Research note: Svenska Cellulosa AB SCA (SFB: SCA.B)

Svenska Cellulosa’s CEO Ulf Larsson’s first reaction to our report was to call it “non-serious high school work.” However, it took Svenska Cellulosa (SFB: SCA.B) almost two weeks to publish a “clarification” to our report. The company’s rebuttal is just six pages long and 75 percent – four and a half pages of the six – discuss the forest assets’ valuations. With less than 350 words, SCA tries to refute our findings regarding its accounting misstatements without providing any factual evidence. The company didn’t support any of its statements with supplementary documents, opinions, or calculations.

In our opinion, it is obvious that SCA can’t refute any of our findings and tries to deceive investors and the public. What’s worse is that some journalists fall for this, as Dagens Industri reported that Svenska Cellulosa “[…] hits back against the blanks point after point.” The accounting-related rebuttal only consisted of baseless counterclaims and sources that refer to one another – like an infinite loop. SCA never addressed that its entire audit committee lacks any experience in accounting or auditing. The same applies to our findings about the material conflict of interest in its nomination committee or the hidden related party transactions.

We will go into detail about how, in our opinion,  

  • SCA avoids responsibility by asserting that the term ‘maturity’ doesn’t carry the universally accepted meaning in a financial context, specifically referring to a due date. However, in Swedish legal documents, SCA defines maturity as “the date on which the nominal amount is to be repaid.”
  • we’ve found that SCA paid cash interest of SEK 363 million in 2022, which is more than double the reported total interest expense of SEK 164 million and ultimately, how Svenska Cellulosa recognized only SEK 2 million in interest expense (less than 1 percent of the total interest paid) in its income statement.
  • SCA tries to avoid any discussion about its net debt because the company’s net debt includes the employee’s pension surplus that the company doesn’t have access to. As this concerns the employees, we have written to the trade unions representing SCA employees asking for clarification as to whether Svenska Cellulosa has unrestricted access to use the employees’ pension surpluses of SEK 2.2bn at the company’s discretion. We believe that all parties are eager for a clear answer.
  • SCA references sources that should prove that the commercial paper is included but the sources don’t prove anything. The sources reference each other, resulting in an infinite loop of no evidence.

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