Annual Report 1998

22
Central and Eastern Europe
SCA’s Polish and Hungarian packaging units, which started
production in 1997, developed favorably according to plan. In
order to complete the network of plants covering this region, a
33% interest in the Obalex packaging company was acquired
during 1998. Obalex produces corrugated board in the Czech
Republic and Slovakia. Since privatization in 1993, Obalex has
steadily grown and presently consists of two integrated box
plants and six converting plants. Obalex reported sales in
1997 of SEK 240 M. Annual production of 80 million m 2 of
corrugated board account for 20% of the market in the Czech
Republic. The Obalex acquisition complements SCA’s production
in Austria, Poland and Hungary which, combined, represent
a key element in SCA’s ability to deliver transport packaging
products to pan-European customers in the region.
SCA Packaging is continuing to study other potential acquisitions
in Central and Eastern Europe in order to further
complete its network of plants.
The economic and financial crisis in Russia has not had any
significant impact to date on SCA’s packaging operations in
Central and Eastern Europe.
Asia
The establishment of operations in China, which SCA began in
1996 in a joint-venture with Weyerhaeuser, is progressing.
SCA’s first packaging plant in China was inaugurated in May
1998. The 35 employees at the plant were trained in Europe
and the US. Customers include Carlsberg, Akzo-Nobel, Coca-
Cola and Budweiser. Due to floods in the Wuhan region, construction
of a second packaging plant has been delayed, but
work has resumed and is now continuing according to plan for
opening in 1999.
At the beginning of 1999, SCA acquired an 11% holding in
the Singapore-based packaging company Central Package
Group, with annual sales of about USD 50 M. SCA has the
possibility to increase ownership to 51% within five years. The
company produces about 50 million m 2 of corrugated board
m2 /capita
150
120
90
60
30
0
Annual per capita
consumption
Western Europe
Eastern Europe
China
Brazil
US
The prosperity and GDP of a country is closely
linked to the consumption of corrugated board.
each year, with production in China, Singapore, Malaysia,
Thailand and Indonesia. Accordingly, it represents an important
complement to SCA’s existing operations in the region
with American Weyerhaeuser.
CONTAINERBOARD
Market
The number of containerboard producers is somewhat less
than corrugated board. The five largest companies hold a relatively
dominant position on the European market.
Most companies deliver containerboard to their own packaging
production but also sell to external corrugated board
producers.
White top liners, which provide for a better printing quality
on the finished packaging, is in increasing demand and is an
important competitive tool.
The market for containerboard in Europe and North
America was affected by the Asian crisis. Demand in Asia declined
during the year, but was offset by stronger demand in
Europe. Demand was favorable for kraftliner and testliner
during the first nine months of the year resulting in rising
prices. Demand declined somewhat toward year-end concurrent
with a surplus of containerboard in the U.S. creating price
pressure on mainly kraftliner in Europe. Demand for testliner
was stable during the entire period.
SCA’s strategy and market position
SCA Packaging is one of the market leaders in containerboard
in Europe, with two kraftliner mills in Sweden and seven testliner
mills in Europe. Total capacity is 2.4 million tons annually,
with a market share of 12% in 1998. SCA sells containerboard
to external customers as well as internally to SCA Packaging’s
plants. Internal sales are at market prices.
SCA delivers corrugated packaging
to Yves Rocher’s sales of
beauty products which are to
some extent sold by mail order.