Interim report January – June 2008

Weak first half

• Consolidated net sales for the first half of 2008 amounted to SEK 2,762 million (3,325). The reduction compared to the same period the previous year is the result of both lower prices and volumes. The net sales for the second quarter amounted to SEK 1,445 million (1,760).
• Operating profit for the January – June 2008 period amounted to SEK -77 million (483), which is SEK 560 million lower than the same period the previous year. The reduction is mainly an effect of lower selling prices and sustained high raw material costs. The operating profit for the second quarter amounted to SEK -82 million (322).
• Profit after tax for the first half of 2008 amounted to SEK -74 million (333). Earnings per share amounted to SEK -2.39 (10.55).
• Cash flow from operating activities for the first half of 2008 amounted to SEK -62 million (-50). The cash flow for the second quarter amounted to SEK 7 million (-81). During the second quarter the cash flow was positively affected by lower stock levels.
• During the latter part of the second quarter, stock levels were reduced by around SEK 200 million.
• A decision was taken in the first quarter to scale down production equivalent to 200,000 m3 of sawn wood. The cuts will mainly affect the third and fourth quarters. A total of around 100 employees are affected. In addition, the sawmill in Seskarö, with approximately 60 employees, was closed during the second quarter.

CEO’s comments
The wood products market has been weak during the first half of the year, although volumes recovered somewhat in the second quarter. In the first quarter Setra’s sales volume was around 15% lower than the same period the previous year. In the second quarter it was 5%. On the positive side, Setra’s sales of processed products in the Swedish market have increased and the large stocks of finished products that existed at the beginning of the period have been reduced.
Setra is reporting an operating loss for the first half of SEK 77 million. The decline in profit is mainly explained by falling prices for finished products and sustained high raw material prices, particularly in northern Sweden where much of Setra’s production takes place. The decline in prices for sawn wood products slowed gradually during the second quarter. Lower price increases were noted for whitewood products at the end of the period. In southern and central Sweden, raw material price reductions have been announced, but this will not have an effect until the second half of the year.
We believe that the construction market will decline further and that the next quarter will continue to be tough, with weak profits and margins throughout the industry. The fact that stock levels have fallen during the period does, however, suggest that we are gradually heading towards a better balance in the market. The considerable production cuts that are now taking place within the European sawmill industry will also help to normalise the stock situation by the end of the year.

For further information, please contact:
Kent Torwald, President & CEO, telephone +46 8 705 03 13, mobile +46 70 636 74 03
Stefan Lundin, CFO, telephone +46 8 705 03 01, mobile +46 70 222 65 07

The complete Report can be accessed at www.setragroup.se/reports.