Södra posts a stable result but the outlook remains unclear
Södra’s operating profit during Q2 was stable given current market conditions. Deliveries were higher year-on-year, but prices for Södra’s core products were considerably weaker than in 2019. For the first half of 2020, operating profit totalled SEK 449 million (2,009), return on capital employed was 4 per cent (19) and the equity ratio was 57 per cent. Sales for the second quarter amounted to SEK 5,416 million (6,199) and operating profit totalled SEK 221 million (861).
“The global outbreak of COVID-19 has led to a serious global crisis. The extent of the economic impact is uncertain, since both production and demand have declined globally. It is with great respect and gratitude that I see how we are continuing to work together to slow the spread of the virus, while simultaneously managing our day-to-day operations,” said Peter Karlsson, Interim President and CEO. “We are also looking ahead and the Board has decided to make additional investments as part of the plan to increase the annual production capacity of our pulp mill at Värö to 850,000 tonnes so that Södra can continue to grow profitability as we move forward.”
“Given the current market conditions, Södra posted a stable result in line with expectations for the first half of the year,” Karlsson added. “Net sales amounted to SEK 10,993 million (12,517) and operating profit totalled SEK 449 million (2,009). Demand for Södra’s core products was favourable, although prices for paper pulp and sawn timber were considerably lower year-on-year, albeit slightly higher at the end of the six-month period than at the beginning of the year.”
“The management of storm-damaged and spruce-bark-beetle infested forests has been a priority, but there will still be challenges to deal with in the coming quarters,” Karlsson continued.
“A key element of Södra’s strategy for sustainable and profitable growth is the efficient use of wood raw material. One example is the pilot facility that is now under construction in Tofte, Norway, the facility aims to develop both the process and the technology for liquid biofuel,” Karlsson added. “A full-scale facility for liquid biofuel production has then been planned. With this initiative, we are taking further steps towards a fossil-free future by processing forest products. At the same time, it is also important that politicians facilitate the use of the potential of forests in the transition to a sustainable bioeconomy.”
In the second quarter of 2020, Södra’s consolidated net sales declined 13 per cent to SEK 5,416 million (6,199) and operating profit totalled SEK 221 million (861). The lower profitability was due to lower price levels for paper pulp and sawn timber compared with the year-earlier period. The operating margin was 4 per cent (14).
During the first six months, sales declined 12 per cent to SEK 10,993 million (12,517) and operating profit totalled SEK 449 million (2,009). The operating margin was 4 per cent (16). Return on capital employed was 4 per cent (19) and the equity ratio was 57 per cent.
Södra Skog’s operating profit for the period totalled SEK 51 million (79). The result was due to weaker margins. During the same period, Södra Skog acquired 4.3 million m³sub, comprising 59 per cent pulpwood and cellulose chips, 31 per cent saw logs and 10 per cent biofuels.
Södra Wood’s operating profit for the period totalled SEK 62 million (118) and reflects the lower price trend for sawn timber. Underlying demand for sawn timber remained favourable. Deliveries from Södra Wood rose to 569 thousand m³ sawn wood compared with 542 thousand m³ sawn wood in the year-earlier period. Sales for the quarter amounted to SEK 1,580 million (1,592).
Södra Cell’s operating profit for the period totalled SEK 250 million (753). The earnings decline was attributable to considerably lower prices. Sales for the quarter amounted to SEK 2,626 million (3,250). Production totalled 483 thousand tonnes, comprising 412 thousand tonnes of NBSK, 33 thousand tonnes of NBHK and 38 thousand tonnes 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.
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