We had a deep dive into VicForests& #39; annual reports. And came up dirty. This is what we found out.
VicForests is less of a business, more of a job creation scheme for rural Victoria. It hardly makes any money, despite being given a free resource in our public forests.
A PricewaterhouseCoopers report from 2016 concluded that VicForests & #39;has demonstrated lower net profit margins than the Australian forestry sector and industry average, and considerably lower profit margins than select forestry internationally& #39;. (p.13)
Let& #39;s have a look. Its after tax profit for the last few years is as follows. All figures come from their annual reports:
2019: $1,953, 000
2018: $1,218,000
2017: $3,170,000 LOSS! OUCH!
2016: $3,424,000
2015: $4,677,000
2014: $3,411,000
Why such small profits? The PwC report of 2016 suggested VicForests & #39;does not charge appropriate commercial harvest and haulage rates& #39;, which is VicForests& #39;  largest expense (p.17). Remember, they get access to our forests for free.
The 2017 loss (OUCH!) is blamed on a revaluation of the & #39;biological asset& #39;, with a forecast reduction in revenue owing to a decrease in high grade ash sawlog available for sale. Not enough wood, I guess.
What else can be to blame for these low numbers? Oh yes, legal bills. In 2019, the annual report mentioned & #39;increased litigation costs& #39;. The 2018 annual report also refers to & #39;increased litigation costs& #39;.
In 2016 we had & #39;increased legal expenses& #39;. I& #39;m beginning to think legal expenses are a feature, not a bug of the VicForests& #39; business model. A model described more broadly as & #39;patently nuts& #39; in The Australian Financial Review in 2014.
It gets nuttier. Counted as income is a payment from the government called & #39;reimbursement of foregone revenue and expenditure incurred for the Leadbeater& #39;s Possum recovery program& #39;. Basically, VicForests is being paid for NOT destroying habitat.
It& #39;s a nice little earner. Here are the figures:
2019: $11,077,000
2018: $5,544,000
2017: $4,850,000
2016: $2,953,000
2015: $1,550,000
Whilst the 2019 figure is double that of 2018, we believe the $5m from the previous year was returned to Treasury. Nevertheless, without these payments, VicForests& #39; miniscule profits would be even worse, tipping into loss last year. It rarely returns a dividend to government.
What to make of these yearly payments? The government says it is not a subsidy! So don& #39;t call it one! Wikipedia says a subsidy is a financial support used with the aim of promoting an economic or social policy. If employment in rural areas is that policy, then it& #39;s a subsidy.
It gets worse. With VicForests, you never really hit rock bottom. The government throws money at other sectors of the industry to keep it afloat. Such as $10m to upgrade the Maryvale Pulp Mill. Or $650,000 into a hardwood mill at Heyfield. You get the picture.
In 2013, the then government, struggling to get the owners of the Maryvale Pulp Mill to pay back a $10m debt, decided to actually REDUCE the cost of logs. Thanks Peter Walsh!

This corporate socialism is what you get when propping up an unsustainable industry
VicForests have access to a cheap $30m loan from the government, through the Treasury Corporation. As noted by PwC back in 2016, it also gets grants for its euphemistically named & #39;fire salvage& #39; efforts. Which might explain why it is so eager to log in the aftermath of the fires.
So, that is VicForests. Afloat on a sea of government support (NOT SUBSIDIES!), with the end result being the destruction of Victoria& #39;s forests, worsening our climate crisis, and driving threatened species to extinction. What a great deal for Victoria& #39;s taxpayers!
Next week: a thread on Leadbeater& #39;s Possum and the Greater Glider, and how VicForests intend to deal with these arboreal pests, once and for all.
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