Annual Report • Mar 6, 2017
Annual Report
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2016
Forest Paperboard Paper Wood products Renewable energy
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 2016 financial year. The annual report comprises the administration report (pages 4–5, 10–11, 27–29, 32–41, 70, 74–75) and the financial statements, together with the notes and supplementary information (pages 42–69). 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.
The basis for the sustainability information presented is the sustainability issues identified as key in view of the business that Holmen conducts. The sustainability work is reported in accordance with the Global Reporting Initiative's GRI G4 guidelines at Core level. The Sustainability Report comprises pages 7,12–13, 24–31, 37, 80–81, the GRI index on the website holmen.com and the pages on holmen.com as set out in the GRI index. The information is audited by a third party, see separate assurance report at holmen.com.
| This is Holmen | 4 |
|---|---|
| The year in brief | 5 |
| Strategy and targets | 6 |
| CEO's message | 8 |
| Operations in 2016 | 10 |
| A sustainable business | 12 |
| Forest | 14 |
| Renewable energy | 16 |
| Paperboard | 18 |
| Paper | 20 |
| Wood products | 22 |
| Environment | 24 |
| Employees | 28 |
| A sustainable future | 30 |
| Corporate governance report | 32 |
| Risk management | 36 |
| Shareholder information | 40 |
| Financial statements | 42 |
| Notes | 48 |
| Proposed appropriation of profits | 70 |
| Auditor's report | 71 |
| Review of Sustainability Report | 73 |
| Board of Directors | 74 |
| Group management | 76 |
| Key figures | 77 |
| Ten-year review, finance | 78 |
| Five-year review, sustainability | 80 |
| Definitions and glossary | 82 |
| Calendar | 83 |
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.
Forest and hydro power make up two thirds of Holmen's assets. Together with large-scale production of paperboard, paper and wood products in well invested plants, this provides stable profitability that will increase over time. At the same time, Holmen's business brings substantial climate benefits, as it reduces the amount of carbon dioxide in the atmosphere by over two million tonnes per year.
Forest
Active and sustainable forestry is conducted on over a million hectares of productive forest land owned by Holmen. Harvesting equates to 85 per cent of the annual growth and amounts to 3 million cubic metres per year.
In a normal year, the renewable energy production from 21 hydro power stations and 4 wind farms amounts to 1.2 TWh.
Market-leading paperboard in the highest quality segments for consumer packaging and advanced graphical printing. The Swedish mill and the British mill produce a combined total of 0.5 million tonnes per year.
Magazine and book paper that utilises the properties of fresh fibre to provide cost-effective alternatives to traditional paper choices. The two Swedish mills produce a combined total of 1.1 million tonnes per year.
Wood products for the joinery and construction industries at two largescale sawmills that are integrated with the Group's paper and paperboard mills. Annual production amounts to 0.8 million cubic metres.
Operating profit increased by SEK 462 million to SEK 2 162 million (excluding items affecting comparability) due to improved results in paper, paperboard and forest. The return on capital employed increased from 6.4 per cent to 8.6 per cent.
The paper mill in Madrid was sold during the year which, combined with increased sales of new products, has shifted the focus of the paper business towards magazine and book paper. Sales of paperboard to new customers in premium segments both inside and outside Europe rose. At the same time, an investment programme was concluded, providing potential for growth. The volume of standing timber grew by 1 per cent and forestry costs were reduced while retaining high quality in forest management. Deliveries of wood products grew following investments in increased capacity, and costs fell due to production being better adapted to
the supply of raw material. Hydro power production reduced as a result of lower rainfall.
Outlook. The harvest of Holmen's own forest is estimated to remain unchanged in 2017 in line with the long-term plan. The ambition is to boost deliveries of paperboard following the completed investments, but competition is expected to increase due to significant additional capacity in the market. The structural downturn for printing paper is forecast to continue. Holmen's strategy is to grow in the area of magazine and book paper by offering customers a cost-effective alternative to traditional products, while reducing deliveries of newsprint. The market balance for wood products is good. Holmen has an opportunity to increase production somewhat in 2017, while at the same time improving the value added through the ongoing investment in a wood treatment plant. Hydro power production was significantly lower than usual in 2016. Low levels in water storage reservoirs mean that production may also be lower than normal in 2017.
| FACTS | 2016 | 2015 |
|---|---|---|
| Net sales, SEKm | 15 513 | 16 014 |
| Operating profit/loss, SEKm | 1 930 | 769 |
| Operating profit/loss, SEKm** | 2 162 | 1 700 |
| Profit for the year, SEKm | 1 424 | 559 |
| Profit for the year**, SEKm | 1 652 | 1 323 |
| Diluted earnings per share, SEK | 16.9 | 6.7 |
| Dividend per share, SEK | 12* | 10.5 |
| Return on capital employed, %** | 8.6 | 6.4 |
| Cash flow before investments | 1 961 | 2 526 |
| Cash flow from investments | 123 | 832 |
| Net financial debt | 3 945 | 4 799 |
| Debt/equity ratio, times | 0.19 | 0.23 |
| Average number of employees | 2 989 | 3 315 |
| * Board proposal ** Excl. items affecting comparability |
Holmen's strategy is to own forest and energy assets and to develop industrial operations in paperboard, paper and wood products. The substantial forest and energy assets shall deliver stable revenue that grows over time.
Large-scale industrial operations at efficient facilities shall provide good profitability through the refining of forest raw material into high-performance consumer paperboard, costeffective printing paper and wood products for the joinery and construction industries.
FOREST Active forestry
RENEWABLE ENERGY Long-term hydro power
PAPERBOARD Organic growth
PAPER Specialisation
WOOD PRODUCTS Large-scale integrated production
The revenue from and future value of Holmen's forest holdings are to increase through active and sustainable forestry, a clear focus on costs and the further development of methods, technologies and expertise. The position in the wood market and economies of scale will contribute to the competitiveness of the industrial operations.
Hydro power is to be managed with a focus on long-term profitability. The potential to develop wind power on Holmen's land will be monitored such that it can be exploited when good profitability is assured.
The position as a market leader in Europe when it comes to high-performance paperboard for consumer products is to be reinforced through product development, while exploiting opportunities for global growth. Well invested production facilities that are self-sufficient in energy ensure competitive production costs and the opportunity to grow through complementary investments.
Holmen will grow in the area of magazine and book paper by offering customers a cost-effective alternative to traditional products, while reducing deliveries of newsprint. The structural downturn in the market demands a constant focus on costs, while also continuously developing market position.
Cost-effective production of high-quality wood products for the joinery and construction industries, based on a strong organisation for wood procurement, large-scale production and co-location with the Group's paper and paperboard mills. Sales to local markets are to be increased by adding value through increased processing.
| Sustainability targets: | Outcome 2016: | Comment: |
|---|---|---|
| INCREASED GROWTH IN HOLMEN'S FORESTS By 2050, annual growth in Holmen's forests is to be 25 per cent higher than in 2007. This will deliver both larger harvests of wood from the Group's forests and greater capture of carbon dioxide. |
Progress will be checked in the next inventory of Holmen's forests in 2021. |
Silviculture measures to ensure increased growth are being implemented. |
| REDUCED USE OF FOSSIL FUELS By 2020, use of fossil fuels at the Group's mills will be down 75 per cent compared with 2005. |
The use of fossil fuels at the mills has fallen by 75 per cent since 2005. |
Following the sale of the Spanish mill, all production units are largely powered by non-fossil fuels. The target has been revised to a reduction of 90 per cent instead of 75 per cent by 2020. |
| INCREASED PRODUCTION OF RENEWABLE ELECTRICITY Company-generated renewable electricity shall account for 50 per cent of Holmen's total electricity consumption by 2020, compared with 31 per cent in 2005. |
The proportion of company produced renewable electrical energy amounted to 45 per cent. |
This figure is down on 2015 primarily because of lower hydro power production, due to low precipi tation in 2016. |
This year's strong results are testament to the success of our investments and long-term strategy. Holmen's substantial forest and energy assets provide stable profitability, while the well invested industrial operations create potential for growth. Against the background of this, the Board has resolved to propose a dividend of SEK 12 (10.5) per share.
Holmen combines forest ownership with the profitable manufacturing of paperboard, paper and wood products. Combined with our renewable energy assets, the forest assets make up two-thirds of the Group's capital and contribute to a stable cash flow that will increase over time. Holmen's financial situation is strong with low net financial debt, which provides stability but also the freedom and opportunity to develop the company.
Holmen has an enviable position as a market leader in the highest quality segments for consumer packaging and paperboard for advanced graphical printing. The major structural investments that have been made in our two paperboard mills, the recovery boiler at Iggesund Mill and the biofuel boiler at the mill in Workington, have gradually made an impact, resulting in a significantly improved cost position and sizeable environmental gains. With last year's investment in a new press section at Workington and expanded pulp capacity at Iggesund, we now have the potential to increase production by around 10 per cent, while at the same time further driving down production costs.
Demand for consumer packaging is growing, particularly in Asia, but to some extent also in Europe and the USA, whereas the market for paperboard for graphical printing is stagnating. The combination of competitiveness and continued product development is crucial in defending and advancing our position in a market that also faces the challenge of new capacity. With a strong offering, we have excellent opportunities to grow in the premium segment in Europe, Asia and the USA.
In paper, our position has radically improved. With the sale of the mill in Madrid, we can put a business with no prospect of survival behind us. Instead, we can focus on fresh fibre-based magazine and book paper at our two Swedish paper mills, a concept that has proven to work well in the tough printing paper market. Overall, this has given us a smaller but significantly more profitable paper business. The printing paper market remains extremely challenging, but through a clear long-standing strategy, we have a product mix and position in the market that stands us in good stead against the competition. We are therefore optimistic about the future.
The large fire that hit the paper mill in Hallstavik in late 2015 also impacted on the operation in 2016. The reconstruction was a major test for the organisation, both in production and on the marketing front.
Looking back, we can report that our employees really delivered, so that we now have a mill in excellent condition and we are well on the way to regaining positions we were forced to give up when production was shut down.
Wood products have a bright future. More housing needs to be built and the focus on wood construction has become much sharper in recent years, not least due to sustainability considerations. This is feeding through to demand, which is seeing a positive trend. The challenge lies in the relatively low added value and an elastic supply on the market. For a company such as Holmen, with forest holdings plus two largescale sawmills integrated with the Group's paperboard and paper mills, processing wood products to add additional value is a natural area for development and we are constantly exploring such opportunities. One step that we have taken in this direction is this year's decision to invest in a wood treatment plant at Braviken Sawmill in order to broaden the product range for builders' merchants.
The growing forest is the starting point for all Holmen's business. Thanks to active silviculture measures, our younger forests are growing faster than those that are currently ready for harvesting. Since the amount harvested is less than the annual growth, in the long term we will be able to harvest more, which generates higher cash flow, while still ensuring that we have a larger volume of standing forest. A key factor for the future value of the forest is the ability of the industry and the sawmills to pay for the wood raw material. It is crucial in this respect to have competitive industries that make full use of the comparative benefits offered by the Swedish raw material – fresh long fibre. After a period of capacity reductions in printing paper, major investments are now being made in both pulp mills and paperboard production in the Nordic region, so strengthening the industry's competitiveness and increasing demand for wood. Coupled with the rise in wood construction, this represents a positive outlook for a forest owner such as Holmen.
With the storage of carbon dioxide in the forest and wood products and the production of renewable energy, Holmen is perfectly placed to be part of the solution to the climate change issue. The challenges lie in the right to manage the forest and in the market's acceptance of fresh fibre-based products in competition with recovered fibre. Without fresh fibre, there is no future recovered fibre. The way we are permitted to manage our forest is affected by political decisions in both Sweden and Brussels. It's a basic question of ownership rights that we take extremely seriously.
Major investments are strengthening the forest industry's competitiveness and increasing demand for wood raw material.
The Swedish energy agreement that was approved over the summer provided positive news. The decision to gradually lower the property tax on hydro power to the same level as other electricity production creates fairer conditions and increases our opportunities to make necessary investments in our power stations. Energy is a good asset that provides cash flow and a stable revenue stream over time.
There is no doubt that the forest as a raw material has good future prospects, not least in the transition to an economy in which products based on fossil raw materials are replaced with renewable alternatives. Strategic choices and investments for the future have strengthened our sustainability profile, which has led to recognition in several contexts. Most recent is the listing on the Global 100, an index of the hundred most sustainable corporations in the world. This achievement is the result of focused and target-driven work, and I am both pleased and proud to work for a company that contributes to sustainable development. Holmen has also been affiliated to the UN's Global Compact since 2007 and sees it as only natural to support its ten principles, which cover areas such as human rights and social and environmental responsibility.
The products of the future will come from the forest, and I am in no doubt that, like our forests, Holmen will continue to develop and grow ever stronger.
Stockholm, 13 February 2017
Henrik Sjölund President and CEO
The listing on the Global 100 index as one of the world's most sustainable companies is recognition of our focused and targetdriven work.
Sören Petersson Head of Forest business area
We have succeeded in improving profits through further cost reductions and slightly higher prices. At the same time, we have continued to develop silviculture measures that will bring increased growth and improve the natural assets in our forests. The harvested volume returned to normal levels after a few years of higher volumes caused by storm felling.
We want to develop the wood business in order to strengthen our capacity to supply the industry with raw material at a competitive cost and to obtain good value from what we harvest in our own forest. In this area, we are working to develop our relationship with private wood suppliers and to optimise wood deliveries, amongst other things. Active measures will enable us to achieve increased growth, climate benefits and improved natural assets in Holmen's forests.
| FACTS | 2016 | 2015 |
|---|---|---|
| External net sales, SEKm | 2 572 | 2 814 |
| Earnings from operations, SEKm | 686 | 638 |
| Operating profit/loss incl. change in value of forests, SEKm |
1 001 | 905 |
| Investments, SEKm | 30 | 31 |
| Book value of company forest, SEKm | 17 448 17 173 | |
| Average number of employees | 364 | 384 |
| Harvesting in own forests, '000 m3 sub |
2 986 | 3 213 |
Fredrik Nordqvist Head of Renewable energy business area
Low rainfall and run-off into our reservoirs resulted in low production. We have been able to partially compensate for this by concentrating production on times with better prices. The energy agreement that was approved on 10 July proposes a gradual lowering of the property tax for hydro power. This is an important step in the right direction that improves conditions for future reinvestment.
In the transition to an energy system based entirely on renewable sources, hydro power is uniquely equipped to provide controllable energy production at low operating costs. EU Directives mean that all hydro power stations in Sweden will need to undergo environmental assessment. Holmen's power stations are all well placed to meet the necessary environmental adaptations, and the lower property tax enable necessary investments for the future.
| FACTS | 2016 | 2015 |
|---|---|---|
| External net sales, SEKm | 314 | 268 |
| Operating profit/loss, SEKm | 120 | 176 |
| Investments, SEKm | 23 | 18 |
| Operating capital, SEKm | 3 412 | 3 351 |
| Average number of employees | 10 | 11 |
| Company-generated hydro and wind power, GWh |
1 080 | 1 441 |
Henrik Sjölund Head of Paperboard business area
Despite rebuilds at both mills, we managed to deliver good results. Production has been raised to new levels on occasion, and the challenge now is to achieve stability at this higher level. Sales in the premium segment increased through continued product development, but also thanks to investments in additional sales resources and distribution centres outside Europe.
The investments of recent years have given us the potential to increase production and at the same time reduce production costs, which will be crucial in defending our position in a market made more challenging by new capacity. With a strong offering in the premium segment, we will continue to grow in Asia and the USA, while consolidating our strong position in the European market.
Nils Ringborg Head of Paper business area
The sale of the paper mill in Madrid was, of course, the main event of the year. Now we are a speciality paper manufacturer with two competitive mills. Thanks to good production and sales of the magazine product Holmen UNIQ, we have been able to deliver good results in a difficult market. On the marketing front, we have improved our offering, with a higher service level and complementary services, which are becoming increasingly important for both existing and new customers.
With a business focused on fresh fibre-based magazine and book paper, we deliver products that give our customers more print surface at a lower cost. Continued production optimisation and efficiencies, further development of our product portfolio and a focus on sales and marketing will strengthen our position in a challenging market.
Johan Padel Head of Wood products business area
The switch to sawing two wood species and measures relating to stock and logistics have significantly lowered costs at Braviken. We have also been able to increase production at Iggesund, following investment in more efficient flows through the sawmill. Unfortunately, this was not enough to compensate for the price reductions that occurred towards the end of 2015 and so profits are down slightly. We are, however, in a strong position for the future, with two large-scale and competitive sawmills.
To meet the growing demand for treated products and boost the value added by our wood products, Braviken Sawmill is gaining a wood treatment plant and a distribution warehouse. At Iggesund Sawmill, the focus is on maintaining the production rate and the profitability level.
| FACTS | 2016 | 2015 |
|---|---|---|
| Net sales, SEKm | 5 252 | 5 472 |
| Operating profit/loss, SEKm | 903 | 847 |
| Investments, SEKm | 413 | 324 |
| Operating capital, SEKm | 6 426 | 6 622 |
| Average number of employees | 1 406 | 1 432 |
| Deliveries, '000 tonnes | 497 | 499 |
Operating profit/loss, excluding items affecting comparability
Return on operating capital, excluding items affecting comparability
| FACTS | 2016 | 2015 |
|---|---|---|
| Net sales, SEKm | 5 431 | 6 148 |
| Operating profit/loss excl. items affecting comparability, SEKm Investments, SEKm |
289 259 |
-74 347 |
| Operating capital, SEKm Average number of employees Deliveries, '000 tonnes |
2 815 861 1 134 |
3 558 1 150 1 325 |
Operating profit/loss
Return on operating capital, excluding items affecting comparability
| FACTS | 2016 | 2015 |
|---|---|---|
| Net sales, SEKm | 1 342 | 1 314 |
| Operating profit/loss excl. items | ||
| affecting comparability, SEKm | -3 | 9 |
| Investments, SEKm | 52 | 103 |
| Operating capital, SEKm | 892 | 924 |
| Average number of employees | 225 | 213 |
| Deliveries, '000 m3 | 776 | 729 |
Holmen's value creation begins in the sustainably managed forest. This is the source of the renewable raw material underpinning the high-quality products that are appreciated by customers around the globe. The business as a whole, with its own energy production and resource-efficient production units, contributes to long-term value growth and brings climate benefits by reducing the amount of carbon dioxide in the atmosphere by over two million tonnes per year.
Growing forest ensures stable profitability. Holmen operates active and sustainable forestry with high growth. Harvesting amounts to 85 per cent of the annual growth, which means that the volume of standing timber is increasing year on year. Continuous development of methods and technologies ensures high productivity and good revenue over the long term.
Holmen's wholly and partly owned hydro power stations are stable and effective suppliers of renewable energy. Electricity production at the hydro power stations and wind farms, together with the electricity production at the larger mills, covers half of the Group's electricity consumption.
Production at the Group's energy-efficient mills and sawmills in Sweden is largely based on renewable electrical and thermal energy. The paperboard mill in the UK is self-sufficient in electrical and thermal energy, and sells its surplus electricity production to the local community.
Nothing goes to waste when it comes to the use of the wood raw material. The logs become wood for joinery and construction. Chips and shavings are turned into pulp. Branches and bark become by-products that can be further processed or used for fossil-free energy production.
Holmen delivers products that exploit all the potential of the forest raw material to create clear competitive advantages for the customer. High quality, reliable deliveries and customised services all bring customer benefits. Continuous product development, coupled with effective and resource-efficient processes, creates products for the future.
Paperboard, paper and wood products constitute basic materials in people's everyday lives. The products are made from renewable raw material and help to capture carbon dioxide from the atmosphere, and since they can replace products made from fossil raw materials, they reduce society's overall emissions of greenhouse gases.
| STAKEHOLDERS | ECONOMIC VALUE (SEKm) |
|
|---|---|---|
| Customers | Sales of paper, paperboard, wood products, wood and electricity |
17 072 |
| Suppliers | Purchases of products, materials and services, along with depreciation, etc. |
-12 873 |
| Employees | Wages and social security costs | -2 268 |
| Lenders | Interest | -71 |
| State | Taxes | -436 |
| Shareholders | Net profit | 1 424 |
| Board's dividend proposal | 1 008 |
Holmen's operations in 2016 broken down into stakeholders based on the Group income statement.
Customers. Almost 90 per cent of Holmen's deliveries go to European customers. Other exports go primarily to customers in the USA, North Africa, the Middle East and countries in Asia. In the drive for growth in the international markets, Holmen is expanding its presence to include more and more countries. This allows us to increase customer service and strengthen work on building relations. Holmen's business ethics policy and associated guidelines provide guidance on how to maintain good business practices when dealing with external contacts in various markets.
Suppliers. Purchasing is a key strategic issue within Holmen. The Group's Supplier Code of Conduct increases the focus on human rights and working conditions among suppliers, with a view to ensuring good conditions for everyone who works in Holmen's value chain. Suppliers in high-risk countries are subject to tighter requirements on showing compliance with the principles of the code.
Employees. Competent and motivated employees who embody the company's values are a key factor for the success and long-term sustainability of Holmen. Priority issues are health and safety, leadership and management by objectives. Delegation of responsibility, skills development and participation in the development of the business are other key areas.
Society. Holmen plays a significant role as a major employer in a number of locations. The business creates jobs not only within the Group, but also for contractors, suppliers and various social functions. This means, in turn, that Holmen contributes substantial tax revenue. Continuous dialogue with local communities, indigenous peoples and stakeholder organisations, as well as partnerships with universities and colleges, creates conditions for sustainable development, with the forest as a core factor in economic growth and human wellbeing.
Public authorities. Environmental permits are required for the majority of the Group's operations. Openness and transparency allow us to establish the conditions for good oversight of and trust in our actions. During permit applications, the authorities, the general public and local residents all have an opportunity to put forward their views.
Shareholders, investors and analysts. Holmen wishes to create long-term value for shareholders through dividends and growth with a good return on invested capital. Sustainability issues are becoming increasingly important to investors and analysts, who are keen to establish long-term relationships with companies that have high ambitions in this regard. The Group's financial statements and sustainability reporting are an effective way of providing relevant data for analysis.
Holmen manages its forest holdings, which are among Sweden's largest, both actively and sustainably. The renewable raw material from the forest is a stable source of revenue and a key component in society's drive to meet the challenge of climate change.
Holmen's forests cover 1.3 million hectares, of which a little over a million is productive forest land. Holmen manages these forests and is largely able to supply its production plants in Sweden with its own renewable raw material. The strategy is to increase the revenue from and future value of the forest holdings through active and sustainable forestry, a clear focus on costs and the continued development of methods, technologies and expertise. Economies of scale and efficient logistics gives us a strong position in the wood market, which contributes to the Group's competitiveness.
The growth of the forest and its value are dependent to a large extent on how it is managed. Holmen's annual harvesting is governed by a long-term plan based on forest inventories that are conducted every 10 years. In the latest plan from 2011, the annual harvest is forecast at around 3.0 million m3 sub, which accounts for around 85 per cent of the growth. The volume of wood is thus growing by 1 per cent per year.
The long-term target for 2050 is that the annual growth in Holmen's forests will be 25 per cent higher than in 2007. This means that today's volume of standing timber, 120 million m3 growing stock, solid over bark, will increase to 160 million m3 growing stock, solid over bark by 2050, whilst at the same time, harvests will rise from 3 to 4 million m3 sub per year.
It is Holmen's active and sustainable forestry that allows harvests to be increased while maintaining growth in the volume of standing timber.
Economic value. The recognised value of Holmen's forest holdings as at 31 December 2016 amounted to SEK 17 488 million under international accounting standard IAS 41. A deferred tax liability of SEK 3 854 million is stated in relation to that figure, which means that the growing forest, net after tax, is recognised at SEK 13 594 million. See Note 11, page 59.
The annual cash flow that the forest delivers gives an annual dividend yield of 4 per cent. Cash flow is made up of the net balance of sales revenues and costs of harvesting, silviculture and administration.
Growth can be increased through active forestry, which provides greater opportunities for harvesting and a rise in cash flow.
Value for the climate. Actively managed forests mitigate the greenhouse effect in multiple ways. The larger the area that is managed and the more the forest grows, the more carbon dioxide is absorbed. Younger and middle-aged stands, where growth is greatest, absorb more carbon dioxide than older stands, where growth is in decline. Furthermore, the benefit to the climate becomes many times greater when the forest's products are able to replace fossil materials and processes.
Forest that is not managed brings nowhere near the same climate benefits. Since the forest raw material is not extracted, no substitution effect is achieved, which slows down the phasing out of products that are harmful to the climate.
Robust against climate change. Conifers have been on the planet for millions of years and are consequently highly adaptable to change. A warmer climate may, however, affect the forest in various ways. Growth may increase in certain areas, but periods of ground frost may become shorter, which makes harvesting more difficult. The seeds for the company's plant nurseries are selected to grow and thrive in a changing climate, and Holmen's silviculture is robust in climate terms.
Under Holmen's active forestry, the volume of standing timber is built up over a period of 70–90 years, with a new growth cycle beginning after harvest. The most important silviculture measures come in the years immediately after harvest. The soil is prepared and the land is reforested through planting or sowing. The forest is cleaned and thinned in order to select trees with the best potential for continuing their growth. Around 10–30 years before the forest is harvested, it can be fertilised to further boost growth.
environment. Long-term development of quality and profitability requires continuous improvements to technology, methods and skills. Holmen works with other actors in the industry, manufacturers and researchers, to improve productivity and develop the natural assets of the forest.
Quality-assured regeneration. Holmen invests around SEK 160 million a year in future growth through silviculture, stewardship and fertilisation. The foundation for future
growth in the forest is laid when new forest is planted. Regeneration is quality-assured and Holmen conducts long-term development work that covers the entire chain from seed to new planting. Together, the company's two nurseries produce 35 million seedlings each year, with the majority planted on the Group's land. At least two new trees are planted for every tree harvested.
Holmen's forests are certified and all wood is traceable. In 2016, Holmen adopted a new nature conservation strategy aimed at ensuring that all naturally occurring species are able to thrive in Sweden's forest landscape. The strategy sets out how Holmen works to combine high growth with preserving biodiversity.
The significance of forestry for both the climate and the Swedish economy places it squarely on the political agenda. Holmen works with the industry to make politicians, authorities and the general public aware that active and sustainable forestry is the very foundation of the emerging bioeconomy and is vital with regard to the climate. The aim is to establish a regulatory framework that takes account of the industry's unique position in contributing to an economically, environmentally and socially sustainable society. Restricting the right to manage the forest one owns could lead to smaller harvests. This could affect the supply of forest raw material to the industry and thus hit the competitiveness of Swedish forestry. One concrete example is the Species Protection Ordinance, which has been implemented in a different, stricter way in Sweden than in the rest of the EU.
Demand for logs is affected by the sawmills' needs, which in turn are governed by the construction market in various parts of the world, and the degree of substitution between different building materials. Widespread interest in wood construction and a growing market for timber-framed buildings are generating increased demand for logs.
Pulpwood upturn. Pulpwood is used to manufacture the pulp that in turn is used for the production of paperboard and paper. Global demand for printing paper is falling, whereas demand for paperboard is rising. Pulp manufacture is capital intensive and demand for pulpwood in local markets is thus predictable over the short and medium term. The market for pulpwood is in equilibrium in Sweden, with the major investments in Swedish pulp mills in recent years ensuring a stable demand for forest raw material.
m3 growing stock, solid over bark
per hectare productive forest land
| 1 275 000 ha |
|---|
| 1 153 000 ha |
| 187 000 ha |
| 1 042 000 ha |
Total volume of standing timber, 120 million m3 on productive forest land stock, solid over bark
* Analysis performed by the Swedish National Forest Inventory, according to the international definition of forest land: Land with an area of more than 0.5 hectares, a tree canopy cover of more than 10 per cent and trees with a minimum height of 5 metres at maturity.
growing
** Forest land that on average can produce 1 m3 growing stock, solid over bark per hectare and year (on average during the growth period of the forest stand).
MAP
Holmen's forest holdings Holmen's Swedish industries
of standing timber is growing by 1 per cent per year and has doubled over the past 100 years.
Holmen owns, manages and develops renewable energy assets. Hydro power forms the basis of the energy production, providing a stable revenue stream over time and at the same time bringing major benefits to society.
Holmen wholly or partly owns 21 hydro power stations. In a normal year, Holmen's production share amounts to 1 112 GWh. Wind power assets comprise part ownership of four wind farms, where the production share in a normal year amounts to 133 GWh. Holmen's own production of hydro and wind power, combined with the bioenergy that is generated at the Group's mills, amounts to just over 1 800 GWh per year, which covers around 50 per cent of Holmen's total energy consumption.
Holmen's own energy production is dominated by climate-smart and renewable hydro power. Compared with other renewable energy sources, hydro power has the unique advantage of being controllable. Storing reserves of water in lakes and watercourses makes it possible to adapt the energy production to demand by reducing or increasing the flow of water through the turbines. In an energy system that is increasingly based on weather-dependent renewable sources, hydro power contributes stable and controllable energy production, based on a non-finite resource. Another benefit of hydro power is service life, since a hydro power station can deliver climate-smart energy for over 100 years. The need for investment is relatively small, compared with other energy types, and the basic operating costs are low. For every kilowatt hour produced via hydro power, fossil-based electricity production can be cut back. Overall, hydro power brings major social benefits on the path to a bio-based economy.
Wind power a supplement. Holmen is a major land owner and has the potential to develop its land holdings by establishing wind farms on sites with good wind conditions. At this moment in time, further expansion is unviable due to low prices for electricity and electricity certificates, and activity in ongoing projects has therefore been tailored to current market conditions.
Energy peat is considered a slowly renewable resource, which makes it possible to add value to certain land assets within Holmen that are not productive forest land. Peat can be used in energy production, but also as a soil improver, animal bedding and a building material. Holmen's peat field outside Örnsköldsvik was taken into use in 2009 and is harvested annually for energy purposes. In 2016, the harvest equated to 70 (63) GWh electrical energy.
Globally, in recent years energy has gone from being in short supply to being in surplus, which has put pressure on prices. The change has been driven by new methods of extracting oil and gas in North America, poorer control of output within OPEC and large quantities of weather-dependent electricity production being subsidised into Europe.
Swedish energy agreement. In 2016, a broad political agreement was reached in Sweden on ensuring that the nation has competitive electricity prices and a robust energy supply, as well as putting the conditions in place to invest in renewable electricity production. The power tax on nuclear power is going to be removed in order to facilitate investment in efficient operation and increased safety in the remaining reactors, while the electricity certificate system is being extended until 2030. Investments in solar, wind and hydro power and bioenergy will contribute to the target of 100 per cent renewable energy supply by 2040.
The energy agreement also states that hydro power plays a central role in Sweden's renewable electricity supply. The property tax on hydro power will be reduced to the same level as for other electricity production plants, i.e. 0.5 per cent, over a four-year period beginning in 2017. This will allow investments to continue the operation of hydro power stations.
As a consequence of an EU Directive, environmental permits for all hydro power stations in Sweden are likely to be reassessed. The process is expected to take many years. Holmen's power stations are all well placed to meet the necessary environmental adaptations without any major impact on production.
| HOLMEN'S | |||||
|---|---|---|---|---|---|
| RIVERS | HYDRO POWER STATIONS |
% | PRODUCTION SHARE GWh* |
YEAR OF CONSTRUCTION |
|
| Umeälven | Harrsele | 49 | 470 | 1957–58 | |
| Tuggen | 22 | 97 | 1962 | ||
| Gideälven | Stennäs | 10 | 3 | 1985–96 | |
| Gammelbyforsen | 10 | 1 | –"– | ||
| Björna | 10 | 8 | –"– | ||
| Gideå | 10 | 9 | –"– | ||
| Gidböle | 10 | 7 | –"– | ||
| Gideåbacka | 10 | 7 | –"– | ||
| Faxälven | Linnvasselv | 7 | 14 | 1961–74 | |
| Junsterforsen | 100 | 115 | –"– | ||
| Gäddede | 30 | 23 | –"– | ||
| Bågede | 100 | 70 | –"– | ||
| Iggesundsån Pappersfallet | 100 | 7 | 1915 | ||
| Iggesunds kraftstation | 100 | 22 | 2009 | ||
| Ljusnan | Sveg | 20 | 30 | 1949–75 | |
| Byarforsen | 20 | 17 | –"– | ||
| Krokströmmen | 9 | 45 | –"– | ||
| Långströmmen | 11 | 29 | –"– | ||
| Ljusne Strömmar | 7 | 17 | –"– | ||
| Motala Ström Holmen | 100 | 112 | 1990 | ||
| Bergsbron-Havet | 100 | 10 | 1927 |
| HOLMEN'S YEAR OF PRODUCTION SHARE |
|||||
|---|---|---|---|---|---|
| OWNER | WIND FARMS | % | GWh* | CONSTRUCTION | |
| Varsvik | Varsvik | 50 | 83 | 2014 | |
| VindIn | Skutskär | 18 | 5 | 2009 | |
| Trattberget | 18 | 38 | 2012 | ||
| Svalskulla, Finland | 18 | 9 | 2014 |
* Refers to normal production
has a unique advantage over other renewable energy sources, since it is controllable.
ELECTRICITY SPOT PRICE, Price area Stockholm (SE3)
21 hydro power stations
Holmen is a market leader in the segment for high-performance paperboard for consumer packaging and graphical applications. The strategy is to grow globally with the support of efficient, well invested mills and two of the market's strongest product brands.
Leading position. Holmen is a market leader in the highest quality segments for consumer packaging and paperboard for advanced graphical printing. The main customer groups are converters, wholesalers and brand owners who want to be able to offer their customers high-quality, sustainable and attractive products. The global market for packaging board is growing, and Holmen is well positioned for growth. The strategy is to consolidate Holmen's leading position in the European market, while at the same time growing in the premium segment in global markets through continuous product development, a high level of service and close customer relations.
Holmen markets its paperboard products under two brands: Invercote and Incada. Invercote is a multi-layered paperboard made from bleached chemical pulp (SBB). Incada is also a multi-layered paperboard, but with a surface layer of chemical pulp and a core of mechanical pulp (FBB). Together, they represent one of the market's most versatile ranges in the highest quality segment, giving the brands a high status among converters, brand owners and designers the world over. The paperboard is used primarily to make high-quality consumer packaging for confectionery, cosmetics, perfumes, wines, spirits, pharmaceuticals, tobacco and food products. The range is constantly being developed in close collaboration with customers, in order to meet the ever-growing demand for innovative, customer-specific packaging solutions. The paperboard from Holmen is renowned for its high and consistent quality, which helps to
ensure predictability, efficiency and stable results in the customer's production process.
The shared feature of Invercote and Incada is that they are made from fresh fibre from sustainably managed forests, which has benefits for both the product and the environment. Higher strength, better brightness and a neutral effect on smell and taste in contact with food are just a few of the properties that add clear value to the end product. The combination of the fresh fibre and the inherent properties of the paperboard also make it possible to manufacture attractive and functional packaging solutions that offer an excellent substitute for packaging based on fossil raw materials.
Sustainable ecocycle. The addition of fresh fibre is necessary to keep the recovered fibre ecocycle going. The forest is the source of all paperboard and paper, and wood fibre can be recycled up to seven times before it ends up as biofuel.
Care by Iggesund is a modern service concept from Holmen that adapts to the customer's specific need for availability, deliveries, support and advice concerning everything from product samples to food safety. The local support team works very close to the market, has in-depth knowledge of the prevailing conditions and speaks the customer's language. The concept also includes environmental documentation plus access to analysis facilities at the company's own accredited laboratory for sensory and chemical analysis, known as the smell and taste lab, at Iggesund Mill.
Invercote and Incada are manufactured in a resource- and energy-efficient way at the modern paperboard mills in Iggesund, Sweden, and Workington, UK. Both mills hold chain-of-custody certification and all the wood raw material comes from well managed and sustainable forests. The plants in Workington and Iggesund already have the capacity to be self-sufficient in renewable energy. Iggesund Mill forms a bio co-location with Iggesund Sawmill that ensures every part of the tree is used on site. Chips from the sawmill serve as raw material for pulp production at the paperboard mill, while bark and wood shavings become biofuel and are converted into energy and district heating. The circle is closed when the surplus heat from the mill is used for drying processes at the sawmill.
Global demand for packaging is rising in line with factors such as population growth, urbanisation and an emerging middle class with more single-person households. Demand in the various product segments varies from continent to continent, but there is a general upward trend for renewable packaging materials, with paperboard considered to have major advantages over other materials. Growth in food
packaging can be seen primarily in Asia, the Middle East and Africa, while demand for pharmaceutical packaging is rising in all markets. Packaging for cosmetics is seeing a particular increase in markets with rapid population growth, such as Asia, Eastern Europe, and South and Central America.
Europe. Significant additions to capacity are expected to make competition stiffer and exports to other parts of the world are expected to rise. We are boosting our customer work and our focus on niche segments, as well as working proactively to continue growing over the long term, together with our customers.
North America. The market is relatively stable, and imports from Europe are expected to rise, although this trend depends on various factors, including currency fluctuations. Holmen is expanding in the premium segment, and has increased its presence and service level in the strategically key regions, for example through stock control and sheeting on the west coast of America.
Asia. Rising prosperity is driving demand for status goods and thus also the need for highquality packaging. This is a market with potential and with emerging local brands. Holmen has increased its presence through a sales office in Japan and a service centre in Taiwan.
Raw materials: Softwood and hardwood pulpwood Process: Sulphate pulp Products: Multi-layered paperboard made from bleached chemical pulp (SBB) Brand: Invercote
Raw materials: Spruce pulpwood and purchased sulphate pulp Process: TMP Products: Multi-layered paperboard, surface layer of chemical pulp, core of mechanical pulp (FBB) Brand: Incada
EUROPEAN PAPERBOARD MARKET 2016
that is harvested to make our paperboard, at least two new ones are planted.
Holmen manufactures magazine and book paper that makes the most of the properties of fresh fibre. This means that the market is offered new opportunities to produce printed materials sustainably and cost-effectively.
Holmen develops and sells fresh fibre-based speciality paper in the form of modern magazine and book paper that challenges traditional, more expensive paper grades. Efficient production units, continued specialisation and a strong marketing organisation are seeing Holmen strengthen its position in existing and new markets. Customers include retailers, printers and publishers across the globe seeking costefficient paper solutions.
Holmen's magazine and book paper is made from fresh fibre from Swedish forests, making it possible to develop paper grades with high bulk, creating paper that is thick but still light. This means that despite fewer tonnes of paper, the customer can produce printed material with the same thickness and feel as traditional, more expensive paper grades. In combination, this leads to lower costs for paper and distribution.
Paper based on fresh fibre has extra stability for its weight. In addition, the paper has a naturally higher brightness that improves the way text and images are experienced, compared with paper based on recovered fibre. This makes printed material from fresh fibrebased paper a natural complement to digital media.
Recovered paper needs fresh fibre. Pulp, paper and paperboard made from fresh fibre from Nordic forests play an important role in the European recovered fibre ecocycle. Forest resources are limited in the rest of Europe, which means that paper manufacture is based on recovered paper to a considerably higher extent. However, paper cannot be recycled again and again forever. The ecocycle needs a constant injection of fresh fibre from the forest.
Book paper. Compared with wood-free paper, Holmen BOOK gives its customers the opportunity to lower paper costs considerably. Publishers appreciate the paper because it maintains high quality and offers product properties that enhance the reading experience thanks to the paper's high stability and bright, smooth surface. The product comes in several variations and is constantly being developed.
Magazine paper. Holmen is an industry leader in developing new products entirely based on fresh fibre. The result is innovative products that, compared with traditional paper choices, offer clear cost benefits when purchasing and distributing finished products. The brands Holmen UNIQ, Holmen VIEW, Holmen TRND and Holmen XLNT represent a broad range of modern printing paper that is ideally suited for direct mail, catalogues and magazines, for example. The fact that all products are ecolabelled and based on traceable raw materials provides important arguments in an increasingly aware market.
The new media landscape, rapidly changing consumer habits and tougher competition for market share are all affecting customers. Holmen offers services that help the customer to maximise benefits in the paper decisionmaking process. This includes analysing the customer's product portfolio and strategic advice for profitable paper choices based on technical, commercial and experience-related aspects.
Production takes place at two mills in Sweden. Both have streamlined and upgraded their operations in line with the strategy of switching to speciality paper. The majority of the product brands can be produced in both mills, ensuring high efficiency, flexibility and delivery reliability. Favourable locations in terms of logistics mean short wood transport distances. Both mills are close to ports with good capacity and efficient handling.
Braviken Paper Mill and Braviken Sawmill make an energy-efficient bio co-location. The mill receives raw material in the form of chips and in turn provides the sawmill with energy and heat. Surplus bark and wood shavings are sold for energy and district heating production.
Hallsta Paper Mill is one of the most resource-efficient mills in its segment in Europe. The residual products from the production processes are sold on as biofuel and soil products.
Traceable raw material. Holmen's forestry, industrial production and products are certified. Certification guarantees that the wood raw material is traceable and comes from sustainably managed forests. Unlike the majority of products based on recovered fibre, the exact origin of the wood raw material can be cited.
Ecolabelled products. All magazine and book paper made by Holmen is approved by the EU Ecolabel, the official ecolabel of the European Union. Only products that meet stringent environmental, functional and quality requirements are allowed to carry the EU Ecolabel. The ecolabelling process mainly examines the use of fibre raw materials, chemicals and energy and emissions to air and water in manufacturing.
The magazine market is looking for new paths. Many magazine publishers are being squeezed by competition from digital channels and are constantly reviewing their paper choices as they chase lower costs. Here Holmen's innovative products with clear cost benefits have an opportunity for volume growth by providing an answer to market challenges.
Direct mail drives sales. Paper-based direct mail is still holding its own. In a short period Holmen has won the trust of retailers with products that combine high quality and competitive pricing, making the sums more than add up for customers.
Growth in the book paper market. With a market share of 50 per cent, Holmen BOOK is the market's leading wood-containing paper in Europe for paperbacks and hardback books. Its share has increased steadily in recent years. The trend is also increasingly moving towards digital printing, where Holmen's paper is ideal.
Holmen is now looking to new markets with potential outside Europe, mainly in Asia and Latin America.
Raw materials: Spruce pulpwood Process: TMP Products: Magazine paper, book paper and newsprint
Raw materials: Spruce pulpwood Process: TMP Products: Magazine paper and book paper END-USERS, %
of all paper. Without fresh fibre, there is no recovered fibre.
Holmen delivers climate-smart wood products to the joinery and construction industry and to builders' merchants. Production takes place at two large-scale sawmills integrated with the Group's paperboard and paper mills.
Holmen manufactures and delivers high-quality base products for further processing for joinery and construction industry customers in Europe, the Middle East, North Africa and to a growing extent also in Asia. Deliveries are also made directly to local Swedish builders' merchants. Competitiveness is based on a strong organisation for wood procurement and cost-efficiency through large-scale production co-located with the Group's paper and paperboard mills. With a finely-tuned production chain and working methods that put the customer in the centre, Holmen is building a solid platform for long-term and profitable customer relations with the capacity to meet demand in different markets.
Wood products have the capacity to store carbon for a long time. This makes buildings made from wood much more climate smart than houses built from materials made using fossil-based materials and processes. Besides the fact that wood is renewable and binds carbon dioxide, wood products can make a positive climate contribution through what is known as the substitution effect. Manufacturing materials such as steel and concrete creates emissions of fossil carbon that affect the climate. Replacing these materials with structural components made from wood results in climate benefits on several fronts, and also makes the entire chain from manufacturing to transport considerably more energy-efficient and cost-effective.
For a long time, the increase in the use of wood in Sweden has largely been attributable to renovation work and extensions. Now the trend is being driven by the construction of new homes, which in turn is affected by population growth, urbanisation and the aim to build sustainable cities. Building in wood will thus continue to increase and at the moment demand is outstripping supply. There is great potential for growth, mainly in high-rise buildings, and the proportion of housing built in wood is expected to rise as the capacity for industrial building in wood is expanded. New techniques for building in wood are also developing in parallel.
Strategic investments in a wood treatment plant and a distribution warehouse at Braviken Sawmill mean that Holmen will be able to offer a broader and more attractive range directly to builders' merchants. Treated wood is an important part of the range offered by Swedish builders' merchants and is used for terraces, decking, fences and jetties. Demand for treated products is growing and the sawmill's central location in a densely populated region means there are good opportunities to reach builders' merchants with a wider range of wood products for outdoor use.
The investment in modern, large-scale sawmills with a high technological level and gradually extended additional processing results in a stronger product range. Combined with efficient wood procurement, this produces competitive sawmills. The product range of the sawmills is adapted to the properties of the local raw material and they complement each other in the market.
Complete bio co-locations. The Group's sawmills form bio co-locations with neighbouring paperboard and paper mills. This means that every aspect of the wood raw material is made use of in a cycle in which chips from the sawmills act as raw material in pulp production and the final residual products are used as biofuel to produce energy and district heating. Steam from the mills is also used in the drying processes at the sawmills.
Local renewable raw material. One key to both profitability and sustainability is the proximity to the raw material and efficient wood procurement. The business area Forest effectively sources wood raw material from Holmen's own forest holdings and from other forest owners, ensuring a highly efficient logistics chain from forest to sawmill. The majority of the raw material used at the sawmills is certified.
The market for wood products is global and huge streams of goods are shipped between continents. The major exporters are Canada, Sweden, Finland and Russia. Typical markets in which Swedish sawmills are competing with other major exporting countries are the UK, China, North Africa and the Middle East.
Demand largely follows the general economic cycle and has recovered relatively well since the financial crisis. In North Africa and the Middle East, however, the recent political unrest has seen the increase in demand tail off somewhat. North American consumption has recovered but has a little way to go to reach historical levels. Asia is breaking new records and is dominated by the Chinese market, which is also seeing the fastest growth. Construction is doing well in Europe.
Raw materials: Spruce and pine saw logs Process: Sawmilling Products: Spruce and pine wood products
Raw materials: Pine saw logs Process: Sawmilling Products: Pine wood products
END PRODUCTS, %
Packaging timber 15%
The main part of the tree goes to our sawmills, where it is made into joinery products and construction timber.
The thinner part of the tree and wood from thinning are used in our mills to produce products such as paperboard, and magazine and book paper.
The rest of the tree is used as biofuel and for fossil-free energy production.
raw material and the only renewable construction material.
Holmen's environmental work focuses on efficient use of raw material and energy, with the forest playing a key role on the climate issue through its absorption of carbon dioxide.
Environmental and energy concerns play a natural role in Holmen's planning of its production and investments. Operations are characterised by resource-efficient use of renewable raw material and energy, and protecting the environment, applying the precautionary principle. Energy, chemicals and fibre are recovered as far as possible, in order to minimise the environmental impact of production. The section on risk management on page 37 outlines Holmen's preventive work on eco-related risks and how they are managed.
Holmen's environmental work is characterised by constant improvements, which is conducted within the remit of the certified environmental and energy management systems. This ensures compliance with the
(base year 2005),% -80 -60 -40 -20 0 20 -75
USE OF FOSSIL FUELS
05 06 07 08 09 10 11 12 13 14 15 16
requirements set in legislation and by government agencies, which is assured via statutory official inspections.
The main environmental impact from the industrial sites takes the form of emissions to air and water. Information on production and priority environmental parameters is presented on pages 80–81.
development. Holmen has been working on Group-wide environmental targets for sustainable development for several years. Increased production and use of products made from renewable forest raw material is important for the production itself and for the climate. Holmen therefore has a target of increasing growth in Holmen's forests by 25 per cent by 2050 compared with 2007.
The Group's target for fossil fuels is to reduce their use at the mills by 75 per cent by 2020 compared with 2005 levels. A reduction of 75 per cent has been achieved by 2016. Exten-
PRODUCTION RELATIVE TO ELECTRICITY USE (base year 2005), % 30 40 50 60 45
RENEWABLE ELECTRICITY
sive investments in bio-based energy production at the paperboard mills, and the adjusted energy strategy at the other mills have had a huge impact on fossil fuel use. The facility in Madrid was sold in mid-2016. Energy production at the mill is based on natural gas, a fossil fuel. The sale of the mill has thus resulted in a further drop in Holmen's fossil carbon dioxide emissions. For this reason, the target has been revised and from 2017 use of fossil fuel is to be cut by 90 per cent from 2005 to 2020.
The third climate-related sustainability target is to increase company-produced renewable electrical energy as a proportion of total electricity use by Holmen. The target for 2020 is for production to reach 50 per cent, compared with 31 per cent for the base year 2005. In 2016 self-generated renewable energy accounted for 45 per cent of Holmen's total electricity use. Access to water for the hydro power plants was slightly down in 2016 compared with 2015, leading to lower electricity production.
| Emissions of fossil carbon dioxide | |
|---|---|
| Forestry | -30 000 |
| Input goods | -70 000 |
| Production facilities | -125 000 |
| Transport of raw materials and products1) | -240 000 |
| Absorption of carbon dioxide | |
| In the growing volume of standing timber | 650 000 |
| Net in forest land | 130 000 |
| Captured in wood products | 640 000 |
| Wood products that substitute for climate-negative materials | 1 200 000 |
| Net, capture of carbon dioxide and substitution effect | 2 155 000 |
1) Includes emissions from transporting finished products to EU customers and incoming deliveries of wood, pulp and chemicals to Holmen's facilities. Data also includes emissions from transporting products to countries outside the EU.
The summary is based on internal data and calculations and on scientific articles published in recent years. Several independent sources show the positive climate impact of forestry and forest products. On the basis of this reference material, data has been obtained to calculate the substitution effect.
Carbon dioxide is captured in the growing forests and in the products. The resource-efficient production is predominantly driven by renewable energy. Investments in company-produced energy and the development of today's products and new products based on forest raw material mean the positive climate effects will be even greater in the future. The Group's investments in research and development amounted to approximately SEK 95 million in 2016.
The forest. Holmen's forests have long been managed in such a way that they contain a greater quantity of wood every year. Based on growth data from the last five years, it is calculated that the volume of standing timber will increase by 1 per cent a year, and approximately 650 000 tonnes of carbon dioxide will be captured by this increase in volume. Over the foreseeable period, annual growth in Holmen's forests is expected to exceed the harvests, and the Group's forest growth target indicates that carbon dioxide storage will increase in the future.
The production units. In recent years the production of renewable electricity and thermal energy has increased considerably through Holmen's investments in biofuel-based energy production at several mills. In the past ten years, emissions of fossil carbon dioxide have fallen by over 75 per cent and amounted to 125 000 tonnes in 2016.
Based on data for the past few years, annual emissions of fossil carbon dioxide from forest machinery, manufacture of input goods and transport of raw materials and products are estimated at approximately 340 000 tonnes. These emissions, together with those from certain types of forest land, represent the negative climate impact of Holmen's operations.
Wood products store carbon dioxide throughout their lifetime and this is only released when the products are incinerated. Holmen's production of wood products in 2016 is equivalent to approximately 640 000 tonnes of carbon dioxide stored in products with a lifetime of more than 50 years. Holmen's wood products that are sold as joinery and construction timber also contribute a substitution effect when used to replace climate-negative construction materials. For 2016 this substitution effect is estimated to amount to approximately 1 200 000 tonnes of carbon dioxide.
Residual volumes from the sawmills are used in wood packaging, which also has a long lifetime. Any substitution effect for these products has not been calculated.
As paper and paperboard products have a relatively short lifetime, it is not meaningful to calculate the storage of carbon dioxide. Once the fibres in these products have been recycled several times as recovered fibre, however, they, like the end-of-life wood products, make excellent biofuels. Biofuels from Holmen's forests and by-products from production, such as bark, provide renewable energy from incineration.
Under the parameters set, calculations show that Holmen's business brings substantial climate benefits, as it reduces the amount of carbon dioxide in the atmosphere by over two million tonnes per year.
The biogenic carbon dioxide released when trees and plants rot or wood and paper are incinerated is already included in the carbon cycle of the atmosphere. The fossil carbon dioxide released when oil is incinerated adds new amounts of carbon dioxide to the atmosphere, however. Fossil carbon dioxide is the major villain of the piece in climate change. Holmen's operations mean that a black carbon atom can be replaced with a green one.
Holmen's Group-wide sustainability targets are in line with the sustainable development goals defined at global, European and national level. In late 2015 the world's leaders adopted a global Agreement on Climate Change to address the climate issue at global level. The agreement that entered into force at the end of 2016 has the general target of keeping global warming well below 2°C, and preferably limiting it to 1.5°C, by cutting emissions of greenhouse gases. The Agreement on Climate Change states that action must be taken to preserve and improve the capacity to capture and store greenhouse gases. The importance of the forests is specifically underlined in this context. Over the long term, Holmen will therefore be an important player in ensuring that the target set out in the global Agreement on Climate Change can be achieved.
overarching objective of the Swedish environmental policy is what is known as the generational goal. The goal guides the values that must be protected and the transformation of society needed to attain the desired environmental quality. Attaining Sweden's environmental objectives demands an ambitious environmental policy in Sweden, in the EU and in international contexts. The Swedish environmental quality system comprises 16 environmental quality objectives in areas such as climate impact, air pollution and biodiversity. Swedish businesses are expected to contribute measures that show how systematic environmental work is profitable for society and for the companies. Holmen is constantly working on environment-related studies and measures both within forest operations and at production plants. Holmen is thus helping to ensure that several of the national environmental quality objectives can be met.
2017
The Global 100 list of the world's most sustainable corporations is announced each year at the World Economic Forum in Davos, Switzerland. The ranking has been carried out by the Canadian analysis company Corporate Knights since 2005 and is based on a total assessment of the company's capacity to tackle issues of resource management, employees and financial management. Almost 5 000 companies were included in the assessment, with the hundred best featuring on the Global 100 index. Holmen secured 21st place and is the only forest industry sector company on this prestigious list.
"We are both proud and pleased to be on the Global 100 list as one of the most sustainable companies in the world. Holmen has taken a focused approach to sustainability issues for many years now. Being recognised and ranked highly by leading analysts is an acknowledgement of this work," says Lars Strömberg, Director of Sustainable and Environmental Affairs at Holmen.
A Non-toxic Environment
Flourishing Lakes and Streams
A Balanced Marine Environment, Flourishing Coastal Areas and Archipelagos
Sustainable Forests A Rich Diversity of Plant and
Animal Life Illustrator: Tobias Flygar Source: www.miljomal.se
CDP'S CLIMATE CHANGE PROGRAM is the name of an international federation that in 2016 represented 827 institutional investors with assets totalling around SEK 900 billion. CDP, which is a non-profit organisation, seeks to encourage companies around the world to reduce their impact on the climate and nature's resources, and report annually on the outcome of its work. Using information from almost 5 800 listed companies, CDP has built up the world's largest database of climate information. This information is made available to support strategic business and investment decisions. Holmen has reported to the CDP Climate Change Program since 2007.
Holmen was highly ranked in CDP's study of companies' climate work 2016 and was placed in the good leadership group. Companies in this group represent best practice in regard to advanced environmental stewardship, with a good understanding of and active efforts to mitigate climate-related risks and capitalise on climate-related opportunities.
CDP WATER PROGRAM. In 2016, CDP sent out a questionnaire to 1 250 companies around the world on the risks and opportunities associated with water use. Holmen was one of the approximately 500 companies that responded to the questionnaire. The assessment showed that Holmen is judged to handle water issues well.
CDP FOREST PROGRAM. In 2016, CDP sent out a questionnaire to around 800 companies around the world on the risks and opportunities of silviculture from a climate perspective. Holmen is among the one quarter of companies that completed the questionnaire. Holmen was highly ranked in the survey and was placed in the good leadership group. Companies in this group show that they have introduced measures that ensure sustainable use of the forest's resources.
| Iggesund Mill, Environmental Code1) Workington Mill, IPCC2) |
2013 2002 |
|---|---|
| Hallsta Paper Mill, Environmental Protection Act |
2000 |
| Braviken Paper Mill, Environmental Code | 2002 |
| Iggesund Sawmill, Environmental Code | 2014 |
| Braviken Sawmill, Environmental Code | 2010 |
1) In addition, operations subject to notification requirements take place at the production unit in Strömsbruk. Port activity (at Skärnäs Terminal) alongside Iggesund Mill has held an environmental permit under the Environmental Code since 1999. An application for a new environmental permit was submitted for Iggesund Mill in 2016 (production increase). Operations at Skärnäs Terminal are included in this application.
2) IED permit from 2017.
At the end of 2016 Holmen was running production operations at six facilities that require environmental permits. The permits specify conditions regarding permitted production volumes and permitted emissions to air and water. Five of the facilities are located in Sweden and one is in Workington in the UK. The facilities have a total turnover amounting to almost 75 per cent of the Group's net sales in 2016.
The EU's Industrial Emissions Directive (IED) entered into force in 2013. The legislation entails more stringent requirements for using the best available technology. Holmen has investigated the extent to which operations at the pulp, paper and paperboard mills need to be adapted in order to meet the tightened emission requirements by October 2018. The environmental status of the mills is good and all the mills except the one in Workington already largely meet the new requirements. The mill in Workington is investigating the process-related measures that in combination with a biological treatment plant will see the process water emissions requirements met. The environmental authorities have granted the mill an exemption whereby the mill is to have invested in measures to ensure that the emission requirements are met by 2021.
An application for a new environmental permit for a production increase at Iggesund Mill was submitted in 2016. Operations at Skärnäs Terminal are included in this application.
Braviken Sawmill intends to invest in a facility for wood preservation treatment. An environmental permit application for this was submitted in 2016.
Holmen is monitoring the energy agreement that involves Sweden complying with the European Court of Justice's rulings regarding operations involving watercourses. All power plants must have environmental conditions in place that involve assessing the balance between production and environmental issues. The process will be
| PRODUCTION FACILITIES1) | ENVIRONMENT ISO 14001:2004 |
ENERGY ISO 50001:2011 |
QUALITY ISO 9001:2008 |
HEALTH AND SAFETY OHSAS 18001:2007 |
|---|---|---|---|---|
| Iggesund Mill2) | 2001 | 2005 | 1990 | 2016 |
| Workington Mill | 2003 | 2015 | 1990 | 2005 |
| Hallsta Paper Mill | 2001 | 2005 | 1993 | 2012 |
| Braviken Paper Mill | 1999 | 2006 | 1996 | 2015 |
| Iggesund Sawmill3) | 1999 | 2006 | 1997 | 2017 |
| Braviken Sawmill3) | 2011 | 2011 | 2011 | 2017 |
The years given in the table are the years when the certification was first issued. The certifications mean that procedures are in place for planning, implementation and follow-up, as well as measures to enable continuous improvement in the work on the various management systems. Certifications can be viewed at holmen.com/certificates.
1) Holmen's forest operationsare certified in accordance with environmental management system ISO 14001:2004. Furthermore, forest operations are also certified under sustainable forestry criteria and have chain-of-custody certification, which means an assurance that non-certified wood also comes from controlled sources. All the facilities at which wood raw material is used have chain-of-custody certification.
2) The certifications include the production unit in Strömsbruk and operations at Skärnäs Terminal.
3) From 2011 the certification is a joint certification for the two sawmills.
time-consuming and there are uncertainties regarding investments and production restrictions mainly for smaller power plants. Holmen's power plants are generally of a good standard and are well placed for future environmental impact assessment.
Holmen has all the permits to build approximately 500 GWh of wind power production in Västernorrland. An application to build an additional approximately 500 GWh of wind power in Västerbotten has been submitted to the environmental authorities. Due to the current market situation for this type of electricity production, with low prices for electricity and electricity certificates, the economic preconditions for investing in wind power are challenging.
Within the EU Emissions Trading Scheme, Holmen has been awarded emission rights up to 2020. As a result of extensive investments in bio-based energy production at several facilities, Holmen has been able to significantly reduce its need for fossil fuels in recent years. Consequently surplus allocated emission rights have been able to be sold.
The Group has produced renewable electricity for several years and electricity certificate trading has generated revenues. In the UK, electricity distributors have to meet a certain quota for renewable electricity, and producers of renewable electrical energy receive green Renewables Obligation Certificates (ROCs) in proportion to the amount of electricity generated. The biofuel boiler at the mill in Workington received such certificates in 2016, which were sold.
The environmental manager within each operation handles incoming complaints and any incidents that occur. During the year there were a number of cases of exceeded threshold values, as well as complaints and incidents in the industrial and forestry operations. Close
dialogue with the mills' local residents is important in order to identify any views on operations at an early stage.
44 industrial incidents were reported by the mills to the supervisory authorities during the year. The nonconformities were not of a significant nature in terms of environmental impact or impact on profits. Corrective measures were taken to deal with these cases, in line with the environmental management system of the operations concerned.
During the autumn one incident took place at Holmen's hydro power station in Norrköping. The water flow changed rapidly due to a technical fault. The fault was rectified within a few minutes. Despite this, the change in the water flow had consequences in that the lower limit of the water level at Grytsdammen was exceeded and a large number of pikeperch died downstream of the power plant. Measures have been put in place to prevent a recurrence. The incident is being investigated by the County Administrative Board.
In consultation with the environmental authorities, studies are being conducted at contaminated discontinued industrial sites where Holmen has operated in the past. Studies relating to the sawmills at Stocka and Lännaholm, the sulphite mills at Strömsbruk, Domsjö and Loddby, the former ground wood mill in Bureå and a landfill site in Kvillsfors continued in 2016. In 2016, remediation of an underground waste oil site in Hudiksvall and remediation of land at the former industrial site of Håstaholmen Sawmill were completed. Remediation of land and buildings at the former industrial site of a surface treatment plant in Iggesund will be completed in the first quarter of 2017.
Expectations of employees are made clear by the Code of Conduct, shared values and the management by objectives process. In total they contribute towards a culture in which the impetus is the desire for development.
The Code of Conduct. The Code provides guidance on day-to-day operations and clarifies what expectations are made of people who work at Holmen.
Values. Holmen's core values of couraged, commitment and responsibility combined with the Code of Conduct creates a framework for how employees should act and how leadership should be structured. Holmen's values aim to create a culture driven by a desire for development.
Management by objectives. Expectations concerning what the organisation and its employees should achieve are clarified through a process of management by objectives, under which success factors are identified and progress is monitored via key performance indicators. Use of a simple tool for continuous follow-up ensures that the organisation is applying appropriate priorities to attain the objectives established.
Productivity. As the number of employees in the Group continues to fall, productivity, defined as production per employee per year, has increased over several years. This is due to organisational changes, investments and more efficient working practices and processes.
A three-year programme is in progress at Iggesund Mill to improve the mill's competitiveness. In 2016, the focus was on reviewing skills and streamlining jobs. A new organisation was set up for forest operations, combining high forest expertise with a stronger focus on business and the market. The mill in Madrid was sold to International Paper during the year. At that point the mill employed about 260 people.
development. To maintain competitiveness over time, attracting the right employees is of the utmost importance. The Group's sustainability profile, combined with our
products geared towards the future and a developing and innovative culture/workplace environment, gives Holmen's brand a strong position in the job market.
To ensure the development of good leadership, Holmen runs internal leadership programmes for managers at all levels. There are also development programmes for specialists who do not have employees directly under them, but who drive change management. Holmen also takes a structured approach to identifying and developing talents in the organisation.
Equality. Holmen aims to create a working environment which is based on the view that all human people are of equal value. All Holmen's employees must have the same rights, obligations and opportunities irrespective of their sex, transgender identity or expression, ethnicity, religion or other belief, disability, sexual orientation, age, nationality, political opinion, union membership, social background, health status or family responsibilities. Holmen draws up action plans and pay surveys in line with the Equality Act and uses performance reviews and employee surveys as tools.
The forest industry is a male-dominated sector. Holmen is working to achieve a better balance. Over 19 per cent of employees are women and the proportion of female managers is about the same.
Employee surveys. Employee surveys are conducted to follow up working conditions and identify improvement measures. During the year it was decided that the surveys are to be carried out locally instead of centrally to produce results closer to operations, with a greater opportunity to put more appropriate measures in place.
Union cooperation. A relationship with the union organisations that is based on trust is important and helps drive Holmen forward. Collaboration with trade unions internationally takes place in the Holmen European Works Council and in consultation groups at various levels in the company. The company's employees are represented on the Group Board by three members and three deputy members.
47 29 8 12 4 0.3 Total: 2 989 Paperboard 1 406 Paper 861 Wood products 225 Forest 364 Renewable energy 10 Group-wide 122
AVERAGE NO. OF EMPLOYEES business area, %
Almost a fifth of employees are women and the proportion of female managers is about the same.
The aim of Holmen's work on safety is to make the workplace free of injuries for employees. A safe work environment is always high on the agenda and the issue is monitored constantly at management level. All units are certified under OHSAS 18001, which means that the Group now runs joint, systematic health and safety work. In 2016, health and safety work focused on safety behaviours, shared rules and exchanging experiences. The number of industrial accidents per 1 million hours worked was the same in 2016 as it was in 2015, at 8.8 accidents. The cause of these were predominantly slips and
trips. The target is zero accidents and several units have also been at this level for more than a year. The interim target is a maximum of 4.0 industrial accidents by the end of 2017 (base year 2012: 11.6).
Sickness absence was 4.2 per cent in 2016, which is on a par with previous years. Long-term sick leave (more than 60 days) stands at 2.0 per cent. The good health index is a measure of the share of employees with no sick leave during the year. The figure for 2016 was 48 per cent, which is on a par with recent years.
with more than 8 hours of absence, per million hours worked 12 13 14 15 16 0 5 10 15 20
With a history stretching back 400 years, Holmen has a long tradition of managing and processing natural resources. The foundation of Holmen's operations has always been the same – making the most of nature's assets and processing them to attain the greatest possible value. The products that are produced have changed over time, but the desire to develop and offer solutions to current challenges lives on.
Holmen has long operated sustainable forestry, whereby carbon dioxide is captured in the forest and its products. For more than a century, the Group's forests have been managed with a sustainable perspective in which growth is higher than the harvest and where far-reaching nature considerations protect biodiversity. Capturing approximately two million tonnes of carbon dioxide a year, Holmen's operations are climate-positive. At the same time, society can be supplied with paperboard, paper, wood
products and other products made from forest raw material that are capable of replacing fossil-based products. The assessment is that both forest growth and extraction of wood can increase by 25 per cent over a 40-year horizon, which means that an increasing amount of carbon dioxide can be captured in the forests and products of the future.
To maximise the value and benefit of the forest, intensive work is also under way to develop today's products while identifying future opportunities for renewable wood fibre. Holmen's work on research and development is mainly focused on three areas – increased forest growth, more efficient production and developing existing and new products in the product areas of paperboard, paper and wood products. This work is largely done jointly with other players, often within the same industry sector, and through collaborations with universities, colleges and research institutes. The Group is also working on identifying and developing new business opportunities, based on Holmen's renewable wood raw material and the by-products that arise in production. Research is being conducted into the components that make up wood: cellulose, hemicellulose and the binding agent lignin, which can be used, for example, to produce light, strong and sustainable products for structural solutions in the construction industry. An important starting point for the work is that the new business opportunities must be linked to Holmen's existing industrial sites.
The modern forest industry has a central role to play in the future bioeconomy, in which the resources of the forest must be used more efficiently and to an ever-increasing extent. The growing forest and the products it produces
are an important cornerstone for the transition to an economy in which bio-based raw materials and products replace fossil-based ones.
The circular economy is a concept that shares some DNA with a bio-economy. Being part of a circular economy means highlighting business opportunities from circular ecocycles, in which the added value of the products is preserved as far as possible and waste is minimised. End-of-life paperboard and paper products top up the recovered paper ecocycle with much-needed fresh fibre, for example. The wood fibre can be re-used up to seven times before it is finally used as biofuel. But without fresh fibre, there is no future recovered fibre. Increased resource-efficiency and a higher proportion of renewable material will be vital to realising a circular economy.
Very nearly 100 per cent of the by-products and waste that arise from Holmen's operations is collected and used for various purposes. The whole tree is utilised and the residual products are used either in Holmen's own manufacturing or in another industry. With a renewable raw material plus products that allow material recovery or, once expended, are used in fossil-free energy production, and recovery of chemicals and energy in the production plants, Holmen is already part of a bio-based circular economy.
Holmen's operations help to combat climate change and create condition for sustainable development in many ways – partly through carbon dioxide being captured and stored in the forests and the products, and partly through resource-efficient production runned predominantly on renewable energy. Thanks to investments, including those in more efficient production processes and developing the products of today and of tomorrow with forest raw materials as a base, the positive climate effects will be reinforced in the future.
The forest's ecosystems are multi-functional and contribute towards several different social functions. Sustainably managed forests are not only important from a climate-related and economic perspective, they are also important for people's wellbeing and a place for recreation, hunting and fishing. Holmen gives particular consideration to forests that are valuable in terms of aesthetics and experiences, and that many people visit for outdoor pursuits, relaxation and exercise.
The fundamental idea behind ecosystem services is making the value of nature clear to people. The forest provides several such services. The production of fibre raw material is one example that already has a market value. The forest's capacity to capture carbon dioxide, improve biodiversity and offer social value are other examples. Various processes are under way in Sweden and internationally to survey, develop and value ecosystem services. Holmen monitors the area and in Holmen's own forest holdings ecosystem services are identified that could lead to new business opportunities.
Sustainability is about more than the climate and the environment. Sustainable development for employees, business partners and owners requires that companies show good profitability and have a strong financial position. As an employer, Holmen must work to ensure good leadership and safe working conditions, while also motivating and developing its personnel. It is also important for operations to be characterised by transparency and comply with rules on business ethics. The Group's CEO has ultimate responsibility for driving progress towards sustainable development. The Group's Director of Environmental and Sustainable Affairs has a coordinating role in this area and reports to Group management.
Continuous improvement and regular follow-up of the business lay the foundation for Holmen's development in economic, social and environmental terms.
Forest that is growing absorbs greenhouse gases and captures them as carbon. This means that growing forests reduce the amount of carbon dioxide in the atmosphere, a capacity on which the forests' climate benefit rests. When wood is used as a substitute for materials and types of energy that have a negative climate impact, the impact is doubled. Emissions of greenhouse gases from manufacturing and using climate-negative materials are avoided, while increased use of products from the forest captures more carbon dioxide.
A managed forest is planted, cleaned, thinned and felled at regular intervals. A stock of wood is built up over about 70 years before the forest is ready to be harvested and a new growth cycle can begin. In unmanaged forest that develops freely, the stock of wood is built up once only and then changes insignificantly over time. The trees provide a benefit as a carbon sink but in unmanaged forest the substitution effect is lost.
In autumn 2015, the member states of the UN adopted 17 global goals for achieving social, economic and sustainable development around the world. With a resource-efficient business model that contributes towards positive climate effects, Holmen is engaged and works actively within the remit of several of the global sustainable development goals.
Holmen has been part of the UN Global Compact and its corresponding Nordic network since 2007. The Group reports its work on sustainability to the organisation each year in line with the ten principles of the Global Compact, and sets out the progress made. The initiative seeks to take active responsibility for ten recognised principles in the areas of the environment, human rights, working conditions and anti-corruption. Information on how the Group complies
with and works in line with the principles of the Global Compact is available at holmen.com. Work on the ten principles also helps to attain the global sustainable development goals above.
For technical reasons, paper and paperboard cannot be recycled again and again. After 5–7 times the fibres are exhausted. This means that the ecocycle needs a constant injection of fresh fibre from the forest. Without fresh fibre, there is no recovered fibre.
Holmen AB is a Swedish public limited company, listed on the Stockholm Stock Exchange (Nasdaq Stockholm) since 1936. The preparation of a corporate governance report is a requirement under the Swedish Annual Accounts Act. This corporate governance report complies with the rules and instructions stipulated in the Swedish Code of Corporate Governance.
Holmen had 28 159 shareholders at yearend 2016. Private individuals with Swedish citizenship accounted for the largest category of owners with 26 032 shareholders.
The largest owner at year-end, with 61.6 per cent of votes and 32.9 per cent of capital, was L E Lundbergföretagen AB, which means that a Group relationship exists between L E Lundbergföretagen AB (corporate ID number 556056-8817), whose registered office is in Stockholm, and Holmen. The Kempe Foundations constitute the second-largest owner and their holdings of Holmen shares amounted to 17.0 per cent of votes and 7.0 per cent of capital at the same date. No other individual shareholder controlled as much as 10 per cent of the votes. 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.
At the 2016 AGM, the Board's authorisation to purchase up to 10 per cent of the company's shares was renewed. No buy-backs took place during the period. As previously, the company holds 0.9 per cent of all shares.
See pages 40–41 for further information on the shares and ownership structure.
The notice convening the general meeting (AGM) is sent no earlier than six and no later than four weeks before the meeting. The notice contains: a) information about registering intention to attend and entitlement to participate in and vote at the meeting; b) a numbered agenda of the items to be addressed; c) information on the proposed dividend and the main content of other proposals. Shareholders or proxies are entitled to vote in respect of the full number of shares owned or represented. Registration to attend the AGM may be made by letter, telephone, email and at holmen.com. Notices convening an Extraordinary General Meeting (EGM) called to deal with changes to the company's articles of association shall be sent no earlier than six and no later than four weeks before the meeting.
Proposals for submission to the AGM 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 at holmen.com.
It was announced on 18 April 2016 that the 2017 AGM would take place in Stockholm on 27 March 2017.
The AGM resolved to establish 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. The composition of the nomination committee for the 2016 and 2017 AGMs is shown in the table on page 34.
The nomination committee's mandate is to submit proposals for the election of Board members and the Board chairman, for the Board fee and auditing fees and, where
applicable, for the election of auditors. The committee's proposals are presented in the notice convening the AGM.
For the 2017 AGM the nomination committee proposes that the Board consist of nine members elected by the AGM. The nomination committee proposes the re-election of the current Board members: Fredrik Lundberg (who is also proposed for re-election as chairman of the Board), Carl Bennet, Carl Kempe, Lars G Josefsson, Lars Josefsson, Louise Lindh, Ulf Lundahl, Henriette Zeuchner and Henrik Sjölund.
The members of the Board are elected each year by the AGM for the period until the end of the next AGM. According to the company's articles of association, the Board shall have 7–11 members, and they are to be elected at the AGM. The company's articles of association contain no other rules regarding the appointment or dismissal of Board members, or regarding amendments to the articles, or restrictions on how long members can serve on the Board.
The 2016 AGM re-elected Fredrik Lundberg, Carl Bennet, Lars G Josefsson, Carl Kempe, Louise Lindh, Ulf Lundahl, Henriette Zeuchner and Henrik Sjölund to the Board and elected Lars Josefsson as a new Board member. Fredrik Lundberg was re-elected chairman. Göran Lundin had declined to stand for reelection. At the statutory first meeting of the new Board in 2016, 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.
Of the nine Board members elected by the AGM, eight are deemed independent of the company as defined by the Code. The CEO is the only Board member with an operational position in the company. Further information about the members of the Board is provided on pages 74–75.
The activities of the Board follow a plan that, among other things, aims to ensure that the Board obtains all requisite information. Each
The 2016 AGM and the material presented was in Swedish. The notice convening the meeting, the agenda, the CEO's speech and the minutes are available at holmen.com.
The meeting was attended by all AGM-elected Board members, Group management and the company's auditors. During the AGM, the shareholders had the opportunity to ask and obtain answers to questions. The AGM adopted the income statement and balance sheet, decided on the appropriation of profits and granted the departing Board discharge from liability. The minutes of the meeting were checked by Ramsay Brufer of Alecta and Emma Otterhem of The Forth Swedish National Pension Fund (AP4).
It was not possible to follow or participate in the meeting from other locations using communication technology. Similarly, no such possibility is planned for the 2017 meeting.
The Board held ten meetings in 2016, four of which were in connection with the company's publication of its quarterly reports. A two-day meeting was dedicated to strategic operational planning. A meeting was held in connection with a forest excursion to the company's land near Örnsköldsvik and a study visit to Holmen's nursery at Gideå.
One meeting dealt with the Group's budget for 2017. Two meetings were held in connection with the company's AGM. The Board also paid special attention to strategic, financial and accounting issues, monitoring of business operations, the sale of the business in Spain and major investment matters. On two occasions the company's auditors reported directly to the Board, providing a presentation about their audit of the accounts and internal control.
| SHAREHOLDERS | |||||||
|---|---|---|---|---|---|---|---|
| NOMINATION COMMITTEE | GENERAL MEETING OF SHAREHOLDERS | ||||||
| REMUNERATION COMMITTEE | BOARD OF DIRECTORS | ||||||
| AUDITORS | |||||||
| GROUP MANAGEMENT | |||||||
| FIVE GROUP STAFFS | FIVE BUSINESS AREAS |
year the Board decides on written working procedures and issues written instructions. The latter relate to the division of responsibilities between the Board and the CEO and the information that the Board is to receive continually regarding financial developments and other key events. Employees of the company participate in Board meetings to submit reports.
An assessment is conducted each year to develop the activities of the Board. Each Board member responded to a questionnaire with relevant questions relating to the work of the Board and the members were also able to make proposals on how the work of the Board could be further developed. Their responses were presented and discussed at a Board meeting. The chairman of the Board prepared a report on the results of the 2016 assessment for the nomination committee, which will form the basis for the planning of the Board's activities for the coming year.
The Board has appointed a remuneration committee consisting of Fredrik Lundberg and Carl Bennet. During the year, the committee prepared matters pertaining to the remuneration and other employment conditions of the CEO, as well as a share savings programme.
Remuneration and other employment conditions for 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 remuneration committee has evaluated the application of both this policy and the guidelines on the remuneration of senior management adopted by the AGM.
The Group applies the principle that each manager's manager must approve decisions on remuneration in consultation with the relevant personnel manager.
At the 2016 AGM the Board set out its proposals regarding guidelines for remuneration of the CEO and other senior management, i.e. heads of business areas and heads of Group staffs who report directly to the CEO. The AGM adopted the guidelines in the proposal. The Board proposes unchanged guidelines to the 2017 AGM. These guidelines and information about remuneration are presented in Note 4 on page 54.
The 2016 AGM approved the Board fee and payment of the auditors' fee as invoiced.
The 2016 AGM approved a targeted share savings programme for Group management employees, heads of the business areas and a number of key individuals in the Holmen Group. Further information about the share savings programme is provided in Note 4.
The Board has delegated operational responsibility for management of the company and the Group to the CEO. The Board annually decides on instructions covering the distribution of tasks between the Board and the CEO.
Holmen's Group management comprises the company's CEO, the heads of four of the five business areas and the heads of the five Group staffs. Information about the CEO and other members of Group management is provided on page 76.
Group management met on 10 occasions in 2016. Its meetings dealt with matters such as earnings trends and reports before and after Board meetings, business plans, budgeting, investments, internal control and reviews of market conditions, general development of the economy and other external factors affecting the business. Projects relating to business areas and Group staffs were also discussed and decided on.
KPMG, which has been Holmen's auditor since 1995, was re-elected by the 2016 AGM as auditor for a period of one year. Authorised accountant Joakim Thilsted was appointed as the principal auditor. KPMG audits Holmen AB and almost all of its subsidiaries.
The examination of internal procedures and control systems begins in the second quarter and continues thereafter until year-end. The interim report for January–September is subject to review by the auditors. The examination
| INDEPENDENT OF THE: | |||||||
|---|---|---|---|---|---|---|---|
| BOARD MEMBERS | POSITION | ELECTED | ATTENDENCE | FEE (SEK) | COMPANY | MAJOR SHAREHOLDERS | |
| Fredrik Lundberg* | Chairman | 1988 | 10/10 | SEK 680 000 | Yes | No | |
| Carl Kempe | Deputy chairman | 1983 | 10/10 | SEK 340 000 | Yes | No | |
| Carl Bennet* | Member | 2009 | 10/10 | SEK 340 000 | Yes | No | |
| Lars G Josefsson | Member | 2011 | 10/10 | SEK 340 000 | Yes | Yes | |
| Lars Josefsson | Member | 2016 | 6/7 | SEK 340 000 | Yes | Yes | |
| Louise Lindh | Member | 2010 | 10/10 | SEK 340 000 | Yes | No | |
| Ulf Lundahl | Member | 2004 | 10/10 | SEK 340 000 | Yes | Yes | |
| Henriette Zeuchner | Member | 2015 | 10/10 | SEK 340 000 | Yes | Yes | |
| Henrik Sjölund | Member, President and CEO | 2014 | 10/10 | - | No | Yes | |
| Total | 8/9 | 5/9 | |||||
| * Representatives of the remuneration committee | |||||||
| EMPLOYEE REPRESENTATIVES | |||||||
| Steewe Björklundh, member, elected 1998 | Kenneth Johansson, member, elected 2004 | Tommy Åsenbrygg, member, elected 2009 |
Per-Arne Berg, deputy member, elected 2015 Daniel Hägglund, deputy member, elected 2014 Martin Nyman, deputy member, elected 2010
Internal management processes
and audit of the final annual accounts and the annual report take place in January–February.
Holmen allows the Board to perform duties that would otherwise be performed by an audit committee. The Board's reporting instructions include requirements that the members of the Board shall receive a report each year from the auditors confirming that 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 2016 the auditors reported to the entire Board at two meetings. Over and above this, the auditors reported to the chairman of the Board and the CEO on one occasion and to the CEO/deputy CEO during their work.
In addition to the audit assignment, Holmen has consulted KPMG on matters pertaining to taxation, accounting and for various investigations. The remuneration paid to KPMG for 2016 is stated in Note 5 on page 55. KPMG is required to assess its independence before making decisions on whether to provide Holmen with independent advice alongside its audit assignment.
As a result of a change in legislation which results in an extension of duties relating to the audit, the Board has decided to establish an audit committee for future financial years.
As part of the Group's annual strategy review, each business area draws up a business plan and sets objectives for its operations, which it presents to the Board. The business plan forms the basis of the expectations made of the units in each respective business area. On the basis of the expectations, each unit sets objectives and identifies success factors for achieving them. Key performance indicators (KPIs) are linked to the success factors in order to measure and demonstrate changes in performance. The business plan also provides the basis for the budget, in which decisions are taken on the distribution of resources and targets for the coming year are set.
The business areas guide the operating businesses towards these targets using processes for purchasing, production and sales, and supported by HR, financial management, R&D, IT and environmental processes. Operations are followed up through regular reporting of financial performance and KPIs, along with additional qualitative analysis. The scope for this work is set by policies, guidelines and instructions, together with authority and authorisation rules.
Management of sustainability and social responsibility. Holmen's code of conduct
provides guidance on day-to-day operations and clarifies what expectations are made of employees. The business ethics policy and its accompanying guidelines address matters such as anti-corruption measures and competition issues. Employees in departments at risk of encountering unauthorised behaviour receive special training on these issues. The code of conduct for suppliers covers the areas of anticorruption measures, human rights, health and safety and the environment. Holmen is subject to the UK Modern Slavery Act and a report relating to this is available at holmen.com.
Whistleblower function. A whistleblower function is available so that employees and other stakeholders can highlight any deficiencies in Holmen's financial reporting or other possible areas of concern at the company.
The Board's responsibility for internal control and financial reporting is regulated by the Swedish Companies Act and the Swedish Corporate Governance Code. Under this code, the Board is also responsible for ensuring that the company is managed in a sustainable and responsible manner. Day-to-day responsibility for all these matters is delegated to the CEO.
Purpose and structure. The purpose of internal control is to ensure that Holmen lives up to its objectives for financial reporting (see box on page 35) and to minimise risk of the Group being subject to fraud. Group Finance coordinates and monitors the internal control process concerning financial reporting in the Group.
This work adheres to guidelines issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in respect of internal control over financial reporting. The framework comprises five basic elements: control environment, risk assessment, control activities, information and communication, as well as monitoring activities. The framework has been modified to suit the estimated needs of Holmen's various operations.
Control environment. The control environment provides the basis for internal control of financial reporting and is based in part on the company's internal management processes. The Board of Directors' procedural rules and the instruction for the CEO establish the distribution of roles and responsibilities to
| BEFORE AGM: | INDEPENDENT OF THE: | ||||
|---|---|---|---|---|---|
| NAME | REPRESENTING | 2017 | 2016 | COMPANY | LARGEST SHAREHOLDER (IN TERMS OF VOTES) |
| Mats Guldbrand | L E Lundbergföretagen* | x (chairman) | x (chairman) | Yes | No |
| Fredrik Lundberg | Chairman of the Board | x | x | Yes | No |
| Alice Kempe | Kempe Foundations* | x | x | Yes | Yes |
| Hans Hedström | Carnegie funds* | x | x | Yes | Yes |
* At 31 August 2016, L E Lundbergföretagen controlled 61.6 per cent of the votes, the Kempe Foundations controlled 17.0 per cent and Carnegie funds (Sweden) controlled 1.7 per cent.
ensure effective control and management of the business' risks.
Policies, guidelines and instructions contribute to making individuals aware of their role in establishing good internal control. These documents also ensure that 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 the company operates.
Risk assessment. Risk assessment activities aim to identify and evaluate the risks that can result in the Group's financial reporting objectives not being met. The results of these riskrelated activities are compiled and assessed under the guidance of Group Finance.
Holmen's greatest risks regarding financial reporting are linked to the valuation of biological assets and property, plant and equipment, pension provisions, other provisions and to financial transactions. The risk assessment also involves identifying and assessing operational risks. For further information, see the Risk Management section on pages 36–39.
Control activities. To ensure that Holmen's financial reporting objectives are met, control requirements are incorporated into the processes that are deemed relevant: sales, purchasing, investments, personnel, financial statements, payments and IT. Control activities aim to prevent, identify and rectify errors and discrepancies. Business-specific self-assessments that are completed by all Group units set out what control requirements apply for each respective process and whether or not they are met.
Information and communication. Holmen's financial information provision, both external and internal, adheres to a communication policy established by Group management. The provision of financial information for Holmen's shareholders and other stakeholders must be accurate, comprehensive, transparent and consistent, and must take place on equal terms and at the right time.
Follow-up and evaluation. Control activities are assessed regularly to ensure that they are effective and appropriate. The results of selfassessments are followed up on a continual basis and discrepancies are reported to the steering group for internal control each quarter. The accuracy of self-assessments is subject to testing.
The reporting of internal control to Group management takes place once a year. The company's auditors report their observations from the review of internal control to the Board during the year.
Follow-up is an important tool to identify possible deficiencies within the Group and to address these through the development of new control requirements.
External financial reporting must:
Internal financial reporting must also support correct business decisions at all levels in the Group.
Statement on internal audit. The Board of Directors does not believe that particular circumstances in the business or other conditions exist to justify an internal audit function. The internal control managed by the Group, together with the activities carried out by the external auditors, is deemed to be sufficient.
The business areas are responsible for business operations and handle business risks such as credit risks in relation to the Group's customers. They also take decisions regarding volumes and pricing with the aim of consistently generating a good return on invested capital. Group Finance manages the Group's funding and financial risks, based on a financial policy that is established by the Board and is characterised by a low level of risk. The purpose is to minimise the Group's cost of capital through suitable financing as well as effective management and control of the Group's financial risks.
| Risk | Risk management | Comment |
|---|---|---|
| Demand and prices. Changes in demand and prices affect opportunities to achieve profitability targets. |
Changes in prices and deliveries largely depend on the develop ment of the European market. This in turn is influenced by several factors, such as demand, production among European producers and changes in imports into Europe, as well as the opportuni ties for exporting profitably from Europe. Holmen has limited opportunities for making rapid significant changes to its range of products, but the company adapts its product focus, steering it towards the products and markets deemed to have the best long term potential. Holmen aims to have a broad customer base and an offering that spans several product areas. This aim, combined with long-term customer relationships, reduces vulnerability to changes in the market. |
The continual development of the product offering is important in meeting changes in demand. In 2016, Holmen successfully increased sales of its new Holmen UNIQ prod uct from Braviken Paper Mill. The decision was also taken in 2016 to invest in a treat ment plant at Braviken Sawmill. This facility provides the opportunity to offer treated wood products to the Swedish construction market. |
| Commodity prices. Wood, electricity and chemicals are the most significant inputs for the industry and price changes affect the industry's profitability. |
The size of the timber harvest from the company's forests is essentially the same as consumption at the company's saw mills, while pulpwood from own forests corresponds to approximately 40 per cent of industry consumption. The industry uses pulpwood to produce pulp, which is then turned into paperboard or paper. The Group is largely in balance in terms of pulp as a result of the integrated production process. The paperboard business generates almost all the electricity required at its own mills, while electricity for paper manufacturing is supplied from external pur chases. The Group also sells electricity from its hydro power and wind power assets to the electricity grid. In net terms, the Group's own electricity generation corresponds to around 50 per cent of its electricity consumption. The price risk in this consumption is managed through physical fixed price contracts and financial hedging. There is a significant need for thermal energy, but this is produced locally at each mill from residual products. Chemicals are a significant input, particularly in paperboard production, but the need is reduced by recycling used chemicals at the mill. |
Raw material prices have been stable in recent years. The price of net electricity consumption is 80–90 per cent hedged for 2017–2020 and 60 per cent hedged for 2021. |
| Facilities. Production equipment can be seriously damaged for example in the event of a fire, machine breakdown or power outage. This can lead to supply problems, unexpected costs and reduced customer confidence. |
Damage prevention measures, regular maintenance and continual upgrades can minimise the risk of damage to facilities. Training of employees promotes participation, knowledge and awareness about these risks and how they can be countered. Holmen insures its facilities to their replacement value against property damage and consequential loss. The excess varies from one facility to another, but the maximum is SEK 30 million for any one claim. The Group has liability insurance that also covers sudden and unforeseen environmental damage affecting 'third parties'. |
No event causing significant damage occurred in 2016. The pulp mill in Hallsta was rebuilt following the major fire that occurred at the end of 2015. The loss of revenue during the shutdown and reconstruction costs are covered by insurance, with the exception of SEK 30 million excess. |
| Forest. Forest fires, grazing by wild animals and insect pests are risks in growing forests. |
The Group's forest holdings are not insured. They are widely dispersed over large parts of Sweden and the risk of extensive damage being incurred simultaneously is deemed to be low. Insect pests such as pine weevils are countered by waxing seedlings. |
No event causing significant damage occurred in Holmen's forests during 2016. |
| Customer credits. The risk of the Group's customers being unable to fulfil their payment obligations gives rise to credit risk. |
The risk that the Group's customers will not fulfil their payment obligations is limited by means of creditworthiness checks, internal credit limits per customer and, in some cases, by insuring trade receivables against credit losses. Credit limits are continual ly monitored. Exposure to individual customers is limited. |
At 31 December 2016 the Group's trade receivables totalled SEK 2 174 million, of which 46 per cent (42) were insured against credit losses. During the year, credit losses on trade receivables had a SEK -5 million (-27) impact on earnings. Sales to the five largest customers accounted for 14 per cent of the Group's total sales in 2016. |
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|---|---|---|---|---|
| Health and safety. Incidents and accidents at the workplace pose a risk to human life and health. This could lead to production disruptions and increased costs. |
Good health and safety is a priority at all levels of management in the Group. The health and safety policy was revised in 2016. Certified management systems, Group-wide targets relating to work accidents, continual training of personnel to increase risk awareness, procedures for incident and accident reporting, and risk assessment of work by contractors are examples of activities to maintain a high level of safety in the workplace. |
The figure in 2016 was 8.8 industrial accidents per 1 million hours worked (2015: 8.8). The overwhelming cause of these were slips and trips. See also page 29. |
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| Environment. Production disruptions can cause breaches of emissions conditions set for the business by environmental authorities. This could have an environmental impact. |
Environmental measures are organised and conducted in accord ance with an environmental and energy policy. In the event of process disruptions, the environment takes precedence over pro duction. Risks are prevented and managed through regular own checks, checks by authorities and environmental risk analyses, as well as through the use of certified environmental and energy management systems and environmental and chain-of-custody certification. |
Holmen represents best practice in regard to advanced environmental stewardship, with active efforts to mitigate climate-related risks and capitalise on climate-related opportunities. This was a finding of the annual survey conducted by CDP. See also pages 24–27. |
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| Personnel. Holmen needs to attract and retain skilled and motivated employees so it can conduct long-term business operations with good profitability. |
Issues regarding management by objectives, responsibility, participation, safety and skills development are prioritised in day to-day work and personnel training. Holmen's Code of Conduct and core values provide a basis for how employees should operate and how leadership should be formed. The Group works systematically to give employees opportunities to influence and develop the business through ongoing feedback and dialogue between managers and workers. Employee representatives have seats on Holmen's Board. A whistleblower function is in place if employees and other stakeholders wish to report improper conduct within Holmen. |
No cases regarding breaches of the Code of Conduct were reported in 2016. |
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| Business ethics. Both nationally and internationally, customers and partners place requirements on Holmen as a stable and reliable supplier that has good business practices and clear sustainability principles. Deviations from principles and policies could have a negative impact on reputation and business relationships. |
Holmen's business ethics policy and associated guidelines provide clear guidance on how to maintain good business practices when dealing with external contacts in various markets. Training on business ethics is provided for management groups and for employees deemed to encounter issues covered by the business ethics policy, such as marketing and sales departments and purchasers. |
A preliminary investigation is currently underway regarding hunting events arranged by Holmen. In January 2017, the prosecutor in the case communicated that he believes there is reasonable suspicion of bribery in connection with some of these hunting events. Holmen's understanding is that the applicable rules have not been breached in any of the cases in question. |
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| Suppliers. Deficiencies in the supply chain for inputs in terms of security of supply and quality can lead to production disruptions. Suppliers that do not meet Holmen's sustainability requirements can also have a negative effect on operations. |
Holmen endeavours to have at least two approved suppliers per area of use. In addition, Holmen's Code of Conduct for suppliers is included in all new contracts. It contains requirements on sustainable development, including by respecting internationally recognised principles on anti-corruption measures, human rights, health and safety and the environment. In 2017, a third party will be used for risk classification and supplier assessment work. |
No cases regarding breaches of the Code of Conduct for suppliers were reported in 2016. By the end of 2016, suppliers accounting for around 75 per cent of the Group's purchasing volumes had signed up to the Code of Conduct for suppliers. |
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| Holmen is subject to the UK Modern Slavery Act and a report relating to this is available at holmen.com. |
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| IT systems. Sales and purchasing require efficient IT support in order to manage and plan production. Disruptions in IT support and unauthorised access to information can have significant negative effects on the business. |
Operating disruptions and unauthorised access are prevented by security measures and preventive measures in the form of ap propriate physical protection, reliable server operation and secure networks. Measures and procedures are in place to minimise the risk of interruption and to manage situations if interruptions occur. |
Operations have not been affected by IT inci dents in 2016. |
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| Political decisions. Laws and rules in coun tries in which the Group operates affect how business activities can be conducted. Rules on how forests may be managed could affect future growth and harvests. Stimulus meas ures to use bio-based products can affect demand for paperboard and wood products, as well as wood from our forests. Rules on the use of fresh fibre versus recovered fibre also have an impact. |
Holmen participates in national and international industry organisations whose purpose is to handle the monitoring of social trends, advocacy and political lobbying. Contact is established with local representatives in areas where the Group has operations. Political decisions are influenced by public opinion. Contact with the general public offers opportunities to contribute knowledge and facts. This takes place, for example, through consultation and information meetings and through debate in the media. |
The right to manage forests and conditions for hydro power were focal issues in 2016. During the year, the Swedish government announced a reduction in the property tax on hydro power plants. |
Currency. The Group's earnings are affected by fluctuations in exchange rates. Transaction exposure risk arises due to a significant portion of the Group's sales income being in different currencies than costs. The translation exposure risk arises from the translation of foreign subsidiaries' assets, liabilities and earnings into Swedish kronor.
Transaction exposure. In order to reduce the impact on profit from changes in exchange rates, net flows are hedged using forward foreign exchange contracts. Net flows in euros, US dollars and sterling 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, competitiveness and the currency situation. Currency exposure arising when investments are paid for in foreign currency is distinguished from other transaction exposure. Normally, 90–100 per cent of the currency exposure associated with major investments is hedged.
Translation exposure. Hedging exposure that arises when subsidiaries' assets and liabilities are translated into Swedish kronor (known as equity hedging) is assessed on a case-by-case basis and is arranged based on the value of net assets upon consolidation. The hedges take the form of foreign currency loans or forward foreign exchange contracts. Exposure that arises when the earnings of foreign subsidiaries are translated into Swedish kronor is not normally hedged.
For the next two years, 90 per cent of expected flows in EUR/SEK are hedged at an average of 9.50, for EUR/GBP 90 per cent of the next year's expected flows are hedged at 0.86 and for USD/SEK 70 per cent of the next year's flows are hedged at 8.93. For other currencies, 4 months of flows are hedged.
Hedging of net assets in euros amounted to EUR 13 million at year-end, which essentially corresponds to the Group's total assets in euros. Hedging in pounds sterling amounted to GBP 5 million at year-end. Net assets in other currencies are very limited and are not hedged.
Interest rates. Risks that arise when changes in the market interest rate affect the Group's interest income and expense.
The fixed interest periods for the Group's financial assets and liabilities are normally short. The Board can decide to lengthen these periods in order to limit the effect of a rise in interest rates. Derivatives in the form of interest rate swaps are used to manage fixed interest periods without altering underlying loans.
The Group's average interest rate on borrowing was 1.1 per cent in 2016 and 0.9 per cent at year-end. The table below shows the Group's fixed interest agreements by currency.
| YEAR 1 | YEAR 1–3 | YEAR 3–5 | >YEAR 5 | PENSION PROVISIONS |
TOTAL | |
|---|---|---|---|---|---|---|
| SEK | -2 311 | -400 | -600 | 0 | -23 | -3 334 |
| EUR | -20 | 0 | 0 | 0 | -8 | -28 |
| GBP | -457 | 0 | 0 | 0 | -170 | -626 |
| Other items | 43 | 0 | 0 | 0 | 0 | 43 |
| -2 744 | -400 | -600 | 0 | -201 | -3 945 |
Credit risk from financial counterparties. The risk of financial transactions giving rise to credit risks in relation to financial counterparties.
A maximum credit risk and settlement risk are established for each financial counterparty and are monitored continually. Holmen's financial counterparties are assessed using reputable credit rating agencies or, where a counterparty has no credit rating, the company's own analyses. This calculation is based on the maturity and historical volatility of different types of derivatives. The maximum credit risk for other financial assets is estimated to their nominal amount.
At 31 December 2016, the Group had outstanding derivative contracts with a nominal amount of about SEK 15 billion and a net fair value of SEK -194 million. Holmen's total credit risk in derivative transactions amounted to SEK 1 405 million at yearend 2016. This calculation is based on the maturity and historical volatility of different types of derivative.
Liquidity and refinancing. The risk of the need for future funding and refinancing of maturing loans being required at a high cost. Holmen's strategy specifies that its financial position should be strong to ensure that it has the freedom to take long-term business decisions. The goal is to not exceed a debt-to-equity ratio of 0.5. Holmen's financing mainly comprises bond loans and the issue of commercial paper. Holmen reduces the risk of future funding becoming difficult or expensive by using long-term contractually agreed credit facilities. The Group plans its financing by forecasting financing needs over the coming years based on the Group's multi-year business plan, budget and profit forecasts that are regularly updated.
Net financial debt decreased in the year by SEK 854 million and amounted at 31 December 2016 to SEK 3 945 million, SEK 201 million of which comprised pension provisions. The Group has contracted a credit facility of EUR 400 million (SEK 3 824 million) with a syndicate of nine banks which expires in 2020 and 2021. The credit facility remained unutilised at year-end. It is available for use provided that the Group's debt/equity ratio is below 1.25. At year-end, the Group's debt/equity ratio was 0.19.
A one per cent change in deliveries and price of the Group's products or significant inputs is deemed to affect Group operating profit as per the table to the right.
Earnings are relatively evenly spread over the year. The clearest seasonal effects are lower personnel costs in the third quarter and the fact that electricity production at the hydro power plants is normally higher in the first and fourth quarters.
| Impact on operating profit | Change | Prices | Deliveries |
|---|---|---|---|
| Paperboard | +/-1% | 51 | 29 |
| Printing paper | +/-1% | 54 | 18 |
| Wood products | +/-1% | 13 | 3 |
| Wood from company forests | +/-1% | 12 | 8 |
| Hydro and wind power | +/-1% | 3 | 3 |
| Inputs | |||
| Wood* | +/-1% | 26 | |
| Electricity* | +/-1% | 12 | |
| Chemicals | +/-1% | 11 | |
| Other variable costs | +/-1% | 11 | |
| Delivery costs | +/-1% | 12 | |
| Employees | +/-1% | 23 | |
| Other fixed costs | +/-1% | 16 |
* Taking account of harvesting of company forests and generation of own electricity, net earnings sensitivity for the Group is SEK 14 million for wood and SEK 10 million for electricity.
The table to the right shows the extent of the impact from a change in the Swedish krona, the market interest rate and the price of electricity on Group operating profit and equity, taking account of hedging.
| Earnings before tax | Change | SEKm |
|---|---|---|
| Exchange rates | +/-1% | 18 |
| SEK/EUR | +/-1% | 4 |
| SEK/USD | +/-1% | 4 |
| SEK/GBP | +/-1% | 8 |
| SEK/other currencies | +/-1% | 3 |
| Borrowing rate | +/-1 percentage point | 21 |
| Electricity price | +/-1% | 1 |
| Equity | Change | SEKm |
| Transaction hedging | +/-1% | 98 |
| Investment hedging | +/-1% | 0 |
| Equity hedging | +/-1% | 13 |
| Interest rate hedging | +/-1 percentage point | 20 |
| Electricity hedging | +/-1% | 13 |
In 2016, the price of Holmen's class B shares increased by SEK 65 or 25 per cent. Earnings per share excluding items affecting comparability was SEK 19.7. It is proposed that the dividend is to be raised to SEK 12 (10.5).
Holmen was listed on the Stockholm Stock Exchange in 1936, but was called Mo och Domsjö AB at that time. Holmen's two series of shares are listed on Nasdaq Stockholm, Large Cap. During the year, the price of Holmen's class B shares increased by SEK 65 or 25 per cent, to SEK 327. The Stockholm Stock Exchange rose by 6 per cent over the same period. Holmen's market capitalisation of SEK 27.4 billion (22.3) represents some 0.4 per cent of the total value of the Stockholm Stock Exchange. The highest closing price for Holmen's class B shares was SEK 327, on 30 December. The lowest closing price was SEK 227, on 20 January. The daily average number of class B shares traded was 192 000, which corresponds to a value of SEK 53 million. The daily average number of class A shares traded was 500. Nearly 70 per cent of trading took place on Nasdaq Stockholm. The Holmen shares have also been traded on other trading platforms, such as BATS Europe, Chi-X and Turquoise.
Diluted earnings per share excluding items affecting comparability was SEK 19.7. Including items affecting comparability, diluted earnings per share was SEK 16.9 (6.7).
Decisions on dividends are based on an appraisal of the Group's profitability, future investment plans and financial position. The Board proposes that the AGM, to be held on 27 March 2017, approve a dividend of SEK 12 (10.5) per share. The proposed dividend corresponds to 4.7 per cent of equity. Over the past five years the dividend has averaged 4 per cent of equity.
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 repurchased class B shares held in treasury. Each class A share carries 10 votes, and each B share 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.
Holmen had a total of 28 159 shareholders at year-end 2016. In terms of numbers, Swedish private individuals account for the largest owner category with 26 032 shareholders. Shareholders registered in Sweden own 83 per cent (81) of the share capital. Among foreign shareholders, the largest proportion of shares are held in the US and Luxembourg, accounting for 7 per cent and 3 per cent of the capital, respectively. The largest owner at the turn of 2016/2017, with 61.6 per cent of votes and 32.9 per cent of capital, was L E Lundbergföretagen AB.
The 2016 AGM decided on a targeted share savings programme for around 40 key individuals in the Holmen Group. The purpose of the programme is to strengthen the interests between the owners and the management of the company and to create long-term commitment to Holmen.
The programme involves previously repurchased shares being transferred to programme participants at the end of the term. The number of shares to be transferred depends on the return generated over the 2016–2018 period. In the event of maximum allocation, 100 000 shares will be transferred from the company to programme participants.
The company has no specific target for share buy-backs. There is a mandate to repurchase up to 10 per cent of all the company's shares. Any buy-backs are regarded as a complement to dividend payments to adjust the capital structure when circumstances are deemed favourable. The 2016 AGM renewed the Board's mandate to decide on the acquisition of up to 10 per cent of the company's shares through the acquisition of class B shares. No shares were repurchased during the year. As previously, the company holds 0.9 per cent of all shares. The Board proposes that the 2017 AGM also authorise the Board to repurchase and transfer up to 10 per cent of all shares in the company through the acquisition of class B shares.
Holmen regularly provides information to the stock market via press conferences in connection with the publication of quarterly reports and on the occasion of the AGM. It also delivers information that is important to the stock market by publishing press releases. The holmen.com website offers financial information in the form of reports, presentations and compiled financial data. The holmen.com website also has recordings of the latest press conferences, together with information on the company's shares, owners, insider trading and more.
Analysts at 14 brokerage firms and banks monitor Holmen's development. This means that they publish analyses of Holmen on an ongoing basis. A list of these analysts is available at holmen.com.
SHARE PRICE PERFORMANCE, HOLMEN CLASS A, HOLMEN CLASS B AND GENERAL INDEX
Incl. reinvested dividend excluding tax
| Percentage of capital | SHAREHOLDER STRUCTURE AT 31 DECEMBER 2016 | % of capital | % of votes | |
|---|---|---|---|---|
| L E Lundbergföretagen | 32.9 | 61.6 | ||
| Kempe Foundations | 7.0 | 17.0 | ||
| Carnegie funds (Sweden) | 5.4 | 1.6 | ||
| Lannebo funds | 3.3 | 1.0 | ||
| Alecta | 2.9 | 0.8 | ||
| Nordea funds | 2.5 | 0.7 | ||
| DFA funds (US) | 2.2 | 0.6 | ||
| Swedbank Robur Fonder | 1.7 | 0.5 | ||
| Norges Bank Investment Management | 1.5 | 0.4 | ||
| SHB funds | 1.0 | 0.3 | ||
| Total | 60.4 | 84.5 | ||
| Swedish institutions | 56% | Other | 39.6 | 15.5 |
| Swedish equity funds | 17% | Total* | 100.0 | 100.0 |
| Swedish private | 10% | * Of which non-Swedish shareholders. | 17.1 | 5.2 |
The 10 identified shareholders with the largest holdings in terms of capital. Some large shareholders may have their holdings registered under nominee names, in which case they are included among 'Other'.
| No. of | Share | Share of capital, |
|---|---|---|
| shares | holders | % |
| 1–1 000 | 26 165 | 6 |
| 1 001–100 000 | 1 927 | 13 |
| 100 001– | 67 | 81 |
| Total | 28 159 | 100 |
| Share | Votes | No. of shares | No. of votes Quotient value | SEKm | |
|---|---|---|---|---|---|
| Class A | 10 | 22 623 234 | 226 232 340 | 50 | 1 131 |
| Class B | 1 | 62 132 928 | 62 132 928 | 50 | 3 107 |
| Total no. of shares | 84 756 162 | 288 365 268 | 4 238 | ||
| Holding of own class B shares repurchased | -760 000 | -760 000 | |||
| Total number of shares outstanding | 83 996 162 | 287 605 268 |
| CHANGES IN SHARE CAPITAL 2000–2016 | Change in no. | Total no. of | Change in share | Total share |
|---|---|---|---|---|
| of shares | shares | capital, SEKm | capital, SEKm | |
| 2001 Cancellation of shares repurchased | -8 885 827 | 79 972 451 | -444 | 3 999 |
| 2004 Conversion and subscription | 4 783 711 | 84 756 162 | 239 | 4 238 |
| DATA PER SHARE | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|---|---|
| Diluted earnings per share, SEK1) | 16.9 | 6.7 | 10.8 | 8.5 | 22.1 | 47.1 | 8.4 | 12.0 | 7.6 | 17.8 |
| Dividend, SEK | 125) | 10.5 | 10 | 9 | 9 | 8 | 7 | 7 | 9 | 12 |
| Dividend as % of: | ||||||||||
| Equity | 5 | 4 | 4 | 4 | 4 | 3 | 3 | 4 | 5 | 6 |
| Closing listed price | 4 | 4 | 4 | 4 | 5 | 4 | 3 | 4 | 5 | 5 |
| Profit/loss for the year | 71 | 158 | 93 | 106 | 41 | 17 | 83 | 58 | 118 | 67 |
| Return, equity, %1) | 7 | 3 | 4 | 3 | 9 | 23 | 4 | 6 | 4 | 9 |
| Return, capital employed, %6) | 9 | 6 | 6 | 5 | 7 | 9 | 6 | 7 | 6 | 10 |
| Equity per share, SEK | 253 | 248 | 250 | 248 | 248 | 235 | 201 | 196 | 186 | 200 |
| Closing listed price, B, SEK | 327 | 262 | 266 | 234 | 192 | 198 | 221 | 183 | 194 | 240 |
| Average listed price for year, B, SEK | 281 | 264 | 236 | 198 | 186 | 201 | 195 | 180 | 203 | 277 |
| Highest listed price for year, B, SEK | 327 | 306 | 272 | 235 | 204 | 251 | 226 | 206 | 242 | 316 |
| Lowest listed price for year, B, SEK | 227 | 219 | 209 | 173 | 169 | 156 | 173 | 135 | 170 | 228 |
| Total closing market capitalisation, SEK '000 m | 27.4 | 22.3 | 22.3 | 19.7 | 16.2 | 16.6 | 18.5 | 15.4 | 16.2 | 20.6 |
| P/E ratio2) | 19 | 39 | 25 | 28 | 9 | 4 | 26 | 15 | 25 | 13 |
| EV/EBITDA3) 6) | 11 | 10 | 10 | 11 | 9 | 7 | 10 | 7 | 9 | 8 |
| Closing beta value (48 months), B4) | 0.8 | 0.7 | 0.8 | 0.7 | 0.9 | 0.8 | 0.8 | 0.7 | 0.5 | 0.9 |
| Number of shareholders at year-end | 28 159 | 28 176 | 27 788 | 27 692 | 28 440 | 28 899 | 28 339 | 30 425 | 29 745 | 30 499 |
1) See page 82: Definitions and glossary. 2) Closing listed price divided by diluted earnings per share. 3) Market capitalisation plus net financial debt at year-end (EV) divided by EBITDA. 4) Measures the sensitivity of the yield on class B shares in relation to the yield on the Affärsvärlden General Index over a period of 48 months. 5) Board proposal. 6) Excl. items affecting comparability.
| NOTE | 2016 | 2015 |
|---|---|---|
| 2 | 15 513 | 16 014 |
| 3 | 1 559 | 1 203 |
| 203 | -187 | |
| -8 801 | -8 661 | |
| 4 | -2 268 | -2 335 |
| 5, 20 | -3 432 | -3 689 |
| 9, 10 | -1 018 | -1 240 |
| 10 | -122 | -555 |
| 11 | 315 | 267 |
| 12 | -18 | -46 |
| 1 930 | 769 | |
| 6 | 13 | 1 |
| 6 | -84 | -91 |
| 1 859 | 679 | |
| 7 | -436 | -120 |
| 1 424 | 559 | |
| 1 424 | 559 | |
| 6.7 | ||
| 6.7 | ||
| 84.0 | ||
| 84.0 | 84.0 | |
| 8 8 |
16.9 16.9 84.0 |
Operating profit amounted to SEK 1 930 million (769). Operating profit was negatively affected by SEK 350 million in connection with the sale of the mill in Madrid and positively affected by SEK 118 million with regard to insurance compensation for reconstruction following the fire at Hallsta Paper Mill, which together amount to a net total of SEK -232 million which has been treated as an item affecting comparability. Operating profit for 2015 was negatively affected by items affecting comparability in an amount of SEK 931 million with regard to impairment losses on non-current assets, provisions for costs and the effects of a fire.
Operating profit excluding items affecting comparability amounted to SEK 2 162 million (1 700). Earnings were positively affected mainly as a result of a better product mix within paper, the sale of the mill in Spain and reduced costs and higher prices within forestry operations.
Net financial items for 2016 totalled SEK -71 million (-90). The average cost of borrowing declined to 1.1 per cent (1.5), and average net debt was lower than in the preceding year. Tax recognised totalled SEK -436 million (-120) in 2016. Recognised tax corresponds to 23 percent of profit before tax.
| GROUP, SEKm | NOTE | 2016 | 2015 |
|---|---|---|---|
| Profit/loss for the year | 1 424 | 559 | |
| OTHER COMPREHENSIVE INCOME | |||
| Revaluations of defined benefit pension plans | 17 | -159 | 208 |
| Tax attributable to items that will not be reclassified to profit/loss for the year | 7 | 29 | -44 |
| Total items that will not be reclassified to profit/loss for the year | -130 | 165 | |
| Cash flow hedging | |||
| Revaluation | 96 | -111 | |
| Transferred from equity to the income statement | 126 | 67 | |
| Transferred from equity to non-current assets | -12 | 10 | |
| Translation difference on foreign operations | -165 | 8 | |
| Hedging of currency risk in foreign operations | 1 | 22 | |
| Share in joint ventures' other comprehensive income | -21 | 3 | |
| Tax attributable to items that will be reclassified to profit/loss for the year | 7 | -52 | 3 |
| Total items that will be reclassified to profit/loss for the year | -26 | 1 | |
| Total other comprehensive income | -157 | 166 | |
| Total comprehensive income | 1 267 | 724 | |
| Attributable to: Owners of the parent company |
1 267 | 724 | |
| GROUP AT 31 DECEMBER, SEKm NOTE |
2016 | 2015 |
|---|---|---|
| NON-CURRENT ASSETS | ||
| Non-current intangible assets 9 |
87 | 107 |
| Property, plant and equipment 10 |
9 387 | 10 321 |
| Biological assets 11 |
17 448 | 17 173 |
| Investments in associates and joint ventures 12 |
1 773 | 1 914 |
| Other shares and participating interests 12 |
2 | 4 |
| Non-current financial receivables 13 |
39 | 43 |
| Deferred tax assets 7 |
4 | 6 |
| Total non-current assets | 28 740 | 29 567 |
| CURRENT ASSETS | ||
| Inventories 14 |
2 981 | 3 089 |
| Trade receivables 15 |
2 174 | 1 987 |
| Current tax receivable 7 |
132 | 12 |
| Other operating receivables 15 |
564 | 519 |
| Current financial receivables 13 |
89 | 61 |
| Cash and cash equivalents 13 |
210 | 221 |
| Total current assets | 6 151 | 5 889 |
| Total assets | 34 891 | 35 456 |
| EQUITY 16 |
||
| Share capital | 4 238 | 4 238 |
| Other contributed capital | 281 | 281 |
| Reserves | -236 | -209 |
| Retained earnings incl. profit/loss for the year | 16 960 | 16 543 |
| Total equity attributable to the owners of the parent company | 21 243 | 20 853 |
| NON-CURRENT LIABILITIES | ||
| Non-current financial liabilities 13 |
882 | 2 295 |
| Pension provisions 17 |
201 | 130 |
| Other provisions 18 |
673 | 585 |
| Deferred tax liabilities 7 |
5 613 | 5 508 |
| Total non-current liabilities | 7 368 | 8 519 |
| CURRENT LIABILITIES | ||
| Current financial liabilities 13 |
3 200 | 2 698 |
| Trade payables 19 |
1 766 | 1 916 |
| Current tax liability 7 |
6 | 53 |
| Provisions 18 |
228 | 157 |
| Other operating liabilities 19 |
1 079 | 1 259 |
| Total current liabilities | 6 279 | 6 085 |
| Total liabilities | 13 648 | 14 603 |
| Total equity and liabilities | 34 891 | 35 456 |
| RESERVES | ||||||
|---|---|---|---|---|---|---|
| SHARE CAPITAL |
OTHER CONTRIBUTED CAPITAL |
TRANSLATION RESERVE |
HEDGE RESERVE |
RETAINED EARNINGS INCL. PROFIT/LOSS FOR THE YEAR |
TOTAL EQUITY |
|
| Opening equity balance 1 Jan 2015 | 4 238 | 281 | 51 | -261 | 16 660 | 20 969 |
| Profit/loss for the year | - | - | - | - | 559 | 559 |
| Other comprehensive income | ||||||
| Revaluation of defined benefit pension plans | - | - | - | - | 208 | 208 |
| Cash flow hedging | - | - | - | -34 | -34 | |
| Translation difference on foreign operations | - | - | 8 | - | - | 8 |
| Hedging of currency risk in foreign operations | - | - | 22 | - | - | 22 |
| Share in joint ventures' other comprehensive income | - | - | - | 3 | - | 3 |
| Tax attributable to other comprehensive income | - | - | -5 | 7 | -44 | -41 |
| Total other comprehensive income | - | - | 25 | -24 | 165 | 166 |
| Total comprehensive income | - | - | 25 | -24 | 723 | 724 |
| Dividend paid | - | - | - | - | -840 | -840 |
| Closing equity balance 31 Dec 2015 | 4 238 | 281 | 76 | -284 | 16 543 | 20 853 |
| Profit/loss for the year | - | - | - | - | 1 424 | 1 424 |
| Other comprehensive income | ||||||
| Revaluation of defined benefit pension plans | - | - | - | - | -159 | -159 |
| Cash flow hedging | - | - | - | 211 | - | 211 |
| Translation difference on foreign operations | - | - | -165 | - | - | -165 |
| Hedging of currency risk in foreign operations | - | - | 1 | - | - | 1 |
| Share in joint ventures' other comprehensive income | - | - | - | -21 | - | -21 |
| Tax attributable to other comprehensive income | - | - | -6 | -46 | 29 | -24 |
| Total other comprehensive income | - | - | -170 | 144 | -130 | -157 |
| Total comprehensive income | - | - | -170 | 144 | 1 294 | 1 267 |
| Dividend paid | - | - | - | - | -882 | -882 |
| Share savings programme | - | - | - | - | 5 | 5 |
| Closing equity balance 31 Dec 2016 | 4 238 | 281 | -95 | -141 | 16 960 | 21 243 |
| GROUP, SEKm NOTE |
2016 | 2015 |
|---|---|---|
| OPERATING ACTIVITIES | ||
| Profit/loss before tax 25 |
1 859 | 679 |
| Adjustments for non-cash items | ||
| Depreciation and amortisation according to plan | 1 018 | 1 240 |
| Impairment losses | 122 | 555 |
| Change in value of biological assets | -315 | -267 |
| Change in provisions | 170 | 236 |
| Other* | -31 | 37 |
| Income tax paid | -504 | -398 |
| Cash flow from operating activities before changes in working capital | 2 320 | 2 083 |
| CASH FLOW FROM CHANGES IN WORKING CAPITAL | ||
| Change in inventories | -62 | 123 |
| Change in trade receivables and other operating receivables | -189 | 275 |
| Change in trade payables and other operating liabilities | -109 | 45 |
| Cash flow from operating activities | 1 961 | 2 526 |
| INVESTING ACTIVITIES | ||
| Acquisition of property, plant and equipment | -766 | -826 |
| Disposal of property, plant and equipment | 440 | 24 |
| Acquisition of non-current intangible assets | -5 | -12 |
| Acquisition of biological assets | -4 | -36 |
| Disposal of biological assets | 95 | 26 |
| Increase in non-current financial receivables | - | -8 |
| Acquisition of shares and participating interests | -10 | - |
| Disposal of shares and participating interests | 127 | - |
| Cash flow from investing activities | -123 | -832 |
| FINANCING ACTIVITIES | ||
| Raised long-term borrowings | - | 300 |
| Repayments of long-term borrowings | -400 | -326 |
| Change in current financial liabilities 25 |
-560 | -792 |
| Change in current financial receivables | -6 | 0 |
| Dividend paid to owners of the parent company | -882 | -840 |
| Cash flow from financing activities | -1 848 | -1 659 |
| CASH FLOW FOR THE YEAR | -10 | 35 |
| Cash and cash equivalents at beginning of year | 221 | 187 |
| Exchange gains/losses on cash and cash equivalents | -1 | 0 |
| Cash and cash equivalents at end of year | 210 | 221 |
* Other adjustments primarily consist of currency effects and the marking to market of financial instruments, profit from associates, as well as gains on the sale of non-current assets.
| CHANGE IN NET FINANCIAL DEBT | 2016 | 2015 |
|---|---|---|
| Opening net financial debt | -4 799 | -5 907 |
| Cash flow | ||
| Operating activities | 1 961 | 2 526 |
| Investing activities (excl. non-current financial receivables) | -123 | -824 |
| Dividend paid | -882 | -840 |
| Revaluations of defined benefit pension plans | -158 | 206 |
| Foreign exchange effects and changes in fair value | 56 | 40 |
| Closing net financial debt | -3 945 | -4 799 |
| INCOME STATEMENT, SEKm | NOTE | 2016 | 2015 |
|---|---|---|---|
| Net sales | 2 | 13 794 | 13 989 |
| Other operating income | 3 | 822 | 696 |
| Change in inventories | 205 | -186 | |
| Raw materials and consumables | -8 086 | -8 057 | |
| Personnel costs | 4 | -1 827 | -1 814 |
| Other external costs | 5, 20 | -4 547 | -4 278 |
| Depreciation and amortisation according to | |||
| plan | 9, 10 | -26 | -26 |
| Operating profit/loss | 335 | 324 | |
| Profit/loss from investments in Group companies 6, 23 | 780 | -118 | |
| Profit/loss from investments in associates | 6 | 0 | 0 |
| Interest income and similar income | 6 | 30 | 38 |
| Impairment losses on other shares and | |||
| participating interests | 6 | 0 | - |
| Interest expense and similar costs | 6 | -52 | -83 |
| Profit/loss after financial items | 1 094 | 161 | |
| Appropriations | 24 | 404 | 821 |
| Profit/loss before tax | 1 499 | 982 | |
| Tax | 7 | -301 | -244 |
| Profit/loss for the year | 1 197 | 738 |
| STATEMENT OF COMPRE- NOTE HENSIVE INCOME, SEKm |
2016 | 2015 |
|---|---|---|
| Profit/loss for the year Other comprehensive income |
1 197 | 738 |
| Cash flow hedging Revaluation Transferred from equity to the income |
133 | -134 |
| statement Transferred from equity to non-current assets |
90 -12 |
94 10 |
| Tax attributable to other comprehensive income 7 |
-46 | 7 |
| Total items that will be reclassified to profit/loss for the year |
164 | -23 |
| Total comprehensive income | 1 362 | 715 |
The parent company includes Holmen's Swedish operations with the exception of the majority of the non-current assets, which are recognised in Holmens Bruk AB.
As part of the sale of the Spanish operations, Holmen AB has paid compensation of SEK 643 million to Holmen Paper Madrid SL in connection with the termination of a sales agreement (see Note 22 for further information). This post is included in the income statement under the item 'Other external costs'.
The item 'Interest expense and similar costs' in the income statement includes the result of SEK 1 million (22) from hedging equity in foreign subsidiaries.
| OPERATING ACTIVITIES Profit/loss after financial items 25 Adjustments for non-cash items Depreciation and amortisation according to plan Change in provisions Other* Income tax paid Cash flow from operating activities before changes in working capital CASH FLOW FROM CHANGES IN WORKING CAPITAL Change in inventories Change in operating receivables Change in operating liabilities Cash flow from operating activities INVESTING ACTIVITIES Shareholders' contribution paid Acquisition of property, plant and equipment Disposal of property, plant and equipment Increase in external non-current financial receivables Disposal of shares and participating interests Cash flow from investing activities FINANCING ACTIVITIES Raised external long-term borrowings Repayments of external long-term borrowings Change in other financial liabilities 25 Change in other financial receivables Dividend paid to owners of the parent company Group contributions received |
1 094 26 -59 502 -464 1 100 -61 |
161 26 258 107 -420 133 |
|---|---|---|
| 159 | ||
| -146 | 178 | |
| -271 | 19 | |
| 622 | 490 | |
| -10 | 0 | |
| -29 | -48 | |
| 28 | 11 | |
| - | -9 | |
| 2 | 0 | |
| -9 | -46 | |
| - | 300 | |
| -400 | -326 | |
| -531 | -732 | |
| 709 | ||
| 450 | -840 | |
| 493 | ||
| Group contributions paid | -882 | -7 |
| Cash flow from financing activities | 700 0 |
-404 |
| CASH FLOW FOR THE YEAR | -663 | |
| Cash and cash equivalents at beginning of year |
-51 | 40 |
| Cash and cash equivalents at end of year | 155 | 115 |
* Other adjustments primarily consist of impairment losses on the value of shares in Group companies, currency effects and the marking to market of financial instruments as well as gains/losses on the sale of non-current assets.
| BALANCE SHEET At 31 December, SEKm |
NOTE | 2016 | 2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Non-current intangible assets | 9 | 8 | 8 |
| Property, plant and equipment | 10 | 2 925 | 2 922 |
| Non-current financial assets | |||
| Shares and participations | 12, 23 | 11 519 | 12 018 |
| Non-current financial receivables | 13 | 3 202 | 3 214 |
| Total non-current assets | 17 653 | 18 163 | |
| Current assets | |||
| Inventories | 14 | 2 396 | 2 336 |
| Operating receivables | 15 | 2 254 | 2 026 |
| Current tax receivable | 7 | 106 | - |
| Current investments | 13 | 89 | 61 |
| Cash and cash equivalents | 13 | 104 | 155 |
| Total current assets | 4 950 | 4 578 | |
| Total assets | 22 602 | 22 741 |
| BALANCE SHEET At 31 December, SEKm |
NOTE | 2016 | 2015 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | 16 | ||
| 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 | 3 724 | 3 698 | |
| Profit/loss for the year | 1 197 | 738 | |
| Total equity | 10 836 | 10 351 | |
| Untaxed reserves | 24 | 2 290 | 1 994 |
| Provisions | |||
| Pension provisions | 17 | 12 | 5 |
| Tax provisions | 18 | 45 | 45 |
| Other provisions | 18 | 833 | 892 |
| Deferred tax liability | 7 | 612 | 569 |
| Total provisions | 1 503 | 1 512 | |
| Liabilities | |||
| Non-current financial liabilities | 13 | 2 328 | 3 295 |
| Current financial liabilities | 13 | 3 200 | 2 698 |
| Current tax liability | 7 | - | 53 |
| Operating liabilities | 19 | 2 445 | 2 837 |
| Total liabilities | 7 974 | 8 884 | |
| Total equity and liabilities | 22 602 | 22 741 |
| RESTRICTED EQUITY | NON-RESTRICTED EQUITY | ||||||
|---|---|---|---|---|---|---|---|
| SHARE CAPITAL |
STATUTORY RESERVE |
REVALUATION RESERVE |
HEDGE RESERVE |
RETAINED EARNINGS |
PROFIT/LOSS FOR THE YEAR |
TOTAL EQUITY |
|
| Opening equity balance 1 Jan 2015 | 4 238 | 1 577 | 100 | -264 | 2 954 | 1 870 | 10 476 |
| Appropriation of profits | - | - | - | - | 1 870 | -1 870 | - |
| Profit/loss for the year | - | - | - | - | - | 738 | 738 |
| Other comprehensive income | |||||||
| Cash flow hedging | - | - | - | -30 | - | - | -30 |
| Tax on other comprehensive income | - | - | - | 7 | - | - | 7 |
| Total other comprehensive income | - | - | - | -23 | - | - | -23 |
| Total comprehensive income | - | - | - | -23 | 1 870 | -1 132 | 715 |
| Dividend paid | - | - | - | - | -840 | - | -840 |
| Closing equity balance 31 Dec 2015 | 4 238 | 1 577 | 100 | -287 | 3 985 | 738 | 10 351 |
| Appropriation of profits | - | - | - | - | 738 | -738 | - |
| Profit/loss for the year | - | - | - | - | - | 1 197 | 1 197 |
| Other comprehensive income | |||||||
| Cash flow hedging | - | - | - | 211 | - | - | 211 |
| Tax on other comprehensive income | - | - | - | -46 | - | - | -46 |
| Total other comprehensive income | - | - | - | 164 | - | - | 164 |
| Total comprehensive income | - | - | - | 164 | 738 | 459 | 1 362 |
| Dividend paid | - | - | - | - | -882 | - | -882 |
| Share savings programme | - | - | - | - | 5 | - | 5 |
| Closing equity balance 31 Dec 2016 | 4 238 | 1 577 | 100 | -123 | 3 847 | 1 197 | 10 836 |
Amounts in SEKm, unless otherwise stated
| 1. Accounting policies | 48 |
|---|---|
| 2. Operating segment reporting | 52 |
| 3. Other operating income | 53 |
| 4. Employees, personnel costs and remuneration to senior management | 54 |
| 5. Auditors' fee and remuneration | 55 |
| 6. Net financial items and income from financial instruments | 55 |
| 7. Tax | 56 |
| 8. Earnings per share | 57 |
| 9. Non-current intangible assets | 57 |
| 10. Property, plant and equipment | 58 |
| 11. Biological assets | 59 |
| 12. Investments in associates, joint ventures and other shares and participating interests |
60 |
| 13. Financial instruments | 61 |
| 14. Inventories | 64 |
|---|---|
| 15. Operating receivables | 64 |
| 16. Equity, parent company | 64 |
| 17. Pension provisions | 65 |
| 18. Other provisions | 66 |
| 19. Operating liabilities | 66 |
| 20. Operating leases | 66 |
| 21. Collateral and contingent liabilities | 67 |
| 22. Related parties | 67 |
| 23. Investments in Group companies | 68 |
| 24. Untaxed reserves | 69 |
| 25. Cash flow statement | 69 |
| 26. Critical accounting estimates and judgements | 69 |
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, associates and joint ventures.
The consolidated accounts are prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB), as adopted by the EU. The Swedish Financial Reporting Board's recommendation (RFR 1 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 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 parent company's ability to apply IFRS as a consequence of the Swedish Annual Accounts Act, the Swedish Pension Obligations Vesting Act, and in some cases for tax reasons.
Assets and liabilities are stated at cost, except for biological assets and certain financial assets and liabilities, which are valued at fair value. In the parent company, biological assets are not valued at fair value. Investments in Group companies and associates are recognised in the parent company at the lower of cost and 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 statements are presented in Swedish kronor.
Preparing the financial statements in accordance with IFRSs requires the company's management to make estimates and judgements, 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.
These estimates and judgements 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 future periods. See also Note 26 'Critical accounting estimates and judgements'.
No new accounting policies with a material effect on the Group's accounting have been applied since 1 January 2016. Changes in the Swedish Annual Accounts Act and IAS 1 have, to a limited extent, affected the preparation of the financial statements.
The following new standards have been published by the IASB, but have either not yet come into force or have not yet been adopted by the EU.
IFRS 15 Revenue from Contracts with Customers is a new revenue standard with associated disclosure requirements which will replace IAS 18, IAS 11 and IFRIC 13. This new standard will come into force on 1 January 2018. During the year, analysis of the Group's revenue flows was undertaken, and an evaluation of the effects was initiated. The initial assessment is that application of this new standard will not result in any material effect on accounting of the Group's revenue. Since IFRS 15 contains additional disclosure requirements, its application will probably result in increased note disclosures regarding revenue.
IFRS 9 Financial Instruments addresses the accounting of financial instruments and will replace IAS 39. This standard encompasses classification, valuation and impairment of financial instruments and hedge accounting. This standard will come into force on 1 January 2018. The initial assessment is that application of this new standard will not result in any material effect on accounting of the Group's financial instruments.
IFRS 16 Leasing replaces the previous IAS 17 Leases and the related interpretations IFRIC 4, SIC-15 and SIC-27. This standard requires assets and liabilities attributable to all leases, with some exceptions, to be recognised in the balance sheet. In the income statement, amortisation must be recognised separately from interest expense attributable to leasing liabilities. This standard will come into force on 1 January 2019. The potential impact of this standard on the Group's financial statements is currently being assessed.
The Group's operations are divided into operating segments, based on which parts of the operations are monitored by the company's highest executive decision-maker, known as the management approach. The segmentation criterion is based on the Group's business areas. This corresponds to the Group's operating structure and the internal reporting to the CEO and the Board. The items in the profit, assets and liabilities of the operating segment are recognised in accordance with the profit (operating profit), assets and liabilities that are monitored by the company's highest executive decision-maker. See Note 2 for more details of the classification and presentation of operating segments.
Essentially, 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. Current assets, current liabilities and provisions essentially 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 a controlling influence. Controlling influence exists if Holmen AB has control over an investment object, is exposed or entitled to variable returns on its involvement and can exercise its control of the investment to influence the size of return. In determining whether one company has control over another, potential shares with an entitlement to vote and whether de facto control exists are taken into account.
The consolidated accounts are prepared using the acquisition method. The acquisition method entails the parent company indirectly acquiring the subsidiary's assets and assuming the liabilities of the subsidiary, valued at fair value. The difference between the cost of the shares and the fair value of the acquired identifiable net assets is treated as goodwill. The subsidiary companies' income and expenses, and their assets and liabilities, are stated in the consolidated accounts 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 related unrealised gains are eliminated in their entirety.
Associates. 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 the consolidated accounts in accordance with the equity method.
Jointly owned companies/joint ventures. In accounting, joint ventures are those companies for which the Group, through cooperation agreements with one or more parties, has joint control whereby the Group has rights to the net assets instead of direct rights to assets and commitments in liabilities. Holdings in joint ventures are consolidated in the consolidated accounts using the equity method. Holmen's jointly owned companies are such that the holding has previously been recognised using the equity method and financial reporting consequently complies with IFRS 11 Joint Arrangements.
The equity method. The equity method means that the carrying amount of the shares in the associates and joint ventures stated in the consolidated accounts corresponds to the Group's interest in the associates' equity and any consolidated surplus and deficit values. The Group's share of the net earnings of associates and joint ventures after tax attributable to parent company owners adjusted for any amortisation or reversal of acquired surplus and deficit values, respectively, is stated in the consolidated income statement as 'Share of profits of associates and joint ventures'. Dividends received from an associate or joint venture reduce the carrying amount of the investment. Unrealised gains arising as a consequence of transactions with associates and joint ventures are eliminated in relation to the owned proportion of equity.
When the Group's share of the recognised losses of an associate and joint venture exceeds the carrying amount of the investments stated in the consolidated accounts, the value of the investments is written down to zero. Losses are also offset against unsecured long-term financial balances that, in financial terms, comprise part of the owning company's net investment in the associate and joint venture. Any further losses are not recognised unless the Group has provided guarantees to cover losses incurred by the associate or joint venture. The equity method is applied until such time as the significant influence no longer exists or the jointly owned company ceases to be jointly owned.
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 the exchange rate prevailing on the balance sheet date. Exchange differences arising on such translations are stated in the income statement. Non-monetary assets and liabilities that are stated at historical cost are translated at the exchange rate prevailing on the transaction date.
The assets and liabilities of foreign operations, including goodwill and other consolidated surplus and deficit values, are translated in the consolidated accounts, from the foreign operation's functional currency, to the Group's reporting currency (Swedish kronor) at the balance sheet date. The income and expenses of foreign operations are translated into Swedish kronor at an average rate that is an approximation of the exchange rates prevailing at 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 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, expenses, assets and liabilities, which arise in the operations conducted by the companies, are recognised in Holmen AB's accounts, except for the majority of investments made as well as some sales of forest properties, which 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 of disposal 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 by-products, renewable energy certificates, rent and land lease income, emission allowances, insurance compensation and gains/losses on sales of non-current assets.
Certificates are issued in relation to production of renewable energy according to a quota system introduced in order to promote electricity generation using renewable sources of energy. Income from allocated certificates is recognised as other operating income in the same period in which generation occurs. Certificates sold on forward contracts are measured at their net realisable value. Unsold certificates are measured at the lower of cost or fair value.
State grants are recognised in the balance sheet as accrued income when it is reasonably certain that the grant will be received and that the Group will satisfy the conditions associated with the grant. State grants linked to a non-current asset reduce the asset's recognised cost. State grants, such as road grants, intended to cover costs are recognised as other operating income. 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.
In some cases, forest land is exchanged for other forest land of similar type and value. Such exchange is recognised in the consolidated accounts as an exchange of one asset for another, i.e. without any form of revenue recognition as the exchange does not constitute a revenue-generating transaction. In the parent company, however, this type of transaction is recognised as a sale of forest land, with recognition of revenue as other operating income and an acquisition of a new 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 capitalised in the consolidated accounts as part of the asset's cost. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use and that is relevant for the Group in connection with major investment projects.
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 investments 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 to the extent that a right of set-off applies.
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 convertible bonds and options issued to employees.
Financial instruments are measured and recognised according to IAS 39.
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 trade date principle. Trade receivables are recognised in the balance sheet when an invoice has been sent. Liabilities are recognised when the counterparty has provided a product or service and there is a contractual obligation to pay, even if an invoice has not yet been received. A financial asset and a financial liability are only offset and recognised at a net amount where a legal right to offset the amounts exists and there is an intention to settle the items at a net amount or simultaneously realise the asset and settle the liability. Financial assets, excluding shares, and financial liabilities have been classified as current if the amounts are expected to be recovered or paid within 12 months of the balance sheet date. Shares have been classified as non-current if they are intended to be held in the operation permanently.
Financial assets at fair value through profit/loss. This category consists of financial assets held for trading. Financial instruments in this category are measured on a current basis at fair value, with changes of value recognised in profit/loss.
Loan receivables and trade receivables. Bank balances, loan receivables and trade receivables are measured at amortised cost. Impairment testing is performed continually, using objective criteria for these assets. If impairment is established, the receivable is derecognised. However, a provision for doubtful trade receivables is made if the impairment is anticipated.
Available-for-sale financial assets. The category of available-for-sale financial assets includes financial assets not classified in any other category or financial assets that the company initially chose to classify in this category. The assets are valued on a current basis at fair value with the changes in value for the period recognised in other comprehensive income, and the accumulated changes in value in a separate component of equity, although not such value changes that are attributable to impairment losses (see below), nor interest on financial instruments receivable and dividend income as well as exchange differences on monetary items, which are recognised in profit/loss for the year. When the asset is disposed of, accumulated profit/loss – which was previously recognised in other comprehensive income – is recognised in profit/loss for the year. Shares and interests not related to Group companies or associates are measured at cost. Measurement at fair value could not be applied, because reliable fair values could not be established.
Financial liabilities at fair value through profit/loss. Financial liabilities are measured initially at the value of funds received after deduction of any transaction costs. Normally, the liabilities are measured on a current basis at amortised cost using the effective interest method. In those cases where funds received fall short of the repayment amount, the difference is allocated over the duration of the loan using the effective interest method. Profit/loss from financial instruments is recognised in net financial items or operating profit/loss, depending on the purpose of the holding. Other financial liabilities. These liabilities are measured at amortised cost. Amortised cost is determined on the basis of the effective interest that was calculated at the time of acquisition. Trade payables and loan liabilities are recognised in this category. Loans hedged against changes in value are initially recognised including any transaction costs and on a current basis at fair value.
Derivatives and hedge accounting. All derivatives, such as currency forward contracts, electricity derivatives and interest rate swaps, are measured at fair value and recognised in the balance sheet. More or less all derivatives are held for hedging purposes. Where hedge accounting is applied, the changes in value are recognised as stated below. 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.
Cash flow hedging. The effective portion of changes in value is recognised in other comprehensive income and accumulated in equity until such time as the hedged item influences the income statement, when the accumulated changes in value are transferred from equity via other comprehensive income to the income statement to meet and match the hedged transaction. In the hedging of investments, the cost of the hedged item is instead adjusted when it occurs. The ineffective portion of hedges is recognised directly in the income statement. Forward foreign exchange contracts and foreign exchange swaps are used as cash flow hedges to safeguard against fluctuations in exchange rates. Interest rate swaps are used as a cash flow hedge to safeguard against changes in interest rates.
Net investments. Changes in the value of hedges relating to net investments in foreign businesses are recognised in other comprehensive income for the Group. Accumulated changes in value are recognised as a component in the Group's equity until the business is disposed of, at which point the accumulated changes in value are recognised in the income statement. In the parent company, changes in value are recognised in the income statement, as hedge accounting is not applied.
Calculation of fair value. 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 13. Where there are no listed market prices, fair value has been calculated using discounted cash flows. In calculating discounted cash flows, all variables used for the calculations, such as discount rates and exchange rates, are taken from market listings where possible. In calculating discounted cash flows, the mean of exchange rates and discount rates is used. These valuations belong to measurement level 2. Other valuations, for which a variable is based on own assessments, belong to measurement level 3. Holmen's measurement of financial instruments belongs exclusively to measurement level 2. Currency options are valued using the Black & Scholes formula, when appropriate.
Non-current intangible assets such as patents, licences and IT systems are recognised at cost after deduction of accumulated depreciation and any impairment losses. The Group's non-current intangible assets are amortised over periods of between 5 and 20 years, except for goodwill. Any goodwill is allotted to cash-generating units. Both goodwill and other non-current intangible assets are tested for impairment annually. Any impairment losses may be reversed via exceptions from goodwill. The Group does not currently recognise any goodwill. Non-current intangible assets in the parent company are amortised over five years.
Goodwill represents the difference between the cost of business combinations and the fair value of the acquired assets, assumed liabilities and contingent liabilities. Goodwill is valued at cost less any accumulated impairment losses. Goodwill arising in connection with the acquisition of associates is included in the carrying amount of the participating 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. The recognised value includes all directly attributable expenses, for example in connection with materials and services, wages/salaries to employees, registration of a legal right, amortisation of patents and licences and borrowing costs in accordance with IAS 23. Other development expenditure is recognised in the income statement as costs when incurred. Development expenditures recognised in the balance sheet are stated at cost less accumulated amortisation and impairment losses.
Property, plant and equipment are stated at 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 components 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 any selling price and the carrying amount of the asset, less any direct selling costs. Gains 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 | 10–40 | |
|---|---|---|
| Administrative and warehouse buildings, residential properties 10–33 | ||
| Production buildings, land installations and machinery for pulp, paper and paperboard production |
10–20 | |
| Machinery for sawmills | 10–12 | |
| Other machinery | 10 | |
| Forest roads | 10 | |
| Equipment | 4–10 |
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 realisable value 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. The discount rate applied takes account of the risk-free rate and the risk associated with the asset. 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.
Borrowing costs attributable to the purchase or construction of qualifying assets are to be capitalised in the consolidated accounts as part of the asset's cost. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use and that is relevant for the Group in connection with major investment projects.
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. Costs relating to operating leases are recognised in profit/loss for the year on a straight-line basis spread over the term of the lease. Variable charges are expensed in the periods in which they are incurred. 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 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 available that can be used to value forest holdings as extensive as Holmen's. Valuation is therefore carried out by estimating the present value of expected future cash flows (after deduction of selling costs) from the growing forests. See Note 11.
In the parent company, biological assets are valued in accordance with RFR 2. This means that biological assets classified as non-current assets are recognised at 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 securing Holmen's raw material requirements through harvesting. No measurable biological change occurs between the acquisition date and harvesting.
Inventories are valued at the lower of cost and production cost after deduction for necessary obsolescence, or net realisable value. The 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 cost of finished products manufactured by the company comprises direct production costs and a reasonable share of indirect costs.
Emission allowances 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. Certificates received for renewable energy sold on forward contracts are recognised at net realisable value. Unsold certificates are measured at the lower of cost or fair value. Recognition takes place, in line with production, as inventories or accrued income.
Obligations 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 obligation regarding defined benefit plans is calculated separately for each plan by estimating future benefits earned by employees through their employment in both current and previous periods. This benefit is discounted to present value and unrecognised costs relating to employment in previous 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 high-quality corporate bond with a duration corresponding to the Group's pension obligations. 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 portion of the pension obligations that is defined benefit.
Establishment of the obligation's present value and the fair value of plan assets may give rise to actuarial gains and losses. These arise either through the actual outcome deviating from previously made assumptions or through changes in assumptions. Actuarial gains and losses are recognised directly in other comprehensive income.
If 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. If any changes occur to a defined benefit plan, these are recognised when the change to the plan occurs. If the change occurs in conjunction with restructuring, this is recognised when the company recognises the associated restructuring costs. The changes are recognised directly in profit/loss for the year.
The interest cost on defined benefit obligations is recognised in profit/loss for the year under financial items. This is calculated as the net total of the upward adjustment of interest on the pension obligation and expected income on plan assets calculated according to the same interest factor (discount rate). Other components are recognised in operating profit/loss. The revaluation effects consist of actuarial gains and losses and the difference between the actual return on plan assets and the amount included in net interest. Revaluation effects are recognised in other comprehensive income.
Payroll tax constitutes part of the actuarial assumptions and is therefore recognised as part of net obligations.
Policyholder tax is recognised as it is incurred in profit/loss for the period to which the tax relates and is consequently not included in the calculation of liabilities. In the case of funded plans, this tax is levied on the return on plan assets and is recognised in other comprehensive income. In the case of unfunded plans or partially unfunded plans, this tax is levied on profit for the year.
In the parent company's accounts, different grounds are used for computation of defined benefit pension plans from those referred to in IAS 19. The parent company complies with the provisions of the Swedish Pension Obligations Vesting Act 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 calculation of the defined benefit obligation 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 payroll tax based on this difference. The present value of the provision or receivable is not calculated.
The outstanding share programme savings is recognised in accordance with IFRS 2 Sharebased Payments and is paid through equity instruments. Recognition of share-based payment programmes paid through equity instruments entails the fair value of the instrument at the dividend date being recognised in the income statement as a cost over the vesting period, with a corresponding adjustment of equity. At the end of each vesting period, an estimate is made of the expected number of allocated shares and the effect of any change in previous estimates are recognised in the income statement with a corresponding adjustment of equity. In addition, a provision is made for estimated social security costs relating to the share programme.
Estimates are based on the value of the shares at the allocation date, which is defined as the period when the agreement was concluded between the parties. Holmen's share savings programme was open to relevant employees between 27 April and 20 May 2016. The average share price during this period was used as the basis for the valuation of the shares at the allocation date. The vesting
period runs from 20 May 2016 through the date of publication of Holmen's interim report for the first quarter of 2019.
Termination benefits in connection with the termination of employment contracts are recognised in the accounts if it is shown that the Group has an obligation, without any reasonable possibility of withdrawing, 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 redundancy, 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.
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. It 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 buy-backs. 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 from 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 unlikely that an outflow of resources will be required.
Group contributions are recognised in the parent company in accordance with RFR 2's alternative rule, i.e. Group contributions paid or received are recognised as appropriations.
Shareholder contributions are recognised as an increase in the item 'Investments in Group companies'. In addition, a review is conducted as to whether an impairment loss on the value of the shares is necessary. This review complies with standard rules on the valuation of this asset item. Shareholder contributions received are recognised directly in non-restricted equity.
The figures presented are rounded off to the nearest whole number or equivalent. The absence of a value is indicated by a dash (-).
| 2016 | FOREST PAPERBOARD | PAPER | WOOD PRODUCTS |
RENEWABLE ENERGY |
GROUP-WIDE AND OTHER |
ELIMINATIONS | TOTAL GROUP |
|
|---|---|---|---|---|---|---|---|---|
| Net sales | ||||||||
| External | 2 572 | 5 252 | 5 431 | 1 342 | 314 | 602 | - | 15 513 |
| Internal | 2 730 | - | - | - | - | 2 | -2 732 | - |
| Other operating income | 206 | 823 | 505 | 261 | 14 | 196 | -466 | 1 559 |
| Operating costs | -4 792 | -4 693 | -5 374 | -1 514 | -180 | -922 | 3 178 | -14 299 |
| Depreciation and amortisation according to plan | -29 | -479 | -380 | -82 | -23 | -24 | - | -1 018 |
| Impairment losses | - | - | -122 | - | - | 0 | - | -122 |
| Change in value of biological assets | 315 | - | - | - | - | - | - | 315 |
| Share of profits of associates | - | - | -1 | -9 | -5 | -3 | - | -18 |
| Operating profit/loss | 1 001 | 903 | 58 | -3 | 120 | -149 | - | 1 930 |
| Operating profit/loss excluding items affecting comparability* |
1 001 | 903 | 289 | -3 | 120 | -148 | - | 2 162 |
| Operating margin excluding items affecting comparability, % |
19 | 17 | 5 | 0 | 38 | - | - | 14 |
| Return on operating capital excluding items affecting comparability, % |
6 | 14 | 9 | neg | 4 | - | - | 7 |
| Operating assets | 18 989 | 7 185 | 3 454 | 1 031 | 3 475 | 807 | -392 | 34 550 |
| Operating liabilities | 1 191 | 759 | 639 | 138 | 64 | 1 351 | -392 | 3 752 |
| Operating capital | 17 798 | 6 426 | 2 815 | 892 | 3 412 | -544 | - | 30 799 |
| Investments | 30 | 413 | 259 | 52 | 23 | 9 | - | 785 |
* Items affecting comparability refers to the sale of the mill in Madrid and insurance compensation of SEK -232 million for reconstruction following a fire at Hallsta Paper Mill.
| 2015 | FOREST PAPERBOARD | PAPER | WOOD PRODUCTS |
ENERGY | GROUP-WIDE AND OTHER |
ELIMINATIONS | TOTAL GROUP |
|
|---|---|---|---|---|---|---|---|---|
| Net sales | ||||||||
| External | 2 814 | 5 472 | 6 148 | 1 314 | 268 | -3 | - | 16 014 |
| Internal | 2 667 | - | - | - | 91 | - | -2 757 | - |
| Other operating income | 179 | 739 | 238 | 251 | 32 | 196 | -434 | 1 203 |
| Operating costs | -4 992 | -4 866 | -6 312 | -1 479 | -196 | -219 | 3 191 | -14 872 |
| Depreciation and amortisation according to plan | -29 | -499 | -588 | -77 | -22 | -25 | - | -1 240 |
| Impairment losses | - | - | -555 | - | - | - | - | -555 |
| Change in value of biological assets | 267 | - | - | - | - | - | - | 267 |
| Share of profits of associates | - | - | -45 | -1 | 2 | -3 | - | -46 |
| Operating profit/loss | 905 | 847 | -1 115 | 9 | 176 | -53 | - | 769 |
| Operating profit/loss excluding items affecting comparability* |
905 | 847 | -74 | 9 | 176 | -163 | - | 1 700 |
| Operating margin excluding items affecting comparability, % |
17 | 15 | -1 | 1 | 49 | - | - | 11 |
| Return on operating capital excluding items affecting comparability, % |
5 | 12 | neg | 1 | 5 | - | - | 5 |
| Operating assets | 18 790 | 7 409 | 4 459 | 1 081 | 3 462 | 254 | -330 | 35 126 |
| Operating liabilities | 1 202 | 787 | 901 | 157 | 111 | 1 142 | -330 | 3 971 |
| Operating capital | 17 589 | 6 622 | 3 558 | 924 | 3 351 | -888 | - | 31 155 |
| Investments | 31 | 324 | 347 | 103 | 18 | 8 | - | 832 |
* Items affecting comparability relate to impairment loss on non-current assets, a provision for costs and the effects of a fire totalling SEK -931 million.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| NON-CURRENT ASSETS PER COUNTRY | 2016 | 2015 | 2016 | 2015 | |
| Sweden | 26 871 | 26 817 | 14 450 | 14 948 | |
| UK | 1 820 | 2 044 | - | - | |
| Spain | - | 648 | - | - | |
| Other | 5 | 6 | - | - | |
| Total | 28 695 | 29 515 | 14 450 | 14 948 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| NET SALES BY PRODUCT AREA | 2016 | 2015 | 2016 | 2015 |
| Paperboard | 5 071 | 5 248 | 3 404 | 3 340 |
| Printing paper | 5 879 | 5 956 | 5 879 | 5 925 |
| Pulp | 169 | 211 | 268 | 326 |
| Wood products | 1 337 | 1 311 | 1 341 | 1 313 |
| Wood | 2 572 | 2 812 | 2 569 | 2 806 |
| Energy | 314 | 268 | 314 | 268 |
| Other | 170 | 206 | 20 | 12 |
| Total | 15 513 | 16 014 | 13 794 | 13 989 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| NET SALES BY MARKET | 2016 | 2015 | 2016 | 2015 |
| Sweden | 3 660 | 3 598 | 3 632 | 3 575 |
| Germany | 1 974 | 1 981 | 1 766 | 1 774 |
| UK | 1 719 | 2 223 | 1 124 | 1 431 |
| Spain | 1 009 | 1 109 | 969 | 911 |
| Italy | 857 | 846 | 807 | 795 |
| Netherlands | 694 | 626 | 624 | 542 |
| France | 661 | 710 | 588 | 621 |
| Rest of Europe | 2 963 | 2 753 | 2 388 | 2 264 |
| Rest of the world | 1 977 | 2 167 | 1 896 | 2 076 |
| Total | 15 513 | 16 014 | 13 794 | 13 989 |
The Forest business area manages the Group's forests, which cover just over one million hectares. Annual wood harvested in company forests is normally about 3.0 million m3 sub. The Renewable energy business area is responsible for the Group's hydro power and wind power assets. Generation in a normal year amounts to 1.2 TWh of electricity. The business areas are also responsible for supplying the Group with wood and electricity, respectively, in Sweden.
The Paperboard business area produces paperboard for consumer packaging and graphical printing at one Swedish and one UK mill. The Paper business area manufactures printing paper for magazines, product catalogues, direct mail, books and daily newspapers at two mills in Sweden. The Wood products business area has manufacturing operations at two sawmills in Sweden. In 2016, the Group produced 0.5 million tonnes of paperboard, 1.1 million tonnes of printing paper and 0.8 million m3 of wood products.
The business areas are responsible for management of operational assets and liabilities. Group management monitors the business at operating profit level, and in terms of how earnings relate to operating capital. Operating capital in each segment includes all assets and liabilities used by the business area such as non-current assets, inventories and 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 'Groupwide and other' segment comprises Group staffs and Group-wide functions that are not allocated to other segments. In June 2016, Holmen sold its newsprint mill in Madrid. Holmen has an undertaking to sell the newsprint produced by the mill up to the second half of 2017. During this period, income and costs from this will be recognised in the Group-wide segment. No profit items after operating profit/loss 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 | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Sales of by-products | 364 | 358 | 226 | 194 |
| Certificates, renewable energy | 415 | 435 | 59 | 130 |
| Emission allowances | 25 | 48 | 21 | 44 |
| Sales of non-current assets | 75 | 37 | 27 | 28 |
| Rent and land lease income | 42 | 42 | 28 | 25 |
| Silviculture contracts | 57 | 67 | 57 | 67 |
| Other | 581 | 215 | 404 | 208 |
| Total | 1 559 | 1 203 | 822 | 696 |
Of the sales of by-products in the Group, SEK 141 million (123) relates to rejects from production, SEK 96 million (104) to sawdust, bark, chips etc., and SEK 127 million (130) to external sales of energy.
Income from renewable energy certificates received from the production of renewable energy at the Group's mills amounted to SEK 415 million (435).
The Group has been allotted emission allowances that have been used partly within its own production. The surplus resulted in a gain of SEK 25 million (48).
The increase for the year in the item 'Other' mainly relates to insurance compensation following the fire at Hallsta Paper Mill and a refund from a dispute over the cost of water in Workington which was settled in Holmen's favour.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| WAGES, SALARIES AND SOCIAL SECURITY COSTS |
2016 | 2015 | 2016 | 2015 |
| Wages, salaries and other remuneration Social security costs |
1 589 619 |
1 665 633 |
1 233 556 |
1 233 534 |
The 2016 AGM decided on the following guidelines for determining the salaries and other remuneration of the CEO and other senior management, namely the heads of the business areas and heads of Group staffs who report directly to the CEO. The guidelines apply to agreements entered into after the AGM's resolution.
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 other than possible share-related incentive programmes determined by the AGM.
The retirement age is normally 65 years. Pension benefits are based on defined contributions and comply with the ITP plan. Additional defined-contribution pension solutions may occur.
The period of notice is six months, regardless of whether notice is given by the company or the member of senior management. In the event of notice being given by the company, severance pay can be paid corresponding to no more than 18 months' salary.
A remuneration committee appointed from among the members of the Board shall handle matters 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 for 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 deviation, information thereon and the reasons therefor shall be submitted to the next AGM.
The 2016 AGM decided on a targeted share savings programme for around 40 key individuals in the Holmen Group. The purpose of the programme is strengthen the interests between the owners and the management of the company and to create long-term commitment to Holmen.
Participation in the programme required the relevant employees to have invested in Holmen shares (known as 'savings shares') during the period 27 April to 20 May 2016. For each savings share invested, half a matching share will be assigned after the end of the vesting period. In addition, a number of performance shares may be assigned to each participant. These are linked to the Group's return on capital employed. The allocation of the number of performance shares may vary, depending on the employee's position within the Group, up to a maximum of 3–6 shares per savings share. The assignment of matching and performance shares requires participants to have been full time employee within the Holmen Group and to have held the savings shares for the entire vesting period. The vesting period runs from 20 May 2016 through the date of publication of Holmen's interim report for the first quarter of 2019.
Total costs for the programme are estimated at SEK 18 million. Costs corresponding to SEK 5 million have been recognised for 2016.
A fixed Board fee shall be paid to the members of the Board elected by the AGM. The CEO, however, does not receive any Board fee. For 2016, fees to the Board amounted to SEK 3 060 000 (2 925 000). The chairman received a fee of SEK 680 000 (650 000), and each of the other seven (seven) members received SEK 340 000 (325 000).
Salary and other benefits for the CEO in 2016 amounted to SEK 8 001 168 (7 198 063). The total pension cost for the CEO, calculated in accordance with IAS 19, amounted to SEK 4 340 722 (3 616 009). No variable remuneration was paid.
In 2016, the salaries and other benefits of other senior management, i.e. the heads of the four (four) business areas and the heads of the five (four) Group staffs who report directly to the CEO, totalled SEK 21 297 113 (18 883 727).
The total pension cost for this group, calculated in accordance with IAS 19, amounted to SEK 10 606 250 (9 856 250) in 2016. No variable remuneration was paid.
For senior management, employed from 2011, a mutual notice period of six months applies. In the event of notice being given by the company, deductible severance pay corresponding to 18 months' salary is paid. These terms apply to six people. For four senior management employment contracts, signed before 2011, the employee is required to give six months' notice and the company must give 12 months' notice. In the event of notice being given by the company, severance pay corresponding to between one and two years' salary is paid, depending on age.
All members of senior management are employed by the parent company.
Holmen's pension obligations over and above the ITP plan for the CEO amounted to SEK 14 million (9) at 31 December 2016 and for other members of senior management to SEK 32 million (24), calculated in accordance with IAS 19. The pension obligations are secured using plan assets managed by an independent pension fund.
| AVERAGE NUMBER OF |
AVERAGE NUMBER OF |
|||
|---|---|---|---|---|
| FULL-TIME | FULL-TIME | |||
| EQUIVA | OF WHICH | EQUIVA | OF WHICH | |
| LENTS | WOMEN | LENTS | WOMEN | |
| 2016 | 2015 | |||
| Parent company | ||||
| Sweden | 2 369 | 448 | 2 422 | 467 |
| Spain | 11 | 5 | 11 | 6 |
| Group companies | ||||
| Estonia | 8 | 2 | 8 | 2 |
| France | 13 | 6 | 13 | 5 |
| Germany | 23 | 10 | 20 | 10 |
| Hong Kong | 5 | 1 | 6 | 1 |
| Italy | 8 | 3 | 7 | 3 |
| Japan | 2 | - | - | - |
| Netherlands | 77 | 38 | 104 | 37 |
| Poland | 7 | 6 | 7 | 4 |
| Portugal | 1 | - | 1 | - |
| Russia | 1 | 1 | 1 | 1 |
| Singapore | 6 | 3 | 6 | 3 |
| Spain | - | - | 268 | 50 |
| Switzerland | 3 | 1 | 3 | 1 |
| UK | 443 | 49 | 429 | 50 |
| US | 12 | 5 | 9 | 3 |
| Total Group companies | 609 | 125 | 882 | 170 |
| Total Group | 2 989 | 578 | 3 315 | 643 |
The reduction in the number of employees in the Group during the year was mainly due to the sale of the paper mill in Madrid, but also to implemented restructurings.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| PROPORTION OF WOMEN, % | 2016 | 2015 | 2016 | 2015 | |
| Board (excl. deputy members) | 17 | 17 | 17 | 17 | |
| Senior management | 30 | 22 | 30 | 22 | |
| Total | 23 | 19 | 23 | 19 |
The audit firm KPMG was elected by the 2016 Annual General Meeting as Holmen's auditors for a period of one year. KPMG audits Holmen AB and almost all of its subsidiaries.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| REMUNERATION TO KPMG | 2016 | 2015 | 2016 | 2015 | |
| Audit assignments | 6 | 6 | 4 | 4 | |
| Tax advice | 3 | 3 | 1 | 1 | |
| Other services | - | 0 | - | - | |
| Total | 9 | 10 | 5 | 5 | |
| Other auditors | 1 | 1 | - | - | |
| Total | 9 | 11 | 5 | 5 |
'Audit assignments' refers to the statutory examination of the annual report and accounting records, the administration by the Board and the CEO, and auditing and other assessment performed as agreed or in accordance with contracts. This includes other duties that are incumbent on the company's auditors and the provision of advice or other assistance resulting from observations in connection with such assessment or the performance of such other duties. 'Tax advice' refers to all consultation in the field of taxation.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| FINANCE INCOME | 2016 | 2015 | 2016 | 2015 |
| Dividend income from Group companies | - | - | 1 288 | 8 |
| Gains on sales of Group companies | 12 | - | 12 | - |
| Net profit/loss | ||||
| Assets and liabilities measured at fair value through profit/loss for the year |
||||
| - Held for financial risk management* | - | - | - | 15 |
| Other financial receivables | - | - | - | 7 |
| Interest income | 1 | 1 | 17 | 16 |
| Total finance income | 13 | 1 | 1 317 | 46 |
| FINANCE COSTS | ||||
| Impairment losses on value of shares in | ||||
| Group companies Net profit/loss |
- | - | -508 | -126 |
| Assets and liabilities measured at fair value | ||||
| through profit/loss for the year | ||||
| - Held for financial risk management* | 36 | -10 | 47 | -12 |
| Cash and cash equivalents | 3 | 5 | 3 | 5 |
| Other financial liabilities | -65 | 3 | -40 | 3 |
| Total net profit/loss | -27 | -2 | -499 | -130 |
| Interest costs** | -57 | -89 | -59 | -79 |
| Finance costs | -84 | -91 | -559 | -209 |
| Net financial items | -71 | -90 | 759 | -163 |
* Refers to the held-for-trading category in accordance with IAS 39.
** SEK -37 million (-38) in the Group and parent company refers to interest costs on derivatives measured at fair value through profit/loss for the year. Other interest income and interest costs are related to financial items not measured at fair value.
Earnings from investments in Group companies amount to SEK 780 million, of which SEK 1 288 million relates to dividends from Group companies and SEK -508 million relates to impairment losses on shares in Group companies.
The net gains and losses stated in net financial items mainly relate to currency revaluations of internal loans and hedging of internal lending. They also include the revaluation of interest rate swaps used to hedge loans at fixed rates of interest. The parent company's net financial items also include currency revaluation of external loans and forward contracts that hedge net investment in foreign operations, which are recognised in the Group under other comprehensive income. The fair value of the interest component in forward foreign exchange contracts as well as value changes in accrued interest and realised interest in fixed-interest-rate swaps is recognised on an ongoing basis in net interest items. Information on financial risks is provided on pages 36–39.
The income from financial instruments included in operating profit/loss is shown in the following table:
| GROUP | PARENT COMPANY |
|||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||
| Exchange gains/losses on trade receivables and trade payables |
15 | 99 | 1 | 69 | ||
| Net gain/loss on derivatives stated in working capital |
-126 | -67 | -102 | -82 | ||
| Interest income on trade receivables | 1 | 1 | 1 | 1 | ||
| Interest costs on trade payables | 0 | -1 | 0 | -1 |
The derivatives included in operating profit/loss relate to currency hedging of trade receivables and trade payables as well as financial electricity derivatives.
Gains and losses on currency hedging are recognised in operating profit/loss when the hedged item is recognised and in 2016 amounted to SEK -73 (-73) million, with the remainder being recognised in other comprehensive income as hedge accounting is applied. The fair value of outstanding transaction hedges at 31 December 2016 was SEK -26 million (82).
Gains on financial electricity hedges are recognised in the income statement when they expire; for 2016 they totalled SEK -53 million (6). The fair value of outstanding financial electricity hedges at 31 December 2016 was SEK -57 million (-365). This is recognised in other comprehensive income as hedge accounting is applied.
The change in the fair value of hedges for investment purchases is recognised in other comprehensive income until expiry, at which point the gain/loss is added to the cost of the non-current asset that was hedged. The fair value of outstanding hedges for investment purchases amounted to SEK 0 million at 31 December 2016. During the period, the cost of hedged items increased by SEK 12 million.
Gains on equity hedges amounted to SEK 1 million (14) in 2016 and are recognised in other comprehensive income as hedge accounting is applied. In the parent company accounts, this gain is recognised in the income statement. The translation of net foreign assets had an impact of SEK 192 million (-8) on consolidated equity. The fair value of outstanding equity hedges at 31 December 2016 was SEK 16 million (25) and relates to financial derivatives.
The fair value of the derivatives used to manage the fixed interest periods amounted to SEK -74 million (-82) at 31 December 2016, which was recognised in other comprehensive income as hedge accounting is applied. This value is expected to be recognised in the income statement from 2017 onwards.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| TAXES STATED IN INCOME STATEMENT | 2016 | 2015 | 2016 | 2015 | |
| Current tax | -331 | -134 | -305 | -252 | |
| Deferred tax | -105 | 14 | 4 | 9 | |
| Total | -436 | -120 | -301 | -244 |
Tax recognised totalled SEK -436 million, corresponding to 23 per cent of profit before tax.
| GROUP | PARENT COMPANY | |||||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||||
| SEKm | % | SEKm | % | SEKm | % | SEKm | % | |
| Recognised profit/loss before tax | 1 859 | 679 | 1 499 | 982 | ||||
| Tax at applicable rate | -409 | 22.0 | -149 | 22.0 | -330 | 22.0 | -216 | 22.0 |
| Difference in tax rate in foreign operations | 3 | -0.2 | 4 | -0.5 | 0 | 0.0 | 0 | 0.0 |
| Non-taxable income and non-deductible costs | -27 | 1.5 | -16 | 2.3 | 29 | -1.9 | -25 | 2.5 |
| Standard interest on tax allocation reserve | -2 | 0.1 | -3 | 0.4 | -2 | 0.1 | -3 | 0.3 |
| Effect of unstated loss carry-forwards and temporary differences | 3 | -0.2 | 4 | -0.6 | 0 | 0.0 | 0 | 0.0 |
| Tax attributable to previous periods | -1 | 0.1 | 19 | -2.8 | 0 | 0.0 | 0 | 0.0 |
| Change to tax rate on deferred tax assets/liabilities | 0 | 0.0 | 21 | -3.1 | 0 | 0.0 | 0 | 0.0 |
| Other | -3 | 0.2 | 0 | 0.0 | 1 | -0.1 | 0 | 0.0 |
| Effective tax | -436 | 23.4 | -120 | 17.7 | -301 | 20.1 | -244 | 24.8 |
| GROUP PARENT COMPANY |
||||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Deferred tax asset | 4 | 6 | - | - |
| Current tax receivable | 132 | 12 | 106 | - |
| Total tax receivables | 136 18 106 |
- | ||
| GROUP | PARENT COMPANY | |||
| Deferred tax liabilities | 2016 | 2015 | 2016 | 2015 |
| Non-current assets | ||||
| Biological assets* | 3 854 | 3 788 | 634 | 634 |
| Property, plant and equipment | 1 319 | 1 363 | -1 | -1 |
| Tax allocation reserve | 502 | 438 | - | - |
| Transactions subject to hedge accounting | -35 | -81 | -35 | -81 |
| Other, including deferred tax assets stated net | ||||
| among deferred tax liabilities | -27 | 0 | 13 | 18 |
| Total deferred tax liabilities | 5 613 | 5 508 | 612 | 569 |
Current tax liability 6 53 - 53 Total tax liabilities 5 618 5 561 612 622
* For the parent company this relates to forest land.
| GROUP PARENT COMPANY |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| STATED | STATED | ||||||||
| IN OTHER | IN OTHER | ||||||||
| STATED IN | COMPRE | TRANSLATION | STATED IN | COMPRE | |||||
| OPENING | THE INCOME | HENSIVE | DIFFERENCES | CLOSING | OPENING | THE INCOME | HENSIVE | CLOSING | |
| 2016 | BALANCE | STATEMENT | INCOME | AND OTHER | BALANCE | BALANCE | STATEMENT | INCOME | BALANCE |
| Biological assets* | -3 788 | -66 | - | - | -3 854 | -634 | -1 | - | -634 |
| Property, plant and equipment | -1 363 | 25 | - | 19 | -1 319 | 1 | 0 | - | 1 |
| Tax allocation reserve | -438 | -64 | - | - | -502 | - | - | - | - |
| Transactions subject to hedge accounting | 81 | - | -46 | - | 35 | 81 | - | -46 | 35 |
| Other | 5 | 0 | 29 | -2 | 32 | -18 | 4 | - | -13 |
| Deferred net tax liability | -5 502 | -105 | -17 | 16 | -5 608 | -569 | 4 | -46 | -612 |
| GROUP | PARENT COMPANY | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| STATED | STATED | |||||||||
| IN OTHER | IN OTHER | |||||||||
| STATED IN | COMPRE | TRANSLATION | STATED IN | COMPRE | ||||||
| OPENING | THE INCOME | HENSIVE | DIFFERENCES | CLOSING | OPENING | THE INCOME | HENSIVE | CLOSING | ||
| 2015 | BALANCE | STATEMENT | INCOME | AND OTHER | BALANCE | BALANCE | STATEMENT | INCOME | BALANCE | |
| Biological assets* | -3 718 | -69 | - | - | -3 788 | -632 | -2 | - | -634 | |
| Property, plant and equipment | -1 361 | 8 | - | -10 | -1 363 | 2 | -1 | - | 1 | |
| Tax allocation reserve | -512 | 74 | - | - | 438 | - | - | - | - | |
| Transactions subject to hedge accounting | 74 | - | 7 | - | 81 | 74 | - | 7 | 81 | |
| Other | 39 | 1 | -44 | 9 | 5 | -29 | 11 | - | -18 | |
| Deferred net tax liability | - 5 479 | 14 | -36 | -1 | -5 502 | -585 | 9 | 7 | -569 |
* For the parent company this relates to forest land.
For information on biological assets see Note 11. 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 18.
The deferred tax income recognised in the consolidated income statement relates primarily to changes in temporary differences. The amount recognised in other comprehensive income includes deferred tax related to changes of SEK -46 million (7) in hedging reserves and an impact of SEK 29 million (-44) from the revaluation of defined benefit pension plans.
| GROUP | ||
|---|---|---|
| 2016 | 2015 | |
| Total number of shares outstanding, 1 January | 83 996 162 83 996 162 | |
| Buy-back of company's own shares during the year | - | - |
| Total number of shares outstanding, 31 December | 83 996 162 83 996 162 | |
| Weighted average number of shares during the year, basic | 83 996 162 83 996 162 | |
| Effect of share savings programme | - | - |
| Weighted average number of shares during the year, | ||
| diluted | 83 996 162 83 996 162 | |
| Shareholders' share of profit for the year, SEKm | 1 424 | 559 |
| Basic average number of shares, million | 83 996 162 83 996 162 | |
| Basic EPS for the year, SEK | 16.9 | 6.7 |
| Shareholders' share of profit for the year, SEKm | 1 424 | 559 |
| Diluted average number of shares, million | 83 996 162 83 996 162 | |
| Diluted EPS for the year, SEK | 16.9 | 6.7 |
In previous years 760 000 class B shares were repurchased, 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.
Holmen introduced a share savings programme during the year. The programme involves previously repurchased shares being transferred to programme participants at the end of the term. The number of shares to be transferred depends on the Group's return on capital employed over the 2016–2018 period. In the event of maximum allocation, 93 000 shares will be transferred from the company to programme participants. The allocation of repurchased shares in order to meet these undertakings results in dilution effects. The effects on key ratios and profit per share are marginal. See Note 4 for further information about the share savings programme.
The Group sold essentially all its operations in Spain in 2016 and is planning to discontinue these operations entirely. The parent company has requested an advance ruling on the entitlement to group relief for tax losses in the Group's Spanish operations when the operations are discontinued. The Swedish tax authority has opposed this. The case is being reviewed by the Supreme Administrative Court and a ruling is expected in 2017. If the Group is entitled to group relief, it is estimated this would result in a deduction in the parent company corresponding to approximately SEK 400 million in tax. No deferred tax asset has been recognised in connection with a possible entitlement to relief.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| ACCUMULATED ACQUISITION COST | 2016 | 2015 | 2016 | 2015 |
| Opening balance | 225 | 215 | 26 | 26 |
| Investments | 5 | 12 | - | - |
| Disposal and retirement of assets | -36 | -1 | - | - |
| Translation differences | 0 | -1 | - | - |
| Total | 194 | 225 | 26 | 26 |
| AMORTISATION AND IMPAIRMENT LOSSES, ACCUMULATED |
||||
| Opening balance | 118 | 101 | 18 | 17 |
| Amortisation for the year | 17 | 19 | 1 | 1 |
| Impairment losses for the year | 1 | - | - | - |
| Disposal and retirement of assets | -28 | -1 | - | - |
| Translation differences | 0 | -1 | - | - |
| Total | 107 | 118 | 19 | 18 |
| Residual value according to plan at end of year |
87 | 107 | 8 | 8 |
Intangible non-current assets mostly consist of IT systems of SEK 64 million (80). These assets were largely acquired from external sources. They have determinable useful lives and are amortised over 5–20 years. No goodwill applies for the Group.
| BUILDINGS, OTHER WORK IN PROGRESS AND LAND AND LAND MACHINERY AND ADVANCE PAYMENTS TO FOREST LAND INSTALLATIONS EQUIPMENT SUPPLIERS |
TOTAL | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| GROUP | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Accumulated acquisition cost | ||||||||||
| Opening balance | 167 | 165 | 7 003 | 6 970 | 31 260 | 30 964 | 130 | 153 | 38 560 | 38 252 |
| Investments | - | - | 37 | 60 | 729 | 811 | 18 | -17 | 784 | 854 |
| Reclassifications | - | - | - | - | 92 | 4 | -92 | -4 | - | - |
| Disposal and retirement of assets | -14 | - | -1 420 | -5 | -4 192 | -526 | -1 | -3 | -5 627 | -533 |
| Translation differences | -6 | 2 | -27 | -22 | -317 | 8 | -11 | 0 | -362 | -13 |
| Total | 146 | 167 | 5 593 | 7 003 | 27 572 | 31 260 | 44 | 130 | 33 355 | 38 560 |
| Amortisation and impairment losses, accumulated |
||||||||||
| Opening balance | - | - | 4 247 | 3 822 | 23 992 | 23 166 | - | - | 28 239 | 26 988 |
| Depreciation and amortisation according to plan for the year |
- | - | 118 | 142 | 882 | 1 080 | - | - | 1 000 | 1 222 |
| Impairment losses for the year | - | - | 81 | 306 | 41 | 249 | - | - | 122 | 555 |
| Disposal and retirement of assets | - | - | -1 212 | -4 | -3 994 | -477 | - | - | -5 205 | -481 |
| Translation differences | - | - | -6 | -19 | -181 | -25 | - | - | -187 | -45 |
| Total | - | - | 3 229 | 4 247 | 20 740 | 23 992 | - | - | 23 968 | 28 239 |
| Residual value according to plan at end of year |
146 | 167 | 2 365 | 2 756 | 6 832 | 7 268 | 44 | 130 | 9 387 | 10 321 |
| BUILDINGS, OTHER | ||||||||
|---|---|---|---|---|---|---|---|---|
| LAND AND LAND | MACHINERY AND | |||||||
| FOREST LAND | INSTALLATIONS | EQUIPMENT | TOTAL | |||||
| PARENT COMPANY | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Accumulated acquisition cost | ||||||||
| Opening balance | 461 | 434 | 139 | 139 | 232 | 248 | 832 | 822 |
| Investments | 3 | 26 | - | - | 26 | 23 | 29 | 49 |
| Disposal and retirement of assets | 0 | 0 | 0 | 0 | -38 | -39 | -38 | -39 |
| Total | 464 | 461 | 139 | 139 | 220 | 232 | 823 | 832 |
| Accumulated depreciation and amortisation according to plan | ||||||||
| Opening balance | - | - | 129 | 128 | 172 | 184 | 301 | 312 |
| Depreciation and amortisation according to plan for the year | - | - | 1 | 1 | 24 | 24 | 25 | 25 |
| Disposal and retirement of assets | - | - | 0 | 0 | -38 | -36 | -38 | -36 |
| Total | - | - | 130 | 129 | 158 | 172 | 288 | 301 |
| Accumulated revaluations | ||||||||
| Opening balance | 2 390 | 2 401 | 1 | 1 | - | - | 2 391 | 2 402 |
| Disposal and retirement of assets | -1 | -12 | - | - | - | - | -1 | -12 |
| Total | 2 389 | 2 390 | 1 | 1 | - | - | 2 389 | 2 391 |
| Residual value according to plan at end of year | 2 853 | 2 850 | 10 | 11 | 62 | 60 | 2 925 | 2 922 |
In 2016, the Spanish operations in the Paper business area were sold, which reduced property, plant and equipment by SEK 527 million, SEK 122 million of which was the result of an impairment loss in connection with the signing of the sales agreement. The Group's impairment losses on property, plant and equipment are stated in the income statement in the line item 'Impairment losses'.
The Group's investment commitments for approved and ongoing projects amounted to SEK 250 million (776) at 31 December 2016. In 2016, the company's capitalised borrowing costs totalled SEK 3 million (3). An interest rate of 1.5 per cent (1.8) was used to determine the amount.
Forest assets are recognised in the consolidated accounts as growing forest, which is stated as a biological asset at fair value, and land, which is stated at 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. Fair value measurement is based on measurement level 3. This calculation of cash flows is made for the coming 100 years, which is regarded as the forests' harvesting cycle. The cash flows are calculated on the basis of harvesting volumes according to Holmen's current plan and assessments of future price and cost changes. The cost of re-planting has been taken into account, as re-planting after harvesting is a statutory obligation. The cash flows are discounted using an interest rate of 5.5 (5.5) per cent.
In total, Holmen owns 1 042 000 hectares of productive forest land, with a volume of standing forest totalling 120 million m3 growing stock, solid over bark. According to the harvesting plan, valid from 2011, harvesting will amount to 3.1 million m3 sub per year, of which 0.1 million m3 sub will be biofuel in the form of branches and treetops. It is believed that this level will remain largely unchanged until 2030. Thereafter, harvesting is expected to increase gradually to over 4 million m3 sub per year by 2110. Around 45 per cent of the wood harvested consists of pulpwood that is sold to the pulp and paper industry, 50 per cent is logs sold to sawmills and the remainder mainly consists of forest fuel.
The valuation is based on a long-term trend price that is adjusted upwards annually by 2 per cent inflation. The trend price for 2017 is 424 kr/m3 sub, which is in line with applicable market prices. The cost forecast is based on present-day levels and is adjusted upwardly by just over 2 per cent per year.
Holmen's forest holdings are reported at SEK 17 448 million (17 173) before tax. A deferred tax liability of SEK 3 854 million (3 788) is stated in relation to that figure. This represents the tax that is expected to be charged against earnings from harvesting in the future. On that basis, the growing forest, net after tax, is stated at SEK 13 594 million (13 385).
The change in the value of the growing forests can be broken down as follows:
| GROUP | 2016 | 2015 |
|---|---|---|
| Carrying amount at start of year | 17 173 | 16 867 |
| Acquisition of growing forest | 4 | 36 |
| Sales of growing forest | -27 | -2 |
| Change due to harvesting | -587 | -540 |
| Unrealised change in fair value | 902 | 807 |
| Other changes | -17 | 5 |
| Carrying amount at end of year | 17 448 | 17 173 |
The table below shows how the value of forest assets would be affected by changes in the most significant valuation assumptions.
| GROUP | BEFORE TAX | AFTER TAX |
|---|---|---|
| Annual change, +0.1% per year | ||
| Rate of harvesting | 740 | 580 |
| Price inflation | 1 120 | 870 |
| Cost inflation | -600 | -470 |
| Change in level, +1% | ||
| Harvesting | 250 | 200 |
| Prices | 390 | 300 |
| Costs | -220 | -170 |
| Discount rate, +0.1% | -480 | -370 |
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 2.0 per cent to 2.1 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 in the calculations are raised by 1 per cent for all years (change in level).
The Nominal price series shows the average selling price for Holmen. The Real series shows nominal prices recalculated at 2016 monetary value using historical Swedish CPI.
| JANUARY–DECEMBER | ||
|---|---|---|
| 2016 | 2015 | |
| Profit/loss from associates and joint ventures | -18 | -46 |
| Recognised in profit/loss for the year | -18 | -46 |
| Other comprehensive income from joint venture | -21 | 3 |
| Recognised in comprehensive income | -21 | 3 |
The combined value of Holmen's share in the profits of associates amounted to SEK -14 million (10) for the Group and to SEK -9 million (4) for the parent company. The combined value of Holmen's share in the profits of joint ventures amounted to SEK -8 million (-3) for the Group and to SEK -8 million (-3) for the parent company.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| ASSOCIATES | 2016 | 2015 | 2016 | 2015 | |
| Carrying amount at start of year | 1 772 | 1 828 | 125 | 125 | |
| Investments | 5 | - | - | - | |
| Share of earnings | -16 | -46 | - | - | |
| Disposals | -105 | - | -2 | - | |
| Dividends received | -12 | - | - | - | |
| Translation difference | 4 | -3 | - | - | |
| Impairment losses | -2 | -7 | - | - | |
| Carrying amount at end of year | 1 646 | 1 772 | 123 | 125 |
| GROUP | PARENT COMPANY | |||||
|---|---|---|---|---|---|---|
| JOINT VENTURE | 2016 | 2015 | 2016 | 2015 | ||
| Carrying amount at start of year | 141 | 142 | 82 | 82 | ||
| Investments | 10 | - | 10 | - | ||
| Share of earnings | -30 | -1 | - | - | ||
| Other | 6 | - | - | - | ||
| Carrying amount at end of year | 127 | 141 | 92 | 82 |
During the year, investments in associates that manage logistics, energy and recycling of recovered paper were sold, primarily in connection with the sale of the Spanish operations.
| CORPORATE ID NO. |
REGISTERED OFFICE |
NO. OF INVEST MENTS |
INTEREST %* | VALUE OF HOLDING IN CONSOLIDAT ED ACCOUNTS |
CARRYING AMOUNT IN THE PARENT COMPANY |
INTEREST %* | VALUE OF HOLDING IN CONSOLIDAT ED ACCOUNTS |
CARRYING AMOUNT IN THE PARENT COMPANY |
|
|---|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | ||||||||
| ASSOCIATES | |||||||||
| Brännälvens Kraft AB | 556017-6678 | Arbrå | 5 556 | 13.9 | 36 | - | 13.9 | 36 | - |
| Gidekraft AB | 556016-0953 | Örnsköldsvik | 990 | 9.9 | 0 | 0 | 9.9 | 0 | 0 |
| Harrsele AB | 556036-9398 | Vännäs | 9 886 | 49.4 | 1 465 | - | 49.4 | 1 467 | - |
| Uni4 Marketing AB | 556594-6984 | Stockholm | 1 800 | 36 | 12 | 2 | 36.0 | 21 | 2 |
| Vattenfall Tuggen AB | 556504-2826 | Lycksele | 683 | 6.8 | 75 | 75 | 6.8 | 75 | 75 |
| VindIn AB | 556713-5172 | Stockholm | 200 | 17.7 | 55 | 46 | 17.7 | 57 | 46 |
| Melodea Ltd, Israel | Tel Aviv | 119 | 46.7 | 2 | - | 42.4 | 2 | - | |
| Baluarte Sociedade de Recolha e Recuperação de Desperdicios, Lda, Portugal |
Alcochete | 2 | - | - | - | 50.0 | 37 | - | |
| SAS Saica Natur sud, France | Lorp-Sentaraille | 678 | - | - | - | 24.0 | 20 | - | |
| Peninsular Cogeneración S.A., Spain | Madrid | 4 500 | - | - | - | 50.0 | 55 | - | |
| Other associates | 0 | 0 | 2 | 2 | |||||
| 1 646 | 123 | 1 772 | 125 | ||||||
| JOINT VENTURE | |||||||||
| Varsvik AB | 556914-9833 | Stockholm | 250 | 50.0 | 127 | 92 | 50.0 | 141 | 82 |
| Total | 1 773 | 215 | 1 914 | 208 |
* The percentage of ownership corresponds to the percentage of votes for the total number of shares.
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 electricity produced at cost price, so the associate only earns a very limited profit. Purchased electricity is sold to external customers at market price, and the earnings are stated in the consolidated accounts within the Renewable energy business area.
The holding in associate Harrsele AB is recognised in the Group at SEK 1 465 million (1 467). Holmen purchased 416 (564) GWh of electrical power from Harrsele AB in 2016, giving Holmen an operating profit of SEK 76 million (95) from market sales. Harrsele AB owns power assets that generate 950 GWh of electrical power in a normal year. These assets were originally constructed in 1957–58 and the carrying amount of the non-current assets in Harrsele AB amounts to SEK 114 million (115). The company has non-current liabilities to its owner of SEK 25 million (25).
Ownership in remaining associates relates to activities in the areas of sales, research and development. The interests in 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.
Ownership in the joint venture, Varsvik AB, relates to wind power operations.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| OTHER SHARES AND PARTICIPATING INTERESTS | 2016 | 2015 | 2016 | 2015 |
| Carrying amount at start of year | 4 | 4 | 1 | 1 |
| Disposals | - | 0 | - | 0 |
| Translation difference | 0 | 0 | - | - |
| Impairment losses | -2 | - | - | - |
| Carrying amount at end of year | 2 | 4 | 1 | 1 |
Non-current financial receivables consist of interesting-bearing financial receivables to other companies, prepayments for credit facilities and the fair value of non-current derivatives. The parent company's receivables from Group companies include a significant share of interestfree receivables between Swedish wholly owned Group companies.
Current financial receivables are recognised as fixed income investments and lending for durations of up to one year, accrued interest income and unrealised exchange gains. Current financial receivables essentially have fixed interest periods of under 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 in bank accounts or as current deposits at banks.
Loan liabilities, accrued interest costs, unrealised exchange losses and fair values of derivatives are stated as financial liabilities.
Financial liabilities are largely interest-bearing. The parent company's liabilities to Group companies include a significant amount of interest-free liabilities between Swedish wholly owned Group companies.
The maturity structure and average interest for the Group's liabilities are stated in the administration report on pages 38–39. SEK -3 151 million of the parent company's liabilities are due for payment within one year. In addition to the financial assets and liabilities identified above, the pension liability (see Note 17) is also included in net financial debt.
All of the Group's derivatives are covered by ISDA or FEMA agreements, which entails a right for Holmen to offset assets and liabilities in relation to the same counterparty in the case of a credit event. Taking into account the terms of the netting agreement, the net exposure is SEK -172 million. Assets and liabilities are not offset in the report. Recognised derivatives totalled SEK 213 million (138) on the asset side and SEK -385 million (-466) on the liabilities side.
Items measured at fair value belong to measurement level 2 pursuant to IFRS 13. Fair value in the tables is calculated on the basis of discounted cash flows and all variables, such as discount rates and exchange rates, are taken from market listings for calculations. The difference between fair value and carrying amount arises because certain liabilities are not measured at fair value in the balance sheet, and are instead stated at their amortised cost. For loans recognised at amortised cost, fair value is calculated on the basis of discounted cash flows and belongs to measurement level 2. All variables are taken from market listings for calculations. The Group has no loans that are recognised at fair value in profit/loss. In the case of trade receivables, trade payables and other items not affected above, the carrying amount is stated as the fair value, as this is judged to be a good reflection of the fair value. Since it has not been possible to determine a reliable fair value for shares and interests, they have been excluded from the tables. For further information on financing, see the section on Risk, on pages 36–39.
| 2017 | 2018 | 2019 | 2020 | 2021– | |
|---|---|---|---|---|---|
| FINANCIAL LIABILITIES | |||||
| Derivatives | -93 | -23 | -17 | -16 | - |
| Other financial liabilities | -3 151 | -310 | -501 | - | - |
| FINANCIAL RECEIVABLES | |||||
| Derivatives | 55 | - | - | - | - |
| Other financial receivables | 245 | 4 | 4 | 1 | 0 |
* Refers to financial instruments included in Group net financial debt, excluding provisions for pensions.
| DERIVATIVES | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| RECOGNISED | TRADE | |||||||||||||
| AT FAIR VALUE | DERIVATIVES | RECEIVABLES | ||||||||||||
| THROUGH | WITH HEDGE | AND LOAN | AVAILABLE-FOR | TOTAL CARRYING | ||||||||||
| Group | PROFIT/LOSS | ACCOUNTING | RECEIVABLES | SALE ASSETS | OTHER LIABILITIES | AMOUNT | FAIR VALUE | |||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| FINANCIAL INSTRUMENTS INCLUDED IN NET FINANCIAL DEBT |
||||||||||||||
| NON-CURRENT FINANCIAL RECEIVABLES |
||||||||||||||
| Other financial receivables | - | - | - | - | 39 | 43 | - | - | - | - | 39 | 43 | 39 | 43 |
| 0 | 0 | - | - | 39 | 43 | - | - | - | - | 39 | 43 | 39 | 43 | |
| CURRENT FINANCIAL RECEIVABLES | ||||||||||||||
| Accrued interest | - | - | - | - | 1 | 0 | - | - | - | - | 1 | 0 | 1 | 0 |
| Derivatives | 55 | 37 | - | - | - | - | - | - | - | - | 55 | 37 | 55 | 37 |
| Other financial receivables | - | - | - | - | 34 | 24 | - | - | - | - | 34 | 24 | 34 | 24 |
| 55 | 37 | - | - | 34 | 24 | - | - | - | - | 89 | 61 | 89 | 61 | |
| CASH AND CASH EQUIVALENTS | ||||||||||||||
| Current deposit of cash and cash | ||||||||||||||
| equivalents | - | - | - | - | 0 | 0 | - | - | - | - | 0 | 0 | 0 | 0 |
| Bank balances | - | - | - | - | 210 | 221 | - | - | - | - | 210 | 221 | 210 | 221 |
| - | - | - | - | 210 | 221 | - | - | - | - | 210 | 221 | 210 | 221 | |
| NON-CURRENT LIABILITIES | ||||||||||||||
| MTN loans | - | - | - | - | - | - | - | - | - | -700 | - | -700 | - | -700 |
| Loans from banks and other credit | ||||||||||||||
| institutions | - | - | - | - | - | - | - | - | -800 | -1 500 | -800 | -1 500 | -800 | -1 500 |
| Derivatives | - | - | -75 | -83 | - | - | - | - | - | - | -75 | -83 | -75 | -83 |
| Other non-current liabilities | - | - | - | - | - | - | - | - | -8 | -13 | -8 | -13 | -8 | -13 |
| - | - | -75 | -83 | - | - | - | - | -808 | -2 213 | -882 | -2 295 | -882 | -2 295 | |
| CURRENT LIABILITIES | ||||||||||||||
| Commercial paper programme | - | - | - | - | - | - | - | - | -1 709 | -2 144 | -1 709 | -2 144 | -1 709 | -2 144 |
| Bank account liabilities | - | - | - | - | - | - | - | - | -26 | -27 | -26 | -27 | -26 | -27 |
| Derivatives | -53 | -8 | - | - | - | - | - | - | - | - | -53 | -8 | -53 | -8 |
| Accrued interest | - | - | - | - | - | - | - | - | -12 | -13 | -12 | -13 | -12 | -13 |
| MTN loans | - | - | - | - | - | - | - | - | -700 | -500 | -700 | -500 | -700 | -500 |
| Other bond loans | - | - | - | - | - | - | - | - | -700 | - | -700 | - | -700 | - |
| Other current liabilities | - | - | - | - | - | - | - | - | - | -7 | - | -7 | - | -7 |
| -53 | -8 | - | - | - | - | - | - | -3 147 | -2 691 | -3 200 | -2 698 | -3 200 | -2 698 | |
| FINANCIAL INSTRUMENTS NOT | ||||||||||||||
| INCLUDED IN NET FINANCIAL DEBT | ||||||||||||||
| Other shares and participating | ||||||||||||||
| interests | - | - | - | - | - | - | 2 | 4 | - | - | 2 | 4 | 2 | - |
| Trade receivables | - | - | - | - | 2 174 | 1 987 | - | - | - | - | 2 174 | 1 987 | 2 174 | 1 987 |
| Derivatives (recognised among | ||||||||||||||
| operating receivables) | 8 | 11 | 150 | 89 | - | - | - | - | - | - | 158 | 100 | 158 | 100 |
| Trade payables | - | - | - | - | - | - | - | - | -1 766 | -1 916 | -1 766 | -1 916 | -1 766 | -1 916 |
| Derivatives (recognised among | ||||||||||||||
| operating liabilities) | -23 | -2 | -233 | -375 | - | - | - | - | - | - | -257 | -377 | -257 | -377 |
| Total financial instruments | -14 | 39 | -158 | -368 | 2 457 | 2 275 | 2 | 4 | -5 721 | -6 820 | -3 433 | -4 871 | -3 433 | -4 875 |
| DERIVATIVES RECOGNISED |
TRADE | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AT FAIR VALUE | DERIVATIVES | RECEIVABLES | ||||||||||||
| THROUGH PROFIT/ | WITH HEDGE | AND LOAN | AVAILABLE-FOR | TOTAL CARRYING | ||||||||||
| Parent company | LOSS | ACCOUNTING | RECEIVABLES | SALE ASSETS | OTHER LIABILITIES | AMOUNT | FAIR VALUE | |||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| FINANCIAL INSTRUMENTS INCLUDED IN NET FINANCIAL DEBT |
||||||||||||||
| NON-CURRENT FINANCIAL RECEIVABLES |
||||||||||||||
| Receivables from Group companies Other financial receivables |
- - |
- - |
- - |
- - |
3 104 98 |
3 119 95 |
- - |
- - |
- - |
- - |
3 104 98 |
3 119 95 |
3 104 98 |
3 119 95 |
| 0 | 0 | - | - | 3 202 | 3 214 | - | - | - | - | 3 202 | 3 214 | 3 202 | 3 214 | |
| CURRENT FINANCIAL RECEIVABLES | ||||||||||||||
| Accrued interest | - | - | - | - | 1 | 0 | - | - | - | - | 1 | 0 | 1 | 0 |
| Derivatives Other financial receivables |
55 - |
37 - |
- - |
- - |
- 34 |
- 24 |
- - |
- - |
- - |
- - |
55 34 |
37 24 |
55 34 |
37 24 |
| 55 | 37 | - | - | 34 | 24 | - | - | - | - | 89 | 61 | 89 | 61 | |
| CASH AND CASH EQUIVALENTS | ||||||||||||||
| Bank balances | - | - | - | - | 104 | 155 | - | - | - | - | 104 | 155 | 104 | 155 |
| - | - | - | - | 104 | 155 | - | - | - | - | 104 | 155 | 104 | 155 | |
| NON-CURRENT LIABILITIES MTN loans |
- | - | - | - | - | - | - | - | - | -700 | - | -700 | - | -700 |
| Loans from banks and other credit | ||||||||||||||
| institutions | - | - | - | - | - | - | - | - | -800 | - 1 500 | -800 | -1 500 | -800 | -1 500 |
| Liabilities to Group companies | - | - | - | - | - | - | - | - | -1 454 | -1 013 | -1 454 | -1 013 | -1 454 | -1 013 |
| Derivatives | - - |
- - |
-75 -75 |
-83 -83 |
- - |
- - |
- - |
- - |
- -2 254 |
- -3 213 |
-75 -2 328 |
-83 -3 295 |
-75 -2 328 |
-83 -3 295 |
| CURRENT LIABILITIES | ||||||||||||||
| Commercial paper programme | - | - | - | - | - | - | - | - | -1 709 | -2 144 | -1 709 | -2 144 | -1 709 | -2 144 |
| Bank account liabilities | - | - | - | - | - | - | - | - | -26 | -27 | -26 | -27 | -26 | -27 |
| Derivatives Accrued interest |
-53 - |
-8 - |
- - |
- - |
- - |
- - |
- - |
- - |
- -12 |
- -13 |
-53 -12 |
-8 -13 |
-53 -12 |
-8 -13 |
| MTN loans | - | - | - | - | - | - | - | - | -700 | -500 | -700 | -500 | -700 | -500 |
| Other bond loans | - | - | - | - | - | - | - | - | -700 | - | -700 | - | -700 | - |
| Other current liabilities | - | - | - | - | - | - | - | - | - | -6 | - | -6 | - | -6 |
| -53 | -8 | - | - | - | - | - | - | -3 147 | -2 690 | -3 200 | -2 698 | -3 200 | -2 698 | |
| FINANCIAL INSTRUMENTS NOT INCLUDED IN NET FINANCIAL DEBT |
||||||||||||||
| Other shares and participating | ||||||||||||||
| interests | - | - | - | - | - | - | 0 | 1 | - | - | 0 | 1 | 0 | - |
| Trade receivables Derivatives (recognised among |
- | - | - | - | 1 874 | 1 645 | - | - | - | - | 1 874 | 1 645 | 1 874 | 1 645 |
| operating receivables) | 13 | 12 | 151 | 90 | - | - | - | - | - | - | 164 | 102 | 164 | 102 |
| Trade payables | - | - | - | - | - | - | - | - | -1 576 | -1 845 | -1 576 | -1 845 | -1 576 | -1 845 |
| Derivatives (recognised among operating liabilities) |
-24 | -3 | -234 | -376 | - | - | - | - | - | - | -258 | -379 | -258 | -379 |
| Total financial instruments | -10 | 39 | -157 | -368 | 5 214 | 5 039 | 0 | 1 | -6 976 | -7 748 | -1 929 | -3 038 | -1 929 | -3 039 |
| GROUP | |||
|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 |
| 831 | 971 | 637 | 645 |
| 233 | 299 | 206 | 272 |
| 1 431 | 1 237 | 1 077 | 858 |
| 431 | 526 | 423 | 508 |
| 52 | |||
| 2 981 | 3 089 | 2 396 | 2 336 |
| 54 | 56 | PARENT COMPANY 54 |
During the year, impairment losses on inventories affected profit by SEK -2 million (18) for the Group and SEK -5 million (9) for the parent company.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Trade receivables | ||||
| Group companies | - | - | 50 | 83 |
| Associates | 38 | 52 | 38 | 51 |
| Other | 2 137 | 1 935 | 1 786 | 1 511 |
| Total trade receivables | 2 174 | 1 987 | 1 874 | 1 645 |
| Current receivables | ||||
| Group companies | - | - | - | - |
| Associates | 5 | 4 | 5 | 4 |
| Other | 226 | 219 | 129 | 191 |
| Derivatives | 158 | 100 | 164 | 102 |
| Prepayments and accrued income | 175 | 196 | 82 | 84 |
| Total other operating receivables | 564 | 519 | 380 | 381 |
| Total operating receivables | 2 738 | 2 505 | 2 254 | 2 026 |
Trade receivables are recognised at the amount expected to be received, based on an individual assessment of each customer. The Group's trade receivables mainly relate to European customers. Trade receivables denominated in foreign currencies were valued at the balance sheet date. Following an individual assessment of all trade receivables, a provision for anticipated credit losses of SEK 37 (38) million has been made and recognised, net, together with trade receivables. During the year, the provision was changed by SEK -3 million (-6) as a result of actual credit losses, and by SEK 2 million (12) as a result of changes in the provision for anticipated credit losses. At 31 December 2016, SEK 44 million (87) of trade receivables were past due for more than 30 days. The credit quality of financial assets that are neither past due nor impaired is deemed to be good.
The fair values of derivatives relate to hedges of future cash flows.
Customer credit risks related to the Group's customers are managed by the relevant business areas and are described on page 37.
| 31 Dec 2016 | |||
|---|---|---|---|
| SHARE CAPITAL | NUMBER QUOTIENT VALUE | SEKm | |
| Registered share capital | |||
| Class A | 22 623 234 | 50 | 1 131 |
| Class B | 62 132 928 | 50 | 3 107 |
| Total no. of shares | 84 756 162 | 4 238 | |
| Repurchased class B shares | -760 000 | ||
| Total number of shares outstanding |
83 996 162 |
| 31 Dec 2015 | |||||
|---|---|---|---|---|---|
| SHARE CAPITAL | NUMBER QUOTIENT VALUE | SEKm | |||
| Registered share capital | |||||
| Class A | 22 623 234 | 50 | 1 131 | ||
| Class B | 62 132 928 | 50 | 3 107 | ||
| Total no. of shares | 84 756 162 | 4 238 | |||
| Repurchased class B shares | -760 000 | ||||
| Total number of shares | |||||
| outstanding | 83 996 162 |
The company's share capital consists of shares issued in two classes: class A, each of which carries 10 votes, and class B, each of which carries one vote. In other respects, there are no restrictions between classes of shares.
At 31 December 2016 the Group's own shareholding was 760 000 shares (760 000). None of the Group's own shares were sold during the year.
Assets and liabilities measured at fair value according to Chapter 4 Section 14a of the Swedish Annual Accounts Act had an impact of SEK -167 million (-330) on parent company equity. In the consolidated accounts, valuation of derivatives and other financial instruments had an impact of SEK -172 million (-330) on equity.
Holmen's profitability target is for forests and power to generate a return of 5 per cent and for its industrial operations to generate a return of over 10 per cent. Taken together this means that the Group's return on capital employed should exceed 7 per cent. Decisions on dividends 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 at a maximum of 0.5.
The AGM has at its disposal the company's earnings amounting to SEK 4 921 232 735. The Board proposes that the AGM on 27 March 2017 approve a dividend of SEK 12 per share. The proposed dividend totals SEK 1 008 million. The Board also proposes that the remaining amount of SEK 3 913 277 791 be carried forward.
For the previous year, the dividend paid was SEK 10.5 per share (SEK 882 million).
The debt/equity ratio was 0.19 (0.23).
Neither the parent company nor any of the subsidiaries are subject to external capital requirements. For further details about the Group's capital management and risk management, see pages 36–39.
Holmen provides defined-benefit pension plans for some office-based employees in Sweden. Most of these commitments 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 10 of the Swedish Financial Reporting Board as a defined contribution plan. Some defined benefit obligations over and above the ITP plan are available for Group management and secured by means of a pension fund. Occupational pensions for other office-based employees and all collective agreement workers in Sweden are defined contribution plans. Defined benefit plans in the UK have been closed to new pension accruals since 2015. These obligations are recognised in the consolidated accounts as defined benefit plans in accordance with IAS 19.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| COST RECOGNISED IN PROFIT/LOSS FOR THE YEAR |
2016 | 2015 | 2016 | 2015 | |
| Defined benefit plans | |||||
| Personnel costs | -7 | -23 | -21 | -12 | |
| Finance costs | -2 | -12 | 1 | 1 | |
| Curtailment gain | - | 36 | - | - | |
| Total defined benefit plans stated in profit/loss for the year |
-9 | 2 | -21 | -10 | |
| Defined contribution plans | |||||
| Personnel costs | -129 | -129 | -106 | -110 | |
| Total recognised in profit/loss for the year | -138 | -127 | -127 | -120 |
| COST RECOGNISED IN OTHER | ||
|---|---|---|
| COMPREHENSIVE INCOME | 2016 | 2015 |
| Return on plan assets excl. recognised interest income | 241 | -43 |
| Actuarial gains and losses from changes in demographic assumptions |
33 | 45 |
| Actuarial gains and losses from changes in financial assumptions |
-418 | 47 |
| Actuarial gains and losses from experiential adjustments | -13 | 157 |
| Payroll tax | -1 | 2 |
| Total recognised in other comprehensive income | -159 | 208 |
The change in the defined benefit obligations and the change in plan assets are specified in the tables below. Some 90 per cent of the obligations relate to the pension plans in the UK. The obligations arising out of the pension schemes in the UK are placed in a trust. These are governed by a board consisting of representatives from Holmen and the beneficiaries. Holmen's UK subsidiary has a commitment to cover the deficit that exists over a period of time as established between the trust and the company in consultation with its actuary. This period is currently just over 4 years and is subject to review every 3 years.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| OBLIGATIONS | 2016 | 2015 | 2016 | 2015 | |
| Obligations at 1 January | -2 374 | -2 565 | -153 | -159 | |
| Current service cost | -7 | -23 | -21 | -12 | |
| Payroll tax | 2 | 3 | - | - | |
| Interest costs | -77 | -93 | -7 | -1 | |
| Actuarial gains/losses | -399 | 249 | - | - | |
| Contribution by plan participants | - | -3 | - | - | |
| Benefits paid | 212 | 101 | 13 | 20 | |
| Transferred from provisions | - | -1 | - | -1 | |
| Settlements | - | 36 | - | - | |
| Exchange differences | 230 | -79 | - | - | |
| Obligations at 31 December | -2 414 | -2 374 | -167 | -153 |
Of the Group's total obligations, SEK 11 million (14) refers to those that are not funded, while the rest are wholly or partially funded obligations. Of the parent company's obligations, SEK 12 million (5) are secured under the Swedish Pension Obligations Vesting Act.
The weighted average duration is 18 years.
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| PLAN ASSETS | 2016 | 2015 | 2016 | 2015 | |
| Fair value of assets at 1 January | 2 244 | 2 165 | 148 | 148 | |
| Interest income | 75 | 82 | - | - | |
| Expected return excl. recognised interest | |||||
| income | 241 | -43 | - | - | |
| Real return (parent company) | - | - | 7 | 3 | |
| Administration fees | -5 | -4 | - | - | |
| Contribution by employer | 73 | 65 | - | - | |
| Contribution by plan participants | - | 3 | - | - | |
| Benefits paid | -197 | -84 | - | -3 | |
| Exchange differences | -218 | 59 | - | - | |
| Fair value of assets at 31 December | 2 213 | 2 244 | 155 | 148 | |
| Pension provisions, net | -201 | -130 | -12 | -5 |
Plan assets by type are as shown below:
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| PLAN ASSETS | 2016 | 2015 | 2016 | 2015 | |
| Equities | 1 130 | 1 127 | 71 | 57 | |
| Bonds | 1 063 | 1 101 | 80 | 90 | |
| Current fixed income investments | 20 | 17 | 3 | 1 | |
| 2 213 | 2 244 | 155 | 148 |
The plan assets do not include any financial instruments issued by Group companies or assets used by the Group. Of equities, 49 per cent relate to the UK, 47 per cent to the rest of Europe and the US and 4 per cent to the rest of the world. Of bonds, 44 per cent relate to government bonds and 56 per cent to corporate bonds.
| GROUP (WEIGHTED AVERAGE), % | 31 Dec 2016 | 31 Dec 2015 |
|---|---|---|
| Discount rate | 2.7 | 3.7 |
| Rate of salary increase | 3.0 | 3.0 |
| Rate of price inflation | 3.1 | 2.9 |
The discount rate for pension obligations was established on the basis of high-quality corporate bonds. A discount rate of 0.8 per cent (1.9) and salary levels at the balance sheet date were used for calculating the amount of the parent company's pension obligation.
The table below shows how the obligation would be affected in the event of a change in key actuarial assumptions (- reduces debt, + increases debt).
| SENSITIVITY ANALYSIS | 31 Dec 2016 | 31 Dec 2015 |
|---|---|---|
| Discount rate (+ 0.5%) | -203 | -188 |
| Rate of salary increase (+ 0.5%) | 2 | 2 |
| Rate of price inflation (+ 0.5%) | 178 | 164 |
| Mortality (+ 1 year in life expectancy) | 82 | 72 |
The Group's payments into the funded defined benefit plans in 2017 are expected to amount to SEK 31 million.
The year's premiums for pension insurance policies taken out with Alecta's ITP 2 plan amounted to SEK 33 million (33) and are included among personnel costs in the income statement. Holmen's share of the total number of active members in the plan amounted to 765 active members, which corresponds to 0.15 per cent. Premiums to Alecta are expected to amount to SEK 32 million in 2017. Alecta's surplus can be allocated to policyholders and/or the persons insured. If Alecta's collective consolidation falls below 125 per cent or exceeds 155 per cent, measures will be taken to create the conditions to ensure the level of consolidation returns to the normal range. In the event of low consolidation, one measure may be to raise the agreed price for new policy subscriptions and an increase in existing benefits. In the event of high consolidation, one measure may be to introduce reductions in premiums. At the end of 2016, Alecta's collective consolidation level was 148 per cent (153).
| PROVISIONS FOR TAXES | OTHER PROVISIONS | TOTAL | ||||
|---|---|---|---|---|---|---|
| GROUP | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Carrying amount at start of year | 45 | 140 | 697 | 463 | 742 | 603 |
| Provisions during the year | - | - | 335 | 410 | 335 | 410 |
| Utilised during the year | - | - | -163 | -59 | -163 | -59 |
| Unutilised amount reversed during the year | - | -95 | -15 | -117 | -15 | -212 |
| Translation differences | - | 0 | 2 | 0 | 2 | 0 |
| Carrying amount at end of year | 45 | 45 | 856 | 697 | 901 | 742 |
| Of which non-current portion of the provisions | 45 | 45 | 627 | 540 | 673 | 585 |
| Of which current portion of the provisions | - | - | 228 | 157 | 228 | 157 |
| PARENT COMPANY | ||||||
| Carrying amount at start of year | 45 | 45 | 892 | 630 | 937 | 676 |
| Provisions during the year | - | - | 228 | 524 | 228 | 524 |
| Utilised during the year | - | - | -274 | -147 | -274 | -147 |
| Unutilised amount reversed during the year | - | - | -13 | -115 | -13 | -115 |
| Carrying amount at end of year | 45 | 45 | 833 | 892 | 878 | 937 |
| Of which non-current portion of the provisions | 45 | 45 | 572 | 608 | 617 | 653 |
| Of which current portion of the provisions | - | - | 261 | 284 | 261 | 284 |
Other provisions mainly relate to uncertainties associated with the sale of the business in Spain, obligations for environmental restoration and for fixed price electricity supply contracts.
The increase during the year mainly relates to provisions as a result of the sale of the mill in Madrid. A provision is included in the parent company for future measures for reforestation after harvesting for SEK 197 million.
| GROUP PARENT COMPANY |
||||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Trade payables | ||||
| Group companies | - | - | 116 | 265 |
| Associates | - | 14 | - | - |
| Other | 1 766 | 1 903 | 1 460 | 1 579 |
| Total trade payables | 1 766 | 1 916 | 1 576 | 1 845 |
| Current liabilities | ||||
| Group companies | - | - | 0 | 0 |
| Associates | 11 | 7 | 11 | 7 |
| Other | 251 | 199 | 158 | 165 |
| Derivatives | 257 | 377 | 258 | 379 |
| Accruals and deferred income | 561 | 676 | 443 | 441 |
| Total other operating liabilities | 1 079 | 1 259 | 870 | 993 |
| Total operating liabilities | 2 845 | 3 176 | 2 445 | 2 837 |
All trade payables are due for payment within one year.
Accruals and deferred income in the parent company principally consist of personnel costs of SEK 196 million (195), discounts of SEK 42 million (48) and goods delivered but not yet invoiced of SEK 36 million (38).
Fair values of derivatives essentially relate to the hedging of future cash flows. See Note 13.
In 2016, the Group's lease payments amounted to SEK 54 million (70), and the parent company's to SEK 38 million (37). The Group's leases mainly relate to trucks, cars and rental agreements. No new leases of any significance for the business were entered into during the 2016 financial year. No leased equipment was subleased.
The breakdown of future lease payments is as follows:
| GROUP | PARENT COMPANY | |||||
|---|---|---|---|---|---|---|
| 2017 | 2018 –2022 |
2023– | 2017 | 2018 –2022 |
2023– | |
| Future lease payments | 40 | 50 | 0 | 26 | 27 | - |
| Present value of future lease payments |
40 | 50 | 0 | 26 | 27 | - |
The contracts have remaining durations ranging from 1 to 7 years. The Group's future lease payments for existing lease agreements amounted to SEK 119 million at the end of the previous year. Those in the parent company amounted to SEK 65 million.
Apart from lease agreements, Holmen has two time charter contracts in respect of ships that are used to distribute the company's products. These two agreements were extended in 2015 and have a remaining duration of one year from 1 January 2017.
| PROPERTY MORTGAGES |
OTHER COLLATERAL |
TOTAL COLLATERAL |
TOTAL COLLATERAL |
|
|---|---|---|---|---|
| GROUP | 2016 | 2015 | ||
| For own liabilities | - | - | - | - |
| Financial liabilities | 6 | 127 | 134 | 148 |
| Total | 6 | 127 | 134 | 148 |
| PARENT COMPANY | ||||
| For own liabilities | - | - | - | - |
| Financial liabilities | 6 | 127 | 134 | 148 |
| Total | 6 | 127 | 134 | 148 |
| The holding in a jointly owned company, Varsvik AB, is pledged and amounted to SEK 127 million | ||
|---|---|---|
| (141) at the end of the year. |
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| CONTINGENT LIABILITIES | 2016 | 2015 | 2016 | 2015 | |
| Surety on behalf of Group companies | - | - | 34 | 34 | |
| Other contingent liabilities | 86 | 122 | 68 | 55 | |
| Total | 86 | 122 | 102 | 89 |
Other contingent liabilities for the Group largely comprise ongoing legal processes and guarantee undertakings for third parties. Holmen has environmentally related contingent liabilities that cannot currently be quantified but that could result in future costs.
Of the parent company's net sales of SEK 13 794 million (13 989), 99 (114) per cent relates to deliveries to Group companies. The parent company's purchases from Group companies amounted to SEK 1 479 million (1 630).
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 23).
Holmen Paper AB has contractually committed to purchase products on a continuous basis from Holmen Paper Madrid SL at a price calculated at production cost plus tied-up capital, for onward sale to end-customers. The aim is to optimise operations within this business area. Holmen Paper AB's purchases from Holmen Paper Madrid SL in 2016 amounted to SEK 1 371 million (1 510). As Holmen Paper AB is acting on a commissioned basis for Holmen AB, these transactions are accounted for via Holmen AB. As part of the sale of the Spanish business, the agreement was terminated early in 2016, which led to Holmen Paper AB paying compensation of SEK 643 million to Holmen Paper Madrid SL for loss of profit over the term of the agreement.
L E Lundbergföretagen AB is a major shareholder in Holmen (see page 41). Holmen rents office premises for SEK 8 million (7) from Fastighets AB L E Lundberg, which is a group company within L E Lundbergföretagen AB. In 2016, Fredrik Lundberg, who is CEO and principal shareholder in L E Lundbergföretagen, received a fee of SEK 680 000 (650 000) as Board chairman of Holmen. Louise Lindh, who is the CEO of Fastighets AB L E Lundberg and who is also a party related to Fredrik Lunberg, received a Board fee of SEK 340 000.
Transactions with related parties are priced on market terms. 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 Renewable energy business area.
In Spain, until the sale of the Spanish business, energy and recovered paper was 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 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Associates | 280 | 208 | 172 | 242 | 0 | 0 | 61 | 91 | 82 | 89 |
| Joint ventures | - | - | - | - | 5 | 0 | - | - | 17 | 12 |
| PARENT COMPANY | ||||||||||
| Subsidiaries | 99 | 115 | 1 479 | 1 630 | 1 299 | 18 | 1 571 | 1 280 | 3 160 | 3 203 |
| Associates | 280 | 208 | 99 | 112 | 0 | 0 | 57 | 77 | 82 | 88 |
| Joint ventures | - | - | - | 5 | 0 | - | - | 79 | 68 |
For fees and remuneration paid to members of the Board, see Note 4.
| PARENT COMPANY | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| ACCUMULATED ACQUISITION COST | 2016 | 2015 | ACCUMULATED IMPAIRMENT LOSSES | 2016 | 2015 |
| Carrying amount at start of year | 17 141 | 17 141 | Carrying amount at start of year | 5 330 | 5 204 |
| Shareholder's contribution | 1 | 0 | Impairment losses for the year | 508 | 126 |
| Closing balance at 31 December | 17 141 | 17 141 | Closing balance at 31 December | 5 838 | 5 330 |
| Carrying amount at end of year | 11 303 | 11 810 |
The parent company's impairment losses on investments in Group companies are stated in the income statement in the line item for 'Profit/loss from investments in Group companies' and do in 2016 relate to holdings in Spanish companies.
| CARRYING | CARRYING | ||||||
|---|---|---|---|---|---|---|---|
| REGISTERED | NO. OF | AMOUNT IN THE PARENT |
AMOUNT IN THE PARENT |
||||
| CORPORATE ID NO. | OFFICE | SHARES | INTEREST %* | COMPANY | INTEREST %* | COMPANY | |
| 2016 | 2015 | ||||||
| Holmen Skog AB | 556220-0658 | Örnsköldsvik | 1 000 | 100 | 0 | 100 | 0 |
| Iggesund Paperboard AB | 556088-5294 | Hudiksvall | 1 000 | 100 | 0 | 100 | 0 |
| Holmen Paper AB | 556005-6383 | Norrköping | 100 | 100 | 0 | 100 | 0 |
| Holmen Timber AB | 556099-0672 | Hudiksvall | 1 000 | 100 | 0 | 100 | 0 |
| Holmen Energi AB | 556524-8456 | Örnsköldsvik | 1 000 | 100 | 0 | 100 | 0 |
| Holmens Bruk AB | 556537-4286 | Stockholm | 1 000 | 100 | 8 868 | 100 | 8 868 |
| Holmen Holding AB | 516406-0062 | Stockholm | 10 000 | 100 | 0 | 100 | 45 |
| MoDo Capital AB | 556499-1668 | Stockholm | 1 000 | 100 | 72 | 100 | 72 |
| Holmen Energi Elnät AB | 556878-3905 | Örnsköldsvik | 500 | 100 | 0 | 100 | 0 |
| Stavro Vind AB | 556953-6153 | Stockholm | 500 | 100 | 7 | 100 | 7 |
| Other Swedish Group companies | 1 | 1 | |||||
| Total Swedish holdings | 8 948 | 8 993 | |||||
| Holmen France S.A.S., France | Paris | 10 000 | 100 | 0 | 100 | 0 | |
| Holmen UK Ltd, UK | Workington | 1 197 100 | 100 | 1 519 | 100 | 1 519 | |
| Holmen Paper Ltd** | London | - | 100 | - | 100 | - | |
| Iggesund Paperboard (Workington) Ltd** | Workington | - | 100 | - | 100 | - | |
| Holmen GmbH, Germany | Hamburg | - | 100 | 1 | 100 | 1 | |
| Holmen Suecia Holding S.L., Spain | Madrid | 9 448 557 | 100 | 808 | 100 | 1 270 | |
| Holmen Paper Madrid S.L.** | Madrid | - | 100 | - | 100 | - | |
| Cartón y Papel Reciclado S.A. (Carpa), Spain** | Madrid | - | - | - | 100 | - | |
| Iggesund Paperboard Asia Pte Ltd, Singapore | Singapore | 800 000 | 100 | 4 | 100 | 4 | |
| Holmen B.V., Netherlands | Amsterdam | 35 | 100 | 9 | 100 | 9 | |
| AS Holmen Mets, Estonia | Tallinn | 500 | 100 | - | 100 | - | |
| Iggesund Paperboard Inc, US | Lyndhurst | 1 000 | 100 | 7 | 100 | 7 | |
| Iggesund Paperboard Asia (HK) Ltd, China | Hong Kong | 4 000 000 | 100 | 5 | 100 | 5 | |
| Other non-Swedish Group companies | 2 | 2 | |||||
| Total non-Swedish holdings | 2 355 | 2 817 | |||||
| Total | 11 303 | 11 810 |
* The percentage of ownership corresponds to the percentage of votes for the total number of shares. ** Indirect holdings.
| PARENT COMPANY |
|---|
| ACCUMULATED DEPRECIATION AND AMORTISATION IN EXCESS OF PLAN |
31 Dec 2016 | APPROPRIATIONS 31 Dec 2015 | |
|---|---|---|---|
| Non-current intangible assets | 0 | -1 | 1 |
| Property, plant and equipment | 10 | 6 | 4 |
| Total | 10 | 6 | 4 |
| TAX ALLOCATION RESERVE | |||
| Assessment of tax 2011 | - | -170 | 170 |
| Assessment of tax 2012 | 560 | 560 | |
| Assessment of tax 2013 | - | - | |
| Assessment of tax 2014 | 280 | 280 | |
| Assessment of tax 2015 | 610 | 610 | |
| Assessment of tax 2016 | 370 | 370 | |
| Assessment of tax 2017 | 460 | 460 | - |
| 2 280 | 290 | 1 990 | |
| Total | 2 290 | 296 | 1 994 |
Group contributions received amounted to SEK 700 million (493) and Group contributions paid amounted to SEK 0 million (7). Total appropriations of profit amounted to SEK 404 million.
| GROUP | PARENT COMPANY |
||||
|---|---|---|---|---|---|
| INTEREST PAID AND DIVIDENDS RECEIVED |
2016 | 2015 | 2016 | 2015 | |
| Dividends received | 0 | 0 | 1 288 | 8 | |
| Interest received | 1 | 1 | 17 | 35 | |
| Interest paid | -49 | -70 | -72 | -72 | |
| Total | -48 | -70 | 1 233 | -30 |
The change in current liabilities mostly relates to borrowing within the Group's commercial paper programme. In 2016, a number of different short-term loans totalling SEK 7 192 million (8 737) were raised within the Group's commercial paper programme, and SEK 7 630 million (9 339) was repaid. For a specification of cash and cash equivalents, see Note 13.
When preparing financial reports the company's management is required to make estimates and judgements that have an effect on the stated amounts. The estimates and judgements that, in the view of the company's management, are of importance for the amounts stated in the annual report, and that are at significant risk of being altered by future events and new information, mainly include the following.
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 log prices, how high inflation will be, and what discount rate is used. Note 11 provides a sensitivity analysis for the valuation of changes in these estimates. The carrying amount of biological assets at 31 December 2016 was SEK 17 448 million and the attributable deferred tax liability was SEK 3 854 million, giving a net value of SEK 13 594 million.
Holmen has requested an advance ruling on the entitlement to apply group relief in the parent company's tax declaration for tax losses incurred in the Group's Spanish operations. The Swedish tax authority has opposed such entitled to group relief. The case is being reviewed by the Supreme Administrative Court and a ruling is expected in 2017. In the event of a ruling in Holmen's favour, it could result in deductions corresponding to approximately SEK 400 million in tax. No deferred tax asset has been recognised. See Note 7.
The Group has defined benefit obligations valued at SEK 2 414 million and plan assets of SEK 2 213 million provided to cover them, which together are recognised as pension provisions of SEK 201 million. The value of pension obligations is estimated on the basis of assumptions regarding discount rates, inflation, future salary increases, and demographic factors. These commitment are usually updated annually, which affects the Group's comprehensive income and the recognised pension provision. See Note 17.
Obligations that may result in costs for Holmen are evaluated on an ongoing basis to assess the need for a provision. Uncertainty in the assessment mainly relates to the date and size of the future cost. The Group mainly has provisions for uncertainty related to the sale of the Spanish business, obligations for environmental restoration, fixed price electricity supply contracts and corporation tax risks. See Note 18.
Impairment testing is carried out annually on the Group's non-current assets. If profitability for a business is weak and a potential need for impairment is identified, further analysis of the asset's value is carried out. Such analysis estimates the asset's value based on applicable market conditions and assessments about the future. The estimated value is then compared with the carrying amount to assess whether or not there is a need for impairment.
| SEK | |
|---|---|
| The following earnings of the parent company are at the disposal of the Annual General Meeting: | |
| Net profit for the 2016 financial year | 1 197 463 610 |
| Retained earnings | 3 723 768 125 |
| 4 921 231 735 | |
| The Board of Directors proposes that a dividend of SEK 12 per share (83 996 162 shares) be paid to the shareholders | 1 007 953 944 |
| and that the remaining amount be carried forward | 3 913 277 791 |
The Board of Holmen AB has proposed that the 2017 Annual General Meeting resolve in favour of paying a dividend of SEK 12 per share – SEK 1.5 per share higher than the preceding year – totalling SEK 1 008 million. The proposal complies with the Board's policy, in that decisions on dividends are to be based on an appraisal of the Group's profitability, future investment plans and financial position.
The proposed dividend corresponds to 70.8 per cent of net profit for 2016 for the Group and means that 4.7 per cent of equity in the Group at 31 December 2016 will be paid out by way of dividend.
The Board has established that the Group should have a strong financial position with a debt/ equity ratio – defined as net financial debt in relation to equity – at a maximum of 0.5. The debt/ equity ratio at 31 December 2016 was 0.19. Payment of the proposed dividend would raise the debt/equity ratio by around 0.06.
Holmen AB's equity at 31 December 2016 amounted to SEK 10 836 million, of which nonrestricted equity was SEK 3 724 million. Assets and liabilities measured at fair value according to Chapter 4 Section 14a of the Swedish Annual Accounts Act had an impact of SEK -167 million on equity. The Group's equity at 31 December 2016 amounted to SEK 21 243 million. In accordance 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
Fredrik Lundberg Chairman
Carl Bennet Board member
Steewe Björklundh Board member
Kenneth Johansson Board member
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 accounts were prepared in accordance with generally accepted accounting principles in Sweden and the Group's consolidated accounts 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 consolidated accounts provide a true and fair view 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 view 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 accounts and the consolidated accounts were approved for publication by the Board in its decision of 13 February 2017. The Group's consolidated 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 to be held on 27 March 2017.
Stockholm, 13 February 2017
Lars G Josefsson Board member
Lars Josefsson Board member
Carl Kempe
Deputy chairman
Tommy Åsenbrygg Board member
Our audit report was submitted on 15 February 2017. KPMG AB
Joakim Thilstedt
Authorised Public Accountant
Louise Lindh Board member
Ulf Lundahl Board member
Henriette Zeuchner Board member
Henrik Sjölund Board member and Chief Executive Officer
To the general meeting of the shareholders of Holmen AB, corp. id 556001-3301
We have audited the annual accounts and consolidated accounts of Holmen AB for the year 2016. The company's annual accounts and consolidated accounts are found on pages 4–5, 10–11, 27–29, 32–70 and 74–75 of this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act, and present fairly, in all material respects, the financial position of the parent company as of 31 December 2016 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2016 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act.
A corporate governance statement has been prepared. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated accounts, and the corporate governance statement is in accordance with the Annual Accounts Act.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
Se note 11, note 26 and the Accounting Principles on page 50 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter.
Biological assets consist of growing forest which has a carrying value of SEK 17 448 million as per 31 December 2016.
Biological assets are measured at fair value, via discounting estimated net future cash flows from the growing forest to present value. Cash flows are estimated over a 100-year period, representing the assessed average harvesting cycle. The valuation is performed internally and is calculated using a combination of harvest plans, future sales prices, cost projections, inflation and discount rates.
The valuation is complex and comprises significant level of judgement. There is a risk that the estimates that form the basis of the carrying value of Biological Assets may need to be adjusted, which would directly affect the reported result for the period.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters. If not stated otherwise the matters is related to the consolidated accounts.
We have reviewed and assessed the Group's choice of a cash flow based valuation model. We have also inspected the valuations performed and the underlying documentation in order to assess that they are in line with established valuation techniques.
Furthermore, through evaluation of management's written plans and documentation, we have assessed the reasonableness of assumptions regarding volumes, prices, costs and the discount rate used in the valuation. We have conducted discussions with Company management and evaluated previous year's estimates compared to actual outcomes. A critical part of our work has also been examination and evaluation of the sensitivity analysis performed by management that shows how changes in the assumptions can affect the overall valuation.
We have involved our own specialists on the audit to ensure that the audit team has had sufficient experience and competence within this area, in particular regarding design of the valuation model. In addition to this we have compared the Group's valuation to valuations performed by other companies via comparison of calculated value per cubic metre.
We have also considered the completeness of the disclosures in the Annual Report and assessed whether they are in agreement with the assumptions made by Company management in their valuation of Biological Assets.
See note 10, not 26 and the Accounting Principles on pages 50 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter. Regarding the parent company's shares in Group companies, see note 23.
Property, plant and equipment as per 31 December 2016 have a carrying value of SEK 9 387 million. In recent years, profitability in certain parts of the business has been weak, which has resulted in impairments of values of the related assets.
Profitability in someparts of the business is still weak and therefore there the need for further impairments of asset values may exist.
According to IFRS; impairment tests shall be performed according to a certain methodology wherein Company management is required to make estimates regarding both internal and external conditions and plans. Examples of estimates are future cash flows as well as which discount rate should be used to take into consideration the fact that future inflows are associated with a certain amount of risk.
Property, plant and equipment are mainly found in subsidiaries of Holmen AB, therefore should there be a need for asset impairment within these subsidiaries, there may be a corresponding impairment of the value of shares in the parent company's balance sheet.
How the matter was addressed during the audit
We have inspected the Group's impairment test to ensure that it is in line with the aforementioned methodology.
Furthermore, through evaluation of management's written plans and documentation, we have assessed the reasonableness of future cash flows and the assumed discount rate. We have also conducted discussions with Company management and evaluated previous year's estimates compared to actual outcomes.
See note 17, note 26 and the Accounting principles on page 51 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter.
Description of key audit matter
The Group has a pension obligation that mainly concerns the United Kingdom. Before reduction by the fair value of plan assets, this pension obligatoin was valued at SEK 2 414 million per 31 December 2016.
Estimation of the value of the pension obligation relies upon a number of assumptions, including mortality and inflation rates, and the discount rate applied to estimated payments of pensions. The Group engages external actuaries to perform these complex calculations.
Changes to the assumptions on which the valuation is based could significantly affect total comprehensive income for the financial period and the size of the pension obligation.
How the matter was addressed during the audit
We have examined the external actuarial report that is used by the Group for valuation of its pension obligation. We have assessed the assumptions within the calculations, for instance regarding inflation and discount rate, with input from our internal specialists' analyses.
We have also considered the the completeness of the disclosures in the Annual Report and assessed the disclosures of the assumptions used by Company management and their sensitivity analysis.
See note 18, note 26 and the Accounting principles on page 51 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter. Regarding the parent company's shares in Group companies, see note 23.
The carrying value of the Group's other provisions amounts to SEK 856 million per 31 December 2016. These relate to uncertainties regarding the sale of operations in Spain, environmental obligations and contractual commitments regarding delivery of electricity at a fixed price.
Provisions in the parent company have a carrying value of SEK 833 million per 31 December 2016 and regard primarily environmental obligations, contractual commitments regarding delivery of electricity at a fixed price and estimated costs for replantation of forest following harvesting.
Provisions involve significant levels of judgement regarding uncertain future outcomes, in particular relating to the amount and timing of the final assessments. Changes to the underlying assumptions used to make these provisions could significantly affect the reported result.
Commitments within subsidiaries of Holmen AB could lead to impairments of the value of shares in Group companies on the parent company's balance sheet.
Other Information than the annual accounts and consolidated accounts
This document also contains other information than the annual report and consolidated accounts, which is found on pages 3, 6–9, 12–26, 30–31 and 76–83. The Managing Director is responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
We have inspected the Group's documentation of its provisions. We have assessed management's estimates and have held discussions with management regarding their assumptions in each area to ensure that the provisions are in line with the Group's accounting principles and with IFRS requirements.
An impairment test of the shares in the Spanish Group companies was conducted in the parent company, which resulted in an impairment of SEK 508 million in 2016. We have inspected the supporting documentation used to test the value of shareholdings and evaluated the performed impairment test against the applicable regulations.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.
We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor's report unless law or regulation precludes disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in the auditor's report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Holmen AB for the year 2016 and the proposed appropriations of the company's profit or loss.
We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets
and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional skepticism throughout the audit. The examination of the administration and the proposed appropriations of the company's profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company's situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
Stockholm 15 February 2017 KPMG AB
Authorised Public Accountant
Holmen's Sustainability Report, as defined on page 3 of Holmen's Annual Report 2016, has been subject to a limited review in accordance with RevR 6 Assurance of Sustainability Reports, issued by FAR.
A complete assurance report on the Sustainability Report is available at holmen.com. The assurance report contains the following conclusion:
Based on the limited assurance procedures we have performed, nothing has come to our attention that causes us to believe that the Sustainability Report is not prepared, in all material respects, in accordance with the criteria defined by Group management.
Stockholm, 15 February 2017 KPMG AB
Joakim Thilstedt Authorised Public Accountant
Torbjörn Westman Expert member of FAR
Deputy chairman. Örnsköldsvik. Born in 1939. Member since 1983. Licentiate in Engineering. Dr. h.c. mult. Other significant appointments: Chairman of Kempe Foundations, MoRe Research AB and UPSC Berzelii Centre for Forest Biotechnology. Own and related parties' shareholdings: 386 000 shares.
Norrköping. Born in 1966. Member since 2014. M.Sc. in International Economics. President and CEO. Other significant appointments: Board member of Swedish Forest Industries Federation. Shareholding: 4 917 shares.
Chairman. Djursholm. Born in 1951. Member since 1988. M.Sc. in Engineering and M.Sc. in Economics. D. Tech. h.c. and D. Econ. h.c. President and CEO of L E Lundbergföretagen AB. Other significant appointments: Chairman of Hufvudstaden AB, AB Industrivärden and Indutrade AB. Deputy chairman of Svenska Handelsbanken AB. Board member of L E Lundbergföretagen AB and Skanska AB.
Own and related parties' shareholdings: 839 724 shares. Shareholding of L E Lundbergföretagen: 27 622 000 shares.
Stockholm. Born in 1979. Member since 2010. M.Sc. in Economics. CEO of Fastighets AB L E Lundberg. Other significant appointments: Chairman of J2L Holding AB. Board member of Hufvudstaden AB and L E Lundbergföretagen AB. Shareholding: 100 000 shares.
Gothenburg. Born in 1951. Member since 2009. M.Sc. in Economics. D. Tech. h.c. CEO of Carl Bennet AB. Former President and CEO of Getinge AB. Chairman of Getinge AB, Lifco AB och Elanders AB. Other significant appointments: Board member of L E Lundbergföretagen AB. Shareholding: 100 000 shares.
Iggesund. Born in 1978. Deputy member since 2010. Employee representative, LO.
Söderköping. Born in 1958. Member since 2004. Employee representative, LO. Section chairman of the Swedish Paper Workers Union branch 53, Holmen Paper Braviken.
Stockholm. Born in 1950. Member since 2011. M.Sc. in Engineering. Former President and CEO of Vattenfall.
Other significant appointments: Chairman of Burntisland Fabrication Ltd. Board member of Robert Bosch GmbH, Robert Bosch Industrietreuhand KG and Brookfield Renewable Energy. Board member of Hand in Hand International and member of The Royal Swedish Academy of Engineering Sciences, IVA. Shareholding: 5 000 shares.
Ulf Lundahl Lidingö. Born in 1952. Member since 2004. Bachelor of Laws and M.Sc. in Economics.
Other significant appointments: Chairman of Eltel AB, Fidelio Capital AB, Ramirent plc and SHB Regionbank Stockholm. Board member of Attendo AB and Indutrade AB. Shareholding: 4 000 shares.
Norrköping. Born in 1953. Board member since 2016. M.Sc. in Engineering.
Other significant appointments: Deputy chairman of Vestas. Chairman of Driconeq, Ouman and TimeZynk. Board member of Metso. Shareholding: 2 500 shares.
Stockholm. Born in 1972. Member since 2015. M.Sc. in Economics and Bachelor of Laws. President and CEO of Berling Media AB. Other significant appointments: Board member of the NTM Group. Shareholding: 800 shares.
Hudiksvall. Born in 1958. Member since 1998. Employee representative, LO.
Skebobruk. Born in 1968. Member since 2015. Employee representative, PTK. Deputy chairman of Ledarna, Hallsta Paper Mill. Shareholding: 100 shares.
Örnsköldsvik. Born in 1982. Deputy member since 2014. Employee representative, PTK.
Forsa. Born in 1955. Deputy member since 2015. Employee representative, PTK. Chairman of the Holmen-Iggesund Trade Union Club.
Auditors: KPMG AB
Principle Auditor: Joakim Thilstedt Authorised Public Accountant
Gunilla Rolander HR Director. Born in 1967. Joined Holmen in 2013. Shareholding: 362 shares.
Nils Ringborg Head of Paper business area. Born in 1958. Joined Holmen in 1988. Shareholding: 2 514 shares.
Ola Schultz-Eklund Director of Technology. Born in 1961. Joined Holmen in 1994. Shareholding: 800 shares.
Sören Petersson Head of Forest business area. Born in 1969. Joined Holmen in 1994. Shareholding: 4 400 shares.
Henrik Sjölund President and CEO. Head of Paperboard business area. Born in 1966. Joined Holmen in 1993. Shareholding: 4 917 shares. Henrik Sjölund has no significant shareholdings and no ownership in companies with which the Group has important business relations. Further information about the CEO is provided on page 74. Johan Padel Head of Wood products business area. Born in 1966. Joined Holmen in 2014. Shareholding: 830 shares.
Lars Ericson Director of Legal Affairs. Company secretary. Born in 1959. Joined Holmen in 1988. Shareholding: 650 shares.
Ingela Carlsson Director of Communications. Born in 1962. Joined Holmen in 2008. Shareholding: 1 015 shares.
Anders Jernhall Executive Vice President. CFO. Born in 1970. Joined Holmen in 1997. Shareholding: 4 900 shares.
Daniel Peltonen will join as head of the Paperboard business area on 1 April 2017.
Holmen uses performance measures in its reporting in addition to the measures defined within IFRS regulations, or directly in the income statement and balance sheet, in order to illustrate the company's financial position and performance and to increase comparability between different periods and other companies. Below are calculations used to arrive at the performance measures applied within the Group. For further information, see also Definitions.
ESMA's (European Securities And Markets Authority) 'Guidelines – Alternative Performance Measures' have been used since 3 July 2016. In accordance with these guidelines, the information on financial measures not defined under IFRS has expanded. Alternative performance measures published in this report should not be regarded as replacing the financial measures defined under IFRS regulations, but rather as a complement and they do not need to be comparable in the same way with defined performance measures published by other companies.
| SEKm | 2016 | 2015 |
|---|---|---|
| OPERATING PROFIT, EBITDA AND EXCLUDING ITEMS AFFECTING COMPARABILITY | ||
| EBITDA | 2 865 | 2 673 |
| Depreciation and amortisation according to plan | -1 018 | -1 240 |
| Change in value of forests | 315 | 267 |
| Operating profit/loss excluding items affecting comparability | 2 162 | 1 700 |
| Items affecting comparability* | -232 | -931 |
| Operating profit/loss | 1 930 | 769 |
| OPERATING MARGIN | ||
| Operating profit/loss | 1 930 | 769 |
| Net sales | 15 513 | 16 014 |
| Operating margin, % | 13.9 | 10.6 |
| EARNINGS FROM OPERATIONS, FOREST | ||
| EARNINGS FROM OPERATIONS, FOREST | 686 | 638 |
| Change in value of forests | 315 | 267 |
| Operating profit, forest | 1 001 | 905 |
| CAPITAL EMPLOYED AND OPERATING CAPITAL | ||
| Equity | 21 243 | 20 853 |
| Net financial debt | 3 945 | 4 799 |
| Capital employed | 25 190 | 25 653 |
| Deferred tax assets | -4 | -6 |
| Deferred tax liabilities | 5 613 | 5 508 |
| Operating capital | 30 799 | 31 155 |
| RETURN ON CAPITAL EMPLOYED | ||
| Operating profit/loss excluding items affecting comparability | 2 162 | 1 700 |
| Average capital employed | 25 146 | 26 769 |
| Return, % | 8.6 | 6.4 |
| RETURN ON OPERATING CAPITAL | ||
| Operating profit/loss excluding items affecting comparability | 2 162 | 1 700 |
| Average operating capital | 30 669 | 32 284 |
| Return, % | 7.0 | 5.3 |
| NET FINANCIAL DEBT | ||
| Non-current financial liabilities | 882 | 2 295 |
| Current financial liabilities | 3 200 | 2 698 |
| Pension provisions | 201 | 130 |
| Non-current financial receivables | -39 | -43 |
| Current financial receivables | -89 | -61 |
| Cash and cash equivalents | -210 | -221 |
| Net financial debt | 3 945 | 4 799 |
| DEBT/EQUITY RATIO | ||
| Net financial debt | 3 945 | 4 799 |
| Equity | 21 243 | 20 853 |
| Debt/equity ratio, times | 0.19 | 0.23 |
| EQUITY/ASSETS RATIO | ||
| Equity | 21 243 | 20 853 |
| Assets | 34 891 | 35 456 |
| Equity/assets ratio, % | 60.9 | 58.8 |
* See page 42 for what items affecting comparability refers to.
| SEKm | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|---|---|
| INCOME STATEMENT | ||||||||||
| Net sales | 15 513 | 16 014 | 15 994 | 16 231 | 17 852 | 18 656 | 17 581 | 18 071 | 19 334 | 19 159 |
| Operating costs | -12 626 | -13 348 | -13 270 | -13 919 | -15 224 | -15 501 | -15 077 | -15 191 | -16 614 | -15 637 |
| Profit from investments in associates and joint ventures | -22 | 7 | -7 | 3 | 47 | 84 | 28 | 45 | 50 | 12 |
| Depreciation and amortisation according to plan | -1 018 | -1 240 | -1 265 | -1 370 | -1 313 | -1 260 | -1 251 | -1 320 | -1 343 | -1 337 |
| Change in value of forests | 315 | 267 | 282 | 264 | 350 | - | 52 | 16 | -16 | 89 |
| Operating profit/loss excl. items affecting comparability |
2 162 | 1 700 | 1 734 | 1 209 | 1 713 | 1 980 | 1 332 | 1 620 | 1 412 | 2 286 |
| Items affecting comparability* | -232 | -931 | -450 | -140 | -193 | 3 593 | 264 | - | -361 | 557 |
| Operating profit/loss | 1 930 | 769 | 1 284 | 1 069 | 1 520 | 5 573 | 1 596 | 1 620 | 1 051 | 2 843 |
| Net financial items | -71 | -90 | -147 | -198 | -227 | -244 | -208 | -255 | -311 | -261 |
| Profit/loss before tax | 1 859 | 679 | 1 137 | 871 | 1 294 | 5 328 | 1 388 | 1 366 | 740 | 2 582 |
| Tax | -436 | -120 | -230 | -160 | 559 | -1 374 | -684 | -360 | -98 | -1 077 |
| Profit/loss for the year | 1 424 | 559 | 907 | 711 | 1 853 | 3 955 | 704 | 1 006 | 642 | 1 505 |
| Diluted earnings per share, SEK | 16.9 | 6.7 | 10.8 | 8.5 | 22.1 | 47.1 | 8.4 | 12.0 | 7.6 | 17.8 |
| NET SALES | ||||||||||
| Forest | 5 302 | 5 481 | 5 641 | 5 694 | 6 061 | 6 348 | 5 585 | 4 799 | 5 443 | 4 775 |
| Paperboard | 5 252 | 5 472 | 5 113 | 4 618 | 4 967 | 5 109 | 4 849 | 5 023 | 4 860 | 5 100 |
| Paper | 5 431 | 6 148 | 6 247 | 7 148 | 8 144 | 8 631 | 8 142 | 9 303 | 10 443 | 10 345 |
| Wood products | 1 342 | 1 314 | 1 352 | 1 175 | 1 129 | 875 | 586 | 553 | 499 | 589 |
| Renewable energy | 314 | 359 | 389 | 450 | 522 | 552 | 626 | 527 | 434 | 377 |
| Elimination of intra-Group net sales | -2 128 | -2 760 | -2 748 | -2 853 | -2 972 | -2 858 | -2 207 | -2 135 | -2 345 | -2 026 |
| Group | 15 513 | 16 014 | 15 994 | 16 231 | 17 852 | 18 656 | 17 581 | 18 071 | 19 334 | 19 159 |
| OPERATING PROFIT/LOSS | ||||||||||
| Forest | 1 001 | 905 | 817 | 924 | 931 | 739 | 818 | 605 | 632 | 702 |
| Paperboard | 903 | 847 | 674 | 433 | 596 | 863 | 817 | 419 | 320 | 599 |
| Paper | 289 | -74 | 141 | -309 | 94 | 228 | -618 | 340 | 280 | 623 |
| Wood products | -3 | 9 | 37 | -75 | -130 | -136 | 20 | 21 | 13 | 146 |
| Renewable energy | 120 | 176 | 212 | 371 | 355 | 406 | 495 | 414 | 327 | 272 |
| Group-wide costs and eliminations | -148 | -163 | -146 | -136 | -132 | -120 | -200 | -178 | -159 | -56 |
| 2 162 | 1 700 | 1 734 | 1 209 | 1 713 | 1 980 | 1 332 | 1 620 | 1 412 | 2 286 | |
| Items affecting comparability* | -232 | -931 | -450 | -140 | -193 | 3 593 | 264 | - | -361 | 557 |
| Group | 1 930 | 769 | 1 284 | 1 069 | 1 520 | 5 573 | 1 596 | 1 620 | 1 051 | 2 843 |
| CASH FLOW | ||||||||||
| Profit/loss before tax | 1 859 | 679 | 1 137 | 871 | 1 294 | 5 328 | 1 388 | 1 366 | 740 | 2 582 |
| Adjustment items | 965 | 1 802 | 1 448 | 1 056 | 1 057 | -2 561 | 811 | 1 163 | 1 797 | 629 |
| Income tax paid | -504 | -398 | -191 | 210 | -434 | -557 | -704 | -334 | -192 | -390 |
| Changes in working capital | -360 | 443 | -217 | -127 | 338 | -109 | 28 | 678 | -686 | -345 |
| Cash flow from operating activities | 1 961 | 2 526 | 2 176 | 2 011 | 2 254 | 2 101 | 1 523 | 2 873 | 1 660 | 2 476 |
| Cash flow from investing activities | -123 | -832 | -834 | -869 | -1 920 | -1 733 | -1 597 | -818 | -1 124 | -1 315 |
| Cash flow after investments | 1 838 | 1 694 | 1 342 | 1 142 | 334 | 368 | -74 | 2 054 | 536 | 1 161 |
| Share buy-backs | - | - | - | - | - | - | - | - | -138 | - |
| Dividend paid | -882 | -840 | -756 | -756 | -672 | -588 | -588 | -756 | -1 017 | -1 017 |
* Items affecting comparability.
Year 2016: Sale of the mill in Spain and insurance compensation of SEK -232 million for the reconstruction of the Hallsta Paper Mill following a fire.
Year 2015: Impairment loss on non-current assets, provision for costs and the effects of a fire totalling SEK -931 million.
Year 2014: Impairment loss on non-current assets of SEK -450 million.
Year 2013: Impairment loss on non-current assets and restructuring costs of SEK -140 million.
Year 2012: Impairment loss on non-current assets and restructuring costs of SEK -193 million.
Year 2011: Revaluation of forest of SEK 3 593 million.
Year 2010: Impairment losses on non-current assets and restructuring costs of SEK -786 million and revaluation of forest amounting to SEK 1 050 million.
Year 2008: Impairment loss on non-current assets, restructuring costs and the effects of a fire totalling SEK -361 million.
Year 2007: Impairment of goodwill and non-current assets of SEK -1 543 million and revaluation of forest amounting to SEK 2 100 million.
| SEKm | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE SHEET | ||||||||||
| Non-current assets | 28 701 | 29 524 | 30 221 | 30 652 | 30 664 | 30 335 | 26 028 | 25 694 | 26 507 | 26 153 |
| Current assets | 5 852 | 5 607 | 5 964 | 5 774 | 6 005 | 6 642 | 6 950 | 6 075 | 7 268 | 6 549 |
| Financial receivables | 128 | 104 | 62 | 52 | 69 | 128 | 262 | 225 | 175 | 147 |
| Cash and cash equivalents | 210 | 221 | 187 | 275 | 308 | 112 | 193 | 182 | 653 | 394 |
| Total assets | 34 891 | 35 456 | 36 434 | 36 753 | 37 046 | 37 217 | 33 432 | 32 176 | 34 602 | 33 243 |
| Equity | 21 243 | 20 853 | 20 969 | 20 854 | 20 813 | 19 773 | 16 913 | 16 504 | 15 641 | 16 932 |
| Deferred tax liability | 5 613 | 5 508 | 5 480 | 5 804 | 5 504 | 6 630 | 5 910 | 5 045 | 4 819 | 5 482 |
| Financial liabilities and interest-bearing provisions | 4 283 | 5 124 | 6 156 | 6 443 | 6 967 | 6 499 | 6 227 | 6 091 | 8 332 | 6 518 |
| Operating liabilities | 3 752 | 3 971 | 3 829 | 3 653 | 3 762 | 4 313 | 4 383 | 4 536 | 5 809 | 4 311 |
| Total equity and liabilities | 34 891 | 35 456 | 36 434 | 36 753 | 37 046 | 37 217 | 33 432 | 32 176 | 34 602 | 33 243 |
| OPERATING CAPITAL Forest |
17 798 | 17 589 | 17 340 | 16 813 | 16 663 | 16 278 | 12 597 | 11 384 | 11 415 | 11 264 |
| Paperboard | 6 426 | 6 622 | 6 790 | 6 863 | 6 177 | 5 041 | 4 313 | 4 114 | 4 254 | 4 180 |
| Paper | 2 815 | 3 558 | 4 666 | 4 810 | 5 608 | 6 606 | 6 954 | 8 789 | 10 237 | 9 971 |
| Wood products | 892 | 924 | 901 | 1 361 | 1 416 | 1 507 | 1 192 | 396 | 366 | 345 |
| Renewable energy | 3 412 | 3 351 | 3 401 | 3 357 | 3 261 | 3 253 | 3 235 | 3 207 | 3 006 | 2 960 |
| Group-wide and other* | -544 | -888 | -744 | -433 | -220 | -217 | 93 | -963 | -1 654 | -630 |
| Operating capital | 30 799 | 31 155 | 32 354 | 32 772 | 32 905 | 32 469 | 28 385 | 26 929 | 27 623 | 28 090 |
| Deferred tax liability, net | -5 609 | -5 502 | -5 478 | -5 802 | -5 502 | -6 436 | -5 700 | -4 741 | -4 477 | -5 181 |
| Capital employed | 25 190 | 25 653 | 26 876 | 26 970 | 27 403 | 26 032 | 22 684 | 22 188 | 23 146 | 22 909 |
| KEY FIGURES | ||||||||||
| OPERATING MARGIN, %** | ||||||||||
| Paperboard | 17 | 15 | 13 | 9 | 12 | 17 | 17 | 8 | 7 | 12 |
| Paper | 5 | -1 | 2 | -4 | 1 | 3 | -8 | 4 | 3 | 6 |
| Wood products | 0 | 1 | 3 | -6 | -12 | -16 | 4 | 4 | 3 | 24 |
| Group | 14 | 11 | 11 | 7 | 10 | 11 | 8 | 9 | 7 | 12 |
| RETURN ON OPERATING CAPITAL, %* | ||||||||||
| Forest | 6 | 5 | 5 | 6 | 6 | 6 | 7 | 5 | 6 | 8 |
| Paperboard | 14 | 12 | 10 | 7 | 10 | 19 | 20 | 10 | 8 | 15 |
| Paper | 9 | neg | 3 | neg | 2 | 3 | neg | 4 | 3 | 5 |
| Wood products | 0 | 1 | 3 | neg | neg | neg | 3 | 6 | 4 | 64 |
| Renewable energy | 4 | 5 | 6 | 11 | 11 | 13 | 15 | 13 | 11 | 9 |
| Group | 7 | 5 | 5 | 4 | 5 | 7 | 5 | 6 | 5 | 8 |
| KEY FIGURES | ||||||||||
| Return on capital employed, %** | 9 | 6 | 6 | 4 | 7 | 9 | 6 | 7 | 6 | 10 |
| Return on equity, % | 7 | 3 | 4 | 3 | 9 | 23 | 4 | 6 | 4 | 9 |
| Debt/equity ratio | 0.19 | 0.23 | 0.28 | 0.29 | 0.32 | 0.32 | 0.34 | 0.34 | 0.48 | 0.35 |
| DELIVERIES | ||||||||||
| Harvesting in own forests, '000 m3 | 2 986 | 3 213 | 3 297 | 3 465 | 3 211 | 2 988 | 2 999 | 2 897 | 2 649 | 2 575 |
| Paperboard, '000 tonnes | 497 | 499 | 493 | 469 | 485 | 474 | 464 | 477 | 494 | 516 |
| Paper*** '000 tonnes | 1 134 | 1 325 | 1 305 | 1 574 | 1 651 | 1 668 | 1 732 | 1 745 | 2 044 | 2 025 |
| Wood products, '000 m3 | 776 | 730 | 725 | 686 | 660 | 487 | 285 | 313 | 266 | 262 |
| Own production of hydro and wind power, GWh | 1 080 | 1 441 | 1 113 | 1 041 | 1 353 | 1 235 | 1 149 | 1 090 | 1 128 | 1 193 |
For a ten-year review of data per share, see page 41.
* Income and costs from the sale of newsprint from the Spanish mill sold in Q2 2016 is recognised in the Group-wide segment.
** Excluding items affecting comparability.
*** Deliveries from own mills, i.e. no deliveries from the Spanish mill as of Q3 2016.
The environmental and employee data provided is the most relevant information with regard to regulatory requirements and internal monitoring. The key performance indicators provided are widely used in the industry.
Data from all parts of the Group is collected, quality-assured and evaluated. No material changes have been made to the principles of reporting in comparison with 2015. The facility in Madrid was sold in mid-2016. Reported data for the Group includes data on the facility in Madrid for the first half of 2016. Some of the parameters have a footnote stating the individual figure for the facility in question.
Holmen reports its environmental data to the supervisory authorities monthly and annually. Reporting to Swedish authorities is made available to the public under the principle of public access to documents. Data from all the mills is reported to the EU annually. Expenditure on environmental protection is reported in accordance with guidelines from Statistics Sweden.
As some of the details provided in this report had already been collected by the end of the year they refer to, they might differ slightly from the information finally reported to the authorities.
| PRODUCTION AND ENVIRONMENT | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| PRODUCTION, '000 TONNES | |||||
| Paperboard | 503 | 502 | 500 | 478 | 492 |
| Market pulp | 56 | 56 | 67 | 50 | 35 |
| Printing paper | 1 176 | 1 287 | 1 325 | 1 545 | 1 658 |
| Wood products, '000 m3 | 776 | 734 | 742 | 710 | 651 |
| RAW MATERIALS, '000 TONNES | |||||
| Wood, million m3 sub1) |
5.36 | 5.10 | 5.16 | 5.25 | 5.19 |
| Recovered fibre | 200 | 394 | 439 | 543 | 630 |
| Purchased pulp | 70 | 79 | 75 | 99 | 108 |
| Thermal energy, GWh | 6 375 | 6 288 | 6 230 | 6 451 | 5 833 |
| Electrical energy, GWh | 3 949 | 3 994 | 4 067 | 4 420 | 4 603 |
| Water use, million m3 | 70 | 682) | 74 | 77 | 77 |
| Plastic granules/foiling material | 2.6 | 2.5 | 2.1 | 2.6 | 2.3 |
| Chemicals3) | 151 | 138 | 146 | 146 | 145 |
| Filler, pigment3) | 148 | 146 | 147 | 178 | 175 |
| THERMAL ENERGY, GWh | |||||
| Production at mills from recovered liquors, bark and wood residues | 4 605 | 4 289 | 4 532 | 4 156 | 2 880 |
| Recovered in the TMP process4) | 1 171 | 1 083 | 1 068 | 1 117 | 1 171 |
| Natural gas, oil and purchased5) | 599 | 916 | 630 | 1 178 | 1 783 |
| ELECTRICAL ENERGY, GWh | |||||
| Company hydro power | 958 | 1 302 | 1 048 | 1 008 | 1 343 |
| Company wind power | 121 | 138 | 65 | 33 | 10 |
| Production at mills | 784 | 781 | 740 | 769 | 563 |
| Purchased, (net)6) | 2 086 | 1 773 | 2 214 | 2 610 | 2 687 |
| EMISSIONS TO AIR, TONNES Sulphur dioxide (counted as sulphur, S) |
52 | 57 | 91 | 116 | |
| Nitrogen oxides | 41 960 |
891 | 1 181 | 1 557 | 1 664 |
| Particulates | 39 | 48 | 29 | 52 | 84 |
| Fossil carbon dioxide7), '000 tonnes | 124 | 180 | 126 | 254 | 330 |
| Biogenic carbon dioxide, '000 tonnes | 1 539 | 1 441 | 1 551 | 1 449 | 1 064 |
| EMISSIONS TO WATER, TONNES | |||||
| COD (organic matter), '000 tonnes | 20.4 | 21.0 | 20.4 | 20.4 | 18.9 |
| Suspended solids, '000 tonnes | 3.2 | 3.3 | 3.6 | 4.3 | 3.2 |
| AOX (chlorinated organic matter) | 51.9 | 56.7 | 54.3 | 46.5 | 47.7 |
| Nitrogen | 208 | 226 | 203 | 215 | 242 |
| Phosphorus | 14.0 | 19.0 | 19.0 | 15.0 | 15.7 |
| BY-PRODUCTS, '000 TONNES | |||||
| To energy production, internally/externally | 872 | 823 | 824 | 885 | 865 |
| Tall oil8) | 12.8 | 11.9 | 13.2 | 13.0 | 12.3 |
| WASTE, '000 TONNES | |||||
| Utilised or for recovering9) | 270 | 303 | 296 | 367 | 380 |
| Hazardous10) | 2.2 | 1.92) | 1.6 | 2.4 | 2.4 |
| Sent to landfill (wet) | 16 | 13 | 5.6 | 12 | 16 |
| ENERGY SUPPLIES | |||||
| Branches, treetops and peat, GWh11) | 155 | 230 | 275 | 294 | 297 |
| Electrical and thermal energy, GWh12) | 380 | 348 | 305 | 199 | 202 |
THERMAL ENERGY Share of Holmen's production/ consumption, %
| Recovered thermal energy | 18 |
|---|---|
| Natural gas | 6 |
| Oil, LPG | 3 |
| Purchased thermal energy | <1 |
| ELECTRICAL ENERGY | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| HOLMEN'S PRODUCTION RELATIVE TO TOTAL CONSUMPTION, % Company hydro power/wind power Electricity production at the mills Purchased electricity (net) |
27 20 53 |
36 20 44 |
27 18 55 |
24 17 59 |
30 12 58 |
| THERMAL ENERGY | 2016 | 2015 | 2014 | 2013 | 2012 |
| SHARE OF HOLMEN'S PRODUCTION/CONSUMPTION, % Biofuel Recovered thermal energy Natural gas Oil, LPG Purchased thermal energy |
72 18 6 3 <1 |
68 17 12 2 <1 |
73 17 8 2 <1 |
64 17 12 6 <1 |
49 20 18 9 4 |
| ENVIRONMENTAL PROTECTION EXPENDITURE |
2016 | 2015 | 2014 | 2013 | 2012 |
| SEKm Investments (remedial and preventive) Electricity and heat-saving investments1) Environmental taxes and charges2) Internal and external environmental costs3) Environmental cost of forestry4) |
55 8 14 182 71 |
12 18 12 208 101 |
26 320 10 169 70 |
122 300 14 178 84 |
60 576 22 196 93 |
| PERSONNEL | 2016 | 2015 | 2014 | 2013 | 2012 |
| EMPLOYEES Average number of whom women, % of whom temporary employees, % Average age5) |
2 989 19.3 8.8 46.3 |
3 315 19.4 9.0 46.8 |
3 359 19.2 7.9 46.8 |
3 718 19.3 7.7 46.8 |
3 945 19.3 6.9 45.9 |
| SICKNESS ABSENCE 6), % | |||||
| Total of which longer than 60 days Good health index (proportion of employees with no sick leave during the year) |
4.2 2.0 48 |
4.2 1.8 48 |
3.9 1.7 50 |
3.6 1.3 47 |
3.4 1.1 48 |
| GENDER EQUALITY 5), % Women managers out of total number of managers Women joining the company out of total new employees |
19.0 27 |
20.5 24 |
20.9 31 |
20.3 37 |
20.3 24 |
| PERSONNEL TURNOVER 5), % Personnel turnover of which given notice of which retiring of which leaving at own request New employees |
6.9 1.6 2.4 2.9 5.4 |
7.6 2.8 2.4 2.5 5.3 |
7.2 2.0 2.2 3.0 5.1 |
11.5 6.2 1.7 3.6 3.4 |
8.5 2.7 2.6 2.9 3.6 |
| NUMBER OF INDUSTRIAL ACCIDENTS Industrial accidents, more than 8 hours of absence, per million hours worked |
8.8 | 8.8 | 6.5 | 8.4 | 11.6 |
| UNION COOPERATION 6), % Percentage of employees that work at a unit with a collective agreement |
94 | 97 | 97 | 98 | 95 |
Rate of union membership 67 68 70 72 72
HOLMEN ANNUAL REPORT 2016 / FIVE-YEAR REVIEW, SUSTAINABILITY 81
Net financial debt plus equity. Average values are calculated on the basis of quarterly data.
Cash flow from operating activities less cash flow from investing activities.
Net financial debt divided by total equity.
Profit/loss 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.
Earnings before interest, taxes, depreciation, amortisation and change in value of forests, excl. items affecting comparability.
Equity expressed as a percentage of total assets.
Non-current and current financial receivables and cash and cash equivalents.
Used to illustrate how income measures were affected by events outside normal business operations, such as impairment losses, disposals, fire and restructuring.
Non-current and current financial liabilities and pension provisions, less financial assets.
Capital employed plus the net sum of deferred tax liability and deferred tax assets, which corresponds to non-current assets plus working capital. Average values are calculated on the basis of quarterly data.
Operating profit/loss (excl. items affecting comparability) expressed as a percentage of net sales.
Profit before net financial items and tax.
Operating profit/loss (excl. items affecting comparability) expressed as a percentage of average capital employed.
Profit for the year expressed as a percentage of average equity, calculated on the basis of quarterly data.
Operating profit/loss (excl. items affecting comparability) expressed as a percentage of average operating capital.
A co-location of different operations for more efficient use of raw materials and energy, amongst other benefits.
Renewable fuels (such as wood, black liquor, bark and tall oil). Fuels that do not generate any net emission of carbon dioxide into the atmosphere, since the quantity of carbon dioxide formed during combustion is part of the carbon cycle.
Bulk is a measure of the volume of the paper. Paper with the same basis weight may have a different thickness, depending on the bulk of the paper. A high bulk indicates a thick but relatively lightweight paper.
Carbon is the building block of life and is part of all living things. Biogenic carbon dioxide is released when biological material decays or wood is burned. Fossil carbon dioxide is released when coal, oil or natural gas is burned.
Chemical Oxygen Demand. A measure of the amount of oxygen needed for the complete decomposition of organic material in water.
Folding Box Board. Multi-layered paperboard made from mechanical and chemical pulp.
Fillers, such as ground marble and kaolin clay, are used to give the paper bulk and make it more uniform in structure and brighter.
Fuels based on carbon and hydrogen compounds from sediment or sedimentary bedrock – mainly coal, oil and natural gas.
Global Reporting Initiative. International cooperation body, in which many different groups of stakeholders in society have drawn up global guidelines for how companies are to report on activities encompassed by the umbrella term of sustainable development.
Integrated Pollution Prevention and Control. EU environmental legislation about integrated, individual testing and supervision of major industrial companies.
An international energy management systems standard that provides a framework for energy efficiency measures.
An international standard for quality management systems. Primarily aimed at companies and organisations that wish to improve two aspects of their operations, i.e. to ensure more satisfied customers and lower costs.
An international standard for environmental management. Important principles in ISO 14001 include regular environmental audits and a gradual increase in the requirements.
Cubic metre growing stock, solid over bark. The volume of tree stems, incl. bark, from stump to top. Generally used as a measure for growing forest.
Cubic metre solid volume under bark. The actual volume (no gaps between the logs) of whole stems or stemwood excl. bark and treetops. Generally used as a measure for harvested wood.
An element contained in wood. Nitrogen emissions to water may cause eutrophication.
Gases that consist of nitrogen and oxygen that are formed in combustion. In moist air, nitrogen oxides are converted into nitric acid, which creates acid rain. Nitrogen oxides also have a fertilising effect.
A series of international standards regarding a management system for health and safety. The management system includes monitoring, evaluating and reporting on health and safety work.
Particles of ash formed in incineration of bark or liquor, for example.
An element contained in wood. Excessive phosphorus in the water may cause over-fertilisation (eutrophication) and oxygen consumption.
Solid Bleached Board. Multi-layer paperboard made from bleached chemical pulp.
Chemical pulp that is produced by boiling wood under high pressure and at a high temperature together with white liquor (sodium hydroxide and sodium sulphide).
A gas consisting of sulphur and oxygen that is formed in combustion of sulphur-containing fuels, such as oil. In contact with moist air, sulphur dioxide is converted into sulphuric acid, which creates acid rain.
Waterborne substances consisting of fibres and particles that can largely be removed using a fine mesh filter.
By-product of the sulphate pulp process used for making soft soap, paints, biodiesel and other products.
Thermo-mechanical pulp. Obtained by heating spruce chips and then grinding them in refiners.
The interim and year-end reports are presented at press and teleconferences in English. The conferences can also be accessed live on holmen.com. The annual report, together with year-end and interim reports, is published in Swedish and English and the reports are sent automatically to the shareholders who have indicated their wish to receive them. They are also available on holmen.com.
How to order printed material:
For 2017 Holmen will publish the following financial reports:
3/5 Interim report January–March 17/8 Interim report January–June 24/10 Interim report January–September
30/1 Year-end report
The cover is printed on Invercote® G 280 gsm. It is laminated, partially varnished and embossed. The insert is printed on Holmen TRND, 2.0 – 80 gsm. Layout: BYN Kommunikationsbyrå AB. Graphic production: Gylling Produktion AB. Photos: Rolf Lavergren, Ulla-Carin Ekblom, Fredrik Schlyter, Lasse Hejdenberg and others. Print: Åtta.45
Holmen AB (publ)
P.O. Box 5407, SE-114 84 Stockholm, Sweden Tel +46 8 666 21 00 E-mail [email protected] • www.holmen.com ID no. 556001-3301 • Registered office Stockholm
This entire annual report is made using Holmen's own products. The cover is printed on Invercote G, manufactured at Iggesund Mill. This is a paperboard with high whiteness and a smooth, matt surface. The paperboard is ideal for products where the focus is on designing and embossing the surface. The insert is printed on Holmen TRND, which is manufactured at Hallsta Paper Mill. This is an uncoated, matt magazine paper that offers a wide range of options in terms of bulk, grammage and shade. Both Holmen TRND and Invercote G are made from fresh fibres that can be recycled up to seven times.
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