2018 in brief
In 2018 the group continued its positive developments from previous years, and increased operating revenues to NOK 11.0 billion (10.8) and the operating profit to NOK 586.2 million (420.4). The group's rate of return on employed capital increased to 19.0%, up from 14.2%.
With exports to more than 40 countries and on several continents, Moelven is dependent on developments in the global economy. Combined, approx. 15 per cent of the group's turnover is in markets beyond Scandinavia, mainly in the euro zone, the UK, Middle East, North Africa and Asia. It is mainly sawn timber that is exported. For Timber in isolation the export share outside of Scandinavia is 45 per cent, and for Wood 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. Both directly for export revenue, but also indirectly because international price levels rapidly impact the home market in Scandinavia.
In 2018 international demand for sawn timber has been good, and the prices for sawn timber increased compared to the previous year. At the same time the currency conditions, in particular against the EUR, have contributed to continued good competitiveness for the export-oriented units. The UK is an important export market for Moelven. Market activity was good in 2018, but the Brexit issue is causing uncertainty around further developments in terms of both market activity and market access. A hard Brexit may lead to significant changes in trade with the UK, and Moelven is implementing measures to reduce risk in relation to this.
The Wood division mainly sells its processed wood products on the building materials market in Scandinavia. Demand from this market has been satisfactory, although building activity in Sweden has dropped somewhat compared to 2017. Price levels for the division as a whole increased for both finished goods and fuel compared to the previous year.
Sawlog inventories at the start of the year were satisfactory with regard to planned production levels for the winter of 2018. Sawlog access during the winter months was normal for the season, although large snowfalls provided certain logistics challenges in some regions. The dry summer led to a great risk of forest fire and caused a challenging supply situation in some locations. With somewhat more precipitation as the autumn progressed, the risk of forest fires however decreased and led to a normalisation of the supply situation. At the end of the year, sawlog access was satisfactory and inventories were somewhat higher than at the beginning of the year. Both sawlog prices and prices for chip and fibre products have been higher in 2018 than the previous year.
Building Systems operates exclusively in building and construction in Scandinavia. Deliveries are to professional players in both the new building and renovations, extensions and conversions markets. Market activity in these markets has declined somewhat in 2018, and demand for the division’s products and services was lower than the previous year. The overall order backlog fell by NOK 510 million and made it necessary to reduce capacity at certain units.
Events in 2018
On 30 March there was a fire in the bioenergy plant at Moelven Valåsen AB. At the time the plant was not owned by Moelven, but the heat energy from the plant is essential for operation of the lumber dryers. In the beginning of April a backup solution was in place, and this, in combination with exploiting drying capacity at other units, allowed production to proceed as normal. Moelven took over the bioenergy plant on 1 December 2018.
An important focus area in the development of the group is to employ new technology and exploit the opportunities inherent in new digital solutions. In the project “The Smart Digital Sawmill,” Moelven has collaborated with a handful of technology partners in linking the entire value chain at Moelven Valåsen AB to a Big Data solution. Real-time data from all underlying systems and machinery are fed into one and the same system, where advanced analysis and machine learning technologies exploit the information in ways one has previously been unable to do. Identified patterns and achieved results were presented at the Trä & Teknik trade fair (Wood and technology) in Gothenburg at the end of August 2018. “The Smart Digital Sawmill” now comprises the template for deploying similar solutions at several of the group’s companies.
In September 2018 Moelven launched a new and updated website, following a comprehensive insight and user analysis along with subsidiaries. The new website constitutes a huge boost in terms of design and usability, and allows for further development of Moelven’s digital presence.
On 4 September 2018 the final glulam beam was hoisted into place in the world’s tallest wooden building – “Mjøstårnet” in Brumunddal. The total height was 85.4 metres. The construction of Mjøstårnet was thoroughly documented. Six films and press material directed at domestic and international audiences were produced. This has resulted in huge media attention at home and abroad. The global news weekly The Economist and the French broadsheet Le Monde have visited and produced stories on the project and the climate benefits of large and tall wooden buildings. This does not only concern the use of sustainable wood materials produced from local raw materials. To Moelven a climate-smart construction method means both that the CO2 burden is reduced through the use of wood as a building material, and that no more materials than necessary are used. The Trä8 system used in several of the slabs between the floors has been developed precisely with this in mind. Trä8 was developed by Moelven Töreboda AB and was introduced to the market in 2009. The elements used in Mjøstårnet have been produced by a local manufacturer. Mjøstårnet was opened on 1 March 2019. The building’s 18 floors houses offices, a hotel, a restaurant, apartments and an indoor swimming pool.
On the night before Saturday 24 November a fire broke out at the dry sorting line at Moelven Notnäs Ransby AB, Ransby department. No one was injured during the fire. However, the dry sorting line sustained significant damage and will be out of service until the summer of 2019. The damage will be covered by the group’s damage and consequential loss insurance. The saw line was not damaged in the fire, and production has proceeded almost as normal by exploiting dry sorting capacity at other units in the group.
Sustainability and the climate challenges the world is facing are attracting more and more attention. 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. Starting from 2017, the group’s public reporting also includes a sustainability report in accordance with the GRI standards (Global Reporting Initiative) and climate accounts according to the GHG protocol (GreenHouse Gas). In society in general, increased knowledge and awareness of wood’s properties and opportunities, both as carbon storage and as a building material, has led to greater interest in climate-smart building with wood.
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.
In work on the corporate strategy for the 2019-2021 period, emphasis has been on clarifying Moelven’s focus areas. In 2019 all employees will receive a short version of the strategy, a strategic framework based on four areas that summarises what Moelven shall focus on in the time ahead. These areas are People, Innovation, Sustainability and Profitability. These main areas shall help the companies prioritise, so that we all pull in the same direction towards a common goal.
In the strategy process that has been ongoing in 2018 it has been decided to expand the group’s focus on own processing of residual raw materials. Previously, residual raw materials from the mechanised industry has mainly been sold to other industries or used for internal bioenergy purposes. Small-scale briquette production has also been carried out. Against the backdrop of the new strategic focus, in the spring of 2018 it was decided to build a new pellets factory and a new bio-energy plant at Sokna near Hønefoss. The overall investment has a scope of NOK 270 million, of which Enova is supporting the bioenergy effort to the tune of NOK 66 million. The effort is employing groundbreaking solutions, where energy and chip products from Moelven’s sawmills in the region will be used for pellet production. When the factory is ready in early 2020, it will ensure that pellet production in Norway is doubled and provide 8-10 new jobs. The factory will be unique in that it is the first pellet factory in Norway that is fully integrated in a sawmill in terms of energy. A major proportion of the overall investment is a brand new bioenergy plant that will both supply the sawmill and the pellet factory with energy. This means that the energy that otherwise would go to waste from the sawmill is used in the production of white pellets. Estimates show that by doing this, one may reduce energy consumption in pellet production by up to 37 per cent.
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. The developments in injury rate have been unsatisfactory, although the LTI rate improved from 12.4 in 2017 to 10.9 in 2018 – a reduction of 12.1%. In the strategy plan a subsidiary goal has been established for 2021 that the number of lost time injuries per million worked hours (LTI rate) shall be below 5, that the number of injuries both with and without injuries per million worked hours (TRI rate) shall be below 20, and that the number of reported hazardous conditions and near accidents overall shall be at least 4,200 (1.2 per employee). The goal for sick leave is to reduce this to below 4 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 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 2018, and are a good contribution to the improved results. In addition, several organizational changes are being implemented, as well as major investment projects that will improve efficiency and profitability.