Södra posted a stable result for the first quarter of 2023. The result reflects the changed market conditions for Södra’s core products, while global turmoil is creating an uncertain outlook.
In the first quarter of 2023, net sales for the Södra Group amounted to SEK 8,002 million (8,165), down 2 percent year-on-year. Operating profit totalled SEK 1,085 million (1,974), representing an operating margin of 14 percent (24). Return on capital employed was 19 percent (36) and the equity ratio increased to 68 percent.
The first quarter result is an effect of expected and changed market conditions for Södra’s core products. The performance reflects the market downturn during the spring, which led to weaker prices following a period of exceptional market conditions. Södra’s mills continued to produce high volumes with stable quality during the quarter, which maintained high sales. In addition, the Group’s focus on world-class efficiency has so far created efficiency gains corresponding to SEK 425 million on a full-year basis.
“In view of the many challenges faced by the market at present, Södra delivered a stable result. After a period with exceptional market conditions, we are now entering a new phase with more uncertainty ahead. Due to our previous results, we are well-equipped to manage the challenges ahead of us and to continue working with what we can influence to strengthen our operations, while refining and renewing family forestry,” said Södra’s President Lotta Lyrå.
Initiatives for long-term ownership value
In the first quarter, Södra made strategic shifts and investments to promote long-term ownership value.
A key part of Södra’s Group strategy is a future-proofed industrial structure that creates a leading offering for customers and consumers. On 15 March, Södra’s new CLT facility was inaugurated on the west coast of Sweden. The facility at Värö is one of the largest in Sweden with the capacity to supply framing materials for just over 4,000 homes per year, representing a tenfold increase in Södra’s production capacity. The new facility is broadening the building materials market, while promoting more sustainable construction. In addition, Södra has decided to launch a pilot project to test the feasibility for construction of a new large-scale sawmill in Kinda. An advanced sawmill structure will strengthen the association, as well as our ability to create added value from members’ forest raw material.
A new product area was also established during the quarter. The energy and chemicals business plays a key role in Södra’s strategy and will continue to grow. As a result, the Södra Bioproducts product area has now been formed to bring sales and marketing together, and thereby further strengthen the customer offering and profitability.
“The global turmoil is creating uncertainty in the short-term outlook, and 2023 will be a challenging year. But underlying demand for family forestry products is favourable and it is important that we keep pace with developments to secure the ability to pay for family forestry products, and to contribute to the social transition. We will therefore continue to strive to maximise the value of forests, and the benefits that customers realise from our products and services,” said Södra’s President, Lotta Lyrå.
Business areas’ results for the first quarter of 2023
In the Södra Skog business area, operating loss totalled SEK 22 million (loss: 6) for the period.
In the Södra Wood business area, operating loss totalled SEK 34 million (profit: 762) for the period. The earnings trend was primarily due to lower average delivery prices year-on-year and a slowdown in demand.
In the Södra Cell business area, operating profit totalled SEK 1,210 million (1,431) for the period. The earnings trend was mainly due to lower delivery volumes and higher raw material costs year-on-year.
In the Södra Innovation business area, operating loss totalled SEK 70 million (loss: 15) for the period. The year-on-year change in earnings was mainly attributable to costs related to further development of the production facility for CLT establishment.