A Customer-responsive, Profitable and Value-creating AssiDoman.

Business Editors

STOCKHOLM, Sweden--(BUSINESS WIRE)--April 17, 2000

Extract from president Gunnar Palme's address to AssiDoman's Annual General Meeting.

Ongoing profitability and efficiency improvement projects have already led to significant improvements in production efficiency in all AssiDoman's mills, corresponding in capacity terms to one paper machine. It is estimated that action taken had a positive impact on operating profit of around MSEK 400 in 1999 and that the effects of ongoing and planned measures this year will be an additional amount of approximately SEK 1 billion.

This emerged when AssiDoman's President and CEO, Gunnar Palme, gave his address to the Annual General Meeting held in Stockholm on Monday.

"The year has begun well and from a market viewpoint positive development looks set to continue. The upswing in industrial production in Europe and increasingly strong economic growth have led to keen demand for our products. We have therefore been able to implement price increases for most grades at the end of 1999 and at the beginning of this year," said Gunnar Palme

"Kraftliner and testliner, together with market pulp, are the products that have seen the strongest price trend over the last 12 months. The strong market position means that additional price increases can be expected for the majority of products during the year. The strongest development is expected for Containerboard and market pulp, where the industry is working at high pressure and the delivery rate is very high."

Structural work

In his address, Gunnar Palme commented on the current restructuring within the company: "When we started our strategic review last year, it was against the background of a long period of heavy investment and expansion. Both within the business units and in management we have made extensive and time-consuming efforts. We chose to proceed with caution to ensure that we do not lose important values along the way. The strategic review was guided by the necessity to focus and concentrate our operations. We have tried to identify the segments where we have strong positions, where we can build up and defend a leading position and which can also provide long-term and sustainable profitability.

"This means that over time AssiDoman will be a focused group where our core businesses are packaging, including the paper raw material, the sawmill operations and forestry. This will provide improved profitability, a stable financial base and a competitive business structure. What will then remain in AssiDoman is a large and well-invested packaging business, consisting of Corrugated & Containerboard, two efficient mills, which are very well placed within their respective product areas, a large sawmill operation and very substantial forest holdings.

"Corrugated & Containerboard is the third largest supplier of corrugated board and containerboard in Europe. This market grows by 3 per cent each year and it is our assessment that there will continue to be room for three major suppliers in Europe. In the slightly longer term, our ambition to remain as an independent supplier in Europe means that AssiDoman must grow."

" Market share in Europe should be over 10 per cent and we must be considerably stronger in the most important markets in Europe: Germany, France, Italy and Spain.

AssiDoman must also achieve a better balance between paper based on recycled fibre and paper based on virgin fibre, and we must also increase integration between paper and corrugated board."

Profitability

Referring to the ongoing profitability and efficiency improvement projects, Gunnar Palme told the Meeting that in the autumn the company had set up a support function at Group level, mainly focused on the improvement programme for the Group's pulp and paper mills:

"Since then, we have started some 70 different projects which are co-ordinated according to character and content. This approach means that we can make effective use of competence and experience across organisational borders."

"We can already see the results. For example, the project work has led to a considerable improvement in production efficiency in all our mills, corresponding in capacity terms to one of our regular paper machines. We estimate that action taken had a positive impact on operating profit of around MSEK 400 in 1999 and that the effects of ongoing and planned measures this year will be an additional amount of about SEK 1 billion."

"We are also working with concrete measures to increase our revenues through additional sales and marketing efforts. This takes the form of assertive campaigns directed at individual customers and market segments. One example is AssiDoman's highly profitable corrugated board operations in Spain, where we have a market share of 35 per cent in the agricultural sector. By investing approximately MSEK 80 we will concentrate these operations and make them more efficient thus creating major opportunities for further development of this profitable market segment. Here we have a unique concept where packaging design and assembly are integrated with the customer's production process"

Flow orientation

"AssiDoman's overall goals include strengthening competitiveness and improving profitability. In order to achieve these goals there are a number of factors for success that apply to all producing companies: low tied-up capital, short lead times and low production costs," said Gunnar Palme and continued:

"AssiDoman has now started a process of renewal following these guidelines. Key words here are flow orientation and Supply Chain Management. We will influence the flow all the way from the forest, to our industries and on out to our customers.

"Tied-up capital will decrease. Cost-savings, and in particular shorter lead times, will mean better customer service and higher quality. And this will help us to change from push to pull in our production control.

"E-business is here to stay. AssiDoman has realised this fact and will play an active role in this development. We have a good awareness of the various players in the market and know who they are. In some cases, we are in direct contact in order to discuss various future projects. As a first step, we have started pilot projects within sales and customer orders in a couple of our business units. E-business for AssiDoman will also raise the efficiency of purchasing and supply chain management processes."

Gunnar Palme concluded by saying that the year had started well from a market viewpoint: "My most important tasks in the immediate future are in the first place to vigorously ensure that action is taken to improve profitability. Profitability must be at least at the same level as our key competitors. My goal is to be able to present a more customer-responsive, more profitable and value-creating AssiDoman at the next annual general meeting."

Please visit http://www.bit.se for further information. The following files are available for download: http://www.bit.se/bitonline/2000/04/17/20000417BIT00710/bit0001.doc http://www.bit.se/bitonline/2000/04/17/20000417BIT00710/bit0002.pdf