CEO’s comments

Our focus on value-added products has taken on an increasingly concrete form over the year.

An intensive year for Setra

2019 was the year that society’s interest in industrial wood construction really took off. For us at Setra, it is apparent that our focus on sustainable, valueadded products is entirely in tune with the times.

With the construction and real estate sector facing major climate challenges, interest in wood as a raw material is growing. In 2019, this trend became increasingly clear – both in Sweden and abroad. At a national level, Setra backed the wood construction industry’s target that wood will account for 50% of apartment block construction and 30% of other building by 2025. Achieving this target would bring a substantial cut to the construction sector’s carbon emissions.

At the same time, we have continued Setra’s advances as a modern wood products company. Our vision of Grönsamhet, our clear sustainability profile and our strategy for value-added products have taken on a more concrete form over the year.

Strategic investments moving forward Our large investments in highly efficient production of cross-laminated timber, or crosslam, at our wood industry hub in Långshyttan have got off to a flying start. Custom floor panels, roof panels and walls can now be produced here in a way that speeds up many of the construction industry’s lead times. We look forward to launching new offerings in this area in 2020, not least through deeper collaboration with architects and construction companies.

In Hasselfors, we will soon be inaugurating our ultramodern new planing line, with production expected to start in the spring. This means that here too we will be able to focus on the

An intensive year for Setra

highly efficient manufacture of products in the area of construction timber.

In the summer, work will also begin on building our pyrolysis plant alongside Kastet sawmill in Gävle. In partnership with fuel company Preem, we will convert sawdust into bio-oil, which will then be turned into an alternative to fossil fuels. This exciting project is expected to come on stream in 2021.

In line with our strategic decisions and investments, we divested ourselves of two operations in 2019. In May we sold the planing mill in Skutskär to Valbo Trä, a company that we have good relations with and to which we will continue to deliver raw material. June saw the end of production at Setra Rolfs in Kalix, a unit that has unfortunately suffered poor profitability. Around 70 employees were affected by the closure but, as former Mill Manager at Rolfs, I am still proud of how Setra has handled the process and of the retirement and retraining solutions that the company has been able to offer.

Slowdown in the economy The Setra Group’s operating profit for 2019 amounted to SEK 30 million, compared with SEK 361 million in 2018. Net sales were SEK 3,924 million (compared with SEK 3,873 million). It is important to remember, however, that for the majority of 2018 we enjoyed an extremely strong market, with one of the best results in Setra’s history. Towards the end of 2018, we began to see a slowdown in the construction industry, and this dip then continued until the end of 2019. As a consequence of the market situation, in December we decided to reduce production at our plants in Malå and Skinnskatteberg, which regrettably meant having to make 40 employees redundant.

Despite the downturn in 2019, we managed to successfully balance our stock levels and prices. Like the construction industry, the wood industry is a good early indicator of economic fluctuations.

In the midst of this contraction in the market, we nevertheless managed to capture new market share in China through a 20% increase in our sales to the Chinese furniture industry. In the Japanese construction industry, we noted a slowdown in early 2019, but demand has now begun to pick up again. However, the outbreak of the coronavirus has led to other challenges concerning travel and the distribution of our goods to Asia and other markets. When it comes to the UK, one of our larger markets, we are following developments concerning Brexit. In this context, there are administrative export issues that we need to deal with, but we do not consider them to be particularly concerning. Once our new planing mill in Hasselfors is up and running, we expect a large proportion of its products to serve the construction industry in the UK, but also the USA and Australia. With the spread of the European spruce bark beetle in Europe, there is a risk that large volumes of low-quality timber will flood the market.

Strengthening the organisation from the inside Internally, during the year we have consolidated work on our vision, Grönsamhet and our values of commitment, innovation and responsibility. We have recently also begun the journey of defining what these concepts mean for each and every one of us in the form of actions and behaviours.

In addition, we are maintaining a strong focus on our flows and reviewing efficiency options for our warehouses. In May last year we established a new supply chain organisation, with all our production planners, product managers and raw material team gathered together, in line with new working practices. This change will be most noticeable internally, but also among our raw material suppliers.

Anders Nordmark, acting CEO in 2019

Katarina Levin, Setra’s new CEO

“In my post at Setra I am proud to be involved in advancing the Group’s work on Grönsamhet. The climate benefits of wood truly make it the material of the future,” says Katarina Levin, Setra’s new President and CEO since January 2020.

Katarina has an MSc in Forestry Science plus extensive experience in the sawmill industry, including as Sawmill Manager at SCA’s plants in Tunadal and Bollsta.

“Together with our customers, we have an exciting year ahead of us. Both our crosslam factory in Långshyttan and the new trimming and planing line in Hasselfors are due to launch operations this year, which will strengthen our position in the market for building solutions and processed wood products,” states Katarina Levin.