INTERIM REPORT JANUARY SEPTEMBER * Net turnover amounted to MSEK 11,107 (10,772 excluding divested activities).

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1 INTERIM REPORT JANUARY SEPTEMBER 2000 Highlights * Profit after financial items amounted to MSEK 4,317 (corresponding period 1999: 1,778). The third quarter profit amounted to MSEK 2,508 (second quarter: 986), including capital gains of MSEK 1,848 on the sale of shares in Modo Paper AB. * Profit after tax for the period amounted to MSEK 3,656 (1,205), which corresponds to earnings per share of SEK (13.60). The return on equity was 29.9 per cent (9.5). * Net turnover amounted to MSEK 11,107 (10,772 excluding divested activities). * During the third quarter, the company bought back Series B shares corresponding to 9.8 per cent of the total number of shares. * Demand for newsprint and magazine paper remained very firm. Holmen Paper had a high level of deliveries, full capacity utilisation and the order situation was strong. Prices were stable in relation to the previous quarter. Demand for paperboard declined from a high level. Price increases of 6 8 per cent have been announced and are expected to have effect towards the end of the year. Iggesund Paperboard s deliveries increased but production of folding boxboard is still below the increased capacity. Holmen AB (publ) Group Public Relations P.O. Box 5407 SE Stockholm Tel: Direct: Fax: info@holmen.com 1(9)

2 Net turnover and result Net turnover amounted to MSEK 11,107 (corresponding period 1999: 10,772 excluding and 16,533 including divested activities). Third quarter turnover amounted to MSEK 3,742, compared with MSEK 3,680 during the second quarter. The operating profit amounted to MSEK 4,404 (1,961). The operating profit excluding items affecting comparability and divested activities increased by MSEK 85 to MSEK 1,857. The improvement is largely due to a higher profit at Iggesund Paperboard. Items affecting comparability relate to the sale of shares in Modo Paper AB in the third quarter and the reimbursement of surplus funds from the SPP pension insurance company in the second quarter. The operating margin was 16.5 per cent (16.5 for comparable entities). The operating profit for the third quarter was MSEK 2,519, which may be compared with MSEK 1,026 for the second quarter. The operating profit, excluding items affecting comparability and divested activities, improved by MSEK 126 to MSEK 671. Profit after tax for the period amounted to MSEK 3,656 (1,205), which corresponds to earnings per share of SEK (13.60). The return on operating capital was 30.2 per cent (10.7). The return on operating capital excluding items affecting comparability and divested activities was 14.3 per cent (14.7). The return on equity was 29.9 per cent (9.5). Holmen Paper Demand for newsprint and magazine paper remained very buoyant. During the January-September period, deliveries of newsprint to Western Europe rose by 5 per cent, of SC paper by 9 per cent and of coated paper by 11 per cent, all in relation to the corresponding period in Holmen Paper s deliveries increased by 9 per cent during the third quarter, mainly due to the inclusion of Papelera Peninsular s sales in this quarter. In relation to January-September 1999, deliveries rose by 9 per cent, mainly as the result of an increase of 15 per cent within improved newsprint, one of the company s priority product areas. Production capacity was utilised to the full, the order situation remained strong and prices were stable. The operating profit for the January-September period amounted to MSEK 1,084 (1,108). Somewhat lower selling prices owing to the strengthening of the krona and higher variable production costs affected the result negatively. However, these factors were largely offset by higher production and delivery volumes. The result for the third quarter improved by MSEK 98 in relation to the second quarter, owing to seasonally lower production costs and to lower maintenance costs. Holmen Paper Net turnover, MSEK 1,978 1,804 5,481 5,089 1,978 1,804 5,481 5,089 Operating profit, MSEK ,084 1,108 Operating margin, % Return on operating capital, % Production, 1,000 t ,133 1,055 Deliveries, 1,000 t ,126 1,033 Interim Report January September (9)

3 Iggesund Paperboard The demand for paperboard showed a seasonal reduction in the third quarter, but deliveries are still higher than in the previous year. In Western Europe price increases of 6-8 per cent have been announced for virgin fibre-based paperboard and these are expected to have effect towards the end of the year. Iggesund Paperboard s deliveries rose by 5 per cent in relation to the second quarter, mainly on account of higher deliveries of folding boxboard. The order intake for this product continued to increase, but some production restrictions were introduced due to market factors. Capacity utilisation remained high for solid bleached board. Iggesund Paperboard s operating profit for the January-September period amounted to MSEK 477 (332). The improvement was due to higher sales volumes and prices for solid bleached board. The result for the third quarter was MSEK 29 higher than in the second quarter, mainly due to slightly lower production costs. Iggesund Paperboard Net turnover, MSEK 1,083 1,036 3,110 2,950 1,077 1,030 3,092 2,940 Operating profit, MSEK Operating margin, % Return on operating capital, % Production, paperboard, 1,000 t Deliveries, paperboard, 1,000 t Iggesund Timber The sawn timber market is still subject to excess supply and depressed prices, despite relatively firm demand. Iggesund Timber incurred an operating loss of MSEK 32 (loss 53) for the January-September period. The reduction in the loss was mainly due to higher prices and lower raw material costs. The third quarter result was a loss of MSEK 8, compared with a loss of MSEK 12 during the second quarter. Iggesund Timber Net turnover, MSEK Operating loss, MSEK Operating margin, % Return on operating capital, % Production, 1,000 m Deliveries own sawmills, 1,000 m Interim Report January September (9)

4 Holmen Skog The Group s wood consumption continued at a high level. The mills cost of pulpwood remained largely unchanged in relation to the second quarter, while the cost of saw logs declined by 1.5 per cent. The market price of pulpwood rose during the quarter, which partly is expected to affect the Group s wood costs during the remainder of the year. Holmen Skog s operating profit for the January-September period amounted to MSEK 358 (345). In the third quarter, the profit declined by MSEK 28 in relation to the second quarter, mainly due to lower deliveries of saw logs. Holmen Skog Net turnover, MSEK 883 1,064 3,138 3, ,731 1,954 Operating profit, MSEK Holmen Kraft The Group s consumption of electricity increased by 4 per cent during the quarter. The mills electricity costs remained broadly unchanged during the quarter. Holmen Kraft s operating profit for the January-September period amounted to MSEK 58 (38). The result for the third quarter was a loss of MSEK 1, which may be compared with a loss of MSEK 22 for the second quarter. The improvement in relation to the second quarter, as well as in relation to the January-September 1999 period, is explained by considerably higher production of hydroelectricity during the third quarter of Holmen Kraft Net turnover, MSEK Operating profit/loss, MSEK Financing The cash flow for the January-September period amounted to MSEK 2,539. This figure includes the acquisition of Papelera Peninsular (negative MSEK 2,053), the sale of shares in Modo Paper (MSEK 6,456), share repurchase (negative MSEK 1,970) and dividend (negative MSEK 977). As the Group had net cash holdings of MSEK 526 at the end of September (December 31, 1999: net financial liability of MSEK 2,054) the debt/equity ratio was 0.03 (0.13). The equity ratio was 67.2 per cent (54.4). Interim Report January September (9)

5 Share repurchase The Extraordinary General Meeting held on August 15 authorised the Board to repurchase up to 10 per cent of the company s shares. A total of 8,666,933 Series B shares were repurchased at a cost of MSEK 1,970 during the third quarter, which corresponds to 9.8 per cent of the total number of shares. The repurchased shares were netted against non-restricted equity, in accordance with current official recommended practice. See also page 9. Capital expenditure The Group s capital expenditure amounted to MSEK 669 (1,497). Capital expenditure including acquisitions amounted to MSEK 2,722. Depreciation according to plan amounted to MSEK 761 (1,146). Employees The average number of employees in the Group was 5,327 (1999 full year: 5,336 excluding employees of divested activities). Important events The acquisition of the Spanish company Papelera Peninsular was completed on July 12, and the company has been consolidated in Holmen Paper s accounts with effect from the third quarter. The investment cost amounted to MSEK 2,053, including surplus value of some MSEK 600, which will be depreciated over 20 years. The sale of Holmen s 50 per cent holding in associate company Modo Paper AB was completed on August 9 for a capital gain of MSEK 1,848. Modo Paper was stated as an associate company until the end of the second quarter of Stockholm, October 27, 2000 Per Ericson President and CEO This interim report has not been subject to examination by the company s auditors. The year-end release for 2000 will be published on February 5, Interim Report January September (9)

6 PROFIT AND LOSS ACCOUNT, MSEK January-September Full year Net turnover 11,107 16,533 20,508 Operating costs 8,511 13,431 16,669 Depreciation according to plan 761 1,146 1,387 Item affecting comparability 2,023 Interest in earnings of associate companies Operating profit 4,404 1,961 2,615 Net financial items Profit after financial items 4,317 1,778 2,409 Tax Profit for the period 3,656 1,205 1,814 Operating margin % Return on operating capital % Return on equity % Earnings per share after tax* SEK * Earnings per share is defined as the result for the period divided by the weighted average of the number of shares in issue during the period (after adjustment for share repurchase) before dilution on account of outstanding convertibles and equity warrants. NET TURNOVER AND OPERATING PROFIT, MSEK Net turnover January September Operating profit/loss January - September Holmen Paper 5,481 5,089 1,084 1,108 Iggesund Paperboard 3,110 2, Iggesund Timber Holmen Skog 3,138 3, Holmen Kraft Group adjustments and other ,052 12,583 1,857 1,772 Item affecting comparability 2,023 Divested activities 8, Intra-group sales 1,945 4,119 11,107 16,533 4,404 1,961 Interim Report January September (9)

7 BALANCE SHEET, MSEK Sept 30 Dec 31 ASSETS Fixed assets 16,860 14,996 Shares in Modo Paper 4,257 Current assets 5,432 5,068 Financial receivables 16 3,395 Liquid funds 2,544 1,456 24,852 29,172 EQUITY AND LIABILITIES Equity 16,699 15,883 Deferred tax liability 2,427 2,408 Financial liabilities 2,034 6,905 Operating liabilities 3,692 3,976 24,852 29,172 Debt/equity ratio Equity ratio % CASH FLOW ANALYSIS, MSEK 2000 Jan-Sept 1999 Full year Operating profit 4,404 2,615 Adjustments for items not included in cash flow* 1,616 1,551 Change in working capital Net financial items Paid tax Cash flow before capital expenditure 1,752 3,835 Capital expenditure Company acquisition 2,053 Other 669 1,988 Cash flow after capital expenditure 970 1,847 Effects from divested activities 6,456 3,258 Cash flow before dividend 5,486 5,105 Share repurchase 1,970 Ordinary dividend Extra dividend 3,110 Cash flow 2,539 1,106 Currency effects Change in net financial liability 2,580 1,089 Liquid funds 2,544 1,456 Financial receivables 16 3,395 Financial liabilities 2,034 6,905 Net financial assets/liabilities 526 2,054 Opening liquid funds 1,456 1,241 Change in liquid funds 1, Currency effects 4 20 Closing liquid funds 2,544 1,456 * The adjustments consist primarily of certain items affecting comparability, depreciation according to plan and interest in earnings of associate companies. Interim Report January September (9)

8 QUARTERLY FIGURES, MSEK III II I Full year IV III II I Net turnover Holmen Paper 1,978 1,804 1,699 6,944 1,855 1,743 1,644 1,702 Iggesund Paperboard 1,083 1, , , Iggesund Timber Holmen Skog 883 1,064 1,191 4,397 1, ,119 1,185 Holmen Kraft , ,328 4,299 4,425 17,040 4,457 4,066 4,116 4,401 Divested activities 8, ,530 2,739 2,800 4,328 4,299 4,425 25,385 4,733 6,596 6,855 7,201 Intra-group sales , ,193 1,377 1,548 3,742 3,680 3,685 20,508 3,974 5,403 5,478 5,653 Profit/loss Holmen Paper , Iggesund Paperboard Iggesund Timber Holmen Skog Holmen Kraft Group adjustments and other , Items affecting comparability 1, Divested activities Operating profit 2,519 1, , Net financial items Profit after financial items 2, , Tax Profit for the period 2, , Operating margin, % Holmen Paper Iggesund Paperboard Iggesund Timber Group Deliveries Newsprint and magazine paper, 1,000 t , Paperboard,1,000 t Sawn timber, 1,000 m Interim Report January September (9)

9 SHARE STRUCTURE Share Votes No. of shares No. of votes A 10 22,623, ,232,340 B 1 66,235,044 66,235,044 Shares in total 88,858, ,467,384 Repurchased shares, B 1 8,666,933 8,666,933 Shares in total after repurchase 80,191, ,800,451 Convertibles, B* 1 2,436,191 2,436,191 Warrants, B* 1 773, ,500 Total number of shares after repurchase and dilution 83,401, ,010,142 * After full conversion and subscription. The share capital has not been reduced by a withdrawal of shares following the share repurchase. The repurchased shares carry no voting rights, and entitle the owner neither to any interest in the company s earnings nor to any other statutory rights customarily associated with share ownership. According to the current recommendations, earnings per share shall be calculated on the basis of the average number of shares in issue. The average number of shares in issue during the January- September period was 88,669,700, while the third quarter total was 88,296,644. Interim Report January September (9)