Svenska Cellulosa Aktiebolaget : Interim Report Q4 2022

Year-end Report

Q4 2022

January-December 2022 compared with January-December 2021

• The carrying amount of SCA's forest assets increased to SEK 97.9bn (84.5) as of December 31, 2022 due to continued increase in transaction prices for forest assets in Northern Sweden.
• Net sales increased 10% to SEK 20,794m (18,822), which mainly related to higher selling prices in containerboard and pulp.
• EBITDA increased 12% to SEK 10,194m (9,109). The increase was mainly attributable to higher selling prices. Cost increases were largely offset through control over SCA's own value chain with a high degre e of self-sufficiency in wood, energy, and logistics. EBITDA margin was 49.0% (48.4).
• Operating profit increased to SEK 8,642m (7,634).
• Operating cash flow was SEK 5,685m (5,216) and fully financed ongoing strategic capital expenditures.
• Earnings per share increased to SEK 9.61 (8.46).
• The Board of Directors proposes a dividend of SEK 2.50 (regular dividend in 2021: SEK 2.25, extra dividend
  in 2021: SEK 1.00) per share.

October-December 2022 compared with October-December 2021

• Net sales increased 2% to SEK 4,873m (4,763).
• EBITDA declined 29% to SEK 1,981m (2,806). Adjusted for an unplanned production stop at Östrand (Pulp), which impacted earnings negatively with SEK 138m, EBITDA amounted to SEK 2,119m. Lower selling prices in solid -wood products had a negative impact on earnings. EBITDA margin was 40.6% (58.9).

October-December 2022 compared with July-September 2022

• Net sales declined to SEK 4,873m (5,007), mainly related to lower selling prices for solid -wood products.
• EBITDA amounted to SEK 1,981m (2,484). The decrease was primarily attributable to lower selling prices for solid-wood products and an unplanned production stop in pulp. EBITDA margin was 40.6% (49.6).

KEY FIGURES

		Quarter				Full year
SEKm	2022:4	2021:4	%	2022:3	%		2022	2021	%
Net sales	4,873	4,763	2	5,007	-3		20,794	18,822	10
EBITDA	1,981	2,806	-29	2,484	-20		10,194	9,109	12
EBITDA margin (%)	40.6	58.9		49.6			49.0	48.4
Operating profit	1,590	2,408	-34	2,094	-24		8,642	7,634	13
Net Profit	1,215	1,995	-39	1,666	-27		6,821	6,101	12
Earnings per share SEK	1.76	2.77		2.35			9.61	8.46
Operating cash flow	727	1,763		1,873			5,685	5,216
Net Debt / EBITDA (LTM)	1.0x	0.9x		0.8x			1.0x	0.9x

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A Y e a r - e n d r e p o r t - J a n u a r y 1 - D e c e m b e r 3 1 , 2 0 2 2

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COMMENTS ON THE FINANCIAL STATEMENTS

Summary of the year

Earnings for 2022 were the highest ever for SCA. EBITDA amounted to SEK 10,194m, with an EBITDA margin of 49.0%. The results were achieved through strong demand and high selling prices for SCA's products and cost control. SCA's high degree of self-sufficiency in wood, energy and logistics contributes towards stability and good profitability over time. Operating cash flow during the year continued to finance SCA's strategic capital expenditures. Toward the end of the year, two strategic capital expenditure p rojects began operating, expanded pulp production at Ortviken in Sundsvall and expanded kraftliner production in Obbola, Umeå. Together with other ongoing strategic capital expenditures, the commissioning of the new production lines will further strengthen the company's result and cash flow generation in the years ahead.

During 2022, SCA continued to invest in forest land and the company's holding amounted to 2.7 million hectares at the end of the year. Transaction prices for forest assets continued to i ncrease in 2022 and the total carrying amount of SCA's forest assets amounted to SEK 97.9bn (84.5) at the end of the year. SCA bases its valuation of forest assets in Sweden on forest transactions in the areas where SCA owns forest. The average market pric e used in valuation of SCA's forest assets was SEK 366/m3fo at December 31, 2022, up 13% compared with the preceding year (SEK 324/m3fo). See page 6.

Summary of the fourth quarter

The supply of wood raw material to SCA's industries was stable during the quarter. The price of pulpwood and sawlogs increased compared with the preceding quarter.

Demand for solid -wood products remained weak in both the building materials trade and for new construction in most regions. Selling prices also declined compared with the preceding quarter on account of the weak demand.

Delivery volumes decreased in the Pulp segment compared with the preceding quarter, mainly related to the planned maintenance stop that was completed at the beginning of the period and a longer unplanned production stop.

Demand for kraftliner declined during the period as a result of lower demand for packaging. The lower demand meant the average selling price for kraftliner was lower than in the preceding quarter.

As a result of the above, earnings for the fourth quarter decreased compared to the preceding quarter and the corresponding quarter in the previous year.

SCA invests in wind power

1. significant expansion of wind power is currently taking place in Sweden and demand for green electricity is expected to continue to increase substantially. During the fourth quarter, SCA acquired a wind farm in Markbygden, Piteå Municipality. The wind farm consists of a total of 36 turbines with a total installed capacity of about 85 MW. In addition to sales revenues, the investment will contribute to SCA's high degree of self- sufficiency in electricity. Approximately 20% of Sweden's installed wind power capacity is currently located on land owned by SCA.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A Y e a r - e n d r e p o r t

Net sales

SEKm 6,0 00

5,0 00

4,0 00

3,0 00

2,0 00

1,0 00

0

20 21 :4 20 22 :1 20 22 :2 20 22 :3 20 22 :4

EBITDA & margin

SEKm				%
3,5 00				70
3,0 00				60
2,5 00				50
2,0 00				40
1,5 00				30
1,0 00				20
50 0				10
0				0
20 21 :4	20 22 :1	20 22 :2	20 22 :3	20 22 :4

Change in net sales (%)

	2212		2022:4	2022:4
	vs	vs	vs
	2112		2021:4	2022:3
Total	10		2	-3
Price/mix	12		-5	-9
Volume	-3		1	4
Currency	4		7	2
Discontinuation	-3		-1	0

Operating cash flow

SEKm 2,0 00 1,8 00 1,6 00 1,4 00 1,2 00 1,0 00

0

20 21 :4 20 22 :1 20 22 :2 20 22 :3 20 22 :4

- J a n u a r y 1 - D e c e m b e r 3 1 , 2 0 2 2

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GROUP

SALES AND OPERATING PROFIT

January-December 2022 compared with January-December 2021

Net sales amounted to SEK 20,794m (18,822), a change of +10%, of which price/mix accounted for +12%, currency +4%, discontinuation of publication paper operations -3%, and volume -3%. The increase was related to higher selling prices in containerboard and pulp, a better mix and positive exchange rate effects. The discontinuation of publication paper operations and lower delivery volumes had a negative impact on sales.

EBITDA increased to SEK 10,194m (9,109), corresponding to an EBITDA margin of 49.0% (48.4). The change was mainly attributable to higher selling prices in containerboard and pulp and positive exchange rate effects. Higher distribution and raw material costs as well as lower volumes had a negative earnings effect. The cost of planned maintenance stops was

SEK 300m (310).

Operating profit amounted to SEK 8,642m (7,634).

October-December 2022 compared with October-December 2021

Net sales increased 2% to SEK 4,873m (4,763), of which currency accounted for +7%, price/mix for -5%, volume for +1% and the discontinuation of publication paper operations -1%. Positive exchange rate effects and higher delivery volumes had a positive effect on sales. Lower selling prices for solid-wood products were offset by higher selling prices for pulp and containerboard.

EBITDA decreased to SEK 1,981m (2,806), corresponding to an EBITDA margin of 40.6% (58.9). The decline was related to lower selling prices for solid -wood products and higher distribution and raw material costs, which were offset by positive exchange rate effects. The cost of planned maintenance stops was SEK 145m (139).

Operating profit amounted to SEK 1,590m (2,408).

October-December 2022 compared with July-September 2022

Net sales decreased to SEK 4,873m (5,007), a change of -3%, of which price/mix accounted for -9%, volume +4% and currency +2%. The decline was attributable to lower selling prices in all product areas, which were offset by higher delivery volumes of solid-wood products and positive exchange rate effects.

EBITDA amounted to SEK 1,981m (2,484), corresponding to an EBITDA margin of 40.6% (49.6). The decrease was primarily attributable to lower selling prices for solid-wood products and an unplanned production stop in pulp, which were offset by a higher share of harvesting from SCA-owned forest. The cost of planned maintenance stops was SEK 145m (88).

Operating profit decreased to SEK 1,590m (2,094).

CASH FLOW

January-December 2022 compared with January-December 2021

The operating cash surplus amounted to SEK 8,331m (7,226). The cash flow effect from changes in working capital was SEK -1,328m(-306). Restructuring expenditure related to the discontinuation of publication paper operations amounted to SEK -40m(-394). Net current capital expenditures totaled SEK -1,436m(-1,236). Operating cash flow was SEK 5,685m (5,216) (see Note 9).

Strategic capital expenditures totaled SEK -4,351m(-3,723) (see page 5) and company and asset acquisitions totaled SEK -832m (0). Cash flow for the period was SEK -228m(-226)

(see page 16).

FINANCING

At December 31, 2022, net debt totaled SEK 9,989m, up SEK 1,708m during the quarter. The increase mainly relates to the acquisition of the wind farm in Markbygden, continued acquisition of forest in the Baltic region and major investment costs in the kraftliner expansion project in Obbola. Net debt in relation to EBITDA amounted to 1.0x compared with 0.8x in the preceding quarter and 0.9x in the preceding year.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A Y e a r - e n d r e p o r t - J a n u a r y 1 - D e c e m b e r 3 1 , 2 0 2 2

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At December 31, 2022, gross debt amounted to SEK 12,785m, with an average maturity of 3.9 years (including the lease liability). The loan structure consists of commercial paper, bonds and bilateral bank loans.

Unutilized credit facilities amounted to approximately SEK 7.8bn at December 31, 2022, of whic h the largest portion falls due in 2026. During the year, financial items totaled SEK -39m compared with SEK -107m in the year-earlier period.

TAX

January-December 2022 compared with January-December 2021

The Group's tax expense amounted to SEK 1,782m (1,426), corresponding to a tax rate of 20.7% (18.9).

EQUITY

January-December 2022

Equity increased by SEK 13,303m during the period, to SEK 96,358m at December 31, 2022. Equity increased due to comprehensive income for the period of SEK 15,738m, decreased by SEK 2,282m due to the dividend payment and decreased due to other items by SEK 153m.

CURRENCY EXPOSURE AND CURRENCY HEDGING

Due to a high proportion of exports, SCA's operations are exposed to various currencies. About 90% of sales are priced in currencies other than SEK, primarily EUR, USD and GBP. Most purchasing is conducted in SEK, but some purchasing is carried out in foreign currencies. To reduce the risk of a weaker SEK, all balance sheet items in foreign currency are hedged, as well as major decided and contracted expenses in foreign currency for investments in fixed assets. Added to this, a share of future net flows in the main currencies is hedged and, in some cases, for special order flows.

The company has hedged about 80% of the expected EUR and USD net exposure from sales minus purchases until the end of the second quarter of 2023, as well as approximately 50% for the third quarter of 2023 and 25% for the fourth quarter 2023. The average exchange rate

used for currency hedging was SEK 10.77 (EUR) and SEK 10.32 (USD), respectively.

For GBP, the company has hedged about 75% of the expected net exposure from sales minus purchases until the end of the second quarter of 2023, as well as approximately 30% for the third quarter of 2023. The average exchange rate used for currency hedging was SEK 12.35.

PLANNED MAINTENANCE STOPS

In the fourth quarter of 2022, one planned maintenance stop was carried out at the mill in Östrand (Pulp). The estimated effect of the planned maintenance stops on earnings, calculated as the sum of the direct cost of the maintenance and the effect from lower fixed cost coverage from reduced production during the stops, is shown in the table below.

			Actual
SEKm	2021:1	2021:2	2021:3	2021:4	Total
Pulp	0	0	20	139	159
Containerboard	0	0	151	0	151
Total	0	0	171	139	310
			Actual
SEKm	2022:1	2022:2	2022:3	2022:4	Total
Pulp	0	0	26	145	171
Containerboard	0	67	62	0	129
Total	0	67	88	145	300
			Forecast
SEKm	2023:1	2023:2	2023:3	2023:4	Total
Pulp	0	0	30	150	180
Containerboard	25	80	65	0	170
Total	25	80	95	150	350

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293

S C A Y e a r - e n d r e p o r t - J a n u a r y 1 - D e c e m b e r 3 1 , 2 0 2 2

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STRATEGIC CAPITAL EXPENDITURES

SCA invests in the Obbola kraftliner mill

In 2019, SCA decided to build a new paper machine for the production of kraftliner at the Obbola paper mill in Umeå. Production in Obbola will increase from the current 450,000 tonnes of kraftliner to 725,000 tonnes per year to meet an expected increase in demand for renewable packaging. The total investment will be approximately SEK 7.5bn over a period from 2019 to 2024. As of December 31, 2022, SEK 717m remained of the investment amount.

The paper machine began operating in the fourth quarter of 2022, which is one quarter ahead of schedule, thereby creating good conditions for a successful project. The new recovered fiber line, which is necessary to reach full capacity at Obbola, is being constructed on schedule and is expected to be completed in the first half of 2023. The project is progressing on budget.

SCA invests in increased CTMP production capacity

In 2020, SCA decided to invest SEK 1.45bn to reach an annual production volume of 300,000 tonnes of chemi-thermomechanical pulp (CTMP) at the Ortviken site in Sundsvall, where some existing infrastructure and mechanical equipment will be utilized. Production started at the new facility in the fourth quarter of 2022, which is one quarter ahead of schedule. The project is progressing on budget.

SCA and St1 invest in the production and development of biofuels

SCA and St1 decided in 2021 to form a joint venture to produce and sell liquid biofuels. A jointly - financed biorefinery is under construction and will have access to SCA's tall oil, which is a pr oduct generated from the production of kraft pulp. SCA's part of the investment in the biorefinery is approximately SEK 0.6bn and the ownership is 25%. The facility is expected to begin operations at the end of 2023.

SCA invests in wind power

During the fourth quarter, SCA acquired a wind farm in Markbygden, Piteå Municipality , for approximately SEK 0.8bn . The wind farm consists of a total of 36 turbines with a total installed capacity of about 85 MW. The annual electricity production from the site is estimated at close to

200 GWh. In addition to sales revenues, the investment will contribute to SCA's high degree of self-sufficiency in electricity. Approximately 20% of Sweden's installed wind power capacity is currently located on land owned by SCA (see page 11).

SCA invests in forest land in the Baltic region

SCA has an ongoing investment program to acquire 100,000 hectares of forest land in the Baltic region. At the end of 2022, SCA had a holding of about 69,000 hectares of land in the Baltic region, of which 57,000 hectares of forest land, and 12,000 hectares other land which can be converted to forest land or be sold . SCA's local presence in the Baltic region also strengthens SCA's long -term opportunities to source timber from local forest owners in the region.

SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ), Skepparplatsen 1, 851 88 SUNDSVALL. www.sca.com. Corp. Reg. No. 556012-6293