The positive trend in forest industries was also reflected in the profitability of non-industrial private forestry in 2017. The operating profit of non-industrial private forests increased to EUR 126 per hectare, being nearly 17% above the average of the preceding ten-year period. The return on investment in wood production increased to more than 6%.
The operating profit of non-industrial private forestry increased to EUR 126 per hectare as a result of increased felling in non-industrial private forests, improved prices of standing sales and fewer investments. The total profit was EUR 1,682 million, showing an increase of 7% from the previous year, when prices were converted using the cost of living index. This was 17% higher than the average of the preceding ten-year period, while being lower than in the 2007 peak year.
Operating profit over three times higher in southern Finland than in northern Finland
In southern Finland, the operating profit of non-industrial private forestry was EUR 165 per hectare on average. The highest profit of EUR 245 per hectare was in the Tavastia Proper region. In northern Finland in the regions of Northern Ostrobothnia, Kainuu and Lapland, the operating profit was EUR 49 per hectare on average.
In southern Finland, the operating profit increased by 6% as a result of increased profit from the sale of wood. The operating profit increased by more than 16% in northern Finland. This increase was also affected by fewer investments in wood production and higher subsidies.
“These significant changes in northern Finland can partly be explained by information about work types, subsidies and total costs being entered in statistics at different times”, says Esa Uotila, researcher at the National Resources Institute Finland (Luke).
According to Uotila, subsidies are entered in statistics after they have been used, while costs are only entered during the year when the project in question is completed.
The operating profit of non-industrial private forests is calculated by deducting investments in wood production and estimated administrative and other costs from stumpage earnings.
Increased stumpage prices improved return on assets in wood production
The return on investment in wood production was 6.4% in 2017. The last time an increase in stumpage prices had a clearly positive impact on profit was in 2010 as a result of corrective actions taken after the decline in 2009. In 2017, the impact of stumpage prices on the profit was 2.1 percentage points. Gains from wood sales had clearly the most impact on the return on investment, i.e. 4.0 percentage points. The value of net increment increased the profit by 0.8 percentage points and state subsidies by 0.1 percentage points. The total costs of wood production reduced the profit by 0.7 percentage points. Compared to the preceding ten-year period, the profit was 3.9 percentage points higher.
“Excluding changes in wood prices, the profit of wood production is slightly above 4%”, Uotila says.
In this calculation, changes in wood prices have an impact on the value of assets calculated on the basis of the prices of standing sales and the number of trees in forests. Variation in prices has ranged at most between +25 percentage points and -20 percentage points.
The total value of non-industrial private forests calculated on the basis of the prices of standing sales and tree volumes was EUR 45.5 billion in 2017.