The Laesti sawmill, just outside Pärnu, is to close down after its parent company cited a lack of profitability. The closure will result in 30 job losses.
Swedish timber industry group Bergs owns the Laesti sawmill, and is to close down operations next month.
Bergs Timber CEO Peter Nilsson said: "While local management is doing a good job, we do not consider it realistic to continue and develop Laesti's operations. Closing the sawmill comes as part of the changes being made at Bergs, where we are moving towards higher added value."
The company plans to sell the sawmill property, its plant capital and the land on which it is situated, to Warmeston, an Estonian firm which produces wood pellets, usually used as a fuel.
An agreement to this effect has already been signed and the transaction is due to come into effect in the third quarter of this year, though Warmeston says it has no plans to restart operations at Laesti.
Laesti reported a turnover of €16.5 million last year.
Bergs Timber informed the stock exchange of its decision, citing a profit sustainability assessment carried out in the spring which it says revealed to running the sawmill was no longer viable.
A growth in operating costs, raw material availability, market potential, investment needs and developments in the financial markets were the factors mentioned.
Teigo Tamm, Laesti board member, said raw materials in particular were expensive, with great uncertainty in levels of supply likely in Estonia in future, which would have the effect of making foreign investors leery.
"It is important for foreign investors to have certainty and fore-knowledge about the long term," Tamm said.
The Estonian Forestry and Timber Industry Association (Metsa- ja puidutööstuse liit) has expressed concerns about the closure, both in and of itself and as a symptom of a wider trend for Estonia being less attractive for foreign investors, which sets up a vicious circle in making Estonian firms less competitive.
Henrik Välja, head of the association, lay much of the blame at the door of the long-running political discussions over forest management.
Products with lower added value cannot be competitive, politicians say – which Välja noted would require sawmills and other industries to add that value.
Bergs says it will halt sawing operations in august and wind up the entire business by the fall.
Teigo Tamm said existing raw materials already in hand will be processed and any inventory stock will be sold off, as part of this process.
The Laesti sawmill currently employs 30 people.
Its turnover and profitability has fallen rapidly in recent years. While in 2021 the company cleared a profit of €3.4 million off a turnover of €23 million, in 2022 this figure was €580,000 and €16.5 million respectively.
Taking the preceding 12 months, to the present, turnover stands at €8.7 million, Bergs says.
The Laesti sawmill is not the only such facility in Estonia recently to have announced it will be closing its doors.
On June 15, Finnish timber industry group Stora Enso announced that restructuring had forced it to close the Näpi sawmill, in Lääne-Viru County, at a cost of around 100 jobs.
Editor: Huko Aaspõllu, Ester Vilgats, Merili Nael, Andrew Whyte
Source: 'Akutaalne kaamera'