UPDATE 2-Sweden’s SCA upbeat on 2011 after narrow Q3 beat

* Q3 pretax profit 2.3 bln crowns vs poll avg 2.2 bln

* CEO sees favourable demand in all business areas

* Price increases, volumes offset higher raw material costs

* Shares down 2.9 pct vs 0.3 decline in Swedish blue chips

(Adds CEO, analyst comment)

By Johan Ahlander

STOCKHOLM, Oct 28 (BestGrowthStock) – SCA (SCAb.ST: ), Europe’s
biggest maker of corrugated packaging and hygiene products, just
beat third-quarter profit (Read more your timing to make a profit.) forecasts as price hikes and rising
volumes offset sharply higher raw material costs.

“We are fairly optimistic about 2011 as markets will improve
when the economic recovery continues,” Chief Executive Jan
Johansson told Reuters and said he saw favourable demand in all
business areas.

“We see that price increases in raw material have come to a
halt and we believe there will be a slight decline in paper pulp
prices.”

The company said in a statement growth in Asia and Latin
America remained strong, although the U.S. economy was losing
momentum and a recovery in western Europe was fragile.

Shares fell 2.9 percent to 101.70 crowns at 1045 GMT versus
a 0.3 percent dip in the Swedish blue-chip index (.OMXS30: ).

One analyst, who declined to be identified, said that
expectations have been high and that shares of all companies not
soundly beating forecasts had declined this week.

“I don’t think it is company specific. Expectations in the
market as a whole have been so high,” the analyst said.

The Swedish company posted pretax profit, excluding one-off
items, of 2.3 billion Swedish crowns ($340 million), compared
with the average forecast of 2.2 billion in a Reuters poll of 12
analysts and 2.2 billion in the same period a year ago.

“The tissue margin wobbles up and down a bit but I don’t
think that’s a disaster. They seem pretty optimistic on the
continued price hikes during the fall and that they will show
results,” said another analyst who also declined to be named.

The operating margin in the tissue segment — making up 36
percent of group sales — fell to 7.6 percent in the third
quarter from 7.9 percent in the previous quarter.

“Overall the operating margin in the fourth quarter will be
about the same as in the third quarter,” Johansson said.

The group was hit by the plunge in demand that followed the
global financial crisis. Demand has since begun to recover, but
rising raw materials prices have left it struggling to protect
profit margins.

SCA, whose products range from diapers to corrugated
cardboard, competes against a wide array of companies including
Kimberly-Clark (KMB.N: ) and Procter & Gamble (PG.N: ), which
reported mixed results this week. [ID:nN26284542][ID:nN27198603]

SCA sales of 27.2 billion fell just short of the average
forecast of 27.9 billion and barely gained on 27.1 billion a
year ago.
(Additional reporting by Anders Zachrisson; Editing by Michael
Shields)

UPDATE 2-Sweden’s SCA upbeat on 2011 after narrow Q3 beat