ASSESSMENT OF THE IMPACT OF THE BAN ON THE EXPORT OF UNTREATED TIMBER ON THE PROFITABILITY OF FORESTRY

Abstract

With large forest areas, Ukraine was one of the main exporters of untreated timber in Europe. The major problem with forestry management was that a large part of the timber that was exported was harvested illegally and was not accounted for, resulting in significant losses to both the national ecosystem and the state budget from tax and levy deficiencies.

After the adoption of the Law on Export of Forest Products, the volumes of illegal logging began to decrease, but in addition to the possibility of selling timber obtained illegally, the legal export markets were closed. Thus, many state forestry companies find themselves in a situation where there is an opportunity to collect timber for sale, but buyers are not enough. This, in turn, leads to an increase in finished goods in warehouses and a decrease in the cash flows of the enterprise, which worsens the financial condition of the national forestry.

From the above data we can conclude that the volume of timber harvesting in Ukraine is increasing every year, despite the ban on its export (except 2017). However, no positive conclusion can be drawn about the growth of sales and profitability of the enterprises of the industry, since the data on the share of finished goods sold and the share remaining in the warehouses of enterprises are not given.

To investigate this issue, we analyzed the indicators of residues of finished products of 12 largest forestry enterprises in Volyn region.

As can be seen from the above data, the share of finished products in the assets of the studied forestry enterprises tends to increase steadily and in 5 years it has increased more than 3 times. That is, the hypothesis about the increase of actual wood residues in the warehouses of enterprises is confirmed. Such an increase adversely affects the overall profitability of the industry by reducing the flow of funds.

Revenue from the sale of the 12 surveyed forestry enterprises has been steadily increasing, but their total net income has been decreasing over the last 4 years. The share of net profit in sales revenue also declines to less than 2% in 2018. This gives reason to speak about the deterioration of the financial condition of the forestry by reducing the amount of profit received.