Holmen Annual Report 2017

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FY2017 Annual Report · Holmen

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Forest
Paperboard
Paper
Wood products
Renewable energy

The year in brief

CEO’s message

Strategy and targets

Forest

Paperboard

Paper

Wood products

Renewable energy

A sustainable business

Employees

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

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 2017 financial year.
The annual report comprises the administration report (pages 2–3,
8–9, 22, 25–26, 28–37, 66, 70–71) and the financial statements,
together with the notes and supplementary information (pages
38–65). The statutory sustainability report in accordance with the
Annual Accounts Act is included in the annual report (pages 8–9, 22,
25–26 and 33). The Group’s income statement and balance sheet
and the parent company’s income statement and balance sheet will
be adopted at the Annual General Meeting.

The basis for the sustainability information presented is the sustain-
ability 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 8–9, 20–27, 33, 76–77 and
the GRI index on the website holmen.com. The information is audited
by a third party, see separate assurance report at holmen.com.

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

Holmen in brief

Forest

Active and sustainable forestry is
conducted on over a million hectares
of productive forest land owned by
Holmen. The annual harvest amounts
to 3 million cubic metres.

Paperboard

Paperboard in the premium consumer
packaging segment. Production,
which takes place at one Swedish
and one UK mill, amounts to just over
500 000 tonnes a year.

Paper

Paper for magazines, books and
advertising. 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. The annual production at three
sawmills, whose by-products are used in the
Group’s paperboard and
paper mills, amounts to just
over 800 000 cubic metres.

Renewable energy

In a normal year, the renewable
energy production from hydroand
wind power amounts to over 1.2 TWh.

Strong cash flow

Operating profit for 2017 amounted to SEK 2 166
million and the return on capital employed was 8.7
per cent, which is largely unchanged compared
with 2016 but significantly above the Group’s
target level. Deliveries increased and the sales mix
improved, but this was offset by somewhat higher
costs and major maintenance shutdowns in paper-
board. Cash flow was strong and covered the
dividend of SEK 1 008 million, while net debt was
reduced by SEK 889 million.

SEKm
20 000

16 000

12 000

8 000

4 000

Net sales and
operating margin

Operating profit/loss
and return

%
20

SEKm
2 500

2 000

1 500

1 000

500

16 133

13.4

14 15 16 17

2 166
8.7

14 15 16 17

%
10

Sales of paperboard increased by 6 per cent through higher deliveries to
customers in the premium segment, both in and outside Europe. A rise
in sales of book and magazine paper, which now account for over 85
per cent of the paper business, meant that deliveries of paper were also
up 6 per cent, adjusted for the fire at Hallsta Paper Mill at the end of
2015 and the divestment of the newsprint mill in Madrid in 2016. The
market for wood products was strong with rising prices, and Holmen’s
deliveries climbed by 10 per cent, driven by productivity increases in
the sawmills and the acquisition of a small sawmill, Linghem. The har-
vesting of forest stood at a normal level and the volume of standing
timber grew by 1 per cent, as planned. Production of hydro and wind
power was 5 per cent lower than in a normal year, due to reduced levels
of rainfall and wind.

Outlook. The market situation for paperboard is good, but additional
production capacity is expected to increase competition. Holmen’s
ambition is to continue to increase paperboard production on the back
of implemented investments and grow globally in the premium seg-
ment. Despite the falling demand for paper, the market balance is good
as a consequence of capacity closures. Holmen’s aim is to continue to
capture market share by offering a cost-effective alternative to estab-
lished products for books, magazines and advertising. Demand for
wood products is strong. Holmen is focusing on increasing production,
while at the same time raising the value added through its wood treat-
ment plant at Braviken Sawmill, which is due to come on stream in
2018. The harvesting of company-owned forest and the production
of hydro and wind power are expected to be at normal levels in 2018.

Key figures

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, SEKm
Cash flow from investments, SEKm
Net financial debt, SEKm
Debt/equity ratio, times
Average number of employees

2017

2016

16 133
2 166
2 166
1 668
1 668
19.9
13*
8.7
2 509
644
2 936
0.13
2 976

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

Net sales
Operating margin*

Operating profit/loss*
Return on capital employed*

*Excl. items affecting comparability

Cash flow, SEKm

Debt/equity ratio, times

0.5

0.4

0.3

0.2

0.1

0.0

3 000

2 000

1 000

2 310

644

1 008

14 15 16 17

Investments
Dividend
Cash flow before investments
and change in working capital

0.13

14 15 16 17

Operating profit/loss*
Business area, %

Capital employed*
Business area, %

Total: 2 166
Forest
1 069 SEKm
Paperboard
764 SEKm
Paper
288 SEKm
Wood Products
80 SEKm
Renewable Energy 135 SEKm

Total: 24 972
Forest
13 824 SEKm
Paperboard
5 433 SEKm
Paper
2 193 SEKm
Wood Products
862 SEKm
Renewable Energy 3 115 SEKm

*Board proposal **Excl. items affecting comparability

*Excl. Group-wide

HOLMEN ANNUAL REPORT 2017 / THE YEAR IN BRIEF

Dear
shareholder

In 2017, we succeeded in significantly growing sales
of paperboard, paper and wood products, while at the
same time seeing a positive development of the product
and market mix. This is the fruit of both long-term invest-
ments and focused internal work. The return is almost
9 per cent, which is good, considering that forest and
energy account for two-thirds of the balance sheet. Our
financial position is strong, thanks to sound cash flow.
Against the background of this, the Board has proposed
to raise the dividend from SEK 12 to SEK 13 per share.

HOLMEN ANNUAL REPORT 2017 / CEO’S MESSAGE

There is a growing
awareness of the
forest’s value and its
role in the transition
to an economy where
products based on
fossil raw materials
are replaced with
renewable alternatives.

Holmen’s own forest holdings are the foundation for its business. With
a focus on profitability, we manage the raw material from the forest and
refine it into everything from wood products for climate-smart construc-
tion to renewable packaging, magazines and books.

Strength in fresh fibre
In the paperboard business, Holmen has an enviable position as a market
leader in the premium segment for consumer packaging. Our fresh fibre-
based paperboard of the very highest quality, combined with active long-
term sustainability work, is appreciated by customers all over the world,
prompting close collaborations with global brand owners such as Apple
and IKEA. Substantial investments in recent years have created an
opportunity to increase production and improve our cost position. Our
strong market position and high product quality provide a sound basis
for continued global growth.
With a paper business fully focused on fresh fibre-based paper for
magazines, books and advertising, we have a concept that has proven
to work well. The fresh fibre allows us to develop paper grades that meet
customer demand for cost-effective and innovative products. Further-
more, our raw material is fundamental for the European recovered paper
ecocycle. The market situation for paper remains challenging, but with
successful products and a clear product strategy, we are well placed to
develop our paper business.

Building the future in wood
There is no doubt that the renewable raw material from our Swedish
forests has huge potential, not least from a climate perspective. The link
between the forest and climate improvement measures is becoming
particularly clear in the wood products area. Building in wood helps
to reduce climate change, as wood binds carbon dioxide and is able to
replace construction materials with a greater carbon footprint, such as
steel and concrete. Since we handle every part of the harvest, we also
ensure that by-products such as wood chips, bark and shavings are
turned into recyclable products or converted into useful bioenergy.
More homes need to be built. According to the Swedish National
Board of Housing, Building and Planning (Boverket), Sweden will be
needing 600 000 new homes by 2025. This, coupled with the growing
interest in sustainable development, has put wood construction firmly
in the spotlight like never before. Holmen’s modern, large-scale sawmills
provide a sound foundation for future development. One step in this
direction is the acquisition of Linghem Sawmill, whose products
complement our existing range and allow more efficient raw material
handling in the region. The construction of a wood treatment plant at

Braviken Sawmill is another example that increases the value added and
gives us a broader offering for builders’ merchants.

Right to manage our forests
There is a growing awareness of the forest’s value and its role in the
transition to an economy where products based on fossil raw materials
are replaced with renewable alternatives. The correct conditions for the
Swedish forest industry, such as the right to manage our forests and mar-
ket acceptance of fresh fibre-based products in competition with recov-
ered fibre, are crucial if we are to complete the transition and make full
use of the forest’s potential.
Holmen has many years’ experience of long-term and successful
sustainability work that combines efficient and rational forestry with the
preservation of biodiversity. Conducting sustainable forestry involves
balancing different interests: economic, social and not least environmen-
tal. I firmly believe there is no contradiction between responsibly man-
aged forests and the preservation of habitats with high conservation
value. Further restrictions on how forests can be managed would, how-
ever, jeopardise the continued success and sustainability of Swedish for-
estry. If large swathes are exempted from forest management, this would
restrict the uptake of carbon dioxide and reduce the forest’s contribution
to mitigating the greenhouse effect. The objective must be to make more
and smarter use of the forest, not less.

We are creating a sustainable future
Our business is rooted in the growing forest. With that foundation, plus
well invested production facilities and strong market positions, we will
continue to develop our business in paperboard, paper and wood prod-
ucts. This will deliver good profitability and growing value for our forest
and our industry, while at the same time contributing to a better climate,
flourishing rural communities and to the Swedish economy.

Stockholm, 16 February 2018

Henrik Sjölund
President and CEO

HOLMEN ANNUAL REPORT 2017 / CEO’S MESSAGE

We grow a
sustainable
future

Our business
concept is
to own and
add value to
the forest.

Holmen’s forest holdings form the basis of our business –
an ecocycle in which the raw material grows and is refined
into everything from wood for climate-smart building to
renewable packaging, magazines and books.

HOLMEN ANNUAL REPORT 2017 / STRATEGY AND TARGETS

Forest

Active forestry
The revenue from and value of the forest
will grow through active and sustainable
forestry, where the harvest is managed
and refined into climate-smart products.
A strong position in the wood market will
contribute to the competitiveness of
Holmen’s industries.

Paperboard

High-performance
premium paperboard

The paperboard business will grow based
on Holmen’s position as a market leader in
the premium segment for consumer pack-
aging. High quality and custom solutions
are combined with large-scale production.

Paper

Cost-effective
alternatives

The paper business will develop by offering
cost-effective alternatives to traditional
products for advertising, magazines and
books.

Wood
Products

Efficient use of the
raw material

Sales of wood products to the joinery and
construction industry will be increased by
adding value and making better use of the
raw material.

Renewable Energy

Renewable production
Hydro and wind power will contribute to a sustainable energy supply and be managed with a
focus on long-term profitability.

HOLMEN ANNUAL REPORT 2017 / STRATEGY AND TARGETS

The value of the forest and
the industry will grow.

The forest is managed to provide a good annual return and stable value growth.
The industry is run with a focus on profitability and greater value added.

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.

The return for 2017 was 8.7 per cent, which
exceeds the target for the second year running.

Capital structure
Our financial position is to 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.

In 2017, the debt/equity ratio was 0.13. Good
cash flow in recent years has enabled a higher
dividend, while at the same time strengthening
the financial position.

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

The Board proposes a dividend of SEK 13 per
share in 2018. The proposed dividend corre-
sponds to 5.0 per cent of equity. Over the past
five years the dividend has increased by 8 per
cent annually.

Return on capital employed, %

Debt/equity ratio, times

Dividend per share

8.7

Excl. items affecting comparability

0.5

0.4

0.3

0.2

0.1

0.0

0.13

SEK
15

Proposal, SEK 13

5.0

Dividend
Dividend as percentage of equity

HOLMEN ANNUAL REPORT 2017 / STRATEGY AND TARGETS

We will contribute
to a better climate.

The growing forests capture carbon dioxide and provide the industry with renewable raw material. The climate impact from
our production is to be reduced by phasing out fossil fuels and increasing the production of our own renewable electricity.

Forest growth
Growth in Holmen’s forests is to increase, which
will give higher future harvests and capture more
carbon dioxide. The volume of standing timber and
harvesting will be 50 per cent higher in 2050 than
in the base year 2000.

The volume of standing timber has grown by 15 per
cent to date, with harvesting up 25 per cent.

Carbon emissions
By 2020, use of fossil fuels at the Group’s mills
will be down 90 per cent compared with the base
year 2005.

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

Renewable electricity
production
Company-generated renewable electricity will
equate to 50 per cent of Holmen’s total electricity
consumption by 2020, compared with 31 per cent
in 2005.

The proportion of company-generated renewable
electricity in 2017 amounted to 45 per cent.

Volume of standing timber,
m3 growing stock per hectare
productive forest land

Use of fossil fuels
(base year 2005),%

Renewable electricity
production relative to electricity
use (base year 2005), %

160

120

+1%/year

1948

1965

1955

1975

1988

2000

2020

2040

1993

2010

2030

2050

-30

-60

-90

-86

Assessment of tax
Forecast

HOLMEN ANNUAL REPORT 2017 / STRATEGY AND TARGETS

Active
forestry
benefits
society

Holmen’s forest holdings are
the foundation of our business.
Efficient and sustainable manage-
ment of the forest boosts its growth
and the opportunities for harvest-
ing. As well as being a stable
source of revenue, the forest brings
major climate benefits by capturing
and storing carbon dioxide and
providing the industry with renew-
able and fossil-free raw material.

Strength in company forest
Holmen’s forests cover 1.3 million hectares, of
which a little over a million is productive forest
land. The strategy is to increase the revenue
from and future value of the forest holdings
through active and sustainable forestry with
a clear focus on costs. As one of the country’s
largest landowners, we are largely able to sup-
ply our Swedish production units with renew-
able raw material from our own sources. Eco-
nomies of scale and efficient logistics give us
a strong position in the wood market, which
contributes to the Group’s competitiveness.

Growing forests create value
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 80 per cent of the growth. The volume of
standing timber is thus growing by 1 per cent
per year.

The goal is for today’s volume of standing

timber, 121 million m³ growing stock, solid
over bark, to increase to 160 million m³ grow-
ing stock, solid over bark by 2050, whilst at
the same time, harvests will rise from 3 to 3.5
million m³sub per year.

Social benefit. Forestry is of significant region-
al importance. It creates employment in rural
areas and for many is the reason why they are
able to live and work outside the big cities.

Climate benefit. 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 captured. Carbon capture is greater
in younger and middle-aged stands, where
growth is greatest, than in older stands where
growth is in decline. Furthermore, the benefit
to the climate becomes many times greater
when the forest’s renewable products replace
fossil materials. Forest that is not managed
does not deliver the same benefits for the cli-
mate, not least because there is no substitution
of products that are harmful for the climate.

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 begin-
ning after harvest. The most important silvicul-
ture measures come in the years immediately
after harvest, when 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 continu-
ing their growth. Around 10–30 years before
the forest is harvested, it can be fertilised to
further boost growth. Holmen’s forestry is cer-
tified according to PEFC™ and FSC® and all
the wood is traceable.

High growth while preserving natural
assets. Long-term development of quality
and profitability requires continuous improve-
ments in technology, methods and skills.
Holmen works with other actors in the indus-
try, manufacturers and researchers, to improve
productivity and develop the natural assets of
the forest.
Holmen’s nature conservation strategy sets
out how we work to combine high growth
with preserving biodiversity. The aim is to
ensure that all naturally occurring species are
able to thrive in Sweden’s forest landscape.

Quality-assured growth. Holmen invests
around SEK 150 million a year in future
growth through silviculture and fertilisation.
The foundation for future growth in the forest
is laid when new forest is planted. Regenera-
tion is quality-assured and Holmen conducts
long-term development work that covers the
entire chain from seed to new planting. Togeth-
er, the company’s two nurseries produce 35
million seedlings each year, with the majority
planted on the Group’s land. For every tree
harvested, at least two new ones are planted
and, through selective breeding, the new trees
show significantly higher growth than the old
ones.

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 while at the same time the periods of
ground frost may become shorter, which makes
harvesting more difficult. The seeds for the com-
pany’s plant nurseries are selected to grow and
thrive in a changing climate, and Holmen’s
forestry is robust in climate terms.

Right to manage our forests
The significance of forestry for both the climate
and the Swedish economy places it squarely on
the political agenda. Holmen and other indus-
try players have joined forces to make politi-
cians, authorities and the general public aware
that the forest is vital with regard to the climate
and that active and sustainable forestry is the
very foundation of the emerging bioeconomy.
The aim is to establish a regulatory framework
that takes account of the industry’s unique posi-
tion in contributing to an economically, envi-
ronmentally and socially sustainable society.

Rising demand for forest raw
material
An active construction industry and a growing
interest in building in wood have led to greater
demand for logs in recent years. Demand for
pulpwood is also on the rise, due to a strong
trend for various types of packaging material and
the recent large-scale investments in pulp mills.

Holmen’s forest holdings
Holmen’s Swedish industries

Volume of standing timber,
m3 growing stock per hectare
productive forest land

160

120

+1%/year

1948

1965

1988

2000

2020

2040

1955

1975

1993

2010

2030

2050

Assessment of tax
Forecast

HOLMEN ANNUAL REPORT 2017 / FOREST

Holmen’s forests 2017
Total land acreage
Total forest land acreage*
- of which nature conservation areas
Productive forest land**

1 301 000 ha
1 153 000 ha
192 000 ha
1 042 000 ha

Total volume of standing timber
on productive forest land

121 million m3 growing
stock, solid over bark

* Analysis performed by the Swedish National Forest Inventory, according to the inter-
national definition of forest land: Land area > 0.5 hectares with a tree canopy cover
of more than 10 per cent for trees capable of reaching a height of at least 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).

2017

2016

2 571
654
1 069

2 572
686
1 001

30
13 824 13 536
364
2 986

363
2 904

Operating profit/loss and return

Key figures

SEKm
1 200

900

600

300

7.8

1 069

Operating profit/loss
Return on capital employed

External net sales, SEKm
Profit/loss before change in value, SEKm
Operating profit/loss incl.
change in value of forests, SEKm
Investments, SEKm
Capital employed, SEKm
Average number of employees
Harvesting in own forests, ’000 m3sub

54 %

of the Group’s capital is employed
in the Forest business area

3.7% cash flow yield
The operating profit from the forest amounted to
SEK 1 069 million in 2017, which breaks down as
SEK 415 million in value growth and SEK 654 mil-
lion in earnings from operations. The earnings from
operations represent the cash flow from the forest
business and equate to a cash flow yield of 3.7 per
cent in relation to the book value of the forest, which
stands at SEK 17.8 billion. See Note 11, page 55.

HOLMEN ANNUAL REPORT 2017 / FOREST
Global
growth
from leading
position

Holmen produces paperboard for
consumer packaging in the pre-
mium segment. The strategy is to
grow globally through two of the
market’s strongest brands, high
quality and custom solutions.

Market leader in the premium
segment
Holmen is a market leader in the premium seg-
ment for consumer packaging and paperboard
for advanced graphical printing. The main cus-
tomer groups are converters, wholesalers and
brand owners who want to be able to offer
high-quality and sustainable products. The
global market for packaging board is growing,
and Holmen is well positioned for growth.

Strong brands in Invercote and Incada.
Holmen markets its paperboard under two
brands: Invercote and Incada. The brands are
held in high esteem by converters, brand owners
and designers the world over and together, they
represent one of the market’s most versatile
ranges in the premium segment for consumer
packaging. With its high and consistent quality,
paperboard from Holmen ensures stable results
in the customer’s production process.

Fresh fibre offers unique
properties
Both Invercote and Incada are manufactured
using fresh fibre from sustainably managed
forests. The fresh fibre-based paperboard
brings benefits for both production and the
environment. Higher strength, better bright-
ness and a neutral effect on smell and taste in
contact with food are just a few of the proper-
ties that add clear value to the end product.
The fresh fibre and the inherent properties of
the paperboard make it possible to manufac-
ture attractive and functional packaging solu-
tions that offer an excellent substitute for
packaging based on fossil raw materials.

Sustainable ecocycle. The forest is the
source of all paperboard and paper. The addi-
tion of fresh fibre is necessary to keep the
recovered fibre ecocycle going. Wood fibre can
be recycled up to seven times before it wears
out and ends up as biofuel.

Customer-led product
development
Products are constantly being developed in
close collaboration with customers, in order to
meet the ever-growing demand for customer-
specific packaging solutions. The longstanding
relationship with Apple is one such example.
The collaboration began in 2005 and has
developed into a partnership for innovation
and sustainable packaging.

The customers’ need for support and fast

deliveries is a priority area that covers
everything from advice and product samples
to service centres with local warehouses and
sheeting units. Our support teams work closely
with the market, speak the customer’s language
and have in-depth knowledge of their circum-
stances. This enables them to offer expert
advice before, during and after the customer’s
production process.

The service offering includes environmen-

tal documentation plus access to analysis facili-
ties at the company’s own accredited laborato-
ry for sensory and chemical analysis, known
as the taint and odour lab, at Iggesund Mill.
Coupled with the finishing options at the lami-
nation unit in Strömsbruk, this means that
Holmen can offer custom solutions that meet
the toughest requirements.

Climate-smart production
Invercote and Incada are manufactured at
paperboard mills in Iggesund (Sweden) and
Workington (UK). Both mills hold chain-of-
custody certification and all the wood raw
material comes from sustainably managed
forests. The plants are largely 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 growth in the packaging
market
Demand for packaging is rising in line with
factors such as population growth, urbanisa-
tion and an expanding middle class with more
single-person households. The demand in the
various product segments varies depending on
the market, but there is a general increase in
demand for renewable packaging materials.
The exception is tobacco products, which are
declining in several markets. Growth in food
packaging can be seen primarily in Asia, the
Middle East and Africa, while demand for
pharmaceutical packaging is rising in all
markets. Packaging for cosmetics is seeing

HOLMEN ANNUAL REPORT 2017 / PAPERBOARD

a particular increase in markets with rapid
population growth, such as Asia, Eastern
Europe, and South and Central America.

Europe. 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.

Asia. Demand for status goods is rising,
with the emergence of local brands for which
Holmen’s high quality paperboard is the per-
fect fit. Holmen’s presence in the Asian market
has grown in recent years, with service levels
boosted not least by the establishment of a
service centre with warehousing and sheeting
in Taiwan.

North America. Holmen is growing in the pre-
mium segment with a greater presence and a
better service level. Thanks to warehousing and
sheeting in three strategic locations, local dis-
tribution and short delivery times are now
offered from coast to coast.

European
paperboard market 2017

0.5

2.3

e
c
i
r
P

2.4

3.7

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) Drinks, dairy products
and dry goods.
WLC (white lined chipboard) Dry
goods and household products.

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

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

2017

2016

5 526
764
375
5 433
1 383
526

5 252
903
413
5 546
1 406
497

6% higher deliveries
2017 saw deliveries rise by 6 per cent through
increased sales in the premium segment within
and outside Europe, plus greater productivity at the
paperboard mills following the completion of invest-
ments. However, operating profit decreased by
SEK 139 million to SEK 764 million as a result of
SEK 220 million in costs and lost revenue relating
to two major maintenance shutdowns and rising
costs for input goods and freight.

Operating profit/loss and return

Key figures

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

SEKm
1 000

750

500

250

764

13.9

Operating profit/loss
Return on capital employed

21%

of the Group’s capital is employed in
the Paperboard business area

HOLMEN ANNUAL REPORT 2017 / PAPERBOARD

Paper
that saves
customers
money

Holmen utilises the properties of
fresh fibre to offer cost-effective
alternatives to traditional paper
products for advertising, maga-
zines and books.

Paper with potential
Holmen develops and sells fresh fibre-based
paper that challenges traditional, more expen-
sive paper grades. All the paper is produced at
two Swedish mills and is made using renewable
raw material from sustainably managed for-
ests. Efficient production units, continued spe-
cialisation and a strong marketing organisa-
tion will see Holmen strengthen its position in
existing and new markets. Customers include
retailers, printers and publishers across the
globe seeking cost-efficient paper solutions.

Unique benefits of fresh fibre
Fresh fibre makes it possible to develop paper
grades with high bulk – paper that is thick but
light. This means that the customer gets more
paper with the same feel as traditional paper
grades, but without the higher costs. A lighter
paper also leads to lower distribution costs. In
addition, the paper has a naturally higher
brightness that improves the way text and
images are experienced, compared with paper
based on recovered fibre.

Cutting-edge products
Holmen is an industry leader in developing
new products entirely based on fresh fibre.
Working closely with the customer, the result is
innovative products that, compared with tradi-
tional paper choices, offer clear cost benefits
when purchasing and distributing finished
products.

Magazine paper. The brands Holmen UNIQ,
Holmen VIEW and Holmen TRND represent a
broad range of modern paper grades. The
products challenge coated paper and are excel-
lent for magazines, without any need to com-
promise on print quality, brightness or feel.

Book paper. Compared with wood-free paper,
Holmen BOOK gives its customers the oppor-
tunity to lower paper costs considerably. Pub-
lishers appreciate Holmen’s wood-containing
paper because it maintains high quality and
offers product properties that enhance the
reading experience thanks to the paper’s high
stability and bright, smooth surface.

Printed advertising. Holmen’s lightweight
papers create opportunities for retailers seek-
ing an attractive overall cost profile – either in
the form of pure cost savings for both paper
and distribution, or through the option of step-
ping up the format, page numbers or print run,
without adding to the cost.

Sustainability at every stage
Production at both mills has been streamlined
and the operations have been upgraded in line
with the strategy to transition to magazine and
book 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, and both mills
are close to ports with good capacity and effi-
cient handling.

Braviken Paper Mill and Braviken Sawmill
make an energy-efficient co-location. The paper
mill receives raw material in the form of wood
chips from the sawmill, which in turn is sup-
plied with energy and heat from the mill. Sur-
plus bark and wood shavings are sold for the
production of renewable energy.
Hallsta Paper Mill is one of the most
resource-efficient mills in its segment in
Europe, with practically no emissions of fossil
carbon dioxide. The residual products from the
mill’s production processes are sold on as bio-
fuel and soil products.

Recovered paper grows in the forest. 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 and
paper manufacture is based on recovered paper
to a considerably higher extent. However,
paper cannot be recycled again and again for-
ever. After 5–7 times the fibres are exhausted.
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, as a guarantee that the wood raw material
is traceable and comes from sustainably man-
aged forests. This stands in stark contrast to
the majority of products based on recovered
fibre, whose origin cannot be guaranteed.

Ecolabelled products. All the magazine and
book paper that Holmen manufactures is
approved to carry the EU Ecolabel – the EU’s
official labelling scheme for products that meet
strict environmental, functional and quality
criteria. The ecolabelling process mainly exam-
ines the use of fibre raw materials, chemicals

HOLMEN ANNUAL REPORT 2017 / PAPER

and energy and emissions to air and water in
manufacturing.

Opportunities in a
challenging market
The transition from newsprint to magazine
and book paper has boosted Holmen’s competi-
tiveness and created opportunities to develop
our position in selected areas.

A changing magazine market. Many maga-
zine publishers are being squeezed by competi-
tion from digital channels and are constantly
reviewing their paper choices as they chase
lower costs. Our products deliver significant
cost benefits, which creates the potential for
volume growth.

Stable book paper market. Holmen BOOK
is the market’s leading wood-containing paper
in Europe for paperbacks and hardback books.
Its market share has increased steadily in
recent years. We are now looking to new mar-
kets with potential outside Europe, mainly in
Asia and Latin America.

Printed advertising for retailers. Although
the digital alternatives are gaining ground,
paper-based direct mail remains strong. Our
products combine high quality and competitive
pricing, making the sums more than add up for
customers.

Production, %

100

Magazine and book paper

Newsprint

Braviken Paper Mill
Products: Paper for magazines, books, printed advertising
and newspapers
Raw material: Spruce pulpwood

Hallsta Paper Mill
Products: Paper for magazines, books and printed advertising
Raw material: Spruce pulpwood

Operating profit/loss and return

Key figures

SEKm
400

200

-200

-400

11.9

288

-6

-12

Operating profit/loss, excl. items
affecting comparability
Return on capital employed, excl.
items affecting comparability

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

of the Group’s capital is employed
in the Paper business area

2017

2016

5 408

5 431

288
141
2 193
858
1 117

289
259
2 507
861
1 134

12% return
At SEK 288 million, this year’s operating profit is
practically the same as in 2016 and equates to a
return of 12 per cent. Deliveries increased by 6 per
cent, adjusted for the divestment of the Spanish
newsprint mill and the effects of the fire at Hallsta
Paper Mill in late 2015. The increase occurred in
magazine and book papers, which now account for
slightly more than 85 per cent of deliveries. The
contribution that sales made to earnings was, how-
ever, offset by higher wood prices.

HOLMEN ANNUAL REPORT 2017 / PAPER

Wood
products for
sustainable
building

Holmen supplies wood products to
the joinery and construction indus-
try and to builders’ merchants. The
business is being developed by
increasing the value added and
making better use of the wood raw
material in combination with large-
scale production.

Building the future in wood
Wood is a versatile material and the only con-
struction material that is renewable. Since
wood products have the capacity to store car-
bon dioxide for a long time, wooden buildings
are significantly more climate-smart than those
built using fossil-based materials and process-
es. Manufacturing steel and concrete creates
considerable emissions of fossil carbon that
affect the climate. Replacing such materials
with renewable structural components in
wood achieves climate benefits on many fronts.
Emissions of greenhouse gases from manufac-

The wood treatment plant
at Braviken Sawmill will be
operational in 2018.

turing and using climate-negative materials are
avoided, while increased use of products from
the forest captures more carbon dioxide. In
addition, the whole chain from manufacture to
transport is much more energy-efficient and
cost-effective.

Modern and large-scale
production
Modern sawmills with a high technological
level and gradually expanding value-adding
processing are delivering a stronger product
range. With an efficient production chain and
customer-centric working methods, Holmen is
building a platform for long-term and profita-
ble customer relations with the capacity to
meet demand in different markets. Proximity
to the raw material combined with efficient
wood purchasing is a key factor for profitabi-
lity. Competitiveness is underpinned by the fact
that production is co-located with the Group’s
paperboard and paper mills. Holmen’s saw-
mills are strategically located to benefit from a
transport network that reaches around the
globe by sea, rail and road. A large proportion
of the finished products are shipped by sea.

Treated wood for builders’ merchants. The
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 impor-
tant part of the range offered by Swedish build-
ers’ merchants and is used for terraces, deck-
ing, fences and jetties. Demand for treated
products is growing and the sawmill’s central
location in a densely populated region means
there are good opportunities to reach out to
builders’ merchants.

Acquisition of Linghem Sawmill. 2017 saw
the acquisition of Linghem, a small log sawmill
situated 40 km from Braviken Sawmill. With
its integrated planing mill, Linghem produces
sawn and planed wood products from small

logs for joinery and construction purposes.
The products provide a good complement to
Braviken’s range and the acquisition helps to
strengthen Holmen’s market position, primari-
ly in Sweden and the UK.

Sustainable raw material supply. Holmen’s
sawmills have chain-of-custody certification,
which means that all the wood can be traced
back to its origin in sustainably managed for-
ests. The wood raw material is sourced from
Holmen’s own forest holdings and from other
forest owners, ensuring an efficient logistics
chain from forest to sawmill. The acquisition
of Linghem Sawmill and the switch to sawing
two types of wood at Braviken Sawmill have
increased flexibility regarding raw material
supply and improved opportunities to source
raw material within the local region to a
greater extent.

Complete bio co-locations. The Group’s
larger sawmills, Iggesund and Braviken, form
co-locations with their neighbouring paper-
board 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 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 pro-
cesses at the sawmills.

Positive market trends
Holmen manufactures and supplies high-quali-
ty wood products to joinery and construction
industry customers, mainly in Scandinavia, the
UK, the rest of Europe, the Middle East and
North Africa. Deliveries are also made directly
to local Swedish builders’ merchants.

The market for wood products is global

and huge streams of goods are shipped
between continents. Demand largely follows
the general economic cycle and has been devel-
oping well. The market for wood products is
strong in all the key territories. The construc-
tion industry is doing well in Europe and
North American consumption has recovered.
Asia is breaking new records and is dominated
by the Chinese market, which is also seeing the
fastest growth.

Growing cities are driving Swedish wood
construction. For a long time, the increase in
the use of wood in Sweden has largely been
attributable to renovation work and exten-
sions. Now the trend is being driven by the
construction of new homes, which in turn is
affected by population growth, urbanisation
and the aim to build sustainable cities. There is
great potential for growth, mainly in high-rise
buildings, and the proportion of housing built
in wood is expected to rise as the capacity for
industrial building in wood is expanded. New
wood building techniques are also under devel-
opment, which could lead to increased
demand.

HOLMEN ANNUAL REPORT 2017 / WOOD PRODUCTS

Braviken Sawmill
Products: Spruce and pine wood products for joinery and construction
Raw material: Spruce and pine saw logs

Iggesund Sawmill
Products: Pine wood products for joinery
Raw materials: Pine saw logs

Linghem Sawmill
Products: Spruce and pine wood products for joinery and construction
Raw materials: Spruce and pine saw logs

16% higher sales
Sales climbed steeply in 2017 as a result of
a 10 per cent increase in deliveries and rising
market prices, which drove operating profit up to
SEK 80 million, equating to a return of 9 per cent.

2017

2016

1 562
80
100
862
251
852

1 342
-3
52
859
225
776

Operating profit/loss and return

Key figures

Net sales, SEKm
Operating profit/loss SEKm
Investments, SEKm
Capital employed, SEKm
Average number of employees
Deliveries, ’000 m3

SEKm
100

-50

-100

-150

80 9.1

-5

-10

-15

Operating profit/loss, excl. items
affecting comparability
Return on capital employed, excl.
items affecting comparability

of the Group’s capital is employed
in the Wood Products business area

HOLMEN ANNUAL REPORT 2017 / WOOD PRODUCTS

Renewable
energy
production

Holmen’s renewable energy as-
sets in the form of hydro and wind
power contribute to a sustainable
energy supply and provide a good
revenue stream over time.

Holmen’s own energy production is dominated
by renewable hydro power. In an energy system
that is increasingly based on weather-depend-
ent energy sources, such as solar and wind
power, hydro power is uniquely controllable.
Electricity cannot be stored to any great extent,
but the water that is used to generate electricity
can be stored in reservoirs, lakes and rivers.
Hydro power stations can therefore generate
both baseload power and regulating power,
which is the energy needed to meet fluctuations
in demand. Production is tailored to demand
or changes in other electricity production by
reducing or increasing the flow of water
through the turbines. The environmental
impact of the operation is marginal, with mini-
mal emissions.

Another benefit of hydro power is service

life, since a hydro power station can deliver
energy for over 100 years. The investment
required is relatively small compared with other
types of power and the operating and mainte-
nance costs are low, since the plants are almost
entirely automated. Overall, hydro power
brings major benefits to society as part of the
drive for a totally renewable electricity system.

Strength in own energy assets
In a normal year, Holmen produces 1 100 GWh
from hydro power and a little over 100 GWh
from wind power. Together with the renewable
electrical energy that is produced at the
Group’s mills, this equates to almost 50 per
cent of Holmen’s overall energy consumption.

Hydro power provides a reliable
electricity supply
Sweden’s electricity production is based largely
on nuclear power and hydro power, each of
which account for around 40 per cent of total
production.

Wind power a supplement. Wind power
is the fastest growing energy source in the EU.
Holmen is a major land owner and has the
potential to develop its land holdings by estab-
lishing wind farms on sites with good wind
conditions. Wind power’s total cost per kilo-
watt hour produced has been relatively high
due to the significant cost of investing in the
infrastructure and power grids. However, tech-
nical advances and a new generation of more
efficient wind turbines, combined with slightly
higher electricity prices, create opportunities
for the future establishment of wind power on
the Group’s land.

Turbine hall at Holmen’s
hydro power station in
central Norrköping.

Swedish investment in
renewable energy
Over the year, Sweden’s energy policy has
focused on implementation of the energy
policy agreement that was secured in 2016.
The tax on thermal energy for nuclear
power is being stepped down to facilitate man-
datory investments and the electricity certifi-
cate system is being increased and extended
until 2030 to stimulate the expansion of wind
power. The energy agreement also states that
hydro power plays a central role in Sweden’s
renewable electricity supply. The property tax
on hydro power will be reduced to the same
level as for other electricity production plants
over a four-year period beginning in 2017. This
will allow investments to continue the opera-
tion of hydro power stations.

Sweden’s electricity
production, %

Hydro power
Nuclear power
Wind power
Thermal power

41%
39%
11%
9%

HOLMEN ANNUAL REPORT 2017 / RENEWABLE ENERGY

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

Owner
Varsvik
VindIn

Wind farms
Varsvik
Skutskär
Trattberget
Svalskulla, Finland

*Refers to normal production

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

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

Holmen’s
production share
GWh*
83
5
38
9

%
50
18
18
18

Year of
construction
1957–58
1962
1985–96
–”–
–”–
–”–
–”–
–”–
1961–74
–”–
–”–
–”–
1915
2009
1949–75
–”–
–”–
–”–
–”–
1990
1927

Year of
construction
2014
2009
2012
2014

2017

2016

315
135
26
3 115
11

314
120
23
3 153
10

1 169

1 080

5% lower production
than normal
Low rainfall caused production to be 5 per cent
lower than in a normal year. However, operating
profit increased by SEK 15 million to SEK 135
million due to a reduction in property tax of
SEK 20 million.

Operating profit/loss and return

Key figures

External net sales, SEKm
Operating profit/loss, SEKm
Investments, SEKm
Capital employed, SEKm
Average number of employees
Own production of hydro and wind
power, GWh

SEKm
500

375

250

125

135

4.3

Operating profit/loss
Return on capital employed

12%

of the Group’s capital is employed
in the Renewable Energy business area

HOLMEN ANNUAL REPORT 2017 / RENEWABLE ENERGY

Sustainability
every step of
the way

Holmen’s value creation begins in the sustainably managed
forest. By absorbing carbon dioxide, the forest plays an
important role for the climate, while also providing the indus-
try with renewable raw material. With our own renewable
energy production and resource-efficient production units,
Holmen creates climate-smart products for the future.

How we manage
the forest

70 – 90 years

After about 70–90 years, the for-
est is mature enough to be har-
vested. By the time the trees are
this old, growth slows down and
the forest’s ability to capture and
store carbon dioxide is reduced.

80%

of the growth is harvested.
This means that the amount
of wood in our forests
increases every year.

From seedling
to plank

0 – 20 years

Once the forest has been har-
vested, the ground is prepared,
and new trees are planted or
sown. Holmen’s two nurseries
produce 35 million seedlings
each year, with the majority
planted on the Group’s land.
The forest is cleaned to select the
trees that are best able to grow,
and to make the forest more re-
sistant to storms and damage.

20 – 70 years

The trees grow fastest during
this time and absorb the highest
amount of carbon dioxide. The
forest is thinned to give the best
trees a chance to grow big. The
trees that are thinned are used
to produce pulp.

We take care of the whole harvest

We saw as much wood as possible from the trees we harvest, and nothing is wasted.

Division of the stem

Wood – Planks and boards
Chips – Paper pulp
Bark – Bioenergy
Wood shavings – Bioenergy

50%
The large logs that make up ap-
proximately half of the harvest go
to sawmills where they become
building materials in the form of
construction timber and joinery
products.

40%
The thinner parts of the tree and
wood from thinning are ground or
boiled down into pulp that then
becomes paper or paperboard.

10%
Branches, tops, bark and wood
shavings become renewable
bioenergy.

HOLMEN ANNUAL REPORT 2017 / A SUSTAINABLE BUSINESSThe carbon cycle

The trees in Holmen’s forests capture carbon dioxide and store it
throughout their lifetime. The carbon dioxide is then bound in the
harvested wood products and does not return to nature until the wood
is burned or rots. This means that a wooden house that is a hundred
years old is still storing the carbon dioxide that the tree absorbed when
it was growing in the forest.

As paperboard and paper have a relatively short lifetime, the carbon di-
oxide bound in these products returns to the ecocycle relatively quickly.
However, paperboard and paper can be recycled several times before
they, like end-of-life wood products, can be used as biofuel.

2 815 000 tonnes
Net uptake of CO2 in
Holmen’s operations 2017

The Swedish
forest is growing

Almost three-quarters of Sweden is covered by forest.
Today there is twice as much forest in Sweden as there
was a hundred years ago and the volume of standing
timber is increasing by 1 per cent a year.

70%

of Sweden is
covered by forest

Approximately 75%
of the forest land is
actively managed and
25% is used for nature
conservation.

Holmen’s forest covers more than 1 million
hectares. That’s about the same size as the region
of Skåne.

Energy-efficient
production

Production at Holmen’s mills and sawmills is largely based
on renewable electrical and thermal energy. In the past
decade, emissions of fossil carbon from the plants have
fallen by almost 80 per cent, and about half of all the energy
consumed in Holmen's operations comes from self-gener-
ated renewable production.

HOLMEN ANNUAL REPORT 2017 / A SUSTAINABLE BUSINESSIn collaboration with our stakeholders
Maintaining knowledge of and continuous dialogue with the company’s
stakeholders as a matter of course enables us to run and develop opera-
tions efficiently and for the long term.

The Group’s CEO bears ultimate responsibility for driving work in

a sustainable direction for the long term, while the group’s Senior Vice
President Sustainability and Communications has a coordinating role
and reports to the Group’s CEO. Continuous improvement and regular
follow-up of the business lay the foundation for Holmen’s development
in economic, social and environmental terms.

Customers. Over 85 per cent of Holmen’s deliveries go to European
customers. Other exports are mainly to customers in the USA and Asia.
Holmen’s business ethics policy and associated guidelines provide guid-
ance on how to maintain good business ethics when dealing with exter-
nal contacts in various markets.

Suppliers. Holmen’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.

Employees. Competent employees and a value-driven company culture
are important to Holmen attaining its business objectives. As an employ-
er, Holmen must work to ensure good leadership and safe working con-
ditions, while also motivating its employees and facilitating their devel-
opment. It is also important for operations to be characterised by trans-
parency and comply with rules on business ethics.

Society. Forestry is of significant regional importance. It creates employ-
ment in rural areas and for many is the reason why they are able to live

and work outside the big cities. Holmen plays a significant role as an
employer in a number of locations and not only creates jobs in the Group
but also for suppliers of goods and services and various social functions.
This means that Holmen contributes substantial tax revenue. Ongoing
dialogue with local communities and stakeholder organisations, and
partnerships with higher education institutions and universities create
conditions for sustainable development. Large parts of Holmen’s land in
northern Sweden overlap Sami winter grazing land for reindeer. Via con-
sultation with the reindeer husbandry community, it is possible to arrive
at solutions that meet both parties’ requirements as closely as possible.

Sustainably managed forests are not only important from a climate-

related and economic perspective, they are also important for people’s
wellbeing and as a place for recreation, hunting and fishing.

Media, opinion formers and the general public. Through clear com-
munication and dialogue, Holmen is helping to increase interest in and
understanding of the conditions and opportunities for the Group and the
industry.

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 pub-
lic 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 and develop operations with a good return
on invested capital. The Group’s financial statements and sustainability
reporting are effective ways of providing relevant data for analysis.

Income statement 2017 by
stakeholders

Customers

Sales of products, wood and electricity

Suppliers

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

Employees

Wages and social security costs

Lenders

State

Interest

Taxes

Shareholders Net profit

Board’s dividend proposal

SEKm

17 269

-12 851

-2 252

-53

-445

1 668

1 092

Development for the future

Holmen’s development work is mainly focused on three areas: in-
creased forest growth, more efficient production and developing exist-
ing and new products with forest raw material as a base. The work is
often industry-wide, through collaboration with universities, higher ed-
ucation institutions and research institutions. Among other things, re-
search is being conducted into the components that make up wood:
cellulose, hemicellulose 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 starting
point for the work is that new business opportunities must be linked to
Holmen’s existing industrial sites. The Group’s investments in research
and development amounted to approximately SEK 95 million in 2017.

HOLMEN ANNUAL REPORT 2017 / A SUSTAINABLE BUSINESS

An important climate actor
Carbon dioxide is captured in the growing forests and in the products.
Holmen’s resource-efficient production is predominantly driven by
renewable energy. Investments in self-generated energy and the develop-
ment of the products of today and tomorrow based on forest raw mate-
rial mean the positive climate effects will be even greater in the future.

The forest. The volume of standing timber in Holmen’s forests increases
by 1 per cent a year, which means that carbon dioxide is bound into
its increase in volume. Based on Sweden’s official reports of greenhouse
gases for forest and land between 1990 and 2017, uptake for Holmen’s
forests and forest land on average is estimated at 1 300 000 tonnes per
year. Over the foreseeable period, annual growth in Holmen’s forests is
expected to exceed the harvests, and the Group’s forest growth target
shows 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 from the
mills have fallen by over 80 per cent and amounted to just under 75 000
tonnes in 2017. Annual emissions of fossil carbon dioxide from forest
machinery, manufacture of input goods and transport of raw materials
and products are estimated at approximately 340 000 tonnes. Emissions
represent the negative climate impact of Holmen’s operations.

The products and substitution effects. Wood products store carbon
dioxide throughout their lifetime and this is only released when the prod-
ucts are incinerated. Holmen’s production of wood products in 2017 is
equivalent to approximately 680 000 tonnes of carbon dioxide 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 substi-
tution effect when used to replace climate-negative construction mate-
rials. The substitution effect for 2017 is estimated to amount to approxi-
mately 1 250 000 tonnes of carbon dioxide.

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

Paper and paperboard products can also replace fossil-based prod-
ucts but as they have a relatively short lifetime, it is not meaningful to
calculate their uptake of carbon dioxide. Once the fibres in paper and
paperboard have been recycled several times as recovered fibre, however,
like the end-of-life wood products, they make excellent biofuels. Biofuels
from Holmen’s forests and by-products from production, such as bark,
provide renewable energy from incineration. Here too, it would be possi-
ble to calculate a substitution effect as fossil fuels are replaced by biofuel,
but no such calculation has been carried out for this compilation.

Under the parameters set, calculations show that Holmen’s business

brings substantial climate benefits, as it reduces the amount of carbon
dioxide in the atmosphere by almost 3 million tonnes per year.

Key figures for Holmen’s operations
from a climate perspective 2017

Emissions of fossil carbon dioxide (tonnes)
Forestry
Input goods
Production facilities
Transport of raw materials and products1)

Absorption of carbon dioxide (tonnes)
Volume of standing timber and forest land2)
Wood products for construction purposes
Substitution of climate-negative construction materials

Net, capture of carbon dioxide and substitution effect
(tonnes)

-26 500
-75 000
-73 500
-240 000
-415 000

1 300 000
680 000
1 250 000
3 230 000

2 815 000

1) Includes emissions from transport of finished products to customers and deliveries of wood,

pulp and chemicals to Holmen’s facilities.

2) Average based on 1990–2017.

Holmen’s operations
contribute major climate
impact by annually reduc-
ing the amount of carbon
dioxide in the atmosphere
by almost 3 million tonnes.

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

• Simplified reporting of carbon pool changes for Holmen’s forest and land holdings in line
with the guidelines of the Convention on Climate Change (UNFCCC), 2018. Swedish
University of Agricultural Sciences.

• 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 Conven-
tion on Climate Change. Swedish Environmental Protection Agency, pp. 353–392.

• 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 sub stitution 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 has been part of the UN Global Compact and
its corresponding Nordic network since 2007. We see
it as natural to support its ten principles on human
rights, social responsibility and anti-corruption.”

Henrik Sjölund, President and CEO

Information on how the Group complies with and works in line with the principles of the Global Compact is available
at holmen.com. The Group reports its work on sustainability to the organisation each year in line with the ten princi-
ples and sets out the progress made. Work on the ten principles also helps to attain the UN’s global sustainable
development goals.

HOLMEN ANNUAL REPORT 2017 / A SUSTAINABLE BUSINESS

Holmen’s environmental
responsibility
For Holmen, environmental and energy con-
cerns play a natural role in planning produc-
tion and investments. Operations are charac-
terised by resource-efficient use of renewable
raw material and energy, and by protecting the
environment, applying the precautionary prin-
ciple. Energy, chemicals and fibre are recovered
as far as possible, in order to minimise the envi-
ronmental impact of production. The section
on Risk management on page 33 outlines
Holmen’s preventive work on eco-related risks
and how they are managed.
Holmen’s environmental work is charac-
terised by constant improvement measures
within the framework of certified environmen-
tal and energy management systems, which
ensure compliance with legislation and require-
ments set by authorities.

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 76–77.

Growth in Holmen’s forests is to increase,
which will give higher future harvests and
capture more carbon dioxide. The volume of
standing timber and harvesting will be 50 per
cent higher in 2050 than in 2000. The volume
of standing timber has grown by 15 per cent to
date, with harvesting up 25 per cent.

The Group’s target for fossil fuels is to
reduce their use at the mills by 90 per cent by
2020 compared with 2005 levels. A reduction
of 86 per cent has been achieved by 2017. Ex-
tensive investments in bio-based energy pro-
duction at the paperboard mills, and the adjust-
ed energy strategy at the other mills have
resulted in a considerable reduction in fossil
fuel use.

The third climate-related sustainability
target is to increase company-produced renew-
able electrical energy as a proportion of total
electricity use by Holmen. The target for 2020
is for production to reach 50 per cent, com-
pared with 31 per cent for the base year 2005.
In 2017 self-generated renewable electrical
energy equated to 45 per cent of Holmen’s
total electricity consumption.

Environmental targets for sustainable
development. For many years, Holmen has
been working with Group-wide environmental
targets for sustainable development. Increased
production and use of products made from
renewable forest raw material are important
for the climate.

Contribute towards global and
national environmental goals
Holmen’s Group-wide sustainability targets
are in line with global, European and national
sustainability goals. In late 2016 the global
Agreement on Climate Change entered into
force, with the overarching goal of keeping

global warming to below 2°C, and ideally
limiting it to 1.5°C. The Agreement on Climate
Change states that action must be taken to pre-
serve and improve the capacity to capture and
store greenhouse gases, and the importance of
the forests is particularly highlighted in this
context. In the long term, Holmen will there-
fore be an important player in ensuring that
the target set out in the global Agreement on
Climate Change can be achieved.

The overarching goal of Swedish environ-
mental policy is the generational goal, which
guides the values that must be protected, and the
transformation of society needed to attain the
desired environmental quality. Achieving it
demands an ambitious environmental policy in
Sweden, the EU and in international contexts.
The Swedish environmental quality system com-
prises 16 environmental quality objectives in
areas such as climate impact, air pollution and
biodiversity. Swedish businesses are expected to
contribute measures that show how systematic
environmental work is profitable for society and
for business. Holmen is constantly working on
environment-related studies and measures both
within forest operations and at production
plants. In this way, Holmen is contributing
towards the achievement of several of Sweden’s
national environmental quality objectives, such
as Reduced climate impact, Sustainable forests
and A rich diversity of plant and animal life.

Work in line with global guidelines

Recognition and assessments

In autumn 2015, the member states of the UN adopted 17 global
goals for achieving social, economic and sustainable development
around the world. An overall analysis shows that with its resource-
efficient business model, Holmen is already working within the scope
of several of the goals, illustrated below. An ongoing materiality analy-
sis will identify the areas that continued sustainability work should be
focused on.

Strategic choices and investments for the future have strengthened
Holmen’s sustainability profile, which has led to recognition in impor-
tant contexts. Holmen is included in a number of sustainability index-
es. More information is available at holmen.com. This can be seen as
a mark of quality, showing that Holmen is capable of tackling risks as
well as opportunities in the field of sustainability.

Holmen has reported to the CDP Climate Program since 2007 and also
to the CDP Forest Program since 2013. The survey of climate work in
2017 shows that Holmen has good management in place and a strate-
gy to reduce the negative impacts of climate change. In the evaluation
of forest management, Holmen was placed in the group for good lead-
ership that ensures sustainable use of the forest’s resources.

In 2017 Holmen was placed 21st in the prestigious Global 100 index
of the 100 most sustainable companies in the world, with Holmen be-
ing the only company in the forest industry sector to make it onto the
list. Almost 5 000 companies were evaluated for the index, which is
based on an overall assessment of
how a company handles issues such
as resource management, em-
ployees and governance.

In 2017 Holmen was awarded the
Golden Peacock Global Award for
Sustainability. The jury made par-
ticular reference to Holmen’s ab-
sorption of carbon dioxide in its
growing forest and the climate ben-
efit from its products. This is the first
time a Swedish company has won in
the sustainability category.

HOLMEN ANNUAL REPORT 2017 / A SUSTAINABLE BUSINESS

Environmental per-
mits for the Group’s
production facilities

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

2013
2017

2000
2002
2014
2010
2003

1) In addition, operations subject to notification require-

ments take place at the production unit in Strömsbruk.
Port activity (at Skärnäs Terminal) alongside Iggesund
Mill has held an environmental permit under the Envi-
ronmental Code since 1999. In 2017 Iggesund Mill un-
derwent the process for obtaining a new environmental
permit for production increase. Operations at Skärnäs
Terminal are included in this application.

Management system certifications

Production facilities1)

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

Environment
ISO 14001
2001
2003
2001
1999
1999
2011

Energy
ISO 50001
2005
2015
2005
2006
2006
2011

Quality
ISO 9001
1990
1990
1993
1996
1997
2011

Health
and safety
OHSAS 18001
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 operations are certified in accordance with environmental management system ISO 14001. Forest operations
are also certified under criteria issued by PEFC™ and FSC® respectively and have chain-of-custody certification (FSC® Con-
trolled Wood), 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. For Linghem Sawmill, which was acquired in 2017,

work began during the year to incorporate its operations under the certification of the other sawmills.

Permits
At the end of 2017 Holmen was running pro-
duction operations that require environmental
permits at seven facilities. The permits specify
conditions regarding permitted production
volumes and permitted emissions to air and
water. Six of the facilities are located in Sweden
and one is in Workington in the UK. The facili-
ties’ turnover amounted to almost 80 per cent
of the Group’s net sales in 2017.

By October 2018 at the latest, Holmen’s
pulp, paper and paperboard mills must comply
with the tougher emissions requirements set out
in the EU’s Industrial Emissions Directive (IED)
of 2013. The environmental status of the Swed-
ish mills is good, and they are expected to meet
the new requirements. The mill in Workington
has been granted a derogation whereby the mill
is to have invested in measures to ensure that the
emission requirements are met by 2021.

In 2017 Iggesund Mill underwent the pro-
cess for obtaining a new environmental permit
for production increase.

In 2017 Braviken Sawmill received an envi-
ronmental permit for a facility for preservation
treatment for wood products. The facility will
be taken into use in spring 2018.
Holmen has all the permits to build
approximately 500 GWh of wind power pro-
duction in Västernorrland, and an application
to build an additional approximately 500
GWh of wind power on Holmen’s land in
Västerbotten is being processed.

The energy agreement from 2016 means
Sweden has to comply with the requirements
of the EU’s Water Framework Directive,
including introducing modern environmental
permits for hydro power. Consequently, in
2017 the Swedish government presented a pro-
posal for significant changes to the Environ-
mental Code that may lead to restrictions on
industry and hydro power that affect aquatic
environments. In autumn 2017, discussions
were held between the ministry responsible
and different actors seeking to arrive at legisla-
tion capable of meeting the EU requirements.
Holmen actively participated in this work.

Emission allowances and
electricity certificates
Within the EU Emissions Trading Scheme,
Holmen has been awarded emission allow-
ances up to 2020. In recent years, Holmen has
significantly reduced the use of fossil fuels as a
result of investments in bio-based energy pro-
duction at several facilities. Surplus allocated
emission allowances 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 in propor-
tion to the amount of electricity generated. The
mill in Workington obtained these green certifi-
cates in 2017.

Exceedances and complaints
The environmental manager within each oper-
ation handles any incidents that occur. Close
dialogue with the mills’ local residents is
important in order to identify and address any
views on operations at an early stage.

29 (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 meas-
ures were taken to deal with these cases, in line
with the environmental management system of
the operations concerned.

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. In 2017,
studies were in progress at different stages
regarding the former sawmills Håstaholmen,
Stocka and Lännaholm, the sulphite mills at
Strömsbruk, Domsjö and Loddby, the former
ground wood mill in Bureå and a landfill site in
Kvillsfors. Remediation of land and buildings
at the former industrial site of a surface treat-
ment plant in Iggesund was completed in the
first quarter of 2017.

Varsvik wind farm in Hallstavik.

HOLMEN ANNUAL REPORT 2017 / A SUSTAINABLE BUSINESS

Together
we achieve
success

Competent employees and a
value-driven company culture are
important to Holmen attaining its
business objectives.

Values and management by
objectives
Holmen’s core values of courage, commitment
and responsibility combined with the Code
of Conduct create a framework for how em -
ployees should act and how leadership should
be structured.

Expectations concerning what the orga-
nisation should achieve are clarified with the
help of a process of management by objectives,
in 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.

How work is managed
HR issues are conducted and developed
Group-wide and locally. Employees and man-
agers bear joint responsibility for a good work-
ing climate that promotes development. At
Group-wide level, the Senior Vice President
Human Resources is responsible for coordina-
tion and for strengthening Holmen’s employer
brand.
Holmen’s Code of Conduct, policies and
values are part of every employee’s induction
programme. To keep them front of mind, the
content is repeated in training at meetings with
employees, where the engagement of managers
is key. Compliance is monitored partly through
employee surveys and appraisal talks, pay sur-
veys, safety statistics and audits of the organi-
sational and social work environment. Where
non-compliances or failings are found in terms
of the corporate culture, the issue is addressed
on a case-by-case basis. The steering docu-
ments below are particularly important for HR
work and the employees.

Code of Conduct. Holmen’s operations must
be characterised by responsible behaviour
towards employees, shareholders, customers,
suppliers, stakeholders, agencies and the sur-
rounding community. The Code of Conduct is

one way of ensuring this by clearly setting out
and emphasising the requirements and expec-
tations made of employees.

HR policy. The policy was updated and adopt-
ed in 2017. It describes expectations of em-
ployeeship and management, and sets out the
remit of management by objectives, talent
management, cooperation with unions, equali-
ty, pay, working hours and other terms of
employment, health and safety, travel, internal
representation, social engagement and side-
lines, as well as the use of tools.

Work environment policy. The policy sets out
how Holmen is to ensure a good working envi-
ronment in terms of health and safety.

Business ethics policy. The policy and asso-
ciated guidelines address issues including
anti-corruption and competition and provide
clear guidance on how to maintain good busi-
ness practices when dealing with external
contacts in various markets. It also states that
employees must carefully consider the meaning
and purpose of any favours/benefits offered in
their contacts with customers and suppliers.
Employees in departments at risk of encounter-
ing unauthorised behaviour receive special
training on these issues.

Recruitment and development
To maintain competitiveness over time, attract-
ing the right employees is of the utmost impor-
tance. The Group’s sustainability profile, com-
bined with our products geared towards the
future and a values-driven company culture,
strengthens Holmen’s employer brand. To
ensure the development of good leadership,
Holmen runs internal leadership programmes
for managers at all levels. In addition, there are
development programmes for specialists who
drive change management. Holmen also takes
a structured approach to identifying and devel-
oping talent in the organisation.

Equality
With respect for human rights, Holmen works
for a workplace climate that is founded in the
equal value of all people. All Holmen’s em -
ployees must have the same rights, obligations
and opportunities irrespective of their sex,
transgender identity or expression, ethnicity,
religion or other belief, disability, sexual orien-
tation and age.
Holmen draws up action plans and annual
pay surveys in line with the Equality Act and
uses appraisal talks and employee surveys as
additional tools.

The forest industry has long been a male-

dominated sector. Holmen is working to attain
a better balance and just over 19 (19) per cent
of employees are women. In 2017 the propor-
tion of women managers was approximately
21 (19) per cent.

Employee surveys
Employee surveys are conducted to follow up
working conditions and identify improvement
measures. They are carried out locally to pro-
duce results closer to operations with a greater
opportunity to put appropriate measures in

place. As well as surveys, appraisal talks are
held with a target frequency of at least once a
year for all employees. In 2017 approximately
80 per cent of Holmen’s employees took part
in such appraisals.

Union cooperation
A relationship with the union organisations
that is based on trust is important and helps
drive Holmen forward. Collaboration with
trade unions takes place in consultation groups
at various levels in the company and interna-
tionally in the Holmen European Works Coun-
cil. The company’s employees are represented
on the Group Board by three members and
three deputy members. In 2017 the level of
union membership reached 77 (67) per cent.

Health and safety
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. Holmen conducts Group-
wide, systematic work on health and safety in
line with OSHAS 18000. All units are certified
with the exception of Linghem Sawmill, which
was acquired in 2017. Work on certification
began during the year. In 2017, health and safe-
ty work focused on safety behaviours, shared
rules and exchanging experiences. The number
of industrial accidents per million hours
worked fell by over 40 per cent in 2017 com-
pared with 2016, from 8.8 in 2016 to 5.1 in
2017. The dominant causes are slips, trips and
pinch injuries. The long-term target is zero
accidents and several units have also been at
this level for more than a year. By the end of
2018 the interim target is for the number of
accidents to be half the 2017 figure.

In 2017 sickness absence was 4.2 per cent,

which is on a par with previous years. Long-
term sickness absence (more than 60 days) is at
2.0 per cent, which is also on a par with previ-
ous years. The good health index is a measure
of the proportion of employees with no sick
leave during the year. The figure for 2017 was
49 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 2017 / EMPLOYEES

Petra Arborén, Claes Lindqvist,
Malin Ekroos, Iggesund Mill.

Average number of employees
Business area, %

Cristoffer Björk, operational
planner and forest planner,
analyses the land area in a
stand using a relascope.

0.4

Forest

Paperboard
Paper
Wood Products
Renewable Energy
Group-wide

Total: 2 976
363

1 383
858
251
11
110

Sandra Kolar, production
engineer, Hallsta Paper Mill.

Niclas Nordström, operator,
Braviken Sawmill.

HOLMEN ANNUAL REPORT 2017 / EMPLOYEES

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 require-
ment under the Swedish Annual
Accounts Act. The corporate
governance report complies
with the rules and instructions
stipulated in the Swedish Code
of Corporate Governance.

Shareholders
Holmen had 30 903 shareholders at year-end
2017. Private individuals with Swedish citizen-
ship accounted for the largest category of own-
ers with 28 967 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, which means that
a Group relationship exists between L E Lund-
bergföretagen 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 Annual Gen-
eral Meeting (AGM).

At the 2017 AGM, the Board’s authorisa-
tion to purchase up to 10 per cent of the com-
pany’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 36–37 for further information

on the shares and ownership structure.

General meeting of shareholders
The notice convening the AGM is sent no earli-
er than six and no later than four weeks before
the meeting. The notice contains: a) informa-
tion about registering intention to attend and
entitlement to participate in and vote at the
meeting; b) a numbered agenda of the items to
be addressed; c) information on the proposed
dividend and the main content of other pro-
posals. Shareholders or proxies are entitled
to vote in respect of the full number of shares
owned or represented. Registration for the
meeting is made by letter, telephone or at
holmen.com. Notices convening an Extra-
ordinary General Meeting (EGM) called to
deal with changes to the company’s articles of
association 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 submit-
ted in good time before the notice is distribut-
ed. Information about the rights of sharehold-
ers to have matters discussed at the meeting is
provided at holmen.com.

It was announced on 5 April 2017 that the
2018 AGM would take place in Stockholm on
10 April 2018.

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 2017 and 2018 AGMs is shown in the table
on page 30.

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 applica-
ble, for the election of auditors. The commit-
tee’s proposals are presented in the notice con-
vening the AGM.

The nomination committee applies rule

4.1 of the Swedish Corporate Governance
Code (the Code) as a diversity policy in estab-
lishing proposals, which means the composi-
tion of the Board should reflect the company’s
business operations, phase of development and
other circumstances, and should be diverse and
wide-ranging in terms of the expertise, experi-
ence and background of the members elected
by general meetings. An even gender distribu-
tion is sought. The nomination committee has
observed this policy in its proposals to the
Board. Further information about the work of
the nomination committee will be provided at
the 2018 AGM.

For the 2018 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, Lars G Josefsson, Lars
Josefsson, Carl Kempe, Louise Lindh, Ulf Lun-
dahl, 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 articles of
association, the Board should consist of seven
to eleven members. The company’s articles of
association contain no other rules regarding
the appointment or dismissal of Board mem-
bers, or regarding amendments to the articles,
or restrictions on how long members can serve
on the Board.

The 2017 AGM re-elected Fredrik
Lundberg, Carl Bennet, Lars G Josefsson,
Lars Josefsson, Carl Kempe, Louise Lindh,
Ulf Lundahl, Henriette Zeuchner and

AGM 2017
The 2017 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 and
approved by Anne-Charlotte Hormgard of The Third Swedish National
Pension Fund (AP3) and Emelie Westholm of Folksam.

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 2018 meeting.

Board meetings
The Board held ten meetings in 2017, four of which were in connec-
tion with the company’s publication of its quarterly reports. One
meeting was dedicated to reviews of strategic issues and the Group
budget for 2018. One meeting was held in connection with the Board
meeting important paperboard and paper customers. Two meetings
were held in connection with the company’s AGM. Short meetings
were held by telephone on two occasions. The Board also paid spe-
cial attention to strategic, financial and accounting issues, follow-up
of business operations and major investment matters. On one occa-
sion the company’s auditors reported directly to the Board, providing
a presentation about their audit of the accounts and internal control.

HOLMEN ANNUAL REPORT 2017 / CORPORATE GOVERNANCE REPORT

SHAREHOLDERS

NOMINATION COMMITTEE

GENERAL MEETING OF SHAREHOLDERS

BOARD OF DIRECTORS

CEO

GROUP MANAGEMENT

AUDITORS

FIVE GROUP STAFFS

FIVE BUSINESS AREAS

Henrik Sjölund to the Board. Fredrik Lundberg
was re-elected chairman. At the statutory first
meeting of the new Board in 2017, Carl Kempe
was elected deputy chairman and Lars Ericson,
Senior Vice President Legal Affairs, was appoint-
ed 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 70–71.

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
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 continually
regarding financial developments and other
key events. Employees of the company partici-
pate in Board meetings to submit reports.

In order to develop the work of the Board, an
annual evaluation is undertaken involving each
member answering a questionnaire containing
relevant questions concerning the Board’s
work and having the opportunity to make sug-
gestions on how to enhance the Board’s work.
Their responses were presented and discussed
at a Board meeting. The results of the 2017
evaluation will form the basis for planning the
Board’s work for the coming year. The chair-
man of the Board has reported the results of
the evaluation to the nomination committee.

Remuneration
The Board has appointed a remuneration
committee consisting of Fredrik Lundberg
and Carl Bennet. During the year, the commit-
tee prepared matters pertaining to the remu-
neration and other employment conditions
of the CEO.

Remuneration and other employment
conditions for senior management who report
directly to the CEO are decided by the latter in
accordance with the 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 2017 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 2018 AGM. These guidelines and informa-
tion about remuneration are presented in
Note 4 on page 50.

The 2017 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

Board members as of the 2017 AGM

Board members

Elected

Role on the Board

Fredrik Lundberg
Carl Kempe
Carl Bennet
Lars G Josefsson
Lars Josefsson
Louise Lindh
Ulf Lundahl
Henriette Zeuchner
Henrik Sjölund

1988
1983
2009
2011
2016
2010
2004
2015
2014

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

Audit
committee

Remuneration
committee

Member
Member
Member
Member
Member
Member
Chairman
Member
-

Chairman
-
Member
-
-
-
-
-
-

Attendance at meetings:

Board1)

10/10
9/10
10/10
8/10
10/10
10/10
9/10
10/10
10/10

Audit
committee

Remuneration
committee

Fee

(SEK ’000)

5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
-

1/1
-
1/1
-
-
-
-
-
-

680
340
340
340
340
340
340
340
-

1) With one exception, absence relates to additional meetings by telephone held at very short notice.

According to the nomination committee, Fredrik Lundberg, Carl Kempe, Carl Bennet, Lars G Josefsson, Lars Josefsson, Louise Lindh, Ulf Lundahl and Henriette Zeuchner are independent of the com-
pany and its senior management, and Lars G Josefsson, Lars Josefsson, Ulf Lundahl, Henriette Zeuchner and Henrik Sjölund are independent of the company’s major shareholders.

Employee representatives

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
Christer Johansson, deputy member, elected 2017

HOLMEN ANNUAL REPORT 2017 / CORPORATE GOVERNANCE REPORT

STRATEGY AND TARGETS

STRATEGY, BUDGET AND MANAGEMENT BY OBJECTIVES

BUSINESS PROCESSES

EARNINGS, REPORTING AND MONITORING

CODE OF CONDUCT

VALUES

POLICIES

GUIDELINES

GROUP INSTRUCTIONS

MANAGEMENT SYSTEMS

AUTHORITY

AUTHORISATION
RULES

Internal management processes.

five business areas and the heads of the five
Group staffs. Information about the CEO and
other members of Group management is pro-
vided on page 72.
Group management met on nine occasions
in 2017. Its meetings dealt with matters such as
earnings trends and reports before and after
Board meetings, strategy reviews, 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 2017 AGM as audi-
tor for a period of one year. Authorised public
accountant Joakim Thilsted was appointed as
the principal auditor. Under applicable regula-
tions KPMG can be re-elected as auditor up
until 2023. 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
and audit of the final annual accounts and the
annual report take place in January–February.
During the year the Board established an
audit committee consisting of external Board
members, chaired by Ulf Lundahl. The audit
committee met five times in 2017. 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 account-
ing, management of funds and other aspects
of the company’s financial circumstances. The
auditors reported to the audit committee at
four meetings in 2017.

In addition to the audit assignment,
Holmen has consulted KPMG on matters per-
taining to taxation, accounting and for various
investigations. The remuneration paid to KPMG
for 2017 is stated in Note 5 on page 51. KPMG
is required to assess its independence before
making decisions on whether to provide
Holmen with independent advice alongside
its audit assignment.

Internal management processes
A review is conducted annually of each busi-
ness area’s strategy, including the business’
goals. The strategy is presented to the Board
and forms the basis of the expectations applied
to 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 perfor-
mance. The strategy review also provides the
basis for the budget, in which decisions are tak-
en 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,
research and development, IT, environment
and communication processes. Operations are
followed up through regular reporting 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.

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 busi-
ness ethics policy and its accompanying guide-
lines address matters such as anti-corruption
measures and competition issues. Employees in
departments at risk of encountering unauthor-
ised behaviour receive special training on these
issues. The Supplier Code of Conduct 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.

Materiality analysis. In order to further
focus and manage Holmen’s sustainability
work, a materiality analysis was initiated in
2017 and this will be completed in 2018.

Whistleblower function. A whistleblower
function is available so that employees and
other stakeholders can highlight any deficien-
cies 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 Cor-
porate 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 achieves
its financial reporting objectives (see box on
page 31), ensure the company’s assets are man-
aged according to Group rules and to prevent
irregularities. Group Finance coordinates and
monitors the internal control process concern-
ing financial reporting in the Group.

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:
2018
x (chairman)
x
x
x

2017
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 2017, 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 2017 / CORPORATE GOVERNANCE REPORT

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: con-
trol 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 processes.
The Board of Directors’ procedural rules and
the instruction for the CEO establish the distri-
bution of roles and responsibilities to ensure
effective control and management of the busi-
ness’ risks.

Policies, guidelines and instructions con-
tribute 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 Nasdaq Stock-
holm 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-re-
lated 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 32–35.

Control activities. To ensure that Holmen’s
financial reporting objectives are met, control
requirements are incorporated into the pro-
cesses that are deemed relevant: sales, purchas-
ing, investments, personnel, financial state-
ments, payments and IT. Control activities aim
to prevent, identify and rectify errors and dis-
crepancies. Business-specific self-assessments
that are completed by all Group units set out
what control requirements apply for each respec-
tive process 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 the CEO. The provision of
financial information for Holmen’s sharehold-
ers and other stakeholders must be accurate,
comprehensive, transparent and consistent,
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
Executive Vice President. 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.

Holmen’s financial
reporting
External financial reporting must:

• be accurate and complete, and

comply with applicable laws, regula-
tions 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.

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

Statement on internal audit. The Board of
Directors does not believe that particular cir-
cumstances in the business or other conditions
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.

Inspection of debarking
drum at Braviken Paper Mill.

HOLMEN ANNUAL REPORT 2017 / CORPORATE GOVERNANCE REPORT

Risk management

The business areas are responsible for their 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
and price changes affect 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 ani-
mals and insect pests are risks in growing
forests.

Changes in prices and deliveries largely depend on the devel-
opment 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
opportunities 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 log harvest from the company’s forests is essen-
tially the same as consumption at the company’s saw mills, while
pulpwood from own forests corresponds to approximately 35 per
cent of the paperboard and paper mills’ consumption. 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 purchases. 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 just under 50 per cent of its
total 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 and used chemicals at the mill are recycled.

Damage prevention measures, regular maintenance and con-
tinual 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 mil-
lion 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.
To reduce the extent of grazing by wild animals, active efforts
are undertaken on Holmen’s land to maintain game at the
correct population level. Insect pests such as pine weevils are
countered by waxing seedlings.

In 2017, sales of paperboard, paper and
wood products to priority end-use areas
and markets increased.

Commodity prices have been generally
stable in recent years. The price of net
electricity consumption is 80–85 per cent
hedged for 2018–2020 and 65 per cent
hedged for 2021. Linghem Sawmill, with
production capacity of 75 000 cubic me-
tres, was acquired in 2017 to strengthen
the raw material supply and expand the
product offering for Braviken Sawmill.

No event causing significant damage
occurred in 2017.

No major unforeseen events involving dam-
age occurred in Holmen’s forests in 2017.

HOLMEN ANNUAL REPORT 2017 / 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 continually 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 also lead to produc-
tion disruptions and increased costs.

Environment. Production disruptions can
cause breaches of emissions conditions set
for the business by environmental authori-
ties, which could impact the environment.

Personnel. Skilled and motivated em-
ployees are key in being able to conduct
long-term business operations with good
profitability.

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

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 re-
quirements can also have a negative effect
on operations.

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.

Good health and safety is a priority at all levels of manage-
ment in the Group. 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 achieve a high level
of safety in the workplace.

Environmental measures are organised and conducted
in accordance with Holmen’s environmental and energy
policy. In the event of process disruptions, the environment
takes precedence over production. 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
chain-of-custody certification.

Issues regarding management by objectives, responsibility,
participation, safety and skills development are prioritised in
day-to-day work through continual feedback and dialogue be-
tween managers and employees, as well as training of person-
nel. 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
ethics 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.

Holmen endeavours to have at least two approved suppliers
per area of use. In addition, Holmen’s Supplier Code of Con-
duct is included in all new contracts. It contains requirements
on sustainable development, including by respecting interna-
tionally recognised principles on anti-corruption measures,
human rights, health and safety and the environment. Since
2017, Holmen has hired an external partner, EcoVadis, to
follow up supplier compliance with the Code in the areas of
human rights, health and safety, the environment, business
ethics and purchasing.

Operating disruptions and unauthorised access are prevented
by security measures and preventive measures in the form
of appropriate 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. Holmen is continually developing these
protective measures to address changes in the risk profile.

At 31 December 2017 the Group’s trade
receivables totalled SEK 2 089 million, of
which 37 per cent (46) were insured against
credit losses. During the year, credit losses
on trade receivables had a SEK -5 million
(-5) impact on earnings. Sales to the five
largest customers accounted for 13 per cent
of the Group’s total sales in 2017.

The figure in 2017 was 5.1 industrial
accidents per 1 million hours worked
(8.8). See also page 26.

The mills reported 29 (44) incidents to
the supervisory authorities in 2017. The
nonconformities were not of a significant
nature in terms of environmental impact
or impact on profits.

No cases regarding deviations from the
code of conduct or the HR policy were
reported in 2017.

No cases concerning deviations from either
the business ethics policy or the parts of
the Code of Conduct regarding business
ethics issues were reported in 2017.

No cases regarding breaches of the Suppli-
er Code of Conduct were reported in 2017.
By the end of 2017, suppliers account-
ing for over 80 per cent of the Group’s
purchasing volumes had signed up to the
Supplier Code of Conduct.

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

Business operations were not affected by
IT incidents in 2017.

Political decisions. Laws and rules in
countries 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. Rules on the use of fresh fibre
rather than recovered fibre, as well as leg-
islation regarding water-based operations,
could have a negative impact on the Group.

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 and the general public
in areas where the Group has operations. This takes place, for
example, through consultation and information meetings and
through debate in the media. On issues regarding the right to
manage the forest and water-based operations, Holmen has
participated actively in work with business organisations and
responses to consultation on relevant subjects.

In late 2017, the EU issued a decision
about how the land and forestry sector
should contribute to the EU’s climate and
energy policy. The result was positive for
Holmen and the Swedish forest products
industry. In 2017, a parliamentary bill
regarding water-based operations was
introduced that could affect Holmen and
the business sector’s ability to develop
operations.

HOLMEN ANNUAL REPORT 2017 / 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 subsidi-
aries’ 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 prod-
ucts’ profitability, competitiveness and the currency situation.
Currency exposure arising when investments are paid for in
foreign currency is distinguished from other transaction ex-
posure. 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. Expo-
sure that arises when the earnings of foreign subsidiaries are
translated into Swedish kronor is not normally hedged.

For the next approximately two years,
90 per cent of expected flows in EUR/SEK
are hedged at an average of 9.67, for
EUR/GBP 90 per cent of one year’s ex-
pected flows are hedged at 0.89. For other
currencies, 4 months of flows are hedged.
USD/SEK are hedged at 8.19 and GBP/SEK
at 10.98.

Hedging in pounds sterling amounted to
GBP 14 million at year-end. Net assets in
other currencies are very limited and are
not usually hedged.

SEKm
10 000

8 000

6 000

4 000

2 000

EUR/SEK

GBP/SEK

USD/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 borrowing rate in
2017 was 1.4 per cent. The table below
shows the Group’s fixed interest agree-
ments by currency.

SEKm

SEK
EUR
GBP
Other items

Year 1

Year 1–3

Year 3–5 >5 years

-1 834
-51
-446
33
-2 297

-600
0
0
0
-600

0
0
0
0
0

Pension
provisions

-12
-8
-19
0
-39

Total

-2 445
-59
-465
33
-2 936

Credit risk from financial counter-
parties. 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 continu-
ally. 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 derivative. The maximum credit risk for
other financial assets is estimated to correspond to their
nominal amount.

At 31 December 2017, the Group had out-
standing derivative contracts with a nom-
inal amount of about SEK 15 billion and a
net fair value of SEK -159 million. Holmen’s
total credit risk in derivative transactions
amounted to SEK 1 497 million at year-end
2017. This calculation is based on the
maturity and historical volatility of different
types of derivative.

HOLMEN ANNUAL REPORT 2017 / RISK MANAGEMENT

Liquidity and refinancing. The risk of
the need for future funding and refinanc-
ing 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 profit forecasts
and budgets that are regularly updated.

SEKm
4 000

3 000

2 000

1 000

2018

2019

2020

2021

Financial liabilities

Credit facility

Net financial debt decreased in the year
by SEK 1 009 million and amounted at
31 December 2017 to SEK 2 936 million,
SEK 39 million of which comprised
pension provisions. The Group has a
contracted credit facility of EUR 400 million
(SEK 3 936 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 0.13.

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 profit before tax and
equity next year, taking account of hedging.

Impact on operating profit, SEKm
Paperboard
Paper
Wood products
Wood from company forests
Hydro and wind power

Input goods
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
54
54
16
12
3

Deliveries
29
18
5
8
3

28
12
12
14
14
23
12

* Taking account of harvesting of company forests and generation of own electricity, net earnings sensitivity for the

Group is SEK 16 million for wood and SEK 9 million for electricity.

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

Electricity price
Borrowing rate

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

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

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

SEKm
23
3
7
8
5
1
21

SEKm
99
3
2
8
12

HOLMEN ANNUAL REPORT 2017 / RISK MANAGEMENT

Shareholder
information

In 2017, the price of Holmen’s
class B shares increased by
SEK 109 or 33 per cent. Earnings
per share excluding items affect-
ing comparability was SEK 19.9.
It is proposed that the dividend
be raised to SEK 13 (12).

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 109 or 33 per cent, to
SEK 436. The Stockholm Stock Exchange rose
by 8 per cent over the same period. Holmen’s
market capitalisation of SEK 36.6 billion (27.4)
represents 0.6 per cent of the total value of the
Stockholm Stock Exchange. The highest closing
price for Holmen’s class B shares was SEK 436,
on 29 December. The lowest closing price was
SEK 314, on 16 January. The daily average
number of class B shares traded was 136 000,
which corresponds to a value of SEK 50 million.
The daily average number of class A shares trad-
ed was 714. Nearly 73 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 were SEK 19.9 (16.9).

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 10 April 2018, approve a dividend of
SEK 13 (12) per share. The proposed dividend
corresponds to 5.0 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: 10 April 2018.

• Record date for dividend: 12 April 2018.
• Payment date for dividend: 17 April 2018.

Share split
In order to make it easier for the shares to be
traded on Nasdaq Stockholm, the Board pro-
poses that the 2018 AGM approve a share
split, involving each share, regardless of series,
being divided into two shares (split 2:1) of the
same series. The proposed record date for the
share split is 2 May 2018.

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. Neither laws nor
the company’s articles of association place any
restrictions on the transferability of the shares.

Ownership structure
Holmen had a total of 30 903 shareholders at
year-end 2017. In terms of numbers, Swedish
private individuals account for the largest
owner category with 28 967 shareholders.
Shareholders registered in Sweden own 82 per
cent (83) of the share capital. Among foreign
shareholders, the largest proportion of shares
are held in the US and Norway, accounting for
6 per cent and 2 per cent of capital, respective-
ly. The largest owner at the turn of 2017/2018,
with 61.6 per cent of votes and 32.9 per cent of
capital, was L E Lundbergföretagen AB.

the company and to create long-term commit-
ment to Holmen. The programme involves
previously repurchased shares being trans-
ferred to programme participants at the end
of the term. The number of shares to be trans-
ferred depends on the return generated over
the 2016–2018 period. In the event of maxi-
mum allocation, 80 000 shares will be trans-
ferred from the company to programme par-
ticipants.

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 2017 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 2018
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 connec-
tion with the publication of quarterly reports
and on the occasion of the AGM. It also deliv-
ers information that is important to the stock
market by publishing press releases. The
holmen.com website offers financial informa-
tion 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.

Share savings programme
The 2016 AGM decided on a targeted share
savings programme for around 40 key individ-
uals in the Holmen Group. The purpose of the
programme was to strengthen the interests
between the owners and the management of

Analysts
Analysts at 10 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 avail-
able at holmen.com.

Share price performance, Holmen class B and general index

Total shareholder return on Holmen class B shares and general index
incl. reinvested dividend excluding tax

SEK

500

400

300

200

100

No. of shares (thousands)

20 000

16 000

12 000

8 000

4 000

Index

300

200

100

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 2017 / SHAREHOLDER INFORMATION

Shareholder categories
Share of capital, %

Swedish institutions
52%
Swedish equity funds
19%
Swedish private individuals 11%
Foreign shareholders
18%

Shareholder structure at 31 December 2017

% of capital

% of votes

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

Other
Total*
*Of which non-Swedish shareholders.

32.9
7.0
5.4
3.2
3.2
2.9
2.0
1.9
1.5
1.5
61.3

38.7
100.0
17.7

61.6
17.0
1.6
0.9
0.9
0.8
0.6
0.6
0.4
0.4
84.9

15.1
100.0
5.4

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’.

Ownership structure

Share structure

No. of
shares

1–1 000
1 001–100 000
100 001–
Total

Share-
holders

29 105
1 788
10
30 903

Share of
capital,
%

6
27
67
100

Votes

No. of shares

No. of votes

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

Quotient
value

50
50

SEKm

1 131
3 107
4 238

Changes in share capital 2000–2017

2001 Cancellation of shares repurchased
2004 Conversion and subscription

Change in
no. of shares

Total no.
of shares

Change in share
capital, SEKm

Total share
capital, SEKm

-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, SEK 1)
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), B, at year-end4)
Number of shareholders at year-end

2017

19.9
135)

5
3
65
8
9
262
436
372
436
314
36.6
22
14
0.8
30 903

2016

16.9
12

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

2015

6.7
10.5

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

1) See page 78: 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 2017 / SHAREHOLDER INFORMATION

GROUP

Financial statements

Income statement, 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
Earnings 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

2017
16 133
1 136
-128
-8 945
-2 252
-3 189
-991
-
415
-12
2 166
2
-55
2 113
-445
1 668

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

1 668

1 424

19.9
19.9

84.0
84.0

16.9
16.9

84.0
84.0

Operating profit amounted to SEK 2 166 million (1 930). Deliveries of paperboard, paper and
wood products increased and the sales mix improved, but this was offset by higher costs for
input goods and shipping, as well as significant maintenance shutdowns within paperboard.

Operating profit for 2016 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 compen-
sation for reconstruction following the fire at Hallsta Paper Mill, which together amount to a net
total of SEK -232 million.

Net financial items for 2017 totalled SEK -53 million (-71). Average net debt was lower than
in the previous year.

Tax recognised totalled SEK -445 million (-436) in 2017. Recognised tax corresponds to 21
per cent of profit before tax.

Statement of comprehensive income, SEKm

Note

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

17
7

12
7

2017

1 668

2016

1 424

121
-24
97

-88
124
-1
36
-49
-4
3
21
119
1 786

-159
29
-130

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

1 786

1 267

HOLMEN ANNUAL REPORT 2017 / FINANCIAL STATEMENTSGROUP

Balance sheet at 31 December, SEKm

Note

2017

2016

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
Assets held for sale
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
11

13
17
18
7

13
19
7
18
19

90
9 078
17 831
1 749
2
42
1
28 793

2 905
2 089
36
658
32
356
23
6 098
34 891

4 238
281
-214
17 731
22 035

552
39
662
5 650
6 903

2 775
1 957
21
144
1 056
5 952
12 856
34 891

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

HOLMEN ANNUAL REPORT 2017 / FINANCIAL STATEMENTS Reserves

Share capital
4 238
-

Other
contributed
capital
281
-

Translation
reserve
76
-

Retained
earnings incl.
profit/loss
for the year
16 543
1 424

Hedge
reserve
-284
-

Total equity
20 853
1 424

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

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

-
-
-
-
-
-
-
-
-
-
281
-

-
-
-
-
-
-
-
-
-
-
281

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

-
-
36
-49
-
11
-2
-2
-
-
-97

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

-
35
-
-
-4
-8
24
24
-
-
-117

-159
-
-
-
-
29
-130
1 294
-882
5
16 960
1 668

121
-
-
-
-
-24
97
1 765
-1 008
13
17 731

-159
211
-165
1
-21
-24
-157
1 267
-882
5
21 243
1 668

121
35
36
-49
-4
-21
119
1 786
-1 008
13
22 035

GROUP

Changes in equity, SEKm

Opening equity balance 31 Dec 2016
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
Share savings programme
Closing equity balance 31 Dec 2016
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 2017

HOLMEN ANNUAL REPORT 2017 / FINANCIAL STATEMENTSCash flow statement, SEKm

Operating activities
Earnings 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
Acquisition of shares and participating interests
Disposal of shares and participating interests
Cash flow from investing activities

Financing activities
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.

** Relates to repayments of loans previously classified as long-term.

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

2017
-3 945

2 509
-644
-1 008
120
32
-2 936

GROUP

2017

2016

2 113

991
-
-415
-236
78
-221
2 310

73
22
104
2 509

-674
31
-18
-11
27
0
0
-644

-1 400
680
9
-1 008
-1 718

147
210
-1
356

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

2016
-4 799

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

HOLMEN ANNUAL REPORT 2017 / FINANCIAL STATEMENTSPARENT COMPANY

Income statement, SEKm Note

2017

2016

Cash flow statement, SEKm Note

2017

2016

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
Disposal of shares and participating interests
Cash flow from investing activities

Financing activities
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

1 257

1 094

25
-109
855
-131

26
-59
502
-464

1 897

1 100

74
97
260
2 329

-1
-32
11
0
-22

-1 400
-479
241

-1 008
530
0
-2 116

190
104
294

-61
-146
-271
622

-10
-29
28
2
-9

-400
-531
450

-882
700
0
-663

-51
155
104

* Other adjustments primarily consist of impairment losses on the value of shares in Group compa-
nies, currency effects and the marking to market of financial instruments as well as gains/losses
on the sale of non-current assets.

** Relates to repayments of loans previously classified as long-term.

2
3

Net sales
Other operating income
Change in inventories
Raw materials and consumables
4
Personnel costs
Other external costs
5, 20
Depreciation and amortisation according to plan 9, 10
Operating profit/loss

Profit/loss from investments in
Group companies
Interest income and similar income
Interest expense and similar costs
Profit/loss after financial items

Appropriations
Earnings before tax

Tax
Profit/loss for the year

6, 23
6
6

14 345
565
-166
-7 969
-1 877
-4 031
-25
841

497
18
-99
1 257

787
2 044

-197
1 847

13 794
822
205
-8 086
-1 827
-4 547
-26
335

780
30
-52
1 094

404
1 499

-301
1 197

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 7
Total items that will be reclassified to
profit/loss for the year
Total comprehensive income

Note

2017

2016

1 847

1 197

-71

109
-1
-8

29
1 876

133

90
-12
-46

164
1 362

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.

The item ‘Interest expense and similar costs’ in the income statement includes the result of
SEK -49 million (1) from hedging equity in foreign subsidiaries.

HOLMEN ANNUAL REPORT 2017 / FINANCIAL STATEMENTSPARENT COMPANY

Balance sheet at
31 December, SEKm

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

Changes in equity, SEKm

Opening equity balance 31 Dec 2016

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

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 2017

Note

2017

2016

Balance sheet at
31 December, SEKm

Note

2017

2016

9
10

12, 23
13

14
15
7
13
13

8
2 930

10 702
3 018
16 658

2 322
2 210
29
32
294
4 888
21 545

8
2 925

11 519
3 202
17 653

2 396
2 254
106
89
104
4 950
22 602

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

4 238
1 577
100

3 956
1 847
11 718

4 238
1 577
100

3 724
1 197
10 836

2 032

2 290

12
45
725
610
1 392

880
2 775
-
2 749
6 403
21 545

12
45
833
612
1 503

2 328
3 200
-
2 445
7 974
22 602

Restricted equity

Non-restricted equity

Share capital
4 238

Statutory
reserve
1 577

Revaluation
reserve
100

Hedge
reserve
-287

Retained
earnings
3 985

Profit/loss
for the year
738

Total equity
10 351

-
-

-
-
-
-
-
-
4 238

-
-

-
-
-
-
-
-
4 238

-
-

-
-
-
-
-
-
1 577

-
-

-
-
-
-
-
-
1 577

-
-

-
-
-
-
-
-
100

-
-

-
-
-
-
-
-
100

-
-

211
-46
164
164
-
-
-123

-
-

38
-8
29
29
-
-
-93

738
-

-
-
-
738
-882
5
3 847

1 197
-

-
-
-
1 197
-1 008
13
4 049

-738
1 197

-
-
-
459
-
-
1 197

-1 197
1 847

-
-
-
649
-
-
1 847

-
1 197

211
-46
164
1 362
-882
5
10 836

-
1 847

38
-8
29
1 876
-1 008
13
11 718

HOLMEN ANNUAL REPORT 2017 / FINANCIAL STATEMENTS
NOTE 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

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 Ac-
counting Rules for Groups) has also been applied.

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 ac-
cordance 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.

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

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

Changes in accounting policies
New and amended accounting policies applicable as of 2017
No new accounting policies with a material effect on the Group’s accounting have been applied
since 1 January 2017. Changes to IAS7 have resulted in disclosures being added to Note 25, with
the change in the debt for the year attributable to financing activities being reconciled against an
itemisation of items such as new borrowing, repayments, changes linked to disposals/acquisitions
of subsidiaries and currency effects. Disclosures are made for both changes affecting cash flow
and not affecting cash flow. The change is applied prospectively, which is why no disclosures are
presented for the comparative year.

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.

IFRS 15 Revenue from Contracts with Customers is a new revenue standard with associated disclo-
sure requirements which will replace IAS 18, IAS 11 and IFRIC 13. This new standard comes into
force on 1 January 2018. During the year, the Group’s sales contracts were analysed based on the
five-stage model defined under regulations. The most significant change from current regulations is
that income was previously recognised after the critical risks and benefits associated with ownership
of the sold goods had been transferred to the buyer, and there is no remaining right of disposal or
possibility to retain actual control over the sold goods. Under IFRS 15, income is recognised when
the customer gains control over the goods, which the Group assesses to be similar to when income
is currently recognised, so it is not assessed there will be any effect from the transition to IFRS 15
on 1 January 2018. Other changes in regulatory changes relate, for example, to accounting of dis-
counts and the right of return, which will only have a marginal impact on Holmen’s accounting.

IFRS 9 Financial Instruments addresses the accounting of financial instruments and will replace
IAS 39. This standard encompasses classification, valuation and impairment of financial instru-
ments and hedge accounting. This standard comes into force on 1 January 2018. The material
changes compared with current regulations are that 1) the category of financial assets held for
trade will disappear, which has no effect on Holmen as it holds no such instruments. 2) Impairment
of financial assets should be based on a model based on expected future losses. The impact from
the introduction of the new model is assessed to be marginal for Holmen. 3) Hedge accounting
rules are changing, with requirements for hedging relationships to be the same as the Group’s risk
management targets, which is not expected to have any impact on Holmen as its hedge relation-
ships are currently the same as requirements under IFRS 9.

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 opera-
tions are monitored by the company’s highest executive decision-maker, known as the manage-
ment approach. The segmentation criterion is based on the Group’s business areas. This corre-
sponds 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.

HOLMEN ANNUAL REPORT 2017 / NOTESClassification
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
recov ered or paid within 12 months of the balance sheet date.

Consolidation principles
Subsidiaries
A subsidiary is a company over which the parent company, Holmen AB, exercises a controlling in-
fluence. 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 in-
fluence 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’ in-
come 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 book value of the shares in the associates
and joint ventures stated in the consolidated accounts corresponds to the Group’s interest in the
associates and joint ventures’ 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, respec-
tively, 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 book value of the in-
vestment. 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
book value 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 trans-
lated into the functional currency at the exchange rate prevailing on the balance sheet date. Ex-
change 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 cur-
rency, to the Group’s reporting currency (Swedish kronor) at the balance sheet date rate. The income
and expenses of foreign operations are translated into Swedish kronor at an average rate that is an ap-
proximation 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.

NOTE 1

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
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 re-
maining 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 and 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 ex-
change 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 for-
est 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 expense, dividend income and re-
valuations of financial instruments valued at fair value, as well as unrealised and realised currency
gains and losses.

Interest income on receivables and interest expense on liabilities are calculated by using the effec-
tive interest method. Interest expense includes transaction costs for loans, which have been distri-
buted 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 expense normally affects profit/loss in the period to which it relates. 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 dif-
ferences between book values 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 differ-
ences are not taken into account in goodwill arising upon consolidation, nor in temporary differ-
ences 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.

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 1

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 ac-
cordance 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. Spot transactions
are stated in accordance with the trade date principle. Trade receivables are recognised in the bal-
ance 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, exclud-
ing 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 prof-
it/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 meas-
ured 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 deter-
mined on the basis of the effective interest that was calculated at the time of acquisition. Trade pay-
ables 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 cri-
teria for hedge accounting, the changes in value are recognised within operating profit/loss or with-
in 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 in-
come 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 ex-
change swaps are used as cash flow hedges to safeguard against fluctuations in exchange rates. In-
terest rate swaps are used as a cash flow hedge to safeguard against changes in interest rates.

Hedging of 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 com-
pany, 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 dis-
counted 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, where appropriate.

Non-current intangible assets
Non-current intangible assets such as patents, licences and IT systems are recognised at cost
after deduction of accumulated amortisation 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 book value 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 materi-
als 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 cap-
italised only if it is estimated to generate financial benefits for the company. The key factor determin-
ing 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 capital-
ised in cases where a new component is created. Any undepreciated book values for replaced com-
ponents or parts of components are retired and expensed in connection with the replacement.

The book value 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 ex-
pected 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 book value of the asset, less any direct
selling costs. Gains and losses are recognised in the accounts as other operating income/costs.

An asset is classified as being held for sale if it is available for immediate sale in its present condition
and based on normal terms, and it is highly likely that a sale will take place. Such assets are recog-
nised on a separate line as a current asset in the balance sheet. Upon initial classification as holdings
for sale, non-current assets are recognised at the lower of book value and fair value, less selling 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 sawmills, pulp, paper and paperboard production

Other machinery

Forest roads

Equipment

10–20

4–10

If there is any indication that the book value is too high, an analysis is made in which the recovera-
ble 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 book value. An 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 book value that would have been recognised, less depreci-
ation, if there had been no impairment.

Borrowing costs attributable to the purchase or construction of qualifying assets are to be capital-
ised 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 rec-
ognised 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.

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 1

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.

expected number of allocated shares and the effect of any change in previous estimates are recog-
nised 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.

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.

Inventories
Inventories are valued at the lower of cost and production cost after deduction for necessary obsoles-
cence, or net realisable value. The cost of inventories is calculated by using the First in, First out meth-
od (FIFO). The net realisable value is the estimated selling price in operating activities after deduction
of the estimated costs of completion and affecting the sale. The cost of finished products manufac-
tured 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 inven-
tories 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 certifi-
cates are measured at the lower of cost and fair value. Recognition takes place, in line with pro-
duction, as inventories or accrued income.

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 pre-
vious periods. This benefit is discounted to present value and unrecognised costs relating to em-
ployment 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 corre-
sponding 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
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 recog-
nised when the company recognises the associated restructuring costs. The changes are recog-
nised directly in profit/loss for the year.

When the calculation leads to an asset for the Group being limited, the book value of the asset is
limited to the lower of the plan surplus and the asset limitation calculated using the discount rate.
The limitation of assets consists of the present value of future economic benefits in the form of re-
duced future costs or cash reimbursement. Any minimum funding requirements are taken into
account in calculating the present value of future reimbursements or receipts.

The interest expense on defined benefit obligations is recognised in profit/loss for the year under fi-
nancial 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 (dis-
count rate). Other components are recognised in operating profit/loss. The revaluation effects con-
sist 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 obli-
gations. Policyholder tax is recognised as it is incurred in profit/loss for the period to which the tax re-
lates 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 pro-
grammes 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 corre-
sponding adjustment of equity. At the end of each vesting period, an estimate is made of the

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
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.

Equity
Consolidated equity comprises share capital, other contributed capital, translation and hedge re-
serves 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 propor-
tion 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 transac-
tions 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 re-
structuring 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 appli-
cable 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
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 compa-
nies’. 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. Share-
holder 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 2017 / NOTESNOTE 2

Note 2. Operating segment reporting

2017

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
Change in value of biological assets
Share of profits of associates
Operating profit/loss

Operating margin, %
Return on capital employed, %
Operating assets
Operating liabilities
Net deferred tax
Capital employed

Investments

2 571
2 965
164
-5 016
-30
415
-
1 069

19
8
19 380
-1 305
-4 251
13 824

5 526
-
742
-5 012
-492
-
-
764

14
14
7 174
-832
-909
5 433

375

5 408
-
147
-4 928
-339
-
-
288

5
12
3 210
-696
-320
2 193

141

1 562
-
275
-1 673
-86
-
1
80

5
9
1 080
-169
-49
862

100

315
-
16
-161
-24
-
-11
135

43
4
3 464
-91
-258
3 115

751
-
246
-1 144
-21
-
-2
-170

-
-
549
-1 143
139
-455

-
-2 965
-455
3 419
-
-
-
-

-
-
-398
398
-
-

16 133
-
1 136
-14 515
-991
415
-12
2 166

13
9
34 461
-3 840
-5 648
24 972

702

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 capital employed, excluding items
affecting comparability, %
Operating assets
Operating liabilities
Net deferred tax
Capital employed

Investments

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

1 001

7
18 989
-1 191
-4 262
13 536

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

903

16
7 185
-759
-880
5 546

413

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

289

10
3 454
-639
-309
2 507

259

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

-3

neg
1 031
-138
-34
859

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

120

4
3 475
-64
-258
3 153

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

-148

-
807
-1 351
134
-410

-
-2 732
-446
3 178
-
-
-
-
-

-
-392
392
-
-

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

2 162

9
34 550
-3 752
-5 608
25 190

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.

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 2–3

Non-current assets
per country
Sweden
UK
Other
Total

Net sales by market
Sweden
Germany
UK
Netherlands
Italy
Poland
Spain
Rest of Europe
Rest of the world
Total

Group

Parent company

2017
27 041
1 701
6
28 748

2016
26 871
1 820
5
28 695

2017
13 639
-
-
13 639

2016
14 450
-
-
14 450

Group

Parent company

2017
3 758
2 096
1 808
756
749
711
699
3 069
2 486
16 133

2016
3 660
1 974
1 719
694
857
645
1 009
2 979
1 977
15 513

2017
3 740
1 843
1 183
679
685
585
651
2 696
2 283
14 345

2016
3 632
1 766
1 124
624
807
540
969
2 436
1 896
13 794

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

The Paperboard business area produces consumer packaging for the premium segment at one
Swedish and one UK mill. The Paper business area produces magazine and book paper at two
Swedish mills. The Wood Products business area produces wood products for use in joinery and
construction at three sawmills, whose by-products are used at the Group’s paper and paperboard
mills. In 2017, the Group produced 0.5 million tonnes of paperboard, 1.1 million tonnes of paper
and 0.8 million m3 of wood products.

These business areas are responsible for managing the operating assets and liabilities, which
together with the net amount of deferred tax assets and tax liabilities constitutes their capital
employed. Group management monitors the business at operating profit level, and in terms of how
earnings relate to capital employed. Capital employed in each segment includes all assets and
liabilities used by the business area such as non-current assets, inventories and operating receiva-
bles and operating liabilities, and the net amount of tax assets and tax liabilities. Financing and tax
issues are managed at group level. Consequently, financial assets and liabilities, including pension
liabilities, and current tax assets and tax liabilities, are not allocated to the business areas.

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. Between 1 July 2016
and the end of 2017 Holmen had an undertaking to sell the newsprint produced by the mill. 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.

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

Net sales by product area
Paperboard
Paper
Wood products
Pulp
Wood
Renewable energy
Other
Total

Group

Parent company

2017
5 347
6 131
1 557
164
2 571
315
49
16 133

2016
5 071
5 924
1 337
169
2 572
314
125
15 513

2017
3 527
6 069
1 561
279
2 565
315
30
14 345

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

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

2017
360
405
21
22
47
67
214
1 136

2016
364
415
25
75
42
57
581
1 559

Parent company
2016
2017
226
231
59
37
21
21
27
9
28
31
57
67
404
169
822
565

Of the sales of by-products in the Group, SEK 101 million (141) relates to rejects from production,
SEK 123 million (96) to sawdust, bark, chips etc., and SEK 137 million (127) 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 405 million (415).

The Group has been allotted emission allowances that have been used partly within its own produc-
tion. The surplus resulted in a gain of SEK 21 million (25).

In the previous year, the item ‘Other’ included income from 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 2017 / 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

2017
1 579
617

2016
1 589
619

2017
1 275
561

2016
1 233
556

Group

Parent company

AGM’s guidelines for determining salaries and other
remuneration for senior management
The 2017 AGM decided on the following guidelines for determining the salaries and other remuner-
ation 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 sal-
ary. 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 remu-
neration committee.

Deviations in individual cases
The Board shall be entitled to depart from these guidelines in individual cases should special rea-
sons 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 to 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
i nvested, 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 sav-
ings share. The assignment of matching and performance shares requires participants to have
been full time employees 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 33 million. Costs corresponding to
SEK 13 million (5) have been recognised for 2017.

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 2017, fees to the Board amounted to SEK 3 060 000
(3 060 000). The chairman received a fee of SEK 680 000 (680 000), and each of the other seven
(seven) members received SEK 340 000 (340 000).

Senior management
Salary and other benefits for the CEO in 2017 amounted to SEK 8 566 098 (8 001 168). The total
pension cost for the CEO, calculated in accordance with IAS 19, amounted to SEK 4 985 519
(4 340 722). Recognised wages and salaries for the share savings programme for the CEO
amounted to SEK 1 676 738 (708 312). No variable remuneration was paid.

In 2017, 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 (five) Group staffs who report directly to the CEO, totalled
SEK 22 829 993 (21 297 113). The total pension cost for this group, calculated in accordance with
IAS 19, amounted to SEK 10 201 247 (10 606 250) in 2017. Recognised wages and salaries for the
share savings programme for this group amounted to SEK 2 320 957 (1 254 348). 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 15 million
(14) at 31 December 2017 and for other members of senior management to SEK 28 million (32),
calculated in accordance with IAS 19. The pension obligations are secured using plan assets
managed by an independent pension fund.

Average
annual
number of
employees

Of
which
women
2017

Average
annual
number of
employees

Of
which
men

Of
which
women
2016

Of
which
men

2 377
-

450
-

1 927
-

2 369
11

448
5

1 921
6

6
12
5
-
2
74
11
-
1
3
6
442
23
14

2
5
1
-
-
39
7
-
1
1
3
49
11
6

4
7
4
-
2
35
4
-
-
2
3
393
12
8

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

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

6
7
4
5
2
39
1
1
-
2
3
394
13
7

599
2 976

125
575

474
2 401

609
2 989

125
578

484
2 411

Parent company
Sweden
Spain

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

Proportion of women, %
Board (excl. deputy members)
Senior management
Total

Group

2017
17
20
18

2016
17
30
23

Parent company
2016
17
30
23

2017
17
20
18

HOLMEN ANNUAL REPORT 2017 / NOTES
NOTE 5–6

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

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

Group

2017

2016

Parent company
2016

2017

-126

-111

-102

Interest income on trade receivables
Interest expense on trade payables

0
0

1
0

0
0

1
0

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 2017 amounted to SEK -90 million (-73), with the remainder being recog-
nised in other comprehensive income as hedge accounting is applied. The fair value of outstanding
transaction hedges at 31 December 2017 was SEK -135 million (-26).

Gains on financial electricity hedges are recognised in the income statement when they expire; for
2017 they totalled SEK -36 million (-53). The fair value of outstanding financial electricity hedges at
31 December 2017 was SEK 55 million (-57). 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 5 million at 31 December 2017. During the period, the cost of hedged items increased by
SEK 1 million.

Gains on hedging of net assets amounted to SEK -49 million (1) in 2017 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 36 million (165) on consolidated equity. The fair value of outstanding hedges of net assets at
31 December 2017 was SEK 3 million (16) and relates to financial derivatives.

The fair value of the derivatives used to manage the fixed interest periods amounted to SEK -47 million
(-74) at 31 December 2017, which was recognised in other comprehensive income as hedge ac-
counting is applied. This value is expected to be recognised in the income statement from 2018
onwards.

Note 5. Auditors’ fee and remuneration

The audit firm KPMG was elected by the 2017 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

2017
6
1
-
7

0
7

Parent company
2016
4
1
-
5

2017
4
0
-
4

-
4

-
5

2016
6
3
-
9

1
9

‘Audit assignments’ refers to the statutory examination of the annual accounts and accounting re-
cords, 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
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 management of financial risks*

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

Interest expense**
Finance costs
Net financial items

Group

2017
-
-
2
2

2016

-
12
1
13

Parent company
2016

2017
1 314
-
18
1 332

1 288
12
17
1 317

-817

-508

42
1
-45
-2

-53
-55
-53

36
3
-65
-27

-57
-84
-71

-4
1
-46
-866

-50
-916
416

47
3
-40
-499

-59
-559
759

* Refers to the held-for-trading category in accordance with IAS 39.

** SEK -36 million (-37) in the Group and parent company refers to interest expense on derivatives

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

Earnings from investments in Group companies amount to SEK 497 million, of which SEK 1 314 million
relates to dividends from Group companies and SEK -817 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 inter-
nal loans and hedging of internal lending. 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 32–35.

HOLMEN ANNUAL REPORT 2017 / NOTES

NOTE 7

Note 7. Tax

Taxes stated in income statement
Current tax
Deferred tax
Total

Group

2017
-436
-10
-445

2016
-331
-105
-436

Parent company
2016
-305
4
-301

2017
-208
11
-197

Tax recognised totalled SEK -445 million, corresponding to 21 per cent of profit before tax.

Taxes stated in income statement
Recognised profit/loss before tax

Tax at applicable rate
Difference in tax rate in foreign operations
Tax-exempt income
Non-tax-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

2017

SEKm
2 113

Group

2016

SEKm
1 859

-465
6
7
-5
-2
11
-8
10
0
-445

22.0
-0.3
-0.3
0.2
0.1
-0.5
0.4
-0.5
0.0
21.1

-409
3
6
-33
-2
3
-1
0
-3
-436

22.0
-0.2
-0.3
1.8
0.1
-0.2
0.1
0.0
0.2
23.4

Parent company

2017

SEKm
2 044

-450
0
328
-182
-2
0
107
0
1
-197

22.0
0.0
-16.0
8.9
0.1
0.0
-5.3
0.0
-0.1
9.7

2016

SEKm
1 499

-330
0
286
-257
-2
0
0
0
1
-301

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

Before
tax

Tax

2017

35
-4
36
-49
121
140

-8
-
-
11
-24
-21

Group

After
tax

Before
tax

28
-4
36
-38
97
119

211
-21
-165
1
-159
-133

Tax

2016

-46
-
-
-6
29
-24

After
tax

Before
tax

Tax

2017

Parent company

After
tax

Before
tax

164
-21
-165
-5
-130
-157

38
-
-
-
-
38

-8
-
-
-
-
-8

29
-
-
-
-
29

211
-
-
-
-
211

Tax

2016

-46
-
-
-
-
-46

22.0
0.0
-19.1
17.2
0.1
0.0
0.0
0.0
-0.1
20.1

After
tax

164
-
-
-
-
164

Taxes as stated in balance sheet
Tax receivables
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

2017

2016

Parent company
2016

2017

1
36
37

4
132
136

3 943
1 278
444
-27

11
5 650

21
5 671

3 854
1 319
502
-35

-27
5 613

6
5 618

-
29
29

635
-1
-
-26

2
610

-
610

-
106
106

634
-1
-
-35

13
612

-
612

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 7–9

Change in the net of deferred tax assets and deferred tax liabilities

Opening
balance
-3 854
-1 319
-502
35
32
-5 608

Stated in
the income
statement
-89
39
57
-
-17
-10

Opening
balance
-3 788
-1 363
-438
81
5
-5 502

Stated in
the income
statement
-66
25
-64
-
0
-105

Group
Stated in
other com-
prehensive
income
-
-
-
-8
-24
-32

Group
Stated in
other com-
prehensive
income
-
-
-
-46
29
-17

Translation
differences
and other
-
2
-
-
0
1

Translation
differences
and other
-
19
-
-
-2
16

Closing
balance
-3 943
-1 278
-444
27
-10
-5 648

Closing
balance
-3 854
-1 319
-502
35
32
-5 608

Parent company

Opening
balance
-634
1
-
35
-13
-612

Stated in
the income
statement
0
0
-
-
11
11

Stated in
other com-
prehensive
income
-
-
-
-8
-
-8

Parent company

Opening
balance
-634
1
-
81
-18
-569

Stated in
the income
statement
-1
0
-
-
4
4

Stated in
other com-
prehensive
income
-
-
-
-46
-
-46

Closing
balance
-634
1
-
26
-2
-610

Closing
balance
-634
1
-
35
-13
-612

2017
Biological assets*
Property, plant and equipment
Tax allocation reserve
Transactions subject to hedge accounting
Other
Deferred net tax liability

2016
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
includes deferred tax related to changes of SEK -8 million (-46) in hedging reserves and an impact
of SEK -24 million (29) from the revaluation of defined benefit pension plans.

Holmen has requested an advance ruling on the entitlement to group relief in the parent company
for tax losses that have arisen in the Group’s Spanish operations. The Swedish tax authority has
opposed such entitled to group relief. The Supreme Administrative Court, which is judging the case,
is obtaining an interpretation from the Court of Justice of the European Union in order to determine
the issue. A positive decision could result in the Group’s tax expense decreasing by approximately
SEK 400 million. No deferred tax asset has been recognised.

Holmen has appealed against the property tax rate on hydro power assets for the 2011–2016 tax
years as the higher tax rate that applied for these assets compared with other types of energy
assets could constitute state aid. If the appeals are upheld, it is estimated that SEK 300 million in
property tax will be repaid. No deferred tax asset has been recognised.

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

2017

2016
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
Basic EPS for the year, SEK

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

1 668

1 424
83 996 162 83 996 162
16.9

19.9

1 668

1 424
83 996 162 83 996 162
16.9

19.9

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 to-
tal number of votes.

In 2016, Holmen introduced a share savings programme. The programme involves previously re-
purchased 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, 90 000 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 costs
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

2017
194
18
-
0
212

107
15
-
0
0
123

2016
225
5
-36
0
194

118
17
1
-28
0
107

Parent company
2016
26
-
-
-
26

2017
26
-
-
0
26

19
-
-
-
0
19

18
1
-
-
-
19

Non-current intangible assets mainly comprise IT systems at SEK 50 million (64) and rights of use
for certain energy assets at SEK 32 million (16). These assets were largely acquired from external
sources. They have determinable useful lives and are amortised over 5–20 years.
No goodwill applies for the Group.

HOLMEN ANNUAL REPORT 2017 / NOTESBuildings,
other land and
land installations

2016

2017

2016

Machinery and
equipment
2017

2016

Work in progress
and advance payments
to suppliers
2017

2016

Forest land
2017

146
0
-
-6
0
140

-
-
-
-
-

167
-
-
-14
-6
146

-
-
-
-
-

5 594
51
-
-7
-5
5 633

3 228

96
-
-7
-1
3 316

7 003
37
-
-1 420
-27
5 594

27 572
559
67
-132
-35
28 031

31 260
729
92
-4 192
-317
27 572

4 247

20 739

23 992

118
81
-1 212
-6
3 228

879
-
-127
-20
21 471

882
41
-3 994
-181
20 739

44
84
-67
-
1
61

-
-
-
-
-

130
18
-92
-1
-11
44

-
-
-
-
-

Total

2017

2016

33 356
693
-
-145
-39
33 865

38 560
784
-
-5 627
-362
33 356

23 967

28 239

976
-
-134
-21
24 787

1 000
122
-5 205
-187
23 967

140

146

2 317

2 365

6 560

6 832

9 078

9 387

Buildings,
other land and
land installations

2016

2017

2016

Forest land
2017

Machinery and
equipment
2017

2016

Total

2017

2016

464
1
0
464

-
-
-
-

461
3
0
464

-
-
-
-

2 389
0
2 389
2 853

2 390
-1
2 389
2 853

139
11
0
150

130
1
0
131

1
-
1
20

139
-
0
139

129
1
0
130

1
-
1
10

220
21
-30
210

158
24
-29
154

-
-
-
56

232
26
-38
220

172
24
-38
158

-
-
-
62

823
32
-30
825

288
25
-29
285

832
29
-38
823

301
25
-38
288

2 389
0
2 389
2 930

2 391
-1
2 389
2 925

NOTE 10

Note 10. Property, plant and equipment

Group
Accumulated acquisition costs
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 costs
Opening balance
Investments
Disposal and retirement of assets
Total

Accumulated depreciations and amortisations 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

The Group’s investment commitments for approved and ongoing projects amounted to
SEK 590 million (250) at 31 December 2017. In 2017, the company’s capitalised borrowing
costs totalled SEK 2 million (3). An interest rate of 1.1 per cent (1.5) was used to determine
the amount.

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 11

The net effect of the change in fair value and the change as a result of harvesting is stated in the
income statement as a change in value of biological assets. In 2017, this amounted to SEK 415
million (315).

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

Change in value
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

760
1 150
-620

260
400
-210

-490

590
900
-480

200
310
-170

-380

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 rele-
vant 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 us-
ing an interest rate of 5.5 (5.5) per cent.

Holmen owns a total of 1 042 000 hectares of productive forest land, 960 000 hectares of which
are actively managed. The productive forest land contains 121 million m3 growing stock, solid over
bark. According to the applicable plan from 2011, the harvest will amount to 3.0 million m3sub per
year. 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
inflation. The trend price for 2018 is 432 SEK/m3sub, which is slightly lower than 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 17 831 million (17 448) before tax. A deferred tax
liability of SEK 3 943 million (3 854) is stated in relation to that figure. This represents the tax that is
expected to be charged against earnings from future harvests. On that basis, the growing forest,
net after tax, is stated at SEK 13 888 million (13 594).

Change in the value of the growing forests
Book value at start of year
Acquisition of growing forest
Sales of growing forest
Change due to harvesting
Unrealised change in fair value
Reclassifications
Other changes
Book value at end of year

Group

2017
17 448
11
-19
-614
1 029
-23
-1
17 831

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

Assets that have been reclassified relate to forest properties in the Björkvattnet area in Jämtland,
which were classified as an asset held for sale. An agreement on the sale of these properties was
signed in late 2017 and the transaction was completed in January 2018. The profit from the sale
will be reported within the Forest business area.

Harvesting
’000 m3sub/year

Prices
SEK/m3sub

4 000

3 000

2 000

1 000

600

500

400

300

200

2001-
2010

2011-
2017

2018-
2020

2021-
2030

2031-
2040

2041-
2050

2051-
2060

2061-
2070

2071-
2080

2081-
2090

2091-
2100

2101-
2110

Average harvest

Planned harvest

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 nomi-
nal prices recalculated at 2017 monetary value using historical Swedish CPI.

HOLMEN ANNUAL REPORT 2017 / 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
Total comprehensive income from associates and joint ventures

Group

2017
-12
-12
-4
-16

2016
-18
-18
-21
-39

The combined value of Holmen’s share in the profits of associates amounted to SEK -4 million (-14)
for the Group and to SEK 0 million (-9) for the parent company. The combined value of Holmen’s
share in the profits of joint ventures amounted to SEK -13 million (-8) for the Group and to
SEK -13 million (-8) for the parent company.

Associates
Book value at start of year
Investments
Share of earnings
Disposals
Dividends received
Translation difference
Impairment losses
Book value at end of year

Group

2017
1 646
-
-9
-
-
0
-
1 636

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

Parent company
2016
125
-
-
-2
-
-
-
123

2017
123
-
-
-
-
-
-
123

Joint ventures
Book value at start of year
Investments
Share of earnings
Other
Book value at end of year

Parent company and Group holdings of shares and investments in associates and joint ventures

Group

2017
127
-
-14
-
113

Parent company
2016
82
10
-
-
92

2017
92
-
-
-
92

2016
141
10
-30
6
127

Corporate
ID No.

Registered
office

Number of
holdings

Holding
%*

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

Arbrå
Örnsköldsvik
Vännäs
Stockholm
Lycksele
Stockholm
Tel Aviv

5 556
990
9 886
1 800
683
200
119

13.9
9.9
49.4
36.0
6.8
17.7
46.8

556914-9833

Stockholm

250

50.0

Value of
holding in
consolidated
accounts
2017

Book value
in the parent
company

Holding
%*

Value of
holding in
consolidated
accounts
2016

Book value
in the parent
company

36
0
1 463
13
75
49
0
0
1 636

113
1 749

-
0
-
2
75
46
-
0
123

92
215

13.9
9.9
49.4
36.0
6.8
17.7
46.8

50.0

36
0
1 465
12
75
55
2
0
1 646

127
1 773

-
0
-
2
75
46
-
0
123

92
215

Associates
Brännälvens Kraft AB
Gidekraft AB
Harrsele AB
Uni4 Marketing AB
Vattenfall Tuggen AB
VindIn AB
Melodea Ltd, Israel
Other associates

Joint venture
Varsvik AB
Total

Other shares and participating interests
Book value at start of year
Disposals
Translation difference
Impairment losses
Book value at end of year

Group

2017
2
0
0
-
2

Parent company
2016
1
-
-
-
1

2017
1
0
-
-
0

2016
4
-
0
-2
2

* 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 1 463 million (1 465).
Holmen purchased 491 GWh (416) of electrical power from Harrsele AB in 2017, giving Holmen an
operating profit of SEK 94 million (76) from market sales. Harrsele AB owns power assets that gen-
erate 950 GWh of electrical power in a normal year. These assets were originally constructed in
1957–58 and the book value of the non-current assets in Harrsele AB amounts to SEK 122 million
(114). 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 develop-
ment.

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

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

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 13

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 par-
ent 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 dura-
tions of up to one year, accrued interest income and unrealised exchange gains and fair values of
derivatives. 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 convert-
ed 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 expense, 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 compa-
nies 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 32–35. SEK -2 807 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 -151 million.
Assets and liabilities are not offset in the report. Recognised derivatives totalled SEK 200 million
(213) on the asset side and SEK -351 million (-385) 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 book value arises because certain liabilities are not measured at fair value in the balance
sheet, and are instead stated at their amortised cost. In the case of trade receivables and trade
payables, the book value 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 32–35.

Maturity structure,
undiscounted amounts*
Financial liabilities
Derivatives
Other financial liabilities

Financial receivables
Derivatives
Other financial receivables

2018

2019

2020

2021

2022–

-36
-2 772

-19
-508

8
380

-
4

-17
-

-
1

-
-

-
0

-
-

-
37

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

pensions.

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 13

Note 13. Financial instruments, cont.

Group

Financial instruments included in
net financial debt

Non-current financial receivables
Derivatives
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
Bond loans
Derivatives
Other non-current liabilities

Current liabilities
Commercial paper programme
Bank account liabilities
Derivatives
Accrued interest
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)

Derivatives recog-
nised at fair value
through profit/loss
2016

2017

Derivatives
with hedge
accounting
2017

2016

Trade receiva-
bles and loan
receivables
2017

2016

Available-for-sale
assets

Other
liabilities

2017

2016

2017

2016

Total
book value
2017

2016

Fair
value

2017

2016

0
-
0

-
8
-
8

-
-
-

-
-
-
-

-
-
-4
-
-
-
-4

-
-

0
-
0

-
55
-
55

-
-
-

-
-
-
-

-
-
-53
-
-
-
-53

-
-

-
-
-

-
-
-
-

-
-
-

-
-
-
-

-
-
-

-
42
42

0
-
24
24

-
39
39

1
-
34
34

0
356
356

0
210
210

-
-45
-
-45

-
-75
-
-75

-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-

-
-

192

150

-
-
-
-

-
-
-
-
-
-
-

-
-
-
-

-
-
-
-
-
-
-

-
2 089

-
2 174

-
-
-

-
-
-
-

-
-
-

-
-
-
-

-
-
-
-
-
-
-

2
-

-
-
-

-
-
-
-

-
-
-

-
-
-
-

-
-
-
-
-
-
-

2
-

-
-
-

-
-
-
-

-
-
-

-
-
-
-

-
-
-

-500
-
-7
-507

-2 099
-10
-
-11
-650
0
-2 770

-800
-
-8
-808

-1 709
-26
-
-12
-1 400
-
-3 147

0
42
42

0
8
24
32

0
356
356

-500
-45
-7
-552

0
39
39

1
55
34
89

0
210
210

-800
-75
-8
-882

0
42
42

0
8
24
32

0
356
356

-500
-45
-7
-552

0
39
39

1
55
34
89

0
210
210

-800
-75
-8
-882

-2 099
-10
-4
-11
-650
0
-2 775

-1 709
-26
-53
-12
-1 400
-
-3 200

-2 099
-10
-4
-11
-650
0
-2 775

-1 709
-26
-53
-12
-1 400
-
-3 200

-
-

2
2 089

2
2 174

2
2 089

2
2 174

192

158

192

158

-1 957

-1 766

-1 957

-1 766

-1 957

-1 766

-301

-257

-301

-257

-5 234

-5 721

-2 872

-3 433

-2 872

-3 433

-34

-23

-267

-233

Total financial instruments

-30

-14

-121

-158

2 511

2 457

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 13

Derivatives recog-
nised at fair value
through profit/loss
2016

2017

Derivatives
with hedge
accounting
2017

2016

Trade receiva-
bles and loan
receivables
2017

2016

Available-for-sale
assets

Other
liabilities

2017

2016

2017

2016

Total
book value
2017

2016

Fair
value

2017

2016

Parent company

Financial instruments included in
net financial debt

Non-current financial receivables
Derivatives
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
Bond loans
Liabilities to Group companies
Derivatives

Current liabilities
Commercial paper programme
Bank account liabilities
Derivatives
Accrued interest
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)

0
-
-
0

-
8
-
8

-
-

-
-
-
-

-
-
-4
-
-
-
-4

-
-

0
-
-
0

-
55
-
55

-
-

-
-
-
-

-
-
-53
-
-
-
-53

-
-

-
-
-
-

-
-

-
-
-
-

-
-

-
-
-45
-45

-
-
-75
-75

-
-
-
-
-
-
-

-
-

-
-
-
-
-
-
-

-
-

194

151

-34

-24

-267

-234

-
2 916
102
3 018

-
3 104
98
3 202

0
-
24
24

294
294

-
-
-
-

-
-
-
-
-
-
-

1
-
34
34

104
104

-
-
-
-

-
-
-
-
-
-
-

-
1 769

-
1 874

Total financial instruments

-27

-10

-118

-157

5 105

5 214

-
-
-
-

-
-

-
-
-
-

-
-
-
-
-
-
-

0
-

-
-
-
-

-
-

-
-
-
-

-
-
-
-
-
-
-

0
-

-
-
-
-

-
-

-
-
-
-

-
-

-500
-334
-
-834

-2 099
-10
-
-11
-650
0
-2 770

-800
-1 454
-
-2 254

-1 709
-26
-
-12
-1 400
-
-3 147

0
2 916
102
3 018

0
3 104
98
3 202

0
2 916
102
3 018

0
3 104
98
3 202

0
8
24
32

294
294

-500
-334
-45
-880

1
55
34
89

104
104

-800
-1 454
-75
-2 328

0
8
24
32

294
294

-500
-334
-45
-880

-1 709
-2 099
-26
-10
-53
-4
-11
-12
-650 - 1 400
-
-3 200

0
-2 775

-2 099
-10
-4
-11
-650
0
-2 775

1
55
34
89

104
104

-800
-1 454
-75
-2 328

-1 709
-26
-53
-12
-1 400
-
-3 200

-
-

0
1 769

0
1 874

0
1 769

0
1 874

198

164

198

164

-1 814

-1 576

-1 814

-1 576

-1 814

-1 576

-301

-258

-301

-258

-5 419

-6 976

-458

-1 929

-458

-1 929

HOLMEN ANNUAL REPORT 2017 / 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

2017
842
212
1 319
507
24
2 905

Parent company
2016
637
206
1 077
423
54
2 396

2017
661
201
934
501
24
2 322

2016
831
233
1 431
431
54
2 981

Registered share capital
Class A
Class B
Total no. of shares
Repurchased class B shares
Total number of shares
outstanding

During the year reversals of previous impairment losses on finished stock had an effect of SEK 7
million on Group profit, while impairment losses on other stock had an effect of SEK -2 million (-2).
Impairment losses on inventories had an impact of SEK -3 million (-5) on the parent company.

31 Dec 2017

Quotient value
50
50

31 Dec 2016

Quotient value
50
50

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

83 996 162

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

83 996 162

SEKm
1 131
3 107
4 238

Registered share capital
Class A
Class B
Total no. of shares
Repurchased class B shares
Total number of shares
outstanding

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 2017 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 -145 million (-167) on parent company equity. In the
consolidated accounts, valuation of derivatives and other financial instruments had an impact of
SEK -151 million (-172) 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 5 802 807 399. The Board
proposes that the AGM on 10 April 2018 approve a dividend of SEK 13 per share. The proposed
dividend totals SEK 1 092 million. The Board also proposes that the remaining amount of
SEK 4 710 857 293 be carried forward.

For the previous year, the dividend paid was SEK 12 per share (SEK 1 008 million).

The debt/equity ratio was 0.13 (0.19).

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 32–35.

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

2017

2016

Parent company
2016

2017

-
56
2 033
2 089

-
3
291
192
171
658
2 747

-
38
2 137
2 174

-
5
226
158
175
564
2 738

59
56
1 654
1 769

-
3
168
198
72
442
2 210

50
38
1 786
1 874

-
5
129
164
82
380
2 254

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. Follow-
ing an individual assessment, a provision for anticipated credit losses of SEK 41 million (37) has
been made and recognised, net, together with trade receivables. During the year, the provision was
changed by SEK -2 million (-3) as a result of actual credit losses, and by SEK 6 million (2) as a result
of changes in the provision for anticipated credit losses. At 31 December 2017, SEK 33 million (44)
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 33.

HOLMEN ANNUAL REPORT 2017 / NOTES
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 bene-
fit 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 con-
tribution 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
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

2017

2016

2017

2016

-5
-4

-9

-7
-2

-9

-12
0

-12

-21
1

-21

-128
-137

-129
-138

-106
-118

-106
-127

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
Effect of asset ceiling
Total recognised in other comprehensive income

Group

2017
103
122
-101
14
1
-18
121

2016
241
33
-418
-13
-1
-
-159

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 obliga-
tions 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 3 years and is subject to
review every 3 years. The assets in a trust exceed the commitment. This surplus has not been rec-
ognised as there are no offset rights. This adjustment is referred to as an asset ceiling in tables.

Obligations
Obligations at 1 January
Current service cost
Payroll tax
Interest expense
Actuarial gains/losses
Benefits paid
Exchange differences
Obligations at 31 December

Group

2017
-2 414
-5
2
-60
35
222
21
-2 198

2016
-2 374
-7
2
-77
-399
212
230
-2 414

Parent company
2016
-153
-21
-
-7
-
13
-
-167

2017
-167
-12
-
-5
-
11
-
-173

Of the Group’s total obligations, SEK 10 million (11) 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
(12) are secured under the Swedish Pension Obligations Vesting Act.

The weighted average duration is 18 years.

NOTE 17

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
Benefits paid
Exchange differences
Fair value of assets at 31 December
Effect of asset ceiling
Pension provisions, net

Plan assets by type are as shown below:

Plan assets
Equities
Bonds
Current fixed income investments

Group

2017
2 213
55

103
-
-3
37
-210
-19
2 177
-18
-39

2016
2 244
75

241
-
-5
73
-197
-218
2 213
-
-201

Parent company
2016
148
-

2017
155
-

-
5
-
-
-
-
160
-
-12

-
7
-
-
-
-
155
-
-12

Group

2017
1 098
1 050
29
2 177

2016
1 130
1 063
20
2 213

Parent company
2016
71
80
3
155

2017
79
79
3
160

The plan assets do not include any financial instruments issued by Group companies or assets used
by the Group. Of equities, 47 per cent relate to the UK, 48 per cent to the rest of Europe and the US
and 4 per cent to the rest of the world. Of bonds, 43 per cent relate to government bonds and 57
per cent to corporate bonds.

Key actuarial assumptions, Group
(weighted average), %
Discount rate
Rate of salary increase
Rate of price inflation

Group

31 Dec 2017
2.5
3.0
3.1

31 Dec 2016
2.7
3.0
3.1

The discount rate for pension obligations was established on the basis of high-quality corporate
bonds. A discount rate of 0.6 per cent (0.8) 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 actuari-
al 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)

Group

31 Dec 2017
-183
2
129
108

31 Dec 2016
-203
2
178
82

The Group’s payments into the funded defined benefit plans in 2018 are expected to amount to
SEK 42 million.

Multi-employer plans
The year’s premiums for pension insurance policies taken out with Alecta’s ITP 2 plan amounted to
SEK 31 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 715 active members, which
corresponds to 0.14 per cent. Premiums to Alecta are expected to amount to SEK 28 million in
2018. 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 intro-
duce reductions in premiums. At the end of 2017, Alecta’s collective consolidation level was
154 per cent (148).

HOLMEN ANNUAL REPORT 2017 / NOTES
NOTE 18–20

Note 18. Other provisions

Group
Book value at start of year
Provisions during the year
Utilised during the year
Unutilised amount reversed during the year
Translation differences
Book value at end of year
Of which non-current portion of the provisions
Of which current portion of the provisions

Parent company
Book value at start of year
Provisions during the year
Utilised during the year
Unutilised amount reversed during the year
Book value 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

2017
45
140
-
-
-
185
185
-

45
-
-
-
45
45
-

2016
45
-
-
-
-
45
45
-

45
-
-
-
45
45
-

2017
856
6
-240
-2
3
622
477
144

833
105
-211
-2
725
532
193

2016
697
335
-163
-15
2
856
627
228

892
228
-274
-13
833
572
261

2017
901
146
-240
-2
3
807
662
144

878
105
-211
-2
770
577
193

2016
742
335
-163
-15
2
901
673
228

937
228
-274
-13
878
617
261

Tax provisions are mainly attributable to the divested operations in Spain.

Other provisions mainly relate to uncertainties associated with obligations for environmental
restoration, for fixed price electricity supply contracts and the sale of the operations in Spain.

A provision is included in the parent company for future measures for reforestation after harvesting
for SEK 190 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

2017

2016

Parent company
2016

2017

-
-
1 957
1 957

-
6
186
301
563
1 056
3 012

-
-
1 766
1 766

-
11
251
257
561
1 079
2 845

53
-
1 761
1 814

0
6
170
301
458
935
2 749

116
-
1 460
1 576

0
11
158
258
443
870
2 445

In 2017, the Group’s lease payments amounted to SEK 52 million (54), and the parent company’s to
SEK 38 million (38). 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 2017 financial year.
No leased equipment was subleased.

Breakdown of future
lease payments
Future lease payments
Present value of future
lease payments

Group

2019
–2022
40

2018
45

Parent company

2023–
0

2018
31

2019
–2022
22

2023–
0

The contracts have remaining durations ranging from 1 to 6 years. The Group’s future lease pay-
ments for existing lease agreements amounted to SEK 90 million at the end of the previous year.
Those in the parent company amounted to SEK 53 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 2017 and
have a remaining duration of two years from 1 January 2018.

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 191 million (196), discounts of SEK 52 million (42) and goods and services delivered but not
yet invoiced of SEK 46 million (36).

Fair values of derivatives essentially relate to the hedging of future cash flows. See Note 13.

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 21–22

Note 21. Collateral and contingent liabilities

Group
Financial liabilities
Total

Parent company
Financial liabilities
Total

Property
mortgages

Other
collateral

6
6

137
137

Total col-
lateral
2017
143
143

Total col-
lateral
2016
150
150

143
143

150
150

Contingent liabilities
Surety on behalf of Group companies
Other contingent liabilities
Total

Group

2017
-
97
97

Parent company
2016
34
68
102

2017
40
83
123

2016
-
86
86

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.

The holding in a jointly owned company, Varsvik AB, is pledged and amounted to SEK 137 million
(144) at the end of the year.

Note 22. Related parties

Of the parent company’s net sales of SEK 14 345 million (13 794), SEK 115 million (99) relates to
deliveries to Group companies. The parent company’s purchases from Group companies amounted
to SEK 1 056 million (1 479).

There are significant financial receivables and liabilities between the parent company and its Swed-
ish 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 was to optimise operations within this business area. The agree-
ment was terminated in 2016, with notice of termination running until September 2017. Holmen
Paper AB’s purchases from Holmen Paper Madrid SL in 2017 amounted to SEK 889 million (1 371).
As Holmen Paper AB is acting on a commissioned basis for Holmen AB, these transactions are
accounted for via Holmen AB.

Transactions with related parties

L E Lundbergföretagen AB is a major shareholder in Holmen (see page 37). Holmen rents office
premises for SEK 8 million (8) from Fastighets AB L E Lundberg, which is a group company within
L E Lundbergföretagen AB. In 2017, Fredrik Lundberg, who is CEO and principal shareholder in L E
Lundbergföretagen, received a fee of SEK 680 000 (680 000) 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 Lundberg, received a Board fee of SEK 340 000 (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 rela-
tion 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 consoli-
dated accounts within the Renewable Energy business area.

Group
Associates
Joint venture

Parent company
Subsidiaries
Associates
Joint venture

Sale of products to
related parties
2017
333
-

2016
280
-

115
333
-

99
280
-

Purchase of products
from related parties

Other (e.g. interest,
dividend)

2017
85
-

1 056
85
-

2016
172
-

1 479
99
-

2017
0
5

1 325
0
5

2016
0
5

1 299
0
5

Liability to
related parties
2017
56
-

2016
61
-

Receivable from
related parties
2017
89
24

2016
82
17

388
52
-

1 571
57
-

2 982
89
86

3 160
82
79

For fees and remuneration paid to members of the Board, see Note 4.

HOLMEN ANNUAL REPORT 2017 / NOTES

NOTE 23

Note 23. Investments in Group companies

Accumulated acquisition costs
Book value at start of year
Shareholder’s contribution
Closing balance at 31 December

Parent company

2017
17 141
1
17 142

2016
17 141
1
17 141

Accumulated impairment losses
Book value at start of year
Impairment losses for the year
Closing balance at 31 December
Book value at end of year

Parent company

2017
5 838
817
6 655
10 487

2016
5 330
508
5 838
11 303

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’.

Corporate ID No.

Registered office

Number of
holdings

Interest %*

Parent company’s direct holdings
of investments in subsidiaries
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.**
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
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.

2017

100
100
100
100
100
100
100
100
100
100

100
100
100
100
100
100
100
100
100
100
100
100

Book value
in the parent
company

Interest %*

2016

0
0
0
0
0
8 868
0
72
0
0
2
8 942

0
1 519
-
-
1
-
-
4
7
-
7
5
2
1 545
10 487

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

HOLMEN ANNUAL REPORT 2017 / NOTESNOTE 24–26

Note 24. Untaxed reserves

Note 26. Critical accounting estimates and judgements

Accumulated depreciation and
amortisation in excess of plan
Property, plant and equipment
Total

31 Dec 2016
10
10

Parent company
Appropria-
tions
2
2

31 Dec 2017
12
12

When preparing financial statements 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 ac-
counts, 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 for-
est 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 pulp-
wood 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 book value of biological
assets at 31 December 2017 was SEK 17 831 million and the attributable deferred tax liability
was SEK 3 943 million, giving a net value of SEK 13 888 million.

Tax
Holmen has requested an advance ruling on the entitlement to group relief in the parent company
for tax losses that have arisen in the Group’s Spanish operations. The Swedish tax authority has
opposed such entitlement to group relief. The Supreme Administrative Court, which is judging the
case, is obtaining an interpretation from the Court of Justice of the European Union in order to
determine the issue. A positive decision could result in the Group’s tax expense decreasing by
approximately SEK 400 million. No deferred tax asset has been recognised. Holmen has appealed
against the property tax rate on hydro power assets for the 2011–2016 tax years as the higher tax
rate that applied for these assets compared with other types of energy assets could constitute state
aid. If the appeals are upheld, it is estimated that approximately SEK 300 million in property tax will
be repaid. No deferred tax asset has been recognised. See Note 7.

Pension obligations
The Group has benefit-based pension obligations measured at SEK 2 198 million and SEK 2 177
million in plan assets set aside to cover such obligations. The value of pension obligations is esti-
mated 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 obligations for environmental res-
toration, fixed price electricity supply contracts, the sale of the Spanish operations and corporation
tax risks. See Note 18.

Tax allocation reserve
2011 fiscal year
2012 fiscal year
2013 fiscal year
2014 fiscal year
2015 fiscal year
2016 fiscal year
2017 fiscal year

Total

560
-
280
610
370
460
-
2 280
2 290

-560
-
-
-
-
-170
470
-260
-258

-
-
280
610
370
290
470
2 020
2 032

Group contributions received amounted to SEK 530 million (700) and Group contributions paid
amounted to SEK 0 million (0). Total appropriations of profit amounted to SEK 787 million.

Note 25. Cash flow statement

Interest paid and dividends received
Dividends received
Interest received
Interest paid
Total

Group

2017
-
2
-36
-34

Parent company
2016
1 288
17
-51
1 254

2017
1 314
17
-37
1 294

2016
-
1
-49
-48

The change in current liabilities mostly relates to borrowing within the Group’s commercial paper
programme. In 2017, a number of different short-term loans totalling SEK 7 160 million (7 192)
were raised within the Group’s commercial paper programme, and SEK 6 770 million (7 630) was
repaid. For a specification of cash and cash equivalents, see Note 13.

Bond loans
Commercial paper
Other financial liabilities
Pension liability
Financial liabilities in-
cluding pension liability

Bond loans
Commercial paper
Liabilities to Group
companies
Other financial liabilities
Pension liability
Financial liabilities in-
cluding pension liability

2016
2 200
1 709
173
201

4 283

2016
2 200
1 709

1 454
166
12

5 541

Group

Cash flow
-1 050*
390
-21
-39

Currency
and market
revaluation
-
-
-74
-123

2017
1 150
2 099
77
39

-720

-197

3 365

Parent company

Currency
and market
revaluation
-
-

74
-77
7

2017
1 150
2 099

334
70
12

3 665

Cash flow
-1 050*
390

-1 194
-18
-7

-1 879

* Relates to SEK 1 400 million in repayment of loans which when raised were long-term but at the
point of repayment were short-term, and SEK 350 million in loans raised.

HOLMEN ANNUAL REPORT 2017 / NOTES
Proposed appropriation of profits

The following earnings of the parent company are at the disposal of the Annual General Meeting:
Net profit for the 2017 financial year
Retained earnings

The Board of Directors proposes that a dividend of SEK 13 per share (83 996 162 shares) be paid to the shareholders

and that the remaining amount be carried forward

SEK

1 846 904 094
3 955 903 305
5 802 807 399

1 091 950 106

4 710 857 293

The Board of Holmen AB has proposed that the 2018 Annual General Meeting resolve in favour
of paying a dividend of SEK 13 per share – SEK 1 per share higher than the preceding year –
totalling SEK 1 092 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.
The proposed dividend corresponds to 65.5 per cent of net profit for 2017 for the Group and
means that 5.0 per cent of equity in the Group at 31 December 2017 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 2017 was 0.13. Payment of the proposed dividend would raise the
debt/equity ratio by 0.06.
Holmen AB’s equity at 31 December 2017 amounted to SEK 11 718 million, of which non-
restricted equity was SEK 5 803 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 -145 million on
equity. The Group’s equity at 31 December 2017 amounted to SEK 22 035 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

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 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 Parlia-
ment’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 16 February 2018. The Group’s consolidated income statement and balance
sheet and the parent company’s income statement and balance sheet will be presented for adop-
tion at the Annual General Meeting to be held on 10 April 2018.

Fredrik Lundberg
Chairman

Carl Bennet
Board member

Steewe Björklundh
Board member

Kenneth Johansson
Board member

Stockholm, 16 February 2018

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 20 February 2018.

KPMG AB

Joakim Thilstedt
Authorised Public Accountant

HOLMEN ANNUAL REPORT 2017 / PROPOSED APPROPRIATION OF PROFITS

Auditor’s report

To the general meeting of the shareholders of Holmen AB (publ.), 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 (publ.)
for the year 2017, except for pages 8-9, 22 and 25-26 in the sustainability report. The
annual accounts and consolidated accounts of the company are included on pages 2-3,
8-9, 22, 25-26, 28-66 and 70-71 in 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 2017 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 2017 and their financial
performance and cash flow for the year then ended in accordance with International Finan-
cial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our
opinions do not cover pages 8-9, 22 and 25-26 in the sustainability report.
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.
Our opinions in this report on the the annual accounts and consolidated accounts are
consistent with the content of the additional report that has been submitted to the parent
company’s audit committee in accordance with the Audit Regulation (537/2014) Article 11.

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 stand-
ards 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 otherwise fulfilled our ethical responsibilities in accordance with
these requirements.This includes that, based on the best of our knowledge and belief,
no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have
been provided to the audited company or, where applicable, its parent company or its
controlled companies within the EU.
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 form-
ing our opinion thereon, the annual accounts and consolidated accounts as a whole, but
we do not provide a separate opinion on these matters.

Valuation of Biological Assets
Se note 11, note 26 and the Accounting Principles on pages 44-47 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 17 831
million as per 31 December 2017.
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.

Response in 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 documen-
tation 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 as-
sumptions can affect the overall valuation.
We have involved our own specialists in 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 valua-
tions 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.

Other provisions/ Valuation of the parent company’s shares in Group companies
See note 18, note 26 and the Accounting principles on page 44-47 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 622 million per 31
December 2017, including environmental obligations and contractual commitments
regarding delivery of electricity at a fixed price.
Provisions in the parent company have a carrying value of SEK 725 million per 31
December 2017 and regard primarily environmental obligations, contractual commit-
ments regarding delivery of electricity at a fixed price and estimated costs for replanta-
tion of forest following harvesting.
Provisions involve significant levels of judgement regarding uncertain future outcomes,
in particular relating to the amount and timing of the final assessments. Changes to the
underlying assumptions used to make these provisions could significantly 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.

Response in 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.
We have evaluated the parent company’s assessment of the value of shares in Group
companies and evaluated whether all of the underlying commitments have been taken
into account and assessed write-downs made against applicable regulations.

HOLMEN ANNUAL REPORT 2017 / AUDITOR’S REPORT

Other Information than the annual accounts and consolidated accounts
This document also contains other information than the annual accounts and consoli-
dated accounts and is found on pages 4-7,10-21, 23-24, 27 and 72-79. The Board of
Directors and the Managing Director are 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 infor-
mation 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 accordance with the Annual Accounts Act and, concerning the consolidated accounts,
in accordance 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 misstatement, 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 accounting is however not applied if the Board of Directors and the
Managing Director intend to liquidate the company, to cease operations, or has no real-
istic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director’s responsibilities
and tasks in general, among other things oversee the company’s financial reporting
process.

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 er-
ror 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.

As part of an audit in accordance with ISAs, we exercise professional judgment and
maintain professional scepticism 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 proce-
dures responsive to those risks, and obtain audit evidence that is sufficient and appro-
priate to provide a basis for our opinions. The risk of not detecting a material misstate-
ment 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 or-
der 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 con-
solidated 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 con-
cern. 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 man-
ner 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 con-
solidated 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.

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 mat-
ters 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.

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 (publ.) for the year 2017 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 mem-
bers 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 Audi-
tor’s Responsibilities section. We are independent 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.

Responsibilities of the Board of Directors and the Managing Director
The Board of Directors is responsible for the proposal for appropriations of the compa-
ny’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 administra-
tion 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 or-
ganization 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 Ac-

counts 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 scepticism 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.

HOLMEN ANNUAL REPORT 2017 / AUDITOR’S REPORT

The auditor’s opinion regarding the statutory sustainability report
The Board of Directors and the Managing Director are responsible for the sustainability
report on pages 8-9, 22, 25-26 and 33, and that it is prepared in accordance with the
Annual Accounts Act.

Our examination has been conducted in accordance with FAR:s auditing standard RevR
12 The auditor’s opinion regarding the statutory sustainability report. This means that
our examination of the statutory sustainability report is different and substantially less in
scope than an audit conducted in accordance with International Standards on Auditing
and generally accepted auditing standards in Sweden. We believe that the examination
has provided us with sufficient basis for our opinion.

A statutory sustainability report has been prepared.

KPMG AB, Box 382, 101 27, Stockholm, was appointed auditor of Holmen AB (publ.) by
the general meeting of the shareholders on the 27 March 2017. KPMG AB or auditors
operating at KPMG AB have been the company’s auditor since 1995.

Stockholm 20 February 2018
KPMG AB

Joakim Thilstedt
Authorised Public Accountant

Review of sustainability report

Holmen’s Sustainability Report, as defined on page 2 of Holmen’s Annual Report 2017,
has been subject to a limited review in accordance with ISAE 3000 Assurance engage-
ments other than audits or reviews of historical financial information.
A complete assurance report on the Sustainability Report is available at holmen.com.
The assurance report contains the following conclusion:

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.

Joakim Thilstedt
Authorised Public Accountant

Torbjörn Westman
Expert member of FAR

Stockholm 20 February 2018
KPMG AB

HOLMEN ANNUAL REPORT 2017 / 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.

Daniel Hägglund
Örnsköldsvik. Born in 1982. Deputy member since
2014. Employee representative, PTK.

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.

Henrik Sjölund
President and CEO

Norrköping. Born in 1966. Member since 2014.
M.Sc. in International Economics.
Other significant appointments: Board member
of the Swedish Forest Industries Federation and
the Confederation of Swedish Enterprise.
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 Lundberg-
företagen: 27 622 000 shares.

Carl Bennet
Gothenburg. Born in 1951. Member since 2009.
M.Sc. in Economics. D. Tech. h.c. CEO of Carl Ben-
net AB. Former President and CEO of Getinge AB.
Chairman of Getinge AB, Lifco AB och Elanders AB.
Other significant appointments: Board member
of Arjo AB and L E Lundbergföretagen AB.
Shareholding: 100 000 shares.

Steewe Björklundh
Hudiksvall. Born in 1958. Member since 1998.
Employee representative, LO.

HOLMEN ANNUAL REPORT 2017 / BOARD OF DIRECTORS

Ulf Lundahl
Lidingö. Born in 1952. Member since 2004.
Bachelor of Laws and M.Sc. in Economics.
Other significant appointments: Chairman of
Attendo AB, Fidelio Capital AB, Ramirent plc and
SHB Regionbank Stockholm. Board member of
Eltel AB and Indutrade AB.
Shareholding: 4 000 shares.

Lars Josefsson
Norrköping. Born in 1953. Member since 2016.
M.Sc. in Engineering.
Other significant appointments: Deputy chair-
man of Vestas. Chairman of Driconeq, Ouman and
TimeZynk. Board member of Metso.
Shareholding: 2 500 shares.

Lars G Josefsson
Stockholm. Born in 1950. Member since 2011.
M.Sc. in Engineering. Former President and CEO
of Vattenfall.
Other significant appointments: Board member
of Robert Bosch GmbH, Robert Bosch Industrie-
treuhand 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.

Henriette Zeuchner
Stockholm. Born in 1972. Member since 2015.
M.Sc. in Economics and Bachelor of Laws. CEO of
Discovery Networks Sweden AB.
Other significant appointments: Board member
of the NTM Group.
Shareholding: 800 shares.

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.

Tommy Åsenbrygg
Skebobruk. Born in 1968. Member since 2015.
Employee representative, PTK. Deputy chairman of
Ledarna, Hallsta Paper Mill.
Shareholding: 100 shares.

Christer Johansson
Iggesund. Born in 1959. Deputy member since
2017. Employee representative, LO. Chairman of
the Swedish Paper Workers Union branch 15.

Per-Arne Berg
Forsa. Born in 1955. Deputy member since 2015.
Employee representative, PTK. Chairman of the
Holmen-Iggesund Trade Union Club.

Information at 31 December 2017.

Auditors: KPMG AB
Principle Auditor: Joakim Thilstedt,
Authorised Public Accountant

HOLMEN ANNUAL REPORT 2017 / BOARD OF DIRECTORS

Group
management

Stina Sandell
Senior Vice President Sustainability and
Communications

Born in 1966. Joined Holmen in 2017.
Shareholding: 0 shares.

Lars Ericson
Senior Vice President Legal Affairs

Company secretary.
Born in 1959. Joined Holmen in 1988.
Shareholding: 650 shares.

Daniel Peltonen
Senior Vice President Paperboard

Born in 1971. Joined Holmen in 1997.
Shareholding: 538 shares.

Nils Ringborg
Senior Vice President Paper

Born in 1958. Joined Holmen in 1988.
Shareholding: 2 514 shares.

Johan Padel
Senior Vice President Wood Products

Born in 1966. Joined Holmen in 2014.
Shareholding: 830 shares.

Henrik Sjölund
President and CEO

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 70.

Anders Jernhall
Executive Vice President, Chief Financial Officer

Born in 1970. Joined Holmen in 1997.
Shareholding: 4 900 shares.

Sören Petersson
Senior Vice President Forest

Born in 1969. Joined Holmen in 1994.
Shareholding: 4 400 shares.

Gunilla Rolander
Senior Vice President Human Resources

Born in 1966. Joined Holmen in 2013.
Shareholding: 362 shares.

Ola Schultz-Eklund
Senior Vice President Technology

Born in 1961. Joined Holmen in 1994.
Shareholding: 800 shares.

HOLMEN ANNUAL REPORT 2017 / 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, %

Profit/loss before change in value, forest
Profit/loss before change in value, forest
Change in value of forests
Operating profit/loss, forest

Capital employed
Equity
Net financial debt
Capital employed

Return on capital employed
Operating profit/loss excluding items affecting comparability
Average capital employed
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 38 for what items affecting comparability refers to.

2017

2016

2 742
-991
415
2 166
-
2 166

2 166
16 133
13.4

654
415
1 069

22 035
2 936
24 972

2 166
24 874
8.7

552
2 775
39
-42
-32
-356
2 936

2 936
22 035
0.13

22 035
34 891
63.2

2 865
-1 018
315
2 162
-232
1 930

1 930
15 513
13.9

686
315
1 001

21 243
3 945
25 190

2 162
25 146
8.6

882
3 200
201
-39
-89
-210
3 945

3 945
21 243
0.19

21 243
34 891
60.9

HOLMEN ANNUAL REPORT 2017 / KEY FIGURES

Ten-year review, finance

SEKm

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

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
Earnings 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
Earnings 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:

16 133
-13 379
-12
-991
415
2 166
-
2 166

-53
2 113

-445
1 668

19.9

5 535
5 526
5 408
1 562
315
-2 214
16 133

1 069
764
288
80
135
-170
2 166
-
2 166

2 113
418
-221
199
2 509
-644
1 865

-
-1 008

15 513
-12 626
-22
-1 018
315
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

16 014
-13 348
7
-1 240
267
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

15 994
-13 270
-7
-1 265
282
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

16 231
-13 919
3
-1 370
264
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

17 852
-15 224
47
-1 313
350
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

18 656
-15 501
84
-1 260
-
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

17 581
-15 077
28
-1 251
52
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

18 071
-15 191
45
-1 320
16
1 620
-
1 620

19 334
-16 614
50
-1 343
-16
1 412
-361
1 051

-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

-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

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.

2015: Impairment loss on non-current assets, provision for costs and the effects of a fire totalling SEK -931 million.

2014: Impairment loss on non-current assets of SEK -450 million.

2013: Impairment loss on non-current assets and restructuring costs of SEK -140 million.

2012: Impairment loss on non-current assets and restructuring costs of SEK -193 million.

2011: Revaluation of forest of SEK 3 593 million.

2010: Impairment losses on non-current assets and restructuring costs of SEK -786 million and revaluation of forest amounting to SEK 1 050 million.

2008: Impairment loss on non-current assets, restructuring costs and the effects of a fire totalling SEK -361 million.

HOLMEN ANNUAL REPORT 2017 / 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

Capital employed
Forest
Paperboard
Paper
Wood Products
Renewable Energy
Group-wide and other*
Capital employed

Key figures
Operating margin, %**
Paperboard
Paper
Wood Products
Group

Return, capital employed, %**
Forest
Paperboard
Paper
Wood Products
Renewable Energy
Group

Key figures
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

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

For a ten-year review of data per share, see page 37.

28 751
5 710
74
356
34 891

22 035
5 650
3 366
3 840
34 891

13 824
5 433
2 193
862
3 115
-455
24 972

14
5
5
13

8
14
12
9
4
9

8
0.13

2 904
526
1 117
852
1 169

28 701
5 852
128
210
34 891

21 243
5 613
4 283
3 752
34 891

13 536
5 546
2 507
859
3 153
-410
25 190

17
5
0
14

7
16
10
0
4
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

13 401
5 698
3 266
897
3 075
-684
25 653

15
-1
1
11

7
15
neg
1
6
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

13 212
5 841
4 366
874
3 118
-535
26 876

13
2
3
11

6
12
3
3
7
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

12 688
5 686
4 438
1 327
3 005
-173
26 970

9
-4
-6
7

7
8
neg
neg
13
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

12 657
5 489
4 920
1 385
2 947
5
27 403

12
1
-12
10

8
12
2
neg
12
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

11 599
4 233
5 798
1 471
2 884
47
26 032

17
3
-16
11

8
23
4
neg
14
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

8 822
3 428
6 069
1 153
2 831
382
22 685

17
-8
4
8

10
24
neg
3
17
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

8 075
3 456
8 131
367
2 907
-748
22 188

8
4
4
9

7
12
4
7
15
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

8 170
3 687
9 670
341
2 748
-1 469
23 146

7
3
3
7

8
9
3
4
12
6

4
0.48

2 649
494
2 044
266
1 128

*Income and costs from the sale of newsprint from the Spanish mill sold in Q2 2016 are 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 2017 / 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 2016. Linghem Sawmill was
acquired in April 2017. Figures for this sawmill are included from May 2017.

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 envi-
ronmental 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
Paperboard, ’000 tonnes
Market pulp, ’000 tonnes
Printing paper, ’000 tonnes
Wood products, ’000 m3
Own production of hydro and wind power, GWh
Electricity production at the mills, GWh

Raw materials
Wood, million m3sub1)
Purchased pulp, ’000 tonnes
Thermal energy, GWh
Electrical energy, GWh
Water use, million m3,4)
Plastic granules/foiling material, ’000 tonnes
Chemicals, ’000 tonnes5)
Filler, pigment, ’000 tonnes5)

Emissions to air, tonnes6)
Sulphur dioxide (counted as sulphur, S)
Nitrogen oxides
Particulates
Fossil carbon dioxide, ’000 tonnes
Biogenic carbon dioxide, ’000 tonnes

Emissions to water, tonnes6)
AOX (chlorinated organic matter)
Nitrogen
Phosphorus
COD (organic matter), ’000 tonnes
Suspended solids (SS), ’000 tonnes

By-products, ’000 tonnes
To energy production, internally/externally
Utilised or for recovery7)
Tall oil8)

Waste, ’000 tonnes
Hazardous9)
Sent to landfill (wet)

Energy supplies
Branches, treetops and peat, GWh10)
Electrical and thermal energy, GWh11)

1) At Group level, wood consumption is computed
net, taking into account internal deliveries of
chips from the sawmills to the nearby mills.

2) Of which 4 615 GWh from production at mills

from recovered liquors, bark and wood residues,
1 132 GWh from the TMP process at Braviken
Paper Mill and Hallsta Paper Mill which generates
thermal energy that is recovered and used in pro-
duction, and 352 GWh from natural gas, oil and
purchased thermal energy.

3) Of which 2 377 GWh from renewables and 1 610
GWh from nuclear. Emissions of fossil carbon
dioxide from production of purchased electricity
totalled 113 tonnes.

4) Almost 100 per cent use of surface water from

lakes and watercourses.

5) 100 per cent active substance. Total quantity of
commodities was 227 000 tonnes for chemicals
and 206 000 tonnes for filler and pigment.

6) Relates to emissions at facilities.

7) By-products used, for example, as filling material,
construction material or for the production of soil
products.

8) For delivery to the chemical industry.

9) Hazardous waste is dealt with by authorised col-

lection and recovery contractors. Certain fractions
of the waste are recovered. In 2017, Holmen
dealt with oil-containing waste from vessels that
docked at two of its own ports. Such waste is
included in the figures for hazardous waste. The
volume of this waste in 2017 totalled 627 tonnes.

10) Branches, treetops and peat delivered from
Holmen’s land to external energy producers.

11) For 2017: 138 GWh of electrical energy supplied
from the mill at Workington to the local commu-
nity. 212 GWh of thermal energy from Iggesund
Mill and Braviken Paper Mill to Iggesund Sawmill
and Braviken Sawmill. A total of 16 GWh thermal
energy from Hallsta Paper Mill and Iggesund Mill
was supplied to the district heating network of
the local communities.

2017

2016

2015

2014

2013

530
54
1 088
827
1 169
621

5.63
79
6 0992)
3 9873)
73
2.9
147
146

48
907
30
73
1 545

48
177
14
20.1
2.8

995
202
14

1.8
1.8

116
366

503
56
1 176
776
1 080
784

5.36
70
6 375
3 949
70
2.6
151
148

41
960
39
124
1 539

52
208
14
20.4
3.2

872
270
13

2.2
16

155
380

502
56
1 287
734
1 441
781

5.10
79
6 288
3 994
68
2.5
138
146

52
891
48
180
1 441

57
226
19
21.0
3.3

823
303
12

1.9
13

230
348

500
67
1 325
742
1 113
740

5.16
75
6 230
4 067
74
2.1
146
147

57
1 181
29
126
1 551

54
203
19
20.4
3.6

824
296
13

1.6
5.6

275
305

478
50
1 545
710
1 041
769

5.25
99
6 451
4 420
77
2.6
146
178

91
1 557
52
254
1 449

47
215
15
20.4
4.3

885
367
13

2.4
12

294
199

HOLMEN ANNUAL REPORT 2017 / FIVE-YEAR REVIEW, SUSTAINABILITY

1) The high costs stated for 2013–2014 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 man-
agement, 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
12 per cent of its productive forest for environ-
mental reasons and thus refrains from harvest-
ing around 12 per cent of the potential volume.
The annual loss of income in 2017 is estimated
at SEK 62 million.

5) Relates to permanent employees.

6) Relates to permanent and temporary

employees.

7) No industrial accidents with a fatal outcome

occurred during the year.

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)

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 accidents7)
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

2017

2016

2015

2014

2013

44
20
12
137
62

55
8
14
182
71

12
18
12
208
101

26
320
10
169
70

122
300
14
178
84

2 976
19.3
7.4
46.0

2 989
19.3
8.8
46.3

3 315
19.4
9.0
46.8

3 359
19.2
7.9
46.8

3 718
19.3
7.7
46.8

4.2
2.0

20.7
25

8.0
0.9
2.6
4.4
5.9

4.2
2.0

19.0
27

6.9
1.6
2.4
2.9
5.4

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

5.1

8.8

6.5

8.4

94
77

94
67

97
68

97
70

98
72

HOLMEN ANNUAL REPORT 2017 / FIVE-YEAR REVIEW, SUSTAINABILITY

Definitions and glossary

Definitions
Capital employed
Net financial debt plus equity, which corresponds to fixed
capital plus working capital less the net sum of deferred tax li-
abilities and deferred tax assets. Average values are calculated
on the basis of quarterly data.

Cash flow after investments
Cash flow from operating activities less cash flow from
investing activities.

Cash flow yield
Profit/loss before change in value in relation to the book value
of biological assets. Used for the Forest business area.

Debt/equity ratio
Net financial debt divided by total equity.

Earnings per share
Profit 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 impair-
ment losses, disposals, fire and restructuring. The effects of
maintenance and rebuilding shutdowns are not treated as an
item affecting comparability.

Net financial debt
Non-current and current financial liabilities and pension provi-
sions, less financial assets.

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.

Profit/loss before change in value
Operating profit/loss before change in value, excl. items affecting
comparability. Used for the Forest business area.

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.

Glossary
Bio co-location
A co-location of different operations for more efficient use of raw
materials and energy, amongst other benefits.

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
Measure of the paper’s volume. Paper of the same basis
weight can have different thicknesses depending on the pa-
per’s bulk. High bulk means thick, but relatively light, 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 demanding substances. 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.

FSC®
Forestry certification system.

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.

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. Im-
portant 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.

PEFC™
Forestry certification system.

Phosphorus (P)
An element contained in wood. Excessive phosphorus in the
water may cause over-fertilisation (eutrophication) and oxygen
consumption.

Precautionary principle
Persons who pursue an activity or take a measure, or intend
to do so, shall implement protective measures, comply with
restrictions and take any other precautions that are necessary
in order to prevent, hinder or combat damage or detriment to
human health or the environment as a result of the activity or
measure. For the same reason, the best possible technology
shall be used in connection with professional activities.

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 2017 / 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 at holmen.com. The annual
report, together with year-end and interim reports, is
published in Swedish and English and the reports are
sent to the shareholders who have indicated their wish
to receive them. They are also available on holmen.com.

How to order printed materials:
• holmen.com
• Holmen AB, Group Sustainability and Communications,

P.O. Box 5407, SE-114 84 Stockholm, Sweden

• e-mail: info@holmen.com
• telephone: +46 8 666 21 00

Calendar

For 2018 Holmen will publish the following
financial reports:

25/4
15/8
24/10

Interim report January – March
Interim report January – June
Interim report January – September

2019
31/1

Year-end report

100%

Holmen-produced
This entire annual report is made using Holmen’s
own products. The cover is printed on Invercote G,
manufactured at Iggesund Mill. This is a paperboard
with high whiteness and a smooth, matt surface. The
paperboard is ideal for graphical products with a surface
finish. The insert is printed on Holmen TRND, which is
manufactured at Hallsta Paper Mill. This is an uncoated,
matt magazine paper that offers a wide range of options
in terms of bulk, basis weight and shade. Both Holmen
TRND and Invercote G are made from fresh fibres that
can be recycled up to seven times.

The cover is printed on Invercote G 280 gsm.
It is laminated, partially varnished and finished with a foil laminate.
The insert is printed on Holmen TRND, 2.0 – 80 gsm.
Layout: BYN Kommunikationsbyrå AB.
Graphic production: Gylling Produktion AB.
Photos: Fredrik Schlyter, Ulla-Carin Ekblom,
Lars-Göran Abrahamsson and others.
Print: Åtta.45

Holmen AB (publ)
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

Building the
future in wood

Wood is a versatile material and the only renew-
able construction material. Replacing steel and
concrete with wood reduces carbon emissions,
is resource-efficient, and saves time and money.
Research also shows that people’s wellbeing is
improved by living in wooden houses.
We use the whole tree, turning the parts that
do not become construction materials into paper-
board and paper. Read more about how Holmen’s
operations and products from the forest help
to create a better climate on page 20.