Weakening economy versus tighter requirements Study on forest - - PowerPoint PPT Presentation

Weakening economy versus tighter requirements

Study on forest machine enterprises

Markku Penttinen Arto Rummukainen Jarmo Mikkola Finnish Forest Research Institute Bo Dahlin University of Helsinki

NSR-conference Copenhagen 23 September 2008

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Metsäntutkimuslaitos Skogsforskningsinstitutet Finnish Forest Research Institute www.metla.fi

Urgent demand for studies

Forest industry

• utsource harvesting and supervision

more domestic wood needed (10-15 milj m3 according to Forest Industries) Forest machine enterprises pressure to reorganise into larger units first generation retires difficulties to get operators costs increase

Compensation do not follow costs

60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 2000 2001 2002 2003 2004 2005 2006 2007 2008 July

Salary Fuel and oils Reparation and service Capital Interest Harvesting and transport compensation

Index, Base year 2000 = 100 Harvesters, Forest machine index by Statistics Finland

Number of machines do not follow removals

75 80 85 90 95 100 105 110 115 2001 2002 2003 2004 2005 2006

Stumpage harvesting, m3 Road side harvesting, m3 Total roundwood harvesting, m3 Number of harvesters Number of forwarders Compensation for harvesting, €/m3 Share of first thinning wood on total harvested volume, % (Metsäteho Oy)

Index, Base year 2001 = 100 Harvested volumes and harvesting machines

Wood versus work

85,0 95,0 105,0 115,0 125,0 135,0 145,0 155,0 165,0 2001 2002 2003 2004 2005 2006 2007 Total roundwood removals, m3 Harvesting cost, €/m3 Pine log stumpage price, €/m3 Spruce log stumpage price, €/m3 Pine pulpwood stumpage price, €/m3 Spruce pulpwood stumpage price, €/m3 Harvester operator wage, €/h Forwarder operator wage, €/h Index, Base year 2001 = 100 Work and wood prises

Profitability development of service businesses of wood procurement enterprises, METLA till 2010

Target Better profitability of harvesting business Sub projects Structure of enterprises and competitive environment Business models and processes Development of profitability follow-up system Development of service concepts and network economy Clearing structural barriers against entrepreneurship Effects on local and national economy Environmental impacts Extension

Data collection: Databases

Finnish Vehicle Authority AKE

• Forest machine registration data june 2007
• harvesters and forwarders total 5650
• Removal of unvalid data
• machine owner: school, bank, factory, etc.
• enterprises 2271 and machines 4748 left

Statistics Finland

• Tax, company et.al. Databases 2001-2006
• Companies 2271 and machines 4698 delivered

with enterprice number to Statistics Finland

• Found companies 1864 and machines 4248

Study enterprises share increase

50 100 150 200 250 300 350 400 450 500 550 2001 2002 2003 2004 2005 2006 Turnover of enterprises in this study, million euros Standing removals, mill.m3 Delivery removals, mill.m3 Roundwood removals, mill.m3 Harvesting cost at standing sales, mill.m3 Harvesting cost in delivery sales, mill.m3 Harvesting cost total, Cutting volume (million cubic meters) and cost of harvesting (million euros)

Economic situation of the branch challenging: the median as well as 25% and 75% quarters downwards

• 2

2 4 6 8 10 12 14 16 18 2001 2002 2003 2004 2005 2006 Vuosi

%

Q1 Median Q3 Q1 Median Q3

• Note: The percentage too high, because a proper salary correction

has not been made yet (the correction of Statistics Finland modest)

Debt burden slowly increasing: the median as well as 25% and 75% quarters upwards

• Payback period of debts in years

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2001 2002 2003 2004 2005 2006 Vuosi Vuosia Q1 Median Q3

Data collection: Interviews

Forest machine enterprises AKE-database Country divided into 6 areas Each area 3 enterprise classes: 1 machine 2 machines 3 or more Target 60 enterprises Interviewed already 48 Forest Management Associations Target 20 FMA Interviewed already 16

What next?

In autumn 2008: results on economic situation of forest machine branch based on Statistics Finland database will be published First results on entrepreneurs structure and situation based on interviews will be out in 2009 First results on Forest Management Associations relationships with harvesting business will be out in 2009 Wood procurement farmers in the profitability book-keeping of the Economic Research of MTT Agrifood Research Finland studied Business models (COST-project) and business processes (Joensuu already published simulation studies) of enterprises studied and the study continues Accounting and executive informations systems development project in co-operation in construction

Help & co-operation needed!

Thank you!

Markku Penttinen et.al. Markku.Penttinen@Metla.Fi Arto.Rummukainen@Metla.Fi Jarmo.Mikkola@Metla.Fi Bo.Dahlin@Helsinki.Fi