Q2 report 2022 - Södra

Q2 in figures

Q2 in figures

Södra’s interim report

9.0 61 2.7 2.3 39 13

1 April–30 June 2022

SEK billion net sales

SEK billion operating profit

» Net sales amounted to SEK 8,953 million (7,287). » Operating profit before depreciation, amortisation and impairment amounted to SEK

2,655 million (1,716). » Operating profit totalled SEK 2,325 million (1,326). » The operating margin was 26 percent (18). » Cash flow after investments was SEK 2,159 million (828).

Key indicators Net sales, SEK million Operating profit before depreciation, amortisation and impairment, SEK million Operating profit, SEK million EBITDA margin Operating margin Return on capital employed Equity ratio Cash flow after investments, SEK million No. of members Affiliated forest area, million hectares No. of employees Positive climate effect, Mt CO₂e 1) Lost-time-accidents (LTA) 2) Lost-time-accident rate (LTAR)3) 1) 2) 3)

million ha affiliated forest area

% return on capital employed

2022 Apr-Jun 8,953

2021 Apr-Jun 7,287

2022 Jan-Jun 17,118

2021 Jan-Jun 13,019

2021 Jan-Dec 27,060

2,655 2,325 30% 26% — — 2,159 — — — — 18 13

1,716 1,326 24% 18% — — 828 — — — — 14 11

4,953 4,299 29% 25% 39% 61% 3,503 51,628 2.72 3,188 — 28 11

2,619 1,873 20% 14% 18% 59% 785 53,033 2.73 3,117 — 25 10

6,811 5,316 25% 20% 25% 63% 3,192 51,938 2.72 3,124 14.5 56 11

Market pulp 48 % Wood products 29 % Wood raw material 7 % Forestry services 7 % Energy products 7 % Houses and lots 0 % Construction 0 % Transportation 2 % Other 0 %

Net sales per revenue category.

% equity ratio

LTAR – number of occupational injuries with absence per million hours worked

Södra Skog 18% Södra Wood 29 %

Södra Skog 21 % Södra Wood 30 %

Södra Cell 52 %

Södra Cell 37 %

Södra Innovation 1 %

Södra Innovation 4 %

Other segments 0 %

Corporate 8 %

Sales per business area. SEK 8,953 million in total, excluding internal deliveries.

Employees per business area.

3,188 employees in total.

CO₂e=carbon dioxide equivalents. This key indicator is not calculated quarterly.

LTA (lost-time-accident): occupational injury with absence.

LTAR (lost-time-accident rate): number of occupational injuries with absence per million hours worked.

This is a translation of the interim report. This translation does not replace the original report.

In the event om any lack of clarity or disparity between this translation and the interim report, the interim report will always take precedence.

01

SÖDR A’S Q2 INTERIM REP O RT, 2022

SÖ DR A’S Q2 INTERIM REP ORT, 2022

02

BRIEF Q2 iINko rthe t

Serious accident in the sawmill at Orrefors On 15 June, a serious accident occurred in Södra’s sawmill at Orrefors when several packages of sawn timber that were ready for unloading collapsed. One of Södra’s employees was killed and another person, a contractor’s employee, was seriously injured.

“This is a tragic event – every injury or accident is one too many. Our thoughts are first and foremost with the families of those affected. We have been working actively to provide support for all of our employees at Orrefors with the help of occupational health services and by offering crisis support to everyone,” said Börje Stamblock, Site Manager at Orrefors.

Q

The quarter in brief

Q2 Q2 i korthe t IN BRIEF

Since the accident, Södra has taken immediate action at all units connected to the accident and at the same time, will continue working to improve safety. The cause of the accident is being investigated by authorities in cooperation with Södra.

More partnerships for OnceMore® Our investment in OnceMore® – the world’s first large-scale process for recycling mixed textile waste – is now taking the next step forward with new partnerships: Jack & Jones The international Bestseller clothing chain and the Jack & Jones brand have launched the first-ever clothing collection based on OnceMore®. From 1 June, shirts based on OnceMore® pulp are sold in Jack & Jones’ online stores.

Lindex One million garments with OnceMore® is the result of a new partnership between Södra and the Scandinavian fashion company Lindex. The garments will be included in Lindex ranges from early 2023.

03

SÖDR A’S Q2 INTERIM REP O RT, 2022

Magnus Hall

AGM resolved on profit distribution and elected Board members After two years of virtual meetings, Södra’s Annual General Meeting was held physically in Värnamo on 24 May. Södra’s 52,000 members were represented by 200 delegates who made decisions for exemple on 16 motions, distribution of the year’s profit, Board members and changes to the Articles of Association.

Magnus Hall new Chair

Campaign to inform about family forest owners

During the meeting, Magnus Hall was elected new Chair of the Board. Magnus has been a member of Södra’s Board since 2020. During the meeting, three new members to the Board were also elected – Hannele Arvonen, Carina Olson and Mikaela Johnsson.

The Skogslandslaget (Forest Team) campaign was launched in May to show how family forest owners in Sweden manage their forests wisely and responsibly. The campaign is a collaboration between Södra, Mellanskog, Norra skog and the Federation of Swedish Farmers (LRF).

Profit distribution of SEK 2.2 billion The meeting resolved to distribute profit of SEK 2,239 million to members.

Millions for new research projects The Södra Foundation for Research, Development and Education has granted SEK 7 million to a range of projects, including just over SEK 1.8 million to a study of whether unconventional types of wood, or wood that is currently rejected, can be used for structural components.

“The project will increase opportunities for using hardwood and “unusual” ranges for construction. By using all of our forest raw material in the best way, we are promoting the profitability of forest estates while helping to phase-out fossil fuel materials, which is supporting the net-zero transition,” said Catrin Gustavsson, President of the Södra Innovation business area.

Welcome amendment of the Species Protection Ordinance Sweden has introduced tougher regulations for protected species than are required by the EU, creating major uncertainty for Swedish forestry. But the government has now decided on an amendment to the Species Protection Ordinance, which will bring Sweden into line with the rest of the EU. “We now expect that authorities will promptly align their application with the government’s decisions,” said Olof Hansson, President of the Södra Skog business area.

Södra has been heavily involved in the matter related to the content of the Species Protection Ordinance, and also represented in the Species Protection Inquiry prior to the government’s decisions.

New premium for nature conservation To reward those members who make additional contributions to the association’s joint nature conservation activities, there is now a new premium for nature conservation initiatives. For those members who exempt a larger percentage of their forest land from management activities, Södra will pay a higher price for their wood.

“Forest raw material is needed for the green transition and to reduce our fossil-fuel dependence, but not at the expense of biodiversity. Family forestry shows how active forest management can be combined with the development of natural values,” said Olof Hansson, President of the Södra Skog business area.

SÖ DR A’S Q2 INTERIM REP ORT, 2022

04

COMMENTS BY THE PRESIDENT

CO MMENTS BY THE PRESIDENT

Safety will always come first at Södra. And also in these comments from your President.

During the quarter, one single event overshadowed everything else. On Wednesday afternoon on the 15th of June, a serious accident occurred at Södra Wood Orrefors, where one of our colleagues was killed and another person was seriously injured.

This is a tragic event. Every accident is one too many and our thoughts are first and foremost with the families of those affected.

The background is currently being investigated by the authorities together with Södra, but whenever a tragedy like this occurs, it is obvious that our safety procedures should be – and must be – at the top of our agenda. We have therefore taken immediate action in connection with the accident to ensure that safety measures are in place in Södra Wood’s units as well as all of Södra.

Safety is always our top priority Lotta Lyrå President and CEO

On one hand, Södra’s second quarter was characterised by a strong market, high levels of production and progress with new initiatives. But it was also marked by a serious accident in the sawmill at Orrefors on 15 June, which underlines the importance of always putting safety first.

05

SÖDR A’S Q2 INTERIM REP O RT, 2022

Our strategic Health and Safety project is also ongoing, where we are taking long-term measures and making additional investments to achieve our zero accident vision. No one should ever be exposed to health risks at work – health and safety for Södra’s employees is our top priority.

Result for the second quarter During the quarter, demand for forest products was favourable and prices for our core ranges remained at high levels, especially for pulp. Our sales amounted to SEK 9.0 billion and operating profit totalled 2.3 billion, representing an operating margin of 26 percent.

The result reflects the strong market demand and shows the value of family forestry’s sustainable products. Our mills also delivered high quality, despite the fact that maintenance shutdowns at both Södra Cell Mörrum and Södra Cell Mönsterås led to longer than expected start-ups and burdened the quarter. We have also distributed a record dividend of SEK 2,239 million to our members.

Despite these high levels of delivery, we also began to see more pronounced negative effects of the global turbulence in the second quarter. The effects of the pandemic and the sanctions against Russia have led to challenges for the availability of components and input products, and not least for global supply chains.

All of these factors affect our operations to varying degrees. For example, price levels for raw material inputs, such as chemicals, have risen by a full 50 percent, corresponding to hundreds of millions in increased costs over a full-year. A great deal of work is taking place across various parts of our operations to avoid shortages that could limit our production in the coming quarters.

The development of the global economy is also causing concern.

The uncertain geopolitical situation and persistently high inflation have challenged the economy, which could lead to a weaker market for our core products in the coming quarter. The sawn timber market has already started to decline, with a clear downturn in the consumer-oriented building materials trade, particularly in Sweden and Europe. We are monitoring the uncertain trend carefully and preparing ourselves for a range of future scenarios.

Everything is interrelated. Continued or worsening problems could affect both our production and the economy, and lead to a rapid reversal of our situation.

Initiatives to strengthen Södra’s 52,000 members Due to the growing uncertainty in our external environment, we need to focus – as always – on what we can influence. And that is one single thing: To make smart choices that help Södra, and the association’s 52,000 members, create long-term profitability for all Södra estates. As the bridge between forest estates and the market, we have to build something that is viable both now and in the future.

In the second quarter, we made several investments in line with this direction: » World-class Efficiency. This program is preparing Södra

for the future by maximising the efficiency of our production processes, administrative processes and the entire supply chain. The aim is to improve our underlying profitability by an annual rate of SEK 1 billion, and the project strengthened our result during the quarter. We have now achieved efficiency gains corresponding to SEK 157 million on a 12-month basis. » Nature conservation premium. On 30 May, Södra

launched a new nature conservation premium. This means that those members who set aside a higher percentage of forest land than is required by forest management certification – and contribute to our joint nature conservation activities – will be paid more for their wood. The aim of the nature conservation premium is to reward the benefits created by many of our family forest owners who have diverse objectives and management methods for their forest estates. » Södra Ädla. This new unit has been formed to attract

technologies and skills to family forestry. Södra Ädla will invest SEK 200 million in new companies that, in one way or another, can strengthen the profitability of our 52,000 members. They could be companies that are developing forest management methods, new forestry practices or alternative revenue models. » OnceMore®. The world’s first large-scale process for recy-

cling mixed textile waste is now moving forward and hitting the shelves. Through new collaborations with Lindex and Jack & Jones, OnceMore®-based garments will be available in stores. » Södra Cell Värö. During the quarter, a decision regarding a

major investment in the lime kiln at Värö was made, which will improve stability and equip the mill for the future.

I think we can learn a lot about the future by studying history and the past. That applies especially to those times when things go wrong. That is why we are now working together to ensure that history does not repeat itself, so that nobody is ever exposed to health risks at work, and to achieve our zero accident vision.

We are working together to build a “one Södra” that stands strong – for all of our 3,200 employees and 52,000 members.

SÖ DR A’S Q2 INTERIM REP ORT, 2022

06

THE PERIOD IN BRIEF

THE PERIO D IN BRIEF

The period in brief Operating profit for the second quarter totalled SEK 2,325 million (1,326), the highest quarterly result for Södra to date. Operating profit was favoured by the strong price formation for Södra’s core products and higher delivery volumes for pulp. Sales rose 23 percent to SEK 8,953 million (7,287). Operating profit for the first half-year totalled SEK 4,299 million (1,873). Return on capital employed was 39 percent (18), and the equity ratio was 61 percent at the end of the period.

Market conditions At the end of the second quarter, industrial activity remained favourable, but the outlook is slightly clouded by the geopolitical uncertainty and high inflation rates. The long-term effects of the pandemic on global supply chains are impacting the logistics situation in Europe and in other markets. In addition, the war in Ukraine and sanctions against Russia have had significant effects on both the availability and prices of many components in the industrial sector.

Global GDP growth forecasts are characterised by major uncertainty. Like other economic analysts, the International Monetary Fund (IMF) has downgraded its growth forecasts for several countries. The trend is clear and the question is not whether growth will slow down, but how severe the slowdown will be. The Manufacturing Purchasing Managers’ Index (PMI) has now been falling for one year, even though several regions remain at levels that show continued growth. However, higher prices for input products, energy and transportation are helping to damage business confidence.

Consumer confidence has dropped sharply in the US, the eurozone, China and Sweden. The lower level of consumer confidence is probably due to lower disposable income. High inflation, rising mortgage rates and spiralling prices for electricity, fuel and food are eroding purchasing power.

Pulp prices

SEK 14

SEK/tonne 15,000

12

12,000

1,200

4,000

400

9,000

900

3,000

300

Average delivery prices for sawn timber USD/tonne 1,500

EUR/m³sw GBP/m³sw 500

SEK/m³sw 5,000

6,000

600

2,000

200

8

3,000

300

1,000

100

6

0

0

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

2022

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

2022

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

GBP/SEK (average rate)

SEK/tonne

SEK/m³sw

EUR/SEK (average rate)

USD/tonne

EUR/m³sw GBP/m³sw

USD/SEK (average rate)

The diagram shows the annual average exchange rate.

Source: ECB

SÖDR A’S Q2 INTERIM REP O RT, 2022

The negative trend for the US Manufacturing PMI continued.

Despite a relatively gloomy trend over the past year, the PMI remains at levels that show continued growth. However, inflation has been higher than expected in the US and the Fed raised its benchmark rates by 0.75 percentage points in June, the most aggressive hike since 1994. There is consensus on additional rate hikes ahead, but how often and how much the rates will be raised is uncertain. The Fed has indicated a much stronger path of rate increases ahead to curb inflation and in its latest projection, anticipates rates of just over 3 percent by the end of 2022.

This rate is above the Fed’s own assessment of a neutral level for the economy. At the same time, it is becoming increasingly clear that higher interest rates will have a negative effect on the real economy, with a downward revision of growth forecasts while unemployment is expected to rise.

Foreign exchange rates

10

07

Both long and short-term interest rates have risen since the end of the first quarter. Higher inflation and rising market rates are presenting a new situation compared with the trend over the past decade. The current rate of inflation is far above the inflation targets of the US Federal Reserve (Fed) and the European Central Bank (ECB). The same applies to the Swedish central bank (Riksbank). The market is therefore expecting faster and larger rate hikes from central banks than were expected earlier this year.

The outlook is therefore likely to remain characterised by inflation fears and concerns about global growth.

The price of bleached softwood sulphate pulp in USD continued to rise during the quarter. The diagram shows the average prices for softwood sulphate pulp delivered to European customers.

Source: FOEX PIX and Södra

2021

0

2022

The diagram shows average delivery prices for sawn timber in the most important currencies.

Source: Södra

SÖ DR A’S Q2 INTERIM REP ORT, 2022

08

THE PERIO D IN BRIEF

Inflation expectations are firmly anchored and are impacting US consumer confidence. Surveys show that consumer confidence has dropped to the lowest level since the 1970s. Several data points from the US provide support for the growth concerns, including a major decline in new construction. While some signs of a recession are emerging, the labour market is currently strong and unemployment is at an all-time low.

For China, both global and national factors have led to a deterioration in short-term growth prospects. The zero COVID -19 strategy has led to major economic costs. Measures to contain the pandemic appeared drastic initially, but were effective. In the longer term, however, the local lockdown strategy proved costly in several respects, particularly in the form of spillover effects on global supply chains. In addition to the regional economic setbacks caused by the lockdowns, an ongoing recession in the property sector and the global tightening of economic stimulus have had a negative impact on the Chinese economy. The Chinese government has released a stimulus package, but the measures are mainly focused on boosting the domestic economy.

Economic growth in Sweden is comparable with Europe and the US. The business sector describes the current situation as still favourable, while consumer sentiment has fallen. However, optimism cooled slightly for Swedish export companies at the beginning of the second quarter, probably due to the war in Ukraine and the lockdowns in China. The impact of these events, in the form of higher prices for input products, energy and transportation, is probably a strong factor underpinning the declining optimism.

Weaker consumer optimism is also discernible in Sweden’s neighbouring countries. Consumer confidence has once again fallen to pandemic levels in Finland and Norway. Norway’s PMI dropped in the second quarter but remains at levels that show growth.

A similar pattern exists in Finland, where industrial confidence fell in the second quarter. In Denmark, consumer confidence dropped to the lowest level since the 2008–2009 financial crisis, while the PMI shows continued strength.

Foreign exchange market

Market uncertainty was negative for risk appetite, which helped to weaken the SEK . The SEK therefore weakened against the USD, EUR and GBP in the second quarter.

Wood supply

Demand for saw logs and pulpwood was favourable during the quarter, as well as conditions for transportation and harvesting.

The quarter was characterised by continued efforts to process wood damaged by storms and spruce bark beetles in an effort

09

SÖDR A’S Q2 INTERIM REP O RT, 2022

THE PERIO D IN BRIEF

to save the value of the wood, but also to reduce the risk of new damage in the coming summer and autumn. Demand for pulpwood is expected to be favourable in the coming quarters, but a slight slowdown for sawable ranges is likely due to the general economic situation.

Sawn timber market

Demand for sawn timber was generally favourable during the quarter, despite a clear slowdown in this market segment that is closest to consumers in the building materials trade. The building materials trade slowed in the Swedish market, while demand from industry customers remained favourable. At the time of writing, the Swedish market is cautious and customers are reducing their stocks.

Demand also declined in Södra Wood’s other core markets in Europe, the UK and the Netherlands, especially in the building materials trade. Demand from the wood products industry in the UK remained favourable, however. Other export markets were also characterised by a generally negative trend.

The market outlook for sawn timber is difficult to assess and uncertainty has increased. These uncertainties include lower import volumes from Russia and Belarus, and whether these will exceed or fall short of the declining market demand. Given the deterioration of the economic environment, the probability that falling demand will spread to industry customers is also increasing.

to a considerably stronger price level for Södra’s core products, and a higher delivery volume for pulp, while delivery volumes for sawn timber were in line with the preceding year.

Net sales for the first half-year amounted to SEK 17,118 million (13,019), up 31 percent. The sales trend was due to considerably better price levels and higher delivery volumes for Södra’s core products.

Result

Operating profit for the quarter totalled SEK 2,325 million (1,326), representing an operating margin of 26 percent (18).

Profit before tax was SEK 2,330 million (1,307). Tax expense for

BUSINESS AREAS SEK million

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Eliminations Group

2021 Apr-Jun

Net sales 2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

2022 Apr-Jun

3,715 2,804 4,657 67 35 — −2,325 8,953

3,191 2,689 3,199 38 147 — −1,977 7,287

7,320 5,498 8,778 134 185 — −4,797 17,118

6,295 4,534 5,755 75 383 — −4,023 13,019

12,203 9,230 12,818 173 532 — −7,896 27,060

39 866 1,696 20 0 −296 — 2,325

Sales per business area

Net sales and operating margin

Market pulp 48 % Wood products 29 % Wood raw material 7 % Forestry services 7 % Energy products 7 % Houses and lots 0 % Construction 0 % Transportation 2 % Other 0 %

SEK million 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

2020

2021

Operating profit 2021 2022 2021 Apr-Jun Jan-Jun Jan-Jun 61 827 662 −43 6 −187 — 1,326

33 1,629 3,127 5 0 −495 — 4,299

84 1,206 1,040 −97 −15 −345 — 1,873

2021 Jan-Dec 370 2,779 3,508 −110 −27 −1,204 — 5,316

Operating profit/loss and return on capital employed

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Total SEK 8,953 million, excluding internal deliveries.

At the end of the quarter, the price (PIX) of softwood sulphate pulp was USD 1,430 per tonne and USD 1,308 per tonne for hardwood sulphate pulp, compared with USD 1,342 and USD 1,177, respectively, at the end of the preceding quarter. Underlying demand remained at a favourable level. The current price level of USD 1,430 per tonne is considered highly favourable. The price of dissolving pulp also remained favourable and was USD 1,200 per tonne at the end of the quarter, according to CCFGroup.

Operating profit for the first half-year totalled SEK 4,299 million (1,873), and return on capital employed was 39 percent (18). The result was due to improved prices for Södra’s core products, combined with increased outbound deliveries and increased pulp production.

2022 Apr-Jun

Pulp market

Pulp prices (PIX) showed a positive trend at the beginning of the year, which continued into the second quarter. The favourable price level and strong underlying demand for pulp are expected to continue in the short term. While the geopolitical effects are impacting economic growth, the uncertainty surrounding the market trend from a slightly longer perspective is increasing and is therefore more difficult to assess.

the period was SEK 369 million (212). Operating profit for the quarter reflects the highly favourable prices for pulp and sawn timber. Södra’s well-invested facilities continued to deliver high volumes at a stable level with high quality. Outbound deliveries of pulp were at a higher level compared with the year-earlier period, and outbound deliveries of sawn timber were in line with the year-earlier period.

2022

% 40 35 30 25 20 15 10 5 0

SEK million 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

% 45 40 35 30 25 20 15 10 5 0

2022

Net sales, SEK million

Operating profit/loss, SEK million

Operating margin, %

Return on operating capital (acc.), %

Södra’s financial target is a minimum long-term return of 10 percent on capital employed.

Net sales

During the quarter, consolidated net sales amounted to SEK 8,953 million (7,287), up 23 percent. The positive sales trend was due

SÖ DR A’S Q2 INTERIM REP ORT, 2022

10

THE PERIOD IN BRIEF – BUSINESS AREAS

THE PERIO D IN BRIEF – BUSINESS AREAS

Business areas Södra Skog

Södra Cell

Södra Skog’s operating profit for the period totalled SEK 39 million (61). The change in earnings was primarily due to higher fuel costs. During the period, Södra Skog acquired 4.6 million m³sub,

Wood volume

Net sales and operating margin

million m³sub 6 5 4 3 2 1 0

SEK million 3,500 3,000 2,500 2,000 1,500 1,000 500 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

2022

comprising 53 percent pulpwood and cellulose chips, 35 percent saw logs and 12 percent biofuels. Cumulative operating profit amounted to SEK 33 million (84).

Operating profit/loss and return on operating capital

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

Wood volume, million m³sub

Net sales, SEK million

Of which from members,million m³sub

Operating margin, %

SEK million 350 300 250 200 150 100 50 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 −50 2020 2021 2022

% 12 10 8 6 4 2 0

2022

% 10

Södra Cell’s operating profit for the period totalled SEK 1,696 million (662). The earnings improvement was due to a considerably stronger price level for pulp and a favourable exchange rate for Södra, while both production volumes and outbound deliveries increased. Sales for the quarter amounted to SEK 4,657 million (3,199). The production volume totalled 443 ktonnes (411), comprising 385 ktonnes (343) of softwood sulphate pulp, Production and delivery volume, pulp

8

Net sales and operating margin

4 2

1,000 tonnes 500

0 −2

400

Operating profit/loss, SEK million

300

Return on operating capital (acc.), %

200 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

Södra Wood

2021

SEK million 5,000

% 50

4,000

2,000

% 50

40

1,500

40

3,000

30

1,200

2,000

20

1,000

10

0

0

2022

Production volume, 1,000 tonnes Delivery volume, 1,000 tonnes

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020 2021 Net sales, SEK million Operating margin, %

Production and delivery volume sawn timber

Net sales and operating margin

1,000 m3sw 600 500 400 300 200 100 0

SEK million 3,000 2,500 2,000 1,500 1,000 500 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

2022

to 553 thousand m³sw, compared with 568 thousand m³sw in the year-earlier period. Sales for the quarter amounted to SEK 2,804 million (2,689). Cumulative sales amounted to SEK 5,498 million (4,534) and operating profit totalled SEK 1,629 million (1,206).

Operating profit/loss and return on operating capital

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

2022

% 40 35 30 25 20 15 10 5 0

SEK million 1,200 1,000 800 600 400 200 0

% 100 80 60

2022

−10

SEK million

30

900

20

600 300

10

0

0

−300 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020 2021 2022 Operating profit/loss, SEK million

Return on operating capital (acc.), %

Södra Innovation Södra Innovation’s operating profit totalled SEK 20 million (loss: 43) for the period. The positive trend was due to a favourable performance by SunPine and the fact that Södra’s holding in Silva Green Fuel is now recognised as profit from shares in partnerships and charged to net financial items. The holding was previously recognised as shares in associates and charged to

operating profit. Construction of the demo facility for liquid biofuel production in Silva Green Fuel in Norwegian Tofte continued according to plan. Construction of the new CLT production facility at Värö also continued as planned and the first panels for certification were produced during the quarter. Cumulative operating profit totalled SEK 5 million (loss: 97).

40 20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

Operating profit/loss and return on operating capital

6

100

Södra Wood’s operating profit for the period totalled SEK 866 million (827) and reflects sustained favourable prices for sawn timber.

At the same time, demand for sawn timber decreased during the quarter. The delivery volume from Södra Wood declined marginally

26 ktonnes (28) of hardwood sulphate pulp and 31 ktonnes (40) of dissolving pulp. Cumulative sales for the first half-year amounted to SEK 8,778 million (5,755) and operating profit totalled SEK 3,127 million (1,040). During the quarter, electricity generated at the pulp mills was 445 GWh. Excess electricity amounted to 129 GWh. The excess represented about 29 percent of the generated volume and was sold on the open market.

2021

2022

Production volume, 1,000 m3sw

Net sales, SEK million

Operating profit/loss, SEK million

Delivery volume, 1,000 m3sw

Operating margin, %

Return on operating capital (acc.), %

0

Other segments Others segments posted operating profit of SEK 0 million (6) during the quarter, pertaining to remaining operations in Trivselhus. Cumulative operating profit totalled SEK 0 million (loss: 15).

11

SÖDR A’S Q2 INTERIM REP O RT, 2022

SÖ DR A’S Q2 INTERIM REP ORT, 2022

12

THE PERIO D IN BRIEF

THE PERIO D IN BRIEF

Net financial items

Events prior to the close of the period

Sustainability

Positive climate effect

The Group’s net financial items for the quarter amounted to income of SEK 5 million (expense: 19).

On 12 October 2021, the European Commission initiated un­announced inspections at a number of pulp producers in several European countries, including Sodra. The Commission suspects anti‑competitive practices in the wood pulp sector. The investigation is ongoing.

Sustainability permeates Södra’s Group strategy. Key areas are sustainable forestry, a positive climate effect and occupational health and safety.

Carbon sequestration in forests, products with a low carbon footprint and reduced greenhouse gas (GHG) emissions are key factors for a positive climate effect. The aim of Södra’s Group strategy is to increase the positive climate effect. A positive climate effect originates in the forest, a result of members’ longterm commitment to responsible forest management. By offering low-carbon products that can replace products with a higher carbon footprint, Södra is helping to reduce GHG emissions.

Cash flow Cash flow before investments amounted to SEK 2,648 million (1,289) for the quarter. Cash flow after investments was SEK 2,159 million (828). At the end of the quarter, cash and cash equivalents and current investments amounted to SEK 8,252 million (2,569).

Cash flow after investments SEK million 2,400 2,100 1,800 1,500 1,200 900 600 300 0 −300 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 2022

Events after the close of the period No significant events occurred after the close of the reporting period.

Employees At 30 June, the number of employees was 3,188 (3,117), of whom 23 percent (23) were women.

Men 77 % Women 23 %

Cash flow after investments was SEK 2,159 million during the quarter.

Financial position At 30 June 2022, equity amounted to SEK 23,423 million (21,088 at 31 December 2021), of which paid-up and issued contributed capital accounted for SEK 5,754 million (5,103 at 31 December 2021). Total assets increased to SEK 38,540 million (33,429 at 31 December 2021). At 30 June 2022, the equity ratio was 61 percent (63 at 31 December 2021). At the end of the quarter, Södra’s borrowings comprised loans of SEK 6,190 million (5,085 at 31 December 2021) from members, and a loan of SEK 533 million (600) from the Nordic Investment Bank that matures in April 2026. Södra has a credit agreement in the form of a club agreement, enabling Södra to borrow up to SEK 2,000 million over a period of almost three years. Under the club agreement, Södra holds four bilateral credit facilities totalling SEK 2,000 million with maturities of one to two years. At the end of the period, cash and cash equivalents exceeded interest-bearing liabilities which means that Södra had net cash at 30 June 2022.

Investments, acquisitions and divestments Investments for the quarter amounted to SEK 517 million (606), of which SEK 286 million (275) pertained to Södra Cell, SEK 102 million (158) to Södra Wood, SEK 34 million (48) to Södra Skog and SEK 95 million (111) to Södra Innovation. The investments were mainly focused on expansion, productivity and the environment.

13

SÖDR A’S Q2 INTERIM REP O RT, 2022

Future outlook The ongoing war in Ukraine is a humanitarian tragedy and contributing to the continuation of geopolitical tensions. The war has also had major adverse effects on the world economy, in the form of high inflation and global supply chain disruptions. As a result, global growth is expected to continue slowing, and it is difficult to see any glimmers of hope or tangible signs of improvement at present. The current economic development is likely to affect the markets for Södra’s core products moving forward. The sawn timber market has already been adversely impacted in the consumer-oriented building materials trade.

Sustainable forestry Sustainable forestry involves increasing forest growth responsibly, managing forests to maintain their long-term production capacity and preserving and promoting the biodiversity, cultural heritage and social values of forests.

Södra’s target is a 20 percent higher rate of forest growth by 2050 compared with 2015. Key measures for the achievement of this target are effective forest management, nutrient recycling, forest tree breeding and damage reduction.

During the second quarter, we continued our efforts to adapt forest management to climate change, which is essential for ensuring a high and sustained rate of forest growth. During the quarter, several workshops were held with researchers in this field to raise awareness in Södra, review the climate change adaptation strategy and to investigate possible research collaborations.

Södra’s members can contribute to the conservation and develop­ ment of biodiversity in different ways. Many members who own estates with large areas of high conservation value set aside more area for nature conservation than is required by forest management certification. To make the value of these set asides visible, Södra introduced a nature conservation premium from 30 May 2022. The nature conservation premium means that the landowner receives an extra premium, relative to the area of nature conservation set-asides, for the yield of wood from their entire estate.

Södra’s target is that Scope 1, 2 and 3 GHG emissions shall be 50 percent lower in 2030 compared with the base year of 2020. In the second quarter, Scope 1 and 2 emissions amounted to 15 ktonnes CO₂e (19).

In the second quarter, the strategic climate change position project continued. The roadmap for achieving the emissions-reduction targets will be concretised with both long and short-term activities.

CO₂ equivalents (CO₂e) is a standard unit for measuring greenhouse gas emissions. Each type of greenhouse gas has a different global warming effect. When emissions are reported as CO₂e, all greenhouse gases are included as if they were carbon dioxide. Scope 1 refers to direct GHG emissions that occur from sources that are financially controlled by Södra. Scope 2 refers to indirect emissions associated with the purchase of energy.

Scope 3 refers to other indirect emissions. The greenhouse gases in Scope 1, 2 and 3 are fossil carbon dioxide, methane, nitrous oxide and refrigerants.

However, prices for Södra’s core products are expected to be favourable in the short term. Prices for sawn timber are more difficult to assess, but remained at a favourable level historically at the end of the second quarter.

The long-term outlook for Södra’s core products is expected to remain favourable. Underlying demand for sustainable forest-based products is bolstered by both underlying long-term growth in the global economy and the tightened emissions-reduction targets that are driving the transition towards a more sustainable bioeconomy.

SÖ DR A’S Q2 INTERIM REP ORT, 2022

14

THE PERIO D IN BRIEF

THE PERIO D IN BRIEF

Occupational health and safety The health and safety of Södra’s employees is a top priority and we are working continuously and systematically to achieve our zero accident vision. The target is a lost-time-accident rate (LTAR) of <5 by 2025. In the second quarter of 2022, the number of lost-time-accidents (LTA) was 18 (14) and the LTAR was 13 (11).

In the second quarter, a serious workplace accident occurred in the sawmill at Orrefors. One of Södra’s employees was killed and another person was seriously injured. In cooperation with the

Police and the Swedish Work Environment Authority, an investigation into the background and cause of the accident has commenced. No one should ever be exposed to health risks at work, and every workplace injury is one too many. The accident has further intensified Södra’s focus on occupational health and safety, also via the ongoing strategic Health and Safety project.

In addition, the operational focus in Södra’s business areas, such as “Safety First” in Södra Wood and “Behaviours that Save Lives” in Södra Cell, will continue.

Occupational injuries LTA 20

LTAR 20

15

15

10

10

5

5

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2020

2021

0

2022

LTA (lost-time-accident).

Occupational injury with absence.

LTAR (lost-time-accident rate).

Number of occupational injuries with absence from work per million hours worked.

On behalf of the Board of Directors Växjö, 15 July 2022

Lotta Lyrå President and CEO

Assurance report This interim report has not been audited.

15

SÖDR A’S Q2 INTERIM REP O RT, 2022

SÖ DR A’S Q2 INTERIM REP ORT, 2022

16

Finan cial statements

Financial statements

Condensed consolidated statement of comprehensive income 2022 Apr-Jun 8,953 289

2021 Apr-Jun 7,287 57

2022 Jan-Jun 17,118 391

2021 Jan-Jun 13,019 168

2021 Jan-Dec 27,060 704

−6,587 −330 2,325 5 2,330 −369 1,961

−5,628 −390 1,326 −19 1,307 −212 1,095

−12,556 −654 4,299 −54 4,245 −614 3,631

−10,568 −746 1,873 2 1,875 −286 1,589

−20,953 −1,495 5,316 −83 5,233 −750 4,483

Other comprehensive income Items that will not be reclassified to profit or loss Items that will be reclassified to profit or loss Other comprehensive income for the period Total comprehensive income for the period

55 175 230 2,191

— −66 −66 1,029

78 214 292 3,923

— 26 26 1,615

168 64 232 4,715

Profit/loss attributable to Owners of the Parent Profit for the period

1,961 1,961

1,095 1,095

3,631 3,631

1,589 1,589

4,483 4,483

Comprehensive income attributable to Owners of the Parent Comprehensive income for the period

2,191 2,191

1,029 1,029

3,923 3,923

1,615 1,615

4,715 4,715

SEK million Net sales

Other revenue Operating expenses Depreciation, amortisation and impairment Operating profit Net financial items Profit before tax Income tax Profit for the period

17

SÖDR A’S Q2 INTERIM REP O RT, 2022

Condensed consolidated statement of financial position 30 June 2022

30 June 2021

31 Dec 2021

Intangible assets Property, plant and equipment Biological assets Shares and participations in associates Financial investments Other non-current receivables Deferred tax assets Total non-current assets

66 15,911 3,776 334 102 8 50 20,247

89 15,464 3,354 336 34 19 — 19,296

66 15,599 3,681 256 139 12 11 19,764

Inventories Tax assets Operating receivables Current investments Cash and cash equivalents Total current assets

3,835 24 6,182 4,567 3,685 18,293

3,452 16 4,844 952 1,617 10,881

3,866 38 4,439 1,648 3,674 13,665

TOTAL ASSETS

38,540

30,177

33,429

23,423 23,423

17,932 17,932

21,088 21,088

1,019 101 142 379 1,697 22 3,360

1,074 128 460 141 1,601 7 3,411

1,246 128 243 381 1,663 7 3,668

Current interest-bearing financial liabilities Current interest-bearing operating liabilities Income tax liabilities Other current operating liabilities Total current liabilities Total liabilities

5,804 86 960 4,907 11,757 15,117

4,442 68 209 4,115 8,834 12,245

4,539 77 478 3,579 8,673 12,341

TOTAL EQUITY AND LIABILITIES

38,540

30,177

33,429

SEK million ASSETS

EQUITY AND LIABILITIES

Equity attributable to owners of the Parent Total equity Non-current interest-bearing financial liabilities Non-current interest-bearing operating liabilities Provisions for pensions Non-current provisions Deferred tax liabilities Other non-current operating liabilities Total non-current liabilities

SÖ DR A’S Q2 INTERIM REP ORT, 2022

18

Finan cial statements

Financial statements

Condensed consolidated statement of changes in equity

Parent Company

Comprehensive income for the year Contributed capital, paid-up by members Contributed capital, paid-out to members Dividends to members Closing balance, 30 June 2022

Total equity 21,088 3,923 70 0 −1,657 23,423

Opening balance, 1 January 2021 Comprehensive income for the year Contributed capital, paid-up by members Contributed capital, paid-out to members Dividends to members Closing balance, 30 June 2021

16,759 1,615 67 0 −509 17,932

SEK million Opening balance, 1 January 2022

Condensed consolidated statement of cash flows SEK million Profit before tax

Adjustment for non-cash items and change in provisions Income tax paid Cash flow from operating activities before change in working capital Change in inventories (increase −) Change in operating receivables (increase −) Change in operating liabilities (increase +) Cash flow from operating activities Cash flow from investing activities Cash flow after investing activities Change in contributed capital Dividends paid Change in loans from members Change in loans Change in current investments with maturity > 90 days Other changes Cash flow from financing activities CASH FLOW FOR THE PERIOD

Cash and cash equivalents at beginning of period Exchange gains on cash and cash equivalents Cash and cash equivalents at end of period

19

SÖDR A’S Q2 INTERIM REP O RT, 2022

Result and financial position Net sales rose to SEK 8,292 million (6,435) and operating profit to SEK 2,062 million (1,227). The positive sales trend was due to a considerably stronger price level for Södra’s core products, and a higher delivery volume for pulp, while delivery volumes for sawn timber were in line with the preceding year.

Operating profit for the quarter reflects the highly favourable prices for pulp and sawn timber. Södra’s well-invested facilities continued to deliver high volumes at a stable level with high qual-

ity. Net financial items for the quarter amounted to an expense of SEK 52 million (expense: 1). Profit after net financial items for the period amounted to SEK 2,010 million (1,226). Cumulative net sales amounted to SEK 15,567 million (11,536) and operating profit totalled SEK 3,815 million (1,789).

Members The number of members was 51,628 (51,938 at year-end). The affiliated forest area increased approximately 2,000 hectares to 2.7 million hectares (2.7 at year-end).

Parent Company income statement, condensed 2022 Jan-Jun 4,245 938 −134 5,049

2021 Jan-Jun 1,588 1,527 −125 3,277

2021 Jan-Dec 5,233 1,644 −271 6,606

−180 −1,527 972 4,314

−202 −1,588 118 1,605

−627 −1,144 355 5,190

−811 3,503

−820 785

−1,998 3,192

70 −1,657 1,104 −67 −2,959 −2 −3,511

67 −509 123 −1,091 −62 — −1,472

123 −509 460 −1,159 −743 — −1,828

−8

−687

1,364

3,674 19 3,685

2,300 4 1,617

2,300 10 3,674

SEK million Net sales

Other revenue Operating expenses Depreciation, amortisation and impairment Operating profit Net financial items Profit after financial items Appropriations Profit before tax Income tax Profit for the period

2022 Apr-Jun 8,292 234 −6,163 −301 2,062

2021 Apr-Jun 6,435 −11 −4,905 −292 1,227

2022 Jan-Jun 15,567 323 −11,474 −601 3,815

2021 Jan-Jun 11,536 120 −9,261 −606 1,789

2021 Jan-Dec 24,601 434 −19,034 −1,329 4,672

−52 2,010 — 2,010 −264 1,746

−1 1,226 — 1,226 −186 1,040

−57 3,758 — 3,758 −489 3,269

−163 1,626 — 1,626 −247 1,379

−57 4,615 −377 4,238 −568 3,670

SÖ DR A’S Q2 INTERIM REP ORT, 2022

20

Finan cial statements

FINANCIAL STATEMENTS – NOTES

Parent Company balance sheet, condensed

Notes

30 June 2022

30 June 2021

31 Dec 2021

Intangible assets Property, plant and equipment Shares and participations in Group companies Shares and participations in associates Surplus in funded pension plans Other non-current investments Other non-current receivables Deferred tax assets Total non-current assets

1 13,884 4,414 99 11 33 8 95 18,545

2 13,359 4,471 99 2 33 15 35 18,016

2 13,692 4,308 99 10 33 9 93 18,246

Inventories Current interest-bearing receivables from Group companies Current receivables Current financial investments Cash and bank balances Total current assets

3,106 470 5,695 4,957 3,161 17,389

2,529 795 4,227 1,077 1,262 9,890

3,048 810 4,089 1,883 3,271 13,101

TOTAL ASSETS

35,934

27,906

31,347

7,167 7,843 15,010

6,460 4,518 10,978

6,516 6,812 13,329

7,687

7,214

7,687

390

144

390

8 1,018 6 1,032

9 1,072 7 1,088

8 1,246 6 1,260

Current interest-bearing liabilities from Group companies Current interest-bearing liabilities Current tax liabilities Current operating liabilities and provisions Total current liabilities

660 5,804 830 4,521 11,815

303 4,442 — 3,737 8,482

330 4,539 440 3,372 8,681

TOTAL EQUITY AND LIABILITIES

35,934

27,906

31,347

SEK million ASSETS

Note 1 | Accounting policies Södra applies International Financial Reporting Standards (IFRSs), as adopted by the EU. This interim report for the Group was prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company applies Recommendation RFR 2 Accounting for Legal Entities issued by the Swedish Financial Reporting Board, and the Swedish Annual Accounts Act. The accounting policies applied are consistent with those presented in the 2021 Annual Report, except for new standards and revisions of standards and interpretations applicable to annual periods beginning on or after 1 January 2022 and that have not already been applied in the preparation of the 2021 Annual Report.

A number of new or revised standards and interpretations are not yet effective, and have not been applied in advance in the preparation of these financial statements. No early adoption of updates or amendments that take effect after the 2021 financial year has been planned, and none of these are expected to have any material impact on the consolidated financial statements.

The rules for economic associations were applied for the calculation of current tax. These mean that dividend proposal for the financial year (which will be paid out in the following year) is tax deductible in the current year and has been treated as a deduction in the calculation of current tax. The deduction impacted recognised tax expense in profit or loss for the year.

The new Södra Innovation business area was formed in the first quarter, and is also reported as a segment. Prior periods have been restated, making comparison with previously published information difficult.

All figures in the report have been rounded off to the nearest million, unless otherwise stated. As a result, some percentages and figures in the report may not correspond with the total shown, and may also differ from previously published information.

EQUITY AND LIABILITIES

Restricted equity Non-restricted equity Total equity Untaxed reserves Provisions Non-current interest-bearing liabilities from Group companies Non-current interest-bearing liabilities Non-current operating liabilities Total non-current liabilities

21

SÖDR A’S Q2 INTERIM REP O RT, 2022

Note 2 | Risks and uncertainties No additional material risks have been identified since the 2021 Annual Report. For a description of risks and uncertainties, refer to Södra’s 2021 Annual Report under ‘Risks and risk management’ on pages 50–51. An overall description of a selection of such risk areas, and the key measures for control and management, are presented below.

Södra operates in a global market and is therefore impacted by the general economic trend and currency fluctuations, as well as more industry and Group-specific factors. Efforts to identify, assess

and manage risks are an integral and key component of Södra’s business management. Södra’s Treasury Unit is responsible for managing financial risk, based on a financial policy established by the Board. Operational risks are controlled and managed by the CEO, management team and employees, in accordance with central policies and guidelines.

Södra also has a Business Ethics Council and a Health and Safety Committee that work Group-wide with risk areas such as anticorruption, cyber security and safety risks.

Note 3 | Related parties There were no transactions between Södra and related parties with any significant effect on the company’s financial position or result.

The nature and scope of transactions with related parties are consistent with those that existed in 2021.

SÖ DR A’S Q2 INTERIM REP ORT, 2022

22

FINANCIAL STATEMENTS – NOTES

FINANCIAL STATEMENTS – NOTES

Note 4 | Revenue

Note 6 | Standing timber

The following table shows Södra’s net sales per revenue category: Södra Skog 2022 2021 682 620 — —

SEK million Wood raw material

Wood products Pulp Energy products Houses and lots Forestry services Transportation Construction contracts Other Net sales, goods and services

— 164 — 605 153 — 11 1,615

— 149 — 545 126 — 12 1,452

Södra Wood 2022 2021 — — 2,543 2,446

April-June Södra Cell Södra Innovation 2022 2021 2022 2021 — — — — — — 39 25

— 60 — — — — 14 2,617

4,269 350 — — — — — 4,619

— 46 — — — — — 2,492

3,045 117 — — — — — 3,162

— 28 — — — — — 67

Other segments 2022 2021 — — — —

— 10 — — — — — 35

— — 15 — — 20 — 35

Group 2022 2021 682 620 2,582 2,471

— — 120 — — 27 — 147

4,269 602 15 605 153 20 25 8,953

3,045 322 120 545 126 27 12 7,287

At 30 June 2022, the estimated fair value of Södra’s standing timber was SEK 3,776 million (3,681). The change on the balance sheet was SEK 95 million (16), and mainly pertains to acquisitions of standing timber in the Baltics.

Note 7 | Scheduled maintenance shutdowns At Södra Cell, in addition to routine maintenance during normal operations, there are also planned maintenance shutdowns to perform more extensive maintenance, whereby pulp production is stopped.

The earnings impact of the maintenance shutdowns varies, depending on the extent and nature of the maintenance measures

and the duration of the shutdowns. The cost comprises loss of revenue from production losses, and the direct costs of the maintenance.

In the second quarter of 2022, costs for scheduled maintenance shutdowns amounted to SEK 218 million (168).

Note 8 | Business combinations

Note 5 | Financial instruments Financial assets and liabilities are substantially the same as in the most recently published annual report.

30 June 2022 Carrying amount Fair value 37 37 — — 4,518 4,518 4,567 4,567 3,685 3,685 12,807 12,807 25,733 38,540

Group SEK million Financial investments Other non-current receivables Operating receivables Current investments Cash and cash equivalents Total assets, financial instruments Other assets, non-financial instruments Total assets Non-current liabilities Current interest-bearing liabilities Current operating liabilities Total liabilities, financial instruments Other liabilities, non-financial instruments Total liabilities

1,135 5,890 3,462 10,487 4,630 15,117

The following tables present information about how fair value is determined for the financial instruments that are measured at fair value in the statement of financial position. Fair value measurements are categorised into a three-level hierarchy:

31 December 2021 Carrying amount Fair value 34 34 4 4 3,402 3,402 1,648 1,648 3,674 3,674 8,762 8,762 24,667 33,429

1,177 5,912 3,462 10,551

1,374 4,616 2,348 8,338 4,003 12,341

During the quarter, 55 percent of the holding in the Trivselhus UK Ltd subsidiary was sold to the company’s former management. The remaining ownership interest of 45 percent will now be recognised as Shares and participations in associates.

1,422 4,628 2,348 8,398

Level 1: Based on prices quoted in active markets for identical instruments.

Level 2: Based on direct or indirect observable market data not included in level 1.

Level 3: Based on inputs for which there is no market information available.

Group, 30 June 2022 SEK million Assets Liabilities

Group, 31 December 2021 Level 1 4,567 —

Level 2 — —

Level 3 37 20

Total 4,604 20

The fair value of financial instruments is measured on the basis of quoted market prices at the balance-sheet date. Derivatives are measured on the basis of published price quotations in an active market. For unquoted shares where a reliable market value cannot

23

SÖDR A’S Q2 INTERIM REP O RT, 2022

SEK million Assets

Liabilities

Level 1 1,648 —

Level 2 — —

Level 3 40 1

Total 1,688 1

be determined, the carrying amount is used as an indicator of fair value. The fair value of debt instruments is measured using techniques such as discounting expected future cash flows at quoted market interest rates for each duration.

SÖ DR A’S Q2 INTERIM REP ORT, 2022

24

Quarterly data and segment info rmatio n

Q uarterly data and segment information

Quarterly data and segment information 2022 Apr-Jun

2021 Apr-Jun

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

3,715 (1,615) 2,804 (2,617) 4,657 (4,619) 67 (67) 35 (35) — −2,325 8,953

3,191 (1,452) 2,689 (2,492) 3,199 (3,162) 38 (35) 147 (147) — −1,977 7,287

7,320 (2,985) 5,498 (5,122) 8,778 (8,693) 134 (133) 185 (185) — −4,797 17,118

6,295 (2,766) 4,534 (4,128) 5,755 (5,668) 75 (75) 383 (383) — −4,023 13,019

12,203 (5,223) 9,230 (8,498) 12,818 (12,634) 173 (173) 532 (532) — −7,896 27,060

57 918 1,952 22 0 −294 2,655

81 945 905 −39 7 −183 1,716

69 1,733 3,629 8 2 −488 4,953

117 1,372 1,527 −92 2 −307 2,619

439 3,050 4,494 −29 −11 −1,132 6,811

39 866 1,696 20 0 −296 2,325

61 827 662 −43 6 −187 1,326

33 1,629 3,127 5 0 −495 4,299

84 1,206 1,040 −97 −15 −345 1,873

370 2,779 3,508 −110 −27 −1,204 5,316

1% 31% 36% 30% neg.

26%

2% 31% 21% neg.

4% 18%

0% 30% 36% 4% 0% 25%

1% 27% 18% neg. neg.

14%

3% 30% 27% neg. neg.

20%

— — — — — — — —

— — — — — — — —

5,544 8,321 24,731 344 163 1,236 −1,799 38,540

4,486 5,034 18,847 248 294 2,492 −1,224 30,177

4,953 6,448 21,223 97 324 1,695 −1,311 33,429

NET SALES, SEK MILLION

Södra Skog of which external Södra Wood of which external Södra Cell of which external Södra Innovation of which external Other segments of which external Intra-Group Eliminations Group

OPERATING PROFIT/LOSS, SEK MILLION

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Group OPERATING MARGIN Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Group ASSETS, SEK MILLION Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Eliminations Group

25

SÖDR A’S Q2 INTERIM REP O RT, 2022

2021 Apr-Jun

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

— — — — — — —

— — — — — — —

5,583 3,816 13,922 862 175 — 22,041

5,132 3,289 12,970 165 389 — 21,171

5,479 3,275 13,229 484 421 — 21,350

— — — — — — —

— — — — — — —

1% 85% 45% neg. neg.

— 39%

3% 73% 16% neg. neg.

— 18%

7% 85% 27% neg. neg.

— 25%

−193 914 1,880 −135 50 −357 2,159

−45 454 611 −129 168 −231 828

495 1,136 2,882 −213 121 −918 3,503

262 595 443 −153 174 −536 785

−118 2,218 2,404 −565 233 −980 3,192

34 102 286 95 0 — 517

48 158 275 111 3 11 606

85 166 475 132 0 — 858

91 195 502 150 3 30 971

184 208 1,009 441 3 30 1,875

— — — — — — —

— — — — — — —

662 929 1,212 116 3 246 3,168

626 939 1,187 87 64 213 3,115

616 939 1,207 98 35 223 3,118

AVERAGE OPERATING CAPITAL, SEK MILLION

OPERATING PROFIT BEFORE DEPRECIATION, AMORTISATION AND IMPAIRMENT, SEK MILLION

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Group

2022 Apr-Jun Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Group, average capital employed RETURN ON OPERATING CAPITAL

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Consolidated return on capital employed CASH FLOW AFTER INVESTMENTS, SEK MILLION

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Group INVESTMENTS, SEK MILLION

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Group AVERAGE NUMBER OF EMPLOYEES

Södra Skog Södra Wood Södra Cell Södra Innovation Other segments Intra-Group Group

SÖ DR A’S Q2 INTERIM REP ORT, 2022

26

Alternative perfo rmance measures

Alternative performance measures

Alternative performance measures NET SALES, CHANGE Opening net sales Closing net sales Change

2022 Jan-Jun 13,019 17,118 31%

2021 Jan-Jun 10,993 13,019 18%

2021 Jan-Dec 20,351 27,060 33%

Change in net sales shows Södra’s growth.

OPERATING PROFIT BEFORE DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES SEK MILLION Operating profit Depreciation, amortisation and impairment of assets Operating profit before depreciation, amortisation and impairment

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

4,299 654

1,873 746

5,316 1,495

4,953

2,619

6,811

A complement to operating profit/loss that shows the items on the income statement that affect cash flow.

OPERATING PROFIT BEFORE DEPRECIATION, AMORTISATION AND IMPAIRMENT MARGIN Operating profit before depreciation, amortisation and impairment Net sales EBITDA margin

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

4,953 17,118 29%

2,619 13,019 20%

6,811 27,060 25%

The EBITDA margin shows the percentage of surplus on each SEK earned less operating costs, but before depreciation, amortisation and impairment. This measure gives an overall view of the cash flow generated. The measure is used to produce an overall trend analysis of Södra’s performance, and for comparison with other companies.

OPERATING PROFIT, SEK MILLION

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

Net sales Other revenue Operating expenses Depreciation, amortisation and impairment Operating profit

17,118 391 −12,556 −654 4,299

13,019 168 −10,568 −746 1,873

27,060 704 −20,953 −1,495 5,316

Operating profit shows the surplus on sales less operating costs, including depreciation, amortisation and impairment. This is an essential measure for producing a trend analysis of Södra’s performance, and for comparison with other companies.

OPERATING MARGIN Operating profit Net sales Operating margin

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

4,299 17,118 25%

1,873 13,019 14%

5,316 27,060 20%

The operating margin is a measurement of the proportion of surplus on each sales SEK less operating costs, including depreciation, amortisation and impairment. This surplus is used to cover interest expense and tax, and to generate an acceptable profit. The measure is used to produce an overall trend analysis of Södra’s performance, and for comparison with other companies.

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SÖDR A’S Q2 INTERIM REP O RT, 2022

Södra manages its operations by analysing key indicators. Some of these financial key indicators are defined or specified in applicable regulations for financial information, or by other applicable laws. All others are referred to as alternative performance measures. Södra uses the following alternative performance measures and believes they provide valuable complementary information for analysing Södra’s performance.

The effect of assets held for sale is presented in the Consolidated statement of comprehensive income and Consolidated statement of financial position. The effect of assets held for sale is not included in the Consolidated statement of cash flows nor is it taken into account in calculated key indicators, which is not directly apparent from the income statement and balance sheet presented, since Södra uses these factors to manage all of its operations. Comparative figures for prior years have not been restated for the above-mentioned effect (from 2021 and earlier), but are reconcilable with historical reports.

NET DEBT, SEK MILLION Interest-bearing provisions Interest-bearing liabilities Financial receivables Current investments and cash and cash equivalents Net debt

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

— 7,010 0 −8,252 −1,242

— 5,712 0 −2,569 3,143

— 5,990 0 −5,322 668

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

−1,242 23,423 −0.1

3,143 17,932 0.2

668 21,088 0.0

Net debt shows Södra’s financial strength.

DEBT/EQUITY RATIO, TIMES Net debt Equity Debt/equity ratio

The debt/equity ratio is used to measure Södra’s financial strength and, in combination with the equity ratio, is the measurement most frequently used by management to monitor the Group’s financial leverage.

CAPITAL EMPLOYED, SEK MILLION Assets Financial assets Provisions* Income tax* Non-interest-bearing operating liabilities Capital employed Average

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

38,540 −8,354 −379 −2,657 −4,929 22,221 22,041

30,177 −2,603 −141 −1,810 −4,122 21,501 21,171

33,429 −5,461 −381 −2,141 −3,586 21,860 21,350

* Not considered in the calculation of Operating capital.

Capital employed shows the capital used by Södra and is a component of Return on capital employed.

RETURN ON CAPITAL EMPLOYED Average capital employed Operating profit 12-month operating profit Return

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

22,041 4,299 8,598 39%

21,171 1,873 3,746 18%

21,350 5,316 — 25%

Return on capital employed is a measure of the interest that Södra pays on capital tied up in operations.

EQUITY RATIO Equity Assets Equity ratio

2022 Jan-Jun

2021 Jan-Jun

2021 Jan-Dec

23,423 38,540 61%

17,932 30,177 59%

21,088 33,429 63%

DEFINITIONS Operating profit before depreciation, amortisation and impairment, SEK million Operating profit/loss excluding depreciation, amortisation and impairment of property, plant and equipment and intangible assets.

EBITDA margin, % Operating profit/loss excluding depreciation and amortisation of property, plant and equipment and intangible assets expressed as a percentage of net sales.

Operating profit, SEK million Net sales and other revenue less operating costs including depreciation, amortisation and impairment.

Operating margin, % Operating profit/loss expressed as a percentage of net sales.

Net debt, SEK million Interest-bearing liabilities less interest-bearing assets and cash and cash equivalents.

Debt/equity ratio, times Net debt in relation to equity.

Capital employed, SEK million Assets excluding interest-bearing assets, provisions and liabilities.

Return on capital employed, % Full-year operating profit/loss expressed as a percentage of average capital employed.

Equity ratio, % Equity expressed as a percentage of assets.

An established and key measure of Södra’s financial strength. Shows the proportion of total assets financed by equity. The measure indicates the ability to pay long-term liabilities, since any future losses will be deducted from equity.

SÖ DR A’S Q2 INTERIM REP ORT, 2022

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Financial statements » The interim report for July-September will be published on 20 October 2022 at 11:00 a.m. » Interim reports can be downloaded from sodra.com/financial

This is Södra Founded in 1938, Södra is Sweden’s largest forest-owner association with 52,000 forest owners as its members. We are also an international forest industry group, with operations based on processing our members’ forest raw material. Södra is one of the largest European suppliers of pulp for the pulp market, and has one of the largest sawmill operations in Europe.

Contact information and address Peter Karlsson, CFO telephone +46 (0)470-890 28 e-mail

peter.ma.karlsson@sodra.com

Södra Skogsägarna ekonomisk förening address

Skogsudden, SE-351 89 Växjö, Sweden

telephone +46 (0)470-890 00 e-mail info@sodra.com, medlemsservice@sodra.com website

sodra.com