4. Results and discussion

This section describes the course of operations and the sequence of their work elements, compiles data resulting from analysis, cross-compares indicators designed to measure the relative efficiencies of the operations studied, and discusses both causes and possible remedies for identified shortcomings.

4.1 Operational efficiency

The logging operations observed for this study, although proceeding fluently and in a reasonably well-synchronised way within work cycles, suffered from low extraction volumes and poor recovery rates. With particularly low productivity, transport constituted the most important operational impediment to a sustained flow of raw materials.

4.1.1 Operational efficiency in felling and crosscutting

Most of the companies divided their logging areas into blocks in an improvised manner, without systematically structuring the blocks through feeder roads and marked skidtrails. Trees to be felled were previously determined and marked by the foreman. Only ÁLVARO de CASTRO and ARCA invested in roading and spatial structuring in order to facilitate extraction. None of the companies’ felling crews applied appropriate techniques for directional felling. Trees were felled in the direction of lean, without using wedges. Motor-manual felling applied a circular fan cut around the base of the tree without an appropriate notch cut. In manual felling, a horizontal notch cut was followed by the felling cut. Because of poor felling techniques damage to neighbouring trees was common and hang-ups occurred frequently. Often twisted and torn fibres in the basal section resulted in a devalued butt log (see Photo Series 3, Appendix 2). In crosscutting, defective log sections and branches were removed, and the log was separated from the trunk. Generally only one log was recovered per tree. At ÁLVARO de CASTRO and SOMANOL, bucking two logs per tree resulted in superior timber recovery rates.

In the companies that used manual felling (ÁLVARO de CASTRO and SOMANOL), two cutters used crosscut saws with straight profile, triangular teeth, and 140 cm length. On the three motor-manual felling operations (ECOSEMA, MITI, and ARCA), crews consisted of a chainsaw operator and an assistant. The chainsaws ranged between 5.4 and 7.0 hp, with bars 63 cm in length.

Technological productivity (PT) of manual methods ranged between 1.11 and 1.99 m³/h (Table 4.1). Most of the productive time was employed in making the felling cuts and crosscuts, due to the slow process of manual sawing. This was particularly true at SOMANOL where the saws were dull and improperly set throughout the period of the field study. Only 10-12% of operating time was occupied in unproductive activities, which were divided into rest and interruption times. Most interruptions were associated with releasing lodged trees. To bring them down, improper and extremely dangerous practices were often used (see Photo Series 2, Appendix 2). Maintenance times did not occur during normal working hours. At ÁLVARO de CASTRO this was because the felling crew used two crosscut saws on alternating days, with the saw not in use being sharpened and set by a saw doctor. At SOMANOL it was due to the lack of sharpening and setting tools for the crosscut saws.

In motor-manual felling, PT varied between 2.13 and 6.79 m³/h, indicating big differences in operational efficiency. Between 67% and 83% of operating time was occupied by productive time. At ECOSEMA the large share of time related to felling cuts and crosscuts reflect delays caused by lack of spatial structuring and the use of improper cutting techniques with the chainsaw. At MITI, apart from lacking spatial structuring, hilly terrain and comparatively dense vegetation made movements between trees and the removal of obstacles occupy a large portion of productive time. ARCA performed more efficiently than the other companies, since blocks were prepared with feeder roads and skidtrails, thus avoiding delays when advancing to the next tree and removing obstacles. Overall, 17-33% of operating time was occupied by unproductive time in the motor-manual felling operations, mainly for chainsaw maintenance.

Recovery rate (RR) ranged between 35% and 63% (Table 4.1). The low end of this range was at MITI, where felled trees had a mean commercial volume of 3.44 m³. Only logs with maximum diameter were extracted and much of the felled volume was thus wasted. This was due to MITI’s focus on the production of logs for export. Furthermore, cutting techniques with the chainsaw tended to provoke precocious falling and fibre splitting in the butt log, so that the damaged wood had to be bucked out. RR was also reduced by the prevalence of high stumps; on average, felling cuts were made at heights above ground between 32 and 76 cm. Similar shortcomings were also observed at ARCA and at ECOSEMA. ÁLVARO de CASTRO and SOMANOL achieved better recovery rates by crosscutting two logs per tree and thus increasing timber volume prepared for extraction to 51% and 63% of commercial tree volume.

Mean volume produced per cycle (Vm) varied between 0.26 m³ and 1.34 m³, and mean distance from one felled tree to the next ranged from 22 to 79 m. ECOSEMA showed the most unfavourable ratio of small logs and large distance between trees, resulting in an extraction volume of only 0.96 m³/ha. Conversely, SOMANOL, by extracting a species not previously exploited in its logging area, was able to achieve an extraction intensity (Vex) of 13.89 m³/ha. This relatively intensive extraction could have resulted in a high level of productivity, if trees had not been cut with crosscut saws that were poorly sharpened and improperly set.

Retrospectively, manual felling seems to result in more efficient felling and crosscutting (potential PT around 2.00 m³/h), if crosscut saws and their maintenance were optimised, and if spatial structuring as well as better cutting techniques were being implemented. The motor-manual method reduces times for some productive elements (potential PT about 6.00 m³/h). However, more demanding requirements as to maintenance and logistics (fuel and oil) made it seem to be less appropriate and more costly (see Section 4.4.1) than the manual method. Furthermore, improper cutting techniques with chainsaws appeared to significantly increase the risk of accidents.

Except for ARCA (high technological productivity) and SOMANOL (high extraction intensity and recovery rate), the described shortcomings indicate that already in this first productive phase low extraction volume, absence of spatial structuring, and poor cutting techniques restrained raw-material flows and impaired the operational efficiency of subsequent activities.

4.1.2 Operational efficiency in extraction

Logs were skidded from the felling site to the landing at a previously prepared feeder road. Generally smooth terrain with gentle slope gradients, soils with good bearing capacity and absence of climbing vines made access and extraction with farm tractors possible, provided logging had been properly planned and prepared (see Section 4.1.1). However, at ECOSEMA, MITI, and SOMANOL skidtrails were either not cleared at all or were only poorly cleared, thus delaying access to the logs. the travel-unloaded element was therefore subject to frequent interruptions. When the tractor arrived at the pick-up point, the chain was fastened around the log, and the tractor started to travel loaded. Except for ÁLVARO de CASTRO, in most cycles just one single log with a mean volume of 0.66 to 1.32 m³ was extracted by ground-skidding, without lifting its base. At ÁLVARO de CASTRO, an average of five logs (total volume 0.64 m³ per cycle) were choked together, starting at the most distant felling site and progressively adding logs to the load along the skidtrail while en route to the landing.

The logs were extracted by 4×2 farm tractors with chains, without hydraulic drag bars or winches. ARCA had a tractor with a hydraulic tong, which during data collection was not operational. The tractor driver was accompanied by an assistant who hooked the log and released it at the landing.

Generally low mean load volume and delays associated with the travel-empty phase limited technological productivity (PT) to between 3.13 and 3.80 m³/h (Table 4.2). SOMANOL achieved an outstanding PT of 8.27 m³/h as a result of relatively short skidding distances and a large mean load volume. Inadequate spatial structuring and difficult access to logs caused the tractors to move more slowly during the travel-empty phase than when travelling loaded.

Between 60% and 95% of operating time was spent in productive activities, mostly travel loaded and travel unloaded. An extraordinarily large share of time was spent fastening the chain, with 17% at ARCA, 23% at ECOSEMA and 31% at SOMANOL, due to delays recorded when grass and soil beneath the log had to be removed in order to loop the chain around the log. MITI spent only 12% of productive time for this element, since obstacles had been removed before the tractor arrived. At ÁLVARO de CASTRO, the elements “Fasten the Log” and “Manual Traction” consumed 48% of productive time, as the tractor had to stop frequently and numerous small logs had to be dragged and joined to the load. Unproductive time (rest pauses and short technical interruptions) occupied between 5% and 20% of operating time, except for ECOSEMA (40%), where much time was required to remove obstacles or manoeuvre around them when travelling unloaded, as a result of poor skidtrail preparation.

Mean time (Tm) provides an overall measure of operational efficiency. It is determined by the mean volume (Vm) skidded per cycle and the mean travel speed (Ss). Vm varied between 0.64 and 1.32 m³/cycle. At MITI, SOMANOL, and ARCA, Ss for travelling unloaded and loaded ranged between 51 and 66 m/min and between 57 and 82 m/min, respectively. At ECOSEMA the tractor travelled from the landing to the skid-trail entrance on a feeder road allowing high speed; however, the small mean load volume and the interruptions described above neutralised its positive impact on Tm. At ÁLVARO de CASTRO speed was extremely low, as skidtrails giving access to dense stands were established in curved patterns and the tractor travelled them carefully to avoid damaging residual trees. MITI showed the highest efficiency as measured by Tm, due to the large mean volume extracted per cycle. Except for ÁLVARO de CASTRO, where low volume and low speed resulted in a Tm of 0.42 min/m·m³, values ranged between 0.04 and 0.08 min/m·m³.

Skidding distance was predetermined by the extraction intensity and the spatial distribution of landings. Together with Tm it rendered values for PT. Short skidding distances as a result of intensive extraction resulted in superior PT values for SOMANOL and ÁLVARO de CASTRO. Conversely, MITI and ARCA, although showing better efficiency in other measures, had low values of PT because of the long skidding distances.

Observations made during data collection and analysis suggest that an appropriate spatial structuring of blocks with feeder roads, skidtrails, and landings could optimise skidding distance and speed. Furthermore, operational efficiency could be improved by attaching slotted beams or hydraulic tongs to the tractor’s three-point linkage. This would facilitate skidding of multiple logs, which could then also be partially lifted above the ground to reduce dragging friction. To avoid tipping the loaded tractor on the rear wheels, counterweights should then be added to the front of the tractor. The time spent hooking logs could be reduced by having the felling crews prepare logs for extraction by removing obstacles around the logs after crosscutting and by using a metal plate on the tip of the chain so that it would be easier to create a gap between the log and the soil.

4.1.3 Operational efficiency in first loading

First landings were established to accumulate extracted logs along secondary roads. These secondary roads either crossed the logging area in an unstructured pattern (ECOSEMA, MITI), or they systematically surrounded the block being logged (ÁLVARO de CASTRO, SOMANOL, ARCA). Logs were deposited on the landings in rows. Loading crews then prepared the logs for loading and positioned a ramp, made of two stakes 3.5-4.5 m in length, against the bed of the trailer or truck being loaded (see Photo Series 5, Appendix 2). The log to be loaded was rolled with cant hooks to a point near the base of the ramp stakes. Two ropes were then looped around the log and attached to a tractor. The log was then pulled up the ramp by the tractor. At ÁLVARO de CASTRO the small and relatively light logs were loaded manually, without using ramp, rope, or other auxiliary devices. After the logs were loaded, the loading crew rearranged them by hand into a stable position on the truck or trailer, using cant hooks and worn suspension springs as levering devices. Between four and six workers were employed in this activity at each site.

Technological productivity (PT), varying between 3.11 and 8.29 m³/h, was determined by mean volume per cycle, log shape and taper, ramp length and slope, the degree in which landings had been prepared for loading, and the share of time spent in unproductive activities.

Productive time occupied between 57% and 93% of operating time. The main loading process, rolling the log up the ramp to the deck, consumed between 13% and 28% of operating time, while more than 50% of productive time was involved in moving the log to the ramp and attaching the ropes. At ECOSEMA and ÁLVARO de CASTRO unproductive time was a large share of operating time. This time was spent mainly in preparing the trailer, along with rest periods and numerous interruptions of short duration.

Analysis of time-study results suggests that the element “Move log to ramp, fix ropes” was extremely time-consuming. This activity could be optimised by arranging logs into lots (according to species, size, and shape), thus creating more consistent loading conditions and improving the stability of loads for subsequent transport.

4.1.4 Operational efficiency in first transport

In this phase the loaded logs were transported either to the technical base (ECOSEMA, MITI, ARCA) or directly to the sawmill (ÁLVARO de CASTRO, SOMANOL)—see Table 2.4. Hauling distances varied between 2.5 and 49 km.

Except at MITI, first transport was done with tractors equipped with one or two semitrailers with capacities of 3-5 t. MITI used flat-deck trucks with capacities of 8 t. Each driver was accompanied by an assistant. Passengers frequently travelled on deck or on top of the load.

Technological productivity (PT) was very low, with values ranging from 0.18 to 1.79 m³/h (Table 4.4). PT was particularly poor at SOMANOL, where slow tractors hauled a low mean volume over a long distance. MITI and ECOSEMA achieved superior PT by using vehicles with load capacities of 6 and 8 tons.

As with extraction, the combined influence of load volume, speed, and unproductive time on operational efficiency was indicated by mean time (Tm), which measures operational efficiency independently of hauling distance. ECOSEMA, MITI, and ÁLVARO de CASTRO had overall efficiencies that were higher than those of SOMANOL and ARCA. The latter two transported low volumes at low speed and, in the case of ARCA, with a large portion of unproductive time. Because of limited load capacities, low speeds, and poor road conditions, none of the companies in this study was able to provide a consistent flow of raw materials.

In addition to low per-km efficiency, long hauling distances at SOMANOL, ÁLVARO de CASTRO, and ECOSEMA resulted in very low levels of PT.

An interesting question is the maximum hauling distance over which first transport could be considered to be at least minimally efficient. Under favourable conditions like those at ECOSEMA (two trailers per tractor and good road conditions), and supposing a required minimum PT of 3.00 m³/h (corresponding to delivery of one load within an eight-hour working day), the maximum limit for hauling distance would be 13 km. For larger distances between first landings and the destination, intermediate landings should be installed where logs would be transferred to trucks with higher capacities and capable of higher speeds. Note that the required PT of 3.00 m³/h in first transport could only be achieved at a distance of 13 km with a load capacity of at least 6 t and roads that are well-graded and well-drained.

4.1.5 Operational efficiency in second loading

This activity occurred in three of the five companies, whereas ÁLVARO de CASTRO and SOMANOL utilised only first transport directly to the sawmill. At MITI, hauling times and their distribution were not recorded; therefore comparative data are not available.

At ECOSEMA and ARCA/SRZ, two different methods were used: semi-manual loading with tractor assistance by the former company and mechanised loading with a front-end loader in the latter case.

Semi-manual loading was carried out at the landing of ECOSEMA’s technical base, where sufficient space was available to manoeuvre the tractor. Logs were loaded on one of two semitrailers allocated to a particular truck, while the second semitrailer was travelling with the truck itself. When the truck returned to the landing from a trip, the empty semitrailer was disconnected and left on the landing to be loaded. The loaded semitrailer was coupled to the truck, which immediately began the trip to the final destination. Procedures were similar to first loading, except that the larger, better-graded landing site facilitated rope attachment and tractor work. Logs with a mean volume of 0.49 m³ were lifted as the tractor pulled two ropes looped around the log, rolling it up a ramp composed by two stakes 4.5 m long. To arrange the load, cant hooks and worn suspension springs were used. In this activity two loaders, the driver and an assistant were employed.

Mechanical loading at ARCA/SRZ required co-ordination between ARCA, which carried out logging and first transport to the central landing in the logging area, and SRZ, which provided the loader and was responsible for second transport to the sawmill. The front-end loader, with a capacity of 3.5 t, was able to handle up to four logs at a time, depending on the average log size. As a result, this method showed an outstanding technological productivity, more than nine times that achieved on the ECOSEMA operation (Table 4.5). However, co-ordination of loader delivery and truck availability made this method most sensitive to bottlenecks in raw-material flow to the sawmill. Although far less productive, semi-manual loading seemed to be better synchronised with second transport and was more capable of sustaining a consistent flow of logs to the final destination.

4.1.6 Operational efficiency in second transport

In second transport, logs were hauled from the second landing to the sawmill or the main log-yard in the provincial capital. Hauling distances ranged between 130 and 279 km. Trucks and semitrailers with load capacities of 25 t were used. An assistant accompanied the truck driver. Except for ECOSEMA, unloading at the destination was included in the time studies.

Technological productivity (PT) of second transport was very low, varying between 0.61 and 2.50 m³/h (see Table 4.6), particularly for MITI hauling with low speed over a long distance. As a result of a relatively short hauling distance, ECOSEMA presented the highest PT. Without considering the influence of hauling distance, SRZ showed the best operational efficiency, with a medium time of 0.17 min/km·m3.

The low efficiencies achieved in second transport made it difficult to maintain a consistent material flow from the logging area to the sawmill or sales site. The most important impediments were long hauling distances and, particularly in the case of MITI, extremely poor public-road conditions that forced trucks to travel with reduced load and at low speed.

Assuming favourable conditions such as those experienced by SRZ and a required minimum PT of 3.00 m³/h (for a roundtrip with a 24 m³ load within 8 hours), second transport could be operationally efficient up to a hauling distance of 118 km. This supposes that public roads comply with minimum technical standards. Otherwise, as in the case of MITI, the operationally efficient hauling distance shrinks to 57 km.

4.2 Organisational efficiency

Utilisation rate (UR), labour productivity (P_L) and capital intensity (IC) were selected as indicators for assessing the relative efficiency with which the five companies used machinery, labour and capital during one year of production (see Section 3.2.2). In order to facilitate comparisons, the analysis was restricted to logging and first transport because information on those activities was available for all five companies.

The organisational indicators suggest generally that equipment and personnel were utilised inefficiently by the five companies in this study. Log production was scattered and extensive in terms of production volume, and intensive as to labour and capital, yielding in most cases unfavourable ratios between output (production volume in m³/year) and input (machine capacity, number of workers and work-months, mean annual investment).

In all studied cases, results suggest that proper harvest planning, spatial structuring and consistent application of logistical principles are prerequisites for making full use of machinery, workforce, and invested capital. Moreover, organisational efficiency can be optimised by increasing extraction intensity, improving road conditions, and reserving road transport exclusively for trucks.

4.2.1 Utilisation rate and production capacity

During the year each was visited, the five companies produced volumes ranging between 150 and 2,400 m³ of logs. ÁLVARO de CASTRO, SOMANOL, and ECOSEMA operated at very low levels.

In most cases production capacity (CP) was limited by the transport vehicles’ low technological productivity as described in Section 4.1.4. Only at MITI, which used a second truck for transport (which was non-operational during data collection), was CP restricted instead by the productivity of the skidding operation. Superior CP was measured in the companies with more favourable equipment configurations (ECOSEMA with two tractors, each of which operated with two trailers; MITI with trucks; ARCA with a short transport distance). In most cases it was not the technological capacity of machinery that limited production but lack of harvest planning, inadequate preparation, and persistent logistical problems. All these had strong negative impacts on production volume and resulted in low utilisation rates (see Table 4.7).

ÁLVARO de CASTRO was troubled by sporadic fuel and spare-parts supplies and ECOSEMA’s operations were hampered by scattered, unsystematic logging progress. These problems caused pronounced discrepancies between the two companies’ technological capacities and actual production volumes, resulting in utilisation rates of 11% and 13% respectively. SOMANOL made almost full use of the tractor and trailer used in transport and achieved a UR of 92% although producing at very low level with minimum equipment. Facilitated by a short transport distance, ARCA managed to produce a relatively high volume with a well-synchronised set of machines, thus reaching a UR of 79%. Its high UR resulted from efficient use of transport vehicles through rapid loading, and from minimising the first transport distance by locating the main landing at a central site within the logging area rather than outside of it as the other companies did.

Most of the companies failed to synchronise technological capacity, adapt it to the required production volume, and to coordinate production. Synchronising in this context requires adjusting equipment capacities in logging and transport to one another by attributing a certain number of machines to each activity. Coordinating means to organise production in such a way that the maximum volume can be produced to fully utilise the company’s adjusted production capacity.

4.2.2 Labour productivity

In logging and first transport, between 17 (ARCA) and 22 (ECOSEMA) workers were employed (see Section 2.4). Rating annual production volume against the number of workers and working months per year yielded values for labour productivity (P_L) varying between 1.04 and 17.65 m³/worker-month. Table 4.7 shows that the companies with low annual production volumes were subject to extremely low labour efficiencies. As with equipment utilisation, workforce efficiency can be improved by synchronising the size and number of crews and co-ordinating labour by clearly defining work tasks and production targets, and then by closely supervising the crews and providing regular feedback on performance.

An explicit training program covering efficient working techniques, occupational safety and application of better practices (see Section 5.3) should be addressed to both workers and foremen. Any substantial improvement in operational and organisational efficiency will require a well-developed professional workforce, working and living under adequate conditions. Standards for remuneration, nutrition, and camp facilities are subjects requiring further attention.

4.2.3 Capital intensity

An analysis comparing mean annual investments in machinery (chainsaws, tractors, trucks) with annual production volume indicated capital intensities (IC) between 20.45 and 63.03 US$/m³ (Table 4.7). At the two extremes, SOMANOL maintained a low production volume with minimum investment, while MITI invested heavily in trucks that were nevertheless subject to frequent breakdowns because of poor road conditions.

4.3 Energy efficiency

Based on fuel consumption, two expressions for energy efficiency were calculated: timber volume produced per 1,000 litres of fuel consumed, and the ratio between calorific values of produced timber and fuel consumed during production (see Section 3.2.3).

Table 4.8 shows that energy efficiency in logging and first transport ranged between 21.56 and 110.91 m³/1,000 l. This was influenced largely by technological productivity, with transport being the most sensitive activity. ECOSEMA’s energy efficiency was the highest, since each tractor hauled two trailers and thus spread fuel consumption over a relatively large transported volume. At ARCA the very short hauling distance resulted in a relatively efficient energy use. At MITI, the short distance for first transport with relatively large-capacity vehicles should have made transport energy-efficient. However, poor road conditions prevented the trucks from travelling at sufficient speed to compensate for their relatively high fuel consumption rates. SOMANOL’s energy efficiency was extremely low due to the fact that the tractor hauled only one trailer over a long distance.

Subsequent activities were second loading and transport at ECOSEMA, MITI, and SRZ, and processing at ÁLVARO de CASTRO, MITI, and SOMANOL (processing at SRZ was not included in this analysis). Energy efficiency in these activities varied between 50.17 and 76.63 m³/1,000 l where logs were produced (ECOSEMA and ARCA/SRZ), and between 15.56 and 55.19 m³/1,000 l where logs were processed into sawnwood (ÁLVARO de CASTRO, MITI, and SOMANOL). It was particularly low at MITI, where second transport over long distances and processing by mobile band saw resulted in high fuel consumption and low technological productivity. ECOSEMA’s efficient energy use was due to relatively high productivity in second transport.

Energy efficiency for total production was on a rather low level, with values for h_e ranging between 17.33 and 45.32 m³/1,000 l for log production and between 12.87 and 25.55 m³/1,000 l for companies that produced sawnwood. ECOSEMA’s relatively high value of 0.91 for hc was achieved by the favourable configuration of two trailers per tractor in first transport and a relatively short distance for second transport. ARCA/SRZ owed the second-highest ratio to a short hauling distance in first transport and relatively efficient second transport in spite of a long hauling distance. In companies producing sawnwood, energy coefficients ranged from 0.26 (MITI) to 0.51 (ÁLVARO de CASTRO). At SOMANOL energy efficiency was severely reduced by first transport, where a slow vehicle hauled small loads over a long distance. MITI’s low energy efficiency was due to high fuel consumption and low productivity in subsequent activities, due in part to poor road conditions for the long second transport and in part to inefficient processing with the mobile sawmill.

4.4 Financial efficiency

Unit costs were used as indicators for financial efficiency as described in Section 3.2.4. Two references were applied: technological productivity as a result of time studies, yielding comparative unit costs, and actual annual production, resulting in effective unit costs. In addition, total effective unit costs were compared to sales revenues in order to assess the relative cost-efficiencies of the companies.

4.4.1 Comparative unit costs (logging and 1^st transport)

Dividing cost per machine-hour by technological productivity provides “unit cost,” a relative measure of potential financial efficiency which is independent of actual production volume. Total unit costs for logging and first transport ranged between 21.06 US$/m³ at ECOSEMA and 32.46 US$/m³ at MITI (Table 4.9). Well outside of this range, SOMANOL’s total unit cost was astronomically high at 73.55 US$/m³, caused largely by an operationally deficient transport system with a unit cost of 61.40 US$/m³. MITI and ARCA also generated relatively high unit costs. For MITI this was due to poor road conditions for first transport, and for ARCA the proximate cause was an out-of-balance system that employed too many workers. In general, between 38% and 84% of total unit costs occurred in first transport, followed by loading and extraction. Unit costs for felling and crosscutting were generally less important, but were significantly lower in companies using crosscut saws (see 4.1.1).

Examination of the results in Table 4.9 suggests that operational costs accounted for most of the unit costs (between 52% and 78%), whereas labour costs did not exceed 16%. Ownership costs ranged between 9% and 40%, depending on how heavily the companies invested in extraction machinery and transport vehicles.

4.4.2 Effective unit costs and margin of profit

Effective unit costs are those associated with an entire year’s production, as calculated in Eq. (24). For this study the reference year for each company was the year in which the company’s operations were examined. Table 4.10 shows that effective unit costs for felling and crosscutting, extraction, first transport and road maintenance ranged between 25.95 and 73.31 US$/m³ and occupied between 18% and 33% of total effective unit costs. Low utilisation rates at ECOSEMA, ÁLVARO de CASTRO, and MITI (see Section 4.2.1) drove them to significantly higher effective unit costs for these activities than the other two companies. Only ARCA managed to keep costs low overall, by efficiently employing equipment and hauling over a short distance. SOMANOL’s intermediate unit cost for these activities resulted from the lack of second transport and a low unit cost for road maintenance.

Total effective unit costs ranged between 80.40 and 364.14 US$/m³. Low annual production at SOMANOL and ÁLVARO de CASTRO resulted in exorbitant unit costs, since expensive processing and supervision added to costly logging and first transport. The low production volumes boosted fixed and labour costs to 67% and 69%, for the two companies respectively, of total costs. At ECOSEMA the low annual production level and large inventory of non-operational machinery resulted in a high contribution from fixed costs. MITI’s production was subject to high variable costs, caused by low productivity in transport and processing. The only company generating moderate unit costs was ARCA, which employed equipment and personnel in a well synchronised manner, produced a relatively large volume, and minimised hauling distance in first transport. However, subsequent activities performed by SRZ (high fixed costs for second loading with front-end loader and high variable costs caused by low productivity in second transport) more than doubled the unit costs of ARCA’s production.

In the companies with low production levels (ECOSEMA, ÁLVARO de CASTRO, SOMANOL) depreciation, interest and insurance costs occurring in the course of annual production resulted in high fixed costs per cubic metre. ÁLVARO de CASTRO, by using obsolete equipment and avoiding second transport by processing close to the logging area, restricted these costs to 30% of total unit costs. However, an excess of personnel in all activities made labour costs prominent. Companies with higher production levels (MITI and ARCA/SRZ) were more affected by variable costs, especially high fuel consumption and low productivity in activities subsequent to logging and first transport.

Looking at the distribution of unit costs over activities, second loading and transport occupied between 21% and 55% of total unit costs, incurring unit costs of between 39.53 and 57.96 US$/m³. Where processing was integrated, it generated costs ranging between 29.53 and 167.17 US$/ m³ (17% to 46% of unit costs), depending on production level and productivity as well as on the degree of conversion (sawnwood from 25% of annual log production at MITI, parquet scantlings at ÁLVARO de CASTRO, truck decks at SOMANOL). Costly production at SOMANOL was due not only to the factory’s short log supply but also to its high-cost downstream processing.

Taking into account sales revenues from final products, most of the companies generated deficits between 44.87 and 205.51 US$/m³, generally as a result of low production levels that caused high fixed costs, and low technological productivity in transport and processing that resulted in high variable costs. ARCA, with the highest overall annual production, was the only company that managed to generate a positive profit margin from its sale of logs at the main landing in the logging area of 13.78 US$/m³. These logs were purchased by SRZ for processing at its sawmill in Nicoadala, which was also supplied from other logging areas. Therefore it was not possible to derive an overall profit margin for ARCA/SRZ including processing. However, the purchase price (50.00 US$/m³) paid to ARCA plus costs for second loading and transport resulted in raw-material costs at SRZ’s sawmill gate of 94.18 US$/m³. Assuming a processing recovery rate of 50% and sales revenue for export sawnwood of 400.00 US$/m³, SRZ’s processing and supervision costs would have to be less than 105.82 US$/m³ in order to generate a profit.

4.4.3 Break-even point

As a function of sales revenue and total cost, the break-even point (BEP) indicates the level of annual production required to generate a profit. As indicated in Eq. (26), the calculation of BEP involves rating the annual costs of ownership, repairs, and labour against the gross sales margin (sales revenue minus variable cost). For the five companies in this study, BEP ranged from 758 to 3,119 m³ of annual production (Table 4.10). Only ARCA produced a volume exceeding its BEP and thus generated a profit.

With the exception of ARCA all of the companies operated at levels well below their break-even points. SOMANOL was closest, with actual production at 63% of its BEP, but operating at the full BEP level would have exceeded its technological capacity (which was restrained by lack of transport vehicles) by 46%. ECOSEMA, ÁLVARO de CASTRO, and MITI could all conceivably have reached their break-even points with better synchronisation and coordination; producing at their break-even points would have required only 48%, 57%, and 69% of the three companies’ respective technological capacities. The break-even points could also have been reached, of course, if the three companies had been able to negotiate sufficiently higher prices for their products.

Generally, results of break-even analyses suggest that companies processing sawnwood close to the logging area are able to cover their production costs at lower production levels than those selling unprocessed timber far from the point of origin. As soon as second transport over a long distance is involved it becomes much more difficult to cover production costs.

The cases of ECOSEMA and MITI raise the critical question of whether the BEP can be achieved at all with available timber stocks if they are to be managed on a sustainable basis. ECOSEMA’s logging area had been repeatedly exploited and the species in highest demand were in short supply at marketable sizes. Consequently the company was unable to make a profit and eventually was forced to suspend its activities altogether. Although a full analysis of MITI’s situation would require more detailed investigation, the sustainable extraction potential of the logging area appears sufficient to permit production at the break-even level if the company were to improve its practices relative to extraction intensity, harvest planning, and transport productivity.