News

JSC “Latvia's State Forests” has Closed the Year 2023 with Good Results

The supervisory board of JSC “Latvia's State Forests” (LVM) has reviewed the company’s operational results for 2023. LVM closed the past year with a profit of 261.7 million euros before the payment of corporate income tax, which is 1.4 million euros more than in 2022.

Pēters Putniņš, Chairman of the LVM Board: “The operating results of 2023 show an atypical situation – the company has achieved excellent financial indicators, but they were facilitated by high prices in the first half of the year and wood sales prices in longer-term cooperation agreements. Compared to the beginning of 2023, at the end of the year, the prices of the average round timber assortment sold by LVM had already dropped by 12 %. Considering the fact that the world market of wood products continues to stagnate and the revival of the construction industry in Europe is not yet to be observed, a decrease in the company's revenue is expected in 2024, which will also affect LVM's profit indicators.”

The weather conditions force the company to reschedule the works

In 2023, 6.94 million cubic metres of round timber assortment were delivered to wood processing companies, and 0.13 million cubic metres of growing trees were sold. In general, the amount of carbon accumulated in sawn timber delivered to the market in 2023, expressed in CO2 equivalent, is 6.4 million tonnes.

The erratic weather conditions of 2023 affected both production and supplies. Last year, the first quarter started with rain and humidity, so the scope of work in felling due to the bad logging conditions decreased. It was only possible to partially return to the development of these areas in mid-November, with the onset of winter. In turn, in December, when frost alternated with thaws, operations had to be rescheduled again: the large volume of snow and icing on the roads at the beginning of December reduced the speed and volume of deliveries.

The warm winter also had a negative impact on wood chip sales. Following several repeated sales procedures, it was still not possible to sell the entire volume planned for 2023, which was affected by the drop in market demand. Although the demand decreased, the revenue from the sale of energy wood chips last year was 1.4 million euros higher than in 2022, which was facilitated by the higher sale price of wood chips.

Changes in legislation and demand affect seedling sales

In 2023, a total of 53.6 million forest tree seedlings were delivered to customers; of them, 26.0 million or 48 % were sold to external customers. Last year, 9.6 million LVM-grown forest tree seedlings were exported to other countries. Compared to 2022, the number of seedlings sold last year decreased by 13 % or 7.8 million seedlings. Sales volumes in domestic and export markets were affected by a number of factors: in Latvia, the decrease was affected by changes in the legislation, which determined a smaller number of seedlings per one hectare of renewable forest, while the significant drop in demand in export markets was caused by the slowdown of the wood market, as well as the weakening of Sweden's national currency against the euro.

The demand for IT solutions is increasing

Responsible management of subsoil resources resulted in 2.4 million euros in 2023 in revenue from the sale of mineral materials and their aggregates to external customers, which is 1.6 million euros less than in 2022. The decrease in the volume of sales to external customers was influenced by the lower volume of sales of mineral materials for the construction of facilities of strategic importance.

In turn, the demand for services based on information technology solutions has grown. LVM structural unit’s “LVM Business System Solutions”, which is more widely known for various geographic information system products under the LVM GEO brand, revenue from developments and services for external customers exceeded the revenue level of 2022 by 32 %, reaching 0.8 million euros.

In 2023, the available territories for the development of wind farms in state forest lands were announced at an auction to create preconditions and opportunities for entrepreneurs to engage in wind farm projects on public lands in accordance with the decision passed by the government. LVM offered 38 territories in this auction for building rights. Of these, 18 territories with a total capacity of 1402 MW were auctioned. The involvement of merchants will ensure a significant growth in the capacity of wind farms in the next 10 years, thus increasing the total amount of electricity produced in Latvia.

Forest management promotes CO2 sequestration

To increase the value of the forest capital, forest restoration and planting works were carried out on an area of 18.9 thousand hectares in 2023, including mechanized forest planting on one thousand hectares; mechanized sowing was performed on an area of 0.6 thousand hectares.

According to research conducted by Latvian scientists, more intensive tending of young trees can contribute to a better adaptation of the forest to climate change in the future. Last year, the company achieved particularly high indicators in this area. In 2023, new plantations were cultivated on an area of 39.1 thousand hectares, which is 10.5 thousand hectares or 37 % more than in 2022.

Just like active forest management, restoration of drainage systems contributes to sequestration of CO2. In 2023, facilities of forest melioration systems in an area of 14.3 thousand hectares were put into operation.

During the reporting period, 276 kilometres of forest roads were put into operation and forest road construction designs with a total length of 155 kilometres were approved, which will facilitate forest management and at the same time allow a prompt response to dangerous situations in the forest.

Environmental protection in forestry planning

Conservation of biodiversity has invariably been an important part of the forest management system at LVM. The company manages 25 % of the forest and other lands (forests, swamps, meadows, waters) owned by the company for the purpose of nature protection.

Each year, LVM employees identify new deposits of protected species (vascular plants, mosses, lichens, mushrooms), nesting and roosting places of protected birds, forest, swamp, water, grassland and dune habitats of European Union importance. To ensure adequate management of species and habitats, LVM also defines additional nature protection areas. In 2023, LVM environmental planning specialists and environmental experts surveyed the territories of economic activity and monitoring sites in an area of 14.8 thousand hectares.

In cooperation with other partners, in 2023 the company continued its work on three environmental projects co-financed by the European Union, the implementation of which was started in 2021.