Generally improved volumes and market prices helped to ensure a strong result for the first six months of 2010. Operating profit increased to SEK 1,084 million (9) and return on capital employed amounted to 21 per cent (0).

Cyclically adjusted, a real productivity improvement of 2.9 per cent was achieved, equating on a yearly basis to SEK 284 million. Much of this positive result is being achieved from implementing suggestions for improvements made by Södra’s employees. Ideas were implemented at a record pace, and over the first six months of the year, 70 suggestions per week were being taken on board, saving SEK 70 million.

The timber market has been characterised by huge competition. Södra has now contracted timber for the rest of the year. The total cost for the raw timber is estimated to increase over the second half of the year by SEK 330 million.

"With historically high pulp prices in our order books, we are now expecting to see slightly higher stocks for the third quarter, which in seasonal terms is slightly weaker. Some of our traditional pulp customers have not yet been able to increase their end prices in line with the increase in pulp prices over the first six months of the year. Fairly weak deliveries to Asia in the first six months of the year have been fully compensated for by better volumes from our domestic market, Europe. We estimate that all our pulp units will deliver an operating profit for the year which is well in excess of the return requirements," said Leif Brodén, Södra's Group Chief Executive.

"Over the next twelve months, we are expecting to be able to start supplying sulphate pulp for textile purposes. At present only 2 per cent of the world's textile fibres are based on cellulose, which is equivalent to around 4 million tonnes of market pulp. We believe there is fast-growing, major potential in this product field which will replace volumes in traditional segments. Certified renewable forest raw materials have major opportunities for taking market shares from both synthetic and cotton-based alternatives," continued Brodén.

New construction activities in Europe and the USA remain at historically low levels. At the same time, the renovation rate is relatively high on a number of important timber markets. Production in Europe and Canada is being held back due to limited access to raw materials. This means that the timber market is in good balance, and further price increases are to be expected over the third quarter. There is a certain degree of uncertainty in the face of the fourth quarter concerning how the austerity packages now being implemented in Europe will affect the construction and renovation market. Demand for architect-designed personal houses is still high in Sweden. House manufacturer Trivselhus is again delivering positive results and has a strong order book equivalent to six months.

Work on production synergies and new products in the field of Interior Products is being intensified. The launch of new hardwood qualities is continuing throughout the year. The market is undergoing a consolidation phase in which Södra Interiör has been a driving force. Prospects are good for the rest of the year.

The biofuel market is still good, and there is development potential in a number of product areas. Södra believes it can achieve a total of 4 TWh in external biofuel deliveries over the year. Bioenergy deliveries, in a variety of forms, are becoming ever more important for Södra. In the fields of bioelectricity and district heating, 466 GWh (379) was supplied to outside sources over the first six months of the year, and during the year Södra Cell Värö became the world's first sulphate pulp mill to be free of fossil fuels for normal operation. Södra’s target is to convert all its mills to fossil-free operation by 2014.

For further information, please contact:

Leif Brodén, President and CEO, Södra
+46 (0) 705 58 94 26

Mikael Staffas, CFO
+46 (0) 705 11 64 97

Per Braconier, Director of Communications
+46 (0) 70 534 51 66

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