Operating profit in non-industrial private forest remains over 2 billion euros

The operating profit in non-industrial private forestry fell slightly but remained at a high level. Despite high inflation, the rise in wood prices increased returns by 1%.

In 2022 the upturn in the forest industry and the end of timber imports from Russia boosted demand for domestic timber, which was, however, reduced by a long work stoppage early in the year.  The operating profit decreased in real terms by 2% to EUR 163 per hectare, totaling EUR 2,205 million. Compared with the previous five years, the result was more than 10% higher in 2022 money terms.

Good operating result in all regions

In Southern Finland, the operating profit was EUR 210 per hectare.  In real terms, the result was down by 1% compared to the previous year. In Northern Finland, the result was EUR65 per hectare (-6%). Northern Finland includes the regions of North Ostrobothnia, Kainuu and Lapland.

By region, the highest results per hectare were obtained as usual Häme, with Päijät-Häme and Kanta-Häme showing slightly above and below EUR 300 per hectare respectively. In Lapland, the operating result was EUR42 per hectare. The largest total income came from forests in Savo; EUR243 million from North Savo and EUR233 million from South Savo.

“Without the work stoppage by a major timber user that lasted more than a hundred days, the operating result of the private forestry would have been much higher than it is now. On the other hand, it made it easier for the industry to adjust to the end of timber imports from Russia. Real investment in private forestry continued to fall, which is not a good sign for income development in the longer term,” says researcher Esa Uotila of Natural Resources Institute Finland (Luke).

Return of six per cent

Investment returns on wood production was 6.3% in 2022 in mainland Finland. The yield fell by 5.8 percentage points from the previous year’s high and was half percentage point below the previous five-year average.

In Luke’s return on assets calculations, the returns have been divided into five components. Income from roundwood sales accounted for +3.7 percentage points of returns, and state wood production subsidies accounted for +0.1 percentage points. Stumpage price change accounted for +1.1 percentage points of returns, and the value of net increment of growing stock for +1.7 percentage points. Total costs in wood production reduced the returns by -0.4 percentage points.

“The calculation method for return on assets in wood production was originally developed for the comparison of the returns of different types of investment. For example, in the calculation, one cubic metre of spruce logs is a ‘share’, the value of which is determined in regional wood markets. The value of assets is calculated by multiplying the number of shares by the share price. In the return calculation, the stumpage value of the assets was EUR 61.5 billion in 2021, rising to EUR 63.3 billion in 2022,” says Uotila.

Over the years, fluctuations in wood prices have swung the return on investment in wood production up or down by at most a good quarter. Excluding changes in wood prices, the trend in returns has been upwards since the turn of the 2000s, reaching 5.0% in 2022.

Information about the statistics

In the statistics for Operating profit in non-industrial private forests, income comprises stumpage earnings calculated based on industrial and energy wood harvesting, the volume of wood harvested for owners’ own use and stumpage sales prices, as well as state subsidies for wood production. Expenditure includes investments in forest management and improvement in private forestry, as well as administrative and other expenditure. Revenues and investments in wood production are based on regional statistical data, while administrative and other expenditure is mainly based on estimates.

The return on assets in wood production is an index of returns calculated based on felling, standing sale prices, state subsidies for wood production, wood production costs and stand data. The calculation relates income and costs to the stumpage value of the stand, calculated based on the volume of trees and standing sale prices. The data are based on Luke statistics and the National Forest Inventory (NFI) . In the statistics, the last two years are preliminary data, as the new inventory data are used to refine the stand data in the calculation.

Note: The first part of the news has been updated on 6..2.2024.