Norwegian sawmiller and timber products manufacturer Moelven has seen its operating profits plummet in the first half to NKr29m (2010: NKr164m).
The company blamed the poor margin on the continuing high cost of raw material, while selling prices of finished goods have fallen from their recent peaks.
Moelven, which also produces glulam, earned NKr56m from operations in the second quarter – NKr85m less than in the same period last year.
Operating revenues for the group in the second quarter were NKr2.17bn (2010: NKr1.93bn) and NKr4.12bn (2010: 3.4bn) in the first half.
“The reason for the drop in operating profits from last year was largely the relatively high raw material prices for the timber consuming units compared with the price level in the finished goods markets,” said Hans Rindal, CEO of Moelven Industrier ASA.
“Even though the prices of raw materials came down during the first half, the combination of these factors led to a weakening in operating profits for both the timber and wood divisions.
“Prices of industrial timber passed their peak in the third quarter of 2010 and during the second quarter of 2011 they have been considerably lower than at the same time last year. The costs of raw materials have not gone down correspondingly.”
He said the finished goods market was still a little unstable but all three divisions were recording positive operating results again.
Increased sales in the wood building product division are mainly the result of acquisitions, while in the building system division, Moelven reported a clear sign of improved market conditions, particularly in the professional building market in Sweden and Norway.
“In total, this gives us a picture of increased activity but reduced earnings. That is a picture we are not entirely satisfied with.
“But we expect to see a better balance between the prices of finished goods and raw materials in the second half than we had in the first.”
Moelven expects profits to improve in the second half of the year, but annual profits to be lower than last year.
