Seasonal improvement together with maintenance shutdowns will improve the market balance further in spring 2013.
Around 300 people attended Södra's general meeting. The Board's proposal for dividend distribution was accepted and a number of motions were discussed.
Around 300 people - of whom 200 were representatives of Södra members - attended Södra's general meeting, held in Skövde on 15 May. Christer Segerstéen, Chairman, Gunilla Saltin, Acting Group President and CEO for the past year, and Lars Idermark, Group President and CEO, used their presentations to give their opinions on Södra's future. The Board's proposal for dividend distribution was accepted and a number of motions were discussed.
The meeting was opened by Chairman Christer Segerstéen. In his presentation, he touched upon the ongoing forestry debate, which attacks current forest policy and strongly questions the right of ownership. In his view, we have to keep a watchful eye on the debate.
Segerstéen explained that during Södra's 75 years in business, both timber volumes and growth have at least doubled and there is more old forest, dead wood and deciduous forest today than ever. This is the result of good forest maintenance and a forest policy which promotes freedom with responsibility.
The Chairman concluded by mentioning the structural changes in the forestry industry and the consequences of these for forestry.
"We have now returned to the same situation that prevailed when Gösta Edström gathered together forest owners 75 years ago, with the same timber surplus. The difference is that we now have an industry with plenty of investment, and so we are in a good position from which to approach the next 75 years," Segerstéen added.
Gunilla Saltin, who has been the Acting Group President and CEO of Södra for the past year, used her presentation to reflect on three areas which have had a strong influence on Södra in 2012 and which she feels will continue to affect the company in the future: The strong Swedish krona, the very low pace of new construction, and the switch from surplus to deficit with regard to softwood pulp in Europe.
She also explained Södra's major efforts to analyse the business, looking at areas such as reducing costs and focusing on liquidity and cash flow.
"Unfortunately, our joint efforts produced no results last year, but we rounded off 2012 with the knowledge that we have created good conditions that will benefit us as we move forward," Saltin concluded.
Photo: Ola Åkeborn
The first day as CEO
For Lars Idermark, the meeting heralded his first day as Group President and CEO for Södra.
"I am taking on my job with joy, humility and a great sense of responsibility. But above all, what I feel is enthusiasm. Södra is close to my heart. As a forest owner, I have known Södra for a long time," said Idermark.
"It is incredibly exciting for me to be able to work with the Board of Directors, the rest of the executive team and all our staff to develop and lead Södra at a time when changes are taking place at an increasingly fast pace."
In his presentation, Idermark also gave his outlook on the future opportunities available to Södra and the company.
"The Södra of today is a well-managed company. We have a good financial position, a strong brand, talented staff and active owners. This gives us the chance to be proactive in the on-going remodelling of the forestry industry and to influence and lead development ourselves," he said.
"Our entire industry is facing major changes. Our traditional products will form the basis for what we produce, but other applications such as plastics, textiles and fuels will take on more and more significance. This is only the beginning of the beginning. The people who stand to benefit the most are the ones who have the ability to see the future and make the most of the opportunities on offer. We can massively increase the value of the forest if we do things right," Idermark added.
Meeting proceedings and motions
Statutory meeting proceedings took place in the afternoon. The Board's proposal to distribute a dividend of SEK 302 million to members was accepted. This decision means a 3 per cent dividend on deposited capital (SEK 80 million) and 3 per cent on timber consignments (SEK 109 million). SEK 106 million will also be transferred to members' deposit accounts through a contribution issue. In addition to dividends and a contribution issue, a decision was made to pay a 5.7 per cent (SEK 7 million) dividend on debenture contributions, series D.
Sixteen motions were discussed at the meeting besides the usual agenda items. These motions related to a large number of topics, such as Södra's trade policy initiatives and forms of profit share. In response to a couple of these motions, a decision was also made to amend the statutes so that the Chairman of the Board would be elected by the meeting in future.
Ola Hildingsson elected to the Board
Ola Hildingsson, who has been on the Board of Södra Cell since 2012, was elected as a new member of Södra's Executive Committee at yesterday's meeting.
Ola has held a number of senior positions at a number of Swedish forestry companies (Iggesund, Hasselfors, Billerud, SCA and Domsjö) since the mid-1970s. He was the CEO of SCA Timber for a decade and spent seven years, until he retired in 2012, as the CEO of Domsjö Fabriker.
Ola has broad experience of Board work, and his positions have included a Chairmanship at the Swedish Academy of Board Directors in Örnsköldsvik. While he was at SCA, he spent several years as Chairman at what was then Svenska Sågverks- och Trävaruexportföreningen, the Swedish Sawmill and Wood Exporters' Association. He was elected to the Board at Södra Cell last year.
He holds a Master of Science in Forestry from Skogshögskolan, the University of Forestry, in Stockholm. He is married to Ingmor. They have four adult children and have lived for the past two years in northern Uppland, where they devote some of their time to their small plot of land covering some 60 hectares.
Hildingsson takes over from Jan-Olof Thorstensson, who has declined re-election and thus left his position at yesterday's meeting. Jan-Olof was elected in 1993 as a deputy on Södra's executive committee and has been a regular member since 1998.
Winners of scholarships and awards
The winners of this year's Gösta Edström scholarships were announced at the general meeting, and an award was presented in honour of Honorary Chairman Lars-Eric Åström.
The 2013 Gösta Edströms Hedersfond scholarship, worth SEK 75,000, was awarded to Marie Carlsson and Adam Gustafsson, students at Carl Malmsten in Stockholm, for "…demonstrating in their application a genuine interest in Swedish wood and furniture making. After completing their studies at Carl Malmsten, they plan to create a craft collective with carpentry in cooperation with Ormestorp Farm in Östergötland."
The award in honour of Honorary Chairman Lars-Eric Åström, worth SEK 30,000, was presented to Kristina Lindelöf from the Vimmerby forestry area. The reasoning behind the decision to present the award to Kristina was as follows:
"On her farm, Ingebo, Kristina has enhanced social values as well as carrying out forest production. She has perceived the opportunities offered by a farm. She has developed the family forestry business, helping it to stand on its own two feet, and worked together with her neighbours to create a living environment and a range of activities that promote the district. Kristina is full of ideas and encourages everyone around her to invest in the future. She has served on the Council of Trustees and is an active member of Skogsstjärnorna, a network for women involved with forestry in the Vimmerby forestry area."
The market balance has been improved during the first quarter 2013, which has resulted in lower global market pulp stock levels for softwood pulp.
For further information, please contact:
Magnus Björkman, President of Södra Cell International, +46 70 265 75 22
Magnus Berg, Director of Corporate Communications, Södra, +46 70 528 94 83
Seasonal improvement together with maintenance shutdowns will improve the market balance further in spring 2013.
Södra's operating profit for 2012 amounted to SEK -929 million (SEK 1,005 million in 2011). Profit after net financial items amounted to SEK -919 million (SEK 883 million in 2011). Net sales fell by SEK 1,384 million to SEK 16,807 million, primarily as a consequence of a major economic downturn with declining markets for Södra's products and strengthening of the Swedish krona. The reported results also include non-recurring items.
2012 was characterised by very weak development in the markets for Södra products. Net sales fell, mainly as a result of lower pulp and timber product prices and the strengthening of the krona. Production at Södra's industries was also affected by the stoppages which took place at the start of the year.
Comments on the results from Acting CEO and Group President Gunilla Saltin:
"We were facing a relatively weak economic situation at the start of the year, and it was hoped that the situation would gradually improve. But the opposite was true. As the year continued, we were affected more and more by the major recession in Europe, which is our primary market. This extremely weak market situation has affected all our business areas," said Gunilla Saltin, Acting CEO and Group President for Södra.
The results reported for 2012 include a number of non-recurring items, such as the costs involved in the closure of Södra Cell Folla and costs linked with organisational changes.
"We hope we will see an upturn in the markets for our products in 2013. The economic situation remains uncertain, but towards the end of the year we were seeing some stabilisation, mainly on the pulp market. The situation remains uncertain for timber products, but we are seeing signs of a certain amount of improvement. We do not think that present exchange rates will be altered to any great extent.
"When it comes to finding a way out of the economic crisis affecting the world economy, this is something our politicians need to do. As far as Södra is concerned, we need to take responsibility for the company and attempt to deal with the prevailing circumstances. This is why we have implemented a series of measures in order to enhance our competitiveness - measures that will take effect over the year.
"Despite the weak results, Södra's equity ratio remains high, amounting to 61 per cent at the end of the year."
Business in 2012
2012 saw the start of permanent production of textile pulp on one of the pulp lines at Södra Cell Mörrum. A total of just under 100,000 tonnes of textile pulp were produced over the year.
Work on the long-term development of energy activities is continuing within the Group. Decisions were made in 2012 to install a new lime kiln and pellet plant at Värö.
"These investments will allow us to further increase energy efficiency at the Värö plant, while at the same time creating profitable processing of our members' raw timber. We are benefiting from the fact that we have access to raw materials in the form of shavings and the energy to dry the shavings to form pellets, all in the same place," said Gunilla Saltin.
Having spent a relatively long time working on creation of profitability at Södra Cell Folla, where CTMP (chemithermomechanical pulp) is manufactured, Södra Cell made the decision to cease production from November 2012. In December, a declaration of intent was signed between Södra and Mayr Melnhof Karton in which Mayr Melnhof Karton stated its intention to take over the pulp mill and resume production.
Pulp production amounted to 1,782,000 tonnes, compared with 1,912,000 tonnes in 2011. This reduction is explained by the stoppages which took place at the Norwegian mills at the start of the year and the decision to cease production at Södra Cell Folla.
Production of sawn timber products increased by 18,000 m3 to 1,399,000 m3. Södra Timber's operating profit was affected by lower prices for finished goods, the strengthening of the Swedish krona and the high cost of raw materials. The business was also affected by the fact that the commissioning of the new sawmill in Värö has taken longer than planned. The new plant is expected to reach its intended production level early next autumn, almost a year later than originally planned.
Södra Interiör's net sales increased by SEK 41 million to SEK 1,281 million. Weak demand combined with price pressure from competing cut-price imports led to a decline in operating profit.
The affiliated member area at the end of the year amounted to 2.36 million hectares, with 50,888 members. Södra Skog managed a total of 15.6 million m3sub of raw timber, compared with 17.0 million m3sub in the previous year.
Södra suggests SEK 302 million profit share
"2012 saw Södra making massive losses. Despite this, Södra's strong financial position means that we are proposing to the meeting a transfer to members totalling SEK 295 million," said Christer Segerstéen, Chairman of Södra.
Södra's executive committee made a decision at its meeting on 14 February on the following suggested dividend to be submitted to the Annual General Meeting on 15 May 2013:
The following dividend will be distributed to members:
|3 per cent on deposited capital||SEK 80 million|
|3 per cent patronage refunds |
(on wood deliveries)
|SEK 109 million|
SEK 106 million will be transferred to members' deposit accounts through bonus shares. This contribution issue amounts to 10 per cent of outstanding deposited capital contributions.
In addition to dividends and a contribution issue, a 5.7 per cent dividend is proposed on debenture contributions, Series D, equivalent to SEK 7 million.
Comments from Chairman Christer Segerstéen
"2012 saw massive losses for Södra, but despite this we are proposing a profit share of SEK 302 million. This is because it is important for Södra's owners to receive returns on their venture capital and wood deliveries," said Christer Segerstéen, Chairman of Södra.
"Adopting a long-term strategy in terms of our dividend will help to make active forestry and active participation in Södra profitable for our members. The Södra model aims to reward the members who choose to supply all their timber to Södra and who therefore participate fully in our partnership. This proposal characterises this principle," said Christer Segerstéen.
"Södra's balance sheet, which has been built up over a number of good years, makes it possible to propose a dividend to our members despite the massive losses we saw in 2012."
Södra has decided to divest the Tofte chemical pulp mill in Norway. This decision has been made as a result of longstanding difficulties with unsatisfactory profitability at the mill. A process has begun to sell the mill.
Södra Cell's management has been given the task of creating a divestment plan for Södra's ownership of the mill.
"We have been attempting for some time now to make Södra Cell Tofte profitable. The commitment and expertise of the staff have kept quality and productivity at a high level, and they have fought valiantly to keep production costs low. Despite everything we've done, we are now forced to conclude that we have failed to reverse the trend," said Gunilla Saltin, Acting CEO of Södra and President of Södra Cell.
The aim is for Södra to end its involvement in the mill during the second quarter of this year.
The theme of the 75th anniversary celebration is the past, the present and the future, where the focus is on Södra's stability, sustainability and development. It is thanks to the development and innovations that we have achieved that have made Södra what it is today and it is with continued investment and sustainable pursuits that we will face the future.
Södra's 51,000 members, who work hard running their family-owned forestry enterprises, are the backbone of the company. Together they manage a legacy, a raw material, as well as biological diversity, but also continue the hard work started by previous generations to restore forests in southern Sweden.
During the 75 years that Södra has existed, it has been our fundamental goal to support family owned and operated forestry enterprises by creating opportunities for the sale of our member's forest products, but also to develop products and services that will help increase their productivity and profitability. Södra will continue the work to ensure future profitability, sustainable production and encompassing support to help in the work done by family-owned forestry enterprises.
A large, public 75th anniversary celebration, will be held during the international forestry fair Elmia Wood on 5-8 June 2013. The anniversary will also be noted in articles in the membership magazine Södrakontakt, at Södra's annual meeting and at board meetings.
Södra decided to leave the project with Angara Paper company to build a Eniseyskiy LKhK pulpmill in Russia. Swedish company was invited to take part in construction of a greenfield mill in southern Siberia.
Södra’s role in the project was to be an industrial partner and to handle the marketing and sales of pulp from the planned mill.
“The scope of the project has changed from the original plan. From our perspective, the project no longer fits in with our future strategy and we have therefore chosen not to continue with our involvement”, said Gunilla Saltin, Acting CEO and President of Södra Cell.
The project of Eniseyskiy pulpmill has long and difficult history. At the APEC summit in Vladivostok Japanese company Marubeni finally concluded a contract with Angara Paper to finance construction of the mill and purchase of equipment. Marubeni is also going to build a port on Yenissey river for the mill. Angara Paper’s project will be financed at minimal interest rate by the Japanese bank for international cooperation.
Total investment scope of the project is $3.2 billion. It is planned to establish annual production of 900,000 tons of softwood bleached pulp, 300,000 tons of dissolving pulp as well as 380,000 cu m of lumber and 100,000 tons of pellets. The project will create 4,500 jobs, including 3,500 in logging.
Södra Cell is world’s third largest producer of market pulp with annual volume of two million tons.
Mayr Melnhof Karton intends to resume operations at Folla as soon as possible, hopefully early in 2013. The parties' intention is to close the deal during the first quarter of next year.
Södra's pulp mill in Follafoss, Norway, has a capacity of 105,000 tpy of CTMP pulp. Södra announced its intention to divest the mill earlier this year.
Mayr Melnhof, based in Vienna, is a world leader in the field of coated, recycled cartonboard and Europe's leading manufacturer of folding cartons. The group's business is focused on MM-Karton and MM-Packaging.
Södra Timber has procured three progressive kilns for the sawmill in Värö to meet the needs of the planned increase in production. Installation will start immediately and production is expected to start by September 2013.
Södra Timber Värö is planning to introduce a three-shift pattern in September 2013, involving a capacity of 600,000 cubic metres.
"We are seeing an increase in the demand for Södra Timber products from Asia, as well as the USA and a number of countries in Northern Europe. This is why we are planning to introduce a third shift in the autumn. Production will be 80 per cent spruce and 20 per cent pine, which is optimal for the catchment area of the Värö sawmill," said Håkan Svensson, Acting President of Södra Timber.
This increase in production will require additional drying capacity.
"The decision was made to invest in progressive kilns from Valutec, as their operating costs are low. These are fitted with heat recovery and require no staffing. These progressive kilns are also particularly well suited to drying side boards containing a lot of water. This means that they will provide a good complement to the existing chamber kilns, which are more suited to centre cut volume," added Svensson.
The sawmill is currently being fine-tuned so that it can achieve the planned production rate by next autumn.
The market balance will improve further in 2013. Södra will raise the price of its softwood pulp in Europe to US$ 840.00 per tonne, effective from 1st January 2013.
In Södra’s world everything starts with the forest. The forest provides our constant supply of raw materials and is the essential requirement for Södra’s many different operations.
More than 51,000 forest owners in southern Sweden are members of the economic association that is Södra. They own just over half of all privately owned forest in the area, as well as a group of companies that are successful in both Swedish and international markets. This gives them a market for their raw materials from the forest and at the same time provides the foundation for profitable forestry.
Södra is also a large employer. 4,000 people work for the Group, in areas that range from forestry management and environmental conservation to accounting, sales and product development. The Group’s four business areas produce sawn and planed timber goods, interior products, paper pulp and biofuel. In recent years Södra has also become such a large producer of electricity that the Group now produces more electricity than it uses.