Highest global sawmilling earnings revealed

WOOD MARKETS' biennial global benchmarking survey (The 2015 edition of the Global Timber / Sawmill / Lumber-Sawnwood Cost Benchmarking Report) has continued to place the U.S. South as the highest margin sawmill region in North America - a place it has held since 2008 - as well as the top global earner in 2014 and into the first part of 2015. However, the new dynamic that hit the global sawmilling industry in 2014, and has continued significantly in 2015, is the ongoing decline in foreign currency exchange rates of major producing and exporting regions against the U.S. dollar. While lower costs also created a massive erosion of lumber prices in many markets around the world, some countries saw their fortunes change dramatically.

With a 50% reduction in the ruble (2014 average vs. Q1/2015 average), Russian sawmills saw huge cost reductions as well as soaring lumber revenues in U.S. dollar terms. As a result, Russian sawmills shot to the top of the earnings ranking in the survey in 2014 and for Q1/2015 (and beyond). Out of 32 countries and/or regions surveyed, U.S. South and Russian mills accounted for 6 of the top 8 positions in terms of earnings (EBITDA) at top-quartile (or best) mills. The global EBITDA average in 2014 for top-quartile mills was double that of 2012 on the strength of improved lumber markets, stable global economic conditions and a slow strengthening of the U.S. dollar. In North America, U.S. mills continue to outperform Canadian mills in overall earnings, which has been a familiar theme since 2008 where managed trade under the Softwood Lumber Agreement (SLA) appears to be a key factor. Sawmills in the U.S West performed well in 2014, but earnings were lower than the U.S. South and were more similar to the earnings results achieved by Canadian mills

While Russia's top-quartile mills have been improving in each global survey over the last four years, 2014 was a break-out year in terms of sawmill earnings at both average and top-quartile mills. Although these results were mainly currency driven, the rapid increase in Russian mills' fortunes caused chaos in markets, as buyers were able to quickly push Russian lumber prices lower in US-dollar terms, especially in China. Nevertheless, Russian mills achieved similar overall earnings results as U.S. mills in 2014 and Q1/2015. "With a huge windfall of cash, a number of Russian sawmill companies have embarked on capital spending programs to create higher production, lower cost mills, not to mention considerable investments in lower cost Scandinavian logging equipment." commented Russell Taylor.

European mills were able to capitalize on a strong first half of 2014 before markets slowed steadily into fourth quarter as well as first quarter 2015. While earnings at European sawmills improved moderately over the disastrous results of 2012, they weakened through into Q1/2015 despite the rapid weakness in the euro relative to the U.S. dollar.

The Southern Hemisphere regions surveyed (Australia, New Zealand, Chile, Brazil and South Africa) also saw improved results in 2014 over 2012 earnings, but they slipped in Q1/2015. Two countries that have always been competing for the top global earnings spot in our survey since 2002 - South Africa and Australia - both fared well, but placed in the second quartile of earnings in the 2014 survey. Australia out-performed South Africa in 2014 and Q1/2015 at "top-quartile" mills to achieve the highest earnings of mills "down-under".

benchmarks delivered log costs (with a full break-out of logging, hauling, overhead and stumpage), sawmilling costs, lumber and by-product revenues, and EBITDA margins in 2014 for 32 producing countries and/or regions around the world, and includes an update for Q1/2015 for both "average" and "top-quartile" sawmills.

Source: www.woodmarkets.com