In the third quarter of this year, exchange rate fluctuations and higher raw material prices left Södra with losses of 360 million kronor, while at the same time the company is seeking savings of 1 billion kronor and has just completed the sale of forest property assets in Latvia and Estonia worth 720 million euros.
“Our priority is to restore stability in earnings,” stresses Södra President Lotta Lyrå. We plan to make structural savings of 1 billion SEK, and we regard investment to increase the profitability of our sawmills as a priority.
Weak demand, exchange rate fluctuations and much higher raw material prices in the third quarter left Södra with losses of 360 million SEK, compared with a profit of 937 million SEK a year earlier. The company's sales also fell by 9% – to 6.35 billion SEK.
“Our immediate priority is to restore stability in earnings,” said Lotta Lyrå, Södra President. “Over the next 12 months we will activate cost reduction measures amounting to 1 billion SEK. We will selectively prioritise investments that increase profit per cubic metre across all our sawmills.”
Södra management reports that the heaviest losses were in the pulp production sector. Owing to unsatisfactory demand in Europe and a supply surplus elsewhere in the world, lower-margin volumes were diverted to Asia, as a result of which Södra Cell suffered losses of 80 million SEK. Deliveries fell to 480,000 tonnes, which is 43,000 tonnes less than a year earlier. Rising sawlog purchase and processing costs outstripped price increases in the sawn timber sector, which left Södra Wood with losses of 103 million SEK, despite a 6% rise in net sales to 1.57 billion SEK. The cooperative announced that the sawn timber market had been “oversupplied” in the USA and the United Kingdom, while signs of market recovery are visible in Germany and parts of Central Europe.
As reported previously, Södra signed an agreement with Ingka Investments on the sale of forest properties in Latvia and Estonia. The transaction price is 720 million euros. The company notes that this will strengthen its balance sheet and make capital available for strategic projects.
Facing continued pressure over the company's profitability figures, its management stepped up efficiency improvement measures. Södra has a dedicated programme, “Södra Klivet”, which delivered permanent annual improvements of 341 million SEK. Purposeful implementation of the “Södra Klivet” programme contributed an increase of 146 million SEK in the quarter and 341 million SEK since the start of the year. The measures include the elimination of 200 jobs, as well as a reduction in consultancy spending.
Södra continues to invest purposefully in order to ensure its plans are delivered over the long term. The company's board approved an investment of 1.5 billion SEK to expand the Kisa sawmill in Kinda, to increase production capacity by roughly 50% and to build a pellet plant that would expand opportunities in the “Green Transition” market segment. The cooperative's management decided to invest in technology, including an AI-based advanced scanning programme at the Värö sawmill, to improve timber optimisation and quality control.
The Södra report includes information on cash flow after investments, liquidity and short-term assets at the end of the quarter. Analysts point out that additional pulp supply and exchange rate fluctuations are likely to keep price pressure on producers until the beginning of 2026. This will be a serious problem for Scandinavian pulp producers and exporters, who depend on global demand for this product.
Södra management warns that, given low construction activity and tariff uncertainty, the decline in demand for pulp and timber may well persist into the first half of 2026, even though long-term growth in demand for timber is forecast. This demand is being driven by climate policy and rapidly growing interest in the use of wood as a renewable resource in construction.