A stronger krona - a cold shower for the forest industry
As the Swedish krona strengthens against the dollar and the euro, the profits of Swedish export-dependent forestry companies are declining - a severe cold shower, writes Danske Bank in a new market report.

Sweden is one of the world's largest exporters of pulp, paper and sawn timber. In 2024, the total export value of Swedish forest products was approximately SEK 185 billion, according to Danske Bank.

Around 90 per cent of what pulp and paper mills produce is exported. The corresponding figure for sawmills is 75 per cent.

54% of Swedish forest industry products are exported to the European market, while 15% are sold to Asia, around 8% to North and Latin America and 6% to Africa.

The forest industry is greatly affected by exchange rate fluctuations. Costs, mainly domestic wood raw material, are priced in Swedish kronor and revenues are mainly in foreign currency.

Margins are affected

Danske Bank has investigated how currency sensitivity can affect a number of companies.

Rottneros and Södra's profits would have been between 40% and 50% lower if the krona had been as strong as it is today at the same time last year.

For Billerud, SCA and Holmen, profits would have been between 10% and 20% lower, according to Danske Bank's calculations.

The bank writes that currency hedging can cushion the negative effects and that price developments for end products can also affect earnings.

In other words, it is difficult to provide complete forecasts of the effects of exchange rate fluctuations.

- But if you buy raw material from Swedish forest owners and pay in kronor but sell abroad for dollars or euros, then of course the margins are now affected,’ says Oskar Lindström, equity analyst at Danske Bank, in a comment to Dagens industri.

He tells Di that the forestry companies have hedged their operations, which has so far dampened the effect, but when the currency hedges expire, the consequences will be clearer.

- ‘Sooner or later, companies will have to deal with exchange rates. We expect the impact to be fully realised by the end of the year. Everyone is affected, but those with the lowest margins suffer most. The Norwegian company Moelven and the Swedish companies Holmen and Rottneros have already announced cutbacks, as has the Finnish company Metsä Fibre,’ says Oskar Lindström.

Source: skogsaktuellt