Operations back to normal and efforts for double certification

Business gradually returned to normal conditions after the widespread efforts of the storm years. Wood acquisition and double certification in accordance with FSC and PEFC were major challenges.

Södra Skog supplies Södra with wood and performs forestry services for members, including everything from planting and forest management to final felling. The majority of wood is purchased from members and largely processed in Södra mills. The forest operation has strong roots in local forestry districts.

Market trends

Despite capacity cutbacks in industry, competition for wood appears to remain tough in the Baltic Sea region. However demand was low in the first six months and Södra Skog reduced spring harvesting due to the difficult situation in the wood market.

The situation improved and became more stable in autumn, in conjunction with increasing competition and rising prices for saw logs in particular. Growing demand in the energy sector is increasingly affecting the wood market.

2009 was a difficult year on the whole, forcing Södra Skog alternately to break and accelerate to adapt to demand.

Wood acquisition

Wood acquisition and efficient wood flow are key issues for Södra. Acquisition and delivery of fresh wood were particularly challenging when demand increased and terminal stocks of storm-felled wood had been depleted.

Södra has since 2000 purchased wood for its Norwegian pulp mills through WoodLog which is owned jointly with Norske Skog.  From 2010, purchasing is purely through the wholly-owned Södra Skog AS.

Productivity

Closer and better member contact and more efficient wood flows have been in focus during the year, along with the ongoing development of the purchasing organisation. A further objective was to increase the number of green forestry plans.

Key improvement processes for 2010 include two joint productivity programmes with Södra Timber. Productivity processes are also continuing throughout the business area as a whole, including a number of smaller, highly specific improvement areas.

Forest management

Södra Skog offers members advisory and forestry services to increase forest growth and thus improve profitability.

Reforestation following the Gudrun and Per storms has been successful. More than 95 per cent of the member forest area laid waste was reforested by the end of the year.

Södra Odlarna delivered more than 39 million plants and has concentrated its growing facilities and automated plant transplantation and sorting. Development of a mechanical pine weevil protection device is planned as well as logistics rationalisation. Technology improvements have created permanent new jobs while also improving productivity.

Cleaning requirements have increased dramatically in recent years with the first Gudrun clearings now due for cleaning. In the worst affected areas, the cleaning need is estimated to be four to five times higher than normal. There is also a need for more thinning following several years of storms and insect infestation. For forest owners it is important that thinning be profitable, and the cost can be reduced if thinning is done at the right time. Bark beetle infestations in the wake of the storms have declined to normal levels as a result of successful forest protection measures, limited bark beetle presence and favourable weather.

There is a steadily growing interest in Södra’s new management concept with a broader range of services. It builds on a base forestry programme to which additional services are available such as a full accounting service with advice, bookkeeping, annual accounts and tax preparation.

Double certification

Double certification of member forestry was introduced during the year in accordance with PEFC and FSC. The goal is to double certify a million hectares by the end of 2010.

Focus on Forestry project and growth

Focus on Forestry is the campaign run jointly by the forest-owner movement and the Federation of Swedish Farmers to make family forestry more profitable by improving forest growth. The vision is to increase growth by 20 per cent in the next 50 to 100 years. The focus is on increasing knowledge about planting, improved plant material, cleaning, forest fertilisation and draining of forest land. Södra Skog is involved in the project and has special Focus on Forestry inspectors in its forestry districts. In Södra’s area, 27,000 forest owners took part in different activities, compared to 9,500 in 2008.

Biofuel

Södra Skogsenergi trades in Södra’s full range of biofuel. Deliveries during the year to thermal and combined power and heating plants, mills and pellets factories totalled 3.7 TWh. Volumes are increasing significantly and a new fuel range including stumps is being developed.

Challenges

Södra Skog faces major challenges, primarily to increase raw material acquisition for Södra mills. This also includes improving its position in the biofuel market. Another challenge is to help increase long-term forest growth on member land. Developing closer relationships with suppliers and customers is a priority, such as through more intensive contact processes and an improved service concept.

Income

Net revenue decreased to SEK 8,723 million (9,551). Operating profit improved to SEK 29 million (–30). Wood deliveries were 16.6 million m³fub.