Setra’s recent press statements have made positive reading.
First the Swedish wood products giant announced late last year that it was moving to automated sorting at its Färila mill. This upgrade includes installation of FinScan visual grading technology, with mechanical engineering and automation systems from CGV, and is described by mill manager Mattias Forslund as "strategically important".
"The market for Färila’s Helsinge spruce is good and production increased 25% in 2013," he said. "Automated sorting will produce even better results."
In March, Setra followed this with details of substantial investment at its Nyby redwood mill. Here it is also moving to automated sorting, installing a ScanWare BoardMaster NOVA scanner, while additionally rebuilding parts of its trimmer with new cutting machinery and control systems.
Improved Results
April brought further good news, in the form of significantly improved first quarter results. Setra’s net sales rose 13% to SKr1.065bn, while profits after tax hit SKr46m, compared to 2013’s SKr28m deficit.
It all combines to paint a picture of a business on an upward curve, an impression confirmed by market director Olle Berg.
"The international market improved through 2013 into 2014, with most GDPs in recovery," he said. "Europe is varied, with some countries advancing more quickly, notably the UK which has been particularly positive for us, but most markets are in play again. We’ve had a good recent run in China, Japan, North Africa and the Middle East, and the US is heading in the right direction."
The fall in the value of the krona has also helped business, as have raw materials prices.
"There’s been a reasonable market balance and log prices through 2013 were fairly stable, although we may now be going to see some increases," said Mr Berg. "At the same time, improving demand and lower overall timber production has enabled us to increase our prices, although from low levels."
While talking in post-recession terms, however, Setra is far from simply turning the clock back to the pre-credit crunch era and pressing the output button. The market and customer requirements have moved on, and the company is adapting accordingly.
Latest capital investment is not "just about volume". The upgrades at Färila and Nyby are both focused on productivity, quality consistency and responsiveness.
"Our aim is to increase yield and efficiency, add value and improve flexibility to be able to deliver products that precisely meet customers’ needs when they need them," said Mr Berg.
Market spread
In common with the wider Swedish timber sector, there has also been a shift in the geographic spread of Setra’s export business, which accounts for 40% of turnover. This is partly the result of the cultivation of new emerging markets to offset recession in Europe, but mainly the fact that these markets have also been evolving at an accelerating pace in their own right
They include North Africa and the Middle East, which now account for 34% of Setra’s exports (21% of turnover), against Europe’s 54% (32%).
"Other than in Syria and Libya it has been surprising how little business there has been affected by the political situation," said Mr Berg. "Public spending has been affected in some countries, but the private sector has continued to buy. These are dynamic markets, with young populations and a shortage of housing. It’s a recipe for increased timber demand, and we’ve also benefited from Russia focusing more towards China."
China itself, of course, has also moved front and centre for Swedish timber suppliers, with Setra recently joining 10 others on a Swedish Wood-organised trade mission.
"It’s no longer a spot market for us, our trade flows there are now constant, but Swedish timber is still relatively unknown, compared with Russian or Canadian," said Mr Berg. "So we’re working together to educate the market that we’re a major, export-oriented industry, with a wide offer, backed by a sustainable raw material supply."
Underlining its commitment to developing its Chinese presence, Setra also opened an office in Guangzhou in December, both to build up sales networks and keep up with rapid market development.
"Most of China’s imports are now destined for domestic consumption, rather than re-export, and it is buying better quality as living standards rise and the population ages," said Mr Berg. "Like the rest of Asia, China is not going to be a dumping ground for cheap timber."
While it widens its export horizons, however, Setra is also intent on rebuilding and developing European markets. It has also just opened a Polish sales office and the UK, where sales rose through last year and this, remains a key focus.
"No softwood supplier in this hemisphere can ignore the UK," said Mr Berg. "It’s not only among the biggest importers, its commitment to sustainable construction and development and timber frame growth indicate strong potential for expansion.
We’re widening our UK product offer, including in glulam and flooring, which has been a growth area in Sweden, and, as the market has become more concentrated and competitive, focused on lead times and service."
Another key development, with potential implications for the UK, has been the creation of a Building Products & Systems division from the merger of Setra’s Wood Products and Plusshus prefabricated building arm.
The latter majors on three- to four-storey apartment buildings in solid wood panels and its merger into the new operation underlines Setra’s aim to develop the business. This includes exports, with the UK, and its burgeoning timber building sector, among likely targets.
Looking ahead across its wider operations, Setra is under no illusions business will be easy. "But the Swedish timber sector is no longer in survival mode," said Mr Berg. "We’re looking at longer-term growth and development."
