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Södra decides in principle on record investments of SEK 2 billion for 2012

Södra's executive committee has set an appropriation limit which will permit a number of offensive investments in 2012. The decision was taken at a meeting held on 7 December 2011.

"In addition to earlier decisions concerning our participation in the development of wind power in 2012, we have now decided on an appropriation limit of SEK 1,895 million," said Group President Leif Brodén.

"This will now permit a number of offensive investments to be made. We are intending to continue investing in product improvements, but first and foremost we now perceive opportunities for further investments in bioenergy. We are taking into account an investment in Lignoboost at Södra Cell Mörrum which will involve a potential investment in new biomaterials in future, as well as making the mill fossil fuel-free. We are envisaging an investment in a new lime kiln at Värö, and we envisage even more pellet production capacity."

"It is important for us to make the most of the business opportunities available to us in bioenergy when our traditional products are finding things considerably more difficult."

Our budget also allows for another investment in textile pulp. The plan is to convert another pulp line for production of textile pulp.

"Hopefully we will have time to identify which of our lines is most suitable prior to the fourth quarter of 2012. Textile pulp offers major benefits in terms of quality, sustainability and ecology, and we believe we will see good growth in years to come. Production of textile pulp will be commencing at Södra Cell Mörrum in December this year."

The forecast results for 2011 indicate an operating profit of almost SEK 1 billion and a return of 10 per cent on capital employed.

"We are seeing a similar result level in our budget for 2012, with uncertain environmental factors," concluded Leif Brodén.

Södra Timber will be limiting production at two sawmills for one week this autumn and at a number of sawmills over the Christmas and New Year break.

"Demand for timber products has fallen, and we have profitability problems. Production capacity must be adapted to fit in with this reduced demand so that we can create the conditions for a price level which will improve our margins," said Peter Nilsson, CEO of Södra Timber.

Södra Timber has decided to shut down production at Långasjö and Ramkvilla in week 44. Kinda, Unnefors, Ramkvilla, Orrefors, Torsås and Långasjö will also be stopping production between 23 December and 9 January. It is estimated that this will reduce production by a total of around 40,000 cubic metres of product. Staff will be offered holiday during these periods.

"These measures will allow us to start the year with balanced stocks, something we must have if we are to see a better market for timber products," said Peter Nilsson.

Södra Timber has acquired all shares in Romerike Trelast, located outside Oslo. The company will operate independently, but will be renamed Södra Timber AS.

Romerike Trelast comprises a sawmill with an annual production of 60,000 cubic metres of sawn timber, a planing mill and a pressure treatment plant. Romerike is situated 40 kilometres north of Oslo, close to Gardermoen Airport, and is currently owned by Romeriks Almenningene and Viken Skog.

Romerike was relocated to its current site in 1995 in connection with the construction of Gardermoen Airport. Romerike has approximately 35 employees and annual sales of about NOK 110 million.

Södra already has operations in Norway, including two pulp mills, a forestry organisation, Södra Interiör and house sales through Trivselhus. The acquisition of Romerike will provide Södra with a platform for sawn and planed timber.

"The acquisition is a logical step to achieve a cohesive forest-industrial structure in Norway. We have a long-term ambition for the acquisition and it strengthens our presence in one of the world's best timber market," says Leif Brodén, Södra's CEO.

Södra Interiör AS will manage and coordinate sales and logistics using its existing sales organisation. The aim is to further develop Romerike into a centre for Södra Timber and Södra Interiör in Norway.

"With this acquisition, we can offer a complete timber range with everything from construction timber to mouldings and flooring. By coordinating sales and logistics with Södra Interiör, we can offer a comprehensive service concept to our building-materials and industrial customers in Norway," says Peter Nilsson, President of Södra Timber.

The transaction is pending final approval by the Norwegian competition authority, which is expected to take between three and five weeks.

Today 3rd October 2011, the new Södra Timber Värö facility has been inaugurated by Minister for Trade Ewa Björling. Through its subsidiary Södra Timber, the Södra forestry Group has invested SEK 1 billion in a new sawmill in Värö that has been relocated from Germany.

The new sawmill is one of the largest and most modern in Europe and represents an investment that will increase competitiveness in terms of both the market and raw material. The sawmill has created new job opportunities and will also generate employment in the forestry and transport sectors. The project involved replacing an existing sawmill in Värö, resulting in a threefold increase in production at Värö to 750,000 cubic metres.

Part of our future
Some 200 guests are invited to attend the inauguration ceremony, the theme of which is "A part of our future."  Ewa Björling will officiate at the inauguration. Together with Södra Timber's President Peter Nilsson, she will lay the final piece of a giant wooden puzzle depicting the sawmill. It symbolises the end of what was a complicated relocation project as well as an important piece of the puzzle moving forward. Following the ceremony, all guests will be invited to take part in a guided tour of the new sawmill.

Increased competitiveness
The aim of the project is to ensure that Södra's sawmill operations remain at the cutting edge, generating long-term profitability and the capacity to pay forest owners.

The investment reinforces Södra's clear ambition to become an international player in the sawmill industry. The market is also moving toward more standardised products, some of which require significant volumes to be competitive in the long term. Consequently, Södra needs a sawmill of this magnitude if it wants to vie for a place in the market of the future.

Short construction period
Project planning and construction took place over a relatively short period. The decision to construct the sawmill was taken in March 2010 and was realised through the acquisition of machinery and inventory from the German sawmill company Klausner Group's facility in Adelebsen, Germany. The sawmill had been in operation for just under a year at that point. It is a collaborative project in which Klausner is responsible for dismantling, relocating and constructing the facility as well as training personnel.

Most of the buildings are new and construction of the sawmill commenced in September of last year. On 19 May, the first log was put through the sorting line, with the first log being sawn on Midsummer Eve. Production at the old sawmill, which is now 40 years old, continued in parallel throughout the construction period. The plan is for the new sawmill to produce 750,000 cubic metres over three shifts. Production is focused on construction timber from pine and spruce.

Combined facility offers unique opportunities
A key part of the project is the location of the new sawmill adjacent to Södra's pulp mill; the combination effect with the pulp mill offers unique coordination opportunities between Södra Cell and Södra Timber. The combined facility generates cost advantages in terms of energy, wood chip transports and overheads.
The sawmill will receive its energy supply from the pulp mill and account for 30 per cent of the mill's wood chip requirements. Another benefit is the proximity to rail lines, the E6 European Highway and the harbour in Varberg. The sawmill will use about 1.5 million cubic metres of timber at full capacity, thus requiring a large harvesting area, from Skaraborg and Dalsland in the north of Sweden to Oskarström in the south. Due to the long distances involved, rail transportation of logs will be used where possible.

"The investment in Värö and the combined facility strengthens our competitiveness and capacity to pay for the raw material" comments Peter Nilsson, President Södra Timber.

Södra is creating a new unit for the group functions of purchasing, productivity and logistics. A new Södra-wide logistics function, Södra Logistics, is being formed with a view to guaranteeing added value from logistics across the entire Södra group. 

Oskar Karlsson will take over as the new Director of Purchasing as of 15 September, and recruitment of a Head of Logistics is set to commence immediately. There will be no changes in productivity. The heads of the three areas Purchasing, Logistics and Productivity will be reporting to Beatrice Kämpe Nikolausson, who will be the Director of the new collective unit.

More in-depth charting of existing logistics operations will take place over the autumn, befre the future organisational structure for Södra Logistics is decided upon. Staff will be allocated to the new function in the spring of 2012. Operational responsibility for call-offs, receiving and loading will remain with the relevant business areas.

On 12 August, a fire broke out in a chip conveyor at Södra's pulp mill in Mönsterås. The wind caused the fire to spread quickly to the chip stacks, but extensive efforts to extinguish the fire meant it was restricted to the surface of the stack and was then put out.


What is happening now?
Clearance work is currently in progress around the stack and in the culverts as it is important to ensure that no soot gets into the production area. The culverts under the chip stacks were relatively undamaged by the fire, but extensive restoration work still needs to be done.

The saw chip stack and pin chip stacks now have to be readied before operations restart so that chips can be supplied from there to the digesters. The chips for these stacks will be transported by road, and after that the temporary conveyor belt for the roundwood stack will be complete. At this point, the digester houses will be able to operate at full capacity.

Asphalting is also being carried out due to undermining of the stack surface and fire-damaged asphalt.

The project to restore and restart the mill, Operation Phoenix, should be finished in September.

Significant events
Ten out of twelve municipalities in the county deployed rescue personnel on site, and it is thought that almost 200 people were involved in putting out the fire.

The unloading of pulp was resumed at full capacity on Thursday, 18 August, and the saw was restarted on 16 August.

Heroic efforts have been made by both the factory's own rescue team and the external rescue services. Now work on planning, repairing, clearing, asphalting, procuring machine parts and resolving any problems that may occur as work progresses is continuing at a tremendous pace.

Urban Eriksson is to be the new CEO of Södra Interiör. He will be leaving his position as President of Södra Skog and Director of Forestry at Södra.
At the same time Håkan Svensson, current CEO of Södra Interiör, will be leaving his position and taking over as the new President of Södra Skog and Director of Forestry.

In other words, the two men will be swapping jobs with one another, remaining on the group executive team at Södra and reporting to Group President Leif Brodén.

"Fortunate circumstances mean that we are able to reposition ourselves with the best interests of everyone at heart. Both Urban and Håkan are men of outstanding calibre, and they have both expressed a great deal of interest in this reshuffle," says Leif Brodén.

Urban Eriksson has been Director of Forestry at Södra for four years. Prior to that, he was Vice President and Acting Group President at Sveaskog. Urban Eriksson is 52 years old and has a solid background in forestry. He is a certified forester and doctor of silviculture, and he also holds an MBA.

Urban was formerly Head of Research at Skogforsk, and he spent ten years in various positions at AssiDomän and, later, Sveaskog. Urban was also the CEO of Svenska Skogsplantor. He is married and has three children.

Håkan Svensson, 46, has been the CEO of Södra Interiör, formerly Gapro, since 2005. Immediately prior to this, he was the CEO of Bengtssons Maskin in Stockholm, a company forming part of the listed technology trading group Indutrade.

Håkan Svensson studied to become a civil engineer in chemical engineering at Lund University and holds an MBA from the School of Business, Economics and Law. He was a member of the sales team and Head of Sales at chemicals group Dow Corning until 2000, when he began working for Bengtssons Maskin. He is married and has two children.

The switchover will take place on 1 September 2011.

The large water cannons are leaving Södra Cell Mönsterås following the fire which broke out on the chip conveyor last Friday. The cannons started to roll out on from the site on Thursday evening (18 August), and the remainder will depart this morning (19 August), returning to the Släckmedelscentralen - SMC - centres in Malmö, Gothenburg and Stockholm from where they were dispatched last week.

Caption: Final extinguishing of the fire at Södra Cell Mönsterås on Thursday.

"This means that all external resources for extinguishing the fire have now been withdrawn," said Michael Bergqvist, leader of the rescue operation and shift manager at Södra Cell Mönsterås.

The rescue services have only twice before dealt with situations on this scale in the county of Kalmar.

"The rescue initiative is the most extensive of its kind in the region since the forest fires in Oskarshamn in 1983 and Påryd in 2009," said Ingemar Idh, leader of the rescue operation and head of rescue operations in the municipality of Mönsterås.
Work is ongoing at the pulp mill at the same time to pave the way for operations to resume. Once hosing down is complete, culverts may need to be emptied for inspection, for example, to determine the extent of the damage.