Construction Slowdown Hits Prices and Volumes

o       Profit in 2008 €9.2 million, down from €40.1 in 2007
o       Turnover €249 million, down from €318m in 2007
o       2.3 million cubic metres of timber sold, down from 2.6 m in 2007

 

Dublin, 29^th April 2009: Coillte, the forestry, panel products, land management and renewable energy company, today announced profits of €9.2m for 2008.

The main drivers of this performance were the slow down in the construction sector in Ireland, the UK and Europe. This resulted in lower sales of logs to sawmills, lower sales of the Group's OSB and MDF panel products, and lower prices across the product range. As approximately 35% of Group sales were to the UK, this situation was made worse by the ongoing depreciation of sterling against the euro during the year.

Commenting on the results Chief Executive David Gunning said:

"We believe that, given the sudden deterioration in the trading environment during the year, delivering a profit is a reasonable result. Nonetheless we are disappointed with the fall in profits from 2007."

Mr Gunning added that Coillte has responded positively to challenges posed by the deteriorating economic situation by finding new markets for its products, developing new products, and reducing costs.  He said that Coillte is also focused on supporting its customers in all markets by continuing to provide its full range of products and services in the current difficult environment.

"We have reduced our prices and are working closely with our customers to maintain our long established and valuable relationships. In particular Coillte continues to offer its full log supply for sale at a time when other forest owners in Ireland and across Europe have withdrawn from the market due to low log prices. In addition, we have continued to invest in our business with targeted investments in 2008 such as a 7,500 ha forestry programme  and the Fibre Optimisation project in Medite, which is already paying back in terms of reduced costs, improved product quality and a broader product range."

He added: "Last year we announced a corporate strategy to reduce our reliance on the construction sector by optimising the value of our land assets including our portfolio of wind energy sites. Coillte achieved a significant milestone with the commencement of construction of our first wind energy project, a potential 30 MW wind farm in Co. Leitrim, which is a joint venture with Hibernian Wind Power, a subsidiary of ESB."

Division by division

Coillte Forest sold 2.3m cubic metres of timber – down from 2.6m in 2007, as demand slowed due primarily to the dramatic fall in the number of new houses built (down from 93,000 in 2006 to 48,000 in 2008).  Prices were also adjusted downwards sharply to reflect market conditions faced by our customers in the sawmill sector. We identified and sold into new markets, such as the emerging domestic energy market, to partially offset the reduction in demand for construction timber.

Forest Stewardship Council (FSC) Certification was retained, a vital, independent verification of our environmental credentials. Coillte has also continued to deliver the highest quality outdoor recreation with investments in world class facilities for walking and mountain biking.

Coillte Panel Products, comprising Medite MDF and SmartPly OSB, also saw reduced sales and lower prices at home, in the UK and in Continental Europe. The weakening of sterling to a rate of over £0.90 against the euro was also a major factor as the UK is the principal market for these brands. We  reduced output to match market demand necessitating short time working in both SmartPly in Waterford and more recently in Medite in Clonmel.

We continue to introduce innovative, sustainable panel products such as the SmartPly SiteProtect hoarding product launched in 2008.

Coillte Enterprise now has a potential wind energy portfolio of over 400 MW following the Commission for Energy Regulation Gate 3 announcement in December on planned grid connection offers. This is approx 10% of the total renewable energy target the Government has set for 2020. We are now looking at the best way to maximise the return on these projects.

A number of significant property development projects received planning permission during the year including a residential housing project in Moycullen, County Galway, where we are working closely with the local community.

  

Outlook

2009 looks set to be an even more difficult year than 2008. Construction activity in Ireland is very subdued and the €/sterling exchange rate remains at a level that makes exporting to the UK a difficult proposition for Coillte Group companies and for our sawmill customers. The company is taking steps to address the situation by focusing on reducing costs and reducing capital expenditure.

Work will also continue on business development with a specific focus on developing new markets for products such as energy wood, developing a biomass energy business, and optimising the value of land assets including the Group's wind energy and mast site portfolios.

Ends.

(To view the Annual Report 2008 please click here)

For further information contact:

 

Tom Byrne
Head of Corporate Communications
Coillte
Tel: 01 201 5231
Mob: 086 810 4224

 

Alison Mills
Q4 Public Relations
Tel: 01 475 1444
Mob: 086 851 2890