Annual Report 2002 - Holmeninvestors.holmen.com/afw/files/press/holmen/Holmen_2002_AR_en.… · Annual Report 2002 Holmen AB (publ) P.O. Box 5407 SE-114 84 STOCKHOLM SWEDEN Tel +46

Annual Report 2002

Holmen AB (publ)P.O. Box 5407SE-114 84 STOCKHOLMSWEDEN

Tel +46 8 666 21 00Fax +46 8 666 21 30E-mail: [email protected]

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HOLMEN PAPERHolmen Paper AB(Vattengränden 2)SE-601 88 NORRKÖPINGSWEDENTel +46 11 23 50 00Fax +46 11 23 63 04E-mail: [email protected]

Hallsta Paper MillSE-763 81 HALLSTAVIKSWEDENTel +46 175 260 00Fax +46 175 264 01E-mail: [email protected]

Braviken Paper MillSE-601 88 NORRKÖPINGSWEDENTel +46 11 23 50 00Fax +46 11 23 66 30E-mail: [email protected]

Wargön MillSE-468 81 VARGÖNSWEDENTel +46 521 27 75 00Fax +46 521 27 75 80 E-mail: [email protected]

Papelera PeninsularParque Industrial LA CANTUEÑAC/del Papel 1ES-28947 FUENLABRADA (Madrid)SPAINTel +34 91 642 0603Fax +34 91 642 2470E-mail: [email protected]

IGGESUND PAPERBOARDIggesund Paperboard ABSE-825 80 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 288 00E-mail: [email protected]

Iggesunds BrukSE-825 80 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 285 32E-mail:[email protected]

Ströms BrukP.O. Box 67SE-820 72 STRÖMSBRUKSWEDENTel +46 650 289 00Fax +46 650 289 30E-mail: [email protected]

Workington MillWORKINGTON CumbriaCA14 1JXGREAT BRITAINTel +44 1900 601000Fax +44 1900 605000E-mail:[email protected]

IGGESUND TIMBERIggesund Timber ABP.O. Box 45SE-825 21 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 280 57E-mail: [email protected]

Iggesund SawmillP.O. Box 45SE-825 21 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 284 48E-mail: [email protected]

HOLMEN SKOGHolmen Skog AB(Hörneborgsvägen 6)SE-891 80 ÖRNSKÖLDSVIKSWEDENTel +46 660 754 00Fax +46 660 759 85E-mail: [email protected]

HOLMEN KRAFT Holmen Kraft AB(Hörneborgsvägen 14)SE-891 80 ÖRNSKÖLDSVIKSWEDENTel +46 660 754 00Fax +46 660 755 10E-mail: [email protected]

The complete list of addresses may be obtained from Holmen’s website, www.holmen.com under Publications.

AddressesHOLMEN AB Head office(Strandvägen 1)P.O. Box 5407SE-114 84 STOCKHOLMSWEDEN


The year in brief ________________________________________________________________________________________ 1The year in pictures _________________________________________________________________________________ 2Comments by the President and CEO ______________________________________________ 4Strategy ______________________________________________________________________________________________________ 6Financial targets _______________________________________________________________________________________ 7The share____________________________________________________________________________________________________ 8Ten year-review_______________________________________________________________________________________ 11History _______________________________________________________________________________________________________ 12Holmen at home and abroad______________________________________________________________ 13Products and production_____________________________________________________________________ 14Human resources __________________________________________________________________________________ 16

Holmen Paper_________________________________________________________________________________________ 18Iggesund Paperboard___________________________________________________________________________ 22Iggesund Timber ____________________________________________________________________________________ 26Holmen Skog __________________________________________________________________________________________ 28Holmen Kraft ___________________________________________________________________________________________ 32

Holmen and society ______________________________________________________________________________ 34Holmen and the environment _____________________________________________________________ 36

ANNUAL REPORTProfit and loss account_________________________________________________________________________ 38Balance sheet _________________________________________________________________________________________ 40Cash flow analysis ________________________________________________________________________________ 42Report of the directors__________________________________________________________________________ 44Financial risk management _________________________________________________________________ 46Quarterly figures _____________________________________________________________________________________ 48Parent company_____________________________________________________________________________________ 49Accounting principles ___________________________________________________________________________ 50Definitions of financial ratios________________________________________________________________ 52Notes _________________________________________________________________________________________________________ 53Shareholdings _________________________________________________________________________________________ 60Proposed treatment of unappropriated earnings _________________________ 62Audit report ______________________________________________________________________________________________ 63

Board of directors __________________________________________________________________________________ 64Senior management______________________________________________________________________________ 66Annual General Meeting_______________________________________________________________________ 68Addresses

Contents

Financial information 2003Holmen publishes the following financial reports in 2003:

5 February Year end report for 2002Beginning of March Annual Report 20027 May Interim report for January-March20 August Interim report for January-June30 October Interim report for January–September.

The annual report is sent by VPC AB to shareholders who have indicated their wish to receive it. The year end and interim reports are included in Holmen Business Report magazine which is published in English and Swedish four times a year. Holmen Business Report is sent to all shareholders who are registered with VPC.

The financial information is available in English and Swedish at Holmen’s website, www.holmen.com and may be ordered from:

Holmen ABGroup Public RelationsP.O. Box 5407SE-114 84 STOCKHOLMSWEDENTel +46 8 666 21 00Fax +46 8 666 21 30E-mail: [email protected]

This annual report is produced by Holmen in co-operation with LINK Investor Relations, Stockholm, Sweden.

Graphic production: Okidok, Stockholm.Printing: db grafiska, Örebro.Photo: Anders Engman, Rolf Adlercreutz and others. Illustration page 15: Thomas Öhrling/Info AB.Paper: The cover is printed on paperboard, Invercote® Albato 250 gsm, made by Iggesund Paperboard.

Inside pages: M-real’s Galerie art silk 150 gsm. Translation: Beck Translations, Stockholm.

1 HOLMEN ANNUAL REPORT 2002

The year in brief

Profit after financial items was MSEK 2,564

Profit for the year after tax amounted to MSEK 1,959, which corresponds to earnings per share of SEK 24.50

The return on equity was 13.7 per cent

The Board proposes payment of a dividend of SEK 11 per share

A new machine for production of paper for specialist magazines, supplements and direct mail advertising was brought into produc-tion at the Hallsta Paper Mill

Hydroelectric power assets of 541 GWh were bought back.

HIGHLIGHTS, GROUP 2002 2001

Net turnover, MSEK 16,081 16,655

Operating profit, MSEK 2,713 2,446

Profit after financial items, MSEK 2,564 2,294

Profit for the year, MSEK 1,959 2,186

Return on capital employed, % 15.5 17.7

Return on equity, % 13.7 16.0

Earnings per share, SEK 24.50 27.33

Dividend, SEK 11.00 * 10.00

Debt/equity ratio 0.25 0.22

Capital expenditure, MSEK 3,191 1,715

Average number of employees 5,075 5,238

* Proposal of the Board

CASH FLOWMSEK

0

1,000

2,000

3,000

4,000

0201009998

Cash flow before capital expenditure Capital expenditure

Excl. divested activities

PROFIT FOR THE YEARMSEK %

0

1,000

2,000

3,000

4,000

02010099980

6

12

18

24

Profit for the yearReturn on equity

Net turnoverOperating margin

Excl. items affecting comparabilityand divested activities

NET TURNOVER%MSEK

0

4,000

8,000

12,000

16,000

20,000

02010099980

5

10

15

20

25

Earnings per shareOrdinary dividendExtra dividendProposed dividend

EARNINGS AND DIVIDEND PER SHARE

SEK

0

10

20

30

40

50

60

0201009998

Operating profitReturn on capital employed


OPERATING PROFITMSEK

0

1,000

2,000

3,000

4,000

02010099980

6

12

18

24%

2 HOLMEN ANNUAL REPORT 2002 3 HOLMEN ANNUAL REPORT 2002

The new paper machine at the Hallsta Paper Mill starts to pro-duce paper in the first week of April after an installation period

of only 70 days. Here, machine operators Dan Jansson (left) and Joakim Jönsson check the quality of the paper.

A new, patented product concept with the working name Secu-rity Board is launched by Iggesund Paperboard at the begin-

ning of the year and arouses great interest. This paperboard can be an effective weapon in the battle against counterfeit packaging for such products as pharmaceuticals, CDs and perfume.

The year in pictures

H olmen announces in June that hydroelectric power assets with an annual output of 541 GWh of electricity are to be

bought back for MSEK 1,700. The buy-back relates to power assets on the river Umeälven and is carried through as of 31 December 2002. Here at the Harrsele power station are Susanne Blomberg (Holmen Kraft) and Göran Sandström (Elektro Sandberg).


I n September, His Majesty the King Carl XVI Gustaf inaugurates the new paper machine in Hallstavik. The King, at the touch of a

button, causes a shower of confetti. The ceremony is attended by more than 450 guests from 25 countries.

Holmen is the leading company in Sweden in the field ofremote forest analysis. Satellite imaging will prove a valuable

tool for determining when forests should be cleared or thinned,for example. Damaged forests can be quickly identified, and by 2002 it was already possible to obtain an accurate picture taken by satellite of the condition of the forest on the ground.

H olmen’s Board decides in March to complete the Iggesund Sawmill by investing in a new quality grading unit. The new

installation is ready for commissioning at the end of 2002.


Comments by the President and CEO

The market for Holmen’s

main products was relatively

weak in Western Europe in

2002. The consumption of

newsprint and magazine

paper declined, while paper-

board consumption

remained largely unchanged.

Despite this market situa-

tion, Holmen reports a good

result, a profit of MSEK

2,564 after financial items

and earnings per share of

SEK 24.50.

The operating results of

our two main business areas

showed diverging patterns:

Iggesund Paperboard’s

improved to a healthy level

that was higher than in

2001, while Holmen Paper’s

result declined, although

under the circumstances it

was still good.

Postponed newsprint expansion A lower order intake resulted

in Holmen having to reduce its production of

newsprint and magazine paper. Demand was

weak, due mainly to a lower advertising intake,

especially in the case of job ads and brand

advertising.

Because of the prevailing demand and uncer-

tainty regarding market developments, the deci-

sion to build a new paper machine at our Span-

ish mill Papelera Peninsular has been postponed

until further notice. This is not a departure

from the Group’s strategy of expansion in news-

print and magazine paper. We are completing the

pre-project and are in the process of acquiring

the land needed for the machine and the accom-

panying infrastructure.

The Braviken Paper Mill did very well during

the year in terms of production. Despite a

difficult start, production on Hallsta Paper

Mill’s new paper machine turned out well, and

the quality of its improved newsprint matches

the high expectations. The new products, on

which we are focusing sharply, have been well

received by the customers.

Higher paperboard volumesThere is still some excess capacity on the Euro-

pean paperboard market. With this in mind, it

is encouraging that our efforts to sell more

paperboard on new markets in 2002, particu-

larly in Asia and the USA, proved successful.

We have strengthened the sales organisations

and are advancing our position on these mar-

kets with the aid of our high quality products.

Capacity utilisation rose considerably at both

Iggesunds Bruk and the Workington Mill. At the

latter, production moved in the right direction

not only in volume terms but also in quality.

The important market for packaging for

medical products showed further growth. The

demand for paperboard for tobacco products

remained stable and Iggesunds Bruk’s new

resource-lean and further improved grades of

paperboard in this segment have been well

received by the customers.

Ownership of forests and power importantIt is important to have an in-depth understand-

ing of and be well informed about the markets

for forest raw materials and power. This is one

of the reasons why Holmen regards its owner-

ship of forest and power assets as strategic. Just

how important it is for the Group to have its

own electric power resources, and so to know

how the power market functions, is something

we were reminded of at the end of 2002. Thanks

to our own hydroelectric power and hedged

prices, Holmen was not significantly affected by

the radical increase in electricity prices that

resulted from the low water levels in the reser-

Göran Lundin.


voirs at power stations and the cold weather. It

became apparent to electricity-intensive manu-

facturers in Sweden that the country’s energy

system in its present form is grossly inadequate.

Holmen, along with Sweden’s other electrici-

ty-intensive industries, has explained the risk of

electricity shortages, pointing out the necessity

for reform of the country’s energy policy.

Efficient sawn timber businessDuring the first half of 2003, the Iggesund Saw-

mill will become an efficient unit for the pro-

duction of sawn timber, when the extensive

programme of measures to improve efficiency

at the sawmill will be completed. A radical

reduction in manning levels and steadily

improving production efficiency will bring the

cost base down to a healthy level for the future.

Focus on profitabilityThe profitability of Holmen’s main businesses

has historically been good. The model we use

for assessing the Group’s profitability is simple

and is used in practice as an effective control

instrument. For the business to generate a prof-

it, the return must be high enough to cover tax

and capital costs.

In 2002 Holmen was adversely affected by

the slack demand and lower prices, particularly

for newsprint and magazine paper that were

caused by the generally weak economic condi-

tions. Swedish exports, however, were boosted

by the weakness of the currency.

Since we are not expecting any external stim-

uli in the form of a stronger economy and

favourable currency movements in the near

future, we have stepped up our efforts to

improve productivity and raise our profitability.

Measures have been taken to lower production

costs, including efficiency improvements and

some reduction in manning levels. Parallel to

this, we are working on the possibility of boost-

ing our sales on new markets and via the intro-

duction of new products.

The currency is importantExchange rates are one factor among many that

determine the international competitiveness of

Swedish industry. Sweden, after the referendum

in September, might be about to replace its

national currency with the euro. Should this

happen, it is essential that the exchange rate rep-

resents acceptable terms for Sweden’s exporters.

Human resources initiatives If Holmen is to continue to develop successfully,

it is important that we have high calibre

employees. In our efforts to stimulate excellence

our managers have a key role to play. For this

reason, we have initiated a number of activities,

including an internal, globally orientated lead-

ership programme together with IFL − Swedish

Institute of Management.

On the human resources side, we are also

turning our attention to long-term sick leave,

which has been on the increase in recent years.

2003The state of the economy in general has a great

impact on the demand for Holmen’s main

products. No real upswing can yet be seen on

our principal markets, where the demand for

newsprint and magazine paper is still weak,

while a slight recovery is becoming apparent on

the paperboard market.

In this situation, Holmen’s profitability, its

strong balance sheet, and its efficient mills pro-

vide a sound platform for our continued efforts,

pending the recovery that will sooner or later

materialise.

Stockholm 14 February 2003

Göran Lundin, President and CEO


Holmen Paperproduces and sells newsprint and magazine paper.

Iggesund Paperboardproduces and sells solid bleached board and folding boxboard.

Iggesund Timbermanufactures and sells sawn timber.

Holmen Skoghas responsibility for procuring wood for the Group’s Swedish units and for the management of the Group’s forests.

Holmen Krafthas responsibility for the procurement of electricity for Holmen’s Swedish mills and for the Group’s hydroelectric power stations.

Business areas

The business areas are described in detail on pages 18–33.

Strategy

Holmen Paper is supplier to Spain’s El Pais newspaper. Some of the postcards and greetings cards in the background could very well be printed on graphic paperboard from Iggesund Paperboard.

Business ConceptHolmen’s main product areas are

– newsprint and magazine paper for newspa-

pers, magazines, directories and advertising

print

– paperboard for consumer packaging and

graphical applications.

In both these areas Holmen has a strong posi-

tion on the market, which it intends to develop.

Holmen shall grow at a faster rate than the

market. Attractive products and product

development provide the prerequisites for

growth, both organic and via selective acqui-

sitions

Holmen focuses on high quality and low

production costs within each product area.

Cost efficiency is achieved by applying large-

scale production and the high competence of

the personnel

By owning forests, power and recovered

paper collection companies Holmen shall

have knowledge and control of important

raw materials regarding purchasing, price,

availability and quality.

Guidelines Holmen’s profitability shall be good, with a

sustainable, long-term return in excess of the

market cost of capital

The financial position shall be strong with a

debt/equity ratio of 0.5–0.7. The ordinary

dividend shall correspond to 5–7 per cent of

equity. Extra dividend will be paid and

shares bought back when the capital struc-

ture and the financing requirements of the

business permit

By training and attracting quality employees

Holmen guarantees its competence long-

term

Research and development are focused on

developing better products and more effi-

cient processes based on the customer-needs

The operations shall be characterised by a

holistic approach, which involves protecting

the environment, lean use of raw materials

and energy, and the promotion of sustainable

development.


Profitability targetsHolmen uses profitability targets to control its

business. The Group’s business concept and its

core business have historically been profitable.

Unprofitable lines of business have been divest-

ed or made the subject of restructuring and

rationalisation to return them to profitability.

The potential to improve profitability lies

mainly in growth, wherever possible, or

through other measures that will strengthen the

Group’s competitiveness and reduce costs.

The Group uses a simple model for measuring

profitability. For the business to be regarded as

profitable its profit must cover tax and capital

costs. The cost of capital is calculated as the cost

of debt and equity weighted based on Holmen’s

debt/equity target. The cost of equity is calculat-

ed based on the long-term interest rate plus a

risk premium adapted to the risk associated

with the business, where the capital employed at

the mills is given a higher risk premium (5 per

cent) than that invested in forests and hydroelec-

tric power assets (2 per cent).

Holmen’s business is capital intensive and

much of the development is made through

investments in enlarged and improved produc-

tion capacity. Cost rationalisation is also often

the result of investments. To evaluate the profit-

ability of such investments, Holmen uses a

model for calculating the discounted cash flow,

by which is meant that the estimated future

cash flow is discounted with the weighted capi-

tal cost.

The Group’s weighted capital cost is at present

approximately 10 per cent for the mills and

approximately 7 per cent for forests and power

assets, calculated before tax.

Targets for capital structureHolmen shall have a strong financial position

with relatively low debt. This ensures a low level

of financial risk and enables the company to

make sound, long-term commercial decisions

relatively independently of the state of the econo-

my and external financing possibilities. The tar-

get for the debt/equity ratio is 0.5−0.7, and is

part of Holmen’s strategic planning. However,

there is no regular fine-tuning to reach the tar-

get, and the debt/equity ratio has not exceeded

0.5 over the past eight years other than in con-

nection with the payment of extra dividends in

1999 and 2001.

Dividend targetHolmen intends to pay a stable and relatively

high ordinary dividend. The target is expressed

as 5−7 per cent of the equity. During the past

eight years the dividend has corresponded on

average to slightly more than 5 per cent of the

equity. This means that some 40 per cent of

Holmen’s earnings per share were paid out in the

form of ordinary dividends during this period.

Over and above the ordinary dividend,

Holmen has paid extra dividends on two

occasions, pursuant to decisions by the Annual

General Meetings in 1999 and 2001. These

decisions reflected the wish to pay out to share-

holders liquid funds that were not deemed to

be necessary for the company’s development.

On both these occasions the debt/equity ratio

increased to 0.5.

The Annual General Meeting has mandated

Holmen’s Board to buy back the company’s

own shares. This mandate was not exercised in

2002. Holmen bought back shares in 2000, cor-

responding to 10 per cent of the shares in issue

at the time. These shares were then cancelled in

2001. There is no specific target for share buy-

backs, but the practice instead has been used as

a complement to the dividend as a means of

adjusting the capital structure when circum-

stances were judged to be favourable.

Financial targets

Capital employed at the mills requi-res a higher risk premium than capital invested in forests and hydroelectric power assets. The photo depicts a reeling machine at the Braviken Paper Mill, as seen from the control room.


The share

Share structureHolmen has 80 million shares, divided upon

22.6 million Series “A” shares and 57.4 million

Series “B” shares. Each Series “A” share carries

ten votes and each Series “B” share one vote.

Otherwise, the shares carry the same rights.

Trading at the stock exchangeThe company’s two series of shares are listed on

Stockholmsbörsen’s list of most heavily traded

stocks. The average number of Holmen’s Series

“B” shares traded each day was 164,000, which

corresponds to a value of MSEK 37. The aver-

age number of Series “A” shares traded was

500 per day.

Convertibles and warrants issued by Holmen

are quoted on Stockholmsbörsen, where stand-

ardised put and call options on Holmen’s Series

“B” shares are also traded. During the year, the

price of Holmen’s Series “B” shares declined by

SEK 27.00 (11 per cent) to SEK 211.50. The

Affärsvärlden General Index fell by 37 per cent

in 2002.

At the year end, Holmen’s shares had weight-

ings of 0.9 per cent and 11.3 per cent in the

Affärsvärlden General Index and the Commod-

ities Index respectively.

Earnings per shareEarnings per share amounted to SEK 24.50

(2001: 27.33), which corresponds to SEK 23.58

(26.41) after full dilution. Holmen’s stated

earnings per share have averaged SEK 29.30

over the past five years.

DividendThe Board proposes that a dividend of SEK 11

per share (10) be paid. Holmen’s target is for

the ordinary dividend to correspond to 5–7 per

cent of the equity. The proposed dividend corre-

sponds to 5.8 per cent of the equity.

Share buy-backThe 2002 Annual General Meeting mandated

the Board to buy back maximum 10 per cent of

all the shares in the company before the 2003

Annual General Meeting. This mandate has not

been exercised in 2002.

Other share information The stated equity per share was SEK 188 (176) at

the end of the year. The return on equity was 14

per cent (16). The stated return on equity has aver-

aged 16 per cent over the past five-year period.

Warrant programmesIn 1998, a convertible loan and warrants were

issued to Holmen’s personnel at market prices.

The conversion and subscription price is SEK

112.70 after adjustments. The conversion and

subscription rights may be exercised between

1 February and 31 March 2004. In the event of

full conversion and subscription, 4.2 million

new shares will be issued, which corresponds to

dilution of 5.0 per cent of the equity and of 1.5

per cent of the votes.

In September 2002, L E Lundbergföretagen

issued 256,000 call options on Holmen’s Series

“B” shares to 40 senior company officers. The

options were assigned for cash at market price.

A similar programme was issued in 1998 with

expiry in 2003.

75

100

125

150

175

200

225

250

275

300

97 98 99 00 01 02

TOTAL RETURN INCLUDING REINVESTED DIVIDENDS FOR HOLMEN B AND GENERAL INDEX, NO TAX DEDUCTED

Holmen B General Index (SIXRX) (c) SIX


1,500

3,000

4,500

6,000

150

200

250

300

350

01 02

Holmen A

Holmen B

Affärsvärlden General Index

Number of ”B”shares traded,thousands

120

(c) SIX

SHARE PRICE DEVELOPMENT AND NUMBER OF SHARES TRADED

Ordinary and extra dividends of SEK 69.00per share in total are distributed.

2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

Earnings per share 1), SEK

Before dilution 24.50 27.33 45.90 20.40 28.20 16.10 22.30 41.30 14.90 –3.60

After dilution 23.58 26.41 44.70 19.90 27.40 16.10 22.30 41.30 14.90 –3.60

Dividend per share, SEK

Ordinary dividend 11 6) 10 9 11 10 9 9 8.50 5.50 0

Extra dividend – – 60 – 35 – – – – –

Ordinary dividend as % of

Equity 6 6 4 6 5 5 5 5 4 –

Closing listed price 5 4 3 4 6 4 5 6 3 –

Earnings per share 45 37 20 54 35 56 40 21 37 –

P/E ratio 2) 9 9 6 15 6 13 9 3 12 Neg

EV/EBITDA 3) 5 5 7 8 5 6 5 3 6 11

Return on 1), %

Equity 14 16 24 11 14 9 13 29 12 –3

Capital employed 7) 16 18 15 17 18 16 26 20 13 3

Equity per share, SEK 188 176 213 179 207 184 176 163 127 118

Closing listed price, ”B”, SEK 211.50 238.50 280 307 176.50 205 192 142 173 128

Closing market value, SEK billion 16.9 19.0 22.7 27.3 15.7 18.1 17.1 12.7 15.4 11.0

Highest price quoted during the year, ”B”, SEK 269 298 328 309 275 304 200 243 186 141

Lowest price quoted during the year, ”B”, SEK 185 169 189 165 134 188 140 135 122 84

Beta value (48 months), at year end, ”B” 4) 0.6 0.7 0.8 1.1 1.5 1.5 1.4 1.8 1.6 1.6

Volatility (250 days), at year end, ”B” 5), % 27 41 42 38 44 37 27 26 28 38

1) See definitions on page 52. 2) Closing share price divided by earnings per share. 3) Market value plus net financial debt (EV) at the end of the year divided by profit before depreciation (EBITDA). 4) Measures the sensitivity of the yield on the “B” share in relation to the yield on the Affärsvärlden General Index over a period of 48 months. 5) Measures changes in the price of the “B” share, expressed in percentage terms, over 250 days. 6) Proposal of the Board. 7) Excl. items affecting comparability and divested activities.


SHARE STRUCTURE Votes No. of shares No. of votes Nom MSEKShare ‘‘A” 10 22,623,234 226,232,340 50 1,131.2‘‘B” 1 57,349,217 57,349,217 50 2,867.4Shares in total 79,972,451 283,581,557 3,998.6Convertibles, ‘‘B’’* 1 3,201,419 3,201,419 50 160.1Warrants, ‘‘B’’* 1 1,014,000 1,014,000 50 50.7Total number of shares 84,187,870 287,796,976 4,209.4*After full conversion and subscription

Changes in Total No. Change in share Total shareCHANGES IN SHARE CAPITAL No. of shares of shares capital, MSEK capital, MSEK1990 Conversion of convertible participations 1 15,681,288 0.0 1,568.1 Conversion KVBs 61,087 15,742,375 6.1 1,574.21991 Conversion KVBs 551 15,742,926 0.1 1,574.31992 Conversion KVBs 6,331 15,749,257 0.6 1,574.91993 Rights issue 14,469,139 30,218,396 1,446.9 3,021.8 Conversion KVBs 204,285 30,422,681 20.4 3,042.21994 Conversion KVBs 3,978,257 34,400,938 397.8 3,440.11995 Conversion KVBs 10,028,201 44,429,139 1,002.8 4,442.91996 Share split 44,429,139 88,858,278 4,442.91997 88,858,278 4,442.91998 88,858,278 4,442.91999 88,858,278 4,442.92000 88,858,278 4,442.92001 Withdrawal of shares bought back –8,885,827 79,972,451 –444.3 3,998.62002 79,972,451 3,998.6

SHAREHOLDERS AT DECEMBER 31, 2002 % of shares % of votesL E Lundbergföretagen 27.5 52.1Kempe Foundations 6.4 16.6AMF pension fund 5.3 1.5Funds of Robur 4.6 1.3Handelsbanken incl. pension funds 3.1 8.7SHB/SPP funds 2.5 0.7Alecta pension insurance 2.1 0.7Skandia 1.4 0.4AFA Insurance 1.3 0.4Other* 45,8 17.6Total 100.0 100.0*of which non-Swedish shareholders 19.3 5.6 OWNERSHIP STRUCTURE Percentage of total No. of shares No. of shareholders no. of shares 1 – 1,000 26,540 6 1,001 – 5,000 1,518 4 5,001 – 10,000 173 2 10,001 – 50,000 216 6 50,001 – 100,000 34 3 100,001 – 63 79Total 28,544 100

The share


Ten-year review

GROUP 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993Profit and loss accounts, MSEKNet turnover 16,081 16,655 15,155 20,508 22,676 21,878 21,495 24,024 21,320 18,020Operating costs –12,205 –12,460 –11,843 –16,669 –18,700 –18,244 –16,981 –17,397 –17,331 –15,990Depreciation according to plan –1,153 –1,126 –1,045 –1,387 –1,507 –1,409 –1,239 –1,151 –1,222 –1,261Items affecting comparability – –620 2,023 – – – 11 282 –51 –Interest in earnings of associate companies –10 –3 552 163 6 5 4 73 –32 –82Operating profit after depreciation 2,713 2,446 4,842 2,615 2,475 2,230 3,290 5,831 2,684 687

Net financial items –149 –152 –101 –206 –137 –204 –371 –615 –859 –1,136Profit/loss after financial items 2,564 2,294 4,741 2,409 2,338 2,026 2,919 5,216 1,825 –449

Tax –605 –108 –769 –595 166 –592 –940 –1,545 –497 193Profit/loss for the year 1,959 2,186 3,972 1,814 2,504 1,434 1,979 3,671 1,328 1) –256

Balance sheets, MSEK 2)

Fixed assets 19,636 18,864 18,725 14,861 20,783 19,669 19,148 18,099 17,721 18,010Shares and participations 1,721 286 230 4,392 148 177 190 641 695 809Current assets 4,922 5,366 5,330 5,068 8,262 8,220 7,805 8,707 8,207 6,774Financial receivables 54 33 15 3,395 – – – – – –Liquid funds 634 399 2,000 1,456 1,241 1,636 2,133 1,296 1,140 3,996Total assets 26,967 24,948 26,300 29,172 30,434 29,702 29,276 28,743 27,763 29,589

Equity 15,073 14,072 17,014 15,883 18,377 16,375 15,670 14,471 11,285 10,281Minority interests 112 – – – 5 5 5 5 5 5Deferred tax liability 4,370 4,014 4,264 2,408 2,920 3,419 2,862 2,421 1,938 1,394Financial liabilities and interestbearing provisions 4,496 3,593 1,721 6,905 4,384 5,505 6,229 7,180 10,247 14,446Operating liabilities 2,916 3,269 3,301 3,976 4,748 4,398 4,510 4,666 4,288 3,463Total equity and liabilities 26,967 24,948 26,300 29,172 30,434 29,702 29,276 28,743 27,763 29,589

Ratios (see page 52 for definitions)Debt/equity ratio 0.25 0.22 –0.02 0.13 0.17 0.24 0.26 0.41 0.81 1.02Equity ratio % 56.3 56.4 64.7 54.4 60.4 55.2 53.5 50.4 40.7 34.8Interest coverage 18.2 16.1 47.9 12.7 18.1 10.9 8.9 9.5 3.1 0.6Return on capital employed % 15.5 17.7 15.1 16.7 17.9 15.8 26.0 20.5 13.1 3.4Return on equity % 13.7 16.0 24.1 10.6 14.4 9.0 13.1 28.5 12.3 –2.7Operating margin % 16.9 18.4 15.0 12.0 10.9 10.2 15.2 22.8 13.0 4.3Capital turnover rate 0.8 0.8 0.8 0.9 0.9 0.9 0.9 1.0 0.9 0.8

Capital expenditure, MSEKShares and participations – 63 7 – – – 35 29 51 31Other fixed assets excl. company acquisitions 1,486 1,652 1,108 1,988 1,642 1,856 2,257 2,625 1,080 563Company acquisitions, etc. 1,705 – 2,053 – 915 – 123 – – –

EmployeesAverage number of employees 5,075 5,238 5,275 8,433 9,586 9,849 9,899 9,707 11,122 11,414Wages, and salaries MSEK 1,705 1,713 1,602 2,410 2,659 2,573 2,497 2,400 2,648 2,628Social security charges MSEK 641 638 605 934 933 985 954 889 942 908

1) Interest cost of MSEK 37 on KVB is not included.

2) Figures for the period 1993–1999 are not re-calculated in accordance with RR 9 Income taxes.


History

Like many of Sweden’s other companies that

can trace their origins back for centuries,

Holmen has its roots in industrial activities

based initially on water and metal ores, and

then on forests and wood.

The history of Holmen thus begins with an

arms factory. Iggesund can trace its roots back

to the same century, more precisely to 1665

when Östanå Paper Mill became the first indus-

trial establishment in the area. In the middle of

the 18th century the business that was to evolve

into MoDo first saw the light of day, with the

commissioning of the Mo water-powered saw-

mill in Söderåfors in 1759.

Mo och Domsjö AB, Holmens Bruk AB and

AB Iggesunds Bruk merged in 1988 to form a

group under the name of MoDo. This name

was changed to Holmen in 2000.

Important dates and events1633 Holmens Bruk’s first mill for handmade

paper is established on the island of Laxholmen

in the river Motala ström

1771 Iggesunds Bruk acquires Östanå Paper

Mill

1837 Holmens Bruk brings its first paper

machine into production on Kvarnholmen

1870 Iggesunds Bruk’s sawmilling epoch opens

with a large water-powered sawmill in Iggesund

1873 The Mo Bruksägare partnership is

reconstituted into Mo och Domsjö AB

1903 Mo och Domsjö’s first pulp mill opens in

Domsjö

1907 Holmen’s shares are floated on Stock-

holmsbörsen

1915 Holmens Bruk’s new newsprint mill in

Hallstavik commences production

1917 Iggesunds Bruk commissions Sweden’s first

combined sulphite and sulphate pulp mill

1936 MoDo’s shares are floated on Stockholms-

börsen

1949 Iggesund’s shares are listed on Stockholms-

börsen

1951 Mo och Domsjö’s first fine paper mill is

commissioned in Hörnefors

1963 Iggesunds Bruk’s first paperboard

machine is brought into production

1972 Mo och Domsjö brings its first fine paper

machine in Husum into production

1977 Braviken Paper Mill starts producing

newsprint

1986 Holmens Bruk’s paper mill in the centre of

Norrköping is closed down, bringing to an end

an industrial epoch on the islands in the Motala

ström river after 377 years of uninterrupted

industrial activity

1988 The Holmen and Iggesund shares are

delisted from Stockholmsbörsen as a conse-

quence of the merger of MoDo, Holmen and

Iggesund

1993 L E Lundbergföretagen becomes

MoDo’s new main shareholder

1999 MoDo and SCA merge their fine paper and

paper merchanting operations to form the fine

paper group, Modo Paper

2000 Modo Paper is sold, and the name of

the parent company is changed to Holmen AB

from Mo och Domsjö AB. Holmen acquires

Papelera Peninsular.

Iggesunds Bruk’s sawmilling epoch began in 1870, when a large water-powered sawmill was built in Igge-sund. This photo is from 1890.

Drawings of Holmens Bruk’s first paper machine in plan and elevation. The machine was commissioned in 1837.

Mo och Domsjö’s first sulphite pulp mill was commissioned in Domsjö in 1903.

Holmen’s history extends across five centuries. Almost 400 years ago, in 1609 to be precise, Duke Johan of Östergötland laid down the foundations for what was to become Holmens Bruk in Norrköping when he built an arms factory on Kvarnholmen, an island in the Motala ström river. Few Swedish companies can boast that they have been in existence as long as or longer than Holmen.


24

8

1754

8

107

512

EXTERNAL NET TURNOVERBY MARKET, %

Sweden

the UK

GermanySpain

France

Holland

Italy

Other EUcountries

Rest of Europe

Rest of the world

EU countries 83

OPERATIONS IN DIFFERENT COUNTRIES Net turnover* Capital expenditure Average No. of MSEK MSEK employees 2002 2001 2002 2001 2002 2001Sweden 13,448 14,119 3,059 1,484 3,997 4,108Australia – – – – 3 3Belgium 2 1 – – 4 4Denmark 4 2 – – 3 3Estonia – – 6 1 16 25France 30 20 1 – 26 22Germany 48 38 – 1 20 20Holland 235 241 7 6 136 139Hong Kong – – – 2 5 5Ireland 2 3 – – 1 1Italy 10 8 – – 4 3Poland 6 5 – – 4 –Portugal 1 1 – – 1 1Singapore – – – – 6 7Spain 772 889 71 148 251 236Switzerland 8 5 – 1 7 8the UK 1,737 1,586 46 71 580 646USA 5 3 1 1 11 7Non-allocated 27 20 – – – –Intra-Group sales –254 –286 – – – –Total 16,081 16,655 3,191 1,715 5,075 5,238

*Relates to turnover in countries where Holmen has activities.

Sales, distribution etc.

WorkingtonWorkington

IggesundIggesundHallstavikHallstavik

NorrköpingNorrköping

Madrid

VargönVargönStockholm

StrömsbrukStrömsbruk

Madrid

Head officeProduction sites

Holmen PaperIggesund PaperboardIggesund TimberHolmen SkogHolmen Kraft

51

30

x

4

213

xx

EXTERNAL NET TURNOVERBY BUSINESS AREA, %

HolmenPaper

IggesundPaperboard

IggesundTimber

Holmen SkogHolmen Kraft

In addition to their European offices, Holmen Paper has sales offices in Australia, Japan and the USA, and Iggesund Paperboard has offices in Hong Kong, Singapore and the USA.

Holmen at home and abroad


Product benefitNewsprint, magazine paper and paperboard are

used in the production of printed matter. They

render the printed word and pictures in both

colour and black and white, and in this way

convey information, initiate communication

and sell goods and services. Paperboard pack-

aging not only protects products but also sells

and describes the contents. Sawn timber is

converted into beautiful components designed

specifically for the home environment.

The products are based on renewable raw

materials from the forest. They can be recov-

ered as material for new products or used as

biofuel for energy production.

Brand namesHolmen’s products are marketed and sold mainly

on the basis of their functional qualities. News-

print and magazine paper, and also graphic

paperboard, are characterised by such features as

good runnability and printability in printing

machines. Converters of paperboard into packag-

ing appreciate qualities that make, for instance,

attractive embossing possible. In comparisons

with the products of other manufacturers the cus-

tomer also factors in price, ability to deliver the

right goods at the right time, and service in the

broad sense.

Holmen’s products are also marketed with

the aid of several brand names, the most com-

mon of which are illustrated on the next page.

Production, raw materials and energyHolmen’s raw materials consist, for instance, of

wood (pulpwood and saw timber), purchased

pulp and recovered paper. The Group obtains

energy from its wholly and part-owned hydro-

electric power stations, or by buying electricity,

as thermal energy and in the form of counter-

pressure power from the mills. Energy is also

produced by the combustion of fossil fuels, such

as oil and natural gas, and biofuels in the form

of recovered liquor, bark and wood. The figures

relate to Holmen as a whole and are based on

the production of newsprint and magazine

paper, paperboard and sawn timber together

with the raw materials and energy used in the

production processes.

HOLMEN TOTAL

Production, 1,000 tonnes 2002 2001Newsprint, standard 766 746MF Special 540 589SC paper 130 132Coated printing paper 105 119Solid bleached board 267 230Folding boxboard 191 173Sulphate pulp (to external customers) 44 33Sawn timber, 1,000 m3 199 299

Raw materials consumptionWood, million m3 4.42 4.65Purchased pulp/paperboard, 1,000 tonnes 146 153Recovered paper, 1,000 tonnes 622 608Plastic granules, 1,000 tonnes 2.4 2.7Process water, million m3 66 64Chemicals, 1,000 tonnes 175 169Filler, pigment, 1,000 tonnes 213 197

Energy consumptionFossil fuels (oil and natural gas), TJ* 6,100 5,000Biofuels, (recovered liquor, bark and wood), TJ 10,800 10,560 Recovered thermal energy, TJ 2,770 3,220Purchased thermal energy, TJ 2,060 2,100Purchased electricity, GWh** 2,930 2,800Wholly and part-ownedhydroelectric power, GWh 1,048 1,362Counter pressure power, GWh 446 301

* TJ – terajoule, 1,000 GJ (gigajoule). 1 TJ has a thermal value to

around 26 m3 heating oil.** GWh – gigawatt hour. 1 GWh is 1 million kilowatt hours.

Products and production

The ability to deliver the right products at the right time and provide high quality service in general is a characteristics that is much appreciated by customers.


HOLMEN NEWS HOLMEN COLOURED NEWS

HOLMEN PLUS HOLMEN XLNT

HOLMEN GUIDE Telephone directory paper

SCANMAG Uncoated printing paper

SCANGLOSS SCANMATT Coated printing paperSCANPLUS

} Newsprint

}

}

} Sawn timber

Monolit

Quatrolit

Relax

Holmen’s products have their origins in the forest and wood fibres in the form of wood and/or recovered paper. This bird’s eye view of Holmen illustrates how the products come about and gives a few examples of how end-consumers come into contact with them.

When you read a newspaper or a magazine, the paper might be made by Holmen Paper.

Paperboard for chocolate boxes is one of Iggesund Paperboard’s products.

When you sit at your wooden table at home or in the office, it’s possible that it and the chairs around it are made of sawn timber from Iggesund Timber.

Wood is procured by harvesting in company forests, by purchasing from its 30,000 or so suppliers and as imports.

Sale of wood to external customers.

Sawn timber is used in the manufacture of furniture, stairs, doors, floors, windows etc.

Production of sawn timber at one sawmill with a total capacity of 200,000 m3 a year.

Production of SBB and FBB on four board machines with a total capacity of 525,000 tonnes a year.

Purchase and production of electricity at 23 wholly and part-owned hydroelectric power stations and in the mills’ counter-pressure plants.

Procurement of elec-tricity for Holmen’s Swedish mills.

Many of Holmen’s prod-ucts are shipped abroad by sea. Recovered paper is imported regularly.

The paper is turned into newspapers, magazines, directories, direct mail advertising and books.

Production of newsprint and magazine paper on nine paper machines with a total capacity of 1,810,000 tonnes a year.

Paperboard is used in consumer packaging and for graphic purposes.

Procurement of wood for Holmen’s Swedish mills.

The most common brand names used by Holmen are:

Invercote

Invercote Albato Solid bleached board (SBB)

Invercote Creato

Incada Silk

Incada Exel }}

Folding boxboard (FBB)}}

Improved newsprint


Holmen’s aim is to be an attractive employer.

This is also part of the Group’s strategy, the

focus of which includes:

achieving cost efficiency by maximising the

competence of the employees

ensuring that the Group maintains this level

of competence in the long term by developing

and attracting skilled personnel.

In 2002, the human resources activities were

focused on the following areas:

– Profiling towards students and the induction of graduate recruits

– Internal labour market

– Management and leadership development

– Good health – everyone’s responsibility

– Competence development and learning.

Profiling towards students and the induction of graduate recruitsThe activities in relation to universities are seen as

a long-term profiling campaign directed towards

students. The extent and focus of these efforts are

governed by long-term and strategic competence

requirements. Holmen had a strong visible pres-

ence at such institutions during the year.

As in previous years, a campaign focusing on

“technology for school girls” was carried out in

selected towns with the object of stimulating

girls’ interest in technical courses when choos-

ing their upper secondary education.

The object of the Group’s new induction pro-

gramme for graduate recruits is to inform those

involved about the Group’s goals, values and

business. The programme is also designed to

help them build professional and social net-

works and to develop their sense of affinity with

the Group. Some 50 employees from the Swed-

ish units took part in the programme, which is

arranged every year.

To make it easier for employees to build both

a career and a family, the Group tops up their

parental allowance over the statutory 7.5 x base-

amount, to up to 80 per cent of their salary.

Internal labour marketHolmen has established an internal labour mar-

ket policy to stimulate internal mobility. The

object is for the Group to make it easier for

employees who wish to move to a new job

within the Group and to support them in their

ambitions. Holmen has also updated its foreign

service policy to facilitate the mobility across

land-frontiers.

Management and leadership development Each unit has listed managers with promotion

potential and prospective managers and these

lists have been co-ordinated. This process will

be repeated each year.

The number of female managers has doubled

in two years to around 30, giving the company

a sound base from which to recruit more wom-

en to senior managerial positions.

An international Group development pro-

gramme for middle and senior managers is being

arranged for the first time in 2002 and 2003. The

object of the programme is to develop manageri-

al and leadership skills and to agree on a com-

mon approach to strategic issues.

Leadership development programmes were

held at a number of mills for first-line managers

and shift managers. The programmes focused

on roles, responsibilities and the necessary key

competence.

Human resources

Iggesund Timber’s “Learning to Learn” training programme. From left: Stefan Persson and his brother Peter, Mikael Wallin, and the course leader Margaretha Wiberg, from Lernia.


Good health – everyone’s responsibility A serious problem in society and at Holmen is

the dramatic rise in long-term sick leave.

“Improved health – everyone’s responsibility”

is the title of the bipartite working group set up

to try to identify reasons for this rise. The work-

ing group hopes to reverse this trend by passing

on experience and information about work-

places applying the best practice both within

and outside the Group.

Employees are encouraged and supported in

various ways to increase their personal respon-

sibility for staying healthy and fit. The company

health service will also be given a clearer man-

date and will be integrated more effectively

than before into the business.

Total sick leave in the Group reached 6.7 per

cent during 2002. The target for 2004 is to get

this figure back to the level of 1998, which was

4.8 per cent.

Competence development and learningLocal development activities were arranged

during the year at all Group units. These includ-

ed:

Mentor programmes for managers and spe-

cialists, and for women in traditionally male-

dominated occupations

Courses in “learning to learn” to stimulate

an interest in continued studies, and in so

doing mitigate the consequences of redun-

dancy

Training drives for operators and mainte-

nance personnel

The training of “front-office” personnel in

communication technology to enable them to

better understand customer needs

Programmes for guaranteeing the compe-

tence of production personnel.

A pilot project has been launched to stimulate

interest in various kinds of competence devel-

opment. Its aim is to have 5 per cent of avail-

able time dedicated to competence development.

The project includes study trips, seminars,

project activities and participation in testruns.

Union co-operationUnion co-operation is conducted at Group level

as well as in consultation groups at each unit.

The working practices were developed during

the year. Bipartite groups have been formed to

handle employee survey, good health, equality

of opportunity and the work environment.

Employee surveyA survey of all employees in Sweden is carried

out at the beginning of 2003 with the object of

gauging the result of the various measures taken

and identifying areas in need of improvement.

2001-122002-12

AGE STRUCTURE OF ALL EMPLOYEES

0

200

400

600

800

65-6

9

60-6

4

55-5

9

50-5

4

45-4

9

40-4

4

35-3

9

30-3

4

25-2

9

20-2

4

2001-122002-12

PERSONNEL TURNOVERRATE, PERMANENTEMPLOYEES

0

2

4

6

8

Tota

l exc

l.in

tern

al m

obili

ty

Tota

l

Inte

rnal

mob

ility

Ow

n ch

oice

Pen

sion

Imp

erat

ive

%

AVERAGE NUMBER OF EMPLOYEES

0

1,000

2,000

3,000

4,000

5,000

6,000

0201009998

Excl. divested activities

The Labour Market Day at Norrköping’s university campus. Niclas Schiller from the Braviken Paper Mill (right) describes Holmen to a couple of students.


Holmen Paper

Holmen Paper produces and sells newsprint and magazine paper with virgin fibre and/or recycled fibre as the raw materials. Holmen Paper is one of the main suppliers to numerous daily newspaper and magazine publishers in Sweden, Spain, Germany, the UK and other countries. The company has a strong market position, particularly in the improved newsprint, telephone directory paper and coloured newsprint product areas.

Operations in 2002Net turnover amounted to MSEK 8,164, which

may be compared with MSEK 8,757 in 2001.

The operating profit amounted to MSEK 1,664

(2,410). The decline in the result is mainly

explained by lower prices, and the general

weakness of the economy, which tended to

reduce advertising orders and compel custom-

ers to take cost-reduction measures.

The market for newsprint and magazine paper

remained weak throughout the year. Total delive-

ries of newsprint to Western Europe were 6 per

cent lower than in the previous year. Demand for

SC paper and coated printing paper was more

stable, but additions to capacity – above all in the

coated segment – reduced capacity utilisation.

The prices of newsprint and magazine paper in

Europe declined with few exceptions at the

beginning of 2002, but then remained largely

stable for the rest of the year. In the early sum-

mer there was a sharp increase in recovered

paper prices in Europe. The price fell back, but

not to the same level as before the increase.

Capacity utilisation at Holmen Paper was limited

due to the order situation and the installation

and running-in of a new paper machine at the

Hallsta Paper Mill.

Capital expenditure amounted to MSEK 1,121

(1,418). This related mainly to the new paper

machine in Hallstavik. The investment cost of

this new machine, the first in the world desig-

ned from the start to produce improved

newsprint, was MSEK 1,850. Minor investment

projects were carried out as planned at the Bra-

viken, Wargön and Peninsular mills.

Market conditionsDeliveries of newsprint and magazine paper to

Western Europe expanded very strongly during

the 1990s. This trend culminated in 2000, a

year when paper was generally in short supply

and prices rose sharply. The first signs of a more

subdued market were emerging in the USA

already towards the end of 2000, while the eco-

nomic slowdown in Europe did not become evi-

dent until after the first quarter of 2001. Both

2001 and 2002 were weaker years than 2000,

although it should be kept in mind that 2000

was an exceptionally strong year.

Market positionExtensive structural changes occurred through-

out the 1990’s. Holmen Paper now ranks fifth

as a supplier in Europe, having been one of the

SUMMARY 2002 2001Net turnover, MSEK 8,164 8,757Operating profit, MSEK 1,664 2,410Operating capital (average), MSEK 9,850 9,138Return on operating capital, % 16.9 26.4Cash flow before cap. exp., MSEK 2,440 2,936Capital expenditure, MSEK 1,121 1,418 Average number of employees 2,528 2,494

PRODUCTION AND DELIVERIES

Production Deliveries1,000 tonnes 2002 2001 2002 2001Newsprint, standard 766 746 763 721MF Special 540 589 532 565SC paper 130 132 129 130Coated printing paper 105 119 104 109Total 1,541 1,586 1,528 1,525

Hallsta Paper Mill

Raw material: Sprucewood, recovered paperProducts: Newsprint, MF Magazine, SC paper and book paperCapacity: 785,000 tonnes/yearAverage No. of employees: 1,036.

Braviken Paper Mill

Raw material: Sprucewood, recovered paperProducts: Newsprint, coloured news-print and telephone directory paperCapacity: 725,000 tonnes/yearAverage No. of employees: 734.

Wargön Mill

Raw material: SprucewoodProducts: Coated printing paper, MWC, on reels and in sheetsCapacity: 130,000 tonnes/yearAverage No. of employees: 375.

Papelera Peninsular

Raw material: Recovered paperProducts: Newsprint, MF Magazine and lightly coated magazine paperCapacity: 170,000 tonnes/yearAverage No. of employees: 223.



NET TURNOVER%MSEK

0

2,000

4,000

6,000

8,000

10,000

02010099980

10

20

30

40

50

Operating profitReturn on operating capital

OPERATING RESULT%MSEK

0

600

1,200

1,800

2,400

3,000

02010099980

10

20

30

40

50

Cash flow before capitalexpenditureCapital expenditure excl. acquisitionsCapital expenditure incl.acquisitions

CASH FLOWMSEK

0

600

1,200

1,800

2,400

3,000

0201009998

Capital expenditure excl. acquisitionsCapital expenditure incl. acquisitionsDepreciation according to planCap. exp. (excl. acq.) as % of turnover

CAPITAL EXPENDITUREMSEK %

0

700

1,400

2,100

2,800

02010099980

5

10

15

20

The football World Cup, which was played in Japan and South Korea, was won by Brazil. England’s The Times newspaper printed its thick and lavishly illustrated World Cup supplement on paper from Holmen Paper.

very largest companies at the beginning of that

decade. The share of the newsprint capacity is

just under 9 per cent. Holmen Paper is well to

the fore in the MF Special segment – coloured

newsprint, telephone directory paper and

MF Magazine with special grades for coldset,

heatset and gravure printing – where its market

share is much higher. In the case of SC paper

and coated printing paper, the market share is

low, but the products nonetheless play a valu-

able complementary role in Holmen Paper’s

product portfolio.

Holmen Paper’s competitors are UPM-Kym-

mene, Stora Enso, Norske Skog, SCA and Myl-

lykoski.

Market structureHolmen Paper’s product range has traditionally

been focused on daily newspaper publishers.

The healthy potential for development within

MF Magazine and the commissioning of the

new paper machine at the Hallsta Paper Mill,

coupled with the investment in lightly coated

magazine paper at Papelera Peninsular, the

Group’s Spanish unit, will make magazine

publishers and commercial printers an increas-

ingly important customer segment. However,

the sales to daily newspaper publishers are and

will remain the core of the business.

In coming years, daily newspapers are ex-

pected to generate growth in paper consump-

tion of just under 2 per cent a year, which is in


line with the historical average. In the case of

daily newspapers, the volume growth in absolu-

te terms will largely be in standard newsprint,

although in relative terms the growth rate will

be higher in MF Magazine and particularly in

coated printing paper. Holmen Paper has a

healthy potential to develop together with its

daily newspaper customers. The planned, but

not yet approved, expansion in Spain would

boost Holmen Paper’s newsprint volumes and

thus strengthen its market position.

The market for directory paper is well conso-

lidated with only a few actors. Holmen Paper

has been expanding strongly ever since the early

1990s. Telephone directory paper has shown a

more stable consumption pattern than other

grades as it is less sensitive to cyclical fluctua-

tions. The growth rate is expected to match that

for daily newspapers, i.e. around 2 per cent per

year. The Yellow Pages have retained their

strength as an advertising medium in relation to

other media. Parallel to this, the white pages,

which are not financed by advertising, and

which only include names and private telepho-

ne numbers, will in the longer term come up

against fierce competition from new technology.

One area in which Holmen Paper’s position

has been relatively weak is the magazine publis-

hing and commercial print segments. For the

most part, this was due to the absence of alter-

native products for the market. As new pro-

ducts have been developed, these segments have

become increasingly interesting, and in recent

years Holmen Paper has gradually established a

position. Latterly, the segments have noted

rapid and positive volume growth, a pattern

that is expected to be repeated in the coming

decade, particularly in the fastest growing seg-

ment, namely commercial print.

Holmen Paper is very well placed to increase

the volumes, not least now that it can offer new

products such as XLNT, MF gravure and lightly

coated magazine paper, complemented with SC

and coated printing papers.

Research and developmentThe Holmen Paper Development Centre (HPD)

is part of the Holmen Paper business area. HPD

co-ordinates development resources for product

development at all four mills (Hallsta, Braviken

Wargön and Peninsular). In addition, there is a

focus on the development of mechanical pulp

and de-inked pulp with the object of creating

more effective process solutions and supporting

the product development activities.

In 2002, the total cost of Holmen Paper’s

research and development activities, including

external projects and the costs incurred on joint

MARKET POSITIONMF SpecialWest European producers

Capacity/year,1,000 t

0

200

400

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MARKET POSITIONNewsprint and magazine paperWest European producers


0

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7,000

8,000

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Holmen Paper

What better way for commuters to pass the time than by having read a newspaper?


research with institutions, universities and

suppliers, amounted to MSEK 50.

Long-term investmentsThe decision to build a new newsprint machine

at Papelera Peninsular, the Group’s Spanish

mill, has been postponed until further notice.

The main reason for this is that the recovery of

the newsprint market appears to be taking

longer than expected. The pre-project, which

includes a recovered paper-based newsprint

machine with an annual capacity of 400,000

tonnes, will be completed and it is intended to

go ahead with the necessary land purchase.

Holmen Paper’s business plan for the next

few years includes several other important pro-

jects. Their purpose is to further develop and/or

maintain existing production and quality levels

at the Swedish mills. An investment of MSEK

80 in developing the quality of the coated prin-

ting paper produced by the Wargön Mill has

already been approved.

Hallsta Paper Mill’s PM 11It took only 70 days during the first quarter of

2002 to dismantle and remove a 35-year old

paper machine at the Hallsta Paper Mill and

install an entirely new one in its place. The new

paper machine was brought into production as

planned at the beginning of April and after a

running-in period during the spring and sum-

mer, the machine was inaugurated in September

by H.M. King Carl XVI Gustaf.

PM 11 has been specifically designed for the

Hallsta Paper Mill, and incorporates the latest

technology. The machine is built according to a

new concept that will enable it to reach very

high production rates. With its rated capacity of

330,000 tonnes per year, PM 11 is the largest

MF Magazine machine in the world. The paper

is intended for newspaper supplements, specia-

list magazines, and direct advertising products,

segments where steady long-term growth is

likely.

The market for MF Magazine for direct advertising products directed towards consumers is growing at a very healthy rate.

Hallsta Paper Mill’s new PM 11 paper machine, which has been specifically designed to produce MF Magazine, was brought into production at the beginning of April 2002.


Iggesunds Bruk

Raw material: Softwood and hard-woodProducts: Solid bleached board for packaging and graphic purposesCapacity: Paperboard 300,000 tonnes/year. Market pulp: 50,000 tonnes/year.Average No. of employees: 818.

Workington

Raw material: Sprucewood and purchased sulphate pulpProducts: Paperboard for packaging and graphic purposesCapacity: 225,000 tonnes/yearAverage No. of employees: 521.

Ströms Bruk

Raw material: Paperboard from Igge-sunds Bruk and Workington, purcha-sed plastic granules, foil etc.Products: Plastic-coated and lamina-ted paperboardCapacity: 40,000 tonnes/yearAverage No. of employees: 130.

Iggesund Paperboard

Iggesund Paperboard produces and sells solid bleached board (SBB) and folding boxboard (FBB), using only virgin fibre as a raw material. Iggesund Paperboard is market leader in the very highest quality segments. The paperboard is used as packaging for food, cosmetics, pharmaceuticals, tobacco and confectionery, and for graphical applications.

SUMMARY 2002 2001Net turnover, MSEK 4,850 4,467Operating profit, MSEK 818 455Operating capital (average), MSEK 4,162 4,956Return on operating capital, % 19.6 9.2Cash flow before cap. exp., MSEK 1,328 877Capital expenditure, MSEK 227 249Average number of employees 1,850 1,930


Production Deliveries1,000 tonnes 2002 2001 2002 2001Paperboard 458 403 453 410Sulphate pulp – – 44 33

Operations in 2002Net turnover increased to MSEK 4,850, which


The operating profit increased to MSEK 818

(455) as a result of higher volumes and lower

variable and fixed costs.

The market for virgin fibre-based paperboard in

Western Europe grew by one per cent. Strong

exports to non-European markets resulted in a

high capacity utilisation. Iggesund Paperboard’s

deliveries rose by 10 per cent.

Prices were increased towards the end of 2002.

Capacity utilisation rose during the year to 91

per cent (80).

Capital expenditure amounted to MSEK 227

(249). The year was characterised by a number

of minor investment projects. Installation of a

new caustisizing plant began at Iggesunds Bruk.

Market conditionsThe global consumption of paperboard

amounts to around 28 million tonnes a year.

The market for the grades of virgin fibre paper-

board produced by Iggesund Paperboard - solid

bleached board and folding boxboard –

amounts to some 8 million tonnes. The annual

consumption in Western Europe of these two

grades is some 2 million tonnes and the market

growth has been running at around two per

cent a year.

In some segments of the market, such as

packaging board for cosmetics and confectione-

ry and graphic paperboard, the annual growth

rate has been higher, 3−5 per cent. The largest

markets in Europe for SBB and FBB are Germa-

ny (23 per cent of consumption), the UK (22),

and France (11). The fastest growing markets

are Asia as well as Central and Eastern Europe,

with Asia being the most important in volume

terms, with an annual growth rate of around 6

per cent. Iggesund Paperboard’s market shares

in Asia and the US are low and the growth

potential is believed to be favourable.

Demand moves in line with private consump-

tion with the competition for customers driving

the need to develop packaging with improved

marketing functions. Other key driving forces

include increasing urbanisation and changes in

household size. Growing world trade is also

generating a need for more distribution and

packaging units.

The process of consolidation amongst custom-

ers and competitors is continuing, and the abili-

ty to satisfy increasingly differentiated product

and service requirements at low cost will have a

decisive impact on competitiveness. During the



NET TURNOVER%MSEK

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4

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16

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Cash flow before capital expenditureCapital expenditure

CASH FLOWMSEK

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1,400

0201009998

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20

One of Wrigley’s latest chewing gum products, X-cite, was launched in a new packet with a lid that requires highly formable paperboard. Their choice fell on Invercote from Iggesund Paperboard.

coming years additions to capacity are expected

to match long-term market growth.

Market positionIggesund Paperboard’s market position in Wes-

tern Europe remained largely unchanged. The

new Incada range of folding boxboard products

from the mill in Workington was particularly

successful on the market. In the UK, which is

Europe’s largest folding boxboard market,

Incada raised its market share and so strengthe-

ned Iggesund Paperboard within the more

demanding segments of the folding boxboard

market.

Market investments and the strengthening of

the sales organisations in Asia and the USA are

showing results, and deliveries to Asia and the

USA now account for 10 per cent of Iggesund

Paperboard’s total deliveries. The plan is to

advance the company’s position on these mar-

kets.

Stora Enso and M-real are Iggesund

Paperboard’s main competitors in Europe. On

other markets, the main competitors are two

North American paperboard producers, Inter-

national Paper and Westvaco.

Market structureThe market for graphic paperboard weakened.

The slackening in demand was due for the most

part to a weak advertising market and a lower

level of marketing activity in industry. Iggesund


MARKET POSITIONVirgin fibre-based paperboard (SBB and FBB)West European producers


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men

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es

Paperboard’s deliveries to this market outper-

formed the market as a whole, much due to suc-

cess of the new products from Workington.

Sales within the graphic segment are largely

channelled through independent merchants on

account of the extremely large number of end

customers. Iggesund Paperboard supplies an

extensive network of merchants that cover most

markets. The merchants’ interest in Iggesund

Paperboard’s products is motivated by their

high and consistent quality as well as the range

of the product portfolio.

Pharmaceutical packaging. Within the packag-

ing segment, sales to the pharmaceutical indus-

try continued to increase. The most significant

factors behind this are the expanding range of

non-prescription products available and the

fact that the population is ageing.

The market for pharmaceutical packaging

has been growing by just over 4 per cent a year

in recent years, with the fastest growth in the

UK and Germany. Invercote, which is Iggesund

Paperboard’s umbrella brand name for SBB, is

used when the customer is looking for a combi-

nation of elegance and performance for exclusi-

ve packages. Design features, such as formabili-

ty and printability, determine how competitive

a package is. These characteristics are in grea-

test demand within the cosmetics sector, where

the packaging needs to reflect the elegance and

exclusivity the product is intended to represent.

Stable tobacco segment. Demand within the

tobacco segment was stable. The market is cha-

racterised by a small number of large, interna-

tional customers with extremely high quality

and service demands. The trend towards greater

use of hard packets (made of paperboard) in-

stead of soft packets (made of paper) and the

increasingly rigorous demands when it comes to

packaging design – in part as a means of com-

bating counterfeiting – are driving the demand

for high quality paperboard.

New logistical solutionsIggesund Paperboard is devoting great energy

to offering customers advanced logistical solu-

tions that will satisfy the demand for shorter

lead times, guaranteed delivery times and less

administration. Several pilot projects intended

to develop service were set in motion.

Research and developmentIggesund Paperboard’s research and develop-

ment has very high priority and is essential for

the continued development and consolidation

of the company’s position as market leader

within the very highest quality segments of the

paperboard market.

Within Holmen the research and develop-

ment organisation is decentralised to business

area level. In addition to development depart-

ments at Iggesund Paperboard’s mills, there is

also a group-wide development centre – Paper-

board Development Centre (PDC) with a focus

on surface treatment of paperboard.

For the past two years the development work

has been based on a new model, which ensures

that the development work has the strong sup-

port of, and influence from the marketing orga-

nisation.

In 2002, the total cost of Iggesund

Paperboard’s R&D, including the cost of joint

projects with universities, research institutions

and suppliers, amounted to MSEK 41.

Security board against counterfeiting. During

the year, PDC carried out extensive develop-

ment work on its pilot coating unit. This has

resulted in a number of customer-specific pro-

duct applications and a patented method for the

production of security board. This concept,

which involves the unique marking of paper-

board, is valuable for customers in combating

counterfeiting and brand name infringement.

Workington. Measures were focused on the opti-

misation of product characteristics and quality

Iggesund Paperboard


Rigorous demands for odour and taste neutrality are made on the paperboard used for packaging foods. In addition to attractive pictures and texts, the package also often has to carry instructions on how to prepare the contents.

consistency for the new family of Incada pro-

ducts. The favourable reception of the new pro-

ducts on the market was further confirmed and

strengthened during the year.

Iggesunds Bruk. The steps being taken to launch

the new grades of Invercote board for tobacco

products were accelerated. These grades, which

have now gained acceptance among customers,

combine an improved grammage/stiffness ratio

with improved conversion and printing qualities.

Within the packaging board and graphic board

segments, efforts were focused on product main-

tenance, that is to say improvements to the fea-

tures of existing products.

Ströms Bruk continued its development work on

new plastic-coated products based on paper-

board from Workington and Iggesunds Bruk.

The development projects were carried out in

close collaboration with the marketing organi-

sation and key customers. The main areas for

development are technical sales support, pro-

duct maintenance, and identification of new

end-use areas, as well as new product develop-

ment.

Long-term capital expenditureAt Workington, measures were directed mainly

towards optimising the characteristics of the

new Incada family and improving production

efficiency.

At Iggesunds Bruk work began on the con-

struction of a new caustisizing plant. The pro-

ject is intended to reduce energy consumption

and to improve efficiency and will be concluded

in 2004.

Favourable progress at WorkingtonProductivity was improved at the Workington

mill in 2002. A series of monthly production

records was noted during the autumn. As a

result of the higher productivity, together with

improvements in product consistency, Incada

raised its share of the market in the UK.

Rationalisations have been made, which has

resulted in a smaller and more streamlined

administration. At the same time the focus of

the organisation has been that the shift teams

will have the operative responsibility and the

other departments will function as support staff.


Iggesund Sawmill

Raw material: PinewoodProduct: Sawn timberCapacity:

200,000 m3/year

Average No. of employees: 119.

SUMMARY 2002 2001Net turnover, MSEK 572 712Operating loss, MSEK –6 –79Operating capital (average), MSEK 249 395Return on operating capital, % –2.5 –20.1Cash flow before cap. exp., MSEK 33 –6Capital expenditure, MSEK 65 13Average number of employees 138 229

Iggesund Timber

Iggesund Timber produces and sells sawn redwood timber to industrial custom-ers that manufacture consumer products. The joinery and furniture industries, manufacturers of solid-wood flooring, planing mills, and builders merchants rank among Iggesund Timber’s main customers.

Operations in 2002.Net turnover amounted to MSEK 572, which

may be compared with MSEK 712 in 2001.

The operating result was a loss of MSEK 6 (loss

79). The improvement is mainly attributable to

lower costs.

The market for sawn timber in Europe grew by

1-2 per cent in relation to the previous year.

During the second half of the year, the market

was characterised by low stocks at the produc-

tion and import stages.

The total volume of redwood products from

Iggesund Timber declined by 8 per cent, while

prices rose by 3 per cent. Iggesund Timber alte-

red its product mix during the year, raising the

proportion of standard timber.

Prices were raised successively on all markets

and the effects of this showed through in the

fourth quarter of 2002.

Capital expenditure amounted to MSEK 65 (13),

and related mainly to the completion of the

Iggesund Sawmill with the installation of a new

quality grading unit, which will be fully opera-

tional in 2003.

Market conditionsThe most powerful driving force on the sawn

timber market is the construction of new dwel-

lings, along with maintenance and renovation.

The growth in total construction was lower in

2002 than in 2001. There is currently good rea-

son to expect the sawn timber market to be

strong.

Nordic sawn timber is used mainly by the

European construction and joinery industries.

Japan and the USA are standing out as increa-

singly important complementary markets,

taking some 10 per cent of Sweden’s total pro-

duction of sawn and planed timber.

Iggesund Timber’s customers are mainly in

the joinery and furniture industries, manufactu-

rers of solid wood flooring, planing mills, and

builders merchants. The main markets, which

take some 75 per cent of delivery volumes, are

the UK and Scandinavia, with Italy, Spain,

North Africa and the Middle East providing

complementary markets.

Research and developmentIggesund Timber’s focus on woodworking indu-

stries places very high demands on the compli-

cated drying process, where all free water and

some of the water bound in the wood cells is

released. The company’s research and develop-

ment resources are therefore largely directed

towards developing drying techniques in close

co-operation with universities and institutes of

technology. New process technology is regular-


Production Deliveries1,000 m3 2002 2001 2002 2001Sawn timber 199 299 220 322Purchased sawn timber – – 102 97Total 199 299 322 419

Only redwood sawn timber was produced and delivered in 2002. In 2001 whitewood was included.



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Solid pine floors are manufactured using sawn timber from Iggesund Timber. Pine floors, perhaps more than any other type of floor, look their best in homes that want to create a homely, welcoming environment.

ly introduced into the company’s modern kiln

dryers in Iggesund.

Long-term capital expenditureThe completion of the new grading unit in Igge-

sund is the final stage in the extensive rationali-

sation project that began in December 2000

with the decision to close down the Domsjö

Sawmill and concentrate production at the saw-

mill in Iggesund. Iggesund Timber has reduced

its annual capacity by around 30 per cent and

the work force has been trimmed by more than

60 per cent. The sawmill will become an efficient

unit during the first half of 2003.


SUMMARY 2002 2001Net turnover, MSEK 3,538 3,982 of which external customers, MSEK 2,085 2,306Operating profit, MSEK 450 455Operating capital (average), MSEK 6,478 6,520Return on operating capital, % 6.9 7.0Cash flow before cap. exp., MSEK 577 500Capital expenditure, MSEK 39 25Average number of employees 426 448

Holmen Skog

Holmen Skog has responsibility for the procurement of wood for the Group’s Swedish mills and for managing the Group’s forest holdings, which cover one million hectares of productive forestland. The business involves harvesting in company forests and wood trading. Almost 60 per cent of sales go to external customers.

Operations in 2002Net turnover decreased to MSEK 3,538, which


The operating profit declined to MSEK 450

(455). The reduction is mainly due to lower

wood prices and higher harvesting costs as a

result of damage done to the forests by storms

and gremmeniella fungus attacks.

Prices and supply in Sweden. During the first

half of the year, the prices of softwood and

sprucewood pulpwood were reduced by SEK

20 and 10 per cubic metre respectively in cen-

tral Sweden. Otherwise, the prices of pulpwood

remained unchanged in the country’s northern

and central regions. In southern Sweden, prices

were raised after the summer by an average of

7 per cent.

The demand among sawmills for saw timber

was generally high, in certain areas very high.

In southern and central Sweden, the demand

for sprucewood exceeded the supply, which

resulted in higher imports. The prices of saw

timber in Sweden remained unchanged, though

with temporary, local surcharges during the

autumn.

The wood market in the country’s northern

and central regions was characterised by excess

supply. This was due to the lingering effects of

the previous year’s storm damage and gremme-

niella attacks, as well as to limited demand

from mills. In southern Sweden, on the other

hand, there were occasional shortages of soft-

wood. The demand for birchwood pulpwood

remained high well into the autumn.

Imports. Holmen Skog’s imports of wood

amounted to 0.6 million cubic metres and thus

remained at the same level as in the previous

year.

The cost of imported wood (free mill) remai-

ned broadly unchanged in 2002. During the

year, Holmen invested MSEK 6 in a new wood

terminal in Estonia.

Management of company forests. The volume

harvested in Holmen’s forests increased to 2.5

million cubic metres (2.4).

According to a 2001 forest census, the volu-

me of wood in Holmen’s forests is increasing by

approximately one per cent a year. It is estima-

ted that this will continue at the same rate until

the middle of this century. According to the

long-term harvesting plan, it has been possible

to raise the harvested volume by some 250,000

cubic metres a year in relation to harvested volu-

me of a few years ago. Under prevailing market

conditions, this would improve Holmen Skog’s

operating result by some MSEK 35 per year.

WOOD PROCUREMENT, million m3 2002 2001Total, gross 9.7 10.6 of which from – Group forests 2.5 2.4 – other Swedish procurement 6.6 7.6 – imports 0.6 0.6Wood deliveries Internal 4.1 4.4 External 5.6 6.2

Holmen Skog

Holmen Skog is organised in four regions, that manage Holmen’s own forests and procure wood. A central wood department has responsibilities including imports.

Regions

LyckseleForest holdings: some 330,000 hectares.Annual wood procurement: some 1,400,000 cubic metres (of which in company forest some 725,000 cubic metres).

ÖrnsköldsvikForest holdings: some 355,000 hectares.Annual wood procurement: some 1,200,000 cubic metres (725,000).

IggesundForest holdings: some 275,000 hectares.Annual wood procurement: some 4,000,000 cubic metres (750,000).

NorrköpingForest holdings: some 70,000 hectares.Annual wood procurement: some 2,600,000 cubic metres (300,000).

Wood department

Örnsköldsvik Annual wood procurement: some 800,000 cubic metres.


ExternalInternal

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Oerating profitReturn on operating capital


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Capital expenditureDepreciation according to plan

CAPITAL EXPENDITUREMSEK

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0201009998

Later surveys showed that some 5,000 hecta-

res of Holmen’s forests had been damaged by the

gremmeniella fungus. This is slightly more than

previously estimated. However, the dry summer

and the cold winter are expected to check the

further spread of the fungus, but it will not be

until the summer of 2003 that it is possible to

ascertain whether the attack is over.

Wood procurement for Group mills. Wood con-

sumption at Holmen’s Swedish mills declined to

4.1 million cubic metres (4.4). The reduction

was due to the reduction in wood consumption

at the Hallsta Paper Mill during the first quarter

in connection with the dismantling of an old

paper machine and the installation of a new

one. It was also due to the conversion of pro-

duction at the Iggesund Sawmill exclusively to

the sawing of pinewood, and the closure of the

Domsjö Sawmill.

Wood trade. Holmen Skog sells more wood to

outside customers than it delivers to Group

mills. The customers comprise sawmills and oth-

er pulp and paper companies’ mills. Holmen

Skog procured a total of 9.7 million cubic metres

of wood (10.6), of which 5.6 million cubic met-

res (6.2) were delivered to external customers.

Market conditionsSweden. The wood market has changed in

recent years. In the past, ownership ties

Holmen Skog is engaged together with the Swedish Defence Research Agency in the development of Carabas airborne land radar system for forestry purposes. Using Carabas, it is possible to determine the volume of wood in a forest to a high degree of precision.


The new Harwarder is the outcome of close development co-operation between Holmen Skog and forest machine manu-facturers. The Harwarder not only fells the trees but also removes the wood from the forest. The new machine will help to lower harvesting costs.

The Starpot cultivation system, which was developed by Holmen Skog, is proving very successful in Sweden and abroad. Starpot promotes root deve-lopment of the plants and reduces pro-blems associated with root spiralling.

Holmen Skog

between mills and forests were closer. There are

now several pulp and paper companies that

own no forests at all. This means that the num-

ber of wood buyers has increased, particularly

in northern Sweden.

The trend in the Swedish sawn timber industry

is quite the opposite, and the number of buyers

has declined. The industry’s profitability has long

been weak, with an attendant need for structural

change. Several sawmills in southern Sweden

merged during the year, and in some areas, saw-

mills have set up joint purchasing companies

with considerable influence on saw timber prices.

Imports. In the 1990s, the countries around the

Baltic Sea evolved into a single market for

wood. Exports of pulpwood and saw timber

from the Baltic states are now substantial and

relatively little untapped potential remains in

these countries. Holmen Skog’s wood imports

come mainly from Estonia, where the company

has a strong position through its wholly owned

purchasing company. Some of the imported

wood is sold on to other companies. Holmen’s

imports of wood have declined during the past

two years owing to higher levels of purchasing

within the country and the lower external sales

of imported wood.

Research and developmentHolmen Skog plays a very active role in the

development work being carried out by the

Swedish forestry. For example, the new Har-

warder forest machine is the outcome of suc-

cessful joint research by Holmen Skog and

forest machine manufacturers. The company is

at the forefront in the use of remote, satellite-

based analysis and the mechanisation of see-

ding and cultivation operations.


Holmen Skog is also involved in a number of

research projects that are being run under the aegis

of the Swedish University of Agricultural Sciences

with the object of improving the knowledge of the

effects of today’s nature-adapted forestry practi-

ces. A further aim is to improve the quality and

effectiveness of nature conservation measures.

The environmentHolmen Skog is certificated in accordance with

the FSC International Forestry Standard and

applies the ISO 14001 environmental manage-

ment system.

Holmen Skog refrains for environmental rea-

sons from harvesting some 10 per cent of the

possible timber volume. The value of the wood

that is not harvested for this reason is approxi-

mately MSEK 50 per year.

Holmen Skog has made a valuable contribution to the development of the new EcoPlanter planting machine. Automated silviculture is on the verge of a definite breakthrough in Sweden.

GideåÖrnsköldsvik

Head office

Regional office

Nurseries

Group forests

Norrköping

Iggesund

Friggesund

Lycksele

FACTS ABOUT HOLMEN'S FORESTS

Total land holdings 1,300,000 hectares of which productive forestland 1,036,000 hectaresAnnual growth 3.7 m3sk per hectareTimber volume 108 m3sk per hectareTimber volume, total 111,415,000 m3sk

TYPES OF TREE,%

Pine 50Spruce 37Hardwood 11Contorta pine 2

AGE CLASS DISTRIBUTION,%

0–30 years 36 31–60 years 23 61–90 years 1691– 25

m3sk = total volume over bark from stump to tip.


Holmen Kraft

Number of wholly and part-owned hydroelectric power stations: 23Production capacity: 1,090 GWh/normal yearAverage number of employees: 9.

SUMMARY 2002 2001Net turnover, MSEK 1,120 1,108 of which external customers 430 439Operating profit, MSEK –26 49Average number of employees 9 13Electric power consumption atGroup’s Swedish units, GWh 3,903 3,998Hydroelectric power production, GWh 1,048 1,362Counter pressure production, GWh 272 216

Holmen Kraft

Holmen Kraft has responsibility for the provision of electricity for Holmen’s Swe-dish mills and for the Group’s hydroelectric power stations. Holmen’s electricity requirements are met by production in wholly and part-owned hydroelectric power stations and the mills’ counter-pressure turbines as well as buying electricity.

Operations in 2002 Net turnover was MSEK 1,120, which may be

compared with MSEK 1,108 in 2001.

The operating loss was MSEK 26 (profit 49),

mainly due to lower production of internally

generated hydroelectric power.

Production of hydroelectricity at Holmen

Kraft’s wholly and part-owned power stations

was 4 per cent lower than a normal year’s out-

put and amounted to 1,048 GWh (1,362). In

the first half of 2002, water flow volumes in

Sweden were very much above average and pro-

duction was much higher than normal. How-

ever, inflow volumes dropped markedly at the

start of the second half of the year, which adver-

sely affected the hydrological balance, causing

an increase in electricity prices. Spot prices

began to climb during the summer, reaching

very high levels at the year end. Forward prices,

particularly for 2003, were also affected. The

rise in prices confirms that the Nordic power

balance is vulnerable and that an impaired

hydrological balance has an immediate infla-

tionary effect on electricity prices.

Holmen’s consumption in Sweden of electricity

declined to 3,903 GWh (3,998), of which 2,583

GWh (2,420) were purchased externally cor-

responding to 66 per cent of the requirement.

The remainder was generated by the Group’s

hydroelectric power stations (27 per cent) and

by counter pressure production (7 per cent) at

the mills. The level of self-sufficiency was thus

34 per cent.

The price of electricity, including grid charges,

for Holmen’s Swedish mills increased by some

7 per cent in relation to 2001. As Holmen was

well hedged for the entire year, the high spot

prices had only a marginal effect on the mills’

electricity costs.

Without this hedging, the mills’ electricity

costs would have been MSEK 305 higher and

Holmen Kraft’s earnings on company-genera-

ted hydroelectric power would have been

MSEK 80 higher. At Group level, therefore, the

net positive effect of the price hedging was

MSEK 225.

For 2003 and 2004 almost all of the Group’s

net consumption has been hedged at levels that

will involve slightly higher electricity costs than

in 2002. For 2005, half has been hedged, while

for the 2006-2011 period the level is around

one-third.

Market conditionsThe Nordic electricity market is generally satis-

factory. Its weakness lies in matters relating to

prices and power. Some enlargement of the grid

and counterpurchases of electric power by the

system manager can improve the situation. The

power problems are due by the way in which

the electricity market does not price power

value, which naturally causes power shortages.

Svenska Kraftnät has proposed a model that, in

all essentials, will involve a market-based solu-

tion as of 2008, with collective procurement of


ExternalInternal

NET TURNOVERMSEK

0

200

400

600

800

1,000

1,200

0201009998

Operating profit/loss

OPERATING RESULTMSEK

-20

0

20

40

60

80

100

0201009998

Hydroelectric powerCounter pressure power

PRODUCTIONGWh

0

200

400

600

800

1,000

1,200

1,400

0201009998

InternalExternal

DELIVERIESGWh

0

1,000

2,000

3,000

4,000

5,000

0201009998

The Harrsele power station. The photo shows a section of the switching station.

broadly the same volume as today up to the end

of 2007. Those industries that do not give rise

to power problems much prefer a market solu-

tion, in which the industries that do cause

power surges would also cover the cost. All col-

lective financing merely postpones the solution

and exacerbates power problems.

Buy-back of hydroelectric power stationsThe partner-financing in Junkaravan was

bought back on 31 December 2002. Holmen’s

share of the annual production capacity at

Harrsele and Tuggen power stations amounts

to 470 GWh and 71 GWh respectively. Harrsele

was commissioned in 1958 and Tuggen in 1962.

Both are well maintained and are considered to

be in excellent condition following major rein-

vestments in the 1990s.

Holmen’s wholly and part-owned hydroelec-

tric power stations are located in the rivers

Umeälven, Faxälven, Motala ström and Gideäl-

ven, and the partner-financed on the Ljusnan

and Iggesundsån (Iggesund Kraft) rivers and are

consolidated at 31 December 2002.


Holmen and society

Holmen is also an important member of society

at other places where the Group has its activiti-

es. The reason for choosing Hudiksvall and

Hallstavik is that Holmen is probably of greater

importance here than elsewhere.

In the Hudiksvall area, over 20 per cent of

total employment derives directly and indirectly

from Holmen; similarly, more than half of all

jobs in the Hallstavik region are attributable to

Holmen.

Holmen´s importance to HudiksvallThe number of employees at Holmen in the

Hudiksvall region amounted to 1,275 in 2002.

In 2001, the figure was 1,350. Holmen pays

them around MSEK 380 a year in salaries and

wages (excluding payroll charges).

Holmen is largely dependent on externally

(within the municipality) purchased goods and

services, which generates numerous jobs in

companies dealing with maintenance, building

and transport, machine-owning forestry cont-

ractors and many others. Materials and services

are purchased from these local companies for

approximately MSEK 250 in a normal year.

The number of local jobs indirectly created

by Holmen is estimated at almost 400. In addi-

tion, felling rights, purchased via Holmen Skog,

generate more than MSEK 50 a year in income

for the region’s private forest owners, a figure

that corresponds to another 100 or so jobs.

Holmen and its direct employees and those

indirectly employed are also consumers and are

therefore of great importance for other busines-

ses in Hudiksvall. This consumption is estima-

ted, on the basis of a proportional distribution,

to create over 600 jobs in the region’s private

enterprises and firms.

Total private sector employment created

direct or indirect by Holmen is estimated at

almost 2,500 man-years. Applying a proportio-

nal distribution, it is estimated that more than

850 of the 5,700 jobs in the public sector are

created through Holmen’s three companies in

the region.

Over 3,300 jobs, or more than 20 per cent of

total employment in the region, are therefore

attributable to Holmen. These jobs generate

income for the municipal and county councils

in the region of MSEK 200-210 a year for fun-

ding of the infrastructure, schools, hospitals etc.

What does Holmen mean for Hudiksvall and Hallstavik? The answer is provided by an analysis that Holmen had made at the end of 2002. At both places, Holmen is the dominant industrial company, by virtue of which it is an important member of society. This is reflected especially in its effects on employment.

JOBS CREATED BY HOLMEN IN THE HUDIKSVALL AREA, 2001 Direct Indirect 1 Indirect 2 TotalHolmen 1,350 389 100 1,839Percentage of service companies – – 635 635Total, private sector 1,350 389 735 2,474Percentage of public sector – – 869 869Total employment 1,350 389 1,604 3,343

Holmen = Iggesund Paperboard, Iggesund Timber and Holmen Skog.Indirect 1 = Jobs created for subcontractors, hauliers, etc. operating on contract for Holmen.Indirect 2 = Effect of harvesting rights converted to “annual income” and the effect of employees’ (direct and indirect) consumption of goods and services within the municipality.

Holmen and Hudiksvall With 1,275 (2001:1,350) full-

time employees at Iggesund Paperboard, Iggesund Timber and Holmen Skog, Holmen is the largest private employer in the region. An additional 500 or so people are indirectly employed as a result of Holmen’s business activities

Holmen’s business activities and the Group´s direct employees and indirect employed create an additional 1,500 jobs in, for example, forestry, transport, construction and the public sec-tor thanks to the consumption of goods and services in the region

Those employed direct or in-direct by Holmen have higher taxable incomes and capital than the average for the region. This has not, however, been taken into account in the appraisal of effects on employment

Population of 15,500 (approx.) in the main town of Hudiksvall (37,300 in the municipality as a whole). Demographic trends are negative, with the number of inhabitants having fallen by ap-proximately 1,500 since 1995.

Hudiksvall


Holmen´s importance to Hallstavik Holmen’s paper mill in Hallstavik employs a

total of approximately 1,050 people and, indi-

rectly, another 60 or so people who are employ-

ed by subcontractors but who are located at the

mill. Holmen Skog has few employees of its

own in Norrtälje, but through contract suppli-

ers, hauliers and the income earned by local

forest owners it is estimated to create employ-

ment corresponding to around 40 full-time jobs

in the region.

The Hallsta Paper Mill’s dependence on

external services is relatively slight, since in all

essentials it handles all maintenance and buil-

ding itself. Total material procurement and the

purchase of external services costs some MSEK

260 in a normal year, of which about MSEK 75

is paid locally (in the Hallstavik region).

Holmen’s annual wage and salary costs, exclu-

ding payroll charges, for its employees in the

Hallstavik region amount to over MSEK 330.

Holmen’s importance as an employer and

member of the community in the Norrtälje regi-

on is considerable. As this applies to Hallstavik

in particular, employment effects occur primari-

ly in this area.

The total number of jobs in the Hallstavik

area (for 2000) is stated to be 3,350. Here,

Holmen has long-standing relations with 50 or

so companies in a variety of sectors, including

power production, building, trade, business ser-

vices, and other service industries. The impor-

tance of Holmen and its employees for employ-

ment in these areas is considerable, and is esti-

mated to be equivalent to 450 jobs.

The direct and indirect effects on employ-

ment in the private sector in the Hallstavik regi-

on are thus estimated to be equivalent to some

1,600 jobs. The public sector’s share of total

employment in the area amounts to over 18 per

cent. The number of people employed direct or

indirect in the private sector in consequence of

Holmen’s business can be estimated to account

for almost 300 of these public sector jobs.

Altogether, then, almost 1,900 full-time jobs,

or more than 56 per cent of the total, in the

Hallstavik area are attributable to Holmen.

A more detailed description of Holmen's

importance for Hudiksvall and Hallstavik may

be found at Holmen's website, www.holmen.com

A two-week technical training programme for twenty-five Class 8 schoolgirls was arranged jointly by the Hudiksvall municipality and a number of local companies in the summer of 2002. Here, Anna Lundh (left) and Angeli Löfqvist-Snell (right) are explaining the art of coating paperboard.

Holmen and Hallstavik With 1,050 full-time employees

at the Hallsta Paper Mill, Holmen is the largest private sector employer in both Hallstavik and the municipality of Norrtälje, in which it lies

Holmen’s business activities and the direct and indirect employed create an additional 845 jobs in, for example, forestry, enginee-ring, energy, transport and the public sector thanks to the con-sumption of goods and services in the region

The average pay of a Holmen employee is considerably higher than the average for the township or the municipality. This generates relatively high purchasing power, which bene-fits other industries and helps to boost employment. This has not, however, been taken into consideration

Population of 4,600 (approx.) in Hallstavik (municipality of Norr-tälje approx. 54,000). Demo-graphic trends in the municipality are positive.

JOBS CREATED BY HOLMEN IN THE HALLSTAVIK AREA, 2001–2002 Direct Indirect 1 Indirect 2 TotalHolmen 1,052 80 20 1,152Percentage of service companies – – 456 456Total, private sector 1,052 80 476 1,608Percentage of public sector – – 294 294Total employment 1,052 80 770 1,902

Holmen = Holmen Paper (Hallsta Paper Mill) and Holmen Skog.Indirect 1 = Jobs created for subcontractors, hauliers, etc. operating on contract for Holmen.Indirect 2 = The effect of locally purchased wood converted into “annual income” and the effect of the consumption of goods and services within the region by direct and indirect employees.

Hallstavik


Holmen and the environment

Holmen has been taking active steps to reduce

the environmental impact of its activities for

more than 30 years. Conditions in the aqueous

environment in the vicinity of the mills are now

generally healthy. The forests are cultivated

taking due account of the natural diversity of

plant and animal life.

Holmen attaches particular importance to

environmental measures as a means of main-

taining the long-term confidence of the commu-

nity and customers alike.

The EU’s Integrated Pollution Prevention and

Control Directive is the cornerstone of the

European Union’s environmental legislation. In

Sweden, its formal requirements are satisfied by

the Environmental Code of Statutes (1999).

The directive was incorporated into English law

in 2000 and into Spanish law in 2002.

Over and above the IPPC directive, the EU

has tightened its demands for the efficient use of

materials and energy and that products should

be manufactured from renewable raw materi-

als, and be capable of being recycled. There are

new laws focusing on waste, which regulate

handling, incineration and sending for landfill.

Numerous initiatives are currently being

taken within the EU and at national level to

overcome the changes in the earth’s climate that

will very likely be caused by greenhouse gases.

Among these initiatives are trade in emission

rights, green power certificates, and long-term

agreements between industry and the govern-

ment on measures to improve energy efficiency.

However, further analysis will be needed of how

these measures interact, and of what consequen-

ces they will have for Holmen. It may at the

same time be observed that Holmen’s business,

with ecocyclical products, modern production

and cleaning equipment, and certificated envi-

ronmental management systems, is regarded

as being well placed to satisfy environmental

legislation and climate and energy initiatives.

A Joint Action Group was set up in 2002 to

underpin Holmen’s activities in the energy field.

Important environmental cases in 2002Hallsta Paper Mill. Following the appeal lodged

by the authorities against a number of points in

the Environmental Court’s decision in 2000 to

permit an increase in production, the Supreme

Environmental Court handed down a ruling in

June 2002 that the mill’s permit to send ash for

landfill at the existing site should remain valid

until the end of 2008. The possibility of using

biofuel ash for a variety of purposes shall be

investigated, as well as the scope for restricting

oil consumption.

Braviken Paper Mill. The Environmental Court

handed down its decision in December. Amongst

other things, Braviken was granted a permit to

increase production, to build a new paper

machine and to install a new solid fuel boiler.

A decision was made to invest in a demo-scale

installation. Fully developed and installed the

process technology for more efficient produc-

tion of thermomechanical pulp will reduce elec-

tricity consumption by 20-35 per cent. The

National Energy Administration granted finan-

cial support to this project.

Wargön Mill. The Environmental Court handed

down its decision in September. Wargön was

granted a permit to increase its production of

groundwood pulp and paper and to close the

sulphite pulp mill. The Board of Holmen then

decided to discontinue the production of

sulphite pulp in the autumn of 2003, which will

halve emissions into water and reduce emis-

sions of sulphur dioxyde into air by 75 per cent.

Papelera Peninsular. The Environmental authori-

ty granted a permit to build a second recycled

fibre-based paper machine. The mill’s present

and planned activities will be examined in accor-

dance with the EU’s IPPC directive in 2003.

Iggesunds Bruk. The investigations required by

the ongoing permit cases were completed during

the year, and negotiations were held in the Envi-

ronmental Court. The company is proposing a

number of measures to reduce emissions into air

and water. The decision of the Environmental

Holmen Environmental Report 2002is published in Swedish and English.

Internet version:Holmen’s complete environmental reporting.www.holmen.com/miljoandwww.holmen.com/environment

Printed version:May be ordered at Holmen’s website www.holmen.com under Publications or from:

Holmen ABGroup Public RelationsP.O. Box 5407SE-114 84 StockholmTel +46 8 666 21 00Fax +46 8 666 21 30

Contact: Lars Strömberg,Environmental [email protected]


Court in March 2003 will determine which of

the proposed projects is carried out.

Workington Mill. The mill obtained a new envi-

ronmental permit at the start of the year in

accordance with the EU’s IPPC directive.

Ströms Bruk. A notification procedure under the

terms of the Environmental Code was begun

after application to the municipality.

Iggesund Timber. The business is conducted on

the basis of the environmental permit received

in 1994. The trimming unit at Håstaholmen is

being closed down and trimming operations

concentrated at the Iggesund sawmill at the

beginning of 2003. The concentration of opera-

tions in one place means less internal and exter-

nal transport and a corresponding reduction in

environmental impact.

Holmen Skog. The drawing up of local, multip-

le-use forest plans for all of Holmen’s land was

completed. These contain plans indicating how

the right environment can be created to allow

animal and plant life to survive in their natural

habitat. 52,000 hectares, i.e. 5 per cent, of

Holmen’s productive forest land is now protec-

ted on environmental grounds.

Holmen Kraft. The permit under the terms of the

Water Act for Holmen’s hydroelectric power

stations and their water regulation systems

includes environmental conditions. Oil pollu-

tion has been analysed at the stockyard at the

Junsterforsen power station on the river Fax-

älven, and some cleaning up might be required.

Environmental management and certification. Papelera Peninsular obtained certification in

accordance with ISO 14001 in September 2002.

Workington obtained equivalent certification in

January 2003. Consequently, all of Holmen’s

mills have now obtained certification in accor-

dance with ISO 14001. Holmen’s forestry is

also certificated in accordance with FSC.

Waste treatment. Waste management is a priori-

ty environmental issue at Holmen. The compa-

ny is engaged in a number of projects to identify

alternative ways to use waste. Holmen is, for

instance, involved in the Värmeforsk research

organisation’s research programme into the

environmentally sound use of incinerator ash,

which began during the year.

Transport. A Transport Environment Group was

set up in 2002 in order to analyse Holmen’s trans-

portation from an environmental perspective.

This will identify the need and capacity to reduce

the environmental impact of transportation.

Discontinued units. Soil tests were carried out at

the discontinued sawmills in Håstaholmen and

Stocka, where the soil is contaminated with

wood-impregnation agents. These tests, which

have been planned and performed in consulta-

tion with the environmental authorities, will

continue in 2003.

The Svartsjöarna lakes, upon which Pauli-

ströms Bruk is located, have been polluted with

mercury and will need cleaning up. Pauliström

belonged to the Holmen Group between 1965

and 1989. The contamination was most likely

not caused during this time. Work has now com-

menced on deciding who is to fund the project.

Exceeded limits and complaints. Only a few

cases of exceeded limits, incidents and com-

plaints relating to Holmen’s business were

reported during the year. These were handled in

accordance with environmental management

system procedures.

Holmen facts about the Environment 2002The supply situation on the electricity market in

Sweden and production disturbances at some

mills resulted in increased use of fossil fuels.

Some type of emission into air and/or water

increased, while others declined. The quantity

of waste sent for landfill declined. For further

information, refer to Holmen’s Environmental

Report for 2002.

ENVIRONMENTAL INVESTMENTS MSEK 2002 2001Direct (treatment) 21 54Integrated (prevention) 19 31Total 40 85

ENVIRONMENTAL COSTS MSEK 2002 2001Internal and external 156 158Capital (depreciations) 82 77Environmentaltaxes and charges 59 48Total 297 283

1) Source: SCB, Environmental protection expenditure in industry (2001).

Environmental protection costsHolmen states environmental protec-tion costs in accordance with Statis-tics Sweden (SCB) guidelines1).

Hallsta Paper Mill is located on the Edebo estuary. Emissions into water in 2002 remained at the previous year’s low levels.

Profit and loss account

OPERATING PROFIT/LOSS, MSEK 2002 2001 2000 1999 1998Holmen Paper 1,664 2,410 1,389 1,418 1,455Iggesund Paperboard 818 455 569 318 590Iggesund Timber –6 –79 –116 –66 –59Holmen Skog 450 455 466 521 548Holmen Kraft –26 49 99 76 56Group adjustments and other –187 –224 –112 –20 –346 2,713 3,066 2,295 2,247 2,244Items affecting comparability – –620 2,023 – –Divested activities – – 524 368 231 2,713 2,446 4,842 2,615 2,475

GROUP, MSEK 2002 2001Net turnover (Note 1) 16,081 16,655Other operating income (Note 2) 497 407 16,578 17,062

Raw materials, goods for resale and consumables (Note 3) –7,112 –7,223Change in inventory of finished products –56 138Personnel costs (Note 22) –2,346 –2,351Other external costs –3,188 –12,702 –3,431 –12,867Depreciation according to plan (Note 4) –1,153 –1,126Items affecting comparability (Note 5) – –620Interest in earnings of associate companies (Note 6) –10 –3Operating profit 2,713 2,446

Net financial items (Note 7) –149 –152Profit after financial items 2,564 2,294

Tax (Note 8) –605 –108Profit for the year 1,959 2,186

Earnings per share, SEK (Note 9) Before dilution 24.50 27.33 After dilution 23.58 26.41

Net turnover Operating profit/lossBY BUSINESS AREA, MSEK 2002 2001 2002 2001Holmen Paper 8,164 8,757 1,664 2,410Iggesund Paperboard 4,850 4,467 818 455Iggesund Timber 572 712 –6 –79Holmen Skog 3,538 3,982 450 455Holmen Kraft 1,120 1,108 –26 49Group adjustments and other – – –187 –224 18,244 19,026 2,713 3,066

Items affecting comparability – – – –620Intra-Group sales –2,163 –2,371 – –Group 16,081 16,655 2,713 2,446

The Board of directors and the President of Holmen Aktiebolag (publ), Co. Reg. No. 556001-3301, herewith submit their

report on the activities of the parent company and the Group for financial year 2002, including the report of the auditors,

on pages 38–63. Information concerning the result of the year’s activities and the financial position of the parent company

and the Group is provided in the following profit and loss accounts and balance sheets, together with the accompanying

notes and supplementary information and the Report of the directors.


MarketsThe market situation for newsprint and maga-

zine paper was weak in 2002. Deliveries of

newsprint to Western Europe were 6 per cent

lower than in 2001. Deliveries from West Euro-

pean producers declined by 2 per cent, due to

higher exports to markets outside Western

Europe. Demand for SC paper and coated prin-

ting paper has been more stable, but capacity

utilisation fell owing to additions to capacity.

Holmen Paper’s capacity utilisation was restric-

ted during the year. Prices were reduced at the

end of 2001 and then remained stable during

the year.

The market situation for virgin fibre-based

paperboard improved in 2002. Deliveries to

Western Europe increased by one per cent.

However, deliveries from West European pro-

ducers rose by 4 per cent due to higher exports

outside Western Europe. Iggesund Paperboard

implemented a price increase in Europe during

the second half of 2002.

Net turnoverNet turnover amounted to MSEK 16,081

(16,655). Holmen Paper’s sales declined by

7 per cent to MSEK 8,164, mainly owing to

lower selling prices. Iggesund Paperboard’s

sales rose by 9 per cent mainly as a result of

higher deliveries.

The value of sales to customers outside Swe-

den represented 76 per cent of total turnover.

Operating resultThe operating profit amounted to MSEK 2,713

(2,446).

Holmen Paper’s profit was MSEK 1,664

(2,410). The downturn is largely attributable to

lower prices, although these were partly offset

by positive currency effects. A net profit of

some MSEK 60 is due to the income from the

sale of the old paper machine at Hallsta Paper

Mill and higher costs associated with the start-

up of the new newsprint machine.

Iggesund Paperboard’s profit amounted to

MSEK 818 (455). The improvement is due to

higher deliveries, lower costs and positive cur-

rency effects.

Iggesund Timber’s result was a loss of MSEK

6 (loss 79). The improvement was mainly due

to lower costs.

Holmen Skog’s result was a profit of MSEK

450 (455). Harvesting in company forests

increased, while lower prices and higher har-

vesting costs had a negative effect on the result.

Holmen Kraft’s result was a loss of MSEK 26

(profit 49). The deterioration in the result is

mainly due to lower production of hydroelec-

tric power as a result of reduced inflow of

water.

Profit after financial itemsNet financial costs amounted to MSEK 149,

which may be compared with a net cost of

MSEK 152 in 2001. The average rate of interest

paid by the Group on its debt in 2002 was 5.0

per cent (5.2).

The profit after financial items amounted to

MSEK 2,564 (2,294).

Net profit after taxThe Group’s tax charge amounted to MSEK

605 (108). A tax case was decided in Holmen’s

favour during the year, which had positive

effects of MSEK 130 on the total tax charge.

The tax charge in 2001 was positively affected

by MSEK 525 by tax cases settled in Holmen’s

favour.

The profit for the year after tax was MSEK

1,959 (2,186).

Key ratiosThe operating margin was 16.9 per cent (18.4).

The return on capital employed was 15.5 per

cent (17.7).

The return on equity was 13.7 per cent

(16.0). Earnings per share was SEK 24.50

(27.33).

Operating profitReturn on capital employed


OPERATING PROFITMSEK

0

1,000

2,000

3,000

4,000

02010099980

6

12

18

24%



NET TURNOVER%MSEK

0

4,000

8,000

12,000

16,000

20,000

02010099980

5

10

15

20

25

Profit and loss account


Balance sheet

GROUP, at December 31, MSEK 2002 2001ASSETS Fixed assets Intangible fixed assets Goodwill, leases and similar rights (Note 10) 576 634

Tangible fixed assets Forest land (Note 11) 6,302 6,297Buildings, other land and land installations (Note 11) 2,552 2,001Machinery and equipment (Note 11) 9,834 8,828Fixed plants under construction and advance payments 124 846 18,812 17,972Financial fixed assets Shares and participations Associate companies (Note 12) 1,634 198 Other shares and participations (Note 12) 87 88Financial receivables 54 33Other long-term receivables (Note 12) 248 258 2,023 577

21,411 19,183Current assets Inventories etc (Note 13) 2,244 2,380Current receivables Operating receivables (Note 14) 2,678 2,986Short-term placements 306 91Cash and bank 328 308 5,556 5,765

26,967 24,948EQUITY AND LIABILITIESEquity (Note 15) Restricted equity Share capital 3,999 3,999Restricted reserves 3,890 3,531Non-restricted equity Non-restricted reserves 5,225 4,356Profit for the year 1,959 2,186 15,073 14,072

Minority interest 112 –

Provisions Interest-bearing Pension provisions (Note 17) 25 36Non-interest-bearing Tax provisions (Note 8) 4,398 4,035 Other provisions (Note 17) 233 290 4,656 4,361Liabilities Financial liabilities (Note 18) 4,471 3,557Operating liabilities (Note 19) 2,655 2,958 7,126 6,515

26,967 24,948

Pledged assets (Note 20) 1,617 52Contingent liabilities (Note 21) 1,320 467


RETURN ONCAPITAL EMPLOYED

%

0

10

20

30

0201009998


RETURN ON EQUITY%

0

5

10

15

20

25

0201009998

OPERATING CAPITAL, MSEK 2002 2001 2000 1999 1998Holmen Paper 9,884 9,584 8,564 6,459 6,412Iggesund Paperboard 3,963 4,330 4,877 4,442 4,036Iggesund Timber 258 232 411 415 442Holmen Skog 6,429 6,517 6,527 6,650 6,675Holmen Kraft 2,877 805 826 837 838Group adjustments –242 –424 –412 –1,000 –511 23,169 21,044 20,793 17,803 17,892Divested activities – – – 4,257 8,268Operating capital 23,169 21,044 20,793 22,060 26,160

Deferred tax liability, net –4,176 –3,811 –4,073 –4,123 –4,635Capital employed 18,993 17,233 16,720 17,937 21,525

OPERATING CAPITAL AND ITS FINANCING AT 31 DEC. 2002, MSEK

Workingcapital

2,006

Fixed assets21,163

Net financialdebt3,808

Equity incl.minority interest15,185

Deferred taxliability, net 4,176

Fixed assetsThe Group’s total fixed assets increased by

MSEK 2,228 to MSEK 21,411 in 2002.

Tangible fixed assets increased by MSEK 840

to MSEK 18,812, mainly as a result of capital

expenditure of MSEK 1,486, depreciation accor-

ding to plan of MSEK 1,153, as well as MSEK

502 arising from the consolidation of Iggesund

Kraft AB.

Financial fixed assets increased by MSEK

1,446 to MSEK 2,023, mainly due to the acqui-

sition of Junkaravan AB, whose main assets are

its equity interest in hydroelectric power assets.

The other principal assets are equity stakes in

recovered paper companies in Spain, and a

deferred tax receivable.

Intangible fixed assets declined by MSEK 58

to MSEK 576, mainly a consequence of depre-

ciation according to plan of goodwill and trans-

lation differences. The assets consist mainly of

goodwill arising on the acquisition of Papelera

Peninsular, the Spanish newsprint mill, in 2000.

Working capital Closing working capital amounted to

MSEK 2,006, and consists mainly of inven-

tories of MSEK 2,244, accounts receivable of

MSEK 2,274, and liabilities to suppliers of

MSEK 1,467.

ProvisionsThe Group’s provisions increased by MSEK

295 to MSEK 4,656, mainly a result of an

increase in deferred tax liability.

Net financial debtThe Group’s net financial debt increased by

MSEK 647 to MSEK 3,808. In addition to the

negative cash flow of MSEK 299, net debt was

affected by the consolidation of Iggesund Kraft

(MSEK −338) and a deficit of MSEK 10 due to

currency effects.

Closing short-term placements and cash and

bank amounted to MSEK 634, and financial

receivables to MSEK 54. Financial liabilities and

interest-bearing provisions amounted to MSEK

4,496, of which MSEK 2,444 were long-term.

The Group had available committed long-term

credit facilities of MEUR 500 (MSEK 4,575).

The maturity structure of the financial liabilities

and credit facilities is shown on page 47.

Minority interestMinority interest amounted to MSEK 112, and

related to the minority interest in Iggesund

Kraft, which was consolidated as of 31 Decem-

ber 2002.

EquityEquity increased by MSEK 1,001 and amoun-

ted to MSEK 15,073 (14,072) at 31 December

2002. The change is mainly due to the payment

of dividend of MSEK 800 and the net profit for

the year of MSEK 1,959.

Key ratiosThe closing debt/equity ratio was 0.25 (0.22).

The equity ratio remained broadly unchan-

ged at 56.3 per cent (56.4).


Cash flow analysis

GROUP, MSEK 2002 2001Operating profit 2,713 2,446Adjustments for items not included in cash flow* 1,244 1,725Change in working capital 356 61Net financial items (Note 7) –149 –152Paid tax –472 –248Cash flow before capital expenditure 3,692 3,832

Capital expenditure –1,486 –1,715Repurchase of hydroelectric power assets** –1,705 –Cash flow before dividend 501 2,117

Dividend paid to shareholders Ordinary –800 –720 Extra – –4,798Cash flow net financial debt –299 –3,401

Consolidation Iggesund Kraft –338 –Currency effects –10 –54Change in net financial debt –647 –3,455 Financing Financial receivables 54 33Liquid funds 634 399Pension provisions –25 –36Financial liabilities (Note 18) –4,471 –3,557Net financial debt –3,808 –3,161

Cash flow net financial debt –299 –3,401Cash flow financial receivables, liabilities and provisions 541 1,790Cash flow liquid funds 242 –1,611 Opening liquid funds 399 2,000Cash flow liquid funds 242 –1,611Currency effects –7 10Closing liquid funds 634 399

* The adjustments consist primarily of depreciation according to plan, interest in earnings of associate companies and for 2001 certain items affecting

comparability.

** Repurchased hydroelectric power assets relate to acquired fixed assets MSEK 1,513, working capital MSEK 63, and net deferred tax receivable MSEK 129.

The amount paid was MSEK 518, and assumed financial liabilities amounted to MSEK 1,187.


Cash flowThe Group’s cash flow before capital expendit-

ure amounted to MSEK 3,692 (3,832). The

cash flow includes paid tax of MSEK 472 (paid

248), and a decrease in working capital (excl.

tax liabilities) of MSEK 356 (61).

Capital expenditure amounted to MSEK

1,486 (1,715), of which MSEK 774 related to

paper machine at Hallsta Paper Mill. Repur-

chase of hydroelectric power assets amounted

to MSEK 1,705.

Cash flow before dividend amounted to

MSEK 501 (2,117). Dividend paid to sharehol-

ders amounted to MSEK 800 (5,518).

The cash absorbed by the Group amounted

to MSEK 299 (absorbed 3,401).

FinancingThe Group’s day-to-day financing during the

year was arranged mainly via the issue of com-

mercial paper with tenors less than one year,

and short-term bank borrowing. Liquid funds

have been placed with banks or on the Swedish

money market.

The Group’s long-term financial liabilities

have increased by MSEK 1,348, mainly as a

consequence of the repurchase and consolida-

tion of the power companies Junkaravan AB

and Iggesund Kraft AB.

Cash flow analysis

DEBT/EQUITY RATIO

-0.1

0.0

0.1

0.2

0.3

0.4

0201009998

CASH FLOW BEFORE CAPITAL EXPENDITURE, MSEK 2002 2001 2000 1999 1998Holmen Paper 2,440 2,936 1,914 1,969 1,852Iggesund Paperboard 1,328 877 578 690 982Iggesund Timber 32 –6 –57 –3 –30Holmen Skog 577 500 617 567 564Holmen Kraft 93 72 115 90 68Other –157 –147 –159 292 –566 4,313 4,232 3,008 3,605 2,870Net financial items –149 –152 –101 –206 –137Paid tax –472 –248 –942 –122 253 3,692 3,832 1,965 3,277 2,986

Cash flow divested activities – – – 558 1,162 3,692 3,832 1,965 3,835 4,148

NET FINANCIAL DEBTMSEK

-4,000

-3,000

-2,000

-1,000

0

1,000

0201009998

CAPITAL EXPENDITURE, MSEK 2002 2001 2000 1999 1998Holmen Paper 1,121 1,418 2,544 * 599 680Iggesund Paperboard 227 249 405 752 302Iggesund Timber 65 13 69 39 54Holmen Skog 39 25 37 38 82Holmen Kraft 1,671 *** 3 – 7 917 **Other 68 *** 7 113 * 7 10 3,191 1,715 3,168 1,442 2,045Divested activities – – – 546 512 3,191 1,715 3,168 1,988 2,557

* Including acquisition of Papelera Peninsular MSEK 1,943 and MSEK 110 respectively

** Including repurchase of power assets MSEK 915

*** Including repurchase of power assets MSEK 1,647 and MSEK 58 respectively.

EQUITY RATIO%

0

20

40

60

80

100

0201009998


Group relationshipL E Lundbergföretagen AB’s holding of shares in Holmen corresponds to 52.1 per cent of the total votes in the compa-ny. This means that a group relationship exists between L E Lundbergföretagen and Holmen. L E Lundbergföretagen owns 27.5 per cent of Holmen’s capital.

Dividend and share buy-backThe Board proposes that the Annual General Meeting to be held on March 26 resolves in favour of paying a dividend of SEK 11 per share. The dividend last year was SEK 10 per share. The proposed dividend amounts in total to MSEK 880. See also “Proposed treatment of unappropriated earnings” on page 62. The 2002 Annual General Meeting mandated the Board to buy back up to 10 per cent of all the shares in the company before the 2003 Annual General Meeting. This mandate was not exercised in 2002.

EnvironmentThe environmental aspects of Holmen’s business are regula-ted by laws and permits in each country. Holmen’s environ-mental policy serves a basis for allocating environmental responsibility and for the organisation and implementation of its environmental activities. At Holmen’s mills the various rules and regulations are integrated as an important part into the planning of production and investments. Holmen’s mills are of a high environmental standard, which is the result of investments in process and treatment equipment as well as of regular measures being taken within the framework of each unit’s environmental management system and the statutory environmental supervision. Operations in Sweden. During 2002 Holmen carried on activiti-es requiring a permit at seven facilities. Three of them have received environmental permits on the basis of the Environmen-tal Protection Act and another three have received permits pur-suant to the Environmental Code. At the seventh facility (Ströms Bruk), a notification procedure pursuant to the Envi-ronmental Code began after the application to the municipality. Their sales represented 64 per cent of the Group’s net turnover. The Group’s environmental impact largely takes the form of emissions into air and water, and of noise and waste. In 2002 Braviken and Wargön were granted new condi-tions pursuant to the Environmental Code. The Skärnäs ter-minal has had such a permit since 1999. Hallsta has had a permit since 2000 pursuant to the Environment Protection Act. Iggesunds Bruk’s permit is undergoing a procedure for a

new permit under the same legislation with a decision in March 2003. The Iggesund Sawmill has had a permit pursu-ant to the Act since 1994. The Holmen Kraft business area generates electricity at hydroelectric power companies that are wholly and part- owned by Holmen. The permits pursuant to the Water Act, which all the power stations have, include environmental conditions. The Group’s Swedish forestry and the operations at its pulp and paper mills are certificated in accordance with ISO 14001. Its forestry is also certificated in accordance with FSC. The introduction of environmental management sys-tems means that Holmen’s environmental activities are now structured and based on clearly defined objectives. By the end of 2002, business units accounting for 64 per cent of the Group’s net turnover had been certificated in accordance with FSC and ISO 14001. During the year, there was a small number of cases of exceeded limits, incidents and complaints relating to forestry activities and the mills. The deviations, which had no effect on the result, were dealt with by taking corrective action with-in the environmental management systems.Operations outside Sweden. Of the Group’s units outside Sweden, it is the mills in Workington, the UK, and Fuenla-brada (Papelera Peninsular), Spain, that can be associated with some form of environmental impact. These units’ sales account for 14 per cent of the Group’s net turnover. In 2002 Workington received the environmental permit in accordance with the EU’s IPPC directive and Papelera Penin-sular received a decision on its permit from the local environ-mental authorities in Spain. The IPPC directive was incorpora-ted into Spanish legislation in 2002. Papelera Peninsular has applied for a permit under the terms of this directive, and a decision is expected in 2003. The activities at Papelera Peninsular obtained certification in accordance with ISO 14001 in 2002. Workington obtained certification according to the same standard early in 2003.Environmental report. Holmen’s environmental activities in 2002 are described in summary on pages 36-37 of this report and in detail in Holmen’s Environmental Report for 2002, which is available in hard copy that is complemented with an environmental report on Holmen’s website – www.holmen.com. The Environmental Report is published at about the same time as this annual report. Neither pages 36-37 of this report, nor the separate environmental report, have been examined by external auditor.

Report of the directors


EU investigationHolmen has explained in earlier annual reports that the EU Commission commenced an investigation in the spring of 1995 into the European market for newsprint and magazine paper to determine whether there had been any restrictive practices in contravention of Article 81 of the Treaty of Rome. The investigation related to Holmen Paper and most other newsprint and magazine paper manufacturers in Wes-tern Europe.The Commission announced in August 2002 that the investigation had been dropped.

Decision on new paper machine postponedThe Holmen Board decided at the meeting of 5 February 2003 to postpone until further notice the decision to build a new newsprint machine at Papelera Peninsular, the Group’s Spanish mill. The main reason for this is that the recovery of the newsprint market appears to be taking longer than expec-ted. The pre-project will be completed and it is intended to go ahead with the necessary land purchase.

Tax caseHolmen has appealed against a decision handed down by the tax authority in December 2002 concerning the tax surcharge imposed on one of Holmen’s subsidiaries. The aggregate amount of taxes and charges is MSEK 538. The company does not share the tax authority’s view on the case, but consi-ders that it has already been subject to legal process and sett-led. The tax authority investigated the matter back in 1998, at which time it did not allow the deduction. The company appealed against the decision. The county administrative court ruled in the company’s favour, and approved the deduc-tion in its decision of 22 May 2001. The decision was not appealed against by the tax authorities, and has thus come into legal effect. The company sees no reason for a surcharge, nor does it agree with the opinion of the tax authority in oth-er respects. In light of this, Holmen has not made any provisi-on for tax in respect of this tax surcharge decision.

Buy-back of hydroelectric power assetsHolmen has bought back the partner financed company Jun-karavan AB on 31 December 2002, which means that Hol-men has acquired hydroelectric power assets corresponding to 541 GWh for MSEK 1,705. Holmen retains the partner financing of Iggesund Kraft AB, which owns hydroelectric power assets corresponding to 170 GWh. Holmen owns 50 per cent of Iggesund Kraft and consolidates the company as of 31 December 2002.

PensionsPension funds set up by the Group’s English companies show-ed a deficit of MSEK 391 as of 31 December 2002. The Group has stated this as a contingent liability in the consoli-dated financial statements.

Board and Board proceduresBoard. Holmen’s Board has 8 members who are elected by the Annual General Meeting and 3 representatives of the employees, together with the same number of deputies. The members elected by the AGM include individuals associated with Holmen’s main shareholders (L E Lundbergföretagen, the Kempe Foundations, and Handelsbanken), as well as other individuals who are independent of these shareholders. The President is a member of the Board. Employees of the company participate in meetings of the Board either to present business or as secretary. The secretary of the Board is the company’s Senior Vice President of Legal Affairs. The Board met on 9 occasions in the 2002 financial year, when it devoted a considerable amount of its time to strate-gic, financial and accounting matters. The work of the Board follows a plan that is designed to ensure that its members receive all necessary information. The company’s auditors report in person to the Board with observations from their audit of the accounts and give their assessment of the company’s internal control systems. The Board has adopted a written set of procedures and issued written instructions for the division of labour between the Board and the President, as well as for information the Board is to receive regularly. The members of the Board are presented on pages 64 and 65.Group management. Holmen’s Group management consists of 12 individuals: the President and CEO, the presidents of the 5 business areas, and the senior vice presidents of the 6 Group staffs. The Group management met on 12 occasions in 2002. Its meetings serve primarily as a forum for the provision of infor-mation on the results at Group and business area level, and for reporting before and after Board meetings. Budgets and capital expenditure are also frequently on the agenda, as are presentations of market, economic and currency develop-ments. The meetings also discuss business area and staff pro-jects, which are regularly followed up stage by stage and eva-luated upon completion. The members of the Group manage-ment are presented on pages 66 and 67.

Report of the directors


Financial risk management

The Group’s financial activities and management of finan-

cial transactions are centralised to Group Finance. The aim

is to minimise the Group’s capital costs by using means of

suitable financing and to effectively control and manage

the Group’s financial risks. The activities are carried out on

the basis of the financial policy established by the Board

and are characterised by a low level of risk.

Currency riskTransaction exposure. The Group’s commercial payment

flows give rise to the exchange of foreign currencies into Swe-

dish kronor that are estimated to some SEK 7.5 billion net

for 2003, of which euro accounts for 64 per cent (see table

below). In order to reduce the effect of currency fluctua-

tions on the result, Holmen hedges its currency flows for a

certain period into the future by means of forwards and

options. Normally, the net currency flow is hedged for the

coming four months. The Board can choose to increase the

hedging ratio if this is considered necessary in the light of

product profitability, competitive position and currency

forecasts.

At the beginning of 2002, the Group had hedged some

80 per cent of the estimated flow of commercial payments

for 2002 and 40 per cent for 2003. During the year, the

hedging ratio was gradually raised and by 31 December

2002, the Group had outstanding currency hedgings in

respect of some 85 per cent of the estimated commercial

flow of payments in 2003, 55 per cent in 2004 and 20 per

cent in 2005, or a total of some SEK 11.3 billion. The

breakdown of the currency hedging as of 31 December

2002 is shown in the table below. Further hedging in euro

has been made for 2005 since the end of the year.

The result from currency hedging is included in the ope-

rating profit of each business area by stating sales that has

been hedged at the hedging rate. Currency fluctuations the-

refore have an effect on the operating result when hedging

contracts mature. The effect of the currency hedging on the

result for 2002 was MSEK 314. The value of hedgings not

yet recognised in the income statement amounted to MSEK

294 at 31 December 2002.

Translation exposure. Holmen’s foreign companies are pri-

marily financed by means of intra-group loans and equity.

Currency hedging of the equity of foreign subsidiaries is

assessed from case to case. Currency differences arising

from the translation of net foreign assets amounted to a

cost of MSEK 175 in 2002, while the result of the equity-

hedging was MSEK 24, both of which are taken direct to

the Group’s equity.

31 December 2002, MSEK Net assets Equity-hedgeEUR 1,357 –1,098GBP 1,549 0Other 41 0

Loans raised in foreign currencies as part of the Group’s

financing are hedged with currency forwards. The transla-

tion of loans and forwards during the year had no effect on

the consolidated result.

Income statement items in the accounts of foreign subsi-

diary and associate companies are not hedged.

Economic exposure. Holmen’s competitive position and

result are influenced by currency fluctuations in relation to

producers whose production costs are incurred in other

currencies. Such currencies include EUR, USD and CAD.

Holmen does not normally hedge such risks.

FinancingHolmen’s financial net debt at 31 December 2002 amoun-

ted to MSEK 3,808, divided into loans MSEK 4,496, liquid

funds MSEK 634 and financial receivables MSEK 54.

The Group normally has no surplus cash reserves, but

uses committed credit facilities to reduce the risk that raising

capital and refinancing loans in the future will be difficult or

costly. During the year, an existing committed credit facility

TRANSACTION EXPOSURE, 31 DECEMBER 2002, MSEK 12 months estimated Hedged Average 2003 2004 2005 net flows total rate % Average rate % Average rate % Average rateEUR 4,800 8,700 9.37 85 9.33 70 9.41 30 9.37GBP 1,100 1,600 14.86 95 14.90 50 14.83USD 1,100 900 10.35 80 10.42 5 9.53Other 500 100 30Total 7,500 11,300 85 55 20


Financial risk management

was replaced by a new MEUR 500 facility maturing in

2007, that was arranged with a group of 23 banks.

The day-to-day financing was arranged during the year

mainly via Holmen’s commercial paper programme with a

limit of MSEK 4,000 and short-term bank loans. On aver-

age MSEK 1,900 were outstanding during the year and

MSEK 1,797 at the year end. For the long-term financing

Holmen has a Swedish Medium Term Note programme

with a limit of MSEK 4,000. The programme has not yet

been utilised.

Holmen has a BBB+ long-term corporate credit rating

and a short-term A-2/K-1 rating from the Standard & Poor

rating institution.

The net debt in foreign currency (loans and forwards)

amounted to MSEK 1,620 at the end of the year, and has

been stated as financing or hedging of the foreign assets.

Interest rate riskThe duration of the Group’s financial liabilities is normally

short, but it can be lengthened in order to limit the adverse

effect of an increase in interest rates. Changes in duration

are decided by the Board. The average duration has varied

between 13 and 21 months during the year, and was 13

months at the end of 2002.

Other financial risk managementHolmen’s net consumption of electricity in Sweden

amounts to some 3,000 GWh in a normal year. In order to

reduce its exposure to changes in the price of electricity, the

Group makes use of financial hedging and physical supply

agreements at fixed prices. Almost all of the estimated net

consumption in Sweden for 2003 and 2004 has been fully

hedged at price levels that are significantly below the mar-

ket prices that applied at the end of 2002. Half of the con-

sumption in 2005 has been hedged, and one-third for the

2006-2011 period

The result of the hedgings are taken into the accounts

when the contracts mature. The effect on the result of phy-

sical and financial contracts amounted net to MSEK 225 in

2002, of which a loss of MSEK 80 is stated in Holmen

Kraft’s accounts and a profit of MSEK 305 in the accounts

of the electricity-using mills.

In the case of certain paper products, there are OTC

markets for financial contracts. Holmen has so far made

little use of these markets to hedge its selling prices.

Credit risks in relation to financial counter-partiesThe risk of a counterparty not fulfilling its commitments is

limited by selecting creditworthy counterparties, limiting

exposure to individual counterparties and by making use

of ISDA and FEMA agreements.

The Group had outstanding derivative contracts, mainly

hedging agreements, with a nominal amount of SEK 18.3

billion and a market value of MSEK 573 as of 31 Decem-

ber 2002. Calculated in accordance with the regulations of

the Swedish Financial Supervisory Authority for financial

institutions, Holmen’s total counter-party risks on its deri-

vative instruments amount to MSEK 1,090 at 31 Decem-

ber 2002.

InsuranceHolmen insures its mills against property damage and

sequential loss. The level of risk varies from one mill to

another, but is maximised to some MSEK 40 for an indivi-

dual damage. The Group’s forests are not insured as they

are widely dispersed throughout the country and the risk is

small of simultaneous damage.

31 December 2002, MSEK Capital employed Net financial debtSEK 15,346 2,188EUR 2,331 1,988GBP 1,307 –321Other 9 –47Total 18,993 3,808

Maturities Financial liabilities Committed and interest-bearing credit31 December 2002, MSEK provisions facilities2003 2,052 2004 889 2005 1,171 2006 4 2007– 380 4,575 Total 4,496 4,575


MSEK 2002 2001 Full year IV III II I Full year IV III II IPROFIT AND LOSS ACCOUNT Net turnover 16,081 4,120 3,996 4,027 3,938 16,655 4,343 4,099 4,097 4,116Operating costs –12,205 –3,179 –2,983 –3,127 –2,916 –12,460 –3,263 –2,908 –3,156 –3,133Depreciation according to plan –1,153 –290 –297 –287 –279 –1,126 –284 –280 –281 –281Items affecting comparability – – – – – –620 –620 – – –Interest in earnings of associate companies –10 –13 – 3 – –3 –5 –2 3 1Operating profit 2,713 638 716 616 743 2,446 171 909 663 703

Net financial items –149 –27 –40 –44 –38 –152 –43 –52 –53 –4Profit after financial items 2,564 611 676 572 705 2,294 128 857 610 699

Tax –605 –175 –166 –58 –206 –108 100 184 –183 –209

Profit for the period 1,959 436 510 514 499 2,186 228 1,041 427 490

KEY RATIOS Operating margin, % 16.9 15.8 17.9 15.2 18.9 18.4 18.3 22.2 16.1 17.1Return on capital employed, % 15.5 14.1 16.5 14.3 17.3 17.7 17.6 20.7 15.7 16.8Return on equity, % 13.7 11.7 14.2 14.8 14.4 16.0 6.5 31.1 13.7 13.4Earnings per share (before dilution), SEK 24.50 5.46 6.37 6.43 6.24 27.33 2.84 13.02 5.34 6.13

NET TURNOVERHolmen Paper 8,164 2,119 2,122 2,029 1,894 8,757 2,283 2,260 2,173 2,041Iggesund Paperboard 4,850 1,166 1,270 1,209 1,205 4,467 1,181 1,131 1,053 1,102Iggesund Timber 572 133 134 148 157 712 161 175 196 180Holmen Skog 3,538 922 739 929 948 3,982 997 808 1,005 1,172Holmen Kraft 1,120 331 247 247 295 1,108 286 263 251 308 18,244 4,671 4,512 4,562 4,499 19,026 4,908 4,637 4,678 4,803

Intra-Group sales –2,163 –551 –516 –535 –561 –2,371 –565 –538 –581 –687

16,081 4,120 3,996 4,027 3,938 16,655 4,343 4,099 4,097 4,116

PROFIT/LOSSHolmen Paper 1,664 337 493 364 470 2,410 568 750 597 495Iggesund Paperboard 818 210 232 190 186 455 110 150 53 142Iggesund Timber –6 3 –1 –2 –6 –79 –24 –19 –20 –16Holmen Skog 450 155 62 105 128 455 193 83 79 100Holmen Kraft –26 –17 –25 –2 18 49 –7 15 5 36Group adjustments and other –187 –50 –45 –39 –53 –224 –49 –70 –51 –54 2,713 638 716 616 743 3,066 791 909 663 703

Items affecting comparability – – – – – –620 –620 – – –

Operating profit 2,713 638 716 616 743 2,446 171 909 663 703

OPERATING MARGIN, % Holmen Paper 21 17 23 18 25 28 25 33 27 24Iggesund Paperboard 17 18 18 16 15 10 9 13 5 13Iggesund Timber –1 2 –1 –2 –4 –11 –16 –11 –11 –9

Group 16 17 18 15 19 18 18 22 16 17

DELIVERIES Newsprint and magazine paper, 1,000 tonnes 1,528 404 396 383 345 1,525 394 388 374 369Paperboard, 1,000 tonnes 453 112 121 110 110 410 106 103 97 104Sawn timber, 1,000 m3 220 52 51 54 63 322 71 74 92 85

Quarterly figures


PROFIT AND LOSS ACCOUNT, MSEK 2002 2001Net turnover (Note 1) 13,015 13,673Other operating income (Note 2) 330 384 13,345 14,057Raw materials and consumables (Note 3) –5,495 –5,788Change in inventory of finished products –14 116Personnel costs (Note 22) –1,842 –1,810Other external costs –3,854 –11,205 –4,042 –11,524Items affecting comparability (Note 5) –53 2,319Depreciation according to plan (Note 4) –27 –30Operating profit 2,060 4,822

Net financial items (Note 7) –65 –791Profit after financial items 1,995 4,031

Appropriations Group contributions received 60 120 Group contributions made –176 –327 Other appropriations (Note 16) –470 99Profit before tax 1,409 3,923

Tax (Note 8) –249 –588Profit for the year 1,160 3,335

CASH FLOW ANALYSIS, MSEK 2002 2001Operating profit 2,060 4,822Adjustments for items not included in cash flow* 84 3,147Change in working capital etc. 478 –4,173Net financial items –65 –791Paid tax –431 –394Cash flow before capital expenditure 2,126 2,611

Capital expenditure –293 –792Cash flow before dividend 1,833 1,819

Dividend paid to shareholders –800 –5,518Cash flow net financial assets/debt 1,033 –3,699 Financial receivables 16 19Liquid funds 534 142Pensions provisions –20 –27Financial liabilities –2,897 –3,534Net financial debt –2,367 –3,400 Cash flow net financial assets/debt 1,033 –3,699Cash flow financial receivables, liabilities and provisions –641 2,036Cash flow liquid funds 392 –1,663 Opening liquid funds 142 1,805Cash flow 392 –1,663Closing liquid funds 534 142

* The adjustments consist mainly of depreciation according to plan and retirement of residual values according to plan in respect of fixed assets and for 2001 certain items affecting comparability.

BALANCE SHEET AT 31 DECEMBER, MSEK 2002 2001ASSETS Fixed assets Intangible fixed assets (Note 10) Leases and similar rights 11 9

Tangible fixed assets (Note 11) Forest land 2,471 2,468Buildings, other land and land installations 25 28Machinery and equipment 53 50 2,549 2,546Financial fixed assets Shares and participations Group companies (Note 12) 12,449 12,224 Associate companies (Note 12) 12 33 Other shares and participations (Note 12) – –Financial receivables 16 19Other long-term receivables (Note 12) 1,747 1,552 14,224 13,828

Total fixed assets 16,784 16,383

Current assets Inventories etc. (Note 13) 1,785 1,887Current receivables Operating receivables (Note 14) 3,156 3,675Short-term placements 295 –Cash and bank 239 142Total current assets 5,475 5,704

Total assets 22,259 22,087

EQUITY AND LIABILITIES Equity (Note 15) Restricted equity Share capital 3,999 3,999Revaluation reserve 100 100Statutory reserve 1,296 1,296Share premium reserve 46 46Non-restricted equity Profit brought forward 5,307 2,772Profit for the year 1,160 3,335Total equity 11,908 11,548

Untaxed reserves (Note 16) 1,774 1,304

Provisions Interest-bearing Pension provisions (Note 17) 20 27Non-interest-bearing Tax provisions (Note 8) 641 633 Other provisions (Note 17) 238 268Total provisions 899 928

Liabilities Financial liabilities (Note 18) 5,501 5,792Operating liabilities (Note 19) 2,177 2,515Total liabilities 7,678 8,307

Total equity and liabilities 22,259 22,087 Pledged assets (Note 20) 10 10Contingent liabilities (Note 21) 1,494 374

Parent companyQuarterly figures


General accounting principles. The annual report is made up

in accordance with the Annual Accounts Act and the

recommendations issued by the Swedish Financial Accoun-

ting Standards Council.

The following recommendations issued by the Swedish

Financial Accounting Standards Council have been applied

with effect from 1 January 2002: RR1:00 Consolidated

financial statements, RR15 Intangible assets, RR16 Provi-

sions, contingent assets and liabilities, RR19 Discontinu-

ing operations, RR21 Borrowing costs, and RR23 Related

party disclosures. The application of these recommenda-

tions has not had any material effect on the consolidated

result or made any adjustments to prior year figures neces-

sary. RR17 Impairment of assets has been applied with

effect from the final accounts for 2001.

Principles of valuation, etc. Assets and liabilities are valued

at acquisition value except where otherwise stated below.

Commission companies. The Group’s business is mainly

conducted through the following commission companies:

Holmen Paper AB

Iggesund Paperboard AB

Iggesund Timber AB

Holmen Skog AB

Holmen Kraft AB

These companies are wholly-owned subsidiary companies

of Holmen AB. The parent company is liable for all the

undertakings and commitments of these commission com-

panies. All income, costs, assets and liabilities, which arise

in the operations conducted by the commission companies,

are stated either in Holmen AB’s accounts or in the

accounts of Group companies other than the commission

companies.

Consolidated financial statements. The consolidated financi-

al statements relate to the parent company and those com-

panies in which the parent company directly or indirectly

controls more than half the votes, or exercises control in

some other way.

The consolidated financial statements are made up

using the purchase method, where shares in Group compa-

nies are replaced in the consolidated financial statements

by the assets and liabilities of the Group companies, valued

at the Group’s acquisition cost. Differences between the

acquisition cost and the assets and liabilities of the acqui-

red company valued on a commercial basis are treated as

positive or negative goodwill. Goodwill and excess values

in respect of assets subject to decrease in value are depreci-

ated according to plan in the consolidated profit and loss

account. The consolidated equity includes – apart from the

parent company’s equity – only changes in the equity of

Group companies that have arisen after acquisitions.

Holmen’s Group companies are defined as independent

companies and their accounts are therefore translated

using the current rate method, whereby all assets, provi-

sions, and other liabilities are translated at closing date

rates and exchange rate differences arising are taken direct

to consolidated restricted and non-restricted reserves

respectively. All items in the profit and loss account are

translated at average rates for the year.

Associate companies. Shareholdings in associate companies,

in which the Group controls a minimum of 20 per cent and

a maximum of 50 per cent of the votes, or otherwise exerci-

ses a significant influence over their operational and financi-

al control, are stated in accordance with the capital interest

method, except for associate companies having a negligible

effect on the Group’s results and financial position.

The capital interest method means that the value of the

shares in the associate company stated in the consolidated

accounts corresponds to the Group’s interest in the associ-

ate company’s equity and any residual value of excess valu-

es and discounts arising upon consolidation. The Group’s

share of the associate companies’ profit/loss after financial

income and costs adjusted for any write-downs or reversals

of acquired goodwill and negative goodwill respectively is

stated in the consolidated profit and loss account as “Inte-

rest in earnings of associate companies”. The Group’s inte-

rest in the booked taxes of associate companies is in the

Group’s tax costs. Interests in profits earned after the acqu-

isition of associate companies which have not been realised

in the form of a dividend, are transferred to capital interest

reserve, which is included in the Group’s restricted equity.

If the associate company is stated at a lower value than the

value according to the acquisition-value method, the diffe-

rence is taken against consolidated non-restricted equity.

Net turnover. By net turnover is meant invoiced sales, exclu-

ding value added tax and after allowing for discounts, and

similar reductions in income, but before allowing for the

cost of delivery.

Accounting principles


Other operating income. Revenue from secondary activities

not forming part of the main business is stated as other

operating income.

Items affecting comparability. The effect on the result of spe-

cific events and transactions of significance is stated within

the respective profit concept. Capital gains and losses on the

divestment of fixed assets and lines of business, restructuring

costs etc. are normally stated within the operating result of

the business area in question or as Group adjustment.

Depreciations according to plan and write-downs. Deprecia-

tion according to plan is based on the original acquisition

value of the assets, taking into account any write-downs

made. Depreciation is provided during the economic life of

the asset.

The following economic lives are used:

Administrative and warehouse buildings, dwellings _________20–33 yearsProduction buildings, land installations, and machineryfor pulp, paper and paperboard production____________________________ 20 yearsMachinery for sawmill ________________________________________________________________ 12 yearsOther machinery _______________________________________________________________________ 10 yearsForest roads ______________________________________________________________________________ 10 yearsEquipment ____________________________________________________________________________________ 4 yearsGoodwill______________________________________________________________________________________ 20 years

Should there be any indication that the book value of the

Group’s tangible, intangible and financial assets is too

high, an analysis is made in which the recovery value of

single or inherently related types of assets is determined at

either the net sales value or the utility value, whichever is

the highest. The utility value is measured as the discounted

cash flow expected in the future. A write-down is made of

the difference between the book value and the recovery

value.

Borrowing costs are charged against the result for the peri-

od to which they relate, regardless of how the borrowed

funds are applied.

Group contributions and shareholder contributions. Group

contributions are stated in the parent company’s profit and

loss account under Appropriations. Shareholder contribu-

tions are taken direct to equity in the recipient’s accounts,

and capitalised under shares and participations if no write-

downs have been necessary in the accounts of the giver.

Taxes. Total tax as stated in the profit and loss account

comprises tax paid and deferred tax. Tax paid is the tax to

be paid or received for the year in question. This also inclu-

des any adjustment to tax paid for previous periods. Defer-

red tax is calculated using the balance sheet method on the

basis of temporary differences between stated values and

values for tax purposes of assets and liabilities, applying

the tax rates and rules that have been approved or announ-

ced as of the closing date. Temporary differences are not

taken into account in goodwill arising upon consolidation,

nor in differences attributable to interests in subsidiary and

associate companies that are not expected to become liable

to taxation in the foreseeable future. In the accounts of

juridical persons, untaxed reserves are stated inclusive of

deferred tax liability. Deferred tax receivables in tax-

deductible temporary differences and loss allowances are

stated only to the extent that they are likely to be used and

entail lower tax payments in the future.

Receivables. Receivables are stated after individual valua-

tion at the amounts that the company expects to receive.

Receivables and liabilities denominated in foreign curren-

cies are translated at closing date rates or, if they have been

hedged, at hedging rates. Exchange rate differences are

included in the operating result, except for differences rela-

ting to short-term placements, cash and bank, financial lia-

bilities and interest-bearing provisions, which are stated

within net financial items. For the hedging of future cur-

rency flows, exchange rate differences are taken into the

result during the same period as the underlying currency

flow. The currency mix of financial liabilities has been alte-

red by means of forward hedging contracts. These forward

contracts are valued at closing date rates and the unreali-

sed profit or loss is stated net as a liability. Any premiums/

discounts are regarded as interest, periodised and stated

within net interest cost. Loans and forward contracts in

foreign currencies can be used to reduce the currency effect

of the translation of foreign net assets into SEK. Currency

differences on these are eliminated to the extent that they

correspond to currency differences on foreign net assets,

after tax effects are taken into account, from the profit and

loss account, and taken direct to equity in the balance

sheet. These hedging measures are based on the value at

Group level of the net assets per currency.

Valuation of inventories. Inventories are valued at the lower

of acquisition value or production cost after allowing for

obsolescence at the standard rate of three per cent, or at

actual value. The acquisition cost of manufactured finished

products comprises direct production costs and a reasona-

Accounting principles


Definitions of financial ratiosOperating capital. Balance sheet total less financial receiva-

bles, short-term placements, cash and bank, operating lia-

bilities and interest-free provisions (excl. deferred tax

receivable and tax liability). Average values are calculated

on the basis of quarterly data.

Capital employed. Operating capital reduced by deferred

tax receivable and liability. Average values are calculated

on the basis of quarterly data.

Equity. For the period 1993–1994 convertible participating

loan (KVB) is included. Average values are calculated on

the basis of quarterly data.

Debt/equity ratio. Net financial debt (financial liabilities and

interest-bearing provisions less financial receivables, short-

term placements and cash and bank) divided by the sum of

equity and minority interests.

Equity ratio. Equity plus minority interests expressed as a

percentage of the balance sheet total.

Interest coverage. Operating profit/loss divided by net finan-

cial items.

Return on operating capital. Operating profit/loss (excl. items

affecting comparability and divested activities) expressed

as a percentage of the average operating capital.

Return on capital employed. The operating result (excl.

items affecting comparability and divested activities) as a

percentage of the average capital employed.

Return on equity. Profit/loss for the year, expressed as a per-

centage of the average equity.

Operating margin. Operating profit/loss (excluding items

affecting comparability, and interest in earnings of associa-

te companies) expressed as a percentage of net turnover.

Capital turnover rate. Net turnover divided by average opera-

ting capital (expressed as times per year).

Earnings per share. Profit/loss for the year divided by the

weighted average number of shares in issue (and up to

1994 also of KVBs), adjusted for buy-back of shares during

the year.

Earnings per share after dilution. The profit for the year, adjus-

ted for interest costs after tax attributable to outstanding

convertibles, divided by the weighted average number of

shares in issue during the year, (adjusted for buy-back of

shares), after adjustment for the number of shares issued in

the event of conversion and premiums, if any, over the book

value of outstanding warrants. Calculated according to the

Council’s recommendation RR 18 Earnings per share.

ble proportion of indirect costs. The actual value of finis-

hed products is their sales value less estimated selling costs.

The actual value of saw timber and pulpwood and other

raw materials, inventory materials and the like is the lower

of replacement value or acquisition value after allowing for

actual obsolescence.

Convertible loan and warrants. The amount of the conver-

tible loan has been calculated on the basis of the market

yield. The difference between the loan amount arrived at in

this way and proceeds is transferred to premium reserve as

a premium on the price of the shares that will eventually be

issued. The size of the stated loan liability is successively

increased during the term of the loan by accruing interest

so that upon maturity the stated amount of the loan will

coincide with the nominal amount of the loan. The pro-

ceeds of the issue of warrants are taken direct to premium

reserve.

Leasing. The financial agreements that exist within the

Group are stated for reasons of relative significance as ope-

rational. There are few operational agreements within the

Group and so, for the same reason, no supplementary

information on them is provided.

Provisions. A provision is stated in the balance sheet in

accordance with RR16 Provisions, contingent assets and

liabilities when the company has a formal or informal

commitment as a consequence of an event that has occur-

red, and it is likely that the disbursement of resources will

be required to regulate the commitment, and a reliable esti-

mate of the amount can be made.

Contingent liabilities. A contingent liability is stated within

the line when there is:

– the possibility of a commitment that originates in events

that have occurred and the existence of which will only be

verified by the future occurrence or non-occurrence of one

or more uncertain events that are not entirely within the

company’s control, or

– a commitment that originates in events that have occur-

red but that has not been stated as a liability or provision

as it is not likely that any disbursement of resources will be

required to regulate the commitment, of that the monetary

value of the commitment cannot be calculated with a suffi-

cient degree of certainty.


Notes Amounts in MSEK, except where otherwise stated.

1 NET TURNOVER GroupExternal ner turnover by market 2002 2001Sweden 3,801 4,114Great Britain 2,699 2,635Germany 1,894 2,104Spain 1,219 1,480France 873 953Holland 825 847Italy 610 571Other EU countries 1,304 1,543Rest of Europe 1,158 1,078Rest of the world 1,698 1,330 16,081 16,655 Of the parent company’s net turnover of MSEK 13,015 (13,673), 0 (1) per cent were sales to Group companies. The parent company’s purchases from Group companies are negligible.

2 OTHER OPERATING INCOMEOther operating income mainly comprises rental income and property leasing income, freight forwarding income, sales of by-products and capital gains on sales of tangible fixed assets.

3 RAW MATERIALS, GOODS FOR RESALE AND CONSUMABLESAs goods for resale account for a small proportion of the Group’s turnover, this item is grouped together with raw materials and consumables.

4 DEPRECIATION ACCORDING TO PLAN Group Parent company 2002 2001 2002 2001Goodwill and leases 33 36 – –Building, other land and land installations 124 123 2 4Machinery and equipment 996 967 25 26 1,153 1,126 27 30

5 ITEMS AFFECTING COMPARABILITY Group Parent company 2002 2001 2002 2001Capital gains/losses on divestments Group companies – – – 3,324 Other – – – 1Write-down of shares Group companies – – –53 –1,002 Associate companies – – – –4Write-down of fixed assets – –620 – – – –620 –53 2,319

The parent company’s result in 2001 of MSEK 3,324 is attributable to re-payment of capital from the parent company’s Group company in France. The item write-down of shares in Group companies in 2001 includes a write-down of MSEK 1,000 in the value of the shareholding in Holmen UK Ltd.

6 INTEREST IN EARNINGS OF ASSOCIATE COMPANIES Group 2002 2001Interest in earnings after financial items –10 –3Tax 5 –2Holmen’s interest in earnings after tax –5 –5

The interest in earnings relate to Carpa with subsidiary, Peninsular Cogene-racion SA and Les Bois de la Baltique SA.

7 NET FINANCIAL ITEMS Group Parent company 2002 2001 2002 2001Dividend income Group companies – – 2 11 Associate companies – – – 3Interest income from current assets External 17 45 10 31 Group companies – – 48 60Interest costs External –169 –199 –170 –197 Group companies – – –15 –332Other financial items Exchange differences other long-term liabilities – – 24 –59 Other 3 2 36 –308 –149 –152 –65 –791


8 TAXTax charge stated in profit Group Parent companyand loss account 2002 2001 2002 2001Tax paid –285 –159 –248 –588Deferred tax Changes in losses allowance carried forward –13 –39 – – Changes in temporary differences –312 –325 92 53 –1 –Interest in earnings of associate companies 5 – –2 – – –605 –108 –249 –588

The tax charge is Group Parent companydistributed as follows 2002 2001 2002 2001Tax paid Sweden –267 –168 –248 –588 Outside Sweden –18 9 – –Subtotal –285 –159 –248 –588

Deferred tax Sweden –328 –12 –1 – Outside Sweden 3 65 – –Subtotal –325 53 –1 –

Associate companies 5 –2 – –Total tax –605 –108 –249 –588

The difference between the nominal Swedish tax rate and the effective tax rate has arisen Group Parent companyin the following way, % 2002 2001 2002 2001Swedish income tax rate 28 28 28 28Difference in relation to tax rate on foreign activities 1 –1 – –Untaxable income –1 –1 – –21Non-deductible costs 1 1 1 8Effects of tax litigation –5 –22 –11 –Tax rate excl. associate companies 24 5 18 15Associate companies – – – –Tax rate 24 5 18 15

Group Parent companyTaxes as stated in balance sheet 2002 2001 2002 2001Financial fixed assets Deferred tax receivable 194 203 – –Operating receivables Current tax receivable 23 21 – – 217 224 0 0Provisions for taxes Deferred tax liability 4,370 4,014 613 612 Other provisions 28 21 28 21Total provisions for taxes 4,398 4,035 641 633Operating liabilities Current tax liability 277 468 236 426 4,675 4,503 877 1 059

The deferred tax receivablesand liabilities are Group Parent companydistributed as follows 2002 2001 2002 2001Deferred tax receivablesLoss allowance carried forward 317 355 – –Deferred tax liabilities stated net among deferred tax receivables –123 –152 – – 194 203 0 0Deferred tax liabilitiesFixed assets Forest land 1,715 1,715 679 679 Machinery and equipment 1,671 1,516 – – Buildings and other real property 62 62 – –Tax allocation reserve 550 418 – –Other 372 303 –66 –67 4,370 4,014 613 612

Tax litigationHolmen has appealed against a decision handed down by the tax aut-hority in December 2002 concerning the tax surcharge imposed on one of Holmen’s subsidiaries. The aggregate amount of taxes and charges is MSEK 538. The company does not share the tax authority’s view on the case, but considers that it has already been subject to legal process and settled. The tax authority investigated the matter back in 1998, at which time it did not allow the deduction. The company appealed against the de-cision. The county administrative court ruled in the company’s favour, and approved the deduction in its decision of 22 May 2001. The decision was not appealed against by the tax authorities, and has thus come into legal effect. The company sees no reason for a surcharge, nor does it agree with the opinion of the tax authority in other respects. In light of this, Holmen has not made any provision for tax in respect of this tax surcharge decision.


9 EARNINGS PER SHARE 2002 2001Earnings per share, SEK Before dilution 24.50 27.33 After dilution 23.58 26.41

Profit for the period, MSEK 1,959 2,186Interest convertible loan, MSEK 14 13Adjusted profit, MSEK 1,973 2,199

Average number of shares (million) Before dilution 80.0 80.0 Convertible loan 3.2 3.0 Warrants 0.5 0.3 After dilution 83.7 83.3

See page 52 Definitions of financial ratios for calculation method.

10 INTANGIBLE FIXED ASSETS Parent Group companyGoodwill, leases and similar rightsAccumulated acquisition valuesOpening value 687 9Capital expenditure 6 6Divestments and retirements –16 –4Translation differences arising for the year –16 – 661 11

Accumulated depreciation according to planOpening balance 53 –Depreciation for the year 33 –Translation differences arising for the year –1 – 85 –Closing residual value according to plan 576 11

Residual value according to plan includes goodwill of MSEK 564 (624). The depreciation period for goodwill arising in connection with the acquisition of Papelera Peninsular is 20 years. The depreciation period is established on the basis of the long-term and strategic significance of the acquisition. Papelera Peninsular has a strong market position and its market and tech-nical conditions are stable.

11 TANGIBLE FIXED ASSETS Buildings, other land and land MachineryGroup Forest land installations and equipmentAccumulatedacquisition values Opening balance 3,872 3,870 19,281Capital expenditure 5 87 2,127Repurchase hydroelectric power assets – 105 6Consolidation Iggesund Kraft – 502 8Divestments and retirements – –47 –521Translation differencesarising for the year – –42 –267 3,877 4,475 20,634

Accumulated depreciation according to plan Opening balance – 1,869 10,453Depriciation for the year – 124 996Divestments and retirements – –45 –474Translation differencesarising for the year – –24 –175 – 1,924 10,800

Accumulated revaluations Opening balance 2,425 1 – 2,425 1 –Closing residual value according to plan 6,302 2,552 9,834

Buildings, other land and land MachineryParent company Forest land installations and equipmentAccumulated acquisition valuesOpening balance 43 146 216Capital expenditure 3 – 29Divestments and retirements – –4 –31 46 142 214

Accumulateddepreciation according to planOpening balance – 119 166Depreciation for the year – 2 25Divestments and retirements – –3 –30 – 118 161

Accumulated revaluations Opening balance 2,425 1 – 2,425 1 –Closing residual value according to plan 2,471 25 53

Assessed tax values Group Parent company 2002 2001 2002 2001Assessed tax values relate to assets in Sweden.Forest and agricultural property 7,493 7,672 3,788 3,999Buildings, other land and land installations 3,196 3,124 28 25 10,689 10,796 3,816 4,024


12 FINANCIAL FIXED ASSETSShares and participations Associate Other shares andGroup companies participationsAccumulated acquisition valuesOpening balance 309 97Repurchase hydroelectric power assets 1,466 –Re-classifications –68 –Translation differences arising for the year –4 –1 1,703 96

Accumulated interest in earningsOpening balance 14 –Interest in earnings –5 – 9 –

Accumulated write-downs Opening balance 125 9Write-down for the year 3 –Re-classifications –50 – 78 9Closing book value 1,634 87

Other Group Associate shares and Parent company companies companies participationsAccumulated acquisition values Opening balance 12,526 117 –Capital expenditure 255 – –Shareholders’ contribution 4 – –Re-classifications and other changes 68 –71 – 12,853 46 –

Accumulated revaluations Opening balance 2,299 – – 2,299 – –

Accumulated write-downs Opening balance 2,601 84 –Write-down for the year 52 – –Re-classifications 50 –50 – 2,703 34 –Closing book value 12,449 12 –

List of shareholdings, see pages 60–61.

Other long-term receivables Group Parent company 2002 2001 2002 2001Receivables from Group companies – – 1,695 1,500Deferred tax receivable 194 203 – –Other long-term receivables 54 55 52 52 248 258 1,747 1,552

13 INVENTORIES ETC. Group Parent company 2002 2001 2002 2001Raw materials and consumables 730 744 531 557Saw logs and pulpwood 139 153 119 125Finished products, goods for resale and work in progress 1,135 1,191 898 912Felling rights 237 290 235 290Advance payments to suppliers 3 2 2 3 2,244 2,380 1,785 1,887

14 OPERATING RECEIVABLES Group Parent company 2002 2001 2002 2001Accounts receivable 2,274 2,537 1,757 2,022Receivables from Group companies – – 1,193 1,309Receivables from associatecompanies – 133 – 125Prepaid costs and accrued income 100 89 74 68Tax receivable 23 21 – –Other receivables 281 206 132 151 2,678 2,986 3,156 3,675

Other


15 EQUITY Non- Restricted equity restricted equity Non- Profit Share Restricted restricted for theGroup capital reserves reserves year TotalOpening balance, January 1, 2002 3,999 3,531 4,356 2,186 14,072Transfer of profit for the year 2001 – – 2,186 –2,186 –Dividend paid – – –800 – –800Currency differences of foreign Group and associate companies – –158 – – –158Restatements between restricted and non-restricted equity – 517 –517 – –Profit for the year – – – 1,959 1,959Closing balance, December 31, 2002 3,999 3,890 5,225 1,959 15,073

Accumulated currency differences in the accounts of foreign businesses have been specified with effect from the start of 1999.

Specification of accumulated currency difference in equityOpening accumulated currency difference 349Currency difference for the year in foreign subsidiary companies –175Effect for the year of currency hedging of net investment in foreign subsidiary companies (incl. tax effect) 17 –158Closing accumulated currency difference 191

Non- Restricted equity restricted equity Non- Profit Share Restricted restricted for theParent company capital reserves* reserves year TotalOpening balance January 1, 2002 3,999 1,442 2,772 3,335 11,548Transfer of profit for the year 2001 – – 3,335 –3,335 –Dividend paid – – –800 – –800Profit for the year – – – 1,160 1,160Closing balance December 31, 2002 3,999 1,442 5,307 1,160 11,908

* Restricted reserves comprise legal reserve of MSEK 1,296, share premium reserve of MSEK 46, and revaluation reserve of MSEK 100.

December 31, 2002 December 31, 2001Parent company Number MSEK Number MSEKEquitySeries “A” 22,623,234 1,131.2 22,623,234 1,131.2Series “B” 57,349,217 2,867.4 57,349,217 2,867.4 79,972,451 3,998.6 79,972,451 3,998.6 In the event of full conversion and subscription of running convertible par-ticipating loan and warrants, 4.2 million Series ”B” shares will be issued. Conversion and subscription rights may be exercised between 1 February and 31 March 2004 at SEK 112.70.

For further information, see “The share”, pages 8–10.

16 UNTAXED RESERVES PARENT COMPANY Total Change Total Jan 1, 2002 of the year Dec 31, 2002Accumulated depreciation in excess of plan 13 –1 12Tax allocation reserve 1,291 471 1,762 1,304 470 1,774

Untaxed reserves including deferred tax liability of MSEK 497 are stated in the parent company´s balance sheet.

17 PROVISIONSPension commitments that are not secured by means of a foundation are stated as pension provisions at the present value of the commitment calcu-lated on actuarial grounds. Deficit on the foundation as at the closing data has been stated as a contingent liability. Other provisions mainly consist of reserves to cover future forestry levies and reserves for personnel reductions.

18 FINANCIAL LIABILITIES Group Parent company 2002 2001 2002 2001Long-term Subordinated loans 394 387 394 387Liabilities to Group companies – – 2,133 1,927Other long-term loans 2,025 673 501 633Total long-term liabilities 2,419 1,060 3,028 2,947

Current Liabilities to credit institutions 31 16 19 55Commercial papers 1,797 2,224 1,797 2,224Current portion of long-term loans 140 153 108 131Liabilities to Group companies – – 471 331Other current liabilities 84 104 78 104Total current liabilities 2,052 2,497 2,473 2,845

Total financial liabilities 4,471 3,557 5,501 5,792

Financial liabilities are in all essentials interest-bearing. The parent company’s liabilities to Group companies include a significant volume of non-interest-bearing liabilities between wholly-owned Swedish Group companies. In 1998 an MSEK 361 convertible subordinated loan was issued to employees, of which MSEK 351 (345) are stated under subordinated loans. The loan may be converted into Holmen Series “B” shares between Fe-bruary 1, 2004 and March 31, 2004 at a conversion price of SEK 112.70. Under certain circumstances, such as the payment of large dividends, the conversion price may be adjusted.

Long-term financial liabilities maturing later than five years from the closing date are specified below. Group Parent company 2002 2001 2002 2001Other long-term loans 353 16 – –

Information concerning the breakdown of liabilities by currency and maturity is provided in the section entitled Financial risk management, pages 46–47.


19 OPERATING LIABILITIES Group Parent company 2002 2001 2002 2001Advance payments from customers 4 – 3 –Liabilities to suppliers 1,467 1,443 962 1,067Bills payable 2 4 – –Liabilities to Group companies – – 298 321Liabilities to associate companies 27 230 – 16Accrued costs and deferred income 649 520 519 458Tax liability 277 468 236 426Other current liabilities 229 293 159 227 2,655 2,958 2,177 2,515

Operating liabilities relate entirely to items falling due for payment no later than one year after the closing date. Accrued costs and deferred income consist largely of personnel costs, discounts and complaints.

20 PLEDGED ASSETS Total Total Pledged liability item pledged pledged Property Other pledged assets assets mortgages assets 2002 2001GroupOwn liabilitiesFinancial liabilities 10 1,566 1,576 10Other commitments – 41 41 42 10 1,607 1,617 52

Parent company Own liabilities Financial liabilities 10 – 10 10Other commitments – – – – 10 – 10 10

The Group’s pledged assets increased in 2002, mainly because Junkara-van AB, which was acquired as of 31 December 2002, has financial liabili-ties that are secured by a lien on its fixed assets.

21 CONTINGENT LIABILITIES Group Parent company 2002 2001 2002 2001Guarantees on behalf of Group companies – – 1,225 46Pension commitments 391 – – –Other guarantees andcontingent liabilities 929 467 269 328 1,320 467 1,494 374

The parent company has provided guarantees for certain undertakings which may become incumbent on Group companies. The Group’s contingent liabilities have risen, partly due to the tax authority’s decision to impose a tax surcharge of MSEK 538 on one of Holmen’s subsidiaries, and partly as a consequence of the under-capitali-sation by MSEK 391 of the Group’s pension funds in the UK. The Swedish environmental authorities, basing their case on the provi-sions of the Environmental Code, have raised the question of soil analysis and decontamination at discontinued sites. Responsibility for deconta-mination will be decided from case to case, often on grounds of what is known as a reasonability assessment. Holmen might possibly incur com-mitments, as yet unquantifiable, over and above provisions already made. See page 37, Discontinued units.

22 PERSONNEL, WAGES AND SALARIES 2002 2001Average number of Of whom Of whomemployees No. men No. men Parent company Sweden 3,938 3,272 4,030 3,369 Group companiesSweden 59 51 78 66Australia 3 1 3 1Belgium 4 2 4 2Denmark 3 1 3 1Estonia 16 11 25 20France 26 18 22 15Great Britain 580 522 646 574Germany 20 13 20 14Holland 136 86 139 85Hong Kong 5 4 5 4Ireland 1 1 1 1Italy 4 – 3 –Poland 4 1 – –Portugal 1 1 1 1Singapore 6 3 7 4Spain 251 211 236 203Switzerland 7 5 8 6USA 11 8 7 4Total Group companies 1,137 939 1,208 1,001Total Group 5,075 4,211 5,238 4,370


Information provided in compliance with the Business Stock Exchange Committee’s recommendation concerning the conditions of employment of senior executives.

Chairman of the BoardFee in 2002, SEK 400,000.

Principles for compensation of senior executivesAll senior company officers have contracts stipulating a fixed annual salary. There are no variable salary components or compensation in the form of options or the like.

President Salaries and other perquisites in 2002, SEK 5,696,153.

Pension. The pension agreement provides for retirement at the age of 65, with either party being entitled to request retirement from 64 years of age. Pension will be paid up to 65 at 60 per cent of the salary, and cor-responds thereafter to the ITP plan, complemented with certain old-age and family pension benefits for that part of the salary between 20 and 50 base amounts.Period of notice and severance pay. The period of notice is twelve months on the part of the company and six months on the part of the President.Decision-making. In the past, the Board delegated to the Chairman the right to enter into agreements with the President on his salary and other conditions. The outcome was then reported to the Board. As of 2003 the

Board has decided that the Chairman shall prepare and then submit the matter to the Board for decision.

Other senior executivesThe Group management consists, in addition to the President, of the 11 individuals who report direct to the President, namely the 5 business area presidents and the 6 Group staff senior vice presidents.Salaries and other remuneration of these senior company officers (excl. the President) amounted to SEK 16,628,478 in 2002.Pension. Pension agreements provide for retirement at the age of 65, but with either party being entitled to request retirement on pension after 60. Pension will be paid between 60 and 65 at 65 per cent of the salary providing entitlement to pension up to 30 base amounts and at 32.5 per cent between 30 and 50 base amounts. The ordinary pension follows the ITP plan or equivalent. Over and above this, it will be complemented with pension benefits for the part of the annual salary between 20 and 50 base amounts.Period of notice and severance pay. The period of notice is twelve months on the part of the company and six months on the part of the employee. In the event of the company giving notice, severance pay corresponding to between one year’s and 2.5 years’ salary can be paid, depending on age.

Auditors’ feesThe audit fee is MSEK 5.7 for the Group and MSEK 3.4 for the parent com-pany. Consulting and other such fees amount to MSEK 5.8 for the Group and MSEK 2.6 for the parent company.

Wages, salaries, other remunerations and social security charges 2002 2001 Of which Wages, Of which Social Of which Wages, President, Social Of which salaries and President security pension salaries and Executive VP security pension remunerations and Board charges costs remunerations and Board charges costsParent company Sweden 1,291 14 1) 551 144 2) 1,265 25 1) 545 158 2)

Group companies Sweden 19 1 7 1 22 1 9 1Other Nordic countries 2 1 0 0 2 1 0 0France 10 1 5 0 10 1 4 0Holland 52 5 9 3 56 9 9 4Spain 76 2 22 2 69 2 18 0UK 212 5 38 20 246 6 44 24Germany 11 1 2 1 13 2 3 0Eastern Europe 3 1 1 0 3 0 1 0Rest of Europe 13 4 4 2 14 3 4 2Other countries 16 3 2 0 13 3 1 0Total Group companies 414 24 4) 90 29 448 28 4) 93 31Total Group 1,705 38 641 173 3) 1,713 53 638 189 3)

1) Of this amount, MSEK 7.2 (19.5) relate to the category President, Executive VP and Board of parent company, and MSEK 7.3 (5.8) relate to the category presidents of commission companies.

2) Of the pension costs, MSEK 4.4 (4.2) relate to the category President, Executive VP and Board of parent company, and MSEK 1.6 (1.3) to the category presidents of commission companies. Outstanding pension commitments, stated under Pension provisions, amount in total to MSEK 0 (0) for these categories.

3) Of the Group’s pension costs, MSEK 11.3 (10.3) relate to the category Board and presidents of parent company and Group companies. The Group’s outstanding pension commitments, stated under Pension provisions, amount to MSEK 0.2 (1.6) for these categories.

4) Bonuses totalling MSEK 0.3 (1.1) were paid to presidents of Group companies.


Shareholdings

Parent company and Group holdings of shares and participations in Group companies

2002 2001 No. of Participation1) Book value Participation1) Book value Reg. no. Registered office participations % SEK 1,000 % SEK 1,000Holmen Paper AB 556005-6383 Norrköping 100 100 100 100 100Iggesund Paperboard AB 556088-5294 Hudiksvall 1,000 100 100 100 100Iggesund Timber AB 556099-0672 Hudiksvall 1,000 100 100 100 100Holmen Skog AB 556220-0658 Örnsköldsvik 1,000 100 83 100 83Holmen Kraft AB 556524-8456 Örnsköldsvik 1,000 100 100 100 100AB Ankarsrums Skogar 556002-5495 Örnsköldsvik 1,000 100 41,609 100 41,609Domsjö Klor AB 556227-5361 Örnsköldsvik 1,000 100 1,079 100 1,079Fiskeby AB 556000-9218 Norrköping 2,000,000 100 646,160 100 646,160Haradsskogarna AB 556000-6909 Örnsköldsvik 100,640 100 129,450 100 129,450Harrsele Linjeaktiebolag 556003-6344 Örnsköldsvik 48,000 100 16,985 100 16,985Holmens Bruk AB 556002-0264 Norrköping 49,514,201 100 4,061,703 100 4,061,703Husum Copy AB 556114-7058 Örnsköldsvik 100 100 100 100 100AB Iggesunds Bruk 556000-8053 Hudiksvall 6,002,500 100 3,932,476 100 3,932,476Iggesund Kraft AB2) 556422-0902 Örnsköldsvik 58,000 50 5,800 – –Junkaravan AB 566227-3630 Örnsköldsvik 1,537,398 100 229,703 – –Lägernskog AB 556003-2806 Örnsköldsvik 1,480 100 1,385 100 1,385MoDo Holding AB 556537-6281 Örnsköldsvik 100 100 393,655 100 393,655MoDo-Iggesund CTMP AB 556245-2556 Örnsköldsvik 400,000 100 40,000 100 40,000MoDo Forest Management AB 556031-9047 Stockholm 100 100 16,200 100 16,200Skärnäs Terminal AB 556008-3171 Hudiksvall 4,800 100 1,913 100 1,913Ströms Trävaru AB 556000-7857 Örnsköldsvik 400 100 166,200 100 166,200AB Överums Skogar 556156-0557 Norrköping 1,000 100 53,005 100 53,005Other Swedish Group companies 191,187 191,187 9,929,093 9,693,590

Holmen UK Ltd, Great Britain Kent 1,197,100 100 1,518,959 100 1,518,959 Iggesund Paperboard (Workington) Ltd Workington – 100 – 100 –Holmen France Holding SAS, France Paris 40,000 100 5,192 100 5,192Iggesund Paperboard Asia Pte Ltd, Singapore Singapore 800,000 100 4,273 100 4,273Holmen Suecia Holding Sl, Spain Madrid 9,448,557 100 938,862 100 950,924 Holmen Paper Papelera Peninsular Sl Madrid – 100 – 100 –Other foreign Group companies 52,424 51,497 2,519,710 2,530,845

12,448,803 12,224,435

1) Percentage of shares and percentage of votes are the same except where otherwise stated.

2) Holmen has altered its assessment of the degree of control over Iggesund Kraft AB and therefore consolidates the company with effect from 31 December 2002 rather than stating it using the equity interest method, the previous method. As this change has no significant effect on the Group’s result or equity neither the figures for 2002 nor those for the year of comparison have been adjusted. Holmen has through option agreements the right but not the obli-gation to buy back the hydroelectric power assets in 2010 at a price that gives the company’s financiers an agreed return. This redemption price was estimated to be some MSEK 500 at the end of 2002.


Shareholdings

Parent company and Group holdings of shares and participations in associate companies 2002 2001 Value of Value of Book value participation Book value participation No. of Partici- at parent in consoli- Partici- at parent in consoli- partici- pation1) company dated accounts pation1) company dated accounts Reg. no. Registered office pations % SEK 1,000 SEK 1,000 % SEK 1,000 SEK 1,000

Harrsele AB 556036-9398 Sundsvall 9,886 49.43 – 1,465,530 – – –Iggesund Kraft AB2) 556422-0902 Örnsköldsvik – – – – 50.0 5,800 5,800Industriskog AB 556193-9470 Falun 25,000 33.3 128 128 33.3 2,503 2,503Junkaravan AB 556227-3630 Örnsköldsvik – – – – 22.3 12,200 12,200Les Bois de la Baltique SA, France Rouen 75,000 33.3 7,591 19,910 33.3 7,591 18,023Cartón y Papel RecicladoSA (Carpa), Spain Madrid 1,100,098 50.0 – 101,392 50.0 – 114,809Peninsular CogeneracionSA, Spain Madrid 4,500 50.0 – 42,273 50.0 – 40,459Miscellaneous shares Parent company 4,702 4,702 4,702 4,702 12,421 1,633,935 32,796 198,496


2) Holmen has altered its assessment of the degree of control over Iggesund Kraft AB and has therefore consolidated the company.

The capital interest reserve amounts to MSEK 8 (see Accounting Principles on page 50).

Parent company and Group holdings of shares and paticipations in other companies

2002 2001 No. of Partici- Partici- partici- pation1) Book value pation1) Book value Reg. no. Registered office pations % SEK 1,000 % SEK 1,000Parent company Miscellaneous shares 312 271Subtotal parent company 312 271 Group Brännälvens Kraft AB 556017- 6678 Arbrå 5,556 13.9 36,400 13.9 36,400MoBaSa-MoDo Battistella Reflorestamento SA,Brazil Curitiba 234,951 1.9 – 1.9 –Papeles Allende SA,Spain Barcelona 265,453 15.0 49,494 15.0 50,670Miscellaneous shares 554 597Subtotal Group 86,448 87,667

Total 86,760 87,938



The following unappropriated earnings of the parent company areat the disposal of the Annual General Meeting: SEK

Net profit for the 2002 financial year 1,160,059,000

Retained earnings brought forward 5,306,934,909

6,466,993,909

The Board of directors and President propose that dividend of SEK 11 per share (79,972,451 shares) be paid to shareholders 879,696,961

and that the remaining amount be carried forward 5,587,296,948

6,466,993,909

Proposed treatment of unappropriated earnings

It is proposed that no transfer be made from the consolidated non-restricted equity of MSEK 7,184 to

consolidated restricted equity.


Fredrik Lundberg

Steewe Björklundh Matts Jutterström Carl Kempe

Hans Larsson Arne Mårtensson Bengt Pettersson

Per Welin Christer Zetterberg Göran Lundin President

Our audit report was submitted on 14 February 2003

KPMG Bohlins AB

Thomas Thiel

Authorised public accountant


To the general meeting of the shareholders of

Holmen Aktiebolag (publ) Co. Reg. No. 556001-3301

Audit report

We have audited the annual accounts and the

consolidated accounts on pages 38–62 and the

accounting records and the administration of

the Board of directors and the President of

Holmen Aktiebolag for 2002. These accounts

and the administration of the company are the

responsibility of the Board of directors and the

President. Our responsibility is to express an

opinion on the annual accounts, the consolida-

ted accounts and the administration based on

our audit.

We conducted our audit in accordance with

generally accepted auditing standards in Swe-

den. Those standards require that we plan and

perform the audit to obtain reasonable assu-

rance that the annual accounts and the consoli-

dated accounts are free of material misstate-

ment. An audit includes examining, on a test

basis, evidence supporting the amounts and

disclosures in the accounts. An audit also inclu-

des assessing the accounting principles used

and their application by the Board of directors

and the President, as well as evaluating the

overall presentation of information in the

annual accounts and the consolidated accounts.

As a basis for our opinion concerning discharge

from liability, we examined significant deci-

sions, actions taken and circumstances of the

company in order to be able to determine the

liability, if any, to the company of any Board

member or the President. We also examined

whether any Board member or the President

has, in any other way, acted in contravention of

the Companies Act, the Annual Accounts Act

or the Articles of Association. We believe that

our audit provides a reasonable basis for our

opinion set out below.

The annual accounts and the consolidated

accounts have been prepared in accordance

with the Annual Accounts Act and, thereby,

give a true and fair view of the company’s and

the Group’s financial position and results of

operations in accordance with generally accep-

ted accounting principles in Sweden.

We recommend to the Annual General Meet-

ing of shareholders that the income statements

and balance sheets of the parent company and

the Group be adopted, that the profit for the

parent company be dealt with in accordance

with the proposal in the Report of the directors

and that the members of the Board of directors

and the President be discharged from liability

for the financial year.


KPMG Bohlins AB

Thomas Thiel

Authorised public accountant


Fredrik LundbergChairman of the Board. Djursholm. Born 1951. Member since 1988. President and CEO of L E Lundbergföretagen AB. Other significant appointments: Chairman of the Board in Cardo AB and Hufvudstaden AB, member of the Board: L E Lundbergföretagen AB, NCC AB, Handelsbanken and Stadium AB. Shareholding in Holmen: 684,724 shares.

Carl KempeDeputy Chairman. Örnsköldsvik. Born 1939. Member since 1983. Other significant appoint-ments: Chairman of the Board in Kempe Foun-dations and MoRe Research AB, member of the Board of UmanGenomics AB and SweTreeTech-nologies AB. Shareholding in Holmen: 300,000 shares.

Steewe BjörklundhHudiksvall. Born 1958. Member since 1998. Representative of the employees, LO. Chairman of the Forest and Wood Union at the Iggesund Sawmill and trustee of Hudiksvalls Sparbank. Shareholding in Holmen: 800 convertibles.

Matts JutterströmForsa. Born 1961. Member since 1999. Repre-sentative of the employees, LO. Chariman of Paper-branch 15, Iggesund. Member of the group and branch committee of the Paper Union and trustee of Hudiksvalls Sparbank.Shareholding in Holmen: 900 convertibles.

Hans LarssonStockholm. Born 1942. Member since 1990. Other significant appointments: Chairman of the Board: Nobia AB, Sydsvenska Kemi AB, Carema AB and Biolight International AB, member of the Board of Handelsbanken, Bilia AB and Pergo AB.Shareholding in Holmen: 1,000 shares.

Göran LundinStockholm. Born 1940. President and CEO. Member since 2001. Other significant appoint-ments: Chairman of the Board: Swedish Forest Industries Federation and Norrköpings Tidningar, member of the Board: Confederation of Swedish Enterprise.Shareholding in Holmen: 20,000 call options.

Board of directors

Carl Kempe

Steewe Björklundh

Fredrik Lundberg

Hans Larsson

Matts Jutterström

Göran Lundin


Arne MårtenssonDjursholm. Born 1951. Member since 1991. Chairman of the Board of Handelsbanken. Other significant appointments: Member of the Board: AB Industrivärden, Sandvik AB, Skanska AB, V & S Vin & Sprit AB, The Swedish Association for Share Promotion, Svenska ICC, International Business Council of the World Economic Forum and Chairman of the Advisory Board of Stock-holm School of Economics.Shareholding in Holmen: 0.

Thomas NilssonÅby. Born 1945. Member since 1992. Represen-tative of the employees, PTK. Chairman of SIF branch Holmen, Norrköping, and SIF's industrial delegation for the forest industry.Shareholding in Holmen: 1,000 convertibles.(Retired 31 December 2002).

Bengt PetterssonStockholm. Born 1938. Member since 1994. Other significant appointments: Member of the Board of Cardo AB and L E Lundbergföretagen AB.Shareholding in Holmen: 3,000 shares and 1,000 warrants.

Per WelinStockholm. Born 1936. Member since 1991. Chairman of the Board: L E Lundbergföretagen AB. Other significant appointments: Member of the Board: Allgon and Autoliv.Shareholding in Holmen: 3,200 shares.

Christer ZetterbergTrosa. Born 1941. Member since 1994. Chair-man of the Board: D Carnegie & Co. Deputy Chariman: Micronic Laser Systems. Other signifi-cant appointments: Member of the Board: Camfil AB, Ekman & Co and L E Lundbergföretagen AB.Shareholding in Holmen: 1,000 shares.

Call options are issued by L E Lundbergföretagen AB. See page 8.

DEPUTY MEMBERSTorgny HammarHallstavik. Born 1943. Deputy member since 1993. Representative of the employees, PTK. Chairman of Leaders in Hallstavik.Shareholding in Holmen: 900 convertibles.

Anders LidénHerräng. Born 1969. Deputy member since 1999. Representative of the employees, LO, Hallstavik. Shareholding in Holmen: 300 warrants.

Karin NorinForsa. Born 1950. Deputy member since 1999. Representative of the employees, PTK. Chair-man of SIF's club Holmen-Iggesund. Member of SIF's industrial delegation for the forest industry. Shareholding in Holmen: 0.

AUDITORSKPMG Bohlins AB. Principal auditor: Thomas Thiel, authorised public accountant.

Anders Lidén

Thomas Nilsson

Bengt Pettersson

Per Welin

Arne Mårtensson

Christer Zetterberg

Torgny Hammar Karin Norin


PRESIDENT AND CEO

Göran Lundin Born 1940. Joined Holmen 1964. Shareholding in Holmen: 20,000 call options.

GROUP STAFFS

Anders Almgren Senior Vice President, Group Finance. CFO.Born 1965. Joined Holmen 1990. Shareholding in Holmen: 11,000 call options, 900 warrants.

Anders EdstedtSenior Vice President, Group IT/Continuous Improvement. Born 1955. Joined Holmen 1990. Shareholding in Holmen: 10,000 call options.

Johan FlodströmSenior Vice President, Group Legal Affairs. Company Secretary. Born 1945. Joined Holmen 1976. Shareholding in Holmen: 500 shares, 10,000 call options, 900 warrants.

Thommy Haglund Senior Vice President, Group Human Resources.Born 1950. Joined Holmen 2001. Shareholding in Holmen: 7,000 call options.

Christer LewellSenior Vice President, Group Public Relations.Born 1948. Joined Holmen 1987. Shareholding in Holmen: 10,000 call options.

Sven WirdSenior Vice President, Group Technology.Born 1951. Joined Holmen 1995. Shareholding in Holmen: 50 shares, 10,000 call options.

Senior management

Göran Lundin

Johan Flodström

Thommy Haglund Anders Edstedt

Anders Almgren Christer Lewell

Sven Wird


BUSINESS AREAS

Björn AndrénPresident, Holmen Skog. Born 1946. Joined Holmen 1971. Shareholding in Holmen: 20,000 call options, 1,000 convertibles.

Åke EklöfPresident, Holmen Kraft. Born 1945. Joined Holmen 1974. Shareholding in Holmen: 1,200 shares,13,000 call options.

Magnus HallPresident, Holmen Paper.Born 1959. Joined Holmen 1985. Shareholding in Holmen: 1,000 shares, 15,000 call options, 1,000 warrants.

Johan HedinPresident, Iggesund Timber. Born 1963. Joined Holmen 1991. Shareholding in Holmen: 10,000 call options.

Björn KvickPresident, Iggesund Paperboard. Born 1950. Joined Holmen 1983. Shareholding in Holmen: 12,500 call options.

Call options are issued by L E Lundbergföretagen AB.See page 8.

Björn Andrén

Åke Eklöf

Magnus Hall

Björn Kvick

Johan Hedin


Annual General MeetingThe Annual General Meeting 2003 of Holmen

AB will be held at “Vinterträdgården’’, Grand

Hôtel (entrance from Stallgatan), Stockholm, at

4 p.m. on Wednesday 26 March.

Participation in Annual General MeetingShareholders who wish to participate in the

Annual General Meeting shall be entered in the

register of shareholders maintained by VPC AB

by no later than Friday 14 March 2003 and

shall notify the company by no later than 5

p.m. on Wednesday 19 March 2003 at:

Holmen AB

Group Legal Affairs

P. O. Box 5407

SE-114 84 Stockholm

Notification may also be made by telephone:

+46 8 666 21 11, by fax +46 660 759 78 or via

the company’s website www.holmen.com

Shareholders whose shares are registered in a

nominee name should temporarily re-register

their shares in their own name with VPC by no

later than Friday 14 March 2003 to be entitled

to participate in the Annual General Meeting.

DividendThe Board has proposed that a dividend of

SEK 11 per share be paid to the shareholders.

The Board has proposed Monday 31 March

2003 as the date of record for entitlement to

the dividend.

Provided the Annual General Meeting resol-

ves in favour of the proposal, the dividend is

expected to be distributed by VPC on Thursday

3 April 2003.

Shareholders are requested to inform their

account operator of any change of name and/or

address.

Annual General Meeting

The 2003 Annual General Meeting will be held on 26 March in the “Vinterträdgården” at Grand Hôtel in Stockholm. This photo was taken at the 2002 AGM.

68 HOLMEN ANNUAL REPORT 2002

HOLMEN PAPERHolmen Paper AB(Vattengränden 2)SE-601 88 NORRKÖPINGSWEDENTel +46 11 23 50 00Fax +46 11 23 63 04E-mail: [email protected]

Hallsta Paper MillSE-763 81 HALLSTAVIKSWEDENTel +46 175 260 00Fax +46 175 264 01E-mail: [email protected]

Braviken Paper MillSE-601 88 NORRKÖPINGSWEDENTel +46 11 23 50 00Fax +46 11 23 66 30E-mail: [email protected]

Wargön MillSE-468 81 VARGÖNSWEDENTel +46 521 27 75 00Fax +46 521 27 75 80 E-mail: [email protected]

Papelera PeninsularParque Industrial LA CANTUEÑAC/del Papel 1ES-28947 FUENLABRADA (Madrid)SPAINTel +34 91 642 0603Fax +34 91 642 2470E-mail: [email protected]

IGGESUND PAPERBOARDIggesund Paperboard ABSE-825 80 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 288 00E-mail: [email protected]

Iggesunds BrukSE-825 80 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 285 32E-mail:[email protected]

Ströms BrukP.O. Box 67SE-820 72 STRÖMSBRUKSWEDENTel +46 650 289 00Fax +46 650 289 30E-mail: [email protected]

Workington MillWORKINGTON CumbriaCA14 1JXGREAT BRITAINTel +44 1900 601000Fax +44 1900 605000E-mail:[email protected]

IGGESUND TIMBERIggesund Timber ABP.O. Box 45SE-825 21 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 280 57E-mail: [email protected]

Iggesund SawmillP.O. Box 45SE-825 21 IGGESUNDSWEDENTel +46 650 280 00Fax +46 650 284 48E-mail: [email protected]

HOLMEN SKOGHolmen Skog AB(Hörneborgsvägen 6)SE-891 80 ÖRNSKÖLDSVIKSWEDENTel +46 660 754 00Fax +46 660 759 85E-mail: [email protected]

HOLMEN KRAFT Holmen Kraft AB(Hörneborgsvägen 14)SE-891 80 ÖRNSKÖLDSVIKSWEDENTel +46 660 754 00Fax +46 660 755 10E-mail: [email protected]

The complete list of addresses may be obtained from Holmen’s website, www.holmen.com under Publications.

AddressesHOLMEN AB Head office(Strandvägen 1)P.O. Box 5407SE-114 84 STOCKHOLMSWEDEN


The year in brief ________________________________________________________________________________________ 1The year in pictures _________________________________________________________________________________ 2Comments by the President and CEO ______________________________________________ 4Strategy ______________________________________________________________________________________________________ 6Financial targets _______________________________________________________________________________________ 7The share____________________________________________________________________________________________________ 8Ten year-review_______________________________________________________________________________________ 11History _______________________________________________________________________________________________________ 12Holmen at home and abroad______________________________________________________________ 13Products and production_____________________________________________________________________ 14Human resources __________________________________________________________________________________ 16

Holmen Paper_________________________________________________________________________________________ 18Iggesund Paperboard___________________________________________________________________________ 22Iggesund Timber ____________________________________________________________________________________ 26Holmen Skog __________________________________________________________________________________________ 28Holmen Kraft ___________________________________________________________________________________________ 32

Holmen and society ______________________________________________________________________________ 34Holmen and the environment _____________________________________________________________ 36

ANNUAL REPORTProfit and loss account_________________________________________________________________________ 38Balance sheet _________________________________________________________________________________________ 40Cash flow analysis ________________________________________________________________________________ 42Report of the directors__________________________________________________________________________ 44Financial risk management _________________________________________________________________ 46Quarterly figures _____________________________________________________________________________________ 48Parent company_____________________________________________________________________________________ 49Accounting principles ___________________________________________________________________________ 50Definitions of financial ratios________________________________________________________________ 52Notes _________________________________________________________________________________________________________ 53Shareholdings _________________________________________________________________________________________ 60Proposed treatment of unappropriated earnings _________________________ 62Audit report ______________________________________________________________________________________________ 63

Board of directors __________________________________________________________________________________ 64Senior management______________________________________________________________________________ 66Annual General Meeting_______________________________________________________________________ 68Addresses

Contents

Financial information 2003Holmen publishes the following financial reports in 2003:

5 February Year end report for 2002Beginning of March Annual Report 20027 May Interim report for January-March20 August Interim report for January-June30 October Interim report for January–September.

The annual report is sent by VPC AB to shareholders who have indicated their wish to receive it. The year end and interim reports are included in Holmen Business Report magazine which is published in English and Swedish four times a year. Holmen Business Report is sent to all shareholders who are registered with VPC.

The financial information is available in English and Swedish at Holmen’s website, www.holmen.com and may be ordered from:

Holmen ABGroup Public RelationsP.O. Box 5407SE-114 84 STOCKHOLMSWEDENTel +46 8 666 21 00Fax +46 8 666 21 30E-mail: [email protected]

This annual report is produced by Holmen in co-operation with LINK Investor Relations, Stockholm, Sweden.

Graphic production: Okidok, Stockholm.Printing: db grafiska, Örebro.Photo: Anders Engman, Rolf Adlercreutz and others. Illustration page 15: Thomas Öhrling/Info AB.Paper: The cover is printed on paperboard, Invercote® Albato 250 gsm, made by Iggesund Paperboard.

Inside pages: M-real’s Galerie art silk 150 gsm. Translation: Beck Translations, Stockholm.

Annual Report 2002

Holmen AB (publ)P.O. Box 5407SE-114 84 STOCKHOLMSWEDEN


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Documents

Annual Report 2002 - Holmeninvestors.holmen.com/afw/files/press/holmen/Holmen_2002_AR_en.… · Annual Report 2002 Holmen AB (publ) P.O. Box 5407 SE-114 84 STOCKHOLM SWEDEN Tel +46