Södra posted a stable result for the first quarter of 2024. Our overall competitiveness is making us strong in these new market conditions and we are continuing to deliver high value to family forestry.
In the first quarter of 2024, net sales for the Södra Group amounted to SEK 7,613 million (8,002), down 5 percent year-on-year. Operating profit totalled SEK 568 million (1,085), representing an operating margin of 7 percent (14). Underlying profitability increased significantly quarter-on-quarter. Return on capital employed was 9 percent (19) and the equity ratio declined to 63 percent.
Given the market conditions and macro-environment, the first quarter result is in line with expectations. The result reflects the weak trend in construction activity and decreased supply in the raw material market.
Södra's mills produced high volumes with stable quality during the quarter. In addition, the Group's continued focus on creating world-class efficiency generated efficiency gains corresponding to SEK 282 million during the quarter, and a total of SEK 1,143 million since the start.
"We are now seeing the strength of the cooperative and decades of strategic investments. There is a strong interest in, and need for, forest products, with great opportunities for those who succeed in using the whole tree wisely. With our strong industrial structure and high level of innovation, we are creating sustainable products for a global market. The new situation in the raw material market, with demand higher than supply, is playing a role, but by doing more with each tree and maximising the value of every wood fibre, forests can last a long way. This is Södra's area of expertise. But we will continue to develop and be a driving market player while securing the profitability of forest estates," said Lotta Lyrå, President of Södra.
Södra continues to invest in a competitive industry
Södra's mission is to refine and renew the value of family forestry by ensuring that our mills process the raw material in the most profitable way possible, by constantly strengthening competitiveness. Family forestry also plays a key role in climate adaptation and biodiversity, which is why we are continuing to work with innovation and changing the way we work.
"That the general public sees us as a sustainability leader in our industry confirms that we are moving in the right direction. We understand how each tree in every forest is important for the climate and biodiversity. By contributing to society's climate transition and ensuring that forest estates can be used by generations to come, we are living up to our promise of sustainability and responsibility," said Lotta Lyrå.
The major macroeconomic changes in recent years that have impacted the market for wood raw material alongside of slowing demand for sawn timber have shown the importance of a future-proofed industrial structure that is continuously innovating, investing and creating a leading offer for our customers and consumers. The industrial consolidation during the quarter is one example of how we are continuously strengthening our position and long-term competitiveness.
To further strengthen competitiveness by doing more with the wood raw material from family forestry, Södra is continuing to invest in green electricity generation and electrification. The growing demand for electricity as part of society's green transition requires energy efficiency and resource-efficient use of all energy. The ability to offer products with a low carbon footprint, to maintain a positive energy balance and to continue supplying surplus green electricity is strengthening Södra's industrial competitiveness. As part of this process, Södra has decided to invest in a new condensing turbine at Södra Cell in Mörrum and in a heavy-duty battery-electric truck in its daily logistics chain for wood chip transportation.
Despite continued high uncertainty in the global market for forest raw material, demand for raw material from family forestry remains favourable. Södra sees a continued high need for forest raw material, which is positive for forest estates and the reason why we have raised our prices for saw logs and forest residues (branches and treetops).
Business areas' results for the first quarter of 2024
In the Södra Skog business area, operating loss totalled SEK 15 million (22) for the period.
- The earnings trend during the quarter was mainly due to lower volumes.
In the Södra Wood business area, operating loss totalled SEK 34 million (34) for the period.
- The earnings trend during the quarter was mainly due to a lower supply of saw logs and relatively weak demand, but also shows a quarter-on-quarter improvement attributable to higher delivery prices and production volumes.
In the Södra Cell business area, operating profit for the period totalled SEK 780 million (1,210).
- The result is lower year-on-year, mainly due to lower pulp prices and higher costs for wood. However, the result shows a positive quarter-on-quarter trend due to favourable deliveries, rising pulp prices and a relatively strong USD.
- The result for energy and chemical products was in line year-on-year. Higher prices for solid fuel products made a positive contribution, while lower prices for electricity and liquid bioproducts had a negative impact.
In the Södra Innovation business area, operating loss totalled SEK 69 million (70) for the period.
- The result is in line year-on-year and mainly attributable to increased costs, which were offset by higher production capacity.
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