The Deputy Premier Bryan Green said today the unprecedented challenges facing Forestry Tasmania have been underlined by its financial result.

Mr Green said it confirmed the work of URS which forecast significant cash losses for the business because of the severe downturn in the forest industry.

"Obviously it is a very disappointing result but not unexpected," Mr Green said.

"That is why the Government made the contingency in this year's budget to assist the business should it be needed.

Mr Green said further substantial losses had been predicted for Forestry Tasmania if markets do not improve.

"The reality is that in these circumstances Forestry Tasmania is not financially sustainable in its current form and is why a restructuring of the organisation is necessary.

"It is about ensuring our forest industry is strong and viable for the long term.

The Government's decision to change the operating structure of Forestry Tasmania was based on independent advice following the Strategic Review of Forestry Tasmania by URS.

"The Government is committed to implementing the reforms.

"The sole focus is on ensuring the business is viable and we are working with the Forestry Tasmania board and management to move the business forward," Mr Green said.