July 18, 2014 / 12:51 PM / 3 years ago

UPDATE 1-Sweden's SCA increases profits on emerging market demand

* Core profit 2.93 bln SEK vs consensus 2.78 bln

* Biggest market Europe was flat in H1

* Shares up 2.5 pct

* Biggest business tissue beats consensus (Adds detail, background, analyst)

STOCKHOLM, July 18 (Reuters) - Swedish hygiene and paper products maker SCA on Friday reported a big increase in second-quarter profit on the back of growing demand from emerging markets, cost cuts and a tissue company acquisition in China.

SCA, Europe’s biggest maker of tissue and largest private forest owner, said demand for tissue and personal care products was stable in Europe, where it still has the bulk of business but was up in emerging markets.

Last year, SCA became main owner in the third-largest tissue firm in China, the world’s second-largest tissue market, as part of plans to grow in emerging markets. SCA expects these markets to have attractive long-term potential due to increasing wealth.

The global market for tissue where SCA competes with Georgia-Pacific, Kimberly-Clark and Sofidel, is valued at slightly more than 410 billion crowns and is growing by 4 percent annually, according to SCA.

The company’s operating profit before restructuring costs and other one-offs at was 2.9 billion crowns ($425.2 million) in the quarter, against a mean forecast of 2.8 billion in a Reuters poll of analysts and a year-ago 2.3 billion.

Profit at the tissue and forest products businesses increased on the back of cost savings, higher volumes and higher prices while profit at the personal care unit decreased hit by higher raw material costs.

“Tissue was strong, better than expected,” said David Hallden, analyst at UBS. “It’s a very strong report throughout”.

The tissue business, which makes up more than half of group sales, sells toilet paper and tissues under brands such as Tork and Edet. The personal care unit sells feminine care, incontinence and baby diapers under brands such as Libero and Tena.

Shares in SCA were up 2.5 percent to 175.90 crowns at 1115 GMT, outperforming the blue-chip Stockholm index.

$1 = 6.8199 Swedish Crowns Reporting by Anna Ringstrom and Rebecka Roos. Editing by Jane Merriman

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