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UPDATE 1-Emerging markets help SCA profit top consensus
July 19, 2012 / 12:46 PM / in 5 years

UPDATE 1-Emerging markets help SCA profit top consensus

* Q2 pretax profit 1.5 bln SEK vs consensus 1.4 bln

* Emerging market demand for hygiene products growing

* Little demand growth in Western Europe, North America

* Shares up 5 pct (Adds analyst comment, detail, background, shares)

By Anna Ringstrom and Christopher Jungstedt

STOCKHOLM, July 19 (Reuters) - Demand from emerging markets pushed hygiene and paper products maker SCA’s quarterly pretax profit slightly higher than expected, offsetting weakness in North America and Europe.

Pretax profit at Europe’s biggest tissue and diaper maker was unchanged from a year earlier at 1.5 billion crowns ($216 million).

The result excludes the packaging unit, which SCA sold in June to DS Smith as part of its process of repositioning itself as a hygiene product group, and compares with a forecast for a 1.4 billion crown profit in a Reuters survey.

Personal care and tissue products are less cyclical and have greater market growth potential, particularly in emerging markets, while paper products have been struggling with falling demand.

SCA’s shares were up 5 percent 1140 GMT to a two-month high, outperforming the wider market in Stockholm.

“They managed to beat consensus across the board. There had been concerns ahead of the report after they missed substantially in Q1,” said Cheuvreux analyst Mikael Jafs. “The market is relieved that miss was a one-off.”

In the first quarter, SCA’s paper and wood product unit especially suffered from weak demand and high raw material and energy costs.

SCA said on Thursday demand for solid-wood products remained weak, and demand in Western Europe for magazine paper and newsprint was down.

“For hygiene products, emerging markets are showing continued favourable development while markets in Western Europe and North America have low or no growth,” the rival to Kimberly-Clark Corp and Procter & Gamble said, pointing to slowing economic growth amid the European debt crisis.

It had earlier forecast continued good demand for its hygiene operations overall.

SCA also said it had now finalised its purchase of Georgia-Pacific’s European tissue operations, a deal that will boost SCA’s market share in consumer tissues by 10 percent to 35 percent.

The parts of Georgia-Pacific’s tissue unit which SCA is required by competition agencies to sell, have sales of some 200 million euros, SCA said.

Nordea analyst Harri Taittonen said that figure was smaller than many had feared, and the news helped lift SCA’s shares.

$1 = 6.9440 Swedish crowns Additional reporting by Sandra Jansson, editing by William Hardy

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