The Swedish producer Södra posted a robust result for the second quarter of 2022. The result reflects the sustained strong market for Södra’s core products in pulp and sawn timber, but the market outlook is highly uncertain.
In the second quarter of 2022, net sales for the Södra Group amounted to SEK 8,953 million (7,287), up 23 percent compared with the year-earlier period. Operating profit totalled SEK 2,325 million (1,326), the highest quarterly result for Södra to date.
Operating profit for the first half of 2022 totalled SEK 4,299 million (1,873). Return on capital employed was 39 percent (18), and the equity ratio was 61 percent at the end of the period.
The second-quarter result reflects the favourable market conditions, with strong demand and highly favourable prices for Södra’s core products, primarily pulp. In addition, Södra’s mills delivered high production volumes with stable quality and Södra Cell, for example, increased both production volumes and outbound deliveries during the period.
“The result is gratifying for us and for Södra’s 52,000 members. Price levels for our core products have been favourable for a long time and the production volumes of our mills have been high. Combined with the hard work of Södra’s members and employees, this led to a strong result for the second quarter of 2022,” said Lotta Lyrå, President and CEO.
“Market uncertainty has increased considerably due to global turmoil and negative economic growth. This could affect our core products moving forward, as slowing demand in Europe’s consumer-oriented building materials trade at the end of the quarter has already shown. We are monitoring the situation closely, continuing to focus on what we can influence and working hard every day to strengthen Södra’s long-term competitiveness,” said Lotta Lyrå.
Several investments during the quarter
In the second quarter, Södra made several decisions that will benefit the association’s 52,000 members and strengthen the profitability of their forest estates.
- During the quarter, Södra’s project for improving efficiency – World-class Efficiency – continued. The aim is to improve underlying profitability by an annual rate of SEK 1 billion, and the project strengthened the result during the quarter. Södra has now achieved efficiency gains corresponding to SEK 157 million on a 12-month basis. A decision to invest in the lime kiln at Värö was also made, which will improve stability and equip the mill for the future.
- A nature conservation premium was introduced. This means that members who set aside a higher percentage of forest land than is required by forest management certification – and contribute to the joint nature conservation activities – will be paid more for their wood. The aim of the nature conservation premium is to reward the benefits created by many of our family forest owners who have diverse objectives and management methods for their forest estates.
- Södra Ädla was formed. This new unit was formed to attract technologies and skills to family forestry. Södra Ädla will invest SEK 200 million in new companies that, in one way or another, can strengthen the profitability of Södra’s 52,000 members. This could be companies that are developing forest management methods, new forestry practices or alternative revenue models.
Serious accident in sawmill
There was a serious workplace accident in the second quarter. On 15 June, one of Södra’s employees was killed and another person was seriously injured at Södra Wood Orrefors.
“This is a horribly tragic event, and our thoughts are first and foremost with the families of those affected. The cause is being investigated by the authorities together with Södra, but whenever a tragedy like this occurs, it is obvious that our safety procedures should be – and must be – at the top of our agenda. Every workplace injury is one too many – no one should ever be exposed to risk at work,” said Lotta Lyrå.
Södra took immediate action in connection with the accident at all affected units and will continue working to improve safety. The cause of the accident is being investigated by the authorities in cooperation with Södra.
Business area results for the second quarter of 2022
In the Södra Skog business area, operating profit for the period totalled SEK 39 million (61). The change in earnings was primarily due to higher fuel costs.
In the Södra Wood business area, operating profit for the period totalled SEK 866 million (827) and reflects the sustained favourable prices for sawn timber. At the same time, demand for sawn timber decreased during the quarter.
In the Södra Cell business area, operating profit for the period totalled SEK 1,696 million (662). The earnings improvement was due to a considerably stronger price level for pulp and a favourable exchange rate for Södra, while both production volumes and outbound deliveries increased.
In the Södra Innovation business area, operating profit for the period totalled SEK 20 million (loss: 43). The positive trend was due to a favourable performance by SunPine and the fact that Södra’s holding in Silva Green Fuel is now recognised as profit from shares in partnerships and charged to net financial items.