Holmen
Annual Report 2021

Plain-text annual report

Annual Report 2021 We groW houses We groW change contents 2021 Holmen in brief CEO’s message Strategy and targets Investment case The year in brief Forest Paperboard Paper Wood Products Renewable Energy A sustainable business Employees Corporate governance report Risk management Shareholder information 03 04 06 10 14 16 18 20 22 24 26 36 38 43 48 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 Business overview Definitions and glossary Calendar and information 50 56 83 85 87 88 90 91 92 94 96 98 99 100% Holmen-produced This entire annual report is made using Holmen’s own products. The cover is printed on Invercote G, manufactured at Iggesund Mill. This is a paper- board with high whiteness and a smooth, matt surface. The paperboard is ideal for graphical products with a surface finish. The insert is printed on Holmen TRND, which is manufactured at Hallsta Paper Mill. This is an uncoated, matt magazine paper that offers a wide range of options in terms of bulk, grammage and shade. Both Holmen TRND and Invercote G are made using fresh fibre from sustainably managed forests. 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 2021 financial year. The annual report comprises the administration report (pages 2, 6–9, 14–15, 34–49, 83–84, 88–89) and the financial statements, together with the notes and supplementary infor- mation (pages 50–82). The statutory sustainability report in accordance with the Annual Accounts Act is included in the annual report (pages 8–9, 31, 34–37, 40–42, 44–45). The Group’s consolidated 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 issues identified as key in view of the materiality analysis conducted in 2018. The Sustainability Report has been compiled in accordance with the Global Reporting Initiative’s GRI guidelines at Core level. The report comprises pages 2, 4–10, 12–13, 16–50, 61, 63–66, 80, 87– 90, 94–97. GRI index is available at 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. The cover is printed on Invercote G 280 gsm. The insert is printed on Holmen TRND, 2.0 – 80 gsm. Layout: Identity Works. Production: Gylling Produktion AB. Photos: Ulla-Carin Ekblom, Måns Berg, Christian Ekstrand and others. Print: Larsson Offsettryck AB 2 2 Holmen Annual Report 2021 Holmen Annual Report 2021 Holmen grows Houses We manage the forest actively and sustain­ ably, and use the raw material wisely and far-sightedly. The wood is refined into wood products for sustainable building, and we turn whatever is left over into world­leading paperboard and innovative paper products. In addition, we use the water rushing down the rivers and the wind blowing through the treetops to produce renewable energy. For us, succesful business and a sustainable future go hand in hand. When we grow houses, we are also growing change. 2021 in figures Net sales 19 479 SEKm Operating profit* 4 061 SEKm Cash flow 3 375 SEKm No. of employees 3 474 Total shareholder return Holmen B and OMX Stockholm Index 700 600 500 400 300 200 100 0 12 13 14 15 16 17 18 19 20 21 Jan 22 Holmen B OMX Stockholm 30 (OMXS30) *Excl. items affecting comparability Holmen in brief Holmen Annual Report 2021 Holmen Annual Report 2021 3 3 CEO’s message Dear sHareHolDers, 2021 was characterised by a rapid economic recovery with a shortage of input goods and logistics resources, which led to increased prices across much of society. With our own forest holdings and renewable energy assets, we were nevertheless able to advance our positions while at the same time seeing our operating profit climb to a historically high level of SEK 3 731 million. As we close the books on 2021, we can clearly see that our business model − creating value based on our forest assets − is a successful one. We have managed to keep up production and seize on opportunities to increase prices, which has generated superb results, helped in no small part by sales of wood products. We can also report that interest in owning forest remains high, as reflected in the 9 per cent increase in the value of our forest assets to SEK 47 billion. In light of the solid earnings development and our strong financial position, the proposal is to increase the ordinary dividend to SEK 7.50 and to pay an extra dividend of SEK 4.00. The transition to a sustainable world The transition to a sustainable world continues, with politicians, businesses and consumers jointly pushing towards sustainable use of the planet’s resources. The greatest challenge lies in halting global warming, in which context it is worth noting that energy production accounts for three-quarters of carbon emissions. Although we are seeing rapid advances in renewable energy, only a small proportion of the world’s energy comes from sustainable sources. Looking back over the past 50 years, the world’s energy consumption has tripled, and this increase in demand has almost exclusively been met using fossil fuels. Moving forward, we have to be able to supply a growing population with more energy, while at the same time transitioning existing energy production to sustainable sources. This means not only that we need to produce more renewable electricity, but that we must also electrify substantial elements of industrial production, heating and transport. Renewable electricity production With a fossil-free energy system and opportunities to increase renewable electricity generation, Sweden is well placed to lead the development of next-generation, fossil- free industrial processes. Recent initiatives concerning everything from green steel to batteries are concrete examples of companies beginning to turn words into action. With our controllable hydro power, we can help to provide the growing industries with green electricity when needed. When Blåbergsliden Wind Farm becomes fully operational in early 2022, we will be increasing our provision of renewable energy by 30 per cent. We see good potential to develop a significant wind power business. Sustainable building The real estate sector accounts for over a third of Europe’s carbon emissions, something that the major construction companies have begun to acknowledge as they set targets to become fossil-free along the whole value chain. The main challenge is that making cement manufacture sustainable is both costly and difficult. Wood offers an alternative that not only is fossil-free, but also stores carbon dioxide in the buildings. This makes the market prospects for wood very promising, not least if fossil construction materials are made to carry their true cost to the climate. Through the acquisitions and investments of recent years, we have expanded our wood products business while at the same time shifting ourselves forward in the value chain, most recently with the acquisition of Martinsons. We are now taking the next step in developing Iggesund Sawmill by adding construction timber as a complement to our strong joinery products portfolio, while at the same time increasing capacity. With a strong position in the wood market and well-invested sawmills, we have created a platform for continued growth for many years to come. Fossil-free paper and paperboard We grow forest with a view to building houses. When we saw the wood, whatever is left over is used in our paper and paperboard mills, where wood chips and shavings are topped up with the trees that are too narrow to become construction material. With a practically fossil-free energy supply, we provide the market with climate friendly products – a fact that our customers are increasingly beginning to appreciate. With control over the wood raw material and a sustainable energy supply, we are continuing to develop our position by making the most of the unique properties that fresh fibre provides. Managed forest generates climate benefits The world’s forests capture and store as much carbon dioxide as there is in the atmosphere, and this sequestration is increasing year on year. This increase is seen exclusively in the forests that are actively managed. We have long combined active forestry with preservation of good biodiversity, and we are seeing this bear fruit with a steadily increasing volume of standing timber and larger harvests from healthy ecosystems. Regular independent measurements show that the conditions for biodiversity in Sweden and Finland are good, while the majority of other countries both in and outside Europe need to do much, much more. We are focused on gradually increasing the carbon storage in our standing forest, while at the same time stepping up production of wood products, paperboard and paper as part of the transition to a sustainable world. In 2021, our combined operations contributed towards a climate benefit of 7 million tonnes CO2e, equivalent to 15 per cent of emissions in Sweden. We grow houses and then make renewable packaging, magazines and books from what is left over, while also harnessing the energy that blows through the treetops and flows down the rivers. Backed by a strong financial position, we are well equipped to benefit from the opportunities that will open up as Europe converts to a fossil-free society. Stockholm, 18 February 2022 Henrik Sjölund President and CEO 4 Holmen Annual Report 2021 CEO’s message » We have created a platform for continued growth for many years to come.« CEO’s message Holmen Annual Report 2021 5 Strategy and targets growing a sustainable future Our business concept is to own and add value to the forest Holmen’s extensive forest holdings are the foundation of our business. Using our own production facilities, the growing trees are refined into everything from wood for climate-smart building to renewable packaging, magazines and books, while at the same time we generate hydro and wind power on our own land. A business that not only creates value for customers and shareholders, but also contributes to a better climate and thriving rural communities. ↗ Paper The Paper business will be developed by offering resource-efficient alternatives to traditional products. 6 Holmen Annual Report 2021 Strategy and targets ← Forest Forest growth and future harvests will increase through active and sustainable forestry. A strong position in the wood market will enable the development of Holmen’s production facilities. ↙ Renewable Energy The Renewable Energy business will grow by establishing wind power on Holmen’s own land. ← Wood Products The Wood Products business will grow through products and solutions for sustainable construction. ← Paperboard The Paperboard business will develop on the basis of its position as a market leader in the premium segment for renewable consumer packaging. Strategy and targets Holmen Annual Report 2021 7 Strategy and targets we aim to create value tHat stanDs tHe test of time wHile contributing to a better climate Forest The forest is sustainably managed to provide a good annual return and stable value growth. Growth and harvests will increase over time. In 2021, harvest amounted to 2.8 million m3, which is in line with the current harvesting plan. Forest property prices continued to rise during the year, which increased the value of the Group’s forest assets by 9 per cent to SEK 47 billion. Industry The industrial operations are run with a focus on long-term profitability. The target is for a sustained return of over 10 per cent on capital employed. In 2021, the return for the industrial side of the business reached 26 per cent, driven by excellent profitability in Wood Products. Renewable Energy The production of renewable energy will increase by complementing our existing hydro power with wind power on our own land. The level of hydro and wind power production was normal, amounting to a little over 1.2 TWh. 2022 will see the wind farm in Blåbergsliden become fully operational, which is expected to boost the Group’s annual production of renewable energy by a little over 0.4 TWh. Annual harvest, ’000 m3sub/year Industry’s return on capital employed, % Production of hydro and wind power, GWh 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2002- 2006 2007- 2011 2012- 2016 2017- 2021 2022- 2026* 2027- 2031* 2032- 2036* 2037- 2041* 30 25 20 15 10 26 17 18 19 20 21 1 600 1 200 800 400 0 1 230 17 18 19 20 21 Harvest Thinning Storms & other events *Forecast 8 Holmen Annual Report 2021 Strategy and targets Climate benefit We will increase our benefit to the climate through higher growth in our forest and higher sales of renewable products that store carbon dioxide and replace fossil- based alternatives, while also reducing the fossil emissions along our value chain. In 2021, Holmen’s operations helped to generate a climate benefit of almost 7 million tonnes of CO2e, with positive contributions from all the business areas. For further information, see page 32. Capital structure Our financial position is to be strong in order to secure room for manoeuvre when making long-term commercial decisions. Net financial debt will not exceed 25 per cent of equity. At year end, the financial position remained strong, with a debt/equity ratio of 9 per cent. Dividend Holmen will generate a good annual dividend for shareholders. The level is determined by the Group’s profitability, investment plans and financial situation. The dividend is supplemented with share buy-backs where this is judged to create long-term value for shareholders. The Board proposes that the 2022 AGM approve a dividend of SEK 7.50 per share and an extra dividend of SEK 4.00 per share. Climate benefit, million tonnes CO2e Net debt as % of equity Dividend per share, SEK 8 6 4 2 0 7 17 18 19 20 21 40 30 20 10 0 9 17 18 19 20 21 12 9 6 3 0 Proposal 4.00 Proposal 7.50 17 18 19 20 21 Ordinary dividend Extra dividend Strategy and targets Holmen Annual Report 2021 9 Investment case tHe value of owning forest Wind and hydro power. Owning forest land also provides opportunities for other revenue streams, not least by developing wind power. With our extensive forest holdings, we have a unique opportunity to develop areas that are favourable for wind power. We continue to initiate projects on our own land, and in the autumn Holmen’s new Blåbergsliden Wind Farm began generating electricity step by step. When operating at full strength, the wind farm will produce 0.4 TWh, boosting our production of hydro and wind power to 1.6 TWh per year. There are currently 159 wind turbines in use or under construction on our land. With several wind projects in various stages of development, we have an opportunity to continue expanding wind power within Holmen. Holmen’s energy production is dominated by hydro power from our 21 fully or partly owned power stations. Hydro power pro- vides a reliable electricity supply and delivers major social benefits in the tran- sition to more renewable energy sources. Other opportunities on our land. Where parts of our land holdings are located near centres of population, in southern and central Sweden, and in tourist areas close to the mountains, the potential exists to develop the land for housing and holiday accommodation. Extracting stone and gravel from our own land for use in projects such as road building is another possibility for landowners such as Holmen. The forest is a fantastic asset. In the drive to become less depen­ dent on fossil raw materials, forest products have a key role to play and demand for them will increase over time. Active forestry improves tree growth, and with it the amount of renewable raw material, but the potential is limited to the areas that are available for forestry. The fact that Holmen owns 1.3 million hectares of land provides fantastic opportunities to create value over time. The growth in the forest is the result of our active and sustainable forest manage- ment, which begins with the seed – we raise our own seedlings and reforest all the areas that are harvested. Because the annual growth is greater than the harvest, the amount of wood in our forests is also increasing year on year, which means that we will gradually be able to harvest more in the future. In 2021, Holmen’s total volume of standing timber amounted to 125 million m3 growing stock, solid over bark, which is 6 per cent higher than 10 years ago. Revenue from our forest holdings Owning forest naturally provides a chance to earn revenue when the forest is harvested. The best prices are achieved for the large logs that are turned into construction material. Holmen uses the narrower part of the tree and wood from thinning, along with residual wood chips from the sawmills, to manufacture paperboard and paper for packaging, books and other graphical printing. In addition to logs and pulpwood, treetops and branches have their own uses and are sold as forest fuel for the production of district heating and so on. The value of the forest is confirmed by current transactions A large number of forest property transac- tions are carried out every year. Holmen’s forest assets are recognised at fair value based on the prices paid for forest proper­ ties in the areas where we have our forest. As of 31 December 2021, the book value stands at SEK 47 080 (43 202) million, which averages out at SEK 45 100 per hectare of productive forest land. The value varies across the country, with forest pro- perties in southern Sweden being valued much higher per hectare as a result of a greater volume of standing timber, higher wood producing capacity, a shorter harvesting cycle and greater demand for forest land. Planned harvest, ’000 m3sub/year 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2002- 2006 2007- 2011 2012- 2016 2017- 2021 2022- 2026* 2027- 2031* 2032- 2036* 2037- 2041* Thinning Harvest Storms & other events *Forecast Wood prices, SEK/m3sub Price of forest properties, SEK/m3sub 600 500 400 300 200 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2004 2006 2008 2010 2012 2014 2016 2018 2020 800 600 400 200 0 2015 2016 2017 2018 2019 2020 2021 Real Nominal Southern Sweden Central Sweden Northern Sweden Source: Annual collation of price statistics from various market players and transaction data. 10 Holmen Annual Report 2021 Investment case tHe climate transition is Driving DemanD One of society’s biggest challenges is meeting the needs of a growing population while at the same time curbing climate change. If we are to successfully transition to a fossil-free society, we must break our dependence on fossil resources and make more use of renewable materials from nature. Growing demand for renewable and fossil-free products Demand for raw materials and products that are renewable, recyclable and fossil­free is on the rise, a trend being accelerated by political decisions and increasing aware- ness among consumers. Active forestry is boosting the growth in our forests, but the supply of forest raw materials is limited, while at the same time global demand is expected to increase, for both logs and pulpwood. Population growth and urbanisation, coupled with surging ambitions for sustainable construction, are driving the wood products market. Demand for paper- board and paper is being fuelled largely by economic and population growth, as well as changes in consumer behaviour and increased digitalisation. The desire to reduce climate impacts and avoid plastic packaging is a strong driving force promoting greater use of wood fibre-based products. Everything and everyone must carry their climate cost The European energy market is undergoing a major transition. Roughly half of electricity production in Europe is fossil­free, but electricity only accounts for a quarter of total energy consumption and almost all other energy consumption is fossil-based. To meet the climate targets, much of fossil- based energy production will need to be switched to fossil-free sources. As fossil energy is phased out, renewable electricity production will take on even greater significance in the future. According to a report by the Confederation of Swedish Enterprise (reference page 99), demand for electricity in Sweden alone is set to rise by at least 60 per cent by the year 2045. However, it will not be enough just to increase the production of renewable energy – all transport and industrial processes will need to be electrified and made more energy-efficient, as will the construction and heating of buildings. Achieving this transition will require major investment and all products will have to carry the true cost of their climate impact. Buildings account for considerable emis- sions of greenhouse gases from material and energy use, during both their construc- tion and their life cycle. Within the EU, the construction and real estate sector is responsible for 35 per cent of fossil carbon dioxide emissions, and in Sweden buildings account for 40 per cent of energy use. Active measures in the areas of heating, material choices and transport offer major opportunities to cut the real estate sector’s climate footprint. As the focus on climate issues intensifies, it is becoming increasingly clear that the forest and its products have a vital role to play in a fossil-free future. This is true not least of wood products, which store carbon dioxide when they are in use, while at the same time reducing demand for products with a high carbon footprint, such as concrete and steel. The climate can’t wait Holmen is a company that is helping to improve the climate. The amount of greenhouse gas in the atmosphere is lower thanks to the work we do. Our growing forests capture and store carbon dioxide, our products replace fossil alternatives and our production of hydro power and wind power contributes to the transition towards a renewable energy system in Europe. Investment case Holmen Annual Report 2021 11 Investment case we are Helping tHe worlD to transition Volume of standing timber, m3 growing stock, solid over bark per hectare of productive forest land We are living in a time of huge challenges for the future and there is an urgent need for change in order to deal with the climate crisis. Our circular business meets that need. With our operations already providing climate benefits, we are looking to make even more of a contribution to the transition. And it all starts in the forest. Higher growth while preserving biodiversity Holmen has been managing forests since the 17th century and over the years has contributed to enormous industrial advances. Historically, biodiversity has not been a priority issue in Swedish forestry, but the past 30 years have seen major developments and we have learned a great deal about how we can improve conditions for biodiversity and at the same time increase growth in the forest. Holmen’s forest strategy focuses on achieving high and profitable growth while also ensuring that all naturally occurring species can thrive in the Swedish forest landscape. Of Holmen’s over a million hectares of forest­clad land, we use about 80 per cent for wood production. The trees we plant today will grow for around 80 years before they are harvested, and an awful lot can happen in that time. The forest could be hit by drought, storms and pests. But a thriving ecosystem increases the chances that the trees will survive and reach maturity. Each year, we invest around SEK 170 million in care for our forests and constantly work to improve everything from seedlings to nature conservation through research, development and education – all to ensure good growth and healthy ecosystems for future generations. The Biodiversity Intactness Index (BII) shows that the conditions for biodiversity in Sweden have improved since the 1970s and are now rated as good. 12 Holmen Annual Report 2021 Investment case 120 90 60 30 0 119 1948 1965 1988 2000 2020 1955 1975 1993 2010 2021 Biodiversity Intactness Index Sweden 100 95 90 85 95.25 1970 1980 1990 2000 2005 2010 2015 2020 Areas with a BII above 90 are considered to have enough biodiversity to be a resilient and functioning ecosystem. Source: Natural History Museum. References page 99. 2010 2012 2013 2013 2014 2017 2020 2021 Braviken Sawmill taken into operation Solid fuel boiler at Hallsta Paper Mill replaced with fossil­free electricity Opening of Varsvik Wind Farm outside Hallstavik Acquisition of Martinsons and its two sawmills New recovery boiler at Iggesund Mill New biofuel boiler at Workington Mill Acquisition of Linghem Sawmill Blåbergsliden Wind Farm built outside Skellefteå Increased production and processing of wood products Increased production of renewable energy from wind power Lower fossil emissions from our production Holmen’s manufacture of wood products has become an increasingly important part of our business. The construction of Braviken Sawmill in 2010 and the acquisition of Martinsons in 2020 have prompted strong growth in our wood products business. Demand for refined wood products is growing and with rising interest in wood construction we see great opportunities to further develop the business. With a broader palette of refined products, we hold a strong market position, with increased sales to chains of builders’ merchants. Through Martinsons, we are now also able to offer the planning and construction of complete frames in CLT and glulam for everything from sports halls and schools to office blocks and apartment buildings. With five sawmills strategically located near our forest holdings, we are maximising the value of our forest and securing the raw material supply to all of our industrial sites. For Holmen, the establishment of large- scale wind power provides a logical comple­ ment to our controllable hydro power. It is also a good way to derive added value from our land, as higher energy production pro­ vides a good revenue stream for Holmen. Holmen opened Uppland’s first wind farm, Varsvik, back in 2014, and now in 2021 Blåbergsliden Wind Farm has just been completed outside Skellefteå. With 26 turbines, the wind farm will boost our annual production of renewable energy by 30 per cent, taking it up to 1.6 TWh. In addition to Blåbergsliden, a permit application for another wind farm in Västerbotten has been submitted, and in 2021 we also applied for environmental permits for wind power in Östergötland. As a large landowner, Holmen is well placed to help with the expansion of wind power and in recent years we have conducted surveys and wind analyses on the Group’s land to identify favourable sites for future wind power development. We began planning for the transition from fossil energy use at our industrial sites in the early 2000s. Since then we have switched to primarily using fossil- free electricity and renewable energy from biofuel. Combined with energy efficiencies, emissions of fossil carbon dioxide from our production facilities have thus been cut significantly. Since 2005, the use of fossil fuels in our production has fallen by 85 per cent. In contrast to many of our competitors on the continent, much of our manufacturing is practically fossil­free, and production at Hallsta Paper Mill is entirely fossil-free. Today the majority of our fossil emissions are generated from purchases of input products, along with transport to and from Holmen’s industrial sites. Therefore, we are now focusing on cutting emissions in these areas. Production of wood products, ’000 m3 Use of fossil fuels (base year 2005), % 1 600 1 200 800 400 0 1 465 2016 2017 2018 2019 2020 2021 30 0 -30 -60 -90 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 -85 Investment case Holmen Annual Report 2021 13 Net sales and operating margin Operating profit/loss and return SEKm 20 000 16 000 12 000 8 000 4 000 0 SEKm 19 479 25 5 000 20 4 000 21 15 3 000 10 2 000 5 0 1 000 0 16 17 18 19 20 21 4 061 9 7 16 17 18 19 20 21 Net sales Operating margin* *Excl. items affecting comparability   Operating profit*  Return on capital employed* Return on equity** *Excl. items affecting comparability **Excl. forest revaluation 2019 Cash flow, SEKm Net debt as % of equity % 15 12 9 6 3 0 Operating profit* Business area, % 8 35 39 16 2 Forest Paperboard Paper Wood Products Renewable Energy Total: 4 061 SEKm 1 495 SEKm 673 SEKm 70 SEKm 1 668 SEKm 347 SEKm *Excl. items affecting profitability and Group- wide Capital employed* Business area, % 4 000 3 000 2 000 1 000 0 3 375 1 332 1 741 16 17 18 19 20 21 20 15 10 5 0 Investments Dividend Acquisitions Cash flow before investments and changes in working capital 8 5 3 10 9 16 17 18 19 20 21 74 Forest Paperboard Paper Wood Products Renewable Energy Total: 51 093 SEKm 37 300 SEKm 5 169 SEKm 1 637 SEKm 2 278 SEKm 4 069 SEKm *Excl. Group-wide 14 Holmen Annual Report 2021 The year in brief The year in brief Historic results based on our own forest 2021 turned out to be another year defined by the coronavirus pandemic. With a business based on our own forest holdings and a substantial profit of SEK 3 731 mill­ ion, it is evident that we success­ fully maintained production and benefited from the price rises that followed when demand rose. The continued strength of the wood products market drove demand for logs, leading to high prices, while demand for pulpwood remained normal with stable prices. Profit for the Forest business area  amounted to SEK 1 495 million, with sales  of forest assets in the UK contributing to the strong result. The value of owning Swedish forest also became increasingly clear, as the market price for forest property continued to rise over the year. Based on transaction prices in the areas where the Group owns forest land, the value of Holmen’s forest assets climbed 9 per cent to SEK 47 billion. As restrictions were lifted and the world opened up, demand for consumer packaging rose, causing an uplift in prices at the end of the year. Paperboard’s revenue was adversely impacted by a major maintenance shutdown at both our mills, leading to a profit of SEK 673 million.  Damage to the turbine in the biofuel boiler at Workington Mill increased energy costs by SEK 330 million, but did not  affect paperboard production. The higher costs were posted as an item affecting comparability. A lack of recycled fibre  and record-high electricity prices placed constraints on European production of printing paper which, coupled with capacity reductions, created a shortage of paper in the market and prices rose towards the end of the year. The high electricity prices were partially offset by substantial increases in deliveries and a better product mix. Paper reported a profit of SEK 70 million.  Wood Products experienced steep price rises in the first half of the year, but as  customers ran down stocks in the autumn, prices fell back slightly. On the back of  these high sales prices, and the greater volumes resulting from the acquisition of Martinsons, Wood Products profit totalled  SEK 1 668 million. The economic recovery drove up demand for coal and natural gas, while tightened regulations on fossil carbon emissions increased the cost of emission allowances. Together, these factors pushed electricity prices on the continent up to record levels. The energy shortage in Europe also affected Swedish electricity prices, while at the same time the price differences within Sweden were unusually large due to limitations in transmission capacity. Although production fell from the high levels of 2020, Renewable Energy reported a higher profit of SEK 347 million  due to a rise in the average electricity price.   Holmen’s financial position remains  strong, even after distribution of the dividend and investments. During the year, the Group’s net financial debt fell  by SEK 80 million to SEK 4 101 million,  equating to 9 per cent of equity. 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 Ordinary dividend per share, SEK Extra dividend per share, SEK Return on capital employed, % Cash flow before investments and changes in working capital, SEKm Cash flow from investments, SEKm** Equity, SEKm Net financial debt, SEKm Net debt as % of equity Average no. of employees (FTE) 2021 19 479 3 731 4 061 3 004 18.5 7.5* 4.0* 8.5 3 375 1 332 46 992 4 101 9 3 474 2020 16 327 2 479 2 479 1 979 12.2 7.25 3.5 5.6 2 411 1 924 42 516 4 181 10 2 974 *Board proposal. **Net including company acquisitions but excluding changes in non-current financial receivables. Outlook The continuing economic recovery is expected to drive demand for pulpwood. Demand for logs is expected to remain at a high level, given the ongoing strength of demand and an unstable supply of raw material from Central Europe due to the long-standing effects of storms and insect attacks. The paperboard market has seen positive development during the pande- mic and is expected to continue growing.  European consumption of fresh fibre  board rose by 6 per cent over the year, and Holmen continues to focus its business development on the customer segments with the highest quality requirements. The shortage of input goods that affected the market balance for paper in 2021 appears to be continuing into 2022. With local wood raw material and fossil-free electricity, our competitiveness is sound and we are continuing to develop our business in segments where the benefits of fresh  fibre are most evident. The established  commitment to wood products continues, with investments in increased capacity and processing aimed at developing the wood products business and generating added value from our own forest holdings. The market for wood products also looks favourable, particularly if other construc- tion materials are required to carry their true cost to the climate.   Greater electrification of both manu­ facturing and transport is going to push up demand for more renewable electricity. Blåbergsliden Wind Farm will become fully operational in the first quarter of 2022,  which will increase our annual wind and hydro power production by 30 per cent. The levels in Holmen’s water storage reservoirs were normal at the end of the year.   With our strong financial position,  Holmen is well equipped to exploit any opportunities as Europe converts to a fossil- free society. Our business already provides climate benefits and the best we can do for  the climate is to help more customers to replace fossil sources with renewables. The year in brief Holmen Annual Report 2021 15 Forest sustainable forestry Holmen manages the forest actively and sustainably. As well as being a stable source of revenue for Holmen, the forest brings major climate benefits by capturing and storing carbon dioxide and reducing the need for fossil raw materials. The strategy is to increase the revenue from and future value of the forest holdings through active and sustainable forestry. Holmen’s forests cover 1.3 million hectares, of which a little over a million hectares comprise productive forest land. As one of Sweden’s biggest landowners, we are largely able to supply Holmen’s Swedish produc tion units with renewable raw ma- terial from our own sources. Economies of scale and efficient logistics give us a strong  position in the wood market, which boosts com petitiveness and enables the develop- ment of Holmen’s production facilities. Actively managed forest benefits the climate In our forests, we grow houses. This means that we manage the forest for the benefit  of the wood. The trees absorb carbon dioxide as they grow, while replacing fossil alternatives doubles the climate effect of the renewable raw material. In addition, the larger the area managed, the more carbon dioxide is captured. Forest that is not managed does not deliver anywhere near the same long­term benefits for the  climate, not least due to the absence of any substitution of products that are harmful for the climate. Our active forestry also means that the trees grow better. When we increase the harvest, we are binding more carbon dioxide in wood products in the long term and are able to offer more climate- smart products in paperboard and paper. Forestry constantly developing The volume of standing timber in Holmen’s forests is built up over 70–90 years and is then harvested when it reaches maturity, with a new growth cycle beginning after harvest. The most important silviculture measures come in the years immediately after harvest, when the soil is prepared and the land is reforested using seedlings and seeds that are specifically tailored  to the location. 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 invests around SEK 170 million a year in future growth  through silviculture and fertilisation. Holmen’s forestry is certified according  to PEFC™ and FSC® and all the wood is traceable. 45 million seedlings. Holmen’s two nur- series – one in Gideå and one in Friggesund – produce a little over 45 million spruce and  pine seedlings each year, the majority of which are planted on our own land. Selected seeds and organic fertiliser produce healthy and vigorous seedlings that are given a special coating to protect against insect attack. Using bio-based heating makes the production of seedlings practically fossil-free. Holmen is also involved in the development of an automated system for growing forest seedlings. This technology will allow us to produce seedlings that grow better, offer higher wood quality and have greater disease resistance. Biodiversity We combine active forestry focused on high growth with protecting the diversity of natural habitats and species in our forests. We apply extensive environmental conservation measures during harvesting. For example, we leave old and dead trees in the forest landscape, as well as trees along watercourses. We also conduct targeted initiatives to increase the availability of habitats that are in short supply, not least by restoring wetlands or performing controlled burning. In addition, we have identified almost 8 800 sites that we do  not harvest. In these areas that have been voluntarily set aside, we conduct inventories of the natural assets and, where necessary, take action to protect and boost habitat diversity. The aim is to ensure that all naturally occurring species are able to thrive in the Swedish forest  landscape. Sustainable forestry is about balancing several perspectives – economic, environ- mental and social – and succeeding in doing so over time. It is in our interest and equally in the interest of society for us to manage the forest actively and sustainably and for us to use the raw material in a wise and far-sighted way. 16 Holmen Annual Report 2021 Forest Learning more about Swedish forests Forestry is essential to thriving rural communities. It creates jobs in places where there are few employers and gives people an opportunity to live, work and enjoy quality of life outside the city regions. Forestry also makes the forests easily accessible. Our forest roads take people out into the countryside, while thinning means the forest does not become overgrown. With its contribution to both the climate and the Swedish economy, management of the forest is of great national, regional and local significance.  Holmen and other industry players have therefore joined forces to make politicians, authorities and the general public aware of how vital the forest is for the climate, and the importance of forestry for an emerging bioeconomy.   Holmen’s Knowledge Forests. To raise awareness of our forestry and forest research, we have established Holmen’s Knowledge Forests. The forests are selected for their specific biological  conditions and is used to explore, gather and pass on knowledge. It is also our way of showing that sustainable forestry can promote growth while at the same time increasing biodiversity in the forest. This year saw the opening of Likstammen Knowledge Forest in Södermanland, where we operate sustainable management of lakeside holdings, combining active forestry with pure nature conservation measures such as restoring wetlands.  Strong position in the wood market The growing interest in building in wood has driven up demand for logs in recent years. Calls for different types of renewable packaging material and large-scale invest- ments in pulp mills have also helped to drive up demand for pulpwood. Over the year, demand for logs remained high and prices increased, while the pulp- wood market was more balanced. Holmen holds a strong position in the wood market and, with our growing output of wood prod- ucts, we can process an ever-increasing proportion of our forest at our own industrial sites. » It is in our interest and equally in the interest of society for us to manage the forest actively and sustainably and for us to use the raw material in a wise and far-sighted way.« Key figures Operating profit Comment on results 2021 2020 Net sales, SEKm 6 509 5 883 Of which from own forest, 1 376 1 325 SEKm Operating profit/loss, SEKm 1 495 1 367 Investments, SEKm 249 207 Book value, forest assets, SEKm Average no. of employees (FTE) Volume from own forest, ’000 m3sub 47 080 43 202 431 384 2 833 2 841 Volume of standing timber, m3 growing stock, solid over bark per hectare of productive forest land 120 90 60 30 0 1948 1965 1988 2000 2020 1955 1975 1993 2010 2021 Forest inventory SEKm 1 600 1 200 800 400 1 495 Forest posted a profit of SEK 1 495 million,  which was positively impacted by the sale of a large forest property in the UK. Demand for logs was good, while the pulpwood market was more balanced, with stable prices. Harvesting and thinning of Holmen’s own forest stood at a normal level, in line with the harvesting plan. Forest property prices continued to rise during the year, which increased the value of the Group’s forest assets by 9 per cent to SEK 47 billion. 0 16 18 21   Operating profit/loss excluding items  17 19 20 affecting comparability Holmen’s forests 2021 Total land acreage Total forest land acreage* – of which nature conservation areas Productive forest land** Total volume of standing timber on productive forest land 1 304 000 ha 1 159 000 ha 201 000 ha 1 044 000 ha 125 million m3 growing stock, solid over bark * Calculated based on Holmen’s stand catalogue and data from the National Forest Inventory in line with the interna- tional definition of forest land: Land area > 0.5 hectares with a tree canopy cover of more than 10 per cent for trees capable of reaching a height of at least 5 metres at maturity. ** Forest land that can produce 1 m3 growing stock, solid over bark per hectare and year (on average during the growth period of the forest stand) according to Holmen’s stand catalogue. Forest Holmen Annual Report 2021 17 » Our customers’ choices make a difference. And the best we can do for the climate is to help more customers to replace fossil sources with renewables.« Key figures Operating profit/loss and return Comment on results 2021 2020 Net sales, SEKm 6 261 6 187 Operating profit/loss excl. items affecting comparability, SEKm 673 812 SEKm 1 000 750 Investments, SEKm 399 275 500 Capital employed, SEKm 5 169 5 276 Average no. of employees (FTE) 1 263 1 228 250 Deliveries, ’000 tonnes 544 544 0 % 20 673 15 13 16 17 18 19 20 21 10 5 0 Demand for paperboard for consumer packaging gradually increased over the year, causing prices to rise. However, major maintenance shutdowns at both mills had a negative impact on profits, which totalled  SEK 673 million for Paperboard. Damage to the turbine at Workington Mill increased energy costs, but did not affect paperboard production. The higher costs were posted as an item affecting comparability.   Operating profit/loss excluding items  affecting comparability Return on capital employed, excluding items affecting comparability European demand for SBB and FBB Price trend FBB Mtonnes 4 3 2 1 0 12 13 14 15 16 17 18 19 20 21 Index 120 100 80 60 40 20 0 12 13 14 15 16 17 18 19 20 21 18 Holmen Annual Report 2021 Paperboard Paperboard Premium PaPerboard for conscious brands Holmen Iggesund is a market leader in the production of high­ quality paperboard. The strategy is to grow globally with two of the market’s strongest brands by combining high quality, custom products and first­class service. Holmen develops premium paperboard for consumer packaging solutions in sectors such as cosmetics, electronics, pharmaceuticals, food and tobacco. The paperboard is marketed under two brands: Invercote and Incada. The products are world leaders due to their quality, durability and excellent design properties. Our facilities for paperboard production  and processing are located in Iggesund and Strömsbruk in Sweden and in Workington in the UK. Our paperboard is manufactured from a renewable, recyclable and biodegradable material, which allows us to work with our customers to develop better packaging solutions that are more fit for purpose –  solutions that are sustainable and promote more circular packaging systems. Fresh fibre delivers unique properties Both Invercote and Incada are manu- factured entirely from fresh fibre, which  brings multiple product benefits. Higher  strength, better brightness and a neutral effect on smell and taste in contact with food are just a few of the properties that add clear value to the end product. Achieving all this relies on the combination of fresh fibre and a  multi­tiered structure,  with layers of different fibre types forming  the basis for the paperboard’s outstanding performance. Close customer collaboration on development With its high and consistent quality, the paperboard ensures stable results in the customer’s production process. Products are constantly being developed to meet the growing demand for sustainable packaging solutions. The customers’ need for support and fast deliveries are priority areas that cover everything from advice and product samples to service centres with local sheeting units and warehousing. Via support teams that maintain close contact with the market and have a deep understanding of the customer’s needs and wishes, we offer expert advice before, during and after the customer’s production process. The service offering includes environ- mental documentation and access to analysis facilities at the company’s own accredited laboratory for sensory and chemical analysis, known as the taint and odour lab, at Iggesund Mill. Coupled with the finishing options at the lamination unit  in Strömsbruk, this means that we can offer custom solutions that meet the toughest requirements. Smart and sustainable production Both of Holmen’s paperboard mills hold chain­of­custody certification and all the  wood raw material comes from sustainably managed forests. Our facilities are largely self­sufficient in renewable thermal and  electrical energy. Iggesund Mill is integrated with Iggesund Sawmill, ensuring that every part of the tree is put to use on site in a circular production process. 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.  Within the past two years, Iggesund Mill and Workington Mill have both received a Platinum rating from EcoVadis for their successful sustainability work. In 2021, Iggesund Mill was also ranked number one in its class by the international analysis firm, cementing the mill’s world­beating  status on sustainability. A renewable alternative to plastic Two strong trends in the packaging market are the drive to reduce impacts on the climate and the drive to avoid plastic packaging. Replacing fossil plastic materials with paperboard cuts our customers’ carbon footprint, while also reducing the amount of plastic that can end up in the natural environment. Products made from fresh fibre can also be recycled,  which is essential for a functioning recycled fibre industry. New product for food packaging. Inverform, a paperboard product specifi­ cally developed to replace plastic and aluminium food packaging, has been well received by the market. Inverform has been designed for press-moulded and folded trays for packaging ready meals. Inverform-based packaging has a substantially lower carbon footprint than regular plastic trays and can also be recycled in the existing packaging collection system. In addition, 2021 saw the launch of a degradable bioplastic that can be used as a barrier against liquids and fats. The new Bio E coating, comprising 75 per cent renewable raw material, is a vital step towards entirely fossil-free food packaging. Our customers’ choices make a difference. And the best we can do for the climate is to help more customers to replace fossil sources with renewables. These innovations are prime examples of how we continue to develop purposeful packaging solutions in collaboration with our customers and partners. Growing packaging market Demand for packaging is rising in line with factors such as population growth, urbanisation, an expanding middle class and more single-person households. Demand in the various product segments varies depending on the market, but there is a general increase in demand for renewable packaging materials. This trend is being driven by regulations against single-use plastics and growing environmental awareness among consumers. Demand up in the wake of the pandemic. The resumption of operations after the pandemic, with the restoration of inven- tories and disruption of supply chains, has created a shortage of paperboard for con- sumer packaging. Demand for paperboard was good over the year, particularly in food, electronics and pharmaceuticals. Paperboard Holmen Annual Report 2021 19 Paper innovative PaPer Products from fresH fibre Holmen develops fresh fibre­ based papers that are perfect for books, magazines and printed advertising. Our papers are lightweight compared to traditional alternatives, making them resource­efficient without compromising on quality or the overall impression. The focus lies on delivering and constantly developing products that are competitive over time. Holmen is a market leader in the develop- ment of new paper products based entirely on fresh fibre. In contrast to recycled fibre  products, fresh fibre produces a naturally  high brightness for an improved experience of text and images. Holmen’s paper prod- ucts have high bulk, making them thick yet light, which means that the customer gets more paper with the same feel at no extra cost. A lighter paper also enables lower distribution costs. With renewable raw material, fossil-free electricity and resource­efficient produc­ tion, we are able to offer products with a low climate footprint. Customer interest in the low climate impact of our products continues to grow, in a trend that matches our strategy of helping our customers to conduct more sustainable business. Paper with the power to communicate Our customers are largely publishers, print- ing firms and retailers looking for resource­  and cost­efficient papers with a focus on  bulk, brightness and overall impression. We take a long-term approach in working to meet customer demand and create profit- able products in three graphical segments: books, magazines and printed advertising. Book paper. Holmen’s book paper is the leading product for paperback books in Europe. Our carbon-neutral paper with high bulk helps customers to achieve efficiencies in both production  and distribution. Publishers appreciate Holmen’s paper because it offers product properties – in the form of a bright, smooth surface – that enhance the reading experience. Graphical paper. Holmen offers a wide range of papers for magazines and printed advertising. The combination of high bulk, whiteness and brightness makes our maga- zine papers competitive alternatives, with a focus on the overall impression. Direct mail is still considered an impor- tant communications channel for driving customers to both physical stores and digital commerce. Holmen’s lightweight paper offers customers the potential to increase the format or the number of pages or copies without adding to the cost, or simply to bank the pure savings on both paper and distribution. Paper products of the future Holmen has been making paper for more than 100 years and has unparalleled expertise. We are convinced that paper has an important role to play in society, today and tomorrow. With fresh fibre as the  foundation, we are continuing to develop our position in a changing market, in both existing and new segments. Investments have boosted capacity in selected product areas and our development of new paper products involves close collaboration with customers and partners. Packaging paper. The launch of paper products for flexible packaging in the form of bags and wrapping paper, as well as base paper for the production of corrugated board, marks our next step in developing the paper products of the future. Broadening our range of products for sustainable packaging solutions boosts our competitiveness, offering customers opportunities to reduce their climate footprint and replace fossil-based packaging. Production in circular ecocycles Holmen’s paper is produced at two Swedish mills, Braviken and Hallsta. Strategic logistical locations ensure short transport distances for the wood and proximity to ports with good capacity. The raw material for our paper comprises residual products from nearby forests and sawmills, which are employed in a circular ecocycle where nothing goes to waste. Environmental and chain­of­custody certification enables  20 Holmen Annual Report 2021 Paper us to ensure that the raw material for our products always comes from sustainably managed forests. Uniquely, production at Hallsta Paper Mill is entirely fossil-free. The mill’s energy solutions include recovering heat from the wastewater and the paper machines, selling the bark to heating plants and composting residual products to create topsoil.   Braviken Paper Mill and Braviken Sawmill  make an energy­efficient unit. 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 paper mill. Surplus bark and wood shavings are sold for the production of renewable energy. Over the year, both mills have received a Platinum rating from EcoVadis. This puts them in the top percentage of the 75 000 companies around the world that have been assessed on their environmental, ethical and social performance. Recycled paper grows in the forest. Paper made from fresh fibre is essential  for the European paper recycling system. Forest resources are limited in the rest of Europe and paper manufacture is based on recycled paper to a considerably higher extent. However, paper cannot be recycled again and again forever. After a certain number of times, the wood fibre is  exhausted. The ecocycle therefore needs a constant injection of fresh fibre. The pandemic’s effects on a challenging market The coronavirus pandemic has had a major impact on both supply and demand with regard to graphical paper. Although the pandemic has accelerated the underlying structural downturn, capacity reductions have stabilised the market. Demand varies between segments, but overall our paper products have demonstrated good competitiveness, not least due to resource- efficient production using local wood raw  material and fossil-free electricity. » With fresh fibre as the foundation, we are continuing to develop our position in a changing market, in both existing and new segments.« Key figures Operating profit/loss and return Comment on results 2021 2020 Net sales, SEKm 5 441 4 879 Operating profit/loss, SEKm Investments, SEKm 70 129 73 280 Capital employed, SEKm 1 637 1 969 Average no. of employees (FTE) 854 832 Deliveries, ’000 tonnes 1 029 883 SEKm 600 500 400 300 200 100 0 4 70 21 16 17 18 19 20 A lack of recycled fibre and record­high  energy prices placed constraints on European production of printing paper over the year. Coupled with capacity reductions, this created a shortage in the market, causing prices to rise towards the end of the year. Paper posted a profit of  SEK 70 million, with substantial increases  in deliveries and a better product mix partially offsetting the high electricity prices. % 30 25 20 15 10 5 0   Operating profit/loss excluding items  affecting comparability Return on capital employed, excluding items affecting comparability European demand for paper Price trend Ktonnes 20 000 15 000 10 000 5 000 0 12 13 14 15 16 17 18 19 20 21 Index 700 600 500 400 300 12 13 14 15 16 17 18 19 20 21 Uncoated magazine and book Newsprint Coated magazine Uncoated magazine Newsprint Coated magazine Paper Holmen Annual Report 2021 21 » Drawing energy from the sun and water from the ground, trees absorb carbon dioxide from the air, and this then remains stored in the wood products we manufacture.« Key figures Operating profit/loss and return Comment on results 2021 2020 Net sales, SEKm 4 872 2 222 Operating profit/loss, SEKm 1 668 Investments, SEKm 242 185 107 Capital employed, SEKm 2 278 1 846 Average no. of employees (FTE) 783 387 Deliveries, ’000 m3 1 373 1 052 SEKm 2 000 1 600 1 200 800 400 0 1 668 82 16 17 18 19 20 21 The market for wood products has developed positively during the pandemic. After steep price rises early in the year, the price of wood products slipped slightly in the autumn as customers ran down their stocks. The acquisition of Martinsons and the expansion of Braviken Sawmill enabled volumes to increase, helping Wood Products to post a historically high profit of  SEK 1 668 million. % 100 80 60 40 20 0   Operating profit  Return on capital employed Consumption of wood products Price trend Million m3 400 300 200 100 0 12 13 14 15 16 17 18 19 20 21 Index 700 600 500 400 300 200 100 0 16 17 18 19 20 21 Europe North America China Other Asia MENA Export price Sweden Price USA 22 Holmen Annual Report 2021 Wood Products Wood Products building tHe future in wood Holmen produces sawn and refined wood products for joinery, construction and builders’ merchants. A project business for full structural frames in CLT provides a complete offering for climate­smart, large­scale wood construction. The business is being developed by increasing the value added and making better use of the wood raw material in combination with large­scale production. Wood is a fantastic material. It is strong, versatile, light and the only construction material that is renewable. Holmen’s sawmills play a key role in our circular business. This is where the wood is split and the processing of the forest we have harvested begins. Developing the wood products business is a natural extension of our forestry work and a key dimension of our strategy of owning and adding value to the forest. Sustainable building Our wood products become houses and other buildings. They are used for façades, roof trusses, floors, walls, doors and win- dow frames, as well as for furniture and decking. Products as simple as planks and boards create great value, not least for the climate. Drawing energy from the sun and water from the ground, trees absorb carbon dioxide from the air, and this then remains stored in the wood products we manufac- ture. Building in wood is therefore signifi- cantly better for the climate than building in concrete and steel, since the manufacture of these materials requires large amounts of energy and generates considerable emissions of fossil carbon dioxide. In addi­ tion, the whole chain from manufacture to transport is much more energy­efficient  and cost-effective, since wood weighs less than concrete and steel. We thus create benefit for the climate on multiple fronts.   Adding value and increasing production Holmen’s high-tech sawmills enable us to offer a wide range of dimensions and grades. Thanks to advanced technology, we can maximise the output from every log. Proximity to the raw material com- bined with efficient wood purchasing is a  key  factor for profitability, while competi­ tiveness is underpinned by the fact that parts of production are co-located with the Group’s paperboard and paper mills.   Demand for refined wood products,  especially CLT and glulam beams, is grow ing and with rising interest in wood construc tion we see great opportunities to further develop the business. We currently offer everything from joinery timber and  refined products for builders’ merchants  to advanced construction components and glulam. The acquisition of Martinsons’ two sawmills in northern Sweden in 2020 advanced Holmen’s position in wood con- struction and now enables us to process the majority of the raw material from our forests in-house. Through Martinsons, we are also able to offer the planning and con- struction of complete wooden frames for everything from sports halls and schools to office blocks and apartment buildings. Investments to boost capacity. Since becoming operational in 2011, Braviken Sawmill has undergone several rounds of technical upgrades to become Scandinavia’s largest and most modern sawmill. Following the expansion of Braviken and the acquisition of Martinsons, the focus now turns to Iggesund Sawmill as the next step in strengthening our market position. An investment in timber sorting and a new planing mill will increase production at Iggesund Sawmill by 20 per cent, as well as adding construction timber on top of its joinery products range. A new environmental permit for a capa- city increase at Kroksjön Sawmill, plus a new log feed and modernisation of the glulam factory at Bygdsiljum Sawmill, will also create opportunities to expand production in northern Sweden. Energy­efficient production units. Two of the Group’s sawmills, Iggesund and Braviken, form energy­efficient units with  their neighbouring paperboard and paper mills. This means that every aspect of the wood raw material is made use of in a cycle in which chips from the sawmills act as raw material in pulp production and the final  residual products are used as biofuel to produce energy and district heating. Steam from the mills is also used in the drying processes at the sawmills. Sustainable raw material supply. Holmen’s sawmills are located near our forest holdings from north to south, bringing logistical benefits and giving  access to a transport network that reaches around the globe by rail, road and, not least, sea. Holmen’s sawmills have chain- of­custody certification, which means that  the wood can be traced back to its origin in sustainably managed forests. The wood raw material is sourced from Holmen’s own forest holdings and from other forest owners, ensuring an efficient logistics chain  from forest to sawmill. With a total of five  sawmills, strategically located near our forest holdings in various parts of Sweden, we have good control over our raw material. Strong growth in global market The market for wood products is global and huge streams of goods are shipped between continents. Worldwide consump- tion of wood products has leapt up 30 per cent in the past decade, propelled largely by increased consumption in China and in the US market. Sustainable building driving the trend. The real estate sector accounts for a third of carbon emissions in Europe and the con- struction industry is working hard to reduce its carbon footprint. Within the ongoing green transition, wood as a construction material has a great deal in its favour, since wooden buildings continue to store carbon dioxide within the structures, instead of generating emissions. As this trend gathers momentum, it is expected to push up demand for wood products, particularly if concrete and steel have to carry their true cost to the climate. There is great potential for growth, mainly in high-rise buildings, and the proportion of housing built in wood is expected to rise as the capacity for industrial building in wood is expanded. Steep price rises during the pandemic. A strong housing market in the USA and a rise in home renovation projects in many countries due to the pandemic, combined with production curtailments in Canada and Russia, led to steep price rises for wood products in the first half of 2021.  Production bottlenecks suppressed activity in the construction market during the autumn, causing a downturn in prices. Wood Products Holmen Annual Report 2021 23 Renewable Energy green energy from our land 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, and the operating and maintenance costs are low since the plants are almost entirely automated. Overall, hydro power brings major benefits to society as part of the  move towards a fossil-free electricity system. Record­high electricity prices over the year The market for electricity in the Nordic region has worked well historically, with harmonised pricing that usually follows the marginal cost of coal-based power, since the market is tied in with the rest of Europe. Over the year, the price of coal and natural gas has risen globally due to the recovery after the pandemic. Rules on fossil carbon emissions have also been tightened in Europe, leading to higher costs for emission allowances. Together, these factors pushed electricity prices on the continent up to record levels. The energy shortage in Europe also affected Swedish electricity prices, while at the same time the price differences within Sweden were unusually large due to limitations in transmission capacity between northern and southern parts of the country. In northern Sweden, however, where Holmen has most of its energy production, the price of electricity decreased slightly due to high hydro power production and limitations in transmission capacity. Holmen’s production of renewable hydro and wind power contributes towards a sustainable energy supply in Sweden and towards Europe’s transition to fossil­free energy sources. We are now taking the next step as a green energy producer by investing in the expansion of our wind power capacity. Holmen produces renewable energy from water and wind. Hydro power is an important source of energy for society as it can be regulated and has an almost infinite  lifetime and minimal climate impact. At the same time, we are investing in building more wind power. This will help to increase the amount of renewable electricity on the market, which is a cornerstone of the transition to a sustainable society. Europe switching to renewables The European energy market is undergoing a major transition due to the issue of climate change. In late 2020, the European Parliament decided to raise its climate ambitions, whereby carbon emissions in the EU are to fall by at least 55 per cent by 2030 (base year 1990) compared with the previous target of a 40 per cent cut. Roughly half of electricity production in Europe is fossil-free. However, electricity only accounts for a quarter of total energy consumption and almost all other energy consumption is fossil-based. To meet the climate targets, much of fossil-based energy production will need to be switched to fossil-free sources. Together with increas ing electrification of both transport  and industry, it is clear that electricity con- sumption is set to increase, creating addi- tional demand for more renewable energy. Transitioning the energy system to more weather-dependent energy sources such as solar and wind power will also bring challenges, since the power supply has to be maintained every minute of every day, all year round. An expansion of transmission capacity both between and within countries is therefore necessary. Wind power creates opportunities Wind power is the fastest growing energy type in the EU and the third largest means of producing electricity in Sweden. Land-based wind power is now a mature technology and electricity generation costs are among the lowest of all the options, including generation using fossil fuels. This expansion is being driven by rapid technical development of next-generation wind turbines that are larger and more efficient,  and as a major landowner, Holmen has excellent opportunities to establish wind power at a competitive cost. Increased production on own land. Blåbergsliden Wind Farm was erected on Holmen’s land outside Skellefteå during the year. When the wind farm is operating at full strength, the 26 turbines, with a total annual production of 0,4 TWh, will be able to supply around 100 000 households with renewable electricity annually. This invest- ment is a significant step in the develop­ ment of Holmen’s energy business. In ad- dition to Blåbergsliden, a permit applica- tion for another wind farm in Västerbotten has been submitted, and during the year we applied for environmental permits for two wind farms in Östergötland. Strength in own energy assets Holmen produced 1.2 TWh renewable electricity from hydro and wind power in 2021, a figure that is set to rise in  future years with the commissioning of Blåbergsliden. Together with the renewable electrical energy that is produced at the Group’s mills, our production of hydro and wind power equates to more than 40 per cent of Holmen’s overall energy consumption. Hydro power provides a reliable electricity supply. Holmen’s energy production is dominated by 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 is difficult to store on any great scale,  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 24 Holmen Annual Report 2021 Renewable Energy » With electrification of both transport and industry on the rise, it is clear that electricity consumption is set to increase, creating additional demand for more renewable energy.« Key figures Operating profit/loss and return Comment on results 2021 2020 488 347 378 215 Net sales, Operating profit/loss excl. items affecting comparability, SEKm Investments, SEKm 712 291 Capital employed, SEKm 4 069 3 351 Average no. of employees (FTE) Own production of hydro and wind power, GWh 19 16 1 230 1 352 SEKm 400 300 200 100 0 347 10 16 17 18 19 20 21 The global recovery after the pandemic has driven up demand for coal and natural gas over the year. Coupled with higher costs for emission allowances, this has helped to drive up electricity prices on the continent to record levels. Since the electricity market in Europe is interconnected, this also affected Swedish electricity prices, so that despite production falling slightly from a high level in 2020, Renewable Energy increased its profit to SEK 347 million. % 12 9 6 3 0   Operating profit/loss excluding items  affecting comparability Return on capital employed, excluding items affecting comparability European energy consumption, % European electricity consumption Price trend 6 7 10 23 15 23 2 37 Fossil fuels Nuclear power Renewables Electricity Natural gas Oil Coal Other TWh 4 000 3 000 2 000 1 000 0 90 95 00 05 10 15 19 Fossil Nuclear Renewable EUR/ MWh 250 200 150 100 50 0 12 13 14 15 16 17 18 19 20 21 SE2 (Sundsvall) Germany SE3 (Stockholm) Marginal cost of coal-based power Renewable Energy Holmen Annual Report 2021 25 A sustainable business We let the forest groW and give Our business model is circular. The forest ecocycle gives us our wood, which is refined and made into products which our customers can then refine in their turn. As the lifecycle draws to a close, the products can be recovered and come back to life in a new form, or be put to use as biofuel. Over the years, we have made circularity an integrated part of our business. Today, growing, healthy forests, efficient manage­ ment of raw materials and circular cycles are not merely essential to our profitability, they are also the cornerstone of a genuinely sustainable business. We have the exper­ tise to make the forest grow and give. We grow houses but we produce more than wood products Holmen’s two nurseries produce more than 45 million seedlings each year, with the majority planted on the Group’s own land. After 70–90 years, as the tree’s growth slows and its capacity to absorb and store carbon dioxide falls, the forest is mature enough to be harvested. We saw as many planks and boards as technically possible from the trees we harvest. But not everything can be turned into construction materials. This is because tree trunks are round and planks are rect­ angular, and because trees also have branches, knots and bark. We use 100 per cent of the raw material. Nothing goes to waste. About half of the harvest consists of large logs that are used to produce construction material used for houses and interiors, for example. The narrower part of the tree and wood from thinning represent about half of the harvest and are used with residual products from the sawmills in the form of wood chips to manufacture paper­ board and paper. The remainder comprises branches, tops, bark and wood shavings, which are used to produce bioenergy. Distribution of by-products and waste, % 0.1 0.2 2 28.5 71.1 To energy production, internally/externally By­products to material production Waste sent to landfill Hazardous waste 71.1 28.5 0.2 0.1 A circular business that is bigger than Holmen Holmen’s production plants are among the most resource-efficient in the world. Over the years, we have effectively reduced our use of energy, water and chemicals, and we recover and reuse the waste that arises. Residual products from the sawmills are used to generate electrical and thermal energy in the mills, organic material from the water treatment process is sold on as soil, and steam from the mills is used in the drying processes at the integrated sawmills. No recycled paper without fresh fibre. When our paperboard and paper is recycled, it feeds into the recycled paper system, which needs an injection of fresh fibre to function. This is why we often say that recycled paper grows in the forest. Reusing water. Holmen’s industries use surface water from lakes and watercourses, partly to transport and wash fibres in the mills. The same water is used many times before it is cleaned in several steps in different combinations of mechanical, biological and chemical treatment. This sees us working to ensure that the ecosystems in the aquatic environments surrounding our mills are healthy and thriving. Flourishing ecosystems for a renewable future The forest has the capacity to provide many benefits at the same time, making it a valuable resource not only for Holmen but for society as a whole. The transition to a fossil­free society demands more renewable material, which means that the earth’s surface needs to be managed more efficiently and to a greater extent. Flourishing ecosystems are essential to creating healthy, resilient forests. Forever learning. We are convinced that it is through research and collaboration that we can continue to develop forestry and find new ways to encourage both growth and biodiversity. Environmental conservation is part of all our activities as we manage and harvest our forest, and protect and improve habitat diversity. This enables Holmen to increase harvests over time, while enabling all naturally occurring species to continue to thrive in the forest landscape. To increase the value and the usefulness of the forest, Holmen constantly engages in development work spanning every aspect of our operations. Holmen’s work on research and development is mainly focused on three areas – increased forest growth, more efficient production and developing new and existing products based on forest raw material. 26 Holmen Annual Report 2021 A sustainable business We let the forest groW and give 5% Branches, tops, bark and wood shavings become renewable bioenergy. 45% The narrower parts of the tree and wood from thinning are ground and digested down into pulp that then becomes paperboard or paper. 50% The large logs that make up half of the harvest go to sawmills where they become building materials in the form of construction timber and joinery products. About half of these logs in turn become wood products while residual products such as wood chips and wood shavings are used to produce pulp and bioenergy. Using all of the tree trunk Wood – Planks and boards Wood chips – Pulp for paper Bark – Bioenergy Wood shavings – Bioenergy A sustainable business Holmen Annual Report 2021 27 A sustainable business forestry from a global perspective Sweden is a country with major forest assets that are actively managed, as is the case in many other countries. However, there are some differences that are worth highlighting. The degree of deforestation, the number of forest plantations and the intensity of forest management are areas that differ widely between different countries. The impact on the ecosystems and the conditions for biodiversity also vary between different countries and regions. All in all, this also affects the forests’ capacity to contribute to a better climate. Managed forests absorb more carbon dioxide Through photosynthesis and using energy from sunlight, growing trees transform carbon dioxide (CO2) into biomass and thus store large amounts of carbon (C) in the trees’ wood. The world’s forests store more than 800 billion tonnes of carbon in trees and in the soil, equivalent to more than 3 000 billion tonnes of carbon dioxide. This means that the forests contain about as much carbon as the whole atmosphere. The forest thus plays a vital role in balancing the global climate. Fortunately, the amount of carbon stored in the world’s forest assets is growing. The growing forests capture and store around 7 billion tonnes of carbon dioxide a year, as a net amount, counteracting the effect of fossil emissions and providing us with a temporary buffer against climate change, to a certain extent. But in which forests does this uptake happen? • A quarter of the world’s forests have very little human involvement. These forests contain high amounts of carbon but do not store any additional carbon dioxide to any greater degree, since emissions of carbon dioxide from old trees and plants as they rot largely balance out carbon uptake in young trees. Minimal growth, a higher risk of fi re and reduced areas due to tropical deforestation also mean that the net uptake in these forests is limited. • Forest plantations account for only 3 per cent of the world’s forests and contribute approximately 3 per cent of the forests’ net uptake due to high growth. • The highest net uptake of carbon dioxide is found in forests with human involvement. A signifi cant part of the explanation behind this is that a large proportion of these forests is actively managed and consequently has both high growth and low emissions from old trees, fi re and other damage, producing a high net carbon uptake. Net CO2 uptake in the world’s forests, billion tonnes per year 8 6 4 2 0 -2 Forest with little human involvement Forest plantations Managed forest or forest with human involvement Temperate and boreal forests Tropical and sub-tropical forests Source: Harris et al., 2021. References page 99. Good conditions for biodiversity in the Nordic countries Safeguarding global biodiversity is a critical dimension of sustainable development, and one that is closely related to how our forests are managed. Although the challenges are often local in nature, there is value in observing progress at an aggregated level. The natural variation of biotopes and species in a given area makes this a complex challenge. The Biodiversity Intactness Index (BII) models human impact on the natural environment and estimates how high a proportion of the original number of species and habitats still remain. If the BII is 90 or higher, the area is considered to have good conditions for resilient and functioning ecosystem. Biodiversity Intactness Index 2020 100 90 80 70 60 50 Finland Sweden Canada Global average Portugal Brazil Indonesia USA Germany France India If the BII of an area is 90 or higher, human impact on the area is considered to be within planetary boundaries. Source: Natural History Museum. Global Forest Watch. References page 99. 28 Holmen Annual Report 2021 A sustainable business The world’s forests Forests cover almost a third of the land area of our planet, or about four billion hectares. More than half of this is tropical and sub-tropical forest. This includes the vast tropical rain forests of the Amazon, the Congo Basin and in South-East Asia, but also large areas of forest in dryer areas. Temperate and boreal forests are mainly found in the northern hemisphere. The taiga has large areas of boreal forest in the cold regions of Siberia, Europe and Canada. A large proportion of temporal and many boreal forests are actively managed, including in Sweden. Tropical 45% Boreal 27% Temperate 16% Sub-tropical 11% Forestry in different parts of the world Forest area Between them, the major European forest industry nations of Sweden and Finland account for about a quarter of the EU’s forests, but only just over 1 per cent of global forested land. Brazil, Canada, the USA and Russia are the countries with the largest amount of forest. In total, these four countries account for almost half of the world’s forests. However, forestry conditions vary between different countries and regions. Differences in forms of ownership and responsibility for the land affect the way the forests are managed and the approach to questions of forest policy. Deforestation Currently 0.2 per cent of the world’s forests are deforested every year; in other words, forest land is converted to other land use, mainly agriculture but also for urban development and infrastructure. Deforestation is at its highest in the tropics and considerably lower in temperate and boreal regions. Forest plantations Intensively managed forest plantations account for 3 per cent of the world’s forests. Brazil, Portugal and India are examples of countries with signifi cant plantation areas. In Sweden, 1.4 per cent of forests are classifi ed as plantations, mainly stands of lodgepole pine or spruce planted on former arable land. Active forestry Sweden and Finland are examples of countries where active forestry is undertaken on a large proportion of forest land, producing a relatively high harvesting level for industrial roundwood. Germany and Portugal are examples of countries with smaller areas of forest but where higher growth due to warmer climate produces longer growth seasons and thus an even higher wood harvest per hectare. Other important forest industry countries such as Brazil, Canada and the USA have a relatively small harvesting level in relation to their vast forest areas. Use of bioenergy Burning wood to meet domestic needs is still the most dominant use of wood in many low and middle­income countries, as a rule with a low energy yield. Sweden and Finland are countries with a high degree of active forestry and a well­ developed, industrialised forest industry. Here, the effective production of renewable bioenergy from residual products from the forest is an integrated part of the value chain and a key component in the countries’ total energy supply. Forest area Deforestation Forest plantations Wood harvest to industry Bioenergy from solid fuel* Brazil Canada USA Indonesia India Sweden Finland France Germany Portugal Mha 497 347 310 92 72 28 22 17 11 3 The world 4 000 %/year 0.3 – – 0.7 0.9 – – – 0.1 1.2 0.2 % 2 – 5 5 14 1 – – – 21 3 m3/ha/year % of the country’s total energy supply 0.3 0.4 1.2 0.9 0.7 2.5 2.3 1.4 5.4 3.5 0.5 22 2 2 5 10 18 23 2 2 8 4 *Excluding domestic use, also includes biomass for energy from agriculture. Russia is not included due to insuffi cient data. References page 99. A sustainable business Holmen Annual Report 2021 29 A sustainable business How we are contributing to a sustainable future At Holmen, successful enterprise and a sustainable future go hand in hand. Sustainability is about balancing several perspectives – economic, environmental and social – and succeeding in doing so over time. It is in our interest and equally in the interest of society to manage the forest sustainably and to use the raw material in a wise and far-sighted way. We have identified Holmen’s three most important areas where we can make progress for a sustainable future. 1 2 3 tHe climate can’t wait We are part of a value chain in which climate benefit is created at several stages and where we control a large proportion of the chain ourselves. We will increase the positive impact of our operations even further, while reducing our own climate footprint at the same time. The forest’s uptake of carbon dioxide will increase through active and sustainable forestry with high growth, while we increase the storage of carbon dioxide in our climate-smart products. We will also cut emissions from our value chain in line with targets approved by the Science Based Targets initiative*. TARGET: We will increase the amount of carbon dioxide stored in our products while reducing our greenhouse gas emissions in line with the Paris Agreement. tHe power of customer cHoice We create the greatest bene fit for the climate to- gether with our customers. Their choosing renewable products from the forest, wind and water mean that the world avoids fossil emis­ sions. We make our custom- ers part of a circular busi- ness that creates value at several stages of the chain. Our customers’ choices make a posi tive difference. And the best we can do for the climate is to help more customers to replace fossil sources with renewables, known as carbon dioxide substitution. The goal is to help customers to choose more renewable products so that more fossil carbon atoms can stay in the ground. TARGET: We will increase the sub- stitution of fossil carbon dioxide through higher sales of renewable products and renewable energy. Outcomes are presented on pages 9 and 32. Outcomes are presented on pages 9 and 32. we grow togetHer We are engaged with our employees and local communities and invest in development and community. When people and communities grow, we can grow too. We create a positive working climate through development and teamwork in equal measures, with goal-oriented work on health and safety, diversity and inclusion. Our forestry fosters thriving rural communities and enables people to live, work and enjoy quality of life outside the urban regions. TARGET: We will be an attractive employer with a healthy work environment free from industrial acc idents, discrimination or harass­ ment, and where employees reco m­ mend Holmen as a workplace. Outcomes are presented on page 37. The materiality analysis carried out in 2018 identified three focus areas where we see Holmen having the greatest opportunity to make progress and contribute to a sustainable future. The analysis included interviews and workshops with about 50 stakeholders and was based on the ten principles of the UN Global Compact, the UN’s Sustainable Development Goals and the mega-trends and external factors affecting our customers and our industry. *The Science Based Targets initiative is an international framework for calculating climate targets in line with the UN body the IPCC’s climate targets: the Paris Agreement. Read more about our climate targets at holmen.com. 30 Holmen Annual Report 2021 A sustainable business The EU taxonomy The EU has decided to implement a taxonomy with criteria for when a business can be considered to be sustainable from a climate perspective. So far, only certain activities are covered by the taxonomy. In 2021 companies are to disclose which of their activities are covered by the taxonomy. Harvest of own forest, electricity production from hydro and wind power and bioenergy are the activities within Holmen that are covered by the taxonomy. Total1) (SEK ’000) Proportion covered by the taxonomy (%) Proportion not covered by the taxonomy (%) Income Capital expenditure (CapEx) Operational expenditure (OpEx) 20 664 1 761 1 507 8/11% 53% 25% 92/89% 47% 75% Some of the harvest from Holmen’s own forest is refi ned by Holmen, which under the taxonomy is classifi ed as integrated activities. Under the rules of the taxonomy, income from such activities should not be included. If the income from these activities is included in the calculation, the proportion of the Group’s income covered by the taxonomy amounts to 11 per cent but if it is not included, the proportion amounts to 8 per cent. The majority of Holmen’s income comes from the production of wood products, paperboard and paper. These products are not covered by the taxonomy, but contribute positively to the climate transition by binding carbon dioxide and replacing fossil alternatives such as steel, concrete and plastic. Should the EU expand the scope of the taxonomy, Holmen is in favour of the inclusion of these activities. 1) Income refers to the Group’s net sales of SEK 19 479 million and parts of the Group’s other operating income (SEK 1 185 million) in line with the taxonomy’s defi nition. These are shown in the Group income statement on page 50. Total CapEx (SEK 1 761) corresponds to investments for the year in line with note 9 Forest assets, note 10 Intangible assets, note 11 Property, plant and equipment and note 12 Leasing on pages 69–71. Of the OpEx defi ned in the taxonomy, repairs and maintenance and research and development are applicable to Holmen. Harvest of own forest falls under taxonomy activity 1.3 (forest management), electricity generation from wind power is taxonomy activity 4.3, electricity generation from hydro power taxonomy activity 4.5 and electricity generation from bioenergy taxonomy activity 4.8. Holmen contributes to the Sustainable Development Goals We have been building our experience for 400 years and we constantly work to fi nd long-term solutions to current challenges. Thanks to sustainable use of our forests’ ecosystems, today we are able to operate a circular, renewable and bio-based business that benefi ts our customers, shareholders, employees and local communities. Our production, business and organisation contribute to the UN’s Sustainable Development Goals and thus also to the 2030 Agenda. Top ranked by EcoVadis In the past two years all of Holmen’s paperboard and paper mills were awarded the Platinum rating by the international analysis fi rm EcoVadis. This means that Holmen’s mills are among the top percentage of the 75 000 companies examined worldwide. EcoVadis assesses how companies work on the environment, sustainable purchasing, ethics, workers’ rights and human rights. 2021 Holmen’s emissions targets are in line with the UN’s climate goals under the Paris Agreement, as certifi ed by the UN­backed organisation the Science Based Targets initiative (SBTi). A holistic approach to sustainability Holmen has been part of the UN Global Compact and its correspond­ ing Nordic network since 2007. We report to the organisation each year on our work in line with its ten principles and set out the progress made. Information on how Holmen is working in line with and fulfi lling the principles of the UN Global Compact is provided at holmen.com. “ We have a holistic approach to responsible business and our work draws on the UN Global Compact. We see it as natural to support its ten principles on human rights, social and environmental responsibility, and anti-corruption.” Henrik Sjölund President and CEO of Holmen High rating in CDP’s annual assessment CDP is an independent sustainability index that analyses climate data from over 13 000 companies each year. The companies that report their sustainability work to CDP are assessed on disclosure, awareness and management of climate risks and opportunities. Holmen has reported to the CDP Climate Program since 2007 and also to the CDP Forest Program since 2013. The results show that Holmen has a good strategy and manage ment to mitigate negative impacts of climate change. In the 2021 evaluation Holmen was ranked A­ in both categories. A sustainable business Holmen Annual Report 2021 31 A sustainable business a value chain that benefits the climate The forest delivers the most benefit when it is put to use. This is the heart of Holmen’s sustainable business. We are part of a value chain that creates climate benefit in four areas, amounting to a total of almost 7 million tonnes of carbon dioxide per year. This is equivalent to 15 per cent of total emissions within Sweden’s borders. This is how Holmen created real climate benefit in 2021. Forest carbon uptake Young trees have the greatest capacity to bind carbon dioxide. When the trees become old and die, they rot and the stored carbon dioxide returns to the atmosphere. Through active and sustainable forestry we increase forest growth and capacity to absorb carbon. In 2021 it is calculated that the net increase in the volume of standing timber in Holmen’s forests has absorbed and stored a net 1.3 million tonnes of carbon dioxide. Carbon storage and substitution in products The raw material from the forest continues to bind carbon dioxide in its refined form and substitution occurs when wood­based products and renewable energy replace fossil alternatives with a higher climate footprint. It is here that Holmen’s climate benefit becomes the most tangible – when our products reduce the need for fossil materials and raw materials, which means that fossil carbon can stay in the ground. The production of wood products increased global storage of carbon dioxide by more than 0.5 million tonnes, while at the same time replacing construction materials that would have caused greenhouse gas emissions of 2.6 million tonnes. Holmen’s paperboard and paper production also contributes, storing an equivalent of just under 0.1 million tonnes of carbon dioxide, and when these products can no longer be recycled, they provide benefit as bioenergy, replacing fossil energy equivalent to emis sions of 1.5 million tonnes of greenhouse gases. Renewable energy production that replaces fossil alternatives Sales of renewable electricity produced by Holmen from hydro power, wind power and biomass replace carbon and gas power equivalent to emissions of 1.0 million tonnes of greenhouse gases. On top of this, we have bioenergy production that comes from residual products from the forest and our facilities. By selling this bioenergy, we replace fossil emissions of 0.6 million tonnes. Climate targets in line with SBT Holmen’s own operations generate greenhouse gas emissions that are already within the Paris Agreement’s threshold values for 2044. We have achieved this through energy efficiency measures and investments in renewable energy at our Managed forests benefit the climate in several ways, million tonnes CO2e facilities. Since 2005, the use of fossil fuels in our production has fallen by 85 per cent and today the majority of our fossil emissions are generated from purchases of input products and from transport to and from Holmen’s industries. Therefore, we are now focusing on cutting emissions in these areas. Holmen’s emission targets are approved by the Science Based Targets initiative. No-one owns climate benefit Holmen’s business helps to benefit our planet by reducing the amount of greenhouse gases in the atmosphere. It is in our own interests to manage our forest sustainably while preserving robust ecosystems and as high growth as possible. This produces more renewable wood raw material while increasing the forest’s capacity to absorb carbon dioxide. The greatest climate benefit is created, however, when our customers choose to replace fossil alternatives with renewables. This means that fossil raw materials such as oil, coal and gas can stay in the ground rather than being extracted. Therefore, Holmen has decided to invest even more in producing the products that contribute to the greatest climate benefit: wood products. The forest provides the greatest benefit when it is used and it is the power of customer choice that makes the difference. 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 2.6 1.5 1.0 0.6 1.3 0.5 0.1 Storage in Holmen’s forests Storage in wood products Storage in paper & paperboard Wood products replacing fossil materials Paper & paperboard replacing fossil energy Bioenergy replacing fossil energy Increased net storage of carbon dioxide Reduced fossil carbon dioxide emissions Renewable electricity production replacing fossil energy -0.7 Holmen’s emissions in Scope 1–3 Emissions in Holmen’s value chain Actively managing the forest enables us to benefit the climate by storing carbon dioxide both in the forest and in our products, and by forest-based products replacing fossil alternatives. Total climate benefit from Holmen’s value chains in 2021 is calculated in line with the methodology used by the Swedish Forest Industries Federation, CEPI and a number of other forest companies. To ensure that Holmen’s reporting is based on the same methodology, Holmen had the calculation methodology produced by Peter Holmgren of Futurevistas AB in 2020. See page 98 for further details of the calculations. 32 Holmen Annual Report 2021 A sustainable business In 2021 Holmen’s operations contributed towards a climate benefit of 7 million tonnes CO2e, equivalent to 15 per cent of emissions within Sweden. 1.3 million tonnes of CO2e were absorbed in the growing volume of standing timber in our forests 4.7 million tonnes of CO2e were stored in and replaced by wood products (3.1) and by paper and paperboard (1.6) 1.6 million tonnes CO2e were replaced by our renewable production of electricity from wind and water (1.0) and from bioenergy (0.6) Emissions equivalent to 0.7 million tonnes CO2e come from Holmen’s production and transport A sustainable business Holmen Annual Report 2021 33 Water treatment plant at Braviken Paper Mill. active environmental activities Holmen’s environmental activities involve constantly reducing environmental and climate impact, and ensuring that the Group complies with the environmental rules and conditions set. 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 pro­ tecting 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 45 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 page 94. Holmen’s environmental work is charac­ terised by constant improvement measures within the framework of certified environ- mental and energy manage ment systems (see page 35), which ensure compliance with legislation and requirements set by authorities. Responsibility for the manage­ ment systems rests with the respective business area, as does environmental responsibility. Permits At the end of 2021, Holmen was running production operations that require environmental permits at nine facilities. Additionally, the coating and laminating factory in Strömsbruk is a notifiable activity. The permits specify conditions regarding permitted production volumes and permitted emissions to air and water, among other things. Eight of the facilities are located in Sweden and one is in Workington in the UK. The facilities’ turnover amounted to 84 per cent of the Group’s net sales in 2021. Workington’s application for an exemption, and the proposed conditions during the period of the exemption, have been submitted to the environmental authority, which commenced its review in April 2021. To meet demand for bright paper products, work continued on the application for a new environmental permit for Braviken Paper Mill in 2021. In 2021 final conditions for noise and emissions to water were decided for the sawmill in Bygdsiljum in Skellefteå municipality. The sawmill in Kroksjön gained a new environmental permit in December 2020, which entered into force in January 2021 and was applied in December 2021. In Västerbotten, Holmen is construct- ing Blåbergsliden Wind Farm, which will have annual electricity production of just over 400 GWh. The wind farm is expected to be fully operational in 2022. Another wind farm of a similar size is undergoing the permit process in Västerbotten and during the year we submitted applications for permits to build wind power on our own land in two areas in Östergötland. New environmental legislation for hydro power entered into force on 1 January 2019. The legislation means that hydro power operators who do not comply with modern environmental criteria will need to apply for a review under the Swedish Environmental Code before the end of 2039. Holmen’s facilities have been registered with the national plan for the revision of hydro power plant licences. Jointly owned facilities have been registered by the respective main owner. 34 Holmen Annual Report 2021 A sustainable business A sustainable business Environmental permits for the Group’s production facilities 2018 2017 Iggesund Mill, Environmental Code1) Workington Mill, IED Hallsta Paper Mill, Environmental Protection Act 2000 Braviken Paper Mill, Environmental Code2) 2002 Iggesund Sawmill, Environmental Code 2014 2010 Braviken Sawmill, Environmental Code Linghem Sawmill, Environmental Code 2003 Bygdsiljum Sawmill, Environmental Code 2018 Kroksjön Sawmill, Environmental Code3) 2020 1) Port activity at Skärnäs Terminal, alongside Iggesund Mill, is included in the environmental permit. In addi- tion, operations subject to notification requirements take place at the production unit in Strömsbruk. 2) An application for a new environmental permit was submitted to the Land and Environment Court in late 2020. 3) The sawmill gained a new environmental permit in late 2020 which was applied in 2021. Discontinued operations In consultation with the environmental authorities, studies are being conducted at contaminated discontinued industrial sites where Holmen has operated in the past. In 2021, studies were in progress at different stages regarding the former sawmills Håstaholmen, Stocka and Lännaholm, the sulphite mills at Strömsbruk, Domsjö, Loddby and Mariannelund, the paper mill at Silverdalen and the groundwood mill at Bureå. The ground area and the buildings at the former sawmill in Håstaholmen in Hudiksvall have been remediated. The project to remediate polluted sediment in the area of water off the industrial site was completed in 2020 and in 2021 the polluted sediment mass was dealt with. The project will be completed in spring 2022, when the environmental authorities are expected to approve the report on completed remediation. The land area, the buildings and the groundwater at the former surface treatment plant in Iggesund have been remediated. In 2021 the environmental authority approved the remediation report and the case was thus closed. Exceedances and complaints Emission allowances and electricity certificates 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. 53 (37) environment­related incidents were reported to the supervisory authorities during the year. One of the nonconformities was of a significant nature in terms of impact on results and was due to a turbine breakdown in Workington. Corrective measures were taken to deal with these cases, in line with the environmental management system of the operations concerned. Holmen has been awarded emission allowances within the EU Emissions Trading Scheme. As a result of invest­ ment in bio­based energy production and energy savings at the facilities, the use of fossil fuels has fallen considerably in recent years. Surplus allocated emission allowances have been able to be sold. Holmen has applied to be allocated emission allo­ wances for the period 2021–2030 and has received an allocation decision for the trading period 2021–2025. The Group has produced renewable electricity for many years. This has contributed income in that we have obtained electricity certificates for our production. The electricity certi­ ficates have been sold to electricity distributors, who have used the certificates in their turn because their customers need a proportion of their electricity to come from renewable sources. In the UK, electricity distri­ butors have to meet a certain quota for renewable electricity, and pro­ ducers of renewable electrical energy receive green Renewables Obligation Certificates in proportion to the amount of electricity generated. Workington Mill obtained such green certificates in 2021. Management system certifications Production facilities1) Environment ISO 14001 Energy ISO 50001 Quality ISO 9001 Health and safety ISO 45001 Iggesund Mill2) Workington Mill3) Hallsta Paper Mill Braviken Paper Mill Iggesund Sawmill Braviken Sawmill Linghem Sawmill4) Bygdsiljum Sawmill4) Kroksjön Sawmill4) 2001 2003 2001 1999 1999 2011 1999 2005 2005 2015 2005 2006 2006 2011 1990 1990 1993 1996 1997 2011 2016 2005 2012 2015 2017 2017 2020 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. Certificates can be viewed at holmen.com/ sustainability. 1) Holmen Forest is certified under the environmental management system ISO 14001. Forest operations also hold forest management and chain-of-custody certification under PEFC™ and FSC® respectively. All Holmen’s facilities at which wood raw material is used have chain-of-custody certification. Licence codes for PEFC™ and FSC® are available at holmen.com. 2) The certifications include the production unit in Strömsbruk and operations at Skärnäs Terminal. 3) Workington Mill has been certified under the food safety management system ISO 22000 since 2019 and upgraded to FSSC 22000 in 2021. 4) Work is in progress to include Linghem, Bygdsiljum and Kroksjön in the other sawmill certificates. A sustainable business Holmen Annual Report 2021 35 Employees employees With courage, commitment & responsibility Today’s Holmen is the result of countless decisions large and small, made in line with our values of courage, commitment and responsibility. A team effort where we have put long-term values ahead of short-term profit and dared to swim against the tide when it made sense to do so. This sees us continuing to fine-tune our products and services. Management by objectives Holmen is a learning workplace where everyone has the opportunity to feel a sense of commitment and responsibility for the areas in which they work and the objectives set. Applying Holmen’s management by objectives model, the strategy, business plans and performance expectations are communicated across the organisation. At employee level, communication is via appraisal talks. Based on the expectations communicated, our employees produce an initial proposal for targets that will lead to the expectations being met. This helps us to make the most of the skills and potential of every employee. We believe in the drive inherent in every individual, team and unit. The management by objectives model is our way of making sure that all of us working at Holmen feel that we are focusing on the right things and helping to implement our strategy. Core values Our core values of courage, commitment and responsibility are the route to a strong culture and the answer to how to perform well and make each other and Holmen better. The core values guide us in our approach to each other, in relations with customers and in our work. They are integrated in our processes and tools, including in the recruitment process, appraisal talks, in the management by objectives model, and as a basis for our internal leadership and management programme. The values are actively applied in work on the ground. Recruitment and development Attracting and retaining the right employees is of the utmost importance in maintaining competitiveness over time. This way, we ensure that Holmen continues to be a business with a focus on innovation and development. We have an attractive employer offering and we are constantly refining our offering to attract the right target groups in the skills market. We recruit using a structured process that helps us bring in the right skills. Employees and leaders are given opportunities to grow through competence development and we create conditions in which each and every individual is able to grow, with stimulating tasks and new challenges. Based on our current and future skills needs, we are working on employee develop ment at all levels. We give employees a great deal of responsibility, but also motiva tion and support from a team of committed and expert colleagues and leaders. We also provide development programmes for new as well as more experienced managers and for specialists driving work on change. Health and safety It goes without saying that we actively pursue a healthy culture and an accident­ free workplace for our employees and the contractors who work with us. Holmen carries out systematic Group­wide health and safety work in line with ISO 45001 (see page 35) and all our production units are certified, apart from Bygdsiljum and Kroksjön Sawmills, which were acquired in 2020. Work is in progress to include these facilities in the certificates of the other sawmills. As a result of the coronavirus pandemic, Holmen implemented a large number of adaptations and measures to ensure a safe work environment for our employees and others present in our operations. The precautionary principle applies. 36 Holmen Annual Report 2021 Employees  A zero vision for accidents The number of accidents per million hours worked increased from 4.3 in 2020 to 5.6 in 2021. The dominant causes of accidents are tripping, slipping, falls and pinch point accidents. In 2021 the number of lacerations fell from 20 per cent to 3 per cent compared with the previous year. The increase in the number of accidents comes from acquired production units. Work to incorporate the new units in the Group’s health and safety work continues. At the previously owned production units, the accident rate remained unchanged in 2021 compared with 2020. It is important for us to continue to work far-sightedly, focused on our vision of zero accidents. Industrial accidents with more than 8 hours of absence (LTI) per million hours worked. LTI 10 8 6 4 2 0 16 17 18 19 20 21 linked to opinions and activities that are not compatible with Holmen’s Code of Conduct. We have clear guidelines on what applies and where to turn in cases where Holmen’s Code of Conduct is not being followed. A zero vision for discrimination and harassment Holmen has a vision of zero discrimination and harassment, which is followed up internally via the employee survey, appraisal talks and reported cases. A few cases involving discrimination and harassment were reported during the year. The cases were handled in line with internal procedures. Employees recommend Holmen as a workplace A comparison based on 600 000 responses from 250 companies in different industries showed that Holmen’s employees recom­ mend Holmen as an employer far exceeding the benchmark. Employee surveys show that Holmen’s employee Net Promotor Score (eNPS) is 43, compared with a benchmark index of 13. Dynamic workplace To maintain strong competitiveness, we want to be a workplace that attracts and retains the skills Holmen needs – employees who represent a diversity of insights, experiences and cultures. Our industry is currently overwhelmingly male and we are therefore working to increase diversity and achieve a more even gender distribution among managers and leaders. This will enable us to benefit from a diversity of backgrounds and experiences and ensure that everyone feels welcome. As part of our work to create an inclusive workplace in which everyone is given the same development opportunities, we draw up action plans and annual pay surveys in line with the Swedish Equality Act. Code of Conduct Holmen’s good reputation as a responsible and trustworthy company is fundamental to our business. Holmen’s Code of Conduct clearly sets out the requirements and expectations of how employees at Holmen are to behave. Office workers are trained in the code via e-learning and 86 per cent of all office staff have completed the training in the past two years. A few cases linked to deviation from Holmen’s Code of Conduct were reported during the year and were handled according to internal procedures. We have also continued to work in line with our supplier follow­up process, which was updated in 2020. We have identified which suppliers pose risks linked to the climate, the environment, labour law, human rights, business ethics and sustainable purchasing. Work to draw up action plans for suppliers identified as being high risk continues. Human rights and equality Holmen safeguards human rights and the equal value of all people in everything we do, both in the workplace and when travelling on business. All employees must have the same rights, obligations and opportunities irrespective of their sex, transgender identity or expression, ethnicity, political 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 and applies to employees, contractors and suppliers. To us, this means that everyone who works at Holmen and in our supply chain must stay healthy and perform well at work, while enjoying an inclusive, safe and healthy work environment with fair terms of employment. Bullying and harassment are not tolerated and everyone is expected to act professionally and not expose themselves to the risk of being Employees Holmen Annual Report 2021 37 Corporate governanCe report Holmen AB is a Swedish public limited company, listed on the Stockholm Stock Exchange (Nasdaq Stockholm) since 1936. The preparation of a corporate governance report is a require­ ment under the Swedish Annual Accounts Act. The corporate governance report complies with the rules and instructions stipulated in the Swedish Code of Corporate Governance. Shareholders Holmen had 48 126 shareholders at year- end 2021. Private individuals with Swedish citizenship accounted for the largest category of owners with 45 729 owners. The largest owner at year-end, with 62.3 per cent of votes and 34.1 per cent of capital, was L E Lundbergföretagen, which means that a Group relationship exists between L E Lundbergföretagen AB ( corporate ID no. 556056-8817), whose registered office is in Stockholm, and Holmen. The second-largest owner was the Kempe Foundations and their holdings of Holmen shares amounted to 17.5 per cent of votes and 7.4 per cent of capital at the same date. No other individual share- holder con trolled as much as 10 per cent of the votes. Employees have no holdings of Holmen shares via a pension fund or similar system. At the 2021 AGM, the Board’s authorisa- tion to purchase up to 10 per cent of the company’s shares was renewed. No shares were bought back in 2021. The company already holds 0.3 per cent of the total number of shares in treasury. See pages 48–49 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 submitted in good time before the notice is distributed. Information about the rights of shareholders to have matters discussed at the meeting is provided at holmen.com. It was announced on 22 September 2021 that the 2022 AGM would take place in Stockholm on 30 March 2022. Nomination committee The AGM resolved that the nomination com- mittee shall consist of the chairman of the Board and one representative from each of the three shareholders in the company that control the most votes at 31 August each year. The composition of the nomination committee for the 2021 and 2022 AGMs is shown in the table on page 41. The nomination committee’s mandate is to submit proposals for the election of ↓ AGM 2021 ↓ Board meetings The Board held seven meetings in 2021, four of which were in connection with the company’s publication of its quarterly reports. One meeting was dedicated to reviews of strategic issues and the Group budget for 2022. One meeting was 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 valuation of the company’s forests, effects of the coronavirus pandemic, sustainability issues and other significant investment matters. On one occasion the company’s auditor reported directly to the Board, providing a presentation about the audit of the accounts and internal control. The 2021 AGM and the material presented were in Swedish. The notice convening the meeting, the agenda and the minutes are available at holmen.com. According to item 1.2 of the Swedish Corporate Governance Code, the Chairman of the Board and as many members of the Board as are required for a quorum are to be present at meetings. In light of the risk of spreading the coronavirus, however, the Board resolved to conduct the AGM only through postal voting so that as few participants as possible would be present. For this reason, only the Chairman of the Board and the CEO were present at the AGM. However, as many members as were needed for the Board to have a quorum were prepared to hold a telephone meeting on the day of the AGM. For the AGM, shareholders were given the opportunity to ask and receive answers to questions in writing. The AGM adopted the income statement and balance sheet, decided on the appropriation of profits and granted the departing Board discharge from liability. Fredrik Lundberg, Hans Hedström, Carnegie Funds, and Carina Silberg, Alecta, checked and approved the minutes. It was not possible to follow or participate in the meeting from other locations using communication technology. 38 Holmen Annual Report 2021 Corporate governance report Shareholders Nomination committee General meeting of shareholders Board of Directors CEO Group management Five group staffs Five business areas Auditors Board members and the Board chairman, for the Board fee and auditing fees and, where applicable, for the election of auditors. The committee’s proposals are presented in the notice convening the AGM. The nomination committee applies rule 4.1 of the Swedish Corporate Governance Code (the Code) as a diversity policy in putting forward proposed Board members, which means the composition of the Board should reflect the company’s business operations, phase of development and other circumstances, and should be diverse and wide-ranging in terms of the expertise, 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 proposals to the Board. Further information about the work of the nomination committee will be provided at the 2022 AGM. For the 2022 AGM, the nomination committee proposes that the Board consist of nine members elected by the AGM. The nomination committee proposes the re-election of the current Board members: Fredrik Lundberg (who is also proposed for re-election as Chairman of the Board), Carl Bennet, Alice Kempe, Lars Josefsson, Louise Lindh, Ulf Lundahl, Henrik Sjölund and Henriette Zeuchner, as well as the election of Fredrik Persson. Current board member Lars G Josefsson has declined 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 seven to eleven members. The company’s articles of association contain no other rules regarding the appointment or dis- missal of Board members, or regarding amendments to the articles, or restrictions on how long members can serve on the Board. The 2021 AGM re-elected Fredrik Lundberg , Carl Bennet, Lars Josefsson, Lars G Josefsson, Alice Kempe, Louise Lindh, Ulf Lundahl, Henrik Sjölund and Henriette Zeuchner to the Board. Fredrik Lundberg was re-elected Chairman of the Board. At the statutory first meeting of the new Board in 2021, Henrik Andersson, Senior Vice President Legal Affairs, was appointed company secretary. 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 88–89. 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 procedures and issues written instructions relating to the division of responsibilities between the Board and the CEO and the information that the Board is to receive continually on financial developments and other key events. Employees of the company participate in Board meetings to submit reports. ↓ Members of the Board of Directors Attendance at meetings in 2021: Board members Elected Role on the Board Audit committee Remuneration committee Board of Directors Audit committee Remuneration committee Fee (SEK ’000) Fredrik Lundberg Carl Bennet Lars Josefsson Lars G Josefsson Alice Kempe Louise Lindh Ulf Lundahl Henriette Zeuchner Henrik Sjölund 1988 2009 2016 2011 2019 2010 2004 2015 2014 Chairman Member Member Member Member Member Member Member Member, President & CEO Member – Member – – – Chairman – – Chairman Member – – Member – – – – 7/7 7/7 7/7 6/7 7/7 7/7 7/7 7/7 7/7 5/5 – 5/5 – – – 5/5 – – 2/2 2/2 – – 2/2 – – – – 740 370 370 370 370 370 370 370 – According to the nomination committee, Fredrik Lundberg, Carl Bennet, Lars Josefsson, Lars G Josefsson, Alice Kempe, Louise Lindh, Ulf Lundahl and Henriette Zeuchner are independent of the company and its senior management, and Lars Josefsson, Lars G Josefsson, Ulf Lundahl, Henriette Zeuchner and Henrik Sjölund are independent of the company’s major shareholders. Employee representatives Steewe Björklundh, member, elected 1998/Kenneth Johansson, member, elected 2004/Tommy Åsenbrygg, member, elected 2009/Martin Nyman, deputy member, elected 2021/Daniel Hägglund, deputy member, elected 2014/Christer Johansson, deputy member, elected 2017. Holmen Annual Report 2021 39 Corporate governance reportStrategy and targets Strategy, budget and management by objectives Business processes Earnings, reporting and monitoring Code of Conduct Policies Guidelines Authority Values Group instructions Authorisation rules Management systems Internal management processes and guideline documents. 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 opportu- nity to make suggestions on how to enhance the Board’s work. Their responses were presented and discussed at a Board meet- ing. The results of the 2021 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, Carl Bennet and Alice Kempe. During the year, the committee prepared matters pertaining to the remuneration and other employment conditions of the CEO and also evaluated guidelines for remuneration and share savings programmes. The committee also examined remuneration structures, remuneration levels and methods for establishing the Group’s salary levels to ensure that these are reasonable and appropriate. In addition, the committee prepared the Board’s proposal to the Annual General Meeting regarding share savings programmes. Remuneration and other employment conditions for senior management who report directly to the CEO are decided by the latter and approved by the remunera- tion committee in accordance with the instructions for the remuneration committee adopted by the Board of Directors, as well as the guidelines adopted by the AGM for remuneration of senior management. The Group applies the principle that each manager’s manager must approve decisions on remuneration in consultation with the relevant personnel manager. The current guidelines for remuneration of the CEO and other senior management, 40 Holmen Annual Report 2021 i.e. heads of business areas and heads of Group staffs who report directly to the CEO, were adopted by the 2020 AGM . The AGM adopted the guidelines in accordance with the Board’s proposal. Current guidelines and information about remuneration are presented in Note 4 on page 63. The 2021 AGM approved the Board fee and payment of the auditors’ fee as invoiced. The 2019 AGM approved a targeted share savings programme for key indivi- duals in the Group. The programme expires in April 2022 and the Board of Directors has proposed that the 2022 AGM take a decision on a new, similar programme. The aim of the programme is to strengthen common interests between shareholders and company management, as well as to create a long-term commitment to Holmen. More information about the current share savings programme can be found in Note 4. Group management The Board has delegated operational responsibility 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 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 90. Group management meets regularly. The meetings during the year dealt with matters such as earnings performance and reports before and after Board meetings, strategic issues, budgets, investments, integration of the sawmill group Martinsons, internal control, work environment, sustainability issues, climate and environmental issues and silviculture matters. Meetings were also dedicated to reviews of market conditions, the coronavirus pandemic, economic developments and other external factors affecting the business, as well as discussion about governance of the Group and the tools, such as the management-by- objectives model and Group-wide policies, used in such governance. In 2021, Group management placed special focus on testing the company’s strategy in relation to a number of potential scenarios for how society and markets might develop. Audit The 2021 AGM chose the auditing company PricewaterhouseCoopers AB (PwC) to serve as the new auditors to succeed KPMG. Authorised Public Accountant Magnus Svensson Henryson was appointed as the principal auditor. PwC performs the audit for Holmen AB as well as for the majority of Holmen’s subsidiaries. The examination of internal procedures and control systems begins in the second quarter and continues thereafter until year-end. The interim report for January– September is subject to review by the auditors. The examination and audit of the final annual accounts and the annual report, including the sustainability report, take place in January–February. The members of Holmen’s audit com- mittee are Ulf Lundahl, chairman, Fredrik Lundberg and Lars Josefsson. The audit com mittee has met five times. The audit com mittee’s task is to monitor the company’s financial reporting and the efficiency of the company’s internal control and risk management. The audit committee reviews and monitors the impartiality and independence of the auditor. The committee also evaluates the auditor’s work and submits proposals to the company’s nomination committee on the election of an auditor for the next mandate period. The Board’s reporting instructions include requirements that the members of the Board shall receive a report each year from the auditors confirming that the company’s organisation is structured to enable satisfactory supervision of accounting, management of funds and other aspects of the company’s financial circumstances. The auditors reported in 2021 to the audit committee at four meetings and to the Board of Directors on one occasion. In addition to the audit assignment, Holmen has consulted PwC on matters pertaining to taxation, accounting and for various investigations. The remuneration paid to PwC for 2021 is stated in Note 5 on page 64. PwC is required to assess its independence before making decisions on whether to provide Holmen with independent advice alongside its audit assignment. Internal management processes Holmen’s business strategy is formulated by Group management in order to create long-term value for both shareholders and customers, while contributing to a better Corporate governance reportclimate and thriving rural communities. An annual review of the Group’s strategy is conducted, including objectives for the business. The strategy is presented to and adopted by the Board and forms the basis for the expectations that are set. On the basis of the expectations, each unit sets objectives and identifies success factors for achieving them. Key performance indicators (KPIs) are linked to the success factors in order to measure and demonstrate changes in performance. The strategy review also provides the basis for the budget, in which decisions are taken on the distribution of resources and targets for the coming year are set. Use of a simple and well-implemented management-by- objectives tool for continuous follow-up ensures that the entire organisation is apply ing appropriate priorities to attain the objectives established. The business areas guide the operating businesses towards these targets using processes for purchasing, production and sales, and supported by HR, financial management, research and development, IT, environment and communication processes. Operations are followed up through regular reporting of performance and KPIs that reflect business activity, along with additional qualitative analysis. Reporting of non-financial data is integrated with the financial reporting. When major investment decisions are under consideration, financial, social and environmental effects are taken into account. Code of Conduct. Holmen’s Code of Conduct is in line with the UN Global Compact and provides guidance on day- to-day operations and clarifies what expectations are made of employees. Holmen’s operations should be characterised by responsible behaviour towards both internal and external stakeholders. 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 endeavours to ensure a workplace climate that is founded on the equal value of all people. All Holmen’s employees must have the same rights, obligations and opportunities irrespective of their sex, transgender identity or expression, ethnicity, religion or other belief, disability, sexual orientation and age. Holmen is subject to the UK Modern Slavery Act and a report relating to this is available at holmen.com. Policies. Holmen works with policies, guidelines and Group instructions to clarify how employees should act within key and critical areas. The Group’s 11 policies cover matters such as expectations of employee participation and leadership, specify the scope of management by objectives, talent management, interaction with trade union organisations, equality and employment terms and conditions. In addition to this, Financial risk is managed centrally and should be characterised by a low level of risk. The policies should also ensure that the company’s assets are managed in accordance with Group rules, risks of errors in financial reporting are minimised and irregularities are prevented. 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. Communication must be accurate, transparent and easily accessible and comply with legal requirements and commercial confidentiality. Compliance. Holmen’s Code of Conduct, policies and values are part of every employee’s induction programme, and shall be reiterated by managers at employee meetings. Compliance is monitored partly through employee surveys and appraisal talks, pay surveys, safety statistics and » Successful entrepreneurship and a sustainable future must go hand in hand. When Holmen increases forest growth, produces more climate-smart products and expands wind power, values are created that stand the test of time, while counteracting global warming.« Louise Lindh, Board member, Holmen 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 relation to external contacts on different markets. Employees in departments at risk of encountering unauthorised behaviour receive special training on business ethics. The policies specify that raw materials should be used efficiently, pollution should be prevented and that we should aspire to make continuous improvements. audits of the organisational and social work environment. The Board is to be informed of any violations of the Code of Conduct. Where non-compliance 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 deficiencies in Holmen’s financial reporting or other possible areas of ↓ Composition of the nomination committee Before AGM: Independent of the: Name Mats Guldbrand Fredrik Lundberg Carl Kempe Hans Hedström Representing 2022 L E Lundbergföretagen* x (chairman) Chairman of the Board Kempe Foundations* Carnegie Funds* x x x 2021 x (chairman) x x x Company Largest shareholder (in terms of votes) Yes Yes Yes Yes No No Yes Yes * At 31 August 2021, L E Lundbergföretagen controlled 62.3 per cent of the votes, the Kempe Foundations controlled 17.5 per cent and Carnegie Funds (Sweden) controlled 1.4 per cent. Holmen Annual Report 2021 41 Corporate governance report concern and improprieties at the company. No complaints about deficiencies were reported through this channel in 2021. 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 internal control is to ensure that Holmen achieves its financial reporting objectives (see below), ensure the company’s assets are managed according to Group rules and to prevent irregularities. Group Finance coordinates and monitors the internal control process concerning financial 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 com- prises five basic elements: control environ- ment, 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 operations. Control environment. The control environ- ment provides the basis for internal control of financial reporting and is based in part on the company’s internal management processes. The Board of Directors’ procedural rules and the instruction for the CEO establish the distribution of roles and responsibilities to ensure effective control and management of the business’ risks. Policies, guidelines and instructions contribute to making individuals aware of their role in establishing good internal control. These documents also ensure that financial reporting complies with the laws and rules that apply to companies listed on Nasdaq Stockholm 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 objectives not being met. The results of these risk-related activities are compiled and assessed under the guidance of Group Finance. Holmen’s greatest risks regarding finan- cial reporting are linked to the valuation of forest assets, pension obligations, pro- visions and financial transactions. The risk assessment also involves identifying and assessing operational risks. For further information, see the Risk Management section on pages 43–47. Control activities. To ensure that Holmen’s financial reporting objectives are met, control requirements are incorporated into the processes that are deemed relevant: sales, purchasing, investments, personnel, financial statements, payments and IT. Control activities aim to prevent, identify and rectify errors and discrepancies. 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 external and internal, adheres to a communication policy established by the CEO. The provision of financial information for Holmen’s shareholders and other stake- holders must be accurate, comprehensive, transparent and consistent, and must take place on equal terms and at the right time. Follow­up and evaluation. Control activities are assessed regularly to ensure that they are effective and appropriate. The results of self-assessments are followed up on a continual basis and discrepancies are reported to the Executive Vice President. The accuracy of self-assessments is subject to testing. The reporting of internal control to Group management takes place once a year. The company’s auditors report their observations from the review of internal control to the audit committee 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 conditions exist to justify an internal audit function. The internal control managed by the Group, together with the activities carried out by the external auditors, is deemed to be sufficient. ↓ Holmen’s financial reporting External financial reporting must: • be accurate and complete, and comply with applicable laws, regulations and recommendations • provide a true and fair description of the company’s business • support a reasoned and informed valuation of the business. Internal financial reporting must also support correct business decisions at all levels in the Group. » Sustainability is about balancing several perspectives – economic, environmental and social – and succeeding in doing so over time. It is a core component of our corporate governance and we were among the first to integrate the sustainability report into our annual report.« Anders Jernhall, Executive Vice President and CFO, Holmen 42 Holmen Annual Report 2021 Corporate governance report Risk management The Group’s business and operational risks are managed by the relevant business areas, which also take decisions regarding production, sales and employees with the aim of generating a lasting good return on invested capital. Purchasing and some parts of IT are managed by Group-wide functions in order to leverage economies of scale and risks are handled in line with the Group’s policies. The Group’s financing and financial risks are managed by Group Finance based on a financial policy established by the Board and that is characterised by a low level of risk and aims to minimise the Group’s cost of capital and provide effective control of the Group’s financial risks. ↓ Operational risks Risk Risk management Comment Production and deliveries Demand for Holmen’s products is affected by many factors, including political and macroeconomic factors, production by European manufacturers, changes in imports to Europe and opportunities for profitably exporting from Europe. Changes in demand for Holmen’s products affect the ability to achieve full production at the Group’s industries and can lead to lower income. Income may also be impacted if harvesting from our own forests needs to be limited as a result of lower demand and variations in precipitation and wind, which govern generation from hydro and wind power. Holmen endeavours to maintain a good cost position through large-scale production at well-invested production facilities, efficient logistics solutions and good control over the supply of wood. Together with longstanding customer relationships and strong product brands, this also increases the ability to maintain a high level of production amid more difficult market conditions. Changes in demand for wood may be met by shifting harvesting from our own forests from year to year, while production of hydro power during the year can be controlled by regulating water reservoir levels. In 2021, Holmen increased production of wood products by 43 per cent as a result of the acquisition of Martinsons, which occurred in late 2020, and the expansion of Braviken Sawmill. Towards the end of the year, Holmen’s new Blåbergsliden Wind Farm gradually began to generate electricity. At full production, the wind farm will generate 0.4 TWh annually, which will increase Holmen’s production of hydro and wind power by 30 per cent. For information about how changes in deliveries would affect Holmen’s operating profit, given the circumstances on 31 December 2021, see the sensitivity analysis on page 47. Selling prices The market balance in each product segment governs the selling price and affects income. Raw materials Wood, electricity and chemicals are the most significant input goods and price changes affect profitability. Holmen’s costs depend on the price trend for input goods, as well as on how well the Group succeeds in making production and administration more efficient. There is a risk that the Group’s costs will increase if there is a shortage of raw materials, or if prices increase for input goods. Holmen has limited possibilities to make rapid changes to its product range in the event of changes in price, but it adjusts its product focus towards those products and markets deemed to have the best long-term conditions, and by having a broad customer base and offering across a number of product areas. Changes in the price of wood can be managed to some extent by shifting harvesting from year to year and changes in the price of electricity can be managed by regulating reservoir water levels in order to shift electricity generation over the year. Half of the Group’s wood needs are covered by harvesting from the Group’s own forests, while the remainder is purchased from private forest owners. 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 electricity purchases. The price risk in this consumption is managed through physical fixed price contracts and financial hedging. The Group also sells electricity from its hydro power and wind power assets to the electricity grid. The need for thermal energy is great and is met locally through recycling and production from residual products. Chemicals are a signi fi cant input, particularly in paperboard production, but the need is declining since used chemicals are being recovered at the mills. Prices for wood products increased sharply during the first half of the year because of strong demand, but during the second half, prices fell somewhat when customers phased out their stocks. Paper prices fell at the turn of the year, 2020/2021, but capacity reductions and a shortage of recycled paper and energy caused prices to rise in the autumn. Paperboard prices rose towards the end of the year because of strong demand. Electricity prices rose during the year, but with great local variations. On average, Holmen’s electricity price was 50 per cent higher than in 2020. For information about how changes in prices would affect Holmen’s operating profit, given the circumstances on 31 December 2021, see the sensitivity analysis on page 47. The price of electricity increased sharply in southern Sweden where the majority of Holmen’s consumption occurs. The rise in electricity prices was partially offset by hedges that had been previously made. Holmen hedges parts of the consumption by the Paper business area. For 2021, 70 per cent of consumption was hedged. At year- end, 85 per cent of electricity consumption was hedged for 2022. For 2023, 65 per cent has been hedged, while for 2024 the figure is 20 per cent. As a result of the strong sawmill economy, log prices rose, while pulpwood prices were stable. For information about how changes in commodity prices would affect Holmen’s operating profit, given the circumstances on 31 December 2021, see the sensitivity analysis on page 47. Holmen Annual Report 2021 43 Risk management Risk Risk management Comment Suppliers Deficiencies in the supply chain for inputs in terms of security of supply and quality can lead to production disruptions. Suppliers that do not meet Holmen’s requirements can also have a negative effect on operations. There is also a risk that essential raw materials are not delivered because of changes in laws and regulations or other external factors. Customer credits The risk of the Group’s customers being unable to fulfil their payment obligations constitutes a credit risk. 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 requirements on sustainable development, including by respecting internationally recognised principles on anti-corruption measures, human rights, health and safety and the environment. Since 2017, Holmen has engaged an external party, EcoVadis, to monitor suppliers regarding their compliance with the Code. Holmen is subject to the UK Modern Slavery Act and a report on this is available at holmen.com. Compliance with forest management contractor agreements is ensured through site visits in the forest and all forest management contractors are trained in forest management and labour law and are informed about where to turn if irregularities should occur. In 2021, 2 (1) cases regarding breach of the Supplier Code of Conduct were reported. In the event of such breaches of the Code, an active dialogue with an action plan is in place in accordance with Holmen’s procedures. Suppliers associated with 85 per cent (90) of the Group’s purchasing volumes have signed the Supplier Code of Conduct. Supply chain risks relating to the climate, environment, labour legislation, human rights, business ethics and a sustainable purchasing have been mapped and an action plan has been formulated. The largest suppliers of input products are engaged in dialogues regarding the reduction of fossil emissions. Despite the challenges associated with the pandemic, Holmen has been able to maintain its deliveries of essential raw materials to such an extent that production has not been negatively impacted. The risk that the Group’s customers will not fulfil their payment obligations is limited by means of creditworthiness checks, 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. At 31 December 2021, the Group’s trade receivables totalled SEK 2 393 million (2 015), of which 34 per cent (32) were insured against credit losses. During the year, no credit losses on trade receivables had an impact on earnings (SEK -14 million). Sales to the five largest customers accounted for 14 per cent (15) of the Group’s total sales in 2021. 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. Production facilities require ongoing maintenance. Major maintenance shutdowns can entail higher costs and greater loss of production than planned. Investments in non-current assets can also be more expensive than initially planned. 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 and has insurance against interruptions in the event of unforeseen events. The Group also has liability insurance that covers sudden and unforeseen environmental damage affecting third parties. IT systems Efficient IT support is required to be able to plan and manage the production and when handling sales and purchasing. Disruptions in IT support and unauthorised access to information can have significant negative effects on the business. Forest management Holmen’s right to manage its own forest is crucial for maintaining its value. There is a risk that requirements to allocate areas for purposes other than forestry could increase in the future. Such a development could have a negative impact on the value of Holmen’s forest assets, and mean that forestry methods may need to change, which could reduce the harvest and increase costs. Damage to forests Wild game can damage the forest when grazing, resulting in both deterioration of the quality of the trees and reduced forest growth. Insect pests are another risk factor; for example, the spruce bark beetle can damage spruce forests. Storm and snow damage, fungal attacks and forest fires are other examples of damage that must be addressed and managed in forestry. Operating disruptions and unauthorised access are prevented by security measures and preventive measures in the form of appropriate physical protection, reliable server operation and secure networks. Measures and procedures are in place to minimise the risk of interruption and to manage situations if interruptions occur. Holmen is continually developing protective measures to address changes in the risk profile. Land and forest management are regulated both nationally and at the EU level. In order to be able to engage in active and sustainable forestry, it is important that laws and regulations such as the Environmental Code, the Forest Inquiry, the EU’s forest strategy and LULUCF do not restrict the conditions necessary for sustainable operations. Holmen participates in national and international industry organisations to exert an influence on relevant political and regulatory issues. Holmen’s forest holdings are scattered across large parts of Sweden and the risk of extensive damage occurring simultaneously is considered to be low, for which reason the Group does not have insurance cover for its forest holdings. 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 combatted by waxing seedlings and infested forest is harvested as soon as possible to prevent spread. The turbine in the biofuel boiler at Workington was damaged at the end of June and was out of operation for the rest of the year. Paperboard production was not affected, but energy costs rose when electricity and gas had to be purchased at the same time that income from green electricity certificates was not received during the period that the turbine was not running, causing costs to increase by SEK 330 million. The turbine is expected to be restarted during the first quarter of 2022. An insurance investigation regarding the damage is underway. During the year major maintenance shutdowns were carried out at the paperboard mills in both Iggesund and Workington, with an adverse effect on profit of SEK 310 million. In 2022, a major maintenance shutdown is planned at Iggesund Mill, which is expected to have a negative impact on profit of SEK 150 million. Business operations were not affected by IT incidents in 2021. A regularly recurring IT security training course was held for employees during the year. During the year, the right to use the forest in line with Swedish laws and regulations was questioned within the EU. Holmen has actively participated, both on its own and through industry organisations, in the debate to influence the EU position, includ- ing by elucidating the positive climate effects associated with a managed forest. The spruce bark beetle infestation continued in southern Sweden in 2021. To prevent spread, Holmen prioritised harvesting spruce bark beetle infested forests and the percentage of spruce sawn at Braviken Sawmill was adapted to take care of the damaged logs. 44 Holmen Annual Report 2021 Risk managementRisk Risk management Comment Climate change The Swedish Meteorological and Hydrological Institute’s forecasts show that average temperature, precipitation and soil moisture will increase in Sweden. A warmer climate could increase the growth of our northerly growing forests with a longer growth period, more precipitation and higher levels of carbon dioxide in the air, aiding photosynthesis. It could also affect the ecosystems in that biological diversity is altered, while the risk of storm and snow damage, fungal attack, insect damage and forest fires increases. Climate change could also impact the ability to carry out harvesting, for example because of the increased risk of damage to the land. Environment and permits Holmen runs operations that require environmental permits. The permits specify conditions regarding permitted production volumes and permitted emissions to air and water. Production disruptions can cause breaches of emissions conditions set for the business by environmental authorities, which could impact the environment. In places where Holmen has conducted industrial operations, the need for remediation may entail future costs. Health and safety Incidents and accidents at the workplace have an effect on human life and health. This could also lead to production disruptions and increased costs. Holmen is developing seedlings and processes for planting, clearing and thinning to adapt our forests to a changed climate. Seeds for Holmen’s cultivation of seedlings are selected to grow and flourish in a changing climate. When planting, we choose tree species based on the specific conditions of the soil to ensure the trees can better withstand extreme weather such as storms, rain and drought. Since shorter periods of frozen ground can make harvesting more difficult in the winter, this work is being adjusted through planning and by relocating machines to areas with better conditions. Ongoing climate risk analyses are conducted to create healthy, resilient forests suited to a changing climate. The risk of impact on Holmen’s sites from climate change is being managed through Holmen operational continuity planning. Risks concerning energy consumption and greenhouse gas emissions are managed through our ISO-certified environmental and energy management systems. Demand for Holmen’s products is rising in response to the market’s ambitions to counteract climate change, since our customers want renewable alternatives to fossil-based products. Environmental measures are organised and conducted in accordance with Holmen’s environmental and energy policy. In the event of process disruptions, the environment takes precedence over production. Risks are prevented and managed through regular own checks, checks by authorities and environmental risk analyses, as well as through the use of certified environmental and energy management systems and chain- of-custody certification. In consultation with the authorities, Holmen is conducting investigations to assess the need for remediation at former industrial sites. In 2021, 53 (37) environmentally related incidents were reported to the supervisory authorities. One of the nonconformities was of a significant nature in terms of impact on results and was due to a turbine breakdown in Workington. Corrective measures were taken to deal with these cases, in line with the environmental management system of the operations concerned. Good health and safety is a priority at all levels of management in the Group. Certified management systems, Group-wide targets relating to work accidents, continual training of personnel to increase risk awareness, procedures for risk observation and incident and accident reporting, and risk assessment of tasks and work by contractors are examples of activities to achieve a high level of safety in the workplace. In 2021, the rate of industrial accidents was 5.6 per 1 million hours worked (4.3). See also page 37. The most common accidents were slips, trips and crush injuries. The most significant areas of risk involve work with overhead cranes and vehicles with people in movement. As a result of the coronavirus pandemic, a large number of adaptations and measures were implemented to ensure a safe work environment for employees and others present in the operation. Talent management Skilled and motivated employees are key to being able to conduct long-term business operations with good profitability. Retirements increase the need to attract new personnel, which can be challenging. With Holmen’s employer brand, Holmen is being marketed as an employer in digital channels and physical meetings. A strong Employer Value Proposition (EVP) featuring Holmen’s sustainable business and the small big company is the prominent message. Business ethics risks 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. International, political and legal risks Holmen is active in a global market and sells products to many countries around the world. Because of this geographical spread, Holmen is exposed to political risks, conflicts, natural disasters, epidemics and pandemics. Moreover, Holmen is obligated to comply with laws and regulations where Holmen conducts business, including in areas such as the environment, real estate, labour law and taxation. Changes in laws and regulations may affect conditions for Holmen’s operations and lead to increased costs for regulatory compliance. Holmen’s Code of Conduct, business ethics policy and associated guidelines provide clear guidance on how to maintain good business ethics when dealing with external contacts in various markets. Holmen’s Code of Conduct also provides guidance on human rights, workers’ rights and the environment. These areas are clarified in Holmen’s policies and related guidelines. Managers and employees in sales, marketing, purchasing, finance, HR, information, market communication, projects and Group staffs have all received training in all aspects of Holmen’s Code of Conduct. 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 relevant political and regulatory 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. More unpredictable risks that may arise, such as shutdowns as a result of disease outbreaks or political unrest, are managed through ongoing external monitoring, close dialogue and coordination with industry organisations to maintain the best possible preparedness. Employer branding efforts in digital channels at the Group level, combined with local efforts at our operating sites, provide a good foundation for an inflow of interested applicants to our vacant positions. The voluntary employee turnover is stable and annual surveys show that new employees appreciate Holmen as an employer, both the culture and the job opportunities. During the year, managers were trained in skills-based recruitment in order to increase the precision of recruitment and to increase diversity. No identified or reported cases concerning deviations from the business ethics policy or the parts of the Code of Conduct or Supplier Code of Conduct regarding business ethics issues were reported in 2021. In 2020 and 2021, 86 per cent of office workers and managers completed the training on the Code of Conduct. See also page 37. During the year Holmen, updated the whistleblower policy in line with the new law to protect people who report misconduct. We had no lawsuits during the year regarding corruption against the organisation or its employees. Holmen worked continually in 2021 to take action to minimise the impact of the coronavirus pandemic, with a focus on the health and safety of our employees. Holmen has been active through dialogue, consultation responses, preparedness and advocacy work, on its own and together with industry organisations, to promote the growth of bio-based and fossil-free activities. Holmen Annual Report 2021 45 Risk management↓ Financial risks Risk Risk management Comment Currency The Group’s earnings are affected by fluctua- tions in exchange rates. Transaction exposure risk arises due to a significant portion of the Group’s sales income being in different currencies from costs. The translation exposure risk arises from the translation of foreign subsidiaries’ assets, liabilities and earnings into Swedish kronor. For the next two years, expected flows in EUR/SEK are hedged at an average of 10.49. For other currencies, 4–10 months of flows are hedged. Hedging of exposure to pounds sterling amounted to GBP 34 million at year-end. Net assets in other currencies are limited and are not usually hedged. Transaction exposure. In order to reduce the impact on profit from changes in exchange rates, net flows are hedged using forward foreign exchange contracts. Net flows in euros, US dollars and pounds sterling for the coming four months are always hedged. These nor- mally correspond to trade receivables and outstanding orders. The Board can decide to hedge flows for a longer period if this is deemed suitable in light of the products’ profitability, competitiveness and the currency situation. Currency exposure arising when investments are paid for in foreign currency is distinguished from other transaction exposure. Normally, 90–100 per cent of the currency exposure associated with major investments is hedged. Translation exposure. Hedging exposure that arises when subsidiaries’ assets and liabilities are translated into Swedish kronor (known as equity hedging) is assessed on a case-by-case basis and is arranged based on the value of net assets upon consolidation. The Group’s non-current assets are mainly Swedish, with the exception of the paperboard mill in the UK, which accounts for 2 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. SEKm 9 000 6 000 3 000 0 EUR/SEK GBP/SEK USD/SEK EUR/GBP CNH/SEK Net flow 12 months Hedged Interest rates Changes in market interest rates affect the Group’s cost of borrowing. Credit risk from financial counterparties The risk of financial transactions giving rise to credit risks in relation to financial counterparties. The fixed rate period for the Group’s net finan- cial debt varies over time and is decided by the Board of Directors. To limit the effects of a rise in interest rates, the interest rate on loans may be fixed, or an interest rate swap agreement may be entered into without changing the interest rate on the underlying loan. The Group’s average borrowing rate in 2021 was 1.2 per cent. In 2021 interest on loans of SEK 500 million was fixed for 5 years. The table below shows the Group’s fixed interest rate period by currency. SEKm <1 year 1–3 years 3–5 years >5 years Pension obligatioins Right-of-use agreement Total SEK -1 118 -1 000 -1 400 EUR GBP Other items 121 -492 56 - - - - - - -1 433 -1 000 -1 400 - - - - - -16 -8 0 - -24 -159 -3 693 -74 -6 -5 39 -498 51 -244 -4 101 At 31 December 2021, the Group had out- standing derivative contracts with a nominal amount of SEK 18 billion and a net fair value of SEK 946 million. The credit risk associated with outstanding derivative contracts is judged to be negligible. The creditworthiness of Holmen’s financial counterparties is assessed using reputable credit rating agencies or, where a counterparty has no credit rating, the company’s own analyses. A maximum credit risk and settle- ment risk are established for each financial counterparty and are monitored continually. This calculation is based on the maturity and historical volatility of different types of derivatives. For cash and cash equivalents and current investments, the maximum credit risk is assessed to correspond to the nominal amount. 46 Holmen Annual Report 2021 Risk management Risk Risk management Comment 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 is to have a strong financial position in order to secure room for manoeuvre when making long-term commercial decisions. The target is for net financial debt not to exceed 25 per cent of equity. Holmen’s financing mainly comprises bonds 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. The financial position is strong, with net financial debt at 31 December 2021 amounting to SEK 4 101 million. Of these financial liabilities, SEK 736 million falls due in 2022. The Group has unutilised committed credit facilities of SEK 5 billion, of which SEK 1 billion matures in 2025 and SEK 4 billion in 2027. Both facilities include a limit stipulating that they cannot be used if net liability in relation to equity exceeds 125 per cent. At year-end, the Group’s net liability in relation to equity was 9 per cent. SEKm 5 000 4 000 3 000 2 000 1 000 0 2022 2023 2024 2025 ≥ 2026 Financial liabilities Credit facility ↓ Sensitivity analysis Operational risks A 1 per cent change in deliveries and price of the Group’s products or significant input goods 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. Sale Paperboard Paper Wood Products Wood from company forests Hydro and wind power Input goods Wood Electricity* Chemicals Other variable costs Delivery costs Employees Other fixed costs Change +/-1% +/-1% +/-1% +/-1% +/-1% Change +/-1% +/-1% +/-1% +/-1% +/-1% +/-1% +/-1% Impact on operating profit, SEKm Price Deliveries 28 15 26 9 3 61 54 49 14 5 Price 38 5 13 8 18 27 14 * Taking electricity price hedges for 2022 into account. Without taking hedges into account, the corresponding figure would be SEK 23 million. Financial risks The table to the right shows the extent of the impact from a change in the Swedish krona, the price of electricity and the market interest rate on Group profit before tax and equity next year, taking account of hedging. The adopted change is calculated based on five years’ average historical volatility for each instrument, which is deemed a reasonable change going forward. Historical volatility on exchange rates is calculated based on average annual volatility on the KIX, the Riksbank’s exchange rate index. Excluding hedging, a 5 per cent change in the krona would affect earnings before tax by SEK 480 million a year. Earnings before tax* Exchange rates EUR/SEK USD/SEK GBP/SEK other currencies/SEK Borrowing rate Equity Transaction hedging Investment hedging Equity hedging Electricity price hedging Interest rate changes Change +/-5% +/-5% +/-5% +/-5% +/-5% +/-0.5% unit Change +/-5% +/-5% +/-5% +/-50% +/-0.5% unit *Estimated effect for 2022 including hedging. SEKm 165 45 14 59 47 7 SEKm 556 14 21 1 282 7 Holmen Annual Report 2021 47 Risk managementshaReholdeR infoRmation Holmen’s two classes of shares are listed on Nasdaq Stockholm, Large Cap. Over the past five years, Holmen’s total shareholder return (dividend paid and share price performance) has been 203 per cent, compared with 87 per cent for OMX Stockholm 30. For Holmen, this corresponds to an annual return of 25 per cent. At the same time, the number of owners has increased by 20 000 to just over 48 000. 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 classes of shares are currently listed on Nasdaq Stockholm, Large Cap. At the end of 2021 Holmen A was trading at SEK 448 (415) and Holmen B at SEK 435 (394), corresponding to a market capitalisation of SEK 71.0 billion (64.7). The highest closing price for Holmen’s class B shares was SEK 469, on 10 August. The lowest closing price was SEK 365, on 23 February. The daily average number of class B shares traded was 510 000, which corresponds to a value of SEK 204 million. The daily average number of class A shares traded was 1 140. Almost 40 per cent of trading took place on Nasdaq Stockholm. Holmen shares have also been traded on other trading platforms, such as Cboe BXE, LSE and CEUX. Dividend Decisions on dividends are based on an appraisal of the Group’s profitability, future investment plans and financial position. The Board proposes that the AGM to be held on 30 March 2022 approve a dividend of SEK 7.5 per share and an extra dividend of SEK 4.0 per share. Share structure Holmen has 161 925 685 shares outstanding, of which 45 246 468 are class A shares and 116 679 217 are class B shares. The company also has 586 639 repurchased class B shares held in treasury. Each class A share carries 10 votes, and each class 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 2019 AGM approved a targeted share savings programme for key individuals in the Group. The programme expires in April 2022 and the Board of Directors has proposed that the 2022 AGM take a decision on a new, similar programme. The aim of the programme is to strengthen common interests between shareholders and company management, as well as to create a long-term commitment to Holmen. More information about the current share savings programme can be found in Note 4. Share buy-backs The 2021 AGM renewed the authorisation for the Board to be able to take decisions to purchase up to 10 per cent of the company’s shares. No buy-backs took place during the period. The company already owns 0.3 per cent of all shares outstanding. The Board proposes that the 2022 AGM approve corresponding authorisation for the Board. Ownership structure Holmen had a total of 48 126 shareholders at year-end 2021. In terms of numbers, Swedish private individuals account for the largest owner category with 45 729 shareholders. 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 4 per cent of capital, respectively. The largest owner at the turn of 2021/2022, with 62.3 per cent of votes and 34.1 per cent of capital, was L E Lundbergföretagen AB. Shareholder communication Information about the company is available at the holmen.com website, including financial information in the form of reports, presentations and financial data, as well as the performance of Holmen shares and contact information. Shareholder categories Share of capital, % 2 19 12 16 52 Swedish institutions Swedish equity funds Swedish private individuals Foreign shareholders 52% 16% 12% 19% Share price performance, Holmen class B and OMX Stockholm Total shareholder return Holmen B and OMX Stockholm Including reinvested dividend without tax Index 400 300 200 100 0 Number of shares (thousand) 4 000 3 000 2 000 1 000 17 18 19 20 21 Jan 22 0 Index 700 600 500 400 300 200 100 0 12 13 14 15 16 17 18 19 20 21 Jan 22 Holmen B Total number of class B shares traded (thousands) OMX Stockholm 30 (OMXS30) Holmen B Source: Macrobond OMX Stockholm 30 (OMXS30) 48 Holmen Annual Report 2021 Shareholder information Earnings per share, 2021 Proposed dividend per share, 2021 SEK 18.5 SEK 7.5 + SEK 4.0 Annual return at 31 Dec 2021*, % 1 year 3 years 5 years 10 years Holmen B OMX Stockholm 30 *Including reinvested dividend. 13 33 39 23 25 13 20 13 Holmen’s total shareholder return has averaged 20 per cent a year over the past 10 years, which is 7 percentage points better than the OMX Stockholm 30. Share capital structure Equities Votes No. of shares No. of votes Quotient value SEKm A B Total no. of shares Holding of repurchased class B shares 10 1 45 246 468 117 265 856 162 512 324 -586 639 452 464 680 117 265 856 569 730 536 -586 639 Total shares outstanding 161 925 685 569 143 897 26 1 180 26 3 058 4 238 Changes in share capital 2000–2021 Change in no. of shares Total no. of shares Change in share capital Total share capital, SEKm 2001 Cancellation of shares repurchased 2004 Conversion and subscription 2018 Share split 2020 Cancellation of shares repurchased -8 885 827 4 783 711 84 756 162 -7 000 000 79 972 451 84 756 162 169 512 324 162 512 324 -444 239 - - 3 999 4 238 4 238 4 238 Ownership structure* 31 Dec 2021 % of capital % of votes L E Lundbergföretagen Kempe Foundations Carnegie Funds (Sweden) SEB Funds Norges Bank Nordea Funds Swedbank Robur Funds Alecta Vanguard (US) BlackRock Total Other Total Of which non-Swedish shareholders 34.1 7.4 5.1 4.1 3.1 2.6 2.5 2.3 1.8 1.5 62.3 17.5 1.4 1.2 0.9 0.7 0.7 0.7 0.5 0.4 64.4 86.3 35.6 13.7 100.0 19.3 100.0 5.7 * Calculated based on the total number of shares outstanding. 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 shareholders’. Shareholder statistics at 31 Dec 2021 Holding classes, no. of shares No. of shareholders Share of capital, % 1−1 000 1 001−100 000 100 001− Total 44 221 3 834 71 48 126 4 11 85 100 Data per share (adjusted for the 2:1 share split in 2018) 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Diluted earnings per share, SEK1) 18.5 12.2 52.6 13.5 9.9 8.5 3.3 5.4 4.3 11.1 Dividend, SEK Ordinary dividend, SEK Extra dividend, SEK Total dividend in % of: Equity Closing market price Profit/loss for the year Return, equity, %1) Return, capital employed, %1) 3) Equity per share, SEK Closing market price, B, SEK Average listed price for year, B, SEK Highest market price for year, B, SEK Lowest market price for year, B, SEK 7.52) 4.02) 7.25 3.5 4.0 2.6 62 7 9 290 435 404 469 365 4.1 2.7 88 5 6 263 394 310 396 228 3.5 - 1.4 1.2 6 35 9 238 285 220 297 172 6.75 - 4.8 3.9 50 10 10 140 175 213 240 175 6.5 - 5.0 3.0 65 8 9 131 218 186 218 157 6 - 4.7 3.7 71 7 9 127 164 141 163 114 5.5 - 4.2 4.0 158 3 6 124 131 132 153 110 5 - 4.0 3.8 93 4 6 125 133 118 136 105 4.5 - 3.6 3.8 106 3 4 124 117 99 118 87 Total closing market capitalisation, ’000 SEKm 71.0 64.7 46.6 29.5 36.6 27.4 22.3 22.3 19.7 P/E ratio4) EV/EBITDA3) 5) 23 14 32 19 5 14 13 9 22 13 19 10 39 11 25 9 28 10 4.5 - 3.6 4.7 41 9 7 124 96 93 102 85 16.2 9 8 Closing beta value (48 months), B, at year-end6) 0.78 0.77 0.77 0.74 0.74 0.72 0.68 0.71 0.67 0.67 Number of shareholders at year-end 48 126 48 104 38 904 33 573 30 903 28 159 28 176 27 788 27 692 28 440 1) See page 98: Definitions and glossary. 2) Board proposal. 3) Excl. items affecting comparability. 4) Closing market price divided by diluted earnings per share. 5) Market capitalisation plus net financial debt at year-end (EV) divided by EBITDA. 6) 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. Holmen Annual Report 2021 49 Shareholder information Financial statements Income statement, SEKm Net sales Other operating income Change in inventories Raw materials and consumables Personnel costs Other operating costs Change in value of biological assets Depreciation and amortisation according to plan Profit/loss from investments in associates and joint ventures Operating profit Financial income Financial costs Earnings before tax Tax Profit/loss for the year Attributable to: Owners of the parent company Earnings per share (SEK) basic diluted Average number of shares (million) basic diluted Note 2 3 4 5 9 10, 11, 12 13 6 6 7 8 8 2021 19 479 1 690 1 -10 110 -2 720 -3 814 464 -1 261 0 3 731 9 -48 3 691 -688 3 004 2020 16 327 1 339 -88 -8 781 -2 411 -3 310 579 -1 172 -6 2 479 11 -53 2 437 -458 1 979 3 004 1 979 18.5 18.5 161.9 161.9 12.2 12.2 161.9 161.9 Operating profit for 2021 amounted to SEK 3 731 million (2 479). Profit was positively affected by higher prices for wood products and the expansion of the wood products business. Net financial items totalled SEK -39 million (-42). Net debt totalled SEK 4 101 million (4 181) at year-end. Tax recognised totalled SEK -688 million (-458), corresponding to 19 per cent (19) of profit before tax. Statement of comprehensive income, SEKm Note 2021 Profit/loss for the year Other comprehensive income Revaluation of forest land Revaluation 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 hedges 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 after tax Total comprehensive income Attributable to: Owners of the parent company 50    Holmen Annual Report 2021 9 18 7 13 7 3 004 3 345 -12 -683 2 650 182 349 -27 180 -39 3 -97 551 3 201 6 204 2020 1 979 1 173 -15 -239 920 380 -105 -2 -187 29 16 -61 69 989 2 968 6 204 2 968 GroupFinancial statementsBalance sheet at 31 December, SEKm Note 2021 2020 Non-current assets Forest assets Biological assets Forest land Non-current intangible assets Property, plant and equipment Right-of-use assets Investments in associates and joint ventures Other shares and participations Non-current financial receivables Deferred tax assets Total non-current assets Current assets Inventories Trade receivables Current tax receivables Other operating receivables Current financial receivables Cash and cash equivalents Total current assets Total assets Equity Share capital Other contributed capital Reserves Retained earnings including profit/loss for the year Total equity attributable to owners of the parent company Non-current liabilities Non-current financial liabilities Non-current liabilities relating to right-of-use assets Pension obligations Non-current provisions Deferred tax liabilities Total non-current liabilities Current liabilities Current financial liabilities Current liabilities relating to right-of-use assets Trade payables Current tax liabilities Current provisions Other operating liabilities Total current liabilities Total liabilities Total equity and liabilities 9 9 10 11 12 13 13 14 7 15 16 8 16 14 14 14 18 19 7 14 20 7 19 20 29 204 17 876 539 9 711 240 1 756 2 268 3 59 598 3 818 2 393 70 1 676 39 507 8 503 28 663 14 538 555 9 226 284 1 717 2 290 1 55 276 3 594 2 015 6 1 262 43 346 7 267 68 101 62 543 4 238 281 14 748 27 725 46 992 3 911 173 24 409 11 610 16 127 736 71 2 836 80 - 1 259 4 982 21 109 68 101 4 238 281 11 541 26 457 42 516 3 919 175 48 491 10 570 15 203 605 112 2 496 211 163 1 235 4 824 20 026 62 543 Holmen Annual Report 2021    51 GroupFinancial statementsReserves Translation reserve Hedge reserve Revaluation reserve Retained earnings incl. profit/loss for the year Total equity 25 052 1 979 40 111 1 979 - -15 - - - - 3 -12 1 967 -567 175 -175 2 1 173 -15 273 -187 29 16 -300 989 2 968 -567 - - 2 26 457 3 004 42 516 3 004 - -12 - - - - 6 -6 2 997 -1 741 12 3 345 -12 504 180 -39 3 -780 3 201 6 204 -1 741 12 10 366 - 1 173 - - - - - -242 932 932 - - - - 11 297 - 3 345 - - - - - -689 2 656 2 656 - - 13 953 27 725 46 992 92 - - - - -187 29 - -6 -165 -165 - - - - -73 - - - - 180 -39 - 8 149 149 - - 76 83 - - - 273 - - 16 -55 234 234 - - - - 316 - - - 504 - - 3 -105 402 402 - - 718 Changes in equity, SEKm Opening equity balance 1 Jan 2020 Profit/loss for the year Other comprehensive income Revaluation of forest land Revaluation of defined benefit pension plans Cash flow hedges 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 Cancellation of treasury shares Bonus issue Share savings programme Closing equity balance 31 Dec 2020 Profit/loss for the year Other comprehensive income Revaluation of forest land Revaluation of defined benefit pension plans Cash flow hedges 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 Other contributed capital Share capital 4 238 - 281 - - - - - - - - - - - -175 175 - 4 238 - - - - - - - - - - - - - - - - - - - - - - - - - 281 - - - - - - - - - - - - Closing equity balance 31 Dec 2021 4 238 281 52    Holmen Annual Report 2021 GroupFinancial statementsCash flow statement, SEKm Operating activities Earnings before tax Adjustments for non-cash items Depreciation and amortisation according to plan 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 Investments in and acquisition of biological assets Disposal of biological assets Acquisition of shares and participations Repayment of non-current financial receivables Cash flow from investing activities Financing activities Raised long-term borrowings Change in current financial liabilities Repayment of debt related to right-of-use assets 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 difference on cash and cash equivalents Cash and cash equivalents at end of year Note 2021 2020 25 25 25 3 691 1 261 -464 -187 -263 -662 3 375 -236 -156 247 3 229 -1 534 19 -13 -166 424 -63 25 -1 307 500 -411 -110 -3 -1 741 -1 764 158 346 2 507 2 437 1 172 -579 -95 46 -569 2 411 195 -44 -105 2 457 -1 032 12 -7 -128 69 -839 141 -1 783 1 900 -2 049 -95 3 -567 -808 -133 483 -4 346 *Otheradjustmentsprimarilyconsistofforeignexchangeeffectsandthemarkingtomarketoffinancialinstruments,profitfromassociates,aswellasgains/losseson sale of non-current assets. Change in net financial debt, SEKm Opening net financial debt Business combinations Cash flow Operating activities Investing activities (excl. non-current financial receivables) Dividend paid Liabilities arising from new right-of-use agreements Revaluation of defined benefit pension plans Foreign exchange effects and changes in fair value Closing net financial debt 2021 -4 181 - 3 229 -1 332 -1 741 -67 17 -27 -4 101 2020 -3 784 -187 2 457 -1 924 -567 -163 -15 1 -4 181 Holmen Annual Report 2021    53 GroupFinancial statementsIncome statement, SEKm Note 2021 2020 Cash flow statement, SEKm Note 2021 2020 Net sales Other operating income Change in inventories Raw materials and consumables Personnel costs Other external costs Depreciation and amortisation according to plan Operating profit Profit/loss from investments in Group companies Interest income and similar income Interest expense and similar costs Profit/loss after financial items Appropriations Earnings before tax Tax Profit/loss for the year 2 3 4 5 10, 11 6, 23 6 6 24 7 18 186 921 35 -10 127 -2 078 -5 428 -51 1 458 380 26 -90 1 774 768 2 541 -451 2 090 14 187 690 -119 -7 285 -1 942 -5 150 -48 332 199 24 -23 531 1 804 2 336 -417 1 919 Statement of comprehensive income, SEKm Profit/loss for the year Other comprehensive income Cash flow hedges 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 Note 2021 2020 2 090 1 919 204 329 -27 -104 401 372 -97 -2 -55 218 7 Total comprehensive income 2 491 2 137 The parent company includes Holmen’s Swedish operations, with the exception of the majority of the non-current assets, as well as certain parts of the operation that was taken over on 1 October 2020 in conjunction with the acquisition of Martinsons, which are recognised in other companies in the Group. Profit after net financial items includes the result from hedging equity in foreign subsidiaries of SEK -39 million (29). 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 Acquisition of property, plant and equipment Disposal of property, plant and equipment Repayment of non-current financial receivables Acquisition of shares and participations Cash flow from investing activities Financing activities Raised 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 25 1 774 531 51 2 -145 75 -618 48 95 -50 22 -440 1 139 206 -250 -641 622 870 -92 10 25 -39 -95 187 96 -171 319 -72 6 141 -918 -842 500 -303 -286 1 900 -1 941 -1 549 -1 741 1 495 -230 -565 -567 2 513 -1 355 209 -168 236 445 403 236 * Other adjustments primarily consist of foreign exchange effect and the marking to marketoffinancialinstrumentsandgains/lossesonthesaleofnon-currentassets. 54    Holmen Annual Report 2021 Parent companyFinancial statements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 receivables Current investments Cash and cash equivalents Total current assets Total assets Note 2021 2020 Balance sheet at 31 December, SEKm Note 2021 2020 10 11 13, 23 14 13 3 075 17 3 038 11 634 4 176 11 597 3 467 18 898 18 119 15 16 7 14 14 2 886 3 616 39 39 445 7 025 2 659 2 442 - 43 236 5 379 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 obligations Provisions Deferred tax liabilities 25 923 23 498 Total provisions Liabilities Non-current financial liabilities Current financial liabilities Current tax liabilities Operating liabilities Total liabilities 17 24 18 19 7 14 14 7 20 4 238 1 577 100 4 986 2 090 4 238 1 577 100 4 394 1 919 12 990 12 228 2 852 2 354 0 599 787 4 744 657 1 386 1 405 4 513 736 - 3 446 8 695 4 083 514 145 2 769 7 511 Total equity and liabilities 25 923 23 498 Restricted equity Statutory reserve Share capital Non-restricted equity Revaluation reserve Hedge reserve Retained earnings Profit/loss for the year Total equity Changes in equity, SEKm Opening equity balance 1 Jan 2020 Appropriation of profits Profit/loss for the year Other comprehensive income Cash flow hedges Tax on other comprehensive income Total other comprehensive income Total comprehensive income Dividend paid Cancellation of treasury shares Bonus issue Share savings programme Closing equity balance 31 Dec 2020 Appropriation of profits Profit/loss for the year Other comprehensive income Cash flow hedges Tax on other comprehensive income Total other comprehensive income Total comprehensive income Dividend paid Share savings programme 4 238 - - - - - - - -175 175 - 4 238 - - - - - - - - 1 577 - - - - - - - - - - 1 577 - - - - - - - - 100 - - - - - - - - - - 100 - - - - - - - - Closing equity balance 31 Dec 2021 4 238 1 577 100 135 - - 272 -55 218 218 - - - - 353 - - 505 -104 401 401 - - 754 2 759 1 847 - - - - 1 847 -567 175 -175 2 4 042 1 919 - - - - 1 919 -1 741 12 4 232 1 847 -1 847 1 919 - - - 72 - - - - 1 919 -1 919 2 090 - - - 171 - - 2 090 10 656 - 1 919 272 -55 218 2 137 -567 - - 2 12 228 - 2 090 505 -104 401 2 491 -1 741 12 12 990 Holmen Annual Report 2021    55 Parent companyFinancial statements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. Forest assets 10. Non-current intangible assets 11. Property, plant and equipment 12. Right-of-use assets (leases) 13. Investments in associates, joint ventures and other shares and participations 56 14. Financial instruments 61 15. Inventories 62 16. Operating receivables 17. Equity, parent company 18. Pension obligations 19. Provisions 20. Operating liabilities 21. Collateral and contingent liabilities 22. Related parties 23. Investments in Group companies 24. Untaxed reserves 25. Cash flow statement 26. Business combinations 27. Critical accounting estimates and judgements 63 64 64 65 66 67 69 70 71 72 73 76 76 76 77 78 78 78 79 80 81 81 82 82 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 Accounting 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 accordance with RFR 2 Accounting for Legal Entities. The differences between the policies applied by the parent company and those applied by the Group are due to restrictions in the parent company’s ability to apply IFRS as a consequence of the Swedish Annual Accounts Act, the Swedish Pension Obligations Vesting Act, and in some cases for tax reasons. 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 forest land, as well as certain financial assets and liabilities, which are measured at fair value. In the parent company, biological assets and forest land 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. The financial statements are presented in millions of Swedish kronor. 56    Holmen Annual Report 2021 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 27 ‘Critical accounting estimates and judgements’. Changes in accounting policies New and amended accounting policies applicable as of 2021 New and amended IFRSs with application from 2021 do not have any material impact on the company’s financial statements. New and amended accounting policies not yet applied New and amended IFRSs to be applied in the future are not expected to have any material impact on the company’s financial statements. Segment reporting The Group’s operations are divided into operating segments, based on which parts of the operations are monitored by the company’s highest executive decision- maker, known as the management approach. The segmentation criterion is based on the Group’s business areas. This corresponds to the Group’s operating structure and the internal reporting to the CEO and the Board. The items in the profit, assets and liabilities of the operating segment are recognised in accordance with the profit (operating profit), assets and liabilities that are monitored by the company’s highest executive decision-maker. See Note 2 for more details of the classification and presentation of operating segments. Note 1NotesClassification Essentially, non-current assets, non-current liabilities and non-current 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 current provisions essentially consist of amounts that are expected to be recovered or paid within 12 months of the balance sheet date. Consolidation principles Subsidiaries A subsidiary is a company over which the parent company, Holmen AB, exercises a controlling influence. Controlling influence exists if Holmen AB has control over an investment object, is exposed or entitled to variable returns on its involvement and can exercise its control of the investment to influence the size of return. In determining whether one company has control over another, potential shares with an entitlement to vote and whether de facto control exists are taken into account. The consolidated accounts are prepared using the acquisition method. The acquisi- tion method entails the parent company indirectly acquiring the subsidiary’s assets and assuming the liabilities of the subsidiary, valued at fair value. The difference between the cost of the shares and the fair value of the acquired identifiable net assets is treated as goodwill. The subsidiary companies’ income and expenses, and their assets and liabilities, are stated in the consolidated accounts as of the date when the Group gains control (acquisition date) until such time as the Group no longer has control. Intra-Group receivables and liabilities, transactions between companies in the Group and related unrealised gains are eliminated in their entirety. Holdings recognised in accordance with the equity method Associates. Shareholdings in associates, in which the Group controls a minimum of 20 per cent and a maximum of 50 per cent of the votes, or otherwise exercises a significant influence, are stated in the consolidated accounts in accordance with the equity method. Jointly owned companies/joint ventures. In accounting, joint ventures are those companies for which the Group, through cooperation agreements with one or more parties, has joint control whereby the Group has rights to the net assets instead of direct rights to assets and commitments in liabilities. Holdings in joint ventures are consolidated in the consolidated accounts using the equity method. 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 depreciation/amortisation or reversal of acquired surplus and deficit values, respectively, is stated in the consolidated income statement as ‘Share of profits of associates and joint ventures’. Dividends received from an associate or joint venture reduce the book value of the investment. Unrealised gains arising as a consequence of transactions with associates and joint ventures are eliminated in relation to the owned proportion of equity. When the Group’s share of the recognised losses of an associate and joint venture exceeds the 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 translated into the functional currency at the exchange rate prevailing on the balance sheet date. Exchange differences arising on such translations are stated in the income statement. Non-monetary assets and liabilities that are stated at historical cost are translated at the exchange rate prevailing on the transaction date. Financial statements of foreign operations The assets and liabilities of foreign operations, including any goodwill and other consolidated surplus and deficit values, are translated in the consolidated accounts, from the foreign operation’s functional currency, to the Group’s reporting currency (Swedish kronor) at the balance sheet date 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. Translation differences arising during 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 Skog AB, Iggesund Paperboard AB, Holmen Paper AB, Holmen Wood Products 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 assets, 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 and services in the construction industry such as installation work. Holmen acts almost 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. Holmen’s guarantees in connection with sales should not be regarded as separable and are therefore recognised in accordance with IAS 37. The transaction price is the price of the goods or service. Variable consideration mainly occurs in the form of volume or cash discounts. Volume discounts give custo mers a discounted price provided that a certain 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 depending 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. The Group’s business also includes construction solutions in wood. Income from this activity is treated as a commercial construction contract and recognised over time, based on costs spent in relation to the total estimated costs of the project. Projects usually do not extend beyond twelve months. Holmen therefore applies the relief rule and does not disclose remaining performance commitments. Accrued income related to commercial construction contracts is initially recognised as contract assets, since the right to payment is conditional upon customer approval. When the customer has accepted the goods, the amount of the contract asset is recognised as a receivable instead. Advances received are included in the contract liability. Payment terms vary from market to market and Holmen usually follows applicable practice on the respective market. Other operating income Income from activities not forming part of the company’s main business is stated as other operating income. This item mainly comprises sales of by-products, renewable energy certificates, rent and land lease income, emission allowances, insurance compensation and gains/losses on sales of non-current assets. Renewable energy certificates Certificates are issued in relation to production of renewable energy according to a quota system introduced in order to promote electricity generation using renewable sources of energy. Income from allocated certificates is recognised as other operating income in the same period in which generation occurs. State grants State grants are recognised in the balance sheet as accrued income when it is reasonably certain that the grant will be received and that the Group will satisfy the conditions associated with the grant. State grants linked to a non-current asset reduce the asset’s recognised cost. State grants, such as road grants, intended to cover costs are recognised as other operating income. Grants are distributed systematically in the income statement in the same way and over the same periods as the costs the grants are intended to cover. Holmen Annual Report 2021    57 Note 1NotesFinancial income and costs Financial income and costs consist of interest income and interest expense, dividend income and revaluations of financial instruments valued at fair value, as well as unrealised and realised currency gains and losses. Interest income on receivables and interest expense on liabilities are calculated by using the effective interest method. Interest expense includes transaction costs for loans, which have been distributed over the duration of the loan; this also applies to any difference between the funds received and the repayment amount. Dividend income is recognised when the dividend is established and the right to receive payment is judged to be certain. Interest expense usually impacts earnings for the period to which it is attributable. Borrowing costs attributable to the purchase, construction or production of qualifying assets are capitalised in the consolidated accounts as part of the asset’s cost. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use and that is relevant for the Group in connection with major investment projects. Taxes Income taxes comprise current tax and deferred tax. Income taxes are recognised in the income statement except when underlying transactions are recognised in other comprehensive income or directly in equity, in which case the associated tax effect is also recognised in other comprehensive income or directly in equity. Current tax is the tax to be paid or received for the year in question, using the tax rates that have been decided on, or to all intents and purposes have been decided on at the balance sheet date. This also includes any adjustment to current tax attributable to previous periods. Deferred tax is calculated using the balance sheet method on the basis of temporary differences between 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/loss 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. Financial instruments Financial instruments are measured and recognised according to IAS 9. Recognition in and derecognition from the balance sheet A financial asset or liability is stated in the balance sheet when the company becomes a party in accordance with the contractual conditions of the instrument. A financial asset is removed from the balance sheet when the rights referred to in the contract have been realised or mature, or when the company no longer has control over them. A financial liability is removed from the balance sheet when the undertaking in the contract is performed or expires in some other way. Spot transactions are stated in accordance with the trade date principle. Trade receivables are recognised in the balance sheet when an invoice has been sent. Liabilities are recognised when the counterparty has provided a product or service and there is a contractual obligation to pay, even if an invoice has not yet been received. A financial asset and a financial liability are only offset and recognised at a net amount where a legal right to offset the amounts exists and there is an intention to settle the items at a net amount or simultaneously realise the asset and settle the liability. Financial assets, excluding shares, and financial liabilities have been classified as current if the amounts are expected to be recovered or paid within 12 months of the balance sheet date. Shares have been classified as non-current if they are intended to be held in the operation permanently. 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 14 for the company’s classifications of financial instruments. Financial assets - are measured initially at fair value less any transaction costs. Normally, the assets are measured on a current basis at amortised cost using the effective interest method since the assets are held with the objective of collecting the contractual cash flows, which consist of principal and interest on the outstanding principal. 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 ongoing basis at 58    Holmen Annual Report 2021 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 using the effective interest method. In those cases where funds received fall short of the repayment amount, the difference is allocated over the duration of the loan using the effective interest method. 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 - When assessing expected credit losses on financial assets, the simplification rule is applied in accordance with IFRS 9. 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 recognised based on an individual estimate. For financial instruments for which there are no indications 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 derivatives 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 changes in value are transferred from equity via other comprehensive income to the income statement to meet and match the hedged transaction. In the hedging of investments, the cost of the hedged item is instead adjusted when it occurs. The ineffective portion of hedges is recognised directly in the income statement. 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 comparing 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 46–47. Forest assets The Group’s forest assets are recognised at fair value based on the transaction prices for forest properties in those areas where the Group has forest land. Fair value measurement is based on measurement level 3. The total value of the forest assets is allocated across growing trees, which are recognised as a biological asset, and forest land. How much of the value is allocated to the biological assets is established by calculating the present value of expected cash flows, less selling costs but before tax, from harvesting those trees currently growing. Calculation of present value uses a discount rate before tax calculated on the basis of forest property transactions. The value of the forest land is calculated as the difference between the total value of the forest assets and the biological assets. Changes in the fair value of biological assets are recognised in profit/loss. Changes in the fair value of forest land are recognised in other comprehensive income and accumulated in a separate component of equity called the revaluation surplus. If the fair value of forest land were to be less than cost, the difference would be recognised in profit/loss as an impairment loss. Recognition in the parent company In the parent company, forest assets are recognised in accordance with RFR 2. This means that they are classified as non-current assets and recognised at cost adjusted for revaluations taking into account the need, if any, for impairment in value. Non-current intangible assets Non-current intangible assets such as the value of acquired wood supply business, patents, licences and IT systems are recognised at cost after deduction of accumulated amortisation and any impairment losses. The Group’s non-current intangible assets are amortised over periods of between 5 and 20 years, except for goodwill. Both goodwill and other non-current intangible assets are tested for impairment annually. Any impairment losses may be reversed via exceptions from goodwill. Non-current intangible assets in the parent company are amortised over five years. Note 1Notes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 allocated to cash-generating units that are expected to benefit from the effects of the acquisition. 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 book value includes all directly attributable expenses, for example in connection with materials and services, employee benefits, registration of a legal right, amortisation of patents and licences and borrowing costs in accordance with IAS 23. Other development expenditure is recognised in the income statement as costs when incurred. Development expenditures recognised in the balance sheet are stated at cost less accumulated amortisation and impairment losses. Property, plant and equipment Property, plant and equipment are stated at cost after deduction of accumulated depreciation and any impairment losses. Property, plant and equipment that consist of parts with different useful lives are treated as separate components of property, plant and equipment. Additional expenditure is capitalised only if it is estimated to generate financial benefits for the company. The key factor determining whether or not additional expenditure is capitalised is if it relates to the replacement of identified components or parts thereof, in which case the expenditure is capitalised. The cost is also capitalised in cases where a new component is created. Any undepreciated 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 expected from the use of the asset. The gain or loss arising on the retirement or disposal of an asset consists of the difference between any selling price and the book value of the asset, less any direct selling costs. Gains and losses are recognised in the accounts as other operating income/costs. An asset is classified as being held for sale if it is available for immediate sale in its present condition and based on normal terms, and it is highly likely that a sale will take place. Such assets are recognised on a separate line as a current asset in the balance sheet. When an asset is classified as holdings for sale, it is recognised at the lower of book value and fair value, less selling costs. Depreciation according to plan is based on original acquisition cost less any impairment losses. Depreciation takes place on a straight-line basis over the estimated useful life of the asset. Land is not depreciated. The following useful lives (years) are used: Machinery for hydro power production 10–40 Administrative and warehouse buildings, residential properties 10–33 Production buildings, land installations, and machinery for sawmills, pulp, paper and paperboard production Other machinery Forest roads Equipment 10–20 10 20 4–10 If there is any indication that the book value is too high, an analysis is made in which the recoverable amount of single or inherently related assets is determined at the higher of the net realisable value and the value in use. The net realisable value is the estimated selling price after deduction of the estimated cost of selling the asset. The value in use is measured as expected future discounted cash flow. The discount rate applied takes account of the risk-free rate and the risk associated with the asset. An impairment loss consists of the amount by which the recoverable amount falls short of the book value. An impairment loss is reversed if there has been any positive change in the circumstances upon which the determination of the recoverable amount is based. A reversal may be made up to, but not exceeding, the book value that would have been recognised, less depreciation, if there had been no impairment. Borrowing costs attributable to the purchase or construction of qualifying assets are to be capitalised in the consolidated accounts as part of the asset’s cost. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use and that is relevant for the Group in connection with major investment projects. Right-of-use assets (leases) When entering an agreement an assessment is made as to whether the agreement is, or contains, a lease. An agreement is, or contains, a lease if the agreement transfers the right for a set period to control the use of an identified asset in exchange for compensation. The Group recognises a right-of-use asset and associated liability upon entering into a lease. Such liabilities are initially valued at the present value of the remaining lease payments for the estimated lease period. Lease payments are discounted at the Group’s marginal borrowing rate, which in addition to the Group’s credit risk reflects the agreement’s lease period and currency. Right-of-use assets are initially valued at the value of the liability plus lease payments paid upon or before the start date, plus any initial direct payments. Such a right-of-use asset is depreciated/amortised on a straight-line basis over the term of the lease. The term of the lease comprises the non-cancellable period plus additional periods in the agreement if it is deemed at the start date reasonably certain that these will be used. No right-of-use asset or lease liability is recognised for leases with a term of a maximum of 12 months or with underlying assets of low value. Lease payments for such leases are recognised as a cost on a straight-line basis over the term of the lease. Parent company The policies on leases, in accordance with IFRS 16, that are applied by the Group are not applied by the parent company. The parent company applies an exception option in RFR 2 with the result that the parent company recognises existing leases as operating leases. Inventories Inventories are valued at the lower of cost and production cost after deduction for necessary obsolescence, or net realisable value. The cost of inventories is calculated by using the first in, first out method (FIFO). The net realisable value is the estimated selling price in operating activities after deduction of the estimated costs of completion and affecting the sale. The cost of finished products manufactured by the company comprises direct production costs and a reasonable share of indirect costs. Purchased felling rights are stated as inventories. They have been acquired with a view to securing Holmen’s raw material requirements through harvesting. No measurable biological change occurs from the acquisition date. Emission allowances received are initially recognised at market price when allotted among inventories and as deferred income. During the year the allocation is recognised as income at the same time as an interim liability, corresponding to emissions made, is expensed. Unsold rights are measured at the lower of cost and fair value. Certificates received for renewable energy are initially recognised at market price when allotted among inventories. Unsold certificates are measured at the lower of cost and fair value. Employee benefits Pension costs and pension obligations Obligations to pay premiums to defined contribution plans are recognised as a cost in the income statement as and when they are earned. The Group’s net obligation regarding defined benefit plans is calculated separately for each plan by estimating future benefits earned by employees through their employment in both current and previous periods. This benefit is discounted to present value and the fair value of any plan assets are deducted. The discount rate is the interest rate at the balance sheet date for a high-quality corporate bond with a duration corresponding to the Group’s pension obligations. If there is no active market for such corporate bonds, the market interest rate for government bonds with a corresponding duration is used instead. The calculation is performed by a qualified actuary using the projected unit credit method for the portion of the pension obligations that is defined benefit. Establishment of the obligation’s present value and the fair value of plan assets may give rise to actuarial gains and losses. These arise either through the actual outcome deviating from previously made assumptions or through changes in assumptions. Actuarial gains and losses are recognised in other comprehensive income. If any changes occur to a defined benefit plan, these are recognised when the change to the plan occurs. If the change occurs in conjunction with restructuring, this is recognised when the company recognises the associated restructuring costs. The changes are recognised directly in profit/loss for the year. 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 reduced future costs or cash reimbursement. Any minimum funding requirements are taken into account in calculating the present value of future reimbursements or receipts. The interest expense on defined benefit obligations is recognised in profit/loss for the year under financial items. This is calculated as the net total of the upward adjustment of interest on the pension obligation and expected income on plan Holmen Annual Report 2021    59 Note 1NotesThe parent company’s equity comprises share capital, statutory reserves, revaluation reserves, retained earnings and profit/loss for the year. The parent company’s statutory reserve consists of previous compulsory provisions to the statutory reserve plus amounts added to the share premium reserve before 1 January 2006. The parent company’s revaluation reserve contains amounts set aside in connection with the revaluation of property, plant and equipment or non-current financial assets. Retained earnings comprise all other parts of equity, such as hedge reserves and transactions as a result of share buy-backs. The parent company applies the same accounting policies as the Group for these items, see above. Provisions A provision is recognised in the balance sheet when the Group has a legal or informal commitment as a consequence of a past event and it is likely there will be an outflow of financial resources to settle the commitment and a reliable estimate of the amount can be made. A provision to cover restructuring is recognised once the Group has established a detailed and formal restructuring plan and the restructuring process has either begun or been publicly announced. Provisions are made for environmental measures that relate to earlier activities when contamination arises or is discovered, it is likely that a payment obligation will arise, and the amount can be estimated reliably. 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 companies’. In addition, a review is conducted as to whether an impairment loss on the value of the shares is necessary. This review complies with standard rules on the valuation of this asset item. Shareholder contributions received are recognised directly in non-restricted equity. Other The figures presented are rounded off to the nearest whole number or equivalent. The absence of a value is indicated by a dash (-). assets calculated according to the same interest factor (discount rate). Other components are recognised in operating profit/loss. The revaluation effects consist of actuarial gains and losses and the difference between the actual return on plan assets and the amount included in net interest. Revaluation effects are recognised in other comprehensive income. Payroll tax constitutes part of the actuarial assumptions and is therefore recognised as part of net obligations. Policyholder tax is recognised as it is incurred in profit/loss for the period to which the tax relates and is consequently not included in the calculation of liabilities. In the case of funded plans, this tax is levied on the return on plan assets and is recognised in other comprehensive income. In the case of unfunded plans or partially unfunded plans, this tax is levied on profit for the year. In the parent company’s accounts, different grounds are used for computation of defined benefit pension plans from those referred to in IAS 19. The parent company complies with the provisions of the Swedish Pension Obligations Vesting Act and the Swedish Financial Supervisory Authority’s regulations, because this is a condition for the right to make deductions for tax purposes. The main differences in relation to the rules in IAS 19 relate to how the discount rate of interest is established, the calculation of the defined benefit obligation on the basis of the current pay level without any assumption regarding pay increments in the future, and the recognition of all actuarial gains and losses in the income statement when they arise. When there is a difference between how the pension cost is arrived at in the legal entity and in the Group, a provision or a receivable is recognised in the consolidated accounts in respect of payroll tax based on this difference. The present value of the provision or receivable is not calculated. Share-based payments The share savings programme is recognised in accordance with IFRS 2 Share-based Payments and is paid through equity instruments. Recognition of share-based payment programmes paid through equity instruments entails the fair value of the instrument at the dividend date being recognised in the income statement as a cost over the vesting period, with a corresponding adjustment of equity. At the end of each vesting period, an estimate is made of the expected number of allocated shares and the effect of any change in previous estimates are recognised in the income statement with a corresponding adjustment of equity. In addition, a provision is made for estimated social security costs relating to the share programme. Estimates are based on the value of the shares at the allocation date, which is defined as the period when the agreement was concluded between the parties. The average share price during this period was used as the basis for the valuation of the shares at the allocation date. 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 employee benefits 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, hedge and revaluation surpluses, and retained earnings, including profit/loss for the year. Other contributed capital refers to premiums paid in conjunction with share issues. The translation reserve consists of all exchange differences that arise in the translation of foreign operations’ financial statements that are prepared in a currency other than Swedish kronor. It also includes exchange differences arising in connection with the revaluation of liabilities and derivatives that are classified as instruments for hedging a net investment in a foreign operation, including tax. The hedge reserve comprises the effective proportion of the accumulated net change in the fair value of a cash flow hedging instrument attributable to underlying transactions that have not yet occurred, including tax. The revaluation surplus also comprises changes in value attributable to forest land. 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 treasury shares are stated as a deduction, and proceeds from the disposal of treasury shares are stated as an increase. Transaction costs are charged directly to retained earnings. 60    Holmen Annual Report 2021 Note 1NotesForest Paperboard Paper Wood Products Renewable Energy Group-wide and other Eliminations Total Group Note 2. Operating segment reporting 2021 Net sales External Internal Other operating income Operating costs Change in value of biological assets Depreciation and amortisation according to plan Profit/loss from investments in associates and joint ventures Operating profit 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 2 424 4 085 580 -5 979 464 -78 - 1 495 1 495 23 4 49 178 -1 834 -10 045 37 300 6 261 - 642 -5 995 - -565 - 343 673 11 13 6 974 -958 -847 5 169 5 441 - 270 -5 270 - -371 - 70 70 1 4 2 707 -840 -231 1 637 4 872 - 499 -3 514 - -189 1 1 668 1 668 34 82 2 954 -606 -70 2 278 Acquisition of non-current assets 249 399 129 242 External net sales by market Sweden UK Germany France Italy Rest of Europe Asia Rest of the world Total 2 422 - - - - 2 - - 2 424 131 804 1 136 465 333 1 780 1 196 415 6 261 195 661 791 528 570 1 677 645 374 5 441 2 113 839 37 81 7 924 309 561 4 872 481 7 28 -140 - -28 -1 347 347 71 10 4 772 -334 -368 4 069 712 481 - - - - - - - 481 - - 217 -380 - -29 - -193 -193 - - 1 320 -633 -47 640 43 - - - - - - - - - - -4 092 -544 4 636 - - - - - - - -620 620 - - - - - - - - - - - - 19 479 - 1 690 -16 643 464 -1 261 0 3 731 4 061 21 9 67 284 -4 584 -11 608 51 093 1 775 5 343 2 304 1 963 1 074 911 4 383 2 150 1 351 19 479 *Items affecting comparability refer to the costs and the loss of revenue associated with the turbine breakdown at the paperboard mill in Workington (SEK 330 million). Net sales by market Sweden UK Germany France Italy Rest of Europe Asia Rest of the world Total Group Parent company 2021 5 343 2 304 1 963 1 074 911 4 383 2 150 1 351 2020 4 197 1 830 2 115 816 805 3 740 1 940 884 2021 6 240 1 793 1 611 896 788 3 497 2 077 1 285 2020 4 382 1 253 1 707 647 716 2 820 1 841 820 19 479 16 327 18 186 14 187 Net sales by product area Consumer paperboard Pulp Book, magazine & packaging paper Newsprint Wood products, pine Wood products, spruce Wood construction solutions Wood Electricity Other Group Parent company 2021 2020 2021 2020 187 396 202 464 6 059 6 001 3 950 3 861 293 4 977 4 381 4 977 4 381 498 863 948 - 2 424 2 664 3 181 2 656 330 358 464 498 2 206 1 035 2 206 2 345 1 080 2 345 - 107 473 194 473 8 330 45 320 Income from external customers is allocated to individual countries according to the country in which the customer is based. Non-current assets per country 2021 2020 2021 2020 Group Parent company Total 19 479 16 327 18 186 14 187 Sweden UK Other Total 57 993 53 657 14 721 14 652 - - 1 321 4 1 329 4 - - 59 326 54 983 14 721 14 652 Holmen Annual Report 2021    61 Note 2Notes Notes 2–3 Note 2. Operating segment reporting, cont. Forest Paperboard Paper Wood Products Renewable Energy Group-wide and other Eliminations Total Group 2020 Net sales External Internal Other operating income Operating costs Change in value of biological assets Depreciation and amortisation according to plan Profit/loss from investments in associates and joint ventures Operating profit Operating margin, % Return on capital employed, % Operating assets Operating liabilities Net deferred tax Capital employed 2 664 3 219 279 -5 318 579 -55 - 1 367 23 4 45 088 -1 673 -9 185 34 230 6 187 - 796 -5 617 - -554 - 812 13 15 6 920 -869 -775 5 276 4 879 - 179 -4 603 - -381 - 73 2 4 2 925 -693 -262 1 969 2 222 - 395 -2 308 - -124 - 185 8 17 2 625 -727 -52 1 846 Acquisition of non-current assets 207 275 280 107 External net sales by market Sweden Germany UK France Italy Rest of Europe Asia Rest of the world Total 2 656 - - - - 8 - - 2 664 105 1 258 774 380 271 1 749 1 329 321 6 187 279 850 590 425 532 1 571 438 192 4 879 781 6 465 11 2 411 174 371 2 222 375 3 19 -149 - -27 -6 215 57 7 3 810 -121 -339 3 351 291 375 - - - - - - - 375 - - 248 -392 - -31 - -174 - - 873 -893 44 24 845 - - - - - - - - - - -3 222 -577 3 799 - - - - - - -379 379 - - - - - - - - - - - - 16 327 - 1 339 -14 589 579 -1 172 -6 2 479 15 6 61 862 -4 597 -10 568 46 697 2 006 4 197 2 115 1 830 816 805 3 740 1 940 884 16 327 The Forest business area manages the Group’s forests, which cover just over one million hectares. The annual harvest of own forest amounts to 2.8 million m3sub. The Renewable Energy business area is responsible for the Group’s hydro power and wind power assets. Production in a normal year is 1.2 TWh of renewable hydro and wind power. In 2022, 0.4 TWh will be added from the new Blåbergsliden Wind Farm. The business areas are responsible for the Group’s wood and electricity supply in Sweden. The Paperboard business area produces paperboard for consumer packaging for the premium segment at one Swedish and one UK mill. The Paper business area produces paper mainly for books, magazines and advertising at two Swedish mills. The Wood Products business area produces wood products at five sawmills, for use in joinery and construction. In 2021, the Group produced 0.5 million tonnes of paperboard, 1.0 million tonnes of paper and 1.5 million m3 of wood products. These business areas are responsible for managing the operating assets and liabilities, which together with the net amount of deferred tax assets and tax liabilities constitutes their capital employed. Group management monitors the business at operating profit level, and in terms of how earnings relate to capital employed. Capital employed in each segment includes all assets and liabilities used by the business area such as non-current assets, inventories and operating receivables and operating liabilities, and the net amount of deferred tax assets and tax liabilities. Financing and tax issues are managed at Group level. Consequently, financial assets and liabilities, including pension obligations, 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. Note 3. Other operating income Group Parent company 2021 2020 2021 2020 Sales of by-products Sales of non-current assets Certificates, renewable energy Emission allowances Rent and land lease income Silviculture contracts Other 584 320 186 140 101 95 264 411 59 457 85 94 80 153 Total 1 690 1 339 378 10 1 136 43 95 258 921 291 6 12 83 49 80 170 690 Of the sales of by-products in the Group, SEK 182 million (118) relates to rejects from production, SEK 292 million (186) to wood shavings, bark and chips, as well as SEK 110 million (108) to external sales of energy. The sale of non-current assets in 2021 mainly relates to the sale of forest properties in the UK. Holmen receives a certificate for the production of renewable energy at the British paperboard mill in Workington. Income declined during the year to SEK 186 million (457) because of the turbine breakdown at the mill in Workington, which resulted in lower than normal renewable energy production. The Group has been allotted emission allowances that have been used partly within its own production. The surplus resulted in a recognised gain of SEK 140 million (85). 62    Holmen Annual Report 2021 NotesNote 4. Employees, personnel costs and remuneration to senior management Note 4 Wages, salaries and social security costs Wages, salaries and other remuneration Social security costs Group Parent company 2021 2020 2021 2020 1 928 759 1 694 679 1 415 615 1 326 577 AGM’s guidelines for determining salaries and other remuneration for senior management The 2020 AGM decided on the following guidelines for determining the salaries and other remuneration of the CEO and other senior management, namely the heads of the business areas and heads of Group staffs who report directly to the CEO. The guidelines shall apply to remuneration agreed after the guidelines have been adopted by the 2020 AGM. The guidelines do not cover remuneration determined by the AGM. Guidelines’ promotion of the company’s business strategy, long-term interests and sustainability Holmen’s strategy is to own and add value to the forest. Holmen’s forest holdings form the basis of the business in which the raw material grows and is refined into everything from wood products for climate-smart building to renewable packaging, magazines and books, using energy that largely comes from its own hydro and wind power. Successful implementation of the company’s business strategy, long-term interests and sustainability requires the company to be able to attract the right employees. This guideline is intended to provide Holmen with the conditions to recruit and retain skilled employees. Forms of remuneration A long-term share-based incentive programme has been established within the company, which is described under Share savings programme. It was approved by the 2019 AGM and is therefore not covered by these guidelines. Over and above share-based incentive programmes approved by the AGM, no variable remuneration shall be paid. The remuneration of the CEO and the senior management shall consist of a fixed market-based salary. Other benefits may include such items as health insurance, accommodation and car allowance. Where such benefits are provided, they should constitute no more than 10 per cent of the fixed salary. The retirement age is normally 65 years. The pension benefit shall be based on contributions and the contributions shall correspond to what is stipulated in the ITP occupational pension plan, currently 30 per cent of fixed cash salary. 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 may be paid corresponding to no more than 18 months’ salary. Consideration of salary and employment terms for other employees In formulating its proposals for these remuneration guidelines, the Board has taken into account salaries and employment terms of the company’s other employees, by including information about employees’ total remuneration, the components of such remuneration and the increase in remuneration and the rate of increase over time, which have constituted part of the basis for decisions in evaluating the reasonableness of these guidelines. Decision-making process for establishing, reviewing and implementing the guidelines The Board has established a remuneration committee. The committee’s duties include preparing the Board’s decision on proposed remuneration guidelines for senior management. Under Chapter 8, § 51 of the Swedish Companies Act, the Board must draft proposed new guidelines at least every four years and put such proposal to the AGM. The remuneration committee must also monitor and evaluate the application of the guideline and applicable remuneration structures and levels in the company. Members of the remuneration committee must be independent in relation to the company and its senior management. The CEO and other members of senior management do not attend the Board’s discussion of and decisions on remuneration-related matters if such matters relate to them. Deviation from the guidelines The Board may decide to temporarily deviate from the guidelines in full or in part if, in an individual case, there are particular reasons for so doing and deviation is necessary in the long-term interests of the company, including its sustainability, or to ensure the company’s financial viability. Share savings programme The 2019 AGM approved a targeted share savings programme for key individuals in the Group. The overall purpose of the programme is to retain close alignment of the interests of senior management and shareholders and to encourage long-term commitment to Holmen. Participation in the programme required the relevant employees to have personally invested in Holmen shares (known as ‘savings shares’) during the period 9 May to 31 May 2019. The programme expires on 28 April 2022. For each invested savings share, a half matching share will be allotted after the end of the vesting period since Holmen’s total return for the period 2019−2021 was positive, which was the condition for the allocation of matching shares. In addition, performance shares will be allotted to participants since return on capital employed exceeded the limit for allocation during the period 2019−2021. The number of performance shares varies depending on the position of the participant. To be eligible for allocation of matching and performance shares, participants must have been full-time employees within the Holmen Group and held the savings shares for the entire vesting period. The vesting period runs from 31 May 2019 through the day of publication of the interim report for the first quarter of 2022. The maximum number of shares that can be allocated is estimated at 112 000. Total costs for the programme are estimated at SEK 32 million. Costs of SEK 20 million (5) have been recognised for 2021. Remuneration of Board and senior management Board of Directors A fixed Board fee shall be paid to the members of the Board elected by the AGM. The CEO, however, does not receive any Board fee. For 2021, fees to the Board amounted to SEK 3 330 000 (3 195 000). The chairman of the Board received a fee of SEK 740 000 (710 000), and each of the other seven (seven) members received SEK 370 000 (355 000). Senior management Salary and other benefits for the CEO in 2021 amounted to SEK 9 786 724 (9 783 332), of which SEK 9 360 000 (9 360 043) relates to basic salary and SEK 426 724 (423 289) relates to other benefits. No variable remuneration was paid. The total pension cost for the CEO, calculated in accordance with IAS 19, amounted to SEK 5 907 348 (5 647 641). Recognised wages and salaries for the share savings programmes for the CEO amounted to SEK 2 309 061 (577 836). In 2021, the salaries and other benefits of other senior management, i.e. the heads of the five (five) business areas and the heads of the five (five) Group staffs and the head of international affairs, who report directly to the CEO, totalled SEK 30 826 296 (29 066 025) in 2021, of which SEK 29 635 750 (28 186 992) relates to basic salary and SEK 1 190 546 (879 033) relates to other benefits. No variable remuneration was paid. The total pension cost for this group, calculated in accordance with IAS 19, amounted to SEK 12 027 090 (11 795 571) in 2021. Recognised wages and salaries for the share savings programmes for this group amounted to SEK 4 694 627 (1 802 587). 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 nine people. For one person no severance is paid. For two 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 32 million (29) at 31 December 2021 and for other members of senior management to SEK 32 million (31), calculated in accordance with IAS 19. The pension obligations are secured using plan assets managed by an indepen- dent pension fund. These agreements were entered into in accordance with the guidelines for remuneration to senior management that were applicable at the time. Holmen Annual Report 2021    63 Notes2 464 507 1 957 2 316 462 1 854 Total net profit/loss Notes 4–6 Note 4. Employees, personnel costs and remuneration to senior management, cont. Average no. of employees (FTE) Of which women Of which men Average no. of employees (FTE) Of which women Of which men 2021 2020 Parent company Sweden Group companies France Netherlands UK Sweden Germany US Other countries Total Group companies Total Group 12 80 383 466 22 9 38 6 45 41 72 8 3 14 6 35 342 394 14 6 24 12 76 377 123 22 12 35 6 41 41 17 8 4 15 6 35 336 106 14 8 20 1 010 3 474 189 821 658 132 526 696 2 778 2 974 594 2 380 Proportion of women, % Board (excl. deputy members) Senior management Total Group Parent company 2021 25 17 21 2020 25 17 21 2021 25 17 21 2020 25 17 21 Note 5. Auditors’ fee and remuneration The audit firm PricewaterhouseCoopers AB (PwC) was elected by the 2021 AGM as Holmen’s auditors for a period of one year. PwC performs the audit for Holmen AB as well as for the majority of Holmen’s subsidiaries. For the 2020 financial year, the audit firm KPMG conducted the audit at Holmen AB as well as at the majority of Holmen’s subsidiaries. Remuneration to auditors Audit assignments PwC Audit assignments KPMG Tax advice PwC Tax advice KPMG Total Other auditors Total Group Parent company 2021 2020 2021 2020 8 1 1 0 9 0 9 - 7 - 0 7 0 7 5 - 1 - 6 - 6 - 4 - 0 5 - 5 ‘Audit assignments’ refers to the statutory examination of the annual accounts and accounting records, the administration by the Board and the CEO, and auditing and other assessment performed as agreed or in accordance with contracts. This includes other duties that are incumbent on the company’s auditors and the provision of advice or other assistance resulting from observations in connection with such assessment or the performance of such other duties. ‘Tax advice’ refers to all consultation in the field of taxation. Note 6. Net financial items and income from financial instruments Financial income Dividend income from Group companies Dividends from associates Gains on sales of Group companies Interest income* Total financial income Group Parent company 2021 2020 2021 2020 - 0 - 8 9 - 0 - 11 11 382 - - 26 408 284 - 10 24 318 * SEK 8 million (11) relates to interest income calculated using the effective interest rate method from financial items valued at amortised cost. 64    Holmen Annual Report 2021 Financial costs Impairment losses on value of shares in Group companies Net profit/loss Assets and liabilities measured at fair value through profit/loss Cash and cash equivalents Assets and liabilities measured at amortised cost Interest expense attributable to right-of-use agreements Interest expense* Financial costs Net financial items Group Parent company 2021 2020 2021 2020 - 3 0 -5 -2 -5 -41 -48 -39 - -2 -95 15 6 -22 -2 -5 -47 -53 -42 -35 0 -5 -40 - -49 -92 316 43 6 -21 28 - -52 -118 199 *SEK -2 million (-7) in the Group and parent company relates to interest expense for derivatives valued at fair value through other comprehensive income. SEK -1 million (-2) relates to interest expense for derivatives recognised at fair value through profit/loss for the year. Remaining interest expense is calculated using the effective interest rate method and relates to financial items valued at amortised cost. Net gains and losses recognised in net financial items mainly relate to currency revaluations of internal lending 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 component in forward foreign exchange contracts as well as value changes in accrued interest and realised interest in fixed-interest-rate swaps is recognised on an ongoing basis in net interest items. Information on financial risks is provided on pages 46–47. The income from financial instruments included in operating profit/loss is shown in the following table: Group Parent company Exchange gains/losses on trade receivables and trade payables Net gain/loss relating to derivatives 2021 2020 2021 2020 -97 336 48 -98 -96 314 45 -80 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 2021 amounted to SEK 120 million (-16), with the remainder being recognised in other comprehensive income as hedge accounting is applied. The fair value of outstanding currency hedges at 31 December 2021 was SEK 103 million (466). Gains/losses on financial electricity hedges are recognised in the income statement when they expire; for 2021 they totalled SEK 215 million (-82). The fair value of outstanding financial electricity hedges at 31 December 2021 was SEK 838 million (14). 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 comprehensive income until expiry, at which point the gain/loss is added to the cost of the non-current asset that was hedged. The fair value of outstanding hedges for investment purchases amounted to SEK -3 million (-35) at 31 December 2021. In 2021 there was an impact of SEK -23 million (-2) on the cost of hedged items owing to results from hedging. Results from hedging of foreign net assets amounted to SEK -39 million (29) in 2021 and are recognised in other comprehensive income as hedge accounting is applied. In the parent company accounts, this gain is recognised in the income statement. The translation of net foreign assets had an impact of SEK 180 million (-187) on consolidated equity. The fair value of outstanding hedges of net assets at 31 December 2021 was SEK -12 million (7) and relates to financial derivatives. The fair value of the derivatives used to manage the fixed interest periods amounted to SEK 13 million (-3) at 31 December 2021, which was recognised in other comprehensive income as hedge accounting is applied. This value is expected to be recognised in the income statement in 2022 and later. Notes Note 7 Note 7. Tax Taxes stated in income statement 2021 2020 2021 2020 Group Parent company Current tax Deferred tax Total -456 -232 -688 -517 59 -458 -426 -25 -451 -429 12 -417 Tax recognised totalled SEK -688 million (-458), corresponding to 19 per cent (19) of profit before tax. Taxes stated in income statement Recognised profit/loss before tax Tax at applicable rate Difference in tax rate in foreign operations Tax-exempt income Non-tax-deductible costs Standard interest on tax allocation reserve Tax attributable to previous periods Change to tax rate on deferred tax assets/liabilities Other* Effective tax Group Parent company 2021 2020 2021 2020 SEKm 3 691 % SEKm 2 437 % SEKm 2 541 % SEKm 2 336 -760 -2 65 -25 -2 4 -31 62 -688 20.6 0.0 -1.8 0.7 0.1 -0.1 0.8 -1.7 18.6 -521 9 7 -19 -2 60 5 4 -458 21.4 -0.4 -0.3 0.8 0.1 -2.4 -0.2 -0.2 18.8 -523 - 79 -4 -2 0 -2 1 -451 20.6 - -3.1 0.2 0.1 0.0 0.1 -0.1 17.7 -500 - 64 -24 -2 45 0 0 -417 % 21.4 - -2.7 1.0 0.1 -1.9 0.0 0.0 17.9 *In 2021, deferred tax income of SEK 60 million is recognised, relating to a tax reduction for the year’s investments in property, plant and equipment. Tax attributable to other comprehensive income Cash flow hedges Share in joint ventures’ other comprehensive income Translation difference from foreign operations Hedging of currency risk in foreign operations Revaluation of forest land Revaluation of defined benefit pension plans Other comprehensive income Group After tax Before tax Before tax Tax 2021 504 3 180 -39 3 345 -12 3 981 -105 - - 8 273 399 16 3 -187 180 -31 29 -689 2 656 1 173 -15 -6 6 -780 3 201 1 289 Taxes as stated in balance sheet 2021 2020 2021 2020 Group Parent company Tax receivables Deferred tax assets Current tax receivables Total tax receivables Deferred tax liabilities Non-current assets Biological assets Forest land Property, plant and equipment Tax allocation reserve Transactions subject to hedge accounting Other, including deferred tax assets stated net among deferred tax liabilities Deferred tax liabilities Current tax liabilities Total tax liabilities 3 70 72 1 6 7 6 016 3 648 1 171 606 196 5 901 2 939 1 063 509 92 -29 66 11 610 10 570 80 211 11 690 10 780 - 39 39 - 601 2 - 196 -12 787 - 787 - - - - 595 2 - 91 -32 657 145 802 Tax 2020 -55 - - -6 -242 3 -300 After tax Before tax 218 16 -187 23 932 -12 989 505 - - - - - 505 Tax 2021 -104 - - - - - -104 Parent company After tax Before tax 401 - - - - - 401 272 - - - - - 272 Tax 2020 -55 - - - - - -55 After tax 218 - - - - - 218 Holmen Annual Report 2021 65 NotesNotes 7–8 Note 7. Tax, cont. Change in the net amount of deferred tax assets and deferred tax liabilities Group Stated in the income statement Stated in other com- prehensive income Opening balance Translation differences and other -5 901 -2 939 -1 063 -509 -92 -66 -125 -10 -51 -97 - 51 -10 570 -232 - -689 - - -105 6 -788 - - -13 - 1 -5 -17 Group Stated in the income statement Stated in other com- prehensive income Opening balance Translation differences and other Parent company Stated in the income statement Stated in other com- prehensive income Re classi- fication Closing balance Opening balance 10 -10 -44 - - 44 -6 016 -3 648 -1 171 -606 -196 29 - -596 -2 - -91 32 - -11 608 -657 - -5 0 - - -20 -25 Closing balance - -601 -2 - -196 11 - - - - -104 - -104 -787 Business combination Closing balance Opening balance Parent company Stated in the income statement Stated in other com- prehensive income -5 746 -2 697 -1 434 -359 -37 -26 -10 298 -155 - 357 -150 - 7 59 - -242 - - -55 -3 -300 - - 14 - 0 7 21 - - - - -5 901 -2 939 -1 063 -509 - -50 -92 -66 - -595 -2 - -37 19 -50 -10 570 -614 - -1 - - - 13 12 - - - - -55 - -55 Closing balance - -596 -2 - -91 32 -657 2021 Biological assets Forest land Property, plant and equipment Tax allocation reserve Transactions subject to hedge accounting Other Deferred net tax liability 2020 Biological assets Forest land Property, plant and equipment Tax allocation reserve Transactions subject to hedge accounting Other Deferred net tax liability The Group’s deferred tax liability for forest assets (biological assets and forest land) amounts to SEK 9 664 million (8 840) and is calculated based on the difference between book value SEK 47 080 million (43 202) and taxable cost SEK 173 million (315). This represents the tax expense that would arise if the forest assets were sold as forest properties. No tax expense arises if the assets are retained. Deferred tax liability in respect of property, plant and equipment is primarily attributable to depreciation/amortisation in excess of plan. The amount recognised in other comprehensive income includes deferred tax mainly related to a change in the value of forest land of SEK -689 million (-242) and hedge reserve of SEK -105 million (-55). Holmen has claimed group relief in the parent company related to tax losses in Spanish subsidiaries that was liquidated. The deductions correspond to SEK 389 million in tax, but no tax receivable has been recognised. There are no other loss carry-forwards of significance in the Group. Note 8. Earnings per share Group 2021 2020 Total number of shares outstanding, 1 January Share savings programme allocation Total number of shares outstanding, 31 December 161 925 685 - 161 925 685 - 161 925 685 161 925 685 Shareholders’ share of profit/loss for the year, SEK Basic average number of shares 3 003 524 941 1 979 252 281 161 925 685 161 925 685 Basic EPS for the year, SEK 18.5 12.2 Shareholders’ share of profit/loss for the year, SEK Diluted average number of shares 3 003 524 941 1 979 252 281 161 925 685 161 925 685 Diluted EPS for the year, SEK 18.5 12.2 The share savings programme approved by the 2019 AGM may entail allocation of a maximum of 112 000 shares from Holmen’s treasury holdings when the programme expires in 2022. The effects on key ratios and profit per share are marginal. 66 Holmen Annual Report 2021 NotesNote 9. Forest assets Holmen’s owns land totalling 1 304 000 hectares, of which 1 044 000 hectares are productive forest land with an estimated volume of standing timber of 125 million cubic metres (m3) of growing stock, solid over bark. The holdings are distributed over three regions in Sweden. Productive forest land, ’000 ha Volume of standing timber, millions m3 growing stock, solid over bark North Central South Total 689 264 91 1 044 75 35 15 125 North Central Forest assets are recognised at fair value, calculated based on the transaction prices for forest properties in those areas where the Group owns forest land. The calculation is carried out through an appraisal of the valuations that are based partly on price statistics published by various market participants and partly on detailed information regarding transactions with forest properties over the past three years. The price statistics refer to SEK per m3 growing stock, solid over bark, which is paid on average in the various counties in Sweden where Holmen has land. The calculation based on transactions with forest properties is carried out as a regression analysis based on transactions exceeding 20 hectares in the areas where Holmen has land. South The book value of forest assets amounted to SEK 47 080 million (43 202) at 31 December 2021. The value per hectare varies between different parts of the country, with forest properties in southern Sweden being valued much higher per hectare as a result of a greater volume of standing timber, higher site quality, a shorter harvesting cycle and greater demand for forest land. The graphs below show Holmen’s recognised value of forest assets by region, stated in both SEK million and in SEK per hectare. Book value, SEKm 50 000 40 000 30 000 20 000 10 000 0 2019 2020 2021 Northern Sweden Central Sweden Southern Sweden Book value, SEK/hectare 120 000 100 000 80 000 60 000 40 000 20 000 0 2019 2020 2021 Northern Sweden Central Sweden Southern Sweden Note 9 The recognised value of forest assets is primarily dependent on how large the volume of standing timber is estimated to amount to and the market price per m3 growing stock, solid over bark calculated based on price statistics and transaction data collected from external parties. The table below shows how the value is affected by changes in the size of the volume of standing timber and the market price, respectively. Price statistics and market data Northern Sweden Central Sweden Southern Sweden Holmen’s volume of standing timber SEK 10/m3 growing stock, solid over bark SEK 10/m3 growing stock, solid over bark SEK 10/m3 growing stock, solid over bark 1 million m3 growing stock, solid over bark SEKm 750 350 150 380 The size of Holmen’s volume of standing timber is calculated based on the most recent inventory, updated with the completed harvest and estimated growth after the time of inventory. In the most recent inventory, an external party carried out a random sample inventory with a standard error of 1.4 per cent. The inventory is normally carried out every ten years. The diagram below shows the volume of standing timber measured as m3 growing stock, solid over bark, per hectare in the inventories carried out since 1988 and the estimated volume of standing timber at 31 December 2021. Volume of standing timber m3 growing stock, solid over bark per hectare productive forest land, average for Holmen’s forest assets 160 120 80 40 0 1988 1993 2000 2010 2020 2021 The price statistics used in the valuation are public information that comes from market participants. The transaction data that are used come from Lantmäteriet (the Swedish mapping, cadastral and land registration authority) and were processed by an external party. In the areas where Holmen has land about 300 transactions involving forest properties are carried out annually. Transactions between legal entities are not normally included in the calculations for price statistics or transac- tion data. Holmen has chosen to use three years of price statistics and transaction data in the valuation. If a different time period were used, the book value would be affected. The diagram below shows the price for forest properties measured in SEK per m3 growing stock, solid over bark, based on annual price statistics and transaction data for the regions in the country where Holmen owns land. Price of forest properties, SEK/m3 growing stock, solid over bark 800 600 400 200 0 2015 2016 2017 2018 2019 2020 2021 Northern Sweden Central Sweden Southern Sweden To verify Holmen’s own valuation of the forest assets, an external independent valua- tion of parts of the forest holdings is carried out every year, with the aim of having a reference valuation of the entire forest holdings over fi ve years. Since Holmen began to recognise forest assets at fair value in 2019, the company Forum Fastighetsekonomi has carried out external valuations each year. At the end of 2021, forest properties cor- responding to two thirds of the book value were valued by Forum Fastighetsekonomi. The external valuations exceed the internal valuations by 1 per cent. Notes Holmen Annual Report 2021 67 Note 9 Note 9. Forest assets, cont. The value of the forest assets is allocated in the balance sheet to growing trees, SEK 29 204 million, recognised as a biological asset, and forest land, SEK 17 876 million. The table below shows how the value of biological assets would be affected by changes in the most significant valuation assumptions. Biological assets The value allocated to the biological assets is established by calculating the present value of expected future cash flows, less selling costs but before tax, from harvesting those trees currently growing. The trees that are currently growing are expected to be harvested when they reach an age of 85 years. The volumes are based on the long-term harvest plan that was updated in 2020. Income and costs are calculated based on long-term trend levels. The trend price that was used for 2021 was SEK 466 (457)/m3sub, which is somewhat lower than current prices. The costs are based on the current level adjusted for temporary effects. Prices and costs are revised up by 2 per cent each year. A discount rate before tax of 4.5 per cent (4.5) has been used. Costs for replanting after harvest have not been included. The change in value of biological assets, calculated as the net of the change as a result of harvesting and the unrealised change in fair value is stated in the income statement and in 2021 totalled SEK 464 million (579). Wood prices, SEK/m3sub 600 500 400 300 200 Annual change +0.1% per year Harvest rate Price inflation Cost inflation Change in level Harvesting Prices Costs +1% Discount rate +0.1% SEKm 1 060 1 530 -630 340 510 -220 -830 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 of level). Forest land The book value of the forest land is calculated as the difference between the total value of the forest assets and the biological assets. This value reflects future income from sources other than the harvest of currently standing trees, such as leasing of land for wind power, quarrying, hunting leases, licence income and harvesting future generations of trees. The change in fair value for forest land is recognised in other comprehensive income and totalled SEK 3 345 million (1 173). No value is assigned to land that is not productive forest land. 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2021 Real Nominal Planned harvest, ’000 m3sub/year 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2002- 2006 2007- 2011 2012- 2016 2017- 2021 2022- 2026* 2027- 2031* 2032- 2036* 2037- 2041* Harvest Thinning Storms & other events *Forecast Group Book value at start of year Acquisitions Disposal Investment in reforestation Change due to harvesting Unrealised change in fair value Other changes Book value at end of year Forest assets Biological assets Forest land Of which 2021 43 202 42 -120 142 -695 4 503 7 47 080 2020 41 345 9 -22 128 -691 2 444 -12 43 202 2021 28 663 24 -93 142 -695 1 158 5 29 204 2020 27 979 0 -16 128 -691 1 271 -8 28 663 2021 14 538 18 -27 - - 3 345 2 17 876 2020 13 366 9 -6 - - 1 173 -4 14 538 The acquisition cost of forest land amounted to SEK 303 million at 31 December 2021. 68 Holmen Annual Report 2021 Notes Note 10 Note 10. Non-current intangible assets Group Goodwill Other intangible assets Total Parent company Non-current intangible assets 2021 2020 2021 2020 2021 2020 2021 2020 Accumulated acquisition costs Opening balance Business combinations Investments Disposal and retirement of assets Translation differences Total Accumulated amortisation, depreciation and impairment losses Opening balance Depreciation and amortisation for the year Disposal and retirement of assets Translation differences Total 355 4 - - - 358 - - - - - - 355 - - - 355 - - - - - Residual value according to plan at end of year 358 355 370 - 13 - 1 384 170 32 0 1 203 181 225 140 7 -2 0 370 155 17 -2 0 170 200 725 4 13 - 1 742 170 32 0 1 203 539 225 495 7 -2 0 725 155 17 -2 0 170 555 68 - - - - 68 50 5 - - 55 13 68 - - - - 68 44 6 - - 50 17 The goodwill recognised is attributable to the Wood Products business area, see Note 26 for more information. Goodwill is tested for impairment annually by calculating the value in use of the cash-flow generating unit to which goodwill has been allocated. The calculations are made by assessing future cash flows. The future cash flows are based on current levels of sales prices, costs and volumes for the coming year. When calculating cash flows for subsequent periods, prices and costs are used based on historical data. The future cash flows have been discounted by 8 per cent interest before tax. The discount rate has been determined by calculating the weighted average cost of capital (WACC). Based on these calculations, there is no need for impairment. Other intangible assets consist primarily of the value of the wood supply business included in the 2020 acquisition of Martinsons SEK 111 million (134), right-of-use relating to certain energy assets SEK 57 million (49) and IT systems SEK 5 million (10). The assets are mainly externally acquired and all assets, with the exception of goodwill, have a definable useful life. Holmen Annual Report 2021 69 NotesNote 11 Note 11. Property, plant and equipment Group Accumulated acquisition costs Opening balance Business combinations Investments Reclassifications Disposal and retirement of assets Translation differences Total Accumulated amortisation, depreciation and impairment losses Opening balance Business combinations 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 *Other land refers to land other than forest land. Buildings, other land* and land installations Machinery and equipment Work in progress and advance payments to suppliers Total 2021 2020 2021 2020 2021 2020 2021 2020 6 441 - 54 37 -72 52 5 934 475 79 7 -1 -53 29 739 - 657 1 061 -492 387 29 050 866 549 89 -416 -399 6 512 6 441 31 352 29 739 676 - 782 -1 098 - 3 363 244 134 397 -96 - -2 676 36 858 - 1 493 - -564 442 35 229 1 475 1 025 - -417 -454 38 227 36 858 3 971 - 122 -70 36 4 059 2 454 3 549 348 110 0 -36 3 971 2 471 23 660 - 22 773 646 995 -487 288 949 -414 -294 24 456 23 660 - - - - - - - - - - - - 27 632 - 26 323 994 1 117 -557 324 1 059 -414 -330 28 515 27 632 6 895 6 078 363 676 9 711 9 226 Parent company Accumulated acquisition costs Opening balance Investments Reclassifications 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 *Other land refers to land other than forest land. Forest land Buildings, other land* and land installations Machinery and equipment Work in progress and advance payments to suppliers Total 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 478 21 - - 499 - - - - 474 4 - - 478 - - - - 190 5 8 - 203 177 9 4 - 190 139 136 4 - 4 - 143 139 2 388 - 2 388 2 388 - 2 388 1 - 1 1 - 1 303 45 - -42 306 193 43 -42 194 - - - 260 52 9 -18 303 173 38 -18 193 - - - 10 13 -8 - 15 - - - - - - - 17 7 -13 - 10 982 84 - -42 1 024 928 72 - -18 982 309 42 -18 333 333 44 -42 336 - - - - - - - 2 388 - 2 388 2 389 - 2 389 2 887 2 866 60 51 113 111 15 10 3 075 3 038 For forest assets in the Group see Note 9. In 2021, capitalised borrowing costs totalled SEK 6 million (2). An interest rate of 1.2 per cent (1.2) was used to determine the amount. 70 Holmen Annual Report 2021 NotesNote 12 Note 12. Right-of-use assets (leases) Group Accumulated acquisition costs Opening balance Business combinations Additional agreements Completed leases Total Accumulated depreciation and amortisation Opening balance Depreciation and amortisation for the year Completed leases Total Value at end of year Buildings Machinery and equipment Total 2021 2020 2021 2020 2021 2020 235 - 57 -32 261 63 46 -32 77 184 167 3 82 -17 235 42 38 -17 63 172 188 - 11 -8 191 78 66 -8 135 56 113 32 80 -36 188 56 58 -36 78 111 424 - 68 -40 452 141 111 -40 212 240 281 35 162 -53 424 98 96 -53 141 284 Buildings The Group’s rental of buildings refers to office and warehouse premises. The leases usually have a term of between 5 and 10 years. Machinery and equipment The Group’s leasing of machinery and equipment mainly relates to cargo ships, forklifts and cars. The leases usually have a term of between 2 and 5 years. Amounts recognised in profit/loss 2021 2020 Depreciation and amortisation Interest expense Costs related to current lease liabilities Costs related to low-value leases Costs related to variable lease payments 111 5 4 3 0 122 96 5 2 0 0 102 In 2021 the Group’s payments attributable to leases amounted to SEK 122 million (102). These payments include both amounts for leases that are recognised as lease liabilities and amounts paid for variable lease payments, short-term leases and low-value leases. No right-of-use asset is recognised for leases with a term of 12 months or less or with underlying assets of low value. See Note 14 for a maturity analysis of liabilities regarding right-of-use assets. Holmen Annual Report 2021 71 NotesNote 13 Note 13. Investments in associates, joint ventures and other shares and participations Profit/loss from associates and joint ventures Recognised in profit/loss for the year Stated in other comprehensive income Total comprehensive income Group 2021 0 3 3 2020 -6 16 10 Associates and joint ventures Book value at beginning of year Business combinations Investments Share of earnings Translation difference Other Associates Joint ventures Total Group Parent company Group Parent company Group Parent company 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 1 642 - 33 0 - - 1 620 13 10 -1 - - 87 - 5 - - - 92 87 - - - - - 87 75 - 3 3 0 0 81 0 - 64 11 0 0 75 64 - 3 - - - 67 0 - 64 - - - 64 1 717 - 36 3 0 0 1 620 13 74 10 0 0 1 756 1 717 151 - 8 - - - 159 87 - 64 - - - 151 Book value at end of year 1 675 1 642 Parent company and Group holdings of shares and investments in associates and joint ventures Corporate ID No. Registered office Number of holdings Holding %* 556036-9398 556504-2826 556017-6678 556016-0953 556594-6984 556594-3015 Vännäs Lycksele Arbrå Örnsköldsvik Stockholm Umeå 9 886 683 5 556 990 2 300 2 014 49.4 6.8 13.9 9.9 46.0 40.3 556914-9833 Stockholm 250 50.0 Associates Harrsele AB Vattenfall Tuggen AB Brännälvens Kraft AB Gidekraft AB Uni4 Marketing AB Rebio AB Other associates Joint venture Varsvik AB Total 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 2021 1 518 90 36 0 20 10 1 1 675 81 1 756 49.4 6.8 13.9 9.9 46.0 40.3 - 90 - 0 2 - 0 92 50.0 67 159 2020 1 493 85 36 0 16 10 1 1 642 75 1 717 - 85 - 0 2 - 0 87 64 151 *The percentage of ownership corresponds to the percentage of votes for the total number of shares. **The proportion of equity is recognised in the Renewable Energy and Wood Products business areas, at SEK 1 725 million (1 690) and SEK 31 million (27), respectively. Group Parent company Other shares and participations 2021 2020 2021 2020 Book value at beginning of year Investments Disposals Translation difference Book value at end of year 2 0 0 0 2 1 0 0 0 2 0 - - - 0 0 - 0 - 0 The holdings in Brännälvens Kraft AB, Gidekraft AB, Harrsele AB and Vattenfall Tuggen AB refer to hydro power assets. The holdings entitle the Group to buy electricity produced at cost price, so the associates only earn 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 1 518 million (1 493). Holmen purchased 515 GWh (568) of electrical power from Harrsele AB in 2021, giving Holmen an operating profit of SEK 180 million (112) 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 155 million (140). The company’s shareholders made a shareholders contribution during the year of SEK 52 million (20). Ownership in remaining associates relates to activities in the areas of sales, research and development. The interests in Brännälvens Kraft AB, Gidekraft AB and Vattenfall Tuggen 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. 72    Holmen Annual Report 2021 Notes Note 14. 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. Current financial receivables are recognised as fixed income investments and lending for durations of up to one year, accrued interest income and unrealised exchange gains 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 converted into cash for a known amount and with a duration of no more than three months from the date of acquisition, which also means that the interest rate risk is negligible. Cash and cash equivalents are placed in bank accounts or as current deposits at banks. Loans, accrued interest expense, unrealised exchange losses and fair values of derivatives are stated as financial liabilities. Financial liabilities are largely interest-bearing. In addition to the financial assets and liabilities identified above, liabilities relating to right-of-use assets (see Note 12) and a pension commitment (see Note 18) are also included in net financial debt. The maturity structure and average interest for the Group’s liabilities are stated in the section on Risk on pages 46–47. SEK 736 million of the parent company’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 946 million (489). Assets and liabilities are not offset in the report. Recognised derivatives totalled SEK 1 097 million (577) on the asset side and SEK 151 million (-88) on the liability side. The ongoing Interest Rate Benchmark Reform only has a marginal impact on Holmen, since interest derivatives are almost exclusively denominated at the Swedish reference rate. For such currencies where the Interest Rate Benchmark Reform is underway, continued hedge accounting will apply while the reform is in progress. Nevertheless, these hedges are expected to be effective in the future. No provision has been made for expected credit losses for the financial assets included in the net liability, 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 16 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, variables used for the calculations, such as discount rates and exchange rates, are taken from market listings where possible. In calculating discounted cash flows, the mean of exchange rates and discount rates is used. These valuations belong to measurement level 2. Other valuations, for which a variable is based on own assessments, belong to measurement level 3. Currency options are valued 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. The difference between fair value and book value arises because certain liabilities are not measured at fair value in the balance sheet, and are instead stated at their amortised cost. In the case of trade receivables and trade payables, the book value is stated as the fair value, as this is judged to be a good reflection of the fair value. For further information about financing and quantitative data on Holmen’s hedge accounting see the section on Risk on pages 46–47 and Note 6. Note 14 Group Maturity structure, undiscounted amounts Financial liabilities Derivatives Derivatives attributable to working capital Trade payables Liabilities relating to right-of-use assets* Other financial liabilities Financial receivables Derivatives Derivatives attributable to working capital Trade receivables Other financial receivables 2022 2023 2024 2025 2026− -23 -91 -2 836 -4 -17 - -2 -11 - -1 -4 - -1 -4 - -73 -59 -51 -743 -1 028 -1 025 -36 -39 -915 -1 017 7 4 885 2 393 133 - 547 36 5 32 - 38 6 23 - 37 4 4 - 166 *Liabilitiesrelatingtoright-of-useassetsarenotclassifiedasafinancial instrument under IFRS 9. 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 2022 2023 2024 2025 2026− -23 -4 -2 -1 -1 -91 -2 540 -11 - -741 -1 635 -1 025 -17 - -4 - -4 - -915 -1 012 7 4 882 2 068 133 - 475 3 947 5 32 - 38 6 23 - 37 4 4 - 164 Holmen Annual Report 2021    73 NotesNote 14 Note 14. 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 Bank balances Non-current liabilities Bonds Derivatives Other non-current liabilities Current liabilities Commercial paper programme Derivatives Accrued interest Other current liabilities Financial instruments not included in net financial debt Other shares and participations Trade receivables Derivatives (recognised among operating receivables) Trade payables Derivatives (recognised among operating liabilities) Total financial instruments Recognised at fair value through profit/loss* Hedging instruments Recognised at amortised cost Total book value Fair value 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 - - - - 6 - 6 - - - - - - - -11 - - -11 2 - 34 - -22 14 -9 - - - - 16 - 16 - - - - - - - -5 - - -5 2 - 19 - 19 - - - - - - - -6 - -6 - -12 - - -12 - - 12 - 12 - - - - - - - -14 - -14 - - - - - - - - 248 248 0 - 33 33 507 507 - 278 278 0 - 27 27 346 346 19 248 268 0 6 33 39 507 507 12 278 290 0 16 27 43 346 346 19 248 268 0 6 33 39 507 507 12 278 290 0 16 27 43 346 346 -3 900 - -5 -3 905 -3 900 - -5 -3 905 -3 900 -6 -5 -3 911 -3 900 -14 -5 -3 919 -3 900 -6 -5 -3 911 -3 900 -14 -5 -3 919 -200 - -10 -503 -713 -500 - -9 -92 -601 -200 -23 -10 -503 -736 -500 -5 -9 -92 -605 -200 -23 -10 -503 -736 -500 -5 -9 -92 -605 - 2 393 - 2 015 2 2 393 2 2 015 2 2 393 2 2 015 36 1 037 513 - - 1 072 550 1 072 550 - -2 36 48 - -99 938 - -2 836 -2 496 -2 836 -2 496 -2 836 -2 496 -68 445 - - -443 -481 -122 508 -70 1 -122 508 -70 1 939 443 -4 273 -4 336 -3 325 -3 845 -3 325 -3 845 *Refers to instruments compulsorily valued at fair value in accordance with IFRS 9. 74    Holmen Annual Report 2021 Notes Note 14 Parent company Financial instruments included in net financial debt Non-current financial receivables Derivatives Receivables from Group companies Other financial receivables Current financial receivables Accrued interest Derivatives Other financial receivables Cash and cash equivalents Bank balances Non-current liabilities Bonds Liabilities to Group companies Derivatives Current liabilities Commercial paper programme Derivatives Accrued interest Liabilities to Group companies Other current liabilities Financial instruments not included in net financial debt Other shares and participations Trade receivables Derivatives (recognised among operating receivables) Trade payables Derivatives (recognised among operating liabilities) Total financial instruments Recognised at fair value through profit/loss* Hedging instruments Recognised at amortised cost Total book value Fair value 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 - - - - - 6 - 6 - - - - - - - -23 - - - -23 0 - 34 - -24 10 -6 - - - - - 16 - 16 - - - - - - - -5 - - - -5 0 - 19 - - 19 - - - - - - - - -6 -6 - - - - - - - - 12 - - 12 - - - - - - - 3 910 246 4 157 0 - 33 33 445 445 - 3 180 275 3 455 0 - 27 27 236 236 19 3 910 246 4 176 0 6 33 39 445 445 12 3 180 275 3 467 0 16 27 43 236 236 19 3 910 246 4 176 0 6 33 39 445 445 12 3 180 275 3 467 0 16 27 43 236 236 - - -14 -14 -3 900 -607 - -4 507 -3 900 -169 - -4 069 -3 900 -607 -6 -4 513 -3 900 -169 -14 -4 083 -3 900 -607 -6 -4 513 -3 900 -169 -14 -4 083 - - - - - - - - -200 - -10 0 -503 -713 -500 - -9 - 0 -509 -200 -23 -10 0 -503 -736 -500 -5 -9 - 0 -514 -200 -23 -10 0 -503 -736 -500 -5 -9 - 0 -514 - 2 068 - 1 487 0 2 068 0 1 487 0 2 068 0 1 487 38 1 037 515 - - 1 072 553 1 072 553 - -3 35 46 - - -2 540 -1 970 -2 540 -1 970 -2 540 -1 970 -101 936 -68 447 - - -472 -483 -125 475 -71 -1 -125 475 -71 -1 950 444 -1 057 -1 344 -114 -853 -114 -853 *Refers to instruments compulsorily valued at fair value in accordance with IFRS 9. Holmen Annual Report 2021    75 NotesNotes 15–17 Note 15. Inventories Note 17. Equity, parent company Felling rights Logs and pulpwood Raw materials and consumables Finished products and work in progress Electricity certificates and emission allowances Total Group Parent company 2021 2020 2021 2020 664 355 975 558 369 916 664 307 674 450 331 689 1 778 1 728 1 218 1 176 45 23 22 14 3 818 3 594 2 886 2 659 During the year impairment losses and reversal of previous impairment losses for finished stock had an effect of SEK 7 million (12) on Group profit, while impairment losses on other stock had an effect of SEK -5 million (-6). Impairment losses and reversal of previous impairment losses for finished stock had an effect of SEK 7 million (5) on the parent company, with impairment losses on other stock of SEK -3 million (-3). Note 16. Operating receivables Trade receivables Group companies Associates Other Total trade receivables Current receivables Derivatives Prepayments and accrued income Total other operating receivables Group Parent company 2021 2020 2021 2020 - 50 2 343 2 393 425 1 072 179 1 676 - 33 1 982 2 015 446 550 266 1 262 108 50 1 910 2 068 320 1 072 157 1 548 14 33 1 440 1 487 298 553 104 955 Total operating receivables 4 069 3 278 3 616 2 442 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 20 million (36). The provision for expected credit losses was SEK 28 million (45). During the year, the provision decreased by SEK 26 million (16) as a result of actual credit losses, and increased by SEK 8 million (31) as a result of changes in the provision for anticipated or expected credit losses. At 31 December 2021, SEK 19 million (58) 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 Number Quotient value SEKm 31 Dec 2021 Class A Class B Total no. of shares Holding of repurchased class B shares Total number of shares outstanding 45 246 468 117 265 856 162 512 324 -586 639 161 925 685 26 26 1 180 3 058 4 238 Registered share capital Number Quotient value SEKm 31 Dec 2020 Class A Class B Total no. of shares Holding of repurchased class B shares Total number of shares outstanding 45 246 468 117 265 856 162 512 324 -586 639 161 925 685 26 1 180 26 3 058 4 238 The company’s share capital consists of shares issued in two classes: class A, each of which carries 10 votes, and class B, each of which carries one vote. In other respects, there are no restrictions between classes of shares. Assets and liabilities measured at fair value according to Chapter 4 Section 14a of the Swedish Annual Accounts Act had an impact of SEK 944 million (490) on parent company equity. In the consolidated accounts, valuation of derivatives and other financial instruments had an impact of SEK 930 million (491) on equity. Decisions on dividends are based on an appraisal of the Group’s profitability, future investment plans and financial position. The objective is to maintain a strong financial position and for the Group’s net financial debt as a percentage of equity not to exceed 25 per cent. The AGM has at its disposal the company’s earnings amounting to SEK 7 075 629 940. The Board proposes that the AGM to be held on 30 March 2022 approve a dividend of SEK 7.50 per share and an extra dividend of SEK 4.00 per share. The proposed dividend totals SEK 1 862 million. The Board also proposes that the remaining amount of SEK 5 213 484 562 be carried forward. In 2021, an ordinary dividend of SEK 7.25 per share (SEK 1 174 million) and an extra dividend of SEK 3.50 per share (SEK 567 million) were paid. Net financial debt as a percentage of equity was 9 per cent (10). 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 43–47. 76    Holmen Annual Report 2021 Notes Note 18. Pension obligations Holmen provides defined benefit pension plans for some office-based employees in Sweden. Most of these commitments are secured by means of insurance policies with Alecta. As Alecta cannot provide sufficient information to permit the ITP plan to be stated in the accounts as a defined benefit plan, it is stated in accordance with statement UFR 10 of the Swedish Financial Reporting Board as a defined contribution plan. Some defined benefit obligations over and above the ITP plan are available for Group management and secured by means of a pension fund. Occupational pensions for other office-based employees and all collective agreement workers in Sweden are defined contribution plans. There are two defined benefit plans in the UK that 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* Financial income and costs Indexation change** Total defined benefit plans stated in profit/loss for the year Defined contribution plans Personnel costs Total recognised in profit/loss for the year Group Parent company 2021 2020 2021 2020 -9 2 65 59 -11 2 - -9 21 0 - 21 -15 0 - -15 -173 -136 -135 -101 -115 -146 -114 -116 *SEK 27 million (-9) is included in the parent company relating to an item that is recognised in the Group as an actuarial revaluation in other comprehensive income. **Change in the index-based price of defined benefit plans in the UK. Note 18 Plan assets Fair value of assets at 1 January Recognised interest income Expected return excl. recognised interest income Real return (parent company) Administrative expenses Receipts and outgoings from employer Benefits paid Exchange differences Fair value of assets at 31 December Effect of asset ceiling Pension obligations, net Plan assets by type are as shown below: Plan assets Equities Bonds and bank account balances Group Parent company 2021 2 231 30 2020 2 388 44 210 - -2 -12 -92 202 2 568 -522 -24 77 - -1 6 -81 -201 2 231 -118 -48 2021 2020 178 - - 25 - -29 - - 174 - 0 176 - - 2 - - - - 178 - -4 Group Parent company 2021 1 052 1 516 2 568 2020 1 119 1 112 2 231 2021 2020 93 82 174 81 96 178 The plan assets do not include any financial instruments issued by Group companies or assets used by the Group. All instruments are traded on an active market. Of equities, 34 per cent relate to the UK, 60 per cent to the rest of Europe and the US and 6 per cent to the rest of the world. Of bonds, 57 per cent relate to government bonds and 43 per cent to corporate bonds. UK Group Key actuarial assumptions, Group (weighted average), % 31 Dec 2021 31 Dec 2020 Cost recognised in other comprehensive income 2021 2020 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 210 4 77 30 142 -208 5 6 -380 -12 88 -1 -1 -15 The change in the defined benefit obligations and the change in plan assets are specified in the tables below. Some 90 per cent of the obligations relate to the pension plans in the UK. The obligations arising out of the pension schemes in the UK are placed in 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. In both trusts, the assets exceed the commitment, but no surplus may be included in the accounts. This adjustment is referred to as an asset ceiling in tables. Obligations Obligations at 1 January Current service cost Payroll tax Interest expense Actuarial gains/losses Benefits paid Indexation change Exchange differences Obligations at 31 December Group Parent company 2021 2020 2021 2020 -2 161 -2 305 -11 1 -42 -90 93 - 192 -9 0 -28 151 92 65 -179 -2 070 -2 161 -182 -3 - -2 - 12 - - -175 -176 -15 - -2 - 12 - - -182 The weighted average duration is 15 years. Of the Group’s total obligations, SEK 10 million (8) refers to those that are not funded, while the rest are wholly or partially funded obligations. Of the parent company’s obligations, SEK 0 million (4) are secured under the Swedish Pension Obligations Vesting Act. Discount rate Rate of salary increase Rate of price inflation 2.0 - 2.7 Sweden 1.3 - 3.1 Key actuarial assumptions, Group, % 31 Dec 2021 31 Dec 2020 Discount rate Rate of salary increase Rate of price inflation 1.2 3.0 2.0 0.9 2.8 1.8 The discount rate for pension obligations have been established based on high- quality corporate bonds in the relevant currency and country of the commitment, i.e. mainly the UK. A discount rate of -0.1 per cent (0.3) 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). Group Sensitivity analysis 31 Dec 2021 31 Dec 2020 Discount rate (+ 0.5%) Rate of salary increase (+ 0.5%) Rate of price inflation (+ 0.5%) Mortality (+ 1 year in life expectancy) -133 2 98 110 -151 2 112 113 The Group’s payments into the funded defined benefit plans in 2022 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 36 million (27) and are included among personnel costs in the income statement. Holmen’s active members in the plan amounted to 658 people, which corresponds to 0.17 per cent of the plan’s active members. 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 2021, Alecta’s collective consolidation level was 172 (148) per cent and Alecta decided to introduce a premium reduction for 2022. Expected premium to Alecta in 2022 amount to SEK 29 million, taking the premium reduction into account. Holmen Annual Report 2021 77 Notes Notes 19–21 Note 19. Provisions Note 21. Collateral and contingent liabilities Contingent liabilities Guarantees on behalf of Group companies Other contingent liabilities Total Group Parent company 2021 2020 2021 2020 - 64 64 - 67 67 60 62 122 210 55 265 Other contingent liabilities for the Group largely comprise guarantee undertakings for third parties. Holmen has environmentally related contingent liabilities that cannot currently be quantified but that could result in future costs. Group 2021 2020 Book value at beginning of year Business combinations Provisions during the year Utilised during the year Unutilised amount reversed during the year Reclassification 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 beginning 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 654 - 6 -169 -50 -32 0 409 409 - 744 120 -261 -5 599 467 132 795 75 53 -158 -55 -55 -1 654 491 163 839 194 -231 -58 744 489 255 Provisions mainly relate to obligations to restore the environment at discontinued factory sites. SEK 100 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 20. Operating liabilities Trade payables Group companies Other Total trade payables Group Parent company 2021 2020 2021 2020 - 2 836 2 836 - 2 496 2 496 70 2 470 2 540 22 1 948 1 970 Current liabilities Associates Other Derivatives Accruals and deferred income 2 257 122 878 4 242 70 920 Total other operating liabilities 1 259 1 235 2 192 125 587 906 3 208 71 516 799 Total operating liabilities 4 095 3 732 3 446 2 769 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 231 million (218), discounts of SEK 84 million (82) and goods and services delivered but not yet invoiced of SEK 68 million (38). The fair values of derivatives relate to hedges of future cash flows. See Note 14. 78 Holmen Annual Report 2021 NotesNote 22 Note 22. Related parties Of the parent company’s net sales of SEK 18 186 million (14 187), SEK 964 million (182) relates to deliveries of goods to Group companies. The parent company’s purchases of goods from Group companies amounted to SEK 1 722 million (134). Parent company net sales also include income from the sale of silviculture services to subsidiaries for an amount of SEK 459 million (427). SEK 2 183 million (2 178) 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. 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 pages 48–49). Holmen rents office premises for SEK 8 million (6) from Fastighets AB L E Lundberg, which is a group company within L E Lundbergföretagen AB. In 2021, Fredrik Lundberg, who is CEO and principal shareholder in L E Lundbergföretagen, received a fee of SEK 740 000 (710 000) 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 370 000 (355 000). Partly owned wind power company Varsvik AB has loans amounting to SEK 254 million (275). Transactions with related parties are priced on market terms. The equity holdings in associates that produce hydro and wind power entitle the Group to buy the electricity produced at cost price in relation to the shareholding, which means that the associate only earns a limited profit. Purchased electricity is sold to external customers at market price, and the earnings are stated in the consolidated accounts within the Renewable Energy business area. Transactions with related parties Group Associates Joint venture Parent company Subsidiaries Associates Joint venture Sale of goods to related parties Purchase of goods from related parties Other (e.g. interest, dividend) Liability to related parties Receivable due from related parties 2021 265 1 964 265 1 2020 261 14 182 261 13 2021 2020 2021 2020 2021 2020 54 - 1 722 54 - 56 - 134 56 - 0 10 399 0 10 0 11 296 0 11 2 2 680 2 - 4 3 192 3 - 2021 60 254 4 018 60 254 2020 43 275 3 197 43 275 See Note 4 for fees and remuneration paid to members of the Board. Holmen Annual Report 2021 79 NotesNote 23 Note 23. Investments in Group companies Accumulated acquisition costs Value at start of year Shareholder contributions and investments Liquidations Total Accumulated impairment losses Value at start of year Impairment losses for the year Liquidations Total Book value at end of year Parent company 2021 13 112 31 -312 12 831 2020 17 335 853 -5 077 13 112 1 666 2 -312 1 357 6 648 95 -5 077 1 666 11 474 11 445 The parent company’s impairment losses on investments in Group companies are stated in the income statement in the line item for ‘Profit/loss from investments in Group companies’. Corporate ID No. Registered office Number of holdings Holding %* Book value in the parent company Holding %* Book value in the parent company 2021 2020 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 0 0 0 0 0 383 2 856 1 527 422 858 2 663 740 276 200 2 9 929 1 519 - - 0 1 1 4 7 0 7 5 2 1 545 0 0 0 0 0 383 2 856 1 527 422 830 2 663 740 276 200 2 9 901 1 519 - - 0 1 - 4 7 0 7 5 2 1 545 11 474 11 445 Parent company’s direct holdings of investments in subsidiaries Holmen Skog AB Iggesund Paperboard AB Holmen Paper AB Holmen Wood Products AB Holmen Energi AB Holmens Bruk AB Holmen Skog Mitt AB Holmen Skog Syd AB Holmen Sågverk AB Martinsons Såg AB Holmen Vattenkraft AB Iggesunds Bruk AB Ljusnan Vattenkraft AB Blåbergsliden Vind AB Other Swedish Group companies Total Swedish holdings 556220-0658 556088-5294 556005-6383 556099-0672 556524-8456 559165-6615 559165-6623 559165-6631 559165-6672 556218-2856 559165-6664 559165-6656 559165-6680 559138-5181 Örnsköldsvik Hudiksvall Norrköping Hudiksvall Örnsköldsvik Stockholm Stockholm Stockholm Stockholm Skellefteå Stockholm Stockholm Stockholm Stockholm 1 000 1 000 100 1 000 1 000 1 000 1 000 1 000 1 000 50 000 1 000 1 000 1 000 500 Holmen UK Ltd, UK Holmen Paper Ltd** Iggesund Paperboard (Workington) Ltd** Holmen France S.A.S., France Holmen GmbH, Germany Holmen Paper S.A Spain Iggesund Paperboard Asia Pte Ltd, Singapore Holmen B.V., Netherlands AS Holmen Mets, Estonia Iggesund Paperboard Inc, US Iggesund Paperboard Asia (HK) Ltd, China Other non-Swedish Group companies Total non-Swedish holdings Total Workington London Workington Paris Hamburg Madrid Singapore Amsterdam Tallinn Lyndhurst Hong Kong 1 197 100 - - 10 000 - 60 000 800 000 35 500 1 000 4 000 000 *The percentage of ownership corresponds to the percentage of votes for the total number of shares. **Indirect holdings. 80 Holmen Annual Report 2021 NotesNotes 24–25 Note 24. Untaxed reserves Parent company Parent company Untaxed reserves 31 Dec 2020 Appropriations 31 Dec 2021 Untaxed reserves 31 Dec 2020 Appropriations 31 Dec 2021 Accumulated depreciation and amortisation in excess of plan Non-current intangible assets Property, plant and equipment -13 17 3 5 4 8 -9 20 12 Tax allocation reserves 2015 fiscal year 2016 fiscal year 2017 fiscal year 2019 fiscal year 2020 fiscal year 2021 fiscal year Group contributions received amounted to SEK 1 495 million (2 513) and Group contributions paid amounted to SEK -230 million (-1). Total appropriations of profit amounted to SEK 768 million (1 804). Total 191 290 470 700 700 - 2 351 2 354 -191 - - - - 680 489 497 - 290 470 700 700 680 2 840 2 852 Note 25. Cash flow statement Interest paid and dividends received Dividends received Interest received Interest paid Total Group Parent company 2021 2020 2021 2020 1 8 -39 -30 - 11 -40 -29 382 26 -36 371 284 24 -35 273 The change in current liabilities mostly relates to borrowing within the Group’s commercial paper programme. In 2021, a number of different short-term loans totalling SEK 2 300 million (3 528) were raised within the Group’s commercial paper programme, and SEK 2 600 million (5 478) was repaid. See Note 14 for a breakdown of cash and cash equivalents. Group Bonds Commercial paper Other financial liabilities Liabilities relating to right-of-use assets Pension obligations Financial liabilities* 2019 2 000 2 450 52 184 46 4 733 Business combination New leases - - 173 34 - 207 - - - 163 - 163 Cash flow 1 900 -1 950 -106 -99 -13 -268 Currency and market revaluation - - 7 5 15 27 2020 3 900 500 126 287 48 4 860 New leases - - - 67 - 67 Cash flow 500 -300 -89 -115 -8 -12 Currency and market revaluation - - 11 5 -16 2021 4 400 200 47 244 24 0 4 915 *Including liabilities relating to right-of-use assets and pension commitments. Parent company Bonds Commercial paper Liabilities to Group companies Other financial liabilities Pension obligations Financial liabilities* *Including pension obligations. 2019 Cash flow Currency and market revaluation 2020 Cash flow Currency and market revaluation 2 000 2 450 476 47 0 4 973 1 900 -1 950 -307 -26 -1 -384 - - - 7 4 3 900 500 169 28 4 11 4 601 500 -300 428 - -5 623 - - 10 14 2 26 2021 4 400 200 607 42 0 5 250 Holmen Annual Report 2021 81 NotesNotes 26–27 Note 26. Business combinations On 1 October 2020 Holmen completed the acquisition of Martinsons, one of Sweden’s leading players in sawn and engineered wood products. In 2021, the final purchase price, for 100 per cent of the shares, was determined to be SEK 858 million. The acquired assets and assumed liabilities are presented in the table below. Goodwill of SEK 358 million is recognised in conjunction with the acquisition. Acquired net assets Non-current intangible assets Other non-current assets Net deferred tax Working capital Net financial debt Identifiable assets, net Goodwill Total purchase price SEKm 140 531 -55 6 -122 499 358 858 Goodwill relates to the value of integrating Holmen’s own forest with its own industry and other intangible assets relate to the value of the wood supply business included in the acquisition. Recognised goodwill is not tax deductible. The fair value of intangible assets other than goodwill are amortised over seven years. Note 27. Critical accounting estimates and judgements 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. Forest assets The book value of the Group’s forest assets at 31 December 2021 was SEK 47 080 million (43 202), divided between SEK 29 204 million (28 663 ) for forest land and SEK 17 876 million (14 538) for biological assets. A deferred tax liability of SEK 9 664 million (8 840) has been recognised relating to the forest assets. The valuation of the forest assets is based on detailed data about transactions and pricing statistics published by different market operators. The valuation takes account of where in the country the forest land is located and differences in the forest in terms of the volume of standing timber and site quality. The book value of the forest assets will be affected by changes in transaction prices for forest properties and by how the volume of standing timber develops. The value of the forest assets is allocated in the balance sheet to growing trees, which are recognised as a biological asset, and forest land. How much of the value is allocated to biological assets is established by calculating the present value of expected future cash flows from growing trees based on estimates of future harvest volumes, price and cost development and discount rate. See Note 7 and Note 9 for further information. Impairment testing of non-current assets and goodwill Non-current assets and goodwill are tested for impairment annually. The calculations are based on current market conditions. Changes in conditions may have an effect on the estimated recoverable amount applied in connection with future impairment tests. Pension obligations The Group has benefit-based pension obligations measured at SEK 2 070 million (2 161) and SEK 2 568 million (2 231) in plan assets set aside to cover such obligations. The value of pension obligations is estimated 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 18. 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. See Note 19. Taxes Holmen has claimed group relief in the parent company related to tax losses in Spanish subsidiaries that was liquidated. The deductions correspond to SEK 389 million in tax, but no tax receivable has been recognised. 82 Holmen Annual Report 2021 NotesProPosed aPProPriation of Profits Appropriation of profits The following earnings of the parent company are at the disposal of the AGM: Net profit for the 2021 financial year Retained earnings The Board of Directors proposes that the shareholders be paid in part, an ordinary dividend of SEK 7.50 per share (161 925 685 shares), and in part, an extra dividend of SEK 4.00 per share (161 925 685 shares) and that the remaining amount be carried forward The Board of Holmen AB has proposed that the 2022 AGM resolve in favour of paying an ordinary dividend of SEK 7.50 per share, and an extra dividend of SEK 4.00 per share, for a total of SEK 1 862 million. In 2021, an ordinary dividend of SEK 7.25 per share and an extra dividend of SEK 3.50 per share were paid. 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 62 per cent of net profit for 2021 for the Group and means that 4.0 per cent of equity in the Group at 31 December 2021 will be paid out by way of dividend. The Board has established that the Group should have a strong financial position, with net financial debt not exceeding 25 per cent of equity. At 31 December 2021 it amounted to 9 per cent. The proposed dividend would increase net debt to equity by 4 percentage points. Holmen AB’s equity at 31 December 2021 amounted to SEK 12 990 million, of which non-restricted equity was SEK 7 076 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 944 million on equity. The Group’s equity at 31 December 2021 amounted to SEK 46 992 million. In accordance with IFRS, no distinction is made at Group level between restricted and non-restricted equity. SEK 2 089 791 594 4 985 838 346 7 075 629 940 1 214 442 638 647 702 740 1 862 145 378 5 213 484 562 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 con- solidated accounts were prepared in accordance with the international accounting standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on 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. Proposed appropriation of profits Holmen Annual Report 2021 83 Signatures The annual accounts and the consolidated accounts were approved for publication by the Board in its decision of 18 February 2022. The Group’s consolidated income statement and balance sheet and the parent company’s income statement and balance sheet will be presented for adoption at the AGM to be held on 30 March 2022. Stockholm, 18 February 2022 Fredrik Lundberg Chairman Carl Bennet Board member Lars G Josefsson Board member Lars Josefsson Board member Alice Kempe Board member Louise Lindh Board member Ulf Lundahl Board member Henriette Zeuchner Board member Henrik Sjölund Board member and Chief Executive Officer Steewe Björklundh Board member, employee representative Kenneth Johansson Board member, employee representative Tommy Åsenbrygg Board member, employee representative Our audit report was submitted on 22 February 2022. PricewaterhouseCoopers AB Magnus Svensson Henryson Authorised Public Accountant Auditor in Charge Robert Söderlund Authorised Public Accountant 84    Holmen Annual Report 2021 Signatures Auditor’s report To the general meeting of 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 2021, except for the corporate governance statement and the sustainabili- ty report on pages 38–42 and 31 and 34–47, respectively. The annual accounts and consolidated accounts of the company are included on pages 2, 6–9, 14–15, 34–84 and 88–89 of this document. In our opinion, the annual accounts have been prepared in accordance with the An- nual Accounts Act, and present fairly, in all material respects, the financial position of the parent company as of 31 December 2021 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 2021 and its financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement and the sustainability report on pages 36–47 and 29–35, respectively. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts. 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 annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the Board of the parent company and the Group in accordance with the Audit Regula- tion (537/2014) Article 11. Basis of opinion We have conducted our audit in accordance with the International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsi- bilities under these standards are further described in the Auditor’s Responsibili- ties section. We are independent of the parent company and the Group in accord- ance with professional ethics for accountants in Sweden and have otherwise ful- filled our ethical responsibilities in accordance with these requirements. This in- cludes, based on the best of our knowledge and belief, that no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU. We believe that the audit evidence we have obtained is sufficient and adequate as a basis for our opinion. Other matters The audit of the annual accounts and consolidated accounts for the 2020 financial year was performed by another auditor who submitted an auditor’s report dated 1 March 2021, with unmodified opinions in the Report on the annual accounts and consolidated accounts. Our audit approach Audit scope We have designed our audit by determining the materiality level and assessing the risk of material misstatement in the financial statements. We have considered where the Managing Director and the Board of Directors have made significant accounting estimates about future events or outcomes that are inherently uncertain. In the audit, we have also addressed the risk that the Board of Directors and the Managing Director may have overridden internal controls, including considering whether there is evidence of systematic deviations that could indicate irregularities. We have designed our audit to enable us to provide an opinion on the financial statements as a whole, taking into account how the Group is organised, the pro- cesses for financial reporting and the industry in which the operations are active. Materiality The scope of our audit has been influenced by our application of materiality. An audit is designed to obtain reasonable assurance about whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we have determined quantitative thresh- olds for materiality concerning the financial statements as a whole. With the help of these and qualitative considerations, we have established the audit orientation and scope and the character and point in time for our audit procedures. Quantita- tive thresholds for materiality have also been used to assess the effect of potential misstatements, individual and aggregated, in the financial statements as a whole. 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 for the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consoli- dated accounts as a whole, but we do not provide a separate opinion on these matters. Revenue recognition How our audit addressed the key audit matter Net sales amount to SEK 19 479 million and are a material item in the income statement. Our audit procedures have included, but were not limited to, the activities listed below. We have: The Group has various types of revenue, which largely consist of goods such as paper, paperboard, timber, wood products and pulp- wood that are sold to customers. Sales of goods are transaction-rich, put requirements on bookkeeping, monitoring and internal controls. The services provided are limited and primarily relate to forest man- agement services and within construction, such as installation work. The various revenue streams have different characteristics, leading to separate processes for revenue recognition, which have been exam- ined individually. • Evaluated the Group’s processes for the recognition of the various revenue streams. • Performed tests of a sample of controls in the processes for revenue recognition. • Tested a selection of transactions against supporting underlying agreements and payments, as well as performed accounts receivable confirmation. • Tested a sample of transactions to assess whether revenue has been recognised in the appropriate period. • Reviewed the information presented in the annual accounts and assessed whether it provides sufficient information according to the regulatory requirements. Valuation of forest assets How our audit addressed the key audit matter The Group’s forest assets amount to SEK 47 080 million and constitute a significant item in the consolidated and the parent company’s balance sheets. The assets are divided into biological assets that are recognised in ac- cordance with IAS 41 Agriculture, and properties that are recognised in accordance with IAS 16 Property, Plant and Equipment. A description of the measurement of value of forest assets and impor- tant assumptions is presented in Note 9. The measurement process is complex since it requires assessments and assumptions in respect of, inter alia, market statistics, and the breakdown of the total value of land and biological assets. Significant areas judgment include the scope and completeness of mar- ket statistics, local market prices and discount rates as well as timber prices and felling costs. The measurement is classified as a Level 3 measurement in accordance with IFRS 13. In view of the above, we consider that measurement of the Group’s forest assets constitutes a key audit matter. Our audit procedures have included, but were not limited to, the activities listed below. We have: • Evaluated and checked the Group’s process and methods for measuring value of forest assets. • Checked the allocation of value between biological assets and land assets. • Evaluated material assumptions that form the basis of the measurement of forest assets and biological assets. • Verified the measurement model’s mathematical correctness and the company’s process for preparing input data. • Checked the Group’s calculation of the cost of capital and evaluated the measurement model’s sensitivity to changes in the cost of capital. • Compared outcomes in the measurement with external observable data points and over time. • Checked that the disclosures in Note 9 match the input data and the assumptions used in the measurement model. Holmen Annual Report 2021    85 Auditor’s ReportOther information than the annual accounts and consolidated accounts This document also contains information other than the annual accounts and consolidated accounts, which is found on pages 3–5, 10–13, 16–33, 85–87 and 90–98 (“other information”). The remuneration report that we obtained prior to the date of this auditor’s report also constitutes other information. The Board of Directors and the Managing Director are responsible for other information. Our opinion on the annual accounts and consolidated accounts does not cover 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 other information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure, we also take into account our knowl- edge otherwise obtained in the audit and assess whether Other information other- wise appears to be materially misstated. If we, based on the work performed concerning this Other information, conclude that the Other information contains a material misstatement, we are required to report this. We have nothing to report in this regard. The Board of Directors’ and Managing Director’s responsibilities The Board of Directors and the Managing Director are responsible for the prepa- ration 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 con- trol 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 Direc- tors and the Managing Director are responsible for assessing 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 assumption applies unless the Board and the Managing Director intend to liquidate the company or cease to operate, or have no realistic alternative to doing so. The 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 misstate- ment, 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 guar- antee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or aggregated, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on the website of the Swedish Inspectorate of Auditors: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor’s report. 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 2021 as well as the proposed appropriations of the company’s profit or loss. We recommend to the general meeting of shareholders that the profit be appro­ priated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year. Basis of opinion We have conducted our audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further de- scribed 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. We believe that the audit evidence we have obtained is sufficient and adequate as a basis for our opinion. The Board of Directors’ and Managing Director’s responsibilities Responsibility for the proposed appropriation of the company’s profit or loss rests with the Board of Directors. In conjunction with 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’ equity, consolida- tion requirements, liquidity and position in general. 86    Holmen Annual Report 2021 The Board of Directors is responsible for the organisation and administration of the company’s affairs. This includes continuous assessment of the company’s and the Group’s financial situation and ensuring that the company’s organisation is de- signed so that the accounting, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director is responsible for day-to-day management in accordance with the guidelines and instructions issued by the Board, and is required to take such actions as may be necessary to ensure compliance with the company’s statutory accounting obliga- tions and satisfactory management of funds. The auditor’s responsibility Our objective for the management audit, and thus for our opinion on release from liability, is to obtain audit evidence which enables us to assess with reasonable assurance whether any member of the Board or the Managing Director has in any material respect: taken any action or been guilty of any neglect that could give rise to a liability to indemnify the company otherwise acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. Our objective in respect of our audit of the proposed appropriation of the compa- ny’s profit or loss, and thus for our opinion on the same, is to obtain reasonable assurance that the proposed appropriation is consistent 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. A further description of our responsibility for the audit of the administration is avail- able on the website of the Swedish Inspectorate of Auditors: www.revisorsinspek- tionen.se/revisornsansvar. This description forms part of the statutory annual report. The auditor’s opinion on the ESEF report Opinion In addition to our audit of the annual accounts and consolidated accounts, we have also examined whether the Board of Directors and the Managing Director have pre- pared the annual accounts and the consolidated accounts in a format that facilitates uniform electronic reporting (the ESEF report) according to Chapter 16, Section 4 a of the Securities Market Act (2007:528) for Holmen AB for the year 2021. Our examination and our opinion refer only to the statutory requirement. In our opinion, the ESEF report has been prepared in a format that in all significant respects facilitates uniform electronic reporting. Basis of opinion We have conducted our examination in accordance with FAR’s recommendation, RevR 18 Review of the ESEF report. Our responsibilities under this recommenda- tion are further described in the Auditor’s Responsibilities section. We are inde- pendent of Holmen AB 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 evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for ensuring that the ESEF report has been prepared in accordance with Chapter 16, Section 4 a of the Securities Market Act (2007:528) and for ensuring that there is such internal control as the Board of Directors and the Managing Director regard as necessary to prepare the ESEF report in a manner that is free from material misstatement, whether due to fraud or error. The auditor’s responsibility Our responsibility is to express an opinion with reasonable assurance on whether, based on our examination, the ESEF report, in all significant respects, has been prepared in a format that satisfies the requirements of Chapter 16, Section 4 a of the Securities Market Act (2007:528). RevR 18 requires that we plan and implement our audit procedures to achieve reasonable assurance that the ESEF report has been prepared in a format that satisfies these requirements. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with RevR 18 and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements may arise from fraud or error and are considered material if, indi- vidually or when aggregated, they could reasonably be expected to influence the economic decisions of users taken on the basis of the ESEF report. The auditing firm applies ISQC 1 (International Standard on Quality Control) Quali- ty Control for audit firms that audit and review financial reports and perform other assurance engagements, as well as related services and accordingly maintains a comprehensive system of quality control including documented policies and pro- cedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor’s ReportThe review involves performing various procedures to obtain evidence that the ESEF report has been prepared in a format that facilitates uniform electronic re- porting of the annual accounts and consolidated accounts. The auditor selects which procedures are to be performed, including assessing the risks of material misstatement in the reporting, whether due to fraud or error. In making these risk assessments, the auditor considers the parts of the internal control relevant to how the Board of Directors and the Managing Director prepare the basis for de- signing audit procedures that are appropriate in view the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal con- trol. The review also includes an evaluation of the appropriateness and reasona- bleness of the Board of Directors’ and the Managing Director’s assumptions. The audit procedures primarily comprise a technical validation of the ESEF report; i.e. whether the ESEF report fulfils the technical specifications stated in the Europe- an Commission’s delegated regulation (EU) 2019/815 and checking that the ESEF report complies with the audited annual accounts and consolidated accounts. The review also includes an assessment of whether the ESEF report has been marked with iXBRL, which enables a fair and complete machine­readable version of the consolidated income statements, balance sheets and statements of equity, as well as the cash flow statement. Auditor’s opinion regarding the corporate governance statement The Board of Directors is responsible for ensuring that the corporate governance statement on pages 38–42 has been prepared in accordance with the Annual Accounts Act. Focus and scope of the examination Our examination has been conducted in accordance with FAR’s auditing standard RevR 16 The Auditor’s Examination of the Corporate Governance Statement. This means that our examination of the corporate governance statement 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 be- lieve that this examination has provided us with sufficient basis for our opinions. Opinion A corporate governance statement has been prepared. Disclosures in accordance with Chapter 6, Section 6, second paragraph, points 2–6 of the Annual Accounts Act and Chapter 7, Section 31, second paragraph of the same law are consistent with the other parts of the annual accounts and the consolidated accounts and are in accordance with the Annual Accounts Act. Auditor’s opinion regarding the statutory sustainability report Assignment and division of responsibilities The Board of Directors is responsible for ensuring that the sustainability report on pages 8–9, 31, 34–47, 40–42 and 44–45 has been prepared in accordance with the Annual Accounts Act. Focus and scope of the examination 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 sustainability report is different and substan- tially more limited in scope compared with the focus and scope of an audit con- ducted 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. Opinion A statutory sustainability report has been prepared. PricewaterhouseCoopers AB, Torsgatan 21, SE-113 97 Stockholm, was appointed auditor of Holmen AB by the general meeting of the shareholders on 22 April 2021 and has been the company’s auditor from that date. Stockholm, 22 February 2022 PricewaterhouseCoopers AB Magnus Svensson Henryson Authorised Public Accountant Auditor in Charge Robert Söderlund Authorised Public Accountant review of sustainAbility report Holmen’s Sustainability Report, as defined on page 2 of Holmen’s Annual Report 2021, has been subject to a limited review in accordance with ISAE 3000 Assurance engagements 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 Sustainabili- ty Report is not prepared, in all material respects,in accordance with the criteria defined by Group management. Stockholm, 22 February 2022 PricewaterhouseCoopers AB Magnus Svensson Henryson Authorised Public Accountant Auditor in Charge Isabelle Hammarström Expert member of FAR Auditor’s Report & Review of Sustainability Report Holmen Annual Report 2021    87 Board of directors 1. Fredrik Lundberg 5. Lars Josefsson Employee representatives 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. Shareholding: 1 679 448 shares. Shareholding of L E Lundbergföretagen: 55 244 000 shares. 2. Henrik Sjölund Norrköping. Born in 1966. Member since 2014. M.Sc. in International Economics. President and CEO. Other significant appointments: Chairman of The Swedish Forest Industries Federation and SKGS. Board member of The Confederation of Swedish Enterprise. Shareholding: 52 155 shares. 3. Carl Bennet Gothenburg. Born in 1951. Member since 2009. M.Sc. in Economics. Med. dr. h.c. and Tekn. dr. h.c. CEO of Carl Bennet AB. Former President and CEO of Getinge AB. Chairman of Elanders AB and Lifco AB. Other significant appointments: Deputy Chairman of Arjo AB and Getinge AB. Board member of L E Lundberg företagen AB. Shareholding: 200 000 shares. 4. Lars G Josefsson Stockholm. Born in 1950. Member since 2011. M.Sc. in Engineering. Former President and CEO of Vattenfall. Other significant appointments: Chairman of Watts 2 You AB. Member of Robert Bosch International Advisory Committee, Hand in Hand Inter national, ARC Power Ltd. Board member of Royal Swedish Academy of Engineering Sciences (IVA). Shareholding: 10 000 shares. Norrköping. Born in 1953. Member since 2016. M.Sc. in Engineering. Other significant appointments: Chairman of TimeZynk. Board member of Vestas, Ouman and Nevel. Shareholding: 7 000 shares. 10. Steewe Björklundh Hudiksvall. Born in 1958. Member since 1998. Employee representative, LO. Chairman of the GS union, Iggesund Sawmill. 11. Kenneth Johansson Söderköping. Born in 1958. Member since 2004. Employee representative, LO. 12. Tommy Åsenbrygg Skebobruk. Born in 1968. Member since 2015. Employee representative, PTK. Shareholding: 200 shares. 13. Martin Nyman Ölsund. Born in 1978. Deputy member since 2021. Employee representative, PTK. Chairman of Unionen Club, Holmen Iggesund. Shareholding: 760 shares. 14. Daniel Hägglund Örnsköldsvik. Born in 1982. Deputy member since 2014. Employee representative, PTK. 15. Christer Johansson Iggesund. Born in 1959. Deputy member since 2017. Employee representative, LO. Chairman of the Swedish Paper Workers Union branch 15. 6. Alice Kempe Torshälla. Born in 1967. Member since 2019. M.Sc. in Forestry. Other significant appointments: Chairwoman of the Kempe Foundations. Board member of MoRe Research Örnsköldsvik AB, SweTree Technologies AB and Arevo AB. Shareholding: 218 792 shares. 7. Louise Lindh Stockholm. Born in 1979. Member since 2010. M.Sc. in Economics. CEO and Board member 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. 8. Ulf Lundahl Lidingö. Born in 1952. Member since 2004. B.A. in Legal Science and B.Sc. (Econ). Other significant appointments: Chairman of Attendo AB, Fidelio Capital AB, and Nordstjernan Kredit AB. Board member of Indutrade AB. Shareholding: 8 000 shares. 9. Henriette Zeuchner Stockholm. Born in 1972. Member since 2015. M.Sc. in Economics and Bachelor of Laws. Other significant appointments: Board member of the NTM Group. Shareholding: 1 600 shares. Auditors: PricewaterhouseCoopers AB Principal Auditor: Magnus Svensson Henryson Authorised public accountant. 88 Holmen Annual Report 2021 Board of Directors The information relates to personal and related party shareholdings at 31 December 2021. 1 4 7 10 13 2 5 8 11 14 3 6 9 12 15 Board of Directors Holmen Annual Report 2021 89 Group manaGement 2 6 3 7 4 8 10 11 12 4. Johan Nellbeck Senior Vice President Paperboard Born in 1964. Joined Holmen in 2019. Shareholding: 4 000 shares. 7. Fredrik Nordqvist Senior Vice President Renewable Energy Born in 1971. Joined Holmen in 2011. Shareholding: 820 shares. 10. Gunilla Rolander Senior Vice President Human Resources Born in 1966. Joined Holmen in 2013. Shareholding: 4 398 shares. 1 5 9 1. Henrik Sjölund President and CEO Born in 1966. Joined Holmen in 1993. Shareholding: 52 155 shares. Henrik Sjölund has no significant sharehold- ings or ownership in compa- nies with which the Group has important business re- lations. Further information is provided on page 88. 5. Lars Lundin Senior Vice President Paper Born in 1966. Joined Holmen in 2018. Shareholding: 2 250 shares. 2. Anders Jernhall 6. Johan Padel Executive Vice President, Chief Financial Officer Born in 1970. Joined Holmen in 1997. Shareholding: 27 527 shares. Senior Vice President Wood Products Born in 1966. Joined Holmen in 2014. Shareholding: 1 200 shares. 3. Sören Petersson Senior Vice President Forest Born in 1969. Joined Holmen in 1994. Shareholding: 16 200 shares. 90 Holmen Annual Report 2021 Group management 8. Stina Sandell Senior Vice President Sustainability and Communications Born in 1966. Joined Holmen in 2017. Shareholding: 765 shares. 9. Nils Ringborg Senior Vice President International Affairs Born in 1958. Joined Holmen in 1988. Shareholding: 7 400 shares. 11. Ola Schultz-Eklund Senior Vice President Technology Born in 1961. Joined Holmen in 1994. Shareholding: 2 740 shares. 12. Henrik Andersson Senior Vice President Legal Affairs Secretary of the Board of Directors. Born in 1971. Joined Holmen in 2008. Shareholding: 3 782 shares. The information relates to personal and related party shareholdings at 31 December 2021. 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 2021 2020 2019 2018 2017 Operating profit, EBITDA and items affecting comparability EBITDA Depreciation and amortisation according to plan Operating profit/loss excluding items affecting comparability Items affecting comparability* Operating profit Operating margin Operating profit/loss excluding items affecting comparability Net sales Operating margin, % Capital employed Equity Net financial debt Capital employed Return on capital employed Operating profit/loss excluding items affecting comparability Average capital employed Return, % Return on equity Profit after tax Average equity Return, % Net financial debt Non-current financial liabilities Non-current liabilities relating to right-of-use assets Current financial liabilities Current liabilities relating to right-of-use assets Pension obligations Non-current financial receivables Current financial receivables Cash and cash equivalents Net financial debt Debt/equity ratio Net financial debt Equity Net debt as % of equity Equity/assets ratio Equity Assets Equity/assets ratio, % *See page 92 for what items affecting comparability refers to. 5 321 -1 261 4 061 -330 3 731 4 061 19 479 20.8 46 992 4 101 51 093 4 061 47 557 8.5 3 004 43 326 6.9 3 911 173 736 71 24 -268 -39 -507 4 101 4 101 46 992 9 46 992 68 101 69 3 651 -1 172 2 479 - 2 479 2 479 16 327 15.2 42 516 4 181 46 697 2 479 44 128 5.6 1 979 40 718 4.8 3 919 175 605 112 48 -290 -43 -346 4 181 4 181 42 516 10 42 516 62 543 68 3 486 -1 141 2 345 8 770 11 115 2 345 16 959 13.8 40 111 3 784 43 895 2 345 26 391 8.9 8 731 25 233 34.6 2 018 171 2 485 13 46 -451 -14 -483 3 784 3 784 40 111 9 40 111 59 340 68 3 488 -1 012 2 476 -94 2 382 2 476 16 055 15.4 23 453 2 807 26 261 2 476 25 469 9.7 2 268 22 546 10.1 1 033 - 2 494 - 61 -468 -35 -278 2 807 2 807 23 453 12 23 453 36 912 64 3 157 -991 2 166 - 2 166 2 166 16 133 13.4 22 035 2 936 24 972 2 166 24 874 8.7 1 668 21 297 7.8 552 - 2 775 - 39 -42 -32 -356 2 936 2 936 22 035 13 22 035 34 891 63 Key figures Holmen Annual Report 2021 91 2021 Ten-year review, finance SEKm 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Income statement Net sales Operating costs Change in value of biological assets Profit from investments in associates and joint ventures 16 327 16 959 17 852 19 479 -14 622 -13 250 -13 961 -12 984 -13 379 -12 626 -13 348 -13 270 -13 919 -15 224 350 47 267 7 579 -6 315 -22 282 -7 487 0 264 3 415 -12 425 -9 464 0 16 014 16 133 15 513 16 231 15 994 16 055 EBITDA 5 321 3 651 3 486 3 488 3 157 3 179 2 940 2 999 2 579 3 026 Depreciation and amortisation according to plan -1 261 -1 172 -1 141 -1 012 -991 -1 018 -1 240 -1 265 -1 370 -1 313 Operating profit/loss excluding items affecting comparability 4 061 2 479 2 345 2 476 2 166 2 162 1 700 1 734 1 209 1 713 Items affecting comparability* -330 - 8 770 -94 - -232 -931 -450 -140 -193 3 731 2 479 11 115 2 382 2 166 1 930 769 1 284 1 069 1 520 -39 -42 -34 -25 -53 -71 3 691 2 437 11 081 2 356 2 113 1 859 -688 -458 -2 351 -89 -445 -436 Profit/loss for the year 3 004 1 979 8 731 2 268 1 668 1 424 Diluted earnings per share, SEK** 18.5 12.2 52.6 13.5 9.9 8.5 Operating profit Net financial items Earnings before tax Tax 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 -90 679 -120 559 3.4 -147 1 137 -230 907 5.4 5 641 5 113 6 247 1 352 389 -2 748 -198 871 -160 -227 1 294 559 711 1 853 4.3 11.1 5 694 4 618 7 148 1 175 450 -2 853 6 061 4 967 8 144 1 129 522 -2 972 6 509 6 261 5 441 4 872 488 -4 092 5 883 6 187 4 879 2 222 378 -3 222 6 286 6 229 5 757 1 695 378 -3 385 5 944 5 785 5 571 1 747 319 -3 311 5 535 5 526 5 408 1 562 315 -2 214 5 302 5 252 5 431 1 342 314 -2 128 5 481 5 472 6 148 1 314 359 -2 760 19 479 16 327 16 959 16 055 16 133 15 513 16 014 15 994 16 231 17 852 1 495 673 70 1 668 347 -193 4 061 -330 1 367 812 73 185 215 -174 1 172 435 509 62 336 -168 1 185 689 329 246 181 -154 1 069 764 288 80 135 -170 1 001 903 289 -3 120 -148 905 847 -74 9 176 -163 817 674 141 37 212 -146 924 433 -309 -75 371 -136 931 596 94 -130 355 -132 2 479 2 345 2 476 2 166 2 162 1 700 1 734 1 209 1 713 - 8 770 -94 - -232 -931 -450 -140 -193 3 731 2 479 11 115 2 382 2 166 1 930 769 1 284 1 069 1 520 3 691 346 -662 -145 3 229 2 437 544 -569 46 11 081 -8 208 -147 158 2 356 540 -396 -214 2 113 418 -221 199 1 859 965 -504 -360 679 1 802 -398 443 1 137 1 448 -191 -217 871 1 056 210 -127 1 294 1 057 -434 338 2 457 2 884 2 286 2 509 1 961 2 526 2 176 2 011 2 254 Cash flow from investing activities*** -1 332 -1 924 -1 050 -1 005 -644 -123 -824 -815 -872 -1 957 Cash flow after investments 1 897 533 1 834 1 281 1 865 1 838 1 702 1 361 1 139 297 Dividend paid Share buy-backs -1 741 - -567 - -1 134 -1 430 -1 092 - -1 008 - -882 - -840 - -756 - -756 - -672 - *Items affecting comparability: 2021: Increased energy costs of SEK -330 million due to turbine breakdown in Workington. 2019: Revaluation of biological assets amounting to SEK 9 079 million, impairment loss by associates of SEK -109 million and provisions of SEK -200 million. 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 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. **Historical figures have been adjusted because of the share split (2:1) in 2018. ***Net after disposals and before changes in non-current financial receivables. 92 Holmen Annual Report 2021 Ten-year review, finance SEKm Balance sheet Forest assets Other non-current assets* Current assets Financial receivables Total assets 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 For a ten-year review of data per share, see page 49. 47 080 12 251 7 956 814 43 202 11 784 6 878 679 41 345 10 781 6 264 950 18 701 10 586 6 845 781 17 971 10 780 5 710 430 17 595 11 106 5 852 338 17 340 12 184 5 607 325 17 032 13 189 5 964 249 16 654 13 998 5 774 327 16 344 14 320 6 005 377 68 101 62 543 59 340 36 912 34 891 34 891 35 456 36 434 36 753 37 046 Equity Deferred tax liabilities Financial liabilities and interest-bearing provisions Operating liabilities 46 992 11 610 4 915 4 584 42 516 10 570 4 860 4 597 40 111 10 299 4 733 4 196 23 453 5 839 3 587 4 033 22 035 5 650 3 366 3 840 21 243 5 613 4 283 3 752 20 853 5 508 5 124 3 971 20 969 5 480 6 156 3 829 20 854 5 804 6 443 3 653 20 813 5 504 6 967 3 762 Total equity and liabilities 68 101 62 543 59 340 36 912 34 891 34 891 35 456 36 434 36 753 37 046 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 Return on equity, % Net debt as % of equity Deliveries Volume from own forest, ’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. **Excluding items affecting comparability. 37 300 5 169 1 637 2 278 4 069 640 34 230 5 276 1 969 1 846 3 351 24 32 718 5 589 1 903 1 000 3 058 -372 14 830 5 316 2 072 927 3 082 34 13 824 5 433 2 193 862 3 115 -455 13 536 5 546 2 507 859 3 153 -410 13 401 5 698 3 266 897 3 075 -684 13 212 5 841 4 366 874 3 118 -535 12 688 12 657 5 489 4 920 1 385 2 947 5 5 686 4 438 1 327 3 005 -173 51 093 46 697 43 895 26 261 24 972 25 190 25 653 26 876 26 970 27 403 11 1 34 21 4 13 4 82 10 9 7 9 13 2 8 15 4 15 4 17 7 6 5 10 7 9 4 14 8 8 24 6 11 9 35 9 12 6 14 15 8 12 15 27 6 10 10 12 14 5 5 13 8 14 12 9 4 9 8 13 17 5 0 14 7 16 10 0 4 9 7 19 15 -1 1 11 7 15 neg 1 6 6 3 23 13 2 3 11 6 12 3 3 7 6 4 28 9 -4 -6 7 7 8 neg neg 13 4 3 29 12 1 -12 10 8 12 2 neg 12 7 9 32 2 833 544 1 029 1 373 1 230 2 841 544 883 1 052 1 352 2 699 538 996 879 1 109 2 816 525 1 036 828 1 145 2 883 526 1 117 852 1 169 2 945 497 1 134 776 1 080 3 132 499 1 325 730 1 441 3 207 493 1 305 725 1 113 3 361 469 1 574 686 1 041 3 085 485 1 651 660 1 353 Ten-year review, finance Holmen Annual Report 2021 93 2021 five-year review, sustainabiliTy The environmental and employee data provided is the most relevant information with regard to regulatory requirements and internal monitoring. The key performance indicators provided are widely used in the industry. Data from all parts of the Group is collected, quality-assured and evaluated. Martinsons was acquired in the fourth quarter of 2020 and its operations are included in the accounts from this point. No material changes have otherwise been made to the principles of reporting. 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 Statistics Sweden guidelines. 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 m3sub2) Purchased pulp, ’000 tonnes Thermal energy, GWh Electrical energy, GWh Water use, million m3,6) Plastic granules/foiling material, ’000 tonnes Chemicals, ’000 tonnes7) Filler, pigment, ’000 tonnes7) Emissions to air, tonnes8) Sulphur dioxide (counted as sulphur, S) Nitrogen oxides Particulates Fossil carbon dioxide, ’000 tonnes Biogenic carbon dioxide, ’000 tonnes Emissions to water, tonnes8) 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 To material production9) Tall oil10) Waste, ’000 tonnes Hazardous11) Sent to landfill (wet) Energy supplies Branches, treetops and peat, GWh12) Electrical and thermal energy, GWh13) Environmental protection expenditure, SEKm Investments (remedial and preventive)14) Electricity and heat-saving investments Environmental taxes and charges15) Internal and external environmental expenses16) Environmental cost of forestry17) 2021 2020 2019 2018 2017 529 80 998 1 465 1 230 4451) 6.343) 77 5 2914) 3 8725) 69 3.3 147 162 50 811 52 81 1 424 39 187 16 19 3.2 1 067 412 16 2.0 3.7 291 317 815 35 15 159 79 551 84 891 1 021 1 352 621 5.62 78 5 885 3 508 69 2.8 147 156 64 902 33 63 1 545 38 210 19 20 3.5 937 252 16 2.3 4.9 115 351 428 18 10 174 80 532 79 975 877 1 109 669 5.49 78 5 992 3 720 70 3.2 181 160 59 888 28 68 1 585 44 174 14 21 2.9 949 208 10 2.5 0.9 101 372 310 20 14 182 65 538 66 1 069 873 1 145 679 5.62 78 6 238 3 996 73 2.9 165 164 56 986 45 75 1 660 48 216 16 22 3.5 977 166 13 1.6 7.6 137 370 84 10 12 165 91 530 54 1 268 827 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 2.8 995 202 14 1.8 1.8 116 366 44 20 12 137 62 94 Holmen Annual Report 2021 Five-year review, sustainability 1) Bio-based electricity production accounted for 442 GWh. 2) At Group level, wood consumption is computed net, taking into account internal deliveries of chips from the sawmills to the nearby mills. 3) Harvest of Holmen’s own forests amounted to 2 833 000 m3sub. 4) Of which 3 885 GWh is renewable from recovered liquor, bark, wood residues, pitch oil and forest fuel, as well as 1 032 GWh recovered from the TMP process. 368 GWh comes from natural gas and oil and 6 GWh from purchased renewable thermal energy. 5) 2 384 GWh renewable electricity, 1 425 GWh fossil- free electricity and 63 GWh fossil electricity. Direct emissions of fossil carbon dioxide from production of purchased electricity totalled 28 982 tonnes. 6) Almost 100 per cent use of surface water from lakes and watercourses, i.e. renewable raw material. 7) Non-renewable raw material stated as 100 per cent active substance, equivalent to 220 000 tonnes of commodities for chemicals and 226 000 tonnes of commodities for filler and pigment. Additionally, 288 tonnes of commodities for chemicals for the protective treatment of wood were used for wood products at three of the sawmills. 8) Relates to emissions at facilities. Emissions of methane and nitrous oxide at the facilities amounted to 14 600 tonnes of carbon dioxide equivalents. 9) By-products used, for example, as filling material, construction material or for the production of soil products. 10) Delivered to the fuel and chemicals industry. 11) Hazardous waste is dealt with by authorised collection and recovery contractors. Certain fractions of the waste are recovered. In 2021, Holmen dealt with 281 tonnes of oil-containing waste from vessels that docked at two of its own ports, which is included in hazardous waste. 12) Branches and treetops (35 GWh) and peat (68 GWh) delivered from Holmen’s land and 188 GWh of branches and treetops from felling rights to external energy producers. Felling rights are included from 2021 onwards. 13) 44 GWh of electrical energy supplied from Workington Mill to the local community. 251 GWh of thermal energy from Iggesund Mill and Braviken Paper Mill to Iggesund Sawmill and Braviken Sawmill. A total of 23 GWh thermal energy from Hallsta Paper Mill and Iggesund Mill was supplied to the district heating network of the local communities. 14) The stated amount includes costs for internal process measures and water treatment measures, plus the cost of erecting wind turbines, which is mainly the cause of this year’s increase. 15) 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. One environmental incident led to corporate fines totalling SEK 0.5 million. 16) Includes costs of environmental personnel, operation of treatment equipment, waste management, management systems, environmental training, applications for permits, environmental consultants and the costs of inquiries and measures in connection with discontinued operations. 17) The environmental cost of forestry is calculated as the value of the wood that is not harvested for environ- mental reasons. The annual loss of income in 2021 is evaluated at approximately SEK 79 million and is due to general considerations and nature conservation. 2021 2020 2019 2018 2017 2) Relates to permanent employees. 1) See page 64, Note 4. Employees Employees Average no. of employees (FTE)1) of whom women, % of whom men, % of whom temporary employees, % Average age2) Sickness absence, % Total of which longer than 60 days Gender equality, %2) Proportion of female managers out of total no. of managers Proportion of male managers out of total no. of managers Women joining the company out of total new employees Men joining the company out of total new employees Personnel turnover, %2) Personnel turnover of which given notice of which retiring of which leaving at own request New employees Number of industrial accidents3) Industrial accidents, more than 8 hours of absence, per million hours worked Union cooperation, %4) Percentage of employees that work at a unit with a collective agreement5) Employees Lenders Society6) Income statement per stakeholder category, SEKm Customers Suppliers 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 Dividend 3 474 20.6 79.4 9.3 43.5 2 974 20.0 80.0 8.4 44.3 2 915 20.0 80.0 11.1 44.4 2 955 20.3 79.7 10.7 44.9 2 976 19.3 80.7 7.4 46.0 4.1 1.4 23.1 76.9 30.3 69.7 8.9 0.3 3.0 4.3 5.1 4.3 1.7 22.7 77.3 35.5 64.5 7.3 0.6 3.1 3.0 2.6 3.8 1.6 22.9 77.1 39.5 60.5 7.9 0.9 2.2 4.4 2.5 4.1 1.6 19.8 80.2 40.1 59.9 7.9 0.4 2.6 3.9 2.7 4.2 2.0 20.7 79.3 25.0 75.0 8.0 0.9 2.6 4.4 5.9 5.6 4.3 5.7 4.9 5.1 95 94 93 94 94 21 169 17 666 18 329 17 339 17 269 -14 675 -12 734 -1 891 -42 -42 -31 -481 -39 -427 1 979 1 741 -2 121 -43 -43 -37 -558 -39 -651 3 004 1 8627) -4 817 -1 819 -34 -55 -27 -472 -25 -2 351 8 731 567 -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 Greenhouse gas emissions Scope 1–3, ’000 tonnes CO2e 2021 2020 Scope 1: Direct greenhouse gas emissions8) Scope 2: Indirect greenhouse gas emissions from purchased electrical energy9) Scope 3: Emissions in the value chain of which category 1: Purchased goods and services10) of which category 2: Capital goods11) of which category 3: Fuel and energy-related activities12) of which category 4: Upstream transport13) of which categories 6 & 7: Travel of which category 9: Downstream transport14) Total emissions* 97 60 550 136 120 38 56 4 196 707 79 38 460 100 80 36 56 4 184 578 * Holmen’s reported emissions for 2021 increased by 129 ktonnes CO2e compared with 2020. The actual increase in emissions amounted to 93 ktonnes and the remaining 36 ktonnes is due to updated calculation methods. Emissions from Scope 1 and 2 have increased mainly as a result of the turbine breakdown at Workington Mill which reduced its own fossil-free electricity production. Scope 3 category 2 (Capital goods) has increased as a result of the construction of Blåbergsliden Wind Farm. Scope 3 category 9 (Downstream transport) has increased as a result of higher volumes of wood products, following the acquisition of Martinsons. The reported emissions from Scope 3 category 1 (Purchased goods and services) has increased for 2021 compared with 2020 as we gradually expand the number of suppliers and input goods from which we gather emissions data, which means that reported figures for 2020 and 2021 are not comparable. More information is available at holmen.com. 3) Relates to employees. No industrial accidents with a fatal outcome occurred during the year. 4) Relates to permanent and temporary employees. 5) Relates to Swedish and UK units, all of which have collective agreements. At other foreign units, Holmen supports different forms of collective employee engagement in line with local standards, e.g. Works Councils. 6) Holmen accepts its responsibility to society and pays its taxes in line with the legislation and rules in force in all the countries in which we operate. Holmen’s financial policy and guidelines state that Holmen must be trans- parent in its tax-related deliberations, with a focus on commercial considerations and no transactions whose main purpose is tax plan- ning. Holmen must also not accept, support or facilitate any tax violations by third parties. 7) Board’s dividend proposal. 8) The increase compared with the previous year’s reporting is mainly due to the turbine breakdown at Workington Mill. Emissions from the production facilities are included in the EU’s system for emissions trading. 9) Purchasing of electricity increased in 2021 due to the turbine breakdown at Workington Mill. In previous annual accounts, Holmen has only reported emissions from the electricity production phase. For 2021, emissions from production and maintenance of plants generating electricity as well as emissions from downstream distribution of electricity are also reported. In 2021, emissions from the production phase amounted to 29 ktonnes CO2e, calculated in line with a market-based methodology, with EPDs from Vattenfall AB as the source. Emissions calculated using a location-based methodology, with GOV.UK and the European Environment Agency as the source, are 56 ktonnes CO2e. 10) Including transport to Holmen's units. For 2021, more suppliers and products have been included in the accounts. The data for 2020 and 2021 are thus not comparable. 11) Acquisition of property, plant and equipment includes the construction of Blåbergsliden Wind Farm. 12) Transport of fuel for the biofuel boiler at Workington Mill and emissions from forestry. 13) Transport of woody biomass, Well to Wheel. 14) Transport of finished products, Well to Wheel. New calculation principle for greenhouse gas emissions As part of the development of our work on sustainability and in line with the Greenhouse Gas Protocol’s methodology for Scope 2 and 3, in 2021 we have refined the methodology for coll- ecting and reporting emissions of green house gases in our value chain. The new accounts are based on larger and more in- depth data and consequently reported reference data for emissions in 2020 has there- fore been adjusted from 377 to 578 ktonnes CO2e. More infor- mation is available in footnotes and text below the tables. Five-year review, sustainability Holmen Annual Report 2021 95 Business overview holmen 2021 Holmen gives quality-conscious customers across the world access to renewable products from the Swedish forests. Holmen’s forests, power plants & industrial sites Forest holdings 1.3 million hectares total land acreage 1 million hectares productive forest land 96 Holmen Annual Report 2021 Business overview Kroksjön Sawmill Blåbergsliden Wind Farm Bygdsiljum Sawmill Umeälven Harrsele Tuggen Gideälven Stennäs Gammelbyforsen Björna Gideå Gidböle Gideåbacka Faxälven Linnvasselv Junsterforsen Gäddede Bågede Strömsbruk Strömsbruk Converting Plant Iggesundsån Pappersfallet Iggesund Power Station Iggesund Iggesund Mill Iggesund Sawmill Ljusnan Sveg Byaforsen Krokströmmen Långströmmen Ljusne Strömmar Hallstavik Hallsta Paper Mill Varsvik Wind Farm Stockholm Head Office Norrköping Braviken Paper Mill Braviken Sawmill Linghem Sawmill Motala Ström Holmen Bergsbron-Havet UK Workington Mill Forest holdings Holmen’s forests 2021 Total land acreage Total forest land acreage* – of which nature conservation areas Productive forest land** Total volume of standing timber on productive forest land Production facilities 1 304 000 ha 1 159 000 ha 201 000 ha 1 044 000 ha Iggesund Mill Products: Multi-layered paperboard made from bleached chemical pulp (SBB). Brand: Invercote and Inverform. Raw material: Softwood and hardwood pulpwood. 125 million m3 growing stock, solid over bark * Calculated based on Holmen’s stand catalogue and data from the National Forest Inventory in line with the international definition of forest land: Land area > 0.5 hectares with a tree canopy cover of more than 10 per cent for trees capable of reaching a height of at least 5 metres at maturity. ** Forest land that can produce 1 m3 growing stock, solid over bark per hectare and year (on average during the growth period of the forest stand) according to Holmen’s stand catalogue. Power plants Hydro power plant %1) GWh2) Built in River Umeälven Gideälven Faxälven Harrsele Tuggen Stennäs Gammelbyforsen Björna Gideå Gidböle Gideåbacka Linnvasselv Junsterforsen Gäddede Bågede Iggesundsån Pappersfallet Iggesund Power Station Ljusnan Motala Ström Sveg Byaforsen Krokströmmen Långströmmen Ljusne Strömmar Holmen Bergsbron-Havet Wind power Varsvik Wind Farm Blåbergsliden Wind Farm 1) Holmen’s share of production. 2) Normal production. Customers and market Business area Products Customer segment 49 22 10 10 10 10 10 10 7 100 30 100 100 100 20 20 9 11 7 100 100 50 100 489 98 3 1 8 9 6 8 16 130 22 71 6 22 22 21 42 32 17 106 8 75 430 1957–58 1962 1985–96 " " " " " 1961–74 " " " 1915 2009 1949–75 " " " " 1990 1927 2014 2020−22 Competitors SCA, Sveaskog plus a number of large forest owners’ associations Forest Paperboard Paper Wood Products Logs, pulpwood and biofuel Sawmills, pulp mills, paperboard and paper mills Premium paperboard for consumer packaging Brand owners, converters and wholesalers Metsä Board, Stora Enso Paper for books, magazines, advertising and packaging Publishers, printing firms and retailers Norske Skog, Stora Enso, UPM Construction and joinery timber, CLT and glulam, plus wood for pallets and packaging Construction industry, joinery industry, builders’ merchants, and packaging industry Moelven, SCA, Setra, Södra, Vida and a large number of foreign companies 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. Strömsbruk Converting Plant Products: Converted paperboard products for the packaging of cosmetics, confectionery, food, etc. Braviken Paper Mill Products: Paper for books, magazines, advertising, newspapers and packaging. Raw material: Spruce pulpwood. Hallsta Paper Mill Products: Paper for books, magazines, advertising and packaging. Raw material: Spruce pulpwood. Braviken Sawmill Products: Spruce and pine construction products. Raw material: Spruce and pine saw logs. Iggesund Sawmill Products: Pine joinery products. Raw material: Pine saw logs. Linghem Sawmill Products: Spruce and pine construction products. Raw material: Spruce and pine saw logs. Bygdsiljum Sawmill Products: Spruce and pine products for joinery and construction plus glulam and CLT for the construction market. Raw material: Spruce and pine saw logs. Kroksjön Sawmill Products: Spruce and pine products for joinery and construction plus planed and painted construction products. Raw material: Spruce and pine saw logs. Renewable Energy Renewable energy from Nordic electricity market hydro and wind power Fortum, Statkraft, Vattenfall, Uniper Business overview Holmen Annual Report 2021 97 Definitions and glossary Definitions Capital employed Net financial debt plus equity, which corresponds to fixed assets (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. Carbon dioxide (CO2) Precautionary principle 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. Carbon dioxide equivalents (CO2e) Carbon dioxide equivalents include the effects from greenhouse gases other than just carbon dioxide, such as methane and nitrous oxide. COD Chemical oxygen demanding substances. A measure of the amount of oxygen needed for the complete decomposition of organic material in water. 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 available technology shall be used in connection with professional activities. SBB Solid Bleached Board. Multi-layered 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. Calculation of Holmen’s climate benefit Comments to calculations on page 32 Carbon dioxide storage in Holmen’s forests is based on the annual increase in the volume of standing timber based on the company inventory carried out in 2019 minus harvested volumes. Net storage in land, wood products, paperboard and paper is calculated in line with Sweden’s official climate reporting to the UN, conducted by the Swedish Environ- mental Protection Agency using the IPCC’s methodology. The methodology is constantly under development and for 2021 calculated storage in land has been lowered, meaning that the reported amount of stored CO2 in Holmen’s forests has decreased compared with 2020. The methodology also takes into account the fact that a certain amount of old wood and fibre products rotted or was incinerated in 2021 and thus stopped binding carbon dioxide. According to the IPCC, fibre products have a half-life of 2 years and wood products 30 years. The substitution effect of wood products is based on European and Canadian research. Holmen’s calculations of the substitution effect of wood products also make the assumption that 100 per cent of older fibre products and old wood products that ceased binding carbon dioxide in 2021 were used for bioenergy which substi tuted for fossil fuel. The substitution effect from paper and paperboard is calculated based on the assumption that 100 per cent of paper and paperboard becomes biofuel at the end of its lifecycle, and thus replaces fossil fuels. The substitution effect from our production of renewable electricity is calculated by biobased electricity production and hydro power replacing fossil-based controllable electricity from coal power, wind power replacing fossil-based electricity from coal and gas power, and bioenergy (comprising branches and treetops and residual products from Holmen’s operations delivered externally) replacing fossil fuels. Details of Holmen’s biogenic and fossil emissions are reported on pages 94–95. More information on calculations and sources is provided in Holmen’s sustainability report at holmen.com. Earnings per share (EPS) FBB Profit for the year divided by the weighted average number of shares outstanding, adjusted for buy- back of shares, if any, during the year. Diluted EPS means that any diluting effect from outstanding call options has been taken into account. EBITDA Earnings before interest, taxes, depreciation and amortisation, excl. items affecting comparability. Equity/assets ratio Equity expressed as a percentage of total assets. Financial assets Non-current and current financial receivables and cash and cash equivalents. Items affecting comparability Used to clarify how the earnings measures are affected by matters outside normal business operations, such as impairment, disposal, closure and major restructuring measures, plus alterations to assumptions in the valuation of biological assets. The effects of maintenance and rebuilding shutdowns are not treated as an item affecting comparability. Page 92 states which items have been treated as items affecting comparability over the past 10 years. Net financial debt Non-current and current financial liabilities, non-current and current liabilities regarding right-of-use assets, and pension provisions, less financial assets. Operating margin Operating profit/loss (excl. items affecting comparability) expressed as a percentage of net sales. Operating profit Profit before net financial items and tax. Return on capital employed Operating profit/loss (excluding items affecting comparability) expressed as a percentage of average capital employed, based on quarterly data. Return on equity Profit for the year expressed as a percentage of average equity, calculated on the basis of quarterly data. Glossary Bio co-location A co-location of different operations for more efficient use of raw materials and energy, amongst other benefits. Biofuel Renewable fuels such as wood, black liquor, bark and tall oil. Fuels that do not generate any net emission of carbon dioxide into the atmosphere, since the quantity of carbon dioxide formed during combustion is part of the carbon cycle. Bulk Measure of the paper’s volume. Paper of the same grammage can have different thicknesses depending on the paper’s bulk. High bulk means thick, but relatively light, paper. 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 9001 An international standard for quality management systems. Primarily aimed at companies and organisations that wish to improve two aspects of their operations, i.e. to ensure more satisfied customers and lower costs. ISO 14001 An international standard for environmental management. Important principles in ISO 14001 include regular environmental audits and a gradual increase in the requirements. ISO 45001 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. ISO 50001 An international energy management systems standard that provides a framework for energy efficiency measures. m3 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. 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 eutrophication and oxygen consumption. 98 Holmen Annual Report 2021 Definitions and glossary Calendar and information Information Calendar The interim and year-end reports are presented at an online conference for press and analysts. The conference is held in English and is broadcast live on holmen.com. The annual report, together with year-end and interim reports, is published in Swedish and English and the reports are sent automatically to the shareholders who have indicated their wish to receive them. They are also available at holmen.com. How to order printed material: 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 or go to holmen.com For 2022, Holmen will publish the following financial reports: Interim report Jan–Mar: 28 April 2022 Interim report Jan–Jun: 19 August 2022 Interim report Jan–Sep: 20 October 2022 Year-end report: 31 January 2023 AGM 2022: 30 March 2022 Dates of trading and dividend The final date for trading, including right to dividend: 30 March 2022 Record date for dividend: 1 April 2022 Payment date for dividend: 6 April 2022 References Reference page 11 • Kraftsamling elförsörjning – Långsiktig scenarioanalys (Focusing energies on electricity supply – long-term scenario analysis), Confederation of Swedish Enterprise 2020. References pages 12, 28–29 • De Palma, A., Hoskins, A., Gonzalez, R.E., Börger, L., Newbold, T., Sanchez-Ortiz, K., Ferrier, S., Purvis, A., 2021. Annual changes in the Biodiversity Intactness Index in tropical and subtropical forest biomes, 2001–2012. Sci Rep 11, 20249. • FAO, 2021a. Global Forest Resources Assessments • FAO, 2021b. FAOSTAT – Forestry Production and Trade • Harris, N.L., Gibbs, D.A., Baccini, A., Birdsey, R.A., de Bruin, S., Farina, M., Fatoyinbo, L., Hansen, M.C., Herold, M., Houghton, R.A., Potapov, P.V., Suarez, D.R., Roman-Cuesta, R.M., Saatchi, S.S., Slay, C.M., Turubanova, S.A., Tyukavina, A., 2021. Global maps of twenty-first century forest carbon fluxes. Nature Climate Change 11, 234–240. • Phillips, H., De Palma, A., Gonzalez, R.E., Contu, S. et al. (2021). Dataset: The Biodiversity Intactness Index – country, region and global-level summaries for the year 1970 to 2050 under various scenarios. National History Museum Data Portal (data.nhm.ac.uk). • IEA, 2021. Data tables • IPCC, 2019. Climate Change and Land • Natural History Museum, 2021a. Biodiversity Intactness Index data • Natural History Museum, 2021b. About the Biodiversity Intactness Index • Pan, Y., Birdsey, R.A., Fang, J., Houghton, R., Kauppi, P.E., Kurz, W.A., Phillips, O.L., Shvidenko, A., Lewis, S.L., Canadell, J.G., Ciais, P., Jackson, R.B., Pacala, S.W., McGuire, A.D., Piao, S., Rautiainen, A., Sitch, S., Hayes, D., 2011. A Large and Persistent Carbon Sink in the World’s Forests. Science 333, 988–993. • Scholes, R.J., Biggs, R., 2005. A biodiversity intactness index. Nature 434, 45–49. • Steffen, W., Richardson, K., Rockström, J., Cornell, S.E., Fetzer, I., Bennett, E.M., Biggs, R., Carpenter, S.R., de Vries, W., de Wit, C.A., Folke, C., Gerten, D., Heinke, J., Mace, G.M., Persson, L.M., Ramanathan, V., Reyers, B., Sörlin, S., 2015. Sustainability. Planetary boundaries: guiding human development on a changing planet. Science 347, 1259855. • Swedish Forest Agency, Dec 2021. Report 2021:11. Sustainable boreal forest management – challenges and opportunities for climate change mitigation • UNEP-WCMC and Natural History Museum. “Biodiversity Intactness.” Holmen Annual Report 2021 99 Holmen AB (publ) P.O. Box 5407, SE-114 84 Stockholm, Sweden +46 8 666 21 00 info@holmen.com ID No. 556001-3301 Registered office Stockholm 

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