Latvia's state-owned forests have contributed a total of 988.8 million euros to the national and municipal budgets, and this year (2018) that figure will exceed one billion euros.

This is the contribution to the national coffers from the state-owned forest manager, Latvijas valsts meži (LVM), which was founded in the autumn of 1999. It should be noted that in addition to direct payments through various taxes and dividends, LVM is a significant employer for forest planters, young growth tenders, loggers, timber transporters, and an important supplier of wood to both timber processors operating in Latvia and energy producers (generating heat and electricity). In total, over the course of LVM's operations, the state has received about 70% of the company's profit as dividends paid into the state budget. The remaining earnings have primarily been invested in the restoration of forest roads and forest infrastructure, ensuring forest accessibility, and increasing forest productivity. Over 17 years, all LVM payments have seen a significant increase – the sharpest rise being in personal income tax and state mandatory social insurance contributions: from 1.5 million euros in 2000, this figure has grown to 13.6 million euros in 2017. The state received 11 million euros in dividends from LVM in 2000, while in 2011 that sum reached 73.5 million euros, with 2012 being only slightly lower.

Climate impact

LVM closed last year (2017) with a turnover of 275.8 million euros and a post-tax profit of 64.8 million euros. According to unaudited data, 2017 revenue exceeded 2016 figures by 21.8 million euros, and post-tax profit was 14.1 million euros higher than the year before. Net turnover grew due to a favourable market and a positive price trend, as well as an 8.3% increase in the proportion of roundwood assortment sales compared to standing timber, relative to 2016. Last year, 5.45 million cubic metres of roundwood assortments and 0.28 million cubic metres of standing trees were sold.

Investments made in forest infrastructure in previous years allowed LVM to not only maintain, but actually increase their income last year, despite adverse climatic conditions, exceeding original plans. This is the picture shown by LVM's 2017 operating results. “At the moment, before the audit, the precise net profit figure cannot yet be stated,” says Dainis Reķelis, Head of the LVM Corporate Planning Department, recommending that we await the audit results. He stresses that climatic conditions in 2017 were a factor that created significant challenges for achieving the company's goals. “The wet year we have just had proved once again that without the prior investments made in clearing forest roads and drainage, it would have been impossible to execute the company's operating plan and ensure regular timber deliveries to the national economy,” points out D. Reķelis.

28 million in investments

In 2017, investments amounting to 28.2 million euros were made, including 20.2 million euros invested in forest infrastructure – the construction of roads, restoration of forest drainage systems, bridge construction, and the creation of timber roads. Last year, 50.8 million forest tree seedlings were sold, 15.7 thousand hectares of forest were renewed, and 27.2 thousand hectares of young growth were tended. While the volume of investment last year was slightly lower than in previous years, its implementation was affected by climatic conditions.

In order to increase the area of forest managed by the company, the joint-stock company acquired 1,600 hectares of land, investing 3 million euros, thus bringing the total volume of land purchased by LVM since 2007 to over 10,600 ha (in total, LVM manages 1.63 million ha, of which 1.41 million ha is forest land). Social responsibility plays an increasingly significant role in the operations of any company - in 2017, LVM maintained more than 300 free recreation sites, the most recognisable of which include, for example, Ložmetējkalns, the Ellīte sulphur spring, the Silva arboretum, and Čertoks or Velnezers, and also donated four million euros to charity, culture, education, and sports.

Opinions

Playing to their strengths

Kristaps Klauss, Executive Director of the Latvian Forest Industry Federation

The increase in LVM's profit and turnover was to be expected, as timber processors raised purchase prices thanks to a favourable global timber market. However, the fact that investments in forest infrastructure from previous years allowed LVM to carry out deliveries at the planned volume, even in climatically very unfavourable conditions, was a pleasant surprise and gave a sense of a job well done.

A rare specimen

Māris Liopa, Chairman of the Board of the Confederation of Latvian Forest Owners and Managers and a forest owner

LVM is a unique company, both because there are not many companies in Latvia that can boast of total payments into the state treasury amounting to almost one billion euros, and because it is able to effectively manage forest lands and be both one of the most efficient forestry companies in Europe and the foundation for the entire forest sector in Latvia. LVM is a kind of example for many private forest owners in Latvia on how to work effectively in their own forests. Although Latvia is one of the greenest countries in the world, reproaches are still heard from time to time from certain interest groups that we are not as green as we should be. New protected areas are being designated, as a result of which areas that are impressive by Latvian standards are completely excluded from economic activity, or activity within them is heavily restricted.

This means lower economic activity and a subsequent decrease in the number of jobs, as well as fewer taxpayers and lower real tax revenue, even though societal needs – in medicine, education, and infrastructure – are not being met precisely due to a lack of money in the state coffers. There is only so much land in Latvia, and by increasingly “encumbering” more hectares with various restrictions, one of the Latvian state's strategic resources is essentially being reduced, which is by no means in the interest of those people who want to live and work in this country.