Södra posts lower result – global economic uncertainty ahead

Lotta Lyrå, Södra’s CEO

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Södra posted a lower result for the second quarter of 2023. The result reflects the weakened market conditions for Södra’s core products.

In the second quarter of 2023, net sales for the Södra Group amounted to SEK 7,322 million (8,953). Operating profit totalled SEK 464 million (2,325), representing an operating margin of 6 percent (26). Return on capital employed was 13 percent (39) and the equity ratio was 61 percent. During the quarter, the World-class Efficiency project achieved annual efficiency gains of SEK 500 million.

The second-quarter result is a consequence of the market downturn, which has led to lower prices for Södra’s core products. The development reflects the general trend of a weaker economy, high inflation and more expensive input products.

“After several years of exceptional conditions, we have now entered tougher times with a downward trend in the global economy. We posted a considerably lower second-quarter result compared with recent years, but the result is stable in view of market conditions. We expect this global trend to continue in the coming quarters and are therefore working intensively on what we can influence to improve efficiency, while also securing a strong market position for Södra’s products going forward,” said Södra’s CEO Lotta Lyrå.

Investments to strengthen competitiveness
In the second quarter, Södra made strategic shifts and investments to promote the long-term competitiveness of the company.

In the updated Group strategy, a future-proofed industrial structure plays a key role in the creation of a leading offering for customers and consumers. During the quarter, a new evaporator was deployed at Södra Cell in Mönsterås, and is one of the largest investments in the pulp mill since the start of this century. The investment amounted to SEK 700 million and will strengthen increased green electricity generation. The investment will also ensure the mill’s operational reliability moving forward.

Another aspect of strengthening competitiveness is to create maximum value from every wood fibre by optimising the product and marketing mix. During the quarter, Södra introduced an innovative method where agricultural residues, such as oat husk, are added to the pulp to create a more resource-efficient product. This means that the wood fibre can be used to produce more pulp, creating more value from every tree. In addition, the EU’s LIFE programme granted funding of EUR 10 million to the OnceMore® initiative, which re-uses blended textiles in dissolving pulp on a large scale.  The funding will be used to further develop the process.

“Full-year 2023 is, and will continue to be, a challenging and testing year. Our Group strategy contains significant shifts for strengthening competitiveness and refining and renewing the value of Södra’s 52,000 members’ forest estates. The long-term outlook for our core products is favourable. Underlying demand for sustainable forest‑based products is bolstered by global economic growth, while tightened emissions reduction targets are driving the transition towards a more sustainable bioeconomy,” said Lotta Lyrå.

Business area results for the second quarter of 2023
In the Södra Skog business area, operating profit totalled SEK 31 million (39) for the period.

In the Södra Wood business area, operating profit totalled SEK 8 million (866) 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 572 million (1,696) for the period. The earnings trend was mainly due to lower pulp prices, lower delivery volumes and higher raw material costs year-on-year.

In the Södra Innovation business area, operating loss totalled SEK 19 million (profit: 20) for the period. The year-on-year change in earnings was mainly attributable to lower profit from shares in associates.

Source: Södra