Sodra Posts Drop in First Quarter 2012 Profit on Reduced Production

April 23, 2012 - Sodra reported that its operating profit for the first quarter of 2012 amounted to SEK -41 million compared to SEK 378 million in the first quarter of 2011. Profit after net financial items amounted to SEK -2 million compared to SEK 374 for the same period in 2011.

Reduced production and a number of market stoppages characterized the first quarter of the year, Sodra said.

"We started the year with most of our sawmills implementing market stoppages, while production at two of our Norwegian pulp mills was down for much of the quarter. Production at our pulp mills was just 73 percent of our normal capacity. For the sawmills, the corresponding figure was a low 70 percent," said Group Chief Executive Leif Broden.

Together with the first quarter of 2009, this is historically the lowest level of capacity utilisation the company has seen. January and February experienced the lowest production figures, but they also mark the turning point. All production units have been back to normal production capacity since 20 March, Sodra said in a statement.

"We are seeing a recovering pulp market and anticipating economic recovery," Broden said. "Price announcements have been accepted, and as of 1 April the price of NSBK is USD 870 per tonne. "We are now seeing strong increases in volumes to China, which up to now has been more or less solely responsible for the increase. We are expecting to see higher prices for sawn timber products over the course of the year, but only small volume increases.

"Viewed from a new development perspective, it seems that 2012 will be another lost year. The sawmill structure will probably need further streamlining," Broden said.

"For the rest of 2012, we will see normal capacity utilization, and we think we will see a profit for the year, which is just below last year's result, along with a 7 to 8 percent return on capital employed," Broden added.

PULP MARKET

In a written statement Sodra said: The pulp market started to show signs of recovery during the first quarter of 2012. The world market price of bleached softwood sulphate pulp went up as inventories decreased.

Pulp production at Sodra's five mills over the period amounted to 380,000 tonnes, compared with 522,000 tonnes over the same period last year. This reduction is due to the market stoppages which took place at Sodra Cell Tofte and Sodra Cell Folla.

Textile pulp is now being produced at Sodra Cell Morrum. Annual production is expected to reach 170,000 tonnes, which will give Sodra a competitive textile pulp product based on hardwood.

Production of DuraPulp is ongoing at Sodra Cell Varo. This is a material which has attracted significant attention due to its unique properties, combined with the fact that it is renewable and biodegradable. DuraPulp is made up of a specially selected pulp from Sodra Cell and a renewable biopolymer. On further processing, these two components provide special properties such as moisture resistance, strength and hardness. For the most part, a lamp and a children's chair have been in the spotlight to date, and work is now ongoing with a number of partners which are testing the material at their production facilities.

Sodra's full first quarter 2012 statement can be found at: www.sodra.com.

SOURCE: Sodra