The business unit developed well, despite a weakening in the market in the latter part of the year. The bark beetle infestation subsided and forest conservation efforts were re-established following the storm years.
Södra Skog supplies Södra mills with wood and provides members with forestry services. The operation has strong roots in the local forestry districts. Each forestry district has its own skill base in the form of forest inspectors and a network of selected forest contractors. Although most wood is purchased from members, other suppliers also provide substantial volumes. The wood is mainly processed in Södra mills.
Södra Skog has a number of subsidiaries, including:
- Södra Skogsenergi, which handles the sale of Södra biofuel products and the purchase and sale of external products. The company delivers mainly to thermal power stations, combined power and heating plants, mills and pellet factories.
- Södra Odlarna produces and sells high quality forest plants from nurseries in Falkenberg and Flåboda.
- Mönsterås harbour loads and unloads ships for Södra with a total volume of 1.2 million tonnes per year.
- Södra Eesti in Estonia and Sodra Latvia in Latvia acquire raw material for Södra mills.
- Södra Metsad and Sodra Mezs own and manage land in Estonia and Latvia.
Several minor storms and terminal closures
Southern Sweden was not affected by any major storms during the year, but there were a number of smaller storms in Södra’s operational area. Although this slowed work during the spring it did not prevent critical forest protection deadlines for processing and removal of wood being met. Intensive efforts have been made to use up the terminal stocks built up during the storms Gudrun and Per. The objective is for the terminals to be emptied in 2009.
Forest conservation and environmental work were re-established after the storm years. The focus has been on reforestation with record levels of land preparation and planting.
Reduced bark beetle attack
Bark beetle damage during the year is estimated to be 50–60 per cent of 2007 levels. Infestation of standing forest was significantly milder than expected despite an early, strong swarming; this was largely due to the trees’ vigorous health and that infestation was largely confined to windfalls that were later removed. Less damage to standing forest than in previous years and successful forest protection efforts in conjunction with favourable weather in the late summer would indicate a milder infestation in 2009.
Declining market towards year end
Södra Skog’s business developed well in 2008. Demand for pulpwood was relatively good, despite a decline in the demand for saw logs from record levels. Thinning was in focus for forest management and market reasons, and a premium was paid during part of the year to stimulate thinning.
Competition on the timber market was strong early in the year and substantial volumes were exported from Sweden. Södra Skog has however been able to retain its market-leading position. During the latter part of the year the economic slowdown was reflected in Södra Skog with lower saw log prices. Over the long term, however, competition on the timber market is expected to increase. Södra Skog is working to increase its domestic wood acquisition.
Successful productivity process
As part of the productivity programme, projects are being run within three areas – wood purchasing, wood flow and plants. The focus in wood purchasing and flow is on efficient working methods shared throughout the organisation.
At Södra Odlarna, plant-related productivity processes are also underway with many employees taking part.
During the autumn all field personnel took part in a major training programme on the Södra Skog business system, which combined system knowledge and working methods.
New management concept
A new management concept was developed during the year and offered to forest-owners. It is an overall concept which comprises more than earlier management agreements, and provides a base for forest management to which additional services can be selected.
Two units in Södra Odlarna
Södra Odlarna supplies members with high quality seedlings and is a leading supplier in southern Sweden. In 2008, 42 million seedlings were delivered. Deliveries are increasingly of refined plant material with excellent growth properties.
Södra Odlarna concentrated its production of forest plants to the nurseries in Falkenberg and Flåboda in south-eastern Sweden. One operation in mid-Sweden was closed. An investment in automation has been made to improve production, providing productivity, environment and quality benefits.
Södra Skogsenergi investing
Södra Skogsenergi is responsible for selling Södra's total range of biofuel as well as the purchase and sale of external products. Deliveries of 3.2 TWh were made during the year, primarily to thermal and combined power and heating plants, mills and pellet factories, which represent a fifth of the biofuel market in southern Sweden.
Volumes are increasing strongly and Södra Skogsenergi is developing its technology and methodology as well as adding personnel to strengthen the business. A major training programme was held in the autumn for Södra Skog field personnel and contractors to make the handling of logging residues (branches and tops) more efficient. There is also a growing demand for stumps.
Södra Skog’s net revenue increased to SEK 9,551 million (9,437). Operating profit was SEK -25 million (115). Wood deliveries totalled 16.3 million m3fub.