State forestry company Coillte completes review of business

Management at Coillte, the State-owned forestry company, has completed a strategic review of the business, and is implementing a restructuring plan designed to free up €60 million of annual cashflow within five years.

It will involve ramping up production at Coillte’s core forestry business, joint ventures with private tourism and leisure operators, such as zip-lining businesses on Coillte lands, and a cost-reduction programme that will see an initial 40 redundancies from its head office.

Fergal Leamy, a former Terra Firma private equity executive who took over as Coillte chief executive a year ago, says the new plan is centred on boosting “recurring cash”.

“Under the plan free cash will move from close to zero today to more than €60 million on a recurring basis,” he said.

Asset base

The business is targeting a “long-term cash yield of 3.5 per cent” or higher from its asset base of about €1.3 billion.

Coillte will release results shortly showing revenues for 2015 of close to €300 million, and operational earnings of about €80 million. Mr Leamy’s plan involves increasing this to €130 million within five years.

The business also reduced its debt levels last year by about €70 million to €155 million, although it is expected to increase slightly this year due to investment. The dividend to the State last year was about €4 million, and it is expected to grow to about €5 million this year.

Coillte, which owns 7 per cent of the country’s land mass, employs about 1,000. Mr Leamy says he expects this number to “still be more than 900” in coming years, although there will be job reductions in phases.

The 40 exits from its head office are currently being sought.

Forestry

He estimates that output from Coillte’s core forestry operation, which comprises a third of its revenues, will increase from 1.3 million cubic feet of logs to more than 1.7 million cubic feet in five years.

Coillte sells its logs to a handful of Irish, mostly family-owned, sawmills. It is currently engaged with some of these businesses to help them expand their operations and diversify into new markets.

Coillte’s fibreboard and panels businesses will also receive investment. It also envisages entering into further wind energy deals, although it sees its future as a developer of wind farms rather than as an operator.

Mr Leamy has identified about 10,000 hectares of its 450,000 hectare land portfolio that it is tagging for alternative uses such as tourism.

He singled out Avondale House, the Coillte-owned birthplace of Charles Stewart Parnell, as an example of part of the group that is ripe for a tourism joint venture with a private operator.