Holmen: Wood prices are now 30 per cent higher than the historical average; combining its paperboard and paper into a single business area, strengthening book paper business
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Holmen: Wood prices are now 30 per cent higher than the historical average; combining its paperboard and paper into a single business area, strengthening book paper business
Holmen is a Swedish forest company that gives quality-conscious customers across the world access to renewable products from the Swedish forests. Holman manages the forest actively and sustainably, and use the raw material wisely and far-sightedly. The wood is refined into wood products for sustainable building, and turns whatever is left over into paperboard of world-leading quality and innovative paper products.
2023 was defined by the central banks’ attempts to combat inflation through interest rate rises, which slowed the pace of newbuild construction and stifled consumption. Despite the challenging economic environment, we were able to maintain operating profit for 2023 at a historically good level of SEK 4 755 million, says Mr Henrik Sjölund, President and CEO, Holmen
Higher interest rates contributed to a decline in demand in the previous year, but our business model − creating value based on our forest assets − has proven successful even during these tougher times. With our large forest holdings as a foundation, we grow houses while also harnessing the energy that blows over the treetops and flows in the rivers. We then make renewable packaging, magazines and books from the residual forestry products.
In light of the solid earnings and our strong financial position, the Board of Directors proposes that the dividend per share be increased from SEK 8 to SEK 8.5, with the payment of an extra dividend of SEK 3.
Forest and energy are in-demand resources
The forest has a key role to play in the climate transition and demand for both logs and pulpwood is expected to increase. Although the industry has not been running at its peak, competition in the wood market across the Nordic region remains high and prices climbed further in 2023. Wood prices are now 30 per cent higher than the historical average, and the value of Holmen’s Forest properties has increased by SEK 4 billion to SEK 56 billion. With a little over a million hectares of productive forest land, we have a much sought after resource that literally grows year on year. Our position in the wood market, with good control over raw materials and the entire value chain, ensures the long-term security of our raw material supplies and gives us good opportunities to continue developing our industries.
The European energy market is undergoing a major transition. Roughly half of today’s electricity production in Europe is fossil free, but electricity only accounts for a quarter of total energy consumption and almost all other energy consumption is fossil based. Europe has accelerated its climate transition and is beginning to pave the way for new green industry. As a result, considerable renewable electricity production is going to be needed, and Holmen is continuing to pursue permits for new wind turbines on its own land. Our hydro power additionally contributes to the production of electricity at times of peak demand in order to stabilise the grid. The role of controllable hydro power is also going to become increasingly important as more weather dependent electricity production is added to the energy mix. The energy situation in Europe improved over the year thanks to good gas stocks, lower production levels in energy intensive industries and a milder winter. Continental electricity and energy prices have also stabilised, but at a higher level than before the energy crisis.
There is significant potential for Holmen to deliver more renewable energy, but to realise this, we need permits from the authorities. I really hope politicians will speed up the permit processes, for the sake of Sweden and the green transition. I am pleased to report that in 2023 we obtained permits for two new wind farms. In the first phase we intend to build Blisterliden Wind Farm in Västerbotten for a 20 per cent boost to our production of wind and hydro power. Alongside this, we are also beginning work with Vattenfall on Stormyrberget Wind Farm in Västernorrland, a project that may be ready for an investment decision by 2025.
Adding value at our own facilities Buildings account for considerable emissions of greenhouse gases, in construction and during the building’s lifecycle. As a building material, wood is benefitting from the ongoing transition to more sustainable building, in a trend that is expected to drive up demand for wood products, particularly if concrete and steel are made to carry their true cost to the climate. There is considerable interest in large-scale wood construction, but demand from the rest of the construction market was subdued over the year due to high interest rates. Given our strong position in the wood market, we see good opportunities to develop the wood products business in pace with the increasing demand for sustainable building materials. The first step is to increase capacity at Iggesund Sawmill, and to ramp up the production of glulam and CLT.
Over the years, Holmen has succeeded in developing both paper and paperboard based on fresh wood raw material and a largely fossil-free production process. Our well-invested facilities, access to fossil-free electricity and local wood make us highly competitive, and we are continuing to develop our process industry. Within paperboard, we have excellent opportunities to grow the premium business over time, while in paper we are investing to strengthen our book paper business while also launching a new product for transport packaging.
To further increase our competitiveness and strategic capabilities, we are now combining paperboard and paper into a single business area – Holmen Board and Paper. This move sees us focusing our business model on four distinct business lines: forestry, hydro and wind power, woodworking industry and process industry operations.
Well equipped for the future
Holmen’s strategy draws on the fact that the world is transitioning towards using energy and materials sustainably. Our growing forests bind carbon dioxide and all our products help to replace fossil-based materials such as concrete, steel and plastic. Our electricity production makes it possible for people to charge their electric cars and for companies to run their production on renewable energy sources. Our positive climate impact for 2023 equated to 7.5 million tonnes of CO2e
Our strong financial position makes Holmen well placed to succeed even during tough economic times. Backed up by our own forest and energy production, we have been able to continue developing and advancing our business despite global uncertainties. And that is going to continue.
The above review of Mr Henrik Sjölund, President and CEO, Holmen, has been extracted from the annual report of SAC for FY 2023
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