The state forest manager AS “Latvijas valsts meži” (LVM) will pay the state 186.1 million euros in dividends on the profit it earned in 2025, says Jānis Teteris, member of the LVM supervisory board. He stresses that LVM's total payments into the state and municipal budgets for the 2025 reporting year will reach 262 million euros, the largest figure in the company's entire history.

How large a dividend will the company pay the state on its 2025 financial results?

The decision on the dividend payment is taken by the LVM shareholders' meeting at the same time as it approves the 2025 annual report, and that meeting is planned for the end of May. The law “On the State Budget for 2026 and the Budgetary Framework for 2026, 2027 and 2028” provides that LVM must pay the Latvian state 90% of the reporting year's profit in dividends, but not less than 155.9 million euros. LVM's net profit last year reached 206.7 million euros, so the company will pay the state 186.1 million euros in dividends for 2025, which is 30.1 million euros more than the lowest threshold set in the 2026 state budget law. At the same time, larger dividends also mean a larger corporate income tax bill – amounting to 47 million euros.

In total, the owner – the state – is forecast to receive 233 million euros from the management of state-owned forests, not counting the 16.7 million euros in mandatory state social insurance contributions and almost 8.5 million euros in personal income tax paid in labour taxes in 2025, nor the 4 million euros paid in real estate and natural resources taxes. Altogether, LVM will have paid 262 million euros into the state and municipal budgets for the 2025 reporting year, the largest contribution to the state in the company's entire history.

Will LVM pay the state equally impressive dividends in 2027 as well?

At present it is clear that the state as owner is keeping the requirement to pay 90% of profit in dividends, but as things stand now – in May 2026 – it is impossible to name specific figures for the amount, because of the unpredictable rise in production costs and also the revenue from product sales (influenced by market demand and price fluctuations). LVM operates in free market conditions, and its financial results are affected both by rising fuel prices and by the activity of timber buyers, which is driven by changes in demand for wood products not only in Europe but across the whole world and, of course, by the behaviour of competitors in other countries. There is a state budget framework for 2027 and there is a shareholder's letter setting out the expectation that the dividends paid by LVM cannot be lower than the 111 million euros paid out in 2024, but it would be premature to name a specific figure at this point, since this year's level of profit is by no means guaranteed yet.

Will LVM be able to sustain such an impressive contribution to the state budget over the long term?

LVM has drawn up a medium-term operating strategy and is implementing it successfully, but the amount of money paid into the state budget depends on several significant factors. The most significant of these is how prices for and demand for wood products develop on the European and world markets, which feeds directly into roundwood prices in Latvia. Also among the most important factors are the volume of timber available for sale, which is determined by the regulatory framework, and unpredictable production costs. Overall, LVM generates revenue for the state both directly through its own payments and through tax revenue from economic activity across the entire value chain of the products LVM makes. It must be stressed that, in order to maintain stable development of the industry, the volume LVM sells to the market should be kept at no less than 6.8 million m³; however, there is a risk that LVM will be unable to supply such a volume because of the disorderly regulatory environment.

But the audit firm KPMG has included among its future development scenarios one that envisages a fall of more than 50% in LVM's timber harvesting volumes!

That is only one of several possible scenarios analysed, and the outcome will be determined by the decisions the state takes – how much timber to harvest in Latvia's state-owned forests, and how much forest area to set aside for nature conservation objectives.

At present, 27% of the 1.6 million ha of land held by LVM is managed with nature conservation as its purpose. Changes in EU legal norms and policy, as well as their incorrect transposition into Latvian legislation, could significantly restrict LVM's economic activity by reducing the available forest area or by imposing prohibitions and an additional administrative burden. Of course, if the state decides to reduce timber harvesting volumes, then both LVM's dividends and its corporate income tax payments will fall accordingly, and at the same time economic activity in the regions and tax revenue from wood processing companies and forestry service providers will decline as well.

The article was first published in the 19 May 2026 issue of the magazine “Dienas Bizness”