Strong demand, but overcapacity exerted pressure on prices

The volumes increased sharply, but overcapacity in the industry exerted downward pressure on prices. Production was adjusted to the market situation and distribution networks were reinforced. New hardwood products were developed and launched.

Södra Interiör manufactures and develops interior wood products for all environments. The strength lies in the broad range of products, the regular launch of new products, the distribution network and the increased internal supply of raw materials.

The business operates from ten locations in Sweden, five in Norway and two in Denmark. After several acquisitions in prior years, consolidation and efficiency were assigned priority. The factories focused on costs and staffing. In Norway, some production was discontinued or moved to Sweden as a part of changes to improve profitability. In Denmark, production was moved from Silkeborg to Åbyhøj.

The concept underlying Södra’s own manufacturing is to create a broad, deep and attractive range that targets key customer segments including the building trade, housing constructors and the timber industry. Products include mouldings, panelling, flooring, glued-joint boards, poles and sawn hardwood products.

Good raw materials and efficient logistics

The raw material is of major importance to production output and one challenge is finding the right raw material at a competitive price. A constant dialogue is conducted with the suppliers in order to secure quality from both a production and marketing perspective. The raw material supply through Södra Skog and Södra Timber continued to grow.

New distribution warehouses improved service and internal logistics became more efficient. A major part of the products go directly to customers from Ronneby or Umeå, and special deliveries to house-factories are delivered from Våxtorp. In Norway, Arendal and Namsos became important distribution warehouses, as did Åbyhøj in Denmark. A new distribution centre in southern Sweden is planned in Kallinge.

Strong volume trend

Scandinavia is Södra Interiör’s domestic market. Export destinations include Japan, South Korea, Eastern Europe and Germany.

Early in the year, demand was relatively moderate in Sweden and Norway, but turned upwards in the second quarter and volumes developed well. In Sweden, the government renovation grant (ROT) had a positive impact on sales. The renovation sector was also behind the increase in demand in Norway, while new construction was low.

In Denmark, demand was very weak, but stabilised at a low level in the latter half of the year. By centralising production to Åbyhøj, costs were cut and operations were again reporting a profit at the end of the year.

Exports to Japan and South Korea developed well, with rising volumes.

Hardwood from the members’ forests

An important task for Södra is being able to receive and process all types of wood from the members’ forests. The hardwood mill in Djursdala plays an important role, both for receiving wood from the members and the possibility of cultivating the market for hardwood products.

The wood-processing industry is very interested in Swedish hardwood and Södra Interiör introduced a new sales organisation for this customer group. The plant in Grimslöv developed new hardwood products for the building trade and launched panelling and flooring based on several new types of wood. Nordingrå Trä started manufacturing fences and posts made of oak and birch. The factory in Rottne, which manufactures glued-joint boards, now also sells boards made of aspen, ash and beech.

With the higher interest, the possibilities of sawing more hardwood were investigated. Oak and birch were test sawed at Södra Timber Traryd. When Södra Interiör takes over the sawmill on 1 April 2011, only hardwood will be processed.

A great deal of energy is being devoted to marketing the hardwood products. Swedish hardwood products have a clear environmental profile, which is increasingly important to consumers.

Investments and productivity

Important investments were made in the sorting plant at the hardwood mill in Djursdala and decisions were made to install new drying chambers that will be ready in spring 2011. Several investments were initiated to increase the capacity of the factories. Measures to reduce energy costs resulted in a 10 per cent decrease in the factories’ electricity consumption.

Work to increase productivity is prioritised. Systematic improvement work has resulted in the enhancement of efficiency at the facilities and a decrease in the cost per running metre produced. During the year, 1,530 ideas were generated and 22 improvement proposals were implemented each week.

Priorities and growth

Priorities for 2011 are effectiveness and profitability. Södra Interiör will continue to grow in its product areas through higher capacity in several production lines. An important task is increasing the use of hardwood in both the wood-processing industry and the building trade. New products will be developed and launched. Special sales efforts aimed at industrial customers will be conducted.

Price pressure affected profit

Net revenue rose to SEK 1,174 million (935), mainly as a result of previous corporate acquisitions. Operating profit was SEK 30 million (0), despite price pressure due to overcapacity in the industry and higher raw material prices.