Rising costs hit Coillte profits

Rising costs left Coillte’s profits trailing 19 per cent at €119 million last year but the State forestry company’s revenues hit a record €479 million.

Coillte blamed increased operating costs for the slip in profit from €135 million in 2021 but highlighted its strong sales growth.

The company, responsible for around three-quarters of the timber felled and processed in the Republic, noted that demand for the key building material eased in the second half of last year.

Coillte pledged to pay the State a €27.7 million dividend for 2022, slightly below the €30 million the company handed over to the exchequer on the back of 2021′s performance.

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Chief executive, Imelda Hurley, said Coillte’s financial performance was strong in spite of easing prices and a global supply-demand mismatch.

“Despite this volatility, we delivered record revenues and operating cash and have proposed a significant dividend payment to the State,” she added.

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Bernie Gray, Coillte’s chairwoman, pointed out that the dividend was the second highest the company had paid the State in its history.

She noted that high demand and limited supplies ensured timber prices were strong in the first half.

“There was a marked reduction in construction sector demand in the second half of 2022,” she said, adding that this depressed prices.

Coillte believes inflation and high interest rates will weaken demand this year. The State company said on Thursday that 2023 would be challenging, with inflation likely to persist across its main markets.

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“Additionally, rising interest rates will likely result in lower disposable incomes with a related impact on consumer confidence,” said a statement.

Consequently, the company said it would focus on optimising production while carefully managing its costs.

Department of Agriculture delays in issuing forestry licences and Government Covid curbs have hindered Coillte’s activities in recent years. Log sales, however, increased in 2022 to 1.5 million cubic meters, from 1.4 million in 2021.

According to its annual report, published with its financial results on Thursday, Coillte began the year with €65 million in net cash and facilities allowing it to borrow up to €180 million.

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Last year, it finished upgrading part of its Medite Smartply panel board factory in Waterford, which cost €45 million and marked the completion of a 10-year investment programme there.

Panel board sales were in line with 2021, the annual report says. Coillte loaned €12.8 million to Futurenergy Ireland, its joint venture with fellow State company, ESB, during the year. The partnership aims build wind farms on Coillte land capable of generating up to 1,000 mega watts of electricity – enough to power 100,000 homes at full capacity – by 2030.

That is likely to cost €1 billion, made up of the two companies’ own cash and debt.

Overall, Coillte invested €86 million in its businesses last year, down from €94 million in 2021. The company planted more than 20 million trees, replacing 8,300 hectares of felled forest.

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Late last year, Coillte launched the Irish Strategic Forestry Fund which will raise up to €200 million to buy land to plant new forests.

Asset manager Gresham House will oversee the fund, which aims to lure local and overseas investors into the Irish forest industry. Coillte will manage the plantations for the investors. The fund will also buy existing forests, ultimately giving it control of around 12,000 hectares.