Surplus supplies of sawn timber and high log prices helped push Finnforest Corporation into the red in the first six months of the year.

But the company’s sales into the British DIY and merchant sectors continued to ‘rack up strong earnings’ and Finnforest UK ‘showed strong performance’.

The Finnish company, which is a subsidiary of the Metsäliitto Group, reports an operating loss of €900,000 for the January to June period, compared with profits of €30.6m in 2000. The loss before extraordinary items was €14.9m, as against profits of €18.5m last year, while sales dipped about €2m to €622.5m.

The worst hit area of the business was the solid wood division, which lost €10m.

‘The fall in prices resulting from an oversupply of redwood sawn timber, coupled with the continued high price of sawlogs, stymied our sawmills’ ability to generate earnings,’ stated the interim report.

Finnforest’s response will be to cut sawn timber production by 12% in the second half.

Finnforest’s plywood arm fared better, with profits at €8.7m, compared with €12.2m, while engineered wood saw earnings fall to €7.7m from €13.1m.

The company’s profits were down in both the US and Germany, but in the UK it continued to move ahead, despite ‘reorganisation costs’.

‘The trade and consumer [division] in Great Britain has performed well,’ said Finnforest. ‘[UK] DIY com-panies are opening a large number of new stores and this is likely to bring a further pick-up in the market.’

The company pointed out that it has invested heavily in production facilities and acquisitions during the year. Its biggest buy was the Moelven timber group in Norway. With the acquisition of a majority interest, Finnforest will be market leader in the Nordic countries and Europe’s largest mechanical forest industry group by turnover.

In the UK, Finnforest opened its new Timber Academy in Boston and is now building a €5m I-beam plant in King’s Lynn (TTJ July 21/28).

The company predicts that poor earnings in its solid wood division will push it ‘deep into the red’ in the third quarter. But it says the situation will improve towards the end of the year, or early next year.