THE State-owned forestry company, Coillte, increased its net profits by just over £1 million to £13.55 million in 1996, despite losses of £1.6 million on a joint venture with a US firm, Louisiana Pacific. Turnover increased to £74.3 million from £67.9 million in 1995, the company said yesterday.

The value of Coillte's net assets increased to £917 million, including net forests growth for the year of £29.1 million and accumulated growth of £190 million. Non-timber revenue, now representing 23 per cent of business, rose by 23 per cent to £18.9 million, the company said.

Coillte's chief executive, Mr Martin Lowery, said he was "disappointed" by the losses run up in the joint venture, a mill in Waterford in which the company has a 35 per cent stake, and admitted that losses for this year at the plant were likely to at least equal those of 1996. He expected the mill to be in the black within two or three years.

The company's chairman, Mr Patrick Cooney, added that the commercial and strategic logic underlying the investment remained sound.

"Sales were affected by the construction of new mills which caused substantial over-capacity worldwide, particularly in the US, which had been intended as the market for most early production," he said.

The mill would now concentrate entirely on the European market. Mr Lowery added, and the US partner, Louisiana Pacific, was absolutely behind this strategy.

Coillte said it had put in place a new system for selling wood, and was now holding an electronic auction every fortnight compared with just six auctions a year in the past.

It had proved very difficult in 1996 to purchase land for forestry, the company said. Coillte already owns some 5 per cent of all of land in the State.

"Despite intense efforts, the level of land acquisition in 1996 was the lowest to date," said Mr Cooney. "Land procurement is affected not only by competing forest owners and companies, but in particular by alternative land use grant schemes such as Rural Environment Protection Scheme, the designation of large areas as natural heritage sites and increased planning requirements."

In the future, Mr Lowery said, Coillte would expand its core forestry base, buying land and planting more trees.

The company owns substantial amounts of high ground across the Republic, he added, and had signed a deal worth "several hundreds of thousands of pounds a year with Esat Digifone, leasing the land for mast sites.