SOURCE: Canadian Forest Industries magazine CFI 2016 Contractor Survey on www.woodbusiness.ca
Results of the Canadian Forest Industries magazine’s Canadian 2016 Contractor Survey were released June 21, with findings that 41 per cent of all contractors saw some form of rate increase over the past three years. For the rest, rates were either stagnant (28 per cent) or had declined somewhat (23 per cent). Just over eight per cent were either too new to have a trend or preferred not to say.
The US magazine Timber Harvesting also recently reported its own survey findings this year, and found that 25 per cent of US loggers reported no profit or a loss last year. On the other hand, 42 per cent reported pre-tax profits above seven per cent.
Canada Report: Real World Logging Profits
Canada-wide, forty per cent of con- tractors felt that in 2016 a fair profit range lay between 11 to 15 per cent. This sentiment varied slightly with company size – 54 per cent of the largest contractors, those with over $5 million in revenue, felt this range was fair. Almost a quarter (23 per cent) of all contractors felt a profit between 16 to 20 per cent was fair.
Canadian Forest Industries found that fewer than half of contractors have seen rate increases over the past three years, but how well they managed to negotiate a rate increase varies greatly by both region and company size.
In general, the larger the contractor, the more likely they were to have negotiated or received some form of rate increase over the past three years. Only 27 per cent of smaller contractors (less than $1 million in annual revenue) saw any form of increase, while up to 64 per cent of the largest contractors enjoyed some form of increase (more than $5 million in annual revenue).
As for the question of what logging contractors saw as a fair profit margin for an established contractor (see report here). While expectations vary greatly by region, with expectations generally falling toward the east of the country, the most popular answer was an EBITDA in the 11 to 15 per cent range.
The national breakdown was two-thirds making between one and 10 per cent profit margin (at EBITDA level), and 17 per cent making none at all.
These averages hide a lot of diversity among companies of different sizes or in different locations. Almost a quarter (24 per cent) of the smallest contractors reported no profit at all in 2015, while half, or only 12 per cent of the largest contractors, made the same claim.
When it comes to region, Ontario fared the worst as far as profit, with almost one-third seeing no profit (31 per cent), followed by the BC Coast (21 per cent), Quebec (17 per cent), Atlantic Canada (16 per cent), BC Interior (14 per cent), and Alberta (9 per cent).
A full half of BC Coastal loggers reported a profit of less than three per cent and 85 per cent report a margin of five per cent or less – both the largest showing of all regions in these ranges. In contrast, only 28 and 59 per cent of BC Interior contractors reported profits in these ranges.
When sawmill woodlands staff were asked the same question, the majority (55 per cent) felt that a mar- gin above 11 per cent was fair, with another 33 per cent feeling six to 10 per cent was a fair profit margin for an established contractor.