The Natural Resources Institute Finland (Luke) has studied the financial performance of forest machine companies in Eastern and Northern Finland by analysing their financial statements. According to the preliminary results, forest machine companies with revenues of less than half a million euros are not doing as well as bigger companies. The purpose of the study was to find out the underlying reasons for the problems faced by forest machine companies and how to solve the predicament at a time when there is a trend of increasing the wood usage volumes.

The study is part of the FOBIA project, funded from the Northern Periphery and Arctic programme of the EU and coordinated by Luke. The purpose of the project is to enhance the competitiveness of forest service companies and other service companies in the forest sector operating in the northern and remote areas of Finland, Sweden, Scotland and Ireland. The results will be used for building training packages which will be made available to the entrepreneurs irrespective of time and place by utilising digital learning environments. In Finland, the training programme will be built by the TTS.

Decreased revenues in Finland

In 2016, there were a total of 1,109 limited companies which had registered wood harvesting as their field of activity. The averages and medians of key financial indicators were calculated from their financial statements. The average revenue of all wood harvesting companies in Finland has decreased during the period 2012–2016 from EUR 3.5 million to EUR 2.75 million. The median value of revenue was approximately EUR 350,000 which means that most of the wood harvesting companies were small micro enterprises having at most one chain of machines, and there are probably also companies for which wood harvesting is only a side line. During the period under review, the overall profitability in the sector was on average of the order of seven per cent when measured by return on investment (ROI) (Figure 1).

Figure 1: Return on investment in the wood harvesting sector (1,109 companies) during 2012–2016
Suomi English
Sijoitetun pääoman tuotto-%: Return on investment, %:
ROI, keskiarvo ROI, average
ROI, mediaani ROI, median

The variation of key indicators was analysed separately for 84 wood harvesting companies in Eastern and Northern Finland. They represented different parts of the area from Southern Savonia to Lapland, as well as four different size categories divided by revenues as follows:

Category 1 (revenues in excess of EUR 2 million)                      18 companies

Category 2 (revenues EUR 1–2 million)                                      20 companies

Category 3 (revenues EUR 0.5–1 million)                                  25 companies

Category 4 (revenues less than EUR 0.5 million)                       21companies

Figure 2. Financial position of wood harvesting companies in Eastern and Northern Finland (return on investment and relative indebtedness) by category during 2012–2016
Suomi English
Sijoitetun pääoman tuotto-% (ROI) Return on investment, % (ROI)
Ryhmä 1: yli 2 milj. euroa Category 1: in excess of EUR 2 million
Ryhmä 2: 1-2 milj. euroa Category 2: EUR 1–2 million
Ryhmä 3: Category 3: EUR 0.5–1 million
Ryhmä 4: alle 500 000 Category 4: less than EUR 500,000
Suhteellinen velkaantuneisuus: Relative indebtedness:

The bigger the better?

Of the companies in Eastern and Northern Finland, the ones with revenues over one million euros were the most successful (Categories 1 and 2). The average return on investment (ROI) was approximately 9% during 2012–2016. The smallest companies (revenues less than 500,000 euros) suffer from poor profitability and fluctuations of the analysed financial indicators from one year to the next. Solvency is tolerable in companies with revenues of less than one million euros, but good in companies larger than that. The median value of indebtedness ratio (debt to revenues ratio), for example, was on average less than 50 per cent, while it was 60–80% in those companies in Northern and Eastern Finland which had revenues of less than one million euros. Short-term liquidity was good in all categories, i.e. the companies have receivables that can be converted into cash for covering debts and charges.

R&D to help also small companies

Well over half of the wood harvesting companies are in the lowest revenue category, which gives cause for concern. In the next phase, some of the entrepreneurs in Eastern and Northern Finland included in the study will be interviewed. The objective is to systematically analyse the business models of companies of different sizes and to produce a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) to be used as a basis for development work. That allows identifying the key areas for development, particularly from the perspective of business skills.


Pasi Rikkonen and Paula Jylhä, Luke