmen Paper's efficiency improvement programme and the new Braviken Sawmill. Ossian Ekdahl from Första AP-fonden and Åsa Nisell from Swedbank Robur Fonder checked and approved the minutes of the meeting. It was not possible to follow or participate in the meeting from other locations using communication technology. No such possibility is planned for the 2010 meeting either.
It was announced on 11 May 2009 that the 2010 AGM would take place in Stockholm on 24 March 2010.
The AGM decided to set up a nomination committee to consist of the chairman of the Board and one representative from each of the three shareholders in the company that control the most votes at 31 August each year. Prior to the 2009 AGM, the nomination committee consisted of Per Welin (L E Lundbergföretagen), Alice Kempe (Kempe Foundations), Håkan Sandberg (Handelsbanken incl. pension fund) and Fredrik Lundberg (Board chairman). Membership of the committee prior to the 2010 AGM is unchanged, except Mats Guldbrand has replaced Per Welin as the representative of L E Lundbergföretagen. Mats Guldbrand is chairman of the nomination committee in the runup to the 2010 AGM. The majority of the committee members are independent of the company and its management. Two are independent of the shareholder controlling the most votes, namely L E Lundbergföretagen. One member is a Board member.
The nomination committee's mandate is to submit proposals for election of Board members and the Board chairman, for the Board fee and auditing fees and, where applicable, for election of auditors. The committee's proposals are presented in the notice convening the AGM.
For the 2010 AGM, the nomination committee proposes the re-election of Fredrik Lundberg (also proposed for re-election as Board chairman), Carl Bennet, Magnus Hall, Carl Kempe, Curt Källströmer, Hans Larsson, Ulf Lundahl and Göran Lundin. Lilian Fossum has declined re-election. The nomination committee also proposes to the AGM that Louise Lindh be elected to the Board as a new member.
The proposed Board fee is SEK 2 475 000, including SEK 550 000 for the chairman and SEK 275 000 for each of the other members. These are the same fees as in the preceding year. The CEO does not receive a Board fee.
The members of the Board are elected each year by the AGM for the period until the end of the next AGM. There is no rule regarding the maximum period a Board member may serve.
The 2009 AGM re-elected Fredrik Lundberg, Lilian Fossum, Magnus Hall, Carl Kempe, Curt Källströmer, Hans Larsson, Ulf Lundahl and Göran Lundin to the Board. Carl Bennet was elected to the Board to replace Bengt
Pettersson, who declined re-election. Fredrik Lundberg was elected chairman. At the statutory first meeting of the new Board in 2009, Carl Kempe was elected deputy chairman and Lars Ericson, the company's general counsel was appointed secretary of the Board. Over and above the nine members elected by the AGM, the local labour organisations have a statutory right to appoint three members and three deputy members.
As defined by the Code, seven AGM-elected members are deemed independent of the company. Of these, five are also deemed independent of the company's major shareholders and satisfy all the criteria for experience. The largest shareholders, each controlling more than 10 per cent of the votes, are L E Lundbergföretagen and the Kempe Foundations. The CEO is the only Board member with an executive position in the company.
Information about the members of the Board is provided on pages 36–37.
The Board held nine meetings in 2009, four in connection with the company's publication of its quarterly reports. At one of these meetings the Board visited Iggesund Mill and Iggesund Sawmill. A two-day meeting was devoted to strategic business planning, and one meeting to the Group's budget for 2010. The other two meetings were held in conjunction with the AGM. During the year the Board paid special attention to strategic, financial and accounting issues, follow-up of business operations and major investment matters. On two occasions the company's auditors reported directly to the Board, presenting their observations from their audit of the final accounts and the company's internal control system. Attendance levels were very high; two members were not able to come to one Board meeting each. The activities of the Board follow a plan that intends to ensure that the Board obtains all requisite information. Each year the Board decides on written working procedures and issues written instructions relating to the division of responsibilities between the Board and the CEO and the information that the Board is to receive continually on financial developments and other key events.
Employees of the company participate in Board meetings to submit reports. The secretary of the Board is the company's general counsel.
| Independent of the: Attendance | |||||||
|---|---|---|---|---|---|---|---|
| major | at board | ||||||
| Name | Function | Elected | Committees* | company | shareholders | meetings | |
| Board members | |||||||
| Fredrik Lundberg | Chairman | 1988 | Remuneration committee |
No | No | 9/9 | |
| Carl Kempe | Dep. Chairman 1983 | Yes | No | 9/9 | |||
| Carl Bennet | Member | 2009 | Yes | Yes | 9/9 | ||
| Lilian Fossum | Member | 2004 | Yes | Yes | 9/9 | ||
| Curt Källströmer | Member | 2006 | Yes | Yes | 9/9 | ||
| Hans Larsson | Member | 1990 | Remuneration committee |
Yes | Yes | 8/9 | |
| Ulf Lundahl | Member | 2004 | Yes | No | 8/9 | ||
| Göran Lundin | Member | 2001 | Yes | Yes | 9/9 | ||
| Magnus Hall | Member, president and CEO |
2004 | No | Yes | 9/9 | ||
| Total | 7/9 | 6/9 | |||||
| Representatives of the employees | |||||||
| Steewe Björklundh Member | 1998 | ||||||
| Kenneth Johansson Member | 2004 | ||||||
| Karin Norin | Member | 1999 | |||||
| Stig Jacobsson | Dep. member | 2004 | |||||
| Andreas Rastbäck | Dep. member | 2008 | |||||
| Tommy Åsenbrygg Dep. member | 2009 |
* The entire Board, except for members employed in the company, form the audit committee.
The Board evaluates its activities each year, and the nomination committee has been informed of the content of the 2009 evaluation. This will serve as a basis for planning the Board's work in the next few years.
The Board has delegated operative responsibility for management of the company and the Group to the CEO. The Board annually decides on instructions covering the distribution of responsibilities between the Board and the CEO. Holmen's Group management consists of 11 individuals: the CEO, the heads of the five business areas and the heads of the five Group staffs units.
Group management met on 11 occasions in 2009, dealing with matters such as earnings trends and reports before and after Board meetings, business plans, budget, investments, internal control, policies and reviews of market conditions, general development of the economy and other external factors affecting the business. Projects relating to business areas and Group staff units were also discussed and decided on.
Information on the CEO and other members
Business processes
Business plan, budget,
Business concept, strategy and goals
of Group management is provided on page 38.
Management at Holmen is based on the business concept, strategies and goals of the Group and the business
areas. The CEO and Group management are accountable to the Board and are responsible for the operational activities, which are decentralised to five business areas. The Group staff units are in charge of coordinating certain matters, such as business administration and finance, human resources, legal affairs, technology and public relations.
The Group uses annual, rolling, three-year business plans to break down goals and strategies into action plans and activities that can be measured and evaluated. These business plans are important to the long-term strategic control of the Group. The Group also uses annual budgets, forecasts and action plans for its day-to-day management of operations.
Various business processes, such as sales, purchasing and production, are used to manage operational activities at business area level with a view to achieving the business targets and implementing the agreed action plans.
The results are followed up through regular financial reports, and approved measures are reviewed through additional follow-ups.
The Board has appointed a remuneration committee consisting of Fredrik Lundberg and Hans Larsson. The committee held several informal meetings during the year at which it prepared matters pertaining to the remuneration and other employment conditions of the CEO and submitted proposals to the Board. Remuneration and other employment conditions of senior management who report directly to the CEO are decided by the latter in accordance with a pay policy established by the remuneration committee.
The Group applies the principle that each
manager's manager must approve decisions on remuneration in consultation with the relevant personnel manager.
At the 2009 AGM, the Board chairman gave an account of the Board's proposed guidelines on remuneration to the CEO and other members of senior management. The AGM adopted the guidelines in the proposal. Information on the Board's proposal to the 2010 AGM for guidelines on remuneration to the CEO and other members of senior management is presented in the administration report on page 49.
The 2009 AGM approved the Board fee and payment of the auditors' fee as invoiced.
In 2008, the Group's employees were invited to acquire call options on class B shares in Holmen at market price. One third of all employees then bought a total of 758 300 call options. Holmen's commitments pursuant to this scheme were secured by buying back some of the company's own shares. See the section on the share and shareholders on pages 28–30 for more details. The 2009 AGM renewed the Board's authorisation to decide on buying back up to 10 per cent of the company's total shares. No buy-backs took place in 2009.
Information about remuneration is provided in note 5 on pages 66–67.
KPMG, which has been Holmen's auditor since 1995, was elected by the 2008 AGM as auditor for a period of four years. KPMG has since appointed George Pettersson, authorised public accountant, as the principal auditor for Holmen. KPMG audits Holmen AB and almost all of its subsidiaries.
The interim accounts are examined for the January–September period. The examination of internal procedures and control systems begins in the second quarter and is thereafter ongoing to year-end. The examination and audit of the final annual accounts and the annual report take place in January–February. The interim report for January–September is subject to review by the auditors.
Holmen's audit committee comprises all Board members except for members employed in the company, that is, the CEO and employee representatives.
The Board's reporting instructions include a requirement that the members of the Board shall receive a report each year from the audi-
Internal management processes
tors on whether the company's organisation is structured to enable satisfactory supervision of accounting, management of funds and other aspects of the company's financial circumstances. In 2009 the auditors reported to the entire Board at two meetings. Over and above this, the auditors reported to the Board chairman and the CEO on two occasions and to the CEO at another meeting.
In addition to the audit assignment, Holmen has consulted KPMG on matters pertaining to taxation, accounting and investigations, and in some countries also on matters of business law. The remuneration paid to KPMG for 2009 is stated in note 6 on page 67. KPMG is required to assess its independence before making decisions on whether to provide Holmen with independent advice alongside its audit assignment.
This section contains the Board's annual presentation of how the internal control system is organised insofar as it relates to financial reporting. The presentation is based on the rules in the Code and the guidelines drawn up by working groups in the Confederation of Swedish Enterprise and FAR SRS (the organisation for highly qualified professionals in the accountancy sector in Sweden).
The Board's responsibility for internal control is laid out in the Swedish Companies Act, and internal control related to financial reporting is covered by the Board's reporting instructions to the CEO. Holmen's financial reporting complies with the laws and rules that apply to companies listed on the Stockholm stock exchange and the local rules in each country where it operates. In addition to external rules and recommendations, financial reporting is also covered by internal instructions, directions and systems, as well as internal delegation of roles and responsibilities with the object of ensuring sound internal control over financial reporting. Financial reports are prepared quarterly and monthly in the Group and its business areas, units and subsidiaries. Forecasts and extensive analyses, along with comments, are provided in connection with the reports to help ensure the accuracy of the financial reports. Financial functions and controllers with functional responsibility for accounting, reporting and analysis of financial developments operate at Group level, at business area level and at all major units.
The audit includes the annual statutory audit of Holmen AB's annual report, the statutory audit of the parent company and all subsidiaries (where so required), the audit of internal reporting packages, an audit of the final accounts and a review of one interim report. The audit process also includes reviews of the internal control system.
Holmen's internal control activities aim to ensure that the Group lives up to its objectives for financial reporting (see box). These activities are based on a common set of instructions and common checklists for key procedures and processes for the Group's financial reporting. The structure adheres to guidelines issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) for small listed companies in respect of internal control over financial reporting. COSO's guidelines contain 20 principles in five areas: control environment, risk assessment, control activities, information and communication, and followup. They have been modified to suit the assessed needs of Holmen's various operations. Holmen's greatest risks regarding financial reporting are linked to the measurement (valuation) of biological assets and property, plant and equipment, as well as being linked to financial transactions.
Holmen has no separate internal auditing function. The Board does not consider that specific circumstances in the business or other conditions exist that justify setting up such a function. In 2008 the company introduced a type of audit procedure whereby experienced accountants and controllers in the Group visit other Group units and examine their internal control procedures. These activities were successful and were therefore also conducted in 2009.
Holmen's information to shareholders and other stakeholders is provided in the annual report, the year-end and interim reports, press releases, the sustainability report Holmen and its World, and the shareholders' magazine Holmen Business Report, all of which are available on the company's website. The website also contains presentation materials for recent years and information on corporate governance. The provision of information by the company complies with an information policy established by the Board.
Holmen's external financial reporting shall:
Internal financial reporting shall, over and above these three objectives, support correct business decisions at all levels in the Group.
Chairman. Djursholm. Born in 1951. Member since 1988. Master of Engineering and Bachelor of Science (Econ.). D. Econ h.c. and D. Eng. H.c. President and CEO of L E Lundbergföretagen AB. Other significant appointments: Chairman of the Board: Cardo AB and Hufvudstaden AB. Deputy chairman of: Svenska Handelsbanken AB and NCC AB. Board member: L E Lundbergföretagen AB, AB Industrivärden and Sandvik AB. Shareholding in Holmen: 734 724 shares. Shareholding of L E Lundbergföretagen
in Holmen: 23 511 000 shares.
Deputy Chairman. Örnsköldsvik. Born in 1939. Member since 1983. Licentiate in Engineering. DDr. h.c. Other significant appointments: Chairman of the Board: Kempe Foundations, MoRe Research AB and UPSC Berzelii Centre for Forest Biotechnology. Member of the Swedish IIASA committee. Own and related parties' shareholding in Holmen: 385 125 shares.
Gothenburg. Born in 1951. Member since 2009. MBA. D. Eng. h.c. Former President and CEO of Getinge. Chairman of the Board: Getinge, Elanders and Lifco. Other significant appointments: Chairman of the Board: University of Gothenburg. Board member: L E Lundbergföretagen and SSAB. Shareholding in Holmen: 100 000 shares.
Hudiksvall. Born in 1958. Member since 1998. Representative of the employees, LO. Chairman of the GS Union at Iggesund Sawmill. Chairman of Hudiksvalls Sparbank and of Bomäklarna i Hudiksvall AB. Shareholding in Holmen: 200 call options.
Lidingö. Born in 1962. Member since 2004. MBA. CFO and Executive Vice President Axel Johnson AB. Other significant appointments: Board member: Åhléns AB, Axel Johnson International AB, Novax AB, Servera AB, Svensk Bevakningstjänst AB, Oriflame Cosmetics S.A. and Retail and Brands AB. Shareholding in Holmen: 500 shares.
Stockholm. Born in 1959. Member since 2004. MSc (Industrial Engineering). President and CEO. Other significant appointments: Chairman of the Board of BasEl i Sverige AB and Industrikraft i Sverige AB. Deputy chairman of the Swedish Forest Industries Federation. Own and related parties' shareholding in Holmen: 12 698 shares, 14 450 call options.
Söderköping. Born in 1958. Member since 2004. Representative of the employees, LO. Section Chairman of Paperbranch 53, Holmen Paper Braviken. Shareholding in Holmen: 500 call options. Related parties' shareholding: 500 call options.
Stockholm. Born in 1941. Member since 2006. Banking degree. Other significant appointments: Chairman of the Board: Umeå School of Economics. Board member: Handelsbanken International, Stockholmsmässan AB, SBC AB, Wåhlin Fastigheter AB and AB Skrindan. Shareholding in Holmen: 600 shares.
Lilian Fossum Göran Lundin Andreas Rastbäck Stig Jacobsson Steewe Björklundh Tommy Åsenbrygg Kenneth Johansson
Stockholm. Born in 1942. Member since 1990. Bachelor of Arts. Other significant appointments:
Chairman of the Board: Svenska Handelsbanken AB, Nobia AB, Attendo AB and Valedo Partners Fund 1 AB. Shareholding in Holmen: 1 000 shares.
Lidingö. Born in 1952. Member since 2004. Bachelor of Arts in Legal Science and Bachelor of Science (Econ). Executive VP and Deputy CEO of L E Lundbergföretagen AB. Other significant appointments: Board member: Brandkontoret, Indutrade AB, Ramirent OYJ, Cardo AB, Husqvarna AB and SHB Regionbank Stockholm.
Shareholding in Holmen: 4 000 shares.
Norrköping. Born in 1940. Member since 2001. Engineer. Other significant appointments: Chairman of the Board: Norrköpings Tidningar AB. Board member: Lorentzen & Wettre AB and Fastighets AB L E Lundberg. Shareholding in Holmen: 1 000 shares.
Forsa. Born in 1950. Member since 2009 . Representative of the employees, PTK. Chairman: Unionen Gävleborg, Unionen Holmen-Iggesund and member in Unionen's delegation ''Industry 1''. Shareholding in Holmen: 200 call options.
Related parties' shareholding: 200 call options. Karin Norin was not present for the photograph.
Deputy members
Iggesund. Born in 1948. Deputy member since 2004. Representative of the employees, LO. Chairman of Paperbranch 15 Iggesund. Shareholding in Holmen: 500 call options.
Örnsköldsvik. Born in 1975. Deputy member since 2008. Representative of the employees, PTK. Chairman of the university graduate association at Holmen Skog. Shareholding in Holmen: 500 call options.
Hallstavik. Born in 1968. Deputy member since 2009. Representative of the employees, PTK. Deputy chairman in Ledarna, Hallstavik. Shareholding in Holmen: 100 shares.
KPMG AB. Principal auditor:
George Pettersson
Authorised public accountant
Magnus Hall
President and CEO
Magnus Hall Born in 1959. Joined Holmen in 1985. Own and related parties' shareholding in Holmen: 12 698 shares, 14 450 call options.
Magnus Hall has no significant shareholdings and no ownership in companies with whom the Group has important business relations.
For further information about the CEO, see page 36.
Group staff units
CFO, Group Finance until 15 April 2010. Born in 1965. Joined Holmen in 1990. Shareholding in Holmen: 4 600 shares, 4 000 call options.
Head of Group Public Relations. Born in 1962. Joined Holmen in 2008. Shareholding in Holmen: 4 000 call options.
Lars Ericson
Head of Group Legal Affairs. Company secretary. Born in 1959. Joined Holmen in 1988. Shareholding in Holmen: 4 000 call options.
Head of Group Human Resources. Born in 1950. Joined Holmen in 2001. Shareholding in Holmen: 500 shares, 4 000 call options.
Head of Group Technology. Born in 1951. Joined Holmen in 1995. Shareholding in Holmen: 50 shares, 4 000 call options.
Business areas
Brynolf Alexandersson Head of Holmen Energi. Born in 1957. Joined Holmen in 2007. Shareholding in Holmen: 4 000 call options.
Head of Holmen Skog until 31 January 2010, when he retired. Born in 1946. Joined Holmen in 1971. Shareholding in Holmen: 4 000 call options.
Head of Iggesund Paperboard. Born in 1950. Joined Holmen in 1983. Shareholding in Holmen: 4 000 call options.
Head of Holmen Timber. Born in 1964. Joined Holmen in 1994. Shareholding in Holmen: 2 000 call options.
Head of Holmen Paper. Born in 1954. Joined Holmen in 1988. Sören Petersson will take up the position of head of Holmen Skog on 1 February 2010. Shareholding in Holmen: 4 000 call options.
Anders Jernhall will take up the position of head of Group Finance on 15 April 2010.
Ingela Carlsson
Lars Ericson
Björn Kvick
Håkan Lindh
Sven Wird
Arne Wallin
Brynolf Alexandersson
| 2009 | 2008 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEKm | Full year | IV | III | II | I | Full year | IV | III | II | I |
| Income statement | ||||||||||
| Net sales | 18 071 | 4 659 | 4 387 | 4 496 | 4 529 | 19 334 | 5 043 | 4 591 | 4 826 | 4 875 |
| Operating costs | -15 175 | -3 943 | -3 636 | -3 806 -3 789 | -16 630 | -4 437 | -3 909 | -4 178 | -4 107 | |
| Depreciation and amortisation according to plan | -1 320 | -334 | -322 | -333 | -332 | -1 343 | -333 | -337 | -339 | -334 |
| Interest in earnings of associates | 45 | 10 | 13 | 15 | 7 | 50 | 10 | 16 | 12 | 12 |
| Items affecting comparability * | - | - | - | - | - | -361 | - | -298 | -63 | - |
| Operating profit | 1 620 | 392 | 442 | 372 | 415 | 1 051 | 284 | 64 | 257 | 446 |
| Net financial items | -255 | -60 | -55 | -66 | -74 | -311 | -89 | -85 | -73 | -64 |
| Profit/loss before tax | 1 366 | 332 | 386 | 306 | 341 | 740 | 195 | -22 | 185 | 383 |
| Tax | -360 | -107 | -106 | -51 | -96 | -98 | 76 | -2 | -61 | -111 |
| Profit/loss for the period | 1 006 | 225 | 280 | 256 | 245 | 642 | 271 | -24 | 124 | 271 |
| Diluted earnings per share, SEK | 12.0 | 2.7 | 3.3 | 3.0 | 2.9 | 7.6 | 3.2 | -0.3 | 1.5 | 3.2 |
| Net sales | ||||||||||
| Holmen Paper | 9 303 | 2 310 | 2 348 | 2 361 | 2 284 | 10 443 | 2 854 | 2 517 | 2 547 | 2 525 |
| Iggesund Paperboard | 5 023 | 1 260 | 1 223 | 1 274 | 1 266 | 4 860 | 1 194 | 1 210 | 1 219 | 1 237 |
| Holmen Timber | 553 | 155 | 142 | 130 | 127 | 499 | 109 | 116 | 124 | 149 |
| Holmen Skog | 4 799 | 1 306 | 1 048 | 1 163 | 1 283 | 5 443 | 1 365 | 1 208 | 1 433 | 1 436 |
| Holmen Energi | 1 628 | 465 | 363 | 359 | 442 | 1 834 | 501 | 442 | 392 | 499 |
| Elimination of intra-group net sales | -3 236 | -837 | -737 | -791 | -872 | -3 745 | -980 | -902 | -890 | -972 |
| Group | 18 071 | 4 659 | 4 387 | 4 496 | 4 529 | 19 334 | 5 043 | 4 591 | 4 826 | 4 875 |
| Operating profit/loss | ||||||||||
| Holmen Paper | 340 | -34 | 107 | 150 | 117 | 280 | 20 | 80 | 100 | 80 |
| Iggesund Paperboard | 419 | 140 | 128 | 77 | 73 | 320 | 16 | 127 | 61 | 116 |
| Holmen Timber | 21 | 19 | 13 | 5 | -16 | 13 | -7 | -1 | -2 | 23 |
| Holmen Skog | 605 | 179 | 147 | 144 | 134 | 632 | 179 | 150 | 152 | 151 |
| Holmen Energi | 414 | 138 | 72 | 59 | 144 | 327 | 110 | 33 | 58 | 125 |
| Group-wide costs | -191 | -50 | -43 | -51 | -47 | -149 | -30 | - 21 | -50 | -48 |
| Elimination of internal operating profit/loss | 13 | 0 | 16 | -11 | 9 | -10 | -4 | -6 | 1 | 0 |
| Items affecting comparability * | - | - | - | - | - | -361 | - | -298 | -63 | - |
| Group | 1 620 | 392 | 442 | 372 | 415 | 1 051 | 284 | 64 | 257 | 446 |
| Operating margin, % ** | ||||||||||
| Holmen Paper | 3.7 | -1.5 | 4.6 | 6.3 | 5.1 | 2.7 | 0.7 | 3.2 | 3.9 | 3.2 |
| Iggesund Paperboard | 8.3 | 11.1 | 10.5 | 6.1 | 5.8 | 6.6 | 1.4 | 10.5 | 5.0 | 9.3 |
| Holmen Timber | 3.8 | 12.2 | 9.5 | 3.5 | -12.4 | 2.5 | -6.8 | -1.1 | -1.5 | 15.3 |
| Group | 9.0 | 8.4 | 10.1 | 8.3 | 9.2 | 7.3 | 5.6 | 7.9 | 6.6 | 9.2 |
| Return on operating capital, % ** | ||||||||||
| Holmen Paper | 3.5 | -1.5 | 4.5 | 6.0 | 4.6 | 2.8 | 0.8 | 3.2 | 4.0 | 3.2 |
| Iggesund Paperboard | 9.9 | 13.6 | 12.1 | 7.2 | 6.9 | 7.5 | 1.5 | 12.1 | 5.8 | 11.1 |
| Holmen Timber | 6.2 | 21.0 | 16.7 | 5.6 | -17.7 | 3.5 | -7.9 | -1.3 | -2.1 | 26.2 |
| Holmen Skog | 5.3 | 6.3 | 5.1 | 5.0 | 4.7 | 5.6 | 6.3 | 5.3 | 5.4 | 5.3 |
| Holmen Energi | 13.3 | 17.3 | 9.1 | 7.7 | 19.1 | 11.1 | 14.8 | 4.5 | 7.9 | 16.9 |
| Group | 5.9 | 5.8 | 6.4 | 5.5 | 6.1 | 5.0 | 4.1 | 5.1 | 4.5 | 6.4 |
| Key indicators | ||||||||||
| Return on capital employed, % ** | 7.2 | 7.0 | 7.8 | 6.6 | 7.3 | 6.1 | 4.9 | 6.3 | 5.6 | 7.8 |
| Return on equity, % | 6.4 | 5.5 | 7.0 | 6.6 | 6.4 | 3.9 | 6.9 | -0.6 | 3.0 | 6.4 |
| Deliveries | ||||||||||
| Newsprint and magazine paper, '000 tonnes | 1 745 | 456 | 455 | 437 | 397 | 2 044 | 539 | 493 | 508 | 503 |
| Paperboard, '000 tonnes | 477 | 123 | 118 | 119 | 117 | 494 | 115 | 124 | 127 | 127 |
| Sawn timber, '000 m3 | 313 | 76 | 76 | 80 | 81 | 266 | 63 | 66 | 66 | 72 |
| Harvesting own forests, '000 m3 | 2 897 | 859 | 704 | 753 | 580 | 2 649 | 770 | 631 | 714 | 534 |
| Own production of hydro power, GWh | 1 090 | 355 | 229 | 203 | 304 | 1 128 | 311 | 176 | 254 | 388 |
* Item affecting comparability in the third quarter of 2008 relating to a provision of SEK -298 million for the closure of Wargön Mill. The second quarter of 2008 includes SEK -63 million for the closure of PM 2 at Hallsta Paper Mill and an impact on profit due to the fire at Braviken Paper Mill.
** Excl. items affecting comparability.
| SEKm | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 |
|---|---|---|---|---|---|---|---|---|---|---|
| INCOME STATE MENT |
||||||||||
| Net sales | 18 071 | 19 334 | 19 159 | 18 592 | 16 319 | 15 653 | 15 816 | 16 081 | 16 655 | 15 155 |
| Operating costs | -15 175 | -16 630 -15 548 -14 954 -13 205 -12 570 -12 306 -12 205 -12 460 -11 843 | ||||||||
| Depreciation and amortisation according to plan | -1 320 | -1 343 | -1 337 | -1 346 | -1 167 | -1 156 | -1 166 | -1 153 | -1 126 | -1 045 |
| Interest in earnings of associates | 45 | 50 | 12 | 11 | 20 | 25 | -6 | -10 | -3 | 552 |
| Items affecting comparability * | - | -361 | 557 | - | - | - | - | - | -620 | 2 023 |
| Operating profit | 1 620 | 1 051 | 2 843 | 2 303 | 1 967 | 1 952 | 2 338 | 2 713 | 2 446 | 4 842 |
| Net financial items | -255 | -311 | -261 | -247 | -233 | -206 | -212 | -149 | -152 | -101 |
| Profit before tax | 1 366 | 740 | 2 582 | 2 056 | 1 734 | 1 746 | 2 126 | 2 564 | 2 294 | 4 741 |
| Tax | -360 | -98 | -1 077 | -597 | -478 | -471 | -675 | -605 | -108 | -769 |
| Profit for the year | 1 006 | 642 | 1 505 | 1 459 | 1 256 | 1 275 | 1 451 | 1 959 | 2 186 | 3 972 |
| Diluted earnings per share, SEK | 12.0 | 7.6 | 17.8 | 17.2 | 14.8 | 15.1 | 17.5 | 23.6 | 26.4 | 44.7 |
| Net sales | ||||||||||
| Holmen Paper | 9 303 | 10 443 | 10 345 | 10 140 | 8 442 | 7 814 | 7 788 | 8 164 | 8 757 | 7 618 |
| Iggesund Paperboard | 5 023 | 4 860 | 5 100 | 5 240 | 4 860 | 4 877 | 4 920 | 4 850 | 4 467 | 4 186 |
| Holmen Timber | 553 | 499 | 589 | 465 | 460 | 492 | 510 | 572 | 712 | 762 |
| Holmen Skog | 4 799 | 5 443 | 4 775 | 4 042 | 3 858 | 3 780 | 3 613 | 3 538 | 3 982 | 4 117 |
| Holmen Energi | 1 628 | 1 834 | 1 590 | 1 691 | 1 480 | 1 258 | 1 337 | 1 120 | 1 108 | 1 110 |
| Elimination of intra-group net sales | -3 236 | -3 745 | -3 239 | -2 986 | -2 781 | -2 568 | -2 352 | -2 163 | -2 371 | -2 638 |
| Group | 18 071 | 19 334 | 19 159 | 18 592 | 16 319 | 15 653 | 15 816 | 16 081 | 16 655 | 15 155 |
| Operating profit/loss | ||||||||||
| Holmen Paper | 340 | 280 | 623 | 754 | 631 | 487 | 747 | 1 664 | 2 410 | 1 389 |
| Iggesund Paperboard | 419 | 320 | 599 | 752 | 626 | 809 | 1 001 | 818 | 455 | 569 |
| Holmen Timber | 21 | 13 | 146 | 80 | 13 | 5 | 18 | -6 | -79 | -116 |
| Holmen Skog | 605 | 632 | 702 | 643 | 537 | 586 | 516 | 450 | 455 | 466 |
| Holmen Energi | 414 | 327 | 272 | 197 | 301 | 178 | 193 | -26 | 49 | 99 |
| Group-wide costs and eliminations | -178 | -159 | -56 | -123 | -141 | -113 | -137 | -187 | -224 | -112 |
| 1 620 | 1 412 | 2 286 | 2 303 | 1 967 | 1 952 | 2 338 | 2 713 | 3 066 | 2 295 | |
| Items affecting comparability * | - | -361 | 557 | - | - | - | - | - | -620 | 2 023 |
| Transferred operations | - | - | - | - | - | - | - | - | - | 524 |
| Group | 1 620 | 1 051 | 2 843 | 2 303 | 1 967 | 1 952 | 2 338 | 2 713 | 2 446 | 4 842 |
| CASH FLOW | ||||||||||
| Profit before tax | 1 366 | 740 | 2 582 | 2 056 | 1 734 | 1 746 | 2 126 | 2 564 | 2 294 | 4 741 |
| Adjustment items | 1 163 | 1 797 | 629 | 1 225 | 914 | 1 031 | 1 169 | 1 050 | 1 679 | -1 486 |
| Paid income tax | -334 | -192 | -390 | -664 | -516 | -378 | -727 | -472 | -248 | -942 |
| Changes in working capital | 678 | -686 | -345 | -259 | 339 | -68 | -125 | 356 | 61 | -388 |
| Cash flow from operating activities | 2 873 | 1 660 | 2 476 | 2 358 | 2 471 | 2 331 | 2 443 | 3 498 | 3 786 | 1 925 |
| Cash flow from investing activities | -818 | -1 124 | -1 315 | -947 | -3 029 | -1 195 | -726 | -1 810 | -1 669 | -2 019 |
| Cash flow after investments | 2 054 | 536 | 1 161 | 1 411 | -558 | 1 136 | 1 717 | 1 688 | 2 117 | -94 |
| Share buy-back | - | -138 | - | - | - | - | - | - | - | -2 025 |
| New share issue through conversion | - | - | - | - | - | 474 | - | - | - | - |
| and subscription | ||||||||||
| Dividend paid | -756 | -1 017 | -1 017 | -932 | -848 | -3 199 | -880 | -800 | -5 518 | -977 |
* Items affecting comparability:
Year 2000: Mainly the disposal within the Group of Modo Paper AB, an associate, for SEK 1 848 million, and the repayment of SPP funds of SEK 175 million. Year 2001: Impairment losses of SEK 620 million on non-current assets.
Year 2007: Impairment losses of SEK 569 million on goodwill and of SEK 1 034 million on property, plant and equipment within Holmen Paper, a reversed impairment losses of SEK 60 million on non-current assets within Holmen Timber, and a positive revaluation of forests of SEK 2 100 million within Holmen Skog. Year 2008: Closure of Wargön Mill SEK accounted for 298 million and a cost of SEK 115 million was for the closure of PM 2 at Hallsta Paper Mill. Income of SEK 52 million corresponds to the effects on the result of the fire at Braviken Paper Mill.
For a ten-year review of data per share, see page 30.
| SEKm | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 |
|---|---|---|---|---|---|---|---|---|---|---|
| BALA NCE SHEET |
||||||||||
| Non-current assets | 23 610 | 24 329 | 24 099 | 23 258 | 23 702 | 21 354 | 18 878 | 19 442 | 18 661 | 18 534 |
| Deferred tax assets | 304 | 342 | 301 | 354 | 352 | 273 | 295 | 194 | 203 | 191 |
| Shares and participating interests | 1 780 | 1 836 | 1 753 | 1 742 | 1 739 | 1 754 | 1 767 | 1 721 | 286 | 230 |
| Current assets | 6 075 | 7 268 | 6 549 | 6 138 | 5 709 | 5 149 | 4 743 | 4 922 | 5 366 | 5 330 |
| Financial receivables | 225 | 175 | 147 | 165 | 132 | 92 | 105 | 54 | 33 | 15 |
| Cash and cash equivalents | 182 | 653 | 394 | 484 | 580 | 367 | 570 | 634 | 399 | 2 000 |
| Total assets | 32 176 | 34 602 | 33 243 | 32 141 | 32 214 | 28 989 | 26 358 | 26 967 | 24 948 | 26 300 |
| Equity | 16 504 | 15 641 | 16 932 | 16 636 | 16 007 | 15 635 | 15 366 | 15 185 | 14 072 | 17 014 |
| Deferred tax liability | 5 045 | 4 819 | 5 482 | 5 030 | 5 143 | 5 177 | 4 557 | 4 370 | 4 014 | 4 264 |
| Financial liabilities and interest-bearing provisions | 6 091 | 8 332 | 6 518 | 6 634 | 7 351 | 5 335 | 4 044 | 4 496 | 3 593 | 1 721 |
| Operating liabilities | 4 536 | 5 809 | 4 311 | 3 841 | 3 713 | 2 842 | 2 391 | 2 916 | 3 269 | 3 301 |
| Total equity and liabilities | 32 176 | 34 602 | 33 243 | 32 141 | 32 214 | 28 989 | 26 358 | 26 967 | 24 948 | 26 300 |
| Operating capital | ||||||||||
| Holmen Paper | 8 789 | 10 237 | 9 971 | 11 541 | 11 452 | 9 659 | 9 461 | 9 884 | 9 584 | 8 564 |
| Iggesund Paperboard | 4 114 | 4 254 | 4 180 | 3 935 | 3 965 | 3 871 | 3 885 | 3 963 | 4 330 | 4 877 |
| Holmen Timber | 396 | 366 | 345 | 208 | 230 | 231 | 277 | 258 | 232 | 411 |
| Holmen Skog | 11 384 | 11 415 | 11 264 | 9 001 | 8 919 | 8 842 | 6 383 | 6 429 | 6 517 | 6 527 |
| Holmen Energi | 3 207 | 3 006 | 2 960 | 2 965 | 2 958 | 2 930 | 2 926 | 2 877 | 805 | 826 |
| Group-wide and other | -963 | -1 654 | -630 | -354 | -87 | -118 | 65 | -242 | -424 | -412 |
| Operating capital | 26 929 | 27 623 | 28 090 | 27 297 | 27 437 | 25 415 | 22 997 | 23 169 | 21 044 | 20 793 |
| Deferred tax liability, net | -4 741 | -4 477 | -5 181 | -4 676 | -4 791 | -4 904 | -4 262 | -4 176 | -3 811 | -4 073 |
| Capital employed | 22 188 | 23 146 | 22 909 | 22 621 | 22 646 | 20 511 | 18 735 | 18 993 | 17 233 | 16 720 |
| KEY RATI OS |
||||||||||
| Operating margin, %* | ||||||||||
| Holmen Paper | 4 | 3 | 6 | 7 | 7 | 6 | 10 | 21 | 28 | 18 |
| Iggesund Paperboard | 8 | 7 | 12 | 14 | 13 | 17 | 20 | 17 | 10 | 14 |
| Holmen Timber | 4 | 3 | 24 | 17 | 3 | 1 | 3 | -1 | -11 | -7 |
| Group | 9 | 7 | 12 | 12 | 12 | 12 | 15 | 17 | 18 | 15 |
| Return on operating capital, %* | ||||||||||
| Holmen Paper | 4 | 3 | 5 | 6 | 6 | 5 | 8 | 17 | 26 | 17 |
| Iggesund Paperboard | 10 | 8 | 15 | 19 | 16 | 20 | 25 | 20 | 9 | 12 |
| Holmen Timber | 6 | 4 | 64 | 38 | 6 | 2 | 7 | neg | neg | neg |
| Holmen Skog | 5 | 6 | 8 | 7 | 6 | 7 | 8 | 7 | 7 | 7 |
| Holmen Energi | 13 | 11 | 9 | 7 | 10 | 6 | 7 | 5 | 7 | 9 |
| Group | 6 | 5 | 8 | 8 | 7 | 8 | 10 | 13 | 14 | 12 |
| Key indicators | ||||||||||
| Return on capital employed, % * | 7 | 6 | 10 | 10 | 9 | 10 | 12 | 16 | 18 | 15 |
| Return on equity, % | 6 | 4 | 9 | 9 | 8 | 8 | 10 | 14 | 16 | 24 |
| Debt/equity ratio | 0.34 | 0.48 | 0.35 | 0.36 | 0.41 | 0.31 | 0.22 | 0.25 | 0.22 | -0.02 |
| Deliveries | ||||||||||
| Newsprint and magazine paper, '000 tonnes | 1 745 | 2 044 | 2 025 | 2 021 | 1 764 | 1 731 | 1 655 | 1 528 | 1 525 | 1 560 |
| Paperboard, '000 tonnes | 477 | 494 | 516 | 536 | 492 | 501 | 481 | 453 | 410 | 415 |
| Sawn timber, '000 m3 | 313 | 266 | 262 | 248 | 229 | 195 | 189 | 220 | 322 | 360 |
| Harvesting own forests, million m3 | 2.9 | 2.6 | 2.6 | 2.6 | 2.3 | 2.6 | 2.7 | 2.5 | 2.4 | 2.3 |
| Own production of hydro power, GWh | 1 090 | 1 128 | 1 193 | 934 | 1 236 | 1 054 | 867 | 1 048 | 1 362 | 1 308 |
Stated in accordance with IFRS from 2004. As far as Holmen is concerned, the principal difference between IFRS and previous accounting policies is that forest assets are valued and stated in the accounts at fair value, that goodwill is no longer amortised according to plan, and that the fair value of financial assets and liabilities where hedge accounting is applied is entered into the balance sheet.
* Excl. items affecting comparability.
The Board of Directors and the CEO of Holmen Aktiebolag (publ.), corporate identity number 556001–3301, submit their annual report for the parent company and the Group for the 2009 financial year. The annual report, including the audit report, comprises pages 42-85. The results of the year's operations and the financial position of the parent company and the Group are presented in the administration report and the accompanying income statements and balance sheets, together with the notes and supplementary information. The Group's income statement and balance sheet and the parent company's income statement and balance sheet will be submitted to the Annual General Meeting for adoption.
This is a translation of the Swedish Annual Report of Holmen Aktiebolag (publ). In the event of inconsistency between the English and the Swedish versions, the Swedish version shall prevail.
A 123-metre long wooden bridge has been built at Iggesund Mill, partly using wood from Holmen's forests.
| Administration report | 44 | |
|---|---|---|
| Income statement | 52 | |
| Statement of comprehensive income | 52 | |
| Balance sheet | 53 | |
| Changes in equity | 54 | |
| Cash flow statement | 55 | |
| Parent company | 56 | |
| Notes to the financial statements | 58 | |
| 1. | Accounting policies | 58 |
| 2. | Financial risk management | 62 |
| 3. | Operating segment reporting | 64 |
| 4. | Other operating income | 66 |
| 5. Employees, staff costs and remuneration to senior management |
66 | |
| 6. | Auditors' fees and remuneration | 67 |
| 7. | Income from financial instruments | 68 |
| 8. | Taxes | 68 |
| 9. | Earnings per share (EPS) | 70 |
| 10. Intangible non-current assets | 70 | |
| 11. Property, plant and equipment | 71 | |
| 12. Biological assets | 72 | |
| 13. Interests in associates and other shares and participating interests |
73 | |
| 14. Financial instruments | 74 | |
| 15. Inventories | 78 | |
| 16. Operating receivables | 78 | |
| 17. Equity | 78 | |
| 18. Pension provisions | 79 | |
| 19. Other provisions | 80 | |
| 20. Operating liabilities | 80 | |
| 21. Operating leases | 80 | |
| 22. Pledged collateral and contingent liabilities | 81 | |
| 23. Related parties | 81 | |
| 24. Interests in Group companies | 82 | |
| 25. Untaxed reserves | 83 | |
| 26. Cash flow statement | 83 | |
| 27. Key assessments and estimates | 83 | |
| Proposed treatment of unappropriated earnings | 84 | |
| Audit report | 85 |
Holmen's operations consist of three product-oriented and two raw-material-oriented business areas, which are to be developed through organic growth and selective acquisitions. Europe is by far the largest market, accounting for some 90 per cent of sales. The Holmen Paper business area manufactures printing paper for newspapers, magazines, directories/manuals, advertising materials and books. The paper is manufactured at two mills in Sweden and one in Spain. Iggesund Paperboard produces paperboard for packaging and graphics printing at one mill in Sweden and one in the UK. Holmen Timber produces sawn timber at one sawmill in Sweden. Annual production capacity is 1 940 000 tonnes of printing paper, 530 000 tonnes of paperboard (after structural change at Workington Mill) and 340 000 cubic metres of sawn timber. Holmen Skog manages the Group's forests, which cover just over one million hectares; each year some 2.5 million cubic metres of wood are harvested in the company's forests. Holmen's annual consumption amounts to about 4.5 million cubic metres. Holmen Energi's normal yearly production amounts to some 1 100 GWh of electricity at wholly and partly owned hydro power stations in Sweden. In addition, about 400 GWh of electricity is produced at the mills. Holmen consumes a total of some 4 700 GWh of electricity per year.
The main part of operations in Sweden is run by the parent company. In turn, the latter's operations are run by five companies acting on behalf of the parent company – one for each business area. The parent company is liable for all commitments entered into by these companies. Abroad, operations are chiefly run by wholly owned subsidiaries.
Market. The weak economy meant that demand for newsprint in Europe fell considerably in 2009 and was 14 per cent lower than in 2008. Along with weak demand outside Europe, this entailed low capacity utilisation for European producers in 2009. Deliveries of MF Magazine to Europe were 20 per cent lower in 2009 than in 2008, while deliveries of SC paper to Europe were down 9 per cent and of coated paper down 22 per cent.
The long-term trend in demand for virgin fibre board in Europe has been positive. The market in Europe however was weak in 2009, and deliveries from European producers to Europe thus fell by 9 per cent compared to 2008. The situation improved somewhat towards the end of the year.
Demand for sawn timber in Europe was substantially lower in 2009 compared to 2008, which led to considerable production cutbacks among European producers. In the
When Iggesund Paperboard launched its new grades of Invercote and Incada paperboard, new cover paper was also introduced for the paperboard rolls.
second half of the year, the market improved, and stock levels were low. The prices of sawn timber fell from the second half of 2007 until the start of 2009, but the price trend reversed during the second half of 2009.
Demand for pulpwood and timber were low at the start of the year and prices fell. Sawmills' demand for timber climbed to a high level during the year, which led to price rises. Demand for pulpwood increased to a normal level and prices were stable.
In 2009, hydro power production in Sweden was slightly below the normal level. The spot price fluctuated during the year, from SEK 350/MWh in May, to SEK 500/MWh in December. The average price was SEK 393/MWh, which was 20 per cent lower than in 2008.
RESULTS. In 2009, the Group's sales decreased by SEK 1 263 million, to SEK 18 071 million. Operating profit amounted to SEK 1 620 million (2008: 1 051). Operating profit for 2008 included a net amount of SEK -361 million comprising items affecting comparability in the Holmen Paper business area.
The improved operating profit is primarily attributable to higher prices of newsprint and paperboard, while weak demand led to extensive production cutbacks , which had a negative impact on earnings.
Holmen Paper's deliveries declined to 1 745 000 tonnes, compared to 2 044 000 tonnes in 2008, as a consequence of low demand and the closure of capacity. The decline mainly affected standard newsprint and coated paper, while deliveries of MF Magazine were higher. Holmen Paper's operating profit for 2009, was SEK 340 million (280 excluding items affecting comparability in 2008). The improvement is thanks to higher selling prices, but considerable production cutbacks and a less favourable market mix had an adverse effect on results. Lower costs of wood and recovered paper made an impact on profit, but energy costs rose.
Iggesund Paperboard's deliveries were down by 3 per cent in relation to 2008 due to lower demand. Iggesund Paperboard implemented price rises for folding boxboard in the UK market during the second half of 2009. Operating profit for 2009 amounted to SEK 419 million, which was SEK 99 million higher than in the preceding year. The price increases, along with a weaker pound (sterling) and Swedish krona, had a positive impact on results. Production cutbacks and high manufacturing costs adversely affected profit, particularly in the first half of 2009.
Holmen permanently shut down a board machine (BM 1) at Workington Mill in December. Provisions and impairment losses resulting from the shutdown had a negative impact of SEK 75 million on costs.
Holmen Timber's deliveries rose to 313 000 cubic metres, compared to 266 000 cubic metres in 2008. Operating profit amounted to SEK 21 million (13). Higher deliveries and lower raw materials costs had a positive impact, although
the average price level was lower.
Operating profit for Holmen Skog amounted to SEK 605 million (632). The figure includes a SEK 16 million (-16) change in the value of the company's forests, calculated in accordance with IAS 41. Operating profit before the change in value of forests fell by SEK 59 million, to SEK 589 million, as a result of lower wood prices, while increased harvesting in the company's own forests had a positive impact. The extent of silviculture rose, entailing higher costs.
Holmen Energi's operating profit increased by SEK 87 million, to SEK 414 million. The rise is largely thanks to higher prices, though production was lower than in 2008 and 2 per cent below that of a normal year.
Net financial items amounted to a loss of SEK 255 million (loss of 311). Lower market interest rates reduced the average borrowing cost to 3.5 per cent (4.5), and net debt was somewhat higher on average than in the preceding year.
The Group's tax expense amounted to SEK 360 million (98), which corresponds to 26 per cent of profit before tax. Tax expense includes SEK 30 million from a successful tax dispute.
Profit after tax was SEK 1 006 million (642). Earnings per share amounted to SEK 12.0 (7.6). The return on equity was 6.4 percent (3.9).
Changes in WORKINGTON. In September 2009 Holmen decided to shut down one of the two board machines at Workington Mill in the UK. The machine, dating from 1967, has an annual production capacity of 70 000 tonnes of folding boxboard in the lower quality segment. Capacity was upgraded on the remaining machine at the same time. The new annual capacity of the mill is 200 000 tonnes (previously 250 000) – a volume that is more tailored to the market. The number of employees is expected to decrease by 99. The shutdown entailed costs as a result of provisions and impairment losses totalling SEK 75 million.
Investments. The Group's acquisitions of non-current assets amounted to SEK 759 million (1 160). Cash flow from investing activities totalled SEK -818 million (-1 124). Scheduled depreciation and amortisation amounted to SEK 1 320 million (1 343). The year's investments include investment projects such as a new sawmill at Braviken, a new hydro power station in Iggesund, improved water treatment at Iggesund Mill and a new power production plant at the mill in Madrid. Production in the new sawmill at Braviken Paper Mill in Norrköping is scheduled to start at the turn of 2010/2011.
Cash flow. The Group's cash flow from operating activities totalled SEK 2 873 million, of which a reduction in tied up working capital accounted for SEK 678 million. Cash flow from investing activities amounted to SEK -818 million.
The Middle East and North Africa are increasingly important markets for Holmen Timber. Consignments of wood from Iggesund Sawmill are unloaded in Alexandria.
A dividend of SEK 756 million was paid to shareholders during the year.
Financing and financial risk management. Holmen shall have a strong financial position that provides financial stability and enables the Group to make correct and long-term business decisions relatively independently of the state of the economy and external financing possibilities. The target for the debt/equity ratio is an interval of 0.3–0.8, and strategic planning includes adjustment to this target.
The Group's net financial debt decreased by SEK 1 821 million, to SEK 5 683 million, during the year. The year-end debt/equity ratio was 0.34 (31 December 2008: 0.48). The equity/assets ratio was 51 per cent (45).
At the end of 2009 financial liabilities amounted to SEK 6 091 million, of which SEK 2 298 million was short term. Cash, cash equivalents and financial receivables totalled SEK 407 million. The Group has a contractually agreed credit facility with a syndicate of banks that amounts to EUR 600 million and expires in 2012. Since 2009 the company has also had a bilateral credit facility of SEK 1 300 million that expires in 2016. Neither of the facilities had been used at year-end.
During the year, new long-term financing was raised through an MTN loan of SEK 1 500 million with a four-year maturity. Other financing during the year was arranged mainly via the Group's commercial paper programme, short-term bank loans and utilisation of the contractually agreed EUR 600 million credit facility. Certain other non-current liabilities were paid down. Cash and cash equivalents were deposited with banks. Standard & Poor's lowered its long-term credit rating for Holmen from BBB+ to BBB, with a negative outlook. The short-term rating was lowered to A-3/K-2.
The Group hedges parts of future estimated net flows in foreign currencies. Gains and losses on currency hedges to cover sales in foreign currencies netted a loss of SEK 408 million (loss of 336) during the year, recognised in operating profit. The result was primarily due to the average hedging rate for euro being SEK 9.4 during the year, compared to the average spot exchange rate of SEK 10.6. Taking account of currency hedges, the average exchange rates for the Group's net flows were SEK 9.5 for euro and SEK 7.8 for US dollars. At yearend, some 90 per cent of the Group's estimated net flows in euro for 2010 were hedged at an average exchange rate of SEK 9.7, for 2011 about 85 per cent were hedged at an average of SEK 10.6 and for 2012 about 25 per cent at an average of SEK 10.5. Four months' estimated flows in dollars were hedged at an average exchange rate of SEK 6.9. The fair value of currency hedges not yet recognised in the income statement amounted to a loss of SEK 45 million at the end of 2009.
Prices for the Group's estimated net consumption of electricity in Sweden during the 2010–2012 period are fully hedged. For 2013–2015, prices for some 85 per cent have been hedged. The Group's financial risk management is described in note 2.
EQUITY. In 2009 the Group's equity increased by SEK 863 million, to SEK 16 504 million. Profit for the year amounted to SEK 1 006 million, and the dividend paid was SEK 756 million. Equity has also been affected by other comprehensive income which consists of items such as revaluation of pension liability, currency revaluation of loans, revaluation of transaction hedges and restatement of assets in foreign entities as well as tax on these items. In 2009 other comprehensive income amounted to SEK 613 million, which is mainly attributable to currency hedges that have expired and been recognised in the income statement, and to the fact that the strengthened Swedish krona reduced the negative fair value of transaction hedges. As of 2009 other comprehensive income is presented in a separate "Statement of comprehensive income" following the ''income statement''.
Research and development (R&D). The Group conducts R&D in-house at business area level and externally. The external activities are co-run with other players – often at industry-wide level – and in collaboration with universities and colleges. In 2009 Holmen opened a development centre in Iggesund, focusing on biorefining and biofuels. The Group's total investments in R&D amounted to around SEK 100 million in 2009.
Tax disputes. In the dispute concerning Holmen's French subsidiary, the county administrative court decided in the company's favour in December 2008. This has now come into force but had no impact on earnings.
On 15 January 2010, Stockholm County Administrative Court announced its judgment on the tax case involving Holmen's subsidiary MoDo Capital AB. Under the Court's judgment, MoDo Capital's depreciation deduction for the 1997 tax year is disallowed, which results in tax expense estimated at a total of SEK 640 million. Holmen has previously made provision for the tax expense; it is thus not anticipated that the judgment will have any impact on the Group's earnings. Holmen will appeal against the judgment to the Administrative Court of Appeal.
In Holmen's product markets 2009 was a difficult year. Demand for printing paper and paperboard declined by more than 10 per cent and demand for sawn timber fell substantially. This entailed major production cutbacks, which for Holmen primarily took place in Holmen Paper. Meanwhile, prices remained relatively stable and were even increased for printing paper in Europe. Costs were lower than in the preceding year, primarily thanks to lower fibre costs.
The outlook for 2010 is less favourable, in particular for Holmen Paper; there are as yet no signs of an improvement in demand. In addition, ongoing price negotiations are expected to entail lower printing paper prices in Europe. However, the prices for recovered paper, a key raw material, have started to rise during the winter. The market for Iggesund Paperboard and Holmen Timber improved in the second half of 2009, which may create better conditions for 2010. In the wood market, demand for timber is considerable and prices have risen, which increases costs for Holmen Timber, but creates potential for some improvement in Holmen Skog's earnings from wood.
For Holmen Energi, 2010 may be another good year, because prices are largely hedged at favourable levels. Hydro power production depends on precipitation during the year.
Exchange rates have a major impact on profits. The largest currency exposure, which is to the euro, is hedged for 2010 and 2011, and the exchange rates will be slightly more favourable than the hedging contracts that applied for 2009. However, the US dollar has weakened compared to one year ago, which is a negative development.
Investments are estimated to exceed SEK 1 500 million for 2010. One reason is the ongoing sawmill project at Braviken. A survey of energy-related investments is in progress, which may keep the level of investment high to the extent and at the rate that these investments are decided on and implemented.
Income. Holmen's income is mainly generated from the sale of printing paper, paperboard and sawn timber in Europe. Changes in prices and deliveries largely depend on market equilibrium in Europe. This in turn is influenced by demand patterns there, trends in production among European producers and changes in imports into Europe, as well as by the opportunities of exporting profitably from Europe. The Group also has sizeable sales of wood from its own forests and electricity from its own power generation. However, wood and electricity are also major costs for the Group's industrial operations.
Costs. Holmen's principal production costs are those of wood, recovered paper, energy and chemicals. In addition, the costs of deliveries, employees, maintenance and capital are significant. Cost trends are primarily determined by changes in the prices of input goods and employees, and by how successfully the Group improves the efficiency of production and administration.
A one percentage point change in deliveries, prices and costs is estimated to have the following impact on operating profit:*
| SEKm | Deliveries P | rice |
|---|---|---|
| Products | ||
| Printing paper | 33 | 91 |
| Paperboard | 24 | 49 |
| Sawn timber | 2 | 6 |
| Company's own raw materials | ||
| Wood from company forests** | 8 | 12 |
| Company-generated electricity** | 5 | 5 |
| SEKm | Costs | |
| Wood** | 21 | |
| Recovered paper | 8 | |
| Pulp | 1 | |
| Electricity** | 16 | |
| Other energy | 4 | |
| Chemicals | 14 | |
| Distribution costs | 15 | |
| Other variable costs | 9 | |
| Staff | 27 | |
| Other fixed costs | 17 |
* Based on income and costs for 2009.
** Sensitivity regarding the Group's net purchases – taking account of the company's own production of raw materials – is SEK 9 million for wood and SEK 11 million for electricity. The price of the Group's net consumption of electricity in Sweden, which corresponds to some 80 per cent of the Group's total net consumption, is fully hedged for coming years (see note 2).
Currencies. Holmen's earnings are affected by exchange rate fluctuations, mainly because a significant proportion of the Group's sales are invoiced in currencies other than its costs are. Currency hedging is used to reduce this exposure. Taking account of estimated currency flows, a one percentage point weakening of the Swedish krona in relation to the currencies below would have the following effects, without considering currency hedges:
| SEKm | Net |
|---|---|
| SEK / EUR | 47 |
| SEK / USD | 11 |
| SEK / GBP | 2 |
| SEK / other currencies | 7 |
Taking account of currency hedges, a one percentage point weakening of the Swedish krona would have a positive impact of about SEK 20 million on the Group's earnings for 2010. See also note 2.
Interest rates. Based on the duration of the fixed interest rate period and net debt at 31 December 2009, a one percentage point change in the average market interest rate would have an impact of about SEK 20 million on earnings for 2010. As loans at fixed rates of interest mature, the exposure to changes in market interest rates will increase. Disregarding the fixed interest rate period, the exposure to a one percentage point change in the market interest rate is SEK 57 million. See also note 2.
Key assessments and estimates. Note 27 provides an account of key assessments and estimates that, were they to change, could affect earnings in 2010.
SEASONAL EFFECTS. Holmen's earnings are spread relatively evenly over the year. The main seasonal effects are that staff and maintenance costs are lower during the third quarter, maintenance costs are usually higher in the fourth quarter and that a large part of electricity production at the hydro power plants takes place during the first and fourth quarters.
The share. Holmen has 83 996 162 shares outstanding, of which 22 623 234 are class A shares and 61 372 928 are class B shares. The company also has 760 000 bought-back class B shares held in treasury. Each A share carries 10 votes and each B share carries one vote; in other respects, the shares carry the same rights. Neither laws nor the company's articles of association place any restrictions on the transferability of the shares.
Dividend. The Board proposes that the AGM, to be held on 24 March 2010, approves a lower dividend of SEK 7 (9) per share, which corresponds to 4 per cent of the Group's closing equity. The proposal to reduce the dividend is due to the lower profitability in the industry, chiefly for paper products. The Group is also making investments, such as building a new sawmill.
Holmen is reformulating its dividend target, which used to be 5–7 per cent of the Group's equity. Instead, decisions on
share dividends will be based on an appraisal of the Group's profitability, future investment plans and financial position.
Over the past ten years the ordinary dividend has averaged 5 per cent of equity. This means that half of earnings per share per year have been paid out by way of ordinary dividends.
Shareholders. At the end of the year, the Holmen shares held by L E Lundbergföretagen AB (corporate identity number 556056-8817) accounted for 52.0 per cent of the total number of votes and 28.0 per cent of the capital, which means that a Group relationship exists between L E Lundbergföretagen, whose registered office is in Stockholm, and Holmen. The Kempe Foundations' holdings of Holmen shares amounted to 16.9 per cent of the votes and 7.0 per cent of the capital at year-end. No other individual shareholder controlled as much as 10 per cent of the votes. A list of major owners' shareholdings is provided in the section on the Holmen share and shareholders on pages 28–30. The employees have no holdings of Holmen shares via a pension fund or similar system. There is no restriction on how many votes each shareholder may cast at the AGM.
According to the company's articles of association, the Board shall have 7–11 members, and they are elected at the AGM. The company's articles contain no other rules regarding the appointment or dismissal of board members or regarding amendments to the articles.
Share buy-backs. The company has no specific target for share buy-backs. A mandate to buy back up to 10 per cent of the company's shares has applied in recent years. Any buybacks are regarded as a complement to dividend payments to adjust the capital structure when circumstances have been deemed favourable. The AGM on 24 March 2009 renewed the Board's authorisation to make decisions to buy back up to 10 per cent of the company's total shares. No buy-backs took place in 2009, but 760 000 B shares were repurchased in 2008 to secure the company's commitments as part of the incentive scheme (see below).
The Board proposes that the 2010 AGM authorises the Board to buy back and transfer up to 10 per cent of all shares in the company.
Incentive scheme. In 2008 the Group's employees were invited to acquire call options on class B shares in Holmen at market price (calculated by an independent bank). As a result, 1 492 people (one third of all employees) bought a total of 758 300 call options. The price of each option was SEK 20, and their exercise price is SEK 224.50 per share. Each option entitles the holder to purchase one share during the exercise period in May/June 2013. Holmen's commitments in the scheme have been secured through buy-backs of own shares.
The Board proposes that the 2010 AGM resolves in favour of the following guidelines for determining salaries and other remuneration for senior management. See note 5 on page 66 for the guidelines adopted by the AGM in 2009.
These guidelines refer to terms and conditions of employment for the CEO and other members of senior management, namely the business area managers and heads of Group staff functions who report directly to the CEO.
Salary and other remunerations. The remuneration for the CEO and the senior management shall consist of a fixed, market-based salary. Other benefits, mainly car and accomodation, shall, insofar as they are provided, represent a limited part of the remuneration. No variable remuneration shall be paid.
Pension. The normal retirement age shall be 65 years. The company and the employee shall be mutually entitled to request that pension be drawn from 60 years of age. Any pension drawn before 65 years of age shall be either defined benefit or defined premium. Pension drawn after 65 years of age shall be in accordance with the ITP plan. Over and above this, the employee may also be entitled to a supplementary old age pension. In this case, there shall be a gradual transition from the existing arrangement with a defined benefit pension to one in which the pension is defined premium.
NOTICE AND SEVERANCE PAY. Discontinuation notice should normally be one year if it is given by the company, and six months if it is given by the employee. In the event of notice being given by the company, severance pay can be paid corresponding to no more than 24 months' salary. For new contracts, salary during the period of notice and severance pay shall not exceed a total of an amount equivalent to two years' salary.
INCENTIVE SCHEME. Any decision on a share and share price based incentive scheme for senior company personnel shall be made by the AGM.
Remuneration committee. A remuneration committee appointed from among the members of the Board shall prepare business pertaining to the CEO's salary and other conditions of employment and submit proposals on such issues to the Board for decision. Detailed principles for determining the salaries, pension rights and other remuneration to senior management shall be laid down in a pay policy adopted by the remuneration committee.
departures in individual cases. The Board shall be entitled to depart from these guidelines in individual cases should special reasons exist. In the event of such a departure, information thereon and the reasons therefore shall be submitted to the next Annual General Meeting.
Holmen's HR policy focuses on developing leadership, the organisation and employees. HR work is governed by laws, contracts and internal policies. Holmen's combined HR policies constitute the Group's approach to staff policy, and the company has worked with strategic goals for its HR activities for several years.
The chief safety representative at Iggesund Mill talks to one of the operators.
The Group's average number of employees in terms of full-time equivalents was 4 577 (4 829) in 2009. The change is due to staff cuts at Hallsta Paper Mill and the closure of Wargön Mill.
THE NUMBER OF industrial ACCIDENTS per 1 000 employees resulting in more than eight hours of absence fell to 31 (38) in the Group. Holmen aims to reduce the number of accidents to fewer than 10 per 1 000 employees by 2011. No fatal accidents have occurred involving any of the company's employees for a very long time.
TOTAL SICKNESS ABSENCE continued to decrease at Holmen's units as a result of various measures; it fell to 3.7 per cent (4.3) in the Group in 2009.
The proportion of female managers at Holmen's units is increasing year after year and equalled 16 per cent (13) in 2009. The proportion of women employed in the Group was 19 per cent. The aim is for the proportion of female managers to correspond to the proportion of women employed.
Fourteen women are members of the management teams of the Group, business areas and mills. Two of Holmen's Board members are women, one of whom was elected by the AGM and the other is an employee representative. See note 5 and pages 36-38 for more details.
EMPLOYEE SURVEY. The Holmen Inblick employee survey was conducted in 2009. It showed that Holmen has become a better workplace since the previous survey in 2007. Compared to process industries in Europe, Holmen is well above average. Many employees are committed to their work situation, which is illustrated by the response rate of 78 per cent.
Holmen earmarks significant resources each year to develop employees' skills. This mainly comprises increasing professional competence and giving employees the opportunity of advancing to more qualified positions.
WORKFORCE REDUCTIONS. In September Holmen decided to shut down the older board machine at Workington Mill in December 2009. As a result, Holmen reached an agreement with the trade union organisations to reduce the number of employees by 99.
The organisation in Braviken is undergoing an overhaul to improve efficiency. Following trade union negotiations, Holmen decided to make staff cuts that affect 95 employees. By February 2010 a total of 35 people had accepted the offer of a company pension or retirement pension, and 17 were offered employment at Holmen's new sawmill at Braviken. Negotiations with the other employees had not yet been concluded at that point.
The environmental aspects of Holmen's business are regulated by laws and permits in each country. The allocation of environmental responsibility and the organisation and management of environmental activities are based on the Group's environmental policy. At the production sites, various types of rules are integrated as key elements in the planning of production and investments. Holmen's environmental policy focuses on the significance to the business of energy and climate change issues.
The environmental standards at Holmen's facilities are high. This is a result of investments made in process and treatment equipment, continuous improvements implemented within the framework of the environmental and energy management systems at the facilities and statutory supervision conducted by authorities.
The environmental activities largely comprise the planning of issues relating to environmental conditions set by relevant government authorities. The main environmental impact of Holmen's facilities consists of emissions to air and water and the occurrence of noise and waste. As considerable attention is currently being given to energy and climate change, fossil fuels and biofuels are of great interest.
Holmen actively aims to use electricity and heating efficiently, reduce emissions of fossil carbon dioxide and increase its self-sufficiency in terms of energy.
Several projects, studies and corrective measures related to the environment were carried out in 2009. The following are a sample.
• Operations at Wargön Mill were closed down at the end of 2008. During 2009, work was carried out to assess the presence of pollutants on the factory site and in buildings. This work will be concluded in 2010.
Activities in Sweden. At the turn of 2009/2010 Holmen was engaged in environmentally hazardous activities at five facilities that require environmental permits pursuant to the Swedish Environmental Protection Act or the Swedish Environmental Code. The permits include conditions on emissions allowed to air and water. The permits per facility are shown below:
| Permits according to: | ||||||
|---|---|---|---|---|---|---|
| Environmental E Protection Act |
nvironmental Code |
|||||
| Hallsta Paper Mill | in 2000 | |||||
| Braviken Paper Mill | in 2002 | |||||
| Iggesund Mill | in 2003 | |||||
| Skärnäs Terminal | in 1999 | |||||
| Iggesund Sawmill | in 1994 |
Holmen also has a production unit in Strömsbruk with operations that the company is obligated to report to authorities. The sales from these units accounted for 58 per cent of the Group's net sales.
In 2009, the first steps were taken to apply for a new environmental permit pursuant to the Environmental Code at the paperboard mill in Iggesund. Corresponding work was launched during the year for Iggesund Sawmill. No other permits of significance need to be renewed or revised in 2010.
Holmen is building a sawmill adjacent to Braviken Paper Mill. The county administrative board granted a permit under the Environmental Code in 2009 and issued related conditions for the construction of the sawmill and the operations that will be run there.
Holmen Energi produces electricity at Holmen's wholly and partly owned hydro power plants. The permits, held by all the units, for water operations (regulations in the Environmental Code) include environmental conditions. In 2006 a decision by the Environmental Court gave the go-ahead to construct a new power station on the River Iggesundsån. This power plant has been in use since the end of 2009 and replaces three old power stations on the site.
Reviews of past water rights decisions may be requested under the Environmental Code. In the case of the river Ljusnan, on which Holmen Energi co-owns a few hydro power plants, such a review is now underway for expansion of production capacity. In river Faxälven's mountain lakes, of which Holmen also has partial ownership, a review has started for regulation of lake Limningen. The storage reservoir is on both Swedish and Norwegian ground.
The Group's mills are participating in the EU trade in carbon dioxide emission rights. The Swedish mills are also active in the trading of electricity certificates.
The operations at the company's facilities in Sweden were
certified at the turn of 2009/2010 in accordance with ISO 14001 (environmental management system) and SS 627750 (energy management system). The forestry operations were certified in accordance with ISO 14001, Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification schemes (PEFC).
During the year there were a number of cases of exceeded threshold values, complaints and incidents in the industrial and forestry operations. None of them had any environmental impact or effect on earnings, and they were all resolved by means of corrective measures in accordance with the operations' environmental management systems.
Activities outside Sweden. Of the Group's operations outside Sweden, the facilities in Workington, the UK, and in Madrid, Spain, have some kind of environmental impact. The sales from these facilities accounted for 21 per cent of the Group's net sales.
In 2002, Workington Mill received an environmental permit for its activities pursuant to the EU's IPPC Directive. In 2006, Holmen Paper Madrid received an environmental permit pursuant to the same Directive.
The mills in Workington and Madrid are certified in accordance with ISO 14001. An energy management system was introduced and certified at the mill in Madrid in 2009. Workington Mill has been running its business in accordance with a certifiable energy management system since the beginning of 2008.
Holmen's HR and environmental activities in 2009 are described in the sustainability report titled Holmen and its World 2009, which will be published at the end of March 2010. It will also be published on the website, where links to supplementary environmental information will be available. Together, these constitute Holmen's complete sustainability report for 2009.
The majority of seedlings planted in Holmen's forests come from the company's own nurseries.
| GROUP, SEKm | Note | 2009 | 2008 |
|---|---|---|---|
| Net sales | 3 | 18 071 | 19 334 |
| Other operating income | 4 | 600 | 755 |
| Change in inventories | -381 | 106 | |
| Raw materials and consumables | -9 017 | -10 929 | |
| Staff costs | 5 | -2 662 | -2 965 |
| Other operating costs | 6, 21 | -3 709 | -3 885 |
| Depreciation and amortisation according to plan | 10, 11 | -1 320 | -1 343 |
| Impairment losses | 10, 11 | -22 | -57 |
| Change in value of biological assets | 12 | 16 | -16 |
| Interest in earnings of associates | 13 | 45 | 50 |
| Operating profit | 1 620 | 1 051 | |
| Finance income | 7 | 12 | 17 |
| Finance costs | 7 | -267 | -328 |
| Profit before tax | 1 366 | 740 | |
| Tax | 8 | -360 | -98 |
| Profit for the year | 1 006 | 642 | |
| Attributable to: | |||
| owners of the parent company | 1 006 | 642 | |
| Earnings per share (SEK) | 9 | ||
| basic | 12.0 | 7.6 | |
| diluted | 12.0 | 7,6 | |
| Average number of shares (million) | 9 | ||
| basic | 84.0 | 84.3 | |
| diluted | 84.0 | 84.3 |
| GROUP, SEKm Note |
2009 | 2008 |
|---|---|---|
| Profit for the year | 1 006 | 642 |
| Other comprehensive income | ||
| Cash flow hedging | ||
| Revaluation of derivatives recognised in equity | 567 | -1 272 |
| Transferred from equity to the income statement | 343 | 309 |
| Transferred from equity to non-current assets | -1 | -1 |
| Actuarial gains and losses in respect of pensions, | ||
| incl. special employer's contributions | 15 | -169 |
| Translation difference on foreign operation | -256 | 445 |
| Hedging of currency risk in foreign operation | 254 | -541 |
| Tax attributable to other comprehensive income 8 |
-310 | 452 |
| Total other comprehensive income | 613 | -778 |
| Total comprehensive income | 1 619 | -135 |
| Attributable to: | ||
| owners of the parent company | 1 619 | -135 |
| GROUP at 31 December, SEKm | Note | 2009 | 2008 |
|---|---|---|---|
| Non-current assets | |||
| Intangible non-current assets | 10 | 27 | 106 |
| Property, plant and equipment | 11 | 12 473 | 13 142 |
| Biological assets | 12 | 11 109 | 11 080 |
| Interests in associates | 13 | 1 770 | 1 824 |
| Other shares and participating interests | 13 | 10 | 11 |
| Non-current financial receivables | 14 | 151 | 87 |
| Deferred tax assets | 8 | 304 | 342 |
| Total non-current assets | 25 845 | 26 593 | |
| Current assets | |||
| Inventories | 15 | 2 850 | 3 434 |
| Trade receivables | 16 | 2 712 | 3 144 |
| Current tax receivable | 8 | 22 | 141 |
| Other operating receivables | 16 | 490 | 548 |
| Current financial receivables | 14 | 74 | 88 |
| Cash and cash equivalents | 14 | 182 | 653 |
| Total current assets | 6 331 | 8 009 | |
| Total assets | 32 176 | 34 602 | |
| Equity | 17 | ||
| Share capital | 4 238 | 4 238 | |
| Other contributed capital | 281 | 281 | |
| Reserves | -70 | -672 | |
| Retained earnings incl. profit for the year | 12 056 | 11 795 | |
| Total equity attributable to the owners of the parent company | 16 504 | 15 641 | |
| Non-current liabilities | |||
| Non-current financial liabilities | 14 | 3 472 | 3 223 |
| Pension provisions | 18 | 320 | 354 |
| Other provisions | 8, 19 | 1 102 | 1 080 |
| Deferred tax liabilities | 8 | 5 045 | 4 819 |
| Total non-current liabilities | 9 939 | 9 475 | |
| Current liabilities | |||
| Current financial liabilities | 14 | 2 298 | 4 756 |
| Trade payables | 20 | 1 911 | 2 282 |
| Current tax liability | 8 | 102 | 14 |
| Provisions | 19 | 274 | 277 |
| Other operating liabilities | 20 | 1 149 | 2 157 |
| Total current liabilities | 5 733 | 9 486 | |
| Total liabilities | 15 672 | 18 960 | |
| Total equity and liabilities | 32 176 | 34 602 |
For information on the Group's pledged collateral and contingent liabilities see note 22.
| Reserves | ||||||
|---|---|---|---|---|---|---|
| GROUP, SEKm | Share capital | Other contrib uted capital |
Translation reserve |
Hedge reserve |
Retaind earn ings incl. profit for the year |
Total equity |
| Opening equity 1 Jan 2008 | 4 238 | 281 | 39 | -55 | 12 429 | 16 932 |
| Comprehensive income | - | - | 56 | -712 | 521 | -135 |
| Dividends paid | -1 017 | -1 017 | ||||
| Buy-backs of company's own shares | -153 | -153 | ||||
| Premiums received for issued call options | 15 | 15 | ||||
| Closing equity 31 Dec 2008 | 4 238 | 281 | 94 | -767 | 11 795 | 15 641 |
| Comprehensive income | - | - | -68 | 670 | 1 017 | 1 619 |
| Dividends paid | -756 | -756 | ||||
| Closing equity 31 Dec 2009 | 4 238 | 281 | 26 | -96 | 12 056 | 16 504 |
| GROUP, SEKm | Note | 2009 | 2008 |
|---|---|---|---|
| Operating activities | |||
| Profit before tax | 26 | 1 366 | 740 |
| Adjustments for non-cash items | |||
| Depreciation and amortisation according to plan | 1 320 | 1 343 | |
| Change in value of biological assets | -16 | 16 | |
| Change in provisions | 15 | 310 | |
| Other* | -157 | 128 | |
| Paid income taxes | -334 | -192 | |
| Cash flow from operating activities | |||
| before changes in working capital | 2 195 | 2 345 | |
| Cash flow from changes in working capital | |||
| Change in inventories | 621 | -373 | |
| Change in trade receivables and other operating receivables | 445 | -40 | |
| Change in trade payables and other operating liabilities | -389 | -273 | |
| Cash flow from operating activities | 2 873 | 1 660 | |
| Investing activities | |||
| Acquisition of property, plant and equipment | -747 | -1 135 | |
| Disposal of property, plant and equipment | 28 | 23 | |
| Acquisition of intangible non-current assets | 0 | -8 | |
| Acquisition of biological assets | -5 | -12 | |
| Disposal of biological assets | 5 | 12 | |
| Increase in non-current financial receivables | -107 | 0 | |
| Repayment of non-current financial receivables | 3 | 0 | |
| Acquisition of shares and participating interests | -6 | -5 | |
| Disposal of shares and participating interests | 12 | 2 | |
| Cash flow from investing activities | -818 | -1 124 | |
| Financing activities | |||
| Raised long-term loans | 1 492 | 927 | |
| Repayments of long-term loans | -584 | -109 | |
| Change in current financial liabilities | 26 | -2 672 | 31 |
| Change in current financial receivables | -1 | 17 | |
| Buy-back of company's own shares | - | -153 | |
| Premiums received for issued call options | - | 15 | |
| Dividends paid to the owners of the parent company | -756 | -1 017 | |
| Cash flow from financing activities | -2 522 | -289 | |
| Cash flow for the year | -467 | 247 | |
| Opening cash and cash equivalents | 653 | 394 | |
| Exchange difference in cash and cash equivalents | -4 | 12 | |
| Closing cash and cash equivalents | 182 | 653 |
* Other adjustments primarily consist of currency effects and the marking to market of financial instruments, profit/loss from associates, impairment losses and reversals of impairment losses on non-current assets as well as gains/losses on sale of non-current assets.
| Change in net financial debt | 2009 | 2008 |
|---|---|---|
| Opening net financial debt | -7 504 | -5 977 |
| Cash flow | ||
| Operating activities | 2 873 | 1 660 |
| Investing activities (excl. non-current financial receivables) | -714 | -1 124 |
| Buy-back of company's own shares | - | -153 |
| Premiums received for issued call options | - | 15 |
| Dividends paid | - 756 | -1 017 |
| Actuarial revaluation of pension liability | 13 | -162 |
| Foreign exchange effects and changes in fair value | 405 | -746 |
| Closing net financial debt | -5 683 | -7 504 |
| INCOME STATEMENT , SEKm |
Note | 2009 | 2008 |
|---|---|---|---|
| Net sales | 3 | 13 436 | 14 382 |
| Other operating income | 4 | 447 | 596 |
| Change in inventories | -368 | 101 | |
| Raw materials and consumables | -6 791 | -8 252 | |
| Staff costs | 5 | -1 929 | -2 320 |
| Other external costs | 6, 21 | -3 907 | -4 296 |
| Depreciation and amortisation according to plan |
10,11 | -27 | -24 |
| Operating profit | 861 | 186 | |
| Income from interests in Group companies | 7 | 1 156 | 15 |
| Income from interests in associates | 7 | 0 | 1 |
| Interest income and similar income | 7 | 18 | 91 |
| Impairment losses on financial non-current assets |
7, 24 | -436 | - |
| Interest costs and similar costs | 7 | 8 | -867 |
| Profit/Loss after financial items | 1 607 | -575 | |
| Appropriations | 25 | 388 | -56 |
| Profit/Loss before tax | 1 995 | -630 | |
| Tax | 8 | -331 | 195 |
| Profit/Loss for the year | 1 664 | -436 |
| STATEMENT OF COMPRE HENSI VE INCOME , SEKm |
2009 | 2008 |
|---|---|---|
| Profit/Loss for the year | 1 664 | -436 |
| Other comprehensive income | ||
| Cash flow hedges | ||
| Revaluation of derivatives recognised in equity | 516 | -1 470 |
| Transferred from equity to the income statement | 403 | 323 |
| Transferred from equity to non-current assets | -1 | -1 |
| Tax attributable to other comprehensive income | -242 | 302 |
| Total other comprehensive income | 677 | -845 |
| Total comprehensive income | 2 341 | -1 281 |
| CASH FLOW STATEMENT , SEKm |
Note | 2009 | 2008 |
|---|---|---|---|
| Operating activities | |||
| Profit/Loss after financial items | 26 | 1 607 | -575 |
| Adjustments for non-cash items | |||
| Depreciation and amortisation | 27 | 24 | |
| according to plan | |||
| Change in provisions | -98 | 451 | |
| Other * | 31 | 624 | |
| Paid income taxes | -323 | -167 | |
| Cash flow from operating activities before changes in working capital |
1 244 | 357 | |
| Cash flow from changes in working capital | |||
| Change in inventories | 523 | -299 | |
| Change in operating receivables | 392 | -128 | |
| Change in operating liabilities | -298 | 87 | |
| Cash flow from operating activities | 1 861 | 18 | |
| Investing activities | |||
| Shareholders' contribution paid | -329 | -228 | |
| Acquisition of property, plant and equipment | -40 | -49 | |
| Disposal of property, plant and equipment | 8 | 15 | |
| Acquisition of intangible non-current assets | - | -8 | |
| Disposal of intangible non-current assets | - | 0 | |
| Increase in external non-current | |||
| financial receivables | -1 | 0 | |
| Repayment of external non-current | |||
| financial receivables | -2 | 0 | |
| Acquisition of subsidiaries | - | -208 | |
| Disposal of subsidiaries | - | 0 | |
| Acquisition of shares and participating interests | - | -5 | |
| Disposal of shares and participating interests | - | 1 | |
| Cash flow from investing activities | -363 | -482 | |
| Financing activities | |||
| Raised external long-term loans | 1 492 | 927 | |
| Repayments of external long-term loans | -563 | -106 | |
| Change in other financial liabilities | 26 | -4 124 | 386 |
| Change in other financial receivables | 1 132 | 1 | |
| Buyback of company's own shares | - | -153 | |
| Premiums received for issued call options | - | 15 | |
| Dividends paid to the owners | |||
| of the parent company | -756 | -1 017 | |
| Group contributions received | 866 | 656 | |
| Group contributions paid | - | -4 | |
| Cash flow from financing activities | -1 952 | 703 | |
| Cash flow for the year | -454 | 239 | |
| Opening cash and cash equivalents | 542 | 303 | |
| Closing cash and cash equivalents | 88 | 542 |
* Other adjustments primarily consist of currency effects and the marking to market of financial instruments, impairment losses on non-current assets as well as gains/losses on sale of non-current assets.
| BALANCE SHEET , |
Note | 2009 | 2008 |
|---|---|---|---|
| at 31 December, SEKm Assets |
|||
| Non-current assets | |||
| Intangible non-current assets | 10 | 15 | 76 |
| Property, plant and equipment | 11 | 2 590 | 2 575 |
| Financial non-current assets | |||
| Shares and participations | 13, 24 | 14 411 | 15 591 |
| Non-current financial receivables | 14 | 2 629 | 2 722 |
| Total non-current assets | 19 645 | 20 963 | |
| Current assets | |||
| Inventories | 15 | 2 142 | 2 629 |
| Operating receivables | 16 | 2 371 | 2 764 |
| Current tax receivable | 8 | - | 117 |
| Current investments | 14 | 74 | 88 |
| Cash and cash equivalents | 14 | 88 | 542 |
| Total current assets | 4 675 | 6 140 | |
| Total assets | 24 320 | 27 103 |
| BALANCE SHEET , at 31 December, SEKm |
Note | 2009 | 2008 |
|---|---|---|---|
| Equity and liabilities | |||
| Equity | 17 | ||
| Restricted equity | |||
| Share capital | 4 238 | 4 238 | |
| Statutory reserve | 1 577 | 1 577 | |
| Revaluation reserve | 100 | 100 | |
| Non-restricted equity | |||
| Retained earnings incl. hedge reserve | 3 112 | 2 989 | |
| Profit/Loss for the year | 1 664 | -436 | |
| Total equity | 10 691 | 8 468 | |
| Untaxed reserves | 25 | 2 363 | 2 751 |
| Provisions | |||
| Pension provisions | 18 | 43 | 64 |
| Tax provisions | 8, 19 | 45 | 45 |
| Other provisions | 19 | 559 | 650 |
| Deferred tax liability | 8 | 538 | 272 |
| Total provisions | 1 185 | 1 031 | |
| Liabilities | |||
| Non-current financial liabilities | 14 | 5 652 | 6 464 |
| Current financial liabilities | 14 | 1 916 | 4 713 |
| Current tax liabilities | 8 | 94 | - |
| Operating liabilities | 20 | 2 419 | 3 676 |
| Total liabilities | 10 081 | 14 853 | |
| Total equity and liabilities | 24 320 | 27 103 |
| Pledged collateral and contingent liabilities | 2008 | ||
|---|---|---|---|
| Pledged collateral | 22 | 6 | 6 |
| Contingent liabilities | 22 | 688 | 766 |
| Restricted equity | Non-restricted equity | ||||||
|---|---|---|---|---|---|---|---|
| Changes in equity, SEKm | Share capital | Statutory reserve |
Revaluation reserve |
Hedge reserve |
Retained earnings |
Profit/Loss for the year |
Total equity |
| Opening equity 1 Jan 2008 | 4 238 | 1 577 | 100 | 19 | 5 049 | -548 | 10 435 |
| Appropriation of profits | -548 | 548 | - | ||||
| Total comprehensive income | -845 | -436 | -1 281 | ||||
| Group contributions received | 472 | 472 | |||||
| Dividends paid | -1 017 | -1 017 | |||||
| Buy-backs of company's own shares | -153 | -153 | |||||
| Premiums received for issued call options | 15 | 15 | |||||
| Closing equity 31 Dec 2008 | 4 238 | 1 577 | 100 | -826 | 3 815 | -436 | 8 468 |
| Appropriation of profits | -436 | 436 | - | ||||
| Total comprehensive income | 677 | 1 664 | 2 341 | ||||
| Group contributions received | 638 | 638 | |||||
| Dividends paid | -756 | -756 | |||||
| Closing equity 31 Dec 2009 | 4 238 | 1 577 | 100 | -149 | 3 261 | 1 664 | 10 691 |
Amounts in SEKm, except where otherwise stated
The accounting policies for the Group presented below have been applied consistently to all periods included in the Group's financial statements except where otherwise stated below. The Group's accounting policies have been applied consistently to the reporting by and the consolidation of the parent company, subsidiaries and associates.
The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretative recommendations issued by the International Financial Reporting Interpretations Committee (IFRIC), which have been approved by the EU. The Swedish Financial Reporting Board's recommendation (RFR 1.2 Supplementary Accounting Rules for Groups) has also been applied.
The parent company applies the same accounting policies as the Group except in the cases that are commented on separately under each section. The parent company's accounts are prepared in accordance with RFR 2.2 Accounting for Legal Entities. The differences between the policies applied by the parent company and those applied by the Group are due to restrictions in the possibilities of the parent company to apply IFRS as a consequence of the Swedish Annual Accounts Act, Tryggandelagen (a Swedish act safeguarding pension obligations), and in some cases due to tax reasons.
Assets and liabilities are stated at acquisition cost, except for biological assets and certain financial assets and liabilities, which are valued at fair value. In the parent company biological assets and financial liabilities are not valued at fair value.
The functional currency is the currency used in the primary financial environments in which the companies conduct their business. The parent company's functional currency is the Swedish krona, (SEK), which is also the reporting currency of the parent company and the Group. This means that the financial reports are presented in Swedish kronor.
Preparing the financial statements in accordance with IFRS requires the company's management to make assessments and estimates, as well as to make assumptions that affect the application of the accounting policies and the recognised amounts for assets, liabilities, income and costs. The actual outcome may deviate from these assessments and estimates.
The estimates and assumptions are reviewed regularly. Changes in estimates are recognised in the accounts for the period in which the change is made if the change only affects that period, or in the period the change is made and in later periods if the change affects current and coming periods. See also note 27 Key assessments and estimates.
The following section describes the amended accounting policies that the Group has applied since 1 January 2009. Other IFRS amendments effective as of 2009 have had no material impact on the Group's accounts.
The Group has applied the amended IAS 1 Presentation of Financial Statements
since 1 January 2009. As a result of the amendment, income and costs previously recognised directly in equity are instead now recognised in other comprehensive income, which Holmen presents in a separate statement titled statement of comprehensive income, directly following the income statement. Another result of the amendment is that Holmen has added a statement of changes in equity. Comparative periods have been adapted throughout the annual report to follow the new presentation. The changes only affect presentation, so no amounts have been restated – neither regarding earnings per share nor other line items in the financial statements.
The Group has applied the new IFRS 8 Operating Segments since 1 January 2009; this replaces IAS 14 Segment Reporting. IFRS 8 introduces a management perspective on how to define and present operating segments. The standard has been applied in accordance with its transitional provisions, by adapting the data for the comparative year to the requirements in IFRS 8. Application of IFRS 8 has not entailed any change to segmentation at Holmen, because the segments identified according to IAS 14 are those that Holmen's president and CEO follows up. The company continues to apply the same accounting policies in its operating segments as in the consolidated accounts, i.e. IFRSs, so none of the recognised amounts have changed from those previously recognised.
As a result of amendments to IFRS 7 Financial Instruments, disclosures applicable as of 1 January 2009 affect Holmen's financial reporting, starting with the annual report for 2009. The amendments mainly comprise new requirements on disclosures about financial instruments measured at fair value on the balance sheet. Each instrument is classified as belonging to one of three levels depending on the quality of the input data in the measurement. The classification determines which disclosures to state about the instruments and how to disclose them; level 3, with the lowest input data quality, is subject to more disclosure requirements than the other levels. These disclosure requirements primarily affected notes 7 and 14. The IFRS 7 amendments also entail certain changes to liquidity risk disclosures. Pursuant to the transitional provisions in IFRS 7, comparative data have not been stated during the first year of application for the disclosures required by the amendments.
The Group has applied the amended IAS 23 Borrowing Costs since 1 January 2009. As a result of the amendment, the Group capitalises borrowing costs in the acquisition cost of qualifying assets with a commencement date of 1 January 2009 or later. Previously, borrowing costs affected profit/loss in the period to which they were attributable instead of being capitalised. The amendment is being applied prospectively, in accordance with the transitional provisions in IAS 23. For a more detailed description of this accounting policy, see the section titled Finance income and costs further on in this note.
A number of new or amended IFRSs are not effective until the coming financial year, and Holmen has opted not to apply any of these standards in advance. Similarly, there are no plans to apply any of the new or amended standards in advance that come into effect in financial years after 2010. New or amended IFRSs applicable as of 2010 are not estimated to have any material impact on the financial statements.
In addition to the amended accounting policies stated above for the Group, the following changes affected the parent company in 2009.
Recommendation RFR 2.2. Accounting for Legal Entities, issued by the Swedish Financial Reporting Board, states that the amended version of IAS 1 Presentation of Financial Statements shall be applied with certain exceptions. One effect for the parent company compared to previous reporting is that a statement of comprehensive income has been added after the income statement. Another effect is that Holmen has added a statement of changes in equity.
The Group's operations are divided into operating segments, based on which
parts of the operation the company's highest executive decision-maker follows up, known as the management approach. The segmentation criterion is based on the Group's business areas. This agrees with the Group's operating structure and the internal reporting to the CEO and the Board. The items recognised in the income, assets and liabilities of the operating segment are measured in accordance with the income, assets and liabilities that the company's highest executive decision-maker follows up. See note 3 for more details of the classification and presentation of operating segments.
Substantially, non-current assets, non-current liabilities and provisions consist solely of amounts that are expected to be recovered or paid more than 12 months after the balance sheet date. Substantially, current assets and current liabilities consist of amounts that are expected to be recovered or paid within 12 months of the balance sheet date.
A subsidiary is a company over which the parent company, Holmen AB, exercises control. Control means the right directly or indirectly, to formulate a company's financial and operative strategies with the object of obtaining economic benefits. In the determination of whether one company has control over another, potential shares with an entitlement to vote and that can be exercised or converted at short notice are taken into account.
The consolidated financial statements are prepared using the acquisition method, whereby the parent company indirectly acquires the assets and assumes the liabilities of the subsidiary, valued at fair value. The difference between the acquisition cost of the shares and the fair value of the acquired identifiable net assets is treated as goodwill. The subsidiary companies' income and costs, and their assets and liabilities, are stated in the consolidated financial statements as of the date when the Group gains control (acquisition date) until such time as the Group no longer has control. Intra-Group receivables and liabilities, transactions between companies in the Group and therewith related unrealised gains are eliminated in their entirety.
Shareholdings in associates, in which the Group controls a minimum of 20 per cent and a maximum of 50 per cent of the votes, or otherwise exercises a significant influence, are stated in accordance with the equity method.
The equity method means that the carrying amount of the shares in the associates stated in the consolidated accounts corresponds to the Group's interest in the associates' equity and any fair value adjustments arising upon consolidation. The Group's interest in the net earnings of associates after tax attributable to parent company owners adjusted for any amortisation or reversal of acquired fair value adjustments. respectively is stated in the consolidated income statement as "Interest in earnings of associates". Dividends received from the associates reduce the carrying amount of the investment. Unrealised gains arising as a consequence of transactions with associates are eliminated in relation to the owned share of capital.
When the Group's interest in the recognised losses of the associates exceeds the carrying amount of the interests stated in the consolidated accounts' the value of the interests is written down to zero. Losses are also offset against unsecured long-term financial balances that, in financial terms, consist of part of the owning company's net investment in the associates. Any further losses are not recognised unless the Group has provided guarantees to cover losses incurred by the associates. The equity method is applied until such time as the significant influence no longer exists.
Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated into the functional currency at closing rates. Exchange differences arising on such translations are stated in the income statement. Non-monetary assets and liabilities that are stated at historical acquisition cost are translated at the exchange rates prevailing on the transaction date.
The assets and liabilities of foreign operations, including goodwill and other fair value adjustments arising on consolidation, are translated in the consolidated financial statements, from the foreign operation's functional currency, to the Group's reporting currency (Swedish kronor) at closing rates. The income and costs of foreign operations are translated into Swedish kronor at an average rate that is an approximation of the exchange rates prevailing on the date of each transaction. Differences arising during the currency translation of foreign operations and the related effects of hedging net investments are recognised in other comprehensive income and are accumulated in a separate component of equity called the translation reserve. In the disposal of a foreign operation, the accumulated translation differences attributable to the business are realised, less any currency hedging, in the consolidated income statement. The company opted to value the accumulated translation differences attributable to foreign operations at zero at the time of the changeover to IFRS.
The parent company's business is largely conducted through companies operating on its behalf: Holmen Paper AB, Iggesund Paperboard AB, Holmen Timber AB, Holmen Skog AB and Holmen Energi AB.
The parent company is liable for all commitments entered into by these companies. All income, costs, assets and liabilities, which arise in the operations conducted by the companies, are recognised in Holmen AB's accounts except most parts of investments made as well as some sale of forest properties, that are instead recognised in some of the Group's subsidiaries.
Net sales refers to invoiced sales (excluding value added tax) of products, wood and energy. The amount recognised is reduced by discounts, and similar reductions in income, and also includes exchange differences related to the sales. Sales are recognised after the critical risks and benefits associated with ownership of the sold goods have been transferred to the buyer, and there is no remaining right or possibility to retain actual control over the sold goods.
Income from activities not forming part of the company's main business is stated as other operating income. This item mainly comprises sales of bi-products, rent and land lease income, income from allotted electricity certificates, income earned from emission rights and gains/losses on sales of non-current assets.
State grants are recognised in the balance sheet as deferred income when it is reasonably certain that the grant will be received and that the Group will satisfy the conditions associated with the grant. Grants are distributed systematically in the income statement in the same way and over the same periods as the costs the grants are intended to cover. State grants related to assets are recognised in the balance sheet as a reduction in the carrying amount of the asset.
Finance income and costs consist of interest income and interest costs, dividend income and revaluations of financial instruments valued at fair value, as well as unrealised and realised currency gains and losses. Interest income on receivables and interest costs on liabilities are calculated by using the effective interest method. Interest costs include transaction costs for loans, which have been distributed over the duration of the loan; this also applies to any difference between the funds received and the repayment amount. Dividend income is recognised when the dividend is established and the right to receive payment is judged to be certain.
Interest costs normally affect profit/loss in the period to which they relate. Borrowing costs attributable to the purchase, construction or production of qualifying assets are to be capitalised as part of the asset's cost. A qualifying asset is an asset that takes a substantial period of time to get ready for intended use. Borrowing costs for significant investment projects are capitalised in the Group. Note 11 describes the method applied.
Income taxes comprise current tax and deferred tax. Income taxes are recognised in the income statement except when underlying transactions are recognised in other comprehensive income or directly in equity, in which case the associated tax effect is also recognised in other comprehensive income or directly in equity. Current tax is the tax to be paid or received for the year in question, using the tax rates that have been decided on, or to all intents and purposes have been decided on at the balance sheet date. This also includes any adjustment to current tax attributable to previous periods. Deferred tax is calculated using the balance sheet method on the basis of temporary differences between carrying amounts and values for tax purposes of assets and liabilities, applying the tax rates and rules that have been approved or announced at the balance sheet date. Temporary differences are not taken into account in goodwill arising upon consolidation, nor in temporary differences attributable to interests in subsidiaries and associates that are not expected to become liable to taxation in the foreseeable future. In the parent company's accounts, untaxed reserves are recognised inclusive of deferred tax liability.
Deferred tax assets in respect of tax-deductible temporary differences and loss carry-forwards are recognised only to the extent that it is likely they will be utilised and entail lower tax payments in the future. Deferred tax assets and deferred tax liabilities in the same country are recognised net.
The calculation of earnings per share (EPS) is based on the Group's profit for the year attributable to the parent company's owners and the weighted average number of shares outstanding during the year. In calculating diluted EPS, the earnings and the average number of shares are adjusted to take account of the effects of any potential ordinary shares having a diluting effect, which during reported periods stem from call options acquired by employees within the framework of the incentive scheme. The dilution effect of options affects the number of shares and only arises when the exercise price is lower than the listed price, and is larger the wider the spread between the exercise price and the listed price.
Financial instruments are valued and recognised in the consolidated financial statements in accordance with IAS 39. The parent company applies the same policies, subject to the restrictions referred to in Chapter 4 Section 14 of the Swedish Annual Accounts Act.
A financial asset or liability is stated in the balance sheet when the company becomes a party in accordance with the contractual conditions of the instrument. A financial asset is removed from the balance sheet when the rights referred to in the contract have been realised or mature, or when the company no longer has control over them. A financial liability is removed from the balance sheet when the undertaking in the contract is performed or expires in some other way. Spot transactions are stated in accordance with the settlement date principle.
Bank balances, loan receivables and trade receivables are measured at amortised cost. Impairment testing is performed continually, using objective criteria for such assets. Impairment losses are recognised for the asset if impairment is established. However, a provision is made if a loss is anticipated. Criteria taken into account when making a provision may include non-payment of invoices or other indications that the debtor is experiencing financial difficulties. Shares and participating interests not related to Group companies or associates are measured at cost. Measurement at fair value could not be applied, because reliable market values could not be established.
Financial liabilities are valued initially at the value of funds received after deduction of any transaction costs. Normally, the liabilities are valued regularly at their amortised cost using the effective interest method. In those cases where funds received fall short of the amount to be repaid, the difference is allocated over the duration of the loan using the effective interest method. Loans hedged against changes in value and loans recognised on the basis of the fair value option are initially recognised excluding any transaction costs and on an ongoing basis at their fair value.
The fair value option has been applied to one loan with the object of arriving at a fairer presentation of results and thereby reflecting changes in the value of the interest rate swap that belongs to the loan. In the parent company, no loans were measured at fair value. Profit/loss from financial instruments is recognised in net financial items or operating profit/loss, depending on the purpose of the holding.
All derivatives are valued at fair value and are recognised in the balance sheet. More or less all derivatives are held for hedging purposes.
Cash flow hedges' effective share of changes in value is recognised in other comprehensive income until the time when the hedged item influences the income statement, when the accumulated changes in value are transferred from other comprehensive income to the income statement to meet and match the hedged transaction. In the case of hedging investments, the acquisition cost of the hedged item is instead adjusted when it occurs. The ineffective part of the hedge is recognised directly in the income statement.
For the hedging of fair value, the change in the value of the derivative is recognised directly in the income statement. Changes in the value of the hedged item are recognised in a corresponding way.
Changes in the value of hedges relating to net investments in foreign businesses are recognised in the income statement for the parent company and in the other comprehensive income for the Group. Accumulated changes in value are retained in Group equity until the business is disposed of, when the accumulated changes in value are recognised in the income statement. In the case of derivatives that do not fulfil the criteria for hedge accounting, the changes in value are recognised within operating profit/loss or within net financial items, depending on the purpose of the holding.
The fair value of financial instruments traded on an active market is based on listed market prices and belongs to measurement level 1 as per IFRS 7. Where there are no listed market prices, fair value has been computed using discounted cash flows. In calculating discounted cash flows, all variables used in the calculation – such as discount rates and exchange rates – are taken from market listings where possible. These measurements belong to level 2. Other measurements, for which a variable is based on the company's own assessments, belong to level 3. Holmen's transactions mainly belong to level 2, except for one transaction classified as level 3. Currency options were measured using the Black & Scholes formula.
Goodwill represents the difference between the acquisition cost of business combinations and the fair value of the acquired assets, assumed liabilities and contingent liabilities. Goodwill is valued at acquisition cost less any accumulated impairment losses. Goodwill arising in connection with the acquisition of associates is included in the carrying amount of the interest in such companies.
Research costs are expensed when they are incurred. Development costs are only capitalised in the case of major projects to the extent that their future financial benefits can be reliably assessed. Other development expenditure is recognised in the income statement as costs when incurred. Development costs recognised in the balance sheet are stated at their acquisition cost less accumulated amortisation and impairment losses.
Intangible non-current assets also include patents, licences and IT systems. Intangible non-current assets are amortised over periods of between five and ten years, except for goodwill. Any goodwill is allotted to cash-generating units and is tested for impairment annually. The Group does not currently recognise any goodwill.
Property, plant and equipment are stated at acquisition cost after deduction of accumulated depreciation and any impairment losses. Property, plant and equipment that consist of parts with different useful lives are treated as separate com
ponents of property, plant and equipment. Additional expenditure is capitalised only if it is estimated to generate financial benefits for the company. The key factor determining whether or not additional expenditure is capitalised is if it relates to the replacement of identified components or parts thereof, in which case the expenditure is capitalised. The cost is also capitalised in cases where a new component is created. Any undepreciated carrying amounts for replaced components or parts of components are retired and expensed in connection with the replacement.
The carrying amount of an item of property, plant or equipment is removed from the balance sheet in connection with retirement or disposal of the asset or when no future financial benefits can be expected from the use of the asset. The gain or loss arising on the retirement or disposal of an asset consists of the difference between the selling price and the carrying amount of the asset, less any direct selling costs. Gain and losses are recognised in the accounts as other operating income/costs.
Depreciation according to plan is based on original acquisition cost less any impairment losses. Depreciation takes place on a straight-line basis over the estimated useful life of the asset. Land is not depreciated.
| Machinery for hydro power production | 20–40 |
|---|---|
| Administrative and warehouse buildings, residential properties | 20–33 |
| Production buildings, land installations, and | |
| machinery for pulp, paper and paperboard production | 20 |
| Machinery for sawmills | 12 |
| Other machinery | 10 |
| Forest roads | 10 |
| Equipment | 4 |
If there is any indication that the carrying amount is too high, an analysis is made in which the recoverable value of single or inherently related assets is determined at the higher of the net selling price and the utility value. The net selling price is the estimated selling price after deduction of the estimated cost of selling the asset. The utility value is measured as expected future discounted cash flow. An impairment loss consists of the amount by which the recoverable amount falls short of the carrying amount. Impairment loss is reversed if there has been any positive change in the circumstances upon which the determination of the recoverable amount is based. A reversal may be made up to, but not exceeding, the carrying amount that would have been recognised, less depreciation, if there had been no impairment.
In the consolidated accounts lease agreements are classified as finance leases or operating leases. The leasing of non-current assets for which the Group is substantially exposed to the same risks and benefits as if the asset were directly owned is classified as finance leases. The leasing of assets over which the lessor substantially retains ownership is classified as operating leases and the leasing charge is expensed. Within the Group all lease agreements are classified as operating leases.
The Group divides all its forest assets for accounting purposes into growing forests, which are recognised as biological assets at fair value, and land, which is stated at acquisition cost. Any changes in the fair value of the growing forests are recognised in the income statement. Holmen's assessment is that there are no relevant market prices availiable that can be used to value forest holdings as extensive as Holmen's. They are therefore valued by estimating the present value of expected future cash flows from the growing forests. See note 12.
In the parent company, biological assets are valued in accordance with RFR 2.2. This means that biological assets classified as non-current assets are recognised at acquisition cost adjusted for revaluations taking into account the need, if any, for impairment in value.
Felling rights are stated as inventories. They are acquired with a view to secure Holmen's raw material requirements through harvesting. Any measurable biological change does not occur between the acquisition date and harvesting.
Inventories are valued at the lower of acquisition cost or production cost after deduction for necessary obsolescence, or net realisable value. The acquisition cost of inventories is calculated by using the First in, First out method (FIFO). The net realisable value is the estimated selling price in operating activities after deduction of the estimated costs of completion and effecting the sale. The acquisition cost of finished products manufactured by the company comprises direct production costs and a reasonable share of indirect costs.
Emission rights received are initially recognised at market price when allotted among inventories and as deferred income. During the year the allocation is recognised as income at the same time as an interim liability, corresponding to emissions made, is expensed.
Commitments to pay premiums to defined contribution plans are recognised as a cost in the income statement as and when they are earned.
The Group's net commitment in respect of defined benefit plans is calculated separately for each plan by estimating the future benefits the employees will have earned by virtue of their employment in current and earlier periods; these benefits are discounted to their present value and any unrecognised costs in respect of employment during earlier periods and the fair value of any plan assets are deducted. The discount rate is the interest rate at the balance sheet date for a first class corporate bond with a duration corresponding to the Group's pension commitments. If there is no active market for such corporate bonds the market interest rate for government bonds with a corresponding duration is used instead. The calculation is performed by a qualified actuary using the projected unit credit method for the part of the pension commitments that is defined benefit.
When the present value of the commitments and the fair value of plan assets are being determined, actuarial gains and losses may arise, either as a result of the actual outcome deviating from earlier assumptions or because the assumptions are changed. Actuarial gains and losses are recognised directly in other comprehensive income.
When the benefits provided by a plan are improved, the proportion of the improvement in the benefit that is attributable to the employees' employment during earlier periods is recognised as a cost in the income statement and is distributed on a straight-line basis over the average period until the benefits have been fully earned. If the benefit has been earned in full, a cost is recognised directly in the income statement.
In the parent company's accounts, different grounds are used for computation of defined benefit pension plans than those referred to in IAS 19. The parent company complies with the provisions of the Swedish pension security law (Tryggandelagen) and the Swedish Financial Supervisory Authority's regulations, because this is a condition for the right to make deductions for tax purposes. The main differences in relation to the rules in IAS 19 relate to how the discount rate of interest is established, the computation of the defined benefit commitment on the basis of the current pay level without any assumption regarding pay increments in the future, and the recognition of all actuarial gains and losses in the income statement when they arise.
When there is a difference between how the pension cost is arrived at in the legal entity and in the Group, a provision or a receivable is recognised in the consolidated accounts in respect of special employer's contribution tax based on this difference. The present value of the provision or receivable is not calculated.
Termination benefits in connection with the termination of employment contracts are only recognised in the accounts if it is shown that the Group has an obligation, without any reasonable possibility of withdrawing it, as a result of a formal, detailed plan to terminate an employment contract before the normal date. When benefits are paid in the form of an offer to encourage voluntary departure, a cost is recognised if it is likely that the offer will be accepted and the number of employees who will accept the offer can be reliably estimated.
Short-term benefits to employees are calculated without being discounted and are recognised as a cost when the related services are provided.
The Holmen Group's incentive scheme that runs from 2008 until 2013 is not subject to the rules in IFRS 2 Share-based Payment, because the employees were invited to acquire call options at their market price.
Consolidated equity comprises share capital, other contributed capital, translation and hedge reserves and retained earnings, including profit/loss for the year. Other contributed capital refers to premiums paid in conjunction with share issues. The translation reserve consists of all exchange differences that arise in the translation of foreign operations' financial statements that are prepared in a currency other than Swedish kronor. The translation reserve also includes exchange differences arising in connection with the revaluation of liabilities and derivatives that are classified as instruments for hedging a net investment in a foreign operation, including tax. The hedge reserve comprises the effective proportion of the accumulated net change in the fair value of a cash flow hedging instrument attributable to underlying transactions that have not yet occurred, including tax. Retained earnings comprise all other parts of equity, including profit/loss for the year.
Holdings of shares bought back are stated as a reduction in retained earnings. Acquisitions of the company's own shares are stated as a deduction, and proceeds from the disposal of the company's own shares are stated as an increase. Transaction costs are charged directly to retained earnings.
The parent company's equity comprises share capital, statutory reserves, revaluation reserves, retained earnings and profit/loss for the year.
The parent company's statutory reserve consists of previous compulsory provisions to the statutory reserve plus amounts added to the share premium reserve before 1 January 2006. The parent company's revaluation reserve contains amounts set aside in connection with the revaluation of property, plant and equipment or non-current financial assets. Retained earnings comprise all other parts of equity, such as hedge reserves and transactions as a result of share buybacks. The parent company applies the same accounting policies as the Group for these items; see above.
A provision is recognised in the balance sheet when the Group has a legal or informal commitment as a consequence of a past event and it is likely there will be an outflow of financial resources to settle the commitment and a reliable estimate of the amount can be made. A provision to cover restructuring is recognised once the Group has established a detailed and formal restructuring plan and the restructuring process has either begun or been publicly announced.
Provisions are made for environmental measures that relate to earlier activities when contamination arises or is discovered, it is likely that a payment obligation will arise, and the amount can be estimated reliably.
Reserves to cover future silvicultural fees are calculated on the basis of interpretations of the applicable forestry laws and regulations whenever it is likely that a payment obligation will arise and once the amount can be assessed to a reasonable extent.
A contingent liability is recognised when there is a potential commitment that originates in past events, the existence of which will be confirmed only by one or more uncertain future events, or when there is a commitment that is not recognised as a liability or provision because it is not likely that an out-flow of resources will be required.
Group contributions and shareholder contributions are recognised in the parent company in accordance with statement UFR 2 of the Swedish Financial Reporting Board. Shareholder contributions are recognised directly in equity of the recipient and capitalised under shares and participating interests of the donor to the extent that no impairment in value applies. Group contributions are recognised on the basis of their financial implications. For example, this means that Group contributions paid or received in order to minimise the Group's total tax are recognised directly in retained earnings after deduction of their current tax effect.
The figures presented are rounded off to the nearest integer or equivalent. The absence of a value is indicated by a dash (-).
The Group's and the parent company's financial activities and financial risk management are centralised within Group Finance. The activities are based on a financial policy established by the Board and are characterised by a low level of risk. The purpose is to minimise the Group's capital costs by using suitable means of financing and to manage and control the Group's financial risks effectively. The most important aspects of this management are described below. Credit risks related to the Group's customers are managed by the relevant business areas and are described in Note 16 Operating receivables.
A significant proportion of Holmen's sales revenue is in currencies different from its costs. To reduce the effect of exchange rate fluctuations on earnings, Holmen hedges its net flows, mainly using currency forward contracts, sometimes supplemented by currency options. The net flows in euro, sterling and US dollars for the coming four months are always hedged. These normally correspond to trade receivables and outstanding orders. The Board can decide to hedge flows for a longer period if this is deemed suitable in light of the products' profitability, competitive position and the currency situation.
At the beginning of 2009, the Group had currency hedges for the majority of estimated payment flows in euro for 2009 and some of the flows in sterling and US dollars. Gains/losses on currency hedges are recognised in operating profit/loss as and when the hedged items are recognised and in 2009 they amounted to a loss of SEK 408 million (loss of 336). At year-end 2009 about 70 per cent of the estimated net currency flows for 2010 were hedged, some 60 per cent of those for 2011 and roughly 20 per cent of estimated flows for 2012; see the table.
| 12 months estimated |
2010 Hedges |
2011 Hedges |
2012 Hedges |
||||||
|---|---|---|---|---|---|---|---|---|---|
| net flows | SEKm rate** | % SEKm rate** | % SEKm rate** | % | |||||
| EUR | 4 700 | 4 200 | 9.70 | 90 3 600 10.63 | 85 1 100 10.45 | 25 | |||
| USD | 1 100 | 350 | 6.94 | 30 | |||||
| GBP | 250 | 50 11.44 | 20 | ||||||
| Other | 650 | 50 | |||||||
| Total | 6 700 | 4 650 | 3 600 | 1 100 |
* The figures in the table have been rounded off.
** This rate equals the average hedging rate.
The fair value of outstanding transaction hedges at 31 December 2009 amounted to SEK -93 million (-1 123); SEK -48 million (-123) was recognised in the income statement for 2009, and the remainder in other comprehensive income as hedge accounting is applied, of which SEK -162 million for 2010, SEK 108 million for 2011 and SEK 10 million for 2012.
Currency exposure arising when investments are paid for in a foreign currency is
distinguished from other transaction exposure. Normally, 90–100 per cent of the currency exposure associated with major investments is hedged. The fair value of hedges for investment purchases is recognised in other comprehensive income until the hedge expires. Then, the gain/loss is added to the cost of the noncurrent asset that was hedged. At 31 December 2009 there were no outstanding hedges for investment purchases. During the period SEK 1 million affected the acquisition cost of hedged items.
The Group's reported profit/loss is affected by changes in exchange rates when the profits/losses of foreign subsidiaries are translated into Swedish kronor. This exposure is normally not hedged. The Group's equity is affected by changes in exchange rates when assets and liabilities of foreign subsidiaries are translated into Swedish kronor. The need to hedge this exposure (known as equity hedging) is judged from case to case and is arranged on the basis of the value of net assets upon consolidation. The hedges take the form of currency forward contracts or foreign currency loans.
| Net assets | Equity hedge | |
|---|---|---|
| EUR | 4 314 | 4 148 |
| GBP | 1 382 | 456 |
| Other | 32 | - |
Gains on equity hedges amounted to SEK 254 million (loss of 541) in 2009 and are recognised in other comprehensive income as hedge accounting is applied (after deduction of tax SEK 187 million). In the parent company accounts, this gain is recognised in the income statement. The translation of net foreign assets had a negative impact of SEK 255 million (positive: 445) on consolidated equity. The fair value of outstanding equity hedges at 31 December 2009 was SEK -159 million (-456), of which SEK -193 million relates to loans and SEK 34 million to financial derivatives. The accumulated change in value resulting from an equity hedge is recognised in the consolidated income statement if the hedged foreign operation is disposed of.
The effect of changes in exchange rates on consolidated operating profit is described in the administration report on page 48. A one percentage point depreciation in the Swedish kronor exchange rate would have a negative impact of SEK 82 million on equity, including translation of foreign subsidiaries' accounts.
The Group's financing costs are influenced by changes in market interest rates. The fixed interest period for the Group's financial assets and liabilities is normally short. The Board can decide to lengthen the period in order to limit the effect of a rise in interest rates. During the year, the average fixed interest rate period varied between 19 and 22 months and was 22 months at the end of 2009. Derivatives in the form of interest rate swaps and FRAs are used to manage the fixed interest period without altering the underlying loans. At 31 December 2009 the fair value of these instruments was a negative amount of SEK 60 million (negative: 132), which is recognised in other comprehensive income as hedge accounting is applied. This value is expected to be recognised in the income statement during 2010 and later. The fixed interest period of the net debt, the breakdown by currency and the average interest rate for various fixed rate periods are shown in the table below, in which derivatives that affect the currency distribution and fixed interest period of the liabilities are taken into account.
| Total | -1 yr 1-3 yrs 3-5 yrs | >5 yrs | Other | |||
|---|---|---|---|---|---|---|
| SEK | -1 525 | 51 | - | -1 533 | - | -43 |
| EUR | -3 944 | -2 787 | -736 | -55 | -361 | -6 |
| GBP | -280 | -9 | - | - | - | -271 |
| Other currencies | 66 | 66 | - | - | - | -1 |
| Net financial debt | -5 683 -2 679 | -736 -1 588 | -361 | -320 | ||
| Average interest rate, % | 2.7 | 4.5 | 4.5 | 3.9 | 7.0 |
The Other column refers to pension provisions; see note 18.
The effect of a change in market interest rates on consolidated operating profit is
explained in the administration report (page 48); a one percentage point increase in market interest rates would have a SEK 19 million impact on equity.
Holmen's net financial debt at 31 December 2009 amounted to SEK 5 683 million, of which financial liabilities and interest-bearing pension provisions equalled SEK 6 091 million, cash and cash equivalents SEK 182 million and financial receivables SEK 225 million.
As part of Holmen's strategy, the company is to have a strong financial position that provides financial stability and enables the Group to make correct and longterm business decisions relatively independently of the state of the economy and external financing possibilities. The target for the debt/equity ratio is the interval of 0.3–0.8, and strategic planning includes harmonisation with this target. At the end of the year the debt/equity ratio was 0.34. Standard & Poor's lowered its long-term credit rating for Holmen from BBB+ to BBB with a negative outlook. The short-term rating was lowered to A-3/K-2 at the same time.
Holmen's financing mainly comprises bank loans, bond loans and the issue of commercial paper. Holmen's Swedish commercial paper programme has a framework amount of SEK 6 000 million. Commercial paper with a time-to-maturity of up to one year can be issued in both Swedish kronor and euro. At 31 December 2009 a negative amount of SEK 945 million was outstanding. Holmen's medium term note (MTN) programme, for issuing bonds, has a framework amount of SEK 4 000 million. Bonds with maturities of 1–15 years can be issued in both Swedish kronor and euro. At 31 December 2009 a negative amount of SEK 2 693 million was outstanding. During the year new long-term financing was raised through MTN loans of SEK 1 500 million and an agreement for a new credit facility of SEK 1 300 million was signed. Other financing during the year was arranged mainly via Holmen's commercial paper programme, utilisation of the contractually agreed EUR 600 million credit facility and short-term bank loans. At 31 December 2009 Holmen had not used any of its credit facilities.
The maturity structure of financial liabilities and assets included in net financial debt and sources of financing are shown in the table below. The table displays carrying amounts where expected interest payments are not included.
| 2010 | 2011 | 2012 | 2013 | 2014- | Total | |
|---|---|---|---|---|---|---|
| Financial assets | ||||||
| Deposits with credit institutions | - | 6 | 2 | 2 | 9 | 21 |
| Cash and cash equivalents | 182 | - | - | - | - | 182 |
| Derivatives | 51 | - | - | - | - | 51 |
| Other financial receivables | 23 | 2 | 1 | 1 | 128 | 154 |
| Total financial receivables | 256 | 8 | 3 | 3 | 137 | 407 |
| Financial liabilities | ||||||
| MTN loans | 510 | - | 330 | 1 493 | 361 | 2 693 |
| Loans from banks and other credit institutions |
551 | 115 | 113 | 1 021 | 2 | 1 802 |
| Commercial paper programme | 945 | - | - | - | - | 945 |
| Bank account liabilities | 251 | - | - | - | - | 251 |
| Derivatives | 41 | 28 | 6 | 3 | - | 78 |
| Total financial liabilities | 2 298 | 143 | 448 2 517 | 363 5 770 | ||
| Contracted credit facilities | 6 180 | 1 300 7 480 |
Financing risk refers to the risk that future funding and refinancing of maturing loans may become difficult or expensive. Holmen reduces the risk by maintaining a good spread of maturities for the liabilities and by using contractually agreed credit facilities. Holmen has a contractually agreed credit facility from a syndicate of banks that amounts to EUR 600 million and expires in 2012. Since 2009 the company has also had a bilateral credit facility of SEK 1 300 million that expires in 2016. Both facilities are available for use, provided that the Group's debt/equity ratio is less than 1.5.
The Group plans its financing by forecasting financing needs over the coming years based on the Group's multi-year business plan, budget and forecasts that are regularly updated.
The Group is exposed to price fluctuations for its products and significant input goods; see page 47 in the administration report. OTC trade in financial contracts exists for certain paper and pulp products. Holmen did not trade in such contracts during the year. The price risk for energy can be hedged, but hedging opportunities for other input goods are limited.The Group mainly hedges the risk of fluctuations in electricity prices.
To reduce exposure to electricity price changes, the Group uses physical supply agreements at fixed prices as well as financial hedges. Decisions on hedging electricity prices are made by the Board. In 2009, Holmen's net purchases of electricity amounted to 3 200 GWh, of which about 2 600 GWh in Sweden.
The prices for the Group's estimated net consumption of electricity in Sweden during the 2010–2012 period are fully hedged. For 2013– 2015 the price of about 85 per cent has been hedged. The hedges predominantly consist of physical fixed price contracts. Gains on financial hedges are recognised in the income statement upon maturity and totalled SEK 64 million (27) for 2009. The fair value of outstanding financial hedges totalled SEK 57 million (88) at 31 December 2009. This amount has been recognised in other comprehensive income as hedge accounting is applied, of which SEK 22 million for 2010, SEK 25 million for 2011 and SEK 10 million for 2012. See page 47 for how changes in raw material prices affect the Group's profit. A one percentage point increase in the price of electricity would have a negative impact of SEK 2 million on equity.
The Group's financial transactions give rise to credit risks in relation to financial counterparties. The risk of a counterparty not meeting its commitments is limited by selecting creditworthy counterparties, by limiting the exposure to each counterparty and by using ISDA and FEMA agreements.
At 31 December 2009, the Group had outstanding derivative contracts with a notional amount of about SEK 16 billion and a fair value of SEK -61 million net. Calculated in accordance with the Swedish Financial Supervisory Authority's regulations for financial institutions (FFFS 2007:1), Holmen's total counterparty risk on derivative contracts would amount to SEK 263 million at 31 December 2009. The maximum credit risk for other financial assets is estimated to correspond to their notional amount. Credit risks in relation to the Group's customers are managed by each business area and are described in note 16 Operating receivables.
Holmen insures its facilities against property damage and consequential loss. The excess varies from one facility to another, but the maximum is some SEK 30 million for any one claim. The Group's forest holdings are not insured. They are widely dispersed over large parts of the country, and the risk of large-scale simultaneous damage is judged not to justify the cost of insuring the holdings.
| 2009 | Holmen Paper |
Iggesund Paperboard |
Holmen Timber |
Holmen Skog |
Holmen Energi |
Group wide and other |
Elimina tions |
Total Group |
|---|---|---|---|---|---|---|---|---|
| Net sales | ||||||||
| External | 9 303 | 5 023 | 553 | 2 745 | 447 | - | - | 18 071 |
| Internal | 0 | 0 | 0 | 2 054 | 1 182 | - | -3 236 | - |
| Other operating income | 238 | 262 | 127 | 119 | 14 | 37 | -197 | 600 |
| Operating costs | -8 363 | -4 484 | -632 | -4 303 | -1 208 | -225 | 3 446 | -15 769 |
| Depreciation and amortisation according to plan | -878 | -361 | -31 | -27 | -21 | -3 | 0 | -1 320 |
| Impairment losses | - | -22 | - | - | - | - | - | -22 |
| Change in value of biological assets | - | - | - | 16 | - | - | - | 16 |
| Interest in earnings of associates | 41 | - | 4 | - | - | - | - | 45 |
| Operating profit/loss | 340 | 419 | 21 | 605 | 414 | -191 | 13 | 1 620 |
| Operating profit/loss excluding items affecting comparability | 340 | 419 | 21 | 605 | 414 | -191 | 13 | 1 620 |
| Operating margin excluding items affecting comparability,% | 4 | 8 | 4 | 13 | 25 | 9 | ||
| Return on operating capital excluding items affecting comparability, % |
4 | 10 | 6 | 5 | 13 | 6 | ||
| Operating assets | 10 186 | 4 781 | 483 | 12 646 | 3 342 | 419 | -392 | 31 465 |
| Operating liabilities | 1 397 | 666 | 87 | 1 262 | 135 | 1 382 | -392 | 4 536 |
| Operating capital | 8 789 | 4 114 | 396 | 11 384 | 3 207 | -963 | 0 | 26 929 |
| Investments | 287 | 260 | 110 | 69 | 88 | 2 | 0 | 818 |
| Group | Parent company | |||
|---|---|---|---|---|
| Non-current assets per country | 2009 | 2008 | 2009 | 2008 |
| Sweden | 21 415 | 21 619 | 17 006 | 18 231 |
| UK | 550 | 598 | - | - |
| Spain | 3 364 | 3 877 | - | - |
| Other | 52 | 59 | - | - |
| Total | 25 380 | 26 153 | 17 006 | 18 231 |
| Group | Parent company | |||
|---|---|---|---|---|
| Net sales by product area | 2009 | 2008 | 2009 | 2008 |
| Newsprint and magazine paper | 9 144 | 10 177 | 7 043 | 7 966 |
| Paperboard | 4 865 | 4 677 | 2 879 | 2 699 |
| Pulp | 137 | 128 | 240 | 224 |
| Sawn timber | 548 | 499 | 548 | 496 |
| Wood | 2 745 | 3 064 | 2 695 | 2 997 |
| Power | 447 | 550 | 1 | 0 |
| Other | 185 | 241 | 32 | 0 |
| Total | 18 071 | 19 334 | 13 436 | 14 382 |
| Group | Parent company | |||
|---|---|---|---|---|
| Net sales by market | 2009 | 2008 | 2009 | 2008 |
| Sweden | 4 211 | 4 940 | 3 749 | 4 308 |
| UK | 2 083 | 1 943 | 1 328 | 1 189 |
| Germany | 2 676 | 2 597 | 2 296 | 2 237 |
| Spain | 1 427 | 1 909 | 288 | 390 |
| The Netherlands | 771 | 771 | 675 | 661 |
| France | 728 | 786 | 449 | 531 |
| Italy | 848 | 953 | 555 | 612 |
| Rest of Europe | 3 011 | 3 411 | 2 313 | 2 829 |
| Rest of the world | 2 316 | 2 024 | 1 784 | 1 624 |
| Total | 18 071 | 19 334 | 13 436 | 14 382 |
| Group | ||||||||
|---|---|---|---|---|---|---|---|---|
| Holmen | Iggesund | Holmen | Holmen | Holmen | wide | Elimina | Total | |
| 2008 | Paper | Paperboard | Timber | Skog | Energi | and other | tions | Group |
| Net sales | ||||||||
| External | 10 443 | 4 845 | 499 | 2 997 | 550 | - | - | 19 334 |
| Internal | 0 | 15 | 0 | 2 446 | 1 284 | - | -3 745 | - |
| Other operating income | 350 | 260 | 138 | 129 | 12 | 37 | -172 | 755 |
| Operating costs | -9 970 | -4 433 | -593 | -4 898 | -1 500 | -196 | 3 916 | -17 673 |
| Depreciation and amortisation according to plan | -896 | -368 | -34 | -26 | -19 | 0 | - | -1 343 |
| Impairment losses | -57 | - | - | - | - | - | - | -57 |
| Change in value of biological assets | - | - | - | -16 | - | - | - | -16 |
| Interest in earnings of associates | 47 | - | 3 | - | - | - | - | 50 |
| Operating profit/loss | -81 | 320 | 13 | 632 | 327 | -149 | -10 | 1 051 |
| Operating profit/loss excluding items affecting comparability* | 280 | 320 | 13 | 632 | 327 | -149 | -10 | 1 412 |
| Operating margin excluding items affecting comparability, %* | 3 | 7 | 3 | 12 | 18 | 7 | ||
| Return on operating capital excluding items affecting comparability, %* |
3 | 8 | 4 | 6 | 11 | 5 | ||
| Operating assets | 12 123 | 4 914 | 439 | 12 796 | 3 149 | 568 | -557 | 33 432 |
| Operating liabilities | 1 886 | 661 | 73 | 1 382 | 142 | 2 222 | -557 | 5 809 |
| Operating capital | 10 237 | 4 254 | 366 | 11 415 | 3 006 | -1 654 | - | 27 623 |
| Investments | 679 | 327 | 19 | 21 | 76 | 2 | - | 1 123 |
* Items affecting comparability relate to a SEK 298 million cost of closing down Wargön Mill, SEK 115 million to cover costs associated with the closure of PM 2 at the mill in Hallsta, and a SEK 52 million positive effect on profit of the fire at Braviken.
The business area Holmen Paper manufactures printing paper for daily newspapers, magazines, directories/manuals, advertising material and books at two Swedish mills and one Spanish mill. Iggesund Paperboard produces paperboard for consumer packaging and graphics printing at one Swedish and one UK mill. Holmen Timber produces sawn timber at one Swedish sawmill. Annual production capacity is 1 940 000 tonnes of printing paper, 530 000 tonnes of paperboard and 340 000 cubic metres of sawn timber.
Holmen Skog manages the Group's forests, which cover just over one million hectares. The annual volume of wood harvested in company forests is about 2.5 million cubic metres. Holmen Energi is responsible for the Group's hydro power assets and for developing the Group's operations in the energy sector. Normal yearly production amounts to some 1 100 GWh of electricity at wholly and partly owned hydro power stations in Sweden. Holmen Skog and Holmen Energi are also responsible for supplying the Group with wood and electricity in Sweden, which are important raw materials for the industrial operations.
In the Holmen Group, the business areas are responsible for management of operational assets and liabilities. Operating capital in each segment includes all assets and liabilities used by the business area, such as non-current assets, inventories, operating receivables and operating liabilities. Financing and tax issues are managed at Group level, so financial assets and liabilities – including pension liabilities – and current and deferred tax assets and tax liabilities are not allocated to the business areas.
Intra-Group sales between segments are founded on an internal market-based price. The "Group-wide and other" segment comprises Group staff units and Group-wide functions that are not allocated to other segments. No profit items below operating profit are allotted to the business areas.
Income from external customers is allocated to individual countries according to the country in which the customer is based.
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Sales of by-products | 186 | 253 | 111 | 181 | |
| Emission rights | 24 | 18 | 25 | 22 | |
| Electricity certificates | 71 | 72 | 63 | 65 | |
| Sales of non-current assets | 31 | 29 | 8 | 12 | |
| Rental and tenancy income | 22 | 19 | 19 | 16 | |
| Silviculture contracts | 52 | 44 | 52 | 44 | |
| Other | 215 | 320 | 169 | 257 | |
| Total | 600 | 755 | 447 | 596 |
Of the sales of by-products in the Group, SEK 124 million (160) relate to rejects from production, SEK 34 million (53) to sawdust, bark, chips etc, and SEK 28 million (40) to external sales of energy.
The Group has been allotted emission rights which, for the most part, have been used for its own production. The surplus resulted in a recognised profit of SEK 24 million (18).
Income from electricity certificates received from the production of renewable energy at the Group's Swedish mills amounted to SEK 71 million (72).
| Group | Parent company | |||
|---|---|---|---|---|
| Wages, salaries and social security costs |
2009 | 2008 | 2009 | 2008 |
| Wages, salaries and other remuneration | 1 866 | 2 054 | 1 292 | 1 546 |
| Social security costs | 720 | 807 | 583 | 693 |
The 2008 AGM decided on the following unchanged guidelines for determining the salaries and other remuneration of the CEO and other senior management, namely the business area managers and heads of Group staff functions who report directly to the CEO.
The remuneration of the CEO and the senior management shall consist of a fixed market-based salary. Other benefits, mainly car and accommodation, shall, insofar as they are provided, represent a limited part of the remuneration. No variable remuneration shall be paid.
The normal retirement age shall be 65 years. The company and the employee shall be mutually entitled to request that pension be drawn from 60 years of age. Any pension drawn before 65 years of age shall be either defined benefit or defined premium. Pension drawn after 65 years of age shall be in accordance with the ITP plan. Over and above this, the employee may also be entitled to a supplementary old age pension. In this case, there shall be a gradual transition from the existing arrangement with a defined benefit pension to one in which the pension is defined premium (contribution).
Discontinuation notice should normally be one year if it is given by the company, and six months if it is given by the employee. In the event of notice being given by the company, severance pay can be paid corresponding to no more than 24 months' salary.
Any decision on a share and share price based incentive scheme for senior company personnel shall be made by the AGM.
A remuneration committee appointed from among the members of the Board shall prepare business pertaining to the CEO's salary and other conditions of employment and submit proposals on such issues to the Board for decision. Detailed principles for determining the salaries, pension rights and other remuneration to senior management shall be laid down in a pay policy adopted by the remuneration committee.
The Board shall be entitled to depart from these guidelines in individual cases should special reasons exist. In the event of such a departure, information thereon and the reasons therefore shall be submitted to the next Annual General Meeting.
The 2008 AGM approved the Board's proposal to introduce an incentive scheme for the Holmen Group's employees; it has applied in the Group since May 2008. In the scheme, the employees were invited to acquire call options on class B shares in Holmen at market price (calculated by an independent bank). As a result, 1 492 of the Group's approximately 5 000 employees bought a total of 758 300 call options at a price of SEK 20 per option. The exercise price of the options is SEK 224.50 per share. Each option entitles the owner to acquire one share during the exercise period in May/June 2013. Holmen's commitment within the scheme has been secured by means of a buyback of shares in the company.
IFRS 2 Share-based Payment is not applicable, because the employees acquired the options at market-based price.
A fixed Board fee shall be paid to the members of the Board elected by the AGM, except for the CEO, who does not receive any Board fee. For 2009, the fee amounted to SEK 2 475 000 (2 475 000). The chairman received a fee of SEK 550 000 (550 000), and each of the other members (except for the CEO) received SEK 275 000 (275 000).
The CEO's salary and other benefits for 2009 amounted to SEK 6 768 603 (6 769 821). In 2009, the total pension cost attributable to the CEO (ITP cost and the cost of benefits over and above ITP), calculated in accordance with IAS 19, amounted to SEK 3 263 711 (3 050 305). No variable remuneration was paid.
In 2009, the salaries and other benefits of the other senior management, i.e. the five business area managers and the heads of the five Group staff units who report directly to the CEO, amounted to a total of SEK 18 206 318 (17 768 644). The total pension cost (ITP cost and the cost of benefits over and above ITP), calculated in accordance with IAS 19, for this group amounted to SEK 10 897 672 (8 570 257) in 2009. No variable remuneration was paid.
For senior management the company is required to give 12 months' notice and the employee six months. In the event of notice being given by the company, termination benefits corresponding to between one and two years' salary are paid, depending on age. For the CEO, a termination benefit of two years' salary is paid.
All members of senior management are employed by the parent company.
Holmen's pension commitments over and above the ITP plan for the CEO amounted to SEK 15 million (13) at 31 December 2009 and for other members of senior management to SEK 63 million (54), calculated in accordance with IAS 19. The Group also has a SEK 7 million (7) commitment for one Board member, Göran Lundin, former CEO of Holmen. The pension commitments are secured using plan assets managed by an independent pension fund.
| 2009 | 2008 | ||||
|---|---|---|---|---|---|
| Average | Average | ||||
| number of | number of | ||||
| full-time | Of whom | full-time | Of whom | ||
| equivalents | women | equivalents | women | ||
| Parent company | |||||
| Sweden | 3 227 | 589 | 3 465 | 608 | |
| Group companies | |||||
| Sweden | - | - | 46 | 5 | |
| Australia | 3 | 2 | 3 | 1 | |
| Belgium | 1 | - | 3 | 2 | |
| Denmark | 2 | 1 | 3 | 2 | |
| Estonia | 20 | 6 | 22 | 6 | |
| France | 34 | 8 | 31 | 6 | |
| Germany | 22 | 8 | 17 | 8 | |
| UK | 514 | 53 | 511 | 54 | |
| Hong Kong | 5 | 1 | 5 | 1 | |
| Italy | 8 | 4 | 7 | 4 | |
| The Netherlands | 116 | 46 | 112 | 30 | |
| Poland | 7 | 4 | 6 | 3 | |
| Portugal | 2 | 1 | 2 | 1 | |
| Singapore | 6 | 4 | 5 | 3 | |
| Spain | 596 | 119 | 573 | 106 | |
| Switzerland | 6 | 2 | 7 | 3 | |
| USA | 8 | 2 | 11 | 3 | |
| Total Group companies | 1 350 | 261 | 1 364 | 238 | |
| Total Group | 4 577 | 850 | 4 829 | 846 |
The year's decrease in the number of parent company employees is mainly an effect of redundancies in connection with the closure of Wargön Mill, and staff cuts in connection with the restructuring programme at Hallsta Paper Mill.
| Group | Parent company | |||
|---|---|---|---|---|
| Proportion of women, % | 2009 | 2008 | 2009 | 2008 |
| Board (excl. deputy members) | 17 | 8 | 17 | 8 |
| Senior management | 9 | 9 | 9 | 9 |
| Group | Parent company | |||
|---|---|---|---|---|
| Sickness absence in Sweden, % | 2009 | 2008 | 2009 | 2008 |
| Total sickness absence | 3.8 | 4.6 | 3.8 | 4.6 |
| Long-term sick leave (>60 days) | 1.7 | 2.7 | 1.7 | 2.7 |
| Sickness absence, men | 3.8 | 4.5 | 3.8 | 4.5 |
| Sickness absence, women | 3.7 | 5.3 | 3.7 | 5.3 |
| Employees below 29 years of age | 2.4 | 2.5 | 2.4 | 2.5 |
| Employees between 30 and 49 years of age | 3.1 | 4.0 | 3.1 | 4.0 |
| Employees aged 50 years and above | 4.7 | 5.7 | 4.7 | 5.7 |
The audit firm KPMG was elected by the 2008 Annual General Meeting as Holmen's auditors for a period of four years (2008–2011). KPMG audits the books of Holmen AB and almost all of its subsidiaries.
| Group | Parent company | |||
|---|---|---|---|---|
| Remuneration to KPMG | 2009 | 2008 | 2009 | 2008 |
| Audit assignments | 8 | 7 | 4 | 4 |
| Other assignments | 5 | 4 | 1 | 1 |
| Total | 13 | 11 | 5 | 5 |
| Other auditors | 0 | 0 | - | - |
| Total | 13 | 11 | 5 | 5 |
Audit assignments refers to the examination of the annual report and accounting records, the administration by the Board and the CEO, other duties that are incumbent on the company's auditors, the provision of advice or other support resulting from observations in connection with the audit or the performance of such other duties. All other activities are defined as other assignments. Over and above the audit assignment, Holmen has consulted KPMG on tax and accounting issues and for various investigations.
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Finance income | ||||
| Dividend income from Group companies | - | - | 1 156 | 15 |
| Gains on sales of Group companies | - | - | - | 0 |
| Gains on sales of shares and participating interests |
- | - | - | 1 |
| Net profit/loss | ||||
| Assets and liabilities measured at fair value via profit/loss for the year - Held for financial risk |
||||
| management* | 5 | 2 | 5 | 2 |
| - Other | 0 | 0 | 0 | 0 |
| Interest income | 7 | 14 | 13 | 88 |
| Total finance income | 12 | 17 | 1 174 | 106 |
| Finance costs | ||||
| Impairment losses on value of shares in Group companies |
- | - | -436 | - |
| Net profit/loss | ||||
| Assets and liabilities measured at fair value via profit/loss for the year - Held for financial risk |
||||
| management* | -38 | -19 | 114 | -176 |
| - Other | 23 | -2 | - | 0 |
| Cash and cash equivalents | 31 | -15 | 31 | -15 |
| Other financial liabilities | 1 | 53 | 102 | -322 |
| Total net profit/loss | 18 | 17 | 247 | -513 |
| Interest costs ** | -284 | -345 | -239 | -354 |
| Finance costs | -267 | -328 | -428 | -867 |
| Net financial items | -255 | -311 | 746 | -761 |
company's net financial items also include currency revaluation of external loans and forward contracts that hedge net investment in foreign operations. These items are recognised in the Group in other comprehensive income. The fair value of the interest component in currency forward contracts and value changes in accrued interest and realised interest in fixed-interest-rate swaps are recognised on an ongoing basis in net interest items.
Changes in the value of the loan that is measured at fair value in accordance with the fair value option affected earnings by SEK 23 million (-2), of which changes in market interest rates accounted for a decrease in value of SEK 8 million (decrease of 19). The accumulated change in value of SEK 73 million (50) is recognised in the income statement. Changes in the value of the swap that belongs to the loan measured at fair value using the fair value option had a negative impact of SEK 5 million on earnings. The change in the value of the loan that has been hedged in respect of its fair value had a SEK 3 million impact on profit (decrease of 8) while related interest rate swaps lowered profit by SEK 3 million (increase of 8). There were no changes in value for loans in the parent company.
The income from financial instruments included in operating profit is shown in the table below:
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Exchange gains/losses on trade receivables and trade payables |
-26 | 232 | -7 | 223 |
| Net loss on derivatives stated in working capital |
-343 | -309 | -403 | -243 |
| Interest income on trade receivables | 1 | 0 | 1 | 0 |
| Interest costs on trade payables | 3 | 0 | 3 | 0 |
The derivatives included in operating profit relate to hedging of trade receivables and trade payables as well as financial electricity derivatives.
* Refers to the held-for-trading category in accordance with IAS 39. ** SEK -63 million (21) in the Group refers to interest costs on liabilities measured
at fair value via profit/loss for the year. Those in the parent company amounted to SEK -63 million (21).
The net gains and losses stated in net financial items mainly relate to currency revaluations of internal loans, hedging of internal lending, currency revaluations of cash and cash equivalents, and hedging of cash and cash equivalents. They also include the revaluation of loans measured at fair value via the income statement and interest rate swaps used to hedge loans at fixed rates of interest. The parent
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Current tax | -474 | -488 | -307 | 137 |
| Deferred tax | 114 | 390 | -24 | 57 |
| Total | -360 | -98 | -331 | 195 |
The 2009 tax rate for the Group was 26.4 per cent and was mainly affected by the company winning a tax dispute and through loss carry-forwards not recorded. See the table below.
| Group | Parent company | |||||||
|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |||||
| SEKm | % | SEKm | % | SEKm | % | SEKm | % | |
| Recognised profit before tax | 1 366 | 740 | 1 995 | -630 | ||||
| Tax at applicable rate | -359 | 26.3 | -207 | 28.0 | -525 | 26.3 | 177 | 28.0 |
| Difference in tax rate in foreign operations | 2 | -0.1 | 2 | -0.2 | 0 | 0.0 | 0 | 0.0 |
| Non-taxable income and non-deductible costs | -2 | 0.1 | -2 | 0.2 | 188 | -9.4 | 2 | 0.3 |
| Standard interest on tax allocation reserve | -15 | 1.1 | -23 | 3.0 | -15 | 0.8 | -23 | -3.6 |
| Effect of not stated loss carry-forwards and temporary differences | -30 | 2.2 | 16 | -2.1 | -8 | 0.4 | 0 | 0.0 |
| Tax attributable to previous periods | 31 | -2.3 | -4 | 0.6 | 29 | -1.4 | 1 | 0.2 |
| Change in tax rate on deferred tax asset/liability | 0 | 0.0 | 331 | -44.7 | 0 | 0.0 | 37 | 5.9 |
| Provision to cover uncertain tax disputes | 0 | 0.0 | -225 | 30.4 | 0 | 0.0 | 0 | 0 |
| Other | 13 | -1.0 | 14 | -2.0 | 0 | 0.0 | 1 | 0.1 |
| Effective tax | -360 | 26.4 | -98 | 13.2 | -331 | 16.6 | 195 | 30.9 |
| Group | Parent company | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |||||||||
| Before tax | Tax | After tax | Before tax | Tax | After tax | Before tax | Tax | After tax | Before tax | Tax | After tax | |
| Cash flow hedges | 910 | -240 | 670 | -964 | 253 | -712 | 919 | -242 | 677 | -1 148 | 302 | -845 |
| Translation differences on foreign operations |
-256 | - | -256 | 445 | - | 445 | - | - | - | - | - | - |
| Hedging of currency risk in foreign operations |
254 | -66 | 188 | -541 | 151 | -389 | - | - | - | - | - | - |
| Actuarial revaluations | 15 | -4 | 11 | -169 | 48 | -121 | - | - | - | - | - | - |
| Other comprehensive income |
923 | -310 | 613 | -1 230 | 452 | -778 | 919 | -242 | 677 | -1 148 | 302 | -845 |
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Deferred tax assets | ||||
| Loss carry-forwards | 307 | 347 | - | - |
| Pension provisions | 68 | 73 | - | - |
| Deferred tax liabilities stated net among deferred tax assets |
-72 | -85 | - | - |
| Other | 1 | 7 | - | - |
| Total deferred tax assets | 304 | 342 | - | - |
| Current tax receivable | 22 | 141 | - | 117 |
| Total tax receivables | 326 | 483 | - | 117 |
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Deferred tax liabilities | ||||
| Non-current assets | ||||
| Biological assets* | 2 922 | 2 914 | 644 | 635 |
| Property, plant and equipment | 1 600 | 1 512 | -4 | -4 |
| Tax allocation reserve | 618 | 721 | - | - |
| Transactions subject to hedge accounting | -34 | -268 | -53 | -295 |
| Other, including deferred tax assets stated net among deferred tax liabilities |
-61 | -61 | -49 | -64 |
| Total deferred tax liabilities | 5 045 | 4 819 | 538 | 272 |
| Provisions for taxes | 692 | 692 | 45 | 45 |
| Current tax liability | 102 | 14 | 94 | - |
| Total tax liabilities | 5 839 | 5 525 | 678 | 317 |
* For parent company this relates to forestland.
| Group | Parent company | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2009 | Opening balance |
Stated in the income statement |
Stated in other com prehensive income |
Translation differences and other |
Closing balance |
Opening balance |
Stated in the income statement |
Stated in other com prehensive income |
Closing balance |
| Biological assets* | -2 914 | -8 | - | - | -2 922 | -635 | -9 | - | -644 |
| Property, plant and equipment | -1 597 | 52 | - | -126 | -1 672 | 4 | 0 | - | 4 |
| Pension provisions | 80 | 1 | -4 | 2 | 78 | - | - | - | - |
| Loss carry-forwards | 347 | -31 | - | -10 | 307 | - | - | - | - |
| Tax allocation reserve | -721 | 103 | - | - | -618 | - | - | - | - |
| Other | 328 | -3 | -240 | 0 | 86 | 359 | -15 | -242 | 102 |
| Deferred net tax liability | -4 477 | 114 | -244 | -135 | -4 741 | -272 | -24 | -242 | -538 |
* For parent company this relates to forestland.
| Group | Parent company | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2008 | Opening balance |
Stated in the income statement |
Stated in other com prehensive income |
Translation differences and other |
Closing balance |
Opening balance |
Stated in the income statement |
Stated in other com prehensive income |
Closing balance |
| Biological assets* | -3 100 | 186 | - | - | -2 914 | -677 | 41 | - | -635 |
| Property, plant and equipment | -1 796 | 189 | - | 10 | -1 597 | 5 | -1 | - | 4 |
| Pension provisions | 53 | -15 | 51 | -9 | 80 | - | - | - | - |
| Loss carry-forwards | 348 | -13 | - | 12 | 347 | - | - | - | - |
| Tax allocation reserve | -753 | 31 | - | - | -721 | - | - | - | - |
| Other | 68 | 12 | 250 | -1 | 328 | 40 | 17 | 302 | 359 |
| Deferred net tax liability | -5 181 | 390 | 301 | 13 | -4 477 | -632 | 57 | 302 | -272 |
* For parent company this relates to forestland.
For information on biological assets see Note 12. Deferred tax liability in respect of property, plant and equipment is primarily attributable to depreciation in excess of plan.
For information concerning provisions for taxes see Note 27.
The deferred tax income recognised in the Group's income statement relates primarily to a change in temporary differences and utilisation of loss carry-forwards. The amount recognised in Other comprehensive income includes deferred tax related to negative changes of SEK 239 million in hedging reserves (positive 253) and negative impact of SEK 4 million from actuarial revaluations (postitive 48).
Of the deferred tax asset in respect of the carry-forwards of unused tax losses, a sum of SEK 94 million relates to loss carry-forwards with no time limitations regarding when they may be utilised. Other loss carry-forwards expire if they are not utilised 2015–2022. The carry-forwards of unused tax losses and temporary differences for which deferred tax assets have not been recognised in the income statement or balance sheet amount to SEK 1 950 million, of which SEK 200 million expire in 2011 and SEK 330 million expire 2022–2024. Whether a deferred tax asset is recognised or not depends on an assessment of how likely it is that the Group will be able to utilise it by offsetting it against future taxable profits.
| Group | ||
|---|---|---|
| 2009 | 2008 | |
| Total number of shares outstanding, 1 January | 83 996 162 | 84 756 162 |
| Buy-back of company's own shares during the year |
- | -760 000 |
| Total number of shares outstanding, 31 December |
83 996 162 | 83 996 162 |
| Average number of shares, before dilution | 83 996 162 | 84 298 573 |
| Effect of options | - | - |
| Average number of shares, after dilution | 83 996 162 | 84 298 573 |
| Profit for the year attributable | ||
| to shareholders, SEKm | 1 006 | 642 |
| Average number of shares before dilution Basic EPS for the year, SEK |
83 996 162 12.0 |
84 298 573 7.6 |
| Profit for the year attributable to shareholders, SEKm |
1 006 | 642 |
| Average number of shares after dilution | 83 996 162 | 84 298 573 |
| Diluted EPS for the year, SEK | 12.0 | 7.6 |
Shares in the company were bought back in 2008 to secure the company's commitments as part of the incentive scheme for the Holmen Group's employees as decided by the 2008 AGM. A total of 760 000 class B shares were bought back, which corresponds to approximately 0.9 per cent of the total number of shares outstanding, and to approximately 0.3 per cent of the total number of votes. The average price paid for these shares was SEK 201.70 per share.
In all, 758 300 call options were issued at a price of SEK 20 per option. The exercise price of the options is SEK 224.50 per share. Each option entitles the owner to acquire one share during the exercise period, May/June 2013.
The exercise price of SEK 224.50 exceeds the average share price for 2009 (SEK 180 per share). The options will therefore have no dilution effect as defined in IAS 33, and were excluded from the calculation of diluted EPS. If the average listed price in the future exceeds the exercise price, these options will give rise to an estimated dilution effect, which is calculated in accordance with IAS 33.
| Group Parent company |
|||||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||||
| Accumulated acquisition cost | |||||||
| Opening balance | 170 | 89 | 77 | 10 | |||
| Investments | 0 | 8 | - | 8 | |||
| Change in emission rights | - | 70 | - | 58 | |||
| Re-classification | -69 | -1 | -58 | - | |||
| Disposal and retirement of assets | 0 | - | - | - | |||
| Translation differences | -3 | 5 | - | - | |||
| Total | 98 | 170 | 19 | 77 | |||
| Accumulated amortisation according to plan |
|||||||
| Opening balance | 64 | 46 | 1 | 0 | |||
| Amortisation for the year | 9 | 13 | 3 | 0 | |||
| Translation differences | -2 | 4 | - | - | |||
| Total | 71 | 64 | 4 | 1 | |||
| Closing residual value | |||||||
| according to plan | 27 | 106 | 15 | 76 |
Intangible non-current assets mostly consist of rights to use electricity grids of SEK 6 million (8) and IT systems of SEK 17 million (24). These assets were largely acquired from external sources. They have determinable useful lives and are amortised over 5–10 years. No goodwill applies.
In 2009, emission rights were reclassified from intangible non-current assets to inventories.
| Work in progress and | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Buildings, other land | Machinery and | advance payments to | ||||||||
| Forestland | and land installations | equipment | suppliers | Total | ||||||
| Group | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Accumulated acquisition cost | ||||||||||
| Opening balance | 100 | 100 | 5 906 | 5 561 | 27 092 | 25 865 | 221 | 270 | 33 319 | 31 796 |
| Investments | - | - | 95 | 127 | 546 | 867 | 107 | 140 | 748 | 1 134 |
| Re-classifications | - | - | 181 | 49 | 72 | 147 | -128 | -195 | 126 | 1 |
| Disposal and retirement of assets | - | - | -19 | -5 | -708 | -82 | - | - | -726 | -87 |
| Translation differences | 0 | 0 | -93 | 175 | -239 | 294 | -1 | 5 | -333 | 474 |
| Total | 100 | 100 | 6 071 | 5 906 | 26 763 | 27 092 | 199 | 221 | 33 134 | 33 319 |
| Accumulated depreciation and impairment losses |
||||||||||
| Opening balance | - | - | 2 775 | 2 618 | 17 401 | 16 194 | - | - | 20 176 | 18 813 |
| Depreciation for the year according to plan |
- | - | 141 | 137 | 1 170 | 1 193 | - | - | 1 311 | 1 329 |
| Impairment losses for the year | - | - | - | 6 | 22 | 51 | - | - | 22 | 57 |
| Reversal of previous impairment losses | - | - | - | - | - | - | - | - | - | - |
| Re-classifications | - | - | -31 | - | 31 | - | - | - | - | - |
| Disposal and retirement of assets | - | - | -15 | -3 | -701 | -76 | - | - | -716 | -79 |
| Translation differences | - | - | -22 | 16 | -112 | 40 | - | - | -133 | 56 |
| Total | - | - | 2 849 | 2 775 | 17 812 | 17 401 | - | - | 20 661 | 20 176 |
| Closing residual value according to plan |
100 | 100 | 3 222 | 3 131 | 8 952 | 9 690 | 199 | 221 | 12 473 | 13 142 |
| Buildings, other land | Machinery and | |||||||
|---|---|---|---|---|---|---|---|---|
| Forestland | and land installations | equipment | Total | |||||
| Parent company | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Accumulated acquisition cost | ||||||||
| Opening balance | 79 | 72 | 137 | 138 | 222 | 203 | 438 | 414 |
| Investments | 0 | 7 | 6 | 2 | 33 | 40 | 40 | 49 |
| Re-classifications | - | - | - | - | - | 0 | - | 0 |
| Disposal and retirement of assets | 0 | 0 | 0 | -3 | -24 | -22 | -24 | -25 |
| Total | 79 | 79 | 143 | 137 | 231 | 222 | 454 | 438 |
| Accumulated depreciation according to plan | ||||||||
| Opening balance | - | - | 125 | 125 | 155 | 154 | 280 | 279 |
| Depreciation for the year according to plan | - | - | 1 | 1 | 23 | 23 | 24 | 24 |
| Disposal and retirement of assets | - | - | 0 | -1 | -24 | -21 | -24 | -23 |
| Total | - | - | 126 | 125 | 155 | 155 | 281 | 280 |
| Accumulated revaluations | ||||||||
| Opening balance | 2 416 | 2 417 | 1 | 1 | - | - | 2 417 | 2 417 |
| Disposal and retirement of assets | 0 | 0 | 0 | - | - | - | 0 | 0 |
| Total | 2 416 | 2 416 | 1 | 1 | - | - | 2 417 | 2 417 |
| Closing residual value according to plan | 2 496 | 2 495 | 18 | 13 | 77 | 66 | 2 590 | 2 575 |
| Group | Parent company | |||||||
| Assessed tax values | 2009 | 2008 | 2009 | 2008 | ||||
| Assessed tax values | 2009 | 2008 | 2009 | 2008 |
|---|---|---|---|---|
| Assessed tax values relate to assets in Sweden | ||||
| Forest and agricultural properties | 14 517 | 14 520 | 6 795 | 6 798 |
| Buildings, other land and land installations | 3 056 | 3 049 | 28 | 28 |
| Total | 17 573 | 17 569 | 6 823 | 6 826 |
The Group's impairment losses regarding property, plant and equipment are stated in the income statement in the line item Impairment losses. Holmen closed a board machine at Workington Mill in 2009 that belongs to the Iggesund Paperboard business area. This resulted in impairment losses on property, plant and equipment of SEK 22 million. For 2008, impairment losses on non-current assets referred to the closure of operations at Wargön Mill in the Holmen Paper business area.
The year's investments were reduced by SEK 2 million (23) as a result of the support received from the Swedish Energy Agency of SEK 40 million in total for the construction of a new pulp line at Braviken Paper Mill.
The Group's investment commitments for approved and ongoing projects amounted to SEK 1 581 million (452) at 31 December 2009. The company's capitalised borrowing costs were SEK 1 million in 2009 and are recognised as Work in progress and advance payments to suppliers. An interest rate of 3 per cent was used to determine the amount.
The assessed tax values are determined by the Swedish Tax Agency by means of a property assessment and are then used for determining the property tax charge. No property tax is charged on forestland.
Forest assets are recognised in the Group as growing forest, which is stated as a biological asset at fair value, and land, which is stated at acquisition cost. Holmen's assessment is that no relevant market prices are available that can be used to value forest holdings as extensive as Holmen's. The valuation is therefore made by calculating the present value of future expected cash flows from the growing forests. This calculation of cash flows is made for the coming 100 years, which is regarded as the harvesting cycle of the forests. The cash flows are calculated on the basis of harvesting volumes according to Holmen's current harvesting plan and assessments of future price and cost changes. The cost of replanting has been taken into account, because re-planting after harvesting is a statutory obligation.
In total, Holmen owns 1 032 000 hectares of productive forestland, with a volume of 119 million forest cubic metres (m3 total volume over bark) of standing timber, of which 67 000 hectares with 12 million forest cubic metres of standing timber have been set aside as nature reserves. According to the current harvesting plan, which came into effect in 2000, harvesting during the 2000–2009 period is to amount to an average of 2.5 million m3 of timber and pulpwood per year. The same plan states that the annual harvesting for the 2010–2019 period will be more than 1 per cent higher. The harvesting volume is then planned to increase gradually and then stabilise at about 3.0 million m3 per year in about 40 years' time. This corresponds to an average increase in harvesting of 0.4 per cent per year. Just over 50 per cent of the wood harvested consists of timber that is sold to sawmills, and the remainder mainly consists of pulpwood, which is sold to the pulp and paper industry. A new harvesting plan is estimated to be complete in 2011 and may entail different harvesting rates.
In 2009, the cash flow from the growing forests decreased to SEK 522 million (622), mainly as a result of lower prices. On average, the cash flows in 2001–2009 amounted to approximately SEK 491 million per year. Holmen based its valuation of 31 December 2009 on the prices prevailing at the end of the year. An assumption has been made that prices will fall somewhat in 2011, see the graph below. From 2011 and thereafter, long-term price assumptions have been used, with an annual increase of 1 per cent until 2035 and thereafter a rise of 2 per cent a year. The cash flow forecast for 2010–2016 is shown in the figure below. Costs are estimated to increase from present-day levels by about 2 per cent per year. The price and cash flows for the period 2017–2035 are estimated to increase by 0.5 per cent per year, after which they are expected to increase broadly in line with the assumed level of inflation of 2 per cent.
The cash flows are discounted using an interest rate of 5.5 per cent (2008: 5.5) after tax. The discount rate was calculated on the basis of the Group's target for its debt/equity ratio (on average 0.55), an assumed long-term, nominal risk-free interest rate of 4.5 per cent, a risk premium of 1 per cent for borrowed capital and of 2 per cent for equity. Tax is taken into account at a rate of 26.3 per cent.
Deferred tax, i.e. the tax that is expected to be charged against the earnings from harvesting in the future, has been calculated on the total value of growing forests.
The value of the forest assets was estimated at the end of 2009 at SEK 11 109 million, i.e. the value of the estimated cash flows before tax. The attributable deferred tax liability was estimated at SEK 2 922 million. The net carrying amount after tax of the growing forests was thus SEK 8 187 milliion. The change in the value of the growing forests can be divided into:
| Group | 2009 | 2008 |
|---|---|---|
| Opening balance | 11 080 | 11 073 |
| Acquisition of growing forest | 5 | 12 |
| Sales of growing forest | 0 | -2 |
| Change due to harvesting | -552 | -622 |
| Change in fair value | 568 | 606 |
| Other changes | 8 | 13 |
| Closing carrying amount | 11 109 | 11 080 |
The net effect of the change in fair value and the change as a result of harvesting is stated in the income statement as Change in value of biological assets. In 2009 this item amounted to SEK 16 million (-16).
The table below shows how the value of forest assets would be affected by changes in the most significant valuation assumptions:
| Change in value (SEKm) | ||
|---|---|---|
| Group | Before tax | After tax |
| Annual change, + 0.1% per year | ||
| Harvesting rate | 420 | 310 |
| Price inflation | 420 | 310 |
| Cost inflation | -250 | -190 |
| Change in level, +1% | ||
| Harvesting | 160 | 120 |
| Prices | 280 | 200 |
| Costs | -150 | -110 |
| Discount rate, +0.1% | -250 | -180 |
Annual change refers to the annual rate of change used in the valuation of each parameter. For example, an increase of 0.1 per cent means that the annual price inflation will be increased from 1.0 per cent to 1.1 per cent in the calculations. Change in level means that the level for each parameter and year changes. For example, a 1 per cent price increase means that the wood prices which the calculations are based on are raised by 1 per cent for all years (change of level).
| Group | Parent company | |||
|---|---|---|---|---|
| Associates | 2009 | 2008 | 2009 | 2008 |
| Carrying amount at start of year | 1 824 | 1 745 | 77 | 77 |
| Investments | 4 | 0 | 4 | 0 |
| Disposals | -15 | -2 | 0 | -1 |
| Re-classifications | 3 | 0 | 3 | 0 |
| Interest in associates' earnings | 45 | 50 | - | - |
| Dividends received | -80 | - | - | - |
| Translation difference | -12 | 30 | - | - |
| Impairment losses | - | 0 | - | 0 |
| Carrying amount at 31 December | 1 770 | 1 824 | 84 | 77 |
Group Parent company Other shares and participating interests 2009 2008 2009 2008 Carrying amount at start of year 11 7 11 6 Investments 3 4 2 4 Disposals - 0 - - Re-classifications -3 0 -3 0 Translation difference 0 0 - - Impairment losses 0 - 0 - Carrying amount at 31 December 10 11 9 11
There were no material impairment losses on the value of other shares and participating interests during the year.
The parent company's opening balance includes accumulated impairment losses of SEK 34 million. There was no impairment during the year. Dividends received refers to the associate Peninsular Cogeneración S.A.
Parent company and Group holdings of shares and interests in associates
| 2009 | 2008 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Carrying | Value of | Carrying | Value of | ||||||
| amount at | holding in | amount at | holding in | ||||||
| Corporate | Registered | No. of | Interest | parent comp. | Group accounts, | Interest | parent comp. | Group accounts, | |
| ID No. | office | shares | %* | SEK thousands | SEK thousands | %* | SEK thousands | SEK thousands | |
| Brännälvens Kraft AB | 556017-6678 | Arbrå | 5 556 | 13.9 | - | 36 400 | 13.9 | - | 36 400 |
| Gidekraft AB | 556016-0953 | Örnsköldsvik | 990 | 9.9 | 99 | 99 | 9.9 | 99 | 99 |
| Harrsele AB | 556036-9398 | Sundsvall | 9 886 | 49.4 | - | 1 481 898 | 49.4 | - | 1 481 898 |
| Uni4 Marketing AB | 556594-6984 | Stockholm | 1 800 | 36.0 | 1 856 | 11 596 | 36.0 | 1 856 | 7 725 |
| Industriskog AB | 556193-9470 | Falun | 25 000 | 33.3 | 37 | 37 | 33.3 | 37 | 37 |
| Pressretur AB | 556188-2712 | Stockholm | 334 | 33.4 | - | - | 33.4 | - | - |
| PÅAB, Pappersåtervinning AB | 556142-5116 | Norrköping | 500 | 50.0 | 109 | 109 | 50.0 | 109 | 109 |
| Vattenfall Tuggen AB | 556504-2826 | Lycksele | 683 | 6.83 | 74 755 | 74 755 | 6.83 | 74 755 | 74 755 |
| VindIn AB | 556713-5172 | Stockholm | 200 | 14.28 | 6 910 | 7 224 | - | - | - |
| Baluarte Sociedade de Recolha e Recuperação de Desperdicios, |
|||||||||
| Lda, Portugal | Alcochete | 2 | 50.0 | - | 41 736 | 50.0 | - | 42 049 | |
| Ets Emilie Llau S.A., France | Lorp-Sentaraille | 678 | 24.0 | - | 24 257 | 38.0 | - | 41 019 | |
| Peninsular Cogeneración S.A., Spain | Madrid | 4 500 | 50.0 | - | 92 031 | 50.0 | - | 140 270 | |
| Other shares owned by the parent company | - | - | 38 | 38 | |||||
| Total | 83 767 | 1 770 143 | 76 895 | 1 824 399 |
* Percentage of shares and percentage of votes for total number of shares are the same.
| 2009 | 2008 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Carrying | Value of | Carrying | Value of | ||||||
| amount at | holding in | amount at | holding in | ||||||
| Corporate | Registered | No. of | Interest | parent comp. | Group accounts, | Interest | parent comp. | Group accounts, | |
| ID No. | office | shares | %* | SEK thousands | SEK thousands | %* | SEK thousands | SEK thousands | |
| Parent company | |||||||||
| Industrikraft i Sverige AB | 556761-5371 | Stockholm | 100 000 | 20.0 | 2 800 | 2 800 | 20.0 | 1 200 | 1 200 |
| SweTree Technologies AB | 556573-9587 | Umeå | 73 500 | 2.7 | 6 280 | 6 280 | 2.7 | 5 640 | 5 640 |
| VindIn AB | 556713-5172 | Stockholm | - | - | - | - | 7.1 | 3 410 | 3 410 |
| Miscellaneous shares owned by the parent company | 389 | 389 | 587 | 587 | |||||
| Total | 9 469 | 9 469 | 10 837 | 10 837 | |||||
| Group | |||||||||
| Miscellaneous shares | 348 | 372 | |||||||
| Total | 9 469 | 9 816 | 10 837 | 11 209 |
* Percentage of shares and percentage of votes for total number of shares are the same.
The holdings in Brännälvens Kraft AB, Gidekraft AB, Harrsele AB and Vattenfall Tuggen AB refer to hydro power assets and the holdings in VindIn AB refer to wind power assets. The holdings entitle the Group to buy some of the electricity produced at cost price, so the associates only earn a limited profit. Purchased electricity is sold to external customers at market price, and the earnings are stated in the Group accounts in the Holmen Energi business area.
Brännälvens Kraft AB, Gidekraft AB, Vattenfall Tuggen AB and VindIn AB are classified as associates even though the holdings are less than 20 per cent, since shareholder agreements provide significant influence over each company's activities. The holding in VindIn AB was reclassified in 2009, from shares and participating interests in other companies, to associates.
Summarised financial information on associates owned by the Group and parent company respectively is specified on the right. The table shows the owned interest in each associate.
Group Parent company 2009 2008 2009 2008
Income 814 861 378 320 Profit/loss 40 51 -2 4 Assets 763 728 209 200 Liabilities 447 362 156 156 Equity 315 366 53 44
| Items recognised at fair value via profit of the year |
||||||||
|---|---|---|---|---|---|---|---|---|
| Derivatives | Trade receiv | Available | Total | |||||
| Loans valued | with hedge | ables and loan | for-sale | Other | carrying | |||
| Group 2009 | at fair value | Derivatives | accounting | receivables | assets | liabilities | amount | Fair value |
| Financial instruments included in net financial debt |
||||||||
| Non-current financial receivables | ||||||||
| Deposits with credit institutions | - | 21 | - | 21 | 21 | |||
| Derivatives | ||||||||
| Other financial receivables | - | 131 | - | 131 | 131 | |||
| 151 | 151 | 151 | ||||||
| Current financial receivables | ||||||||
| Accrued interest | - | 6 | - | 6 | 6 | |||
| Derivatives | - | 17 | 34 | - | 51 | 51 | ||
| Other financial receivables | - | 17 | - | 17 | 17 | |||
| 17 | 34 | 23 | 74 | 74 | ||||
| Cash and cash equivalents | ||||||||
| Current deposit of cash and cash equivalents | - | 17 | - | 17 | 17 | |||
| Bank balances | - | 165 | - | 165 | 165 | |||
| 182 | 182 | 182 | ||||||
| Non-current liabilities | ||||||||
| MTN loans | - | 2 183 | 2 183 | 2 205 | ||||
| Loans from banks and other | ||||||||
| credit institutions | - | 1 252 | 1 252 | 1 252 | ||||
| Derivatives | - | 37 | - | 37 | 37 | |||
| 37 | 3 435 | 3 472 | 3 495 | |||||
| Current liabilities | ||||||||
| Commercial paper programme | - | 945 | 945 | 945 | ||||
| Bank account liabilities | - | 251 | 251 | 251 | ||||
| Current portion of long-term loans | 371 | - | 623 | 994 | 994 | |||
| Derivatives | - | 19 | 22 | - | 41 | 41 | ||
| Accrued interest | - | 54 | 54 | 54 | ||||
| Other current liabilities | - | 12 | 12 | 12 | ||||
| 371 | 19 | 22 | 1 886 | 2 298 | 2 298 | |||
| Financial instruments not included in net financial debt |
||||||||
| Other shares and participating interests | - | 10 | - | 10 | ||||
| Trade receivables | - | 2 712 | - | 2 712 | 2 712 | |||
| Derivatives (recognised among | ||||||||
| operating receivables) | - | 2 | 223 | - | 225 | 225 | ||
| Trade payables | - | 1 911 | 1 911 | 1 911 | ||||
| Derivatives (recognised among operating liabilities) | - | 50 | 208 | - | 258 | 258 |
Non-current financial receivables consist of non-current interest-bearing deposits with credit institutions, financial receivables from other companies, which, substantially, are interest-bearing, and prepayments relating to committed credit facilities. Over and above this, the figure includes the fair values of noncurrent derivatives. The parent company's receivables from Group companies include a significant share of interest-free receivables between Swedish, whollyowned Group companies.
Current financial receivables consist of fixed income investments and lending for durations of up to one year, accrued interest income and unrealised translation gains. Current financial receivables substantially have fixed interest periods of less than three months, and thus involve a very limited interest rate risk.
Cash and cash equivalents refers to bank balances and investments that can be readily converted into cash for a known amount and with a duration of no more than three months from the date of acquisition, which also means that the interest rate risk is negligible. Cash and cash equivalents are placed on deposit with banks or in current deposit accounts at banks. The average rate of interest on the Group's financial assets in 2009 was around 1.5 per cent (3.3).
Loan liabilities, accrued interest costs, unrealised translation losses and fair values of derivatives are stated as financial liabilities.
| Items recognised at fair | ||||||||
|---|---|---|---|---|---|---|---|---|
| value via profit of the year | ||||||||
| Derivatives | Trade receiv | Available | Total | |||||
| Group 2008 | Loans valued at fair value |
Derivatives | with hedge accounting |
ables and loan receivables |
for-sale assets |
Other liabilities |
carrying amount |
Fair value |
| Financial instruments included in net financial debt |
||||||||
| Non-current financial receivables | ||||||||
| Deposits with credit institutions | - | 26 | - | 26 | 26 | |||
| Derivatives | - | 32 | - | 32 | 32 | |||
| Other financial receivables | - | 29 | - | 29 | 29 | |||
| 32 | 55 | 87 | 87 | |||||
| Current financial receivables | ||||||||
| Accrued interest | - | 6 | - | 6 | 6 | |||
| Derivatives | - | 31 | 34 | - | 65 | 65 | ||
| Other financial receivables | - | 16 | - | 16 | 16 | |||
| - | 31 | 34 | 23 | - | - | 88 | 88 | |
| Cash and cash equivalents | ||||||||
| Current deposit of cash and cash equivalents | - | 243 | - | 243 | 243 | |||
| Bank balances | - | 410 | - | 410 | 410 | |||
| - | - | - | 653 | - | - | 653 | 653 | |
| Non-current liabilities | ||||||||
| MTN loans | - | 1 266 | 1 266 | 1 282 | ||||
| Loans from banks and other | ||||||||
| credit institutions | 394 | - | 1 423 | 1 817 | 1 825 | |||
| Derivatives | - | 13 | 126 | - | 139 | 139 | ||
| 394 | 13 | 126 | - | - | 2 689 | 3 223 | 3 247 | |
| Current liabilities | ||||||||
| Commercial paper programme | - | 1 467 | 1 467 | 1 467 | ||||
| Bank account liabilities | - | 146 | 146 | 146 | ||||
| Current portion of long-term loans | - | 567 | 567 | 567 | ||||
| Derivatives | - | 60 | 95 | - | 155 | 155 | ||
| Accrued interest | - | 161 | 161 | 161 | ||||
| Other current liabilities | - | 2 260 | 2 260 | 2 260 | ||||
| - | 60 | 95 | - | - | 4 602 | 4 756 | 4 756 | |
| Financial instruments not included in net financial debt |
||||||||
| Other shares and participating interests | - | 11 | - | 11 | ||||
| Trade receivables | - | 3 144 | - | 3 144 | 3 144 | |||
| Derivatives (recognised among operating receivables) |
- | 14 | 144 | - | 157 | 157 | ||
Trade payables - 2 282 2 282 2 282 Derivatives (recognised among operating liabilities) - 135 1 056 - 1 191 1 191
Substantially, financial liabilities are interest bearing. The parent company's liabilities to Group companies include a significant amount of interest-free liabilities between Swedish wholly-owned Group companies.
Liabilities valued at fair value amount to SEK 573 million (598). The amount repayable in respect of these liabilities is SEK 538 million. The maturity structure and average rate of interest for the Group's liabilities are shown in note 2. A total of SEK 1 916 million of the parent company's liabilities mature within one year. In addition to the financial assets and liabilities identified above, pension liabilities (see note 18) are also included in net financial debt.
The loan measured at fair value using the fair value option and its related swaps comes under measurement level 3 as per IFRS 7, because interest payments and loan repayments partly depend on inflation assumptions for the current year.
Note 7 states the impact on profit from revaluation of these items; the effect of changed assumptions was immaterial. Other items measured at fair value belong to measurement level 2 as per IFRS 7.
The fair value in the tables above has either been taken directly from listed market prices or by calculating the discounted cash flows. In cases where the latter method is used, all variables used in the calculation, such as discount rates and exchange rates, are taken from market listings. The difference between fair value and carrying amount arises because certain liabilities are not valued at fair value in the balance sheet, but are stated at their amortised cost. In the case of trade receivables and trade payables the carrying amount is used as the fair value, as this is judged to be an accurate reflection of the fair value. When it has not been possible to determine a reliable fair value for shares and participating interests, they have been excluded from the tables.
| Items recognised at fair | ||||||||
|---|---|---|---|---|---|---|---|---|
| value via profit of the year | ||||||||
| Derivatives | Trade receiv | Available | Total | |||||
| Parent company 2009 | Loans valued at fair value |
Derivatives | with hedge accounting |
ables and loan receivables |
for-sale assets |
Other liabilities |
carrying amount |
Fair value |
| Financial instruments included in net financial debt |
||||||||
| Non-current financial receivables | ||||||||
| Deposits with credit institutions | - | - | - | - | - | - | - | |
| Derivatives | ||||||||
| Receivables from Group companies | - | - | - | 2 602 | - | 2 602 | 2 602 | |
| Other financial receivables | - | - | - | 27 | - | 27 | 27 | |
| 2 629 | 2 629 | 2 629 | ||||||
| Current financial receivables | ||||||||
| Accrued interest | - | - | 6 | - | 6 | 6 | ||
| Derivatives | - | 51 | - | 51 | 51 | |||
| Receivables from Group companies | - | |||||||
| Other financial receivables | - | - | 17 | - | 17 | 17 | ||
| 51 | 23 | 74 | 74 | |||||
| Cash and cash equivalents | ||||||||
| Current deposit of cash and cash | ||||||||
| equivalents | - | - | - | - | - | - | - | |
| Bank balances | - | - | - | 88 | - | 88 | 88 | |
| 88 | 88 | 88 | ||||||
| Non-current liabilities | ||||||||
| MTN loans | - | 2 183 | 2 183 | 2 205 | ||||
| Loans from banks and other | ||||||||
| credit institutions | - | 1 240 | 1 240 | 1 240 | ||||
| Liabilities to Group companies | - | 2 193 | 2 193 | 2 193 | ||||
| Derivatives | - | 37 | - | 37 | 37 | |||
| 37 | 5 615 | 5 652 | 5 675 | |||||
| Current liabilities | ||||||||
| Commercial paper programme | - | 945 | 945 | 945 | ||||
| Bank account liabilities | - | 249 | 249 | 249 | ||||
| Current portion of long-term loans | - | 619 | 619 | 619 | ||||
| Derivatives | - | 19 | 22 | - | 41 | 41 | ||
| Accrued interest | - | 54 | 54 | 54 | ||||
| Liabilities to Group companies | ||||||||
| Other current liabilities | - | 7 | 7 | 7 | ||||
| 19 | 22 | 1 875 | 1 916 | 1 916 | ||||
| Financial instruments not included in net financial debt |
||||||||
| Other shares and participating interests | - | 9 | - | 9 | ||||
| Trade receivables | - | 1 988 | - | 1 988 | 1 988 | |||
| Derivatives (recognised among | ||||||||
| operating receivables) | - | 2 | 190 | - | 192 | 192 | ||
| Trade payables | - | 1 489 | 1 489 | 1 489 | ||||
| Derivatives (recognised among | ||||||||
| operating liabilities) | - | 50 | 248 | - | 298 | 298 |
| Items recognised at fair | ||||||||
|---|---|---|---|---|---|---|---|---|
| value via profit of the year | ||||||||
| Derivatives | Trade receiv | Available | Total | |||||
| Loans valued | with hedge | ables and loan | for-sale | Other | carrying | |||
| Parent company 2008 | at fair value | Derivatives | accounting | receivables | assets | liabilities | amount | Fair value |
| Financial instruments included in net financial debt |
||||||||
| Non-current financial receivables | ||||||||
| Deposits with credit institutions | ||||||||
| Derivatives | - | 32 | - | 32 | 32 | |||
| Receivables from Group companies | - | 2 663 | - | 2 663 | 2 663 | |||
| Other financial receivables | - | - | 27 | - | - | 27 | 27 | |
| - | 32 | - | 2 690 | - | - | 2 722 | 2 722 | |
| Current financial receivables | ||||||||
| Accrued interest | - | 6 | - | 6 | 6 | |||
| Derivatives | - | 65 | - | 65 | 65 | |||
| Receivables from Group companies | - | |||||||
| Other financial receivables | - | - | 16 | - | - | 16 | 16 | |
| - | 65 | - | 23 | - | - | 88 | 88 | |
| Cash and cash equivalents | ||||||||
| Current deposit of cash and cash | ||||||||
| equivalents | - | 226 | - | 226 | 226 | |||
| Bank balances | - | - | - | 316 | - | - | 316 | 316 |
| - | - | - | 542 | - | - | 542 | 542 | |
| Non-current liabilities | ||||||||
| MTN loans | - | 1 262 | 1 262 | 1 282 | ||||
| Loans from banks and other | ||||||||
| credit institutions | - | 1 404 | 1 404 | 1 412 | ||||
| Liabilities to Group companies | - | 3 660 | 3 660 | 3 660 | ||||
| Derivatives | - | 13 | 126 | - | - | 139 | 139 | |
| - | 13 | 126 | - | - | 6 325 | 6 464 | 6 493 | |
| Current liabilities | ||||||||
| Commercial paper programme | - | 1 467 | 1 467 | 1 467 | ||||
| Bank account liabilities | - | 143 | 143 | 143 | ||||
| Current portion of long-term loans | - | 567 | 567 | 567 | ||||
| Derivatives | - | 154 | 1 | - | 155 | 155 | ||
| Accrued interest | - | 125 | 125 | 125 | ||||
| Liabilities to Group companies | ||||||||
| Other current liabilities | - | - | - | - | 2 255 | 2 255 | 2 255 | |
| - | 154 | 1 | - | - | 4 558 | 4 713 | 4 713 | |
| Financial instruments not included in net financial debt |
||||||||
| Other shares and participating interests | - | 11 | - | 11 | ||||
| Trade receivables | - | 2 343 | - | 2 343 | 2 343 | |||
| Derivatives (recognised among | ||||||||
| operating receivables) | - | 33 | 105 | - | 138 | 138 | ||
| Trade payables | - | 1 738 | 1 738 | 1 738 | ||||
| Derivatives (recognised among operating liabilities) |
- | 137 | 1 098 | - | 1 235 | 1 235 |
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Raw materials and consumables | 830 | 885 | 534 | 534 |
| Timber and pulpwood | 211 | 297 | 182 | 237 |
| Finished products and work in progress | 1 081 | 1 454 | 756 | 1 118 |
| Felling rights | 577 | 737 | 541 | 684 |
| Electricity certificates and emission rights |
152 | 62 | 129 | 56 |
| Total | 2 850 | 3 434 | 2 142 | 2 629 |
The year's impairment losses on inventories adversely affecting profit for the year amount to SEK 70 million (26) for the Group and to SEK 40 million (28) for the parent company. In 2009, emission rights were reclassified from intangible noncurrent assets to inventories.
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Trade receivables | ||||
| Group companies | - | 114 | 162 | |
| Associates | 46 | 64 | 46 | 64 |
| Other | 2 666 | 3 080 | 1 828 | 2 118 |
| Total trade receivables | 2 712 | 3 144 | 1 988 | 2 343 |
| Current receivables | ||||
| Group companies | - | 0 | ||
| Associates | 9 | 5 | 5 | 5 |
| Other | 160 | 220 | 113 | 143 |
| Derivatives | 225 | 157 | 192 | 138 |
| Prepayments and | ||||
| accrued income | 96 | 166 | 72 | 135 |
| Total other operating receivables | 490 | 548 | 383 | 421 |
| Total operating receivables | 3 202 | 3 692 | 2 371 | 2 764 |
Trade receivables are stated after deduction of anticipated and actual credit losses. The Holmen Paper business area's trade receivables correspond to 58 per cent of the Group's total trade receivables, while those of Iggesund Paperboard account for 27 per cent. The Group's trade receivables mainly relate to European customers. Trade receivables denominated in foreign currencies are valued at closing rates. The fair values of derivatives relate to hedges for future cash flows.
Customer credit risk. The risk that the Group's customers will not fulfil their payment obligations is limited by means of credit worthiness checks, internal credit limits per customer and, in some cases, by insuring trade receivables against credit losses. At 31 December 2009 some 50 per cent (54) of the Group's trade receivables were insured against credit losses. Holmen's exposure to individual customers is limited and in 2009 sales to the five largest customers accounted for just under 11 per cent of the Group's total turnover.
During the year, losses on trade receivables had a negative SEK 14 million (negative: 1) impact on earnings.The provision for anticipated credit losses on trade receivables amounted to SEK 21 million (13) at 31 December 2009 and it has been recognised net together with trade receivables. During the year the provision was reduced by SEK 0 million (-22) as a result of actual credit losses, and was increased by SEK 8 million (2) as a result of changes in the provision for anticipated credit losses.
At 31 December 2009 trade receivables of SEK 120 million (144) had been due for payment for more than 15 days, excluding trade receivables for which provisions had been made. The maturity structure of these items is shown in the next table:
| Group, SEKm | 2009 | 2008 | |
|---|---|---|---|
| Total trade receivables | 2 712 | 3 144 | |
| Of which overdue > 15 days * | 120 | 144 | |
| Of which overdue > 30 days ** | 92 | 88 |
* incl. overdue > 30 days.
** excl. bad debts/provisions recognised in profit/loss.
| 31 Dec 2009 | |||
|---|---|---|---|
| Parent company | Number | value | SEKm |
| Registrered share capital | |||
| Class A | 22 623 234 | 50 | 1 131.2 |
| Class B | 62 132 928 | 50 | 3 106.6 |
| Total number of shares | 84 756 162 | 4 237.8 | |
| Bought back class B shares | -760 000 | ||
| Total number of shares outstanding | 83 996 162 | ||
| Issued call options, B shares | 758 300 |
| 31 Dec 2008 | |||
|---|---|---|---|
| Parent company | Number | Quotient value |
SEKm |
| Registrered share capital | |||
| Class A | 22 623 234 | 50 | 1 131.2 |
| Class B | 62 132 928 | 50 | 3 106.6 |
| Total number of shares | 84 756 162 | 4 327.8 | |
| Bought back class B shares | -760 000 | ||
| Total number of shares outstanding | 83 996 162 |
At 31 December 2009 the Group's own shareholding was 760 000 shares (760 000). None of the Group's own shares were sold during the year.
Issued call options, B shares 758 300
The Board proposes that the AGM, to be held on 24 March 2010, approves a dividend of SEK 7 per share. The proposed dividend totals SEK 588 million. The preceding year, the dividend paid was SEK 9 per share (SEK 756 million).
Assets and liabilities measured at fair value according to Chapter 4 Section 14a of the Swedish Annual Accounts Act had a negative impact of SEK 132 million (1 294) on parent company equity. In the Group, valuation of derivatives and other financial instruments had a negative impact of SEK 96 million (1 291) on equity.
Holmen's profitability target is a return that is consistently above the marketbased cost of capital. Decisions on ordinary dividend are based on an appraisal of the Group's profitability, future investment plans and financial position. The aim is to have a robust financial position with a debt/equity ratio in the interval of 0.3– 0.8. Neither the parent company nor the subsidiaries are subject to external capital requirements, except for Holmen Försäkring AB, the Group's insurance company that insures Group companies internally, which complies with the Swedish Financial Supervisory Authority's regulations on the ratio between equity and risk. For more details about the Group's capital management, see the administration report on pages 46 and 48.
Holmen has defined benefit occupational pension plans for its salaried employees in Sweden (ITP plan) and for most of its employees in the UK. These plans provide benefits based on final salary and period of employment. The scheme in the UK has been closed for new entrants since the end of June 2004. Since then, new employees have been offered a defined contribution pension scheme. Occupational pension plans for "blue-collar" employees in Sweden are defined contribution plans.
The commitments arising out of the pension schemes in the UK are placed in trusts. The defined benefit commitments over and above the ITP plan for Group management in Sweden are secured by means of a pension fund. These commitments are recognised in the consolidated accounts as defined benefit plans in accordance with IAS 19. Most of the defined benefit pension commitments on behalf of salaried employees in Sweden are secured by means of insurance policies with Alecta. As Alecta cannot provide sufficient information to permit the ITP plan to be stated in the accounts as a defined benefit plan it is stated in accordance with statement UFR 6 of the Swedish Financial Reporting Board as a defined contribution plan. The year's premiums for pension insurance policies taken out with Alecta amounted to SEK 37 million (24), of which SEK 35 million (22) relates to old age and family pensions. These are included among staff costs in the income statement. Alecta's surplus can be allocated to policyholders and/or the persons insured. At the end of 2009, Alecta's collective consolidation level was 141 per cent (112).
| Group | Parent company | |||
|---|---|---|---|---|
| Pension costs | 2009 | 2008 | 2009 | 2008 |
| Defined benefit plans | ||||
| Staff cost | -17 | -20 | 7 | -10 |
| Finance income | 0 | 2 | 0 | - |
| Finance costs | -28 | -7 | -3 | -1 |
| Total defined benefit plans stated in income statement |
-45 | -25 | 4 | -11 |
| Defined contribution plans | ||||
| Staff cost | -145 | -104 | -132 | -92 |
| Total recognised in income statement | -190 | -129 | -128 | -103 |
The year's actuarial adjustment for the Group was SEK 15 million (-169), including the cost of associated special employer's contribution of SEK 2 million (7), which was recognised in other comprehensive income. The accumulated actuarial revaluation amounts to a cost of SEK 113 million (128).
The change in the defined benefit commitments and the change in plan assets are specified in the table below. Most of the commitments relate to the pension plans in the UK.
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Commitments | ||||
| Commitments at 1 January | -1 553 | -1 769 | -189 | -183 |
| Cost of employment during current period | -21 | -20 | -6 | 0 |
| Interest costs | -87 | -88 | -3 | -1 |
| Actuarial gains/losses | -118 | 75 | - | - |
| Premiums paid by employees | -7 | -7 | - | - |
| Pensions paid | 105 | 89 | 31 | 24 |
| Transferred from provisions | -13 | -36 | -13 | -36 |
| Settlements | 4 | 6 | - | 6 |
| Exchange differences | -16 | 198 | - | - |
| Commitments at 31 December | -1 706 | -1 553 | -180 | -189 |
| Plan assets | ||||
| Fair value of assets at 1 January | 1 199 | 1 521 | 125 | 135 |
| Expected return | 59 | 83 | - | - |
| Actuarial gains/losses | 131 | -237 | - | - |
| Real return (parent company) | - | - | 19 | 10 |
| Premiums paid by employer | 53 | 54 | - | - |
| Premiums paid by employees | 7 | 7 | - | - |
| Pensions paid | -74 | -63 | -8 | - |
| Exchange differences | 11 | -167 | - | - |
| Fair value of assets at 31 December | 1 385 | 1 199 | 137 | 125 |
| Pension provisions, net | -320 | -354 | -43 | -64 |
Of the Group's total commitments, SEK 53 million (68) refers to those that are not funded, while the rest are wholly or partially funded commitments. Of the parent company's commitments, SEK 43 million (58) are secured under the act on safeguarding pension obligations, Tryggandelagen.
Plan assets by type are as shown below:
| Group | Parent company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Plan assets | ||||
| Equity | 611 | 457 | 52 | 35 |
| Bonds | 691 | 617 | 85 | 89 |
| Current fixed income investments | 84 | 125 | 0 | 1 |
| 1 385 | 1 199 | 137 | 125 |
The plan assets do not include any financial instruments issued by Group companies or assets used by the Group.
| Key actuarial assumptions, Group | 2009 | 2008 |
|---|---|---|
| (weighted average), % | 31 Dec | 31 Dec |
| Discount rate | 5.5 | 5.4 |
| Expected return on plan assets | 5.5 | 4.9 |
| Pay increases in the future | 4.2 | 3.9 |
| Inflation in the future | 3.4 | 2.9 |
The expected return on fixed income securities was estimated on the basis of highly rated long-term bonds; in the case of shares, a risk premium was added.
A discount rate of 4.2 per cent (4.0) and salary levels at the balance sheet date were used for calculating the amount of the parent company's pension commitment.
| Five-year figures, Group | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|
| Present value of commitments | -1 706 | -1 553 | -1 769 | -1 866 | -1 818 |
| Fair value of plan assets | 1 385 | 1 199 | 1 521 | 1 510 | 1 400 |
| Net | -320 | -354 | -247 | -356 | -418 |
| Adjustments based on experience |
|||||
| Defined benefit commitments | -11 | -3 | 4 | 15 | |
| Plan assets | 131 | -237 | -6 | 32 |
The Group's payments into the funded defined benefit plans in 2010 are expected to amount to SEK 51 million.
| Provisions for taxes |
Silviculture provision |
Other provisions |
Total | |||||
|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |
| Group | ||||||||
| Carrying amount at start of year | 692 | 426 | 153 | 141 | 511 | 193 | 1 357 | 759 |
| Provisions during the period | - | 267 | 100 | 101 | 145 | 391 | 246 | 759 |
| Utilised during the period | - | - | -93 | -88 | -132 | -74 | -224 | -162 |
| Translation differences | - | - | - | - | -3 | 0 | -3 | 0 |
| Closing carrying amount | 692 | 692 | 161 | 153 | 522 | 511 | 1 375 | 1 357 |
| Of which non-current part of the provisions | 692 | 692 | 71 | 54 | 338 | 333 | 1 102 | 1 080 |
| Of which current part of the provisions | - | - | 90 | 99 | 184 | 178 | 274 | 277 |
| Parent company | ||||||||
| Carrying amount at start of year | 45 | 45 | 153 | 141 | 496 | 46 | 695 | 231 |
| Provisions during the period | - | - | 100 | 101 | 30 | 522 | 130 | 623 |
| Utilised during the period | - | - | -93 | -88 | -128 | -72 | -221 | -160 |
| Closing carrying amount | 45 | 45 | 161 | 153 | 398 | 496 | 604 | 695 |
| Of which non-current part of the provisions | 45 | 45 | 71 | 54 | 269 | 320 | 386 | 419 |
| Of which current part of the provisions | - | - | 90 | 99 | 129 | 177 | 218 | 275 |
Holmen has made a provision of SEK 692 million to cover disputes and uncertainties relating to taxes. Holmen has one large tax case still in progress, affecting MoDo Capital, a Holmen subsidiary. In January 2010, the County Administrative Court did not rule in favour of the company, resulting in tax expense estimated at a total of about SEK 640 million. The provision for taxes covers this expense; it is thus not anticipated that the expense will affect the Group's earnings. Holmen will appeal against the judgment to the Administrative Court of Appeal.
The silviculture provision relates to a provision to cover coming reforestation measures to be taken after completion of final harvesting. The measures are normally carried out within three years after harvesting.
Other provisions primarily relate to obligations to restore the environment, as well as staff costs and restructuring costs. In 2009 production ceased on Workington's BM1 board machine, and major staff cuts were initiated at Braviken Paper Mill. In 2008, operations ceased at Wargön Mill, and production was discontinued on the PM 2 machine and the line for recovered paper at Hallsta Paper Mill. By the end of 2009, provisions of SEK 254 million had been made to cover the costs of these restructuring measures.
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Trade payables | |||||
| Group companies | - | - | 129 | 136 | |
| Associates | 39 | 62 | 0 | - | |
| Other | 1 872 | 2 220 | 1 360 | 1 602 | |
| Total trade payables | 1 911 | 2 282 | 1 489 | 1 738 | |
| Current liabilities | |||||
| Associates | - | 2 | - | 2 | |
| Other | 253 | 237 | 203 | 193 | |
| Derivatives | 258 | 1 191 | 298 | 1 235 | |
| Accruals and deferred income | 637 | 727 | 429 | 509 | |
| Total other operating liabilities | 1 149 | 2 157 | 930 | 1 938 | |
| Total operating liabilities | 3 060 | 4 439 | 2 419 | 3 676 |
All trade payables are due for payment within one year.
Accruals and deferred income in the parent company mainly consists of staff costs of SEK 207 million (225) and discounts of SEK 46 million (60).
Fair values of derivatives relate substantially to hedging of future cash flows; see notes 2 and 14.
In 2009, the Group's lease payments amounted to SEK 25 million (23), and the parent company's to SEK 9 million (12). The Group's lease agreements relate to forklift trucks. No new lease agreements of any significance for the business were entered into during the 2009 financial year. No leased equipment was rented out.
| Group | Parent company | |||||
|---|---|---|---|---|---|---|
| 2011 | 2011 | |||||
| 2010 | –2015 2016– | 2010 | –2015 2016– | |||
| Future lease payments | 21 | 19 | - | 8 | 0 | - |
| Present value of future lease | ||||||
| payments | 21 | 18 | - | 7 | 0 | - |
The contracts have remaining durations ranging from 1 to 5 years. The Group's future lease payments for existing lease agreements amounted to SEK 33 million at the end of 2008. Those in the parent company amounted to SEK 6 million.
Apart from lease agreements, Holmen has time charter contracts in respect of five ships that are used to distribute the company's products. The contracts were entered into in 2006 and 2008 and run for a remaining 1 to 7 years.
| Pledged collateral value | ||||||||
|---|---|---|---|---|---|---|---|---|
| Total | ||||||||
| Property | Other | pledged | pledged | |||||
| mortgages | collateral | collateral | collateral | |||||
| 2009 | 2008 | |||||||
| Group | ||||||||
| For own liabilities | ||||||||
| Financial liabilities | 6 | 15 | 21 | 25 | ||||
| Total | 6 | 15 | 21 | 25 | ||||
| Parent company | ||||||||
| For own liabilities | ||||||||
| Financial liabilities | 6 | - | 6 | 6 | ||||
| Total | 6 | 0 | 6 | 6 |
| Group | Parent company | |||
|---|---|---|---|---|
| Contingent liabilities | 2009 | 2008 | 2009 | 2008 |
| Surety on behalf of Group companies | - | - | 602 | 444 |
| Other contingent liabilities | 140 | 671 | 86 | 321 |
| Total | 140 | 671 | 688 | 766 |
The parent company's surety on behalf of Group companies relates mainly to surety for loans in the subsidiary Holmen Energi Elhandel AB.
On the basis of the Swedish Environmental Code, the Swedish environmental authorities may raise the issue of soil tests and site restoration at discontinued units. Responsibility for restoring the environment is determined from case to case, often with the aid of a reasonability assessment. Holmen has environmentrelated contingent liabilities that cannot at present be quantified, but that could involve costs in the future.
Of the parent company's net sales of SEK 13 436 million (14 382), 0.8 (0.9) per cent relates to deliveries to Group companies. The parent company's purchases from Group companies amounted to SEK 143 million.
There are significant financial receivables and liabilities between the parent company and its Swedish subsidiaries, which do not carry interest.
The parent company has a related party relationship with its subsidiaries (see note 24).
L E Lundbergföretagen AB is a large shareholder in Holmen (see page 29). Holmen rents office premises for SEK 7 million (7) from Fastighets AB L E Lundberg, which is a group company within L E Lundbergföretagen AB. In 2009, Fredrik Lundberg, who is CEO and principal shareholder in L E Lundbergföretagen, received a fee of SEK 550 000 as Board chairman of Holmen.
Transactions with related parties are priced at market-based conditions. The equity holdings in associates that produce hydro and wind power entitle the Group to buy the electricity produced at cost price in relation to the shareholding, which means that the associate only earns a limited profit. Purchased electricity is sold to external customers at market price, and the earnings are stated in the consolidated accounts within the Holmen Energi business area.
In Spain, energy and recovered paper are purchased from associates.
| Sale of products to related parties |
Purchase of products from related parties |
Other (e.g. interest, dividend) |
Liability to related parties |
Receivable from related parties |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Group | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Associates | 220 | 190 | 273 | 384 | 1 | 1 | 39 | 64 | 194 | 104 |
| Parent company | ||||||||||
| Subsidiaries | 103 | 134 | 143 | 291 | 1 146 | 41 | 2 322 | 3 813 | 2 716 | 2 842 |
| Associates | 220 | 190 | 0 | - | 1 | 1 | 0 | 2 | 87 | 104 |
For fees and remuneration paid to members of the Board see note 5.
| Parent company | 2009 | 2008 |
|---|---|---|
| Accumulated acquisition cost | ||
| Carrying amount at start of year | 17 426 | 17 397 |
| Purchases | - | 208 |
| Shareholder contribution | 323 | 228 |
| Sales | -1 073 | -407 |
| Closing balance at 31 December | 16 676 | 17 426 |
| Accumulated revaluations | ||
| Carrying amount at start of year | 2 299 | 2 299 |
| Closing balance at 31 December | 2 299 | 2 299 |
| Accumulated impairment losses | ||
| Carrying amount at start of year | 4 222 | 4 222 |
| Impairment losses for the year | 436 | - |
| Closing balance at 31 December | 4 658 | 4 222 |
| Closing carrying amount | 14 318 | 15 503 |
The parent company's impairment losses on participating interests in Group companies are recognised in the income statement in the line item Impairment losses on financial non-current assets, and refer to holdings in Swedish subsidiaries.
Several mergers took place within the Group during the year, aiming to simplify the company's structure in Sweden; Iggesund Kraft AB, Junkaravan AB and MoDo Holding AB were merged with Holmen Energi Elhandel AB. In conjunction with the mergers, Holmen AB transferred its shares in the relevant subsidiaries to Holmen Energi Elhandel AB, reported in the line item Sales (negative: SEK 1 073 million). The transfer took place at the carrying amount.
| 2009 | 2008 | |||||||
|---|---|---|---|---|---|---|---|---|
| Corporate | Registered | Carrying amount | Carrying amount | |||||
| ID No. | office | No. of shares | Interest, %* | SEK thousands | Interest, %* | SEK thousands | ||
| Holmen Paper AB | 556005-6383 | Norrköping | 100 | 100 | 100 | 100 | 100 | |
| Iggesund Paperboard AB | 556088-5294 | Hudiksvall | 1 000 | 100 | 100 | 100 | 100 | |
| Holmen Timber AB | 556099-0672 | Hudiksvall | 1 000 | 100 | 100 | 100 | 100 | |
| Holmen Skog AB | 556220-0658 | Örnsköldsvik | 1 000 | 100 | 83 | 100 | 83 | |
| Holmen Energi AB | 556524-8456 | Örnsköldsvik | 1 000 | 100 | 100 | 100 | 100 | |
| Fiskeby AB | 556000-9218 | Norrköping | 2 000 000 | 100 | 646 160 | 100 | 646 160 | |
| Holmen Energi Elhandel AB | 556537-4286 | Stockholm | 1 000 | 100 | 100 | 100 | 100 | |
| Holmens Bruk AB | 556002-0264 | Norrköping | 49 514 201 | 100 | 4 286 121 | 100 | 4 286 121 | |
| Holmen Försäkring AB | 516406-0062 | Stockholm | 10 000 | 100 | 45 304 | 100 | 45 175 | |
| AB Iggesunds Bruk | 556000-8053 | Hudiksvall | 6 002 500 | 100 | 3 932 558 | 100 | 3 932 558 | |
| Iggesund Kraft AB | 556422-0902 | Örnsköldsvik | - | - | - | 100 | 61 361 | |
| Junkaravan AB | 556227-3630 | Örnsköldsvik | - | - | - | 100 | 549 125 | |
| MoDo Capital AB | 556499-1668 | Stockholm | 1 000 | 100 | 71 552 | 100 | 96 588 | |
| MoDo Holding AB | 556537-6281 | Örnsköldsvik | - | - | - | 100 | 462 372 | |
| Skärnäs Terminal AB | 556008-3171 | Hudiksvall | 4 800 | 100 | 2 913 | 100 | 2 913 | |
| Other Swedish Group companies | 3 211 | 90 836 | ||||||
| Total Swedish holdings | 8 988 402 | 10 173 793 | ||||||
| Holmen France Holding S.A.S., France | Paris | 40 000 | 100 | 5 192 | 100 | 5 192 | ||
| Iggesund Decoupe France, S.A., France ** | Valence | - | 100 | - | 100 | - | ||
| Holmen UK Ltd, UK | Workington | 1 197 100 | 100 | 1 518 959 | 100 | 1 518 959 | ||
| Holmen Paper UK Ltd ** | London | - | 100 | - | 100 | - | ||
| Iggesund Paperboard (Workington) Ltd ** | Workington | - | 100 | - | 100 | - | ||
| Holmen GmbH, Germany | Hamburg | 100 | 655 | 100 | 655 | |||
| Holmen Suecia Holding S.L., Spain | Madrid | 9 448 557 | 100 | 3 577 265 | 100 | 3 577 265 | ||
| Holmen Paper Madrid S.L. ** | Madrid | - | 100 | - | 100 | - | ||
| Cartón y Papel Reciclado S.A. (Carpa), Spain ** | Madrid | - | 100 | - | 100 | - | ||
| Iggesund Paperboard Asia Pte Ltd, Singapore | Singapore | 800 000 | 100 | 4 273 | 100 | 4 273 | ||
| Iggesund Paperboard Europe B.V., the Netherlands | Amsterdam | 35 | 100 | 207 733 | 100 | 207 733 | ||
| Iggesund (Paper & Board) Services B.V. ** | Utrecht | - | 100 | - | 100 | - | ||
| AS Holmen Mets, Estonia | Tallinn | 500 | 100 | - | 100 | - | ||
| Other non-Swedish Group companies | 15 029 | 15 122 | ||||||
| Total non-Swedish holdings | 5 329 106 | 5 329 199 | ||||||
| Total | 14 317 508 | 15 502 992 | ||||||
* Percentage of shares and percentage of votes for the total number of shares are the same.
** Indirect holding.
| 31 Dec | 31 Dec | ||
|---|---|---|---|
| Parent company | 2009 | Appropriations | 2008 |
| Accumulated depreciation and amortisation in excess of plan |
|||
| Intangible non-current assets | 4 | 0 | 4 |
| Property, plant and equipment | 9 | 5 | 4 |
| Total | 13 | 5 | 8 |
| Tax allocation reserve | |||
| Assessment of tax 2004 | 0 | -518 | 518 |
| Assessment of tax 2005 | 0 | -590 | 590 |
| Assessment of tax 2006 | 520 | 520 | |
| Assessment of tax 2007 | 490 | 490 | |
| Assessment of tax 2008 | 570 | 570 | |
| Assessment of tax 2009 | 55 | 55 | |
| Assessment of tax 2010 | 715 | 715 | |
| 2 350 | -393 | 2 743 | |
| Total | 2 363 | -388 | 2 751 |
| Group | Parent company | |||
|---|---|---|---|---|
| Interest paid and dividends received | 2009 | 2008 | 2009 | 2008 |
| Dividends received | - | - | 1 156 | 15 |
| Interest received | 7 | 14 | 19 | 87 |
| Interest paid | -287 | -335 | -272 | -331 |
| Total | -280 | -320 | 903 | -229 |
The change in current liabilities mostly relates to borrowing within the Group's commercial paper programme and to utilisation of the Group's long-term committed credit facility. In 2009, a number of different short-term loans amounting in total to SEK 8 760 million (9 327) were raised within the Group's commercial paper programme, and SEK 9 295 million (11 398) was repaid. Several different short-term loans amounting in total to SEK 1 880 million (2 702) were raised in 2009 within the Group's long-term credit facility, and SEK 4 131 million (516) were repaid.
For a specification of cash and cash equivalents see Note 14.
When preparing financial reports the company's management is required to make assessments and estimates that have an effect on the stated amounts. The assessments and estimates that, in the view of the company's management, are of importance for the amounts stated in the annual report, and for which there is a significant risk that future events and new information could alter these assessments and estimates, mainly include:
Holmen's assessment is that no relevant market prices are available that can be used to value forest holdings as extensive as Holmen's. The valuation is therefore made by calculating the present value of future expected cash flows from the growing forests. The most material estimates made relate to how much harvesting can be increased in the future, what changes there will be in pulpwood and timber prices, how high inflation will be, and what discount rate is used. Note 12 provides a sensitivity analysis for the valuation of changes in these estimates. The carrying amount of biological assets at 31 December 2009 was SEK 11 109 million and the attributable deferred tax liability SEK 2 922 million, to give a net value of SEK 8 187 million.
Holmen has one large tax case still in progress, affecting MoDo Capital, a Holmen subsidiary. In January 2010, the County Administrative Court did not rule in favour of the company, resulting in tax expense estimated to total SEK 640 million. The provision for taxes covers this expense; it is thus not anticipated that it will have any impact on the Group's earnings. Holmen will appeal against the judgment to the Administrative Court of Appeal. See notes 8, 19 and 22.
Net deferred tax assets of SEK 307 million are recgonised in the consolidated accounts on the basis of the assessment that it will probably be possible to utilise them to reduce tax payments in the future. Over and above this , at year-end the Group had loss carry-forwards and fiscal temporary differences corresponding to tax of some SEK 570 million not stated in the consolidated accounts on the grounds for assessment that utilisation must be likely. See note 8.
The Group's provision for pensions amounts to SEK 320 million on the basis of defined benefit pension commitments valued at SEK 1 706 million and plan assets of SEK 1 385 million provided to cover them. The value of pension commitments is estimated on the basis of assumptions regarding discount rates, inflation, future pay increases, and demographic factors. These assumptions are normally updated each year, which has an effect on the size of the recognised pension liability and equity. Together with assumptions regarding the expected return on plan assets, these assumptions will have an influence on the coming year's recognised pension cost. See note 18.
Provisions have been made to cover environmentally-related measures associated with former activities based on estimated future site-restoration costs. Moreover it is judged that the company has a responsbility for environmental measures that cannot at present be quantified but that could involve costs in the future. See note 22.
In 2009 production ceased on Workington's BM 1 board machine, and major staff cuts were initiated at Braviken Paper Mill. In 2008, operations ceased at Wargön Mill, and production was discontinued on the PM 2 paper machine and the line for recovered paper at Hallsta Paper Mill. By the end of 2009, provisions of SEK 254 million had been made to cover the costs of these restructuring measures. The uncertainty regarding the amount of the provision relates primarily to the cost of restoring the mill site and how much income will be received from the sale of machinery. Restructuring costs normally arise as a consequence of changes in the business. The Group makes minor changes on an ongoing basis, and costs associated with these are not normally specified separately. No major changes have been announced, but, should the situation alter, further provisions may become necessary.
Holmen has an obligation to carry out regular impairment testing to determine the need to state new impairment losses and/or reversals. In 2007 impairment losses of SEK 1 603 million were recognised on goodwill and property, plant and equipment within the Holmen Paper business area. This impairment was based on estimates of recoverable amounts using assumptions regarding future changes in prices, volumes and costs, as well as the estimated market cost of capital. Changes in conditions may have an effect on the estimated recoverable amount applied in connection with future impairment tests. Uncertainty about trends in the demand for and price of newsprint is greater than usual.
| The following unappropriated earnings of the parent company are at | |
|---|---|
| the disposal of the Annual General Meeting: | SEK |
| Net profit for the 2009 financial year | 1 664 178 896 |
| Retained earnings brought forward | 3 112 287 430 |
| 4 776 466 326 | |
| The Board of Directors propose that | |
| an ordinary dividend of SEK 7 per share (83 996 162 shares) be paid to shareholders | 587 973 134 |
| and that the remaining amount be carried forward | 4 188 493 192 |
| 4 776 466 326 |
The Board of Holmen AB has proposed that the 2010 Annual General Meeting resolves in favour of paying a dividend of SEK 7 per share, a total of SEK 588 million, which is a reduction of SEK 2 per share compared to the previous year.
The proposed dividend means that 4 per cent of the Group's equity at 31 December 2009 will be paid out by way of dividend. The proposal complies with the Board's policy, in that decisions on dividend are to be based on an appraisal of the Group's profitability, future investment plans and financial position. The proposed dividend corresponds to 58 per cent of the net profit for 2009.
The Board has established that the Group shall have a strong financial position with a debt/equity ratio – defined as net financial debt in relation to equity – in the interval between 0.3 and 0.8. The debt/equity ratio at 31 December 2009 was 0.34. Payment of the proposed dividend would raise the debt/equity ratio by around 0.05.
Holmen AB's equity at 31 December 2009 amounted to SEK 10 691 million, of which non-restricted equity was SEK 4 776 million. The Group's equity on the same date amounted to SEK 16 504 million. Complying with IFRS, no distinction is made at Group level between restricted and non-restricted equity.
The Board considers that payment of a dividend of the amount proposed is justifiable in view of the demands made on the company and the Group by the nature, extent and risks associated with the business in terms of the amount of equity required, and taking into account the need for consolidation, liquidity and financial position in other respects. The financial position will remain strong after payment of the proposed dividend and is considered to be fully adequate to enable the company to fulfil its obligations in both the short and the long term, as well as to finance such investments as may be necessary.
The Board and CEO declare that the annual report was prepared in accordance with generally accepted accounting principles in Sweden and the Group's financial statements were prepared in accordance with the international accounting standards referred to in the European Parliament's and Council's regulation (EG) No. 1606/2002 of 19 July 2002 concerning the application of international accounting standards. The annual report and the Group's financial statements provide a true and fair picture of the performance and financial position of the parent company and the Group. The administration report for the parent company and the Group provides a true and fair picture of the development of the operations, financial position and performance of the Group and the parent company and also describes material risks and uncertainties to which the parent company and the other companies in the Group are exposed.
The annual report and the Group's financial statements were approved for publication by the Board in its decision of 22 February 2010. The Group's income statement and balance sheet and the parent company's income statement and balance sheet will be presented for adoption at the Annual General Meeting that will be held on 24 March 2010.
Stockholm, 22 February 2010
Fredrik Lundberg Kenneth Johansson Ulf Lundahl
Chairman Board member Board member
Carl Bennet Carl Kempe Göran Lundin
Board member Deputy chairman Board member
Steewe Björklundh Curt Källströmer Karin Norin Board member Board member Board member
Lilian Fossum Hans Larsson Magnus Hall
Board member Board member Board member and Chief Executive Officer
Our audit report was submitted on 24 February 2010.
KPMG AB
Authorised public accountant
To the Annual General Meeting of the shareholders in Holmen Aktiebolag. Corporate identity No. 556001-3301
We have audited the annual report, the Group's financial statements, the accounting records and the administration of the Board of Directors and the CEO of Holmen AB for the year 2009. The annual report and the Group's financial statements are included in the printed version of this document on pages 42–84. The Board of Directors and the CEO have responsibility for these accounts and the administration of the company as well as for the application of the Swedish Annual Accounts Act when preparing the annual report and the application of international financial reporting standards IFRS as adopted by the EU and the Swedish Annual Accounts Act when preparing the Group's financial statements. Our responsibility is to express our opinion on the annual report, the Group's financial statements and the administration on the basis of our audit.
We carried out our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable but not absolute assurance that the annual report and the Group's financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the CEO and significant estimates made by the Board of Directors and the CEO when preparing the annual report and the Group's financial statements as well as evaluating the overall presentation of the information in the annual report and the Group's financial statements. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any Board member or the CEO. We also examined whether any board member or the CEO in any other way acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.
The annual report were prepared in accordance with the Swedish Annual Accounts Act and gives a true and fair view of the company's financial position and the result of its operations in accordance with generally accepted accounting principles in Sweden. The Group's financial statements were prepared in accordance with international financial reporting standards IFRS as adopted by the EU and the Swedish Annual Accounts Act and give a true and fair view of the Group's financial position and the result of its operations. The administration report is consistent with the other parts of the annual report and the Group's financial statements.
We recommend to the Annual General Meeting of shareholders that the income statements and balance sheets of the parent company and the Group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the Board of Directors and the CEO be discharged from liability for the financial year.
Stockholm, 24 February 2010
KPMG AB
George Pettersson
Authorised public accountant
The 2010 Annual General Meeting of Holmen AB will be held at "Vinterträdgården", Grand Hôtel (the Royal entrance), Stockholm, at 4.00 p.m. CET on Wednesday 24 March.
Shareholders who wish to participate in the Annual General Meeting shall be entered in the register of shareholders maintained by Euroclear Sweden AB no later than Thursday 18 March 2010, and shall notify the company by no later than Thursday 18 March 2010 at:
Holmen AB Group Legal Affairs P.O. Box 5407 SE-114 84 Stockholm Sweden
Notification may also be made via the company's website www.holmen.com or by telephone +46 8 666 21 11 or by fax +46 660 759 78.
Shareholders whose shares are registered in a nominee name should temporarily re-register their shares in their own name with Euroclear Sweden so that this takes effect no later than Thursday 18 March 2010 to be entitled to participate in the Annual General Meeting.
The Board has proposed that a dividend of SEK 7 (9) per share be paid to shareholders. The Board has proposed Monday 29 March 2010 as the record date for entitlement to dividend. Provided the Annual General Meeting resolves in favour of the proposal, the dividend is expected to be distributed by Euroclear Sweden on Thursday 1 April 2010. Shareholders are requested to inform their account operator of any change of name and/or address.
The Annual Report for 2009 will be posted in the week starting 8 March to shareholders who have indicated their wish to receive it in this way. New shareholders will be informed in connection with the distribution of the shareholder magazine Holmen Business Report, how to order and cancel printed and electronically transmitted financial information via the website under Shareholder service.
Holmen and its World 2009 will be published at the same time as the Annual Report and will describe Holmen's holistic approach to the environment, social responsibility and financial development. The complete sustainability report for 2009 is available on the website. The report will be posted in the week starting 15 March to shareholders who have indicated their wish to receive it in this way.
The financial information and Holmen and its World 2009 are available on the website in both English and Swedish. Holmen and its World is also available in Spanish.
All material is available on the website, where you can also place orders and start subscriptions. You can also do this via:
Holmen AB Group Public Relations P.O.Box 5407 SE- 114 84 Stockholm Sweden Phone +46 8 666 21 00 Fax +46 8 666 21 30 e-mail: [email protected]
Holmen's shareholders are the main target readership for the annual report, which is published in both English and Swedish. It is posted in the week starting 8 March to shareholders who have indicated their wish to receive it in this way. In addition to its annual report Holmen also publishes a separate sustainability report entitled Holmen and its World. This is written for a broad readership, including customers, employees, school pupils and local residents where Holmen has large facilities.
The sustainability report is published in Swedish and English in connection with the Annual General Meeting. A Spanish version is published in May. The annual report and the sustainability report are avaliable at and can be ordered from Holmen's website.
You can follow Holmen's progress throughout the year by visiting the company's website: www.holmen.com
New information was added during 2009, primarily based on the needs and interests of shareholders and investors. Extensive historic data, such as the price trend of the Holmen share over the years and dividend history, are available under the headings Investors and shareholders,
The share. Shareholders can also easily calculate the return that they have received on their own shareholding. The website gives visitors access to analysis tools for the income statements of the Group and its business areas. The cash flow statement and key indicators are also presented. Additionally, you can read about the Group's financing, ratings and maturity structure of loans and get access to press releases, printed matter and other published information.
The interim and year-end reports are presented at press and teleconferences in English. The conferences can also be accessed live on Holmen's website.
The interim reports are presented in our shareholder magazine Holmen Business Report, which is published along with the quarterly reports. The magazine also includes the CEO's comments, news and articles on current Holmen events. Holmen Business Report can be ordered via Holmen's website www.holmen.com and it is published in Swedish and English.
| For 2010 Holmen will publish the following financial reports: | |
|---|---|
| Interim report, January–March | 6 May |
| Interim report, January–June | 11 August |
| Interim report, January–September | 26 October |
| Year-end report for 2010 | 2 February 2011 |
For 2011 Holmen will publish the following financial reports: Interim report, January–March 6 May Interim report, January–June 17 August Interim report, January–September 26 October
Annual General Meeting 2011 30 March
| Definitions | |
|---|---|
| Capital employed | Operating capital reduced by the net sum of deferred tax assets and deferred tax liabilities. Average values are calcu lated on the basis of quarterly data. |
| Cash flow after investments |
Cash flow from operating activities, less cash flow from investing activities. |
| Debt/equity ratio | Net financial debt divided by the sum of equity and minority interests, if any. |
| Earnings per share (EPS) | Profit for the year divided by the weighted average number of shares outstanding, adjusted for buy-back of shares, if any, during the year. Diluted EPS means that any diluting effect from outstanding call options has been taken into account. |
| Equity/assets ratio | Equity plus minority interests, if any, expressed as a percentage of total assets. |
| Financial assets | Non-current and current financial receivables and cash and cash equivalents. |
| Net financial debt | Non-current and current financial liabilities and pension provisions, less financial assets. |
| Items affecting comparability | See the ten-year review on page 40. |
| Operating capital | Total assets, less financial receivables, cash and cash equivalents, deferred tax assets, operating liabilities, tax provision and other provisions. Average values are calculated on the basis of quarterly data. |
| Operating margin | Operating profit/loss (excl. items affecting comparability) expressed as a percentage of net sales. |
| Return on capital employed | Operating profit/loss (excl. items affecting comparability and transferred operations) expressed as a percentage of the average capital employed. |
| Return on equity | Profit for the year, expressed as a percentage of the average equity calculated on the basis of quarterly data. |
| Return on operating capital | Operating profit/loss (excl. items affecting comparability and transferred operations) expressed as a percentage of the average operating capital. |
| Biofuel/biorefining | Renewable fuels, such as wood (including liquors, bark and crude tall oil). |
|---|---|
| DIP/De-Inked Pulp | Pulp manufactured from de-inked recovered paper. |
| FBB/Folding Box Board | Multi-layered paperboard made from mechanical and chemical pulp. |
| FSC | Forest Stewardship Council. An inter national forest certification system to promote use of the world's forests in ways that are acceptable according to three sets of criteria: environmental, social and economic. |
| Groundwood pulp | Mechanical pulp produced by grinding wood against a grindstone. |
| LWC/Light Weight Coated | Lightweight coated wood-containing paper. Mainly used for magazines, manuals and directories. |
| MF Special/Machine Finished Includes standard and coloured newsprint. |
|
| MWC/Medium Weight Coated Medium weight coated wood-containing paper. Used for magazines, manuals, directories and advertising print. |
|
| PEFC | Programme of the Endorsement of Forest Certification schemes. An international forest certification system. In Sweden the PEFC and FSC standards are broadly identical. |
| RMP/Refiner Mechanical Pulp Pulp produced from the refining of chips with or without chemical or thermal treatment. |
|
| SBB/Solid bleached board | Multi-layer paperboard made from bleached chemical pulp. |
| SC/Super Calender | Super calendered paper. Uncoated, glazed magazine paper. |
| Sulphate pulp | Chemical pulp that is produced by cooking wood under high pressure and at a high temperature together with white liquor (sodium hydroxide and sodium sulphide). |
| TMP/Thermo-mechanical | Obtained by heating spruce chips and then grinding them in refiners. |
| Virgin fibre board | Paperboard produced from fibre that has not previously been used to make paper board or paper, in contrast to recycled fibre/recovered fibre. |
Head office (Strandvägen 1) P.O. Box 5407 SE-114 84 STOCKHOLM SWEDEN Tel +46 8 666 21 00 Fax +46 8 666 21 30 E-mail [email protected] www.holmen.com
(Vattengränden 2) SE-601 88 NORRKÖPING SWEDEN Tel +46 11 23 50 00 Fax +46 11 23 63 04
SE-763 81 HALLSTAVIK SWEDEN Tel +46 175 260 00 Fax +46 175 264 01
SE-601 88 NORRKÖPING SWEDEN Tel +46 11 23 50 00 Fax +46 11 23 66 30
Parque Industrial La Cantueña C/del Papel 1 ES-28947 FUENLABRADA (Madrid) SPAIN Tel +34 91 642 0603 Fax +34 91 642 2470
SE-825 80 IGGESUND SWEDEN Tel +46 650 280 00 Fax +46 650 288 00 E-mail [email protected]
SE-825 80 IGGESUND SWEDEN Tel +46 650 280 00 Fax +46 650 285 32 E-mail [email protected]
WORKINGTON Cumbria CA14 1JX UK Tel +44 1900 601000 Fax +44 1900 605000 E-mail [email protected]
P.O. Box 45 SE-825 21 IGGESUND SWEDEN Tel +46 650 280 00 Fax +46 650 203 80 E-mail [email protected]
P.O. Box 45 SE-825 21 IGGESUND SWEDEN Tel +46 650 280 00 Fax +46 650 284 48 E-mail [email protected]
SE-601 88 NORRKÖPING SWEDEN Tel +46 11 23 50 00 Fax +46 11 23 62 19 E-mail [email protected]
(Hörneborgsvägen 6) SE-891 80 ÖRNSKÖLDSVIK SWEDEN Tel +46 660 754 00 Fax +46 660 759 85 E-mail [email protected]
(Hörneborgsvägen 6) SE-891 80 ÖRNSKÖLDSVIK SWEDEN Tel +46 660 754 00 Fax +46 660 755 10 E-mail [email protected]
The complete list of addresses is available on Holmen's website www.holmen.com
The cover of the annual report is printed on Iggesund Paperboard's solid bleached board, Invercote® Creato 280 gsm. It is embossed and UV-varnished.
The annual report is produced by Holmen. Graphic production: Gylling Produktion Layout: AD Reklambyrå and Energi Reklambyrå Photos: Rolf Andersson and others Print: Trosa Tryckeri Translation: Translator Scandinavia AB
Holmen's business concept is to develop and run profitable business within three product-oriented business areas for printing paper, paperboard and sawn timber as well as two raw-material-oriented business areas for forests and energy. Europe is the key market.
The business area Holmen Paper manufactures printing paper for daily newspapers, magazines, directories/manuals, advertising matter and books at two Swedish mills and one Spanish mill. Iggesund Paperboard produces paperboard for consumer packaging and graphics printing at one Swedish and one UK mill. Holmen Timber produces sawn timber in one Swedish sawmill. Annual production capacity is 1 940 000 tonnes of printing paper, 530 000 tonnes of paperboard and 340 000 cubic metres of sawn timber.
Holmen Skog manages the Group's just over one million hectares of forests. The annual volume of wood harvested in company forests is some 2.5 million cubic metres. Holmen Energi is responsible for the Group's hydro power assets and for developing the Group's business within the energy sector. Normal yearly production amounts to about 1 100 GWh of electricity at wholly and partly owned hydro power stations in Sweden. Holmen Skog and Holmen Energi are also responsible for the Group's wood and electricity procurement in Sweden; these are important input goods for the industrial operations.
| SEKm | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|
| Income statement | |||||
| Net sales | 18 071 | 19 334 | 19 159 | 18 592 | 16 319 |
| Operating costs | -15 175 -16 630 -15 548 -14 954 -13 205 | ||||
| Depreciation and amortisation | -1 320 | -1 343 | -1 337 | -1 346 | -1 167 |
| Interest in associates | 45 | 50 | 12 | 11 | 20 |
| Items affecting comparability | - | -361 | 557 | - | - |
| Operating profit | 1 620 | 1 051 | 2 843 | 2 303 | 1 967 |
| Net financial items | -255 | -311 | -261 | -247 | -233 |
| Profit before tax | 1 365 | 740 | 2 582 | 2 056 | 1 734 |
| Tax | -360 | -98 | -1 077 | -597 | -478 |
| Profit for the year | 1 006 | 642 | 1 505 | 1 459 | 1 256 |
| Operating profit by business area | |||||
| Holmen Paper | 340 | 280 | 623 | 754 | 631 |
| Iggesund Paperboard | 419 | 320 | 599 | 752 | 626 |
| Holmen Timber | 21 | 13 | 146 | 80 | 13 |
| Holmen Skog | 605 | 632 | 702 | 643 | 537 |
| Holmen Energi | 414 | 327 | 272 | 197 | 301 |
| Group central | -178 | -159 | -56 | -123 | -141 |
| Items affecting comparability | - | -361 | 557 | - | - |
| Group | 1 620 | 1 051 | 2 843 | 2 303 | 1 967 |
| Cash flow | |||||
| Operating activities | 2 873 | 1 660 | 2 476 | 2 358 | 2 471 |
| Investing activities | -818 | -1 124 | -1 315 | -947 | -3 029 |
| Cash flow after investments | 2 054 | 536 | 1 161 | 1 411 | -558 |
| Key indicators | |||||
| Return, % | |||||
| capital employed* | 7.2 | 6.1 | 10.0 | 10.0 | 9.0 |
| equity | 6.4 | 3.9 | 9.2 | 9.0 | 8.0 |
| Debt/equity ratio, times | 0.34 | 0.48 | 0.35 | 0.36 | 0.41 |
| The share | |||||
| Earnings per share, SEK | 12.0 | 7.6 | 17.8 | 17.2 | 14.8 |
| Ordinary dividend, SEK | 7** | 9 | 12 | 12 | 11 |
| Closing listed price, B, SEK | 183 | 193.5 | 240 | 298 | 262.5 |
| P/E ratio | 15 | 25 | 13 | 17 | 18 |
| EV/EBIT* | 13 | 17 | 12 | 14 | 15 |
* Excl. items affecting comparability
Holmen AB (publ.) • P.O. Box 5407 • SE-114 84 STOCKOLM • SWEDEN
Tel +46 8 666 21 00 • Fax +46 8 666 21 30 • E-mail [email protected] • www.holmen.com Corporate identity 556001-3301 • Registered office Stockholm
Holmen's profitability shall consistently exceed the market cost of capital. The company's financial position shall be strong with a debt/equity ratio in the interval of 0.3–0.8. Decisions on dividends are based on an appraisal of the Group's profitability, future investment plans and financial position.
Share price and total return, Holmen B
| n Major shareholders | % of capital | % of votes |
|---|---|---|
| L E Lundbergföretagen | 28.0 | 52.0 |
| Kempe Foundations | 7.0 | 16.9 |
| Handelsbanken incl. pension fund | 3.1 | 9.1 |
| Silchester International Investors | 10.9 | 3.2 |
| Alecta | 3.2 | 0.9 |
| Other | 47.8 | 17.9 |
| Total* | 100.0 | 100.0 |
| * of which non-Swedish shareholders | 26.8 | 8.0 |
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