Strong ending of 2009 in Sveaskog

January 29, 2010 by timbercommunity

Year end report Sveaskog
Year ended on a strong note with increased sales. Good demand for wood raw material, primarily sawlogs and biofuel, with rising prices. The pulp industry accounts for the most positive development with rising order bookings and expectations of higher prices in the future as well. Pulp prices have risen in recent months partly due to a sharp rise in demand, primarily from the Chinese market.
 

Sveaskog is Sweden's largest forest owner and leading supplier of timber, pulpwood and biofuel.

Fourth quarter Sveaskog

    * Year ended on a strong note with increased sales.
    * Good demand for wood raw material, primarily sawlogs and biofuel, with rising prices.
    * Net sales for the quarter amounted to SEK 1,653 million (1,735).
    * Operating profit from operations amounted to SEK 334 million (117).
    * Operating profit amounted to SEK 1,441 million (373), which includes capital gains from the sale of forest properties of SEK 74 million (71) and change in value of forest assets of SEK 1,028 (257).
    * Profit for the period amounted to SEK 1,029 million (598).

Full year

    * Substantial cost savings boost Sveaskog’s earnings.
    * Higher proportion of sawlogs and timber from own forests made positive contribution to earnings.
    * Lower sales volume and average timber prices compared with 2008.
    * Net sales amounted to SEK 6,034 million (7,240).
    * Operating profit from operations amounted to SEK 924 million (744).
    * Operating profit amounted to SEK 2,915 million (1,738), which includes capital gains from the sale of forest properties of SEK 407 million (330) and change in value of forest assets of SEK 1,723 (810).
    * Profit for the year amounted to SEK 1,924 million (1,370).

CEO’s comments Sveaskog

2009 ended on a strong note. The improvement in earnings during the third quarter strengthened further during the fourth, from SEK 184 million to SEK 334 million. For the full year 2009 operating profit from operations improved by 24% to SEK 924 million (744). This despite the fact that net sales decreased by 17% or just over SEK 1.2 billion, due to lower sales volumes and average timber prices.

One explanation for the improved earnings in Sveaskog is a sharp reduction in operating expenses.
At the start of the year Sveaskog initiated an efficiency improvement programme and a review of costs and investments. An adjustment of the organisation and some activities being given a lower priority or postponed led to cost savings of over SEK 150 million.

Operating profit was also positively affected by Sveaskog’s changed product mix in the total sales volume with an increased proportion of sawlogs, as well as a higher proportion of timber from own forests. During the year Sveaskog delivered a total of 10.8 million cubic metres of sawlogs, pulpwood and biofuel, a decrease of 12.6% compared with 2008.

Sveaskog’s sales of biofuel increased in volume by 42% compared with 2008 and accounted for 12% of Sveaskog’s total sales. Sveaskog acquired the Lövholmen industrial site in Piteå in order to further strengthen the biofuel business.

Sales of properties totalled SEK 987 million compared with SEK 1,030 million in 2008. It is worth noting that the total sold area increased by 3% to 39,500 ha. The increase is primarily attributable to the land sales programme designed to strengthen forestry and replacement land sold in northern Sweden.

In line with Sveaskog’s strategy, sales of biofuel increased in volume by 42% compared with 2008 and accounted for 12% of Sveaskog’s total sales.  The business climate in the sawmill industry has stabilised. Order booking are rising in the home market while falling somewhat in export markets.

Business development in the pulp and paper industry remains positive. The pulp industry accounts for the most positive development with rising order bookings and expectations of higher prices in the future as well. Pulp prices have risen in recent months partly due
to a sharp rise in demand, primarily from the Chinesemarket. This has reduced producers’ stocks to the lowest level since 2002, which has provided support for recurrent price increases.

Timber market
Demand for sawn timber remains good. The sawmills have sawlog supplies but stocks are low and in some cases shortages caused production restrictions. Most pulp mills are operating at full capacity while other paper-producing plants are slightly below their normal production level.