PROFITABLE LOGGING

Each fall the past 20 years has included travel to the American Loggers Council Annual Meeting, held in which ever state that year’s president resides, a practice established in that first year. This year’s meeting was held in Marksville, Louisiana roughly 90 miles north of Baton Rouge, picturesque and lush with greenery, but a real contrast for those of us from the Pacific Northwest who have little experience with the South’s humidity. And according to the locals, the humidity wasn’t even serious! (All relative I assure you).

Many contractors eschew the idea of such national, or even statewide logging association meetings as a “waste of time,” yet many successful contractors, and growing companies, invest their time and energy not as a cost of doing business, but a way to make connections with other contractors, discover new technologies, new approaches, changing rules and laws, and ultimately find a way to more profitable logging. How many ideas from seeing something new, talking to others about their problems, their solutions, meeting someone who shares your interest or curiosity on how to find a better solution do you need to make this meeting help build your future?

The ALC was formed as a unified voice of professional loggers from throughout our nation, which represents the working logger. In the twenty years since its formation in St. Louis in 1994, as was evident through the course of both the Board and General Meeting, in reports and conversation, our voice is recognized in the halls of congress, speaking to members of congress, and respected for their experience and knowledge. We’re the experts, with hands on experience who actually can accomplish on the ground progress.

We’ve also formed a number of strategic alliances with the equipment manufacturers, both large and small that have helped both politically and with a better understanding of our needs in the woods, a definite plus that’s helped to refine and focus our message to legislators and the public in general.

One speaker standing out in this year’s program was Jim Hourdequin, managing director of The Lyme Timber Company, which is a “so-called” TIMO (timberland investment management organization), and has also been a logging contractor. “My path is not your typical path into the logging business, but the challenge of figuring out how to make money in logging, while also doing quality work, and paying good wages has become a passion of sorts, and that’s why I’ve stayed in the business as a co-owner and part of the management team. It should come as no surprise to you, however, that I haven’t touched a chainsaw in almost 10 years.”

Hourdequin’s perspective on logging’s future mirrors concerns held by many of the “logging capacity shortage” facing our industry on the heels of a prolonged recession. We heartily agree, in that there’s not only a shortage of qualified loggers, but of equipment. “According a recent RISI/ Wood Supply research Institute study, capital expenditures by logging contractors dropped in half during the period from 2008 to 2010 relative to pre-recession levels. The authors predict that capital expenditures on logging equipment will need to increase by 50% in the next three to four years to meet fiber and round wood demand from mills.”

And while the conversation on logging capacity is a valid concern it, “...obscures a more fundamental issue, and that is logging business profitability - your profitability,” Hourdequin said. “When people talk about ‘logging capacity,’ what they really mean is a lack of incentive for contractors to expand their existing businesses, or for would-be logging contractors to start new businesses. And this comes down to that simple issue of profitability. “Why borrow hundreds of thousands of dollars to replace aging equipment without confidence in future business opportunities?”

“Profitability is the deciding factor between contractors seeking a future in the logging business,” Hourdequin emphasized, “and planning an exit strategy.”

He hits the nail squarely on the head. “And if that’s the case,” said Hourdequin, “the next question is: how do contractors - and the logging industry more broadly - become more profitable?”

Additional productivity efficiencies and gains can come from additional investment in men and equipment yes, but only, “...if existing businesses are more profitable and provide a platform for expansion and growth.”
Profitability stems from the pricing. “In short, the price we charged for our services,” he explained, “rather than the cost of providing those services, was the deciding factor on profitability.”

He talked of the changing dynamics with mills, REITs, TIMOs, and its effect on contracts pricing historically and presently. “I would challenge the consuming side of the industry - mills - to recognize that profitable and successful logging contractors living in rural communities are ambassadors for the industry,” said Hourdequin, “and the best defense against negative public perceptions of logging and the forest products industry. Successful logging contractors are leaders in their communities - providing tours to school groups, speaking in legislators, and doing all sorts of things that present the industry in a positive light. If their businesses are successful and growing, they will be in a position to provide a level of positive public relations that cannot be matched by even the most ambitious marketing budget. Their investments in people and equipment will also make the entire supply chain more globally competitive.”

“I would challenge the environmental community to recognize the importance of successful and profitable logging contractors as well,” he said. “These are the businesses that have the capacity to continually raise the bar and do quality work that causes the least damage to soils, streams, and habitat.”

“Finally, and perhaps most importantly,” said Hourdequin, “profitable logging businesses will be able to pay the kinds of wages necessary to recruit talented young people to the industry and to rural communities, many of which have lost this talent and wage base, and are struggling in a variety of ways.”

(To see the complete text of Hourdequin’s presentation go to Www.lymetimber.com)

The $11.00 McDonalds BigMac

Early in October we accepted an invitation from Ponsse (www.ponsse.com) Corp. to visit their factory in Finland to celebrate their 9,000 machine sold and tour their facilities. The Ponsse team were very gracious hosts and kept the group of six business writers on the move from manufacturing to accessories, spare parts, and out in the field to see the machines in operation.

The Ponsse demonstration site had two harvesters and a forwarder, although the star of the demonstration was their newly introduced Ponsse Scorpion harvester, the most impressive and innovative machine we’ve seen in several years. Scorpion represents a thorough redesign especially noticeable with the yoke-style of boom that straddles the cab with two separate hydraulic cylinders controlling the boom, which allows complete, unobstructed visibility to the operator. The Scorpion was introduced at last Summer’s ElmiaWood Forestry Show in Sweden.
The Ponsse Company is 60% family owned with the sons of the founder actively involved in the operations, and carrying on the family tradition of innovation and service.

Having seen the entire Ponsse operation the size, scope and logistics required to build, maintain, sell and service machinery throughout the world was impressive. The world market is broad, to compete planning, and foresight are essential for success, a lesson we could all profit from following.

We had an open day in Helsinki, which exposed us directly to the wonders of the Euro and one aspect of the European economy... to sum it up, Europe is VERY expensive and not just from the exchange of dollar to Euro (American dollar = 0.72 cents Euro as of this writing). But even allowing for that, it costs a good deal more to be part of the European Union, which we attribute to the enormous cost of bureaucracy being funded by VAT (value added tax) and a wide array of taxes on everything. Fine if you’re a member of the bureaucratic class, but hindering at least for the rest of society.

While exploring Helsinki we’d stopped at McDonalds for lunch (one of our troop admits to being addicted to McD’s), not really my first choice in food. It appeared as any McDonald’s in any city with a glaring difference on their menu board.... Gourmet food prices: 7.99 Euro (rougly $11.00!) for a Big Mac, YIKES!!! 

And to think, the current administration believes That’s the model economy we should emulate in the United states: a tax on everything and anything for the glory and wellbeing of the ruling class who, in turn, are exempt from many of the laws they enact for we serfs. Thank you, but independent thinkers will pass on those plans.

’Til next month! We hope all of you have a wonderful Thanksgiving and take the time to share with friends, family, and colleagues the wonder of our nation.