Chairman's report

A Year of Change

The Forest Products Commission undertook a program of profound change during 2009/10. Pressures on financial sustainability with operating losses in 2008/09 required FPC to seriously consider its future business model.

Financial pressures stemmed from two areas. Firstly, soft demand following gas supply restrictions in 2008 in Western Australia, the global financial crisis, severe bush fires and the closure of timber processing plants lead to downward pressure on harvesting revenues.

Secondly, the funding for new plantations expired with the finalisation of the National Action Plan for Salinity and Water Quality in 2009 and the failure of the carbon emission scheme to materialise. This was compounded with difficult capital investment markets in the private sector.

In this context, over 2009/10 the Forest Products Commission conducted an extensive review of its operations and structure. In the first half of the year, at the direction of commissioners, management embarked on a ‘reshaping’ programme. This targeted all expenditure items and over the year substantial progress was made in reducing costs, such that a very small operating deficit for the year eventuated.

In January 2010, the government announced that FPC will no longer offer fee for service reforestation but will facilitate the development of, rather than invest in, wood resources on farm land. Any associated activities would be exited, including parts of the sharefarm estate over the next 2-4 years, the new plantations division closed, and where possible, assets disposed of.

Following the departure of the General Manager in March, an acting General Manager, Mr David Hartley was appointed. He was given a clear mandate to restructure the FPC with the aim of establishing an agency that is financially sustainable into the medium term. Subsequent to the balance date of this report, the Minister for Forestry has announced a major restructure. The key elements are:

that FPC continues to function as an independent statutory authority with the General Manager reporting to the Board, but ‘hosted’ by Department of Agriculture and Food of Western Australia (DAFWA),
the transfer of science and industry branch into DAFWA, and
a reduced administrative structure with services purchased from DAFWA as required.

With a restructure of this nature which will take some 2-4 years to implement, significant job losses across the organisation, particularly in sharefarming and corporate services will be inevitable.

However, with the implementation of the restructure, together with encouraging signs on the business front with sales of pine logs picking up towards the end of the year, I am confident that FPC will progressively return to a sustainable financial situation and provide a triple bottom line return to government.

I would like to recognise the previous General Manager, Dr Paul Biggs, who energetically led the organisation for some ten years from its inception in 2000, and Mr David Hartley who stepped in as Acting General Manager during a very difficult time.

I would like to thank the Commissioners, the Executive and particularly the staff for their contribution during this challenging period. During the year, two Commissioners completed their terms, Messrs Ray Curo and Nick Oaks, and I thank them for their long years of service. Subsequently, Ms Karen Gadsby was appointed to the Board. I would also like to acknowledge my predecessor Mr David Taylor whose term as Chairman expired on 30 June 2009. On behalf of the Board, I would also like to thank the Hon. Terry Redman, Minister for Forestry, for his guidance and support throughout the year.

Eva Skira
Chair