Segezha Group, one of Russia’s leading timber and forestry companies, has announced plans to reduce its workforce at the Novoeniseysky Wood-Chemical Complex in Lesosibirsk, Krasnoyarsk Krai. The decision will impact approximately 350 of the 1,000 employees at the facility. This move reflects the broader economic challenges facing Russia’s timber industry, particularly in Siberia. The layoffs at the Novoeniseysk sawmill are part of Segezha Group’s strategy to optimize costs amid declining revenues and increased operational expenses.
The Krasnoyarsk Krai forestry sector has been grappling with a structural crisis since 2022, driven by several factors:
- Loss of European markets: Sanctions and trade restrictions have led to the closure of high-margin markets, significantly reducing revenue streams.
- Export challenges: Efforts to redirect exports to Asia have encountered obstacles, including price pressures from Chinese buyers and severe congestion on the Russian Railways’ Eastern route.
- Rising logistics costs: Increased transportation expenses and delays have further eroded profitability.
Segezha Group’s financial results for the first half of 2025 underscore these challenges. Revenue declined by 8% year-on-year to 44.8 billion rubles ($512 million), while adjusted operating income before depreciation and amortisation (OIBDA) dropped 54% to 2.6 billion rubles ($30 million). The company reported an adjusted net loss of 15.9 billion rubles ($182 million), a 68% increase compared to the same period last year.
Decline in product sales
The downturn in Segezha Group’s financial performance is also reflected in its product sales:
- Lumber sales: Decreased by 6% to 1.0 million cubic meters, with China accounting for 78% of the total volume.
- Plywood sales: Fell by 18% to 40 million rubles (€448 million), indicating reduced demand and market share.
- Paper and packaging segment: Experienced a 10% year-on-year decrease in revenue to 15.3 billion rubles.
- Forest resources and woodworking segment: Saw a 40% year-on-year decline in sales to 17.8 billion rubles.
- Plywood and boards segment: Revenue dropped by 40% year-on-year to 4.5 billion rubles.
- House construction segment: Experienced a 47% year-on-year decrease in sales to 2 billion rubles.
These declines are attributed to the company’s ongoing efforts to transform its sales markets and production chains, following sanctions and the loss of a significant share of exports.
Increased debt load
Despite the depreciation of the ruble, which typically benefits exporters, Segezha Group’s financial situation has worsened. In the first half of 2023, the company recorded a loss of 7.6 billion rubles, a stark contrast to a profit of 12 billion rubles during the same period the previous year. Total debt increased by 24% year-on-year to 123 billion rubles, while net debt rose by 20% to 114 billion rubles. This escalating debt load, coupled with declining revenues and rising interest rates, has placed Segezha Group in a precarious financial position. The company’s ability to refinance and reschedule debt payments may be complicated by the unstable interest rate environment in Russia.
The Novoeniseysky Wood-Chemical Complex plays a significant role in the local economy of Lesosibirsk, serving as one of the city’s primary employers. The planned layoffs are expected to have a substantial impact on the community, affecting not only the workers directly involved but also local businesses and services that depend on the sawmill‘s operations.
Segezha Group’s challenges are indicative of broader issues within the Russian timber industry. The sector has been facing declining production, falling prices, and increased costs, leading to financial difficulties for major players. Restructuring loans and seeking alternative markets have become common strategies as companies navigate the complex economic landscape.
The situation underscores the need for strategic planning and adaptability in the face of shifting market dynamics and geopolitical factors. Companies within the timber industry must explore diversification of markets, investment in technology, and cost optimisation measures to remain competitive and sustainable.
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