Transition and change for increased competitiveness and long-term profitability
Within the context of Södra's Group strategy, investments and restructuring are now being realised to increase competitiveness and long-term profitability. The results for 2016 will be impacted, and operating profit for the first eight months of the year totalled SEK 553 million (1,660). "Operating profit is in line with expectations, due to lower prices for market pulp and sawn timber, our transition and the change programme," said Södra's CEO Lars Idermark.
Net sales rose slightly to SEK 12,268 million (12,186), while operating profit declined to SEK 553 million compared with an historically high year-on-year operating profit of SEK 1,660 million. Both prices and currencies have shown an unfavourable trend since last year, which affected the results. Earnings were also charged with restructuring costs of SEK 204 million related to Södra Wood, while the year-on-year comparative figures included a positive nonrecurring item of SEK 133 million derived from the sale of shares in Södra Cell Tofte AS.
"With account for prices, currencies and restructuring costs, the underlying operations delivered in line with the preceding year. 2016 is a year of transition for Södra. We are now realising our Group strategy with investments of SEK 6 billion to increase the capacity of our pulp mills, and a major restructure of our sawn timber and interior wood operations," said Lars Idermark.
"In the second four-month period, operations resumed in the mill at Värö after investments of just over SEK 4 billion and in 2017, we will achieve the expected production rate of 700,000 tonnes per year. The new mill will be one of the most advanced mills in the world, and our energy efficiency will continue to improve," said Lars Idermark.
"In sawn timber, we are restructuring and investing to boost profitability and secure long-term competitiveness, which will impact earnings for the second four-month period. Sawn timber is Södra's backbone and vital for promoting the profitability of forest estates," said Lars Idermark.
In the January-August period, operating profit for the Södra Skog business area totalled SEK 60 million (74). The earnings trend was attributable to lower year-on-year margins on field wood volumes.
Operating loss for Södra Wood totalled SEK 316 million (profit: 2). The lower earnings were mainly attributable to restructuring costs of SEK 204 million, but also to weaker prices for sawn timber and an unfavourable currency trend.
Operating profit for Södra Cell totalled SEK 886 million (1,713). The lower earnings were mainly the result of a weaker price trend.
The interim report in brief:
|May-Aug||May-Aug||Jan-Aug||Jan-Aug||1 Jan-31 Dec|
|Net sales, SEK million||6,029||5,943||12,186||12,186||18,267|
|Operating profit before depreciation, amortisation and impairment (EBITDA), SEK million||630||1,028||1,279||2,292||3,146|
|Operating profit (EBIT), SEK million||219||718||553||1,660||2,162|
|Cash flow after investing activities, SEK million||-433||141||-1,132||881||218|
|Return on capital employed, %||6||20||17|
|Equity ratio, %||53||60||62|
For questions, please Contact:
Peter Karlsson, Interim CFO
Tel: +46 (0)470 - 890 28
Annica Gerentz, Senior Vice President Corporate Communications
Tel: +46 (0)470 - 894 81
Tel: +46 (0)470 - 890 90
Södra was founded in 1938 and is the largest forest-owner association in Sweden, with a membership of more than 50,000 forest owners. We engage in modern and responsible forestry, and operate state-of-the-art mills in which we process our raw material. Through value-generating relationships and a long-term approach, Södra is leading the way for the next generation of forestry.