June 13, 2013 / 6:01 PM / 6 years ago

SCA sees opportunities as rivals quit Europe

STOCKHOLM (Reuters) - Europe’s biggest hygiene products maker, Sweden’s SCA (SCAb.ST), aims to grow its market share as rivals quit a difficult European market which shows no sign of recovery, its chief executive told Reuters on Thursday.

“I actually don’t see any signs of recovery in Europe and I think it will take many years before we will see that,” Chief Executive Jan Johansson said in an interview.

While demand for soft tissue and nappies is relatively resilient to economic downturns, some big rivals have chosen to pull out of European markets.

SCA however sees scope to grow market share, notably in the baby diaper segment as Kimberly-Clark (KMB.N) plans to quit much of the region, while for incontinence diapers there is a vast untapped market, Johansson said.

SCA, whose main incontinence nappy brand is Tena and main baby nappy brand in Europe is Libero, last year bought Georgia-Pacific’s European tissue operations.

“We have since the Lehman crisis in 2008 had some of the best results in the group’s history in Europe,” Johansson said.

Kimberly-Clark’s decision to exit leaves a vacuum that SCA wants to fill, either manufacturing for retailers or through its own brands, Johansson said.

“We are now looking at all the countries. As one of the larger players on this market, we will benefit from this.”

SCA, whose shares are up 64 percent in the last year, is the second-largest baby diaper player in Europe, after Procter & Gamble (PG.N).

SCA is the global and European market leader of incontinence products and the group has made it a priority to grow that business - in countries like China, with ageing populations, but also in Europe, Johansson said.

“Only 40 percent of people in Europe that would need our products use them,” he said. “So, there is a gigantic growth opportunity there. Short-term, Europe is actually a better growth case for incontinence than China,” he added.

SCA is now stepping up investments to raise awareness and reduce the “shame factor” around adult diapers, Johansson said. Recently, SCA mailed samples of incontinence diapers for men to all Swedish men above 55 - receiving a few angry calls.

“We are starting to find new methods even if we are getting a bit yelled at underway,” Johansson said.

SCA’s Tissue unit, which makes kitchen rolls, toilet paper and tissues, is its biggest by sales and profits. Incontinence care is however SCA’s most profitable and its share of group profit will grow, Johansson said.

While hoping to bank on fast-growing demand for hygiene products in emerging markets long-term, SCA still has over 70 percent of group revenues in Europe.

Johansson said SCA, which last year bought Taiwan-based Everbeauty, is looking to buy more hygiene firms in emerging markets such as Brazil and China, and in the United States.

In Europe, however, SCA has become too big for competition authorities to approve more acquisitions except possibly in the feminine product segment, he said.

In 2012, SCA’s operating profit before one-offs was up 12 percent to 8.6 billion crowns on sales of 85.4 billion crowns.

The company’s shares trade at 18.1 times forecast 2013 earnings compared with Kimberly-Clark’s 16.9 and Procter & Gamble’s 19.2, according to Thomson Reuters data.

Reporting by Anna Ringstrom; Editing by Elaine Hardcastle

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