Forests of Ukraine to allocate over UAH 500 mln to raise base salaries of lower-tier employees – Chair of Supervisory Board

The Supervisory Board of SOE Forests of Ukraine held its second meeting last week in Lviv and reviewed the company's financial report for the first quarter of 2025. The company's performance was assessed for the first time by an independent corporate governance body. In an interview with Interfax-Ukraine, Chairman of the Supervisory Board Oleksiy Kucher, who heads the State Regulatory Service of Ukraine, spoke about the decisions made by the board.

By Oksana Ruzhenkova

 

- Forests of Ukraine reported on the increase in timber prices. How has this affected the company's financial condition?

- One of the key issues of the meeting was hearing the company's financial report for the first quarter of 2025. The financial plan was exceeded. The income of Forests of Ukraine in the first quarter amounted to UAH 5.82 billion, which is UAH 500 million more than in the first quarter of 2024. Profit reached UAH 1.24 billion, that is, over 50% higher year-over-year. Profitability almost tripled the planned figure. My colleagues and I even had a discussion about what such growth is connected with.

 

- Did you find out?

 

- One of the reasons is the increase in the average selling price of timber. With the exception of military supplies, providing for the population and the public sector, the company sells products exclusively at open auctions. Last year, the State Forest Resources Agency of Ukraine implemented a number of critical measures to block illegal timber schemes. Photo documentation of timber loaded onto trucks was introduced with the addition of photos to the consignment note, and the Electronic Timber Accounting System was secured against unauthorized interference. The gray market has shrunk, respectively, since the end of 2024, demand on exchanges has increased, prices have risen. The company's profit has boosted. However, this is not the only reason for record financial indicators. As you can see, the percentage of profit growth is many times greater than the percentage of revenue growth.

What happened? Last year, Forests of Ukraine underwent a reorganization: they left the forestry, but dissolved the branches (forestry enterprises), centralizing management at the level of regional offices. The processes have become more controlled, the administrative staff has been reduced, the payroll has been optimized. The enterprise is gradually getting rid of subsidized assets: non-core assests that are held by the company but not used are being sold through the State Property Fund. In other words, the financial result is the result of systematic work, and not a random positive market situation. According to the CEO's contract, based on the results of the company's work in 2024 and the first quarter of 2025, he is entitled to a performance bonus. However, Yuriy Bolokhovets [CEO of Forests of Ukraine] voluntarily declined bonuses until the end of martial law. This is his personal initiative, which I commend.

- - Plus UAH 500 million year-over-year profit. Is there a solution yet, how to spend it?

- The Supervisory Board recommended raising salaries for production personnel – from blue-collar employees to foresters. The total amount planned for the increase is over UAH 500 million. The salary increase is planned to be implemented in a differentiated manner – depending on the actual workload on the employee. For example, the highest percentage of increase is for forest masters who work with the highest fire risk class and a patrol zones of ​​​​1,200 hectares.

 

- When will the salary raises take effect?

- The increase is planned from June 1. Before the reform, there was an imbalance in labor remuneration in the forestry sector. Salaries in one forestry could be twice as high as in another. In resource-poor regions, they generally received pennies. Currently, due to the differentiated salary increase, the labor remuneration system will become more balanced and transparent.

 

- Corporate governance will help attract investments. Is there any positive news in this direction?

- Investments will not appear just because a supervisory board has been created in Forests of Ukraine. Financial transparency is necessary. That is why the supervisory board decided to audit the annual financial statements of SOE Forests of Ukraine for 2022–2024 as well as for 2025 [since January 1, 2025, the company has followed international financial reporting standards]. The audit for 2025 will be conducted in accordance with international financial reporting standards. The criteria for selecting an auditor have been approved. We are focusing on reputable international companies. The State Forest Resources Agency will be provided with proposals outlining contract terms with the auditor and the maximum amount of funds that can be spent on paying for his services.

 

- Audit of financial statements is not mandatory during the martial law.

- True, but investors want to be convinced that the figures in the report correspond to reality. This is also important for evaluating the effectiveness of forestry sector reforms. The public must be convinced that the results of the enterprise's activities correspond to the declared data. During the meeting, the members of the supervisory board also made proposals for involving consulting companies to assess the effectiveness of the enterprise's management and organizational structure. We heard some proposals regarding the research methodology. Frankly, we need a high-quality, meaningful product that will not gather dust, but will open the way to real changes – to reducing corruption risks, increasing operational efficiency, optimizing costs. Therefore, at the next meeting we will decide on the advisability of conducting such an analysis.

 

- The subject of increasing logging volumes is constantly raised at meetings between foresters and business. Has the supervisory board reviewed this issue?

 

- The Supervisory Board obliged me to contact the relevant ministry, which is considering issues that directly relate to the ability of Forests of Ukraine to increase the volume of logging. In particular, this concerns the approval of forest management materials, without which logging in some farms risks stopping completely. The law on the corporatization of SOE Forests of Ukraine has not been progressing since last year. Corporatization opens the way to attracting investments in mechanized logging and the construction of forest roads – these are key conditions for increasing the volume of logging.

 

- The meeting took place in Lviv. Last year, the Cabinet of Ministers decided to ban clear-cutting in the Carpathians starting in 2027. What will happen to local forestry?

- There is a public demand for the protection and preservation of the Carpathian forests, while foresters are required not to reduce the supply of timber. New powerful woodworking plants are being built. The only way to find a balance between ecology and economy is to switch to natural forestry. During a trip to Lviv region, members of the supervisory board were shown experimental plots where reformative felling has been carried out since 2008 and has led to excellent results. We are not losing areas covered with forest. Thanks to better lighting, the process of natural renewal of plantations is constantly taking place, and the wood stock on the plot is increasing more than twice. This method is used in Germany and Switzerland. But to manage this way, a dense network of forest roads and modern logging equipment are needed. These are big investments, so we are returning to the topic of corporatization again.

 

- Forests of Ukraine has annexed Kharkiv forest units this year and plans to annex forest units in Kherson and Donetsk regions by the end of the year. Do you support this decision?

- This is certainly a major additional burden. The territories of the deoccupied units are mostly mined. The material and technical base is destroyed and requires significant capital investments. But the management of Forests of Ukraine takes a proactive position, believing that the restoration process will take place faster as part of a large company, because the government and local authorities currently have many other tasks. One of the members of the supervisory board recently visited Izium forestry. There are certain ideas for organizing the demining process using modern equipment and new technologies. I hope that at the next meeting the supervisory board will be able to provide specific proposals on this matter.