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Profitability of forestry continues to improve in 2018

Published : 16 Sep 2019, 01:58

  DF Report

Record-high felling volumes and the increased price of wood increased the operating profit in non-industrial private forestry to almost EUR 160 per hectare. Photo Natural Resources Institute Finland by Erkki Oksanen.

The year 2018 saw a peak of the world economic trend, which reflected as high demand for forest industry products. The high demand for wood increased the volume of felled logs to a record level, according to Natural Resources Institute Finland (Luke).

Meanwhile, the price of wood also increased. Felling of industrial wood from non-industrial private forests increased by 12 per cent from the previous year, while standing sales prices of softwood logs showed an increase of approximately 10 per cent and standing sales prices of pulpwood showed an increase of approximately 9 per cent in real terms.

Operating profit in non-industrial private forestry increased to EUR 157 per hectare, which was almost one-quarter more than in the previous year. The operating profit of non-industrial private forestry totalled EUR 2,079 million, which was a better result in terms of money than in the peak year 2007, but the real change when taking into account the change in value was seven per cent lower.

ROA (Return on assets) in wood production increased to 13.0% in 2018. In Luke’s calculation, the return has been divided into five parts. An increase of stumpage prices by 8.8 percentage points had the largest impact on the return in 2018. Earnings from wood sales increased the return by 4.4, the value of the net increment by 0.2 and state subsidies by 0.1 percentage points. Total wood production costs reduced the ROA by 0.6 percentage points.

The return doubled from the previous year and was over ten percentage points higher than during the preceding ten-year period, at which time the result was reduced by a decrease in standing sales prices.