Södra faces challenging quarter with a strong focus on profitability and competitiveness

In the second quarter of 2025, net sales for the Södra Group amounted to SEK 7,193 million (7,527), down 4 percent compared with the year-on-year period. Operating loss totalled SEK 389 million (profit: 398), where exchange-rate effects of just over SEK 580 million were charged to earnings compared with the year-earlier period. The result corresponds to an operating margin of –5 percent (5). Return on capital employed was 7 percent (7), rolling 12-month, and the equity ratio was 57 percent.

“The second quarter was challenging for Södra. Increased global uncertainty, combined with rapid currency fluctuations and high raw material prices, has created a triple external effect that puts pressure on our profitability and has had a negative impact on our results. In addition, two scheduled maintenance shutdowns have burdened the result by approximately SEK 240 million. Given the assessment that these external conditions will persist, we are facing a decisive joint effort going forward and are therefore initiating an action programme to strengthen our competitiveness,” says Södra’s President and CEO Lotta Lyrå.

The markets for Södra’s products were affected by the current recession and increased concern about trade tariffs. The rapid strengthening of the SEK against the USD also led to a clear translation effect, particularly in the pulp business where a large share of volumes is exported. At the same time, the quarter was marked by weaker demand for paper pulp, partly due to changes in consumer behaviour. Earnings were also affected by production losses in connection with two scheduled maintenance shutdowns.

In sawn timber, the high raw material prices remained a challenge, although seasonal effects and price adjustments in several markets have provided a degree of balance. The construction market remains weak, but Södra’s CLT reported a positive trend with increased sales and production during the quarter. The proportion of timber used in construction is increasing, which is reflected in a stronger order trend for the autumn.

Sales of bioproducts were affected by a decline in the need for solid fuels and district heating during the spring, and by unplanned disruptions in electricity generation. In parallel, biomethanol demonstrated stability in terms of both production and demand. In relation to raw materials, demand remains high, but with signs of a slowdown moving forward due to the global situation.

World-class Efficiency – our way of working with continuous improvements – generated improvements and efficiencies during the quarter with an annual recurring effect of SEK 115 million and the total effect since the start in 2021 has been SEK 1,671 million.

Södra initiates action programme

As part of efforts to address the current business environment and to stand better equipped for the future, Södra is initiating an action programme to strengthen profitability and limit any negative impact. This will entail clear priorities and increases focus on costs in operations, volume and production. At the same time, focus will remain on health and safety with the aim of reducing the number of occupational injuries. The programme will also intensify the development of digital capabilities and utilisation of AI, as part of strengthening the long-term competitiveness of operations.

“Our competitiveness is always high on the agenda, and maintaining it even in challenging times is what underpins our actions moving forward. The action programme will take us to a new level of competitiveness. It will require leadership and courage in day-to-day operations, without losing sight of the horizon. Because our mission stands firm – to refine and renew family forestry. A competitive Södra has a significant role to play in this,” said Lotta Lyrå.

Despite a challenging quarter, Södra is making important progress through several strategic investments and a stronger offering to customers and members. One such example is the construction start of our lignin plant in Mönsterås, which took place in May. The investment in our own kraft lignin production will strengthen the profitability of both Södra and the forest estate, while contributing to a fossil-free future. The facility is scheduled for completion in 2027 and will then be the first commercial plant of its kind in Sweden and the world’s largest producer of kraft lignin.

The last elements were recently delivered of the timber structure to Gothenburg Grand Central, the new station building in Gothenburg. Over the past six months, Södra has delivered a total of 9,100 m² of cross-laminated timber for the building’s frame. The project shows how Södra’s growing CLT business is contributing to the green transition by reducing the building’s carbon footprint while storing carbon dioxide throughout its entire life.

As a step to increase digital capacity and strengthen members in their forest ownership, Södra is investing in an initiative where broad knowledge of forest owners’ needs is combined with AI and automated data. The app for forestry planners will be launched in the autumn and the forest management plan as a product will be developed in parallel.

Business areas’ results for the second quarter of 2025

In the Södra Skog business area, operating profit totalled SEK 7 million (46) for the period. The earnings trend was mainly due to lower volumes and increased digital investments.

In the Södra Wood business area, operating profit totalled SEK 3 million (128) for the period. The earnings trend during the quarter was mainly due to significantly higher saw log costs, partly offset by higher delivery prices and some negative exchange rate effects.

In the Södra Cell business area, operating loss totalled SEK 221 million (profit: 380) for the period. The change in earnings during the quarter was mainly due to the SEK/USD currency trend and scheduled maintenance shutdowns.

In the Södra Building Systems business area, operating loss for the period totalled SEK 44 million (loss: 26). The earnings trend was primarily attributable to persistently low volumes due to a weak construction market.

Operating profit for the Södra Bioproducts business area is included in other business areas. The business area’s sales for the period amounted to SEK 704 million (800).