Covid-19 and falling timber prices to ‘substantially’ hit Coillte’s performance

Covid-19 and falling timber prices will hit State forestry company Coillte's performance this year, according to its chief executive Imelda Hurley.

Coillte’s operating profits fell around 11 per cent to €63.3 million last year from €71.5 million as timber prices dipped, figures published on Friday show.

Speaking after the company released the results, Ms Hurley warned that the pandemic allied to other pressures made it difficult to predict what would happen through 2020.

“What we do know is that we will see a substantially worse performance this year than last year,” she said, adding that this would not be solely due to Covid-19’s impact on its business.

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Coillte manages State forests and harvests trees, while its Medite Smartply subsidiary makes and sells timber building products.

Ms Hurley said timber prices had fallen 20 per cent in the UK, the company’s biggest market, at the start of the year.

Early felling of continental European forests to combat a damaging parasite, the bark beetle, flooded the UK construction market with timber, pushing down prices.

Mr Hurley noted that Coillte sold its highest volume of timber ever in 2019. However, the fall in prices meant that revenues dipped 1 per cent to €327.4 million.

Changes in the rules governing tree-felling licences have slowed the rate at which the Department of Agriculture issues the permits, Ms Hurley said. This could also affect sales.

Meanwhile, the Covid-19 lockdown hit sales to the construction market.

So far this year revenues are down more than 25 per cent, according to Ms Hurley.

Sales held up during the pandemic’s early stages, but since the Government shut down the construction sector in March they fell sharply.

Coillte is noticing some recovery stemming from construction’s restart last week, but expects demand to be down as ongoing precautions against the disease on sites slow the rate at which work is completed.

The company cut executive pay by 10 per cent and workers’ wages by 6 per cent.

It has also frozen increases, discretionary spending and any capital investment that can be delayed.

Uncertainty

Brexit means that it faces ongoing uncertainty. If the UK ends the current transition period with no trade deal with the EU, timber could be hit with 6 per cent tariffs.

“The trading arrangements need to be made clear as soon as possible,” Ms Hurley said, adding that this would boost confidence in the UK’s economy, which would in turn aid construction growth.

Earnings before interest, tax and writeoffs, a measure of the cash a company generates, were €103 million last year, the second highest in its history. Coillte recorded its highest earnings, €115 million, in 2018.

Pre-tax profit fell €101 million to €61.5 million in 2019 from €162.5 million the previous year.

However the sale of its interest in several wind farms in 2018 boosted that year’s pre-tax surplus by almost €90 million.

Coillte is joining forces with fellow State company ESB to build wind farms that could generate enough electricity to power around half a million homes by 2030. This could involve an investment of around €1 billion.

Ms Hurley said that the pair were continuing to work on those plans. They have also sought approval from the Government and the EU.