Risks and uncertainties

Risks related to Koskinen, its business operations and operating environment are managed within the framework of the Group’s risk management policy and risk management principles. The businesses are responsible for risk management in their own operations.

Near-term risks and uncertainties

Koskisen’s most significant short-term risks are related to the availability of raw materials and the management of price changes, the functioning of the financial markets, customers’ solvency and consumers’ purchasing power, the delivery capability of suppliers and service providers, the labour market situation, and changes in business areas and customer relationships.

Russia’s military action

The cessation of imports from Russia has tightened the timber market situation in Finland, mainly for pulpwood and forest chips. The procurement of birch raw material, which is more important for the company, from Finland has been reasonably successful.

In 2022, 98.6 (97.2) per cent of the wood raw material purchased by Koskisen came mainly from Finland. Of the raw material, 1.4 (2.8) per cent (birch) was imported from Russia. Wood imports from Russia stopped completely in March 2022, after which all wood used in production has been sourced entirely from Finland.

EU sanctions against Russia affect the supply of sawn timber and birch plywood on the market, significantly limiting it.

Koskisen sold its wholly-owned Russian subsidiary OOO Koskisilva, which formed the majority of the company’s business operations in Russia, to a local operator on 21 June 2022. The process of winding down Koskisen’s logistics and wood procurement company in Russia is ongoing. The timing of its implementation cannot currently be predicted in relation to the processes of local authorities. The share of Russian logistics and wood procurement of the Group’s net sales was small, approximately 0.1 per cent, and the financial impact of the shutdown of operations is minor. The unit has employed four people.

General risks and business uncertainties

Koskisen faces typical business, operating environment and financing risks. Together or separately, they may have a positive or unfavourable impact on Koskisen’s business, result, financial position, competitiveness and reputation. The risks presented below are presented in random order.

Risks related to operating environment

Market risks

Koskisen operates in cyclical sawmill and panel industry markets, where economic uncertainty and other unfavourable developments may reduce the demand for Koskisen’s products or the profitability of its operations. Price fluctuations in roundwood, disruptions in wood supply and impacts on the availability of wood may cause significant costs and disruptions in production.

Koskisen manages market risks partly through diversification of its countercyclical businesses, geographical and end-use areas of sales, and through an experienced and competent wood procurement organisation. Koskisen closely monitors the development of procurement and production costs and steers the pricing of end products accordingly. Hedging instruments are used to manage price fluctuations in key factors of production whenever justified.

Risks based on environmental factors

Environmental impacts and climate change, as well as their mitigation, may have an impact on Koskisen’s operations, results and reputation. Such impacts may include, for example, changes in consumer behaviour, business processes, material damage, the need for technological change, increased regulation and tightening environmental taxation.

Koskisen systematically manages material environmental and climate impacts, especially in energy and material efficiency, the immediate impacts of its production facilities and the responsibility of its supply chain. In its raw material procurement, Koskisen ensures the implementation of sustainable forest management practices.

Business risks

Koskisen’s business operations are subject to general and industry-wide operational risks as well as risks related to customer relationships, the environment, safety, people and information systems.

Business operations involve production and supply chain risk factors related to industrial activities, for example in the form of accidents, accidents or serious disturbances. Such events could materially affect Koskisen’s ability to produce and deliver its products to customers. In wood processing operations, business operations also involve risks related to environmental pollution and environmental damage. Significant customer losses may affect business operations and profitability.

Koskisen has taken risk factors into account as comprehensively as possible throughout its integrated production and supply chain and customer relationship management. Environmental impacts are measured, analysed and reported systematically. Koskisen has certified quality, environmental and safety management systems. In terms of damage risks, Koskisen has comprehensive insurance cover that is actively maintained. Koskisen is prepared for increased cybercrime and information system disruptions.

The commissioning of the strategically important new wood processing unit will be carried out in stages, moving from the old production line. In this way, the risk of production continuity is as low as possible and comprehensively controlled.

The commitment and well-being at work of personnel and key personnel is strengthened by offering a sufficient package of rewards, work content and development opportunities. Koskisen actively monitors and manages well-being, motivation, job satisfaction and related development needs.

The Code of Conduct is the foundation of Koskisen’s business. The company’s Code of Conduct guides us to act honestly, transparently, lawfully and ethically with all stakeholders.

Financial risks

Koskisen’s financial risks are related to the terms of financing agreements as well as possible unfavourable fluctuations in exchange rates and credit losses.

Covenants included in Koskisen’s financing agreements may limit Koskisen’s business operations and financial flexibility, and Koskisen may have difficulties complying with the terms of its financing agreements, which may lead to early maturity of financing agreements or increased costs.

Koskisen actively ensures its solvency, sufficient and well-functioning relations with financiers and the financing structure. Financial risk management is described in more detail in Note 3 to the Financial Statements. Koskisen uses currency hedging instruments in accordance with the hedging policy approved by the Board of Directors. Credit risk is managed in accordance with the policy using credit risk insurance and risk management methods.