Challenging market conditions burden Södra’s 2025 earnings

In 2025, the Södra Group’s reported net sales of SEK 28,302 million (29,487), a negative change of 4 percent compared with the preceding year. Operating loss was SEK 1,290 million (profit: 2,630), corresponding to a negative operating margin of 5 percent (pos: 9). At year-end, return on capital employed was negative 5 percent (pos: 10) and the equity ratio was 56 percent (62).

The operating result deteriorated by SEK 3.4 billion compared with 2024. The triple effect that Södra encountered involving higher raw material prices, negative exchange rate effects and reduced demand impacted earnings by about SEK 4 billion, of which about SEK 2.2 billion is from higher raw material prices and about SEK 1.8 billion from exchange rate effects. At the heart of this situation is a squeezed contribution margin, which has now fallen to 24 percent from 33 percent at the beginning of 2025.

Södra implemented a far-reaching action programme during the year to cut costs and boost competitiveness, the effects of which have not yet been fully reflected in earnings. In parallel, Södra has implemented extensive operational improvements. Overheads have been reduced by SEK 380 million, pulp production reached a record-breaking 1.9 million tonnes and an improved sawing yield in Södra Wood has strengthened earnings. Södra has also surpassed the target set as part of the World-class Efficiency programme, generating cost saving of SEK 518 million.

“2025 was a challenging year for Södra. The triple effect we have encountered of higher raw material prices, rapid exchange rate fluctuations and reduced demand have combined to yield a sharply negative impact on our earnings. At the same time, we have implemented clear steps to realise operational improvements, for example, by setting a new production record for pulp, increased the sawing yield, making extensive efficiency improvements and launching an action programme aimed at reducing overheads. We have really focused on what we can control, but it is not enough when the impact of the combined external factors on our margins is so dramatic,” said Lotta Lyrå, President and CEO of Södra.

Transition and investment to boost competitiveness

Södra’s mission is to refine and renew family forestry by combining competitive wood sales with industrial operations that have the capacity to develop, invest in and sell products with good profitability. In 2025, this balance was put to the test. At the same time, Södra also took important steps to boost its long-term competitiveness.

During the year, Södra continued to invest in the future earnings capacity of its industrial operations. This included the decision on the Kinda sawmill and the start of construction on the kraft lignin plant in Mönsterås. Both initiatives align with our strategy of making more from every tree, and support the ability to offer renewable and low-carbon products to customers. In parallel, extensive improvements were made under the scope of World-class Efficiency and the action programme. Reducing overheads and adjusting work practices as well as efforts in the areas of digitisation, AI and automation are important enablers of these programmes.

Södra has decided to divest its forest holding in the Baltics and is doing so focus more clearly on its members’ forests while strengthening both its balance sheet and its long-term competitiveness. At the same time, the association has reached its target of 3,000 hectares of forest subject to nature conservation measures, thereby strengthening biodiversity and demonstrating the long-term responsibility that family forestry stands for. Combined, these measures aim to both address the current situation and ensure Södra’s robustness going forward.

Profit distribution proposal for the year

Södra’s Board of Directors proposes a profit distribution of SEK 616 million, allocated between wood deliveries and a bonus issue on contributed capital. The aim of the proposal is both to distribute value to Södra’s members and safeguard the association’s financial stability in a strained situation. The Annual General Meeting in Jönköping on 2 June will resolve on the profit distribution.

“2025 put Södra to the test. Therefore, the Board has chosen a profit distribution level that allocates value today but safeguards Södra’s financial robustness and capacity to invest for the future. With this proposal, we want to consider the bigger picture – the profitability of the forest estate, the stability of the association and the potential to continue to develop the industrial operations over time,” said Magnus Hall, Chair of the Board of Södra.

The Board proposes a profit distribution of SEK 616 million consisting of:

• A dividend of up to SEK 560 million on wood deliveries, comprising SEK 190 million (SEK 87/m³sub) for standard saw logs, SEK 162 million (SEK 45/m³sub) for pulpwood, and SEK 208 million (6 percent) for other wood deliveries.
• Bonus issue of SEK 56 million (2 percent).

Business areas’ results 2025

In the Södra Skog business area, operating loss totalled SEK 14 million (profit: 513).
The earnings trend was impacted by slightly lower volumes, mainly from sales of energy products. Demand for sawlogs and pulpwood was high and stable during the year, though declining towards the end of the year with the exception of spruce logs.

In the Södra Wood business area, operating loss totalled SEK 463 million (profit: 23) for the period. The earnings trend was attributable to higher delivery prices, lower volumes and significantly higher sawlog costs.

In the Södra Cell business area, operating loss totalled SEK 258 million (profit: 2,867) for the period. The earnings trend during the year was mainly due to unfavourable exchange rates and increased raw material costs, partially offset by higher volumes.

In the Södra Building Systems business area, operating loss for the period totalled SEK 168 million (loss: 157). The earnings trend was mainly attributable to higher raw material costs, partially offset by higher invoicing volumes.

Sales for the Södra Bioproducts business area are included in other business areas. The business area’s sales amounted to: SEK 3,553 million (3,818).