Production in the Finnish forest industry was down by approximately 5% during the first quarter of 2002 compared with the same period last year as weak economic development in the main market countries depressed demand for forest products, reports the Finnish Forest Industries Federation.

Finnish sawn wood production in January-March was about 2% lower than in the first quarter of 2001, although at 3.37 million m3 it was still quite high. Plywood production totalled 288,000m3 in January-March, which was 5% less than the year before. Production of birch plywood was nearly 128,000m3, down 13%, while softwood plywood production was up 3%.

Despite the drop in production, acquisitions and investments by Finnish forest industry companies have led to increased turnover while cost-saving initiatives have benefited profitability.

One example is the Metsäliitto Group, which showed a markedly better result for the first quarter in comparison with the last quarter of 2001. Turnover was up 4% at e2.4bn and the result was e82.6m profits as against a loss of e7.8m for the last quarter of 2001. The company reports that internal rationalisation has contributed to the result being improved by over e20m and the sawmill industry in particular performed better.

Turnover growth

Finnforest, which is part of the Metsäliitto Group, recorded a growth in turnover from e297.8m in the first quarter of 2001 to e426.4m and showed a result of e1.1m for the first quarter of this year. It points out that the growth in turnover was the result of acquisitions and investments.

Finnforest recently acquired Montague L Meyer‘s softwood timber distribution and machining business. The deal will enable Finnforest to double its exports of sawn pine and higher value-added products from Finland to the UK.

Ahlstrom also benefited from cost-saving initiatives despite turnover being 2% less in the first quarter compared with the same period last year (e491.4m as against e584.1m). These measures enabled an increase in operating income to e24.6m compared with e17.4m for the first quarter of 2001.

Targeted profitability

Juha Rantanen, the Ahlstrom Group CEO, said: ‘Although we are not yet at the level of targeted profitability, the first quarter results show encouraging progress in our performance. The improvement took place in a still weak overall market environment and is a reflection of several cost saving initiatives we have taken during last year.’

Stora Enso‘s operating profits for the first quarter at e274m were in line with the previous quarter (e270.1m) but showed a substantial drop in comparison with the first quarter of 2001 (e523m).

As part of its strategy of freeing up capital and increasing its financial flexibility in order to develop its core businesses, Stora Enso plans to restructure the ownership of its forestlands in Finland and the US. The total amount of forestland involved is about 73,000ha with a total book value of approximately e500m.

Stora Enso also plans to close Papyrus GB Ltd, its merchant division within Great Britain. The company points out that although rationalisation of Papyrus GB has taken place in recent years, it has not been possible to reach a satisfactory level of profitability. Papyrus GB distributed 100,000 tonnes of fine paper and board last year, with approximately half of the sales being from products manufactured by Stora Enso’s mills.

Acquisitions result

UPM-Kymmene is another company reporting an increase in turnover – up 3% to e2.7bn – as a result of acquisitions, but operating profits were down from e400m in the first quarter of 2001 to e284m this year.

The company reports that trading in wood raw materials in Finland continued to be slow during the first three months of 2002. Wood prices at the mills were little changed from the previous quarter, but around 5% lower than during the first quarter of last year. Wood purchases from private forests were 8% down on the previous quarter and about one fifth down on this period last year.

UPM-Kymmene has donated 560ha in south-east Finland towards the creation of a new national park. After this donation approximately 1,500ha in Repovesi will be state owned. The national park will cover a relatively small area but this will be compensated by a surrounding conservation area of 1,400ha owned by UPM-Kymmene. It is expected that the Finnish parliament will pass a bill establishing the park later this year.