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Segezha Group is one of Russia's largest forest industry holdings: timber harvesting and the production of sawn timber, paper, packaging and plywood. The company operates along a vertical chain from the logging site to the finished sack. Its shares trade on the Moscow Exchange under the ticker SGZH.
The forest industry is a series of processing stages applied to a single raw material. Logs become sawn timber, wood chips and pulpwood become pulp and paper, and paper becomes sacks and packaging. The further down the processing chain, the higher the value added and the lower the dependence on exchange prices for raw materials.
Historically, a significant share of output was exported to Europe — a market that was close in logistics terms and paid a premium for quality. Its closure in 2022 forced a pivot to China and the Middle East: prices there are lower and the delivery distance is several times longer, and both factors hit the margin at the same time.
A separate burden is the debt taken on to build capacity before the markets shifted. It is being serviced on revenue that turned out lower than planned, and so it determines the group's financial position more than its operating results do.
Sack paper and paper sacks — highly processed, high value-added products.
Boards and beams for construction, supplied to the domestic and export markets.
Products for furniture manufacturing and construction.
The group's own raw material base, which supplies its processing stages.
Strengths and weaknesses describe the business itself. Opportunities and threats describe what may happen around it.
The company harvests timber and processes it: it produces sawn timber, paper, paper sacks, plywood and boards. The chain runs from its own logging site to the finished product.
Because the price of a log is set by the exchange market, while the price of a paper sack is set by a contract with the buyer. The further down the processing chain, the more stable the margin and the lower the dependence on swings in commodity prices.
Europe was close in logistics terms and paid a premium for quality. The pivot to Asia means a longer delivery distance and a lower price — both factors squeeze the margin at the same time, while the infrastructure was built for the old routes.