2017 in brief
The international demand for sawn timber was very good in 2017. (Photo: Moelven)
For the Timber division in isolation the export share outside of Scandinavia is 45 per cent, and for the Wood division it is 10 per cent. Both price developments on the international market for sawn timber and exchange rate developments therefore have a major impact on the business. International price levels are rapidly transferred to the domestic market in Scandinavia. In 2017 there has been good international demand for sawn timber. The delivery rate to the Middle East, North Africa and Asia was somewhat reduced in the first six months. This was however not related to the underlying demand for sawn timber, but was due to issues in connection with sea transport and public regulations. These were resolved in the second half of the year. Prices for sawn timber internationally increased compared to the previous year, while currency conditions, in particular against the EUR, contributed to good competitiveness for the export-oriented units. The UK is an important export market for Moelven. Prices in GBP have increased, and compensate the majority of the margin shortfall as a result of the depreciation of the pound following the Brexit referendum.
Moelven Wood Prosjekt AS supplied the facades in untreated cedar to the project “Grilstad Marina” in Trondheim. (Photo: Matthias Herzog)
The Wood division mainly sells its processed wood products on the building materials market in Scandinavia. Demand from this market has been satisfactory, although activity in rehabilitation, conversion and extension (RCE) in Sweden dropped somewhat and stabilised at a lower level after changes to the tax rules related to deductions in 2016. Price levels for the division as a whole increased for both finished goods and raw materials compared to the previous year.
Timber stocks at the start of the year were satisfactory with regard to planned production levels for the winter of 2017. Access to timber in the first half of the year was normal for the season. In the second half of the year access was somewhat reduced in certain areas as a result of the wet autumn. The situation towards the end of the year, and at the end of 2017 timber stocks were satisfactory and on a par with the same time in 2016. For the Swedish units sawlog prices have been on a par with the previous year throughout 2017, while the Norwegian units have seen a slight increase in sawlog prices. Prices for wood chip and fibre products for the Swedish units have been at the same level as 2016. For the Norwegian units currency conditions and costs related to logistics had a certain negative effect in the second half of the year.
Building Systems operates exclusively in building and construction in Scandinavia. Deliveries are to professional players in both the new building and RCE-markets. Demand for the division's products and services have been satisfactory through the year as a whole. The combined order backlog at the end of the year was NOK 105 million lower than the previous year. Market conditions saw somewhat different developments in Norway and Sweden as the year progressed. In Sweden activity levels have remained high, but with signs of a certain slowdown after some years of very high activity. On the Norwegian side the oil slowdown is a thing of the past and market activity has been increasing.
Climate smart construction and architectural innovation in the project “Ängsnäs Terrass” in Huddinge. Building modules supplied by Moelven Byggmodul AB.
Sustainability and the climate challenges the world is facing are attracting more and more attention. This, in combination with increased knowledge and awareness of wood’s properties and opportunities, have led to greater interest in environmentally friendly building with wood as a building material. Among the Moelven Group’s products and services, the deliveries from Wood and Building systems are most visible to the outside world. This concerns both processed wood building materials, bridges and other load-bearing structures in glulam and module-based apartment buildings. In addition, activity in infrastructure is high. Use of wood in connection with this is also on the increase, and is an important cause of the good demand for sawn timber, which is the main product of the Timber companies.
For the Moelven Group sustainability and environmental impact have been central topics for a long time, and are a natural part of the culture and mindset in a business based on wood as a raw material. In the annual strategy work, the board has nevertheless placed even greater emphasis on sustainability in 2017. Starting from 2017, sustainability reporting in accordance with the GRI standards (Global Reporting Initiative) and climate accounts according to the GHG protocol (GreenHouse Gas) are included in public reporting.
Moelven’s mechanical wood business uses raw materials from sustainable forestry. Read more about this in the Group's Sustainability Report for 2017. (Photo: Johan Alp)
Besides the environmental and sustainability theme, HSE has become steadily more important in the strategy work.
The Group has a long-term target of zero injuries – it should be safe to work at Moelven. However, the development in the injury rate has not been satisfactory, with only a marginal improvement in H1 value from 12.8 in 2016 to 12.4 in 2017. In the strategy plan a subsidiary goal has been established for 2020 that the number of lost time injuries per million worked hours (LTI rate) shall be below five and that the number of reported hazardous conditions / near accidents shall be at least 3,500 (one per employee). The goal for sick leave is to reduce this to below four per cent within the end of the strategy period. The health, safety and environment strategy can be summarized in nine points:
- Clear goals
- Clear leadership
- Increased use of resources
- Clear sharing of responsibility
- Increased expertise
- Underpinning systems
- Unambiguous processes and rules
- Incentives and consequences
- Frequent information.
With regard to business, the Group is in a phase where large parts of operations are doing well and with improving results, while other parts of operations still fail to meet the requirements to profitability and returns that have been defined. It is thus important that the right priorities and choices are made, to have the best possible foundation for sustained profitability. The shareholder values in Moelven are best ensured and developed by the organization focusing on developing the units the company currently possesses, which in all likelihood will reach profitability targets in the course of an economic cycle. New investments must be adjusted to the strategic choices that have been made and take place within the applicable financial framework. Investments and growth will mainly take place on the basis of existing business areas.
Efforts on internal improvement work and restructuring in accordance with the action plan that was drawn up in the autumn of 2014 have proceeded with full strength in 2017, and are the main cause of the improved results. In addition, several organizational changes are being implemented, as well as major investment projects that will improve efficiency and profitability. At the Group's two largest sawmills in Sweden, Moelven Valåsen AB and Moelven Notnäs AB, investment projects are being carried out with an overall framework of around SEK 164 million. Besides exploiting the opportunities afforded by new technology, competence development and organizational rationalization have high priority in these projects. Investments will be made in stages, and will be completed by the summer of 2019. At Moelven Byggmodul AB’s factory in Säffle, the investment project for a robotized production line was completed according to plan in the second quarter of 2017. The project, which had a framework of SEK 72 million, almost doubled the overall capacity at the factory and provided more rational production solutions.
At the Corporate Assembly meeting after the annual general meeting on 26 April 2017, Aud Ingvild Storås was elected as new member of the board of directors to replace Mari Wilhelmsen. Beyond this, there have been no changes to the board in 2017. As of 26 April the board has consisted of Olav Fjell (chairman), Trond Stangeby (deputy chairman), Elisabeth Krokeide, Aud Ingvild Storås, Asbjørn Bjørnstad, Martin Fauchald and Lars Håkan Karlsson.
Corporate governance at the Moelven Group is based on the current Norwegian recommendation for corporate governance of October 2014. The Board's report on the Group's policies and practice for corporate governance in accordance with section 3-3b of the Norwegian Accounting Act has been incorporated into the board’s account of corporate governance on page XX. Comprehensive information on the Group’s governing bodies is published at www.moelven.no, and in note 28.
Moelven acquired DLH’s Swedish operations in Hässleholm on 21 November 2016. The acquisition included inventory, warehouses and office premises, and gave Moelven improved market access in southern Sweden and strengthened logistics. In March 2017 it was decided to move the entire storage and processing activity in Malmö to Hässleholm. In connection with the move, Malmö AB, which owned the old warehouse building in Malmö, was sold. The company had no employees. Moelven Wood retains a sales office in Malmö.
On 25 September the Board of Moelven Norsälven AB decided to discontinue sawmill operations. This is because the plant’s technical condition is so poor that even significant investments would most likely fail to turn it into a future-oriented and profitable plant. The closing of Moelven Norsälven is part of a structural overall assessment required to create better overall profitability in the Moelven Group.
A total of 42 employees are affected by the closure. Production at the facility stopped at the turn of the year, and liquidation will largely be completed in the first quarter of 2018.
Moelven Våler AS and Moelven Løten AS have established joint management and administration. The main reason for the two companies to enter into an administrative partnership is to save costs and strengthen both companies' competitiveness. The companies will both continue as separate legal entities, but with administrative coordination.
On 10 October the two wholly-owned Timber companies Moelven Ransbysågen AB and Moelven Notnäs AB were merged into one company with the latter as the acquiring company. The merged company is called Moelven Notnäs Ransby AB. The companies have for an extended period shared management and market organization. The operations will continue with two production locations.
With effect from 1 January Moelven Tom Heurlin AB in Ånimskog was transferred from Timber to Wood. In the course of 2017, the company’s activities have been restructured and adapted to Wood’s market strategy within Scandinavia. The company’s planing activities are included in the production and processing of interior panels together with the sister companies Moelven Värmlands Trä AB (Säffle) and Moelven Notnäs Wood AB (Notnäs). The structure process entails downsizing of 16 employees in Ånimskog and 9 in Säffle. The merger between the companies was completed with effect from 27 December, with Moelven Notnäs Wood AB as the acquiring company. Operations continue at three production locations under the company name Moelven Wood Interiör AB.
Moelven Polska Sp. z o.o was established in the fourth quarter of 2017 as a wholly-owned subsidiary of Moelven Industrier ASA. The company is a sales company and will have no production of its own. Moelven Polska Sp. z o.o. will serve the Polish market, primarily with sales of Timber’s products.