Renovators can breathe? This industry will reduce margins

Such conclusions can be drawn from the report of Bank Pekao, “Wood roller coaster. Will the domestic production of wood products face a cyclical collapse after the excellent year 2021 and the first half of 2022?”

“Throughout almost the entire period from April 2020 to May 2022, it showed a production dynamics that was more favorable than the average for the industrial processing sector. In the following months, however, wood production began to slow down quite rapidly, in July, noting the first drop y / y from May 2020“- we read in the report.

End of good times

As described by Pekao, 2021 was a real “explosion” of financial results of the domestic wood industry. The aggregated net profit of the sector increased by about 2.5 times compared to 2020, to a record 4.6 billion PLN. This was due to both a strong increase in revenues (+ 37% y / y), but also a simultaneous clear (by nearly 5 percentage points) increase in net profitability, which increased to as much as about 11%. (vs the 6% average for processing).

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However, after the rapid growth so far, in Q3 this year it becomes clearer and clearer deterioration of the domestic wood industry.

“The coming quarters are a possible clash of the sustained cost pressure with much tougher demand conditions, and as a result decrease in margins of companies from the wood industry. One of the key challenges remains the availability of the raw material and its price. During the second quarter of 2022, prices for virtually all types of wood sold by the State Forests National Forest Holding increased by several dozen percent y / y (in extreme cases even more than twice), while the average increase in wood prices was around 60 percent at that time. y / y Record prices of energy carriers are also a growing challenge for the industry“- we read further.

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