Södra, a leading player in the forestry and wood products industry, has posted a negative result for the second quarter of 2025. The result reflects the current global uncertainties, rapid currency fluctuations, and persistently high raw material prices. This financial outcome has raised concerns across the company, which is actively addressing these challenges through an action programme aimed at improving profitability and future competitiveness.
Financial Results for Q2 2025
For the second quarter of 2025, Södra reported net sales of SEK 7,193 million, a decrease of 4% from the previous year (SEK 7,527 million). The company faced an operating loss of SEK 389 million, a stark contrast to the profit of SEK 398 million recorded during the same period in 2024. The result also includes a significant exchange-rate impact of SEK 580 million, exacerbating the downturn compared to the previous year. This operating loss equates to an operating margin of -5%, compared to a 5% margin in the same quarter last year. Despite these challenges, Södra’s return on capital employed remained stable at 7%, the same as the rolling 12-month figure for 2024. The equity ratio stood at a solid 57%, reflecting the company’s strong financial position despite current difficulties.
“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.
Factors Affecting Market Performance
Södra’s market performance during Q2 2025 was affected by several external factors. Global recession concerns, trade tariffs, and a stronger SEK against the USD contributed to these market challenges. The strengthening of the SEK particularly impacted Södra’s pulp business, where a large share of volumes are exported. Demand for paper pulp was weaker during the quarter, driven by changes in consumer behaviour.
The sawn timber market was also impacted by high raw material prices. Although seasonal effects and price adjustments in various markets have helped to balance things, the construction sector remains weak. However, there was a positive trend in Södra’s CLT (Cross-Laminated Timber) business, with increased sales and production during the quarter. The proportion of timber used in construction is steadily growing, which has led to a stronger order trend for the autumn.
Södra’s bioproducts division also saw challenges during the quarter, with a decline in the need for solid fuels and district heating. This was further compounded by unplanned disruptions in electricity generation. However, biomethanol production and demand remained stable. The demand for raw materials in the bioproducts sector remains high, although signs of a slowdown are beginning to emerge due to the ongoing global economic situation.
Operational Efficiencies Through World-Class Efficiency Programme
Despite these setbacks, Södra continues to implement its “World-class Efficiency” programme, which has led to significant improvements in operational efficiency. The programme generated annual recurring savings of SEK 115 million, bringing the total savings since its inception in 2021 to SEK 1,671 million. These improvements are crucial for maintaining the company’s profitability during a period of global uncertainty.
Action Programme to Strengthen Competitiveness
In response to the ongoing challenges, Södra has launched an action programme aimed at boosting profitability and ensuring the company’s long-term competitiveness. The programme will focus on optimising costs in operations, increasing volume and production, and enhancing digital capabilities through the use of AI. At the same time, the company is placing strong emphasis on health and safety, with the goal of reducing occupational injuries.
“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.
Strategic Investments and Future Growth
In addition to addressing immediate challenges, Södra is making strategic investments aimed at strengthening its long-term growth prospects. One such investment is the construction of a lignin plant in Mönsterås, which began in May. The plant will produce kraft lignin and is expected to be completed in 2027. It will be the world’s largest producer of kraft lignin and will contribute to a fossil-free future.
Södra is also making strides in its CLT business. Recently, the company delivered the final elements of timber for the construction of Gothenburg Grand Central, where Södra supplied 9,100 m² of CLT for the building’s frame. This project highlights how Södra’s CLT business is supporting the green transition by reducing the building’s carbon footprint.
Furthermore, Södra is investing in digital tools to strengthen its forest management services. The company plans to launch an app for forestry planners in the autumn, combining AI and automated data to better support forest owners.
Q2 2025 Business Area Results
For Q2 2025, Södra’s business areas reported varied results. The Södra Skog business area saw an operating profit of SEK 7 million, down from SEK 46 million in 2024. The decrease was primarily due to lower volumes and increased digital investments.
The Södra Wood business area also experienced a decline in earnings, with operating profit falling to SEK 3 million from SEK 128 million in the same period last year. This decline was attributed to higher saw log costs, partly offset by price adjustments and some negative exchange rate effects.
In the Södra Cell business area, operating loss amounted to SEK 221 million, compared to a profit of SEK 380 million in the previous year. This change was mainly due to the SEK/USD currency trend and maintenance shutdowns.
The Södra Building Systems business area posted an operating loss of SEK 44 million, a worsening from the loss of SEK 26 million in 2024. The weak construction market continued to affect the business.
Södra Bioproducts saw a decline in sales to SEK 704 million, down from SEK 800 million in 2024.
Despite a challenging Q2 2025, Södra remains focused on navigating these uncertain times. Through strategic investments and a proactive action programme, the company is committed to strengthening its position and ensuring long-term sustainability in the global timber and bioproducts market.
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