Our 'BBB' long-term issuer rating on Södra Skogsägarna ekonomisk förening is unchanged following the publication of its third-quarter results.
High pulp and sawn wood prices drive margins
Södra's revenues for the third quarter came in 42% higher than in the corresponding quarter of 2020. The strong performance was due to increased demand and high prices for pulp and sawn wood products, although volumes were somewhat lower than in the corresponding quarter a year earlier. Södra's operating margin for the first three quarters of 2021 was 20%, a significant increase from 3% in the corresponding period of 2020.
Improved cash flows and financial position enable deleveraging
Strong markets for pulp and sawn wood products have supported Södra's cash flows so far this year, enabling visible deleveraging which has exceeded our expectations; reported net debt has decreased to SEK 1.0bn from SEK 3.7bn at end-2020.
We view the currently strong pulp and sawn wood markets and Södra's improved financial position as positive for the company's credit profile. However, at this point we are not adjusting the issuer rating or the outlook in view of possible future market volatility.
This commentary does not constitute a rating action.
Contacts:
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com