Södra Reports Q2 2026 Operating Loss as Weak Market Conditions Continue

Swedish forest industry group Södra reported an operating loss of SEK 424 million for the second quarter of 2026 as persistent market weakness, lower demand, and continued imbalance between raw material costs and product prices weighed on earnings. Net sales for the quarter declined 3% year-on-year to SEK 6.947 billion, compared with SEK 7.193 billion in the corresponding period of 2025.

The company's operating margin was negative 6%, while operating loss before depreciation, amortisation and impairment amounted to SEK 10 million, compared with a profit of SEK 15 million a year earlier. Cash flow after investments was negative SEK 979 million, improving from negative SEK 1.155 billion in the prior-year period. The equity ratio stood at 55%.

President and CEO Lotta Lyrå said the results reflected another challenging quarter marked by weak demand, depressed pricing and a significant mismatch between raw material costs and finished product markets.

"We are doing our utmost to reverse our earnings trend by strengthening our cost position and by enhancing efficiency and our commercial capabilities."

Södra said its contribution margin improved from 17% in the first quarter to 22% in the second quarter, although the company stated that further improvement in product market conditions will be required to achieve sustainable profitability. Planned maintenance at the Mörrum mill increased costs by approximately SEK 100 million during the quarter, while inventory timing effects meant that current purchasing prices for raw materials were not yet fully reflected in earnings. According to the company, had those prices been fully reflected during the period, operating profit would have improved by approximately SEK 400 million.

Cost Reduction Programme Continues

Södra continued implementing its Södra Leap action programme aimed at reducing operating costs and improving efficiency. Since its launch a year ago, the programme has reduced operating expenses by SEK 329 million, including SEK 202 million during the second quarter. Measures include reducing consulting costs, reprioritising projects, completing major IT initiatives and workforce adjustments. During the quarter, efficiency improvements under the company's World-class Efficiency programme generated an additional SEK 122 million in savings.

Business Area Performance

Södra Cell, the group's pulp business, recorded sales of SEK 3.427 billion, broadly unchanged from the previous year. Operating loss improved to SEK 88 million, compared with a loss of SEK 221 million in the second quarter of 2025, supported by higher delivery volumes and lower maintenance-related overheads.

Södra Wood reported sales of SEK 1.714 billion, down from SEK 1.787 billion, while posting an operating loss of SEK 215 million versus an operating profit of SEK 3 million a year earlier. The deterioration reflected lower sawn timber delivery volumes, weaker market prices and higher raw material costs.

Södra Skog generated sales of SEK 1.743 billion, down from SEK 1.913 billion, with an operating loss of SEK 12 million as lower delivery volumes reduced revenue.

Södra Building Systems reported stable sales of SEK 63 million and an operating loss of SEK 45 million. The company said exports continued to gain momentum while the share of cross-laminated timber (CLT) in sales increased.

Sales from Södra Bioproducts increased to SEK 888 million, driven primarily by stronger performance in tall oil and electricity.

Strategic and Operational Developments

During the quarter, Södra's Annual General Meeting approved a SEK 696 million profit distribution to members. The company also announced that Cecilia Karlsson will become Chief Financial Officer on 1 December 2026.

Södra completed deliveries of approximately 22,000 square metres of cross-laminated timber to Kaj 16, Gothenburg's tallest timber-frame building, and launched Södra blue S, a new paper pulp combining softwood fibres with oat hulls from Swedish grain processor Berte Qvarn.

The company also integrated innovation subsidiary Södra Ädla AB into its core innovation activities while maintaining its investments in portfolio companies Nordic Forestry Automation and Nordluft. It continued investing in AI-based operator support for forest machines through Nordic Forestry Automation, maintaining an ownership stake of just over 10% following a new funding round.

Market Outlook

Södra said market conditions remain uncertain due to geopolitical tensions, subdued construction activity in Europe and North America, and continued weak demand for forest products. While pulp prices stabilised during the second quarter and electricity prices remained relatively high, the company expects market uncertainty to persist.

Despite the difficult trading environment, Södra said its long-term outlook remains positive, supported by growing global demand for sustainable forest-based products and the ongoing transition toward a bio-based economy.