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Last week’s announcement of Glennon Brothers’ purchase of Balcas continues a trend of sawmill rationalisation that began in earnest in the mid-1990s.
What sets this acquisition apart is the scale of the deal, which sees the Longford-based company increase its annual turnover to €265m and log intake to well over one million m3.
Mike Glennon – joint managing director of Glennon Brothers, along with his brother Pat – explains some of the reasons for the Balcas purchase.
“Like Glennon Brothers, Balcas is a good innovative business so this deal gives us critical mass to invest in new technology and to expand,” he says.
“It also adds to our product range. For example, Balcas has a track record in wood energy both in its CHP plant and as a major producer of wood pellets.”
Glennon Brothers’ record in acquiring sawmills and timber-frame plants is to align with companies that have potential to increase Glennons’ overall market reach, especially in offering new products.
Balcas is not only a leader in renewable energy “but also produces other products including long-lasting incised fencing stakes, a new market for Glennons”, Glennon says.
He is referring to the Balcas Permapost fencing posts which are incised to allow deep penetration of preservatives to increase their service life.
The total increased log intake of Glennons today would have absorbed almost half the island’s logs 20 years ago but he puts this in perspective, especially as production on the island is forecast to reach 5.4m m3 next year.
“In addition, the private timber harvest is forecast to double over the next two decades,” he maintains, but he questions how much of this will reach the market based on the underperformance of felling licences issued by the Department of Agriculture, Food and the Marine.
“The continuous unacceptable felling licence shortfall illustrates the urgent need of total reform of forestry legislation,” he says.
As expected, his immediate concern along with Forest Industries Ireland (FII) is trying to ensure a continuous flow of felling licences so that timber availability from thinning and clearfell matches sawmill requirements.
However, as joint MD of a company with a long tradition – dating to 1913 – he is also deeply concerned about the dramatic downturn in afforestation, due mainly to licence appeals and low rates of Department approvals.
Annual planting level
“The current annual planting level [2,400ha] is unacceptably low and threatens future long-term log supply,” he maintains.
He is passionate about getting more timber into housing and says “there is no reason why Ireland’s 20% share of the timber-frame market shouldn’t be as high as Scotland’s which is 80%”.
The need to increase this market was one of the reasons why the company purchased Dempsey Timber Engineering (DTE) near Arklow and Alexanders Timber Design in Troon, Scotland .
Both specialise in the supply and installation of timber-frame homes and engineered roof trusses to the construction industry in Ireland and the UK.
“DTE is now supplying and installing timber-frame homes with close to 100% timber,” he says. “This is not just sawn timber but also material such as oriented strand board (OSB).”
He is not drawn on future plans but says an increase in timber-frame building is essential. “This will require a change in attitudes and in the Irish building regulations to allow construction to at least four stories as is being achieved in Scotland at present,” he maintains.
While the purchase of Balcas is subject to approval from the Competition and Markets Authority in the UK and Competition and Consumer Protection Commission in Ireland, he is confident the deal will go ahead, with the company achieving another important milestone in its 108-year history.
The rationalisation of the Irish timber processing industry has been driven by sawmills, Coillte and Enterprise Ireland especially since the 1990s (Table 1).
While reports on forestry and timber processing often gather dust, The Irish Timber Industry: An Export Development Plant for the 1990s – known as the Simons Report – did influence change in the sector.
Compiled by Simons Strategic Services and commissioned by Coillte, the Irish Timber Council, IDA and Enterprise Ireland (EI) – then Córas Tráchtála – it was one of the first initiatives by Martin Lowery who was appointed CEO of Coillte when it began trading in 1989.
Simons proposed a fivefold increase in exports and identified the lack of markets for small logs and sawmill residue (wood chips, sawdust, bark) as a major challenge.
Within seven years, the residue problem was largely solved as board mills were established by Masonite and the Coillte-Louisiana Pacific joint venture.
Simons also proposed rationalisation of sawmills and a joint export consortium involving large sawmills and Coillte with support from Enterprise Ireland.
Rationalisation
This “Team Ireland” approach floundered as independently minded sawmills went their own way with support from EI. But rationalisation of sawmills did occur (Table 1) and they began to increase exports modestly from the 1990s up until the economic crash in 2008.
Since then, sawmills dramatically increased exports from 20% to 70% today.
Despite a reduction in appeals, the forest licence backlog remains a serious issue claims Tomás Hanrahan, spokesperson for the Association of Irish Forestry Contractors (AIFC).
“The number of tree felling licence applications from 2017 up to and including March 2021 has risen to 4,095,” he said. “This represents over 13 million m3 of logs,” said Hanrahan, of Forestlink Ltd, the forestry consultancy company.
He is basing the data on 25,423ha of clearfells averaging 350m3/ha to 450m3/ha and 63,490ha of first and subsequent thinnings averaging 40m3/ha to 70m3/ha.
The data for Coillte and private licences, is sourced from Department monthly reports. “Although appeals have significantly reduced since legislation was introduced last year, the backlog continues to increase for felling licences,” he said. “Remember, these figures are for tree felling licence applications only. Delayed licences for planting and roads also remain unacceptably high.”
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