The operating profit of non-industrial private forestry increased over EUR 2 billion in 2021

The operating profit in non-industrial private forestry improved clearly from the previous year. Only in the peak years of 2007 and 2018 has there been more income in real terms. The return on assets in wood production also increased significantly.

The boom in the forest industry kept demand for wood strong. In particular, harvesting of logs increased and the price paid for wood was higher than in the previous year. The operating profit increased by 32% in real terms to €155 per hectare (€2,101 million). Compared to the previous five years, the result in 2021 was almost one fifth higher in real terms.

The operating profit increased in all regions

In Southern Finland, the operating profit of non-industrial private forestry rose to EUR 200 per hectare (+34% compared with the previous year) and in Northern Finland, EUR 65 per hectare (+22%). Northern Finland consists of the regions of North Ostrobothnia, Kainuu and Lapland.

Studied by region, the highest hectare-specific operating profit was achieved in Päijät-Häme (EUR 302 per hectare) and Kanta-Häme (EUR 293 per hectare). In Lapland, the operating profit was EUR 40 per hectare. The operating profit increased in all regions. It rose most in real terms, by over 40%, in Päijät-Häme, Pirkanmaa, North Karelia and South Ostrobothnia.

"As logging increased and timber prices rose, so did profits. However, a worrying sign for the future is that investment in wood production, which is important for periodic forestry, is declining. They fell by more than 10% compared with the previous year and also compared with the average for the previous ten years. In 2021, a quarter, or EUR 17 million, of unused subsidies remained in the state coffers, and this year, in November, we were almost 40% behind target", says researcher Esa Uotila from the Natural Resources Institute Finland (Luke).

Return on assets over 12 percent

The return on assts in wood production increased to 12.5% in 2021. The returns increased by 10 percentage points from the previous year. Compared to the average of the previous five years, the return was six percentage points better.

In Luke’s return on assets calculations, the returns have been divided into five components. The increase in standing sales prices contributed 7.0 percentage points to the return on investment, earnings from wood sales 3.4, the value of the net increment 1.5 and state subsidies 0.1 percentage points. Total wood production costs reduced returns by 0.5 percentage points.

"The calculation method for return on assets in wood production was originally developed for the comparison of the returns of different investment methods. In the calculation, for example, 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 2021, the value of non-industrial private forests calculated in this manner was EUR 58 billion, which is EUR 5 billion more than in the previous year", 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 2021.

Information on the statistics

The statistics on operating profit in non-industrial private forestry comprise gross stumpage earnings (calculated on the basis of the volume of felled industrial and energy wood, as well as wood felled for private use, and standing sales prices) and state subsidies for wood production. Costs includes investments in silviculture and forest improvement, administrative costs and other expenses. Earnings and wood production investments are based on regional statistical information, as well as on administrative costs and other expenses, most of which have been estimated.

The return on assets in wood production published in the statistics on forest as an investment is a return index calculated on the basis of fellings, standing sales prices, state forestry subsidies, wood production costs and growing stock data. In this calculation, earnings and costs are proportional to the value of the growing stock calculated based on the growing stock and standing sales prices. The information is based on Luke’s statistics and the National Forest Inventories (VMI).