Ola Olsson is one of many members who commission Södra to harvest. When the work is done, he can study the presented results.
Value is generated for the members in multiple stages
Södra is owned by 51,000 forest owners in southern Sweden. The collaboration in Södra aims to strengthen the forest owners' finances and develop family forestry. Each member has a vote, regardless of the amount of capital they have contributed or the size of their forest estate.
Members and their forest estates are the basis of all value creation in Södra. Value creation takes place in several steps including good forest management, sales of wood, ownership of mills and business policy lobbying.
Members have access to advice and education concerning forest management. They are also offered value-creating forestry services ranging from planting to final harvesting.
Members do not pay a fee to be part of Södra, but rather participate with risk capital in the form of capital contributions that are paid back when membership ends. The required contribution is SEK 600 per hectare of productive forest land and is paid in stages by deducting it from the amount paid for wood deliveries. Contributions are not required for land exceeding 200 hectares, but members may contribute more if they wish. A growing number of members elect to do this as capital contributed is the basis for profit dividends.
The capital belongs to members, but Södra uses the money during the membership period and pays dividends on contributed capital. At year-end, capital contributed in Södra totalled SEK 2,508 million, of which SEK 986 million was paid-up. Through bonus issues, SEK 1,522 million of the association’s earnings was transferred to the members as individually capital contributed.
Owners and suppliers
The members are owners of a major forest industry group, suppliers of wood raw materials, lenders to their own company and customers who buy services and goods.
As owners, they can present their points of view at, for example, member meetings, to their local elected representatives who have a dialogue with the Board through the Administrative Council. This is a kind of owner management that distinguishes Södra from limited liability companies.
An important assignment is to secure markets for members’ wood at market prices. The wood is mainly processed in Södra's own mills and the products are sold on an international market. Södra is one of the world’s leading suppliers of bleached sulphate pulp and one of the biggest producers of timber products in Europe.
During the year, 25,395 members delivered 8.8 million m3fub raw materials in the form of saw logs, pulpwood and biomass fuel to Södra with a total value of SEK 4,245 million. The average delivery per property was 510 m3fub and had a value of SEK 246,000.
Members invest money in Södra and collectively comprise its largest lender. At the end of the year, loans from members totalled SEK 2,531 million, allocated between member accounts SEK 1,783 million, forest loans SEK 36 million, payment plans SEK 684 million and liquidity accounts SEK 28 million. Dividends are deposited in member accounts if not requested otherwise. This money is freely available to the owner and pays an interest which compares favourably with traditional bank accounts. Forest loans enable Södra to borrow money from members, which pays an even higher interest rate with a fixed-rate period of six months.
Purchase goods and services
During the year, members purchased goods and services from Södra for a total of SEK 1,400 million, mainly for harvesting services. Södra also offers services such as forest maintenance, forestry plans, forest certification and products in the form of saplings and tools.
The members share mill profits. It is the Board’s ambition that profit distribution over a full business cycle is to represent at least 40 per cent of profit. The Annual General Meeting resolves on profit distribution at the end of each financial year.
The dividend is based on the capital contributed by members as well as on the their wood deliveries during the year. The aim is that half of the dividend and any bonus issue will be based on contributed capital and half on the value of the wood delivered. A bonus issue entails that collectively owned non-restricted equity is transferred to the members' individual contribution capital accounts. This increases the calculation base for future profit dividends.
Many member activities
The Focus on Forestry project, which aimed to increase the profitability of the members’ forestry, was concluded at the end of 2010. Södra’s work on skills development for forest owners is extensively being continued in ordinary operations. One example of such a service is Kraftsamtal Skog (Focus on Forestry Consultation) where the member is offered expert financial advice in various kinds of land transactions as a part of cooperation between Södra and LRF Konsult. The Focus on Forestry project is being followed up by a new project, Forest Action, which is focused on personal advice to increase the forest estate's profitability.
The level of activity with regard to safety issues in the forestry work was high during the year. Elected representatives and other members are committed to developing safety for active forest owners. In Södra’s membership area, 7,500 people have completed the criteria for power saw driving licences. During the year, study circle leaders received training in the brush saw driving licence training and a number of study circles were established.
Training was also held for wildlife representatives, nature conservation representatives, water representatives and the district councils.
Sweden’s four forest-owner associations have jointly compiled the book Skogens vatten (Forest water), which is the first comprehensive book on the water environments of the forest. At the end of the year, a study guide was presented for study circle activities planned to commence in the spring. Work is also under way in Södra to introduce the book’s blue target classes to the green forestry plan.
The results of last year’s owner meetings will form the basis of continued member dialogue in 2012. The issues were prepared for these meetings during the year.
The annual meetings in the forestry districts attracted some 5,000 participants. The topics covered at the meetings included the strategy that was set in terms of new products initiatives, energy and the development of operations.
Annual General Meeting (AGM)
Södra’s AGM was held in Växjö on 17 May. The AGM resolved to pay a dividend totalling SEK 851 million. The AGM addressed several new motions and motions addressed at previous AGMs were reported on.
Gunilla Aschan declined re-election to the Board. Caroline Sundewall and Marie Hallén were elected as new Board members. At the AGM, Marianne Eriksson of the forest-owner chapter of the Federation of Swedish Farmers (LRF) received the first award presented in honour of Honorary Chairman Lars-Eric Åström. She received the award for her successful work on the Focus on Forestry project.
Forest and land owners are affected by a large number of rules and ordinances. Södra protects the interests and rights of its members by monitoring economic policy issues and active lobbying efforts. The basis of these efforts is to safeguard the individual forest owner's right to cultivate his or her forest. The economic policy work is often conducted together with other forest-owner associations and the forest-owner chapter of the Federation of Swedish Farmers. Important areas for these efforts during the year concerned the new wildlife administration, water issues, encroachment by power lines and other infrastructure.
The dialogue with the authorities regarding the protection of forests continued. The Komet trial project, where land owners voluntarily register forest for nature conservation, was encouraged by Södra, which also initiated an action plan for future measures against the European spruce bark beetle in and around nature reserves.
As a result of the new organisation with 36 forestry districts and 19 forestry operations areas, a productivity programme on greater collaboration between administrators and elected representatives was carried out. Discussions were held on a training day regarding how to activate current members and recruit new members. All forestry districts participated in the training.
Trade in contributed capital
Trade in issued capital takes place on an external trading site, SEB Aktiehandel Syd, with monthly closure. Trading for the year was SEK 14.2 million. The rate on the traded issued capital varied between 105 and 108 per cent. In September and November, it also became possible to trade in paid-up contributed capital.