Södra: Financial results Q4 2009

Stronger market and productivity gains make positive contribution

Södra’s profit after financial income and expenses for 2009 declined by SEK 34 million to SEK 662 million compared with 2008. Revenue declined by SEK 297 million to SEK 16,696 million. Recession progressed to recovery in the second half of the year. Strong productivity development and a positive effect on profits from implemented employee suggestions dampened the negative effects of the crisis. Non-recurring items also contributed to improved profitability

The effects of the global economic crisis resulted in a very weak start to the year. Extended market shutdowns were held in the spring at Södra’s Norwegian pulp mills. At the same time, the decline in price and demand that commenced with the crisis continued during the early part of the year. Price falls slowed in the second quarter and began to recover after the summer.

“During the year we went from a situation of economic crisis to one more resembling a normal recession. Our production units have been running at full capacity since summer apart from shutdowns in conjunction with planned maintenance,” said Södra President and CEO Leif Brodén.

“We have countered the economic fluctuations with measures in the areas we can affect. We have adapted our production rate. In addition, Södra  has performed extremely well in terms of productivity development. In 2009 we implemented 3,400 improvement suggestions from Södra employees, the total effect of which represents an annual profit improvement of SEK 93 million,” he continued.

“The total average productivity improvement for the Group was 1.7 per cent, with variations between business units. Södra Timber, for example, increased its real productivity by more than 5 per cent,” said Brodén.

After the initial crisis, the second half of the year was characterised by low pulp inventories at producers as well as buyers. In particular, robust demand in China contributed to the stronger balance on the pulp market and the strengthening of Södra Cell’s profit in the second half-year.
This situation with a balanced market and low pulp inventories still prevails. Pulp inventories at European producers in December were down to 16 days.

A weak timber market in early 2009 led to major production cutbacks primarily in Central Europe and Finland. Despite the recession and decline in construction  these measures contributed to the market becoming balanced from the second quarter, which lead to gradual price increases. Following an amount of retooling in the first quarter, Södra Timber has essentially been able to operate at full capacity. 

Processing of storm wood from the Gudrun and Per storms was concluded during the year. The last logs were sawn two days prior to Christmas, and in addition to the terminals being emptied and the wood used, replanting is largely completed. Less than five per cent of the cleared land belonging to Södra members is yet to be replanted and this is expected to be completed in spring 2010.

Södra implemented a total of ten acquisitions of varying sizes in 2009. The acquisitions provided Södra Interiör and Södra Timber with a stronger base in anticipation of an expected improvement in business conditions. Major acquisitions included housing construction company Trivselhus, hardwood sawmill Wernerträ, and interior products companies BE Profiler and Vima in Danmark. During the same period, 90 per cent of Södra’s windpower project was sold to Statkraft.

During the year, Södra decided to offer its members FSC certification. The initiative attracted strong interest and 850,000 hectares of member land was quickly certified. This increases Södra’s earnings capability by enabling it to offer pulp and timber customers FSC-certified products. It also provides forest owners with a dual-certification premium of SEK 20 per cubic metre.

Total membership area increased by 15,000 hectares in 2009 to 2.35 million hectares. Södra Skog handled a total of 16.6 million m3fub wood raw materials in 2009, which is down  6.7 per cent compared with 2008. During the year Södra Skog increased deliveries of biofuel by 20 per cent to 3.7 TWh.

 
New increase in sawlog price
Södra is increasing the list price for normal spruce saw logs by SEK 75/m3fub and for pine by SEK 25 from 1 February 2010. This may be increased by local market premiums.

“There is strong demand for wood raw materials and we have a high level of activity in our harvesting. We have a good supply of sawlogs for the spring but need to top up our final harvesting inventory prior to summer and autumn deliveries,” said Urban Eriksson, Södra’s director of forestry. ”Meanwhile we are simplifying our offer by moving to a common quality class for all spruce sawlogs on new contracts signed after 1 February.”
 

Södra’s complete annual report will be published on 10 March on www.sodra.com

For further information contact:
Leif Brodén, CEO, +46 470 89435
Per Braconier, Director of Communications +46 70 534 5166
Mikael Staffas, CFO, +46 70 511 6497