Södra reported a second-quarter operating loss as weak demand, subdued pricing and continued pressure from raw material costs weighed on earnings.
The Swedish forest industry group is responding by intensifying cost-cutting efforts and operational improvements aimed at strengthening its long-term competitiveness.
Net sales for the quarter totalled SEK 6.95 billion, down 3.4% from SEK 7.19 billion a year earlier. The group posted an operating loss of SEK 424 million, resulting in a negative operating margin of 6%.
According to Södra, the weaker performance primarily reflected lower delivery volumes in markets where demand remained soft. Profitability also continued to be affected by a lag between higher raw material costs and corresponding price adjustments for finished products.
“We are reporting negative earnings amid a market environment that remains challenging, with depressed demand and a weak price scenario,” said President and CEO Lotta Lyrå. “At the same time, we are strengthening our cost position, improving efficiency and enhancing our commercial capabilities. We can see that we are heading in the right direction.”
The company said overhead costs declined by SEK 202 million during the quarter, while contribution margin improved by 5%, indicating that efficiency measures are beginning to deliver results despite difficult market conditions.
Efficiency measures gain momentum
Södra continued implementing its Södra Leap action programme during the quarter, focusing on reducing overhead costs, improving operational efficiency and strengthening commercial performance across the organization.
Since the programme was launched, operating expenses have been reduced by SEK 329 million. Measures have included lower consulting costs, the completion or reassessment of major IT initiatives, and approved workforce adjustments.
The company also delivered SEK 122 million in improvements through its World-class Efficiency programme during the quarter.
Management said additional measures remain possible as Södra continues adapting its operations to current market conditions.
Markets remain uneven
Market conditions varied across Södra's business segments during the quarter.
The pulp business performed largely as planned, with delivery volumes reaching customers. However, global pulp markets remain oversupplied, keeping prices under pressure. Demand for paper and paperboard also remained weak.
The sawn timber market remained volatile during a period that is normally marked by stronger seasonal activity. Demand was soft in Sweden, the United States, the United Kingdom and Northern Ireland, while some European markets showed slightly stronger activity. Weak construction markets also continued to limit cross-laminated timber (CLT) sales, although the residential segment showed signs of modest recovery.
Bioproducts offered a brighter outlook. Markets for electricity, biomethanol and turpentine remained favourable, while dissolving pulp continued to experience solid demand. Conditions for solid biofuels, however, were more mixed.
Business areas
Results varied across Södra's operating divisions.
- Södra Skog reported an operating loss of SEK 12 million, compared with a SEK 7 million operating profit a year earlier, reflecting lower delivery volumes and reduced revenue, particularly for spruce logs.
- Södra Wood posted an operating loss of SEK 215 million, compared with a SEK 3 million operating profit in the second quarter of 2025, due to lower deliveries, weaker market prices and higher raw material costs.
- Södra Cell reduced its operating loss to SEK 88 million, from SEK 221 million a year earlier, supported by higher delivery volumes and lower maintenance shutdown costs.
- Södra Building Systems reported an operating loss of SEK 45 million, broadly unchanged from the previous year, as stable sales and disciplined cost control helped offset difficult market conditions.
Sales for Södra Bioproducts, reported under Other business areas, increased to SEK 888 million, up from SEK 704 million in the second quarter of 2025.
Focus remains on competitiveness
Despite continued market weakness, Södra says it will maintain its focus on actions within its control, including cost reductions, operational efficiency and commercial development.
The company believes these initiatives will strengthen its competitiveness and position the business for improved performance when market conditions recover.
Founded in 1938, Södra is Sweden's largest forest owners' association, representing more than 50,000 family forest owners. The cooperative operates across the forestry value chain, producing market pulp, sawn timber, building systems and a growing range of bio-based products, including biomethanol, tall oil, turpentine and renewable energy. Headquartered in Växjö, Sweden, Södra's operations are primarily based in southern Sweden, with products exported to customers worldwide.
