Government reaps rewards from good forestry management

FORESTRYSA last financial year paid $44m to the State Government in taxation and dividends (up from $23m in 2008-09) and more than $1.2m in rates to various Local Governments, according to its annual report.
Total revenue from timber sales increased to $126m, up from $108m the previous year. Profit after tax was $113m ($93m in 2008-09) which included an $81m ($70m in 2008-09) net increase in the value of the plantation. This valuation adjustment comprises an increase in the volume and unit value of the trees.
ForestrySA also continued to build on the future profitability of the business during 2009-10, making incremental investment in land and plantation expansion, further increasing environmental benefits through carbon sequestration and continued commitment to the Australian Forestry Standard (AS 4708).
“The framing of our business goals for 2009-10 were established during 2008-09 in the shadow of the Global Financial Crisis and with perceptions of further difficult economic conditions in the year ahead,” Chief executive Islay Robertson said.
“The above expected achievement reflects a number of decisions made by the ForestrySA Board to improve sales and performance.
“As a result, considerable cost savings, capital expenditure reduction and additional revenue sources provided a very satisfactory business result,” he said.
In his chairman’s report, John Ross said a clear strategic exercise to improve understanding of the forest resource in order to maximise the allowable cut without risking long term supply was conducted during 2009-10. As a result, the Board endorsed the principle of increasing the allowable cut of sawlog to 1.1m cubic metres per annum and applying a more flexible silvicultural strategy.
“This decision to increase the level of harvest will have significant flow-on economic benefits in terms of jobs, timber processing activity and returns to the Government, without impacting future log supply arrangements. The increased harvest in 2009-10 generated some $5m in additional payments to contractors compared with budget,” the chairman said.
ForestrySA recognised that a key competitor for its product was imported timber products produced in efficient and well managed sawmills and paper mills elsewhere. “As such, both ForestrySA and our industry need scale, quality and efficient processing capacity to remain price competitive. ForestrySA will run a significant revenue risk if supply arrangements do not consider the productive capacity and risks that may be inherent with potential customers.”
Despite a tightening of operating expenditure, ForestrySA continued investment in new land and new plantations. Some 800 hectares of new softwood plantations were established in the winter of 2010, compared with approximately 567ha in 2009. ForestrySA’s growth strategy aims to increase regional softwood sawlog production by 1m cubic metres per annum in the long term. Significant opportunities exist at the present time for ForestrySA to increase its area of land under forest management and to develop the necessary softwood plantings.
“It is important to recognise the achievement of the ForestrySA team in improving our results and a number of our business practices and knowledge. It is, however, important that we continue to better understand our cost drivers, revenue opportunities and forest capacity so as to continue to improve our results and risk management practices. It is encouraging when employees engage and develop new ideas, skills and methods and we see these results in the forest,” the chairman said.
ForestrySA continues to support projects and sponsor local communities across a wide range of cultural, educational, charity and sporting endeavours.