Coillte, the State-owned forestry company, has reported a (€19 million) last year, compared with £14.2 million the year before.

Turnover increased to £82.5 million from £76.9 million, with £59.4 million coming from direct timber sales and £23.04 million from non-timber revenue. Coillte made a net loss of £2.7 million on its investment in associated companies. This arose from its 35 per cent shareholding in Lousiana-Pacific Coillte, based in Waterford.

While the company expressed satisfaction with the results, the problem of acquiring new land for forest growth and the failure of sawmills to keep pace with Coillte's production were raised.

"The widening gap between the production potential of Coillte's forests and the processing capability of the saw-milling sector is a major concern," said its annual report.

It said the problem of land availability was caused, in part, by farmers deciding there were more rewarding ways to use land than giving it over to forestry. Chief executive Mr Martin Lowery also said new competition from Sweden and the Baltic states was having a "significant impact" on the industry.

These are likely to be the last annual results from Coillte in its present form as the Government will decide its future in September.

Yesterday the Minister for the Marine and Natural Resources, Mr Woods, announced that AIB Capital Markets and Merrill Lynch will carry out a consultancy study on the possible options for the company, including flotation or strategic alliance.

Coillte's land bank, valued at more than £1 billion, is regarded as its main strength going into the future. While the flotation route will be examined closely, the chairman, Mr Ray MacSharry said it was not automatically the first option.

The fact that much of Coillte's land assets, particularly forests which are in an early stage of growth, are "off balance sheet" is regarded as one difficulty.

The chances to expand its land bank are also being hampered at present by a reluctance by many farmers to give over their land. Mr MacSharry said the consultancy study could recommend any of the possible options and may even suggest Coillte "stays as it is". Other people in the industry have speculated that Coillte may decide to "lease out" parts of its lands to private groups.

Mr MacSharry said one advantage of the flotation route was that it would provide Coillte with badly-needed capital. Mr Lowery said the company "had to expand" and was in favour of looking overseas. "We would be interested in certain opportunities," he said.

The company suffered a disappointment last year when its £4 million bid for the Northern Ireland saw-milling company, Balcas, was blocked by the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney.