Considerable demand, sharp price increases and a high level of activity
Operations on the wood market were characterised by intense competition. Considerable demand for forest raw materials and sharp price increases resulted in high levels of activity in forestry. The earnings trend was positive and volumes and sales increased.
Södra Skog’s main task is to find markets for the wood that the members want to harvest and obtain the forest raw materials processed in the Group’s mills. Most of the wood is purchased from the members. The business area carries out forestry services for the members, including harvesting, forest management, green forestry plans and advice.
Intense competition for wood
The trend towards increasingly intensive competition for forest raw materials was strengthened. Higher demand and depleted storm-felled inventories led to strong and rapid price increases in the spring, primarily for saw logs. Prices reached record high levels. The supply of growing, standing forest increased, as did activity in the forest. The high level of wood contracts in the summer provided well-filled inventories of standing forest along with stable conditions for the operations in the autumn.
Despite troubling production and transport conditions due to cold weather and snow early and late in the year, the deliveries to Södra’s mills worked well.
Operations in the recently established company for wood acquisition in Norway got off to a flying start and conditions are good for continued development.
After several years of rising demand and a limited supply of biofuel, the market stabilised. More efficient logistics and a reduction in terminal handling increased the payment capacity of the biofuel product lines.
Forestry services gaining speed
In order to increase and improve forestry services, a new position – forestry supervisor – was created in all forestry operations areas. The need for cleaning requirements is increasing as the felling areas planted after the storms Gudrun and Per become be ready for cleaning.
Efforts to create a more efficient distribution system for saplings were launched. The system was successfully tested, entailing that the saplings are automatically packed in boxes, frozen and then transported to the forest owner or contractor. Södra Odlarna’s 40 million saplings will start being distributed this way in 2011.
2010 was a normal year without any major impact by storms. Bark beetle infestations increased somewhat compared with 2009, mainly in eastern Kronoberg County, but the damage was assessed to be moderate. The area in eastern Kronoberg that was infested by the red pine sawfly in 2009 was extended to the east and north in the summer, and many members’ pine forests were afflicted. Södra has redoubled vigilance in the area.
Focus on Forest project finished
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, called Focus on Forest, was concluded during the year. The vision is to increase growth by 20 per cent on the long term. Many sub-targets for reaching this have been met: 37,000 forest owners participated in the activities and planting, ditch clearing and the demand for processed material have increased as well as the number of green forestry plans. Södra’s work on skills development for forest owners is now being performed as a prioritised task in Södra Skog’s ordinary operations.
Rapid pace of double certification
The double certification of the members’ forestry according to FSC and PEFC continued. The year’s target of one million hectares was reached as early as the spring. At the end of the year, 1.2 million hectares were double certified.
More deliveries of biofuel
Södra Skogsenergi trades in Södra’s full range of biofuel. The year’s deliveries to thermal power stations, co-generation stations, industry and pellets factories increased 16 per cent to the equivalent of 4.3 TWh. During the year, the organisation and market in Denmark and the UK were developed.
Successful productivity programmes
The improvement efforts were carried out through productivity programmes that were more targeted than before and in various development projects. The productivity programmes included collaboration with Södra Timber.
In order to enhance the operational efficiency and address the increasing competition on the wood market, the operating activities were reorganised. The focus is on more contact with the members, management, efficient logistics and refined marketing communication. These measures together with the idea-generation efforts have contributed to productivity. During the year, 1,451 ideas were generated and 18 improvement proposals were implemented each week.
Greater requirements, major challenges
Södra Skog’s greatest challenges result from the more stringent requirements of suppliers and customers. Among other factors, the volumes of all product lines must increase substantially in the next five years. The service and product offering must be developed in a manner that is profitable and attractive to the members, an effort that commenced during the year. Södra Skog is also participating in a project aimed at developing future forestry plans together with the other forest-owner associations.
Positive business trend
Net revenue increased to SEK 10,186 million (8,723). Operating profit improved to SEK 56 million (29). Wood deliveries amounted to 16.6 million m3fub.