Holmen Annual Report 2018

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FY2018 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

Environment

Employees

UN Sustainable Development Goals

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, glossary and references

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 2018 financial year. The annual report com-
prises the administration report (pages 2–3, 8–9, 23–24, 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,
23–24, 30, 31 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 sustainability
issues identified as key in view of the materiality analysis conducted by
Holmen during the year. The sustainability work is reported in accordance
with the Global Reporting Initiative’s GRI guidelines at Core level. The Sus-
tainability Report comprises pages 8–9, 20–27, 30, 31, 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 Aktiebolag
(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
0.5 million tonnes a year.

Paper

Paper for magazines, books and
advertising. The two Swedish
mills produce a combined total
of 1 million tonnes per year.

Wood Products

Wood products for the joinery and construction
industries. The annual production at three
sawmills amounts to just under
1 million cubic metres. The
by-products are used in the
Group’s paperboard and
paper mills.

Renewable Energy

In a normal year, the renewable
energy production from hydro and
wind power amounts to over 1 TWh.

A strong result

Operating profit excluding items affecting com-
parability increased by SEK 310 million to SEK
2 476 million as a result of higher profits from forest
and wood products. Return on capital employed
increased to 10 per cent. The financial position has
been further strengthened, while at the same time
additional forest holdings have been gained through
acquisitions.

Demand for raw material from the forest was high in 2018, with pric-
es gradually rising. Despite difficult winter weather and fires over the
summer, profit from the forest increased by just over SEK 100 million.
Revenue from hydro power climbed almost SEK 50 million due to ris-
ing electricity prices and a stepped reduction in property tax. Demand
for paperboard grew solidly over the year, but profits dipped by SEK 75
million due to new capacity in the market increasing competition and
making it difficult to pass on rising raw material costs to customers. The
market situation for paper was good, with rising prices, but higher raw
mate rial costs limited growth in profits to SEK 40 million. The wood
products market was strong, with significant price increases, which
drove up the profit from wood products by over SEK 160 million.

Outlook. There is major competition for wood and the prices of
imported wood in particular are high. Holmen is establishing new
logistics solutions aimed at increasing the supply of wood from our
own forests. Demand for paperboard is good, but competition has
grown. Holmen intends to develop its position in the premium seg-
ment, while also gradually ramping up production through targeted
investments to eliminate bottlenecks. The market balance for paper is
good, but structural demand is falling. Holmen’s aim is to capture mar-
ket share by offering cost-effective alternatives to established products
for books, magazines and advertising. Demand for wood products has
seen strong growth over the past couple of years, but the market situa-
tion softened towards the end of 2018, leading to price drops in some
markets. Holmen’s ambition is to develop the wood products business
based on a strong cost position and good control over the raw mate rial,
not least through the ongoing investment in increased production at
Braviken Sawmill. The water levels in Holmen’s reservoirs were slightly
lower than normal by the end of 2018, which will restrict production
in the first few months of 2019.

Net sales and
operating margin

Operating profit/loss
and return

SEKm
20 000

16 000

12 000

8 000

4 000

%
20

SEKm
2 500

2 000

1 500

1000

500

16 055

15.4

15 16 17 18

9.7

%
10

2 476

15 16 17 18

Net sales
Operating margin*

Operating profit/loss*
Return on capital employed*

*Excl. items affecting comparability

Cash flow, SEKm

Debt/equity ratio, times

3 000

2 000

1 000

2 500

1 005

1 092

15 16 17 18

0.5

0.4

0.3

0.2

0.1

0.0

Investments
Dividend
Cash flow before investments
and change in working capital

0.12

15 16 17 18

Operating profit/loss*
Business area, %

Capital employed*
Business area, %

Key figures

Net sales, SEKm
Operating profit/loss, SEKm
Operating profit/loss excl.
items affecting comparability, 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 (FTE)

2018

16 055
2 382

2017

16 133
2 166

2 476
2 268
13.5
6.75*
9.7
2 286
1 005
2 807
0.12
2 955

2 166
1 668
9.9
6.5
8.7
2 509
644
2 936
0.13
2 984

Forest
Paperboard
Paper
Wood Products
Renewable
Energy

Total: 2 476
1 185 SEKm
689 SEKm
329 SEKm
246 SEKm

181 SEKm

*Board proposal **2017 figures have been adjusted because of the share split (2:1) in 2018
***Net after disposals and before changes in non-current financial receivables.

* Excl. items affecting comparability and
Group-wide

Total: 26 261
14 830 SEKm
5 316 SEKm
2 072 SEKm
927 SEKm

3 052 SEKm

Forest
Paperboard
Paper
Wood Products
Renewable
Energy
*Excl. Group-wide

HOLMEN ANNUAL REPORT 2018 / THE YEAR IN BRIEF

Dear
shareholder

2018 was a favourable year for us as forest owners.
Demand for raw material from the forest has risen steadi
ly, driven by major expansions in the pulp and packaging
industries across the Nordic region. Competition in the
wood market became considerably tougher over the
year with substantial price rises, which in turn drove up
costs in our industry. Thanks to price rises for our end
products, we have nevertheless managed to improve
the Group’s profits by SEK 310 million and increase the
return on capital employed to 10 per cent.

HOLMEN ANNUAL REPORT 2018 / CEO’S MESSAGE

Customers
and consumers
are increasingly
demanding sustain-
able products and
production methods.
And we have a
genuinely sustainable
business.

Strength in our own forest land
The weather in 2018 was challenging for Swedish forestry. The begin-
ning of the year was cold and wet with heavy snowfall, which hampered
harvesting and led to a nationwide wood shortage. Then came a histori-
cally hot and dry summer with extensive wildfires. Holmen was one of
the forest owners hit, but thanks to fast and decisive damage limitation
work, the fires will have no significant impact on our future harvests.
The forest is extremely resilient. It can handle being managed and should
be managed, not least for the sake of the climate.
We are constantly working to improve our forest holdings. A prime
example is the sale of a remote area of forest near the Norwegian bor-
der, which was followed by the purchase of Långvind, a forest property
located 30 km south of Holmen’s sawmill and paperboard mill in Igge-
sund. This acquisition strengthens our control over the raw material and
reduces the amount of transport required. Our ambition is to increase
the forest holdings close to our plants, where opportunities for a good
deal exist, but this process will take time since quality properties are hard
to come by.

The large-scale investments that have been made in pulp and pack-
aging capacity in the Nordic region have shifted the balance in the wood
market. Competition for local raw material in Sweden has grown and
wood imports have become an increasingly important part of the raw
material supply. Here at Holmen we are currently establishing rail-based
logistics solutions that will enable us to supply more of our mills with
raw material from our own forests in northern Sweden. As well as cut-
ting our dependence on expensive imported wood, having our own train
is also the key to developing our manufacturing while retaining control
over raw material costs. With the ongoing expansion of Braviken Saw-
mill, for example, we are in a position to step up production by 30 per
cent without affecting the local raw material market.
Our extensive land holdings are a valuable asset, not only because
of the trees on the productive forest land, but also due to the other
opportunities that our land has to offer. Our hydro power delivers fos-
sil-free energy that can be steered towards times when it can be of most
use. This is an excellent asset that we have built up over a long time,
making full use of our land holdings. The expansion of wind power is
another opportunity that is now gathering pace in Sweden. We will be
actively working to get wind turbines built on our land, as they provide
a good return and help with society’s transition to a renewable energy
system.

Growing demand for sustainable products
The general public has quickly become aware of the enormous problems
that plastics pose in our oceans and the issue has climbed high up the
political agenda. Interest in reducing the plastic in consumer goods pack-
aging has also risen dramatically, as we have noted in our dialogue with
customers. Demand for paperboard is progressing well, but new capaci-

ty in the market is increasing competition and making it difficult to pass
on rising raw material costs to our customers. Alongside our structured
cost-cutting work, our ambition is to gradually increase production as
we grow with customers in the premium segment.
Holmen has succeeded in shifting its business from newsprint to
book and magazine paper. Although demand for printing paper is gener-
ally falling, the segments that we have focused on remain comparative-
ly stable. Over the year, we have been able to implement substantial price
increases, which have more than compensated for rising raw material
costs. The focus is now on ensuring good profitability for the long term
by advancing our position in book and magazine paper towards prod-
ucts that make the best use of fresh fibre.
Wood construction has made great progress over the past few years
and we are seeing an increased interest in building in wood. I am positive
about future developments in this area, since building in wood has so
many advantages and brings clear benefits for the climate and the envi-
ronment. Prices have been on a strong upward trend and the year’s profit
from wood products is historically high. We did, however, notice a slow-
down towards the end of the year. With a strong cost profile and good
access to raw material, we are confident that we will be able to further
develop our wood products business even in a weaker market.

The future is growing in the forest
The issue of climate change is more pressing than ever and requires a
complete shift in the way we live. More and more people are realising
that managed forests and the renewable, fossil-free products that the for-
est provides form a vital part of the solution. Customers and consumers
are increasingly demanding sustainable products and production meth-
ods. And we have a genuinely sustainable business. With our own pro-
duction of renewable energy, resource-efficient mills and climate-smart
products, I would say that Holmen is well placed to meet the needs of
the future.

Finally, I would like to thank Holmen’s employees for all their great

work over the year. Particular thanks go to those who made such an
invaluable contribution during the severe summer wildfires. Together,
we are growing a sustainable future.

Stockholm, 12 February 2019

Henrik Sjölund
President and CEO

HOLMEN ANNUAL REPORT 2018 / 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 climatesmart building to
renewable packaging, magazines and books.

6
6

HOLMEN ANNUAL REPORT 2018 / STRATEGY AND TARGETS

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 products are
combined with large-scale production and
good service.

Paper

Cost-effective
alternatives

The paper business will be developed by
exploiting the properties of fresh fibre and
offering cost- and resource-efficient alter-
natives to traditional products for books,
magazines and advertising.

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.

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 sustainable energy production and be managed with a
focus on long-term profitability.

HOLMEN ANNUAL REPORT 2018 / STRATEGY AND TARGETS

7
7

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 2018 was 9.7 per cent which
means that, as in 2017, the target was exceeded.

Capital structure
Our financial position is to be strong in order to
secure room for manoeuvre when making long-
term commercial decisions. The target is to not
exceed a debt-to-equity ratio of 0.5.

In 2018, the debt/equity ratio was 0.12. 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 6.75
per share in 2019. The proposed dividend corre-
sponds to 4.8 per cent of equity. Over the past five
years the dividend has increased by 6 per cent
annually.

Return on capital employed, %

Debt/equity ratio, times

Dividend per share

9.7

0.5

0.4

0.3

0.2

0.1

0.0

0.12

15 16

Excl. items affecting comparability

SEK
8

Proposal, SEK 6.75

4.8

%
8

Dividend
Dividend as percentage of equity

The historical dividends have been adjusted because of the share
split (2:1) in 2018.

HOLMEN ANNUAL REPORT 2018 / 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 of our production is to be reduced by phasing out fossil fuels and increasing the
production of 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 16
per cent to date, with harvesting up 23 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 the base year 2005.

The proportion of company-generated renewable
electricity in 2018 amounted to 45 per cent.

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

+1%/year

1948

1965

1988

2000

2020

2040

1955

1975

1993

2010

2030

2050

160

120

Use of fossil fuels
(base year 2005),%

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

-30

-60

-90

-86

Assessment of tax

Forecast

HOLMEN ANNUAL REPORT 2018 / STRATEGY AND TARGETS

Active and
sustainable
forestry

Holmen’s forest holdings are the
foundation of our business. Active
and sustainable management of
the forest boosts its growth and
the opportunities for harvesting.
As well as being a stable source
of revenue, the forest brings major
climate benefits by capturing and
storing carbon dioxide and pro-
viding the industry with renewable
and fossil-free raw material.

Strength in our own forest
Holmen’s forests cover 1.3 million hectares,
of which a little over a million hectares con-
sist of productive forest land. The strategy is to
increase the revenue from and future value of
the forest holdings through active and sustain-
able forestry with a clear focus on costs. As one
of Sweden’s biggest landowners, we are large-
ly able to supply Holmen’s Swedish production
units with renewable raw material from our
own sources. Economies of scale and efficient
logistics give us a strong position in the wood
market, which contributes to the Group’s com-
petitiveness.

Growing forests create value
The growth of the forest and its value are
dependent to a large extent on how the forest is
managed and how much is harvested. Holmen’s
annual harvesting is governed by a long-term
plan based on forest inventories that are con-
ducted every 10 years.

In the latest plan from 2011, the annual
harvest is forecast to grow from today’s 3.0
million m³sub to 3.5 million m³sub by 2050,
while the volume of standing timber is expect-
ed to rise from 122 million m³ to 160 million
m³ growing stock, solid over bark. The volume
of standing timber is thus growing by 1 per cent
per year.

Social benefit. Forestry is of significant
regional importance. It creates employment
in rural areas and enables many people to live
and work outside the major urban regions. The
construction and maintenance of forest roads
for management and harvesting activities also

makes it easy to get out into the countryside
and travel between different areas.

Climate benefit. Active forestry enables us to
create climate benefits on numerous fronts. A
managed forest combats the greenhouse effect,
since younger trees absorb significantly more
carbon dioxide than older forest, where growth
has tailed off. In addition, the larger the area
managed, the more carbon dioxide is captured.
Furthermore, the benefit to the climate becomes
many times greater when the forest’s renewa-
ble products replace fossil materials. Forest that
is not managed does not deliver anywhere near
the same long-term benefits for the climate, not
least because there is no substitution of products
that are harmful for the climate.

Forest matters. The significance of forest-
ry for both the climate and the Swedish econo-
my makes it an issue that matters to many peo-
ple. Holmen and other industry players have
joined forces to make politicians, authorities
and the general public aware that the forest is
vital with regard to the climate and that active
forestry is the very foundation of an emerging
bioeconomy.

Forestry constantly developing
Under Holmen’s active forest management,
the volume of standing timber is built up over a
period of 70–90 years, with a new growth cycle
beginning after harvest. The most important
silviculture measures come in the years imme-
diately after harvest, when the soil is prepared
and the land is reforested through planting
or sowing with fortified material. The forest
is cleaned and thinned in order to select trees
with the best potential for continuing their
growth. Around 10–30 years before the forest
is harvested, it can be fertilised to further boost
growth. Holmen’s forestry is certified accord-
ing to PEFC™ and FSC® and all the wood is
traceable.
Holmen’s nature conservation strategy
sets out how we work to combine high growth
with preserving biodiversity. We improve our
methods and know-how on a continuous basis
through collaboration with research organisa-
tions and other industry actors. The aim is to
ensure that all naturally occurring species are
able to thrive in Sweden’s forest landscape.

Investing in the future. Holmen invests
around SEK 150 million a year in future
growth through silviculture and fertilisation.
Together, our two nurseries produce 35 million
seedlings each year, with the majority planted
on the Group’s land. At least two new trees are
planted for every tree harvested. With active
improvement measures, the new trees also
grow faster than the old ones.
Our nurseries use organic arginine instead
of traditional nitrate-heavy fertiliser. Arginine
is better at delivering nitrogen to the seedling
than other fertilisers, where the nitrogen leach-
es out more and contaminates the surrounding
watercourses.

In 2018, Holmen received funding from
the Swedish Environmental Protection Agen-
cy’s Klimatklivet initiative in order to replace
the oil-fired boilers that heat the greenhouses

at the nursery in Friggesund with district heat-
ing. This switch, which is scheduled for 2019,
will make the heating entirely fossil-free.

Robust against climate change. Conifers
have been on the planet for millions of years
and are highly adaptable. Seeds for Holmen’s
seedling cultivation are also selected to grow
and thrive in a changing climate. A warmer cli-
mate may, however, impact on the forest in var-
ious ways: growth may increase in certain are-
as while at the same time the periods of ground
frost may become shorter, which makes har-
vesting more difficult.

Strong demand for forest raw
material
An active construction industry and a grow-
ing interest in building in wood have led to
greater demand for logs in recent years. Due to
a strong trend for various types of packaging
material and the recent large-scale investments
in pulp mills, competition for pulpwood has
also become tougher, leading to price rises.

Holmen’s forest
holdings
Holmen’s
Swedish
industries

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

+1%/year

1948

1965

1988

2000

2020

2040

1955

1975

1993

2010

2030

2050

Assessment of tax

Forecast

160

120

HOLMEN ANNUAL REPORT 2018 / FOREST

Holmen’s forests 2018
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

122 million m3 growing
stock, solid over bark

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

hectare and year (on average during the growth period of the forest stand).

Control over the
raw material

The acquisition of Långvind forest holding in autumn 2018 was
a natural step in Holmen’s strategy to increase the amount of
forest we own near our mills. Långvind is a large, contiguous
area of 5 700 hectares productive forest land located 30 km
south of Holmen’s sawmill and paperboard mill in Iggesund.
Proximity to our own production site makes the new acquisition
an excellent addition to Holmen’s holdings in the region.
In 2018, the decision was also taken to establish a
climate-smart and cost-effective transport solution that uses
rail to carry logs from our own forests in northern Sweden to
our manufacturing sites in the south. With this level of control
over the raw material, the strength of being a forest-owning
manufacturing company becomes increasingly clear.

Operating profit/loss and return

Key figures

SEKm
1 200

900

600

300

8.3
1 185

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 (FTE)
Harvesting in own forests, ’000 m3sub

2018

2017

2 633
760

2 571
654

1 185

1 069

357

49
14 830 13 824
363
2 904

365
2 831

* Of which acquisition of forest properties SEK 317 million.

57%

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

Rising prices
Demand for raw material from the forest was high
in 2018, with prices gradually rising. Despite diffi-
cult winter weather and fires over the summer, prof-
it from the forest increased by just over SEK 100
million to SEK 1 185 million. This profit makes up
almost half of the Group’s earnings. In addition, our
own forests provide the basis for the supply of wood
for our own production, which has been increasing-
ly important over the past year amid greater compe-
tition for raw material.

HOLMEN ANNUAL REPORT 2018 / FOREST

Leading
position in
the premium
segment

Holmen is a market leader in the
manufacture of 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 products.

Customer-led product
development creates strong
brands
Holmen markets paperboard under two
brands – Invercote and Incada – which are
produced at our paperboard mills in Iggesund,
Sweden and Workington, UK respectively.
With its high and consistent quality, the paper-
board ensures stable results in the customer’s
production process. In 2018, Invercote and
Incada were named Europe’s two most valua-
ble paperboard brands in market analyst Opti-
com’s regular survey of converters.

Tailored to specific needs. Products are con-
stantly being developed in close collaboration
with customers, in order to meet the ever-grow-
ing demand for custom packaging solutions.
The longstanding relationship with Apple is one
such example. The collaboration began in 2005
and has since 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 and have a deep understand-
ing of customers’ needs and wishes. This ena-
bles 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 facil-
ities 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 products with
unique properties
Both Invercote and Incada are manufactured
using fresh fibre, which brings multiple prod-
uct benefits. Higher strength, better brightness
and a neutral effect on smell and taste in con-
tact with food are just a few of the properties
that add clear value to the end product.

The addition of fresh fibre is necessary to
keep the recovered fibre ecocycle going, since
wood fibre can only be recycled a limited num-
ber of times before it wears out and ends up as
biofuel. The inherent properties of fresh fibre
make it possible to manufacture attractive and
functional packaging solutions that offer an
excellent substitute for environmentally harm-
ful packaging based on fossil raw materials.

Sustainable production. Both of Holmen’s
paperboard mills earned the highest marks for
sustainability in a review that analysis firm
EcoVadis conducted in 2018. This puts both
paperboard mills among the top one per cent
of all companies evaluated by EcoVadis. Both
mills hold chain-of-custody certification and
all the wood raw material comes from sustain-
ably managed forests. The plants are largely
self-sufficient in renewable thermal energy.

Iggesund Mill forms a bio co-location with

Iggesund Sawmill, ensuring that every part of
the tree is put to use on site. Wood chips from
the sawmill are used as raw material for the
paperboard production, while bark and wood
shavings are used as biofuel to produce 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. Two strong trends
in the packaging market are the drive to reduce
impacts on the climate and the drive to avoid
plastic packaging that contributes to pollution
of the oceans. This is leading to the phasing out
of fossil packaging materials such as various
kinds of plastic.
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 mar-
kets. 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 particular growth in markets with an
emerging middle class and rising living stand-
ards, 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

HOLMEN ANNUAL REPORT 2018 / PAPERBOARD

perfect 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 sheet-
ing in Taiwan.

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

European paperboard market 2018

0.5

2.4

e
c
i
r
P

2.4

3.6

Million tonnes

SBB Prestige products for graphical
printing, perfumes, confectionery
and tobacco.
FBB Confectionery, pharmaceuticals,
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 material: Softwood and hardwood pulpwood.

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

Paperboard products
replacing plastic

Replacing plastic with renewable materials is a clear trend,
not least in the packaging industry. Replacing fossil plastic
materials with paperboard cuts our customers’ carbon footprint
while also reducing the amount of plastic that can end up
polluting the natural environment. As companies begin to look
at packaging with more environmental awareness, they are also
realising that it is possible to reduce their environmental impact
in other areas too, such a gift cards.

IKEA and SF Bio are two companies that have opted to

change the material in their gift cards – from plastic to paper-
board from Holmen. The Invercote paperboard card functions
well in the card manufacturers’ processes and shows that it
is perfectly possible to switch a whole product category to a
sustainable alternative. The transition means less plastic waste,
plus 97 per cent lower carbon emissions from the cards.

Operating profit/loss and return

Key figures

SEKm
1 000

750

500

250

689

12.4

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

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

20%

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

2018

2017

5 785
689

5 526
764

471
5 316
1 346
525

375
5 433
1 383
526

Higher raw material
costs
Demand for paperboard progressed well over
the year, but profit fell by SEK 75 million to
SEK 689 million as it was not possible to pass on
rising raw material costs to customers, owing to
increasing competition. Production was established
at a higher level and Holmen advanced its position
in the premium segment for packaging. An ongoing
cost-cutting programme includes reducing the
workforce by 150 people.

HOLMEN ANNUAL REPORT 2018 / PAPERBOARD

Innovative
paper
products
using
fresh fibre

By refining and exploiting the
unique properties of fresh fibre,
Holmen is able to offer sustaina-
ble and resource-efficient paper
products for books, magazines
and advertising. The focus lies on
securing and constantly develop-
ing a profitable business that can
be sustained over time.

Fresh fibre creates sought-after
products
Holmen is an industry leader in the deve l-
opment of new products based entirely
on fresh fibre, using its unique properties to
challenge traditional alternatives. In contrast
to recovered fibre products, fresh fibre pro-
duces paper grades with a naturally high
brightness that lifts text and images, and with
high bulk – paper that is thick but light at the
same time. This means that the customer gets
more paper with the same feel, but without the
higher costs. A lighter paper also leads to lower
distribution costs.

Efficient production units, continued spe-

cialisation and a strong marketing organisa-
tion will see Holmen strengthen its position in
existing and new markets. Customers around
the world include publishers, printing firms
and retailers looking for resource-efficient
paper solutions with a focus on bulk, bright-
ness and overall feel.
We take a long-term approach in work-
ing to meet customer demand and create
profitable segments for our product brands
in three product areas: books, magazines and
advertising. Investments and high utilisation of
capacity allow us to keep production efficient
and flexible in order to meet varied demands.

brand and the introduction of Holmen VIEW
Matt, we are able to offer wood-containing
paper with high whiteness and opacity, plus
practically unbeatable image reproduction.

Book paper. Holmen BOOK is a carbon-
neutral paper with high bulk that helps
customers to achieve cost-efficiencies in
both production and distribution. Publishers
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,
bulky papers create opportunities for retailers
seeking an attractive overall cost profile –
either in the form of pure cost savings for both
paper and distribution, or through the option
of stepping up the format, numbers of pages or
print run, without adding to the cost.

Sustainability at every stage
Our papers are manufactured using wood
fibre from sustainably managed forests and are
produced at two Swedish mills, Braviken and
Hallsta. 100 per cent of the wood raw material
is used in the resource-efficient mills.
Hallsta Paper Mill has almost zero emis-
sions of fossil carbon dioxide. The mill’s energy
solutions include recovering heat from the
wastewater and the paper machines, selling
the bark to heating plants and composting the
sludge to create topsoil.

Braviken Paper Mill and Braviken Sawmill

make an energy-efficient bio co-location. The
paper mill receives raw material in the form of
wood chips from the sawmill, which in turn is
supplied with energy and heat from the mill.
Surplus bark and wood shavings are sold for
the production of renewable energy.

The majority of the products can be
produced at both mills, which ensures highly
reliable deliveries. Favourable locations in
terms of logistics mean short wood transport
distances, and the mills are close to ports with
good capacity and efficient handling.

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
forever. After a limited number of times, the
fibres are exhausted. The ecocycle therefore
needs a constant injection of fresh fibre
from the forest. Environmental and chain-
of-custody certification enables Holmen to
ensure that our products always come from
sustainably managed forests.

Magazine paper. Holmen EPIC, Holmen
UNIQ, Holmen VIEW and Holmen TRND
provide a broad range of cost-effective maga-
zine papers that challenge coated and woodfree
grades. With the new Holmen EPIC product

Successful transition creating
demand
Our successful transition from newsprint
to book and magazine paper has reinforced
Holmen’s competitiveness and generated high

HOLMEN ANNUAL REPORT 2018 / PAPER

demand for our products. Targeted investments
have opened up increased capacity in selected
product areas and we are developing our
position in a challenging market through a
keen focus on employees, processes and unique
product properties.

A changing magazine market. Holmen is
continuing to grow in a magazine market that
is undergoing major change. With publishers
reviewing their costs as circulations and adver-
tising revenues shrink, our resource-efficient
uncoated product alternatives have proven a
great success.

Stable book paper market. The market for
book paper has remained on a positive tra-
jectory in Europe and Holmen BOOK is the
leading wood-containing product for paper-
backs and hardback books. Our strong focus
on quality and service has helped us to steadily
capture market share. Our sales also continued
to grow globally, with the products now estab-
lished in both Asia and Latin America.

Printed advertising for retailers. Direct mail
is still considered a vital communications chan-
nel for driving customers into physical stores.
Since the business model for retailers is based
on broad and high-frequency exposure to the
end user, their needs have primarily been based
on low overall cost (bulk and grammage). We
have continuously developed products that
meet these requirements.

100

Production, %

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.

Product development
with higher whiteness

The newly launched Holmen EPIC and Holmen BOOK Fine,
papers that represent a serious challenge to woodfree
alternatives when it comes to whiteness, are the latest examples
of how we turn fresh fibre into innovative, sustainable and
resource-efficient paper products. Wood-containing paper
has a much better cost profile than the woodfree alternatives
right from the start, and Holmen’s thick but light papers make
it possible to reduce the grammage without losing that all-
important feeling that the paper conveys.

The combination of high bulk and a whiteness and

brightness that are unique for a wood-containing paper make
these products a cost-effective choice with unparalleled image
reproduction – perfect for textbooks, magazines, direct mail
and notebooks.

Operating profit/loss and return

Key figures

2018

2017

SEKm
400

200

-200

-400

14.7

329

-8

-16

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

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

5 571
329
173
2 072
860
1 036

5 408
288
141
2 193
866
1 117

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

Continued product
restructuring
The market situation for paper was good in 2018,
although rising prices were largely offset by high-
er raw material costs. Profit increased by just over
SEK 40 million to SEK 329 million and the return on
capital employed rose to 15 per cent. The product
mix improved, with an increased proportion of book
and magazine paper.

HOLMEN ANNUAL REPORT 2018 / PAPER

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 oth-
er forest owners, ensuring an efficient logis-
tics chain from forest to sawmill. The decision
to establish a rail-based transport solution that
will carry logs from Holmen’s forest holdings
in northern Sweden down to Braviken Saw-
mill strengthens our control over the raw mate-
rial supply.

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.

Efficient, large-scale production
Modern sawmills with a high technological
level and gradually expanding value-add-
ing processing are delivering a stronger prod-
uct range. Investing in optical log sorting has
brought greater precision, efficiency and vol-
umes to Iggesund and Linghem Sawmills. With
customer-centric working methods, Holmen
is building a platform for long-term and prof-
itable customer relations with the capacity to
meet demand in different wood product mar-
kets. Proximity to the raw material combined
with efficient wood purchasing is a key fac-
tor for profitability, while competitiveness is
underpinned by the fact that production is
co-located with the Group’s paperboard and
paper mills. Holmen’s sawmills are strategical-
ly located to benefit from a transport network
that reaches around the globe by rail, road and
not least sea. A large proportion of the prod-
ucts are transported by ship.

Investment in Braviken. In late 2018, the
decision was taken to invest in increased pro-
duction at Braviken Sawmill. Since it opened
in 2011, the sawmill has been through sever-
al stages of augmentation. The next step in the
mill’s development is now being taken with an
investment in dryers and a new trimming saw
for sorting, which will increase capacity by
150 000 m³.

2018 also saw the opening of the wood
treatment plant at Braviken Sawmill, which
now delivers pressure-treated wood direct-
ly to builders’ merchants. This category forms
a vital and steadily growing component of the
product range at Swedish builders’ merchants.

Positive market trend
Holmen manufactures and supplies high-qual-
ity wood products to joinery and construction
industry customers, mainly in Scandinavia, the
UK, the rest of Europe, the Middle East and
North Africa.

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 for several years. Demand for wood
products is currently strong in all major mar-
kets, although a slowdown was noted towards
the end of the year.

Construction market driving development.
For a long time, the rise in the use of wood in
Sweden has largely been attributable to reno-
vation work and extensions. Now demand is
increasingly being driven by the construction
of new homes, which in turn is affected by pop-
ulation growth, urbanisation and the aim to
build sustainable cities. There is great poten-
tial for growth, mainly in high-rise buildings,
and the proportion of housing built in wood
is expected to rise as the capacity for industri-
al building in wood is expanded. New wood
building techniques are also under develop-
ment, which could lead to a further increase
in demand.

Wood
products for
climate-smart
building

Holmen supplies wood products
to the joinery and construction
industry and to builders’ mer-
chants. The business is being
developed by increasing the value
added and making better use of
the wood raw material in combina-
tion with large-scale production.

Building the future in wood
Wood is a strong and versatile material and the
only construction material that is renewable.
Over the lifetime of the trees, they capture car-
bon dioxide, which then remains stored in the
wood products that we manufacture. Build-
ing in wood is therefore significantly better for
the climate than building in concrete and steel.
Manufacturing concrete and steel requires sub-
stantial amounts of energy and generates size-
able emissions of carbon dioxide, in contrast to
products from the forest, which instead deliv-
er carbon storage. In addition, the whole chain
from manufacture to transport is much more
energy-efficient and cost-effective. We thus cre-
ate benefit for the climate on multiple fronts.

The wood treatment plant at
Braviken Sawmill came on
stream in spring 2018.

HOLMEN ANNUAL REPORT 2018 / 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 joinery products.
Raw material: Pine saw logs.

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

Wood offers major
advantages

Several independent studies have shown that the use of wood
in the structure of buildings has major climate benefits com-
pared with other construction materials. A study by Linköping
University presented calculations showing that an apartment
building in wood has 40 per cent lower carbon emissions than
a concrete building. The study took into account raw material
extraction, transport and the production of the construction
material. The researchers also state that if the effect of the
carbon that is stored in wooden buildings is included in the
calculation, the climate benefit of building in wood doubles.

The wood products that Holmen supplied to the construc-

tion sector in 2018 represent the storage of 720 000 tonnes
carbon dioxide, which will remain bound in products with a
lifetime in excess of 50 years. By building in wood more often,
we can significantly reduce emissions from the construction
sector while also building more quickly and cheaply, not to
mention creating more jobs in the rural areas where the forest
raw material is located.

For references, see page 78.

Operating profit/loss and return

Key figures

2018

2017

SEKm
300

200

100

-100

246 27.1

-10

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

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

1 747
246
76
927
261
828

1 562
80
100
862
251
852

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

High return
The wood products market has been strong
for a few years now and prices have risen
significantly. Profit for 2018 increased by just
over SEK 160 million, providing a return on capital
employed of 27 per cent. Direct sales to Swedish
builders’ merchants rose thanks to the new wood
treatment plant at Braviken Sawmill.

HOLMEN ANNUAL REPORT 2018 / WOOD PRODUCTS

Green energy
from water
and wind

Holmen’s production of renewable
hydro and wind power contributes
to a sustainable energy supply
and provides a good revenue
stream over time.

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

Hydro power provides a reliable electricity
supply. Holmen’s energy production is
dominated by the renewable hydro power from
our 21 wholly or partly owned power stations
located on the Umeälven, Faxälven, Gideälven,
Iggesundsån, Ljusnan and Motala Ström
rivers. In contrast to other renewable energy
sources, hydro power is uniquely controllable.
Energy 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 climate impact of
the operation is also marginal, with minimal
emissions.

Another benefit of hydro power is service
life. A hydro power station can deliver energy
for a very long time. The investment required
is relatively small compared with other types
of power and the operating and maintenance
costs are low since the plants are almost entire-
ly automated. Overall, hydro power brings
major benefits to society as part of the move
towards a totally renewable electricity system.

Wind power a supplement. Wind power is
the fastest growing energy type in the EU and
the third largest source of electricity in Sweden.
Land-based wind power is now a mature tech-
nology and electricity generation costs are
among the lowest of all the options, including
generation using fossil fuels. Expansion is
being driven by rapid developments in the
wind power industry and a new generation
of more efficient wind turbines. As a major
landowner, Holmen has great potential to play
its part in the expansion of wind power.

Sweden switching to renewables
As part of its commitment to the UN’s
2030 Agenda for sustainable development,
the Swedish Government has decided to
implement the biggest investment in the
environment and the climate in Swedish
history, setting a target that Sweden’s energy
production will be based 100 per cent on
renewable energy by 2040 and the nation
will be entirely carbon neutral by 2045. As
the owner of hydro power stations and wind
farms, Holmen has a key role to play in this
transition – through our direct provision of
fossil-free energy, but also by making our
knowledge and our extensive land holdings
available to other actors so that they can

establish themselves and grow in the energy
market.
Most of Sweden’s current electricity gene-
ration is based on nuclear and hydro power,
each of which account for around 40 per cent
of total production. With average energy
consumption rising, the population growing
and the planned partial decommissioning of
nuclear capacity, renewable energy production
is set to take on increasing importance in the
future.

Volatile energy market. In 2018, the price
of electricity climbed to much higher levels
than have been seen for many years, averaging
out at SEK 460 per MWh. This was caused by
dry weather, which led to a poor hydrological
balance – low reserves of water and snow
in the Nordic countryside. Restrictions on
nuclear power due to audits, plus rising prices
for emission allowances and imported coal-
based power contributed to the price hike.

Sweden’s electricity production, %

Hydro power
Nuclear power
Wind power
Thermal power

40%
40%
11%
9%

Wind analysis of Holmen’s
land holdings

More effective wind turbines and low operating costs are driving the expansion
of wind power in Sweden. This is also creating the conditions for viable expan-
sion of wind power on Holmen’s land. In 2018, we therefore conducted a survey
and wind analysis of the Group’s land holdings to identify favourable areas for
future wind power installations. The analysis shows that about twenty sites are
judged suitable for wind farms. Holmen already has permits for approximately
900 GWh of wind power in Västerbotten and Västernorrland. An application for
an additional 300 GWh in Västerbotten is under review.

HOLMEN ANNUAL REPORT 2018 / 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

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

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

Owner
Varsvik

Wind farms
Varsvik

*Refers to normal production

Holmen’s
production share
GWh*
83

%
50

Year of
construction
2014

2018

2017

319
181
22
3 052
12

315
135
26
3 115
11

1 145

1 169

Rising profits
Low rainfall and higher prices for emission
allowances contributed to high electricity
prices in Sweden in 2018. Profit rose by almost
SEK 50 million to SEK 181 million thanks to
higher electricity prices and a gradual reduction
in property tax, taking the rate down to the same
level as for other energy types.

Operating profit/loss and return

Key figures

SEKm
500

375

250

125

181

5.8

Operating profit/loss
Return on capital employed

Net sales, SEKm
Operating profit/loss, SEKm
Investments, SEKm
Capital employed, SEKm
Average number of employees (FTE)
Own production of hydro and wind
power, GWh

12%

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

HOLMEN ANNUAL REPORT 2018 / RENEWABLE ENERGY

How we grow a
sustainable future

We are operating in a rapidly
developing and changing world.
This prompted us to conduct an
in-depth stakeholder analysis in
2018, which showed that our great-
est opportunity to influence and
create a sustainable future can be
summarized three areas.

The Holmen Sustainability
Management Group, an offshoot
of Group management, is charged
with validating and quality assuring
work on sustainability with the sup-
port of sustainability experts from all
the business areas.

We contribute
to a better
climate

The forest is a valuable resource that binds
carbon and provides a renewable alternative to
fossil material. Young, growing trees bind more carbon
than old trees whose growth has slowed down. Our goal
is for the growth of our forest stands to increase, provid-
ing higher future harvests and higher carbon absorption.
We plant at least two new trees for every tree harvested,
and because our annual harvest equates to 80 per cent of
the growth, the amount of wood in our forests increases
year on year. The growth of the forest and its value largely
depend on how it is managed. We practise active silvicul-
ture, encouraging biodiversity, to produce healthy forests,
rich in plant and animal species. This ensures that we pre-
serve important natural assets for future generations.

Phasing out fossil fuels and increasing the production
of our own renewable electricity see us reducing the climate
impact of our production. We work actively to cut mate-
rial, energy and water consumption, minimise emissions
and use waste products to produce renewable energy. The
geographical locations of our mills and sawmills mean we
can transport goods by sea and rail, cutting emissions to
air, land and water.

We help our customers in
their sustainable business

The key to profitable, long-term, and sustainable business is our climate-smart
products, which form part of the transition to an economy in which bio-based
raw materials and products replace fossil-based ones. Our customers can be confi-
dent in the knowledge that we protect the forest we manage and that our produc-
tion methods are sustainable. We are transparent about our working methods and
our customers know the origin of our products. They can also have confidence in
our business relationship. Holmen has been here for hundreds of years and has its
sights set on the future. Many of our customer relationships have developed into
close partnerships in which we work together to meet changing needs in an increas-
ingly complex and global world.
Despite our long-term focus, we know that a better tomorrow demands inno-
vative thinking today. This is why we focus on developing smart solutions and a

forward-thinking product offering. At the same time, we work active-
ly with other industry actors to make decision-makers, authorities
and the general public aware of the forest’s importance for the
climate and that sustainable forestry is the very foundation of
the emerging bioeconomy.

We are committed
to our employees
and our local
communities

It takes a healthy workplace to create a sustainable future. We
therefore work actively to attain gender equality and inclusivity,
promote diversity, combat discrimination and prevent accidents.
We want our employees to develop and grow with us, which is why
we focus on skills development through training programmes, take
a positive view of employee initiative and encourage internal career
moves.

Forestry is also of significant regional importance. It creates
employment in rural areas and in many cases enables people to live
and work outside the big cities. Holmen has an important role as
an employer in several locations, and our engagement and partner-
ships help to create thriving local communities, which in turn helps
us to attract and retain competent employees.

The materiality analysis conducted in 2018 included interviews and workshops with
about 50 stakeholders, such as employees, customers, investors, authorities, politicians,
universities and voluntary organisations. A number of sustainability issues were identified as
important to Holmen playing its part in the transition to a sustainable future. These form the
basis of our three focus areas linked to economic, environmental and social sustainability.

HOLMEN ANNUAL REPORT 2018 / A SUSTAINABLE BUSINESS

Circularity – integral to our business

Growing, healthy forests, efficient management of raw materials and circular ecosystems are
vital to our profitability. They are also the cornerstones of a genuinely sustainable business.

We manage the forest
preserving biodiversity

Our products replace fossil-based
products and can be recycled to
produce recovered paper
and energy

Our growing
forests capture
carbon dioxide

We use all the
raw material

Our mills and sawmills are
resource and energy efficient

We produce
renewable energy

We take care of the
whole harvest

Holmen’s two nurseries produce 35 million seedlings
each year, with the majority planted on the Group’s own
land. After 70–90 years, as growth slows and the forest’s
capacity to absorb and store carbon has fallen, it is mature
enough to be harvested. 80 per cent of the growth is
harvested, which means that the amount of wood in our
forests increases every year.

About half of the harvest consists of large logs that

are used to produce construction material. The narrower
part of the tree and wood from thinning represents 45 per
cent of the harvest and is used to manufacture paperboard
and paper. The remainder comprises branches, tops, bark
and sawdust, which are used to produce renewable energy.
We saw as much wood as technically possible from the
trees we harvest. Nothing goes to waste, everything is used.

Circularity means that resources are used, reused and recycled to avoid final waste.
Holmen owns and adds value to the forest by using renewable raw material to
make climate-smart products in a business model that is almost entirely circular.
Holmen’s forest management has chain-of-custody certification, which means
that all the wood can be traced back to its origin in sustainably managed forests.
Holmen manages its forests with as little environmental impact as possible through
long-term, clear silviculture plans. We use the whole harvest in our sawmills and
mills, in which production is largely based on fossil-free electrical and thermal energy.
Since 2005, emissions of fossil carbon from the mills have fallen by 86 per cent and
our own renewable energy production corresponds to almost half of Holmen’s total
electricity consumption. Close collaboration with paperboard and paper recycling
organisations means we take responsibility for the final stage of our value chain.

By-products
become new
resources

Our production plants are among the most
resource-efficient in the world. Over the years,
we have developed methods to effectively
reduce our use of energy, water and chemicals,
and to recover and re-use the waste that arises.
For example, wood waste products from the
sawmill are used to generate electrical and ther-
mal energy in the mills, organic material from
the water treatment process is used to make
natural fertiliser, which is sold on, and steam
from the mills at Iggesund and Braviken is
used in the drying processes at the integrated
sawmills.

Distribution of
by-products and waste, %

0.7

0.3

Division of the stem

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

To energy production,
internally/externally
Utilised or sent for
material recovery
Waste sent to landfill
Hazardous waste

0.7
0.3

HOLMEN ANNUAL REPORT 2018 / A SUSTAINABLE BUSINESS

Active environmental work creates climate benefit

Holmen’s work to contribute to a better climate has three overarching business objectives, which are
presented on page 9. The aims are to increase growth in our forests, reduce the use of fossil fuel at our mills
and increase the proportion of self-generated renewable energy.

INCREASE GROWTH
IN THE FOREST

REDUCE THE USE
OF FOSSIL FUELS

INCREASE THE PROPOR-
TION OF RENEWABLE
ELECTRICAL ENERGY

The volume of standing timber in Holmen’s forests
is increasing by 1 per cent a year. Carbon dioxide
is bound into the increase in volume. Based on
Sweden’s official reports of greenhouse gases
for forest and land in 1990–2018, uptake for
Holmen’s forests and forest land is estimated at
approximately 1.3 million tonnes per year. Over
the foreseeable period, annual growth in Holmen’s
forests is expected to exceed harvests, and an in-
creasing amount of carbon dioxide will be bound in
while harvesting of renewable forest raw material
will increase. The measures to encourage growth
that are estimated to have the greatest impact
are increasing the use of improved seedlings and
seeds in regeneration and limiting grazing damage.

Extensive investments in bio-based energy pro-
duction at the paperboard mills, and the adjusted
energy strategy at the other mills have resulted in
a reduction in fossil fuel use of 86 per cent since
2005. Emissions of fossil carbon dioxide from
the mills have thus also fallen considerably, and
amounted to 75 000 tonnes in 2018.

Annual emissions of fossil carbon dioxide

from forest machinery, manufacture of input
goods and transport of raw materials and prod-
ucts are estimated at just over 340 000 tonnes.
Together with emissions from production facilities,
this represents the negative climate impact of
Holmen’s operations.

Holmen produces renewable electricity in the
form of hydro power and wind power, as well as
bio-based electricity in our mills. The goal is to
increase company-produced renewable electrical
energy as a proportion of total electricity use by
Holmen. By 2020 the target is to attain produc-
tion equivalent to 50 per cent of Holmen’s total
electricity usage. This proportion reached 45
per cent in 2018.

Technical advances and a new generation of
more efficient wind turbines create opportunities
for the future establishment of wind power on
Holmen’s extensive land holdings and thus higher
production of renewable electricity.

A carbon-positive business

With the climate targets we have set, we see Holmen’s operations contribut-
ing major climate benefits by reducing the amount of carbon dioxide in the
atmosphere by just over 2.9 million tonnes while also contributing renewable
forest raw material, climate-smart products and green energy. Greater use
and development of the products of today and tomorrow based on forest raw
material mean the positive climate effects will be even greater in the future.

Holmen’s production of wood products in 2018 is equivalent to
720 000 tonnes of carbon dioxide stored in products with a lifetime
of more than 50 years. Wood products also contribute a substitution
effect when they replace climate-negative construction materials. The
substitution effect for 2018 is estimated to amount to approximately
1 340 000 tonnes of carbon dioxide.

Key figures climate impact 2018

Emissions of fossil carbon dioxide (tonnes)
Nurseries and forestry
Input goods
Production facilities
Transport of raw materials and products

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

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

-26 100
-68 900
-75 000
-248 000
-418 000

1 300 000
720 000
1 340 000
3 360 000

2 942 000

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. The substitution factor used in the calculations comes from a study completed
in 2010. Work is in progress in several industries to reduce the climate impact of construction
material manufacture and use. An updated version of the previous study is expected to be
published in 2019. For references, see page 78.

HOLMEN ANNUAL REPORT 2018 / ENVIRONMENT

Environmental
permits 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

2018
2017

2000

2002
2014
2010
2003

1) Port activity at Skärnäs Terminal, alongside Iggesund

Mill, is included in the environmental permit. In addition,
operations subject to notification requirements take place
at the production unit in Strömsbruk.

The CDP CLIMATE PROGRAM is the name of an international
federation that in 2018 represented over 650 institutional
investors with assets totalling almost SEK 800 billion. Using
information from more than 7 000 listed companies, CDP has
built up the world’s largest database of climate information. This
information is made available to support strategic business and
investment decisions.

Holmen has reported to the CDP Climate Program since

2007 and also to the CDP Forest Program since 2013. Surveys
over the years have shown that Holmen has good management
in place and a strategy to reduce the negative impacts of
climate change. In the evaluation of forest management, Holmen
has been placed in the group for good leadership that ensures
sustainable use of the forest’s resources for several years now.
Strategic choices and investments for the future have

boosted Holmen’s sustainability profile and our capacity
to tackle risks and opportunities in the field of climate and
sustainability. For more information about our work on
sustainability, see holmen.com.

2018

Holmen’s environmental
responsibility
For Holmen, environmental and energy
concerns play a natural role in planning
production and investments. Operations
are characterised by resource-efficient use
of renewable raw material and energy, and
by protecting the environment, applying the
precautionary principle. Energy, chemicals
and fibre are recovered as far as possible,
in order to minimise the environmental
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. 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 and 77.
Holmen’s environmental work is char-
acterised by constant improvement measures
within the framework of certified environmen-
tal and energy management systems (see page
77), which ensure compliance with legislation
and requirements set by authorities. Respon-
sibility for the management systems rests with
the respective business area, as does environ-
mental responsibility.

Permits
At the end of 2018 Holmen was running pro-
duction operations that require environmen-
tal permits at seven facilities. The permits spec-
ify 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 facil-
ities’ turnover amounted to 81 per cent of the
Group’s net sales in 2018.

The EU’s Industrial Emissions Directive
(IED) from 2013 requires that pulp, paper and
paperboard mills comply with tougher emis-
sions requirements by October 2018. The envi-
ronmental status of Holmen’s Swedish mills is
good and the mills meet the new criteria. The
mill in Workington has been granted a dero-
gation whereby the mill is to have invested in
measures to ensure that the emission require-
ments for water are met by 2021.

Iggesund Mill gained a new environmental per-
mit in October 2018 with associated condi-
tions regarding increased production of pulp
and paperboard.

At Braviken Paper Mill the production of
bright products will gradually be stepped up. In
2018 the Land and Environment Court granted
a temporary amendment to emissions require-
ments in 2018–2020. The mill will invest in an
additional treatment stage in the process.

In 2018 Holmen gained a permit to build
approximately 400 GWh of wind power pro-
duction on Holmen land in Västerbotten. An
application for a permit to build an addition-
al approximately 300 GWh of wind power in
Västerbotten is under examination.

The Government adopted a decision on

new environmental legislation mainly for
hydro power in 2018. This legislation entered
into force on 1 January 2019. The legislation
means that hydro power operators will need
to apply for a review under the Swedish Envi-
ronmental Code before the end of 2039. It was
also stated that the opportunities in EU law to
set less far-reaching requirements that favour
socially beneficial operations are to be exploit-
ed to the full.

In 2018 Holmen conducted studies in the
watercourses in which we have wholly owned
hydro power stations with the aim of produc-
ing factual data on ecological status. The sur-
veys show that the aquatic environment is bet-
ter than the classification of the watercourses
by the authorities would suggest.

Exceedances and complaints
The environmental manager within each
operation 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.

32 (29) industrial incidents were reported
by the mills to the supervisory authorities dur-
ing 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.

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. This
is a result of investments in bio-based energy
production and energy savings at the mills.
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 received such green
certificates in 2018.

Discontinued operations
In consultation with the environmental author-
ities, studies are being conducted at contam-
inated discontinued industrial sites where
Holmen has operated in the past. In 2018,
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 two landfill
sites, one in Kvillsfors and one at Hults Bruk.
Remediation of land and buildings at the for-
mer industrial site of a surface treatment plant
in Iggesund took place in 2017. In 2018 the
concluding phase of remediation work began,
in which polluted groundwater will undergo a
treatment process.

HOLMEN ANNUAL REPORT 2018 / ENVIRONMENT

Employees with courage,
commitment and responsibility

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

Employees are the key to successful, long-
term sustainable business. Holmen places
great emphasis on ensuring their safety,
delegating responsibility and stimulating
a desire for personal growth and skills
develop ment founded on the company’s core
values. The Group works systematically to
provide employees with opportunities to
influence and develop operations through
ongoing feedback and dialogue between
manager and employee.
HR is run both across the whole Group
and at business area level. The Senior Vice
President Human Resources is responsible
for coordinating the work.

Core values
Holmen’s core values of Courage, Commit-
ment and Responsibility are an important
part of our corporate culture. The core val-
ues guide us in our work and form a natural
element of our processes and tools, includ-
ing in appraisal talks, as a complement to the
management by objectives model, and as a
basis for the leadership programme. The val-
ues are also used in employee surveys and in
our processes to develop, retain and attract
new talent.

Health and safety in focus
Health and safety is a priority for Holmen.
The aim of our work in this respect is to
achieve a pleasant, accident-free workplace
for our employees and the contractors who
work for us. Safety is consistently high on the
agenda and all new employees are trained in
health and safety. Work on health and safe-
ty is constantly monitored at management
level. Holmen carries out systematic Group-
wide health and safety work in line with
OSHAS 18000 (see page 77) and all our pro-
duction units are certified, apart from Ling-
hem Sawmill, which was acquired in 2017.
Work on certification began that same year.
The Group’s focus areas in 2018 were safe
behaviours, communication, shared rules
and health.

In 2018 sickness absence was 4.1
per cent, which is on a par with previous
years. Long-term sickness absence (over 60
days) is 1.6 (2.0) per cent.

Equality
With respect for human rights, Holmen
works for a workplace climate that is founded
in the equal value of all people. All employees
must have the same rights, obligations and
opportunities irrespective of their sex, trans-
gender identity or expression, ethnicity, politi-
cal opinion, union membership, religion or
other belief, disability, sexual orientation,
health status, age or family responsibilities.
This is set out in Holmen’s Code of Conduct.
A few events linked to the Code were report-
ed during the year. All have been addressed
in line with Holmen’s internal processes.
Steps have been taken and no further action
is required.
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 to improve our
work on equality and actively combat dis-
crimination.

The forest industry has long been a
male-dominated sector and the proportion
of women remains relatively low. How ever,
we are working to increase the proportion
of women at all levels of the company. In
2018 women made up 20.3 (19.3) per cent
of Holmen’s employees. Women account-
ed for 40 (25) per cent of new employees and
20 (21) per cent of managers.

Recruitment and development
To maintain competitiveness over time,
attracting and retaining the right employees
is of the utmost importance. We ensure that
Holmen continues to be a business with a
focus on innovation and development and
we work actively to identify current and
future skills needs. Internally we invest in
employee development at all levels, employee
skills training programmes, leadership devel-
opment and development programmes for
specialists engaged in change projects. Ques-
tions such as gender equality, product devel-
opment and sustainability are important areas
in improving our attractiveness to new talent.

A ZERO VISION
FOR ACCIDENTS

The number of accidents per million hours
worked fell from 5.1 in 2017 to 4.9 in 2018. The
dominant causes of accidents are slips, trips, pinch
accidents, cuts and lacerations. In the past few
years we have successfully managed to reduce the
number of accidents and we are taking a focused,
long-term approach to maintaining and improving
on this positive trend. The long-term vision is zero
accidents. Some units have been at this level for
more than a year.

Industrial accidents
with more than 8 hours of absence
per million hours worked

Average number of employees (FTE)
per business area, %

0.4

Forest
Paperboard
Paper
Wood Products
Renewable Energy
Group-wide

Total: 2 955
365
1 346
860
261
12
112

HOLMEN ANNUAL REPORT 2018 / EMPLOYEES

Thriving rural communities

Forestry has major regional importance and creates employment in rural areas.
Silviculture has enabled many people 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. This means that Holmen contributes significant tax revenue in
Sweden and in the other countries in which we operate. This sees us fulfilling
a responsibility to society and we pay our taxes in line with the legislation
and rules in force in all the countries in which we operate. We also choose
to report this contribution to society on page 77.

Ongoing dialogue with local communities and stakeholder organisations,

and partnerships with higher education institutions and universities see us
working for sustainable development. One example of such collaboration
is the ‘Grow your income’ project, which seeks to increase the supply of
biomass for the biofuel boiler at the mill in Workington by encouraging local
farmers to grow energy crops. This project has generated a dialogue with
a whole new stakeholder group, strengthening the mill’s local engagement.
Besides creating a new source of income for local farmers, planting energy
crops has had several positive side effects as the energy crops prevent
flooding and increase local biodiversity.

Sustainably managed forests are not only important from an environmental

and economic perspective, they are also important for people’s wellbeing and
a place for recreation, hunting and fishing. Holmen pays particular attention to
forests that are valuable in terms of aesthetics and experiences, and forests
that many people visit for outdoor pursuits, relaxation and exercise.

HOLMEN ANNUAL REPORT 2018 / EMPLOYEES

Global contributions and local challenges

Holmen is an export company and part of Sweden’s basic industries. With high carbon absorption
and exports of climate-smart products, our contribution to sustainable development is global.
The challenges and the direct impact we have on the environment and people are largely local.

In 2015 the UN member states adopted the
2030 Agenda, a universal agenda that encom-
passes 17 sustainable development goals
(SDGs). These goals cover social, economic
and environmental sustainability.
We only have one planet and it is only by
sustainable use of the Earth’s resources that
humanity can survive. This is made clear by
Johan Rockström and Pavan Sukhdev from the
Stockholm Resilience Centre in their ‘wedding
cake’ model, produced to show the importance
of protecting the world’s resources to secure
food supplies. The lowest level, the base, repre-
sents goals linked to environmental sustaina-
bility. The centre contains the social goals, with
the economic ones higher up. The planet sets
the boundaries and these are non-negotiable.
Even if Holmen’s operations are more
geared towards sustainable consumption than
sustainable food supplies, the principle of the

importance of sustainable management of the
world’s resources remains the same. Sustaina-
ble bio-based operations and innovation with-
in the planet’s limits are crucial to combat cli-
mate change and thus fundamental to attaining
the social and economic goals.

Holmen and the SDGs
The basis of Holmen’s operations is active
forestry where the growing forest absorbs car-
bon and provides industry with renewable raw
materials. The forest raw material is turned
into products that bind carbon and can replace
fossil- based plastic packaging and climate-
negative construction material. We protect bio-
diversity and we work actively to cut emissions
to air and water. Although we have come a
long way in our work on sustainability, chal-
lenges still remain. Water consumption, trans-
port and the right to manage our forests are

key issues that Holmen, like other forest indus-
try businesses, is actively monitoring and
working on.
Holmen’s mission is to create a sustainable
future. We do this is by contributing to several
of the UN’s Sustainable Development Goals.
With carbon-positive operations, climate-
smart products and a long-term environmental
approach, our foremost contributions are
linked to SDGs 13, 14 and 15. These are goals
that are fundamental to all life on Earth. But
our work cannot stand alone. For the climate
and environmental benefits to be realised, our
partnerships and relationships with customers
and suppliers are central. For this reason, SDG
17, which covers implementation and partner-
ship, is an important aspect of our work for a
sustainable future.

“At Holmen we are proud to be part of a
sustainable bioeconomy and that our business
creates benefits locally and globally. All the
UN’s sustainable development goals must be
attained to achieve sustainable development and
Holmen’s work goes hand in hand with several of
them. Our greatest contribution is on the SDGs
relating to climate and the environment, which
are also vital to a sustainable future.”

Elin Swedlund, Sustainability Manager, Holmen

Illustration based on a design by Azote Images (Jerker
Lokrantz) for the Stockholm Resilience Centre.

“ 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 principles and sets out the progress made. Work on the ten principles also helps to attain the
UN Sustainable Development Goals.

HOLMEN ANNUAL REPORT 2018 / UN SUSTAINABLE DEVELOPMENT GOALS

SDG: 13
CLIMATE ACTION

Growth in Holmen’s forests exceeds har-
vest, which means that large quantities
of carbon are stored in our forests every
year. Holmen’s wood products that are
used as joinery and construction timber
also contribute a substitution effect
when used to replace climate-negative
construction materials. Our investments
in higher production of wood products
create greater opportunities for sustain-
able construction. We contribute towards
a sustainable energy supply by produc-
ing renewable energy in the form of
hydro power and wind power.

SDG: 14
LIFE BELOW WATER

The environmental situation in the water
outside Holmen’s mills has improved con-
siderably over the past 40 years thanks
to new process technology and technical
water treatment measures. Holmen en-
gages in industry-wide environmental
research to investigate steps that lead to
lasting environmental improvements.
Replacing products made from plastic
with paperboard products means we also
reduce dependence on fossil raw mate-
rials, while reducing the amount of plastic
waste that can end up in the sea.

SDG: 15 LIFE ON LAND

Holmen’s aim is to ensure that all natural-
ly occurring species are able to thrive in
the forest landscape. We set aside or car-
ry out natural nature conservation meas-
ures on just over 20 per cent of our for-
est land. We also restore the environ-
ment at sites of discontinued operations,
which has resulted in reinstating environ-
ments that previously suffered negative
impacts. Our products based on fresh fi-
bre provide the recovered paper industry
with a necessary injection of raw materi-
als in the form of fresh fibre from sustain-
ably managed forests in which biodiversi-
ty is safeguarded.

SDG: 17
PARTNERSHIPS
FOR THE GOALS

The climate and sustainability chal-
lenges faced by our planet cannot be
tackled by an individual company like
Holmen alone. This is why we work
with our suppliers and customers to
meet the ambitions of the SDGs. In
many cases the environmental benefit
first manifests itself in our customers’
processes or products, making great-
er cooperation to exchange knowledge
and ideas central to attaining the sus-
tainable development goals.

HOLMEN ANNUAL REPORT 2018 / UN SUSTAINABLE DEVELOPMENT GOALS

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 gov-
ernance report complies with the
rules and instructions stipulated in
the Swedish Code of Corporate
Governance.

Shareholders
Holmen had 33 573 shareholders at year-end
2018. Private individuals with Swedish citizen-
ship accounted for the largest category of own-
ers with 31 586 owners.

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 Lundbergföretagen AB (corporate ID num-
ber 556056-8817), whose registered office is
in Stockholm, and Holmen. The Kempe Foun-
dations constituted the second-largest owner
and their holdings of Holmen shares amounted

to 17.0 per cent of votes and 7.0 per cent of
capital at the same date. No other individual
shareholder 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 2018 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.

The 2018 AGM approved an increase
in the number of shares in the company by
means of a share split. This resulted in each
share, regardless of series, being divided into
two shares (a 2:1 split) of the same series. The
record date for the share split was 2 May 2018,
in accordance with the AGM’s decision.

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
earlier than six and no later than four weeks
before the meeting. The notice contains: a)
information 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 proposals. 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
Extraordinary 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 28 September 2018
that the 2019 AGM would take place in Stock-
holm on 11 April 2019.

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 con-
trol the most votes at 31 August each year. The
composition of the nomination committee for
the 2018 and 2019 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 appli-
cable, 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 putting for-
ward proposed Board members, which means
the composition of the Board should reflect the
company’s business operations, phase of devel-
opment and other circumstances, and should
be diverse and wide-ranging in terms of the
expertise, experience and background of the
members elected by general meetings. An even
gender distribution is sought. The nomination
committee has observed this policy in its pro-
posals to the Board. Further information about
the work of the nomination committee will be
provided at the 2019 AGM.

For the 2019 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, Louise Lindh, Ulf Lundahl,
Henriette Zeuchner, Henrik Sjölund and the
new election of Alice Kempe. Carl Kempe did
not stand for re-election.

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 sev-
en 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,

AGM 2018
The 2018 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 Ramsay Brufer, Alecta and Martin
Wallin, Lannebo funds.

It was not possible to follow or participate in the meeting from
other locations using communication technology. No changes in this
regard are planned for the 2019 AGM.

Board meetings
The Board held eight meetings in 2018, four of which were in con-
nection with the company’s publication of its quarterly reports. One
meeting was dedicated to reviews of strategic issues and the Group
budget for 2019. One meeting was held in connection with the
Board’s visit to Iggesund Mill and Iggesund Sawmill, with discussion
being dedicated in particular to development of the paperboard mar-
ket. Two meetings were held in connection with the company’s AGM.
In addition, the Board paid particular attention to strategic, financial
and accounting issues, the monitoring of business operations, the ac-
quisition of a large forest holding in Hälsingland and the decision to
expand Braviken Sawmill, as well as other major investment matters.
On one occasion the company’s auditors reported directly to the
Board, providing a presentation about their audit of the accounts and
internal control.

HOLMEN ANNUAL REPORT 2018 / CORPORATE GOVERNANCE REPORT

NOMINATION COMMITTEE

SHAREHOLDERS

GENERAL MEETING OF SHAREHOLDERS

BOARD OF DIRECTORS

CEO

GROUP MANAGEMENT

AUDITORS

FIVE GROUP STAFFS

FIVE BUSINESS AREAS

or restrictions on how long members can serve
on the Board.

The 2018 AGM re-elected Fredrik
Lundberg, Carl Bennet, Lars G Josefsson,
Lars Josefsson, Carl Kempe, Louise Lindh,
Ulf Lundahl, Henriette Zeuchner and Henrik
Sjölund to the Board. Fredrik Lundberg was
re-elected Chairman. At the statutory first
meeting of the new Board in 2018, Carl Kempe
was elected Deputy Chairman and Lars
Ericson, Senior Vice President Legal Affairs,
was appointed Secretary of the Board.
Over and above the nine members elected
by the AGM, the local labour organisations
have a statutory right to appoint three
members 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, one
of whose aims is to ensure that the Board
obtains all requisite information. Each year
the Board decides on written working proce-
dures and issues written instructions. The lat-

ter relate to the division of responsibilities
between the Board and the CEO and the infor-
mation that the Board is to receive continual-
ly regarding financial developments and other
key events. Employees of the company partici-
pate in Board meetings to submit reports.

In order to develop the work of the Board,

an annual evaluation is undertaken involv-
ing each member answering a questionnaire
containing relevant questions concerning
the Board’s work and having the opportuni-
ty to make suggestions on how to enhance the
Board’s work. Their responses were presented
and discussed at a Board meeting. The results
of the 2018 evaluation will form the basis for
planning the Board’s work for the coming year.
The chairman 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 committee pre-
pared matters pertaining to the remuneration
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 2018 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 2019 AGM. These guidelines and informa-
tion about remuneration are presented in Note
4 on page 50.

The 2018 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. The programme expires in May 2019
and the Board proposes that the 2019 AGM
approve a new three-year programme. Further
information about the existing share savings
programme is provided in Note 4.

Board members as of the 2018 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

Board

Audit
committee

Remuneration
committee

(SEK ’000)

Attendance at meetings:

Member
Member
Member
Member
Member
Member
Chairman
Member
-

Chairman
-
Member
-
-
-
-
-
-

8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8

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

2/2
-
2/2
-
-
-
-
-
-

710
355
355
355
355
355
355
355
-

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
company 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 2018 / 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 and guideline documents.

Group management
The Board has delegated operational responsi-
bility for management of the company and the
Group to the CEO. The Board annually decides
on instructions covering the distribution of
tasks between the Board and the CEO.
Holmen’s Group management comprises
the company’s CEO, the heads of four of the
five business areas, the heads of the five Group
staffs and the head of international affairs.
Information about the CEO and other mem-
bers of Group management is provided on
page 72.
Group management met on nine occasions
in 2018. The meetings dealt with matters such
as earnings performance and reports before
and after Board meetings, strategic issues,
budgets, investments, internal control, work
environment, sustainability issues and the
impact of the new General Data Protection
Regulation (GDPR). Meetings were also dedi-
cated to reviews of market conditions, eco-
nomic developments, possible consequences of
Brexit and other external factors affecting the
business, as well as discussion about govern-
ance of the Group and the tools, such as the
management-by-objectives model and Group-
wide policies, used in such governance.

Audit
KPMG, which has been Holmen’s auditor
since 1995, was re-elected by the 2018 AGM
as auditor for a period of one year. Author-
ised Public Accountant Joakim Thilsted was

appointed as the principal auditor. Under
applicable regulations KPMG can be re-elect-
ed 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 examina-
tion and audit of the final annual accounts and
the annual report, including the sustainability
report, take place in January–February.
Holmen’s audit committee consists of
external Board members and is chaired by Ulf
Lundahl. The audit committee met five times
in 2018. 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 satisfac-
tory supervision of accounting, management
of funds and other aspects of the company’s
financial circumstances. The auditors report-
ed to the audit committee at three meetings in
2018.

In addition to the audit assignment,
Holmen has consulted KPMG on matters per-
taining to taxation, accounting and for vari-
ous investigations. The remuneration paid to
KPMG for 2018 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. Use of a simple and
well-implemented management-by-objectives
tool for continuous follow-up ensures that the
entire organisation is applying appropriate pri-
orities to attain the objectives established.

The business areas guide the operating
businesses towards these targets using pro-
cesses for purchasing, production and sales,
and supported by HR, financial management,
research and development, IT, environment
and communication processes.
Operations are followed up through reg-
ular reporting of financial performance and
KPIs, along with additional qualitative analy-
sis. During the year, sustainability data was
integrated into the financial reporting process.

Code of Conduct. Holmen’s Code of Con-
duct is in line with the UN Global Compact
and provides guidance on day-to-day opera-
tions and clarifies what expectations are made
of employees. Holmen’s operations should
be characterised by responsible behaviour
towards both internal and external stakehold-
ers. The Supplier Code of Conduct complies
with the UN Global Compact and covers the
areas of anti-corruption, human rights, health
and safety and the environment.
With respect for human rights, Holmen
works for a workplace climate that is founded
in the equal value of all people. All Holmen’s
employees must have the same rights, obliga-
tions and opportunities irrespective of their
sex, transgender identity or expression, ethnici-
ty, religion or other belief, disability, sexual ori-
entation and age. Holmen is subject to the UK
Modern Slavery Act and a report relating to
this is available at holmen.com.

Composition of the nomination committee

Name
Mats Guldbrand
Fredrik Lundberg
Alice Kempe
Torbjörn Widmark
Hans Hedström

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

Independent of the:
Company

Before AGM:
2019
2018
x (chairman) x (chairman) Yes
Yes
x
x
Yes
x
-
Yes
-
x
Yes
x
x

Largest shareholder (in terms of votes)
No
No
Yes
Yes
Yes

* At 31 August 2018, L E Lundbergföretagen controlled 61.6 per cent of the votes, the Kempe Foundations controlled 17.0 per cent and Carnegie funds (Sweden) controlled 1.5 per cent.

HOLMEN ANNUAL REPORT 2018 / CORPORATE GOVERNANCE REPORT

Policies. Holmen uses policies, guidelines and
Group instructions to clarify how employees
should act within key, critical and Group-wide
areas. The Group’s 11 policies cover matters
such as expectations of employee participation
and leadership, specify the scope of manage-
ment by objectives, talent management, inter-
action with trade union organisations, equal-
ity and employment terms and conditions. In
addition to this, a good work environment
is covered in terms of health and safety, anti-
corruption and competition issues, and how
good business practice is maintained in rela-
tion to external contacts on different markets.
Employees in departments at risk of encoun-
tering unauthorised behaviour receive special
training on business ethics. The policies speci-
fy how raw materials should be used efficient-
ly, how pollution should be prevented and that
we should aspire to make continuous improve-
ments. Financial risk is managed centrally and
should be characterised by a low level of risk.
The policies should also ensure that the com-
pany’s assets are managed in accordance with
Group rules, minimise risks of errors in finan-
cial reporting and prevent irregularities. The
Group’s purchasing should contribute to long-
term profitability. The sustainable sale of raw
materials, products and services should be
ensured in both the short and long term. Com-
munication must be accurate, transparent and
easily accessible and comply with legal require-
ments and commercial confidentiality.

Compliance. Holmen’s Code of Conduct,
policies and values are part of every employee’s
induction programme, and are reiterated by
managers at employee meetings. Compliance
is monitored partly through employee surveys
and appraisal talks, pay surveys, safety statis-
tics and audits of the organisational 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.

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

Purpose and structure. The purpose of inter-
nal control is to ensure that Holmen achieves
its financial reporting objectives (see box), en-
sure the company’s assets are managed accord-
ing to Group rules and to prevent irregulari-
ties. Group Finance coordinates and monitors
the internal control process concerning finan-
cial reporting.

This work adheres to guidelines issued by

the Committee of Sponsoring Organizations of

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

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 dis-
tribution 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
respective process and whether or not they are
met.

Information and communication. Holmen’s
financial information provision, both exter-
nal and internal, adheres to a communication
policy established by the CEO. The provision
of financial information for Holmen’s share-
holders and other stakeholders must be accu-
rate, comprehensive, transparent and consist-
ent, 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.

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.

Holmen’s MSCI
ESG ‘AAA’ rating
ESG stands for environmental, social
and governance. MSCI ESG ratings
are designed to help investors under-
stand ESG risks and opportunities and
incorporate these factors into their
portfolio structure and management
process. Holmen’s MSCI ESG rating
for 2018 remains unchanged at the
highest level, ‘AAA’.

See page 78 regarding use of the MSCI logo.

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 audit com-
mittee and Board during the year.

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

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

HOLMEN ANNUAL REPORT 2018 / 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 profit-
ability.

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

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

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

The harvest of logs from our own forests essentially corresponds to
consumption at our own sawmills. Pulpwood from our own forests
and wood chips from our own sawmills supply just under 50 per
cent of consumption at our paperboard and paper mills. 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 genera-
tion 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 being
reduced and used chemicals are recycled at mills.

Damage prevention measures, regular maintenance and continual
upgrades can minimise the risk of damage to facilities. Training
of employees promotes participation, knowledge and awareness
about these risks and how they can be countered. Holmen insures
its facilities at replacement value against damage to property and
interruption of business. The insurance excess varies from one
facility to another but the maximum is SEK 30 million for a single
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.

The product mix has developed in line
with the strategy for all business areas,
which for Paper, for example, means
increased sales of book and magazine
paper, while sales of newsprint paper
have decreased.

Costs for input goods increased signifi-
cantly in 2018. The market for pulp was
difficult, with high import prices. In order
to reduce dependence on expensive
imported wood, in 2019 Holmen will
use more fibre from its own forests by
means of a new transport solution from
its northern forest holdings. The price of
net electricity consumption is 80 per cent
hedged for 2019–2020 and 65 per cent
hedged for 2021. The nominal amount for
financial hedging is SEK 505 million.

No event causing significant damage
occurred in 2018.

In 2018 there were an unusually large
number of forest fires in Sweden and on
Holmen’s land. Holmen’s costs for dealing
with the fire damage and replanting the
areas affected are estimated at SEK 30
million.

HOLMEN ANNUAL REPORT 2018 / RISK MANAGEMENT

Customer credits. The risk of the
Group’s customers being unable to ful-
fil their payment obligations constitutes
a credit risk.

The risk that the Group’s customers will not fulfil their
payment obligations is limited by means of creditworthi-
ness 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.

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

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 author-
ities and environmental risk analyses, as well as through
the use of certified environmental and energy management
systems and chain-of-custody certification.

Health and safety. Incidents and ac-
cidents at the workplace have an effect
on human life and health. This could
also lead to production disruptions and
increased costs. Work involving over-
head cranes and vehicles constitutes
the most significant areas of risk.

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.

Talent management. Skilled and
motivated employees are key in being
able to conduct long-term business
operations with good profitability. Retire-
ments increase the need to attract new
personnel, which can be challenging.

Business ethics. Both nationally and
internationally, 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 produc-
tion disruptions. Suppliers that do not
meet Holmen’s requirements can also
have a negative effect on operations.

IT systems. Sales and purchasing
require efficient IT support in order to
manage and plan production. Disrup-
tions in IT support and unauthorised
access to information can have signifi-
cant negative effects on the business.

Regulatory risks. 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 legislation regarding
water-based operations, could have
an impact on the Group’s competi-
tiveness.

Based on Group-wide employer branding efforts, we mar-
ket Holmen as an employer using digital channels and by
meeting people in person. Communication is applied both
generally and directly at the primary target groups.

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 man-
agement 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
Conduct is included in all new contracts. It contains require-
ments on sustainable development, including by respecting
internationally recognised principles on anti-corruption
measures, human rights, health and safety and the environ-
ment. 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 environ-
ment, business ethics and sustainable purchasing.

Operating disruptions and unauthorised access are pre-
vented 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 con-
tinually developing these protective measures to address
changes in the risk profile.

Holmen participates in national and international industry
organisations whose purpose is to handle the monitoring of
social trends, advocacy and put forward Holmen’s position
and view on certain political issues. 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 meetings with decision-makers. On issues
regarding the right to manage the forest and water-based
operations, Holmen has participated actively in work with
business organisations and in responses to consultation on
relevant subjects.

At 31 December 2018 the Group’s trade receivables
totalled SEK 1 929 million, of which 43 per cent
(37) were insured against credit losses. During the
year, credit losses on trade receivables had a SEK
-1 million (-5) impact on earnings.
Sales to the five largest customers accounted for
14 per cent of the Group’s total sales in 2018.

The mills reported 32 (29) incidents to the supervi-
sory authorities in 2018. The nonconformities were
not of a significant nature in terms of environmental
impact or impact on profits.

The figure in 2018 was 4.9 (5.1) industrial acci-
dents per 1 million hours worked. See also page 24.
The most common accidents were slips, trips, pinch
accidents, cuts and lacerations.

Our efforts have resulted in slightly more appli-
cants for those positions that we are looking to fill.
Voluntary employee turnover is stable and surveys
of new employees show that new employees have
job satisfaction and that young people joining from
university remain with the company, which is a plus.

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 2018.

No cases regarding breaches of the Supplier Code
of Conduct were reported in 2018. By the end of
2018, suppliers accounting for over 85 per cent (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 inci-
dents in 2018.

In 2018, forestry’s access to raw materials became
a point of debate in Sweden. Holmen is monitoring
developments closely and has contributed actively to
increasing knowledge about how Swedish forestry
makes a positive contribution to the UN’s climate
targets. In late 2018 the EU also made progress on
a new directive on single-use plastics. Holmen takes
a positive view of the directive as it could mean
opportunities for the forest industry’s renewable
products. The UK’s exit from the EU could affect the
markets on which Holmen sells its products. Holmen
also has production operations in the UK. We are fol-
lowing developments in the negotiations closely, but
the outcome and consequences are hard to predict.

HOLMEN ANNUAL REPORT 2018 / RISK MANAGEMENT

Financial risks

Risk

Risk management

Comment

Currency. The Group’s earnings are af-
fected 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 for-
eign exchange contracts. Net flows in euros, US dollars and sterling
for the coming four months are always hedged. These normally cor-
respond to trade receivables and outstanding orders. The Board can
decide to hedge flows for a longer period if this is deemed suitable in
light of the products’ profitability, competitiveness and the currency
situation. Currency exposure arising when investments are paid for
in foreign currency is distinguished from other transaction exposure.
Normally, 90–100 per cent of the currency exposure associated with
major investments is hedged.

Translation exposure. Hedging exposure that arises when
subsidiaries’ assets and liabilities are translated into Swedish
kronor (known as equity hedging) is assessed on a case-by-case
basis and is arranged based on the value of net assets upon
consolidation. The Group’s non-current assets are mainly Swedish,
with the exception of the paperboard mill in the UK, which accounts
for 5 per cent of the assets. The hedges take the form of foreign
currency loans or forward foreign exchange contracts. Exposure
that arises when the earnings of foreign subsidiaries are translated
into Swedish kronor is not normally hedged.

For just over the next two years,
90 per cent of expected flows in EUR/
SEK are hedged at an average of 9.97.
For other currencies, 4 months of flows
are hedged.

Hedging in pounds sterling amounted to
GBP 5 million at year-end. Net assets in
other currencies are 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 cost.

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 2018 was 1.1 per cent. The table
below shows the Group’s fixed interest
period by currency. The Group has fixed
SEK 600 million until 2020 at a fixed
interest rate of 3 per cent.

SEKm

SEK
EUR
GBP
Other items

<1 year

Year 1–3

Year 3–5 >5 years

-2 283
4
79
54
-2 146

-600
0
0
0
-600

0
0
0
0
0

Pension
provisions

-31
-7
-23
0
-61

Total

-2 914
-3
56
54
-2 807

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

At 31 December 2018, the Group had
outstanding derivative contracts with a
nominal amount of SEK 15 billion and a
net fair value of SEK +162 million.

HOLMEN ANNUAL REPORT 2018 / RISK MANAGEMENT

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

Holmen’s strategy specifies that its financial position should be
strong in order to secure room for manoeuvre when making
long-term commercial decisions. The target 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 budget and
profit forecasts that are regularly updated.

SEKm
4 000

3 000

2 000

1 000

2019

2020

>2020

Financial liabilities

Credit facility

Net financial debt decreased in the year
by SEK 129 million and amounted at 31
December 2018 to SEK 2 807 million, SEK
61 million of which comprised pension pro-
visions. The Group has a contracted credit
facility of EUR 400 million (SEK 4 108
million) with a syndicate of nine banks, of
which SEK 291 million expires in 2020 and
the remainder in 2021. The credit facility
remained unutilised at year-end. It is avail-
able for use provided that the Group’s debt/
equity ratio is below 1.25. At year-end, the
Group’s debt/equity ratio was 0.12.

Sensitivity analysis

Operational risks
A 1 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. The adopted change is calculated
based on five years’ historical volatility
for each instrument, which is deemed a
reasonable change going forward. Excluding
hedging, a 5 per cent change in the
krona would affect earnings before tax by
SEK 425 million a year.

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

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

Price
56
56
17
13
3

Deliveries
29
18
6
8
3

Input goods
Wood*
Electricity*
Chemicals
Other variable costs
Delivery costs
Employees
Other fixed costs

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

30
13
14
6
14
23
13

* Taking account of harvesting of company forests and generation of own electricity, net earnings sensitivity for the
Group was SEK 18 million for wood and SEK 10 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 price hedging
Interest rate hedging

Change
+/-5%
+/-5%
+/-5%
+/-5%
+/-5%
+/-25%
+/- 0.5% unit

Change
+/-5%
+/-5%
+/-5%
+/-25%
+/- 0.5% unit

*Estimated effect for 2019 including hedging

SEKm
179
28
57
43
51
35
5

SEKm
493
5
3
244
4

HOLMEN ANNUAL REPORT 2018 / RISK MANAGEMENT

Shareholder
information

Holmen’s two series of shares
are listed on Nasdaq Stockholm,
Large Cap. Over the past five
years, Holmen’s total share-
holder return (dividend paid
and share price performance)
has been 78 per cent, com-
pared with 28 per cent for OMX
Stockholm 30. For Holmen, this
corresponds to an annual return
of 12 per cent.

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. At the end of 2018 Holmen A was
trading at SEK 178 (220) and Holmen B at
SEK 175 (218), corresponding to a market
capitalisation of SEK 29.5 billion (36.6). The
highest closing price for Holmen’s class B
shares was SEK 240, on 24 April. The lowest
closing price was SEK 175, on 28 December.
The daily average number of class B shares
traded was 242 000, which corresponds to
a value of SEK 64 million. The daily average
number of class A shares traded was 1 700.
Just over 70 per cent of trading took place on
Nasdaq Stockholm. The Holmen shares have
also been traded on other trading platforms,
such as BATS Europe, Chi-X and Turquoise.

Dividend
Decisions on dividends are based on an apprais-
al of the Group’s profitability, future investment
plans and financial position. The Board propos-
es that the AGM to be held on 11 April 2019
approve a dividend of SEK 6.75 (6.5) per share,
corresponding to 4.8 per cent of equity.

Share structure
During the year a share split was carried out,
resulting in each share, regardless of series,
being divided into two shares (a 2:1 split) of the
same series. In this annual report, figures regard-
ing share prices, dividend and earnings per share
have been restated on the basis of the new num-
ber of shares. The new number of shares fol-
lowing the share split is 167 992 324, with
45 246 468 class A shares and 122 745 856
class B shares. The company also has 1 520 000
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.

Share savings programme
The 2016 AGM decided on a targeted share
savings programme for around 40 key indi-
viduals in the Holmen Group. The purpose of
the programme was to strengthen the interests
between the owners and the management of
the company and to create long-term commit-
ment to Holmen. The number of shares allocat-
ed under the programme depends on the return
on capital employed for 2016–2018. The pro-
gramme expires in May 2019 and approxi-
mately 75 000 shares will then be transferred
from the company to participants. The compa-
ny’s commitment to allocate shares to partici-
pants will be fulfilled through the use of previ-
ously repurchased shares.

The Board proposes that the 2019 AGM

approve a new similar share savings pro-
gramme.

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 comple-
ment to dividend payments to adjust the capi-
tal structure when circumstances are deemed
favourable. The 2018 AGM renewed the
Board’s authorisation to both take decisions
on acquiring as many class B shares so that the
company’s holding of its own shares does not
exceed 10 per cent of all shares and to sell the
company’s holding of its own shares as liquid
assets for acquisitions. No shares were repur-
chased during the year. As previously, the com-
pany holds 0.9 per cent of all shares. The Board
proposes that the 2019 AGM provide the same
authorisation.

Earnings per share, 2018

SEK 13.5

Proposed dividend per share, 2018

SEK 6.75

Share price performance,
Holmen class B and OMX Stockholm

Total shareholder return for Holmen B and OMX Stockholm,
incl. reinvested dividend but excl. tax.

No. of shares (thousands)

Index

9 000

300

6 000

200

3 000

100

Source: Macrobond

Holmen B

OMX Stockholm 30 (OMXS30)

Holmen B
Total number of class B shares traded (thousands)

OMX Stockholm 30 (OMXS30)

HOLMEN ANNUAL REPORT 2018 / SHAREHOLDER INFORMATION

SEK

300

200

100

Communication with shareholders
The website holmen.com contains informa-
tion about the company and financial informa-
tion in the form of reports, presentations and
financial data, performance of Holmen shares,
which brokerage firms monitor Holmen and
contact information.

Ownership structure
Holmen had a total of 33 573 shareholders
at year-end 2018. In terms of numbers,
Swedish private individuals account for the
largest owner category with 31 586 share-
holders. Shareholders registered in Sweden
own 81 per cent (82) 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, respectively. The largest
owner at the turn of 2018/2019, with 61.6
per cent of votes and 32.9 per cent of capi-
tal, was L E Lundbergföretagen AB.

Shareholder categories
Share of capital, %

Swedish institutions
Swedish equity funds
Swedish private individuals
Foreign shareholders

52%
19%
11%
18%

Annual return at 31 Dec 2018, %

1 year

3 years

5 years

10 years

Holmen B
OMX Stockholm 30

-17
-7

14
3

12
5

10
7

Holmen’s total shareholder return has averaged 10 per cent a year over the past 10 years,
which is 3 percentage points better than the OMX Stockholm 30.

Share structure

Equities

Votes

No. of shares

No. of votes

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

10
1

45 246 468
124 265 856
169 512 324

452 464 680
124 265 856
576 730 536

-1 520 000

167 992 324

575 210 536

Quotient
value

25
25

SEKm

1 131
3 107
4 238

Changes in share capital
2000–2018
2001 Cancellation of shares
repurchased
2004 Conversion and subscription
2018 share split

Change in
no. of shares

Total no. of
shares

Change in
share capital,
SEKm

Total share
capital,
SEKm

79 972 451
-8 885 827
4 783 711
84 756 162
84 756 162 169 512 324

-444
239
-

3 999
4 238
4 238

Shareholder structure at
31 December 2018

% of capital % of votes

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

Other
Total*
*Of which non-Swedish shareholders.

32.9
7.0
5.4
3.4
2.9
2.3
2.2
1.7
1.6
1.3
60.7

39.3
100.0
17.7

61.6
17.0
1.6
1.0
0.8
0.7
0.7
0.5
0.5
0.4
84.7

15.3
100.0
5.5

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

No. of shares

1–1 000
1 001–100 000
100 001–
Total

Data per share (adjusted for the 2:1 share split in 2018)

2018

2017

2016

2015

2014

2013

Diluted earnings per share, SEK1)
Dividend, SEK
Dividend as % of:
Equity
Closing listed price
Profit/loss for the year
Return, equity, %1)
Return, capital employed, %6)
Equity per share, SEK
Closing listed price, B, SEK
Average listed price for year, B, SEK
Highest listed price for year, B, SEK
Lowest listed price for year, B, SEK
Total closing market capitalisation, SEK ’000 m
P/E ratio2)
EV/Profit before depreciation/amortisation3) 6)
Closing beta value (48 months), B, at year-end4)
Number of shareholders at year-end

13.5
6.755)

9.9
6.5

8.5
6

3.3
5.5

5.4
5

4.3
4.5

5
4
50
10
10
140
175
213
240
175
29.5
13
11
0.74
33 573

5
3
65
8
9
131
218
186
218
157
36.6
22
14
0.74
30 903

5
4
71
7
9
127
164
141
163
114
27.4
19
11
0.72
28 159

4
4
158
3
6
124
131
132
153
110
22.3
39
10
0.68
28 176

4
4
93
4
6
125
133
118
136
105
22.3
25
10
0.71
27 788

4
4
106
3
5
124
117
99
118
87
19.7
28
11
0.67
27 692

Shareholders

Share of
capital, %

29 532
3 964
77
33 573

4
11
85
100

2012

11.1
4.5

4
5
41
9
7
124
96
93
102
85
16.2
9
9
0.67
28 440

2011

23.6
4

3
4
17
23
9
118
99
101
126
78
16.6
4
7
0.67
28 899

2010

2009

4.2
3.5

6.0
3.5

3
3
83
4
6
101
111
98
113
87
18.5
26
10
0.67
28 339

4
4
58
6
7
98
92
90
103
68
15.4
15
7
0.71
30 425

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 OMX 30 Stockholm over a period of 48 months. 5) Board proposal. 6) Excl. items affecting comparability.

HOLMEN ANNUAL REPORT 2018 / 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

*2017 figures have been adjusted because of the share split (2:1) in 2018.

Note
2
3

4
5, 20
9, 10
9
11
12

6
6

2018
16 055
1 284
439
-9 027
-2 306
-3 443
-1 012
-25
425
-9
2 382
13
-38
2 356
-89
2 268

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

2 268

1 668

13.5
13.5

168.0
168.0

9.9
9.9

168.0
168.0

Operating profit was SEK 2 382 million (2 166). The increase in profit was due to higher earnings
from Forest and Wood Products.

Net financial items for 2018 totalled SEK -25 million (-53). Average net debt was lower than in
the previous year.

Tax recognised totalled SEK -89 million (-445) in 2018. Tax recognised was affected positively
in an amount of SEK 315 million as a result of lower future corporation tax in Sweden reducing
the deferred tax liability.

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

2018

2 268

2017

1 668

-52
10
-42

115
222
-8
55
-8
-23
-69
284
242
2 510

121
-24
97

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

2 510

1 786

HOLMEN ANNUAL REPORT 2018 / FINANCIAL STATEMENTSGROUP

Balance sheet at 31 December, SEKm

Note

2018

2017

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

13
17
18
7

13
19
7
18
19

68
9 077
18 400
1 740
1
468
1
29 755

3 628
1 929
328
959
35
278
-
7 157
36 912

4 238
281
70
18 865
23 453

1 033
61
483
5 839
7 416

2 494
2 232
13
197
1 108
6 044
13 459
36 912

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

HOLMEN ANNUAL REPORT 2018 / FINANCIAL STATEMENTSGROUP

Changes in equity, SEKm

Opening equity balance 1 Jan 2017
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 2017
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 2018

Share capital Other contributed capital
281
-

4 238
-

Reserves

Translation
reserve
-95
-

Hedge reserve
-141
-

Retained earnings
incl. profit/loss
for the year
16 960
1 668

Total equity
21 243
1 668

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

-
-
-
-
-
-
-
0
-
-
4 238

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

-
-
-
-
-
-
-
0
-
-
281

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

-
-
55
-8
-
2
49
49
-
-
-48

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

-
329
-
-
-23
-71
235
235
-
-
118

121
-
-
-
-
-24
97
1 765
-1 008
13
17 731
2 268

-52
-
-
-
-
10
-42
2 226
-1 092
0
18 865

121
35
36
-49
-4
-21
119
1 786
-1 008
13
22 035
2 268

-52
329
55
-8
-23
-60
242
2 510
-1 092
0
23 453

HOLMEN ANNUAL REPORT 2018 / 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
Increase in non-current financial receivables
Repayment of non-current financial receivables
Acquisition of shares and participating interests
Disposal of shares and participating interests
Cash flow from investing activities

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

Cash flow for the year
Cash and cash equivalents at beginning of year
Exchange gains/losses on cash and cash equivalents
Cash and cash equivalents at end of year

Note

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

**Refers to repayments of loans that were long-term loans when raised.

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

2018
-2 936

2 286
-1 005
-1 092
-47
-13
-2 807

GROUP

2018

2017

2 356

1 012
25
-425
-39
-33
-396
2 500

-705
230
262
2 286

-972
98
-15
-150
38
-456
24
-3
0
-1 436

1 000
-300
-539
0
-1 092
-930

-81
356
3
278

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

2017
-3 945

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

HOLMEN ANNUAL REPORT 2018 / FINANCIAL STATEMENTSPARENT COMPANY

Income statement, SEKm

Note

2018

2017

Cash flow statement, SEKm Note

2018

2017

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

Profit/loss from investments in Group companies
Profit/loss from investments in associates
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

2
3

4
5, 20
9, 10
9

6, 23
6,12
6
6

14 384
628
391
-7 636
-1 921
-4 367
-47
-25
1 407

467
-20
32
-45
1 841

-1 373
467

47
514

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

497
-
18
-99
1 257

787
2 044

-197
1 847

Statement of comprehensive
income, SEKm

Note

2018

2017

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

Revaluation
Transferred from equity to the income
statement
Transferred from equity to non-current assets
Tax attributable to other comprehensive income
Total items that will be reclassified to
profit/loss for the year
Total comprehensive income

514

1 847

230
0
-70

255
769

-71

109
-1
-8

29
1 876

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

The item ‘Interest expense and similar costs’ in the income statement includes the result of SEK
-8 million (-49) from hedging equity in foreign subsidiaries.

Operating activities
Profit/loss after financial items
Adjustments for non-cash items
Depreciation and amortisation
according to plan
Impairment losses
Change in provisions
Other*

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

Cash flow from changes in working capital
Change in inventories
Change in operating receivables
Change in operating liabilities
Cash flow from operating activities

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

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

Cash flow for the year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

1 841

1 257

47
25
-17
-113
-297

25
-
-109
855
-131

1 485

1 897

-597
140
207
1 235

-3
-67
9
-456
24
100
-395

1 000
-300
-502
2 384
-1 092
191
-2 584
-904

-64
294
230

74
97
260
2 329

-1
-32
11
-
-
0
-22

-
-1 400
-479
241
-1 008
530
0
-2 116

190
104
294

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

**Refers to repayments of loans that were long-term loans when raised.

HOLMEN ANNUAL REPORT 2018 / FINANCIAL STATEMENTSPARENT COMPANY

Note

2018

2017

Balance sheet at
31 December, SEKm

Note

2018

2017

9
10

12, 23
13

14
15
7
13
13

25
2 974

10 787
7 419
21 205

2 926
2 424
327
35
230
5 942
27 147

8
2 930

10 702
3 018
16 658

2 322
2 210
29
32
294
4 888
21 545

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
Operating liabilities
Total liabilities
Total equity and liabilities

17
18
18
7

13
13
19

4 238
1 577
100

4 966
514
11 395

4 238
1 577
100

3 956
1 847
11 718

1 012

2 032

20
45
708
635
1 407

7 817
2 494
3 022
13 333
27 147

Restricted equity

Non-restricted equity

Share
capital
4 238

Statutory
reserve
1 577

Revaluation
reserve
100

Hedge
reserve
-123

Retained
earnings
3 847

Profit/loss
for the year
1 197

-
-

-
-
-
-
-
-
4 238

-
-

-
-
0
0
-
-
4 238

-
-

-
-
-
-
-
-
1 577

-
-

-
-
0
0
-
-
1 577

-
-

-
-
-
-
-
-
100

-
-

-
-
0
0
-
-
100

-
-

38
-8
29
29
-
-
-93

-
-

326
-70
255
255
-
-
162

1 197
-

-
-
0
1 197
-1 008
13
4 049

1 847
-

-
-
0
1 847
-1 092
0
4 805

-1 197
1 847

-
-
0
649
-
-
1 847

-1 847
514

-
-
0
-1 333
-
-
514

12
45
725
610
1 392

880
2 775
2 749
6 403
21 545

Total
equity
10 836

-
1 847

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

-
514

326
-70
255
769
-1 092
0
11 395

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 1 Jan 2017

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

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 2018

HOLMEN ANNUAL REPORT 2018 / 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 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 2018
IFRS 15 Revenue from Contracts with Customers is a new revenue standard with associated disclo-
sure requirements which has replaced IAS 18, IAS 11 and IFRIC 13. This standard came into force
on 1 January 2018. Under IFRS 15 income items are recognised when the customer gains control
over the goods, which for Holmen has not resulted in any change compared with previous policies.
Consequently, this has not resulted in any impact from the transition to IFRS 15 at 1 January 2018.
Other regulatory changes relate to accounting of discounts and the right of return, which have only
had a marginal impact on Holmen’s accounting.

IFRS 9 Financial Instruments addresses the accounting of financial instruments and has replaced
IAS 39. This standard encompasses classification, valuation and impairment of financial instru-
ments and hedge accounting. This standard came into force on 1 January 2018. The material
changes that have affected Holmen compared with previous regulations are that 1) the new catego-
ry of financial instruments, 2) impairment of financial assets is based on a model based on expect-
ed future losses, 3) hedge accounting rules have changed, with requirements for hedging relation-
ships to be the same as the Group’s risk management targets. The introduction of IFRS 9 has not
had any effect on Holmen’s recognised values. See Note 13 for further information.

New and amended accounting policies not yet applied
IFRS 16 Leases is replacing the previous IAS 17 Leases and the related interpretations IFRIC 4,
SIC-15 and SIC-27 from 1 January 2019. This standard requires assets and liabilities attributable
to all leases, with some exceptions, to be recognised in the balance sheet. The leasing cost allo-
cated by depreciation, amortisation and interest expense is recognised in the income statement.
Holmen will use the simplified forward-looking method, which involves an asset and liability being
set at the same value in connection with the transition. An asset and liability will be recognised for
an amount of SEK 205 million at 1 January 2019. Under the new regulations, in 2019 depreciation
and amortisation are estimated to increase by approximately SEK 80 million, interest expense by
around SEK 5 million, while other external costs are expected to decrease by approximately SEK 85
million. Profit before tax will be largely unchanged. The change will have some effect on key indica-
tors such as net debt, capital employed and profit before depreciation/amortisation. Agreements
for Holmen that are affected by the new regulations mainly relate to office rent, leased vehicles and
vessels.

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.

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

HOLMEN ANNUAL REPORT 2018 / NOTESConsolidation 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 en-
tails the parent company indirectly acquiring the subsidiary’s assets and assuming the liabilities of
the subsidiary, valued at fair value. The difference between the cost of the shares and the fair value
of the acquired identifiable net assets is treated as goodwill. The subsidiary companies’ income
and expenses, and their assets and liabilities, are stated in the consolidated accounts as of the date
when the Group gains control (acquisition date) until such time as the Group no longer has control.
Intra-Group receivables and liabilities, transactions between companies in the Group and related
unrealised gains are eliminated in their entirety.

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

Jointly owned companies/joint ventures. In accounting, joint ventures are those companies for
which the Group, through cooperation agreements with one or more parties, has joint control
whereby the Group has rights to the net assets instead of direct rights to assets and commitments
in liabilities. Holdings in joint ventures are consolidated in the consolidated accounts using the
equity method.

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, respective-
ly, is stated in the consolidated income statement as ‘Share of profits of associates and joint ven-
tures’. Dividends received from an associate or joint venture reduce the book value of the invest-
ment. 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 func-
tional currency, 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 approximation of the exchange rates prevailing at the date of each transaction. Dif-
ferences arising during the currency translation of foreign operations and the related effects of
hedging net investments are recognised in other comprehensive income and are accumulated in a
separate component of equity called the translation reserve. In the disposal of a foreign operation,
the accumulated translation differences attributable to the business are realised, less any currency
hedging, in the consolidated income statement.

Companies operating on behalf of the parent company
The parent company’s business is largely conducted through companies operating on its behalf:
Holmen Paper AB, Iggesund Paperboard AB, Holmen Timber AB, Holmen Skog AB and Holmen
Energi AB.

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

Income
The Group’s sales mostly relate to goods sold to customers, which is specified in the tables in Note 2.
The services provided are limited and essentially relate to silviculture services. Holmen acts al-
most exclusively as principal and the sales transactions are based on agreements. For Holmen, the
vast majority of contracts are separate undertakings and comprise one undertaking per contract.

NOTE 1

Holmen’s guarantees in connection with sales should not be regarded as separable and are there-
fore recognised in accordance with IAS37.

The transaction price is the price of the goods or service. Variable consideration mainly occurs in
the form of rights of return, or volume or cash discounts. All returns relating to defective goods are
recognised as they arise. Volume discounts give customers a discounted price provided that a cer-
tain amount of goods are purchased over a period. A cash discount entitles customers to a lower
price if payment is made by a certain date. Discounts are recognised as a reduction in net sales.

The income item is recognised when Holmen fulfils its commitment by transferring control of the
pledged goods and, where applicable, services to the customer. The date of transfer of control, and
the transfer of risk, is critical to when an income item is recognised. The transfer of risk differs de-
pending on the shipping terms applied. The sale of energy differs from other sales as supply takes
place in conjunction with generation, when it is also recognised as revenue.

Payment terms vary from market to market and Holmen usually follows applicable practice on the
respective market. See Note 1 Accounting Policies and Note 15 Operating Receivables for manage-
ment of credit losses.

Other operating income
Income from activities not forming part of the company’s main business is stated as other operat-
ing 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 estimated fair value.

State grants
State grants are recognised in the balance sheet as accrued income when it is reasonably cer-
tain 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.

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 dis-
tributed 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 at-
tributable 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 sub-
stantial period of time to get ready for its intended use and that is relevant for the Group in connec-
tion 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, us-
ing 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. 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 2018 / NOTESNOTE 1

Financial instruments
Financial instruments are measured and recognised according to IAS 9.

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.

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.

Classification and measurement of financial instruments
Financial instruments are classified and measured based on the company’s business model and
the nature of contractual cash flows. See Note 13 for the company’s classifications of financial in-
struments.

Financial assets - are measured initially at fair value less any transaction costs. Normally, the as-
sets are measured on a current basis at amortised cost using the effective interest method. In
those cases where funds issued fall short of the repayment amount, the difference is allocated over
the duration of the loan using the effective interest method. Derivatives are recognised on an on-
going basis at fair value. Changes in the value of derivatives that are not hedged are recognised in
profit/loss.

Financial liabilities - are measured initially at the value of funds received after deduction of any
transaction costs. Normally, the liabilities are measured on a current basis at amortised cost us-
ing 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.
Derivatives are recognised on an ongoing basis at fair value. Changes in the value of derivatives
that are not hedged are recognised in profit/loss.

Impairment of financial assets - For financial assets for which there is an indication that the entire
book value cannot be recovered, an individual assessment of the respective instrument is made.
Missed payments from counterparties usually constitute such an indication. Any impairment is re-
cognised based on an individual estimate. For financial instruments for which there are no indica-
tions of low credit quality, a provision is made for credit losses based on historical outcomes.

Hedge accounting - All derivatives, such as forward foreign exchange contracts, electricity deriva-
tives and interest rate swaps, are measured at fair value and recognised in the balance sheet.
Essentially all derivatives are held for hedging purposes. The effective portion of changes in value
from cash flow hedges is recognised in other comprehensive income and accumulated in equity
until such time as the hedged item influences the income statement, when the accumulated chan-
ges 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. Interest rate swaps are used as a cash flow hedge for interest rates.
Changes in the value of hedges relating to net investments in foreign businesses are recognised
in other comprehensive income for the Group. Accumulated changes in value are recognised as a
component in the Group’s equity until the business is disposed of, at which point the accumulated
changes in value are recognised in the income statement. In the parent company, changes in
value are recognised in the income statement, as hedge accounting is not applied. Holmen’s cash
flow hedges mainly relate to the hedging of sales in foreign currency, future interest payments,
the purchase of electricity and purchases in foreign currency in conjunction with investments.
Hedging instruments comprise forward foreign exchange contracts, forward electricity contracts
and interest rate swaps. The hedged items comprise forecasts of future sales, interest payments,
electricity purchases and capital expenditures. The hedge ratio is set on an ongoing basis by com-
paring hedged amounts with actual forecasts. For hedging of net investments in foreign operations,
the book value of the net investment is a hedged item and the hedge ratio is set by comparing the
hedged amounts with the net investment. Any inefficiency is based on an estimate of the hedge
ratio. The Group’s risk management of financial instruments is described on pages 34–35.

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 intan-
gible assets are amortised over periods of between 5 and 20 years, except for goodwill. Any good-
will 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 good-
will. The Group does not currently recognise any goodwill. Non-current intangible assets in the par-
ent 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

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 capital-
ised only if it is estimated to generate financial benefits for the company. The key factor determining
whether or not additional expenditure is capitalised is if it relates to the replacement of identified com-
ponents or parts thereof, in which case the expenditure is capitalised. The cost is also capitalised in
cases where a new component is created. Any undepreciated book values for replaced components 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 condi-
tion and based on normal terms, and it is highly likely that a sale will take place. Such assets are
recognised 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. De-
preciation 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

Administrative and warehouse buildings, residential properties

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

Other machinery

Forest roads

Equipment

10–40

10–33

10–20

4–10

If there is any indication that the book value is too high, an analysis is made in which the recover-
able 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 cir-
cumstances 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 depreciation,
if there had been no impairment.

Borrowing costs attributable to the purchase or construction of qualifying assets are to be capi-
talised 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, leases 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 leases are classified as operating leases. On 1 January 2019 IFRS16
Leases comes into force, which means that assets and liabilities attributable to all leases, with
some exceptions, are recognised in the balance sheet. The leasing cost allocated by depreciation,
amortisation and interest expense is recognised in the income statement.

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.

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

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

HOLMEN ANNUAL REPORT 2018 / NOTESInventories
Inventories are valued at the lower of cost and production cost after deduction for necessary obso-
lescence, or net realisable value. The cost of inventories is calculated by using the First in, First out
method (FIFO). The net realisable value is the estimated selling price in operating activities after
deduction of the estimated costs of completion and affecting the sale. The cost of finished prod-
ucts manufactured by the company comprises direct production costs and a reasonable share of
indirect costs.

Emission allowances received are initially recognised at market price when allotted among 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 produc-
tion, 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 ac-
tuarial 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 ac-
count 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
(discount rate). Other components are recognised in operating profit/loss. The revaluation effects
consist of actuarial gains and losses and the difference between the actual return on plan assets
and the amount included in net interest. Revaluation effects are recognised in other comprehen-
sive income.

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

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

NOTE 1

Estimates are based on the value of the shares at the allocation date, which is defined as the pe-
riod 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 dur-
ing this period was used as the basis for the valuation of the shares at the allocation date. The vest-
ing 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 contamina-
tion arises or is discovered, it is likely that a payment obligation will arise, and the amount can be
estimated reliably.

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 2018 / NOTESNOTE 2

Note 2. Operating segment reporting

2018

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

Acquisition of non-current assets
Net sales by market
Scandinavia
Rest of Europe
Asia
Rest of the world
Total

Forest

Paperboard

Paper

Wood
Products

Renewable
Energy

Group-wide
and other

Eliminations

Total Group

2 633
3 311
251
-5 404
-31
-
425
-
1 185

1 185

8
20 313
-1 520
-3 963
14 830

357

2 598
35
-
-
2 633

5 785
-
770
-5 430
-507
-25
-
-
595

689

12
7 324
-934
-1 074
5 316

471

137
4 108
1 114
427
5 785

5 571
-
184
-5 090
-336
-
-
-
329

329

15
3 235
-735
-428
2 072

173

449
4 410
537
175
5 571

1 747
-
305
-1 716
-92
-
-
1
246

246

27
1 176
-197
-52
927

624
644
218
261
1 747

319
-
28
-132
-24
-
-
-10
181

181

6
3 500
-114
-334
3 052

319
-
-
-
319

-
-
219
-350
-22
-
-
-
-154

-154

-
1 045
-995
13
64

-
-
-
-
-

-
-3 311
-473
3 784
-
-
-
-
-

-
-461
461
-
-

-
-
-
-
-

16 055
-
1 284
-14 337
-1 012
-25
425
-9
2 382

2 476

10
36 132
-4 033
-5 838
26 261

1 140

4 127
9 198
1 868
863
16 055

*Items affecting comparability refer to restructuring costs of SEK -94 million in the Paperboard business area.

Forest

Paperboard

Paper

Wood
Products

Renewable
Energy

Group-wide
and other

Eliminations

Total Group

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

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

2 564
6
-
-
2 571

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

14
14
7 174
-832
-909
5 433

375

133
4 136
967
290
5 526

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

5
12
3 210
-696
-320
2 193

141

560
4 129
564
155
5 408

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

5
9
1 080
-169
-49
862

100

562
566
205
228
1 562

315
-
16
-161
-24
-
-11
135

43
4
3 464
-91
-258
3 115

315
-
-
-
315

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

-
-
549
-1 143
139
-455

-
751

751

-
-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

4 135
9 589
1 736
673
16 133

2017

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

Acquisition of non-current assets
Net sales by market
Scandinavia
Rest of Europe
Asia
Rest of the world
Total

HOLMEN ANNUAL REPORT 2018 / NOTESNOTES 2–3

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 million m3sub. The Renewable Energy
business area is responsible for the Group’s hydro power and wind power assets. In a normal year
generation amounts to just over 1 TWh of electricity. The business areas are also responsible for
the Group’s supply of wood and electricity in Sweden.

The Paperboard business area produces paperboard for consumer packaging for the premium seg-
ment at one Swedish and one UK mill. The Paper business area produces paper for books, maga-
zines and advertising 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 2018, the Group produced 0.5 million tonnes of paper-
board, 1.1 million tonnes of paper and 0.9 million m3 of wood products.

These business areas are responsible for managing the operating assets and liabilities, which to-
gether with the net amount of deferred tax assets and tax liabilities constitutes their capital em-
ployed. 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 li-
abilities 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. Dur-
ing 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.

Non-current assets
per country
Sweden
UK
Other
Total

Net sales by market
Scandinavia
Rest of Europe
Asia
Rest of the world
Total

Group

Parent company

2018
27 674
1 604
6
29 284

2017
27 041
1 701
6
28 748

2018
13 786
-
-
13 786

2017
13 639
-
-
13 639

Group

Parent company

2018
4 127
9 198
1 868
863
16 055

2017
4 142
9 582
1 736
673
16 133

2018
4 103
7 763
1 713
805
14 384

2017
4 114
7 947
1 608
675
14 345

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

Net sales by product area
Consumer paperboard
Pulp
Book and magazine paper
Newsprint
Wood products, pine
Wood products, spruce
Wood
Energy
Other
Total

Group

Parent company

2018
5 607
179
5 053
517
989
758
2 633
319
0
16 055

2017
5 347
164
4 787
1 344
871
685
2 571
315
49
16 133

2018
3 496
329
4 959
517
989
758
2 598
319
419
14 384

2017
3 527
279
4 725
1 344
875
685
2 565
315
30
14 345

Sales of consumer paperboard and pulp are made within the Paperboard business area, while book
and magazine paper and newsprint are attributable to the Paper business area. Spruce and pine
products are sold within the Wood Products business area. Wood is sold by the Forest business
area and energy by the Renewable Energy business area.

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

Parent company

2018
335
479
41
28
39
63
300
1 284

2017
360
405
21
22
47
67
214
1 136

2018
174
64
40
9
37
63
241
628

2017
231
37
21
9
31
67
169
565

Of the sales of by-products in the Group, SEK 41 million (101) relates to rejects from production,
SEK 130 million (123) to sawdust, bark, chips etc., and SEK 164 million (137) 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 479 million (405).

The Group has been allotted emission allowances that have been used partly within its own
production. The surplus resulted in a gain of SEK 41 million (21).

HOLMEN ANNUAL REPORT 2018 / 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

2018
1 609
638

2017
1 579
617

2018
1 297
584

2017
1 275
561

Group

Parent company

AGM’s guidelines for determining salaries and other
remuneration for senior management
The 2018 AGM decided on the following guidelines for determining the salaries and other
remunera tion of the CEO and other senior management, namely the heads of the business areas
and heads of Group staffs who report directly to the CEO. The guidelines apply to agreements
entered into after the AGM’s resolution.

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

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

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

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

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

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

Participation in the programme required the relevant employees to have invested in Holmen shares
(known as ‘savings shares’) during the period 27 April to 20 May 2016. For each savings share
invested, half a matching share will be assigned after the end of the vesting period. In addition,
a number of performance shares may be assigned to each participant. These are linked to the
Group’s return on capital employed. The allocation of the number of performance shares may vary,
depending on the employee’s position within the Group, up to a maximum of 3–6 shares per 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 en-
tire 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 30 million. Costs corresponding to
SEK 9 million (13) have been recognised for 2018.

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, how-
ever, does not receive any Board fee. For 2018, fees to the Board amounted to SEK 3 195 000
(3 060 000). The chairman received a fee of SEK 710 000 (680 000), and each of the other seven
(seven) members received SEK 355 000 (340 000).

Senior management
Salary and other benefits for the CEO in 2018 amounted to SEK 9 052 744 (8 566 098). The total
pension cost for the CEO, calculated in accordance with IAS 19, amounted to SEK 4 992 483
(4 985 519). Recognised wages and salaries for the share savings programme for the CEO
amounted to SEK 1 581 019 (1 676 738). No variable remuneration was paid.

In 2018, 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 and the head of international
affairs from October 2018 who report directly to the CEO, totalled SEK 22 211 926 (22 829 993).
The total pension cost for this group, calculated in accordance with IAS 19, amounted to
SEK 10 160 508 (10 201 247) in 2018. Recognised wages and salaries for the share savings
programme for this group amounted to SEK 2 188 461 (2 320 957). 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 seven people. For one person no severance is paid. For three
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 for these people, severance pay corresponding to up to 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 19 million
(15) at 31 December 2018 and for other members of senior management to SEK 35 million (28),
calculated in accordance with IAS 19. The pension obligations are secured using plan assets
managed by an independent pension fund.

Average
no. of
employees
(FTE)

Of
which
women
2018

Average
no. of
employees
(FTE)

Of
which
men

Of
which
women
2017

Of
which
men

2 379

454

1 925

2 377

450

1 927

6
12
5
7
2
74
8
2
2
6
415
23
14

2
5
1
2
-
43
4
2
-
3
49
9
6

4
7
4
5
2
31
4
-
2
3
366
14
8

6
12
5
8
2
74
11
1
3
6
442
23
14

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

4
7
4
5
2
35
4
-
2
3
393
12
8

576
2 955

126
580

450
2 374

607
2 984

128
578

479
2 406

Parent company
Sweden

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

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

Group

2018
17
18
17

2017
17
20
18

Parent company
2017
17
20
18

2018
17
18
17

HOLMEN ANNUAL REPORT 2018 / NOTESNote 5. Auditors’ fee and remuneration

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

NOTES 5–6

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

Group

2018

2017

Parent company
2017

2018

285

280

-222

-126

-231

-111

Interest income on trade receivables
Interest expense on trade payables

1
0

0
0

1
0

0
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 2018 amounted to SEK -324 million (-90), with the remainder being rec-
ognised in other comprehensive income as hedge accounting is applied. The fair value of outstand-
ing currency hedges at 31 December 2018 was SEK -244 million (-135).

Gains on financial electricity hedges are recognised in the income statement when they expire; for
2018 they totalled SEK 102 million (-36). The fair value of outstanding financial electricity hedges
at 31 December 2018 was SEK 473 million (55). The change in fair value 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 compre-
hensive income until expiry, at which point the gain/loss is added to the cost of the non-current as-
set that was hedged. The fair value of outstanding hedges for investment purchases amounted to
SEK 5 million (5) at 31 December 2018. In 2018 there was a SEK 8 million positive effect on the
cost of hedged items owing to results from hedging.

Results from hedging of foreign net assets amounted to SEK -8 million (-49) in 2018 and are rec-
ognised in other comprehensive income as hedge accounting is applied. In the parent company ac-
counts, this gain is recognised in the income statement. The translation of net foreign assets had
an impact of SEK 55 million (36) on consolidated equity. The fair value of outstanding hedges of net
assets at 31 December 2018 was SEK 2 million (3) and relates to financial derivatives.

The fair value of the derivatives used to manage the fixed interest periods amounted to SEK -26 mil-
lion (-47) at 31 December 2018, which was recognised in other comprehensive income as hedge
accounting is applied. This value is expected to be recognised in the income statement in 2019 and
2020.

The audit firm KPMG was elected by the 2018 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

2018
6
1
0
7

0
8

Parent company
2017
4
0
-
4

2018
4
1
0
6

-
6

-
4

2017
6
1
-
7

0
7

‘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

Financial income
Dividend income from Group companies
Gains on sales of Group companies
Gains on sales of associates
Interest income*
Total financial income

Financial costs
Impairment losses on value of shares
in Group companies
Impairment losses on value of shares
in associates
Net profit/loss
Assets and liabilities measured at

fair value through profit/loss
Cash and cash equivalents
Assets and liabilities measured at

amortised cost

Total net profit/loss

Interest cost**
Financial costs
Net financial items

Group

2018
-
0
-
12
13

-9
1

8
0

-38
-38
-25

2017

-
-
-
2
2

42
1

-45
-2

-53
-55
-53

Parent company
2017

2018
367
100
8
23
499

1 314
-
-
18
1 332

-817

-20

-12
1

7
-24

-41
-65
434

-4
1

-46
-866

-50
-916
416

*SEK 12 million relates to interest income calculated using the effective interest rate method from
financial items valued at amortised cost.
**SEK -23 million (-31) in the Group and parent Company relates to interest expense for derivatives
valued at fair value through other comprehensive income. SEK -6 million (-5) relates to interest ex-
pense for derivatives recognised at fair value through profit/loss for the year. Remaining interest ex-
pense is calculated using the effective interest rate method and relates to financial items valued at
amortised cost.
The net gains and losses stated in net financial items mainly relate to currency revaluations of in-
ternal loans and hedging of internal lending. The parent company’s net financial items also include
currency revaluation of 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 com-
ponent in forward foreign exchange contracts as well as value changes in accrued interest and re-
alised 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 2018 / NOTES

NOTE 7

Note 7. Tax

Taxes stated in income statement
Current tax
Deferred tax
Total

Group

2018
36
-125
-89

2017
-436
-10
-445

Parent company
2017
-208
11
-197

2018
1
46
47

Tax recognised totalled SEK -89 million, corresponding to 4 per cent of profit before tax. There was
a positive effect of SEK 315 million on recognised tax owing to a decision on lower future corpora-
tion tax in Sweden reducing the deferred tax liability.

Taxes stated in income statement
Recognised profit/loss before tax

2018

SEKm
2 356

Group

2017

SEKm
2 113

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

-518
5
54
-30
-2
3
87
315
-2
-89

22.0
-0.2
-2.3
1.3
0.1
-0.1
-3.7
-13.4
0.1
3.8

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

Group

After
tax

Before
tax

Tax

2018

329
-23
55
-8
-52
302

-71
-
-
2
10
-60

258
-23
55
-6
-42
242

35
-4
36
-49
121
140

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

Tax

2017

-8
-
-
11
-24
-21

Parent company

2018

SEKm
467

-103
0
107
-8
-2
0
1
40
11
47

22.0
0.0
-23.0
1.8
0.3
0.0
-0.2
-8.6
-2.4
-10.0

2017

SEKm
2 044

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

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

After
tax

Before
tax

28
-4
36
-38
97
119

326
-
-
-
-
326

Tax

2018

-70
-
-
-
-
-70

Parent company

After
tax

Before
tax

255
-
-
-
-
255

38
-
-
-
-
38

Tax

2017

-8
-
-
-
-
-8

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

After
tax

29
-
-
-
-
29

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

2018

2017

Parent company
2017

2018

1
328
329

1
36
37

3 811
1 754
225
44

4
5 839

13
5 852

3 943
1 278
444
-27

11
5 650

21
5 671

-
327
327

594
2
-
44

-6
635

-
635

-
29
29

635
-1
-
-26

2
610

-
610

HOLMEN ANNUAL REPORT 2018 / NOTESNOTES 7–9

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

Group

Stated in
the income
statement
131
-473
219
-
-3
-125

Stated in other
comprehen-
sive income
-
-
-
-71
10
-61

Group

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

Stated in other
comprehen-
sive income
-
-
-
-8
-24
-32

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

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

Translation
differences
and other
-
-3
-

0
-4

Translation
differences
and other
-
2
-
-
0
1

Closing
balance
-3 811
-1 754
-225
-44
-3
-5 838

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

Parent company

Stated in
the income
statement
40
-3
-
-
8
46

Stated in other
comprehen-
sive income
-
-
-
-70
-
-70

Parent company

Stated in
the income
statement
0
0
-
-
11
11

Stated in other
comprehen-
sive income
-
-
-
-8
-
-8

Opening
balance
-635
1
-
26
-2
-610

Opening
balance
-634
1
-
35
-13
-612

Closing
balance
-594
-2
-
-44
6
-635

Closing
balance
-635
1
-
26
-2
-610

2018
Biological assets*
Property, plant and equipment
Tax allocation reserve
Transactions subject to hedge accounting
Other
Deferred net tax liability

2017
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 a
change in the tax rate in Sweden and changes in temporary differences. The amount recognised
in other comprehensive income includes deferred tax related to changes of SEK 71 million (-8)
in hedging reserves and an impact of SEK 10 million (-24) 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 350 million. No deferred tax asset has been recognised. There are no other loss carry-for-
wards of significance in the Group.

Note 8. Earnings per share

Note 9. Non-current intangible assets

2017
167 992 324 167 992 324
Total number of shares outstanding, 1 January
-
-
Buy-back of company’s own shares during the year
Total number of shares outstanding, 31 December 167 992 324 167 992 324

2018

Group

Weighted average number of shares during the year, basic 167 992 324 167 992 324
Effect of share savings programme
-
Weighted average number of shares during the
year, diluted

167 992 324 167 992 324

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

2 268

1 668
167 992 324 167 992 324
9.9

13.5

2 268

1 668
167 992 324 167 992 324
9.9

13.5

The 2018 AGM approved a share split, meaning that each share, irrespective of series, is divided
into two shares (2:1 split) of the same series. The share split was carried out in May 2018. Compar-
ative figures in the table above have been adjusted for the new number of shares. See Note 16 for
information about share capital prior to the share split. In previous years 1 520 000 class B shares
were repurchased, which corresponds to approximately 0.9 per cent of the total number of shares
outstanding, and to approximately 0.3 per cent of the total number of votes.

In 2016, Holmen introduced a share savings programme. The programme involves previously repur-
chased 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 pe-
riod. The programme expires in May 2019 and approximately 75 000 shares are expected be trans-
ferred from the company to the owners. The company’s commitment to allocate shares to partici-
pants will be fulfilled through the use of previously repurchased shares. The allocation of repurchased
shares in order to meet the undertaking 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
Translation differences
Total

Accumulated amortisation,
depreciation and impairment losses
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

2018
212
18
0
231

2017
194
18
0
212

Parent company
2017
26
-
-
26

2018
26
55
-
81

123
16
25
-
0
163

107
15
-
0
0
123

19
12
25
-
-
56

19
-
-
-
-
19

Non-current intangible assets mainly comprise IT systems at SEK 13 million (50) and rights of use
for certain energy assets at SEK 42 million (32). These assets were largely acquired from external
sources. They have determinable useful lives and are amortised over 5–20 years. No goodwill ap-
plies for the Group.

HOLMEN ANNUAL REPORT 2018 / NOTESNOTE 10

Note 10. Property, plant and equipment

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

Accumulated depreciation, amor-
tisation and impairment losses
Opening balance
Depreciation and amortisation
according to plan for the year
Disposal and retirement of assets
Translation differences
Total
Residual value according to plan
at end of year

Forest land
2018

Buildings, other land
and land installations

2017

2018

2017

Machinery and
equipment
2018

2017

Work in progress
and advance payments
to suppliers
2018

2017

140
167
-
-7
0
301

-
-

146
0
-
-6
0
140

-
-
-
-

5 633
54
-
-5
13
5 695

3 316

99
-5
8
3 418

5 594
51
-
-7
-5
5 633

28 031
723
4
-280
95
28 573

27 572
559
67
-132
-35
28 031

3 228

21 471

20 739

96
-7
-1
3 316

898
-277
62
22 154

879
-127
-20
21 471

61
22
-4
-
1
80

-
-
-
-

44
84
-67
-
1
61

-
-
-
-

Total

2018

2017

33 865
966
-
-291
110
34 649

33 356
693
-
-145
-39
33 865

24 787

23 967

997
-282
70
25 572

976
-134
-21
24 787

301

140

2 277

2 317

6 418

6 560

9 077

9 078

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

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

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

Forest land
2018

Buildings, other land
and land installations

2017

2018

2017

Machinery and
equipment
2018

2017

Total

2018

2017

464
4
0
469

-
-
-
-

464
1
0
464

-
-
-
-

2 389
0
2 388
2 857

2 389
0
2 389
2 853

150
17
-1
166

131
2
0
133

1
-
1
34

139
11
0
150

130
1
0
131

1
-
1
20

210
59
-19
251

154
33
-19
168

-
-
-
83

220
21
-30
210

158
24
-29
154

-
-
-
56

825
81
-20
886

285
35
-19
301

823
32
-30
825

288
25
-29
285

2 389
0
2 389
2 974

2 389
0
2 389
2 930

The Group’s investment commitments for approved and ongoing projects amounted to SEK 601 million (590) at 31 December 2018. In 2018, the company’s capitalised borrowing costs totalled
SEK 3 million (2). An interest rate of 1.5 per cent (1.1) was used to determine the amount.

HOLMEN ANNUAL REPORT 2018 / 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 2018, this amounted to
SEK 425 million (415).

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

780
1 170
-630

260
430
-230

-500

620
930
-500

210
340
-180

-400

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

Note 11. Biological assets

Forest assets are recognised in the consolidated accounts as growing forest, which is stated as
a biological asset at fair value, and land, which is stated at cost. Holmen’s assessment is that
no relevant market prices are available that can be used to value forest holdings as extensive as
Holmen’s. The valuation is therefore made by calculating the present value of future expected
cash flows from the growing forests. Fair value measurement is based on measurement level 3.
This calculation of cash flows is made for the coming 100 years, which is regarded as the forests’
harvesting cycle. The cash flows are calculated on the basis of harvesting volumes according to
Holmen’s current plan and assessments of future price and cost changes. The cash flows are
discounted using 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 122 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 until 2030. It is then calculated that it may gradually increase to just over 4 million m3sub in
2110. 50 per cent of the harvest consists of logs that are sold to sawmills, 45 per cent consists of
pulpwood that is sold to the pulp and paper industry, and the remainder 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 2019 is 445 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 18 400 million (17 831) before tax. A deferred tax
liability of SEK 3 811 million (3 943) 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 14 589 million (13 888).

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

2018
17 831
150
-9
-654
1 079
-
3
18 400

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

Harvest
’000 m3sub/year

Prices
SEK/m3sub

600

500

400

300

200

100

2001-
2010

2011-
2018

2019-
2020

2021-
2030

2031-
2040

2041-
2050

2051-
2060

2061-
2070

2071-
2080

2081-
2090

2091-
2100

2101-
2110

1999

2003

2007

2011

2015

2019

2023

4 000

3 000

2 000

1 000

Average harvest

Planned harvest

Real

Nominal

Price used in valuation (nominal)

The Nominal price series shows the average selling price for Holmen. The Real series shows
nominal prices recalculated at 2018 monetary value using historical Swedish CPI.

HOLMEN ANNUAL REPORT 2018 / 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 ventures
Total comprehensive income from associates and
joint ventures

Group

2018
-9
-9
-23

-32

2017
-12
-12
-4

-16

The combined value of Holmen’s share in the profits of associates amounted to SEK 5 million (-4) for
the Group and to SEK 11 million (0) for the parent company. The combined value of Holmen’s share
in the profits of joint ventures amounted to SEK -27 million (-13) for the Group and to SEK -27 million
(-13) for the parent company.

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

Group

2018
1 636
11
-21
0
-
1 626

2017
1 646
-
-9
0
-
1 636

Parent company
2017
123
-
-
-
-
123

2018
123
11
-
-
-20
114

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

Group

2018
113
31
-30
113

2017
127
-
-14
113

Parent company
2017
92
-
-
92

2018
92
93
-
185

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

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

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

Book value
in the parent
company

Holding
%*

Value of holding
in consolidated
accounts

Book value
in the parent
company

2018

2017

36
0
1 461
14
85
29
0
0
1 626

113
1 740

-
0
-
2
85
26
-
0
114

185
299

13.9
9.9
49.4
36.0
6.8
17.7
46.8

50.0

36
0
1 463
13
75
49
0
0
1 636

113
1 749

-
0
-
2
75
46
-
0
123

92
215

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

Group

2018
2
0
0
-
1

Parent company
2017
1
0
-
-
0

2018
0
0
-
-
0

2017
2
0
0
-
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 1 461 million (1 463).
Holmen purchased 471 GWh (491) of electrical power from Harrsele AB in 2018, giving Holmen
an operating profit of SEK 107 million (94) from market sales. Harrsele AB owns power assets that
generate 950 GWh of electrical power in a normal year. These assets were originally constructed in
1957–58 and the book value of the non-current assets in Harrsele AB amounts to SEK 122 million
(122). The company has non-current liabilities to its owner of SEK 25 million (25).

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

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

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

HOLMEN ANNUAL REPORT 2018 / NOTESNote 13. Financial instruments

Non-current financial receivables consist of interest-bearing financial receivables from
other companies, prepayments for credit facilities and the fair value of non-current derivatives.
The parent company’s receivables from Group companies include a significant share of interest-
free receivables between Swedish wholly owned Group companies. The partly owned wind power
company Varsvik AB has loans amounting to SEK 452 million, which Holmen acquired from creditor
bank for the nominal value in 2018.

Current financial receivables are recognised as fixed income investments and lending for du-
rations 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.

Financial 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 companies include a significant amount of interest-free
liabilities between Swedish wholly owned Group companies.

In addition to the financial assets and liabilities identified above, the pension liability (see Note 17)
is also included in net financial debt. The maturity structure and average interest for the Group’s lia-
bilities are stated in the section on Risk on pages 32–35. SEK -2 494 million of the parent compa-
ny’s liabilities are due for payment within one year.

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 176 million.
Assets and liabilities are not offset in the report. Recognised derivatives totalled SEK 557 million
(200) on the asset side and SEK -381 million (-351) on the liability side.

No provision has been made for expected credit losses for the financial assets included in the net lia-
bility, based on no losses arising over the past 10 years and assets held at the balance sheet date
being deemed to be of good credit quality. See Note 15 for information about impairment testing of
trade receivables.

The fair value of financial instruments traded on an active market is based on listed market prices
and belongs to measurement level 1 as per IFRS 13. Where there are no listed market prices, fair
value has been calculated using discounted cash flows. In calculating discounted cash flows, vari-
ables 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 dis-
count 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. Currency options are val-
ued using the Black & Scholes formula, where appropriate. Holmen uses valuation level 2 when
measuring financial instruments in accordance with 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 receiva-
bles and trade payables, the book value is stated as the fair value, as this is judged to be a good re-
flection of the fair value. For further information about financing and quantitative data on Holmen’s
hedge accounting see the section on Risk on pages 32–35 and Note 6 on page 51.

NOTE 13

Group
Maturity structure,
undiscounted amounts
Financial liabilities
Derivatives
Derivatives attributable to working
capital
Trade payables
Other financial liabilities

Financial receivables
Derivatives
Derivatives attributable to working
capital
Trade receivables
Other financial receivables

Parent company
Maturity structure,
undiscounted amounts
Financial liabilities
Derivatives
Derivatives attributable to working
capital
Trade payables
Other financial liabilities

Financial receivables
Derivatives
Derivatives attributable to working
capital
Trade receivables
Other financial receivables

2019

2020

2021

2022

2023–

-25

-273
-2 232
-2 489

286
1 929
342

-18

-73
-
-8

178
-
32

-3
-
-1

77
-
42

-
-
-501

-
-
-500

-
-
50

-
-
392

2019

2020

2021

2022

2023–

-25

-273
-2 033
-2 489

286
1 594
295

-18

-73
-
-7

178
-
32

-3
-
-1

77
-
42

-
-
-501

-
-
-500

-
-
50

-
-
392

Financial instruments have been reclassified in conjunction with the introduction of IFRS 9.
Reclassification has not had any effect on the book value of the financial instruments. The table
below shows how financial assets and liabilities were classified under IAS 39 and how they are
now classified under IFRS 9. See pages 58–59 for specification of financial instruments.

Classification of financial assets and liabilities
Previous classification

Current classification

Derivatives recognised at fair value
through profit/loss

Derivatives with hedge accounting

Trade and loan receivables
Available-for-sale assets
Other liabilities

Recognised at fair value through profit/loss

Hedging instruments recognised at fair
value through other comprehensive income

Recognised at amortised cost

HOLMEN ANNUAL REPORT 2018 / NOTES
NOTE 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)

Total financial instruments

Recognised at fair value
through profit/loss*

2018

2017

Hedging instruments
recognised at fair
value through other
comprehensive income
2017

2018

Recognised at
amortised cost

Total book value

2018

2017

2018

2017

Fair value
2018

2017

-
468

468

0
-
18

0
278

278

-1 000
-
-7

-1 007

-1 951
-24
-
-12
-500
0

-2 487

-
42

0
-
24

0
356

356

-500
-
-7

-507

-2 099
-10
-
-11
-650
0

-2 770

0
468

468

0
17
18

0
278

278

-1 000
-26
-7

-1 033

-1 951
-24
-7
-12
-500
0

-2 494

0
42

0
8
24

0
356

356

-500
-45
-7

-552

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

-2 775

0
468

468

0
17
18

0
278

278

-1 000
-26
-7

-1 033

-1 951
-24
-7
-12
-500
0

-2 494

0
42

0
8
24

0
356

356

-500
-45
-7

-552

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

-2 775

-
1 929

-
2 089

1
1 929

2
2 089

1
1 929

2
2 089

-
-

-
-
-

-
-

-
-26
-

-26

-
-
-
-
-
-

-
-

0
-

-
-
-

-
-

-
-45
-

-45

-
-
-
-
-
-

-
-

536

192

541

192

541

192

-303

233

-2 232

-1 957

-2 232

-1 957

-2 232

-1 957

-267

-75

-303

132

-348

109

-301

-348

109

-301

207

-121

-3 033

-2 723

-2 855

-2 872

-2 855

-2 872

-
-

-
17
-

-
-

-
-
-

-
-
-7
-
-
-

-7

1
-

-45

-39

-29

-
-

-
8
-

-
-

-
-
-

-
-
-4
-
-
-

-4

2
-

-34

-31

-28

*Refers to instruments compulsorily valued at fair value in accordance with IFRS 9.

HOLMEN ANNUAL REPORT 2018 / NOTESParent 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)

Total financial instruments

-
-
-

-
17
-

-
-
-

-
-
-7
-
-
-

-7

0
-

-45

-40

-30

0
-
-

-
8
-

-
-
-

-
-
-4
-
-
-

-4

0
-

-34

-30

-27

*Refers to instruments compulsorily valued at fair value in accordance with IFRS 9.

NOTE 13

Recognised at fair value
through profit/loss*

2018

2017

Hedging instruments
recognised at fair
value through other
comprehensive income
2017

2018

Recognised at
amortised cost

Total book value

2018

2017

2018

2017

Fair value
2018

-
6 954
465

7 419

0
-
18

230

-1 000
-6 791
-

-7 331

-1 951
-24
-
-12
-500
0

-2 487

-
2 916
102

3 018

0
-
24

294

-500
-334
-

-834

-2 099
-10
-
-11
-650
0

-2 770

-
6 954
465

7 419

0
17
18

230

-1 000
-6 791
-26

-7 817

-1 951
-24
-7
-12
-500
0

-2 494

0
2 916
102

3 018

0
8
24

294

-500
-334
-45

-880

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

-2 775

-
6 954
465

7 419

0
17
18

230

-1 000
-6 791
-26

-7 817

-1 951
-24
-7
-12
-500
0

-2 494

2017

0
2 916
102

3 018

0
8
24

294

-500
-334
-45

-880

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

-2 775

-
-
-

-
-
-26

-26

-
-
-
-
-
-

-
-

-
-
-

-
-
-45

-45

-
-
-
-
-
-

-
-

-
1 594

-
1 769

0
1 594

0
1 769

0
1 594

0
1 769

536

194

541

198

541

198

-304

232

-2 033

-1 814

-2 033

-1 814

-2 033

-1 814

-267

-73

-439

-45

-350

-248

-301

-148

-350

-248

-301

-148

206

-118

-2 590

-313

-2 875

-458

-2 875

-458

HOLMEN ANNUAL REPORT 2018 / NOTESNOTES 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

2018
873
282
1 804
613
56
3 628

Parent company
2017
661
201
934
501
24
2 322

2018
660
239
1 369
603
55
2 926

2017
842
212
1 319
507
24
2 905

During the year impairment losses on finished stock had an effect of SEK -6 (8) 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 -2 million (-2) on the parent company.

Note 15. Operating receivables

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

Group

2018

2017

Parent company
2017

2018

-
61
1 868
1 929

-
-
214
541
205
959
2 889

-
56
2 033
2 089

-
3
291
192
171
658
2 747

37
61
1 495
1 594

-
-
184
541
104
830
2 424

59
56
1 654
1 769

-
3
168
198
72
442
2 210

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 consist of receivables
from European customers. Trade receivables denominated in foreign currencies were valued
at the balance sheet date. Contract assets attributable to goods delivered but not yet invoiced
that are not included in the item ‘Trade receivables’ amounted to SEK 26 million (17). The
provision for expected credit losses was SEK 34 million (41) at 31 December 2018. During the
year, the provision was changed by SEK -1 million (-2) as a result of actual credit losses, and by
SEK -6 million (6) as a result of changes in the provision for anticipated or expected credit losses. At
31 December 2018, SEK 27 million (33) of trade receivables were past due for more than 30 days.
The credit quality of trade receivables that are neither past due nor impaired is deemed to be good
and on a par with previous years.

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

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

Number
45 246 468
124 265 856
169 512 324
-1 520 000
167 992 324

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

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

31 Dec 2018

Quotient value
25
25

31 Dec 2017

Quotient value
50
50

SEKm
1 131
3 107
4 238

The 2018 AGM approved a share split, meaning that each share, irrespective of series, was divided
into two shares (2:1 split) of the same series, which is why the number of shares has increased.

The company’s share capital consists of shares issued in two classes: class A, each of which car-
ries 10 votes, and class B, each of which carries one vote. In other respects, there are no restric-
tions between classes of shares.

At 31 December 2018 the Group’s own shareholding was 1 520 000 shares (760 000). None of
the Group’s own shares were sold during the year. The increase was due to the share split being
carried out.

Assets and liabilities measured at fair value according to Chapter 4 Section 14a of the Swedish
Annual Accounts Act had an impact of SEK 176 million (-145) on parent company equity. In the
consolidated accounts, valuation of derivatives and other financial instruments had an impact of
SEK 178 million (-151) 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 5 480 444 085. The Board
proposes that the AGM on 11 April 2019 approve a dividend of SEK 6.75 per share. The pro-
posed dividend totals SEK 1 134 million. The Board also proposes that the remaining amount of
SEK 4 346 495 898 be carried forward.

For the previous year the dividend was SEK 13 per share (SEK 1 092 million), which corresponds to
SEK 6.5 per share following implementation of the share split.

The debt/equity ratio was 0.12 (0.13).

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.

HOLMEN ANNUAL REPORT 2018 / 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. In the UK there are two defined benefit plans. Both 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

2018

2017

Parent company
2017

2018

-7
0

-7

-5
-4

-9

-18
0

-18

-12
0

-12

-117
-123

-128
-137

-93
-111

-106
-118

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

2018
-135

14
56
53
-5
-34
-52

2017
103

122
-101
14
1
-18
121

The change in the defined benefit obligations and the change in plan assets are specified in the ta-
bles 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 two trusts. These are governed by
boards consisting of representatives from Holmen and the beneficiaries. Holmen’s UK subsidiaries
have commitments to cover any deficits that exist. This should be done over a period of time estab-
lished between the respective trust and the company in consultation with its actuary. The assets in
one trust exceed the commitment by SEK 52 million. This surplus has not been recognised as there
are no offset rights. This adjustment is referred to as an asset ceiling in tables. The other trust has a
deficit of SEK 23 million which will be covered over the next three years.

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

Group

2018

2017
-2 198 -2 414
-5
2
-60
35
222
21
-2 063 -2 198

-7
-2
-55
122
127
-52

Parent company
2017
-167
-12
-
-5
-
11
-
-173

2018
-173
-18
-
5
-
11
-
-176

The weighted average duration is 16 years.

Of the Group’s total obligations, SEK 9 million (10) refers to those that are not funded, while the rest
are wholly or partially funded obligations. Of the parent company’s obligations, SEK 20 million (12)
are secured under the Swedish Pension Obligations Vesting Act.

NOTE 17

Plan assets
Fair value of assets at 1 January
Interest income
Expected return excl. recognised interest
income
Real return (parent company)
Administrative expenses
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

2018
2 177
55

-135
-
-2
24
-115
51
2 053
-52
-61

2017
2 213
55

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

Parent company
2017
155
-

2018
160
-

-
-5
-
-
-
-
156
-
-20

-
5
-
-
-
-
160
-
-12

Group

2018
1 007
1 040
6
2 053

2017
1 098
1 050
29
2 177

Parent company
2017
79
79
3
160

2018
70
83
2
156

The plan assets do not include any financial instruments issued by Group companies or assets used
by the Group. Of equities, 46 per cent relate to the UK, 49 per cent to the rest of Europe and the
US and 5 per cent to the rest of the world. Of bonds, 44 per cent relate to government bonds and
56 per cent to corporate bonds.

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

Group

31 Dec 2018
2.7
3.0
3.2

31 Dec 2017
2.5
3.0
3.1

The discount rate for pension obligations have been established based on high-quality corpo-
rate bonds in the relevant currency and country of the commitment, i.e. mainly the UK. A discount
rate of 0.6 per cent (0.6) and salary levels at the balance sheet date were used for calculating the
amount of the parent company’s pension obligation.

The table below shows how the obligation would be affected in the event of a change in key
actuarial assumptions (- reduces debt, + increases debt).

Sensitivity analysis
Discount rate (+ 0.5%)
Rate of salary increase (+ 0.5%)
Rate of price inflation (+ 0.5%)
Mortality (+ 1 year in life expectancy)

Group

31 Dec 2018
-144
2
111
92

31 Dec 2017
-183
2
129
108

The Group’s payments into the funded defined benefit plans in 2019 are expected to amount to SEK
5 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 (31) and are included among personnel costs in the income statement. Holmen’s
active members in the plan amounted to 672 people, which corresponds to 0.14 per cent of the
plan’s active members. Premiums to Alecta are expected to amount to SEK 27 million in 2019.
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 150 per cent, measures will be taken to create
the conditions to ensure the level of consolidation returns to the normal range. In the event of
low consolidation, one measure may be to raise the agreed price for new policy subscriptions
and an increase in existing benefits. In the event of high consolidation, one measure may be to
introduce reductions in premiums. At the end of 2018, Alecta’s collective consolidation level was
142 per cent (154).

HOLMEN ANNUAL REPORT 2018 / NOTES

NOTES 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

2018
185
-
-
-95
-
90
90
-

45
-
-
-
45
45
-

2017
45
140
-
-
-
185
185
-

45
-
-
-
45
45
-

2018
622
76
-110
-
3
590
393
197

725
180
-197
-
708
451
256

2017
856
6
-240
-2
3
622
477
144

833
105
-211
-2
725
532
193

2018
807
76
-110
-95
3
680
483
197

770
180
-197
-
753
496
256

2017
901
146
-240
-2
3
807
662
144

878
105
-211
-2
770
577
193

Other provisions mainly relate to uncertainties associated with obligations for environmental
restoration, fixed price electricity supply contracts and restructuring costs. SEK 370 million of
these provisions are expected to be settled within three years, while the remainder is expected to
be settled over a longer time horizon.

Note 19. Operating liabilities

Note 20. Operating leases

Group

2018

2017

Parent company
2017

2018

In 2018, the Group’s lease payments amounted to SEK 72 million (52), and the parent company’s to
SEK 46 million (38). The Group’s leases mainly relate to transportation and office rent.

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

-
-
1 957
1 957

-
6
186
301
563
1 056
3 012

1 996
2 033

0
7
159
350
472
989
3 022

53
-
1 761
1 814

0
6
170
301
458
935
2 749

2 232
2 232

8
171
348
581
1 108
3 340

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 210 million (191), discounts of SEK 54 million (52) and goods and services delivered but not
yet invoiced of SEK 78 million (46).

The fair values of derivatives relate to hedges of future cash flows. See Note 13.

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

Group

2020
–2023
99

2019
72

Parent company

2024–
42

2019
46

2020
–2023
65

2024–
40

The contracts have remaining durations ranging from 1 to 10 years. The net present value of the
Group’s future lease payments for existing leases amounted to SEK 205 million at the end of the
previous year. Those in the parent company amounted to SEK 143 million.

On 1 January 2019 IFRS16 Leases comes into force, which means that assets and liabilities
attribu table to all leases, with some exceptions, are recognised in the balance sheet. See Note 1 for
information about the transition method.

HOLMEN ANNUAL REPORT 2018 / NOTESNOTES 21–22

Note 21. Collateral and contingent liabilities

Group
Financial liabilities
Total

Parent company
Financial liabilities
Total

Property
mortgage

Other
collateral

-
-

6
6

Total
collateral
2018
6
6

Total
collateral
2017
143
143

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

Group

2018
-
98
98

Parent company
2017
40
83
123

2018
38
83
122

2017
-
97
97

6
6

143
143

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.

Note 22. Related parties

Of the parent company’s net sales of SEK 14 384 million (14 345), SEK 151 million (115) relates
to deliveries of goods to Group companies. The parent company’s purchases of goods from
Group companies amounted to SEK 242 million (1 056). Parent company net sales also include
income from the sale of silviculture services to subsidiaries for an amount of SEK 389 million (-).
SEK -1 378 million (-1 208) of expenses for leasing of non-current assets from subsidiaries are
recognised in the parent company.

There are significant financial receivables and liabilities between the parent company and its
Swedish subsidiaries, which do not carry interest.

The parent company has a related party relationship with its subsidiaries (see Note 23).

L E Lundbergföretagen AB is a major shareholder in Holmen (see page 37). Holmen rents office
premises for SEK 6 million (8) from Fastighets AB L E Lundberg, which is a group company within

L E Lundbergföretagen AB. In 2018, Fredrik Lundberg, who is CEO and principal shareholder in
L E Lundbergföretagen, received a fee of SEK 710 000 (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 355 000 (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 re-
lation 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.

The partly owned wind power company Varsvik AB has loans amounting to SEK 452 million, which
Holmen acquired from creditor banks for the nominal value in 2018.

Transactions with related parties

Group
Associates
Joint venture

Parent company
Subsidiaries
Associates
Joint venture

Sale of products to
related parties
2018
395
3

2017
333
3

151
395
3

115
333
3

Purchase of products
from related parties

Other (e.g. interest,
dividend)

2018
71
-

242
71
-

2017
85
-

1 056
85
-

2018
0
17

374
0
16

2017
0
5

1 325
0
5

Liability to
related parties
2018
37
-

2017
56
-

Receivable from
related parties
2018
85
454

2017
89
24

6 830
34
-

388
52
-

6 993
85
454

2 982
89
86

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

HOLMEN ANNUAL REPORT 2018 / NOTES
NOTE 23

Note 23. Investments in Group companies

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

Parent company

2018
17 142
1
-
-1
17 142

2017
17 141
0
1
-
17 142

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

2018
6 655
-
6 655
10 487

2017
5 838
817
6 655
10 487

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’.

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
Holmens Bruk AB
Holmen Skog Mitt AB
Holmen Skog Syd AB
Holmen Sågverk AB
Holmen Vattenkraft AB
Iggesunds Bruk AB
Ljusnan Vattenkraft AB
Holmen Holding AB
MoDo Capital AB
Holmen Energi Elnät AB
Stavro Vind AB
Other Swedish Group companies
Total Swedish holdings

Holmen UK Ltd, UK
Holmen Paper Ltd**
Iggesund Paperboard (Workington) Ltd**
Holmen France S.A.S., France
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

Corporate
ID No.

Registered
office

Number of
holdings

Holding %*

Book value
in the parent
company

Holding %*

Book value
in the parent
company

2018

2017

556220-0658
556088-5294
556005-6383
556099-0672
556524-8456
556537-4286
559165-6615
559165-6623
559165-6631
559165-6672
559165-6664
559165-6656
559165-6680
516406-0062
556499-1668
556878-3905
556953-6153

Örnsköldsvik
Hudiksvall
Norrköping
Hudiksvall
Örnsköldsvik
Stockholm
Stockholm
Stockholm
Stockholm
Stockholm
Stockholm
Stockholm
Stockholm
Stockholm
Stockholm
Örnsköldsvik
Stockholm

Workington
London
Workington
Paris
Hamburg
Madrid
Madrid
Singapore
Amsterdam
Tallinn
Lyndhurst
Hong Kong

1 000
1 000
100
1 000
1 000
-
1 000
1 000
1 000
1 000
1 000
1 000
1 000
10 000
1 000
500
500

1 197 100
-
-
10 000
-
9 448 557
-
800 000
35
500
1 000
4 000 000

100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100

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

0
0
0
0
0
-
383
2 856
1 527
422
2 663
740
276
0
72
0
0
2
8 943

1 519
-
-
0
1
0
-
4
7
0
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
0
2
8 942

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

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

**Indirect holdings.

HOLMEN ANNUAL REPORT 2018 / NOTESNote 24. Untaxed reserves

Note 26. Critical accounting estimates and judgements

NOTES 24–26

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
accounts, 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 2018 was SEK 18 400 million and the attributable deferred tax liability was
SEK 3 811 million, giving a net value of SEK 14 589 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 350 million. No deferred tax asset has been recognised. See Note 7.

Pension obligations
The Group has benefit-based pension obligations measured at SEK 2 063 million and SEK 2 053
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 and demographic factors.
These commitments 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
restoration, fixed price electricity supply contracts and corporation tax risks. See Note 18.

Accumulated depreciation and
amortisation in excess of plan
Non-current intangible assets
Property, plant and equipment

Parent company

31 Dec 2017 Appropriations
-23
-2
-24

-
12
12

31 Dec 2018
-23
11
-12

Tax allocation reserves
2013 fiscal year
2014 fiscal year
2015 fiscal year
2016 fiscal year
2017 fiscal year

Total

280
610
370
290
470
2 020
2 032

-280
-610
-106
-
-
-996
-1 020

-
-
264
290
470
1 024
1 012

Group contributions received amounted to SEK 191 million (530) and Group contributions paid
amounted to SEK -2 584 million (0). Total appropriations of profit amounted to SEK -1 373 million.

Note 25. Cash flow statement

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

Group

2018
-
12
-28
-16

Parent company
2017
1 314
17
-36
1 294

2018
367
23
-29
362

2017
-
2
-36
-34

The change in current liabilities mostly relates to borrowing within the Group’s commercial paper
programme. In 2018, a number of different short-term loans totalling SEK 6 585 million (7 160)
were raised within the Group’s commercial paper programme, and SEK 6 733 million (6 770) was
repaid. For a specification of cash and cash equivalents, see Note 13.

Bond loans
Commercial paper
Other financial liabilities
Pension liability
Financial liabilities
including pension liability

Bond loans
Commercial paper
Liabilities to Group
companies
Other financial liabilities
Pension liability
Financial liabilities
including pension liability

2017
1 150
2 099
77
39

3 365

2017
1 150
2 099

334
70
12

3 665

Group

Cash flow
350*
-148
-19
-25

Currency
and market
revaluation
-
-
17
47

2018
1 500
1 951
75
61

158

3 587

Parent company

Currency
and market
revaluation
-
-

-
17
21

2018
1 500
1951

6 791
68
20

10 330

Cash flow
350*
-148

6 457
-19
-13

6 627

* Relates to SEK 300 million in repayment of loans which when raised were long-term but at the point
of repayment were short-term, SEK 350 million in repayment of short-term loans and SEK 1 000
million in loans raised.
The increase in the parent company’s liabilities to associates is affected by items attributable to an
intra-group restructuring.

HOLMEN ANNUAL REPORT 2018 / NOTESProposed appropriation of profits

The following earnings of the parent company are at the disposal of the Annual General Meeting:
Net profit for the 2018 financial year
Retained earnings

The Board of Directors proposes that a dividend of SEK 6.75 per share (167 992 324 shares) be paid to the shareholders

and that the remaining amount be carried forward

SEK

513 951 736
4 966 492 348
5 480 444 085

1 133 948 187

4 346 495 898

The Board of Holmen AB has proposed that the 2019 Annual General Meeting resolve in favour
of paying a dividend of SEK 6.75 per share – SEK 0.25 per share higher than the preceding year
– totalling SEK 1 134 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 50.0 per cent of net profit for 2018 for the Group and means
that 4.8 per cent of equity in the Group at 31 December 2018 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 2018 was 0.12. Payment of the proposed dividend would raise the
debt/equity ratio by 0.06.
Holmen AB’s equity at 31 December 2018 amounted to SEK 11 395 million, of which non
restricted equity was SEK 5 480 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 176 million on
equity. The Group’s equity at 31 December 2018 amounted to SEK 23 453 million. In accordance
with IFRS, no distinction is made at Group level between restricted and nonrestricted 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 12 February 2019. 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 11 April 2019.

Fredrik Lundberg
Chairman

Carl Bennet
Board member

Steewe Björklundh
Board member

Kenneth Johansson
Board member

Stockholm 12 February 2019

Lars G Josefsson
Board member

Lars Josefsson
Board member

Carl Kempe
Deputy Chairman

Louise Lindh
Board member

Our audit report was submitted on 14 February 2019.

KPMG AB

Joakim Thilstedt
Authorised Public Accountant

Ulf Lundahl
Board member

Henriette Zeuchner
Board member

Tommy Åsenbrygg
Board member

Henrik Sjölund
Board member and Chief Executive Officer

HOLMEN ANNUAL REPORT 2018 / PROPOSED APPROPRIATION OF PROFITS

Auditor’s report

To the general meeting of the shareholders of Holmen AB, corp. id 556001-3301

Report on the annual accounts and consolidated accounts

Opinions
We have audited the annual accounts and consolidated accounts of Holmen AB for the
year 2018, except for the sustainability report on pages 89, 2324, 30, 31, 33. The
annual accounts and consolidated accounts of the company are included on pages 23,
89, 2324, 2866, 7071 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 2018 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 2018 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 the sustainability report on pages 89, 2324, 30, 31, 33.
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 con
trolled 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
See note 11, note 26 and the Accounting Principles on pages 44-47 of in 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 18 400
million as of 31 December 2018.
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 per
formed 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 assump
tions can affect the overall valuation. In addition to this we have compared the Group’s
valuation to valuations performed by other companies via comparison of calculated
value per cubic metre.
We have also considered the completeness of the disclosures in the Annual Report
and assessed whether they are in agreement with the assumptions made by Company
management in their valuation of Biological Assets.

Other provisions
See note 18, note 26 and the Accounting principles on page 44-47 in the annual accounts and consolidated accounts for detailed disclosure and description of the matter.

Description of key audit matter
The carrying value of the other provisions per 31 December 2018 amounts to SEK 680
million in the Group and SEK 753 million in the parent company. The other provisions
include among other environmental obligations, contractual commitments regarding
delivery of electricity at a fixed price, restructuring costs and tax risks.
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.

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 also considered the completeness of the disclosures in the Annual Report and
assessed whether they are, in all material respects, in agreement with IFRS require
ments.

HOLMEN ANNUAL REPORT 2018 / 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 47, 1022, 2527 samt 7279. 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
procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinions. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the over
ride of internal control.

• Obtain an understanding of the company’s internal control relevant to our audit in

order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the company’s internal
control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Board of Directors and the
Managing Director.

• Conclude on the appropriateness of the Board of Directors’ and the Managing Direc
tor’s, use of the going concern basis of accounting in preparing the annual accounts
and consolidated accounts. We also draw a conclusion, based on the audit evidence
obtained, as to whether any material uncertainty exists related to events or conditions
that may cast significant doubt on the company’s and the group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the annual ac
counts 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 for the year 2018 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 Accounts

Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company’s
profit or loss, and thereby our opinion about this, is to assess with reasonable degree of
assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with generally accepted auditing standards in Sweden will
always detect actions or omissions that can give rise to liability to the company, or that
the proposed appropriations of the company’s profit or loss are not in accordance with
the Companies Act.

As part of an audit in accordance with generally accepted auditing standards in Sweden,
we exercise professional judgment and maintain professional 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 2018 / AUDITOR'S REPORT

The auditor’s opinion regarding the statutory sustainability report
The Board of Directors is responsible for the sustainability report on pages 89, 2324,
30, 31, 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 by the gen
eral meeting of the shareholders on the 10 April 2018. KPMG AB or auditors operating at
KPMG AB have been the company’s auditor since 1995.

Stockholm 14 February 2019
KPMG AB

Joakim Thilstedt
Authorized Public Accountant

Review of Sustainability Report

Holmen’s Sustainability Report, as defined on page 2 of Holmen’s Annual Report 2018,
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 14 February 2019
KPMG AB

HOLMEN ANNUAL REPORT 2018 / AUDITOR'S REPORT

Board of
Directors

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.

Carl Bennet
Gothenburg. Born in 1951. Member since 2009.
M.Sc. in Economics. D. Tech. h.c. CEO of Carl Bennet
AB. Former President and CEO of Getinge AB.
Chairman of Getinge AB, Lifco AB and Elanders AB.
Other significant appointments: Board member
of Arjo AB and L E Lundbergföretagen AB.
Shareholding: 200 000 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: 9 834 shares.

Louise Lindh
Stockholm. Born in 1979. Member since 2010.
M.Sc. in Economics. CEO of Fastighets AB
L E Lundberg.
Other significant appointments: Chairman of
J2L Holding AB. Board member of Hufvudstaden
AB and L E Lundbergföretagen AB.
Shareholding: 200 000 shares.

Fredrik Lundberg
Chairman

Djursholm. Born in 1951. Member since 1988.
M.Sc. in Engineering and M.Sc. in Economics.
Tech. h.c. and D. Econ. h.c. President and CEO of
L E Lundbergföretagen AB.
Other significant appointments: Chairman
of Hufvudstaden AB and AB Industrivärden.
Deputy Chairman of Svenska Handelsbanken AB.
Board member of L E Lundbergföretagen AB and
Skanska AB.
Own and related parties’ shareholdings:
1 679 448 shares. Shareholding of
L E Lundbergföretagen: 55 244 000 shares.

Carl Kempe
Deputy chairman

Örnsköldsvik. Born in 1939. Member since 1983.
Licentiate in Engineering. Dr. h.c. mult.
Other significant appointments: Chairman of
MoRe Research AB and permanent secretary of
the Kempe Foundations.
Own and related parties’ shareholdings:
772 000 shares.

Tommy Åsenbrygg
Skebobruk. Born in 1968. Member since 2015.
Employee representative, PTK.
Shareholding: 200 shares.

HOLMEN ANNUAL REPORT 2018 / BOARD OF DIRECTORS

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

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: 1 600 shares.

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

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
Industrietreuhand KG and Brookfield Renewable
Energy. Board member of Hand in Hand
International and member of The Royal Swedish
Academy of Engineering Sciences, IVA.
Shareholding: 10 000 shares.

Lars Josefsson
Norrköping. Born in 1953. Member since 2016.
M.Sc. in Engineering.
Other significant appointments: Chairman of
Ouman and TimeZynk. Board member of Metso.
Deputy Chairman of Vestas.
Shareholding: 5 000 shares.

Ulf Lundahl
Lidingö. Born in 1952. Member since 2004.
Bachelor of Laws and M.Sc. in Economics.
Other significant appointments: Chairman of
Attendo AB, Fidelio Capital AB, Ramirent plc and
SHB Regionbank Stockholm. Board member of
Eltel AB, Indutrade AB and Nordstjernan Kredit AB.
Shareholding: 8 000 shares.

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

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

Information at 31 December 2018.

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

HOLMEN ANNUAL REPORT 2018 / BOARD OF DIRECTORS

Group
management

Anders Jernhall
Executive Vice President, Chief Financial Officer

Lars Lundin
Senior Vice President Paper

Born in 1970. Joined Holmen in 1997.
Shareholding: 9 800 shares.

Born in 1966. Joined Holmen in 2018.
Shareholding: 0 shares.

Sören Petersson
Senior Vice President Forest

Born in 1969. Joined Holmen in 1994.
Shareholding: 8 800 shares.

Ola Schultz-Eklund
Senior Vice President Technology

Born in 1961. Joined Holmen in 1994.
Shareholding: 1 600 shares.

Henrik Sjölund
President and CEO

Born in 1966. Joined Holmen in 1993.
Shareholding: 9 834 shares.
Henrik Sjölund has no significant shareholdings
and no ownership in companies with which the
Group has important business relations. Further
information about the President and CEO can be
found on page 70.

Gunilla Rolander
Senior Vice President Human Resources

Born in 1966. Joined Holmen in 2013.
Shareholding: 724 shares.

Nils Ringborg
Senior Vice President International Affairs

Born in 1958. Joined Holmen in 1988.
Shareholding: 5 028 shares.

Lars Ericson
Senior Vice President Legal Affairs

Company secretary.
Born in 1959. Joined Holmen in 1988.
Shareholding: 1 300 shares.

Daniel Peltonen
Senior Vice President Paperboard

Born in 1971. Joined Holmen in 1997.
Shareholding: 1 076 shares.

Johan Padel
Senior Vice President Wood Products

Born in 1966. Joined Holmen in 2014.
Shareholding: 1 660 shares.

Stina Sandell
Senior Vice President Sustainability
and Communications

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

HOLMEN ANNUAL REPORT 2018 / 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’ are used. 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 excluding items affecting comparability
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 74 for what items affecting comparability refers to.

2018

2017

2016

2015

2014

3 063
-1 012
425
2 476
-94
2 382

2 476
16 055
15.4

760
425
1 185

23 453
2 807
26 261

2 476
25 469
9.7

1 033
2 494
61
-468
-35
-278
2 807

2 807
23 453
0.12

23 453
36 912
63.5

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

2 673
-1 240
267
1 700
-931
769

769
16 014
10.6

638
267
905

20 853
4 799
25 653

1 700
26 769
6.4

2 295
2 698
130
-43
-61
-221
4 799

4 799
20 853
0.23

20 853
35 456
58.8

2 717
-1 265
282
1 734
-450
1 284

1 284
15 994
10.8

535
282
817

20 969
5 907
26 876

1 734
27 010
6.4

2 488
3 269
400
-40
-22
-187
5 907

5 907
20 969
0.28

20 969
36 434
57.6

HOLMEN ANNUAL REPORT 2018 / KEY FIGURES

Ten-year review, finance

SEKm

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

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 excluding items affecting
comparability
Items affecting comparability*
Operating profit

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
Group-wide costs and eliminations***
Group

Operating profit
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

16 055
-12 984
-9
-1 012
425

16 133
-13 379
-12
-991
415

15 513
-12 626
-22
-1 018
315

16 014
-13 348
7
-1 240
267

15 994
-13 270
-7
-1 265
282

16 231
-13 919
3
-1 370
264

17 852
-15 224
47
-1 313
350

18 656
-15 501
84
-1 260
-

17 581
-15 077
28
-1 251
52

18 071
-15 191
45
-1 320
16

2 476
-94
2 382

-25
2 356

-89
2 268

13.5

5 944
5 785
5 571
1 747
319
-3 311
16 055

1 185
689
329
246
181
-154
2 476
-94
2 382

2 356
540
-396
-214
2 286
-1 005
1 281

2 166
-
2 166

-53
2 113

-445
1 668

9.9

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

2 162
-232
1 930

-71
1 859

-436
1 424

8.5

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

1 700
-931
769

-90
679

-120
559

3.4

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
-824
1 702

1 734
-450
1 284

-147
1 137

-230
907

5.4

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
-815
1 361

1 209
-140
1 069

-198
871

-160
711

4.3

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
-872
1 139

1 713
-193
1 520

-227
1 294

559
1 853

11.1

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
-1 957
297

1 980
3 593
5 573

-244
5 328

-1 374
3 955

23.6

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
-1 791
310

1 332
264
1 596

-208
1 388

-684
704

4.2

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
-1 585
-62

1 620
-
1 620

-255
1 366

-360
1 006

6.0

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
-714
2 158

Dividend paid

-1 092

-1 008

-882

-840

-756

-672

-588

-756

*Items affecting comparability:

2018: Restructuring costs of SEK -94 million.

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.

**Historical figures have been adjusted because of the share split (2:1) in 2018.

***Income and costs from the sale of newsprint from the Spanish mill sold in Q2 2016 are recognised in the Group-wide segment.

****Net after disposals and before changes in non-current financial receivables.

HOLMEN ANNUAL REPORT 2018 / TEN-YEAR REVIEW, FINANCESEKm

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

*Excluding non-current financial receivables.

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

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

29 287
6 845
503
278
36 912

23 453
5 839
3 588
4 032
36 912

14 830
5 316
2 072
927
3 082
34
26 261

12
6
14
15

8
12
15
27
6
10

10
0.12

2 831
525
1 036
828
1 145

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

**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.

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

HOLMEN ANNUAL REPORT 2018 / TEN-YEAR REVIEW, FINANCEFive-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 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
environmental protection is reported in accordance with guidelines from Statistics Sweden.

As some of the details provided in this report had already been collected by the end of the year
they refer to, they might differ slightly from the information finally reported to the authorities.

Production
Paperboard, ’000 tonnes
Market pulp, ’000 tonnes
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)

Environmental protection expenditure, SEKm
Investments (remedial and preventive)
Electricity and heat-saving investments12)
Environmental taxes and charges13)
Internal and external environmental expenses14)
Environmental cost of forestry15)

2018

2017

2016

2015

2014

538
66
1 069
873
1 145
679

5.62
78
6 2382)
3 9963)
73
2.9
165
164

56
986
45
75
1 660

48
216
16
21.5
3.5

977
166
13

1.6
7.6

137
370

84
10
12
165
91

530
54
1 088
827
1 169
621

5.63
79
6 099
3 987
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

44
20
12
137
62

503
56
1 176
776
1 080
784

5.36
70
6 375
3 949
70
2.6
151
148

41
960
39
124
1 540

52
208
14
20.4
3.2

872
270
13

2.2
16.0

155
380

55
8
14
182
71

502
56
1 287
734
1 441
781

5.10
79
6 288
3 994
68
2.5
138
146

52
891
48
180
1 440

57
226
19
21.0
3.3

823
303
12

1.9
13.0

230
348

12
18
12
208
101

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
1 550

54
203
19
20.4
3.6

824
296
13

1.6
5.6

275
305

26
320
10
169
70

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 4 675 GWh from production at mills

from recovered liquors, bark and wood residues,
1 222 GWh from the TMP process at Braviken
Paper Mill, Hallsta Paper Mill and the mill in
Workington. The process generates thermal
energy that is recovered and used in production.
341 GWh comes from natural gas, oil and pur-
chased thermal energy.

3) Of which 1 420 GWh from renewables and

2 576 GWh from nuclear. Emissions of fossil
carbon dioxide from production of purchased
electricity totalled 21 tonnes.

4) Almost 100 per cent use of surface water from

lakes and watercourses.

5) Stated as 100 per cent active substance. Total
quantity of commodities was 238 000 tonnes
for chemicals and 232 000 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 2018, 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 2018 totalled 634 tonnes.

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

11) For 2018: 130 GWh of electrical energy supplied

from the mill at Workington to the local community.
229 GWh of thermal energy from Iggesund Mill
and Braviken Paper Mill to Iggesund Sawmill
and Braviken Sawmill. A total of 11 GWh thermal
energy from Hallsta Paper Mill and Iggesund Mill
was supplied to the district heating network of the
local communities.

12) The high costs stated for 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.

13) 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.

14) Includes costs of environmental personnel,

operation of treatment equipment, waste mana-
gement, management systems, environmental
training, applications for permits, environmental
consultants and the costs of inquiries and mea-
sures in connection with discontinued operations.

15) The environmental cost of forestry is calculated

as the value of the wood that is not harvested for
environmental reasons. Holmen sets aside just
under 16 per cent of its productive forest acreage
and thus refrains from harvesting just under 16
per cent of the potential volume. The annual loss
of income in 2018 is estimated at SEK 91 million.

HOLMEN ANNUAL REPORT 2018 / FIVE-YEAR REVIEW, SUSTAINABILITY

Personnel
Employees
Average number
of whom women, %
of whom temporary employees, %
Average age1)
Sickness absence, %2)
Total
of which longer than 60 days
Gender equality, %1)
Women managers out of total number of managers
Women joining the company out of total new employees
Personnel turnover, %1)
Personnel turnover
of which given notice
of which retiring
of which leaving at own request
New employees
Number of industrial accidents2)
Industrial accidents, more than 8 hours of absence,
per million hours worked
Union cooperation, %3)
Percentage of employees that work at a unit with
a collective agreement4)

Income statement per stakeholder category, SEKm
Customers

Suppliers

Employees
Lenders
Society

Sales of products, wood and electricity
Purchases of products, services, along with
depreciation, etc.
Wages and social security costs
Interest
Property tax
Excise tax
Social security costs
Payroll tax
Corporation tax

Shareholders Net profit

Board’s dividend proposal

1) Relates to permanent employees.

2) No industrial accidents with a fatal outcome

occurred during the year.

3) Relates to permanent and temporary employees.

4) All Swedish units have collective agreements.

At foreign units, Holmen supports other forms of
collective employee engagement in line with local
standards.

2018

2017

2016

2015

2014

2 955
20.3
10.7
44.9

4.1
1.6

19.8
40.1

7.9
0.4
2.6
3.9
2.7

4.9

2 976
19.3
7.4
46.0

4.2
2.0

20.7
25.0

8.0
0.9
2.6
4.4
5.9

2 989
19.3
8.8
46.3

4.2
2.0

19.0
27.0

6.9
1.6
2.4
2.9
5.4

3 315
19.4
9.0
46.8

4.2
1.8

20.5
24.0

7.6
2.8
2.4
2.5
5.3

3 359
19.2
7.9
46.8

3.9
1.7

20.9
31.0

7.2
2.0
2.2
3.0
5.1

5.1

8.8

6.5

17 339

17 269

17 072

17 216

17 015

-12 539
-1 792
-25
-82
-30
-479
-35
-89
2 268
1 134

-12 719
-1 767
-53
-101
-31
-449
-36
-445
1 668
1 092

-12 721
-1 786
-71
-126
-26
-448
-34
-436
1 424
1 008

-13 955
-1 825
-90
-129
-27
-481
-29
-120
559
882

-13 307
-1 792
-147
-138
-18
-453
-23
-230
907
840

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

RENEWABLE
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

1) Holmen’s forest operations are certified in accordance with environ-
mental management system ISO 14001. Forest operations are also
certified under criteria issued by PEFC™ and FSC® respectively and
have chain-of-custody certification (Controlled 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 opera-

tions 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 has begun to
incorporate its operations under the certification of the other sawmills.

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.

HOLMEN ANNUAL REPORT 2018 / FIVE-YEAR REVIEW, SUSTAINABILITY

Definitions, glossary and references

DEFINITIONS
Capital employed
Net financial debt plus equity, which corresponds to fixed
capital (excluding non-current financial receivables) plus
working capital less the net sum of deferred tax liabilities 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.

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 buyback of shares, if any,
during the year. Diluted EPS means that any diluting effect
from outstanding call options has been taken into account.

Equity/assets ratio
Equity expressed as a percentage of total assets.

Financial assets
Non-current and current financial receivables and cash and
cash equivalents.

Items affecting comparability
Used to illustrate how income measures were affected by events
outside normal business operations, such as impairment losses,
disposals and major restructuring. The effects of maintenance
and rebuilding shutdowns are not treated as an item affecting
comparability. Page 74 states which items have been treated as
items affecting comparability over the past 10 years.

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

Operating margin
Operating profit/loss (excluding items affecting comparability)
expressed as a percentage of net sales.

Operating profit
Profit before net financial items and tax.

Profit before depreciation/amortisation
Earnings before interest, taxes, depreciation, amortisation and
change in value of forests, excl. items affecting comparability.

Result before change in value
Result before change in value, excl. items affecting
comparability. Used for the Forest business area.

Return on capital employed
Operating profit/loss (excluding 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.

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

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 grammage
can have different thicknesses depending on the paper’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 14001
An international standard for environmental management.
Important principles in ISO 14001 include regular environmental
audits and a gradual increase in the requirements.

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.

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 cooking 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.

Wood-containing paper
Paper that is manufactured from mechanical pulp.

Woodfree paper
Paper that is manufactured from chemical pulp.

REFERENCES
References page 17
• Brege, S, Nord, T and Stehn, L. Industriellt byggande i trä –

nuläge och prognos mot 2025 (Industrial construction in wood
– status and forecast to 2025). 2017, Linköping University. With
annex from consultancy firm Tyréns, Framtidsstudie: Indata för
bedömning av klimateffekt av ökat träbyggande (Future study:
Input data for assessing climate impact of increased wood
construction), 2017.

• Hurmekoski, E. How can wood construction reduce

environmental degradation, 2017. European Forest Institute.
ISBN 978-952,5980-43-9.

• Tettey, U, Y, A; Dodoo, A. and Gustafsson, L., Carbon balances
for a low energy apartment building with different structural
frame materials. 10th International Conference on Applied
Energy (ICAE2018), 22-25 August 2018, Hong Kong, China.
To be published in Energy Procedia.

References page 24
• 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.

• Sathre, R. and O’Connor, J. Meta-analysis of greenhouse gas

displacement factors of wood product substitution.
Environmental Science Policy 2010, 13, 104–114.

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

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

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

The use by Holmen of any MSCI ESG Research LLC data, and the
use of MSCI logos, trademarks, service marks or index names
herein, do not constitute a sponsorship, endorsement or
promotion of Holmen AB. MSCI services and data are the property
of MSCI or its information providers. MSCI and MSCI ESG
Research names and logos are trademarks or service marks of
MSCI or its affiliates.

HOLMEN ANNUAL REPORT 2018 / DEFINITIONS, GLOSSARY AND REFERENCES

Information

The interim and year-end reports are presented at
a tele conference for the press and analysts. The
conference is in English and can 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 automatically to
the share holders 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 2019 Holmen will publish the following
financial reports:

Interim report January–March: 8 May 2019
Interim report January–June: 15 August 2019
Interim report January–September: 18 October 2019
Year-end report: 30 January 2020

Date for trading and dividend
The final date for trading in Holmen shares
including right to dividend: 11 April 2019
Record date for dividend: 15 April 2019
Payment date for dividend: 18 April 2019

100%

Holmen-produced

This entire annual report is made using Holmen’s own pro-
ducts. 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 prin-
ted 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, grammage
and shade. Both Holmen TRND and Invercote G are made
from fresh fibre 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,
Lasse Hejdenberg, Måns Berg, Magnus Glans and others.
Print: Åtta.45

Cover photos:
Holmen’s forest outside Norrköping and
refiner plate from Braviken Paper Mill.

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