Swedish forest group Södra swung to an operating profit of SEK 267 million in the third quarter, from a loss of SEK 360 million a year earlier, as pulp delivery volumes increased, energy-product prices rose and overhead costs fell. Net sales rose 2% to SEK 6.49 billion from SEK 6.35 billion, while the operating margin was 4%. The result included a SEK 288 million capital gain after Södra sold its holding in Sunpine; excluding that item, the operating result was a loss of SEK 21 million, Södra said.

“The result is moving in the right direction, and we see that our intensive work on everything we can influence ourselves is having an effect. At the same time, profitability is still not where it needs to be, not least because of the very challenging situation for the wood products business. That is why we are continuing the transformation with undiminished force and full focus on strengthening competitiveness,” said Lotta Lyrå, chief executive, in a statement.

Market conditions remained difficult. Global pulp supply exceeded demand, putting pressure on pulp prices, while demand for paper and paperboard was weak in several markets. Sawn-timber demand was low in the United Kingdom and the U.S., although the Netherlands, Poland and Sweden showed more stable development. The cross-laminated timber market also faced weak construction activity.

Pulp production followed plan, and delivery volumes increased from a year earlier. Export business in sawn timber grew, lifting delivery volumes, while market prices remained lower. Demand for electricity and energy-related products was strong, and markets for tall oil, turpentine and biomethanol developed favorably. Dissolving-pulp demand remained good, with customers holding low inventories.

Overhead costs fell by SEK 200 million, or about 15%, from a year earlier. Södra implemented efficiency improvements and other improvements worth SEK 181 million during the quarter.

Pilot production of lignin began on a small scale. The new tannin plant in Värö entered trial operation, and production started during the quarter. Varberg Energi became the first customer for the Enriched by Södra offering.

Södra Skog posted an operating loss of SEK 75 million, compared with a loss of SEK 32 million a year earlier. Södra Woods reported a loss of SEK 256 million, compared with a loss of SEK 103 million. Södra Cell generated an operating profit of SEK 380 million, compared with a loss of SEK 80 million, while Södra Building Systems reduced its loss to SEK 37 million from SEK 51 million.

Sales in Södra Bioproducts rose to SEK 916 million from SEK 674 million.