Coillte, the State-owned forestry company, reported a 37 per cent increase in profits last year, as it leased more land, and demand for engineered wood increased.

Profits jumped to €35.07 million, while revenue rose 7.5 per cent to €184.97, chief executive Martin Lowery said at a presentation of the group's results.

"The increases have come from across the board," said Mr Lowery. "2005 has started well and will be a good year, but the time has come for us to move the business away from basic commodities into value-added products."

Sawlog sales fell 5 per cent last year and, to combat this decline, Mr Lowery said he hopes that more of the company's wood can be used in higher-value products, particularly houses.

"We see the industry moving in that direction and we want to drive Irish timber into that niche," he said.

Small amounts of timber are already used in the construction of houses in Ireland and Coillte is benefiting as demand for new homes remains strong.

Still, according to Mr Lowery, there is an opportunity for more wood to be used in houses, as demonstrated by the group's Austrian joint venture, Griffner Coillte, which designs and manufactures buildings made primarily from timber.

Houses with high timber content are commonplace in parts of Switzerland and Sweden, where often whole sides of houses are manufactured at a factory and then shipped to the site of the new home.

Performance at Coillte's SmartPly division - which produces engineered wood for export to the UK, mainland Europe and the US - improved "significantly" during the year, according to Mr Lowery, who said the company is looking to increase production at the plant in Waterford.

"Significant progress" was also made at Coillte's land-based business, which received planning permission for two more wind farm sites.