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Small-scale Forestry

, Volume 10, Issue 2, pp 211–229 | Cite as

Profitability, Liquidity and Solvency of Wood Harvesting Contractors in Finland

  • Markku PenttinenEmail author
  • Arto Rummukainen
  • Jarmo Mikkola
Article

Abstract

In order to respond to global competition challenges, the wood-processing industry in Finland and elsewhere is outsourcing roundwood harvesting to harvesting contractors. The industry also seeks to negotiate with fewer, larger and more diverse contractor enterprises. The weak profitability, liquidity and solvency of harvesting contractors and the consequent difficulty in hiring qualified machine operators make networking and enterprise growth a complicated process. Financial data of 1,060 Finnish wood harvesting contractors from the period 2001 to 2007 were studied using the ‘closing of the accounts’ data. The material represents most of the full-time contractors. For 2007 net profit was about 6%, credit share of turnover over 50% and median financial reserve €18,000. High machine depreciation and interest expenses together with low solidity make it difficult for small enterprises to absorb seasonal variations and to cope with recessions. Profitability varies considerably amongst smallest enterprises, which most often are sole-operator enterprises. Moreover, even the median profit of the smallest enterprises tends to be negative, which means that enterprise capital will be consumed and many enterprises are at risk of failure. Larger enterprises are more likely to be limited liability companies. Their median profit is clearly positive and the profit varies relative little between enterprises.

Keywords

Forest machine Ratio analysis Financial reserves Business survival 

Notes

Acknowledgments

We gratefully acknowledge very helpful comments of main editor Steve Harrison. The English language of the paper has been checked and improved by Dr. Ashley Selby.

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Copyright information

© Steve Harrison, John Herbohn 2010

Authors and Affiliations

  • Markku Penttinen
    • 1
    Email author
  • Arto Rummukainen
    • 1
  • Jarmo Mikkola
    • 1
  1. 1.Finnish Forest Research InstituteVantaaFinland

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