Result in line with expectations but the future is difficult to predict
Despite dramatically changed conditions in the wake of the COVID-19 pandemic, production rates at Södra’s facilities remained high and stable in the first quarter. Sales amounted to SEK 5,576 million (6,318). Operating profit for the quarter totalled SEK 227 million (1,148). At the end of the quarter, cash and cash equivalents and current investments amounted to SEK 2,627 million (1,527) and the equity ratio was 60 percent.
“In the wake of the ongoing global spread of COVID-19, conditions changed dramatically towards the end of the first quarter. Södra has taken a number of steps to protect our employees, customers and suppliers in the first instance, but also any others that we come into contact with in order to save lives and protect health. It is with great gratitude that I see how we are working together to slow the spread of the virus and to mitigate the negative effects of the ongoing crisis,” said Peter Karlsson, Interim President and CEO.
“The economic slowdown from 2019 was replaced by a general decline in supply and demand due to the outbreak of COVID-19, and the consequences are difficult to predict at present. Nonetheless, the first quarter result was in line with expectations. Net sales amounted to SEK 5,576 million (6,318) and operating profit totalled SEK 227 million (1,148),” said Karlsson. “Demand for Södra’s core products was favourable, although prices for paper pulp and sawn timber remained low during the quarter, albeit slightly higher at the end of the quarter compared with the beginning of the year.”
“The necessary adjustment to these changed market conditions has been handled impressively by all employees in our respective operations. Without this commitment, we would not be so well-equipped to meet the future,” said Karlsson. “So, although the global economy is now slowing down, it is important that we maintain a long-term approach. Economic cycles will always cause market conditions to fluctuate, but in the long run, there is an underlying and steadily rising demand for forest-based products,” Karlsson concluded.
During the first quarter, consolidated net sales amounted to SEK 5,576 million (6,318), down 12 percent year-on-year. Operating profit totalled SEK 227 million (1,148) and the decline in profitability was due to lower price levels for paper pulp and sawn timber. The result corresponds to an operating margin of 4 percent (18). Return on capital employed was 4 percent (22). At the end of the quarter, cash and cash equivalents and current investments amounted to SEK 2,627 million (1,527) and the equity ratio was 60 percent.
Södra Skog’s operating profit for the period totalled SEK 1 million (56). The result was due to weaker margins. During the period, Södra Skog acquired 4.9 million m³sub, comprising 54 percent pulpwood and cellulose chips, 32 percent saw logs and 14 percent biofuels.
Södra Wood’s operating profit for the period totalled SEK 22 million (147) and reflects the considerably lower price formation for sawn timber. Underlying demand for sawn timber also remained favourable. Sales for the quarter amounted to SEK 1,507 million (1,498). The delivery volume from Södra Wood rose to 519 km³ SW, compared with 476 km³ SW in the year-earlier period.
Södra Cell’s operating profit for the period totalled SEK 302 million (1,112). The earnings decline was due to a weaker price level, while higher volumes and a more favourable USD exchange rate had a positive impact. Sales for the quarter amounted to SEK 2,867 million (3,501). The production volume totalled 474 ktonnes, comprising 402 ktonnes of softwood sulphate pulp, 34 ktonnes of hardwood sulphate pulp and 38 ktonnes of dissolving pulp.
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Founded in 1938, Södra is Sweden’s largest forest-owner association, with 52,000 forest owners as its members. We conduct modern and responsible forestry, and operate state-of-the-art mills in which we process our raw material. In 2019, net sales amounted to SEK 23 billion and employees totalled 3,100. Through value-generating relationships and a long-term approach, Södra shows the way for the next generation of forestry.