Södra Reports "Stable" Third Quarter 2020 Results
"In view of the current market conditions and geopolitical uncertainty, Södra's operating profit to date this year can be considered stable." – Peter Karlsson, Interim President and CEO, Södra.
Oct. 22, 2020 (Press Release) - The current market conditions had a significant impact on Södra's operating profit in the third quarter. Despite higher year-on-year delivery volumes for Södra's core products, the price formation for market pulp was weaker. For the third quarter, Södra's sales amounted to SEK 4,925 million (5,391) and operating profit to SEK 93 million (512).
For the first nine months of the year, operating profit totalled SEK 541 million (2,520). Return on capital employed was 3 percent (16) and the equity ratio was 57 percent.
"The global economy is projected to contract this year due to COVID-19, despite a slight and recent recovery. A more stable and sustainable turnaround in the years ahead will require an easing of the uncertainty created by the pandemic. In view of the current market conditions and geopolitical uncertainty, Södra's operating profit to date this year can be considered stable," said Peter Karlsson, Interim President and CEO.
"Both the decrease in sales and decline in earnings were due to considerably lower prices for market pulp compared with the year-earlier period. A weak upward trajectory meant that prices were slightly higher at the end of the quarter compared with the beginning of the year. To date this year, the price of sawn timber is lower year-on-year. Demand for Södra's core products remained favourable, while production was stable at a high level," Karlsson said.
A mobilisation of Södra's entire chain - from owners, contractors and employees to the mills — combined with favourable weather conditions minimised the negative effects of the spruce bark beetle outbreaks. Despite a 50-percent reduction compared with last year, the level of damage is 1 million m³sub on Södra members' estates, which is still extremely high.
"A key element of Södra's strategy for sustainable and profitable growth is efficient use of forest products. We are therefore proud to have inaugurated the world's first fossil-free biomethanol plant at the pulp mill in Mönsterås in early October. The facility is one the forest industry's many contributions to the transition to a bioeconomy," Karlsson noted.
The biomethanol is made from the crude methanol recovered from the pulp manufacturing process and is part of the circular process that already exists at the pulp mill. The facility was inaugurated by the Swedish Minister for Enterprise, Ibrahim Baylan, at a virtual ceremony.
Financial key indicators:
During the quarter, consolidated net sales declined 9 percent to SEK 4,925 million (5,391). The operating margin was 2 percent (9). The negative sales trend was due to considerably lower prices for market pulp, while delivery volumes for Södra's core products were higher year-on-year, both during the quarter and cumulative. Cumulative net sales amounted to SEK 15,918 million (17,908). Return on capital employed was 3 percent (16) and the equity ratio was 57 percent.
Södra Skog's operating profit for the period totalled SEK 35 million (26). The result is attributable to favourable volumes from field operations and reduced imports. During the period, Södra Skog acquired 3.7 million m³sub, comprising 62 percent pulpwood and cellulose chips, 31 percent saw logs and 7 percent biofuels. Cumulative operating profit amounted to SEK 88 million (161).
Södra Wood's operating profit for the period totalled SEK 128 million (39), reflecting the positive price formation for sawn timber and continued high demand for sawn timber. The delivery volume from Södra Wood rose to 520 thousand m³sw, compared with 490 thousand m³sw in the year-earlier period. Sales for the quarter amounted to SEK 1,524 million (1,395). Cumulative sales amounted to SEK 4,611 million (4,485) and operating profit was SEK 212 million (304).
Södra Cell's operating loss for the period totalled SEK 8 million (profit: 551). The earnings decline was due to lower prices for market pulp. Sales for the quarter amounted to SEK 2,545 million (3,054). The production volume totalled 468 ktonnes, comprising 401 ktonnes of softwood sulphate pulp, 29 ktonnes of hardwood sulphate pulp and 38 ktonnes of dissolving pulp. Cumulative sales amounted to SEK 8,039 million (9,804) and operating profit to SEK 544 million (2,416).
Södra is Sweden's largest forest-owner association, with 52,000 forest owners as its members. Södra is also an international forest industry Group, with operations based on processing its members' forest products, such as softwood and hardwood pulp, and wood products. To learn more, please visit: www.sodra.com.