Holmen Annual Report 2016

FY2016 Annual Report · Holmen

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Annual Report

Forest
Paperboard
Paper
Wood products
Renewable energy

2016

Contents

The Board of Directors and the CEO of Holmen
Aktiebolag (publ.), corporate identity number
556001-3301, submit their annual report for the
parent company and the Group for the 2016
financial year. The annual report comprises the
administration report (pages 4–5, 10–11, 27–29,
32–41, 70, 74–75) and the financial statements,
together with the notes and supplementary
information (pages 42–69). The Group’s income
statement and balance sheet and the parent
company’s income statement and balance sheet
will be submitted to the Annual General Meeting
for adoption.

The basis for the sustainability information
presented is the sustainability issues identified as
key in view of the business that Holmen conducts.
The sustainability work is reported in accordance
with the Global Reporting Initiative’s GRI G4
guidelines at Core level. The Sustainability Report
comprises pages 7,12–13, 24–31, 37, 80–81,
the GRI index on the website holmen.com and
the pages on holmen.com as set out in the GRI
index. The information is audited by a third party,
see separate assurance report at holmen.com.

This is Holmen

The year in brief

Strategy and targets

CEO’s message

Operations in 2016

A sustainable business

Forest

Renewable energy

Paperboard

Paper

Wood products

Environment

Employees

A sustainable future

Corporate governance report

Risk management

Shareholder information

Financial statements

Notes

Proposed appropriation of profits

Auditor’s report

Review of Sustainability Report

Board of Directors

Group management

Key figures

Ten-year review, finance

Five-year review, sustainability

Definitions and glossary

Calendar

This is a translation of the Swedish annual report of Holmen Aktiebolag (publ.).
In the event of inconsistency between the English and the Swedish versions, the Swedish version shall prevail.

HOLMEN ANNUAL REPORT 2016

A forest
owner with
profitable
industry

Forest

Active and sustainable forestry is conducted on over a million hectares of
productive forest land owned by Holmen. Harvesting equates to 85 per cent
of the annual growth and amounts to 3 million cubic metres per year.

Renewable energy

In a normal year, the renewable energy production from 21 hydro
power stations and 4 wind farms amounts to 1.2 TWh.

Paperboard

Market-leading paperboard in the highest quality segments for consumer
packaging and advanced graphical printing. The Swedish mill and the
British mill produce a combined total of 0.5 million tonnes per year.

Paper

Magazine and book paper that utilises the properties of fresh fibre to
provide cost-effective alternatives to traditional paper choices. The two
Swedish mills produce a combined total of 1.1 million tonnes per year.

Wood products

Wood products for the joinery and construction industries at two large-
scale sawmills that are integrated with the Group’s paper and paperboard
mills. Annual production amounts to 0.8 million cubic metres.

Forest and hydro power
make up two thirds of
Holmen’s assets. Together
with large-scale production
of paperboard, paper
and wood products in
well invested plants, this
provides stable profitability
that will increase over time.
At the same time, Holmen’s
business brings substantial
climate benefits, as it
reduces the amount of
carbon dioxide in the
atmosphere by over two
million tonnes per year.

HOLMEN ANNUAL REPORT 2016 / THIS IS HOLMEN

A good result

Operating profit increased
by SEK 462 million to
SEK 2 162 million (exclud-
ing items affecting com-
parability) due to improved
results in paper, paper-
board and forest. The
return on capital employed
increased from 6.4 per cent
to 8.6 per cent.

The paper mill in Madrid was
sold during the year which, com-
bined with increased sales of new
products, has shifted the focus of
the paper business towards mag-
azine and book paper. Sales of
paperboard to new customers in
premium segments both inside
and outside Europe rose. At the
same time, an investment pro-
gramme was concluded, provid-
ing potential for growth. The vol-
ume of standing timber grew by
1 per cent and forestry costs were
reduced while retaining high qual-
ity in forest management. Deliv-
eries of wood products grew fol-
lowing investments in increased
capacity, and costs fell due to pro-
duction being better adapted to

the supply of raw material. Hydro
power production reduced as a
result of lower rainfall.

Outlook. The harvest of Holmen’s
own forest is estimated to re-
main unchanged in 2017 in line
with the long-term plan. The am-
bition is to boost deliveries of pa-
perboard following the complet-
ed investments, but competition
is expected to increase due to sig-
nificant additional capacity in the
market. The structural downturn
for printing paper is forecast to
continue. Holmen’s strategy is to
grow in the area of magazine and
book paper by offering customers
a cost-effective alternative to tra-
ditional products, while reducing
deliveries of newsprint. The mar-
ket balance for wood products is
good. Holmen has an opportuni-
ty to increase production some-
what in 2017, while at the same
time improving the value added
through the ongoing investment
in a wood treatment plant. Hydro
power production was significant-
ly lower than usual in 2016. Low
levels in water storage reservoirs
mean that production may also be
lower than normal in 2017.

FACTS

Net sales, SEKm
Operating profit/loss, SEKm
Operating profit/loss, SEKm**
Profit for the year, SEKm
Profit for the year**, SEKm
Diluted earnings per share, SEK
Dividend per share, SEK
Return on capital employed, %**
Cash flow before investments
Cash flow from investments
Net financial debt
Debt/equity ratio, times
Average number of employees

* Board proposal ** Excl. items affecting comparability

2016

15 513
1 930
2 162
1 424
1 652
16.9
12*
8.6
1 961
123
3 945
0.19
2 989

2015

16 014
769
1 700
559
1 323
6.7
10.5
6.4
2 526
832
4 799
0.23
3 315

NET SALES AND
OPERATING MARGIN

OPERATING PROFIT/LOSS
AND RETURN

SEKm
20 000

16 000

12 000

8 000

4 000

15 513

13.9

%
20

SEKm
2 500

2 000

1 500

1 000

500

2 162

8.6

Net sales

Operating margin*

Operating profit/loss*

Return on capital employed*

* Excl. items affecting comparability

NET SALES
Market %

NET SALES*
Business area %

OPERATING PROFIT/LOSS*
Business area %

OPERATING CAPITAL*
Business area %

Sweden*
Rest of Europe
Outside Europe

Total: 15 513
3 660 SEKm
9 876 SEKm
1 977 SEKm

* Of which forest and energy 19%

Total: 15 513
Forest
2 572 SEKm
Paperboard
5 252 SEKm
Paper
5 431 SEKm
Wood products
1 342 SEKm
Renewable energy 314 SEKm

Total: 2 162
Forest
1 001 SEKm
Paperboard
903 SEKm
Paper
289 SEKm
Wood products
-3 SEKm
Renewable energy 120 SEKm

Total: 30 799
Forest
17 798 SEKm
Paperboard
6 426 SEKm
Paper
2 815 SEKm
Wood products
892 SEKm
Renewable energy 3 412 SEKm

* Excl. Group-wide

* Excl. items affecting comparability and

* Excl. Group-wide

Group-wide

HOLMEN ANNUAL REPORT 2016 / THE YEAR IN BRIEF

Strategy
and
targets

Holmen’s strategy is to own forest and energy assets and to develop
industrial operations in paperboard, paper and wood products.
The substantial forest and energy assets shall deliver stable
revenue that grows over time.
Large-scale industrial operations at efficient facilities shall
provide good profitability through the refining of forest raw
material into high-performance consumer paperboard, cost-
effective printing paper and wood products for the joinery and
construction industries.

Strategic direction

FOREST
Active forestry

The revenue from and future value of Holmen’s forest holdings are to increase through active and sustainable forestry,
a clear focus on costs and the further development of methods, technologies and expertise. The position in the wood
market and economies of scale will contribute to the competitiveness of the industrial operations.

RENEWABLE ENERGY
Long-term hydro power

Hydro power is to be managed with a focus on long-term profitability. The potential to develop wind power on
Holmen’s land will be monitored such that it can be exploited when good profitability is assured.

PAPERBOARD
Organic growth

PAPER
Specialisation

The position as a market leader in Europe when it comes to high-performance paperboard for consumer products is to
be reinforced through product development, while exploiting opportunities for global growth. Well invested production
facilities that are self-sufficient in energy ensure competitive production costs and the opportunity to grow through
complementary investments.

Holmen will grow in the area of magazine and book paper by offering customers a cost-effective alternative to traditional
products, while reducing deliveries of newsprint. The structural downturn in the market demands a constant focus on
costs, while also continuously developing market position.

WOOD PRODUCTS
Large-scale integrated
production

Cost-effective production of high-quality wood products for the joinery and construction industries, based on a strong
organisation for wood procurement, large-scale production and co-location with the Group’s paper and paperboard mills.
Sales to local markets are to be increased by adding value through increased processing.

HOLMEN ANNUAL REPORT 2016 / STRATEGY AND TARGETS

Financial targets:
PROFITABILITY
The aim is that forest and energy, which constitute two-thirds
of the Group’s assets, will provide a stable return on capital
employed of at least 5 per cent, while the industrial business
will consistently return more than 10 per cent. Taken together,
this means that the Group’s return will exceed 7 per cent.

CAPITAL STRUCTURE
Our financial position must be strong in order to secure room
for manoeuvre when making long-term commercial decisions.
The target for debt/equity ratio is a maximum of 0.5.

DIVIDEND
Decisions on dividends are to be based on an appraisal of the
Group’s profitability, investment plans and financial position.

Outcome 2016:

Comment:

The return on capital employed
was 8.6 per cent.

The return increased from 6.4 per cent to
8.6 per cent due to the return from paper
turning from negative to 10 per cent,
alongside an increase for paperboard and
forest.

The debt/equity ratio was 0.19.

Good cash flow in recent years has enabled
a higher dividend, while at the same time
strengthening the financial position.

The Board proposes a dividend
of SEK 12 per share in 2017.

The proposed dividend corresponds to 4.7 per cent
of equity. Over the past five years the dividend
has averaged 4 per cent of equity.

PROFITABILITY
Return on capital employed, %

CAPITAL STRUCTURE
Debt/equity ratio, times

DIVIDEND PER SHARE

8.6

Excl. items affecting comparability

0.5

0.4

0.3

0.2

0.1

0.0

0.19

SEK
15

Proposal, SEK 12

4.7

Dividend

Dividend as percentage of equity

Sustainability targets:
INCREASED GROWTH IN HOLMEN’S FORESTS
By 2050, annual growth in Holmen’s forests is to be
25 per cent higher than in 2007. This will deliver both
larger harvests of wood from the Group’s forests and
greater capture of carbon dioxide.

REDUCED USE OF FOSSIL FUELS
By 2020, use of fossil fuels at the Group’s mills will be
down 75 per cent compared with 2005.

Outcome 2016:

Comment:

Progress will be checked in
the next inventory of Holmen’s
forests in 2021.

Silviculture measures to ensure increased growth
are being implemented.

The use of fossil fuels at the
mills has fallen by 75 per cent
since 2005.

Following the sale of the Spanish mill, all production
units are largely powered by non-fossil fuels.
The target has been revised to a reduction of
90 per cent instead of 75 per cent by 2020.

INCREASED PRODUCTION OF RENEWABLE ELECTRICITY
Company-generated renewable electricity shall account
for 50 per cent of Holmen’s total electricity consumption
by 2020, compared with 31 per cent in 2005.

The proportion of company-
produced renewable electrical
energy amounted to 45 per cent.

This figure is down on 2015 primarily because of
lower hydro power production, due to low precipi-
tation in 2016.

HOLMEN ANNUAL REPORT 2016 / STRATEGY AND TARGETS

With the storage of carbon dioxide in the forest
and wood products and the production
of renewable energy, Holmen is perfectly placed
to be part of the solution to the climate change
issue. The challenges lie in the right to manage
the forest and in the market’s acceptance of
fresh fibre-based products in competition with
recovered fibre. Without fresh fibre, there is no
future recovered fibre. The way we are permitted
to manage our forest is affected by political
decisions in both Sweden and Brussels. It’s a
basic question of ownership rights that we take
extremely seriously.

Major investments are
strengthening the forest
industry’s competitiveness
and increasing demand for
wood raw material.

Dear
shareholder

This year’s strong results are testament
to the success of our investments and
long-term strategy. Holmen’s substantial
forest and energy assets provide sta-
ble profitability, while the well invested
industrial operations create potential for
growth. Against the background of this,
the Board has resolved to propose a
dividend of SEK 12 (10.5) per share.

Holmen combines forest ownership with
the profitable manufacturing of paperboard,
paper and wood products. Combined with our
renewable energy assets, the forest assets make
up two-thirds of the Group’s capital and con-
tribute to a stable cash flow that will increase
over time. Holmen’s financial situation is strong
with low net financial debt, which provides sta-
bility but also the freedom and opportunity to
develop the company.

Well invested profitable industry
Holmen has an enviable position as a market
leader in the highest quality segments for con-
sumer packaging and paperboard for advanced
graphical printing. The major structural invest-
ments that have been made in our two paper-
board mills, the recovery boiler at Iggesund
Mill and the biofuel boiler at the mill in Work-
ington, have gradually made an impact, result-
ing in a significantly improved cost position
and sizeable environmental gains. With last
year’s investment in a new press section at
Workington and expanded pulp capacity at
Iggesund, we now have the potential to in-
crease production by around 10 per cent, while
at the same time further driving down produc-
tion costs.
Demand for consumer packaging is grow-
ing, particularly in Asia, but to some extent
also in Europe and the USA, whereas the mar-
ket for paperboard for graphical printing is
stagnating. The combination of competitive-
ness and continued product development is
crucial in defending and advancing our posi-
tion in a market that also faces the challenge of
new capacity. With a strong offering, we have
excellent opportunities to grow in the premium
segment in Europe, Asia and the USA.

In paper, our position has radically improved.
With the sale of the mill in Madrid, we can put
a business with no prospect of survival behind
us. Instead, we can focus on fresh fibre-based
magazine and book paper at our two Swedish
paper mills, a concept that has proven to work
well in the tough printing paper market. Over-
all, this has given us a smaller but significantly
more profitable paper business. The printing
paper market remains extremely challenging,
but through a clear long-standing strategy, we
have a product mix and position in the market
that stands us in good stead against the compe-
tition. We are therefore optimistic
about the future.

The large fire that hit the

paper mill in Hallstavik in
late 2015 also impacted
on the operation in
2016. The reconstruc-
tion was a major test for
the organisation, both
in production and on
the marketing front.
Looking back, we can report that our
employees really delivered, so that we now have
a mill in excellent condition and we are well on
the way to regaining positions we were forced
to give up when production was shut down.
Wood products have a bright future. More
housing needs to be built and the focus on wood
construction has become much sharper in recent
years, not least due to sustainability considera-
tions. This is feeding through to demand, which
is seeing a positive trend. The challenge lies in
the relatively low added value and an elastic
supply on the market. For a company such as
Holmen, with forest holdings plus two large-
scale sawmills integrated with the Group’s
paperboard and paper mills, processing wood
products to add additional value is a natural
area for development and we are constantly
exploring such opportunities. One step that
we have taken in this direction is this year’s
decision to invest in a wood treatment plant
at Braviken Sawmill in order to broaden the
product range for builders’ merchants.

Strength in renewable
raw materials
The growing forest is the starting point for all
Holmen’s business. Thanks to active silviculture
measures, our younger forests are growing fast-
er than those that are currently ready for har-
vesting. Since the amount harvested is less than
the annual growth, in the long term we will be
able to harvest more, which generates higher
cash flow, while still ensuring that we have a
larger volume of standing forest. A key factor
for the future value of the forest is the ability
of the industry and the sawmills to pay for the
wood raw material. It is crucial in this respect to
have competitive industries that make full use of
the comparative benefits offered by the Swedish
raw material – fresh long fibre. After a period
of capacity reductions in printing paper, major
investments are now being made in both pulp
mills and paperboard production in the Nordic
region, so strengthening the industry’s compe-
titiveness and increasing demand for wood.
Coupled with the rise in wood construction,
this represents a positive outlook for a forest
owner such as Holmen.

HOLMEN ANNUAL REPORT 2016 / CEO’S MESSAGE

The Swedish energy agreement that was
approved over the summer provided positive
news. The decision to gradually lower the prop-
erty tax on hydro power to the same level as oth-
er electricity production creates fairer conditions
and increases our opportunities to make neces-
sary investments in our power stations. Energy is
a good asset that provides cash flow and a stable
revenue stream over time.

The future is growing in
the forest
There is no doubt that the forest as a raw mate-
rial has good future prospects, not least in the
transition to an economy in which products
based on fossil raw materials are replaced with
renewable alternatives. Strategic choices and
investments for the future have strengthened
our sustainability profile, which has led to
recognition in several contexts. Most recent
is the listing on the Global 100, an index of the
hundred most sustainable corporations in the
world. This achievement is the result of focus-
ed and target-driven work, and I am both
pleased and proud to work for a company
that contributes to sustainable development.
Holmen has also been affiliated to the UN’s
Global Compact since 2007 and sees it as only
natural to support its ten principles, which
cover areas such as human rights and social
and environmental responsibility.

The products of the future will come from

the forest, and I am in no doubt that, like our
forests, Holmen will continue to develop and
grow ever stronger.

Stockholm, 13 February 2017

Henrik Sjölund
President and CEO

The listing on the
Global 100 index
as one of the world’s
most sustainable
companies is
recognition of our
focused and target-
driven work.

Around
Holmen
2016

How would you sum
up the past year in
your business area?

What is happening
now and how does
the future look?

Sören Petersson
Head of Forest business area

Fredrik Nordqvist
Head of Renewable energy
business area

We have succeeded in improving profits through
further cost reductions and slightly higher prices.
At the same time, we have continued to develop
silviculture measures that will bring increased
growth and improve the natural assets in our
forests. The harvested volume returned to normal
levels after a few years of higher volumes caused
by storm felling.

Low rainfall and run-off into our reservoirs resulted
in low production. We have been able to partially
compensate for this by concentrating production on
times with better prices. The energy agreement that
was approved on 10 July proposes a gradual low-
ering of the property tax for hydro power. This is an
important step in the right direction that improves
conditions for future reinvestment.

We want to develop the wood business in order
to strengthen our capacity to supply the industry
with raw material at a competitive cost and to
obtain good value from what we harvest in our
own forest. In this area, we are working to develop
our relationship with private wood suppliers
and to optimise wood deliveries, amongst other
things. Active measures will enable us to achieve
increased growth, climate benefits and improved
natural assets in Holmen’s forests.

In the transition to an energy system based
entirely on renewable sources, hydro power is
uniquely equipped to provide controllable energy
production at low operating costs. EU Directives
mean that all hydro power stations in Sweden will
need to undergo environmental assessment. Hol-
men’s power stations are all well placed to meet
the necessary environmental adaptations, and the
lower property tax enable necessary investments
for the future.

OPERATING PROFIT/LOSS

SEKm
1 200

900

600

300

1 001

5.7

SEKm
500

375

250

125

Operating profit/loss

Return on operating capital

120

3.5

Operating profit/loss

Return on operating capital

FACTS

2016

2015

FACTS

2016

2015

686

2 572 2 814
638

External net sales, SEKm
Earnings from operations, SEKm
Operating profit/loss incl.
change in value of forests, SEKm
905
31
Investments, SEKm
Book value of company forest, SEKm 17 448 17 173
384
Average number of employees
Harvesting in own forests, ’000 m3sub
3 213

1 001
30

364
2 986

External net sales, SEKm
Operating profit/loss, SEKm
Investments, SEKm
Operating capital, SEKm
Average number of employees
Company-generated hydro
and wind power, GWh

314
120
23

268
176
18
3 412 3 351
11

1 080

1 441

HOLMEN ANNUAL REPORT 2016 / OPERATIONS IN 2016

Henrik Sjölund
Head of Paperboard
business area

Nils Ringborg
Head of Paper business area

Johan Padel
Head of Wood products
business area

Despite rebuilds at both mills, we managed to de-
liver good results. Production has been raised to
new levels on occasion, and the challenge now is
to achieve stability at this higher level. Sales in the
premium segment increased through continued
product development, but also thanks to invest-
ments in additional sales resources and distribu-
tion centres outside Europe.

The sale of the paper mill in Madrid was, of
course, the main event of the year. Now we are a
speciality paper manufacturer with two competitive
mills. Thanks to good production and sales of the
magazine product Holmen UNIQ, we have been
able to deliver good results in a difficult market.
On the marketing front, we have improved our
offering, with a higher service level and comple-
mentary services, which are becoming increasingly
important for both existing and new customers.

The switch to sawing two wood species and meas-
ures relating to stock and logistics have significantly
lowered costs at Braviken. We have also been able
to increase production at Iggesund, following invest-
ment in more efficient flows through the sawmill.
Unfortunately, this was not enough to compensate
for the price reductions that occurred towards the
end of 2015 and so profits are down slightly. We are,
however, in a strong position for the future, with two
large-scale and competitive sawmills.

The investments of recent years have given us
the potential to increase production and at the
same time reduce production costs, which will be
crucial in defending our position in a market made
more challenging by new capacity. With a strong
offering in the premium segment, we will continue
to grow in Asia and the USA, while consolidating
our strong position in the European market.

With a business focused on fresh fibre-based
magazine and book paper, we deliver products
that give our customers more print surface at a
lower cost. Continued production optimisation and
efficiencies, further development of our product
portfolio and a focus on sales and marketing will
strengthen our position in a challenging market.

To meet the growing demand for treated products
and boost the value added by our wood products,
Braviken Sawmill is gaining a wood treatment
plant and a distribution warehouse. At Iggesund
Sawmill, the focus is on maintaining the production
rate and the profitability level.

OPERATING PROFIT/LOSS

SEKm
1 000

750

500

250

903

13.9

SEKm
400

200

-200

-400

9.4

289

-5

-10

SEKm
50

-50

-100

-150

-0.3

-3.3

-5

-10

-15

Operating profit/loss

Return on operating capital

Operating profit/loss, excluding items affecting
comparability
Return on operating capital, excluding items
affecting comparability

Operating profit/loss

Return on operating capital, excluding items
affecting comparability

FACTS

2016

2015

FACTS

2016

2015

FACTS

Net sales, SEKm
Operating profit/loss, SEKm
Investments, SEKm
Operating capital, SEKm
Average number of employees
Deliveries, ’000 tonnes

903
413

5 252 5 472
847
324
6 426 6 622
1 406 1 432
499

497

Net sales, SEKm
Operating profit/loss excl. items
affecting comparability, SEKm
Investments, SEKm
Operating capital, SEKm
Average number of employees
Deliveries, ’000 tonnes

5 431 6 148

289
259

-74
347
2 815 3 558
861 1 150
1 325

1 134

Net sales, SEKm
Operating profit/loss excl. items
affecting comparability, SEKm
Investments, SEKm
Operating capital, SEKm
Average number of employees
Deliveries, ’000 m3

2016

2015

1 342 1 314

-3
52
892
225
776

9
103
924
213
729

HOLMEN ANNUAL REPORT 2016 / OPERATIONS IN 2016

A sustainable
business

Holmen’s value creation begins in the sustainably managed forest.
This is the source of the renewable raw material underpinning the
high-quality products that are appreciated by customers around the
globe. The business as a whole, with its own energy production and
resource-efficient production units, contributes to long-term value
growth and brings climate benefits by reducing the amount of carbon
dioxide in the atmosphere by over two million tonnes per year.

FOREST

PAPERBOARD

SOCIETY

PAPER

RENEWABLE
ENERGY

WOOD PRODUCTS

SURPLUS
ENERGY

RECOVERED
ENERGY

BIOFUEL

Growing forest ensures stable profitability.
Holmen operates active and sustainable fores-
try with high growth. Harvesting amounts to
85 per cent of the annual growth, which means
that the volume of standing timber is increas-
ing year on year. Continuous development of
methods and technologies ensures high pro-
ductivity and good revenue over the long term.

Energy-efficient production units.
Production at the Group’s energy-efficient
mills and sawmills in Sweden is largely based
on renewable electrical and thermal energy.
The paperboard mill in the UK is self-sufficient
in electrical and thermal energy, and sells its
surplus electricity production to the local
community.

Renewable energy from own production.
Holmen’s wholly and partly owned hydro power
stations are stable and effective suppliers of
renewable energy. Electricity production at the
hydro power stations and wind farms, together
with the electricity production at the larger mills,
covers half of the Group’s electricity consumption.

Optimal raw material usage.
Nothing goes to waste when it comes to the
use of the wood raw material. The logs become
wood for joinery and construction. Chips and
shavings are turned into pulp. Branches and bark
become by-products that can be further pro-
cessed or used for fossil-free energy production.

Customised products and services.
Holmen delivers products that exploit all
the potential of the forest raw material to
create clear competitive advantages for the
customer. High quality, reliable deliveries and
customised services all bring customer benefits.
Continuous product development, coupled
with effective and resource-efficient processes,
creates products for the future.

Paperboard, paper and wood products con-
stitute basic materials in people’s everyday lives.
The products are made from renewable raw
material and help to capture carbon dioxide from
the atmosphere, and since they can replace pro-
ducts made from fossil raw materials, they reduce
society’s overall emissions of greenhouse gases.

HOLMEN ANNUAL REPORT 2016 / A SUSTAINABLE BUSINESS

Value creation on every front

Economy

STAKEHOLDERS

Customers

Suppliers

Sales of paper, paperboard, wood products,
wood and electricity

Purchases of products, materials and
services, along with depreciation, etc.

Employees

Wages and social security costs

Lenders

State

Interest

Taxes

Shareholders

Net profit

Board’s dividend proposal

ECONOMIC VALUE
(SEKm)

17 072

-12 873

-2 268

-71

-436

1 424

1 008

Holmen’s operations in 2016 broken down into stakeholders based on the
Group income statement.

Environment

• Sustainable forestry to safeguard biodiversity
• Carbon dioxide is captured by growing forest and stored in products
• Renewable products that can replace climate-negative alternatives
• Renewable electricity production
• Almost 100 per cent of thermal energy is produced at Holmen’s own mills
• Fresh fibre from Holmen contributes to the recovered fibre ecocycle
• Almost 100 per cent of by-products and waste is put to good use
• Reduced emissions to air and water from the plants

Society

• The economy benefits from direct and indirect job opportunities
• Delivery of carbon-free electrical and thermal energy plus biofuel
• Safe working environment with fewer industrial accidents
• Assessment of suppliers’ work on human rights and employee rights
• Regular contact with local residents, the general public, authorities and the media
• Forests are important for people’s wellbeing and recreation
• Investors have an opportunity to buy shares in a sustainable company

In collaboration with
our stakeholders

Customers. Almost 90 per cent of Holmen’s deliveries
go to European customers. Other exports go primarily
to customers in the USA, North Africa, the Middle
East and countries in Asia. In the drive for growth in
the international markets, Holmen is expanding its
presence to include more and more countries. This
allows us to increase customer service and strengthen
work on building relations. Holmen’s business ethics
policy and associated guidelines provide guidance on
how to maintain good business practices when dealing
with external contacts in various markets.

Suppliers. Purchasing is a key strategic issue
within Holmen. The Group’s Supplier Code of
Conduct increases the focus on human rights and
working conditions among suppliers, with a view to
ensuring good conditions for everyone who works in
Holmen’s value chain. Suppliers in high-risk countries
are subject to tighter requirements on showing
compliance with the principles of the code.

Employees. Competent and motivated employees
who embody the company’s values are a key fac-
tor for the success and long-term sustainability of
Holmen. Priority issues are health and safety, lead-
ership and management by objectives. Delegation of
responsibility, skills development and participation in
the development of the business are other key areas.

Society. Holmen plays a significant role as a major em-
ployer in a number of locations. The business creates
jobs not only within the Group, but also for contractors,
suppliers and various social functions. This means, in
turn, that Holmen contributes substantial tax revenue.
Continuous dialogue with local communities, indigenous
peoples and stakeholder organisations, as well as part-
nerships with universities and colleges, creates condi-
tions for sustainable development, with the forest as a
core factor in economic growth and human wellbeing.

Public authorities. Environmental permits are
required for the majority of the Group’s operations.
Openness and transparency allow us to establish the
conditions for good oversight of and trust in our
actions. During permit applications, the authorities,
the general public and local residents all have an
opportunity to put forward their views.

Shareholders, investors and analysts. Holmen
wishes to create long-term value for shareholders
through dividends and growth with a good return on in-
vested capital. Sustainability issues are becoming in-
creasingly important to investors and analysts, who are
keen to establish long-term relationships with compa-
nies that have high ambitions in this regard. The Group’s
financial statements and sustainability reporting are an
effective way of providing relevant data for analysis.

HOLMEN ANNUAL REPORT 2016 / A SUSTAINABLE BUSINESS

Managed
forests brings
climate
benefits

Holmen manages its forest holdings,
which are among Sweden’s largest,
both actively and sustainably. The
renewable raw material from the for-
est is a stable source of revenue and
a key component in society’s drive to
meet the challenge of climate change.

It all begins in the forest
Holmen’s forests cover 1.3 million hectares,
of which a little over a million is productive
forest land. Holmen manages these forests
and is largely able to supply its production
plants in Sweden with its own renewable raw
material. The strategy is to increase the revenue
from and future value of the forest holdings
through active and sustainable forestry, a clear
focus on costs and the continued development
of methods, technologies and expertise.
Economies of scale and efficient logistics gives
us a strong position in the wood market, which
contributes to the Group’s competitiveness.

Forest’s value is growing
The growth of the forest and its value are
dependent to a large extent on how it is man-
aged. Holmen’s annual harvesting is governed
by a long-term plan based on forest inventories
that are conducted every 10 years. In the latest
plan from 2011, the annual harvest is forecast at
around 3.0 million m3sub, which accounts for
around 85 per cent of the growth. The volume
of wood is thus growing by 1 per cent per year.
The long-term target for 2050 is that the
annual growth in Holmen’s forests will be 25
per cent higher than in 2007. This means that
today’s volume of standing timber, 120 million
m3 growing stock, solid over bark, will increase
to 160 million m3 growing stock, solid over
bark by 2050, whilst at the same time, harvests
will rise from 3 to 4 million m3sub per year.
It is Holmen’s active and sustainable for-
estry that allows harvests to be increased while
maintaining growth in the volume of standing
timber.

Economic value. The recognised value of
Holmen’s forest holdings as at 31 December
2016 amounted to SEK 17 488 million under

international accounting standard IAS 41. A
deferred tax liability of SEK 3 854 million is
stated in relation to that figure, which means
that the growing forest, net after tax, is rec-
ognised at SEK 13 594 million. See Note 11,
page 59.

The annual cash flow that the forest

delivers gives an annual dividend yield of 4 per
cent. Cash flow is made up of the net balance
of sales revenues and costs of harvesting,
silviculture and administration.
Growth can be increased through active
forestry, which provides greater opportunities
for harvesting and a rise in cash flow.

Value for the climate. Actively managed
forests mitigate the greenhouse effect in
multiple ways. The larger the area that is
managed and the more the forest grows, the
more carbon dioxide is absorbed. Younger and
middle-aged stands, where growth is greatest,
absorb more carbon dioxide than older stands,
where growth is in decline. Furthermore, the
benefit to the climate becomes many times
greater when the forest’s products are able to
replace fossil materials and processes.

Forest that is not managed brings nowhere
near the same climate benefits. Since the forest
raw material is not extracted, no substitution
effect is achieved, which slows down the
phasing out of products that are harmful to the
climate.

Robust against climate change. Conifers
have been on the planet for millions of years
and are consequently highly adaptable to
change. A warmer climate may, however,
affect the forest in various ways. Growth
may increase in certain areas, but periods of
ground frost may become shorter, which makes
harvesting more difficult. The seeds for the
company’s plant nurseries are selected to grow
and thrive in a changing climate, and Holmen’s
silviculture is robust in climate terms.

Active and sustainable forestry
Under Holmen’s active forestry, the volume
of standing timber is built up over a period
of 70–90 years, with a new growth cycle
beginning after harvest. The most important
silviculture measures come in the years
immediately after harvest. The soil is prepared
and the land is reforested through planting
or sowing. The forest is cleaned and thinned
in order to select trees with the best potential
for continuing their growth. Around 10–30
years before the forest is harvested, it can be
fertilised to further boost growth.

Focus on productivity and the
environment. Long-term development of
quality and profitability requires continuous
improvements to technology, methods and
skills. Holmen works with other actors in the
industry, manufacturers and researchers, to
improve productivity and develop the natural
assets of the forest.

Quality-assured regeneration. Holmen
invests around SEK 160 million a year in future
growth through silviculture, stewardship
and fertilisation. The foundation for future

growth in the forest is laid when new forest is
planted. Regeneration is quality-assured and
Holmen conducts long-term development
work that covers the entire chain from seed
to new planting. Together, the company’s two
nurseries produce 35 million seedlings each
year, with the majority planted on the Group’s
land. At least two new trees are planted for
every tree harvested.

Traceability and nature conservation.
Holmen’s forests are certified and all wood
is traceable. In 2016, Holmen adopted a
new nature conservation strategy aimed at
ensuring that all naturally occurring species
are able to thrive in Sweden’s forest landscape.
The strategy sets out how Holmen works
to combine high growth with preserving
biodiversity.

Right to manage the forest
The significance of forestry for both the climate
and the Swedish economy places it squarely
on the political agenda. Holmen works with
the industry to make politicians, authorities
and the general public aware that active and
sustainable forestry is the very foundation of
the emerging bioeconomy and is vital with
regard to the climate. The aim is to establish
a regulatory framework that takes account of
the industry’s unique position in contributing
to an economically, environmentally and
socially sustainable society. Restricting the
right to manage the forest one owns could lead
to smaller harvests. This could affect the supply
of forest raw material to the industry and thus
hit the competitiveness of Swedish forestry.
One concrete example is the Species Protection
Ordinance, which has been implemented in a
different, stricter way in Sweden than in the
rest of the EU.

Market with opportunities
Demand for logs is affected by the sawmills’
needs, which in turn are governed by the
construction market in various parts of the
world, and the degree of substitution between
different building materials. Widespread
interest in wood construction and a growing
market for timber-framed buildings are
generating increased demand for logs.

Pulpwood upturn. Pulpwood is used to
manufacture the pulp that in turn is used for
the production of paperboard and paper.
Global demand for printing paper is falling,
whereas demand for paperboard is rising.
Pulp manufacture is capital intensive and
demand for pulpwood in local markets is thus
predictable over the short and medium term.
The market for pulpwood is in equilibrium in
Sweden, with the major investments in Swedish
pulp mills in recent years ensuring a stable
demand for forest raw material.

HOLMEN ANNUAL REPORT 2016 / FOREST

VOLUME OF STANDING TIMBER
m3 growing stock, solid over bark
per hectare productive forest land

+1%/year

1948

1955

1965

1975

1988

1993

2000

2010

2020

2030

2040

2050

Assessment of tax

Forecast

160

120

HOLMEN’S FORESTS 2016
Total land acreage
Total forest land acreage*
of which nature conservation areas
Productive forest land**

1 275 000 ha
1 153 000 ha
187 000 ha
1 042 000 ha

Total volume of standing timber, 120 million m3 growing
stock, solid over bark
on productive forest land

* Analysis performed by the Swedish National
Forest Inventory, according to the international
definition of forest land: Land with an area of
more than 0.5 hectares, a tree canopy cover
of more than 10 per cent and trees with a
minimum height of 5 metres at maturity.
** Forest land that on average can produce
1 m3 growing stock, solid over bark per hectare
and year (on average during the growth period
of the forest stand).

The volume
of standing timber is growing
by 1 per cent per year and has
doubled over the past 100 years.

MAP

Holmen’s forest holdings

Holmen’s Swedish industries

HOLMEN ANNUAL REPORT 2016 / FOREST
Hydro power gives stable
energy production
Holmen’s own energy production is dominated
by climate-smart and renewable hydro power.
Compared with other renewable energy sources,
hydro power has the unique advantage of be-
ing controllable. Storing reserves of water in
lakes and watercourses makes it possible to
adapt the energy production to demand by re-
ducing or increasing the flow of water through
the turbines. In an energy system that is in-
creasingly based on weather-dependent renew-
able sources, hydro power contributes stable
and controllable energy production, based on
a non-finite resource. Another benefit of hydro
power is service life, since a hydro power sta-
tion can deliver climate-smart energy for over
100 years. The need for investment is relatively
small, compared with other energy types, and
the basic operating costs are low. For every
kilowatt hour produced via hydro power, fos-
sil-based electricity production can be cut
back. Overall, hydro power brings major social
benefits on the path to a bio-based economy.

Wind power a supplement. Holmen is a
major land owner and has the potential to
develop its land holdings by establishing wind
farms on sites with good wind conditions. At
this moment in time, further expansion is unvi-
able due to low prices for electricity and elec-
tricity certificates, and activity in ongoing pro-
jects has therefore been tailored to current
market conditions.

Energy peat is considered a slowly renew-
able resource, which makes it possible to add
value to certain land assets within Holmen that
are not productive forest land. Peat can be used
in energy production, but also as a soil impro-
ver, animal bedding and a building material.
Holmen’s peat field outside Örnsköldsvik was
taken into use in 2009 and is harvested annual-
ly for energy purposes. In 2016, the harvest
equated to 70 (63) GWh electrical energy.

Complex market conditions
Globally, in recent years energy has gone from
being in short supply to being in surplus, which
has put pressure on prices. The change has
been driven by new methods of extracting oil
and gas in North America, poorer control of
output within OPEC and large quantities of
weather-dependent electricity production
being subsidised into Europe.

Swedish energy agreement. In 2016, a
broad political agreement was reached in Swe-
den on ensuring that the nation has competi-
tive electricity prices and a robust energy sup-
ply, as well as putting the conditions in place to
invest in renewable electricity production. The
power tax on nuclear power is going to be
removed in order to facilitate investment in
efficient operation and increased safety in the
remaining reactors, while the electricity certifi-
cate system is being extended until 2030.
Investments in solar, wind and hydro power
and bioenergy will contribute to the target of
100 per cent renewable energy supply by 2040.

Positive consequences for hydro power.
The energy agreement also states that hydro
power plays a central role in Sweden’s renew-
able electricity supply. The property tax on
hydro power will be reduced to the same level
as for other electricity production plants, i.e.
0.5 per cent, over a four-year period beginning
in 2017. This will allow investments to con-
tinue the operation of hydro power stations.

As a consequence of an EU Directive, envi-
ronmental permits for all hydro power stations
in Sweden are likely to be reassessed. The pro-
cess is expected to take many years. Holmen’s
power stations are all well placed to meet the
necessary environmental adaptations without
any major impact on production.

Renewable
energy gives
position of
strength

Holmen owns, manages and
develops renewable energy assets.
Hydro power forms the basis of the
energy production, providing a stable
revenue stream over time and at the
same time bringing major benefits to
society.

Value of own energy assets
Holmen wholly or partly owns 21 hydro pow-
er stations. In a normal year, Holmen’s produc-
tion share amounts to 1 112 GWh. Wind pow-
er assets comprise part ownership of four wind
farms, where the production share in a normal
year amounts to 133 GWh. Holmen’s own pro-
duction of hydro and wind power, combined
with the bioenergy that is generated at the
Group’s mills, amounts to just over 1 800
GWh per year, which covers around 50 per
cent of Holmen’s total energy consumption.

Varsvik wind farm
outside Hallstavik.

4
wind
farms

HOLMEN ANNUAL REPORT 2016 / RENEWABLE ENERGY

Hydro power
has a unique advantage
over other renewable
energy sources, since it
is controllable.

Holmen’s power plants

RIVERS
Umeälven

Gideälven

Faxälven

HYDRO POWER
STATIONS
Harrsele
Tuggen
Stennäs
Gammelbyforsen
Björna
Gideå
Gidböle
Gideåbacka
Linnvasselv
Junsterforsen
Gäddede
Bågede

Iggesundsån Pappersfallet

Ljusnan

Iggesunds kraftstation
Sveg
Byarforsen
Krokströmmen
Långströmmen
Ljusne Strömmar

Motala Ström Holmen

Bergsbron-Havet

HOLMEN’S
PRODUCTION SHARE

%
49
22
10
10
10
10
10
10
7
100
30
100
100
100
20
20
9
11
7
100
100

GWh*
470
97
3
1
8
9
7
7
14
115
23
70
7
22
30
17
45
29
17
112
10

YEAR OF
CONSTRUCTION
1957–58
1962
1985–96
–”–
–”–
–”–
–”–
–”–
1961–74
–”–
–”–
–”–
1915
2009
1949–75
–”–
–”–
–”–
–”–
1990
1927

OWNER
Varsvik
VindIn

WIND FARMS
Varsvik
Skutskär
Trattberget
Svalskulla, Finland

* Refers to normal production

HOLMEN’S
PRODUCTION SHARE

%
50
18
18
18

GWh*
83
5
38
9

YEAR OF
CONSTRUCTION
2014
2009
2012
2014

ELECTRICITY SPOT PRICE,
Price area Stockholm (SE3)

SEK/MWh

800

600

400

200

322

21
hydro
power
stations

HOLMEN ANNUAL REPORT 2016 / RENEWABLE ENERGY

packaging can be seen primarily in Asia, the
Middle East and Africa, while demand for
pharmaceutical packaging is rising in all mar-
kets. Packaging for cosmetics is seeing a par-
ticular increase in markets with rapid popula-
tion growth, such as Asia, Eastern Europe, and
South and Central America.

Europe. Significant additions to capacity
are expected to make competition stiffer and
exports to other parts of the world are expect-
ed to rise. We are boosting our customer work
and our focus on niche segments, as well as
working proactively to continue growing over
the long term, together with our customers.

North America. The market is relatively
stable, and imports from Europe are expected
to rise, although this trend depends on various
factors, including currency fluctuations.
Holmen is expanding in the premium segment,
and has increased its presence and service level
in the strategically key regions, for example
through stock control and sheeting on the west
coast of America.

Asia. Rising prosperity is driving demand for
status goods and thus also the need for high-
quality packaging. This is a market with poten-
tial and with emerging local brands. Holmen
has increased its presence through a sales office
in Japan and a service centre in Taiwan.

Global
growth for
paperboard
products

Holmen is a market leader in the
segment for high-performance
paperboard for consumer packaging
and graphical applications. The
strategy is to grow globally with the
support of efficient, well invested mills
and two of the market’s strongest
product brands.

Premium products with potential
Leading position. Holmen is a market leader
in the highest quality segments for consumer
packaging and paperboard for advanced
graphical printing. The main customer groups
are converters, wholesalers and brand owners
who want to be able to offer their customers
high-quality, sustainable and attractive prod-
ucts. The global market for packaging board is
growing, and Holmen is well positioned for
growth. The strategy is to consolidate Holmen’s
leading position in the European market, while
at the same time growing in the premium seg-
ment in global markets through continuous
product development, a high level of service
and close customer relations.

Invercote and Incada
drive progress
Holmen markets its paperboard products
under two brands: Invercote and Incada.
Invercote is a multi-layered paperboard made
from bleached chemical pulp (SBB). Incada is
also a multi-layered paperboard, but with a
surface layer of chemical pulp and a core of
mechanical pulp (FBB). Together, they repre-
sent one of the market’s most versatile ranges
in the highest quality segment, giving the
brands a high status among converters, brand
owners and designers the world over. The
paperboard is used primarily to make
high-quality consumer packaging for confec-
tionery, cosmetics, perfumes, wines, spirits,
pharmaceuticals, tobacco and food products.
The range is constantly being developed in
close collaboration with customers, in order to
meet the ever-growing demand for innovative,
customer-specific packaging solutions. The
paperboard from Holmen is renowned for its
high and consistent quality, which helps to

ensure predictability, efficiency and stable
results in the customer’s production process.

Fresh fibre strength ens
proposition
The shared feature of Invercote and Incada is
that they are made from fresh fibre from sus-
tainably managed forests, which has benefits
for both the product and the environment.
Higher strength, better brightness and a neu-
tral effect on smell and taste in contact with
food are just a few of the properties that add
clear value to the end product. The combina-
tion of the fresh fibre and the inherent proper-
ties of the paperboard also make it possible to
manufacture attractive and functional packag-
ing solutions that offer an excellent substitute
for packaging based on fossil raw materials.

Sustainable ecocycle. The addition of fresh
fibre is necessary to keep the recovered fibre
ecocycle going. The forest is the source of all
paperboard and paper, and wood fibre can be
recycled up to seven times before it ends up as
biofuel.

Strong customer relations and
modern service solutions
Care by Iggesund is a modern service concept
from Holmen that adapts to the customer’s
specific need for availability, deliveries, support
and advice concerning everything from prod-
uct samples to food safety. The local support
team works very close to the market, has
in-depth knowledge of the prevailing condi-
tions and speaks the customer’s language.
The concept also includes environmental docu-
mentation plus access to analysis facilities at
the company’s own accredited laboratory for
sensory and chemical analysis, known as the
smell and taste lab, at Iggesund Mill.

Climate-smart production
process
Invercote and Incada are manufactured in a
resource- and energy-efficient way at the mod-
ern paperboard mills in Iggesund, Sweden, and
Workington, UK. Both mills hold chain-of-cus-
tody certification and all the wood raw materi-
al comes from well managed and sustainable
forests. The plants in Workington and Iggesund
already have the capacity to be self-sufficient in
renewable energy. Iggesund Mill forms a bio
co-location with Iggesund Sawmill that ensures
every part of the tree is used on site. Chips
from the sawmill serve as raw material for pulp
production at the paperboard mill, while bark
and wood shavings become biofuel and are
converted into energy and district heating. The
circle is closed when the surplus heat from the
mill is used for drying processes at the sawmill.

Global market with opportunities
Global demand for packaging is rising in line
with factors such as population growth, urban-
isation and an emerging middle class with
more single-person households. Demand in the
various product segments varies from conti-
nent to continent, but there is a general upward
trend for renewable packaging materials, with
paperboard considered to have major advan-
tages over other materials. Growth in food

HOLMEN ANNUAL REPORT 2016 / PAPERBOARD

Iggesund Mill
Raw materials: Softwood and hardwood pulpwood
Process: Sulphate pulp
Products: Multi-layered paperboard made from bleached
chemical pulp (SBB)
Brand: Invercote

Workington Mill
Raw materials: Spruce pulpwood and purchased sulphate pulp
Process: TMP
Products: Multi-layered paperboard, surface layer of chemical
pulp, core of mechanical pulp (FBB)
Brand: Incada

END PRODUCTS, %

Consumer packaging
Graphical printing

84%
16%

EUROPEAN
PAPERBOARD MARKET 2016

0.5

2.3

s
e
c
i
r
P

2.4

3.6

MILLION TONNES

SBB Prestige products for
graphical printing, perfumes,
confectionery and tobacco.
FBB Confectionery, pharmaceu-
ticals, tobacco, frozen goods,
skin care and hygiene articles.
SUB/LPB (solid unbleached
board and liquid packaging
board) Beverages, dairy
products and dry goods.
WLC (white lined chipboard) Dry
goods and household products.

For every tree
that is harvested to make our paperboard,
at least two new ones are planted.

HOLMEN ANNUAL REPORT 2016 / PAPERBOARD

the EU Ecolabel, the official ecolabel of the
European Union. Only products that meet
stringent environmental, functional and quali-
ty requirements are allowed to carry the EU
Ecolabel. The ecolabelling process mainly
examines the use of fibre raw materials, chemi-
cals and energy and emissions to air and water
in manufacturing.

A changing market
The magazine market is looking for new
paths. Many magazine publishers are being
squeezed by competition from digital channels
and are constantly reviewing their paper choices
as they chase lower costs. Here Holmen’s inno-
vative products with clear cost benefits have an
opportunity for volume growth by providing
an answer to market challenges.

Direct mail drives sales. Paper-based direct
mail is still holding its own. In a short period
Holmen has won the trust of retailers with
products that combine high quality and com-
petitive pricing, making the sums more than
add up for customers.

Growth in the book paper market. With a
market share of 50 per cent, Holmen BOOK is
the market’s leading wood-containing paper in
Europe for paperbacks and hardback books.
Its share has increased steadily in recent years.
The trend is also increasingly moving towards
digital printing, where Holmen’s paper is ideal.
Holmen is now looking to new markets
with potential outside Europe, mainly in Asia
and Latin America.

The challenger
in magazine
paper

Holmen manufactures magazine
and book paper that makes the
most of the properties of fresh
fibre. This means that the market
is offered new opportunities to pro-
duce printed materials sustainably
and cost-effectively.

Paper with built-in
innovative thinking
Holmen develops and sells fresh fibre-based
speciality paper in the form of modern maga-
zine and book paper that challenges traditional,
more expensive paper grades. Efficient produc-
tion units, continued specialisation and a strong
marketing organisation are seeing Holmen
strengthen its position in existing and new
markets. Customers include retailers, printers
and publishers across the globe seeking cost-
efficient paper solutions.

Fresh fibre offers unique benefits
Holmen’s magazine and book paper is made
from fresh fibre from Swedish forests, making it
possible to develop paper grades with high
bulk, creating paper that is thick but still light.
This means that despite fewer tonnes of paper,
the customer can produce printed material with
the same thickness and feel as traditional, more
expensive paper grades. In combination, this
leads to lower costs for paper and distribution.
Paper based on fresh fibre has extra stabili-

ty for its weight. In addition, the paper has a
naturally higher brightness that improves the
way text and images are experienced, com-
pared with paper based on recovered fibre.
This makes printed material from fresh fibre-
based paper a natural complement to digital
media.

Products that show the way
Book paper. Compared with wood-free paper,
Holmen BOOK gives its customers the oppor-
tunity to lower paper costs considerably. Pub-
lishers appreciate the paper because it main-
tains high quality and offers product properties
that enhance the reading experience thanks to
the paper’s high stability and bright, smooth
surface. The product comes in several varia-
tions and is constantly being developed.

Magazine paper. Holmen is an industry lead-
er in developing new products entirely based
on fresh fibre. The result is innovative products
that, compared with traditional paper choices,
offer clear cost benefits when purchasing and
distributing finished products. The brands
Holmen UNIQ, Holmen VIEW, Holmen
TRND and Holmen XLNT represent a broad
range of modern printing paper that is ideally
suited for direct mail, catalogues and maga-
zines, for example. The fact that all products
are ecolabelled and based on traceable raw
materials provides important arguments in an
increasingly aware market.

Services centred on the customer
The new media landscape, rapidly changing
consumer habits and tougher competition for
market share are all affecting customers.
Holmen offers services that help the customer
to maximise benefits in the paper decision-
making process. This includes analysing the
customer’s product portfolio and strategic
advice for profitable paper choices based on
technical, commercial and experience-related
aspects.

Sustainable all the way
Production takes place at two mills in Sweden.
Both have streamlined and upgraded their
operations in line with the strategy of switch-
ing to speciality paper. The majority of the
product brands can be produced in both mills,
ensuring high efficiency, flexibility and delivery
reliability. Favourable locations in terms of
logistics mean short wood transport distances.
Both mills are close to ports with good capaci-
ty and efficient handling.

Braviken Paper Mill and Braviken Sawmill

make an energy-efficient bio co-location. The
mill receives raw material in the form of chips
and in turn provides the sawmill with energy
and heat. Surplus bark and wood shavings are
sold for energy and district heating production.
Hallsta Paper Mill is one of the most
resource-efficient mills in its segment in Europe.
The residual products from the production pro-
cesses are sold on as biofuel and soil products.

Recovered paper needs fresh fibre. Pulp,
paper and paperboard made from fresh fibre
from Nordic forests play an important role in
the European recovered fibre ecocycle. Forest
resources are limited in the rest of Europe,
which means that paper manufacture is based
on recovered paper to a considerably higher
extent. However, paper cannot be recycled
again and again forever. The ecocycle needs a
constant injection of fresh fibre from the forest.

Traceable raw material. Holmen’s forestry,
industrial production and products are certi-
fied. Certification guarantees that the wood
raw material is traceable and comes from sus-
tainably managed forests. Unlike the majority
of products based on recovered fibre, the exact
origin of the wood raw material can be cited.

Ecolabelled products. All magazine and
book paper made by Holmen is approved by

HOLMEN ANNUAL REPORT 2016 / PAPER

Braviken Paper Mill
Raw materials: Spruce pulpwood
Process: TMP
Products: Magazine paper, book paper and newsprint

Hallsta Paper Mill
Raw materials: Spruce pulpwood
Process: TMP
Products: Magazine paper and book paper

END-USERS, %

Magazines, direct mail
and books
Daily newspapers

78%

22%

PRODUCTION
Proportion of speciality paper
and newsprint

100

Speciality paper

Newsprint

The forest
is the source
of all paper. Without fresh fibre,
there is no recovered fibre.

HOLMEN ANNUAL REPORT 2016 / PAPER

pulp production and the final residual products
are used as biofuel to produce energy and
district heating. Steam from the mills is also
used in the drying processes at the sawmills.

Local renewable raw material. One key to
both profitability and sustainability is the
proximity to the raw material and efficient
wood procurement. The business area Forest
effectively sources wood raw material from
Holmen’s own forest holdings and from other
forest owners, ensuring a highly efficient logis-
tics chain from forest to sawmill. The majority
of the raw material used at the sawmills is cer-
tified.

Positive market trends
The market for wood products is global and
huge streams of goods are shipped between
continents. The major exporters are Canada,
Sweden, Finland and Russia. Typical markets
in which Swedish sawmills are competing with
other major exporting countries are the UK,
China, North Africa and the Middle East.
Demand largely follows the general eco-
nomic cycle and has recovered relatively well
since the financial crisis. In North Africa and
the Middle East, however, the recent political
unrest has seen the increase in demand tail off
somewhat. North American consumption has
recovered but has a little way to go to reach
historical levels. Asia is breaking new records
and is dominated by the Chinese market,
which is also seeing the fastest growth. Con-
struction is doing well in Europe.

being driven by the construction of new homes,
which in turn is affected by population growth,
urbanisation and the aim to build sustainable
cities. Building in wood will thus continue to
increase and at the moment demand is out-
stripping supply. There is great potential for
growth, mainly in high-rise buildings, and the
proportion of housing built in wood is expect-
ed to rise as the capacity for industrial building
in wood is expanded. New techniques for
building in wood are also developing in paral-
lel.

Treated wood for builders’
merchants
Strategic investments in a wood treatment
plant and a distribution warehouse at Braviken
Sawmill mean that Holmen will be able to
offer a broader and more attractive range
directly to builders’ merchants. Treated wood
is an important part of the range offered by
Swedish builders’ merchants and is used for
terraces, decking, fences and jetties. Demand
for treated products is growing and the saw-
mill’s central location in a densely populated
region means there are good opportunities to
reach builders’ merchants with a wider range
of wood products for outdoor use.

Large-scale and sustainable
production
The investment in modern, large-scale sawmills
with a high technological level and gradually
extended additional processing results in a
stronger product range. Combined with effi-
cient wood procurement, this produces com-
petitive sawmills. The product range of the
sawmills is adapted to the properties of the
local raw material and they complement each
other in the market.

Complete bio co-locations. The Group’s
sawmills form bio co-locations with neigh-
bouring paperboard and paper mills. This
means that every aspect of the wood raw
material is made use of in a cycle in which
chips from the sawmills act as raw material in

Increased
processing
of wood
products

Holmen delivers climate-smart wood
products to the joinery and construc-
tion industry and to builders’ mer-
chants. Production takes place at two
large-scale sawmills integrated with the
Group’s paperboard and paper mills.

Platform for growth
Holmen manufactures and delivers high-quali-
ty base products for further processing for
joinery and construction industry customers in
Europe, the Middle East, North Africa and to a
growing extent also in Asia. Deliveries are also
made directly to local Swedish builders’ mer-
chants. Competitiveness is based on a strong
organisation for wood procurement and
cost-efficiency through large-scale production
co-located with the Group’s paper and paper-
board mills. With a finely-tuned production
chain and working methods that put the cus-
tomer in the centre, Holmen is building a solid
platform for long-term and profitable custom-
er relations with the capacity to meet demand
in different markets.

Climate-smart products
for the future
Wood products have the capacity to store car-
bon for a long time. This makes buildings made
from wood much more climate smart than
houses built from materials made using fos-
sil-based materials and processes. Besides the
fact that wood is renewable and binds carbon
dioxide, wood products can make a positive
climate contribution through what is known as
the substitution effect. Manufacturing materi-
als such as steel and concrete creates emissions
of fossil carbon that affect the climate. Replac-
ing these materials with structural components
made from wood results in climate benefits on
several fronts, and also makes the entire chain
from manufacturing to transport considerably
more energy-efficient and cost-effective.

Growing cities drive
building in wood
For a long time, the increase in the use of wood
in Sweden has largely been attributable to ren-
ovation work and extensions. Now the trend is

HOLMEN ANNUAL REPORT 2016 / WOOD PRODUCTS

Braviken Sawmill
Raw materials: Spruce and pine saw logs
Process: Sawmilling
Products: Spruce and pine wood products

Iggesund Sawmill
Raw materials: Pine saw logs
Process: Sawmilling
Products: Pine wood products

Wood is
a versatile
raw material and the only
renewable construction material.

END PRODUCTS, %

Construction timber
Joinery timber
Packaging timber

41%
43%
15%

100% of
the tree
is used
50 per cent
The main part of the tree goes to our
sawmills, where it is made into joinery
products and construction timber.

40 per cent
The thinner part of the tree and wood
from thinning are used in our mills to
produce products such as paperboard,
and magazine and book paper.

10 per cent

The rest of the tree is used as biofuel
and for fossil-free energy production.

HOLMEN ANNUAL REPORT 2016 / WOOD PRODUCTS

An important
climate actor

USE OF FOSSIL FUELS
(base year 2005),%

RENEWABLE ELECTRICITY
PRODUCTION RELATIVE TO
ELECTRICITY USE
(base year 2005), %

-20

-40

-60

-80

-75

Holmen’s environmental work focuses
on efficient use of raw material and
energy, with the forest playing a key
role on the climate issue through its
absorption of carbon dioxide.

Holmen’s environmental responsibility.
Environmental and energy concerns play a
natural role in Holmen’s planning of its pro-
duction and investments. Operations are char-
acterised by resource-efficient use of renewable
raw material and energy, and protecting the
environment, applying the precautionary prin-
ciple. Energy, chemicals and fibre are recovered
as far as possible, in order to minimise the
environmental impact of production. The sec-
tion on risk management on page 37 outlines
Holmen’s preventive work on eco-related risks
and how they are managed.
Holmen’s environmental work is char-
acterised by constant improvements, which
is conducted within the remit of the certi-
fied environmental and energy management
systems. This ensures compliance with the

requirements set in legislation and by govern-
ment agencies, which is assured via statutory
official inspections.

The main environmental impact from the
industrial sites takes the form of emissions to
air and water. Information on production and
priority environmental parameters is presented
on pages 80–81.

Environmental targets for sustainable
development. Holmen has been working on
Group-wide environmental targets for sustain-
able development for several years. Increased
production and use of products made from
renewable forest raw material is important
for the production itself and for the climate.
Holmen therefore has a target of increasing
growth in Holmen’s forests by 25 per cent by
2050 compared with 2007.

The Group’s target for fossil fuels is to
reduce their use at the mills by 75 per cent by
2020 compared with 2005 levels. A reduction
of 75 per cent has been achieved by 2016. Exten-

sive investments in bio-based energy production
at the paperboard mills, and the adjusted ener-
gy strategy at the other mills have had a huge
impact on fossil fuel use. The facility in Madrid
was sold in mid-2016. Energy production at the
mill is based on natural gas, a fossil fuel. The sale
of the mill has thus resulted in a further drop in
Holmen’s fossil carbon dioxide emissions. For
this reason, the target has been revised and from
2017 use of fossil fuel is to be cut by 90 per cent
from 2005 to 2020.

The third climate-related sustainabili-
ty target is to increase company-produced
renewable electrical energy as a proportion of
total electricity use by Holmen. The target for
2020 is for production to reach 50 per cent,
compared with 31 per cent for the base year
2005. In 2016 self-generated renewable ener-
gy accounted for 45 per cent of Holmen’s total
electricity use. Access to water for the hydro
power plants was slightly down in 2016 com-
pared with 2015, leading to lower electricity
production.

The investment in a biofuel boiler makes
the mill at Workington self-sufficient in
electricity and heating.

HOLMEN ANNUAL REPORT 2016 / ENVIRONMENT

Key figures for Holmen’s operations from a climate perspective 2016

Emissions of fossil carbon dioxide

Forestry

Input goods

Production facilities

Transport of raw materials and products1)

Absorption of carbon dioxide

In the growing volume of standing timber

Net in forest land

Captured in wood products

-30 000

-70 000

-125 000

-240 000

650 000

130 000

640 000

Tonnes
3 000 000

2 000 000

1 000 000

Capture 2 620 000

Wood products that substitute for climate-negative materials

1 200 000

Net, capture of carbon dioxide and substitution effect

2 155 000

-1 000 000

Emissions -465 000

1) Includes emissions from transporting finished products to EU customers and incoming

deliveries of wood, pulp and chemicals to Holmen’s facilities. Data also includes
emissions from transporting products to countries outside the EU.

The summary is based on internal data and calculations and on
scientific articles published in recent years. Several independent
sources show the positive climate impact of forestry and forest
products. On the basis of this reference material, data has been
obtained to calculate the substitution effect.

• Lundblad, M. et al. Land Use, Land-Use Change and Forestry
(CRF sector 4). In: National Inventory Report Sweden 2016 –
Submitted under the United Nations Framework Convention on
Climate Change. Swedish Environmental Protection Agency,
pp.353–392.

• Simplified reporting of carbon pool changes for Holmen’s
forest and land holdings in line with the guidelines of the
Convention on Climate Change, 2017. Swedish University
of Agricultural Sciences.

• Sathre, R. and O’Connor, J. Meta-analysis of greenhouse
gas displacement factors of wood product substitution.
Environmental Science Policy 2010, 13, 104–114.

• Gustavsson, L. et al. Climate change effects of forestry and
substitution of carbon-intensive materials and fossil fuels.
Renewable and Sustainable Energy Reviews 2017, Volume
67, 612–624.

• Cintas, O. et al. The potential role of forest management in

Swedish scenarios towards climate neutrality by mid century.
Forest Ecology and Management 2017, 383, 73–84.

Holmen creates climate benefit
Carbon dioxide is captured in the growing for-
ests and in the products. The resource-efficient
production is predominantly driven by renew-
able energy. Investments in company-produced
energy and the development of today’s prod-
ucts and new products based on forest raw
material mean the positive climate effects will
be even greater in the future. The Group’s
investments in research and development
amounted to approximately SEK 95 million
in 2016.

The forest. Holmen’s forests have long been
managed in such a way that they contain a
greater quantity of wood every year. Based
on growth data from the last five years, it
is calculated that the volume of standing
timber will increase by 1 per cent a year, and
approximately 650 000 tonnes of carbon
dioxide will be captured by this increase in
volume. Over the foreseeable period, annual
growth in Holmen’s forests is expected to
exceed the harvests, and the Group’s forest
growth target indicates that carbon dioxide
storage will increase in the future.

The production units. In recent years the
production of renewable electricity and
thermal energy has increased considerably
through Holmen’s investments in biofuel-based
energy production at several mills. In the past
ten years, emissions of fossil carbon dioxide
have fallen by over 75 per cent and amounted
to 125 000 tonnes in 2016.

Based on data for the past few years, annu-

al emissions of fossil carbon dioxide from for-

est machinery, manufacture of input goods
and transport of raw materials and products
are estimated at approximately 340 000
tonnes. These emissions, together with those
from certain types of forest land, represent
the negative climate impact of Holmen’s
operations.

The products and substitution effects.
Wood products store carbon dioxide through-
out their lifetime and this is only released when
the products are incinerated. Holmen’s produc-
tion of wood products in 2016 is equivalent to
approximately 640 000 tonnes of carbon diox-
ide stored in products with a lifetime of more
than 50 years. Holmen’s wood products that
are sold as joinery and construction timber
also contribute a substitution effect when used
to replace climate-negative construction mate-
rials. For 2016 this substitution effect is esti-
mated to amount to approximately 1 200 000
tonnes of carbon dioxide.

Residual volumes from the sawmills are used
in wood packaging, which also has a long life-
time. Any substitution effect for these products
has not been calculated.

As paper and paperboard products have a
relatively short lifetime, it is not meaningful to
calculate the storage of carbon dioxide. Once
the fibres in these products have been recycled
several times as recovered fibre, however, they,
like the end-of-life wood products, make excel-
lent biofuels. Biofuels from Holmen’s forests
and by-products from production, such as
bark, provide renewable energy from incinera-
tion.

Under the parameters set, calculations
show that Holmen’s business brings substan-
tial climate benefits, as it reduces the amount
of carbon dioxide in the atmosphere by over
two million tonnes per year.

Carbon dioxide vs.
carbon dioxide?
The biogenic carbon dioxide released when trees and plants rot
or wood and paper are incinerated is already included in the car-
bon cycle of the atmosphere. The fossil carbon dioxide released
when oil is incinerated adds new amounts of carbon dioxide to
the atmosphere, however. Fossil carbon dioxide is the major vil-
lain of the piece in climate change. Holmen’s operations mean
that a black carbon atom can be replaced with a green one.

HOLMEN ANNUAL REPORT 2016 / ENVIRONMENT

Holmen helps to ensure that
environmental goals are met
Holmen’s Group-wide sustainability targets
are in line with the sustainable development
goals defined at global, European and nation-
al level. In late 2015 the world’s leaders adopt-
ed a global Agreement on Climate Change to
address the climate issue at global level. The
agreement that entered into force at the end of
2016 has the general target of keeping glob-
al warming well below 2°C, and preferably
limiting it to 1.5°C, by cutting emissions of
greenhouse gases. The Agreement on Climate
Change states that action must be taken to pre-
serve and improve the capacity to capture and
store greenhouse gases. The importance of the
forests is specifically underlined in this context.
Over the long term, Holmen will therefore be
an important player in ensuring that the tar-
get set out in the global Agreement on Climate
Change can be achieved.

Swedish environmental objectives. The
over arching objective of the Swedish environ-
mental policy is what is known as the genera-
tional goal. The goal guides the values that
must be protected and the transformation of
society needed to attain the desired environ-
mental quality. Attaining Sweden’s environ-
mental objectives demands an ambitious
environmental policy in Sweden, in the EU
and in international contexts. The Swedish
environmental quality system comprises 16
environmental quality objectives in areas such
as climate impact, air pollution and bio-
diversity. Swedish businesses are expected to
contribute measures that show how systematic
environmental work is profitable for society
and for the companies. Holmen is constantly
working on environment-related studies and
measures both within forest operations and at
production plants. Holmen is thus helping to
ensure that several of the national environmen-
tal quality objectives can be met.

One of the
world’s most
sustainable
companies

2017

The Global 100 list of the world’s most sustainable corporations is an-
nounced each year at the World Economic Forum in Davos, Swit-
zerland. The ranking has been carried out by the Canadian analy-
sis company Corporate Knights since 2005 and is based on a total
assessment of the company’s capacity to tackle issues of resource
management, employees and financial management. Almost 5 000
companies were included in the assessment, with the hundred best
featuring on the Global 100 index. Holmen secured 21st place and is
the only forest industry sector company on this prestigious list.

“We are both proud and pleased to be on the Global 100 list
as one of the most sustainable companies in the world.
Holmen has taken a focused approach to sustainability
issues for many years now. Being recognised and ranked
highly by leading analysts is an acknowledgement of this
work,” says Lars Strömberg, Director of Sustainable and
Environmental Affairs at Holmen.

Reduced Climate Impact

Clean Air

A Non-toxic Environment

Zero Eutrophication

Flourishing Lakes and Streams

Good Quality Groundwater

A Balanced Marine Environ-
ment, Flourishing Coastal Areas
and Archipelagos

Thriving Wetlands

Sustainable Forests

A Rich Diversity of Plant and
Animal Life

Illustrator: Tobias Flygar Source: www.miljomal.se

Holmen’s climate work scores highly
CDP’S CLIMATE CHANGE PROGRAM is the name of an international federation that in 2016 represented 827 institutional in-
vestors with assets totalling around SEK 900 billion. CDP, which is a non-profit organisation, seeks to encourage companies
around the world to reduce their impact on the climate and nature’s resources, and report annually on the outcome of its work.
Using information from almost 5 800 listed companies, CDP has built up the world’s largest database of climate information. This
information is made available to support strategic business and investment decisions. Holmen has reported to the CDP Climate
Change Program since 2007.
Holmen was highly ranked in CDP’s study of companies’ climate work 2016 and was placed in the good leadership group.
Companies in this group represent best practice in regard to advanced environmental stewardship, with a good understanding of
and active efforts to mitigate climate-related risks and capitalise on climate-related opportunities.
CDP WATER PROGRAM. In 2016, CDP sent out a questionnaire to 1 250 companies around the world on the risks and opportunities associated with
water use. Holmen was one of the approximately 500 companies that responded to the questionnaire. The assessment showed that Holmen is judged to
handle water issues well.
CDP FOREST PROGRAM. In 2016, CDP sent out a questionnaire to around 800 companies around the world on the risks and opportunities of silviculture
from a climate perspective. Holmen is among the one quarter of companies that completed the questionnaire. Holmen was highly ranked in the survey and was
placed in the good leadership group. Companies in this group show that they have introduced measures that ensure sustainable use of the forest’s resources.

HOLMEN ANNUAL REPORT 2016 / ENVIRONMENTEnvironmental permits
for the Group’s
production facilities

Iggesund Mill, Environmental Code1)
Workington Mill, IPCC2)
Hallsta Paper Mill,
Environmental Protection Act
Braviken Paper Mill, Environmental Code
Iggesund Sawmill, Environmental Code
Braviken Sawmill, Environmental Code

2013
2002

2000
2002
2014
2010

1) In addition, operations subject to notification requirements
take place at the production unit in Strömsbruk. Port activ-
ity (at Skärnäs Terminal) alongside Iggesund Mill has held
an environmental permit under the Environmental Code
since 1999. An application for a new environmental per-
mit was submitted for Iggesund Mill in 2016 (production
increase). Operations at Skärnäs Terminal are included in
this application.

2) IED permit from 2017.

Management system certifications

PRODUCTION FACILITIES1)

Iggesund Mill2)
Workington Mill
Hallsta Paper Mill
Braviken Paper Mill
Iggesund Sawmill3)
Braviken Sawmill3)

ENVIRONMENT
ISO 14001:2004
2001
2003
2001
1999
1999
2011

ENERGY
ISO 50001:2011
2005
2015
2005
2006
2006
2011

QUALITY
ISO 9001:2008
1990
1990
1993
1996
1997
2011

HEALTH AND SAFETY
OHSAS 18001:2007
2016
2005
2012
2015
2017
2017

The years given in the table are the years when the certification was first issued. The certifications mean that procedures are
in place for planning, implementation and follow-up, as well as measures to enable continuous improvement in the work on
the various management systems. Certifications can be viewed at holmen.com/certificates.
1) Holmen’s forest operationsare certified in accordance with environmental management system ISO 14001:2004.

Furthermore, forest operations are also certified under sustainable forestry criteria and have chain-of-custody certification,
which means an assurance that non-certified wood also comes from controlled sources. All the facilities at which wood raw
material is used have chain-of-custody certification.

2) The certifications include the production unit in Strömsbruk and operations at Skärnäs Terminal.
3) From 2011 the certification is a joint certification for the two sawmills.

Permits
At the end of 2016 Holmen was running
production operations at six facilities that
require environmental permits. The permits
specify conditions regarding permitted
production volumes and permitted emissions
to air and water. Five of the facilities are
located in Sweden and one is in Workington
in the UK. The facilities have a total turnover
amounting to almost 75 per cent of the
Group’s net sales in 2016.

The EU’s Industrial Emissions Directive

(IED) entered into force in 2013. The
legislation entails more stringent requirements
for using the best available technology. Holmen
has investigated the extent to which operations
at the pulp, paper and paperboard mills need
to be adapted in order to meet the tightened
emission requirements by October 2018. The
environmental status of the mills is good and
all the mills except the one in Workington
already largely meet the new requirements.
The mill in Workington is investigating the
process-related measures that in combination
with a biological treatment plant will see the
process water emissions requirements met.
The environmental authorities have granted
the mill an exemption whereby the mill is to
have invested in measures to ensure that the
emission requirements are met by 2021.

An application for a new environmental
permit for a production increase at Iggesund
Mill was submitted in 2016. Operations
at Skärnäs Terminal are included in this
application.

Braviken Sawmill intends to invest in a

facility for wood preservation treatment. An
environmental permit application for this was
submitted in 2016.
Holmen is monitoring the energy
agreement that involves Sweden complying
with the European Court of Justice’s rulings
regarding operations involving watercourses.
All power plants must have environmental
conditions in place that involve assessing
the balance between production and
environmental issues. The process will be

time-consuming and there are uncertainties
regarding investments and production
restrictions mainly for smaller power plants.
Holmen’s power plants are generally of a
good standard and are well placed for future
environmental impact assessment.
Holmen has all the permits to build
approximately 500 GWh of wind power
production in Västernorrland. An application
to build an additional approximately 500 GWh
of wind power in Västerbotten has been
submitted to the environmental authorities.
Due to the current market situation for this
type of electricity production, with low prices
for electricity and electricity certificates, the
economic preconditions for investing in wind
power are challenging.

Emission allowances and
electricity certificates
Within the EU Emissions Trading Scheme,
Holmen has been awarded emission rights up
to 2020. As a result of extensive investments
in bio-based energy production at several facil-
ities, Holmen has been able to significantly
reduce its need for fossil fuels in recent years.
Consequently surplus allocated emission rights
have been able to be sold.

The Group has produced renewable elec-
tricity for several years and electricity certifi-
cate trading has generated revenues. In the UK,
electricity distributors have to meet a certain
quota for renewable electricity, and producers
of renewable electrical energy receive green
Renewables Obligation Certificates (ROCs) in
proportion to the amount of electricity gener-
ated. The biofuel boiler at the mill in Working-
ton received such certificates in 2016, which
were sold.

Exceedances and complaints
The environmental manager within each
operation handles incoming complaints and
any incidents that occur. During the year there
were a number of cases of exceeded threshold
values, as well as complaints and incidents in
the industrial and forestry operations. Close

dialogue with the mills’ local residents is
important in order to identify any views on
operations at an early stage.

44 industrial incidents were reported by
the mills to the supervisory authorities during
the year. The nonconformities were not of a
significant nature in terms of environmental
impact or impact on profits. Corrective
measures were taken to deal with these cases,
in line with the environmental management
system of the operations concerned.
During the autumn one incident took
place at Holmen’s hydro power station in
Norrköping. The water flow changed rapidly
due to a technical fault. The fault was rectified
within a few minutes. Despite this, the change
in the water flow had consequences in that the
lower limit of the water level at Grytsdammen
was exceeded and a large number of pike-
perch died downstream of the power plant.
Measures have been put in place to prevent a
recurrence. The incident is being investigated
by the County Administrative Board.

Discontinued operations
In consultation with the environmental author-
ities, studies are being conducted at contami-
nated discontinued industrial sites where
Holmen has operated in the past. Studies relat-
ing to the sawmills at Stocka and Lännaholm,
the sulphite mills at Strömsbruk, Domsjö and
Loddby, the former ground wood mill in Bureå
and a landfill site in Kvillsfors continued in
2016. In 2016, remediation of an underground
waste oil site in Hudiksvall and remediation
of land at the former industrial site of Håsta-
holmen Sawmill were completed. Remediation
of land and buildings at the former industrial
site of a surface treatment plant in Iggesund
will be completed in the first quarter of 2017.

HOLMEN ANNUAL REPORT 2016 / ENVIRONMENT

Values and
objectives
drive devel
opment

Expectations of employees are
made clear by the Code of Conduct,
shared values and the manage-
ment by objectives process. In total
they contribute towards a culture in
which the impetus is the desire for
development.

The Code of Conduct. The Code provides
guidance on day-to-day operations and clari-
fies what expectations are made of people who
work at Holmen.

Values. Holmen’s core values of couraged, com-
mitment and responsibility combined with the
Code of Conduct creates a framework for how
employees should act and how leadership should
be structured. Holmen’s values aim to create a
culture driven by a desire for development.

Management by objectives. Expectations
concerning what the organisation and its
employees should achieve are clarified through
a process of management by objectives,
under which success factors are identified and
progress is monitored via key performance
indicators. Use of a simple tool for continuous
follow-up ensures that the organisation is
applying appropriate priorities to attain the
objectives established.

Productivity. As the number of employees
in the Group continues to fall, productivity,
defined as production per employee per year,
has increased over several years. This is due to
organisational changes, investments and more
efficient working practices and processes.

A three-year programme is in progress at
Iggesund Mill to improve the mill’s competitive-
ness. In 2016, the focus was on reviewing skills
and streamlining jobs. A new organisation was
set up for forest operations, combining high for-
est expertise with a stronger focus on business
and the market. The mill in Madrid was sold
to International Paper during the year. At that
point the mill employed about 260 people.

Talent management and skills
development. To maintain competitiveness
over time, attracting the right employees
is of the utmost importance. The Group’s
sustainability profile, combined with our

AVERAGE NO. OF EMPLOYEES
business area, %

0.3

Paperboard
Paper
Wood products
Forest
Renewable energy
Group-wide

Total: 2 989
1 406
861
225
364
10
122

products geared towards the future and a
developing and innovative culture/workplace
environment, gives Holmen’s brand a strong
position in the job market.

To ensure the development of good leader-

ship, Holmen runs internal leadership pro-
grammes for managers at all levels. There are
also development programmes for specialists
who do not have employees directly under
them, but who drive change management.
Holmen also takes a structured approach
to identifying and developing talents in the
organisation.

Equality. Holmen aims to create a working
environment which is based on the view that
all human people are of equal value. All
Holmen’s employees must have the same
rights, obligations and opportunities irrespec-
tive of their sex, transgender identity or expres-
sion, ethnicity, religion or other belief, disabili-
ty, sexual orientation, age, nationality, political
opinion, union membership, social background,
health status or family responsibilities. Holmen
draws up action plans and pay surveys in line
with the Equality Act and uses performance
reviews and employee surveys as tools.

The forest industry is a male-dominated
sector. Holmen is working to achieve a better
balance. Over 19 per cent of employees are
women and the proportion of female managers
is about the same.

Employee surveys. Employee surveys are
conducted to follow up working conditions
and identify improvement measures. During
the year it was decided that the surveys are to
be carried out locally instead of centrally to
produce results closer to operations, with a
greater opportunity to put more appropriate
measures in place.

Union cooperation. A relationship with
the union organisations that is based on
trust is important and helps drive Holmen
forward. Collaboration with trade unions
internationally takes place in the Holmen
European Works Council and in consultation
groups at various levels in the company. The
company’s employees are represented on the
Group Board by three members and three
deputy members.

Almost a fifth of employees are
women and the proportion of female
managers is about the same.

HOLMEN ANNUAL REPORT 2016 / EMPLOYEES

Linda Magnusson,
business developer, Forest.

Jonas Jonsson, Ann Mattsson and
Sandra Kolar, Hallsta Paper Mill.

Bo Larsson,
Iggesund Mill.

Daniel Norenius,
head of hydro power.

Safety and sick leave
The aim of Holmen’s work on safety is to make the
workplace free of injuries for employees. A safe work
environment is always high on the agenda and the
issue is monitored constantly at management level.
All units are certified under OHSAS 18001, which
means that the Group now runs joint, systematic
health and safety work. In 2016, health and safety
work focused on safety behaviours, shared rules and
exchanging experiences. The number of industrial
accidents per 1 million hours worked was the
same in 2016 as it was in 2015, at 8.8 accidents.
The cause of these were predominantly slips and

trips. The target is zero accidents and several units
have also been at this level for more than a year.
The interim target is a maximum of 4.0 industrial
accidents by the end of 2017 (base year 2012:
11.6).
Sickness absence was 4.2 per cent in 2016, which
is on a par with previous years. Long-term sick leave
(more than 60 days) stands at 2.0 per cent. The good
health index is a measure of the share of employees
with no sick leave during the year. The figure for 2016
was 48 per cent, which is on a par with recent years.

INDUSTRIAL ACCIDENTS
with more than 8 hours of absence,
per million hours worked

HOLMEN ANNUAL REPORT 2016 / EMPLOYEES

35 million seedlings are produced
every year at Holmen’s two nurseries.

A sustainable
future

With a history stretching back
400 years, Holmen has a long
tradition of managing and processing
natural resources. The foundation
of Holmen’s operations has always
been the same – making the most of
nature’s assets and processing them
to attain the greatest possible value.
The products that are produced have
changed over time, but the desire to
develop and offer solutions to current
challenges lives on.

Carbon-positive operations
Holmen has long operated sustainable forest-
ry, whereby carbon dioxide is captured in the
forest and its products. For more than a cen-
tury, the Group’s forests have been managed
with a sustainable perspective in which growth
is higher than the harvest and where far-reach-
ing nature considerations protect biodiversity.
Capturing approximately two million tonnes
of carbon dioxide a year, Holmen’s operations
are climate-positive. At the same time, society
can be supplied with paperboard, paper, wood

products and other products made from for-
est raw material that are capable of replacing
fossil-based products. The assessment is that
both forest growth and extraction of wood can
increase by 25 per cent over a 40-year horizon,
which means that an increasing amount of car-
bon dioxide can be captured in the forests and
products of the future.

R&D in three areas
To maximise the value and benefit of the forest,
intensive work is also under way to develop
today’s products while identifying future
opportunities for renewable wood fibre.
Holmen’s work on research and development
is mainly focused on three areas – increased
forest growth, more efficient production and
developing existing and new products in the
product areas of paperboard, paper and wood
products. This work is largely done jointly with
other players, often within the same industry
sector, and through collaborations with univer-
sities, colleges and research institutes. The
Group is also working on identifying and
developing new business opportunities, based
on Holmen’s renewable wood raw material
and the by-products that arise in production.
Research is being conducted into the compo-
nents that make up wood: cellulose, hemicellu-
lose and the binding agent lignin, which can be
used, for example, to produce light, strong and
sustainable products for structural solutions in
the construction industry. An important start-
ing point for the work is that the new business
opportunities must be linked to Holmen’s
existing industrial sites.

Ecocycles produce a circular
economy
The modern forest industry has a central role
to play in the future bioeconomy, in which the
resources of the forest must be used more effi-
ciently and to an ever-increasing extent. The
growing forest and the products it produces

are an important cornerstone for the transition
to an economy in which bio-based raw materi-
als and products replace fossil-based ones.
The circular economy is a concept that
shares some DNA with a bio-economy. Being
part of a circular economy means highlighting
business opportunities from circular ecocycles,
in which the added value of the products
is preserved as far as possible and waste is
minimised. End-of-life paperboard and paper
products top up the recovered paper ecocycle
with much-needed fresh fibre, for example. The
wood fibre can be re-used up to seven times
before it is finally used as biofuel. But without
fresh fibre, there is no future recovered fibre.
Increased resource-efficiency and a higher
proportion of renewable material will be vital
to realising a circular economy.

Very nearly 100 per cent of the by-prod-
ucts and waste that arise from Holmen’s opera-
tions is collected and used for various purpos-
es. The whole tree is utilised and the residual
products are used either in Holmen’s own
manufacturing or in another industry. With a
renewable raw material plus products that
allow material recovery or, once expended,
are used in fossil-free energy production, and
recovery of chemicals and energy in the pro-
duction plants, Holmen is already part of a
bio-based circular economy.

Constantly improving
Holmen’s operations help to combat climate
change and create condition for sustainable
development in many ways – partly through
carbon dioxide being captured and stored
in the forests and the products, and partly
through resource-efficient production runned
predominantly on renewable energy. Thanks to
investments, including those in more efficient
production processes and developing the
products of today and of tomorrow with forest
raw materials as a base, the positive climate
effects will be reinforced in the future.

HOLMEN ANNUAL REPORT 2016 / A SUSTAINABLE FUTURE

Work in line with
global guidelines
In autumn 2015, the member states of the UN adopted 17 global goals
for achieving social, economic and sustainable development around
the world. With a resource-efficient business model that contributes to-
wards positive climate effects, Holmen is engaged and works actively
within the remit of several of the global sustainable development goals.

The many values of the forest
The forest’s ecosystems are multi-functional and contribute towards several dif-
ferent social functions. Sustainably managed forests are not only important from
a climate-related and economic perspective, they are also important for people’s
wellbeing and a place for recreation, hunting and fishing. Holmen gives particular
consideration to forests that are valuable in terms of aesthetics and experiences,
and that many people visit for outdoor pursuits, relaxation and exercise.
The fundamental idea behind ecosystem services is making the value of nature
clear to people. The forest provides several such services. The production of
fibre raw material is one example that already has a market value. The forest’s
capacity to capture carbon dioxide, improve biodiversity and offer social val-
ue are other examples. Various processes are under way in Sweden and inter-
nationally to survey, develop and value ecosystem services. Holmen monitors
the area and in Holmen’s own forest holdings ecosystem services are identified
that could lead to new business opportunities.

Sustainability
every step of
the way
Sustainability is about more than
the climate and the environment.
Sustainable development for
employees, business partners and
owners requires that companies show
good profitability and have a strong
financial position. As an employer,
Holmen must work to ensure
good leadership and safe working
conditions, while also motivating
and developing its personnel. It is
also important for operations to
be characterised by transparency
and comply with rules on business
ethics. The Group’s CEO has ultimate
responsibility for driving progress
towards sustainable development. The
Group’s Director of Environmental and
Sustainable Affairs has a coordinating
role in this area and reports to Group
management.
Continuous improvement and regu-
lar follow-up of the business lay the
foundation for Holmen’s development
in economic, social and environmen-
tal terms.

The
substitution
effect
Forest that is growing absorbs green-
house gases and captures them as
carbon. This means that growing for-
ests reduce the amount of carbon di-
oxide in the atmosphere, a capacity
on which the forests’ climate benefit
rests. When wood is used as a substi-
tute for materials and types of energy
that have a negative climate impact,
the impact is doubled. Emissions of
greenhouse gases from manufactur-
ing and using climate-negative mate-
rials are avoided, while increased use
of products from the forest captures
more carbon dioxide.
A managed forest is planted, cleaned,
thinned and felled at regular intervals.
A stock of wood is built up over about
70 years before the forest is ready to
be harvested and a new growth cycle
can begin. In unmanaged forest that
develops freely, the stock of wood is
built up once only and then changes
insignificantly over time. The trees
provide a benefit as a carbon sink but
in unmanaged forest the substitution
effect is lost.

Holmen has been part of the UN
Global Compact and its corre-
sponding Nordic network since
2007. The Group reports its
work on sustainability to the or-
ganisation each year in line with
the ten principles of the Global
Compact, and sets out the pro-
gress made. The initiative seeks
to take active responsibility for
ten recognised principles in the
areas of the environment, hu-
man rights, working conditions
and anti-corruption. Informa-
tion on how the Group complies
with and works in line with the principles of the Global Compact is avail-
able at holmen.com. Work on the ten principles also helps to attain the
global sustainable development goals above.

Recovered
fibre grows
on trees
For technical reasons, paper and pa-
perboard cannot be recycled again
and again. After 5–7 times the fibres
are exhausted. This means that the
ecocycle needs a constant injection
of fresh fibre from the forest. Without
fresh fibre, there is no recovered fibre.

HOLMEN ANNUAL REPORT 2016 / A SUSTAINABLE FUTURE

Corporate
governance
report

Holmen AB is a Swedish public
limited company, listed on the
Stockholm Stock Exchange
(Nasdaq Stockholm) since 1936.
The preparation of a corporate
governance report is a requirement
under the Swedish Annual Accounts
Act. This corporate governance
report complies with the rules and
instructions stipulated in the Swedish
Code of Corporate Governance.

Shareholders
Holmen had 28 159 shareholders at year-
end 2016. Private individuals with Swedish
citizenship accounted for the largest category
of owners with 26 032 shareholders.

The largest owner at year-end, with 61.6
per cent of votes and 32.9 per cent of capital,
was L E Lundbergföretagen AB, which means
that a Group relationship exists between L E
Lundbergföretagen AB (corporate ID number
556056-8817), whose registered office is in
Stockholm, and Holmen. The Kempe Founda-
tions constitute the second-largest owner and
their holdings of Holmen shares amounted to
17.0 per cent of votes and 7.0 per cent of capi-
tal at the same date. No other individual share-
holder controlled as much as 10 per cent of the
votes. Employees have no holdings of Holmen
shares via a pension fund or similar system.

There is no restriction on how many votes each
shareholder may cast at the AGM.

At the 2016 AGM, the Board’s author-
isation to purchase up to 10 per cent of the
company’s shares was renewed. No buy-backs
took place during the period. As previously, the
company holds 0.9 per cent of all shares.

See pages 40–41 for further information

on the shares and ownership structure.

General meeting of shareholders
The notice convening the Annual General
Meeting (AGM) is sent no earlier than six
and no later than four weeks before the meet-
ing. The notice contains: a) information about
registering intention to attend and entitle-
ment to participate in and vote at the meet-
ing; b) a numbered agenda of the items to be
addressed; c) information on the proposed div-
idend and the main content of other proposals.
Shareholders or proxies are entitled to vote in
respect of the full number of shares owned or
represented. Registration to attend the AGM
may be made by letter, telephone, email and at
holmen.com. Notices convening an Extraor-
dinary General Meeting (EGM) called to deal
with changes to the company’s articles of asso-
ciation shall be sent no earlier than six and no
later than four weeks before the meeting.

Proposals for submission to the AGM

should be addressed to the Board and
submitted in good time before the notice is
distributed. Information about the rights of
shareholders to have matters discussed at the
meeting is provided at holmen.com.

It was announced on 18 April 2016 that
the 2017 AGM would take place in Stockholm
on 27 March 2017.

Nomination committee
The AGM resolved to establish a nomination
committee to consist of the chairman of the
Board and one representative from each of the
three shareholders in the company that control
the most votes at 31 August each year. The
composition of the nomination committee for
the 2016 and 2017 AGMs is shown in the table
on page 34.

The nomination committee’s mandate

is to submit proposals for the election of
Board members and the Board chairman, for
the Board fee and auditing fees and, where

applicable, for the election of auditors. The
committee’s proposals are presented in the
notice convening the AGM.

For the 2017 AGM the nomination com-
mittee proposes that the Board consist of nine
members elected by the AGM. The nomination
committee proposes the re-election of the cur-
rent Board members: Fredrik Lundberg (who is
also proposed for re-election as chairman of the
Board), Carl Bennet, Carl Kempe, Lars G Josefs-
son, Lars Josefsson, Louise Lindh, Ulf Lundahl,
Henriette Zeuchner and Henrik Sjölund.

Composition of the Board
The members of the Board are elected each year
by the AGM for the period until the end of the
next AGM. According to the company’s articles
of association, the Board shall have 7–11
members, and they are to be elected at the AGM.
The company’s articles of association contain
no other rules regarding the appointment or
dismissal of Board members, or regarding
amendments to the articles, or restrictions on
how long members can serve on the Board.

The 2016 AGM re-elected Fredrik Lund-

berg, Carl Bennet, Lars G Josefsson, Carl
Kempe, Louise Lindh, Ulf Lundahl, Henriette
Zeuchner and Henrik Sjölund to the Board and
elected Lars Josefsson as a new Board member.
Fredrik Lundberg was re-elected chairman.
Göran Lundin had declined to stand for re-
election. At the statutory first meeting of the
new Board in 2016, Carl Kempe was elected
deputy chairman and Lars Ericson, the compa-
ny’s general counsel, was appointed secretary
of the Board.
Over and above the nine members elected
by the AGM, the local labour organisations
have a statutory right to appoint three mem-
bers and three deputy members.
Of the nine Board members elected by the
AGM, eight are deemed independent of the
company as defined by the Code. The CEO is
the only Board member with an operational
position in the company. Further information
about the members of the Board is provided on
pages 74–75.

The Board’s activities
The activities of the Board follow a plan that,
among other things, aims to ensure that the
Board obtains all requisite information. Each

AGM 2016
The 2016 AGM and the material presented was in Swedish. The
notice convening the meeting, the agenda, the CEO’s speech and
the minutes are available at holmen.com.
The meeting was attended by all AGM-elected Board members,
Group management and the company’s auditors. During the AGM,
the shareholders had the opportunity to ask and obtain answers to
questions. The AGM adopted the income statement and balance sheet,
decided on the appropriation of profits and granted the departing
Board discharge from liability. The minutes of the meeting were
checked by Ramsay Brufer of Alecta and Emma Otterhem of The
Forth Swedish National Pension Fund (AP4).

It was not possible to follow or participate in the meeting from
other locations using communication technology. Similarly, no such
possibility is planned for the 2017 meeting.

Board meetings
The Board held ten meetings in 2016, four of which were in
connection with the company’s publication of its quarterly reports.
A two-day meeting was dedicated to strategic operational planning.
A meeting was held in connection with a forest excursion to the
company’s land near Örnsköldsvik and a study visit to Holmen’s
nursery at Gideå.
One meeting dealt with the Group’s budget for 2017. Two
meetings were held in connection with the company’s AGM.
The Board also paid special attention to strategic, financial and
accounting issues, monitoring of business operations, the sale of the
business in Spain and major investment matters. On two occasions
the company’s auditors reported directly to the Board, providing a
presentation about their audit of the accounts and internal control.

HOLMEN ANNUAL REPORT 2016 / CORPORATE GOVERNANCE REPORT

SHAREHOLDERS

NOMINATION COMMITTEE

GENERAL MEETING OF SHAREHOLDERS

REMUNERATION COMMITTEE

BOARD OF DIRECTORS

CEO

GROUP MANAGEMENT

AUDITORS

FIVE GROUP STAFFS

FIVE BUSINESS AREAS

year the Board decides on written working
procedures and issues written instructions. The
latter relate to the division of responsibilities
between the Board and the CEO and the infor-
mation that the Board is to receive continual-
ly regarding financial developments and other
key events. Employees of the company partici-
pate in Board meetings to submit reports.

An assessment is conducted each year to
develop the activities of the Board. Each Board
member responded to a questionnaire with
relevant questions relating to the work of the
Board and the members were also able to make
proposals on how the work of the Board could
be further developed. Their responses were
presented and discussed at a Board meeting.
The chairman of the Board prepared a report
on the results of the 2016 assessment for the
nomination committee, which will form the
basis for the planning of the Board’s activities
for the coming year.

Remuneration
The Board has appointed a remuneration
committee consisting of Fredrik Lundberg and
Carl Bennet. During the year, the committee
prepared matters pertaining to the remunera-
tion and other employment conditions of the
CEO, as well as a share savings programme.

Remuneration and other employment
conditions for senior management who report
directly to the CEO are decided by the latter in

accordance with a pay policy established by
the remuneration committee. The remunera-
tion committee has evaluated the application
of both this policy and the guidelines on the
remuneration of senior management adopted
by the AGM.

The Group applies the principle that each
manager’s manager must approve decisions on
remuneration in consultation with the relevant
personnel manager.

At the 2016 AGM the Board set out its

proposals regarding guidelines for remunera-
tion of the CEO and other senior management,
i.e. heads of business areas and heads of Group
staffs who report directly to the CEO. The
AGM adopted the guidelines in the proposal.
The Board proposes unchanged guidelines to
the 2017 AGM. These guidelines and informa-
tion about remuneration are presented in Note
4 on page 54.

The 2016 AGM approved the Board fee
and payment of the auditors’ fee as invoiced.

The 2016 AGM approved a targeted share

savings programme for Group management
employees, heads of the business areas and
a number of key individuals in the Holmen
Group. Further information about the share
savings programme is provided in Note 4.

Group management
The Board has delegated operational responsi-
bility for management of the company and the

Group to the CEO. The Board annually decides
on instructions covering the distribution of
tasks between the Board and the CEO.
Holmen’s Group management comprises
the company’s CEO, the heads of four of the
five business areas and the heads of the five
Group staffs. Information about the CEO
and other members of Group management
is provided on page 76.
Group management met on 10 occasions
in 2016. Its meetings dealt with matters such
as earnings trends and reports before and after
Board meetings, business plans, budgeting,
investments, internal control and reviews of
market conditions, general development of the
economy and other external factors affecting
the business. Projects relating to business areas
and Group staffs were also discussed and
decided on.

Audit
KPMG, which has been Holmen’s auditor since
1995, was re-elected by the 2016 AGM as
auditor for a period of one year. Authorised
accountant Joakim Thilsted was appointed as
the principal auditor. KPMG audits Holmen
AB and almost all of its subsidiaries.

The examination of internal procedures

and control systems begins in the second quar-
ter and continues thereafter until year-end. The
interim report for January–September is sub-
ject to review by the auditors. The examination

Board members as of the 2016 AGM

BOARD MEMBERS

POSITION

ELECTED

ATTENDENCE

FEE (SEK)

COMPANY

MAJOR SHAREHOLDERS

INDEPENDENT OF THE:

Fredrik Lundberg*
Carl Kempe
Carl Bennet*
Lars G Josefsson
Lars Josefsson
Louise Lindh
Ulf Lundahl
Henriette Zeuchner
Henrik Sjölund
Total
* Representatives of the remuneration committee

Chairman
Deputy chairman
Member
Member
Member
Member
Member
Member
Member, President and CEO

EMPLOYEE REPRESENTATIVES

1988
1983
2009
2011
2016
2010
2004
2015
2014

10/10
10/10
10/10
10/10
6/7
10/10
10/10
10/10
10/10

SEK 680 000
SEK 340 000
SEK 340 000
SEK 340 000
SEK 340 000
SEK 340 000
SEK 340 000
SEK 340 000
-

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
8/9

No
No
No
Yes
Yes
No
Yes
Yes
Yes
5/9

Steewe Björklundh, member, elected 1998
Per-Arne Berg, deputy member, elected 2015

Kenneth Johansson, member, elected 2004
Daniel Hägglund, deputy member, elected 2014

Tommy Åsenbrygg, member, elected 2009
Martin Nyman, deputy member, elected 2010

HOLMEN ANNUAL REPORT 2016 / CORPORATE GOVERNANCE REPORT

STRATEGY AND TARGETS

BUSINESS PLAN, BUDGET AND MANAGEMENT BY OBJECTIVES

BUSINESS PROCESSES

EARNINGS, REPORTING AND MONITORING

CODE OF CONDUCT

POLICIES

GUIDELINES

AUTHORITY

VALUES

CENTRAL & LOCAL
INSTRUCTIONS

AUTHORISATION
RULES

Internal management processes

and audit of the final annual accounts and the
annual report take place in January–February.
Holmen allows the Board to perform
duties that would otherwise be performed by
an audit committee. The Board’s reporting
instructions include requirements that the
members of the Board shall receive a report
each year from the auditors confirming that
the company’s organisation is structured to
enable satisfactory supervision of accounting,
management of funds and other aspects of the
company’s financial circumstances. In 2016 the
auditors reported to the entire Board at two
meetings. Over and above this, the auditors
reported to the chairman of the Board and the
CEO on one occasion and to the CEO/deputy
CEO during their work.

In addition to the audit assignment,

Holmen has consulted KPMG on matters
pertaining to taxation, accounting and for
various investigations. The remuneration
paid to KPMG for 2016 is stated in Note 5
on page 55. KPMG is required to assess its
independence before making decisions on
whether to provide Holmen with independent
advice alongside its audit assignment.

As a result of a change in legislation which
results in an extension of duties relating to the
audit, the Board has decided to establish an
audit committee for future financial years.

Internal management processes
As part of the Group’s annual strategy review,
each business area draws up a business plan
and sets objectives for its operations, which
it presents to the Board. The business plan
forms the basis of the expectations made of
the units in each respective business area. On
the basis of the expectations, each unit sets
objectives and identifies success factors for
achieving them. Key performance indicators
(KPIs) are linked to the success factors in
order to measure and demonstrate changes in
performance. The business plan also provides
the basis for the budget, in which decisions
are taken on the distribution of resources and
targets for the coming year are set.

The business areas guide the operating
businesses towards these targets using process-
es for purchasing, production and sales, and
supported by HR, financial management,
R&D, IT and environmental processes. Opera-
tions are followed up through regular report-
ing of financial performance and KPIs, along
with additional qualitative analysis. The scope
for this work is set by policies, guidelines and
instructions, together with authority and
authorisation rules.

Management of sustainability and social
responsibility. Holmen’s code of conduct

provides guidance on day-to-day operations
and clarifies what expectations are made of
employees. The business ethics policy and its
accompanying guidelines address matters such
as anti-corruption measures and competition
issues. Employees in departments at risk of
encountering unauthorised behaviour receive
special training on these issues. The code of
conduct for suppliers covers the areas of anti-
corruption measures, human rights, health and
safety and the environment. Holmen is subject
to the UK Modern Slavery Act and a report
relating to this is available at holmen.com.

Whistleblower function. A whistleblower
function is available so that employees and
other stakeholders can highlight any deficiencies
in Holmen’s financial reporting or other
possible areas of concern at the company.

Internal control of financial
reporting
The Board’s responsibility for internal control
and financial reporting is regulated by the
Swedish Companies Act and the Swedish
Corporate Governance Code. Under this code,
the Board is also responsible for ensuring that
the company is managed in a sustainable and
responsible manner. Day-to-day responsibility
for all these matters is delegated to the CEO.

Purpose and structure. The purpose of inter-
nal control is to ensure that Holmen lives up
to its objectives for financial reporting (see box
on page 35) and to minimise risk of the Group
being subject to fraud. Group Finance coordi-
nates and monitors the internal control process
concerning financial reporting in the Group.

This work adheres to guidelines issued by

the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in respect
of internal control over financial reporting.
The framework comprises five basic elements:
control environment, risk assessment, control
activities, information and communication, as
well as monitoring activities. The framework
has been modified to suit the estimated needs
of Holmen’s various operations.

Control environment. The control environ-
ment provides the basis for internal control
of financial reporting and is based in part on
the company’s internal management process-
es. The Board of Directors’ procedural rules
and the instruction for the CEO establish the
distribution of roles and responsibilities to

Composition of the nomination committee

NAME
Mats Guldbrand
Fredrik Lundberg
Alice Kempe
Hans Hedström

REPRESENTING
L E Lundbergföretagen*
Chairman of the Board
Kempe Foundations*
Carnegie funds*

BEFORE AGM:
2017
x (chairman)
x
x
x

2016
x (chairman)
x
x
x

INDEPENDENT OF THE:
COMPANY
Yes
Yes
Yes
Yes

LARGEST SHAREHOLDER (IN TERMS OF VOTES)
No
No
Yes
Yes

* At 31 August 2016, L E Lundbergföretagen controlled 61.6 per cent of the votes, the Kempe Foundations controlled 17.0 per cent and Carnegie funds (Sweden) controlled 1.7 per cent.

HOLMEN ANNUAL REPORT 2016 / CORPORATE GOVERNANCE REPORT

ensure effective control and management of
the business’ risks.

Policies, guidelines and instructions
contribute to making individuals aware of
their role in establishing good internal control.
These documents also ensure that financial
reporting complies with the laws and rules that
apply to companies listed on the Stockholm
Stock Exchange and the local rules in each
country where the company operates.

Risk assessment. Risk assessment activities
aim to identify and evaluate the risks that can
result in the Group’s financial reporting objec-
tives not being met. The results of these risk-
related activities are compiled and assessed
under the guidance of Group Finance.
Holmen’s greatest risks regarding financial
reporting are linked to the valuation of biologi-
cal assets and property, plant and equipment,
pension provisions, other provisions and to
financial transactions. The risk assessment also
involves identifying and assessing operational
risks. For further information, see the Risk
Management section on pages 36–39.

Control activities. To ensure that Holmen’s
financial reporting objectives are met, control
requirements are incorporated into the process-
es that are deemed relevant: sales, purchasing,
investments, personnel, financial statements,
payments and IT. Control activities aim to pre-
vent, identify and rectify errors and discrepan-

cies. Business-specific self-assessments that are
completed by all Group units set out what con-
trol requirements apply for each respective pro-
cess and whether or not they are met.

Information and communication. Holmen’s
financial information provision, both external
and internal, adheres to a communication poli-
cy established by Group management. The pro-
vision of financial information for Holmen’s
shareholders and other stakeholders must be
accurate, comprehensive, transparent and con-
sistent, and must take place on equal terms and
at the right time.

Follow-up and evaluation. Control activities
are assessed regularly to ensure that they are
effective and appropriate. The results of self-
assessments are followed up on a continual
basis and discrepancies are reported to the
steering group for internal control each quar-
ter. The accuracy of self-assessments is subject
to testing.

The reporting of internal control to Group
management takes place once a year. The com-
pany’s auditors report their observations from
the review of internal control to the Board dur-
ing the year.

Follow-up is an important tool to identify
possible deficiencies within the Group and to
address these through the development of new
control requirements.

Holmen’s financial
reporting
External financial reporting must:

• be accurate and complete, and
comply with applicable laws,
regulations and recommendations

• provide a true and fair description of

the company’s business

• support a reasoned and informed

valuation of the business.

Internal financial reporting must also
support correct business decisions at
all levels in the Group.

Statement on internal audit. The Board
of Directors does not believe that particular
circumstances in the business or other condi-
tions exist to justify an internal audit function.
The internal control managed by the Group,
together with the activities carried out by the
external auditors, is deemed to be sufficient.

Carl Bennet, Henrik Sjölund,
Fredrik Lundberg and Carl Kempe.

Lars Josefsson, new Board
member since 2016.

In May the Board visited Holmen’s
forests outside Örnsköldsvik.

HOLMEN ANNUAL REPORT 2016 / CORPORATE GOVERNANCE REPORT

Risk management

The business areas are responsible for business operations and manage business risks such as credit risks in relation to
the Group’s customers. They also take decisions regarding volumes and pricing with the aim of consistently generating
a good return on invested capital. Group Finance manages the Group’s funding and financial risks, based on a financial
policy that is established by the Board and is characterised by a low level of risk. The purpose is to minimise the Group’s
cost of capital through suitable financing as well as effective management and control of the Group’s financial risks.

Operational risks

Risk

Risk management

Comment

Demand and prices. Changes in demand
and prices affect opportunities to achieve
profitability targets.

Commodity prices. Wood, electricity and
chemicals are the most significant inputs for
the industry and price changes affect the
industry’s profitability.

Facilities. Production equipment can be
seriously damaged for example in the event of
a fire, machine breakdown or power outage.
This can lead to supply problems, unexpected
costs and reduced customer confidence.

Forest. Forest fires, grazing by wild animals
and insect pests are risks in growing forests.

Changes in prices and deliveries largely depend on the develop-
ment of the European market. This in turn is influenced by several
factors, such as demand, production among European producers
and changes in imports into Europe, as well as the opportuni-
ties for exporting profitably from Europe. Holmen has limited
opportunities for making rapid significant changes to its range of
products, but the company adapts its product focus, steering it
towards the products and markets deemed to have the best long-
term potential. Holmen aims to have a broad customer base and
an offering that spans several product areas. This aim, combined
with long-term customer relationships, reduces vulnerability to
changes in the market.

The size of the timber harvest from the company’s forests is
essentially the same as consumption at the company’s saw mills,
while pulpwood from own forests corresponds to approximately
40 per cent of industry consumption. The industry uses pulpwood
to produce pulp, which is then turned into paperboard or paper.
The Group is largely in balance in terms of pulp as a result of
the integrated production process. The paperboard business
generates almost all the electricity required at its own mills, while
electricity for paper manufacturing is supplied from external pur-
chases. The Group also sells electricity from its hydro power and
wind power assets to the electricity grid. In net terms, the Group’s
own electricity generation corresponds to around 50 per cent
of its electricity consumption. The price risk in this consumption
is managed through physical fixed price contracts and financial
hedging. There is a significant need for thermal energy, but this is
produced locally at each mill from residual products. Chemicals
are a significant input, particularly in paperboard production, but
the need is reduced by recycling used chemicals at the mill.

Damage prevention measures, regular maintenance and continual
upgrades can minimise the risk of damage to facilities. Training
of employees promotes participation, knowledge and awareness
about these risks and how they can be countered. Holmen insures
its facilities to their replacement value against property damage
and consequential loss. The excess varies from one facility to
another, but the maximum is SEK 30 million for any one claim.
The Group has liability insurance that also covers sudden and
unforeseen environmental damage affecting ‘third parties’.

The Group’s forest holdings are not insured. They are widely
dispersed over large parts of Sweden and the risk of extensive
damage being incurred simultaneously is deemed to be low.
Insect pests such as pine weevils are countered by waxing
seedlings.

The continual development of the product
offering is important in meeting changes
in demand. In 2016, Holmen successfully
increased sales of its new Holmen UNIQ prod-
uct from Braviken Paper Mill. The decision
was also taken in 2016 to invest in a treat-
ment plant at Braviken Sawmill. This facility
provides the opportunity to offer treated wood
products to the Swedish construction market.

Raw material prices have been stable in
recent years. The price of net electricity
consumption is 80–90 per cent hedged for
2017–2020 and 60 per cent hedged for
2021.

No event causing significant damage occurred
in 2016. The pulp mill in Hallsta was rebuilt
following the major fire that occurred at the
end of 2015. The loss of revenue during
the shutdown and reconstruction costs are
covered by insurance, with the exception of
SEK 30 million excess.

No event causing significant damage occurred
in Holmen’s forests during 2016.

HOLMEN ANNUAL REPORT 2016 / RISK MANAGEMENT

Customer credits. The risk of the
Group’s customers being unable to fulfil their
payment obligations gives rise to credit risk.

The risk that the Group’s customers will not fulfil their payment
obligations is limited by means of creditworthiness checks,
internal credit limits per customer and, in some cases, by insuring
trade receivables against credit losses. Credit limits are continual-
ly monitored. Exposure to individual customers is limited.

Health and safety. Incidents and accidents
at the workplace pose a risk to human life
and health. This could lead to production
disruptions and increased costs.

Environment. Production disruptions can
cause breaches of emissions conditions set
for the business by environmental authorities.
This could have an environmental impact.

Personnel. Holmen needs to attract and
retain skilled and motivated employees so it
can conduct long-term business operations
with good profitability.

Business ethics. Both nationally and
internationally, customers and partners
place requirements on Holmen as a stable
and reliable supplier that has good business
practices and clear sustainability principles.
Deviations from principles and policies could
have a negative impact on reputation and
business relationships.

Good health and safety is a priority at all levels of management
in the Group. The health and safety policy was revised in 2016.
Certified management systems, Group-wide targets relating to
work accidents, continual training of personnel to increase risk
awareness, procedures for incident and accident reporting, and
risk assessment of work by contractors are examples of activities
to maintain a high level of safety in the workplace.

Environmental measures are organised and conducted in accord-
ance with an environmental and energy policy. In the event of
process disruptions, the environment takes precedence over pro-
duction. Risks are prevented and managed through regular own
checks, checks by authorities and environmental risk analyses,
as well as through the use of certified environmental and energy
management systems and environmental and chain-of-custody
certification.

Issues regarding management by objectives, responsibility,
participation, safety and skills development are prioritised in day-
to-day work and personnel training. Holmen’s Code of Conduct
and core values provide a basis for how employees should
operate and how leadership should be formed. The Group works
systematically to give employees opportunities to influence and
develop the business through ongoing feedback and dialogue
between managers and workers. Employee representatives have
seats on Holmen’s Board. A whistleblower function is in place
if employees and other stakeholders wish to report improper
conduct within Holmen.

Holmen’s business ethics policy and associated guidelines
provide clear guidance on how to maintain good business
practices when dealing with external contacts in various markets.
Training on business ethics is provided for management groups
and for employees deemed to encounter issues covered by the
business ethics policy, such as marketing and sales departments
and purchasers.

Suppliers. Deficiencies in the supply chain
for inputs in terms of security of supply and
quality can lead to production disruptions.
Suppliers that do not meet Holmen’s
sustainability requirements can also have
a negative effect on operations.

Holmen endeavours to have at least two approved suppliers per
area of use. In addition, Holmen’s Code of Conduct for suppliers
is included in all new contracts. It contains requirements on
sustainable development, including by respecting internationally
recognised principles on anti-corruption measures, human rights,
health and safety and the environment. In 2017, a third party will
be used for risk classification and supplier assessment work.

IT systems. Sales and purchasing require
efficient IT support in order to manage and
plan production. Disruptions in IT support and
unauthorised access to information can have
significant negative effects on the business.

Operating disruptions and unauthorised access are prevented by
security measures and preventive measures in the form of ap-
propriate physical protection, reliable server operation and secure
networks. Measures and procedures are in place to minimise the
risk of interruption and to manage situations if interruptions occur.

Political decisions. Laws and rules in coun-
tries in which the Group operates affect how
business activities can be conducted. Rules
on how forests may be managed could affect
future growth and harvests. Stimulus meas-
ures to use bio-based products can affect
demand for paperboard and wood products,
as well as wood from our forests. Rules on
the use of fresh fibre versus recovered fibre
also have an impact.

Holmen participates in national and international industry
organisations whose purpose is to handle the monitoring of social
trends, advocacy and political lobbying. Contact is established
with local representatives in areas where the Group has
operations. Political decisions are influenced by public opinion.
Contact with the general public offers opportunities to contribute
knowledge and facts. This takes place, for example, through
consultation and information meetings and through debate in the
media.

At 31 December 2016 the Group’s trade
receivables totalled SEK 2 174 million, of
which 46 per cent (42) were insured against
credit losses. During the year, credit losses on
trade receivables had a SEK -5 million (-27)
impact on earnings. Sales to the five largest
customers accounted for 14 per cent of the
Group’s total sales in 2016.

The figure in 2016 was 8.8 industrial
accidents per 1 million hours worked (2015:
8.8). The overwhelming cause of these were
slips and trips. See also page 29.

Holmen represents best practice in regard
to advanced environmental stewardship,
with active efforts to mitigate climate-related
risks and capitalise on climate-related
opportunities. This was a finding
of the annual survey conducted by CDP. See
also pages 24–27.

No cases regarding breaches of the Code of
Conduct were reported in 2016.

A preliminary investigation is currently
underway regarding hunting events arranged
by Holmen. In January 2017, the prosecutor
in the case communicated that he believes
there is reasonable suspicion of bribery
in connection with some of these hunting
events. Holmen’s understanding is that the
applicable rules have not been breached in
any of the cases in question.

No cases regarding breaches of the Code of
Conduct for suppliers were reported in 2016.
By the end of 2016, suppliers accounting for
around 75 per cent of the Group’s purchasing
volumes had signed up to the Code of
Conduct for suppliers.

Holmen is subject to the UK Modern Slavery
Act and a report relating to this is available at
holmen.com.

Operations have not been affected by IT inci-
dents in 2016.

The right to manage forests and conditions
for hydro power were focal issues in 2016.
During the year, the Swedish government
announced a reduction in the property tax on
hydro power plants.

HOLMEN ANNUAL REPORT 2016 / RISK MANAGEMENT

Financial risks

Risk

Risk management

Comment

Currency. The Group’s earnings are affected
by fluctuations in exchange rates. Transaction
exposure risk arises due to a significant
portion of the Group’s sales income being in
different currencies than costs. The translation
exposure risk arises from the translation of
foreign subsidiaries’ assets, liabilities and
earnings into Swedish kronor.

Transaction exposure. In order to reduce the impact on profit from
changes in exchange rates, net flows are hedged using forward foreign
exchange contracts. Net flows in euros, US dollars and sterling for the
coming four months are always hedged. These normally correspond
to trade receivables and outstanding orders. The Board can decide to
hedge flows for a longer period if this is deemed suitable in light of
the products’ profitability, competitiveness and the currency situation.
Currency exposure arising when investments are paid for in foreign
currency is distinguished from other transaction exposure. Normally,
90–100 per cent of the currency exposure associated with major
investments is hedged.

Translation exposure. Hedging exposure that arises when
subsidiaries’ assets and liabilities are translated into Swedish
kronor (known as equity hedging) is assessed on a case-by-case
basis and is arranged based on the value of net assets upon
consolidation. The hedges take the form of foreign currency loans
or forward foreign exchange contracts. Exposure that arises when
the earnings of foreign subsidiaries are translated into Swedish
kronor is not normally hedged.

For the next two years, 90 per cent of
expected flows in EUR/SEK are hedged at an
average of 9.50, for EUR/GBP 90 per cent of
the next year’s expected flows are hedged at
0.86 and for USD/SEK 70 per cent of the next
year’s flows are hedged at 8.93. For other
currencies, 4 months of flows are hedged.

Hedging of net assets in euros amounted to
EUR 13 million at year-end, which essentially
corresponds to the Group’s total assets in
euros. Hedging in pounds sterling amounted
to GBP 5 million at year-end. Net assets in
other currencies are very limited and are not
hedged.

SEKm
8 000

6 000

4 000

2 000

EUR/SEK

USD/SEK

GBP/SEK

EUR/GBP

CNH/SEK

Transaction exposure, 12 months

Hedged transaction exposure

Interest rates. Risks that arise when
changes in the market interest rate affect the
Group’s interest income and expense.

The fixed interest periods for the Group’s financial assets and
liabilities are normally short. The Board can decide to lengthen
these periods in order to limit the effect of a rise in interest rates.
Derivatives in the form of interest rate swaps are used to manage
fixed interest periods without altering underlying loans.

The Group’s average interest rate on
borrowing was 1.1 per cent in 2016 and 0.9
per cent at year-end. The table below shows
the Group’s fixed interest agreements by
currency.

SEK
EUR
GBP
Other items

YEAR 1 YEAR 1–3 YEAR 3–5 >YEAR 5

PENSION
PROVISIONS

-2 311
-20
-457
43
-2 744

-400
0
0
0
-400

-600
0
0
0
-600

0
0
0
0
0

-23
-8
-170
0
-201

TOTAL

-3 334
-28
-626
43
-3 945

Credit risk from financial counterparties.
The risk of financial transactions giving
rise to credit risks in relation to financial
counterparties.

A maximum credit risk and settlement risk are established
for each financial counterparty and are monitored continually.
Holmen’s financial counterparties are assessed using reputable
credit rating agencies or, where a counterparty has no credit
rating, the company’s own analyses. This calculation is based
on the maturity and historical volatility of different types of
derivatives. The maximum credit risk for other financial assets
is estimated to their nominal amount.

At 31 December 2016, the Group had
outstanding derivative contracts with a
nominal amount of about SEK 15 billion and
a net fair value of SEK -194 million. Holmen’s
total credit risk in derivative transactions
amounted to SEK 1 405 million at year-
end 2016. This calculation is based on the
maturity and historical volatility of different
types of derivative.

HOLMEN ANNUAL REPORT 2016 / RISK MANAGEMENT

Liquidity and refinancing. The risk of the
need for future funding and refinancing of
maturing loans being required at a high cost.

Holmen’s strategy specifies that its financial position should
be strong to ensure that it has the freedom to take long-term
business decisions. The goal is to not exceed a debt-to-equity
ratio of 0.5. Holmen’s financing mainly comprises bond loans
and the issue of commercial paper. Holmen reduces the risk of
future funding becoming difficult or expensive by using long-term
contractually agreed credit facilities. The Group plans its financing
by forecasting financing needs over the coming years based on
the Group’s multi-year business plan, budget and profit forecasts
that are regularly updated.

Net financial debt decreased in the year
by SEK 854 million and amounted at 31
December 2016 to SEK 3 945 million, SEK
201 million of which comprised pension
provisions. The Group has contracted a
credit facility of EUR 400 million (SEK 3 824
million) with a syndicate of nine banks which
expires in 2020 and 2021. The credit facility
remained unutilised at year-end. It is available
for use provided that the Group’s debt/equity
ratio is below 1.25. At year-end, the Group’s
debt/equity ratio was 0.19.

SEKm
4 000

3 000

2 000

1 000

2017

2018

2019

2020

2021

Financial liabilities

Credit facility

Sensitivity analysis

Operational risks
A one per cent change in deliveries and price
of the Group’s products or significant inputs is
deemed to affect Group operating profit as per
the table to the right.

Earnings are relatively evenly spread over the
year. The clearest seasonal effects are lower
personnel costs in the third quarter and the
fact that electricity production at the hydro
power plants is normally higher in the first and
fourth quarters.

Financial risks
The table to the right shows the extent of the
impact from a change in the Swedish krona,
the market interest rate and the price of
electricity on Group operating profit and equity,
taking account of hedging.

Impact on operating profit
Paperboard
Printing paper
Wood products
Wood from company forests
Hydro and wind power

Inputs
Wood*
Electricity*
Chemicals
Other variable costs
Delivery costs
Employees
Other fixed costs

Change
+/-1%
+/-1%
+/-1%
+/-1%
+/-1%

+/-1%
+/-1%
+/-1%
+/-1%
+/-1%
+/-1%
+/-1%

Prices
51
54
13
12
3

Deliveries
29
18
3
8
3

26
12
11
11
12
23
16

* Taking account of harvesting of company forests and generation of own electricity, net earnings sensitivity for the
Group is SEK 14 million for wood and SEK 10 million for electricity.

Earnings before tax
Exchange rates
SEK/EUR
SEK/USD
SEK/GBP
SEK/other currencies

Borrowing rate
Electricity price

Equity
Transaction hedging
Investment hedging
Equity hedging
Interest rate hedging
Electricity hedging

Change
+/-1%
+/-1%
+/-1%
+/-1%
+/-1%
+/-1 percentage point
+/-1%

Change
+/-1%
+/-1%
+/-1%
+/-1 percentage point
+/-1%

SEKm
18
4
4
8
3
21
1

SEKm
98
0
13
20
13

HOLMEN ANNUAL REPORT 2016 / RISK MANAGEMENT

Shareholder
information

In 2016, the price of Holmen’s class B
shares increased by SEK 65 or 25 per
cent. Earnings per share excluding
items affecting comparability was
SEK 19.7. It is proposed that the
dividend is to be raised to SEK 12
(10.5).

Stock exchange trading
Holmen was listed on the Stockholm Stock
Exchange in 1936, but was called Mo och
Domsjö AB at that time. Holmen’s two series
of shares are listed on Nasdaq Stockholm,
Large Cap. During the year, the price of
Holmen’s class B shares increased by SEK 65
or 25 per cent, to SEK 327. The Stockholm
Stock Exchange rose by 6 per cent over the
same period. Holmen’s market capitalisation
of SEK 27.4 billion (22.3) represents some
0.4 per cent of the total value of the Stockholm
Stock Exchange. The highest closing price for
Holmen’s class B shares was SEK 327, on 30
December. The lowest closing price was SEK
227, on 20 January. The daily average number
of class B shares traded was 192 000, which
corresponds to a value of SEK 53 million. The
daily average number of class A shares traded
was 500. Nearly 70 per cent of trading took
place on Nasdaq Stockholm. The Holmen
shares have also been traded on other trading
platforms, such as BATS Europe, Chi-X and
Turquoise.

Earnings per share
Diluted earnings per share excluding items
affecting comparability was SEK 19.7. Includ-
ing items affecting comparability, diluted earn-
ings per share was SEK 16.9 (6.7).

Dividend
Decisions on dividends are based on an
appraisal of the Group’s profitability, future
investment plans and financial position. The
Board proposes that the AGM, to be held on
27 March 2017, approve a dividend of SEK
12 (10.5) per share. The proposed dividend
corresponds to 4.7 per cent of equity. Over the
past five years the dividend has averaged 4 per
cent of equity.
• The final date for trading in Holmen shares
including right to dividend: 27 March 2017.

• Record date for dividend: 29 March 2017.
• Payment date for dividend: 3 April 2017.

Share structure
Holmen has 83 996 162 shares outstanding,
of which 22 623 234 are class A shares and
61 372 928 are class B shares. The company
also has 760 000 repurchased class B shares
held in treasury. Each class A share carries
10 votes, and each B share one vote. In other
respects, the shares carry the same rights. Nei-
ther laws nor the company’s articles of associa-
tion place any restrictions on the transferabili-
ty of the shares.

Ownership structure
Holmen had a total of 28 159 shareholders at
year-end 2016. In terms of numbers, Swedish
private individuals account for the largest
owner category with 26 032 shareholders.
Shareholders registered in Sweden own 83
per cent (81) of the share capital. Among
foreign shareholders, the largest proportion
of shares are held in the US and Luxembourg,
accounting for 7 per cent and 3 per cent of the
capital, respectively. The largest owner at the
turn of 2016/2017, with 61.6 per cent of votes
and 32.9 per cent of capital, was
L E Lundbergföretagen AB.

Share savings programme
The 2016 AGM decided on a targeted share
savings programme for around 40 key indi-
viduals in the Holmen Group. The purpose of
the programme is to strengthen the interests
between the owners and the management of
the company and to create long-term commit-
ment to Holmen.

The programme involves previously repur-
chased shares being transferred to programme
participants at the end of the term. The num-
ber of shares to be transferred depends on the
return generated over the 2016–2018 period.
In the event of maximum allocation, 100 000
shares will be transferred from the company to
programme participants.

Share buy-backs
The company has no specific target for share
buy-backs. There is a mandate to repurchase
up to 10 per cent of all the company’s shares.
Any buy-backs are regarded as a complement
to dividend payments to adjust the capital
structure when circumstances are deemed
favourable. The 2016 AGM renewed the
Board’s mandate to decide on the acquisition
of up to 10 per cent of the company’s shares
through the acquisition of class B shares. No
shares were repurchased during the year. As
previously, the company holds 0.9 per cent of
all shares. The Board proposes that the 2017
AGM also authorise the Board to repurchase
and transfer up to 10 per cent of all shares in
the company through the acquisition of class
B shares.

Communication with
shareholders
Holmen regularly provides information to
the stock market via press conferences in
connection with the publication of quarterly
reports and on the occasion of the AGM. It
also delivers information that is important
to the stock market by publishing press
releases. The holmen.com website offers
financial information in the form of reports,
presentations and compiled financial data.
The holmen.com website also has recordings
of the latest press conferences, together with
information on the company’s shares, owners,
insider trading and more.

Analysts
Analysts at 14 brokerage firms and banks
monitor Holmen’s development. This means
that they publish analyses of Holmen on
an ongoing basis. A list of these analysts is
available at holmen.com.

SHARE PRICE PERFORMANCE, HOLMEN CLASS A,
HOLMEN CLASS B AND GENERAL INDEX

TOTAL SHAREHOLDER RETURN FOR HOLMEN CLASS B AND GENERAL INDEX
Incl. reinvested dividend excluding tax

SEK

400

300

200

100

Number of shares (thousands)

Index

12 000

250

9 000

6 000

200

150

3 000

100

Holmen A
Holmen B

Affärsvärlden General Index
Total number of class B shares traded (thousands)

Holmen B

General index (SIX Return Index)

Source: Macrobond

HOLMEN ANNUAL REPORT 2016 / SHAREHOLDER INFORMATION

SHAREHOLDER CATEGORIES
Percentage of capital

SHAREHOLDER STRUCTURE AT 31 DECEMBER 2016

% of capital

% of votes

L E Lundbergföretagen
Kempe Foundations
Carnegie funds (Sweden)
Lannebo funds
Alecta
Nordea funds
DFA funds (US)
Swedbank Robur Fonder
Norges Bank Investment Management
SHB funds
Total

Other
Total*
* Of which non-Swedish shareholders.

32.9
7.0
5.4
3.3
2.9
2.5
2.2
1.7
1.5
1.0
60.4

39.6
100.0
17.1

61.6
17.0
1.6
1.0
0.8
0.7
0.6
0.5
0.4
0.3
84.5

15.5
100.0
5.2

The 10 identified shareholders with the largest holdings in terms of capital. Some large shareholders may have their holdings registered under
nominee names, in which case they are included among ‘Other’.

Swedish institutions
Swedish equity funds
Swedish private
individuals
Foreign shareholders

56%
17%
10%

17%

OWNERSHIP STRUCTURE

SHARE STRUCTURE

No. of
shares

1–1 000
1 001–100 000
100 001–
Total

Share-
holders

26 165
1 927
67
28 159

Share of
capital,
%

6
13
81
100

Votes

No. of shares

No. of votes Quotient value

Class A
Class B
Total no. of shares
Holding of own class B shares repurchased
Total number of shares outstanding

10
1

22 623 234
62 132 928
84 756 162
-760 000
83 996 162

226 232 340
62 132 928
288 365 268
-760 000
287 605 268

50
50

SEKm

1 131
3 107
4 238

CHANGES IN SHARE CAPITAL 2000–2016

Change in no.
of shares

Total no. of
shares

Change in share
capital, SEKm

Total share
capital, SEKm

2001 Cancellation of shares repurchased
2004 Conversion and subscription

-8 885 827
4 783 711

79 972 451
84 756 162

-444
239

3 999
4 238

DATA PER SHARE

Diluted earnings per share, SEK1)
Dividend, SEK
Dividend as % of:
Equity
Closing listed price
Profit/loss for the year
Return, equity, %1)
Return, capital employed, %6)
Equity per share, SEK
Closing listed price, B, SEK
Average listed price for year, B, SEK
Highest listed price for year, B, SEK
Lowest listed price for year, B, SEK
Total closing market capitalisation, SEK ’000 m
P/E ratio2)
EV/EBITDA3) 6)
Closing beta value (48 months), B4)
Number of shareholders at year-end

2016

16.9
125)

2015

6.7
10.5

5
4
71
7
9
253
327
281
327
227
27.4
19
11
0.8
28 159

4
4
158
3
6
248
262
264
306
219
22.3
39
10
0.7
28 176

2014

10.8
10

4
4
93
4
6
250
266
236
272
209
22.3
25
10
0.8
27 788

2013

8.5
9

4
4
106
3
5
248
234
198
235
173
19.7
28
11
0.7
27 692

2012

22.1
9

4
5
41
9
7
248
192
186
204
169
16.2
9
9
0.9
28 440

2011

47.1
8

3
4
17
23
9
235
198
201
251
156
16.6
4
7
0.8
28 899

2010

8.4
7

3
3
83
4
6
201
221
195
226
173
18.5
26
10
0.8
28 339

2009

12.0
7

4
4
58
6
7
196
183
180
206
135
15.4
15
7
0.7
30 425

2008

7.6
9

5
5
118
4
6
186
194
203
242
170
16.2
25
9
0.5
29 745

2007

17.8
12

6
5
67
9
10
200
240
277
316
228
20.6
13
8
0.9
30 499

1) See page 82: Definitions and glossary. 2) Closing listed price divided by diluted earnings per share. 3) Market capitalisation plus net financial debt at year-end (EV) divided by EBITDA. 4) Measures the
sensitivity of the yield on class B shares in relation to the yield on the Affärsvärlden General Index over a period of 48 months. 5) Board proposal. 6) Excl. items affecting comparability.

HOLMEN ANNUAL REPORT 2016 / SHAREHOLDER INFORMATION

41
41

INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

INCOME STATEMENT

GROUP, SEKm
Net sales
Other operating income
Change in inventories
Raw materials and consumables
Personnel costs
Other operating costs
Depreciation and amortisation according to plan
Impairment losses
Change in value of biological assets
Profit/loss from investments in associates and joint ventures
Operating profit/loss
Finance income
Finance costs
Profit/loss before tax
Tax
Profit/loss for the year
Attributable to:
Owners of the parent company

Earnings per share (SEK)

basic
diluted

Average number of shares (million)

basic
diluted

NOTE
2
3

4
5, 20
9, 10
10
11
12

6
6

2016
15 513
1 559
203
-8 801
-2 268
-3 432
-1 018
-122
315
-18
1 930
13
-84
1 859
-436
1 424

1 424

16.9
16.9

84.0
84.0

2015

16 014
1 203
-187
-8 661
-2 335
-3 689
-1 240
-555
267
-46
769
1
-91
679
-120
559

559

6.7
6.7

84.0
84.0

Operating profit amounted to SEK 1 930 million (769). Operating profit was negatively affected
by SEK 350 million in connection with the sale of the mill in Madrid and positively affected by SEK
118 million with regard to insurance compensation for reconstruction following the fire at Hallsta
Paper Mill, which together amount to a net total of SEK -232 million which has been treated as an
item affecting comparability. Operating profit for 2015 was negatively affected by items affecting
comparability in an amount of SEK 931 million with regard to impairment losses on non-current
assets, provisions for costs and the effects of a fire.

Operating profit excluding items affecting comparability amounted to SEK 2 162 million (1 700).
Earnings were positively affected mainly as a result of a better product mix within paper, the sale
of the mill in Spain and reduced costs and higher prices within forestry operations.

Net financial items for 2016 totalled SEK -71 million (-90). The average cost of borrowing
declined to 1.1 per cent (1.5), and average net debt was lower than in the preceding year.

Tax recognised totalled SEK -436 million (-120) in 2016. Recognised tax corresponds to
23 percent of profit before tax.

STATEMENT OF COMPREHENSIVE INCOME

GROUP, SEKm

Profit/loss for the year

OTHER COMPREHENSIVE INCOME
Revaluations of defined benefit pension plans
Tax attributable to items that will not be reclassified to profit/loss for the year
Total items that will not be reclassified to profit/loss for the year
Cash flow hedging

Revaluation
Transferred from equity to the income statement
Transferred from equity to non-current assets

Translation difference on foreign operations
Hedging of currency risk in foreign operations
Share in joint ventures’ other comprehensive income
Tax attributable to items that will be reclassified to profit/loss for the year
Total items that will be reclassified to profit/loss for the year
Total other comprehensive income
Total comprehensive income

Attributable to:
Owners of the parent company

NOTE

17
7

2016

1 424

-159
29
-130

96
126
-12
-165
1
-21
-52
-26
-157
1 267

1 267

2015

559

208
-44
165

-111
67
10
8
22
3
3
1
166
724

724

HOLMEN ANNUAL REPORT 2016 / FINANCIAL STATEMENTSBALANCE SHEET

BALANCE SHEET

GROUP AT 31 DECEMBER, SEKm

NOTE

2016

2015

NON-CURRENT ASSETS
Non-current intangible assets
Property, plant and equipment
Biological assets
Investments in associates and joint ventures
Other shares and participating interests
Non-current financial receivables
Deferred tax assets
Total non-current assets

CURRENT ASSETS
Inventories
Trade receivables
Current tax receivable
Other operating receivables
Current financial receivables
Cash and cash equivalents
Total current assets
Total assets

EQUITY
Share capital
Other contributed capital
Reserves
Retained earnings incl. profit/loss for the year
Total equity attributable to the owners of the parent company

NON-CURRENT LIABILITIES
Non-current financial liabilities
Pension provisions
Other provisions
Deferred tax liabilities
Total non-current liabilities

CURRENT LIABILITIES
Current financial liabilities
Trade payables
Current tax liability
Provisions
Other operating liabilities
Total current liabilities
Total liabilities
Total equity and liabilities

9
10
11
12
12
13
7

14
15
7
15
13
13

13
17
18
7

13
19
7
18
19

87
9 387
17 448
1 773
2
39
4
28 740

2 981
2 174
132
564
89
210
6 151
34 891

4 238
281
-236
16 960
21 243

882
201
673
5 613
7 368

3 200
1 766
6
228
1 079
6 279
13 648
34 891

107
10 321
17 173
1 914
4
43
6
29 567

3 089
1 987
12
519
61
221
5 889
35 456

4 238
281
-209
16 543
20 853

2 295
130
585
5 508
8 519

2 698
1 916
53
157
1 259
6 085
14 603
35 456

HOLMEN ANNUAL REPORT 2016 / FINANCIAL STATEMENTSCHANGES IN EQUITY

CHANGES IN EQUITY

GROUP, SEKm

Opening equity balance 1 Jan 2015
Profit/loss for the year
Other comprehensive income

Revaluation of defined benefit pension plans
Cash flow hedging
Translation difference on foreign operations
Hedging of currency risk in foreign operations
Share in joint ventures’ other comprehensive income
Tax attributable to other comprehensive income

Total other comprehensive income
Total comprehensive income
Dividend paid
Closing equity balance 31 Dec 2015
Profit/loss for the year
Other comprehensive income

Total other comprehensive income
Total comprehensive income
Dividend paid
Share savings programme
Closing equity balance 31 Dec 2016

RESERVES

SHARE
CAPITAL

OTHER
CONTRIBUTED
CAPITAL

TRANSLATION
RESERVE

HEDGE
RESERVE

RETAINED
EARNINGS INCL.
PROFIT/LOSS
FOR THE YEAR

4 238
-

-
-
-
-
-
-
-
-
-
4 238
-

-
-
-
-
-
-
-
-
-
-
4 238

281
-

-
-
-
-
-
-
-
-
-
281
-

-
-
-
-
-
-
-
-
-
-
281

51
-

-
-
8
22
-
-5
25
25
-
76
-

-
-
-165
1
-
-6
-170
-170
-
-
-95

-261
-

-
-34
-
-
3
7
-24
-24
-
-284
-

-
211
-
-
-21
-46
144
144
-
-
-141

16 660
559

208

-
-
-
-44
165
723
-840
16 543
1 424

-159
-
-
-
-
29
-130
1 294
-882
5
16 960

TOTAL
EQUITY

20 969
559

208
-34
8
22
3
-41
166
724
-840
20 853
1 424

-159
211
-165
1
-21
-24
-157
1 267
-882
5
21 243

HOLMEN ANNUAL REPORT 2016 / FINANCIAL STATEMENTSCASH FLOW STATEMENT

GROUP, SEKm

OPERATING ACTIVITIES
Profit/loss before tax
Adjustments for non-cash items

Depreciation and amortisation according to plan
Impairment losses
Change in value of biological assets
Change in provisions
Other*

Income tax paid
Cash flow from operating activities before changes in working capital

CASH FLOW FROM CHANGES IN WORKING CAPITAL
Change in inventories
Change in trade receivables and other operating receivables
Change in trade payables and other operating liabilities
Cash flow from operating activities

INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Disposal of property, plant and equipment
Acquisition of non-current intangible assets
Acquisition of biological assets
Disposal of biological assets
Increase in non-current financial receivables
Acquisition of shares and participating interests
Disposal of shares and participating interests
Cash flow from investing activities

FINANCING ACTIVITIES
Raised long-term borrowings
Repayments of long-term borrowings
Change in current financial liabilities
Change in current financial receivables
Dividend paid to owners of the parent company
Cash flow from financing activities

CASH FLOW FOR THE YEAR
Cash and cash equivalents at beginning of year
Exchange gains/losses on cash and cash equivalents
Cash and cash equivalents at end of year

NOTE

* Other adjustments primarily consist of currency effects and the marking to market of financial instruments, profit from associates, as well as gains on the sale of non-current assets.

CHANGE IN NET FINANCIAL DEBT
Opening net financial debt
Cash flow

Operating activities
Investing activities (excl. non-current financial receivables)
Dividend paid

Revaluations of defined benefit pension plans
Foreign exchange effects and changes in fair value
Closing net financial debt

2016
-4 799

1 961
-123
-882
-158
56
-3 945

CASH FLOW STATEMENT

2016

2015

1 859

1 018
122
-315
170
-31
-504
2 320

-62
-189
-109
1 961

-766
440
-5
-4
95
-
-10
127
-123

-
-400
-560
-6
-882
-1 848

-10
221
-1
210

679

1 240
555
-267
236
37
-398
2 083

123
275
45
2 526

-826
24
-12
-36
26
-8
-
-
-832

300
-326
-792
0
-840
-1 659

35
187
0
221

2015

-5 907

2 526
-824
-840
206
40
-4 799

HOLMEN ANNUAL REPORT 2016 / FINANCIAL STATEMENTSCASH FLOW STATEMENT, SEKm NOTE

2016

2015

OPERATING ACTIVITIES
Profit/loss after financial items
Adjustments for non-cash items

Depreciation and amortisation according
to plan
Change in provisions
Other*

Income tax paid
Cash flow from operating activities
before changes in working capital

CASH FLOW FROM CHANGES IN
WORKING CAPITAL
Change in inventories
Change in operating receivables
Change in operating liabilities
Cash flow from operating activities

INVESTING ACTIVITIES
Shareholders’ contribution paid
Acquisition of property, plant and equipment
Disposal of property, plant and equipment
Increase in external non-current financial
receivables
Disposal of shares and participating interests
Cash flow from investing activities

FINANCING ACTIVITIES
Raised external long-term borrowings
Repayments of external long-term borrowings
Change in other financial liabilities
Change in other financial receivables
Dividend paid to owners of the parent
company
Group contributions received
Group contributions paid
Cash flow from financing activities

CASH FLOW FOR THE YEAR
Cash and cash equivalents at beginning of
year
Cash and cash equivalents at end of year

1 094

161

26
-59
502
-464

1 100

-61
-146
-271
622

-10
-29
28

-
2
-9

-
-400
-531
450

-882
700
0
-663

-51

155
104

26
258
107
-420

133

159
178
19
490

0
-48
11

-9
0
-46

300
-326
-732
709

-840
493
-7
-404

115
155

* Other adjustments primarily consist of impairment losses on the value of shares in Group

companies, currency effects and the marking to market of financial instruments as well as
gains/losses on the sale of non-current assets.

PARENT COMPANY

INCOME STATEMENT, SEKm NOTE

Net sales
Other operating income
Change in inventories
Raw materials and consumables
Personnel costs
Other external costs
Depreciation and amortisation according to
plan
Operating profit/loss

2
3

4
5, 20

9, 10

Profit/loss from investments in Group companies 6, 23
Profit/loss from investments in associates
Interest income and similar income
Impairment losses on other shares and
participating interests
Interest expense and similar costs
Profit/loss after financial items

6
6

Appropriations
Profit/loss before tax

Tax
Profit/loss for the year

2016

13 794
822
205
-8 086
-1 827
-4 547

-26
335

780
0
30

0
-52
1 094

404
1 499

-301
1 197

2015

13 989
696
-186
-8 057
-1 814
-4 278

-26
324

-118
0
38

-
-83
161

821
982

-244
738

STATEMENT OF COMPRE-
HENSIVE INCOME, SEKm

Profit/loss for the year
Other comprehensive income
Cash flow hedging

Revaluation
Transferred from equity to the income
statement
Transferred from equity to non-current assets

Tax attributable to other comprehensive
income
Total items that will be reclassified to
profit/loss for the year
Total comprehensive income

NOTE

2016

2015

1 197

738

133

90
-12

-46

164
1 362

-134

94
10

-23
715

The parent company includes Holmen’s Swedish operations with the exception of the majority
of the non-current assets, which are recognised in Holmens Bruk AB.

As part of the sale of the Spanish operations, Holmen AB has paid compensation of SEK
643 million to Holmen Paper Madrid SL in connection with the termination of a sales agreement
(see Note 22 for further information). This post is included in the income statement under the
item ‘Other external costs’.

The item ‘Interest expense and similar costs’ in the income statement includes the result of
SEK 1 million (22) from hedging equity in foreign subsidiaries.

HOLMEN ANNUAL REPORT 2016 / FINANCIAL STATEMENTSPARENT COMPANY

NOTE

2016

2015

BALANCE SHEET
At 31 December, SEKm

NOTE

2016

2015

BALANCE SHEET
At 31 December, SEKm

ASSETS
Non-current assets
Non-current intangible assets
Property, plant and equipment
Non-current financial assets
Shares and participations
Non-current financial receivables

Total non-current assets

Current assets
Inventories
Operating receivables
Current tax receivable
Current investments
Cash and cash equivalents
Total current assets
Total assets

9
10

12, 23
13

14
15
7
13
13

8
2 925

11 519
3 202
17 653

2 396
2 254
106
89
104
4 950
22 602

8
2 922

12 018
3 214
18 163

2 336
2 026
-
61
155
4 578
22 741

EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital
Statutory reserve
Revaluation reserve
Non-restricted equity

Retained earnings incl. hedge reserve
Profit/loss for the year

Total equity

Untaxed reserves

Provisions
Pension provisions
Tax provisions
Other provisions
Deferred tax liability
Total provisions

Liabilities
Non-current financial liabilities
Current financial liabilities
Current tax liability
Operating liabilities
Total liabilities
Total equity and liabilities

17
18
18
7

13
13
7
19

CHANGES IN EQUITY, SEKm

RESTRICTED EQUITY

Opening equity balance 1 Jan 2015

Appropriation of profits
Profit/loss for the year
Other comprehensive income

Cash flow hedging
Tax on other comprehensive income
Total other comprehensive income
Total comprehensive income
Dividend paid
Closing equity balance 31 Dec 2015

Appropriation of profits
Profit/loss for the year
Other comprehensive income

Cash flow hedging
Tax on other comprehensive income
Total other comprehensive income
Total comprehensive income
Dividend paid
Share savings programme
Closing equity balance 31 Dec 2016

SHARE
CAPITAL

4 238

-
-

-
-
-
-
-
4 238

-
-

-
-
-
-
-
-
4 238

STATUTORY
RESERVE

REVALUATION
RESERVE

1 577

-
-

-
-
-
-
-
1 577

-
-

-
-
-
-
-
-
1 577

100

-
-

-
-
-
-
-
100

-
-

-
-
-
-
-
-
100

NON-RESTRICTED EQUITY

RETAINED
EARNINGS

PROFIT/LOSS
FOR THE YEAR

2 954

1 870
-

-
-
-
1 870
-840
3 985

738
-

-
-
-
738
-882
5
3 847

1 870

-1 870
738

-
-
-
-1 132
-
738

-738
1 197

-
-
-
459
-
-
1 197

HEDGE
RESERVE

-264

-
-

-30
7
-23
-23
-
-287

-
-

211
-46
164
164
-
-
-123

4 238
1 577
100

3 724
1 197
10 836

4 238
1 577
100

3 698
738
10 351

2 290

1 994

12
45
833
612
1 503

2 328
3 200
-
2 445
7 974
22 602

5
45
892
569
1 512

3 295
2 698
53
2 837
8 884
22 741

TOTAL
EQUITY

10 476

-
738

-30
7
-23
715
-840
10 351

-
1 197

211
-46
164
1 362
-882
5
10 836

HOLMEN ANNUAL REPORT 2016 / FINANCIAL STATEMENTSNOTE 1

NOTES TO THE FINANCIAL STATEMENTS

Amounts in SEKm, unless otherwise stated

1. Accounting policies

2. Operating segment reporting

3. Other operating income

4. Employees, personnel costs and remuneration to senior management

5. Auditors’ fee and remuneration

6. Net financial items and income from financial instruments

7. Tax

8. Earnings per share

9. Non-current intangible assets

10. Property, plant and equipment

11. Biological assets
12. Investments in associates, joint ventures and other shares and

participating interests

13. Financial instruments

14. Inventories

15. Operating receivables

16. Equity, parent company

17. Pension provisions

18. Other provisions

19. Operating liabilities

20. Operating leases

21. Collateral and contingent liabilities

22. Related parties

23. Investments in Group companies

24. Untaxed reserves

25. Cash flow statement

26. Critical accounting estimates and judgements

NOTE 1. ACCOUNTING POLICIES

The accounting policies for the Group presented below have been applied consistently to all periods
included in the Group’s financial statements except where otherwise stated below. The Group’s
accounting policies have been applied consistently to the reporting by and the consolidation of the
parent company, subsidiaries, associates and joint ventures.

COMPLIANCE WITH STANDARDS AND STATUTORY
REQUIREMENTS
The consolidated accounts are prepared in accordance with International Financial Reporting
Standards (IFRSs) issued by the International Accounting Standards Board (IASB), as adopted
by the EU. The Swedish Financial Reporting Board’s recommendation (RFR 1 Supplementary
Accounting Rules for Groups) has also been applied.

See also Note 26 ‘Critical accounting estimates and judgements’.

CHANGES IN ACCOUNTING POLICIES
New and amended accounting policies applicable as of 2016
No new accounting policies with a material effect on the Group’s accounting have been applied
since 1 January 2016. Changes in the Swedish Annual Accounts Act and IAS 1 have, to a limited
extent, affected the preparation of the financial statements.

New and amended accounting policies not yet applied
The following new standards have been published by the IASB, but have either not yet come into
force or have not yet been adopted by the EU.

The parent company applies the same accounting policies as the Group except in the cases that
are commented on separately under each section. The parent company’s accounts are prepared
in accordance with RFR 2 Accounting for Legal Entities. The differences between the policies
applied by the parent company and those applied by the Group are due to restrictions in the parent
company’s ability to apply IFRS as a consequence of the Swedish Annual Accounts Act, the
Swedish Pension Obligations Vesting Act, and in some cases for tax reasons.

IFRS 15 Revenue from Contracts with Customers is a new revenue standard with associated disclosure
requirements which will replace IAS 18, IAS 11 and IFRIC 13. This new standard will come into force on
1 January 2018. During the year, analysis of the Group’s revenue flows was undertaken, and an evaluation
of the effects was initiated. The initial assessment is that application of this new standard will not result
in any material effect on accounting of the Group’s revenue. Since IFRS 15 contains additional disclosure
requirements, its application will probably result in increased note disclosures regarding revenue.

VALUATION PRINCIPLES APPLIED IN PREPARING THE
FINANCIAL STATEMENTS OF THE PARENT COMPANY
AND THE GROUP
Assets and liabilities are stated at cost, except for biological assets and certain financial assets and
liabilities, which are valued at fair value. In the parent company, biological assets are not valued at
fair value. Investments in Group companies and associates are recognised in the parent company
at the lower of cost and fair value.

FUNCTIONAL CURRENCY AND REPORTING CURRENCY
The functional currency is the currency used in the primary financial environments in which the
companies conduct their business. The parent company’s functional currency is the Swedish krona
(SEK), which is also the reporting currency of the parent company and the Group. This means that
the financial statements are presented in Swedish kronor.

ESTIMATES AND JUDGEMENTS IN THE FINANCIAL
STATEMENTS
Preparing the financial statements in accordance with IFRSs requires the company’s management
to make estimates and judgements, as well as to make assumptions that affect the application of
the accounting policies and the recognised amounts for assets, liabilities, income and costs. The
actual outcome may deviate from these assessments and estimates.

These estimates and judgements are reviewed regularly. Changes in estimates are recognised in
the accounts for the period in which the change is made if the change only affects that period, or in
the period the change is made and in later periods if the change affects current and future periods.

IFRS 9 Financial Instruments addresses the accounting of financial instruments and will replace
IAS 39. This standard encompasses classification, valuation and impairment of financial
instruments and hedge accounting. This standard will come into force on 1 January 2018. The
initial assessment is that application of this new standard will not result in any material effect on
accounting of the Group’s financial instruments.

IFRS 16 Leasing replaces the previous IAS 17 Leases and the related interpretations IFRIC 4,
SIC-15 and SIC-27. This standard requires assets and liabilities attributable to all leases, with some
exceptions, to be recognised in the balance sheet. In the income statement, amortisation must be
recognised separately from interest expense attributable to leasing liabilities. This standard will
come into force on 1 January 2019. The potential impact of this standard on the Group’s financial
statements is currently being assessed.

SEGMENT REPORTING
The Group’s operations are divided into operating segments, based on which parts of the operations
are monitored by the company’s highest executive decision-maker, known as the management
approach. The segmentation criterion is based on the Group’s business areas. This corresponds to the
Group’s operating structure and the internal reporting to the CEO and the Board. The items in the profit,
assets and liabilities of the operating segment are recognised in accordance with the profit (operating
profit), assets and liabilities that are monitored by the company’s highest executive decision-maker.
See Note 2 for more details of the classification and presentation of operating segments.

CLASSIFICATION
Essentially, non-current assets, non-current liabilities and provisions consist solely of amounts that
are expected to be recovered or paid more than 12 months after the balance sheet date. Current
assets, current liabilities and provisions essentially consist of amounts that are expected to be
recovered or paid within 12 months of the balance sheet date.

HOLMEN ANNUAL REPORT 2016 / NOTESCONSOLIDATION PRINCIPLES
Subsidiaries
A subsidiary is a company over which the parent company, Holmen AB, exercises a controlling
influence. Controlling influence exists if Holmen AB has control over an investment object, is exposed
or entitled to variable returns on its involvement and can exercise its control of the investment to
influence the size of return. In determining whether one company has control over another, potential
shares with an entitlement to vote and whether de facto control exists are taken into account.

The consolidated accounts are prepared using the acquisition method. The acquisition method
entails the parent company indirectly acquiring the subsidiary’s assets and assuming the liabilities
of the subsidiary, valued at fair value. The difference between the cost of the shares and the fair
value of the acquired identifiable net assets is treated as goodwill. The subsidiary companies’
income and expenses, and their assets and liabilities, are stated in the consolidated accounts as of
the date when the Group gains control (acquisition date) until such time as the Group no longer has
control. Intra-Group receivables and liabilities, transactions between companies in the Group and
related unrealised gains are eliminated in their entirety.

Holdings recognised in accordance with the equity method
Associates. Shareholdings in associates, in which the Group controls a minimum of 20 per cent and
a maximum of 50 per cent of the votes, or otherwise exercises a significant influence, are stated in
the consolidated accounts in accordance with the equity method.

Jointly owned companies/joint ventures. In accounting, joint ventures are those companies for
which the Group, through cooperation agreements with one or more parties, has joint control
whereby the Group has rights to the net assets instead of direct rights to assets and commitments
in liabilities. Holdings in joint ventures are consolidated in the consolidated accounts using the
equity method. Holmen’s jointly owned companies are such that the holding has previously been
recognised using the equity method and financial reporting consequently complies with IFRS
11 Joint Arrangements.

The equity method. The equity method means that the carrying amount of the shares in the associates
and joint ventures stated in the consolidated accounts corresponds to the Group’s interest in the
associates’ equity and any consolidated surplus and deficit values. The Group’s share of the net
earnings of associates and joint ventures after tax attributable to parent company owners adjusted
for any amortisation or reversal of acquired surplus and deficit values, respectively, is stated in the
consolidated income statement as ‘Share of profits of associates and joint ventures’. Dividends
received from an associate or joint venture reduce the carrying amount of the investment. Unrealised
gains arising as a consequence of transactions with associates and joint ventures are eliminated in
relation to the owned proportion of equity.

When the Group’s share of the recognised losses of an associate and joint venture exceeds the
carrying amount of the investments stated in the consolidated accounts, the value of the investments
is written down to zero. Losses are also offset against unsecured long-term financial balances that,
in financial terms, comprise part of the owning company’s net investment in the associate and joint
venture. Any further losses are not recognised unless the Group has provided guarantees to cover
losses incurred by the associate or joint venture. The equity method is applied until such time as the
significant influence no longer exists or the jointly owned company ceases to be jointly owned.

FOREIGN CURRENCY
Transactions denominated in foreign currencies
Transactions in foreign currencies are translated into the functional currency at the exchange rates
prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated into
the functional currency at the exchange rate prevailing on the balance sheet date. Exchange differences
arising on such translations are stated in the income statement. Non-monetary assets and liabilities that
are stated at historical cost are translated at the exchange rate prevailing on the transaction date.

Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and other consolidated surplus and
deficit values, are translated in the consolidated accounts, from the foreign operation’s functional currency,
to the Group’s reporting currency (Swedish kronor) at the balance sheet date. The income and expenses
of foreign operations are translated into Swedish kronor at an average rate that is an approximation of
the exchange rates prevailing at the date of each transaction. Differences arising during the currency
translation of foreign operations and the related effects of hedging net investments are recognised in other
comprehensive income and are accumulated in a separate component of equity called the translation
reserve. In the disposal of a foreign operation, the accumulated translation differences attributable to the
business are realised, less any currency hedging, in the consolidated income statement.

COMPANIES OPERATING ON BEHALF
OF THE PARENT COMPANY
The parent company’s business is largely conducted through companies operating on its behalf: Holmen
Paper AB, Iggesund Paperboard AB, Holmen Timber AB, Holmen Skog AB and Holmen Energi AB.

The parent company is liable for all commitments entered into by these companies. All income,
expenses, assets and liabilities, which arise in the operations conducted by the companies, are
recognised in Holmen AB’s accounts, except for the majority of investments made as well as some
sales of forest properties, which are instead recognised in some of the Group’s subsidiaries.

INCOME
Net sales
Net sales refers to invoiced sales (excluding value added tax) of products, wood and energy. The
amount recognised is reduced by discounts, and similar reductions in income, and also includes

NOTE 1

exchange differences related to the sales. Sales are recognised after the critical risks and benefits
associated with ownership of the sold goods have been transferred to the buyer, and there is no
remaining right of disposal or possibility to retain actual control over the sold goods.

Other operating income
Income from activities not forming part of the company’s main business is stated as other operating
income. This item mainly comprises sales of by-products, renewable energy certificates, rent and
land lease income, emission allowances, insurance compensation and gains/losses on sales of
non-current assets.

Renewable energy certificates
Certificates are issued in relation to production of renewable energy according to a quota system
introduced in order to promote electricity generation using renewable sources of energy. Income
from allocated certificates is recognised as other operating income in the same period in which
generation occurs. Certificates sold on forward contracts are measured at their net realisable
value. Unsold certificates are measured at the lower of cost or fair value.

State grants
State grants are recognised in the balance sheet as accrued income when it is reasonably certain
that the grant will be received and that the Group will satisfy the conditions associated with the
grant. State grants linked to a non-current asset reduce the asset’s recognised cost. State grants,
such as road grants, intended to cover costs are recognised as other operating income. Grants are
distributed systematically in the income statement in the same way and over the same periods as
the costs the grants are intended to cover.

Exchange transactions
In some cases, forest land is exchanged for other forest land of similar type and value. Such exchange
is recognised in the consolidated accounts as an exchange of one asset for another, i.e. without any
form of revenue recognition as the exchange does not constitute a revenue-generating transaction.
In the parent company, however, this type of transaction is recognised as a sale of forest land, with
recognition of revenue as other operating income and an acquisition of a new asset.

FINANCE INCOME AND COSTS
Finance income and costs consist of interest income and interest costs, dividend income and revaluations
of financial instruments valued at fair value, as well as unrealised and realised currency gains and losses.

Interest income on receivables and interest costs on liabilities are calculated by using the effective
interest method. Interest costs include transaction costs for loans, which have been distributed
over the duration of the loan; this also applies to any difference between the funds received and the
repayment amount. Dividend income is recognised when the dividend is established and the right
to receive payment is judged to be certain.

Interest costs normally affect profit/loss in the period to which they relate. Borrowing costs attributable to
the purchase, construction or production of qualifying assets are capitalised in the consolidated accounts
as part of the asset’s cost. A qualifying asset is an asset that takes a substantial period of time to get
ready for its intended use and that is relevant for the Group in connection with major investment projects.

TAXES
Income taxes comprise current tax and deferred tax. Income taxes are recognised in the income
statement except when underlying transactions are recognised in other comprehensive income or
directly in equity, in which case the associated tax effect is also recognised in other comprehensive
income or directly in equity. Current tax is the tax to be paid or received for the year in question, using the
tax rates that have been decided on, or to all intents and purposes have been decided on at the balance
sheet date. This also includes any adjustment to current tax attributable to previous periods. Deferred
tax is calculated using the balance sheet method on the basis of temporary differences between carrying
amounts and values for tax purposes of assets and liabilities, applying the tax rates and rules that
have been approved or announced at the balance sheet date. Temporary differences are not taken into
account in goodwill arising upon consolidation, nor in temporary differences attributable to investments
in subsidiaries and associates that are not expected to become liable to taxation in the foreseeable future.
In the parent company’s accounts, untaxed reserves are recognised inclusive of deferred tax liability.

Deferred tax assets in respect of tax-deductible temporary differences and loss carry-forwards are
recognised only to the extent that it is likely they will be utilised and entail lower tax payments in the
future. Deferred tax assets and deferred tax liabilities in the same country are recognised net to the
extent that a right of set-off applies.

EARNINGS PER SHARE
The calculation of earnings per share (EPS) is based on the Group’s profit for the year attributable
to the parent company’s owners and the weighted average number of shares outstanding during
the year. In calculating diluted EPS, the earnings and the average number of shares are adjusted to
take account of the effects of any potential ordinary shares having a diluting effect, which during
reported periods stem from convertible bonds and options issued to employees.

FINANCIAL INSTRUMENTS
Financial instruments are measured and recognised according to IAS 39.

Recognition in and derecognition from the balance sheet
A financial asset or liability is stated in the balance sheet when the company becomes a party in
accordance with the contractual conditions of the instrument. A financial asset is removed from the
balance sheet when the rights referred to in the contract have been realised or mature, or when the
company no longer has control over them. A financial liability is removed from the balance sheet
when the undertaking in the contract is performed or expires in some other way.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 1

Spot transactions are stated in accordance with the trade date principle. Trade receivables are
recognised in the balance sheet when an invoice has been sent. Liabilities are recognised when the
counterparty has provided a product or service and there is a contractual obligation to pay, even
if an invoice has not yet been received. A financial asset and a financial liability are only offset and
recognised at a net amount where a legal right to offset the amounts exists and there is an intention
to settle the items at a net amount or simultaneously realise the asset and settle the liability.
Financial assets, excluding shares, and financial liabilities have been classified as current if the
amounts are expected to be recovered or paid within 12 months of the balance sheet date. Shares
have been classified as non-current if they are intended to be held in the operation permanently.

Measurement of financial instruments
Financial assets at fair value through profit/loss. This category consists of financial assets held for
trading. Financial instruments in this category are measured on a current basis at fair value, with
changes of value recognised in profit/loss.

Loan receivables and trade receivables. Bank balances, loan receivables and trade receivables are
measured at amortised cost. Impairment testing is performed continually, using objective criteria
for these assets. If impairment is established, the receivable is derecognised. However, a provision
for doubtful trade receivables is made if the impairment is anticipated.

Available-for-sale financial assets. The category of available-for-sale financial assets includes
financial assets not classified in any other category or financial assets that the company initially chose
to classify in this category. The assets are valued on a current basis at fair value with the changes
in value for the period recognised in other comprehensive income, and the accumulated changes
in value in a separate component of equity, although not such value changes that are attributable to
impairment losses (see below), nor interest on financial instruments receivable and dividend income
as well as exchange differences on monetary items, which are recognised in profit/loss for the year.
When the asset is disposed of, accumulated profit/loss – which was previously recognised in other
comprehensive income – is recognised in profit/loss for the year. Shares and interests not related to
Group companies or associates are measured at cost. Measurement at fair value could not be applied,
because reliable fair values could not be established.

Financial liabilities at fair value through profit/loss. Financial liabilities are measured initially at
the value of funds received after deduction of any transaction costs. Normally, the liabilities are
measured on a current basis at amortised cost using the effective interest method. In those cases
where funds received fall short of the repayment amount, the difference is allocated over the
duration of the loan using the effective interest method. Profit/loss from financial instruments is
recognised in net financial items or operating profit/loss, depending on the purpose of the holding.

Other financial liabilities. These liabilities are measured at amortised cost. Amortised cost is
determined on the basis of the effective interest that was calculated at the time of acquisition. Trade
payables and loan liabilities are recognised in this category. Loans hedged against changes in value
are initially recognised including any transaction costs and on a current basis at fair value.

Derivatives and hedge accounting. All derivatives, such as currency forward contracts, electricity
derivatives and interest rate swaps, are measured at fair value and recognised in the balance sheet.
More or less all derivatives are held for hedging purposes. Where hedge accounting is applied,
the changes in value are recognised as stated below. In the case of derivatives that do not fulfil the
criteria for hedge accounting, the changes in value are recognised within operating profit/loss or
within net financial items, depending on the purpose of the holding.

Cash flow hedging. The effective portion of changes in value is recognised in other comprehensive
income and accumulated in equity until such time as the hedged item influences the income
statement, when the accumulated changes in value are transferred from equity via other
comprehensive income to the income statement to meet and match the hedged transaction. In
the hedging of investments, the cost of the hedged item is instead adjusted when it occurs. The
ineffective portion of hedges is recognised directly in the income statement. Forward foreign
exchange contracts and foreign exchange swaps are used as cash flow hedges to safeguard
against fluctuations in exchange rates. Interest rate swaps are used as a cash flow hedge to
safeguard against changes in interest rates.

Net investments. Changes in the value of hedges relating to net investments in foreign businesses
are recognised in other comprehensive income for the Group. Accumulated changes in value are
recognised as a component in the Group’s equity until the business is disposed of, at which point
the accumulated changes in value are recognised in the income statement. In the parent company,
changes in value are recognised in the income statement, as hedge accounting is not applied.

Calculation of fair value. The fair value of financial instruments traded on an active market is
based on listed market prices and belongs to measurement level 1 as per IFRS 13. Where there
are no listed market prices, fair value has been calculated using discounted cash flows. In
calculating discounted cash flows, all variables used for the calculations, such as discount rates
and exchange rates, are taken from market listings where possible. In calculating discounted
cash flows, the mean of exchange rates and discount rates is used. These valuations belong to
measurement level 2. Other valuations, for which a variable is based on own assessments, belong
to measurement level 3. Holmen’s measurement of financial instruments belongs exclusively
to measurement level 2. Currency options are valued using the Black & Scholes formula, when
appropriate.

NON-CURRENT INTANGIBLE ASSETS
Non-current intangible assets such as patents, licences and IT systems are recognised at cost
after deduction of accumulated depreciation and any impairment losses. The Group’s non-current
intangible assets are amortised over periods of between 5 and 20 years, except for goodwill. Any
goodwill is allotted to cash-generating units. Both goodwill and other non-current intangible assets
are tested for impairment annually. Any impairment losses may be reversed via exceptions from
goodwill. The Group does not currently recognise any goodwill. Non-current intangible assets in the
parent company are amortised over five years.

Goodwill represents the difference between the cost of business combinations and the fair value of
the acquired assets, assumed liabilities and contingent liabilities. Goodwill is valued at cost less any

accumulated impairment losses. Goodwill arising in connection with the acquisition of associates is
included in the carrying amount of the participating interest in such companies.

Research costs are expensed when they are incurred. Development costs are only capitalised in
the case of major projects to the extent that their future financial benefits can be reliably assessed.
The recognised value includes all directly attributable expenses, for example in connection with
materials and services, wages/salaries to employees, registration of a legal right, amortisation
of patents and licences and borrowing costs in accordance with IAS 23. Other development
expenditure is recognised in the income statement as costs when incurred. Development
expenditures recognised in the balance sheet are stated at cost less accumulated amortisation
and impairment losses.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost after deduction of accumulated depreciation and any
impairment losses. Property, plant and equipment that consist of parts with different useful lives are
treated as separate components of property, plant and equipment. Additional expenditure is capitalised
only if it is estimated to generate financial benefits for the company. The key factor determining whether
or not additional expenditure is capitalised is if it relates to the replacement of identified components or
parts thereof, in which case the expenditure is capitalised. The cost is also capitalised in cases where a
new component is created. Any undepreciated carrying amounts for replaced components or parts of
components are retired and expensed in connection with the replacement.

The carrying amount of an item of property, plant or equipment is removed from the balance sheet
in connection with retirement or disposal of the asset or when no future financial benefits can be
expected from the use of the asset. The gain or loss arising on the retirement or disposal of an asset
consists of the difference between any selling price and the carrying amount of the asset, less any
direct selling costs. Gains and losses are recognised in the accounts as other operating income/costs.

Depreciation according to plan is based on original acquisition cost less any impairment losses.
Depreciation takes place on a straight-line basis over the estimated useful life of the asset. Land is
not depreciated.

The following useful lives (years) are used:
Machinery for hydro power production

10–40

Administrative and warehouse buildings, residential properties 10–33

Production buildings, land installations and machinery
for pulp, paper and paperboard production

Machinery for sawmills

Other machinery

Forest roads

Equipment

10–20

10–12

4–10

If there is any indication that the carrying amount is too high, an analysis is made in which the
recoverable value of single or inherently related assets is determined at the higher of the net selling
price and the utility value. The net realisable value is the estimated selling price after deduction of
the estimated cost of selling the asset. The utility value is measured as expected future discounted
cash flow. The discount rate applied takes account of the risk-free rate and the risk associated
with the asset. An impairment loss consists of the amount by which the recoverable amount falls
short of the carrying amount. Impairment loss is reversed if there has been any positive change in
the circumstances upon which the determination of the recoverable amount is based. A reversal
may be made up to, but not exceeding, the carrying amount that would have been recognised, less
depreciation, if there had been no impairment.

Borrowing costs attributable to the purchase or construction of qualifying assets are to be
capitalised in the consolidated accounts as part of the asset’s cost. A qualifying asset is an asset
that takes a substantial period of time to get ready for its intended use and that is relevant for the
Group in connection with major investment projects.

LEASING
In the consolidated accounts, lease agreements are classified as finance leases or operating
leases. The leasing of non-current assets for which the Group is substantially exposed to the same
risks and benefits as if the asset were directly owned is classified as finance leases. The leasing of
assets over which the lessor substantially retains ownership is classified as operating leases. Costs
relating to operating leases are recognised in profit/loss for the year on a straight-line basis spread
over the term of the lease. Variable charges are expensed in the periods in which they are incurred.
Within the Group, all lease agreements are classified as operating leases.

BIOLOGICAL ASSETS
The Group divides all its forest assets for accounting purposes into growing forests, which are
recognised as biological assets at fair value, and land, which is stated at cost. Any changes in the
fair value of the growing forests are recognised in the income statement. Holmen’s assessment
is that there are no relevant market prices available that can be used to value forest holdings
as extensive as Holmen’s. Valuation is therefore carried out by estimating the present value of
expected future cash flows (after deduction of selling costs) from the growing forests. See Note 11.

In the parent company, biological assets are valued in accordance with RFR 2. This means that
biological assets classified as non-current assets are recognised at cost adjusted for revaluations
taking into account the need, if any, for impairment in value.

Felling rights are stated as inventories. They are acquired with a view to securing Holmen’s raw
material requirements through harvesting. No measurable biological change occurs between the
acquisition date and harvesting.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 1

INVENTORIES
Inventories are valued at the lower of cost and production cost after deduction for necessary
obsolescence, or net realisable value. The cost of inventories is calculated by using the First in,
First out method (FIFO). The net realisable value is the estimated selling price in operating activities
after deduction of the estimated costs of completion and effecting the sale. The cost of finished
products manufactured by the company comprises direct production costs and a reasonable share
of indirect costs.

Emission allowances received are initially recognised at market price when allotted among
inventories and as deferred income. During the year the allocation is recognised as income at
the same time as an interim liability, corresponding to emissions made, is expensed. Certificates
received for renewable energy sold on forward contracts are recognised at net realisable value.
Unsold certificates are measured at the lower of cost or fair value. Recognition takes place, in line
with production, as inventories or accrued income.

period runs from 20 May 2016 through the date of publication of Holmen’s interim report for the
first quarter of 2019.

Termination benefits
Termination benefits in connection with the termination of employment contracts are recognised
in the accounts if it is shown that the Group has an obligation, without any reasonable possibility of
withdrawing, as a result of a formal, detailed plan to terminate an employment contract before the
normal date. When benefits are paid in the form of an offer to encourage voluntary redundancy, a
cost is recognised if it is likely that the offer will be accepted and the number of employees who will
accept the offer can be reliably estimated.

Short-term benefits
Short-term benefits to employees are calculated without being discounted and are recognised as a
cost when the related services are provided.

EMPLOYEE BENEFITS
Pension costs and pension obligations
Obligations to pay premiums to defined contribution plans are recognised as a cost in the income
statement as and when they are earned.

The Group’s net obligation regarding defined benefit plans is calculated separately for each plan
by estimating future benefits earned by employees through their employment in both current and
previous periods. This benefit is discounted to present value and unrecognised costs relating to
employment in previous periods and the fair value of any plan assets are deducted. The discount
rate is the interest rate at the balance sheet date for a high-quality corporate bond with a duration
corresponding to the Group’s pension obligations. If there is no active market for such corporate
bonds, the market interest rate for government bonds with a corresponding duration is used
instead. The calculation is performed by a qualified actuary using the projected unit credit method
for the portion of the pension obligations that is defined benefit.

Establishment of the obligation’s present value and the fair value of plan assets may give rise to
actuarial gains and losses. These arise either through the actual outcome deviating from previously
made assumptions or through changes in assumptions. Actuarial gains and losses are recognised
directly in other comprehensive income.

If the benefits provided by a plan are improved, the proportion of the improvement in the benefit
that is attributable to the employees’ employment during earlier periods is recognised as a cost in
the income statement and is distributed on a straight-line basis over the average period until the
benefits have been fully earned. If the benefit has been earned in full, a cost is recognised directly
in the income statement. If any changes occur to a defined benefit plan, these are recognised
when the change to the plan occurs. If the change occurs in conjunction with restructuring, this
is recognised when the company recognises the associated restructuring costs. The changes are
recognised directly in profit/loss for the year.

The interest cost on defined benefit obligations is recognised in profit/loss for the year under
financial items. This is calculated as the net total of the upward adjustment of interest on the
pension obligation and expected income on plan assets calculated according to the same interest
factor (discount rate). Other components are recognised in operating profit/loss. The revaluation
effects consist of actuarial gains and losses and the difference between the actual return on
plan assets and the amount included in net interest. Revaluation effects are recognised in other
comprehensive income.

Payroll tax constitutes part of the actuarial assumptions and is therefore recognised as part of net
obligations.

Policyholder tax is recognised as it is incurred in profit/loss for the period to which the tax relates
and is consequently not included in the calculation of liabilities. In the case of funded plans, this tax
is levied on the return on plan assets and is recognised in other comprehensive income. In the case
of unfunded plans or partially unfunded plans, this tax is levied on profit for the year.

In the parent company’s accounts, different grounds are used for computation of defined benefit
pension plans from those referred to in IAS 19. The parent company complies with the provisions
of the Swedish Pension Obligations Vesting Act and the Swedish Financial Supervisory Authority’s
regulations, because this is a condition for the right to make deductions for tax purposes. The main
differences in relation to the rules in IAS 19 relate to how the discount rate of interest is established,
the calculation of the defined benefit obligation on the basis of the current pay level without any
assumption regarding pay increments in the future, and the recognition of all actuarial gains and
losses in the income statement when they arise.

When there is a difference between how the pension cost is arrived at in the legal entity and in the
Group, a provision or a receivable is recognised in the consolidated accounts in respect of payroll
tax based on this difference. The present value of the provision or receivable is not calculated.

Share-based payments
The outstanding share programme savings is recognised in accordance with IFRS 2 Share-
based Payments and is paid through equity instruments. Recognition of share-based payment
programmes paid through equity instruments entails the fair value of the instrument at the
dividend date being recognised in the income statement as a cost over the vesting period, with
a corresponding adjustment of equity. At the end of each vesting period, an estimate is made of
the expected number of allocated shares and the effect of any change in previous estimates are
recognised in the income statement with a corresponding adjustment of equity. In addition, a
provision is made for estimated social security costs relating to the share programme.

Estimates are based on the value of the shares at the allocation date, which is defined as the period
when the agreement was concluded between the parties. Holmen’s share savings programme was
open to relevant employees between 27 April and 20 May 2016. The average share price during
this period was used as the basis for the valuation of the shares at the allocation date. The vesting

EQUITY
Consolidated equity comprises share capital, other contributed capital, translation and hedge
reserves and retained earnings, including profit/loss for the year. Other contributed capital refers
to premiums paid in conjunction with share issues. The translation reserve consists of all exchange
differences that arise in the translation of foreign operations’ financial statements that are prepared
in a currency other than Swedish kronor. It also includes exchange differences arising in connection
with the revaluation of liabilities and derivatives that are classified as instruments for hedging a
net investment in a foreign operation, including tax. The hedge reserve comprises the effective
proportion of the accumulated net change in the fair value of a cash flow hedging instrument
attributable to underlying transactions that have not yet occurred, including tax. Retained earnings
comprise all other parts of equity, including profit/loss for the year.

Holdings of shares bought back are stated as a reduction in retained earnings. Acquisitions of the
company’s own shares are stated as a deduction, and proceeds from the disposal of the company’s
own shares are stated as an increase. Transaction costs are charged directly to retained earnings.

The parent company’s equity comprises share capital, statutory reserves, revaluation reserves,
retained earnings and profit/loss for the year. The parent company’s statutory reserve consists of
previous compulsory provisions to the statutory reserve plus amounts added to the share premium
reserve before 1 January 2006. The parent company’s revaluation reserve contains amounts
set aside in connection with the revaluation of property, plant and equipment or non-current
financial assets. Retained earnings comprise all other parts of equity, such as hedge reserves and
transactions as a result of share buy-backs. The parent company applies the same accounting
policies as the Group for these items, see above.

PROVISIONS
A provision is recognised in the balance sheet when the Group has a legal or informal commitment
as a consequence of a past event and it is likely there will be an outflow of financial resources to
settle the commitment and a reliable estimate of the amount can be made. A provision to cover
restructuring is recognised once the Group has established a detailed and formal restructuring plan
and the restructuring process has either begun or been publicly announced.

Provisions are made for environmental measures that relate to earlier activities when contamination
arises or is discovered, it is likely that a payment obligation will arise, and the amount can be
estimated reliably.

Reserves to cover future silvicultural fees are calculated on the basis of interpretations of the
applicable forestry laws and regulations whenever it is likely that a payment obligation will arise and
once the amount can be assessed to a reasonable extent.

CONTINGENT LIABILITIES
A contingent liability is recognised when there is a potential commitment that originates from past
events, the existence of which will be confirmed only by one or more uncertain future events, or
when there is a commitment that is not recognised as a liability or provision because it is unlikely
that an outflow of resources will be required.

GROUP CONTRIBUTIONS AND SHAREHOLDER
CONTRIBUTIONS FOR LEGAL ENTITIES
Group contributions are recognised in the parent company in accordance with RFR 2’s alternative
rule, i.e. Group contributions paid or received are recognised as appropriations.

Shareholder contributions are recognised as an increase in the item ‘Investments in Group
companies’. In addition, a review is conducted as to whether an impairment loss on the value of the
shares is necessary. This review complies with standard rules on the valuation of this asset item.
Shareholder contributions received are recognised directly in non-restricted equity.

OTHER
The figures presented are rounded off to the nearest whole number or equivalent. The absence of a
value is indicated by a dash (-).

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 2

NOTE 2. OPERATING SEGMENT REPORTING

2016

FOREST PAPERBOARD

PAPER

WOOD
PRODUCTS

RENEWABLE
ENERGY

GROUP-WIDE

AND OTHER ELIMINATIONS

TOTAL
GROUP

Net sales
External
Internal
Other operating income
Operating costs
Depreciation and amortisation according to plan
Impairment losses
Change in value of biological assets
Share of profits of associates
Operating profit/loss

Operating profit/loss excluding items affecting
comparability*

Operating margin excluding items affecting
comparability, %
Return on operating capital excluding items
affecting comparability, %
Operating assets
Operating liabilities
Operating capital
Investments

2 572
2 730
206
-4 792
-29
-
315
-
1 001

1 001

6
18 989
1 191
17 798
30

5 252
-
823
-4 693
-479
-
-
-
903

903

14
7 185
759
6 426
413

5 431
-
505
-5 374
-380
-122
-
-1
58

289

9
3 454
639
2 815
259

1 342
-
261
-1 514
-82
-
-
-9
-3

-3

neg
1 031
138
892
52

314
-
14
-180
-23
-
-
-5
120

120

4
3 475
64
3 412
23

602
2
196
-922
-24
0
-
-3
-149

-148

-
807
1 351
-544
9

-
-2 732
-466
3 178
-
-
-
-
-

-
-392
-392
-
-

15 513
-
1 559
-14 299
-1 018
-122
315
-18
1 930

2 162

7
34 550
3 752
30 799
785

* Items affecting comparability refers to the sale of the mill in Madrid and insurance compensation of SEK -232 million for reconstruction following a fire at Hallsta Paper Mill.

2015

FOREST PAPERBOARD

PAPER

WOOD
PRODUCTS

RENEWABLE
ENERGY

GROUP-WIDE

AND OTHER ELIMINATIONS

TOTAL
GROUP

Operating profit/loss excluding items affecting
comparability*

Operating margin excluding items affecting
comparability, %
Return on operating capital excluding items
affecting comparability, %
Operating assets
Operating liabilities
Operating capital
Investments

2 814
2 667
179
-4 992
-29
-
267
-
905

905

5
18 790
1 202
17 589
31

5 472
-
739
-4 866
-499
-
-
-
847

847

12
7 409
787
6 622
324

6 148
-
238
-6 312
-588
-555
-
-45
-1 115

-74

-1

neg
4 459
901
3 558
347

1 314
-
251
-1 479
-77
-
-
-1
9

1
1 081
157
924
103

268
91
32
-196
-22
-
-
2
176

176

5
3 462
111
3 351
18

-3
-
196
-219
-25
-
-
-3
-53

-163

-
254
1 142
-888
8

-
-2 757
-434
3 191
-
-
-
-
-

-
-330
-330
-
-

16 014
-
1 203
-14 872
-1 240
-555
267
-46
769

1 700

5
35 126
3 971
31 155
832

* Items affecting comparability relate to impairment loss on non-current assets, a provision for costs and the effects of a fire totalling SEK -931 million.

HOLMEN ANNUAL REPORT 2016 / NOTESNON-CURRENT ASSETS PER COUNTRY
Sweden
UK
Spain
Other
Total

NET SALES BY PRODUCT AREA
Paperboard
Printing paper
Pulp
Wood products
Wood
Energy
Other
Total

NET SALES BY MARKET
Sweden
Germany
UK
Spain
Italy
Netherlands
France
Rest of Europe
Rest of the world
Total

NOTE 2–3

GROUP

PARENT COMPANY

2016
26 871
1 820
-
5
28 695

2015
26 817
2 044
648
6
29 515

2016
14 450
-
-
-
14 450

2015
14 948
-
-
-
14 948

GROUP

PARENT COMPANY

2016
5 071
5 879
169
1 337
2 572
314
170
15 513

2015
5 248
5 956
211
1 311
2 812
268
206
16 014

2016
3 404
5 879
268
1 341
2 569
314
20
13 794

2015
3 340
5 925
326
1 313
2 806
268
12
13 989

GROUP

PARENT COMPANY

2016
3 660
1 974
1 719
1 009
857
694
661
2 963
1 977
15 513

2015
3 598
1 981
2 223
1 109
846
626
710
2 753
2 167
16 014

2016
3 632
1 766
1 124
969
807
624
588
2 388
1 896
13 794

2015
3 575
1 774
1 431
911
795
542
621
2 264
2 076
13 989

The Forest business area manages the Group’s forests, which cover just over one million hectares.
Annual wood harvested in company forests is normally about 3.0 million m3sub. The Renewable
energy business area is responsible for the Group’s hydro power and wind power assets. Generation
in a normal year amounts to 1.2 TWh of electricity. The business areas are also responsible for sup-
plying the Group with wood and electricity, respectively, in Sweden.

operating capital. Operating capital in each segment includes all assets and liabilities used by the
business area such as non-current assets, inventories and operating receivables and operating
liabilities. Financing and tax issues are managed at Group level, so financial assets and liabilities –
including pension liabilities – and current and deferred tax assets and tax liabilities are not allocated
to the business areas.

The Paperboard business area produces paperboard for consumer packaging and graphical
printing at one Swedish and one UK mill. The Paper business area manufactures printing paper for
magazines, product catalogues, direct mail, books and daily newspapers at two mills in Sweden. The
Wood products business area has manufacturing operations at two sawmills in Sweden. In 2016, the
Group produced 0.5 million tonnes of paperboard, 1.1 million tonnes of printing paper and 0.8 million
m3 of wood products.

Intra-Group sales between segments are founded on an internal market-based price. The ‘Group-
wide and other’ segment comprises Group staffs and Group-wide functions that are not allocated
to other segments. In June 2016, Holmen sold its newsprint mill in Madrid. Holmen has an
undertaking to sell the newsprint produced by the mill up to the second half of 2017. During this
period, income and costs from this will be recognised in the Group-wide segment. No profit items
after operating profit/loss are allotted to the business areas.

The business areas are responsible for management of operational assets and liabilities. Group
management monitors the business at operating profit level, and in terms of how earnings relate to

Income from external customers is allocated to individual countries according to the country in
which the customer is based.

NOTE 3. OTHER OPERATING INCOME

Sales of by-products
Certificates, renewable energy
Emission allowances
Sales of non-current assets
Rent and land lease income
Silviculture contracts
Other
Total

GROUP

2016
364
415
25
75
42
57
581
1 559

2015
358
435
48
37
42
67
215
1 203

PARENT COMPANY
2015
194
130
44
28
25
67
208
696

2016
226
59
21
27
28
57
404
822

Of the sales of by-products in the Group, SEK 141 million (123) relates to rejects from production,
SEK 96 million (104) to sawdust, bark, chips etc., and SEK 127 million (130) to external sales of
energy.

Income from renewable energy certificates received from the production of renewable energy at
the Group’s mills amounted to SEK 415 million (435).

The Group has been allotted emission allowances that have been used partly within its own
production. The surplus resulted in a gain of SEK 25 million (48).

The increase for the year in the item ‘Other’ mainly relates to insurance compensation following
the fire at Hallsta Paper Mill and a refund from a dispute over the cost of water in Workington
which was settled in Holmen’s favour.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 4

NOTE 4. EMPLOYEES, PERSONNEL COSTS AND REMUNERATION TO SENIOR MANAGEMENT

WAGES, SALARIES AND SOCIAL
SECURITY COSTS
Wages, salaries and other remuneration
Social security costs

GROUP

PARENT COMPANY

2016
1 589
619

2015
1 665
633

2016
1 233
556

2015
1 233
534

AGM’S GUIDELINES FOR DETERMINING SALARIES AND
OTHER REMUNERATION FOR SENIOR MANAGEMENT
The 2016 AGM decided on the following guidelines for determining the salaries and other
remuneration of the CEO and other senior management, namely the heads of the business areas
and heads of Group staffs who report directly to the CEO. The guidelines apply to agreements
entered into after the AGM’s resolution.

Salary and other benefits
The remuneration of the CEO and the senior management shall consist of a fixed market-based
salary. Other benefits, mainly car and accommodation, shall, insofar as they are provided,
represent a limited part of the remuneration. No variable remuneration shall be paid other than
possible share-related incentive programmes determined by the AGM.

Pension
The retirement age is normally 65 years. Pension benefits are based on defined contributions and
comply with the ITP plan. Additional defined-contribution pension solutions may occur.

Notice and severance pay
The period of notice is six months, regardless of whether notice is given by the company or the
member of senior management. In the event of notice being given by the company, severance pay
can be paid corresponding to no more than 18 months’ salary.

Remuneration committee
A remuneration committee appointed from among the members of the Board shall handle matters
pertaining to the CEO’s salary and other conditions of employment and submit proposals on such
issues to the Board for decision. Detailed principles for determining the salaries, pension rights
and other remuneration for senior management shall be laid down in a pay policy adopted by the
remuneration committee.

Deviations in individual cases
The Board shall be entitled to depart from these guidelines in individual cases should special
reasons exist. In the event of such a deviation, information thereon and the reasons therefor shall
be submitted to the next AGM.

SHARE SAVINGS PROGRAMME
The 2016 AGM decided on a targeted share savings programme for around 40 key individuals in
the Holmen Group. The purpose of the programme is strengthen the interests between the owners
and the management of the company and to create long-term commitment to Holmen.

Participation in the programme required the relevant employees to have invested in Holmen shares
(known as ‘savings shares’) during the period 27 April to 20 May 2016. For each savings share
invested, half a matching share will be assigned after the end of the vesting period. In addition,
a number of performance shares may be assigned to each participant. These are linked to the
Group’s return on capital employed. The allocation of the number of performance shares may
vary, depending on the employee’s position within the Group, up to a maximum of 3–6 shares
per savings share. The assignment of matching and performance shares requires participants to
have been full time employee within the Holmen Group and to have held the savings shares for the
entire vesting period. The vesting period runs from 20 May 2016 through the date of publication of
Holmen’s interim report for the first quarter of 2019.

Total costs for the programme are estimated at SEK 18 million. Costs corresponding to SEK
5 million have been recognised for 2016.

Senior management
Salary and other benefits for the CEO in 2016 amounted to SEK 8 001 168 (7 198 063). The total
pension cost for the CEO, calculated in accordance with IAS 19, amounted to SEK 4 340 722
(3 616 009). No variable remuneration was paid.

In 2016, the salaries and other benefits of other senior management, i.e. the heads of the four
(four) business areas and the heads of the five (four) Group staffs who report directly to the CEO,
totalled SEK 21 297 113 (18 883 727).

The total pension cost for this group, calculated in accordance with IAS 19, amounted to SEK
10 606 250 (9 856 250) in 2016. No variable remuneration was paid.

For senior management, employed from 2011, a mutual notice period of six months applies. In the
event of notice being given by the company, deductible severance pay corresponding to 18 months’
salary is paid. These terms apply to six people. For four senior management employment contracts,
signed before 2011, the employee is required to give six months’ notice and the company must give
12 months’ notice. In the event of notice being given by the company, severance pay corresponding
to between one and two years’ salary is paid, depending on age.

All members of senior management are employed by the parent company.

Pension obligations in respect of senior management
Holmen’s pension obligations over and above the ITP plan for the CEO amounted to SEK 14 million
(9) at 31 December 2016 and for other members of senior management to SEK 32 million (24),
calculated in accordance with IAS 19. The pension obligations are secured using plan assets
managed by an independent pension fund.

AVERAGE
NUMBER OF
FULL-TIME
EQUIVA-
LENTS

OF WHICH
WOMEN

2016

2015

OF WHICH
WOMEN

2 369
11

8
13
23
5
8
2
77
7
1
1
6
-
3
443
12
609
2 989

448
5

2
6
10
1
3
-
38
6
-
1
3
-
1
49
5
125
578

2 422
11

8
13
20
6
7
-
104
7
1
1
6
268
3
429
9
882
3 315

467
6

2
5
10
1
3
-
37
4
-
1
3
50
1
50
3
170
643

Parent company
Sweden
Spain

Group companies
Estonia
France
Germany
Hong Kong
Italy
Japan
Netherlands
Poland
Portugal
Russia
Singapore
Spain
Switzerland
UK
US
Total Group companies
Total Group

The reduction in the number of employees in the Group during the year was mainly due to the sale
of the paper mill in Madrid, but also to implemented restructurings.

REMUNERATION OF BOARD AND SENIOR MANAGEMENT
Board
A fixed Board fee shall be paid to the members of the Board elected by the AGM. The CEO, however,
does not receive any Board fee. For 2016, fees to the Board amounted to SEK 3 060 000 (2 925 000).
The chairman received a fee of SEK 680 000 (650 000), and each of the other seven (seven) mem-
bers received SEK 340 000 (325 000).

PROPORTION OF WOMEN, %
Board (excl. deputy members)
Senior management
Total

GROUP

2016
17
30
23

2015
17
22
19

PARENT COMPANY
2015
17
22
19

2016
17
30
23

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 5–6

The income from financial instruments included in operating profit/loss is shown in the following table:

GROUP

2016

2015

PARENT
COMPANY
2016

2015

Exchange gains/losses on trade receivables
and trade payables
Net gain/loss on derivatives stated in
working capital

-126

-67

-102

Interest income on trade receivables
Interest costs on trade payables

1
0

1
-1

1
0

-82

1
-1

The derivatives included in operating profit/loss relate to currency hedging of trade receivables and
trade payables as well as financial electricity derivatives.

Gains and losses on currency hedging are recognised in operating profit/loss when the hedged
item is recognised and in 2016 amounted to SEK -73 (-73) million, with the remainder being
recognised in other comprehensive income as hedge accounting is applied. The fair value of
outstanding transaction hedges at 31 December 2016 was SEK -26 million (82).

Gains on financial electricity hedges are recognised in the income statement when they expire; for
2016 they totalled SEK -53 million (6). The fair value of outstanding financial electricity hedges at
31 December 2016 was SEK -57 million (-365). This is recognised in other comprehensive income
as hedge accounting is applied.

The change in the fair value of hedges for investment purchases is recognised in other comprehen-
sive income until expiry, at which point the gain/loss is added to the cost of the non-current asset
that was hedged. The fair value of outstanding hedges for investment purchases amounted to
SEK 0 million at 31 December 2016. During the period, the cost of hedged items increased by
SEK 12 million.

Gains on equity hedges amounted to SEK 1 million (14) in 2016 and are recognised in other
comprehensive income as hedge accounting is applied. In the parent company accounts, this
gain is recognised in the income statement. The translation of net foreign assets had an impact
of SEK 192 million (-8) on consolidated equity. The fair value of outstanding equity hedges at
31 December 2016 was SEK 16 million (25) and relates to financial derivatives.

The fair value of the derivatives used to manage the fixed interest periods amounted to SEK
-74 million (-82) at 31 December 2016, which was recognised in other comprehensive income
as hedge accounting is applied. This value is expected to be recognised in the income statement
from 2017 onwards.

NOTE 5. AUDITORS’ FEE AND REMUNERATION

The audit firm KPMG was elected by the 2016 Annual General Meeting as Holmen’s auditors for a
period of one year. KPMG audits Holmen AB and almost all of its subsidiaries.

REMUNERATION TO KPMG
Audit assignments
Tax advice
Other services
Total

Other auditors
Total

GROUP

2016
6
3
-
9

1
9

2015
6
3
0
10

1
11

PARENT COMPANY
2015
4
1
-
5

2016
4
1
-
5

-
5

‘Audit assignments’ refers to the statutory examination of the annual report and accounting
records, the administration by the Board and the CEO, and auditing and other assessment
performed as agreed or in accordance with contracts. This includes other duties that are
incumbent on the company’s auditors and the provision of advice or other assistance resulting
from observations in connection with such assessment or the performance of such other duties.
‘Tax advice’ refers to all consultation in the field of taxation.

NOTE 6. NET FINANCIAL ITEMS AND INCOME FROM

FINANCIAL INSTRUMENTS

FINANCE INCOME
Dividend income from Group companies
Gains on sales of Group companies
Net profit/loss
Assets and liabilities measured at fair value

through profit/loss for the year
- Held for financial risk management*

Other financial receivables
Interest income
Total finance income

FINANCE COSTS
Impairment losses on value of shares in
Group companies
Net profit/loss
Assets and liabilities measured at fair value

through profit/loss for the year
- Held for financial risk management*

Cash and cash equivalents
Other financial liabilities
Total net profit/loss

Interest costs**
Finance costs
Net financial items

PARENT COMPANY
2015

GROUP

2016
-
12

-
-
1
13

2015

-
-

-
-
1
1

2016
1 288
12

-
-
17
1 317

8
-

15
7
16
46

-508

-126

36
3
-65
-27

-57
-84
-71

-10
5
3
-2

-89
-91
-90

47
3
-40
-499

-59
-559
759

-12
5
3
-130

-79
-209
-163

* Refers to the held-for-trading category in accordance with IAS 39.
** SEK -37 million (-38) in the Group and parent company refers to interest costs on derivatives

measured at fair value through profit/loss for the year. Other interest income and interest costs are
related to financial items not measured at fair value.

Earnings from investments in Group companies amount to SEK 780 million, of which SEK
1 288 million relates to dividends from Group companies and SEK -508 million relates to
impairment losses on shares in Group companies.

The net gains and losses stated in net financial items mainly relate to currency revaluations of
internal loans and hedging of internal lending. They also include the revaluation of interest rate
swaps used to hedge loans at fixed rates of interest. The parent company’s net financial items also
include currency revaluation of external loans and forward contracts that hedge net investment in
foreign operations, which are recognised in the Group under other comprehensive income. The fair
value of the interest component in forward foreign exchange contracts as well as value changes
in accrued interest and realised interest in fixed-interest-rate swaps is recognised on an ongoing
basis in net interest items. Information on financial risks is provided on pages 36–39.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 7

NOTE 7. TAX

TAXES STATED IN INCOME STATEMENT
Current tax
Deferred tax
Total

GROUP

2016
-331
-105
-436

PARENT COMPANY
2015
-252
9
-244

2016
-305
4
-301

2015
-134
14
-120

Tax recognised totalled SEK -436 million, corresponding to 23 per cent of profit before tax.

Recognised profit/loss before tax

Tax at applicable rate
Difference in tax rate in foreign operations
Non-taxable income and non-deductible costs
Standard interest on tax allocation reserve
Effect of unstated loss carry-forwards and temporary differences
Tax attributable to previous periods
Change to tax rate on deferred tax assets/liabilities
Other
Effective tax

GROUP

PARENT COMPANY

2016

SEKm
1 859

-409
3
-27
-2
3
-1
0
-3
-436

22.0
-0.2
1.5
0.1
-0.2
0.1
0.0
0.2
23.4

2015

SEKm
679

-149
4
-16
-3
4
19
21
0
-120

22.0
-0.5
2.3
0.4
-0.6
-2.8
-3.1
0.0
17.7

2016

SEKm
1 499

-330
0
29
-2
0
0
0
1
-301

22.0
0.0
-1.9
0.1
0.0
0.0
0.0
-0.1
20.1

2015

SEKm
982

-216
0
-25
-3
0
0
0
0
-244

22.0
0.0
2.5
0.3
0.0
0.0
0.0
0.0
24.8

TAX ATTRIBUTABLE TO OTHER
COMPREHENSIVE INCOME

Cash flow hedging
Share in joint ventures’ other comprehensive income
Translation difference on foreign operations
Hedging of currency risk in foreign operations
Revaluations of defined benefit pension plans
Other comprehensive income

TAXES AS STATED IN BALANCE SHEET

GROUP

AFTER
TAX

BEFORE
TAX

TAX

2016

211
-21
-165
1
-159
-133

-46
-
-
-6
29
-24

164
-21
-165
-5
-130
-157

-34
3
8
22
208
207

TAX

2015

7
-
-
-5
-43
-41

AFTER
TAX

BEFORE
TAX

-26
3
8
17
165
166

211
-
-
-
-
211

TAX

2016

-46
-
-
-
-
-46

PARENT COMPANY
BEFORE
TAX

AFTER
TAX

164
-
-
-
-
164

-30
-
-
-
-
-30

AFTER
TAX

TAX

2015

7
-
-
-
-
7

-23
-
-
-
-
-23

Deferred tax asset
Current tax receivable
Total tax receivables

Deferred tax liabilities
Non-current assets
Biological assets*
Property, plant and equipment
Tax allocation reserve
Transactions subject to hedge accounting
Other, including deferred tax assets stated net
among deferred tax liabilities
Total deferred tax liabilities

Current tax liability
Total tax liabilities

* For the parent company this relates to forest land.

GROUP

2016
4
132
136

PARENT COMPANY
2015
-
-
-

2016
-
106
106

2015
6
12
18

GROUP

2016

2015

PARENT COMPANY
2015

2016

3 854
1 319
502
-35

-27
5 613

6
5 618

3 788
1 363
438
-81

0
5 508

53
5 561

634
-1
-
-35

13
612

-
612

634
-1
-
-81

18
569

53
622

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 7–9

CHANGE IN THE NET OF DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

GROUP

STATED
IN OTHER
COMPRE-
HENSIVE
INCOME
-
-
-
-46
29
-17

GROUP

STATED
IN OTHER
COMPRE-
HENSIVE
INCOME
-
-
-
7
-44
-36

PARENT COMPANY

TRANSLATION
DIFFERENCES
AND OTHER
-
19
-
-
-2
16

CLOSING
BALANCE
-3 854
-1 319
-502
35
32
-5 608

OPENING
BALANCE
-634
1
-
81
-18
-569

STATED IN
THE INCOME
STATEMENT
-1
0
-
-
4
4

STATED
IN OTHER
COMPRE-
HENSIVE
INCOME
-
-
-
-46
-
-46

PARENT COMPANY

TRANSLATION
DIFFERENCES
AND OTHER
-
-10
-
-
9
-1

CLOSING
BALANCE
-3 788
-1 363
438
81
5
-5 502

OPENING
BALANCE
-632
2
-
74
-29
-585

STATED IN
THE INCOME
STATEMENT
-2
-1
-
-
11
9

STATED
IN OTHER
COMPRE-
HENSIVE
INCOME
-
-
-
7
-
7

CLOSING
BALANCE
-634
1
-
35
-13
-612

CLOSING
BALANCE
-634
1
-
81
-18
-569

OPENING
BALANCE
-3 788
-1 363
-438
81
5
-5 502

STATED IN
THE INCOME
STATEMENT
-66
25
-64
-
0
-105

OPENING
BALANCE
-3 718
-1 361
-512
74
39
- 5 479

STATED IN
THE INCOME
STATEMENT
-69
8
74
-
1
14

2016
Biological assets*
Property, plant and equipment
Tax allocation reserve
Transactions subject to hedge accounting
Other
Deferred net tax liability

2015
Biological assets*
Property, plant and equipment
Tax allocation reserve
Transactions subject to hedge accounting
Other
Deferred net tax liability

* For the parent company this relates to forest land.

For information on biological assets see Note 11. Deferred tax liability in respect of property, plant
and equipment is primarily attributable to depreciation in excess of plan.

For information concerning provisions for taxes see Note 18.

The deferred tax income recognised in the consolidated income statement relates primarily to
changes in temporary differences. The amount recognised in other comprehensive income in-
cludes deferred tax related to changes of SEK -46 million (7) in hedging reserves and an impact of
SEK 29 million (-44) from the revaluation of defined benefit pension plans.

The Group sold essentially all its operations in Spain in 2016 and is planning to discontinue these
operations entirely. The parent company has requested an advance ruling on the entitlement to
group relief for tax losses in the Group’s Spanish operations when the operations are discontinued.
The Swedish tax authority has opposed this. The case is being reviewed by the Supreme Adminis-
trative Court and a ruling is expected in 2017. If the Group is entitled to group relief, it is estimated
this would result in a deduction in the parent company corresponding to approximately SEK 400
million in tax. No deferred tax asset has been recognised in connection with a possible entitlement
to relief.

NOTE 8. EARNINGS PER SHARE

NOTE 9. NON-CURRENT INTANGIBLE ASSETS

Total number of shares outstanding, 1 January
Buy-back of company’s own shares during the year
Total number of shares outstanding, 31 December

GROUP

2016

2015
83 996 162 83 996 162
-
-
83 996 162 83 996 162

Weighted average number of shares during the year, basic 83 996 162 83 996 162
Effect of share savings programme
-
Weighted average number of shares during the year,
diluted

83 996 162 83 996 162

Shareholders’ share of profit for the year, SEKm
Basic average number of shares, million
Basic EPS for the year, SEK

Shareholders’ share of profit for the year, SEKm
Diluted average number of shares, million
Diluted EPS for the year, SEK

1 424

559
83 996 162 83 996 162
6.7

16.9

1 424

559
83 996 162 83 996 162
6.7

16.9

In previous years 760 000 class B shares were repurchased, which corresponds to approximately
0.9 per cent of the total number of shares outstanding, and to approximately 0.3 per cent of the
total number of votes.

Holmen introduced a share savings programme during the year. The programme involves previ-
ously repurchased shares being transferred to programme participants at the end of the term. The
number of shares to be transferred depends on the Group’s return on capital employed over the
2016–2018 period. In the event of maximum allocation, 93 000 shares will be transferred from the
company to programme participants. The allocation of repurchased shares in order to meet these
undertakings results in dilution effects. The effects on key ratios and profit per share are marginal.
See Note 4 for further information about the share savings programme.

ACCUMULATED ACQUISITION COST
Opening balance
Investments
Disposal and retirement of assets
Translation differences
Total

AMORTISATION AND IMPAIRMENT
LOSSES, ACCUMULATED
Opening balance
Amortisation for the year
Impairment losses for the year
Disposal and retirement of assets
Translation differences
Total
Residual value according to plan at end
of year

GROUP

2016
225
5
-36
0
194

118
17
1
-28
0
107

PARENT COMPANY
2015
26
-
-
-
26

2016
26
-
-
-
26

2015
215
12
-1
-1
225

101
19
-
-1
-1
118

107

18
1
-
-
-
19

17
1
-
-
-
18

Intangible non-current assets mostly consist of IT systems of SEK 64 million (80). These assets
were largely acquired from external sources. They have determinable useful lives and are amor-
tised over 5–20 years. No goodwill applies for the Group.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 10

NOTE 10. PROPERTY, PLANT AND EQUIPMENT

GROUP
Accumulated acquisition cost
Opening balance
Investments
Reclassifications
Disposal and retirement of assets
Translation differences
Total

Amortisation and impairment
losses, accumulated
Opening balance
Depreciation and amortisation
according to plan for the year
Impairment losses for the year
Disposal and retirement of assets
Translation differences
Total
Residual value according to plan
at end of year

PARENT COMPANY
Accumulated acquisition cost
Opening balance
Investments
Disposal and retirement of assets
Total

BUILDINGS, OTHER
LAND AND LAND
INSTALLATIONS

2015

2016

2015

MACHINERY AND
EQUIPMENT
2016

2015

WORK IN PROGRESS AND
ADVANCE PAYMENTS TO
SUPPLIERS
2016

2015

FOREST LAND
2016

167
-
-
-14
-6
146

-
-
-
-
-

165
-
-
-
2
167

-
-
-
-
-

7 003
37
-
-1 420
-27
5 593

6 970
60
-
-5
-22
7 003

31 260
729
92
-4 192
-317
27 572

30 964
811
4
-526
8
31 260

4 247

3 822

23 992

23 166

118
81
-1 212
-6
3 229

142
306
-4
-19
4 247

882
41
-3 994
-181
20 740

1 080
249
-477
-25
23 992

130
18
-92
-1
-11
44

-
-
-
-
-

153
-17
-4
-3
0
130

-
-
-
-
-

TOTAL

2016

2015

38 560
784
-
-5 627
-362
33 355

38 252
854
-
-533
-13
38 560

28 239

26 988

1 000
122
-5 205
-187
23 968

1 222
555
-481
-45
28 239

146

167

2 365

2 756

6 832

7 268

130

9 387

10 321

BUILDINGS, OTHER
LAND AND LAND
INSTALLATIONS

2015

2016

2015

FOREST LAND
2016

MACHINERY AND
EQUIPMENT
2016

2015

TOTAL

2016

2015

461
3
0
464

-
-
-
-

434
26
0
461

-
-
-
-

2 390
-1
2 389
2 853

2 401
-12
2 390
2 850

139
-
0
139

129
1
0
130

1
-
1
10

139
-
0
139

128
1
0
129

1
-
1
11

232
26
-38
220

172
24
-38
158

-
-
-
62

248
23
-39
232

184
24
-36
172

-
-
-
60

832
29
-38
823

301
25
-38
288

822
49
-39
832

312
25
-36
301

2 391
-1
2 389
2 925

2 402
-12
2 391
2 922

Accumulated depreciation and amortisation according to plan
Opening balance
Depreciation and amortisation according to plan for the year
Disposal and retirement of assets
Total

Accumulated revaluations
Opening balance
Disposal and retirement of assets
Total
Residual value according to plan at end of year

In 2016, the Spanish operations in the Paper business area were sold, which reduced property, plant
and equipment by SEK 527 million, SEK 122 million of which was the result of an impairment loss in
connection with the signing of the sales agreement. The Group’s impairment losses on property, plant
and equipment are stated in the income statement in the line item ‘Impairment losses’.

The Group’s investment commitments for approved and ongoing projects amounted to SEK
250 million (776) at 31 December 2016. In 2016, the company’s capitalised borrowing costs to-
talled SEK 3 million (3). An interest rate of 1.5 per cent (1.8) was used to determine the amount.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 11

The net effect of the change in fair value and the change as a result of harvesting is stated in the in-
come statement as a change in value of biological assets. In 2016, this amounted to SEK 315 mil-
lion (267).

The table below shows how the value of forest assets would be affected by changes in the most sig-
nificant valuation assumptions.

Change in value
GROUP
Annual change, +0.1% per year
Rate of harvesting
Price inflation
Cost inflation

Change in level, +1%
Harvesting
Prices
Costs

Discount rate, +0.1%

BEFORE TAX

AFTER TAX

740
1 120
-600

250
390
-220

-480

580
870
-470

200
300
-170

-370

Annual change refers to the annual rate of change used in the valuation of each parameter. For
example, an increase of 0.1 per cent means that the annual price inflation will be increased from
2.0 per cent to 2.1 per cent in the calculations. Change in level means that the level for each
parameter and year changes. For example, a 1 per cent price increase means that the wood prices
in the calculations are raised by 1 per cent for all years (change in level).

NOTE 11. BIOLOGICAL ASSETS

Forest assets are recognised in the consolidated accounts as growing forest, which is stated as
a biological asset at fair value, and land, which is stated at cost. Holmen’s assessment is that
no relevant market prices are available that can be used to value forest holdings as extensive as
Holmen’s. The valuation is therefore made by calculating the present value of future expected
cash flows from the growing forests. Fair value measurement is based on measurement level 3.
This calculation of cash flows is made for the coming 100 years, which is regarded as the forests’
harvesting cycle. The cash flows are calculated on the basis of harvesting volumes according to
Holmen’s current plan and assessments of future price and cost changes. The cost of re-planting
has been taken into account, as re-planting after harvesting is a statutory obligation. The cash
flows are discounted using an interest rate of 5.5 (5.5) per cent.

In total, Holmen owns 1 042 000 hectares of productive forest land, with a volume of standing
forest totalling 120 million m3 growing stock, solid over bark. According to the harvesting plan,
valid from 2011, harvesting will amount to 3.1 million m3sub per year, of which 0.1 million m3sub
will be biofuel in the form of branches and treetops. It is believed that this level will remain largely
unchanged until 2030. Thereafter, harvesting is expected to increase gradually to over 4 million
m3sub per year by 2110. Around 45 per cent of the wood harvested consists of pulpwood that is
sold to the pulp and paper industry, 50 per cent is logs sold to sawmills and the remainder mainly
consists of forest fuel.

The valuation is based on a long-term trend price that is adjusted upwards annually by 2 per cent infla-
tion. The trend price for 2017 is 424 kr/m3sub, which is in line with applicable market prices. The cost
forecast is based on present-day levels and is adjusted upwardly by just over 2 per cent per year.

Holmen’s forest holdings are reported at SEK 17 448 million (17 173) before tax. A deferred tax li-
ability of SEK 3 854 million (3 788) is stated in relation to that figure. This represents the tax that is
expected to be charged against earnings from harvesting in the future. On that basis, the growing
forest, net after tax, is stated at SEK 13 594 million (13 385).

The change in the value of the growing forests can be broken down as follows:

GROUP
Carrying amount at start of year
Acquisition of growing forest
Sales of growing forest
Change due to harvesting
Unrealised change in fair value
Other changes
Carrying amount at end of year

2016
17 173
4
-27
-587
902
-17
17 448

2015
16 867
36
-2
-540
807
5
17 173

HARVESTING
’000 m3sub/yr

PRICES
SEK/m3sub

4 000

3 000

2 000

1 000

2001-2010

2011-2016

2017-2020

2021-2030

2031-2040

2041-2050

2051-2060

2061-2070

2071-2080

2081-2090

2091-2100

2101-2110

Average harvest

Planned harvest

600

500

400

300

200

1999

2003

2007

2011

2015

2019

2024

Real

Nominal

Price used in valuation (nominal)

The Nominal price series shows the average selling price for Holmen. The Real series shows
nominal prices recalculated at 2016 monetary value using historical Swedish CPI.

HOLMEN ANNUAL REPORT 2016 / NOTES

NOTE 12

NOTE 12. INVESTMENTS IN ASSOCIATES, JOINT VENTURES AND OTHER SHARES AND PARTICIPATING INTERESTS

Profit/loss from associates and joint ventures
Recognised in profit/loss for the year
Other comprehensive income from joint venture
Recognised in comprehensive income

JANUARY–DECEMBER

2016
-18
-18
-21
-21

2015
-46
-46
3
3

The combined value of Holmen’s share in the profits of associates amounted to SEK -14 million (10) for the Group and to SEK -9 million (4) for the parent company. The combined value of Holmen’s share in
the profits of joint ventures amounted to SEK -8 million (-3) for the Group and to SEK -8 million (-3) for the parent company.

ASSOCIATES
Carrying amount at start of year
Investments
Share of earnings
Disposals
Dividends received
Translation difference
Impairment losses
Carrying amount at end of year

GROUP

2016
1 772
5
-16
-105
-12
4
-2
1 646

2015
1 828
-
-46
-
-
-3
-7
1 772

PARENT COMPANY
2015
125
-
-
-
-
-
-
125

2016
125
-
-
-2
-
-
-
123

During the year, investments in associates that manage logistics, energy and recycling of recovered
paper were sold, primarily in connection with the sale of the Spanish operations.

JOINT VENTURE
Carrying amount at start of year
Investments
Share of earnings
Other
Carrying amount at end of year

GROUP

2016
141
10
-30
6
127

PARENT COMPANY
2015
82
-
-
-
82

2016
82
10
-
-
92

2015
142
-
-1
-
141

PARENT COMPANY AND GROUP HOLDINGS OF SHARES AND INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

CORPORATE
ID NO.

REGISTERED
OFFICE

NO. OF
INVEST-
MENTS INTEREST %*

VALUE OF
HOLDING IN
CONSOLIDAT-
ED ACCOUNTS
2016

CARRYING
AMOUNT IN
THE PARENT
COMPANY

VALUE OF
HOLDING IN
CONSOLIDAT-
ED ACCOUNTS
2015

CARRYING
AMOUNT IN
THE PARENT
COMPANY

INTEREST %*

556017-6678
556016-0953
556036-9398
556594-6984
556504-2826
556713-5172

ASSOCIATES
Brännälvens Kraft AB
Gidekraft AB
Harrsele AB
Uni4 Marketing AB
Vattenfall Tuggen AB
VindIn AB
Melodea Ltd, Israel
Baluarte Sociedade de Recolha
e Recuperação de Desperdicios,
Lda, Portugal
SAS Saica Natur sud, France
Peninsular Cogeneración S.A., Spain
Other associates

Arbrå
Örnsköldsvik
Vännäs
Stockholm
Lycksele
Stockholm
Tel Aviv

Alcochete
Lorp-Sentaraille
Madrid

5 556
990
9 886
1 800
683
200
119

2
678
4 500

13.9
9.9
49.4
36
6.8
17.7
46.7

-
-
-

JOINT VENTURE
Varsvik AB
Total

556914-9833

Stockholm

250

50.0

36
0
1 465
12
75
55
2

-
-
-
0
1 646

127
1 773

-
0
-
2
75
46
-

-
-
-
0
123

92
215

13.9
9.9
49.4
36.0
6.8
17.7
42.4

50.0
24.0
50.0

50.0

36
0
1 467
21
75
57
2

37
20
55
2
1 772

141
1 914

-
0
-
2
75
46
-

-
-
-
2
125

82
208

* The percentage of ownership corresponds to the percentage of votes for the total number of shares.

The holdings in Brännälvens Kraft AB, Gidekraft AB, Harrsele AB and Vattenfall Tuggen AB refer to
hydro power assets, and the holdings in VindIn AB refer to wind power assets. The holdings entitle
the Group to buy electricity produced at cost price, so the associate only earns a very limited profit.
Purchased electricity is sold to external customers at market price, and the earnings are stated in
the consolidated accounts within the Renewable energy business area.

The holding in associate Harrsele AB is recognised in the Group at SEK 1 465 million (1 467).
Holmen purchased 416 (564) GWh of electrical power from Harrsele AB in 2016, giving Holmen
an operating profit of SEK 76 million (95) from market sales. Harrsele AB owns power assets that

generate 950 GWh of electrical power in a normal year. These assets were originally constructed
in 1957–58 and the carrying amount of the non-current assets in Harrsele AB amounts to
SEK 114 million (115). The company has non-current liabilities to its owner of SEK 25 million (25).

Ownership in remaining associates relates to activities in the areas of sales, research and development.

The interests in Brännälvens Kraft AB, Gidekraft AB, Vattenfall Tuggen AB and VindIn AB are
classified as associates even though the holdings are less than 20 per cent, since shareholder
agreements provide significant influence over each company’s activities.

Ownership in the joint venture, Varsvik AB, relates to wind power operations.

HOLMEN ANNUAL REPORT 2016 / NOTESOTHER SHARES AND PARTICIPATING INTERESTS
Carrying amount at start of year
Disposals
Translation difference
Impairment losses
Carrying amount at end of year

NOTE 12–13

GROUP

2016
4
-
0
-2
2

PARENT COMPANY
2015
1
0
-
-
1

2016
1
-
-
-
1

2015
4
0
0
-
4

NOTE 13. FINANCIAL INSTRUMENTS

Non-current financial receivables consist of interesting-bearing financial receivables to
other companies, prepayments for credit facilities and the fair value of non-current derivatives.
The parent company’s receivables from Group companies include a significant share of interest-
free receivables between Swedish wholly owned Group companies.

Current financial receivables are recognised as fixed income investments and lending for
durations of up to one year, accrued interest income and unrealised exchange gains. Current
financial receivables essentially have fixed interest periods of under three months, and thus involve
a very limited interest rate risk.

Cash and cash equivalents refers to bank balances and investments that can be readily
converted into cash for a known amount and with a duration of no more than three months from
the date of acquisition, which also means that the interest rate risk is negligible. Cash and cash
equivalents are placed in bank accounts or as current deposits at banks.

Loan liabilities, accrued interest costs, unrealised exchange losses and fair values of derivatives
are stated as financial liabilities.

Financial liabilities are largely interest-bearing. The parent company’s liabilities to Group
companies include a significant amount of interest-free liabilities between Swedish wholly owned
Group companies.

The maturity structure and average interest for the Group’s liabilities are stated in the administra-
tion report on pages 38–39. SEK -3 151 million of the parent company’s liabilities are due for pay-
ment within one year. In addition to the financial assets and liabilities identified above, the pension
liability (see Note 17) is also included in net financial debt.

All of the Group’s derivatives are covered by ISDA or FEMA agreements, which entails a right for
Holmen to offset assets and liabilities in relation to the same counterparty in the case of a credit
event. Taking into account the terms of the netting agreement, the net exposure is SEK -172 million.
Assets and liabilities are not offset in the report. Recognised derivatives totalled SEK 213 million
(138) on the asset side and SEK -385 million (-466) on the liabilities side.

Items measured at fair value belong to measurement level 2 pursuant to IFRS 13. Fair value in the
tables is calculated on the basis of discounted cash flows and all variables, such as discount rates
and exchange rates, are taken from market listings for calculations. The difference between fair
value and carrying amount arises because certain liabilities are not measured at fair value in the
balance sheet, and are instead stated at their amortised cost. For loans recognised at amortised
cost, fair value is calculated on the basis of discounted cash flows and belongs to measurement
level 2. All variables are taken from market listings for calculations. The Group has no loans that
are recognised at fair value in profit/loss. In the case of trade receivables, trade payables and other
items not affected above, the carrying amount is stated as the fair value, as this is judged to be a
good reflection of the fair value. Since it has not been possible to determine a reliable fair value for
shares and interests, they have been excluded from the tables. For further information on financing,
see the section on Risk, on pages 36–39.

MATURITY STRUCTURE, UNDISCOUNTED AMOUNTS*
2018

2017

2019

2020

2021–

FINANCIAL LIABILITIES
Derivatives
Other financial liabilities

FINANCIAL RECEIVABLES
Derivatives
Other financial receivables

-93
-3 151

-23
-310

-17
-501

-16
-

55
245

-
4

-
1

-
-

-
0

* Refers to financial instruments included in Group net financial debt, excluding provisions for pensions.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 13

NOTE 13. FINANCIAL INSTRUMENTS, CONT.

DERIVATIVES
RECO GNISED
AT FAIR VALUE
THROUGH
PROFIT/LOSS
2016

2015

DERIVATIVES
WITH HEDGE
ACCOUNTING
2016

2015

TRADE
RECEIVABLES
AND LOAN
RECEIVABLES
2016

2015

AVAILABLE-FOR-
SALE ASSETS
2016

2015

OTHER LIABILITIES
2015

2016

TOTAL CARRYING
AMOUNT
2016

2015

FAIR VALUE
2016

2015

-
0

-
55
-
55

-
-
-

-
-
-
-

-
-
-53
-
-
-
-
-53

-
-

-23

-14

-
0

-
37
-
37

-
-
-

-
-
-
-

-
-
-8
-
-
-
-
-8

-
-

-2

-
-

-
-
-
-

-
-
-

-
-

-
-
-
-

-
-
-

-
-75
-
-75

-
-83
-
-83

-
-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-
-

-
-

39
39

1
-
34
34

43
43

0
-
24
24

0
210
210

0
221
221

-
-
-
-

-
-
-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-
-
-

-
2 174

-
1 987

150

-233

-375

-158

-368

2 457

2 275

-
-

-
-
-
-

-
-
-

-
-
-
-

-
-
-
-
-
-
-
-

2
-

-
-

-
-
-
-

-
-
-

-
-
-
-

-
-
-
-
-
-
-
-

4
-

-
-

-
-
-
-

-
-
-

-
-

-
-
-
-

-
-
-

39
39

1
55
34
89

43
43

0
37
24
61

39
39

1
55
34
89

43
43

0
37
24
61

0
210
210

0
221
221

0
210
210

0
221
221

-700

-800
-
-8
-808

-1 709
-26
-
-12
-700
-700
-
-3 147

-1 500
-
-13
-2 213

-2 144
-27
-
-13
-500
-
-7
-2 691

-800
-75
-8
-882

-1 709
-26
-53
-12
-700
-700
-
-3 200

-1 500
-83
-13
-2 295

-2 144
-27
-8
-13
-500
-
-7
-2 698

-800
-75
-8
-882

-1 709
-26
-53
-12
-700
-700
-
-3 200

-1 500
-83
-13
-2 295

-2 144
-27
-8
-13
-500
-
-7
-2 698

-
-

2
2 174

4
1 987

2
2 174

-
1 987

158

100

158

100

-1 766

-1 916

-1 766

-1 916

-1 766

-1 916

-257

-377

-257

-377

-5 721

-6 820

-3 433

-4 871

-3 433

-4 875

Group

FINANCIAL INSTRUMENTS
INCLUDED IN NET FINANCIAL DEBT

NON-CURRENT FINANCIAL
RECEIVABLES
Other financial receivables

CURRENT FINANCIAL RECEIVABLES
Accrued interest
Derivatives
Other financial receivables

CASH AND CASH EQUIVALENTS
Current deposit of cash and cash
equivalents
Bank balances

NON-CURRENT LIABILITIES
MTN loans
Loans from banks and other credit
institutions
Derivatives
Other non-current liabilities

CURRENT LIABILITIES
Commercial paper programme
Bank account liabilities
Derivatives
Accrued interest
MTN loans
Other bond loans
Other current liabilities

FINANCIAL INSTRUMENTS NOT
INCLUDED IN NET FINANCIAL DEBT
Other shares and participating
interests
Trade receivables
Derivatives (recognised among
operating receivables)

Trade payables
Derivatives (recognised among
operating liabilities)

Total financial instruments

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 13

Parent company

FINANCIAL INSTRUMENTS
INCLUDED IN NET FINANCIAL DEBT

NON-CURRENT FINANCIAL
RECEIVABLES
Receivables from Group companies
Other financial receivables

CURRENT FINANCIAL RECEIVABLES
Accrued interest
Derivatives
Other financial receivables

CASH AND CASH EQUIVALENTS
Bank balances

NON-CURRENT LIABILITIES
MTN loans
Loans from banks and other credit
institutions
Liabilities to Group companies
Derivatives

CURRENT LIABILITIES
Commercial paper programme
Bank account liabilities
Derivatives
Accrued interest
MTN loans
Other bond loans
Other current liabilities

FINANCIAL INSTRUMENTS NOT
INCLUDED IN NET FINANCIAL DEBT
Other shares and participating
interests
Trade receivables
Derivatives (recognised among
operating receivables)

Trade payables
Derivatives (recognised among
operating liabilities)

Total financial instruments

DERIVATIVES
RECOGNISED
AT FAIR VALUE
THROUGH PROFIT/
LOSS

2016

2015

DERIVATIVES
WITH HEDGE
ACCOUNTING
2016

2015

TRADE
RECEIVABLES
AND LOAN
RECEIVABLES
2016

2015

AVAILABLE-FOR-
SALE ASSETS
2016

2015

OTHER LIABILITIES
2015

2016

TOTAL CARRYING
AMOUNT
2016

2015

FAIR VALUE
2016

2015

-
-
0

-
55
-
55

-
-

-
-
-
-

-
-
-53
-
-
-
-
-53

-
-

-24

-10

-
-
0

-
37
-
37

-
-

-
-
-
-

-
-
-8
-
-
-
-
-8

-
-

-3

-
-
-

-
-
-
-

-
-

-
-
-

-
-
-
-

-
-

-
-
-75
-75

-
-
-83
-83

-
-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-
-

-
-

3 104
98
3 202

3 119
95
3 214

1
-
34
34

104
104

0
-
24
24

155
155

-
-
-
-

-
-
-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-
-
-

-
1 874

-
1 645

151

-234

-376

-157

-368

5 214

5 039

-
-
-

-
-
-
-

-
-

-
-
-
-

-
-
-
-
-
-
-
-

0
-

-
-
-

-
-
-
-

-
-

-
-
-
-

-
-
-
-
-
-
-
-

1
-

-
-
-

-
-
-
-

-
-

-
-
-

-
-
-
-

-
-

3 104
98
3 202

3 119
95
3 214

3 104
98
3 202

3 119
95
3 214

1
55
34
89

104
104

0
37
24
61

155
155

1
55
34
89

104
104

0
37
24
61

155
155

-700

-800 - 1 500
-1 013
-
-3 213

-1 454
-
-2 254

-1 709
-26
-
-12
-700
-700
-
-3 147

-2 144
-27
-
-13
-500
-
-6
-2 690

-800
-1 454
-75
-2 328

-1 709
-26
-53
-12
-700
-700
-
-3 200

-1 500
-1 013
-83
-3 295

-2 144
-27
-8
-13
-500
-
-6
-2 698

-800
-1 454
-75
-2 328

-1 709
-26
-53
-12
-700
-700
-
-3 200

-1 500
-1 013
-83
-3 295

-2 144
-27
-8
-13
-500
-
-6
-2 698

-
-

0
1 874

1
1 645

0
1 874

-
1 645

164

102

164

102

-1 576

-1 845

-1 576

-1 845

-1 576

-1 845

-258

-379

-258

-379

-6 976

-7 748

-1 929

-3 038

-1 929

-3 039

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 14–16

NOTE 14. INVENTORIES

NOTE 16. EQUITY, PARENT COMPANY

Raw materials and consumables
Logs and pulpwood
Finished products and work in progress
Felling rights
Electricity certificates and emission
allowances
Total

GROUP

2016
831
233
1 431
431

54
2 981

2015
971
299
1 237
526

56
3 089

PARENT COMPANY
2015
645
272
858
508

2016
637
206
1 077
423

54
2 396

52
2 336

During the year, impairment losses on inventories affected profit by SEK -2 million (18) for the
Group and SEK -5 million (9) for the parent company.

NOTE 15. OPERATING RECEIVABLES

Trade receivables
Group companies
Associates
Other
Total trade receivables
Current receivables
Group companies
Associates
Other
Derivatives
Prepayments and accrued income
Total other operating receivables
Total operating receivables

GROUP

2016

2015

PARENT COMPANY
2015

2016

-
38
2 137
2 174

-
5
226
158
175
564
2 738

-
52
1 935
1 987

-
4
219
100
196
519
2 505

50
38
1 786
1 874

-
5
129
164
82
380
2 254

83
51
1 511
1 645

-
4
191
102
84
381
2 026

Trade receivables are recognised at the amount expected to be received, based on an individual
assessment of each customer. The Group’s trade receivables mainly relate to European customers.
Trade receivables denominated in foreign currencies were valued at the balance sheet date.
Following an individual assessment of all trade receivables, a provision for anticipated credit losses
of SEK 37 (38) million has been made and recognised, net, together with trade receivables. During
the year, the provision was changed by SEK -3 million (-6) as a result of actual credit losses, and
by SEK 2 million (12) as a result of changes in the provision for anticipated credit losses. At 31
December 2016, SEK 44 million (87) of trade receivables were past due for more than 30 days.
The credit quality of financial assets that are neither past due nor impaired is deemed to be good.

The fair values of derivatives relate to hedges of future cash flows.

Customer credit risks related to the Group’s customers are managed by the relevant business areas
and are described on page 37.

SHARE CAPITAL
Registered share capital
Class A
Class B
Total no. of shares
Repurchased class B shares
Total number of shares
outstanding

31 Dec 2016

NUMBER QUOTIENT VALUE

SEKm

50
50

1 131
3 107
4 238

22 623 234
62 132 928
84 756 162
-760 000

83 996 162

31 Dec 2015

NUMBER QUOTIENT VALUE

SEKm

50
50

1 131
3 107
4 238

22 623 234
62 132 928
84 756 162
-760 000

83 996 162

The company’s share capital consists of shares issued in two classes: class A, each of which
carries 10 votes, and class B, each of which carries one vote. In other respects, there are no
restrictions between classes of shares.

At 31 December 2016 the Group’s own shareholding was 760 000 shares (760 000).
None of the Group’s own shares were sold during the year.

Assets and liabilities measured at fair value according to Chapter 4 Section 14a of the Swedish
Annual Accounts Act had an impact of SEK -167 million (-330) on parent company equity. In the
consolidated accounts, valuation of derivatives and other financial instruments had an impact of
SEK -172 million (-330) on equity.

Holmen’s profitability target is for forests and power to generate a return of 5 per cent and for its
industrial operations to generate a return of over 10 per cent. Taken together this means that the
Group’s return on capital employed should exceed 7 per cent. Decisions on dividends are based on
an appraisal of the Group’s profitability, future investment plans and financial position. The aim is to
have a robust financial position with a debt/equity ratio at a maximum of 0.5.

The AGM has at its disposal the company’s earnings amounting to SEK 4 921 232 735. The Board
proposes that the AGM on 27 March 2017 approve a dividend of SEK 12 per share. The proposed
dividend totals SEK 1 008 million. The Board also proposes that the remaining amount of SEK
3 913 277 791 be carried forward.

For the previous year, the dividend paid was SEK 10.5 per share (SEK 882 million).

The debt/equity ratio was 0.19 (0.23).

Neither the parent company nor any of the subsidiaries are subject to external capital requirements.
For further details about the Group’s capital management and risk management, see pages 36–39.

HOLMEN ANNUAL REPORT 2016 / NOTES
NOTE 17

NOTE 17. PENSION PROVISIONS

Holmen provides defined-benefit pension plans for some office-based employees in Sweden.
Most of these commitments are secured by means of insurance policies with Alecta. As Alecta
cannot provide sufficient information to permit the ITP plan to be stated in the accounts as a
defined benefit plan, it is stated in accordance with statement UFR 10 of the Swedish Financial
Reporting Board as a defined contribution plan. Some defined benefit obligations over and above
the ITP plan are available for Group management and secured by means of a pension fund.
Occupational pensions for other office-based employees and all collective agreement workers in
Sweden are defined contribution plans. Defined benefit plans in the UK have been closed to new
pension accruals since 2015. These obligations are recognised in the consolidated accounts as
defined benefit plans in accordance with IAS 19.

COST RECOGNISED IN PROFIT/LOSS
FOR THE YEAR
Defined benefit plans
Personnel costs
Finance costs
Curtailment gain
Total defined benefit plans stated in
profit/loss for the year
Defined contribution plans
Personnel costs
Total recognised in profit/loss for the year

GROUP

PARENT COMPANY

2016

2015

2016

2015

-7
-2
-

-9

-23
-12
36

-21
1
-

-21

-12
1
-

-10

-129
-138

-129
-127

-106
-127

-110
-120

COST RECOGNISED IN OTHER
COMPREHENSIVE INCOME
Return on plan assets excl. recognised interest income
Actuarial gains and losses from changes in demographic
assumptions
Actuarial gains and losses from changes in financial
assumptions
Actuarial gains and losses from experiential adjustments
Payroll tax
Total recognised in other comprehensive income

2016
241

-418
-13
-1
-159

2015
-43

47
157
2
208

The change in the defined benefit obligations and the change in plan assets are specified in
the tables below. Some 90 per cent of the obligations relate to the pension plans in the UK. The
obligations arising out of the pension schemes in the UK are placed in a trust. These are governed
by a board consisting of representatives from Holmen and the beneficiaries. Holmen’s UK subsidiary
has a commitment to cover the deficit that exists over a period of time as established between the
trust and the company in consultation with its actuary. This period is currently just over 4 years and
is subject to review every 3 years.

OBLIGATIONS
Obligations at 1 January
Current service cost
Payroll tax
Interest costs
Actuarial gains/losses
Contribution by plan participants
Benefits paid
Transferred from provisions
Settlements
Exchange differences
Obligations at 31 December

GROUP

2016
-2 374
-7
2
-77
-399
-
212
-
-
230
-2 414

2015
-2 565
-23
3
-93
249
-3
101
-1
36
-79
-2 374

PARENT COMPANY
2015
-159
-12
-
-1
-
-
20
-1
-
-
-153

2016
-153
-21
-
-7
-
-
13
-
-
-
-167

Of the Group’s total obligations, SEK 11 million (14) refers to those that are not funded, while the rest
are wholly or partially funded obligations. Of the parent company’s obligations, SEK 12 million (5) are
secured under the Swedish Pension Obligations Vesting Act.

The weighted average duration is 18 years.

PLAN ASSETS
Fair value of assets at 1 January
Interest income
Expected return excl. recognised interest
income
Real return (parent company)
Administration fees
Contribution by employer
Contribution by plan participants
Benefits paid
Exchange differences
Fair value of assets at 31 December
Pension provisions, net

Plan assets by type are as shown below:

PLAN ASSETS
Equities
Bonds
Current fixed income investments

GROUP

2016
2 244
75

241
-
-5
73
-
-197
-218
2 213
-201

2015
2 165
82

-43
-
-4
65
3
-84
59
2 244
-130

PARENT COMPANY
2015
148
-

2016
148
-

-
7
-
-
-
-
-
155
-12

-
3
-
-
-
-3
-
148
-5

GROUP

2016
1 130
1 063
20
2 213

2015
1 127
1 101
17
2 244

PARENT COMPANY
2015
57
90
1
148

2016
71
80
3
155

The plan assets do not include any financial instruments issued by Group companies or assets used
by the Group. Of equities, 49 per cent relate to the UK, 47 per cent to the rest of Europe and the US
and 4 per cent to the rest of the world. Of bonds, 44 per cent relate to government bonds and 56
per cent to corporate bonds.

KEY ACTUARIAL ASSUMPTIONS,
GROUP (WEIGHTED AVERAGE), %
Discount rate
Rate of salary increase
Rate of price inflation

31 Dec 2016
2.7
3.0
3.1

31 Dec 2015
3.7
3.0
2.9

The discount rate for pension obligations was established on the basis of high-quality corporate
bonds. A discount rate of 0.8 per cent (1.9) and salary levels at the balance sheet date were used
for calculating the amount of the parent company’s pension obligation.

The table below shows how the obligation would be affected in the event of a change in key actuarial
assumptions (- reduces debt, + increases debt).

SENSITIVITY ANALYSIS
Discount rate (+ 0.5%)
Rate of salary increase (+ 0.5%)
Rate of price inflation (+ 0.5%)
Mortality (+ 1 year in life expectancy)

31 Dec 2016
-203
2
178
82

31 Dec 2015
-188
2
164
72

The Group’s payments into the funded defined benefit plans in 2017 are expected to amount to
SEK 31 million.

Multi-employer plans
The year’s premiums for pension insurance policies taken out with Alecta’s ITP 2 plan amounted
to SEK 33 million (33) and are included among personnel costs in the income statement. Holmen’s
share of the total number of active members in the plan amounted to 765 active members, which
corresponds to 0.15 per cent. Premiums to Alecta are expected to amount to SEK 32 million in
2017. Alecta’s surplus can be allocated to policyholders and/or the persons insured. If Alecta’s
collective consolidation falls below 125 per cent or exceeds 155 per cent, measures will be taken to
create the conditions to ensure the level of consolidation returns to the normal range. In the event
of low consolidation, one measure may be to raise the agreed price for new policy subscriptions
and an increase in existing benefits. In the event of high consolidation, one measure may be to
introduce reductions in premiums. At the end of 2016, Alecta’s collective consolidation level was
148 per cent (153).

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 18–20

NOTE 18. OTHER PROVISIONS

GROUP
Carrying amount at start of year
Provisions during the year
Utilised during the year
Unutilised amount reversed during the year
Translation differences
Carrying amount at end of year
Of which non-current portion of the provisions
Of which current portion of the provisions

PARENT COMPANY
Carrying amount at start of year
Provisions during the year
Utilised during the year
Unutilised amount reversed during the year
Carrying amount at end of year
Of which non-current portion of the provisions
Of which current portion of the provisions

PROVISIONS FOR TAXES

OTHER PROVISIONS

TOTAL

2016
45
-
-
-
-
45
45
-

45
-
-
-
45
45
-

2015
140
-
-
-95
0
45
45
-

45
-
-
-
45
45
-

2016
697
335
-163
-15
2
856
627
228

892
228
-274
-13
833
572
261

2015
463
410
-59
-117
0
697
540
157

630
524
-147
-115
892
608
284

2016
742
335
-163
-15
2
901
673
228

937
228
-274
-13
878
617
261

2015
603
410
-59
-212
0
742
585
157

676
524
-147
-115
937
653
284

Other provisions mainly relate to uncertainties associated with the sale of the business in Spain,
obligations for environmental restoration and for fixed price electricity supply contracts.

The increase during the year mainly relates to provisions as a result of the sale of the mill in Madrid.

A provision is included in the parent company for future measures for reforestation after harvesting
for SEK 197 million.

NOTE 19. OPERATING LIABILITIES

NOTE 20. OPERATING LEASES

Trade payables
Group companies
Associates
Other
Total trade payables

Current liabilities
Group companies
Associates
Other
Derivatives
Accruals and deferred income
Total other operating liabilities
Total operating liabilities

GROUP

2016

2015

PARENT COMPANY
2015

2016

-
-
1 766
1 766

-
11
251
257
561
1 079
2 845

-
14
1 903
1 916

-
7
199
377
676
1 259
3 176

116
-
1 460
1 576

0
11
158
258
443
870
2 445

265
-
1 579
1 845

0
7
165
379
441
993
2 837

In 2016, the Group’s lease payments amounted to SEK 54 million (70), and the parent company’s
to SEK 38 million (37). The Group’s leases mainly relate to trucks, cars and rental agreements.
No new leases of any significance for the business were entered into during the 2016 financial year.
No leased equipment was subleased.

The breakdown of future lease payments is as follows:

GROUP

2018
–2022
50

2017
40

PARENT COMPANY

2023–
0

2017
26

2018
–2022
27

2023–
-

Future lease payments
Present value of future
lease payments

The contracts have remaining durations ranging from 1 to 7 years. The Group’s future lease
payments for existing lease agreements amounted to SEK 119 million at the end of the
previous year. Those in the parent company amounted to SEK 65 million.

Apart from lease agreements, Holmen has two time charter contracts in respect of ships that are
used to distribute the company’s products. These two agreements were extended in 2015 and
have a remaining duration of one year from 1 January 2017.

All trade payables are due for payment within one year.

Accruals and deferred income in the parent company principally consist of personnel costs of
SEK 196 million (195), discounts of SEK 42 million (48) and goods delivered but not yet invoiced of
SEK 36 million (38).

Fair values of derivatives essentially relate to the hedging of future cash flows. See Note 13.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 21–22

CONTINGENT LIABILITIES
Surety on behalf of Group companies
Other contingent liabilities
Total

GROUP

2016
-
86
86

PARENT COMPANY
2015
34
55
89

2016
34
68
102

2015
-
122
122

Other contingent liabilities for the Group largely comprise ongoing legal processes and guarantee
undertakings for third parties. Holmen has environmentally related contingent liabilities that cannot
currently be quantified but that could result in future costs.

L E Lundbergföretagen AB is a major shareholder in Holmen (see page 41). Holmen rents office
premises for SEK 8 million (7) from Fastighets AB L E Lundberg, which is a group company within
L E Lundbergföretagen AB. In 2016, Fredrik Lundberg, who is CEO and principal shareholder in
L E Lundbergföretagen, received a fee of SEK 680 000 (650 000) as Board chairman of Holmen.
Louise Lindh, who is the CEO of Fastighets AB L E Lundberg and who is also a party related to
Fredrik Lunberg, received a Board fee of SEK 340 000.

Transactions with related parties are priced on market terms. The equity holdings in associates
that produce hydro and wind power entitle the Group to buy the electricity produced at cost price in
relation to the shareholding, which means that the associate only earns a limited profit. Purchased
electricity is sold to external customers at market price, and the earnings are stated in the
consolidated accounts within the Renewable energy business area.

In Spain, until the sale of the Spanish business, energy and recovered paper was purchased
from associates.

NOTE 21. COLLATERAL AND CONTINGENT LIABILITIES

GROUP
For own liabilities
Financial liabilities
Total

PARENT COMPANY
For own liabilities
Financial liabilities
Total

PROPERTY
MORTGAGES

OTHER
COLLATERAL

-
6
6

-
127
127

TOTAL
COLLATERAL
2016
-
134
134

TOTAL
COLLATERAL
2015
-
148
148

-
134
134

-
148
148

The holding in a jointly owned company, Varsvik AB, is pledged and amounted to SEK 127 million
(141) at the end of the year.

NOTE 22. RELATED PARTIES

Of the parent company’s net sales of SEK 13 794 million (13 989), 99 (114) per cent relates to
deliveries to Group companies. The parent company’s purchases from Group companies amounted
to SEK 1 479 million (1 630).

There are significant financial receivables and liabilities between the parent company and its
Swedish subsidiaries, which do not carry interest.

The parent company has a related party relationship with its subsidiaries (see Note 23).

Holmen Paper AB has contractually committed to purchase products on a continuous basis from
Holmen Paper Madrid SL at a price calculated at production cost plus tied-up capital, for onward
sale to end-customers. The aim is to optimise operations within this business area. Holmen Paper
AB’s purchases from Holmen Paper Madrid SL in 2016 amounted to SEK 1 371 million (1 510).
As Holmen Paper AB is acting on a commissioned basis for Holmen AB, these transactions are
accounted for via Holmen AB. As part of the sale of the Spanish business, the agreement was
terminated early in 2016, which led to Holmen Paper AB paying compensation of SEK 643 million
to Holmen Paper Madrid SL for loss of profit over the term of the agreement.

Transactions with related parties

GROUP
Associates
Joint ventures

PARENT COMPANY
Subsidiaries
Associates
Joint ventures

SALE OF PRODUCTS TO
RELATED PARTIES

2016
280
-

99
280

2015
208
-

115
208
-

PURCHASE OF PRODUCTS
FROM RELATED PARTIES
2015
242
-

2016
172
-

OTHER (E.G. INTEREST,
DIVIDEND)
2016
0
5

2015
0
0

1 479
99
-

1 630
112
-

1 299
0
5

18
0
0

LIABILITY TO RELATED
PARTIES

RECEIVABLE FROM
RELATED PARTIES

2016
61
-

1 571
57
-

2015
91
-

1 280
77
-

2016
82
17

3 160
82
79

2015
89
12

3 203
88
68

For fees and remuneration paid to members of the Board, see Note 4.

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 23

NOTE 23. INVESTMENTS IN GROUP COMPANIES

ACCUMULATED ACQUISITION COST
Carrying amount at start of year
Shareholder’s contribution
Closing balance at 31 December

PARENT COMPANY

2016
17 141
1
17 141

2015
17 141
0
17 141

ACCUMULATED IMPAIRMENT LOSSES
Carrying amount at start of year
Impairment losses for the year
Closing balance at 31 December
Carrying amount at end of year

PARENT COMPANY

2016
5 330
508
5 838
11 303

2015
5 204
126
5 330
11 810

The parent company’s impairment losses on investments in Group companies are stated in the
income statement in the line item for ‘Profit/loss from investments in Group companies’ and do in
2016 relate to holdings in Spanish companies.

Parent company’s direct holdings of investments in subsidiaries

CORPORATE ID NO.

REGISTERED
OFFICE

NO. OF
SHARES

CARRYING
AMOUNT IN
THE PARENT
COMPANY

INTEREST %*

2015

INTEREST %*

2016

Holmen Skog AB
Iggesund Paperboard AB
Holmen Paper AB
Holmen Timber AB
Holmen Energi AB
Holmens Bruk AB
Holmen Holding AB
MoDo Capital AB
Holmen Energi Elnät AB
Stavro Vind AB
Other Swedish Group companies
Total Swedish holdings

556220-0658
556088-5294
556005-6383
556099-0672
556524-8456
556537-4286
516406-0062
556499-1668
556878-3905
556953-6153

Holmen France S.A.S., France
Holmen UK Ltd, UK
Holmen Paper Ltd**
Iggesund Paperboard (Workington) Ltd**
Holmen GmbH, Germany
Holmen Suecia Holding S.L., Spain
Holmen Paper Madrid S.L.**
Cartón y Papel Reciclado S.A. (Carpa), Spain**
Iggesund Paperboard Asia Pte Ltd, Singapore
Holmen B.V., Netherlands
AS Holmen Mets, Estonia
Iggesund Paperboard Inc, US
Iggesund Paperboard Asia (HK) Ltd, China
Other non-Swedish Group companies
Total non-Swedish holdings
Total

Örnsköldsvik
Hudiksvall
Norrköping
Hudiksvall
Örnsköldsvik
Stockholm
Stockholm
Stockholm
Örnsköldsvik
Stockholm

Paris
Workington
London
Workington
Hamburg
Madrid
Madrid
Madrid
Singapore
Amsterdam
Tallinn
Lyndhurst
Hong Kong

1 000
1 000
100
1 000
1 000
1 000
10 000
1 000
500
500

10 000
1 197 100
-
-
-
9 448 557
-
-
800 000
35
500
1 000
4 000 000

* The percentage of ownership corresponds to the percentage of votes for the total number of shares. ** Indirect holdings.

100
100
100
100
100
100
100
100
100
100

100
100
100
100
100
100
100
-
100
100
100
100
100

0
0
0
0
0
8 868
0
72
0
7
1
8 948

0
1 519
-
-
1
808
-
-
4
9
-
7
5
2
2 355
11 303

100
100
100
100
100
100
100
100
100
100

100
100
100
100
100
100
100
100
100
100
100
100
100

0
0
0
0
0
8 868
45
72
0
7
1
8 993

0
1 519
-
-
1
1 270
-
-
4
9
-
7
5
2
2 817
11 810

HOLMEN ANNUAL REPORT 2016 / NOTESNOTE 24–26

NOTE 24. UNTAXED RESERVES

PARENT COMPANY

NOTE 26. CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS

ACCUMULATED DEPRECIATION
AND AMORTISATION IN EXCESS
OF PLAN
Non-current intangible assets
Property, plant and equipment
Total

TAX ALLOCATION RESERVE
Assessment of tax 2011
Assessment of tax 2012
Assessment of tax 2013
Assessment of tax 2014
Assessment of tax 2015
Assessment of tax 2016
Assessment of tax 2017

Total

31 Dec 2016 APPROPRIATIONS 31 Dec 2015
1
4
4

0
10
10

-1
6
6

-
560
-
280
610
370
460
2 280
2 290

-170

460
290
296

170
560
-
280
610
370
-
1 990
1 994

Group contributions received amounted to SEK 700 million (493) and Group contributions paid
amounted to SEK 0 million (7). Total appropriations of profit amounted to SEK 404 million.

NOTE 25. CASH FLOW STATEMENT

INTEREST PAID AND
DIVIDENDS RECEIVED
Dividends received
Interest received
Interest paid
Total

GROUP

PARENT
COMPANY

2016
0
1
-49
-48

2015
0
1
-70
-70

2016
1 288
17
-72
1 233

2015
8
35
-72
-30

The change in current liabilities mostly relates to borrowing within the Group’s commercial paper
programme. In 2016, a number of different short-term loans totalling SEK 7 192 million (8 737)
were raised within the Group’s commercial paper programme, and SEK 7 630 million (9 339) was
repaid. For a specification of cash and cash equivalents, see Note 13.

When preparing financial reports the company’s management is required to make estimates and
judgements that have an effect on the stated amounts. The estimates and judgements that, in the
view of the company’s management, are of importance for the amounts stated in the annual report,
and that are at significant risk of being altered by future events and new information, mainly include
the following.

BIOLOGICAL ASSETS
Holmen’s assessment is that no relevant market prices are available that can be used to value
forest holdings as extensive as Holmen’s. The valuation is therefore made by calculating the
present value of future expected cash flows from the growing forests. The most material estimates
made relate to how much harvesting can be increased in the future, what changes there will be
in pulpwood and log prices, how high inflation will be, and what discount rate is used. Note 11
provides a sensitivity analysis for the valuation of changes in these estimates. The carrying amount
of biological assets at 31 December 2016 was SEK 17 448 million and the attributable deferred tax
liability was SEK 3 854 million, giving a net value of SEK 13 594 million.

TAX
Holmen has requested an advance ruling on the entitlement to apply group relief in the parent
company’s tax declaration for tax losses incurred in the Group’s Spanish operations. The Swedish
tax authority has opposed such entitled to group relief. The case is being reviewed by the Supreme
Administrative Court and a ruling is expected in 2017. In the event of a ruling in Holmen’s favour, it
could result in deductions corresponding to approximately SEK 400 million in tax. No deferred tax
asset has been recognised. See Note 7.

PENSION OBLIGATIONS
The Group has defined benefit obligations valued at SEK 2 414 million and plan assets of SEK
2 213 million provided to cover them, which together are recognised as pension provisions of SEK
201 million. The value of pension obligations is estimated on the basis of assumptions regarding
discount rates, inflation, future salary increases, and demographic factors. These commitment are
usually updated annually, which affects the Group’s comprehensive income and the recognised
pension provision. See Note 17.

OTHER PROVISIONS
Obligations that may result in costs for Holmen are evaluated on an ongoing basis to assess the
need for a provision. Uncertainty in the assessment mainly relates to the date and size of the future
cost. The Group mainly has provisions for uncertainty related to the sale of the Spanish business,
obligations for environmental restoration, fixed price electricity supply contracts and corporation
tax risks. See Note 18.

IMPAIRMENT TESTING
Impairment testing is carried out annually on the Group’s non-current assets. If profitability for a
business is weak and a potential need for impairment is identified, further analysis of the asset’s
value is carried out. Such analysis estimates the asset’s value based on applicable market
conditions and assessments about the future. The estimated value is then compared with the
carrying amount to assess whether or not there is a need for impairment.

HOLMEN ANNUAL REPORT 2016 / NOTESPROPOSED APPROPRIATION OF PROFITS

PROPOSED APPROPRIATION OF PROFITS

The following earnings of the parent company are at the disposal of the Annual General Meeting:
Net profit for the 2016 financial year
Retained earnings

The Board of Directors proposes that a dividend of SEK 12 per share (83 996 162 shares) be paid to the shareholders

and that the remaining amount be carried forward

SEK

1 197 463 610
3 723 768 125
4 921 231 735

1 007 953 944

3 913 277 791

The Board of Holmen AB has proposed that the 2017 Annual General Meeting resolve in favour
of paying a dividend of SEK 12 per share – SEK 1.5 per share higher than the preceding year –
totalling SEK 1 008 million. The proposal complies with the Board’s policy, in that decisions on
dividends are to be based on an appraisal of the Group’s profitability, future investment plans and
financial position.

with the business in terms of the amount of equity required, and taking into account the need for
consolidation, liquidity and financial position in other respects. The financial position will remain
strong after payment of the proposed dividend and is considered to be fully adequate to enable
the company to fulfil its obligations in both the short and the long term, as well as to finance such
investments as may be necessary.

The proposed dividend corresponds to 70.8 per cent of net profit for 2016 for the Group and means
that 4.7 per cent of equity in the Group at 31 December 2016 will be paid out by way of dividend.

The Board has established that the Group should have a strong financial position with a debt/
equity ratio – defined as net financial debt in relation to equity – at a maximum of 0.5. The debt/
equity ratio at 31 December 2016 was 0.19. Payment of the proposed dividend would raise the
debt/equity ratio by around 0.06.

Holmen AB’s equity at 31 December 2016 amounted to SEK 10 836 million, of which non-
restricted equity was SEK 3 724 million. Assets and liabilities measured at fair value according to
Chapter 4 Section 14a of the Swedish Annual Accounts Act had an impact of SEK -167 million on
equity. The Group’s equity at 31 December 2016 amounted to SEK 21 243 million. In accordance
with IFRS, no distinction is made at Group level between restricted and non-restricted equity.

The Board considers that payment of a dividend of the amount proposed is justifiable in view of
the demands made on the company and the Group by the nature, extent and risks associated

The Board and CEO declare that the annual accounts were prepared in accordance with
generally accepted accounting principles in Sweden and the Group’s consolidated accounts
were prepared in accordance with the international accounting standards referred to in the
European Parliament’s and Council’s regulation (EG) No. 1606/2002 of 19 July 2002 concerning
the application of international accounting standards. The annual report and the Group’s
consolidated accounts provide a true and fair view of the performance and financial position
of the parent company and the Group. The administration report for the parent company and
the Group provides a true and fair view of the development of the operations, financial position
and performance of the Group and the parent company and also describes material risks and
uncertainties to which the parent company and the other companies in the Group are exposed.

The annual accounts and the consolidated accounts were approved for publication by the Board
in its decision of 13 February 2017. The Group’s consolidated income statement and balance
sheet and the parent company’s income statement and balance sheet will be presented for
adoption at the Annual General Meeting to be held on 27 March 2017.

Fredrik Lundberg

Chairman

Carl Bennet

Board member

Steewe Björklundh

Board member

Kenneth Johansson

Board member

Stockholm, 13 February 2017

Lars G Josefsson

Board member

Lars Josefsson

Board member

Carl Kempe

Deputy chairman

Louise Lindh

Board member

Ulf Lundahl

Board member

Henriette Zeuchner

Board member

Tommy Åsenbrygg

Board member

Henrik Sjölund

Board member and Chief Executive Officer

Our audit report was submitted on 15 February 2017.

KPMG AB

Joakim Thilstedt

Authorised Public Accountant

HOLMEN ANNUAL REPORT 2016 / PROPOSED APPROPRIATION OF PROFITS

AUDITOR’S REPORT

To the general meeting of the shareholders of
Holmen AB, corp. id 556001-3301

Report on the annual accounts and consolidated accounts

Opinions
We have audited the annual accounts and consolidated accounts of Holmen AB for
the year 2016. The company’s annual accounts and consolidated accounts are found
on pages 4–5, 10–11, 27–29, 32–70 and 74–75 of this document.

In our opinion, the annual accounts have been prepared in accordance with the
Annual Accounts Act, and present fairly, in all material respects, the financial position
of the parent company as of 31 December 2016 and its financial performance and
cash flow for the year then ended in accordance with the Annual Accounts Act. The
consolidated accounts have been prepared in accordance with the Annual Accounts
Act and present fairly, in all material respects, the financial position of the group as of
31 December 2016 and their financial performance and cash flow for the year then
ended in accordance with International Financial Reporting Standards (IFRS),
as adopted by the EU, and the Annual Accounts Act.

A corporate governance statement has been prepared. The statutory administration
report and the corporate governance statement are consistent with the other parts
of the annual accounts and consolidated accounts, and the corporate governance
statement is in accordance with the Annual Accounts Act.

We therefore recommend that the general meeting of shareholders adopts the income
statement and balance sheet for the parent company and the group.

Basis for Opinions
We conducted our audit in accordance with International Standards on Auditing (ISA)
and generally accepted auditing standards in Sweden. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities section. We are inde-
pendent of the parent company and the group in accordance with professional ethics
for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in
accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinions.

Key Audit Matters
Key audit matters of the audit are those matters that, in our professional judgment, were
of most significance in our audit of the annual accounts and consolidated accounts of
the current period. These matters were addressed in the context of our audit of, and in
forming our opinion thereon, the annual accounts and consolidated accounts as a whole,
but we do not provide a separate opinion on these matters. If not stated otherwise the
matters is related to the consolidated accounts.

Valuation of Biological Assets
Se note 11, note 26 and the Accounting Principles on page 50 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter.

Description of key audit matter
Biological assets consist of growing forest which has a carrying value of SEK 17 448
million as per 31 December 2016.

Biological assets are measured at fair value, via discounting estimated net future
cash flows from the growing forest to present value. Cash flows are estimated over a
100-year period, representing the assessed average harvesting cycle. The valuation
is performed internally and is calculated using a combination of harvest plans, future
sales prices, cost projections, inflation and discount rates.

The valuation is complex and comprises significant level of judgement.

There is a risk that the estimates that form the basis of the carrying value of
Biological Assets may need to be adjusted, which would directly affect the reported
result for the period.

How the matter was addressed during the audit
We have reviewed and assessed the Group’s choice of a cash flow based valuation
model. We have also inspected the valuations performed and the underlying
documentation in order to assess that they are in line with established valuation
techniques.

Furthermore, through evaluation of management’s written plans and documentation,
we have assessed the reasonableness of assumptions regarding volumes, prices,
costs and the discount rate used in the valuation. We have conducted discussions
with Company management and evaluated previous year’s estimates compared
to actual outcomes. A critical part of our work has also been examination and
evaluation of the sensitivity analysis performed by management that shows how
changes in the assumptions can affect the overall valuation.

We have involved our own specialists on the audit to ensure that the audit team has
had sufficient experience and competence within this area, in particular regarding
design of the valuation model. In addition to this we have compared the Group’s
valuation to valuations performed by other companies via comparison of calculated
value per cubic metre.

We have also considered the completeness of the disclosures in the Annual Report
and assessed whether they are in agreement with the assumptions made by
Company management in their valuation of Biological Assets.

Valuation of property, plant and equipment / Valuation of the parent company’s shares in Group companies
See note 10, not 26 and the Accounting Principles on pages 50 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter.
Regarding the parent company’s shares in Group companies, see note 23.

Description of key audit matter
Property, plant and equipment as per 31 December 2016 have a carrying value of
SEK 9 387 million. In recent years, profitability in certain parts of the business has
been weak, which has resulted in impairments of values of the related assets.

Profitability in someparts of the business is still weak and therefore there the need
for further impairments of asset values may exist.

According to IFRS; impairment tests shall be performed according to a certain
methodology wherein Company management is required to make estimates regarding
both internal and external conditions and plans. Examples of estimates are future
cash flows as well as which discount rate should be used to take into consideration
the fact that future inflows are associated with a certain amount of risk.

Property, plant and equipment are mainly found in subsidiaries of Holmen AB,
therefore should there be a need for asset impairment within these subsidiaries,
there may be a corresponding impairment of the value of shares in the parent
company’s balance sheet.

How the matter was addressed during the audit
We have inspected the Group’s impairment test to ensure that it is in line with the
aforementioned methodology.

Furthermore, through evaluation of management’s written plans and documentation,
we have assessed the reasonableness of future cash flows and the assumed
discount rate. We have also conducted discussions with Company management and
evaluated previous year’s estimates compared to actual outcomes.

HOLMEN ANNUAL REPORT 2016 / AUDITOR’S REPORT

AUDITOR’S REPORT

Pension provisions

See note 17, note 26 and the Accounting principles on page 51 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter.

Description of key audit matter
The Group has a pension obligation that mainly concerns the United Kingdom.
Before reduction by the fair value of plan assets, this pension obligatoin was valued at
SEK 2 414 million per 31 December 2016.

Estimation of the value of the pension obligation relies upon a number of assumptions,
including mortality and inflation rates, and the discount rate applied to estimated
payments of pensions. The Group engages external actuaries to perform these
complex calculations.

Changes to the assumptions on which the valuation is based could significantly
affect total comprehensive income for the financial period and the size of the pension
obligation.

How the matter was addressed during the audit
We have examined the external actuarial report that is used by the Group for
valuation of its pension obligation. We have assessed the assumptions within the
calculations, for instance regarding inflation and discount rate, with input from our
internal specialists’ analyses.

We have also considered the the completeness of the disclosures in the Annual
Report and assessed the disclosures of the assumptions used by Company
management and their sensitivity analysis.

Other provisions/Valuation of the parent company’s shares in Group companies

See note 18, note 26 and the Accounting principles on page 51 of the annual accounts and consolidated accounts for detailed disclosure and description of the matter.
Regarding the parent company’s shares in Group companies, see note 23.

Description of key audit matter
The carrying value of the Group’s other provisions amounts to SEK 856 million per
31 December 2016. These relate to uncertainties regarding the sale of operations in
Spain, environmental obligations and contractual commitments regarding delivery of
electricity at a fixed price.

How the matter was addressed during the audit
We have inspected the Group’s documentation of its provisions. We have assessed
management’s estimates and have held discussions with management regarding
their assumptions in each area to ensure that the provisions are in line with the
Group’s accounting principles and with IFRS requirements.

Provisions in the parent company have a carrying value of SEK 833 million per 31
December 2016 and regard primarily environmental obligations, contractual com-
mitments regarding delivery of electricity at a fixed price and estimated costs for
replantation of forest following harvesting.

Provisions involve significant levels of judgement regarding uncertain future out-
comes, in particular relating to the amount and timing of the final assessments.
Changes to the underlying assumptions used to make these provisions could signifi-
cantly affect the reported result.

Commitments within subsidiaries of Holmen AB could lead to impairments of the
value of shares in Group companies on the parent company’s balance sheet.

Other Information than the annual accounts and consolidated accounts
This document also contains other information than the annual report and
consolidated accounts, which is found on pages 3, 6–9, 12–26, 30–31 and 76–83.
The Managing Director is responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this
other information and we do not express any form of assurance conclusion regarding
this other information.

In connection with our audit of the annual accounts and consolidated accounts, our
responsibility is to read the information identified above and consider whether the
information is materially inconsistent with the annual accounts and consolidated
accounts. In this procedure we also take into account our knowledge otherwise
obtained in the audit and assess whether the information otherwise appears to be
materially misstated.

If we, based on the work performed concerning this information, conclude that there
is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the preparation of the
annual accounts and consolidated accounts and that they give a fair presentation in accord-
ance with the Annual Accounts Act and, concerning the consolidated accounts, in accord-
ance with IFRS as adopted by the EU. The Board of Directors and the Managing Director
are also responsible for such internal control as they determine is necessary to enable the
preparation of annual accounts and consolidated accounts that are free from material mis-
statement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts The Board of Directors and
the Managing Director are responsible for the assessment of the company’s and the group’s
ability to continue as a going concern. They disclose, as applicable, matters related to going
concern and using the going concern basis of accounting. The going concern basis of ac-
counting is however not applied if the Board of Directors and the Managing Director intend
to liquidate the company, to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the annual accounts
and consolidated accounts as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs and generally accepted auditing standards
in Sweden will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these annual accounts and consolidated accounts.

An impairment test of the shares in the Spanish Group companies was conducted
in the parent company, which resulted in an impairment of SEK 508 million in
2016. We have inspected the supporting documentation used to test the value of
shareholdings and evaluated the performed impairment test against the applicable
regulations.

As part of an audit in accordance with ISAs, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the annual accounts
and consolidated accounts, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinions. The risk of
not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.

Obtain an understanding of the company’s internal control relevant to our audit
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
company’s internal control.

Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Board of Directors and the Managing Director.

Conclude on the appropriateness of the Board of Directors’ and the Managing
Director’s, use of the going concern basis of accounting in preparing the annual
accounts and consolidated accounts. We also draw a conclusion, based on the
audit evidence obtained, as to whether any material uncertainty exists related
to events or conditions that may cast significant doubt on the company’s and
the group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the annual accounts and consolidated accounts
or, if such disclosures are inadequate, to modify our opinion about the annual
accounts and consolidated accounts. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause a company and a group to cease to continue as a going
concern.

Evaluate the overall presentation, structure and content of the annual accounts
and consolidated accounts, including the disclosures, and whether the annual
accounts and consolidated accounts represent the underlying transactions and
events in a manner that achieves fair presentation.

Obtain sufficient and appropriate audit evidence regarding the financial
information of the entities or business activities within the group to express
an opinion on the consolidated accounts. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible
for our opinions.

We must inform the Board of Directors of, among other matters, the planned scope
and timing of the audit. We must also inform of significant audit findings during our
audit, including any significant deficiencies in internal control that we identified.

HOLMEN ANNUAL REPORT 2016 / AUDITOR’S REPORT

AUDITOR’S REPORT / REVIEW OF SUSTAINABILITY REPORT

We must also provide the Board of Directors with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those
matters that were of most significance in the audit of the annual accounts and
consolidated accounts, including the most important assessed risks for material
misstatement, and are therefore the key audit matters. We describe these matters
in the auditor’s report unless law or regulation precludes disclosure about the matter
or when, in extremely rare circumstances, we determine that a matter should not be
communicated in the auditor’s report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such
communication.

Report on other legal and regulatory requirements

Opinions
In addition to our audit of the annual accounts and consolidated accounts, we have also
audited the administration of the Board of Directors and the Managing Director of Holmen
AB for the year 2016 and the proposed appropriations of the company’s profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in
accordance with the proposal in the statutory administration report and that the members
of the Board of Directors and the Managing Director be discharged from liability for the
financial year.

Basis for Opinions
We conducted the audit in accordance with generally accepted auditing standards
in Sweden. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities section. We are independent of the parent company and the
group in accordance with professional ethics for accountants in Sweden and have oth-
erwise fulfilled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinions.

Responsibilities of the Board of Directors and the Managing Director
The Board of Directors is responsible for the proposal for appropriations of the
company’s profit or loss. At the proposal of a dividend, this includes an assessment of
whether the dividend is justifiable considering the requirements which the company’s
and the group’s type of operations, size and risks place on the size of the parent
company’s and the group’s equity, consolidation requirements, liquidity and position
in general.

The Board of Directors is responsible for the company’s organization and the
administration of the company’s affairs. This includes among other things continuous
assessment of the company’s and the group’s financial situation and ensuring that the
company’s organization is designed so that the accounting, management of assets

and the company’s financial affairs otherwise are controlled in a reassuring manner.

The Managing Director shall manage the ongoing administration according to the
Board of Directors’ guidelines and instructions and among other matters take
measures that are necessary to fulfill the company’s accounting in accordance with
law and handle the management of assets in a reassuring manner.

Auditor’s responsibility
Our objective concerning the audit of the administration, and thereby our opinion
about discharge from liability, is to obtain audit evidence to assess with a reasonable
degree of assurance whether any member of the Board of Directors or the Managing
Director in any material respect:

•

has undertaken any action or been guilty of any omission which can give rise to
liability to the company, or

in any other way has acted in contravention of the Companies Act, the Annual
Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s
profit or loss, and thereby our opinion about this, is to assess with reasonable degree
of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with generally accepted auditing standards in Sweden
will always detect actions or omissions that can give rise to liability to the company, or
that the proposed appropriations of the company’s profit or loss are not in accordance
with the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in
Sweden, we exercise professional judgment and maintain professional skepticism
throughout the audit. The examination of the administration and the proposed
appropriations of the company’s profit or loss is based primarily on the audit of the
accounts. Additional audit procedures performed are based on our professional
judgment with starting point in risk and materiality. This means that we focus the
examination on such actions, areas and relationships that are material for the
operations and where deviations and violations would have particular importance
for the company’s situation. We examine and test decisions undertaken, support for
decisions, actions taken and other circumstances that are relevant to our opinion
concerning discharge from liability. As a basis for our opinion on the Board of Directors’
proposed appropriations of the company’s profit or loss we examined the Board of
Directors’ reasoned statement and a selection of supporting evidence in order to be
able to assess whether the proposal is in accordance with the Companies Act.

Stockholm 15 February 2017
KPMG AB

Joakim Thilstedt
Authorised Public Accountant

REVIEW OF SUSTAINABILITY REPORT

Holmen’s Sustainability Report, as defined on page 3 of Holmen’s Annual Report
2016, has been subject to a limited review in accordance with RevR 6 Assurance of
Sustainability Reports, issued by FAR.

Based on the limited assurance procedures we have performed, nothing has come to
our attention that causes us to believe that the Sustainability Report is not prepared,
in all material respects, in accordance with the criteria defined by Group management.

A complete assurance report on the Sustainability Report is available at holmen.com.
The assurance report contains the following conclusion:

Stockholm, 15 February 2017

KPMG AB

Joakim Thilstedt
Authorised Public Accountant

Torbjörn Westman
Expert member of FAR

HOLMEN ANNUAL REPORT 2016 / AUDITOR’S REPORT

Board of
Directors

Carl Kempe
Deputy chairman. Örnsköldsvik. Born in 1939.
Member since 1983. Licentiate in Engineering.
Dr. h.c. mult. Other significant appointments:
Chairman of Kempe Foundations, MoRe Research AB
and UPSC Berzelii Centre for Forest Biotechnology.
Own and related parties’ shareholdings:
386 000 shares.

Henrik Sjölund
Norrköping. Born in 1966. Member since 2014.
M.Sc. in International Economics. President and CEO.
Other significant appointments: Board member of
Swedish Forest Industries Federation.
Shareholding: 4 917 shares.

Fredrik Lundberg
Chairman. Djursholm. Born in 1951. Member
since 1988. M.Sc. in Engineering and M.Sc.
in Economics. D. Tech. h.c. and D. Econ. h.c.
President and CEO of L E Lundbergföretagen AB.
Other significant appointments: Chairman of
Hufvudstaden AB, AB Industrivärden and Indutrade
AB. Deputy chairman of Svenska Handelsbanken
AB. Board member of L E Lundbergföretagen AB
and Skanska AB.
Own and related parties’ shareholdings: 839 724
shares. Shareholding of L E Lundbergföretagen:
27 622 000 shares.

Louise Lindh
Stockholm. Born in 1979. Member since 2010. M.Sc.
in Economics. CEO of Fastighets AB L E Lundberg.
Other significant appointments: Chairman of J2L
Holding AB. Board member of Hufvudstaden AB
and L E Lundbergföretagen AB.
Shareholding: 100 000 shares.

Carl Bennet
Gothenburg. Born in 1951. Member since 2009.
M.Sc. in Economics. D. Tech. h.c.
CEO of Carl Bennet AB. Former President and
CEO of Getinge AB. Chairman of Getinge AB,
Lifco AB och Elanders AB.
Other significant appointments: Board member of
L E Lundbergföretagen AB.
Shareholding: 100 000 shares.

Martin Nyman
Iggesund. Born in 1978. Deputy member since
2010. Employee representative, LO.

Kenneth Johansson
Söderköping. Born in 1958. Member since 2004.
Employee representative, LO. Section chairman
of the Swedish Paper Workers Union branch 53,
Holmen Paper Braviken.

HOLMEN ANNUAL REPORT 2016 / BOARD OF DIRECTORS

Lars G Josefsson
Stockholm. Born in 1950. Member since 2011.
M.Sc. in Engineering. Former President and CEO
of Vattenfall.
Other significant appointments: Chairman of
Burntisland Fabrication Ltd. Board member
of Robert Bosch GmbH, Robert Bosch
Industrietreuhand KG and Brookfield Renewable
Energy. Board member of Hand in Hand
International and member of The Royal Swedish
Academy of Engineering Sciences, IVA.
Shareholding: 5 000 shares.

Ulf Lundahl
Lidingö. Born in 1952. Member since 2004.
Bachelor of Laws and M.Sc. in Economics.
Other significant appointments: Chairman of
Eltel AB, Fidelio Capital AB, Ramirent plc and
SHB Regionbank Stockholm. Board member of
Attendo AB and Indutrade AB.
Shareholding: 4 000 shares.

Lars Josefsson
Norrköping. Born in 1953. Board member since
2016. M.Sc. in Engineering.
Other significant appointments: Deputy chairman
of Vestas. Chairman of Driconeq, Ouman and
TimeZynk. Board member of Metso.
Shareholding: 2 500 shares.

Henriette Zeuchner
Stockholm. Born in 1972. Member since 2015.
M.Sc. in Economics and Bachelor of Laws.
President and CEO of Berling Media AB.
Other significant appointments:
Board member of the NTM Group.
Shareholding: 800 shares.

Steewe Björklundh
Hudiksvall. Born in 1958. Member since 1998.
Employee representative, LO.

Tommy Åsenbrygg
Skebobruk. Born in 1968. Member since 2015.
Employee representative, PTK. Deputy chairman of
Ledarna, Hallsta Paper Mill.
Shareholding: 100 shares.

Daniel Hägglund
Örnsköldsvik. Born in 1982. Deputy member since
2014. Employee representative, PTK.

Per-Arne Berg
Forsa. Born in 1955. Deputy member since 2015.
Employee representative, PTK. Chairman of the
Holmen-Iggesund Trade Union Club.

Auditors: KPMG AB
Principle Auditor: Joakim Thilstedt Authorised Public
Accountant

HOLMEN ANNUAL REPORT 2016 / BOARD OF DIRECTORS

Group
management

Johan Padel Head of Wood products
business area.
Born in 1966. Joined Holmen in 2014.
Shareholding: 830 shares.

Lars Ericson Director of Legal Affairs.
Company secretary.
Born in 1959. Joined Holmen in 1988.
Shareholding: 650 shares.

Ingela Carlsson Director of Communications.
Born in 1962. Joined Holmen in 2008.
Shareholding: 1 015 shares.

Anders Jernhall Executive Vice President. CFO.
Born in 1970. Joined Holmen in 1997.
Shareholding: 4 900 shares.

Gunilla Rolander HR Director.
Born in 1967. Joined Holmen in 2013.
Shareholding: 362 shares.

Nils Ringborg Head of Paper business area.
Born in 1958. Joined Holmen in 1988.
Shareholding: 2 514 shares.

Ola Schultz-Eklund Director of Technology.
Born in 1961. Joined Holmen in 1994.
Shareholding: 800 shares.

Sören Petersson Head of Forest business area.
Born in 1969. Joined Holmen in 1994.
Shareholding: 4 400 shares.

Henrik Sjölund President and CEO.
Head of Paperboard business area.
Born in 1966. Joined Holmen in 1993.
Shareholding: 4 917 shares.
Henrik Sjölund has no significant shareholdings
and no ownership in companies with which the
Group has important business relations. Further
information about the CEO is provided on page 74.

Daniel Peltonen will join as head of the Paperboard business area on 1 April 2017.

HOLMEN ANNUAL REPORT 2016 / GROUP MANAGEMENT

KEY FIGURES

Holmen uses performance measures in its reporting in addition to the measures
defined within IFRS regulations, or directly in the income statement and balance
sheet, in order to illustrate the company’s financial position and performance and to
increase comparability between different periods and other companies. Below are
calculations used to arrive at the performance measures applied within the Group.
For further information, see also Definitions.

ESMA’s (European Securities And Markets Authority) ‘Guidelines – Alternative
Performance Measures’ have been used since 3 July 2016. In accordance with
these guidelines, the information on financial measures not defined under IFRS has
expanded. Alternative performance measures published in this report should not be
regarded as replacing the financial measures defined under IFRS regulations, but
rather as a complement and they do not need to be comparable in the same way
with defined performance measures published by other companies.

KEY FIGURES

SEKm

OPERATING PROFIT, EBITDA AND EXCLUDING ITEMS AFFECTING COMPARABILITY
EBITDA
Depreciation and amortisation according to plan
Change in value of forests
Operating profit/loss excluding items affecting comparability
Items affecting comparability*
Operating profit/loss

OPERATING MARGIN
Operating profit/loss
Net sales
Operating margin, %

EARNINGS FROM OPERATIONS, FOREST
EARNINGS FROM OPERATIONS, FOREST
Change in value of forests
Operating profit, forest

CAPITAL EMPLOYED AND OPERATING CAPITAL
Equity
Net financial debt
Capital employed
Deferred tax assets
Deferred tax liabilities
Operating capital

RETURN ON CAPITAL EMPLOYED
Operating profit/loss excluding items affecting comparability
Average capital employed
Return, %

RETURN ON OPERATING CAPITAL
Operating profit/loss excluding items affecting comparability
Average operating capital
Return, %

NET FINANCIAL DEBT
Non-current financial liabilities
Current financial liabilities
Pension provisions
Non-current financial receivables
Current financial receivables
Cash and cash equivalents
Net financial debt

DEBT/EQUITY RATIO
Net financial debt
Equity
Debt/equity ratio, times

EQUITY/ASSETS RATIO
Equity
Assets
Equity/assets ratio, %

* See page 42 for what items affecting comparability refers to.

2016

2015

2 865
-1 018
315
2 162
-232
1 930

2 673
-1 240
267
1 700
-931
769

1 930
15 513
13.9

769
16 014
10.6

686
315
1 001

21 243
3 945
25 190
-4
5 613
30 799

2 162
25 146
8.6

2 162
30 669
7.0

882
3 200
201
-39
-89
-210
3 945

3 945
21 243
0.19

21 243
34 891
60.9

638
267
905

20 853
4 799
25 653
-6
5 508
31 155

1 700
26 769
6.4

1 700
32 284
5.3

2 295
2 698
130
-43
-61
-221
4 799

4 799
20 853
0.23

20 853
35 456
58.8

HOLMEN ANNUAL REPORT 2016 / KEY FIGURES

TEN-YEAR REVIEW, FINANCE

SEKm

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

INCOME STATEMENT
Net sales
Operating costs
Profit from investments in associates and joint ventures
Depreciation and amortisation according to plan
Change in value of forests
Operating profit/loss excl. items affecting
comparability
Items affecting comparability*
Operating profit/loss

Net financial items
Profit/loss before tax

Tax
Profit/loss for the year

Diluted earnings per share, SEK

NET SALES
Forest
Paperboard
Paper
Wood products
Renewable energy
Elimination of intra-Group net sales
Group

OPERATING PROFIT/LOSS
Forest
Paperboard
Paper
Wood products
Renewable energy
Group-wide costs and eliminations

Items affecting comparability*
Group

CASH FLOW
Profit/loss before tax
Adjustment items
Income tax paid
Changes in working capital
Cash flow from operating activities
Cash flow from investing activities
Cash flow after investments

Share buy-backs
Dividend paid

* Items affecting comparability.

15 513
-12 626
-22
-1 018
315

16 014
-13 348
7
-1 240
267

15 994
-13 270
-7
-1 265
282

16 231
-13 919
3
-1 370
264

17 852
-15 224
47
-1 313
350

18 656
-15 501
84
-1 260
-

17 581
-15 077
28
-1 251
52

18 071
-15 191
45
-1 320
16

19 334
-16 614
50
-1 343
-16

19 159
-15 637
12
-1 337
89

2 162
-232
1 930

-71
1 859

-436
1 424

16.9

5 302
5 252
5 431
1 342
314
-2 128
15 513

1 001
903
289
-3
120
-148
2 162
-232
1 930

1 859
965
-504
-360
1 961
-123
1 838

-
-882

1 700
-931
769

-90
679

-120
559

6.7

5 481
5 472
6 148
1 314
359
-2 760
16 014

905
847
-74
9
176
-163
1 700
-931
769

679
1 802
-398
443
2 526
-832
1 694

-
-840

1 734
-450
1 284

-147
1 137

-230
907

10.8

5 641
5 113
6 247
1 352
389
-2 748
15 994

817
674
141
37
212
-146
1 734
-450
1 284

1 137
1 448
-191
-217
2 176
-834
1 342

-
-756

1 209
-140
1 069

-198
871

-160
711

8.5

5 694
4 618
7 148
1 175
450
-2 853
16 231

924
433
-309
-75
371
-136
1 209
-140
1 069

871
1 056
210
-127
2 011
-869
1 142

-
-756

1 713
-193
1 520

-227
1 294

559
1 853

22.1

6 061
4 967
8 144
1 129
522
-2 972
17 852

931
596
94
-130
355
-132
1 713
-193
1 520

1 294
1 057
-434
338
2 254
-1 920
334

-
-672

1 980
3 593
5 573

-244
5 328

-1 374
3 955

47.1

6 348
5 109
8 631
875
552
-2 858
18 656

739
863
228
-136
406
-120
1 980
3 593
5 573

5 328
-2 561
-557
-109
2 101
-1 733
368

-
-588

1 332
264
1 596

-208
1 388

-684
704

8.4

5 585
4 849
8 142
586
626
-2 207
17 581

818
817
-618
20
495
-200
1 332
264
1 596

1 388
811
-704
28
1 523
-1 597
-74

-
-588

1 620
-
1 620

-255
1 366

-360
1 006

12.0

4 799
5 023
9 303
553
527
-2 135
18 071

605
419
340
21
414
-178
1 620
-
1 620

1 366
1 163
-334
678
2 873
-818
2 054

-
-756

1 412
-361
1 051

-311
740

-98
642

7.6

5 443
4 860
10 443
499
434
-2 345
19 334

632
320
280
13
327
-159
1 412
-361
1 051

740
1 797
-192
-686
1 660
-1 124
536

-138
-1 017

2 286
557
2 843

-261
2 582

-1 077
1 505

17.8

4 775
5 100
10 345
589
377
-2 026
19 159

702
599
623
146
272
-56
2 286
557
2 843

2 582
629
-390
-345
2 476
-1 315
1 161

-
-1 017

Year 2016: Sale of the mill in Spain and insurance compensation of SEK -232 million for the reconstruction of the Hallsta Paper Mill following a fire.

Year 2015: Impairment loss on non-current assets, provision for costs and the effects of a fire totalling SEK -931 million.

Year 2014: Impairment loss on non-current assets of SEK -450 million.

Year 2013: Impairment loss on non-current assets and restructuring costs of SEK -140 million.

Year 2012: Impairment loss on non-current assets and restructuring costs of SEK -193 million.

Year 2011: Revaluation of forest of SEK 3 593 million.

Year 2010: Impairment losses on non-current assets and restructuring costs of SEK -786 million and revaluation of forest amounting to SEK 1 050 million.

Year 2008: Impairment loss on non-current assets, restructuring costs and the effects of a fire totalling SEK -361 million.

Year 2007: Impairment of goodwill and non-current assets of SEK -1 543 million and revaluation of forest amounting to SEK 2 100 million.

HOLMEN ANNUAL REPORT 2016 / TEN-YEAR REVIEW, FINANCE

SEKm

BALANCE SHEET
Non-current assets
Current assets
Financial receivables
Cash and cash equivalents
Total assets

Equity
Deferred tax liability
Financial liabilities and interest-bearing provisions
Operating liabilities
Total equity and liabilities

OPERATING CAPITAL
Forest
Paperboard
Paper
Wood products
Renewable energy
Group-wide and other*
Operating capital
Deferred tax liability, net
Capital employed

KEY FIGURES
OPERATING MARGIN, %**
Paperboard
Paper
Wood products
Group

RETURN ON OPERATING CAPITAL, %*
Forest
Paperboard
Paper
Wood products
Renewable energy
Group

KEY FIGURES
Return on capital employed, %**
Return on equity, %
Debt/equity ratio

DELIVERIES
Harvesting in own forests, ’000 m3
Paperboard, ’000 tonnes
Paper*** ’000 tonnes
Wood products, ’000 m3
Own production of hydro and wind power, GWh

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

For a ten-year review of data per share, see page 41.

28 701
5 852
128
210
34 891

21 243
5 613
4 283
3 752
34 891

17 798
6 426
2 815
892
3 412
-544
30 799
-5 609
25 190

17
5
0
14

6
14
9
0
4
7

9
7
0.19

2 986
497
1 134
776
1 080

29 524
5 607
104
221
35 456

20 853
5 508
5 124
3 971
35 456

17 589
6 622
3 558
924
3 351
-888
31 155
-5 502
25 653

15
-1
1
11

5
12
neg
1
5
5

6
3
0.23

3 213
499
1 325
730
1 441

30 221
5 964
62
187
36 434

20 969
5 480
6 156
3 829
36 434

17 340
6 790
4 666
901
3 401
-744
32 354
-5 478
26 876

13
2
3
11

5
10
3
3
6
5

6
4
0.28

3 297
493
1 305
725
1 113

30 652
5 774
52
275
36 753

20 854
5 804
6 443
3 653
36 753

16 813
6 863
4 810
1 361
3 357
-433
32 772
-5 802
26 970

9
-4
-6
7

6
7
neg
neg
11
4

4
3
0.29

3 465
469
1 574
686
1 041

30 664
6 005
69
308
37 046

20 813
5 504
6 967
3 762
37 046

16 663
6 177
5 608
1 416
3 261
-220
32 905
-5 502
27 403

12
1
-12
10

6
10
2
neg
11
5

7
9
0.32

3 211
485
1 651
660
1 353

30 335
6 642
128
112
37 217

19 773
6 630
6 499
4 313
37 217

16 278
5 041
6 606
1 507
3 253
-217
32 469
-6 436
26 032

17
3
-16
11

6
19
3
neg
13
7

9
23
0.32

2 988
474
1 668
487
1 235

26 028
6 950
262
193
33 432

16 913
5 910
6 227
4 383
33 432

12 597
4 313
6 954
1 192
3 235
93
28 385
-5 700
22 684

17
-8
4
8

7
20
neg
3
15
5

6
4
0.34

2 999
464
1 732
285
1 149

25 694
6 075
225
182
32 176

16 504
5 045
6 091
4 536
32 176

11 384
4 114
8 789
396
3 207
-963
26 929
-4 741
22 188

8
4
4
9

5
10
4
6
13
6

7
6
0.34

2 897
477
1 745
313
1 090

26 507
7 268
175
653
34 602

15 641
4 819
8 332
5 809
34 602

11 415
4 254
10 237
366
3 006
-1 654
27 623
-4 477
23 146

7
3
3
7

6
8
3
4
11
5

6
4
0.48

2 649
494
2 044
266
1 128

26 153
6 549
147
394
33 243

16 932
5 482
6 518
4 311
33 243

11 264
4 180
9 971
345
2 960
-630
28 090
-5 181
22 909

12
6
24
12

8
15
5
64
9
8

10
9
0.35

2 575
516
2 025
262
1 193

* Income and costs from the sale of newsprint from the Spanish mill sold in Q2 2016 is recognised in the Group-wide segment.

** Excluding items affecting comparability.

*** Deliveries from own mills, i.e. no deliveries from the Spanish mill as of Q3 2016.

HOLMEN ANNUAL REPORT 2016 / TEN-YEAR REVIEW, FINANCE

FIVE-YEAR REVIEW, SUSTAINABILITY

The environmental and employee data provided is the most relevant information with regard to
regulatory requirements and internal monitoring. The key performance indicators provided are
widely used in the industry.

Data from all parts of the Group is collected, quality-assured and evaluated. No material changes have
been made to the principles of reporting in comparison with 2015. The facility in Madrid was sold in
mid-2016. Reported data for the Group includes data on the facility in Madrid for the first half of 2016.
Some of the parameters have a footnote stating the individual figure for the facility in question.

Holmen reports its environmental data to the supervisory authorities monthly and annually.
Reporting to Swedish authorities is made available to the public under the principle of public
access to documents. Data from all the mills is reported to the EU annually. Expenditure on
environmental protection is reported in accordance with guidelines from Statistics Sweden.

As some of the details provided in this report had already been collected by the end of the year
they refer to, they might differ slightly from the information finally reported to the authorities.

PRODUCTION AND ENVIRONMENT

2016

2015

2014

2013

2012

PRODUCTION, ’000 TONNES
Paperboard
Market pulp
Printing paper
Wood products, ’000 m3
RAW MATERIALS, ’000 TONNES
Wood, million m3sub1)
Recovered fibre
Purchased pulp
Thermal energy, GWh
Electrical energy, GWh
Water use, million m3
Plastic granules/foiling material
Chemicals3)
Filler, pigment3)
THERMAL ENERGY, GWh
Production at mills from recovered liquors, bark and wood residues
Recovered in the TMP process4)
Natural gas, oil and purchased5)
ELECTRICAL ENERGY, GWh
Company hydro power
Company wind power
Production at mills
Purchased, (net)6)
EMISSIONS TO AIR, TONNES
Sulphur dioxide (counted as sulphur, S)
Nitrogen oxides
Particulates
Fossil carbon dioxide7), ’000 tonnes
Biogenic carbon dioxide, ’000 tonnes
EMISSIONS TO WATER, TONNES
COD (organic matter), ’000 tonnes
Suspended solids, ’000 tonnes
AOX (chlorinated organic matter)
Nitrogen
Phosphorus
BY-PRODUCTS, ’000 TONNES
To energy production, internally/externally
Tall oil8)
WASTE, ’000 TONNES
Utilised or for recovering9)
Hazardous10)
Sent to landfill (wet)
ENERGY SUPPLIES
Branches, treetops and peat, GWh11)
Electrical and thermal energy, GWh12)

503
56
1 176
776

5.36
200
70
6 375
3 949
70
2.6
151
148

4 605
1 171
599

958
121
784
2 086

41
960
39
124
1 539

20.4
3.2
51.9
208
14.0

872
12.8

270
2.2
16

155
380

502
56
1 287
734

5.10
394
79
6 288
3 994
682)
2.5
138
146

4 289
1 083
916

1 302
138
781
1 773

52
891
48
180
1 441

21.0
3.3
56.7
226
19.0

823
11.9

303
1.92)
13

230
348

500
67
1 325
742

5.16
439
75
6 230
4 067
74
2.1
146
147

4 532
1 068
630

1 048
65
740
2 214

57
1 181
29
126
1 551

20.4
3.6
54.3
203
19.0

824
13.2

296
1.6
5.6

275
305

478
50
1 545
710

5.25
543
99
6 451
4 420
77
2.6
146
178

4 156
1 117
1 178

1 008
33
769
2 610

91
1 557
52
254
1 449

20.4
4.3
46.5
215
15.0

885
13.0

367
2.4
12

294
199

492
35
1 658
651

5.19
630
108
5 833
4 603
77
2.3
145
175

2 880
1 171
1 783

1 343
10
563
2 687

116
1 664
84
330
1 064

18.9
3.2
47.7
242
15.7

865
12.3

380
2.4
16

297
202

1) At Group level, wood consumption is

computed net, taking into account internal
deliveries of chips from the sawmills to the
nearby mills.

2) Figure adjusted.

3) 100 per cent active substance.

Total quantity of commodities was
229 000 tonnes for chemicals and
207 000 tonnes for filler and pigment.

4) Thermal energy is produced from the
electricity used in the production of
thermo-mechanical pulp at Braviken
Paper Mill and Hallsta Paper Mill; this is
recovered and used in production.

5) The reporting includes data for gas

consumption and associated emissions
linked to Holmen’s share (approximately
240 GWh) of electricity production at the, until
mid-2016, half-owned cogeneration (COGEN)
plant at the mill in Madrid. The data also
includes natural gas and oil used at the mills.

6) The energy purchased is fossil-free.

7) Emissions in 2016 from the mill in Madrid
that was sold mid-year were approximately
47 000 tonnes.

8) For delivery to the chemical industry.

9) By-products used, for example, as filling
material, construction material or for the
production of soil products.

10) Hazardous waste is dealt with by authorised
collection and recovery contractors. Certain
fractions of the waste are recovered. Oil-
containing waste from docking ships is dealt
with at port facilities at three Holmen mills.
Such waste is included in the figures for
hazardous waste. The volume of this waste
in 2016 totalled 591 tonnes.

11) Branches, treetops and peat delivered
from Holmen’s land to external energy
producers.

12) For 2016: 155 GWh of electrical energy
supplied from the mill at Workington to the
local community. 217 GWh of thermal energy
from Iggesund Mill and Braviken Paper Mill
to Iggesund Sawmill and Braviken Sawmill,
8 GWh thermal energy from Hallsta Paper
Mill and Iggesund Mill to the district heating
network of the local communities.

HOLMEN ANNUAL REPORT 2016 / FIVE-YEAR REVIEW, SUSTAINABILITY

ELECTRICAL ENERGY

2016

2015

2014

2013

2012

HOLMEN’S PRODUCTION RELATIVE TO TOTAL CONSUMPTION, %
Company hydro power/wind power
Electricity production at the mills
Purchased electricity (net)

27
20
53

36
20
44

27
18
55

24
17
59

30
12
58

THERMAL ENERGY

2016

2015

2014

2013

2012

SHARE OF HOLMEN'S PRODUCTION/CONSUMPTION, %
Biofuel
Recovered thermal energy
Natural gas
Oil, LPG
Purchased thermal energy

72
18
6
3
<1

68
17
12
2
<1

73
17
8
2
<1

64
17
12
6
<1

49
20
18
9
4

THERMAL ENERGY
Share of Holmen's production/
consumption, %

<1
3

Biofuel
Recovered thermal energy
Natural gas
Oil, LPG
Purchased thermal energy

72
18
6
3
<1

ENVIRONMENTAL PROTECTION
EXPENDITURE

SEKm
Investments (remedial and preventive)
Electricity and heat-saving investments1)
Environmental taxes and charges2)
Internal and external environmental costs3)
Environmental cost of forestry4)

PERSONNEL

EMPLOYEES
Average number
of whom women, %
of whom temporary employees, %
Average age5)

1) The high costs stated for 2012–2014 mainly
consist of environmentally related elements
of the implementation of biofuel boilers within
the paperboard business and the wind farm at
Varsvik, Norrtälje, Sweden.

2) The stated amount includes costs for waste
management, energy tax charged in Sweden
on the use of fossil fuels, nitrogen oxide tax and
inspection charges.

3) Includes costs of environmental personnel,
operation of treatment equipment, waste
management, management systems,
environmental training, applications for permits,
environmental consultants and the costs of
inquiries and measures in connection with
discontinued operations.

4) The environmental cost of forestry is calculated
as the value of the wood that is not harvested
for environmental reasons. Holmen sets
aside 14 per cent of its productive forest for
environmental reasons and thus refrains from
harvesting around 14 per cent of the potential
volume. The annual loss of income in 2016 is
estimated at around SEK 71 million.

5) Relates to permanent employees.

6) Relates to permanent and temporary employees.

SICKNESS ABSENCE 6), %
Total
of which longer than 60 days
Good health index (proportion of employees with no sick leave
during the year)

GENDER EQUALITY 5), %
Women managers out of total number of managers
Women joining the company out of total new employees

PERSONNEL TURNOVER 5), %
Personnel turnover
of which given notice
of which retiring
of which leaving at own request
New employees

NUMBER OF INDUSTRIAL ACCIDENTS
Industrial accidents, more than 8 hours of absence, per million
hours worked

UNION COOPERATION 6), %
Percentage of employees that work at a unit with a collective
agreement
Rate of union membership

2016

2015

2014

2013

2012

55
8
14
182
71

12
18
12
208
101

26
320
10
169
70

122
300
14
178
84

60
576
22
196
93

2016

2015

2014

2013

2012

2 989
19.3
8.8
46.3

4.2
2.0

19.0
27

6.9
1.6
2.4
2.9
5.4

8.8

94
67

3 315
19.4
9.0
46.8

3 359
19.2
7.9
46.8

3 718
19.3
7.7
46.8

3 945
19.3
6.9
45.9

4.2
1.8

20.5
24

7.6
2.8
2.4
2.5
5.3

3.9
1.7

20.9
31

7.2
2.0
2.2
3.0
5.1

3.6
1.3

20.3
37

11.5
6.2
1.7
3.6
3.4

3.4
1.1

20.3
24

8.5
2.7
2.6
2.9
3.6

8.8

6.5

8.4

11.6

97
68

97
70

98
72

95
72

HOLMEN ANNUAL REPORT 2016 / FIVE-YEAR REVIEW, SUSTAINABILITY

DEFINITIONS AND GLOSSARY

DEFINITIONS
Capital employed
Net financial debt plus equity. Average values are calculated on
the basis of quarterly data.

GLOSSARY
Bio co-location
A co-location of different operations for more efficient use of raw
materials and energy, amongst other benefits.

Cash flow after investments
Cash flow from operating activities less cash flow from
investing activities.

Debt/equity ratio
Net financial debt divided by total equity.

Earnings per share
Profit/loss for the year divided by the weighted average
number of shares outstanding, adjusted for buy-back of
shares, if any, during the year. Diluted EPS means that any
diluting effect from outstanding call options has been taken
into account.

EBITDA
Earnings before interest, taxes, depreciation, amortisation and
change in value of forests, excl. items affecting comparability.

Equity/assets ratio
Equity expressed as a percentage of total assets.

Financial assets
Non-current and current financial receivables and cash and
cash equivalents.

Items affecting comparability
Used to illustrate how income measures were affected
by events outside normal business operations, such as
impairment losses, disposals, fire and restructuring.

Net financial debt
Non-current and current financial liabilities and pension
provisions, less financial assets.

Operating capital
Capital employed plus the net sum of deferred tax liability and
deferred tax assets, which corresponds to non-current assets
plus working capital. Average values are calculated on the
basis of quarterly data.

Operating margin
Operating profit/loss (excl. items affecting comparability)
expressed as a percentage of net sales.

Operating profit/loss
Profit before net financial items and tax.

Return on capital employed
Operating profit/loss (excl. items affecting comparability)
expressed as a percentage of average capital employed.

Return on equity
Profit for the year expressed as a percentage of average equity,
calculated on the basis of quarterly data.

Return on operating capital
Operating profit/loss (excl. items affecting comparability)
expressed as a percentage of average operating capital.

Biofuel
Renewable fuels (such as wood, black liquor, bark and tall oil).
Fuels that do not generate any net emission of carbon dioxide
into the atmosphere, since the quantity of carbon dioxide
formed during combustion is part of the carbon cycle.

Bulk
Bulk is a measure of the volume of the paper. Paper with the
same basis weight may have a different thickness, depending
on the bulk of the paper. A high bulk indicates a thick but
relatively lightweight paper.

Carbon dioxide (CO2)
Carbon is the building block of life and is part of all living
things. Biogenic carbon dioxide is released when biological
material decays or wood is burned. Fossil carbon dioxide is
released when coal, oil or natural gas is burned.

COD
Chemical Oxygen Demand. A measure of the amount of oxygen
needed for the complete decomposition of organic material
in water.

FBB
Folding Box Board. Multi-layered paperboard made from
mechanical and chemical pulp.

Fillers
Fillers, such as ground marble and kaolin clay, are used to give the
paper bulk and make it more uniform in structure and brighter.

Fossil fuels
Fuels based on carbon and hydrogen compounds from sediment
or sedimentary bedrock – mainly coal, oil and natural gas.

GRI
Global Reporting Initiative. International cooperation body, in which
many different groups of stakeholders in society have drawn up
global guidelines for how companies are to report on activities
encompassed by the umbrella term of sustainable development.

IPPC
Integrated Pollution Prevention and Control. EU environmental
legislation about integrated, individual testing and supervision
of major industrial companies.

ISO 50001
An international energy management systems standard that
provides a framework for energy efficiency measures.

ISO 9001
An international standard for quality management systems.
Primarily aimed at companies and organisations that wish to
improve two aspects of their operations, i.e. to ensure more
satisfied customers and lower costs.

ISO 14001
An international standard for environmental management.
Important principles in ISO 14001 include regular environmental
audits and a gradual increase in the requirements.

m3 growing stock, solid over bark
Cubic metre growing stock, solid over bark. The volume of
tree stems, incl. bark, from stump to top. Generally used as a
measure for growing forest.

m3sub
Cubic metre solid volume under bark. The actual volume (no
gaps between the logs) of whole stems or stemwood excl. bark
and treetops. Generally used as a measure for harvested wood.

Nitrogen (N)
An element contained in wood. Nitrogen emissions to water
may cause eutrophication.

Nitrogen oxides (NOx)
Gases that consist of nitrogen and oxygen that are formed in
combustion. In moist air, nitrogen oxides are converted into
nitric acid, which creates acid rain. Nitrogen oxides also have
a fertilising effect.

OHSAS 18001
A series of international standards regarding a management
system for health and safety. The management system
includes monitoring, evaluating and reporting on health and
safety work.

Particulates
Particles of ash formed in incineration of bark or liquor, for
example.

Phosphorus (P)
An element contained in wood. Excessive phosphorus in the
water may cause over-fertilisation (eutrophication) and oxygen
consumption.

SBB
Solid Bleached Board. Multi-layer paperboard made from
bleached chemical pulp.

Sulphate pulp
Chemical pulp that is produced by boiling wood under high
pressure and at a high temperature together with white liquor
(sodium hydroxide and sodium sulphide).

Sulphur dioxide (SO2)
A gas consisting of sulphur and oxygen that is formed in
combustion of sulphur-containing fuels, such as oil. In contact
with moist air, sulphur dioxide is converted into sulphuric acid,
which creates acid rain.

Suspended solids
Waterborne substances consisting of fibres and particles that
can largely be removed using a fine mesh filter.

Tall oil
By-product of the sulphate pulp process used for making soft
soap, paints, biodiesel and other products.

TMP
Thermo-mechanical pulp. Obtained by heating spruce chips
and then grinding them in refiners.

HOLMEN ANNUAL REPORT 2016 / DEFINITIONS AND GLOSSARY

Information

The interim and year-end reports are
presented at press and teleconferences in
English. The conferences can also be accessed
live on holmen.com. The annual report, together
with year-end and interim reports, is published
in Swedish and English and the reports are sent
automatically to the shareholders who have
indicated their wish to receive them. They are
also available on holmen.com.

How to order printed material:
• holmen.com
• Holmen AB, Group Communications,
P.O. Box 5407, SE-114 84 Stockholm, Sweden
• e-mail: info@holmen.com
• telephone: +46 8 666 21 00

Calendar

For 2017 Holmen will publish the following
financial reports:

Interim report January–March

3/5
17/8 Interim report January–June
24/10 Interim report January–September

2018
30/1 Year-end report

The cover is printed on Invercote® G 280 gsm.
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The insert is printed on Holmen TRND, 2.0 – 80 gsm.
Layout: BYN Kommunikationsbyrå AB.
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Photos: Rolf Lavergren, Ulla-Carin Ekblom,
Fredrik Schlyter, Lasse Hejdenberg and others.
Print: Åtta.45

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P.O. Box 5407, SE-114 84 Stockholm, Sweden
Tel +46 8 666 21 00
E-mail info@holmen.com • www.holmen.com
ID no. 556001-3301 • Registered office Stockholm

100%

Holmen-produced

This entire annual report is made using Holmen’s
own products. The cover is printed on Invercote G,
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with high whiteness and a smooth, matt surface. The
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