Investments in a subsidiary and a proposed energy deal with ESB boosted borrowings at State forestry company Coillte last year.
Coillte confirmed on Friday that operating profit more than halved to €29 million in 2020 from €63.3 million in 2019 as it struggled with a licensing crisis that slowed sales.
The group ended the year with net debt of €28 million from zero 12 months earlier, its figures showed.
Chief executive Imelda Hurley explained that borrowings increased as the group was spending €45 million on upgrading its Smartply construction boards factory in Co Waterford.
“We also continued to incur expenditure for the projects that will ultimately go into a joint venture with ESB,” Ms Hurley added.
The two State companies plan to spend €1 billion building wind farms on Coillte land over the next decade in a deal recently approved by the Competition and Consumer Protection Commission.
Coillte’s revenues tumbled to €285 million in 2020 from €327 million the previous year, while the cash generated by its businesses fell to €24 million from €30.1 million.
Department of Agriculture delays in issuing licences needed to fell, plant and transport trees hampered Coillte’s main forestry business. Log sales fell 400,000 sq m to 2.31 million sq m.
Ms Hurley said the fall in production was enough timber to build 7,000 homes.
She acknowledged that Department of Agriculture efforts to speed up licence applications were beginning to have an impact. However, she repeated a warning from earlier this year that permits for roads remained an issue.
Road building to transport logs requires a licence from the department, along with tree cutting and planting.
Ms Hurley said that Coillte had licences to cut trees in areas that it could not access as it needed permits to build roads. “That is very much our focus now,” she said.
The executive added that it took 12 weeks from the point at which a licence is issued to complete the road, as the company has to wait four weeks to allow for any appeals, and then spend eight weeks building the route.
She cautioned that log supply remained tight and that the department needed to continue increasing the number of all permits that it was issuing.
Ms Hurley said that Coillte’s main focus this year would be on restoring production to normal levels.
Chairwoman Bernie Gray described 2020 as a challenging year for Coillte. "The potential impact of Brexit was overshadowed by Covid-19 and we were also impacted by the forestry licensing crisis which resulted in major timber supply shortages," she said.
“Despite the challenges we faced, Coillte delivered a solid financial performance, albeit below our original expectations.”
‘Year of recovery’
Coillte said that the outlook for 2021 remained challenging. The company noted that demand for timber in the Republic and UK, its main markets, remained reasonably strong, but licensing issues continued to restrict timber supply. Coillte projected that 2021 would be a “year of recovery”.
Demand from the US, Europe and China has pushed timber prices up 20 per cent year-on-year to near record highs.
Irish builders say they are having difficulty getting supplies of the material while most of them report that its price has risen between 10 per cent and 20 per cent.
Employers' body Forestry Industries Ireland recently warned that permit hold ups were leaving export opportunities worth €1 billion a year untapped.