Chair and Chief Executive review
Strong confidence in forestry's future
Tony Nowell CNZM, Chair and Dr Warren Parker, Chief Executive
Scion has completed another busy, stimulating and challenging year pursuing its core purpose to provide the science that helps drive innovation and growth from New Zealand’s forestry, wood product and wood-derived materials sectors. Our focus has been on increasing the contribution of plantation forests to national and regional economic development, driven by our vision of creating “Prosperity from trees” for New Zealand and New Zealanders.
Our work has had an increased emphasis on harnessing sector complementarity. Specific initiatives will assist the integration of forests with other land uses in order that more stringent environmental requirements are met, and more products are used in supply chains. This will benefit environmental and social outcomes, support regional job creation and help Māori achieve their aspirations.
We have carried out this work within dynamic industry, business, science and political environments, with intense review of our future funding streams and how our investment in publically funded science is made. This has involved significant work engaging with five National Science Challenges relevant to Scion’s future, and towards year end, an extensive Four Year Rolling Review of Scion. Our resources were challenged, and we have been required to adapt, to change and to upskill accordingly, while also seeking to grow income from the private sector.
To address these changing dynamics and the opportunities they present, we added exciting new talents during the year to enhance our capabilities in value chain optimisation, market analysis, informatics and ‘big data’, human factors research (for improved health and safety in the forest industry), biopolymers, biotechnologies, biofibres and green (or ‘clean’) technologies.
At Scion, we have a strong confidence in forestry’s future, supported by the re-elected government’s ongoing commitment to achieving business growth agenda targets, with specific aims to lift GDP growth in under-performing regions that all have large forestry sectors. Also, global trends are driving resource-efficient and renewable economic growth; and domestic imperatives are in force to improve freshwater quality, address climate change and enhance the built environment. These are opportunities for Scion to contribute to, and have further sharpened the focus of our research.
A record harvest of 30 million tonnes of logs in the past year, expected to reach 32-36 million tonnes per annum over the next decade, augurs well for the forestry sector and the positive economic impact it can make to New Zealand. However, with deforestation of some 100,000 hectares in recent years, the wood processing sector faces major concerns over the security of log supply from the late 2020s if planting levels of both harvested and new forests are not substantially increased.
Iwi aspirations to plant up to 1 million hectares of forests on under-utilised land, including indigenous and non-radiata pine exotic species, is an important opportunity for both reforestation and regional development that is being supported by our science.
With impending global shortages of the long fibre softwood used as an essential ingredient for packaging and lightweight material substitutes for fossil oil products, and with the new global impetus for addressing climate change by the setting of meaningful 2030 individual country commitments, we see New Zealand’s radiata pine plantation forests facing a very positive future by providing excellent mitigation and value creation opportunities. Our science continues to make ground in international and domestic ‘bio-economy’ research and development opportunities, whether they be for packaging and coatings, lightweight wood-plastic composite components, industrial heating options or biofuels. Notably, our Woodforce technology for thermo-plastic wood composites is now undergoing industrial-scale commercial testing within the automotive and other sectors.
Weather events and heightened concerns about biosecurity risks over the past year have reinforced the forest owners’ need to adapt their tree genetics, forest management and forest protection for more extreme weather and biosecurity incursions. Our science programmes strive to double forest productivity, reduce forest biosecurity, wind and fire risk, and secure licence to operate in areas such as new genetic technologies, alternatives to methyl bromide for log fumigation and steep land harvesting.
Demand for up to 30,000 new houses per year in New Zealand over the next decade, and an imperative to improve housing affordability through mechanisms like pre-fabrication, better standards and gains in supply chain efficiency, has increased our focus on the development of better building solutions and establishing closer links with BRANZ and the construction sector. We continue to develop our understanding of how the characteristics and structure of our timber can best contribute to stronger, more innovative and more cost-effective engineered wood products for structural solutions and modified wood products to replace tropical hardwoods.
Scion’s technology focus is enabling productivity gains and essential improvements to worker health and safety across the forestry value chains. We are supporting the rapid uptake of ‘smart connected products’ for precision forestry, including the use of unmanned aerial vehicles with LiDAR capability, mobile tree scanners, robotics for mechanised pruning and harvesting and decision support tools for small forest owners. Also, our work with Solid Wood Innovation on log segregation technologies continues.
During the year we refined and reviewed Scion’s values, consistent with our changed work environment, and our changing customer and stakeholder needs. Ingenuity, Collaboration, Excellence, and Manaakitanga express the refreshed approach of Scion to its work and purpose. We retained Scion’s ACC tertiary Workplace Safety Management Practices accreditation.
Revenue of $47.34 million was below budget of $49.12 million, reflecting both delayed and reduced public sector funding. However, EBIT of $3.27 million and NPAT of $2.43 million were above budget of $2.50 million and $1.77 million respectively, mainly reflecting timing related savings in personnel costs as staff capability was built in the new fields identified above. Return on equity was 7.3 per cent above budget of 5.6 per cent. Capital expenditure of $4.44 million, including $1.73 million carried forward from the prior year approvals, maintained our momentum in modernising and improving the safety of our facilities, plant and equipment, and in strengthening both campus and cyber security. The 10-year plan for the Rotorua campus was updated in preparation for a major refurbishment and consolidation of our wood engineering laboratories and pilot plant facilities over the next two years.
We thank Scion staff for their hard work and ingenuity; and our industry, iwi and policy stakeholders for their advice and support. Brian Rhoades completed his final year as a Scion Director - we thank him for his wisdom and wide-ranging input over the past six years. The remaining Directors will continue into the new financial year providing continuity through a period of substantial change in the New Zealand science sector.
Tony Nowell CNZM, Chair
Warren Parker, Chief Executive