Nearly all the wood raw material to the forest industry is delivered by about 1,200 forest machine entrepreneurs and 1,000 timber truckers. Since the 1970s, profitability in the forest machine contracting business sector has been good as measured by operating surplus. The high operating surplus is an indication of the fact that operations have been effective. On the other hand, net income, which shows the financial return to the entrepreneur himself, has been negative for over a decade. The return on investment, however, which at times was very good, shows that the profits from the entrepreneurship were reaped by the financiers. The financial returns from the forest machine contracting businesses have been used mainly for new investments. Therefore, and as a result of poor profitability at times, the businesses in the sector are heavily indebted on average.
Timber transport to the mill is done by another group of small entrepreneurs, the timber truckers. The profitability of the sector was quite good in the late 1980s and solidity was good as well. The sector has clearly been more profitable then the forest machine contracting sector. Even though timber truckers serve the same customers as the forest machine entrepreneurs, their economic circumstances and position in the markets has been quite different. The biggest difference between the sectors has been the fact that timber trucking has been regulated until 1991. Until the year 1991, the means-testing was used to decide on the entry of new entrepreneurs into the sector. This practice generally prevented overcapacity from arising and presumably was the greatest reason for the fact that timber trucking was much more profitable than forest machine contracting. Entry into the forest machine contracting sector has had no natural barriers, and that is one of the reasons why there is often overcapacity in the sector, at times resulting in tight price competition. The high capital costs have forced the entrepreneurs to be flexible in terms of price, not capacity, in a competitive situation.
After 1991 many changes have taken place in the timber transport sector. Partly as a reason for this about every fifth entrepreneur of the sample studied 1991 has discontinued operations. The most common reason for discontinuation was the reduced profitability. Other, primarily personal reasons were also present. Deregulation in the sector has not increased the average size of the businesses. The one man/one truck principle still holds. The economic situation in the sector has deteriorated, but not decisively. The businesses continuing in the field were not only the ones found to be most successful before deregulation. The continuation or discontinuation of a business is clearly not only dependent on economic success, but also on goals concerning income and wages, and partly on factors that cannot be discovered during a study.
Key words: profitability, contracting, entrepreneurs, harvesting, transportation.
Correspondence: Pekka Mäkinen, Finnish Forest Research Institute, P.O. Box 18, FIN-01301 Vantaa, Finland
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