About the SCA Split

2.2017 A magazine from sca on trends, markets and business

Essity born out of necessities and essentials Focus on Hygiene health and well-being SCA Home sweet home Forest Products moves back to Sundsvall

interview He knows How to build a brand Separate ways All about the SCA split Shape is a magazine from SCA primarily geared toward customers, shareholders and analysts, but also for journalists, opinion leaders and others interested in SCA’s business and development.

Publisher Printer Joséphine Edwall- Stibo Björklund Address Managing Editor SCA, Group Splitting the apple in two can unlock dormant value in the business units. Page 32 Gabriella Ekelund Communications, Editorial Box 200, Anna Gullers, 101 23 Stockholm, Helena Åkesson, Sweden. Appelberg Telephone Design +46 8 7885100 Kristin Päeva, Fax +46 8 6788130 Cecilia Farkas, Appelberg Contents:

04. One company becomes two The SCA Group splits into two separate listed companies: one hygiene and health company, Essity, and one forest products company, SCA.

06. meet essity’s CEO “The merger The creation of a separate hygiene and health company with BSN provides a means to improve people’s hygiene, health and Medical is well-being. CEO Magnus Groth explains. all about 12. The importance of branding The art of branding is all about storytelling, growth and says a leading expert who makes it sound so simple. sales syner- 19. One name, many criteria Cover photo: Ellen Hoverkamp gies.” The search for a name for the new health and hygiene company started with a long wish list. Margaretha Lehmann This issue of SCA Shape is published in Swed- Page 32 ish and English. The contents are printed on 24. M eet the ceo for “new” sca GraphoSilk 90 grams from SCA. Reproduction Forests have been highlighted as part of the solution to only by permission of SCA Group Communi- climate change, and Ulf Larsson understands SCA’s cations. The opinions expressed herein are responsibility as Europe’s largest private forest owner. those of the authors or persons interviewed and do not necessarily reflect the views of the 26. B ack to the roots editors or SCA. You can read Shape as a pdf at The “new” forest product company SCA is moving the www.sca.com. headquarters of its forest products business back to Address changes: www.sca.com/subscribe or Sundsvall. The company has come full circle. [email protected]

2 sca Shape 1 2017 “We offer necessities for all people, solutions to people’s basic needs in all stages of life.“ “A necessity Joséphine Edwall-Björklund for more and more people” This edition of Shape is focused on the split of SCA into two separately listed companies: the forest products company SCA and the hygiene and health company Essity. The words from which the name Essity come, essentials and necessities, describe what this new hygiene and health company is about. We offer necessities for all people, solutions to people’s basic needs in all stages of life. We do not invent things that customers and consumers do not need and whose benefits are questionable anyway. When we develop new products, expand to new markets or acquire other companies, it’s about making improvements in everyday life – whether it’s baby diapers, toilet paper, incontinence products, wound care, feminine care or any of our other products. It also means that we have a strong belief in the future: we offer something that is important and fundamental to more and more people, in line with an aging population and Photo:Kristofer Lönnå better economic conditions. Essity is becoming essential and necessary for more and more of us.

joséphine edwall-björklund Senior Vice President, Group Communications SCA, to be Essity Do you know...... which European country is considering menstrual leave for working women? Find out on page 20.

sca Shape 2 2017 3 SCA HISTORY 1929–2017

1929 1995 the Chilean hygiene company PISA (Papeles • SCA is founded through • SCA becomes Europe’s Industriales S.A.). the merger of some 10 leading hygiene products Swedish forest company following 2013 companies. acquisition of the German • SCA becomes a majority company PWA. 1930-1949 shareholder in the Chinese 2001 tissue company Vinda. • Production is focused on • Establishes operations in pulp. • Acquisition of Georgia- India. • Construction of Östrand Pacific Tissue and • Divests its Austrian pulp mill. Tuscarora gives SCA a publication paper mill in strong position in North Laakirchen. 1949 America in away-from- • Relocation of headquar- home tissue and 2014 ters from Stockholm to protective packaging, • Cooperation with the Sundsvall. respectively. Chinese hygiene company 1950 2007 Vinda is strengthened. • Joint venture company • SCA is listed on the • SCA sells its North Asaleo Care is listed. Stockholm Stock American packaging • SCA enters with an Exchange. operations and acquires all-female crew, Team Procter & Gamble’s 1950–1959 SCA, the 2014–15 Volvo European tissue business. Ocean Race. • SCA starts newsprint • Start of SCA’s extensive production and builds a wind power investments 2015 paper machine at Ortviken in cooperation with • Initiate to divide the Group (1958). Norwegian Statkraft. into two divisions: a • Production is confined to 2009 Hygiene division and a Sweden, but exports Forest Products division increase. • SCA acquires Algodonera • Invests in a new Aconcagua, one of the 1960–1974 production facility in largest players in feminine Brazil. • Kraftliner production care in Argentina, through • Increased pulp production starts. its Colombian joint capacity in Sweden. venture company Familia. 1975 • Divests operations in 2010 Southeast Asia, Taiwan • SCA lays the foundation and South Korea for for its hygiene business • SCA acquires Copamex integration with Vinda. through the acquisition of baby diaper business in • Closes down a tissue the Swedish company Mexico and Central production plant in France Mölnlycke. America. and a newsprint machine 1975–1999 2011 in Sweden. • Expansion of publication • SCA acquires the Brazilian 2016 paper operations. hygiene products • SCA acquires Wausau • Acquisition of the Italian company Pro Descart and Paper Corp., a leading packaging company 95 percent of the Turkish North American tissue Italcarta. incontinence care producer. • Establishment of company San Saglik. • Invests in paper produc- operations in Latin • SCA and Pacific Equity tion in Mexico and diaper America. Partners form a joint production in Europe. venture, and SCA acquires 1990 50 percent of the Turkish 2017 • Acquisition of the British hygiene products • SCA acquires BSN company Reedpack makes company Komili. medical, a medical SCA the European leader 2012 solutions company. in transport packaging. • The shareholders of SCA • SCA divests its packaging 1993 decide to split the Group operation to DS Smith (UK). into two companies: the • Relocation of headquar- • Acquires Georgia-Pacific’s forest products company ters from Sundsvall to European tissue SCA and the hygiene and Stockholm. operations, the Asian health company Essity. hygiene company Everbeauty, and the remaining 50 percent of

4 sca Shape 2 2017 Two is better than one SCA splitting into two separate listed companies – Essity and SCA

On April 5, 2017, the Annual activities (paper products produc- General Meeting decided on a dis- tion, personal care, consumer tis- tribution of all shares in the wholly sue, AfH tissue and packaging) and owned subsidiary SCA Hygiene AB, expanded geographically. SCA de- to be Essity, to shareholders of SCA. veloped into a leading global hygiene The company plans to execute the and forest products company. In split in June 2017. The result will be 2016 the hygiene business accounted two separate listed companies: one for approximately 86% of the SCA hygiene and health company, to be Group’s net sales and the forest prod- Essity, and one forest products com- ucts business for approximately 14%. pany, SCA. Over time, the synergies between the In August of 2016 SCA announced operations have diminished. that the company would initiate work “I am pleased that the share- in order to be able to propose to the holders support the Board’s pro- 2017 Annual General Meeting a split posal regarding two separate listed of the SCA Group into two separate companies. This will increase value listed companies: the forest products for shareholders in the long term company SCA and the hygiene and through increased focus, customer health company, to be Essity. Now, value and development opportuni- one year later, we are here. Soon the ties and enables each company to SCA Group will be divided into two successfully realize independent, listed companies. One its strategies. We will be Essity AB, a leading global hy- look forward to giene and health company with head- an exciting future quarters in Stockholm. The other, for the two strong an efficient and well-invested forest listed companies,” products company, keeping the name says Magnus Groth, Magnus Groth SCA, with headquarters in Sundsvall. currently president and CEO of SCA and future president SCA was founded in 1929 as a for- and CEO of the new hygiene and est products company operating in health company Essity. Sweden. Over the years, the com- This edition of Shape is focused on pany expanded into other business the SCA split into two companies.

sca Shape 2 2017 5 The split of the group is expected to increase focus, customer value and development opportunities and enable each company to successfully realize its strategies, says Magnus Groth.

6 sca Shape 2 2017 Interview/ESSITY

“SCA split opens new doors” “The SCA split means an increased focus and the chance to diversify the hygiene and health business into new product groups. The acquisition of BSN medical is a great proof-point to this,” says CEO Magnus Groth. text Göran lind photo SCA

Last fall a new vision was set: “The Tork XPressnap dispenser, “Dedicated to improving well-being for example, is designed so con- through leading hygiene and health sumers can only take one napkin solutions.” at a time and we guarantee a 25% “With this vision, we looked reduction in napkin consumption,” more broadly at product groups into Groth explains. “Our commitment to which we could potentially expand. improve well-being through leading Subsequently we had an opportu- hygiene and health solutions means nity to acquire BSN medical. I’m not providing not only products and so- sure we would’ve considered the lutions but also hygiene educational acquisition of BSN medical had we programs,” Groth says. “In 2016 not been working on the split and the dedicated strategies for hygiene and “The new forest products,” says Magnus Groth, who will be the CEO of the new hy- name Essity is a giene and health company Essity. combination of “The new name Essity is a combination of the English words essen- the English words tials and necessities and reflects essentials and what we and our products and solutions stand for,” Groth says. necessities.” Essity not only creates value for its Magnus Groth shareholders, he explains. “It is also well placed to help our hygiene educational programs deliver on the UN Global Goals as reached more than 2,000,000 hygiene, health and sanitation are at people worldwide. Our Hygiene the core of the goals,” he says. Matters initiative is our key com- Every day, products from Essity munication platform with the goal are used by millions of people glob- of raising awareness of the connec- ally, so there’s an opportunity to tion between hygiene, health and meet social and environmental well-being.” needs and improve well-being for millions of people. Essity is also The company vision can cover working in many ways to reduce its many things and the question is climate impact. where the boundaries lie. Groth

sca Shape 2 2017 7 Interview/ESSITY

explains that BSN medical has similar user groups to those of Essity’s incontinence products. Both sell consumables, and the products are sold through the same channels. “It’s all about health products in related areas – we’re not going into pharma- ceuticals or remote medical areas.” Essity will continue to invest in its core businesses, Personal Care, Consumer Tissue and Professional Hygiene products and solutions. Last year, SCA acquired Wausau Paper Corp., a leading North American away-from-home tissue producer. “We went from third- to second- largest player in the North American away-from-home tissue market, strengthening further our leading global position,” explains Groth. “In 2016 our hygiene educational When asked about the ambition to market the new company Essity, programs reached more than Groth explains: “We will not be in- 2,000,000 people worldwide.” vesting major resources in marketing the new name for the hygiene and health company toward consumers – we will focus on current and future can achieve the most,” says Magnus employees, investors, customers Groth. and important influencers in public Specialization increases transpar- affairs and specific media. But of ency, enabling the stock market to course we will continue to highlight more easily compare both companies the new name and company and with other similar consumer prod- what it stands for when we run our ucts and forest products businesses. Hygiene Matters initiative internally Comparable figures increase the and externally. We want to maintain pressure to perform, which Groth the link between the product brands sees as positive. “It will be easier for and the new company name.” us to decide how to allocate our re- “Being a separate listed com- sources and investments. It will also pany means a stronger focus in each strengthen cost focus in everything company, which naturally is posi- we do. As Essity, our focus is to deliver tive. Capital allocation will be more on our strategy, including improving effective – we will focus our invest- people’s hygiene, health and well-be- The articles contained in this issue were produced and printed before the split of SCA. Therefore, some ments on the segments in which we ing,” Groth says. of the information in the articles may have changed.

8 sca Shape 2 2017 essity Essity’s vision is “Dedicated to improving well-being through leading hygiene and health solutions.” Essity is a leading global hygiene and health company that develops, produces and sells Personal Care (Baby Care, Feminine Care, Incontinence Products and Medical Solutions), Consumer Tissue and Professional Hygiene products and solutions. Sales are conducted under many strong brands, including the leading global brands TENA and Tork, and other brands, such as Leukoplast, Libero, Libresse, Lotus, Nosotras, Saba, Tempo, Vinda and Zewa. The business operations are based on a sustainable business model with focus on value creation for people 48,000 and nature. Employees

Headquarters Net sales 2016 (SEKm) in Stockholm. Sales are Hygiene conducted education in about 150 150 countries. 2,000,000 women, men, children and caregivers 101,238 received hygiene education in 2016.

Hygiene Matters Did you know that.... is an initiative that ... Essity partners with the United Nations Foundation in support of the Sustainable aims to drive and sup- Development Goals to improve hygiene, port a global dialogue health and well-being worldwide? around hygiene, health and well-being to improve hygiene standards worldwide. It focuses on breaking taboos around menstruation ...Essity partners with Fotografiska and incontinence, (Swedish Museum of Photography) to high- highlighting the light how hygiene and health affect people’s economic impact of well-being. hygiene and encour- aging innovation in the hygiene sector in order to support sustainable progress.

sca Shape 2 2017 9 First aid for growth SCA’s recently acquired medical solutions group BSN medical joins the Incontinence Care business in a new unit to form a powerful new platform for growth.

text jan lindroth photo Getty Images

“The medical solutions industry is a very fragmented market, so there is still room for growth.”

10 sca Shape 2 2017 market

BSN medical is a leading supplier of care group Beiersdorf and UK medical medical solutions with brands such as equipment company Smith & Nephew. Leukoplast, Cutimed, JOBST, Delta and BSN medical has around 6,000 employ- Actimove. It has sales in more than 140 ees and had total sales in 2016 of EUR 850 countries, with production in eleven million. countries, and it has one of the industry’s The merger gives rise to synergies of most-developed marketing and supply EUR 30 million per year, but the absolute chains. biggest part of this comes from cross- “Strategically, BSN medical is a great selling. Lower costs will mainly come fit,” says Margareta Lehmann, head of through some overlapping management SCA’s Health and Medical Solutions busi- and administrative functions. ness unit. “It brings different products “This merger is not about cutting to SCA, but in many ways it has the same costs,” Lehmann says. “It is about grow- type of sales channels and customers as ing and finding additional growth oppor- the incontinence business. This merger is tunities” all about growth and sales synergies. BSN medical brings not only strong products but also a very professional sales force and a strong presence in some comple- mentary sales channels.” BSN medical has The merger between BSN medical well-known brands In acute wound care, and SCA’s Incontinence care business is such as Leukoplast, Cutimed, JOBST, BSN medical is the based on healthy growth prospects and Delta and Actimove. European leader and good synergies. the world’s No. 2. BSN medical has healthy market positions, especially in Europe, where it does just over half of its sales, followed by North America with almost a quarter of total sales. BSN medical is organized in three areas: wound care, compression therapy and orthopedics. In acute wound care, BSN medical is the leader in Europe and the global No. 2, while BSN medical is the global leader in fracture management and physiotherapy within orthopedics. “The medical solutions industry is a very fragmented market, so there is still room for growth,” Lehmann says. SCA intends to invest in R&D to continue to develop BSN medical’s products as well BSN medical as the sales organization. The company’s in Brief total available market is close to 12 billion Sales 2016: euros globally, with wound care the big- EUR 850 million gest. It is expected to grow by around 4 adjusted EBITDA: percent a year over the next few years. EUR 197 million Employees: Around 6,000 “We certainly want to Major Brands: Leukoplast, maintain a high pace of inno- Cutimed, JOBST, Delta and vation,” Lehmann says. Actimove BSN medical was acquired Geography: from private equity firm EQT Headquarters in Hamburg, sales in 140 countries. for EUR 2.75 billion. It was Production: BSN medical has Margareta formed in 2001 as a joint ven- production facilities in eleven Lehmann ture between German skin countries.

sca Shape 2 2017 11 Focus: Branding

The art of branding How do you build a brand? Look at it as a person. Creating an emotional connection between brand and consumer is very similar to building a relationship and making new friends. It starts with a first impression and deepens if you share the same values.

text Susanna Lindgren photo Getty Images

12 sca Shape 2 2017 VIGNETTE

The art of branding

Branding is key to making a company stand out from the competition.

sca Shape 2 2017 13 Focus: Branding

It sounds simple when Stanley Hainsworth Embracing disruption describes the art of brand building. He knows what through design, he is talking about, though, and he has a success- Apple changed the perception of what a ful track record from rebranding consumer titans computer should look like Nike and Lego. His signature also helped like. Starbucks and Pepsi, and he currently has his fin- ger on Gatorade. “It’s all about storytelling,” Hainsworth says. “When you think about a brand it should be like thinking about a person. You should be able to describe the brand like you describe an acquaintance or a good friend.” At Nike, Hainsworth used the help of sports stars such as Michael Jordan and Andre Agassi to push into branded entertainment. Before he went to work for Nike he was an actor, and it’s easy to think about movie making when he talks about brand character and brand audience. His starting point for any brand building is the creation of a brand book. It has three main chapters: takes place, but the values stated in the brand book The Mission, which explains why that particular remain the same. brand exists; The Promise, which describes what “It’s all Most successful, Hainsworth says, are those customers will feel every time they encounter the about brands that manage to disrupt a category that has brand; and The Characteristics of the brand. Once been stable for many years. that platform is solid, it’s time to start to work on storytelling. “Apple is a great example of disruption through that brand-consumer relationship. When you design,” he says. “They changed the perception of “The first challenge is to attract,” he says. “If think about what a computer should look like – and also, by the I meet you in the street, the only way I can judge way, it was called ‘Apple.’ That is not the kind of you is by your looks. It’s the same in the aisles of a a brand it name people were used to for a business machine.” grocery store or when using a web browser. To get should be The greatest flops, on the other hand, he says, a first date there has to be something that attracts are generally caused by not doing the homework you to start the dialogue.” like thinking properly. What makes a consumer pick up a cereal box, about “You can put your logo on anything, but should take it home and try it? It varies, depending on the a person.” you?” he asks. “Coffee, food and music were a message and the receiver. But that first encounter natural part of the Starbucks experience, but when is necessary to enter any lasting relationship with Stanley Hainsworth we promoted a movie that the guest had to go to

14 sca Shape 2 2017 Stand out or die? a theater to watch, it flopped.” A flop on a bigger e-commerce competing with the brick-and-mortar scale, he says, is Microsoft’s billion-dollar invest- stores and social media taking up more and more ment in developing the Kin platform. of our lives, companies need to keep a close eye “Microsoft was struggling against Apple and on the digital scene. Most brands have designated came out with a phone with social media focus staff who monitor social media to pick up trends, called Kin in 2010,” he says. “The target was check the competition and make sure that any- 15-year-old girls. I think the product was only on thing unfavorable said about their brand gets an the market for a few months. They had seen an op- immediate response. portunity but not properly researched the market.” “Every visual matters, and it’s important that Today there are plenty of new tools for research. every tweet, every post on Instagram or Facebook Crowd-funding sites like Kickstarter have become says something about who you are,” Hainsworth markets to test the waters for both new and estab- says. “Once your brand has a solid foundation lished brands. To ensure success, a PR-ready video declaring what you stand for, you can also have a is often posted on the site. transparent conversation on social media when a For a first date between brand and consumer consumer is disappointed. Those in danger are the to have a chance to grow into something steady, ones that haven’t created their brand book, and it is essential for the brand to stay relevant. With hence their brand platform, properly.”

sca Shape 2 2017 15 VIGNETTE

16 sca Shape 2 2017 Focus: Branding

The name of the game And the name will be … yes, what? Finding a suitable name for a find a name that is different. Because there are so many things that can company can be a complex business. How do you make sure you knock out a name in the process, we always advise clients to explore a few find the right one? Branding expert Neil Taylor has spent a lot of different options that can all do the time thinking about how companies come up with new names. same job. Where do you start? text Susanna Lindgren photo ED Miles Start with the strategy. The example I always give is the mobile phone In theory there are more than 8.4 It was. It’s not a real word, but is brand Orange that’s now owned by billion possibilities to form a word sounds like one. The makeup of es- France Télécom. When they named with seven or fewer letters. As the sentials and necessities has a nice the company, one part was to stand name needs to be pronounceable and tone to it, a human touch that stems out from the competitors with more often work globally, the search natu- from the personality of the company. SUCCESS: tech-sounding names. They could rally has limits. In the search for a new name, The mobile just as easily have chosen to call the London-based Neil Taylor is what do you think was the biggest phone brand company Pink, Gorilla or Cocktail. Orange creative partner at The Writer, the challenge? stands out All of those names strategically gave world’s largest language consul- The trick is to find a made-up from its the same thing – they wanted to stick tancy. Most of his working life is name that’s not too alien, that works rivals. out. about giving brands advice on how around the world. In this case it’s an Are some names more trendy than to communicate. The visual side of a endorsing brand name, and you don’t others? brand, he states, is generally tightly want it to compete with the cus- There is definitely a trend to controlled with a logo, special fonts tomer and consumer brands. As it is move toward names that have an or colors. How brands come across a corporate name, the consumer on independence from the business. in words, on websites or through the street doesn’t necessarily have to As brands often move from one customer contacts is just as impor- know it. Most important is how em- sector to another, the name should PITFALL: tant. The choice of letters that form ployees feel about the name and if it The car have a stretch to it. Take Google, the company name is one of many will attract new employees, investors brand Nova which started as search engine but important decisions in the crea- or other stakeholder audiences. can mean now is doing driverless cars. If you tion of the communication strategy. How do you find a perfect name? “doesn’t go” are called British Airways you are When the hygiene and health com- The first thing is to not look for a in Spanish. kind of limited. Essity has that kind pany created by the split of SCA into perfect name. There are so many of stretch to it and is at the same two companies needed a new name, things that can trap you in a naming time more connected to the actual he gave advice on the shortlisted process. The hardest task is prob- products than names like Orange or suggestions. ably to find a name that legally has Google. And the name is Essity. Was that no problems with it. There are so How wrong can you go in the choice your favorite on the shortlist of many companies with trademarks of name? names? around the world and you need to Honestly, I think it’s really hard to

sca Shape 2 2017 17 “When you just see that name in isolation it’s easy to say, ‘Oh, I like’ or ‘I don’t’ on the basis of whatever association you have to it.”

it has a nice story behind it. It says: Call our headquarters as we are going to bet on things that are going to outperform the market – which in the finance market is called alpha. An alpha bet = Alphabet. You have written a book about the perils of naming brands. What is your most important message? Neil Taylor Naming its incredibly subjective. says a com- I can pick a word like Alphabet. I can pany’s name invent a word like Essity. When you can be a just see that name in isolation it’s springboard easy to say, ‘Oh, I like’ or ‘I don’t’ on for communication. the basis of whatever association you have to it. In real life, employees and customers don’t encounter the name like that. They see it in a richer con- pick a disastrous name. First of all, this was a name that had to do with text – on a sign outside the building, people get used to everything. Over newness, so stories can be over- on a business card or in an advertise- time you stop analyzing a name in stated. When professional services ment. A name is just a word. It only great detail. In fact, there is scientific firm PwC spun off their consultancy tells part of a story, but it can be an research that say our brains store agency they named it Monday. I important springboard for the rest of brand names in a different part of the think the idea was “working with us the stuff you want to communicate. brain than normal words. Apparently is going to make you like Mondays,” we don’t think about them as just but at the time it was laughed at – as words. We think about them along- was Orange, by the way. As it hap- side the logo, the colors and other pens, Monday was bought a week associations connected to them. later by IBM and the name was the sca name: Any less successful examples? killed. I absolutely think, though, SCA was founded and got its name in 1929. The There are famous examples, but that if they had stuck with that name Swedish financier Ivar Kreuger had experience from most of them aren’t really true. and made campaigns around it they mergers in the Swedish match industry (he was Vauxhall and Opel used to have a would have made it work. actually nicknamed the Match King), and he wanted to merge the forest industry companies in the north car called Nova. In Spanish no va Any favorites? of Sweden in the same manner. In October 1929 the means “doesn’t go,” which obvi- The most recent one I really liked forest companies Munksund, Holmsunds, Kramfors ously is a bad name for a car. In spite is Alphabet, the name Google gave and Sundsvallsbolagen became one group, which was of the possible interpretation, most their holding company. For a corpo- given the name Svenska Cellulosa Aktiebolaget, SCA. Spanish speakers could see that rate name that was very unusual, but

18 sca Shape 2 2017 Focus: Branding

“Essity stems from the words ‘essentials’ and ‘necessities,’ a fitting name for the products offered – everyday necessities.”

Gabriella Ekelund knows the challenges to register a global internet domain. of picking a new As the wish was a name that also company name. conveyed a sense of the business, the search became increasingly difficult. The wish list was long. “Most names related to hygiene, health, well-being and care were How Essity already owned,” says Gabriella Ekelund.“Sometimes it felt like taking two steps forward and one step got its name back.”

Even so, the search was fairly The search for a new name started long before the formal quickly narrowed down from liter- decision to split the company in two. The forest product ally thousands of options to just a handful. business would keep the name SCA. The challenge was “Many suggestions came from people working at SCA, which shows to find a name for the personal care and tissue products. the huge engagement.” Then there were name suggestions from the The new name had to meet a wide negative cultural associations or agencies that were asked to conduct range of criteria. It should reflect the things that could get lost in transla- interviews with employees in a vari- company history, values and culture. tion,” she recalls. ety of positions within SCA to gain Gabriella Ekelund, VP corporate Other criteria were that it had to an insight into the company history, brand communications SCA (to be be memorable, work well in search culture and values. Essity) had a few sleepless nights be- engines and social media, and of “The new name Essity stems from fore the new name was born. course not be too similar to other the words essentials and necessities “It also needed to work in a names. Just as important were the – a fitting name for the new hygiene global context and had to be easy to legal considerations. and health company that offers pronounce in all countries where Ekelund explains that the name products for everyday necessities,” SCA does business – and involve no had to be possible to trademark and Ekelund concludes.

sca Shape 2 2017 19 shape up Check out what’s happening outside SCA

Renaissance of wind power at sea The Finnish company Norsepower has developed a rotor sail for tankers, which the Danish shipping giant Maersk will test in 2018 and 2019. But this is no ordinary sail – it’s like a pillar, a vertical wing that rotates. When the wind blows against the wing it creates air currents that help to drive the ship forward, just like the drag and lift that keep airplanes aloft. The hope is that the technology will make the shipping industry both greener and more profitable. Fuel consumption is estimated to be reduced by up to 10 percent, equivalent to 1,100 tons of fuel per year for each ship. New regulations that take effect in 2020 reduce the amount of sulfur allowed in ship fuel, making diesel more expensive.

Incontinence, Johnér in the absence of suitable Italy set to offer ‘menstrual leave’ solutions, Italy might soon become the first Western But some fear that the law might backfire reduced pro- country with an official “menstrual leave” policy since employers could become even more ductivity in for working women. The parliament is consider- inclined to hire men rather than women. ing a proposal for a law that would force com- Despite having fairly generous female-friendly China by an panies to grant three days of paid leave each labor laws on paper, Italy has one of the lowest average of 12.6 month to female employees who experience rates of female participation in the workforce in painful periods, The Independent newspaper Europe. Only 61 percent of Italian women work, days a year. reports. well below the European average of 72 percent. Source: SCA, Hygiene Matters

20 sca Shape 2 2017 Recycled oranges Did you know your leftover orange peel can come in handy in the most unexpected ways? Healing in the forest Instead of tossing it in the com- post you can: Rub the inside of the orange Have you heard of shinrin-yoku? It’s Boosted immune system functioning, with peel on light bulbs and radiators. Japanese for “forest bathing” or “taking an increase in the count of the body’s natu- Once the devices are flipped on, in the forest atmosphere.” Researchers in ral killer (NK) cells they’ll Japan and South Korea have studied the Reduced blood pressure emit a fresh scent throughout health benefits of spending time in a living Reduced stress your home. Make easy forest. The idea is simple: visiting a natural Improved mood orange-scented by filling a jug with water area and walking in a relaxed way can Increased ability to focus, even in children cleaner and adding peels. Let the mixture produce many calming, rejuvenating and with ADHD sit for a few weeks, shaking restorative benefits, such as: Accelerated recovery from surgery or illness occasionally. Use it to mop floors, Increased energy level dust furniture and clean your Improved sleep. countertops. Manicure. Rub on your nails for shine. Start a fire. Peels are great fire starters for your camping trip or in your home fireplace. Edible water bottle Repel cats – and insects. Scatter peels in your garden to discour- Biodegradable water balloons may replace age cats from using it as a toilet. plastic bottles in the future. London-based The oil in orange peels is a natural Skipping Rocks Lab has developed a gel-like insect repellent. Rub a fresh packaging for water that it calls Ooho!, made of orange peel on your skin to deter algae. At first, Ooho! will be sold at music festivals mosquitoes. and running events. After you drink the water you can even eat the container.

sca Shape 2 2017 21 TRUSTED around the globe1–3 Quality of care Partnering with you to make a difference

For over 50 years, TENA has partnered with care homes to help meet the needs of each and every resident, while improving the overall care home environment and efficiency. With the right products, services and expertise in continence and personal hygiene care, we help you to make a difference. TENA is ready to stand by your side, enabling you to deliver the best and most compassionate care for every individual.

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1. Study involving 924 respondents (depending on question) from Canada, France, Germany, Italy, Sweden, UK and the USA. Results vary across countries. Kantar Health. LTC Brand Audit Study. August 2014;1-106. Zewa hagyományos toalettpapírt, majd utána 2. No. 1 Global leader in continence care; Price Hanna, Global Outlook For Hygiene Absorbent Products, February 2015. 3. TENA provides products and solutions for consumers and professionals in more than 100 countries; SCA Data on file. Zewa nedves toalettpapírt.

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25 sca Shape 1 2017 VIGNETTE SCA SCA’s vision is ‘Contribute to a circular society by providing our customers with sustainable products based on raw materials from responsibly managed forests and an efficient value chain.’ The core of the operations is SCA’s vast forest holdings in northern Sweden – the largest private forest holding in Europe. SCA’s products include solid-wood products, pulp, kraftliner, publication papers and renewable energy.

Biological diversity The forests are managed in a way that sustains the biological diversity, and the trees absorb and store Head office Sundsvall CO 4,000 2 Employees 77 million seedlings were produced in 2016

renewable energy 2.6 Net sales 2016 (SEKm) million hectares of environmentally 16,587 certified forest that is used for: Wood-based products Printing paper Pulp Kraftliner Photo:Kristofer Lönnå Photo:Kristofer

sca Shape 1 2017 23 interview/SCA

“This opens opportunities” Ulf Larsson, CEO-to-be of the listed forest products company SCA, will be heading a resource-efficient company with strong cash flows and a unique asset – the forest.

text Göran lind photo Per-Anders Sjöquist

ULF LARSSON, CURRENTLY presi- the company will have a board that dent of SCA Forest Products and can focus entirely on the forest prod- executive vice president of SCA, ucts business. will manage the “new SCA” and What about relations with the the forest products business from hygiene business? Larsson says SCA Sundsvall. Today the forest products Forest Products currently works business is a relatively independent closely with the hygiene business, part of the SCA Group, Larsson says. particularly in pulp, both in product With sales in 2016 of 16.5 billion development and in a supplier- Swedish kronor (2 billion US dol- customer relationship. The hygiene lars) and more than 4,000 employ- business acquires pulp correspond- ees, SCA will be a relatively large ing to about 3 percent of the forest company on the stock exchange, on products’ business sales. a level with listed forest companies Holmen and BillerudKorsnäs. “The split of SCA into two compa- “Both companies nies is the best way of continuing to have strong cash create shareholder value, customer value and further development op- flows and can con- portunities,” Larsson says. “Both tinue to develop companies have strong cash flows and can continue to develop in their in their respective respective directions.” directions.” Ulf Larsson For employees, things will remain much the same. “In the short term, the great “The hygiene business will be one majority of employees will not be of our key customers in the future SCA will be an affected at all, but in the long term too, and collaboration is already on efficient, inde- they will be positively affected by our commercial terms,” he says. pendent forest products com- increased focus on the forest products Larsson sees a strong future market pany that will business,” he says. “A small number for the majority of “Forest” SCA’s include all forest of new hires will be necessary in product areas. Solid wood products land owned by group functions, partly due to us show strong underlying growth, the SCA Group and the forest becoming a separate listed company.” and pulp is experiencing increased products opera- The increased focus will be notice- demand for tissue and packaging, tions, explains able at various levels, partly because confidence that is manifested in the Ulf Larsson.

24 sca Shape 2 2017 SEK 7.8 billion expansion investment of the Östrand pulp mill. “Around 25 percent of the forest products business consists of kraftliner (packaging paper), an area with strong demand,” Larsson says. “Another 25 percent consists of publication paper, where the market is declining, but we know that and are prepared for it. We’ve previously sold those areas of the publication paper business that were not strongly inte- grated with the other operations, and the remaining paper mill, Ortviken, is a very competitive mill with good products.” Forest holdings are a valuable asset, and Larsson points out that forests were highlighted as part of the solution to climate change at the Paris climate summit in 2015. By extension, this makes SCA part of the solution, in its capacity as Europe’s largest private forest owner. Its volume of standing timber has increased by 50 percent in the past 50 years, and growth continues to be considerably higher than logging.

LARSSON SEES keeping the forest holdings in the business as a no- brainer, pointing out that the importance of having fresh forest fiber as a raw material increases as the supply of recovered fiber decreases. SCA is also involved in significant biofuel and wind power operations, and the company also conducts R&D in renewable energy. In 2016 a pilot plant was constructed to produce biofuel and chemicals at the Obbola mill. The fuel and chemicals are produced from black liquor, a residual product from pulp production. The production units are very advanced from a climate perspective, and wood pellets have replaced oil as fuel at Östrand, Munksund and Ortviken. Energy from the plants is used for district heating. Green electricity is produced at all the paper and pulp mills. “The new Östrand plant will provide a significant surplus of green electricity, which will be sold to exter- nal customers wanting to help reduce climate change,” Larsson says.

sca Shape 2 2017 25 sca inside News from SCA Queen Silvia and SCA in Poland Her Majesty Queen Silvia of Sweden recently paid a visit to Poland, with a focus on care for elderly people and dementia sufferers and subjects related to nursing education. The oc- casion for the invitation was the final ceremony of the competition for the Queen Silvia Nursing Award. SCA was Proud Bunzl invited to the event to create a platform supplier to discuss challenges related to care The distribution company for seniors and to highlight the signifi- Bunzl recently awarded SCA cance of the crucial work carried out by one of its highest honors for the nurses. fourth consecutive time – Supplier of the Year. SCA was The winner of Queen Silvia Nursing Award – Natalia Duszeńska – with Queen Silvia of Sweden. also named Most Innovative The objective of the winning project, titled “It’s Supplier at the latest biannual Never Too Late To Follow Your Dreams,” is to Bunzl Supplier Day in Europe. involve NGOs, institutions and local authorities in This is a result of “exception- making seniors’ dreams come true. al service, superior engagement between the businesses and a commitment to the highest quality of supply chain Lotus family management.” gets bigger The SCA hygiene brand Lotus is the market leader in all its product categories in France. At least one Lotus product can be found in half of French homes. SCA is now adding a full range of baby products to the Lotus brand family. With its current assortment of dry and moist toilet paper, Italy likes anti- tissues, hankies, baby cotton pads, cotton swabs and household towels, Lotus is bacterial tissue seen as a family brand. The product range For a second time, the SCA brand Tempo is the winner of will include a full line of diapers the Product of the Year award (open and pants) and baby in Italy. Tempo Protect, which wipes. won the award for 2017, con- “Adding baby products to tains an antibacterial formula- its product portfolio will both tion that effectively reduces strengthen the brand further bacteria and viruses directly and drive profitable growth in the tissue and thus protects in the baby category,” from contamination through explains Volker Zöller, presi- the used tissue. The “protect” dent, Consumer Goods. product has been launched Products are available in under the Zewa, Lotus and stores from May. Tempo brands across Europe and Asia.

34 sca Shape 2 2017 voices from a historic meeting SCA held its Annual General Meeting in Stockholm on April 5, and it was a historic event for the company when the shareholders voted in favor of splitting the group into two separate listed companies. Shape spoke to some of the shareholders.

1. Margareta 2. Karl-Johan 3. Amelia 4. Jonna 5. Arne Gärdin- Grundström, Hjelmstedt, Sahlberg, Wennerstål, Lundgren, Uppsala Aktiespararna, Stockholm stenungsund Mariestad Uppsala What do you think What were your What do you think What do you think about the split into What do you think expectations prior to about the split? about the split into two companies? about the split into the AGM today? These are two widely I wanted to listen and two companies? It won’t be a change two companies? differing areas targeting It remains to be seen for the worse for I hope that they can try to understand what slightly different cus- what the advantages Mölnlycke (hygiene) at then each focus on their happens at an AGM. tomer groups. So I think will be. any rate. They may get own business. Then What do you think of it’s positive, as they can What do you think of greater opportunities we’re looking forward to the new name of the focus on the consumers the new name of the for finding alternative the listing of Essity and hygiene company? who use the hygiene Cool, actually – inge- hygiene company? raw material suppli- it will be interesting to products. Forest prod- I don’t really under- ers. The connection see who the company nious! The logo was also ucts have a totally differ- stand it. We were a bit between develop- directors will be. cool, striking somehow. ent customer group. disappointed. Anything ments in Sundsvall and What do you think of What do you think of would probably have felt Mölnlycke hasn’t felt the new name? the new name? wrong when we’re so very natural to me. I think it’s good! Very At first I thought it used to SCA. What do you think of good. Essentials and was an odd name, but it the new name? necessities are both in grows on you. Great, really good! the name.

sca Shape 2 2017 35 SCA moves back to its roots SCA has come full circle. The forest products company is moving its headquarters back to Sundsvall in northern Sweden.

text OLOF AXELSSON photo KRISTOFFER Lönnå

26 sca Shape 2 2017 back to the roots

sca Shape 2 2017 27 back to the roots

about sundsvall Population: 55,000 Municipal area population: 100,000 Latitude: 62 degrees north Major industries: Pulp and paper, sawmills, aluminum, hydroelectric power

Sundsvall

Stockholm

uring the 19th century lumber boom, Sundsvall was Sweden’s timber mecca, which is witnessed not least by The forest products company the city’s magnificent stone buildings. SCA is returning to its headquar- Svenska Cellulosa Aktiebolaget was ters building in Sundsvall, which D opened in 1961. founded in 1929 through the merger of a number of smaller forest companies. At first the company was headquartered in Stockholm, but headquarters were relocated to Sundsvall in 1949 to be closer to the operations. “Even today SCA is one of the With its forest, sawmills, paper mills and trans- municipality’s absolutely most port operations, even today SCA is one of the municipality’s most important employers. important employers.” On account of its size, the company also plays a key role for its subcontractors and the Sundsvall Municipality, but also for Mid Sweden University’s forest industry research and local club activities. Consequently there was considerable disap- pointment when the company relocated its headquarters to Stockholm in 1993. The reason was that the forest products business only accounted for listed forest products company, which is retaining a minor part of the Group at that time. Just under the name SCA, will once again be the building on a dozen jobs were affected by the relocation, but Skepparplatsen in Sundsvall. the symbolic value was much the greater. It is also Even today the original floor remains in the said that Sundsvall’s most exclusive clothing store map room, according to Björn Lyngfelt, VP com- experienced a substantial dip in suit sales. munications at SCA Forest Products, who has Now that SCA is being split into two companies, worked for the Group in Sundsvall since 1986. it has come full circle. The headquarters of the He is delighted that the city has been entrusted

28 sca Shape 2 2017 In 1888 Sundsvall was hit by a devastating fire that destroyed the city’s wooden buildings. From the ashes, a miniature European metropolis emerged: a dense, stylish city made of stone, largely preserved today.

Mats Hansen, Petra Elf, Finance director Runs a recruitment What do you think of when company I say SCA? What do you think of when “Forest, timber and paper, I say SCA? but also freighters.” “Forest, pulp mills, sawmills What significance does and then hygiene products.” SCA have for Sundsvall? What significance does “An enormous amount as so SCA have for Sundsvall? many people work there. “A huge amount. The forest But it’s also important for is our gold and is closely the city’s identity that associated with the city. Sundsvall is associated with Without the timber barons SCA’s good reputation.” we wouldn’t have our Headquarters are now beautiful historic buildings.” moving back to Sundsvall. Headquarters are now Your comments, please? moving back to Sundsvall. “I think it’s great. It’s a Your comments, please? guarantee that Sundsvall “It’s very positive because retains skilled jobs.” they need specialists who have not been able to find jobs in Sundsvall previously.”

sca Shape 2 2017 29 “Local politicians and the business community are, of course, positive, but I’ve also met many other Sundsvall residents who think this is great.”

with housing the headquarters once again. As fill a number of skilled posts, including financial with the relocation in 1993, the symbolic value is jobs. enormous. “Recruitment is going well,” Lyngfelt says. “It’s good that decisions will be made close to “We’ve already attracted people from Stockholm the operations,” Lyngfelt says. and abroad.” It was not quite so simple in the 1950s when SCA What does it mean for Sundsvall itself to once decided to relocate its sales organization from again be the headquarters of a listed forest indus- Stockholm. try giant? Today the city has a considerably higher sta- “Local politicians and the business commu- tus. Thanks to the new headquarters, the city’s nity are, of course, positive,” Lyngfelt says. “But restaurateurs and hoteliers are looking forward I’ve also met many other Sundsvall residents who to increased visitor numbers – especially as next think this is great.” year’s Annual General Meeting will be held in It’s also clear that the new headquarters will Sundsvall.

30 sca Shape 2 2017 back to the roots

With timber, sawmills and paper mills, SCA is one of Sundsvall’s leading employers.

Stefan Anna Wassbrink, Felländer, Energy controller Midwife and school nurse What do you think of when What do you think of when I say SCA? I say SCA? “Pulp and forest are the first “Oh, lots of things. My dad things that come to mind.” has always worked there. What significance does And I pushed the tea wagon SCA have for Sundsvall? in the Skepparplatsen office “A huge amount in the form in my youth.” of both jobs and various What significance does types of collaboration – for SCA have for Sundsvall? example, with Mid Sweden “A great deal. It’s a big University.” business that employs lots Headquarters are now of people.” moving back to Sundsvall. Headquarters are now Your comments, please? moving back to Sundsvall. “My spontaneous reaction Your comments, please? is that it’s good – it feels “It’s surely a good thing that positive. But the question is the management becomes what difference it will make clearer. But the most in practice.” important thing is that the name SCA remains the By relocating its headquarters to Sundsvall, same.” SCA will be close to its roots in the forest.

sca Shape 2 2017 31 Spin-offs on the rise A corporate spin-off involves taking part of a company and making it a separate entity, so that each part of the enterprise can focus on its core business and strategy. The practice has become more common in recent years, and research suggests that it benefits both the companies and the shareholders.

text Jan Lindroth photo Gallery Stock

spin-offs in the business world have rebounded for some time,” says Alexander Roos, senior part- significantly since the financial crisis, supported ner and managing director at Boston Consulting in part by strong capital markets, low interest rates Group, an international management consult- and activist investors seeking value-creation alter- ing firm. “Interest varies with the industry but in, natives. A successful spin-off also has the potential for example, energy, retail and engineering, it is to unlock dormant value in a business unit that can good.” move forward and flourish on its own. Traditionally, conglomerates were valued for “There is a clear trend of more spin-offs in recent the security that came with diverse operations in a years, and from what we see in the pipeline and single company, but the evolution of easily acces- from talks with clients, we expect this to continue sible and open markets has inspired investors to

Split the apple in two and unlock dormant value in the business units.

32 sca Shape 2 2017 market

Division yields multiplication: Splitting the big apple can result in the growth of many new, profitable apples.

seek more pure-play business models. split, the company that is being spun off and the Instead of a corporation with several divisions, remaining part both do well on the market over managers and strategic directives, a pure-play the short as well as the long term. Stock market spin-off can focus on its core business and pursue indexes that track spun-off companies have also its own growth path, while providing the market performed better than the overall market. with a clearer understanding of its underlying “Spin-offs provide an opportunity to define a value drivers. A pure-play business also typically compelling investment thesis for the new com- has more flexibility to pursue value-creating pany and refocus the investment thesis and value initiatives within its own industry. creation strategy of the businesses that remain “A new driver for spin-offs is also the political behind,” Roos says. “The spun-off companies tend uncertainty in several markets, the deregulation to do well also in the longer run, which would sug- or regulation of some markets and accelerating gest that they grow and perform better than they technological development and digitalization,” otherwise would have.” Roos says. “This means business models are One reason spin-offs do well is that pent-up changing and the corporate realities are very dif- entrepreneurial forces are unleashed. From a ferent now.” balance-sheet perspective, a pure play can also Research from both JP Morgan, the interna- establish a capital structure that is appropriate for tional investment bank, and Boston Consulting its specific line of business. For example, a slow- Group shows that after companies announce a growth manufacturing company might want to use more leverage than a faster-growing software company. In addition, a pure play can better use its “... many start pursuing a stock as currency to fund future acquisitions. more aggressive growth “Companies being spun off often start by going through some focusing and efficiency program,” agenda than before, typically Roos says. “But after a while many start pursuing a through acquisitions that more aggressive growth agenda than before, typi- perhaps were not possible cally through acquisitions that perhaps were not possible when they were part of a bigger group.” when they were part of a Although there are many benefits with spin-offs, bigger group.” Boston Consulting Group offers a word of cau- tion that not all spin-offs are successful and that a Alexander Roos, senior partner and managing diligent and well-planned execution is key to the director at Boston Consulting Group future success of both companies.

sca Shape 1 2017 33 Last issue of

shape, a magazine from SCA, primarily geared toward customers, shareholders and analysts, but also for journalists, opinion leaders and others interested in SCA’s business and development. The decision has been taken to split the company into two separate listed companies: the hygiene and health company Essity and the forest products company SCA. We thank all of you Shape readers – for interacting with us, providing feedback and comments to the magazine. As we enter a new chapter for our business, this issue of Shape is the last one. You will be able to continue to interact with us on the following sites once the split has taken place: The hygiene and health company Essity: www.essity.com The forest products business SCA: www.sca.com