SCA growth in Middle
East, Europe and Americas
SCA is forming a joint venture company in
the Middle East with Jordan-based industrial group
Nuqul. In other news, the company has announced completion
of its takeover of P&G’s European operations
and expansion of its North American business.
The new Nuqul JV, in which SCA will own 50%, will manufacture
and sell feminine hygiene products in the Middle East and
Egypt. The operation will span 18 countries in the region.
SCA's purchase price for its 50% stake amounts to $18.5 million.
Nuqul is a leading industrial group in the Middle East, with
operations that include tissue and personal hygiene products.
The Group’s annual sales
total approximately $400 million. Nuqul is the leading supplier
of tissue in the region and has a substantial and fast growing
hygiene business with strong positions in all Middle East
markets.
The new joint venture company will gain immediate access
to Nuqul's production facilities and broad distribution network.
SCA will bring to the joint venture its own feminine product
range, world-leading technology and marketing expertise.
Nuqul’s Feminine Care business – with annual sales of approximately
$15 million – will form the base of the joint venture
company.
”This joint venture gives us a unique platform for entering Egypt and the
main markets of the Middle East with our successful feminine hygiene products," says
Gunnar Johansson, president of SCA Personal Care. "These
markets have immense growth potential, and we expect to grow
our sales in the region substantially. We aim to complement
Nuqul's product range, sold under the Cinderella and Lady
Fine brands, with our own product range. Our ambition is
to eventually extend our joint venture to other personal
care categories in the future.”
SCA’s sales of personal care products in Africa, Middle
East and South Asia (India, Pakistan and Afghanistan) are
about $70 million. The market outlook is positive, with a
young female population. In the key markets as much as a
third of the population is 14 years or younger. These markets
are identified as Jordan, Lebanon, Palestine, Saudi Arabia,
the United Arab Emirates, Kuwait, Oman, Bahrain, Qatar and
Egypt. The purchasing power of people in the region is also
expected to grow.
DEAL ANNOUNCED EARLIER
CLOSED
The transfer of Procter & Gamble’s European Tissue operations to SCA
was completed at the end of September. The total purchase price is approximately €512
million, and the first payment of €329 million was made in cash in connection
with the closure. The remaining part of the purchase price, €183
million, will be paid following agreed technical adjustments
at certain plants, which are expected to be completed during
the first half of 2008.
In
the UK, the deal will mean the addition of the Charmin,
Bounty and Tempo brands to SCA’s current portfolio
of tissue products, that already included Velvet, Handy
Andies, Wipe & Clean and Tork. The new brands give
SCA further prominence in the major multiples and independent
retailers, the company says. It adds: “The acquisition
gives SCA key prerequisites for the creation of an even
better platform for consumer-driven awareness and will
also serve to strengthen SCA’s position in several
important markets across Europe”.
Mats Berencreutz, head of SCA’s European Tissue Business, commented: “This
deal means we can provide a much more competitive offer to
Kleenex and Andrex and make retailers appreciate having more
than one major branded player on the shelf. We want to tell
people we are here and that we are committed to growing the
market.”
Joanne Mathers, brand manager, Velvet, comments: “We are very excited that
the deal has now reached completion stage and the impact this will have on our
business in the UK is considerable. We’re proud to
be bringing the Charmin, Bounty and Tempo brands into our
fold and we are currently laying plans for marketing activity
in 2008.”
Velvet is currently the second biggest toilet tissue brand in the UK. SCA, makers
of Velvet, recently came top in a WWF survey of the big five tissue manufacturers,
who make up 75% of the European market, based on their environmental performance.
The performance is assessed on criteria including the levels of recycled content,
wood sourcing practices, pollution control and transparency.
CONTINUED GOOD GROWTH IN
KEY AMERICAS MARKET
SCA sees a continued positive sales trend for its hygiene products in North,
Central and South America (Americas) over the next few years, it said in a prepared
statement. It already has leading brands established on these markets. Organic
growth is expected to be 5-7 % in the next few years. Furthermore, SCA sees opportunities
for selective acquisitions.
At a capital market day in New York in September, SCA Americas’ management
presented their strategy for continued growth and profitability improvements
in the region. SCA’s CFO and acting CEO, Lennart Persson, confirmed at
the same time the Group’s potential for improvement
as presented earlier.
This means that SCA can improve its earnings by an additional
1-2 percentage points over the next two years from today’s
operating surplus margin of 15%. The outlook presented at
the end of the second quarter is thus unchanged.
SCA Americas today has dedicated hygiene operations with strong market positions
within both tissue and personal care products and the goal is to achieve organic
growth of 5-7 % over the next few years.
“We have strong brands in our product portfolio,” says Thomas Wulkan,
President of SCA Americas. “In Colombia, for example, our brands for tissue
(Familia) and feminine care (Nosotras) outperform some of the bestknown brands
in the world in terms of awareness and recognition. We have built up our positions
locally, often through strong joint ventures. We have the platform – now
we want to continue to grow and establish SCA in new markets in the region,” says
Thomas Wulkan.
SCA is open for selective acquisitions, but underlines that organic growth is
at least equally important, together with raising the valueadded content of products
and services.
In the US, SCA has established itself as a leading player
within AfH tissue. The strongest segments are the restaurant
sector and commercial workplaces. Within both these segments
SCA is working to increase the value of its products and
services. “Our target is to double the proportion of sales of high-value
products from 15% to 30% within the next four years. Our launch of the Tork brand
is a decisive part of this work,” says Thomas Wulkan.
Within incontinence care, SCA is today the leading supplier
to nursing homes and institutions in North America. Total
sales of incontinence care products had annual growth of
approximately 9% in 2004–2006.
“Our assessment is that we will continue to have a strong sales trend in
the years ahead. However, improving margins within the nursing home and institutions
segment is just as important as good growth,” Lennart
Persson concludes.
