Epsilon Archive for Student Projects

Abstract

Cash flow analysis from pine and spruce stands on I and II site index was made
basing on data collected from three Polish forestry districts. Data obtained from districts
allowed to calculate NPV, IRR and FR economical indicators for the years 2001 and
2006. Economic outcomes were calculated by discounting costs and incomes with 3%
discount rate. Additionally, calculations with administration costs were made.
Furthermore, a part of the report compares Polish and Lithuanian economical outcomes in
2006 from pine and spruce stands of the same productivity. The following criteria were
defined for all pine and spruce stands: the height of the pines reaches 24 meters and
spruce 28 meters at the age of 100 years. Only state owned productive forests were
investigated. The next accepted step was making the forest management programme as
similar as possible to the forestry practice in both countries.
Project investigations revealed that pine stands in Poland on most common site
index are not profitable according to NPV and IRR criterion with and without adding
administration costs. However spruce profitability reaches more than 4 percent without
taking into account administration costs. After adding administration costs it went down
into 2.5 percent. For Polish pine and spruce stands forest rent remains positive with and
without administration costs. Despite increasing prices for timber assortments,
profitability did not increase significantly between years 2001 and 2006 due to increase of
labour costs.
Comparison of Polish and Lithuanian silviculture regimes revealed that Polish
pine stands are much less profitable than Lithuanian. The reason behind this lies in a
higher number of treatments required and implemented during rotation. However Polish
spruce stands with more treatments implemented but a 25 years longer rotation have a
higher profitability in Poland. The main reason for this is a much higher spruce
productivity in Poland than in Lithuania and higher wood prices.
Furthermore administration costs are more severe in Poland, which decreases
profitability as compared to Lithuania.
In general, the report results lead to the conclusion that only those entrepreneurs
which are willing to freeze their capital for a long time in bringing low interest rate
investments can invest money in Polish and Lithuanian forestry.