Sonae reports significant reduction in profitability

The firm – which is the parent company for the UK's largest consumer of recycled woodchip, Sonae UK Ltd – has published unaudited consolidated results for the first nine months of 2008, which show a “significant reduction in profitability”.

Compared to the same period in 2007, turnover for the company decreased by 12% to €1,396 million (£1,175 million) and working capital in Q3 decreased by €5 million (£4.2 million) as the firm's stocks fell by €19 million (£16 million).

In the UK, where Sonae runs a plant at Knowsley, on Merseyside, sales fell by 13% year-on-year and 11% from Q2 to Q3 2008, due to the downturn in the construction sector and the seasonal summer period.

The results could have worrying connotations for wood recyclers, who still rely on chipboard manufacturers as the largest market for waste woodchip in the UK, and have seen demand for woodchip falling steadily over the last few months.

And, Sonae Industria's board of directors claimed that they were “not expecting market conditions to improve in the near future” – showing that it could be a long wait before things pick up.

Summing up the situation, Sonae Industria chief executive Carlos Biachi de Aguiar said: “Due to the escalating worldwide financial crisis over recent months, we have been facing a further deterioration in economic conditions and a reduction in activity in the sectors that consume our products in almost all countries where we operate. As a result, wood based panel demand has been decreasing and our turnover and profitability have been adversely affected.”

He added: “We will continue to focus on improving our efficiency, to minimise the impact of these challenging times.”

SONAE UK

Speaking to letsrecycle.com today, John Huckstepp, human resources manager at Sonae UK, revealed that the company was currently only taking in 35,000 tonnes of waste woodchip in a month at its Knowsley factory, as opposed to the 50,000 tonnes it had been taking earlier this year, due to the economic crisis.

However, he pointed out that this was a trend occurring around the country and claimed that because of the economic downturn, less waste wood was around because of a downturn in arisings from the construction and demolition sector, from pallets and even from civic amenity sites.

He said: “We were fairly fortunate in the first five months of the year. But from June onwards our production has been reduced by about 25% which means we are taking in less wood. We are down about 15,000 tonnes a month. But it is also worth bearing in mind that because of the difficulties in the economy the recycled fibre supply is also down.”

Mr Huckstepp added said that despite the downturn, Sonae was “quietly optimistic” about the market and did not think it was all doom and gloom. For instance, he claimed it was hoping not to make any redundancies as this could damage the company in the long-term.

He explained that all decisions would be taken in partnership at the firm following the departure of former chief executive, Tony Hackney, who has now joined BSW sawmills. Former general manager Nigel Graham is now Sonae UK managing director, and is supported by finance manager Brian Hayes and sales and marketing director Dave Chapman.

Mr Huckstepp said: “We will be keeping the situation under constant review.”