Koskisen invests EUR 15 million to develop Järvelä production

Translation: Original comment published in Finnish on 8/14/2023 at 6:49 am EEST.

We believe that the investment is a natural part of the development of the Järvelä unit and we estimate that the company will be able to achieve productivity improvements by simplifying its log logistics through the investment. We will include the impact of the investment in our estimates for Koskisen in the Q2 update, but our preliminary estimate is that the changes will not be significant given the size of the company and the assumptions included in our previous forecasts.

Investment aims to further improve production efficiency in Järvelä

Koskisen announced last week that the company will continue to develop its sawmill production and has decided to build an eight-hectare log yard at the new sawmill in Järvelä. The investment includes a log sorting yard and line with control facilities and a stormwater treatment system. In addition, a new access route to the factory area, a gate environment, access control and a vehicle scale will be built.

The value of the investment is around EUR 15 million, the bulk of which will be invested in 2024. The new log yard and related activities are expected to be completed in early 2025.

Production at Koskisen's new sawmill in Järvelä started in July 2023. Production is being gradually ramped up and full capacity will be reached in early 2024. The productivity of the sawing process is expected to increase by 40% thanks to increased automation, higher production capacity and material yield. In the first phase, the new sawmill will increase production capacity from the current 300,000 cubic meters to 400,000 cubic meters of softwood sawn timber.

Productivity should be improved by simplifying log logistics

Koskisen's current log logistics in Järvelä seems complex, as sorting and final handling are in different places. Thus, we believe that the investment should lead to reasonably clear productivity improvements. The efficiency of log processing is also expected to become more important for the company in the future as the Järvelä unit's new sawmill will gradually increase the company's capacity from next year. We therefore see the investment as a natural continuation of the development of the Järvelä unit.

We will update our Koskisen estimates in connection with the company's Q2 report to be published on August 25. Our preliminary assessment is that there may be slight upward pressure on investment forecasts for 2024, while the likely efficiency gains from the investment will be reflected in our estimates from 2025 onwards. However, as a starting point, we do not expect the investment to lead to significant changes in our estimates, taking into account certain assumptions already included in them.