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Metsähallitus is making a good profit from forestry
(16.06.2011)
Metsähallitus is making a good profit from forestry
Published 9.6.2011
Forestry on state land is highly profitable, stated Director General Jyrki Kangas at the Forestry Day event organised by the OP-Pohjola Group in Helsinki on Thursday. - Metsähallitus is one of the public companies and state enterprises that pay the highest dividends to the state. With the dividend of Eur 96 million paid from the profits last year, Metsähallitus ranked among top five contributors with Veikkaus, Fortum Corporation, Senate Properties and Alko Inc, Kangas said.
Metsähallitus’ turnover from business operations last year was Eur 367 million, while the profits amounted to a record-breaking Eur 114 million. Some 85% of the turnover and even a higher share of the profits are derived from forestry. Kangas referred to an evaluation commissioned by the Ministry of Agriculture and Forestry last year, which concluded that the forestry operations are well managed, show a favourable trend and are turning an excellent profit.
The politically endorsed target of state-owned Metsähallitus was to increase its yield on capital to 3% in the 2005-2010 period. This target was exceeded in several years, and last year, the yield on capital was 4.3%.
- When evaluating the profits, we must not lose sight of the other benefits of our commercial forests. Taking these into account in business operations brings down the yield on capital calculated on a commercial basis. According to Kangas, investments in biodiversity, recreational use and cultural aspects as well as the operating environment of reindeer husbandry reduce the business profits by some Eur 50 million every year.
In order to produce all these other benefits, the area felled is reduced by some 1.6 million m3 annually, while the area of actual fellings has been in the range of 5-6 million m3.
- To what extent state forests focus on business profit and to what extent on other social objectives is a political choice. As regards Metsähallitus, producing the two types of benefits for society suits us very well, Kangas emphasised.
- Revenue generation from our forestry operations is based on delivery trade. Flexible precision deliveries of timber are made to the customers’ factories and plants. Logs for those who need them, fibre for fibre users and wood-based energy for energy plants – to more than a hundred customers. Harvesting and transporting timber is outsourced to contractors, but the management of the entire logistic system with its modern information systems and optimisation tools is in our hands.
- We are the largest and most reliable timber seller in the country, said Director General Kangas.
Most of the state forests comprise pine stands and soils of poorer than average productivity in Eastern and Northern Finland. Along with systematic silviculture and forest structure development, the possibilities of logging are steadily improving – especially as the large open fellings of the post-war era are now again maturing for felling. An added obstruction to profitability is the increased share of intermediate fellings and, consequently, the share of fibre wood, as well as plant closures in Eastern and Northern Finland that result in extended transport distances.
Another challenge lies in the poor profitability of non-subsidised wood energy deliveries in areas where no energy plants using wood are nearby.
Kangas stressed that the other business areas of Metsähallitus are among the most significant ones in their sectors, even if they are clearly outperformed by forestry when measured by turnover. They have experienced fluctuations in their profitability, but Laatumaa has been producing strong results year after year, and more recently, so have Fin Forelia Oy and Morenia Oy. This year, positive results are expected of all subsidiaries and profit areas.
Director General Kangas feels that the outlook is good and that the forest sector has a bright future. Demand for timber is increasing and becoming diversified, new wood products are being developed, and looking even a little bit further in the future, other cost-effective forms of forest exploitation are emerging besides timber production.
- A precondition for this is the profitability of the entire sector and its actors. Securing the profitability of all links in the value chains, also that of timber production, is our shared advantage. Only trust in sustainable profitability – which in forestry is to a great deal reflected as acceptable timber prices – will encourage investments in production, also without continuous subsidies from society.
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Source: http://www.metsa.fi
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