Södra posts a strong result in a declining market

Södra’s operating profit for the first half-year totalled SEK 2,009 million, compared with SEK 2,257 million in the year-earlier period. Return on capital employed was 19 per cent, which surpassed Södra’s target of 10 per cent. Net sales for the second quarter of 2019 amounted to SEK 6,199 million (6,626), and operating profit totalled SEK 861 million (1,318). All production facilities delivered favourable results and, as planned, CLT production commenced in May.

“The favourable forest economy of recent years is about to subside in line with the slowdown in global economic growth. Nevertheless, Södra performed well in the second quarter. However, the economic slowdown will lead to a lower quarterly result for the second half-year compared with the year-earlier period,” said Lars Idermark, President and CEO. “All business areas delivered favourable results. As expected, prices for the company’s core products – market pulp and sawn timber – were revised downwards but remained at high levels during the quarter.”

CONTINUED FOCUS ON INCREASED PROCESSING

“Södra is following its strategy for sustained profitable growth with a focus on increased processing. In the Södra Wood business area, CLT production commenced in May and investments in a large production facility are under way. The green biomethanol venture at Mönsterås is also making good progress and production start-up is planned for late autumn. Increased timber construction and the use of liquid biofuels are key components of a growing bioeconomy. Forests have a key role to play here,” said Lars Idermark.

In the second quarter of 2019, consolidated net sales declined six per cent to SEK 6,199 million, with operating profit of SEK 861 million (1,318). The operating margin was 14 per cent (20).

Sales for the first half-year amounted to SEK 12,517 million (12,343), up by just over 1 per cent, with operating profit of SEK 2,009 million (2,257). The operating margin was 16 per cent (18). Return on capital employed was 19 per cent (26) and the equity ratio remained strong at 58 per cent.

In the Södra Skog business area, operating profit totalled SEK 79 million (49) for the period. The result was positively impacted by both higher volumes and improved margins.

“In Södra Skog, tackling the severe spruce bark beetle outbreak required targeted measures, and despite the extensive damage, the situation was easier to handle than expected,” said Lars Idermark.

In the Södra Wood business area, operating profit for the period totalled SEK 118 million (210), reflecting the lower price formation for sawn timber. Sales for the quarter amounted to SEK 1,592 million (1,515). The investment in CLT production is progressing as planned. Increased processing is the next stage of the strategy for Södra Wood and constitutes a component of strengthening long-term profitability.

In the Södra Cell business area, operating profit for the period totalled SEK 753 million (1,196). The earnings trend was attributable to a declining market with lower price levels, but a continued

Favourable USD exchange rate. Sales for the quarter amounted to SEK 3,250 million (3,603), corresponding to an operating margin of 23 per cent (33).

See the video interview with Lars Idermark: https://youtu.be/VH94XoXbKSo