Södra delivers strong result in favourable market

Softwood Pulp saw higher price increases worldwide than Hardwood Pulp
October 14, 2021

Södra-Cell, Väröbacka, Sweden

Södra posted a strong result for January–September 2021. The result is due to a highly robust market for Södra’s core products, combined with a high level of industrial production.

The Södra Group’s net sales for the first nine months of 2021 increased more than 25 percent compared with the year-earlier period to SEK 20,018 million. Operating profit totaled SEK 4,021 million and return on capital employed was 26 percent. The equity ratio was 62 percent at the end of September.

Operating profit for the third quarter, July–September, totaled SEK 2,148 million. Sales for the quarter amounted to SEK 6,999 million.

“The favorable market conditions with high price levels have led to a strong result. There has been substantial interest in sawn timber and the demand for pulp remained positive. We estimate that the market outlook will remain positive in the short term, but can also see greater uncertainty in the slightly longer perspective,” said Lotta Lyrå, President and CEO.

“The market is at an exceptionally high level, partly as a reaction to the weaker market conditions in 2020. We should view these unique years – 2020 and 2021 – as a whole and not as two separate years. We can then separate temporary reactions from long-term trends and allow the latter to guide us in strengthening our efficiency, making sustainable decisions, and keeping pace with the times.”

Several investments during the quarter

In the third quarter, Södra made strategic shifts and investments to promote long-term shareholder value. The growing business in cross-laminated timber (CLT) has been established in Denmark. This is in response to the high interest in Södra’s products, and it is the first step towards the establishment of the building system in Europe.

Digitization efforts also intensified during the quarter. During the autumn, one thousand sensors will be installed at Södra’s three pulp mills to provide better control of maintenance work. This is part of the digital initiative that will strengthen operations by integrating data support as a natural part of the industrial process. Through the use of digitization, Södra will increase efficiency and in parallel improve profit by SEK 1 billion by 2024.

“The digitization of the value chain is key to the future family forestry and value generation. Today, consumer behavior and markets are changing rapidly and this places high demands on flexibility and agility. By using digital tools throughout the value chain, Södra will strengthen its ability to generate value for forest estates,” said Lotta Lyrå, President and CEO.

Business areas’ results for the third quarter of 2021

In the Södra Skog business area, operating profit for the period totaled SEK 4 million. The change in earnings was due to weaker margins.

In the Södra Wood business area, operating profit for the period totaled SEK 1,121 million, reflecting the favorable price formation for sawn timber.

In the Södra Cell business area, operating profit totaled SEK 1,248 million for the period. The earnings improvement was due to a considerably stronger price level.

In the Södra Innovation business area, operating profit totaled SEK 56 million for the period. The change is due to the fact that the holding in Silva Green Fuel is now recognized as participation in partnerships and is charged to net financial items.